Contents

Eraa v. Vera ............................................................................................ 2

Ramcar, Inc. v. De Leon ............................................................................ 4
Adlawan v. Torres ..................................................................................... 6
Carpio v. Macadaeg ................................................................................ 11
Uy(Maximo) v. CA................................................................................... 13
Olib v. Pastoral ....................................................................................... 16
Davao Light, Inc. v. CA ............................................................................ 19

Provisional Remedies

Oate v. Abrogar .................................................................................... 24

Rule 57 Cases - Preliminary Attachment

Mindanao Savings & Loan Association, Inc. v. CA .................................. 31

Peral Compania, Inc. v. Ramolete .......................................................... 28

Calderon v. IAC ....................................................................................... 33

Uy(Esteban) v. CA ................................................................................... 37
Torres v. Satsatin .................................................................................... 41
Metro, Inc. v. Lara's Gifts and Decors, Inc.............................................. 46
Lim v. Sps. Lazaro ................................................................................... 50
Allied Banking Corp. v. South Pacific Sugar Corp. .................................. 53
Phil. Bank of Communications v. CA ...................................................... 57
Sps. Santiago v. Allied Banking Corp. ..................................................... 61
RP v. Maj. Gen. Garcia ............................................................................ 69
Sps. Yu v. Ngo Yet Te .............................................................................. 73
Silangan Textitle Manu. Corp. v. Demetria ............................................ 78
PCL Industries Manu. Corp. v. CA ........................................................... 83

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Eraa v. Vera

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-48955

July 27, 1943

GERVASIO ERAA, et al., petitioners,

vs.
JOSE O. VERA, Judge of First Instance of Manila, and MARIE JOSEPHINE
PANZANI, respondents.
Vicente J. Francisco for petitioners.
Mariano H. de Joya for respondents.
MORAN, J.:
Respondent Marie Josephine Panzani was charged in the Court of First Instance of
Manila with the crime of murder committed against Dr. Francisco Erana and with
the crime of frustrated murder committed against Bienvenido P. Erana. In these two
criminal cases, the offended parties reserved their right to institute a separate civil
action for the civil liability arising from the two crimes charged. The same
respondent was charged in the same court in another criminal case with estafa
wherein the right to institute a separate civil action was not waived nor reserved by
the offended persons.
In these three criminal cases for murder, frustrated murder and estafa a
petition was filed by the offended parties wherein a preliminary attachment of the
properties belonging to respondent was applied for upon some of the grounds
specified in Rule 59, section 1, of the new Rules of Court. The Court issued an order
declaring itself to be without authority to issue writs of preliminary attachment in
criminal cases. Hence, this petition for combined writs of certiorari and mandamus
to annul such order and to compel the respondent court to consider the merits of
the motion for preliminary attachment.
The question here raised is, therefore, whether or not a court, acting on a criminal
case, has authority to grant preliminary attachment. According to Rule 107, section

1, of the new Rules of Court, "when a criminal action is instituted, the civil action for
recovery of civil liability arising from the offense charged is impliedly instituted with
the criminal action, unless the offended party expressly waives the civil action or
reserves his right to institute it separately." In the estafa case, since the offended
persons did not either waive or reserve their right to institute their civil action
separately, the same is deemed instituted with the criminal action. There were
therefore, in the estafa case two actions before the court: the criminal action for the
punishment of the accused, and the civil action for recovery of the money
fraudulently taken by her. If the Court had jurisdiction over the civil action, it must
necessarily have jurisdiction of all its necessary incidents. Indeed, it is expressly
provided in Rule 124, section 6, that "when by law jurisdiction is conferred on a
court or judicial officer, all auxilliary writs, processes and other means necessary to
carry it into effect may be employed by such court or officer; and if the procedure to
be followed in the exercise of such jurisdiction is not specifically pointed out by
these rules, any suitable process or mode of proceeding may be adopted which
appears most conformable to the spirit of said rules." One of the auxiliary writs to
carry into effect the jurisdiction of the court over the civil action is the preliminary
writ of attachment without which the judgment of the court awarding civil
indemnity may be nugatory. Other processes which the court may issue are those
which refer to the execution of such judgment where the rules applicable in civil
cases should be followed.
Respondents, however, invoke the decisions of this Court in U.S. vs. Namit, 38 Phil.,
926 and People vs. Moreno, 60 Phil., 674, wherein it was held that preliminary
attachment is not proper in criminal cases. But this ruling is predicated
fundamentally upon the theory that preliminary attachment is a purely statutory
remedy and there was then no clear legal provision making it applicable in criminal
proceedings. All doubts on this question have, however, disappeared upon the
promulgation of the new Rules of Court wherein, by clear authority of Rule 124,
section 6, above quoted, a criminal court having jurisdiction over the civil action
arising from the offense charged, is now permitted to issue all the auxiliary writs
necessary to carry such jurisdiction into effect. A similar legal principle was
recognized before in scattered provisions of law or decisions (see Act No. 136,
section 19; Revised Administrative Code, section 145-G; Act No. 190, section 610;
Shioji vs. Harvey, 43 Phil., 333, 344), applicable only in some courts and in certain
cases, and does not seem to cover the question now before us. Now, it is made
general and applicable in all cases and in all courts provided the requirements
therein specified are present.
2|P a g e

At the hearing of this case, it has been suggested that as the respondent Judge
merely followed former decisions of this Court, he should not be blamed therefor
and that accordingly the writ does not lie against him. This suggestion confuses the
basic ground for the writ. The personal motives of the respondent Judge as well as
his good or bad faith are in no way material for the grant or denial of the writ. The
only issue before us is whether the action taken by him constitutes a mistake of law.
We hold it be such according to our construction of the law as it is. The fact that he
has followed previous rulings of this Court may exempt him from blame but it can in
no wise wipe out his mistake. And such mistake, however well-grounded it may be,
is a sufficient basis for granting the writ.
In the criminal cases for murder and frustrated murder, since the offended persons
reserved their right to institute their civil action separately, preliminary attachment
is not proper. As the court in said criminal cases has no jurisdiction of the civil
actions arising from the offenses charged, there is nothing before the court to which
the preliminary attachment may be considered as an auxiliary writ and, therefore,
the court has no jurisdiction to issue such writ.
Judgment is, therefore, rendered declaring the respondent Court with authority to
grant preliminary writ of attachment in the estafa case wherein the civil action
arising from the offense charged is deemed instituted, and the respondent Court is
hereby ordered to act upon the merits of the motion for preliminary attachment
filed therein by the offended parties. With respect, however, to the criminal cases
for murder and frustrated murder, the respondent is declared to be without
authority to issue preliminary writs of attachment therein, and, accordingly, its
order to that effects is valid. Without costs.
Yulo, C.J., concurs.

3|P a g e

Ramcar, Inc. v. De Leon

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-1329

May 15, 1947

RAMCAR, INCORPORATED, petitioner,

vs.
DIONISIO DE LEON, Judge of First Instance of Manila, ET AL., respondents.
Roman A. Cruz for petitioner.
Ferdinand E. Marcos for respondents.
PERFECTO, J.:
On December 26, 1946, petitioner initiated a civil action against Daniel Francisco,
Ulysses S. Tread, Jr., and Antonio Lloret, by filing a complaint for damages with the
Court of First Instance of Manila, praying that defendants be sentenced to pay the
sum of P5,000, value of a stolen taxicab, P500, a price offered through the
newspaper to anyone who could point the whereabouts of said taxicab, plus P50 per
day as the average minimum daily income of the car and the costs of the suit, and
that, pending all proceedings attachment of the properties of defendants be
ordered, upon such bond and in the amount that the court may deem proper to fix.
Plaintiff alleged that he owns, among other taxicabs, a Renault car with motor No.
36428, painted black and white and provided with a taximeter, the total value of
which is P5,000, and that about December 2, 1946, it was stolen from the parking
place in front of the premises of plaintiff at 1049 R. Hidalgo, Manila, and after many
days of fruitless search, an offer of P500 through the newspapers was made to
anyone who could point to its whereabouts, and that said car, already in dismantled
condition, was found in and recovered from the possession of defendants, who
confessed to the representative of plaintiff and the police authorities as being the
authors of the theft of said car and of dismantling it to pieces, making it completely
unserviceable and a total loss. In support of the petition for the issuance of a writ of
attachment, plaintiff alleged that defendants were concealing their properties and
were about to dispose of them with intent of defrauding their creditos, including
plaintiff.

Two days later, on December 28, an information for the theft of the abovedescribed taxicab and based on the same facts alleged in the complaint, was filed
with the court of first instance against the said three defendants.
On January 2, 1947, after petitioner had filed a bond in the amount of P5,000, a writ
of attachment was issued against the properties of defendants. On January 14,
1947, defendant Daniel Francisco filed a petition praying for the dismissal of the
complaint and for the setting aside of the writ of attachment. On January 27, 1947,
defendant Ulysses S. Tread, Jr., moved for the suspension of the time within which
to file a responsive pleading to the complaint and to dissolve the writ of attachment.
On January 30, 1947 respondent judge issued an order denying the dismissal of the
complaint prayed for by Daniel Francisco, but granted its petition to set aside the
writ of attachment against him. On February 3, the same judge granted the petition
of defendant Ulysses S, Tread, Jr., dated January 27, 1947. On February 20, 1947,
respondent judge denied the motion for reconsideration filed by plaintiff who,
consequently, filed with this Supreme Court the petition which is now under our
consideration, praying that the orders of respondent judge of January 30 and
February 3 and 20, 1947, be declared null and void and that the writ of attachment
of January 2, 1947, be declared valid and in force.
Respondent judge set aside the writ of attachment of January 2, 1947, upon the
theory that it was improperly issued because at the time of its issuance the
information in the criminal case had already been filed, the theory being based on
the lower court's interpretation of section 1 of Rule 107 in which it is read:
(b) Criminal and civil actions arising from the same offense may be instituted
separately, but after the criminal action has been commenced the civil action cannot
be instituted until final judgment has been rendered in the criminal action;
(c) After a criminal action has been commenced, no civil action arising from the
same offense can be prosecuted; and the same shall be suspended, in whatever
stage it may be found, until final judgment in the criminal proceeding has been
rendered.
From the provisions of Rule 107 it is clear that, unless there is a waiver of civil action
or reserve of the right to initiate it expressly, criminal action always carries the civil
action for recovery of liability arising from the offense charged; that when criminal
action has been commenced before the civil action, the latter cannot be instituted
until final judgment has been rendered in the former; that when the civil action has
been commenced before the criminal action, the former shall be suspended upon
4|P a g e

the institution of the latter and until final judgment is rendered in the same; that,
generally, extinction of the criminal action does not carry with it extinction of the
civil; and that final judgment rendered in a civil action in absolving defendant from
the civil liability is no bar to a criminal action.
The above-quoted subsection (c) is the one directly applicable to the facts in this
case, although it should not be interpreted as an isolate provision, but in
conjunction with the rest of Rule 107. Said subsection enjoins that the civil action
arising from the same offense can be prosecuted after a criminal action has been
commenced, and if the civil action has been instituted before the criminal, it "shall
be suspended, in whatever stage it may be found, until final judgment in the
criminal proceeding has been rendered." The question is whether, under such
injunctions, the lower court was, after the filing of the information in the criminal
case, ipso facto deprived of the power to issue preliminary and auxiliary writs, such
as preliminary injunction, attachment, appointment of receiver, fixing amounts of
bonds to be filed, and other processes of similar nature, none of which goes into the
merits of the case.
Under the subsection in question, the civil action undergoes a procedural freezing.
But, in the same way that in physical congelation not all manifestations of life are
wiped out, the procedural freezing in question does not have the effect of wiping
out all manifestations of the existence of the suspended civil action. Marmots and
certain species of bats, including pipistrels, when hibernating in burrows and caves
during winter, offer the appearance of immobile corpses or simple lumps of ice. But
within the lifeless appearance that deceives human perception, because
metabolism, heart-beat rate, breathing and body temperature drop so low, there
lies the mysteriously latent vitality that, when hibernation is over, will permit those
animals to run with surprising agility and to soar high in cross-country flying.
Suspension is not termination. Suspension is not final ending, is not destruction, is
not death. The suspended civil action continues to be alive. Only its evolution to
maturity is temporarily stopped. Only it has to bide time. In meantime, while it is
waiting to be tried and decided on the merits, it may avail itself of the ancillary
processes which, expressly authorized by law, will permit it to accomplish its
purposes efficaciously, and may defend itself against bad faith, fraud and other evil
practices, intended to make nugatory the relief sought by it and to defeat the ends
of the administration of justice. If those ancillary processes cannot be resorted to
during the suspension, there is no sense in the rule providing only for suspension,
when its effect is to kill the action. We cannot subscribe to the idea that the authors
of the subsection in question, in providing for the suspension of the civil action

during the life of the criminal action, had the purpose of crippling to death the civil
action, but lacked the honesty of saying so in an outright manner, seeking rather the
hypocritical method of concealing their purpose under a deceitful word.
No one should forget that civil action for recovery of civil liability arising from an
offense has always deserved the concern of the law. The Revised Penal Code,
although it is supposed to deal only on criminal offenses, contains an express
provision reserving to offended parties such civil action. To make effective that right
of recovery of civil liability, section 2 of Rule 106 grants to the offended party the
right to commence a criminal action through a complaint, and section 16 of the
same rule guarantees to the offended party the right of intervention in criminal
action, either personally or by attorney. Rule 107 has been drafted to further
guarantee to the offended party the right of recovery abovementioned.
When no civil action is expressly instituted, according to subsection (a) of section 1
of Rule 107, it shall be impliedly jointly "instituted with the criminal action." That
means as if two actions are joined in one as twins, each one complete with the same
completeness as any of the two normal persons composing a twin. It means that the
civil action may be tried and prosecuted, with all the ancillary processes provided by
law. Such was the idea of the Supreme Court in United States vs. Heery (25 Phil.,
600) where, besides affirming the criminal judgment rendered therein, it ordered
the record returned to the lower court "for the further purpose of completing the
civil branch of the case." Therefore, within the criminal action, with which the civil
action is "impliedly instituted," the offended party may obtain the preliminary writ
of attachment. There is no logic in denying that right to the plaintiff, when the civil
action is separately instituted.
The orders of the respondent judge dated January 30 and February 3, 1947, having
been issued upon a wrong interpretation of subsection (c) of section 1 of Rule 107,
and no intimation to the contrary having been made, we should assume that,
without said wrong interpretation, the writ of attachment was issued because the
plaintiff was, under the facts and the law, entitled to its issuance, and that there was
the duty of the lower court to issue it.
For all the foregoing, the orders of the respondent judge of January 30 and February
3, 1947, are set aside, and the writ of attachment of January 2, 1947, is maintained,
unless and until lifted through a proper counter-bond that the defendants may file
or for any other reason recognized by law. Costs shall be taxed against respondents.

5|P a g e

representing payments for: (1) the unpaid amortizations of a loan; (2) technical and
managerial services rendered; and (3) the unpaid installments of the equipment
provided by respondent Aboitiz to petitioners (Rollo, p. 37).

Adlawan v. Torres

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. Nos. 65957-58 July 5, 1994

ELEAZAR V. ADLAWAN and ELENA S. ADLAWAN, petitioners,
vs.
Hon. Judge RAMON AM. TORRES, as Presiding Judge of Branch 6, Regional Trial
Court Cebu City, ABOITIZ & COMPANY, INC. and THE PROVINCIAL SHERIFFS OF
CEBU, DAVAO, RIZAL and METRO MANILA, Respectively, respondents.
Pablo P. Garcia for petitioners.
Isaias P. Dicdican and Sylva G. Aguirre-Paderanga for Aboitiz & Co., Inc.

QUIASON, J.:
This is a petitioner for certiorari and mandamus with preliminary injunction or
restraining order to nullify: (1) the Order dated September 14, 1983 of respondent
Judge Ramon Am. Torres of the Regional Trial Court, Branch 6, Cebu City, in Civil
Case No. CEB-1185 and the Order dated September 26, 1983 of Judge Emilio A.
Jacinto of Branch 23 of the same court in Civil Case No. CEB-1186, which granted the
motion for the issuance of writs of preliminary attachment for the seizure of the
property of petitioners by respondent Provincial Sheriffs; and (2) the Order dated
December 12, 1983 of respondent Judge Ramon Am. Torres in the consolidated
cases, Civil Case No. CEB-1185 and Civil Case No. CEB-1186.
I
In a complaint dated April 24, 1982 filed with the Court of First Instance of Cebu,
now Regional Trial Court, (Civil Case No. R-21761), respondent Aboitiz and
Company, Inc. (Aboitiz) sought to collect from petitioners a sum of money

Acting on the ex parte application for attachment, the Executive Judge of the Court
of First Instance of Cebu, issued on May 14, 1982, an order directing the issuance of
the writ of preliminary attachment against the property of petitioners upon the
filing by respondent Aboitiz of an attachment bond.
Subsequently, the case was raffled to Branch 11 of the Court of First Instance of
Cebu, which issued a writ of attachment addressed to the Provincial Sheriffs of Cebu
and the City Sheriff of Davao City. It was the Sheriff of Davao City who enforced the
writ of attachment, resulting in the seizure of heavy construction equipment, motor
vehicle spare parts, and other personal property with the aggregate value of
P15,000,000.00. The said court also granted the motion of respondent Aboitiz to
take possession and custody of the attached property of petitioners and ordered the
Provincial Sheriff of Davao to deliver the property to respondent Aboitiz.
Petitioners moved for a bill of particulars and to set aside the ex parte writ of
attachment. Finding merit in the motion to set aside the writ, Branch 11 ordered on
July 6, 1982 the lifting of the writ and, consequently, the discharge of the property
levied upon.
Respondent Aboitiz filed an urgent ex parte motion, praying for the stay of the July
6, 1982 Order for a period of 15 days for it to be able to appeal the order. The
motion was favorably acted upon.
However, on July 13, 1982, respondent Aboitiz filed a notice of dismissal of its
complaint in accordance with Section 1, Rule 17 of the Revised Rules of Court.
Consequently, Branch 11 issued an order confirming the notice of dismissal,
emphasizing that all orders of the court issued prior to the filing of said notice of
dismissal had been rendered functus oficio, and considering all pending incidents in
the case as moot and academic.
Petitioner Eleazar Adlawan filed a motion praying that the July 6, 1982 Order be
implemented and enforced. On December 20, however, Branch 11 denied the
motion on account of the filing by respondent Aboitiz before Branch 16 of the Court
of First Instance of Cebu in Lapu-lapu City of an action for delivery of personal
property (Civil Case No. 619-L), and the filing by petitioner Eleazar Adlawan before

6|P a g e

Branch 10 of the same court of an action for damages in connection with the seizure
of his property under the writ of attachment.

Accordingly, the dispositive portion of the April 3, 1990 decision of the Third Division
of this Court was modified to read as follows:

In the replevin suit, Branch 16 ordered the seizure and delivery of the property
described in the complaint. Said property were later delivered by the provincial
sheriff to respondent Aboitiz. Alleging that while his office was situated in Cebu City,
Adlawan was a resident of Minglanilla, and therefore, the Lapu-lapu City court
should not entertain the action for replevin. Petitioner Eleazar Adlawan filed an
omnibus motion praying for the reconsideration and dissolution of the writ of
seizure, the retrieval of the property seized, and the dismissal of the complaint. He
also averred that the property seized were in custodia legis by virtue of the writ of
attachment issued by Branch 11. His omnibus motion was denied. Subsequently, he
filed a motion for reconsideration which was not granted.

WHEREFORE, in view of the foregoing, this Court rules that the properties in the
custody of the private respondent Aboitiz & Company by virtue of the writ of
attachment issued in Civil Case No. R-21761 be returned to the petitioner, but
properties in the custody of the private respondent by virtue of the writ of replevin
issued in Civil Case No. 619-L be continued in custodia legis of said court pending
litigation therein.

The denial of his omnibus motion led petitioner Eleazar Adlawan to file a petition
for certiorari and mandamus in the Supreme Court (G.R. No. 63225). The Third
Division of this Court ruled on April 3, 1990 that since attachment is an ancillary
remedy, the withdrawal of the complaint left it with no leg to stand on. Thus, the
Court disposed of the case as follows:
WHEREFORE, in view of the foregoing, this Court rules that the attached properties
left in the custody of private respondent Aboitiz and Company, Inc. be returned to
petitioner Eleazar V. Adlawan without prejudice to the outcome of the cases filed by
both parties (Rollo, p. 324).
Respondent Aboitiz filed a motion for reconsideration of the decision, contending
that the replevin case was distinct and separate from the case where the writ of
attachment was issued. It argued that the writ of replevin, therefore, remained in
force as the Third Division of the Supreme Court had not found it illegal. The motion
was, however, denied with finality in the Resolution of July 11, 1990.

The Decision in G.R. No. 63225 having become final and executory, entry of
judgment was made on November 15, 1990. This should have terminated the
controversy between petitioners and respondent Aboitiz insofar as the Supreme
Court was concerned, but that was not to be. On September 9, 1983 respondent
Aboitiz filed against petitioners two complaints for collection of sums of money with
prayers for the issuance of writs of attachment in the Regional Trail Court, Branch
23, Cebu City, docketed as Civil Cases Nos. CEB-1185 and CEB-1186. The complaint
in Civil Case No. CEB-1185 alleged that petitioner Eleazar Adlawan (defendant
therein) was awarded a contract for the construction of the Tago Diversion Works
for the Tago River Irrigation Project by the National Irrigation Administration and
that respondent Aboitiz (plaintiff therein) loaned him money and equipment, which
indebtedness as of June 30, 1983 totaled P13,430,259.14. Paragraph 16 of the
complaint states:
16. That, in view of the enormous liabilities which the defendants have with the
plaintiff, defendants executed a real estate mortgage covering eleven (11) parcels of
land in favor of Philippine Commercial and Industrial Bank (PCIB) to secure a
P1,000,000.00 loan with said bank and was able to remove, conceal and dispose of
their properties, obviously to defraud the plaintiff, . . . (Rollo, pp. 65-66).

Undaunted, respondent Aboitiz filed a second motion for reconsideration with a

prayer that the dispositive portion of the decision be clarified. It asserted that
because the writ of preliminary attachment was different from the writ of replevin,
we should rule that the property subject of the latter writ should remain in custodia
legis of the court issuing the said writ.

The complaint in Civil Case No. CEB-1186 alleged that petitioner Eleazar Adlawan
(defendant therein) was awarded a contract for the construction of the Lasang River
Irrigation Project by the National Irrigation Administration and that respondent
Aboitiz (plaintiff therein) loaned him money and equipment, which indebtedness as
of June 30, 1983 totalled P5,370,672.08. Paragraph 15 of the complaint is similarly
worded as paragraph 16 of the complaint in Civil Case No. CEB-1185.

In the Resolution dated September 10, 1990, the Third Division stated that "the
properties to be returned to petitioner are only those held by private respondent
(Aboitiz) by virtue of the writ of attachment which has been declared non-existent."

Civil Case No. CEB-1185 was raffled to the Regional Trial Court, Branch 6, presided
by respondent Judge Ramon Am. Torres. On September 14, 1983, respondent Judge
ordered the issuance of a writ of attachment upon respondent Aboitiz' filing of a
7|P a g e

bond of P5,000,000.00. Similarly, in Civil Case No. CEB-1186, which was raffled to
Branch 23, presiding Judge Emilio A. Jacinto ordered the issuance of a writ of
attachment upon the filing of a bond of P2,500,000.00. Accordingly, in Civil Case No.
CEB-1185, the Acting Provincial Sheriff of Cebu issued separate writs dated
September 26, 1983 addressed to the Sheriffs of Cebu, Davao and Metro Manila. No
writ of preliminary attachment was, however, issued in Civil Case No. CEB-1186.
Petitioners then filed in Civil Cases Nos. CEB-1185 and CEB-1186 urgent motions to
hold in abeyance the enforcement of the writs of attachments. They alleged in the
main that since their property had been previously attached and said attachment
was being questioned before the Supreme Court in G.R. No. 63225, the filing of the
two cases, as well as the issuance of the writs of attachment, constituted undue
interference with the processes of this court in the then pending petition involving
the same property.
Upon motion of respondent Aboitiz, Branch 23 issued on October 13, 1983, an order
directing the transfer to Branch 6 of Civil Case No. CEB-1186 for consolidation with
Civil Case No. CEB-1185.
Meanwhile, in its comment on petitioners' motion to withhold the enforcement of
the writs of attachment, respondent Aboitiz alleged that the voluntary dismissal of
Civil Case No. R-21761 under Section 1, Rule 17 of the Revised Rules of Court was
without prejudice to the institution of another action based on the same subject
matter. It averred that the issuance of the writ of attachment was justified because
petitioners were intending to defraud respondent Aboitiz by mortgaging 11 parcels
of land to the Philippine Commercial and Industrial Bank (PCIB) in consideration of
the loan of P1,100,000.00, thereby making PCIB a preferred creditor to the prejudice
of respondent Aboitiz, which had an exposure amounting to P13,430,259.14.
Petitioners then filed a rejoinder to said comment, contending that since the
property subject of the writ of attachment have earlier been attached or replevied,
the same property were under custodia legis and therefore could not be the subject
of other writs of attachment.
On December 12, 1983, respondent Judge issued an order finding no merit in
petitioners' motion for reconsideration and directing the sheriffs of Cebu, Davao and
Metro Manila "to proceed with the enforcement and implementation of the writs of
preliminary attachment." Respondent Judge ruled that the writs of attachment were
issued on the basis of the supporting affidavits alleging that petitioner had removed

or disposed of their property with intent to defraud respondent Aboitiz (Rollo, pp.
109-113).
On December 15, petitioners filed an ex parte motion praying: (1) that the
December 12, 1983 Order be set for hearing; (2) that they be given 15 days within
which to either file a motion for reconsideration or elevate the matter to this Court
or the then Intermediate Appellate Court; and (3) that within the same 15-day
period the implementation or enforcement of the writs of attachment be held in
abeyance.
On the same day, respondent Judge issued an order holding in abeyance the
enforcement of the writs of preliminary attachment in order to afford petitioners an
opportunity to seek their other remedies (Rollo, p. 116).
On December 27, petitioners filed the instant petition for certiorari and mandamus.
They alleged that respondent Judge gravely abused his discretion in ordering the
issuance of the writs of preliminary attachment inasmuch as the real estate
mortgage executed by them in favor of PCIB did not constitute fraudulent removal,
concealment or disposition of property. They argued that granting the mortgage
constituted removal or disposition of property, it was not per se a ground for
attachment lacking proof of intent to defraud the creditors of the defendant.
Petitioners contended that in Civil Case No. 21761, Branch 11 had ruled that the
loan for which the mortgage was executed was contracted in good faith, as it was
necessary for them to continue their business operations even after respondent
Aboitiz had stopped giving them financial aid.
Petitioners also contended that respondent Judge exceeded his jurisdiction when he
issued the Order of December 12, 1983, without first hearing the parties on the
motion for attachment and the motion to dissolve the attachment. Moreover, they
argued that respondent Judge gravely abused his discretion in proceeding with the
case, notwithstanding that his attention had been called with regard to the
pendency of G.R. No. 63225 in this Court.
As prayed for by petitioners, we issued a temporary restraining order on January 6,
1984 "enjoining the respondents from enforcing or implementing the writs of
preliminary attachment against the property of petitioners, all dated September 26,
1983 and issued in Civil Cases Nos. CEB 1185 and 1186" (Rollo, p. 118).

8|P a g e

II
The resolution of this case centers on the issue of the legality of the writ of
attachment issued by respondent Judge in the consolidated cases for collection of
sums of money.
The affidavit submitted by respondent Aboitiz in support of its prayer for the writ of
attachment does not meet the requirements of Rule 57 of the Revised Rules of
Court regarding the allegations on impending fraudulent removal, concealment and
disposition of defendant's property. As held in Carpio v. Macadaeg, 9 SCRA 552
(1963), to justify a preliminary attachment, the removal or disposal must have been
made with intent to defraud defendant's creditors. Proof of fraud is mandated by
paragraphs (d) and (e) of Section 1, Rule 57 of the Revised Rules of Court on the
grounds upon which attachment may issue. Thus, the factual basis on defendant's
intent to defraud must be clearly alleged in the affidavit in support of the prayer for
the writ of attachment if not so specifically alleged in the verified complaint. The
affidavit submitted by respondent Aboitiz states:
REPUBLIC OF THE PHILIPPINES
CITY OF CEBU ...............) S.S.
I, ROMAN S. RONQUILLO, of legal age, married and a resident of Cebu City, after
being sworn in accordance with law, hereby depose and say:
That I am the Vice-President of the plaintiff corporation in the above-entitled case;
That a sufficient cause of action exists against the defendants named therein
because the said defendants are indebted to the plaintiffs in the amount of
P13,430,259.14 exclusive of interests thereon and damages claimed;
That the defendants have removed or disposed of their properties with intent to
defraud the plaintiff, their creditor, because on May 27, 1982 they executed a real
estate mortgage in favor of Philippine Commercial and Industrial Bank (PCIB)
covering eleven (11) of their fifteen (15) parcels of land in Cebu to secure a
P1,000,000.00 loan with the same bank;
That this action is one of those specifically mentioned in Section 1, Rule 57 of the
Rules of Court, whereby a writ preliminary attachment may lawfully issue because
the action therein is one against parties who have removed or disposed of their
properties with intent to defraud their creditor, plaintiff herein;

That there is no sufficient security for the claims sought to be enforced by the
present action;
That the total amount due to the plaintiff in the above-entitled case is
P13,430,259.14, excluding interests and claim for damages and is as much the sum
for which an order of attachment is herein sought to be granted; above all legal
counter-claims on the part of the defendants.
IN VIEW WHEREOF, I hereunto set my hand this 24th day of August 1983 at Cebu
City, Philippines.
(Sgd.)
RAMON S. RONQUILLO
Affiant
(Rollo, pp. 171-172)
It is evident from said affidavit that the prayer for attachment rests on the mortgage
by petitioners of 11 parcels of land in Cebu, which encumbrance respondent Aboitiz
considered as fraudulent concealment of property to its prejudice. We find,
however, that there is no factual allegation which may constitute as a valid basis for
the contention that the mortgage was in fraud of respondent Aboitiz. As this Court
said in Jardine-Manila Finance, Inc. v. Court of Appeals, 171 SCRA 636 (1989), "[T]he
general rule is that the affidavit is the foundation of the writ, and if none be filed or
one be filed which wholly fails to set out some facts required by law to be stated
therein, there is no jurisdiction and the proceedings are null and void."
Bare allegation that an encumbrance of a property is in fraud of the creditor does
not suffice. Factual bases for such conclusion must be clearly averred.
The execution of a mortgage in favor of another creditor is not conceived by the
Rules as one of the means of fraudulently disposing of one's property. By
mortgaging a piece of property, a debtor merely subjects it to a lien but ownership
thereof is not parted with.
Furthermore, the inability to pay one's creditors is not necessarily synonymous with
fraudulent intent not to honor an obligation (Insular Bank of Asia & America, Inc. v.
Court of Appeals, 190 SCRA 629 [1990]).
Consequently, when petitioners filed a motion for the reconsideration of the order
directing the issuance of the writ of attachment, respondent Judge should have
9|P a g e

considered it as a motion for the discharge of the attachment and should have
conducted a hearing or required submission of counter-affidavits from the
petitioners, if only to gather facts in support of the allegation of fraud (Jopillo, Jr. v.
Court of Appeals, 167 SCRA 247 [1988]). This is what Section 13 of Rule 57
mandates.
This procedure should be followed because, as the Court has time and again said,
attachment is a harsh, extraordinary and summary remedy and the rules governing
its issuance must be construed strictly against the applicant. Verily, a writ of
attachment can only be granted on concrete and specific grounds and not on
general averments quoting perfunctorily the words of the Rules (D.P. Lub Oil
Marketing Center, Inc. v. Nicolas, 191 SCRA 423 [1990]).
The judge before whom the application is made exercises full discretion in
considering the supporting evidence proffered by the applicant. One overriding
consideration is that a writ of attachment is substantially a writ of execution except
that it emanates at the beginning, instead of at the termination of the suit (Santos v.
Aquino, Jr., 205 SCRA 127 [1992]; Tay Chun Suy v. Court of Appeals, 212 SCRA 713
[1992]).
We need not discuss the issue of whether or not Civil Cases Nos. CEB-1185 and CEB1186 constituted undue interference with the proceedings in G.R. No. 63225 in view
of the entry of judgment in the latter case.
WHEREFORE, the petition is GRANTED and the Temporary Restraining Order issued
on January 6, 1984 is made PERMANENT. Respondent Judge or whoever is the
presiding judge of the Regional Trial Court, Branch 6, Cebu City, is DIRECTED to
PROCEED with the resolution of Civil Cases Nos. CEB-1185 and CEB-1186 with
deliberate dispatch.
SO ORDERED.
Cruz, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

10 | P a g e

Carpio v. Macadaeg

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17797

November 29, 1963

ISABELO CARPIO, petitioner,

vs.
HON. HIGINIO MACADAEG, as presiding Judge of Branch X, Court of First Instance
of Manila; OSCAR C. ABAYA, Provincial Sheriff of Rizal and City Sheriff of
Manila, respondents.
W. S. Fajardo and J. P. Cortez for petitioner.
O.C. Baria and F. Manalo for respondents.
MAKALINTAL, J.:
Isabelo Carpio filed this petition for certiorari and prohibition to annul and stop
implementation of respondent Judge's orders of October 24 and November 25,
1960, directing the sale of five race horses and goods previously attached upon
motion of respondent Oscar Abaya. We issued a writ of preliminary injunction to
restrain the sale, with instructions to respondent Sheriff of Rizal to allow the daily
training of the said horses and their participation in races whenever they were
included in the racing programs.
On January 17, 1960 respondent Oscar Abaya filed a complaint against petitioner for
the recovery of various sums aggregating P25,000 (Civil Case No. 42450, C.F.I.
Manila). Before summons was served, and upon ex partemotion of respondent
Abaya (Annex B), respondent Judge issued two orders of attachment dated February
8 (Annex C-1) and February 10, 1960 (Annex C), pursuant to which the Sheriff of
Manila garnished goods consisting of hardware imported by petitioner, and the
Sheriff of Rizal seized petitioner's five racing horses named Mohamad, Mohamad's
Pride, Magic Spell, Nashua and Sirius. On February 12, 1960 petitioner filed an
urgent petition to discharge the orders of attachment (Annex 1). Acting thereon,
respondent Judge, on March 11, 1960, set aside the two orders of February 8 and
10, 1960 (Annex F).

Upon two motions of respondent Abaya (Annexes H and 1), respondent Judge, on
March 29, 1960, set aside his order of March 11, 1960 (Annex K). Though no new
petition was filed for issuance of a writ of attachment and no new order or alias writ
of attachment was issued, respondent Sheriff of Manila garnished the
aforementioned goods and respondent Sheriff of Rizal attached the five racing
horses.
Upon petition of respondent Abaya (Annex L), respondent Judge issued an order
directing the sale at public auction of the five racing horses (Annex M). However, the
sale was halted by petitioner's putting up a bond of P4,000 and the horses were
released to him by respondent Sheriff of Rizal.
Upon motion of respondent Abaya (Annex R), respondent Judge, on October 24,
1960, ordered the increase of the bond to P10,000, and ordered respondent Sheriff
of Rizal to proceed with the sale of the horses should petitioner failed to file the
additional bond of P6,000 (Annex S). Motions filed by petitioner seeking
reconsideration of the said order of October 24 were denied by respondent Judge
on November 25, 1960 (Annex X). So, respondent Sheriff of Rizal advertised the sale
at public auction of the five racing horses. Upon motion of respondent Abaya (Annex
T), and despite the opposition of petitioner(Annex U), respondent Judge, on the
same day November 25 issued an order authorizing the sale of the garnished
goods (Annex Z).
Petitioner seeks annulment of the order of October 24, 1960 ordering him to file an
additional bond of P6,000; the order of November 25, 1960 denying his motion for
reconsideration of the order of October 24; and the order of the same date
authorizing the sale of the garnished goods, on the ground that in issuing them
respondent Judge acted without jurisdiction and/or with grave abuse of discretion.
Respondent Judge should not have issued the two writs of preliminary attachment
(Annexes C and C-1) on Abaya's simple allegation that the petitioner was about to
dispose of his property, thereby leaving no security for the satisfaction of any
1
judgment. Mere removal or disposal of property, by itself, is not ground for
issuance of preliminary attachment, notwithstanding absence of any security for the
satisfaction of any judgment against the defendant. The removal or disposal, to
justify preliminary attachment, must have been made with intent to defraud
2
defendant's creditors.
Respondent Judge in fact corrected himself. Acting on petitioner's motion to
discharge attachment and apparently believing the correctness of the grounds
11 | P a g e

alleged therein, he set aside the orders of attachment (Order of March 11, 1960,
Annex F).
But reversing himself again, he set aside his order of March 11, 1960 (Annex K,
4
dated March 29, 1960. This he did apparently on Abaya's contention that petitioner
was about to remove or dispose of his property in order to defraud his creditors, as
examples of which disposals he pointed to the alleged sale of the horses and of
petitioner's office furniture (Abaya's motion for reconsideration dated March 15,
1960, Annex H). These averments of fraudulent disposals were controverted by
petitioner who, in his opposition to Abaya's motions for reconsideration (Annex J),
reiterated the defenses against preliminary attachment which he had previously
enumerated in his petition to discharge the two orders of attachment. Thus the
question of fraudulent disposal was put in issue; and respondent Judge, before
issuing the preliminary attachment anew, should have given the parties opportunity
to prove their respective claims or, at the very least, should have provided petitioner
with the chance to show that he had not been disposing of his property in fraud of
5
creditors.

Having construed that the preliminary attachment should not have been ordered,
we believe it is no longer necessary to discuss the subsequent actuations of
respondent Judge which were all based on the erroneous assumption that his order
of March 29, 1960 was valid (Annex K).
WHEREFORE, the order of March 29, 1960 and all succeeding orders of respondent
Judge with respect to said preliminary attachment, are hereby declared null and
void; the attached properties are ordered released; and the preliminary injunction
issued by this Court is made permanent. Costs against respondent Abaya.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Barrera, Paredes, Dizon and
Regala, JJ., concur.

But for much more than the above reason, respondent Judge should not have again
ordered the issuance of the writ of preliminary attachment since Abaya never made
any affidavit as required by Rule 59, Rules of Court, which states that:
SEC. 3. Order issued only when affidavit and bond filed An order of attachment
shall be granted when it is made to appear by the affidavit of the plaintiff, 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 plaintiff, or the value of the property which he is entitled to
recover the possession of, is as much as the sum for which the order is granted
above all legal counterclaims; which affidavit, and the bond required by the next
succeeding section, must be duly filed with the clerk or judge of the court before the
order issues.
For the purposes of issuance of preliminary attachment, the affidavit (Annex B-1)
attached to Abaya's motion therefor (Annex B), as we have said, is not sufficient,
and it does not appear that he ever executed another affidavit that complies with
the above section. None appears attached either to his motion for reconsideration
dated March 15, 1960 (Annex H) or to his motion for reconsideration dated March
16, 1960 (Annex I), upon which the order of attachment (Annex K) was based.
12 | P a g e

Uy(Maximo) v. CA

Republic of the Philippines

SUPREME COURT
Manila

Hence, respondent filed a complaint against petitioners for recovery of a sum of

money, return of the fishing vessel and damages before the Regional Trial Court of
Negros Oriental, Dumaguete City, Branch 40. After trial on the merits, a judgment,
dated November 29, 1989, was rendered against petitioners ordering them to:
1. Return the fishing vessel which they leased from respondents, together with its
accessories or to pay its value of P350,000.00 if delivery cannot be made;

SECOND DIVISION
2. To pay respondents the following sums:

G.R. No. 95550 November 23, 1992

MAXIMO UY and SYLVIA VASQUEZ-UY, petitioners,
vs.
THE HON. COURT OF APPEALS, and ROSALINDA MORENO-ANLAP, respondents.

a) P32,000.00 for unpaid rentals plus legal rate of interest from the filing of the civil
case until paid;
b) P400/day representing the daily income of the fishing vessel or its value paid;
c) P3,000.00 as expenses for litigation;
d) P5,000.00 as moral damages;

NOCON, J.:

and 20% of all the aforementioned amount as attorneys fees and to pay cost.

Petitioners, spouses Maximo Uy and Sylvia Vasquez, are before Us praying for the
review of the decision of respondent Court of Appeals, dated April 24, 1990, and its
resolution dated September 26, 1990, denying their motion for reconsideration. The
questioned decision dismissed the petition for certiorari and upheld the order of
attachment against petitioner's properties, issued by Judge Jesus Tabilon, Branch 40
of the 7th Judicial Region, Dumaguete City.

The judgment was predicted on the following findings of the trial court, to wit:

Records show that private respondents Enrique Anlap and Rosalinda Moreno-Anlap
are the owners of a fishing vessel known as "cub-cub" valued at P350,000.00. On
September 20, 1985, they rented said vessel and its accessories to petitioners for a
period of sixty (60) days commencing September 20, 1985 until November 19, 1985,
at the rental of P8,000.00 per 30-days or for a total sum of P16,000.000, which
petitioners fully paid. The agreement was that should petitioners continue using the
vessel after the expiration of the lease, the same shall be considered renewed for
another period of one hundred twenty (120) days, provided petitioners pay the
amount of P16,000.00 as advance payment for the first sixty (60) days and another
P16,000.00 after the expiration of the first sixty (60) days. However, despite the
expiration of the original 60-day period petitioners failed to return the fishing vessel
and instead continued using the vessel without paying rentals in spite of repeated
demands.

Defendants, however, failed to deliver to plaintiffs at Basay, Negros Oriental, the

fishing vessel and its accessories in question up to the present nor pay the rentals
thereof, in violation of the contract of lease . . . which is the law between plaintiffs
and defendants. Obligations arising from contracts had (sic) the force of law
between the contracting parties and should be complied with in good faith (Art.
1159, New Civil Code). Those who in the performance of their obligations are guilty
of fraud, negligence, or delay and those who in any manner contravene the tenor
thereof, are liable for damages (Art. 1170, New Civil Code). Defendants (sic)
allegation that on December 21, 1985, plaintiffs went to their house and informed
them that they (plaintiffs) were terminating the lease of the fishing vessel in
question and had already informed Edson Celle the boat engineer to bring the
fishing vessel in question from Zamboanga to Basay do not absolve defendants from
complying with their obligations mandated in the contract of lease, for aside from
the fact that those allegations were not supported with clear and convincing
evidence and therefore, lacks the ring of truth, they were denied by plaintiffs. That
even granting that those allegations were true, the same cannot be considered
delivery of the fishing vessel . . . as contemplated in . . . the lease contract . . .

13 | P a g e

xxx xxx xxx

Defendants cannot also claimed (sic) exemption from any liability regarding the nondelivery of the fishing boat . . . on the ground that the same got lost due to
fortuitous event because in the contract of lease . . . defendants are bound to pay
plaintiffs the value of the fishing boat . . . in the event of total loss or destruction by
fortuitous events. When the law or stipulation, the obligor is liable even for
fortuitous events, the loss of the thing does not extinguish the obligation and he
1
shall be responsible for damages.
On December 15, 1989, petitioners filed a notice of appeal from the aforesaid
decision, while respondent filed an ex-parte motion for writ of attachment dated
December 18, 1989, which was granted, and the same issued on December 19,
1989. Petitioners' ex-parte motion to discharge said writ failed. Likewise, their
attempt at securing a reversal with the Court of Appeals was a failure with the
dismissal of their petition for certiorari.
Elevating the matter to this Court, petitioners specifically challenge the propriety of
the order of preliminary attachment issued by the trial court, which read as follows:
It appearing that the appeal taken by the defendants by filing a Notice of Appeal had
not been perfected on account of the fact that the last day for taking an appeal has
not yet expired and finding the Ex-parte Motion for writ of attachment to be
2
meritorious, the same is hereby granted.
Petitioners contend that the above-quoted Order does not measure up to the rigid
standard set by this Court in the issuance of preliminary attachment orders since it
does not contain any findings of fact or of law. The lower court in denying the
motion of the petitioners to discharge the writ of attachment admitted that "there
was no hearing in the granting of the question (sic) writ for this case was decided by
this court and its factual findings supporting the decision supports the issuance of
the question (sic) writ pursuant to paragraphs (c) and (d) of Sec. 1, Rule 57 of the
Rules of court. That to conduct a hearing of said motion will just be a repetition in
3
the presentation of evidence already on record.
Petitioners argue that there is nothing in the trial court's decision which would
support any kind of fraud or concealment which could serve as basis for attachment.
At any rate, petitioners do not agree that a writ of attachment may be issued upon a
ground established from the evidence in the main case. Petitioners went further to
say that during the entire hearing of the main case, no petition for attachment was

filed by the respondents, and it was only after the appeal was perfected that an exparte motion for attachment was filed.
Attachment is a provisional remedy by which the property of an adverse party is
taken into legal custody as a security for the satisfaction of any judgment that may
4
be recovered by the plaintiff or any proper party. It is an auxiliary remedy the
granting of which lies within the sound discretion of the judge taking cognizance of
the principal case upon existence it depends. Its purpose is to secure a contingent
lien on defendant's property until plaintiff can obtain a judgment and have such
property applied to its satisfaction or to make 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 placed beyond reach of
5
creditors.
We find nothing in the Rules of Court which makes notice and hearing indispensible
and mandatory for the issuance of a writ of attachment. It is simply the duty of the
court to ensure that the writ is issued on concrete and specific grounds and not on
general averments. Such being the rule, there is no reason why the evidence in the
main case cannot be used as basis for issuance of a writ of attachment, more so if it
was proved that the defendants unjustly detained, improperly disposed of or
concealed or placed the personal property beyond the reach of their creditors.
In the case before Us the writ of attachment sought for was granted only after trial
on the merits and a finding on petitioners' liability for the return of the boat leased
or its value in case delivery cannot be effected. Nevertheless, We agree with the
petitioners that We find nothing in the judgment that would justify the issuance of a
writ of attachment.
The statement in respondent's motion for a writ of attachment that they are
incorporating "by way of reference the allegations of plaintiffs' complaint and all the
evidence already adduced in this case insofar as they are
6
applicable;" and in which complaint, respondents alleged that petitioners refused
7
and/or denied them information as to the whereabouts of their fishing vessel, are
not grounds justifying the issuance of a writ of attachment. Moreover, such
allegations was not proved in the main case. Petitioners' liability, if any is predicted
on their non-fulfillment of their obligation under the lease contract.
Be that as it may, petitioners' impression that the trial court loses jurisdiction to
issue a writ of attachment upon perfection of the appeal is misplaced. The rules
specifically state that a motion for a writ of attachment may be filed at the
14 | P a g e

commencement of an action or at anytime thereafter. 8 The trial court may even

issue orders for the protection and preservation of the rights of the parties which do
9
not involve any matter litigated by the appeal.
10

In the case of Galang v. Endencia this Court upheld the issuance of a writ of
attachment even though appeal had been perfected. Relying on Sec. 9, Rule 41 of
the then Rules of Court, the Court said that "[t]he 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 defendant's appeal."
In the same case, the Court said that errors committed by the trial 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. In such cases,
appeal together with the main case, not certiorari, is the proper remedy.
PREMISES CONSIDERED, the Petition for Review is hereby GRANTED, the decision of
the Court of Appeals dated April 24, 1990 is hereby REVERSED and the trial court's
order of preliminary attachment against the properties of the petitioners is hereby
LIFTED and CANCELLED. It is further ordered that properties attached be restituted
to the petitioners or if this is not possible, to allow petitioners to claim on the bond.
SO ORDERED.
Narvasa, C.J., Feliciano, Regalado, and Campos, JJ., concur.

15 | P a g e

the bonding company that the bond had not been renewed and the corresponding
4
payment for extension had not been made .

Olib v. Pastoral

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 81120 August 20, 1990

Sps. OLIB and ROBERTA R. OLIB, petitioners,
vs.
Hon. EDELWINA C, PASTORAL, Judge of the Regional Trial Court of Agusan del
Norte and Butuan City, Branch III and CORAZON M, NAVIA, respondents.
Carlito B. Yebes for petitioners.
Wenceslao B. Resales for respondents.

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,
petitioner herein, for dissolution of their partnership and other reliefs, with a prayer
1
for the issuance of a writ of a preliminary attachment. The it was granted on
November 10, 1983, resulting in the attachment of six parcels of land belonging to
2
the petitioners, along with stocks of merchandise in their bodega. 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
3
November 1983 had already lapsed. This was accompanied by a certification from

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
5
attorney's fees and litigation expenses. On April 16, 1986, Navia perfected her
appeal from the challenged judgment, and the records of the case were elevated to
6
the Court of Appeals on January 25, 1988.
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:
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:
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
16 | P a g e

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.
7
Endencia, where this Court held:
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:
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 nonpayment 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
8
recovered by the plaintiff or any proper party.
It is an auxiliary remedy and cannot have an independent existence apart from the
9
main suit or claim instituted by the plaintiff against the defendant. Being merely
ancillary to a principal proceeding, the attachment must fail if the suit itself cannot
be maintained as the purpose of the writ can no longer be justified.
The consequence is that where the main action is appealed, the attachment which
may hive 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 judgement which gives an end to the
litigation. (Section 143, Act 190; 3 C.J., 549. par. 389.)
xxx xxx xxx
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
17 | P a g e

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
11
Appeals, this Court observed:

... 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
13
to resolve.

... 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.

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
14
appeal is not allowed.

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
12
this clear inLuzon Surety Co. v. Quebrar, where it declared:

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.

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.

Narvasa (Chairman), Gancayco, Grio-Aquino and Medialdea, JJ., concur.

xxx xxx xxx

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.
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:

18 | P a g e

2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by raffle,
issued an Order granting the ex parte application and fixing the attachment bond at
P4,600,513.37.

Davao Light, Inc. v. CA

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 93262 December 29, 1991

DAVAO LIGHT & POWER CO., INC., petitioner,
vs.
THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLAND
TOURIST INN, and TEODORICO ADARNA, respondents.
Breva & Breva Law Offices for petitioner.
Goc-Ong & Associates for private respondents.

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.
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.

NARVASA, J.:p
Subject of the appellate proceedings at bar is the decision of the Court of Appeals in
CA-G.R. Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna v. Davao
Light & Power Co., Inc.," promulgated on May 4, 1990. 1 That decision nullified and
set aside the writ of preliminary attachment issued by the Regional Trial Court of
Davao City 2 in Civil Case No. 19513-89 on application of the plaintiff (Davao Light &
Power Co.), before the service of summons on the defendants (herein respondents
Queensland Co., Inc. and Adarna).
Following is the chronology of the undisputed material facts culled from the
Appellate Tribunal's judgment of May 4, 1990.
1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light) filed
a verified complaint for recovery of a sum of money and damages against
Queensland Hotel, etc. and Teodorico Adarna (docketed as Civil Case No. 19513-89).
The complaint contained an ex parte application for a writ of preliminary
attachment.

This Order of September 19, 1989 was successfully challenged by Queensland and
Adarna in a special civil action of certiorari instituted by them in the Court of
Appeals. The Order was, as aforestated, annulled by the Court of Appeals in its
Decision of May 4, 1990. The Appellate Court's decision closed with the following
disposition:
. . . the Orders dated May 3, 1989 granting the issuance of a writ of preliminary
attachment, dated September 19, 1989 denying the motion to discharge
attachment; dated November 7, 1989 denying petitioner's motion for
reconsideration; as well as all other orders emanating therefrom, specially the Writ
of Attachment dated May 11, 1989 and Notice of Levy on Preliminary Attachment
dated May 11, 1989, are hereby declared null and void and the attachment hereby
ordered DISCHARGED.
The Appellate Tribunal declared that

19 | P a g e

. . . While it is true that a prayer for the issuance of a writ of preliminary attachment
may be included m 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 is duly
summoned or voluntarily appears, and adding the phrase that it be issued "ex parte"
does not confer said jurisdiction before actual summons had been made, nor
retroact jurisdiction upon summons being made. . . .
It went on to say, citing Sievert v. Court of Appeals, 3 that "in a proceedings in
attachment," the "critical time which must be identified is . . . when the trial court
acquires authority under law to act coercively against the defendant or his property
. . .;" and that "the critical time is the of the vesting of jurisdiction in the court over
the person of the defendant in the main case."
Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Light
seeks in the present appellate proceedings.
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 defendant 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 subjectmatter or nature of the action, or the res or object hereof.
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
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.
A preliminary attachment may be defined, paraphrasing the Rules of Court, as the
provisional remedy in virtue of which a plaintiff or other 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." 17The phase, "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
20 | P a g e

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 (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.
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 plaintiffs 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.
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. CA., 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.
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 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.
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
21 | P a g e

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
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, viz.:
Sec. 13. Discharge of attachment for improper or irregular issuance. The party
whose property has been attached may also, at any time either BEFORE or AFTER
the release of the attached property, or before any attachment shall have been
actually levied, upon reasonable notice to the attaching creditor, apply to the judge
who granted the order, or to the judge of the court in which the action is pending,
for an order to discharge the attachment on the ground that the same was
improperly or irregularly issued. If the motion be made on affidavits on the part of
the party whose property has been attached, but not otherwise, the attaching
creditor may oppose the same by counter-affidavits or other evidence in addition to
that on which the attachment was made. . . . (Emphasis supplied)
This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987), The
attachment debtor cannot be deemed to have waived any defect in the issuance of
the attachment writ by simply availing himself of one way of discharging the
attachment writ, instead of the other. Moreover, the filing of a counterbond is a
speedier way of discharging the attachment writ maliciously sought out by the
attaching creditor instead of the other way, which, in most instances . . . would
require presentation of evidence in a fullblown trial on the merits, and cannot easily
be settled in a pending incident of the case." 27
It may not be amiss to here reiterate other related principles dealt with in Mindanao
Savings & Loans Asso. Inc. v.C.A., supra., 28 to wit:
(a) When an attachment may not be dissolved by a showing of its irregular or
improper issuance:
. . . (W)hen the preliminary attachment is issued upon a ground which is at the same
time the applicant's cause of action; e.g., "an action for money or property
embezzled or fraudulently misapplied or converted to his own use by a public

officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk,

in the course of his employment as such, or by any other person in a fiduciary
capacity, or for a willful violation of duty." (Sec. 1 [b], Rule 57), or "an action against
a party who has been guilty of fraud m contracting the debt or incurring the
obligation upon which the action is brought" (Sec. 1 [d], Rule 57), the defendant is
not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57
by offering to show the falsity of the factual averments in the plaintiff's application
and affidavits on which the writ was based and consequently that the writ based
thereon had been improperly or irregularly issued (SEE Benitez v. I.A.C., 154 SCRA
41) the reason being that the hearing on such a motion for dissolution of the writ
would be tantamount to a trial of the merits of the action. In other words, the
merits of the action would be ventilated at a mere hearing of a motion, instead of at
the regular trial. Therefore, when the writ of attachment is of this nature, the only
way it can be dissolved is by a counterbond (G.B. Inc. v. Sanchez, 98 Phil. 886).
(b) Effect of the dissolution of a preliminary attachment on the plaintiffs attachment
bond:
. . . The dissolution of the preliminary attachment upon security given, or a showing
of its irregular or improper issuance, does not of course operate to discharge the
sureties on plaintiff's own attachment bond. The reason is simple. That bond is
"executed to the adverse party, . . . conditioned that the . . . (applicant) will pay all
the costs which may be adjudged to the adverse party and all damages which he
may sustain by reason of the attachment, if the court shall finally adjudge that the
applicant was not entitled thereto" (SEC. 4, Rule 57). Hence, until that
determination is made, as to the applicant's entitlement to the attachment, his
bond must stand and cannot be with-drawn.
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 defendant, as above indicated
issuance of summons, order of attachment and writ of attachment (and/or
appointments 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
22 | P a g e

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 explicity 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 explicity directed by Section 3,
Rule 14 of the Rules of Court. Service of all such documents is indispensable not only
for the acquisition of jurisdiction over the person of the defendant, but also upon
considerations of fairness, to apprise the defendant of the complaint against him, of
the issuance of a writ of preliminary attachment and the grounds therefor and thus
accord him the opportunity to prevent attachment of his property by the posting of
a counterbond in an amount equal to the plaintiff's claim in the complaint pursuant
to Section 5 (or Section 12), Rule 57, or dissolving it by causing dismissal of the
complaint itself on any of the grounds set forth in Rule 16, or demonstrating the
insufficiency of the applicant's affidavit or bond in accordance with Section 13, Rule
57.

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.
Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla, Bidin, Grio-Aquino,
Medialdea, Regalado and Romero, JJ., concur.
Fernan, C.J., is on leave.
Davide, Jr., J., took no part.

It was on account of the failure to comply with this fundamental requirement of

service of summons and the other documents above indicated that writs of
attachment issued by the Trial Court ex parte were struck down by this Court's Third
Division in two (2) cases, namely: Sievert v. Court of Appeals, 31 and BAC
Manufacturing and Sales Corporation v.Court of Appeals, et al. 32 In contrast to the
case at bar where the summons and a copy of the complaint, as well as the order
and writ of attachment and the attachment bond were served on the defendant
in Sievert, levy on attachment was attempted notwithstanding that only the petition
for issuance of the writ of preliminary attachment was served on the defendant,
without any prior or accompanying summons and copy of the complaint; and in BAC
Manufacturing and Sales Corporation, neither the summons nor the order granting
the preliminary attachment or the writ of attachment itself was served on the
defendant "before or at the time the levy was made."
For the guidance of all concerned, the Court reiterates and reaffirms the proposition
that writs of attachment may properly issue ex parte provided that the Court is
satisfied that the relevant requisites therefor have been fulfilled by the applicant,
although it may, in its discretion, require prior hearing on the application with notice
to the defendant; but that levy on property pursuant to the writ thus issued may not
be validly effected unless preceded, or contemporaneously accompanied, by service
on the defendant of summons, a copy of the complaint (and of the appointment of
23 | P a g e

Oate v. Abrogar

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

Petitioners maintain that, in accordance with prior decisions of this Court, the
attachment of their properties was void because the trial court had not at that time
acquired jurisdiction over them and that the subsequent service of summons on
them did not cure the invalidity of the levy. They further contend that the
examination of the books and ledgers of the Bank of the Philippine Islands (BPI), the
Philippine National Bank (PNB) and the Urban Bank was a "fishing expedition" which
the trial court should not have authorized because petitioner Emmanuel C. Oate,
whose accounts were examined, was not a signatory to any of the documents
evidencing the transaction between Sun Life Assurance of Canada (Sun Life) and
Brunner Development Corporation (Brunner).

G.R. No. 107303 February 23, 1995

EMMANUEL C. OATE and ECON HOLDINGS CORPORATION, petitioners,
vs.
HON. ZEUS C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial
Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents.
BRUNNER DEVELOPMENT CORPORATION, petitioner,
vs.
HON. ZEUS C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial
Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents.
RESOLUTION

MENDOZA, J.:
These are motions separately filed by petitioners, seeking reconsideration of the
decision of the Second Division holding that although the levy on attachment of
petitioners' properties had been made before the trial court acquired jurisdiction
over them, the subsequent service of summons on them cured the invalidity of the
attachment.
The motions were referred to the Court en banc in view of the fact that in another
decision rendered by the Third Division on the same question, it was held that the
subsequent acquisition of jurisdiction over the person of a defendant does not
1
render valid the previous attachment of his property. The Court en bancaccepted
the referral and now issues this resolution.

On the other hand private respondent Sun Life stresses the fact that the trial
court eventually acquired jurisdiction over petitioners and contends that this cured
the invalidity of the attachment of petitioners' properties. With respect to the
second contention of petitioners, private respondent argues that the examination of
petitioner Oate's bank account was justified because it was he who signed checks
transferring huge amounts from Brunner's account in the Urban Bank to the PNB
and the BPI.
I
At the outset, it should be stated that the Court does not in the least doubt the
validity of the writ of attachment issued in these cases. The fact that a criminal
complaint for estafa which Sun Life had filed against petitioner Oate and Noel L.
Dio, president of Brunner, was dismissed by the Office of the Provincial Prosecutor
is immaterial to the resolution of the motions for reconsideration. In the first place,
the dismissal, although later affirmed by the Department of Justice, is pending
reconsideration. In the second place, since the issue in the case below is precisely
whether petitioners were guilty of fraud in contracting their obligation, resolution of
the question must await the trial of the main case.
However, we find petitioners' contention respecting the validity of the attachment
of their properties to be well taken. We hold that the attachment of petitioners'
properties prior to the acquisition of jurisdiction by the respondent court is void and
that the subsequent service of summons on petitioners did not cure the invalidity of
such attachment. The records show that before the summons and the complaint
were served on petitioners Oate and Econ Holdings Corporation (Econ) on January
9, 1992, Deputy Sheriff Arturo C. Flores had already served on January 3, 1992
2
notices of garnishment on the PNB Head office and on all its Metro Manila
24 | P a g e

branches and an A.B capital. In addition he made other levies before the service of
summons on petitioners, to wit:
On January 6, 1992, he served notices of garnishment on the Urban Bank Head
4
5
Office and all its Metro Manila branches, and on the BPI.
On the same day, he levied on attachment Oate's condominium unit at the
Amorsolo Apartments Condominium Project, covered by Condominium Certificate
6
of Title No. S-1758.
On January 7, 1992, he served notice of garnishment on the Union Bank of the
7
Philippines.
On January 8, 1992, he attached Oate's lot, consisting of 1,256 square meters, at
8
the Ayala-Alabang Subdivision, Alabang, Muntinlupa, covered by TCT No. 112673.
First. The Deputy Sheriff claims that he had tried to serve the summons with a copy
of the complaint on petitioners on January 3, 1992 but that there was no one in the
offices of petitioners on whom he could make a service. This is denied by petitioners
who claim that their office was always open and that Adeliza M. Jaranilla, Econ's
Chief Accountant who eventually received summons on behalf of Oate and Econ,
was present that day. Whatever the truth is, the fact is that no other attempt was
made by the sheriff to serve the summons except on January 9, 1992, in the case of
Oate and Econ, and on January 16, 1992, in the case of Dio. Meantime, he made
several levies, which indicates a predisposition to serve the writ of attachment in
anticipation of the eventual acquisition by the court of jurisdiction over petitioners.
Second. Private respondent invokes the ruling in Davao Light & Power Co. v. Court of
Appeals 9 in support of its contention that the subsequent acquisition of jurisdiction
by the court cured the defect in the proceedings for attachment. It cites the
following portion of the decision in Davao Light and Power, written by Justice, now
Chief Justice, Narvasa:
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 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,
10
Rule 14 of the Rules of Court.
It is clear from the above excerpt, however, that while the petition for a writ of
preliminary attachment may be granted and the writ itself issued before the
defendant is summoned, the writ of attachment cannot beimplemented until
jurisdiction over the person of the defendant is obtained. As this Court explained,
"levy on property pursuant to the writ thus issued may not be validly effected unless
preceded, orcontemporaneously 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
11
bond."
Further clarification on this point was made in Cuartero v. Court of Appeals,
which it was held:

12

in

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.
Private respondent argues that the case of Cuartero itself provides for an exception
as shown in the statement that "the court [in issuing the writ of preliminary
attachment] cannot bind and affect the defendant until jurisdiction
is eventually obtained" and that since petitioners were subsequently served with
summons, no question can be raised against the validity of the attachment of
petitioners' properties before such service.
25 | P a g e

The statement in question has been taken out of context. The full statement reads:
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 proper officer
commences implementation of the writ of attachment service of summons should be
13
simultaneously made.
Indeed, as this Court through its First Division has ruled on facts similar to those in
these cases, the attachment of properties before the service of summons on the
defendant is invalid, even though the court later acquires jurisdiction over the
14
defendant. At the very least, then, the writ of attachment must be
servedsimultaneously with the service of summons before the writ may be enforced.
As the properties of the petitioners were attached by the sheriff before he had
served the summons on them, the levies made must be considered void.
Third. Nor can the attachment of petitioners' properties before the service of
summons on them was made be justified an the ground that unless the writ was
then enforced, petitioners would be alerted and might dispose of their properties
before summons could be served on them.
The Rules of Court do not require that issuance of the writ be kept a secret until it
can be enforced. Otherwise in no case may the service of summons on the
defendant precede the levy on attachment. To the contrary, Rule 57, 13 allows the
defendant to move to discharge the attachment even before any attachment is
actually levied upon, thus negating any inference that before its enforcement, the
issuance of the writ must be kept secret. Rule 57, 13 provides:
Sec. 13. Discharge of attachment for improper or irregular issuance. The party
whose property has been attached may also, at any time either before or after the
release of the attached property, or before any attachment shall have been actually
levied, upon reasonable notice to the attaching creditor, apply to the judge who
granted the order, or to the judge of the court in which the action is pending, for an
order to discharge the attachment on the ground that the same was improperly or
irregularly issued. . . . (Emphasis added).
15

As this Court pointed out in Davao Light and Power, the lifting of an attachment
"may be resorted to even before any property has been levied on."

It is indeed true that proceedings for the issuance of a writ of attachment are
16
generally ex parte. In Mindanao Savings and Loans Ass'n v. Court of Appeals it was
held that no hearing is required for the issuance of a writ of attachment because this
"would defeat the objective of the remedy [because] the time which such hearing
would take could be enough to enable the defendant to abscond or dispose of his
property before a writ of attachment issues." It is not, however, notice to defendant
that is sought to be avoided but the "time which such hearing would take" because
of the possibility that defendant may delay the hearing to be able to dispose of his
properties. On the contrary there may in fact be a need for a hearing before the writ
17
is issued as where the issue of fraudulent disposal of property is raised. It is not
true that there should be no hearing lest a defendant learns of the application for
attachment and he remove's his properties before the writ can be enforced.
On the other hand, to authorize the attachment of property even before jurisdiction
over the person of the defendant is acquired through the service of summons or his
voluntary appearance could lead to abuse. It is entirely possible that the defendant
may not know of the filing of a case against him and consequently may not be able
to take steps to protect his interests.
Nor may sheriff's failure to abide by the law be excused on the pretext that after all
the court later acquired jurisdiction over petitioners. More important than the need
for insuring success in the enforcement of the writ is the need for affirming a
principle by insisting on that "most fundamental of all requisites the jurisdiction
18
of the court issuing attachment over the person of the defendant." It may be that
the same result would follow from requiring that a new writ be served all over
again. The symbolic significance of such an act, however, is that it would affirm our
19
commitment to the rule of law.
II
We likewise find petitioners' second contention to be meritorious. The records show
that, on January 21, 1992, respondent judge ordered the examination of the books
of accounts and ledgers of Brunner at the Urban Bank, Legaspi Village branch, and
on January 30, 199 the records of account of petitioner Oate at the BPI, even as he
ordered the PNB to produce the records regarding certain checks deposited in it.
First. Sun Life defends these court orders on the ground that the money paid by it to
Brunner was subsequently withdrawn from the Urban Bank after it had been
deposited by Brunner and then transferred to BPI and to the unnamed account in
the petitioner Oate's account in the BPI and to the unnamed account in the PNB.
26 | P a g e

The issue before the trial court, however, concerns the nature of the transaction
between petitioner Brunner and Sun Life. In its complaint, Sun Life alleges that
Oate, in his personal capacity and as president of Econ, offered to sell to Sun Life
P46,990,000.00 worth of treasury bills owned by Econ and Brunner at the
discounted price of P39,526,500.82; that on November 27, 1991, Sun Life paid the
price by means of a check payable to Brunner; that Brunner, through its president
Noel L. Dio, issued to it a receipt with undertaking to deliver the treasury bills to
Sun Life; and that on December 4, 1991, Brunner and Dio delivered instead a
promissory note, dated November 27, 1991, in which it was made to appear that the
transaction was a money placement instead of sale of treasury bills.
Thus the issue is whether the money paid to Brunner was the consideration for the
sale of treasury bills, as Sun Life claims, or whether it was money intended for
placement, as petitioners allege. Petitioners do not deny receipt of P39,526,500.82
from Sun Life. Hence, whether the transaction is considered a sale or money
placement does not make the money the "subject matter of litigation" within the
meaning of 2 of Republic Act No. 1405 which prohibits the disclosure or inquiry
into bank deposits except "in cases where the money deposited or invested is the
subject matter of litigation." Nor will it matter whether the money was "swindled"
as Sun Life contends.
Second. The examination of bank books and records cannot be justified under Rule
57, 10. This provision states:
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 of the court, sheriff, or other
proper officer on such terms as may be just, having reference to any lien thereon or
claims against the same, to await the judgment in the action.

considered invalid. Under Rule 57, 10, as quoted above, such examination is only
proper where the property of the person examined has been validly attached.
WHEREFORE, the decision dated February 21, 1994 is RECONSIDERED and SET ASIDE
and another one is rendered GRANTING the petitions for certiorari and SETTING
ASIDE the orders dated February 26, 1992 and September 9, 1992, insofar as they
authorize the attachment of petitioners' properties and the examination of bank
books and records pertaining to their accounts, and ORDERING respondent Judge
Zeus C. Abrogar
(1) forthwith to issue an alias writ of attachment upon the same bond furnished by
respondent Sun Life Assurance Company of Canada;
(2) direct the sheriff to lift the levy under the original writ of attachment and
simultaneously levy on the same properties pursuant to the alias writ so issued; and
(3) take such steps as may be necessary to insure that there will be no intervening
period between the lifting of the original attachment and the subsequent levy under
the alias writ.
Petitioners may file the necessary counterbond to prevent subsequent levy or to
dissolve the attachment after such levy.
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo,
Melo, Quiason, Puno, Vitug, Kapunan and Francisco, JJ., concur.

Since, as already stated, the attachment of petitioners' properties was invalid, the
examination ordered in connection with such attachment must likewise be
27 | P a g e

Peral Compania, Inc. v. Ramolete

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-60887 November 13, 1991
PERLA COMPANIA DE SEGUROS, INC., petitioner,
vs.
HON. JOSE R. RAMOLETE, PRIMITIVA Y. PALMES, HONORATO BORBON, SR.,
OFFICE OF THE PROVINCIAL SHERIFF, PROVINCE OF CEBU, respondents.
Hector L. Fernandez for petitioner.

On 25 June 1976, private respondents Primitiva Palmes (widow of Calixto Palmes)

and Honorato Borbon, Sr. (father of minor Adeudatus Borbon) filed a
complaint 5 against Cosme Casas and Nelia Enriquez (assisted by her husband
Leonardo Enriquez) before the then Court of First Instance of Cebu, Branch 3,
claiming actual, moral, nominal and exemplary damages as a result of the accident.
The claim of private respondent Honorato Borbon, Sr., being distinct and separate
from that of co-plaintiff Primitiva Palmes, and the amount thereof falling properly
within the jurisdiction of the inferior court, respondent Judge Jose R. Ramolete
ordered the Borbon claim excluded from the complaint, without prejudice to its
being filed with the proper inferior court.
On 4 April 1977, the Court of First Instance rendered a Decision 6 in favor of private
respondent Primitiva Palmes, ordering common carrier Nelia Enriquez to pay her
P10,000.00 as moral damages, P12,000.00 as compensatory damages for the death
of Calixto Palmes, P3,000.00 as exemplary damages, P5,000.00 as actual damages,
and P1,000.00 as attorney's fees.

Domingo Quibranza and Vicente A. Quibranza for private respondents.

FELICIANO, J.:p
The present Petition for Certiorari seeks to annul: (a) the Order dated 6 August
1979 1 which ordered the Provincial Sheriff to garnish the third-party liability
insurance policy issued by petitioner Perla Compania de Seguros, Inc. ("Perla") in
favor of Nelia Enriquez, judgment debtor in Civil Case No. R-15391; (b) the Order
dated 24 October 1979 2 which denied the motion for reconsideration of the 6
August 1979 Order; and (c) the Order dated 8 April 1980 3 which ordered the
issuance of an alias writ of garnishment against petitioner.
In the afternoon of 1 June 1976, a Cimarron PUJ owned and registered in the name
of Nelia Enriquez, and driven by Cosme Casas, was travelling from Cebu City to
Danao City. While passing through Liloan, Cebu, the Cimarron PUJ collided with a
private jeep owned by the late Calixto Palmes (husband of private respondent
Primitiva Palmes) who was then driving the private jeep. The impact of the collision
was such that the private jeep was flung away to a distance of about thirty (30) feet
and then fell on its right side pinning down Calixto Palmes. He died as a result of
cardio-respiratory arrest due to a crushed chest. 4 The accident also caused physical
injuries on the part of Adeudatus Borbon who was then only two (2) years old.

The judgment of the trial court became final and executory and a writ of execution
was thereafter issued. The writ of execution was, however, returned unsatisfied.
Consequently, the judgment debtor Nelia Enriquez was summoned before the trial
court for examination on 23 July 1979. She declared under oath that the Cimarron
PUJ registered in her name was covered by a third-party liability insurance policy
issued by petitioner Perla.
Thus, on 31 July 1979, private respondent Palmes filed a motion for
garnishment 7 praying that an order of garnishment be issued against the insurance
policy issued by petitioner in favor of the judgment debtor. On 6 August 1979,
respondent Judge issued an Order 8 directing the Provincial Sheriff or his deputy to
garnish the third-party liability insurance policy.
Petitioner then appeared before the trial court and moved for reconsideration of
the 6 August 1979 Order and for quashal of the writ of garnishment, 9 alleging that
the writ was void on the ground that it (Perla) was not a party to the case and that
jurisdiction over its person had never been acquired by the trial court by service of
summons or by any process. The trial court denied petitioner's motion.10 An Order
for issuance of an alias writ of garnishment was subsequently issued on 8 April
1980. 11

28 | P a g e

More than two (2) years later, the present Petition for Certiorari and Prohibition was
filed with this Court on 25 June 1982 alleging grave abuse of discretion on the part
of respondent Judge Ramolete in ordering garnishment of the third-party liability
insurance contract issued by petitioner Perla in favor of the judgment debtor, Nelia
Enriquez. The Petition should have been dismissed forthwith for having been filed
way out of time but, for reasons which do not appear on the record, was
nonetheless entertained.
In this Petition, petitioner Perla reiterates its contention that its insurance contract
cannot be subjected to garnishment or execution to satisfy the judgment in Civil
Case No. R-15391 because petitioner was not a party to the case and the trial court
did not acquire jurisdiction over petitioner's person. Perla further argues that the
writ of garnishment had been issued solely on the basis of the testimony of the
judgment debtor during the examination on 23 July 1979 to the effect that the
Cimarron PUJ was covered by a third-party liability insurance issued by Perla,
without granting it the opportunity to set up any defenses which it may have under
the insurance contract; and that the proceedings taken against petitioner are
contrary to the procedure laid down in Economic Insurance Company, Inc. v. Torres,
et al., 12 which held that under Rule 39, Section 45, the Court "may only authorize"
the judgment creditor to institute an action against a third person who holds
property belonging to the judgment debtor.
We find no grave abuse of discretion or act in excess of or without jurisdiction on
the part of respondent Judge Ramolete in ordering the garnishment of the judgment
debtor's third-party liability insurance.
Garnishment has been defined as a species of attachment for reaching any property
or credits pertaining or payable to a judgment debtor. 13 In legal contemplation, it is
a forced novation by the substitution of creditors: 14 the judgment debtor, who is
the original creditor of the garnishee is, through service of the writ of garnishment,
substituted by the judgment creditor who thereby becomes creditor of the
garnishee. Garnishment has also been described as a warning to a person having in
his possession property or credits of the judgment debtor, not to pay the money or
deliver the property to the latter, but rather to appear and answer the plaintiff's
suit. 15
In order that the trial court may validly acquire jurisdiction to bind the person of the
garnishee, it is not necessary that summons be served upon him. The garnishee
need not be impleaded as a party to the case. All that is necessary for the trial court
lawfully to bind the person of the garnishee or any person who has in his possession

credits belonging to the judgment debtor is service upon him of the writ of
garnishment.
The Rules of Court themselves do not require that the garnishee be served with
summons or impleaded in the case in order to make him liable.
Rule 39, Section 15 provides:
Sec. 15. Execution of money judgments. The officer must enforce an execution of
a money judgment by levying on all the property, real or personal of every name
and nature whatsoever, and which may be disposed of for value, of the judgment
debtor not exempt from execution . . .
Real property, stocks, shares, debts, credits, and other personal property, or any
interest in either real or personal property, may be levied on in like manner and with
like effect as under a writ of attachment. (Emphasis supplied).
Rule 57, Section 7(e) in turn reads:
Sec. 7. Attachment of real and personal property; recording thereof. Properties
shall be attached by the officer executing the order in the following manner:
xxx xxx xxx
(e) Debts and credits, and other personal property not capable of manual delivery,
by leaving with the person owing such debts, or having his possession or under his
control such credits or other personal property, or with his agent, a copy of the
order, and notice that the debts owing by him to the party against whom
attachment is issued, and the credits and other personal property in his possession,
or under his control, belonging to said party, are attached in pursuance of such
order;
xxx xxx xxx (Emphasis supplied)
Through service of the writ of garnishment, the garnishee becomes a "virtual party"
to, or a "forced intervenor" in, the case and the trial court thereby acquires
jurisdiction to bind him to compliance with all orders and processes of the trial court
with a view to the complete satisfaction of the judgment of the court. In Bautista v.
Barredo, 16 the Court, through Mr. Justice Bautista Angelo, held:
While it is true that defendant Jose M. Barredo was not a party in Civil Case No.
1636 when it was instituted by appellant against the Philippine Ready Mix Concrete
29 | P a g e

Company, Inc., however, jurisdiction was acquired over him by the court and he
became a virtual party to the case when, after final judgment was rendered in said
case against the company, the sheriff served upon him a writ of garnishment in
behalf of appellant. Thus, as held by this Court in the case of Tayabas Land Company
vs. Sharruf, 41 Phil. 382, the proceeding by garnishment is a species of attachment
for reaching credits belonging to the judgment debtor and owing to him from a
stranger to the litigation. By means of the citation, the stranger becomes a forced
intervenor; and the court, having acquired jurisdiction over him by means of the
citation, requires him to pay his debt, not to his former creditor, but to the new
creditor, who is creditor in the main litigation. (Emphasis supplied).
In Rizal Commercial Banking Corporation v. De Castro, 17 the Court stressed that the
asset or credit garnished is thereupon subjected to a specific lien:
The garnishment of property to satisfy a writ of execution operates as an attachment
and fastens upon the property a lien by which the property is brought under the
jurisdiction of the court issuing the writ. It is brought into custodia legis, under the
sole control of such court. 18 (Emphasis supplied)
In the present case, there can be no doubt, therefore, that the trial court actually
acquired jurisdiction over petitioner Perla when it was served with the writ of
garnishment of the third-party liability insurance policy it had issued in favor of
judgment debtor Nelia Enriquez. Perla cannot successfully evade liability thereon by
such a contention.
Every interest which the judgment debtor may have in property may be subjected to
execution.19 In the instant case, the judgment debtor Nelia Enriquez clearly had an
interest in the proceeds of the third-party liability insurance contract. In a thirdparty liability insurance contract, the insurer assumes the obligation of paying the
injured third party to whom the insured is liable. 20 The insurer becomes liable as
soon as the liability of the insured to the injured third person attaches. Prior
payment by the insured to the injured third person is not necessary in order that the
obligation of the insurer may arise. From the moment that the insured became
liable to the third person, the insured acquired an interest in the insurance contract,
which interest may be garnished like any other credit. 21
Petitioner also contends that in order that it may be held liable under the third-party
liability insurance, a separate action should have been commenced by private
respondents to establish petitioner's liability. Petitioner invokesEconomic Insurance
Company, Inc. vs. Torres, 22 which stated:

It is clear from Section 45, Rule 39 that if a persons alleged to have property of the
judgment debtor or to be indebted to him claims an interest in the property adverse
to him or denies the debt, the court may only authorize the judgment creditor to
institute an action against such person for the recovery of such interest or debt. Said
section does not authorize the court to make a finding that the third person has in
his possession property belonging to the judgment debtor or is indebted to him and
to order said third person to pay the amount to the judgment creditor.
It has been held that the only power of the court in proceedings supplemental to
execution is to niake an order authorizing the creditor to sue in the proper court to
recover an indebtedness due to the judgment debtor. The court has no jurisdiction to
try summarily the question whether the third party served with notice of execution
and levy is indebted to defendant when such indebtedness is denied. To make an
order in relation to property which the garnishee claimed to own in his own right,
requiring its application in satisfaction of judgment of another, would be to deprive
the garnishee of property upon summary proceeding and without due process of
law. (Emphasis supplied)
But reliance by petitioner on the case of Economic Insurance Company, Inc. v. Torres
(supra) is misplaced. The Court there held that a separate action needs to be
commenced when the garnishee "claims an interest in the property adverse to him
(judgment debtor) or denies the debt." In the instant case, petitioner Perla did not
deny before the trial court that it had indeed issued a third-party liability insurance
policy in favor of the judgment debtor. Petitioner moreover refrained from setting
up any substantive defense which it might have against the insured-judgment
debtor. The only ground asserted by petitioner in its "Motion for Reconsideration of
the Order dated August 6, 1979 and to Quash Notice of Garnishment" was lack of
jurisdiction of the trial court for failure to implead it in the case by serving it with
summons. Accordingly, Rule 39, Section 45 of the Rules of Court is not applicable in
the instant case, and we see no need to require a separate action against Perla: a
writ of garnishment suffices to hold petitioner answerable to the judgment creditor.
If Perla had any substantive defenses against the judgment debtor, it is properly
deemed to have waived them by laches.
WHEREFORE, the Petition for Certiorari and Prohibition is hereby DISMISSED for
having been filed out of time and for lack of merit. The assailed Orders of the trial
court are hereby AFFIRMED. Costs against petitioner. This Decision is immediately
executory.
SO ORDERED. Narvasa, CJ., Cruz, Grio-Aquino and Medialdea, JJ., concur.
30 | P a g e

Mindanao Savings & Loan Association, Inc. v. CA

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
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.
A B C Law Offices for private respondents.

GRIO-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.
On September 28, 1986, Judge Dinopol issued an order granting ex parte the
application for a writ of preliminary attachment.
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.

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.
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)
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.
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.
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.
A careful consideration of the petition for review fails to yield any novel legal
questions for this Court to resolve.
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.
31 | P a g e

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).
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.

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.)
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.
SO ORDERED.
Cruz, Gancayco and Medialdea, JJ., concur.

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.
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."
32 | P a g e

Calderon v. IAC

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 74696 November 11, 1987
JOSE D. CALDERON, petitioner,
vs.
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,
vs.
THE INTERMEDIATE APPELLATE COURT, GEORGE SCHULZE, ANTONIO C. AMOR,
MANUEL A. MOZO and VICTOR M. NALUZ, respondents.

PARAS, J.:
For review on certiorari is respondent appellate Court's decision 1 in AC-G.R. No.
2
01420, which affirmed the Regional Trial Court's decision 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:
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. 718, 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 disclose 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
33 | P a g e

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 counterbond, 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:
WHEREFORE, the judgment of the lower court is modified as follows:
To defendant-appellee George Schulze:
P650,000.00 as moral damages and
P200,000.00 as exemplary damages.
To defendant-appellee Antonio C. Amor:
P150,000.00 as moral damages and
P30,000.00 as exemplary damages,
An other dispositions in the judgment appealed from, including the dismissal of the
amended complainant are hereby affirmed in toto.
SO ORDERED.
In his petition, petitioner Calderon asserts, among other things, that the court below
erred:
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 EX-EXEMPLARY DAMAGES AS WELL.
On the other hand, petitioner Insurance Company raises the following issues:
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 CON. SEQUENCE 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 crossexamined, no document on the charges was presented by him.

34 | P a g e

What the Appellate Court found in this regard need not be further elaborated upon.
The Appellate Court ruled:
... 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 Pl,475,840.00 and that
an the defendants had maliciously and fraudulently concealed and withheld from
him this alleged liability of Luzon Brokerage Corporation in breach of the contractwarranty 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 crossexamination 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 Pl,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, 46-1, 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 43- 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 0), 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 vs. 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).
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.
35 | P a g e

Anent the petition of the surety, We say the following:

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:

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 full-blown 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.

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.

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:

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 vs.
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.

2. Respondent Antonio C. Amor, P50,000.00 as moral damages and P10,000.00 as

exemplary damages.

1. Respondent George Schulze, P250,000.00 as moral damages and P50,000.00 as

exemplary damages; and

The rest of the judgment of the Intermediate Appellate Court is hereby AFFIRMED.
SO ORDERED.
Yap (Chairman), Melencio-Herrera and Padilla, JJ., concur.
Sarmiento, J., took no part.

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
36 | P a g e

herein) as Special Sheriff to implement the writ. On April 6, 1982, the same court
issued a break-open order upon motion filed by petitioner Uy.

Uy(Esteban) v. CA

Republic of the Philippines

SUPREME COURT
Manila

On the following day, April 7, 1982, petitioner Cabang began to implement the writ
of preliminary attachment as the Special Sheriff on the case.
On April 19, 1982, petitioner Cabang filed a Partial Sheriffs Return, stating, inter alia:

SECOND DIVISION
xxx xxx xxx
G.R. No. 83897 November 9, 1990
ESTEBAN B. UY JR. and NILO S. CABANG, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, WILSON TING, and YU HON. respondents.

That in the afternoon of April 12, 1982, the undersigned together with Atty. Lupino
Lazaro, plaintiff's counsel and the members of the same team proceeded to No. 65
Speaker Perez St., Quezon City, and effected a physical and actual count of the items
and merchandise pointed to by the Ting family as having been taken from the
Mansion Emporium and nearby bodega which are as follows:

E.P. Mallari & Associates for petitioners.

a) 329 boxes of "GE" Flat Iron, each box containing 6 pcs. each;
Elpidio G. Navarro for private respondents.
b) 229 boxes of Magnetic Blank Tapes with 48 pcs. each;
c) 239 boxes of floor polishers marked "Sanyo"
PARAS, J.:
d) 54 boxes of floor polishers marked "Ronson"
This is a petition for review on certiorari seeking to reverse the decision ** which
dismissed CA-G.R. No. SP-05659 for certiorari and Prohibition with Preliminary
Injunction and/or Restraining Order filed by petitioner seeking to annul and set
aside the two Orders dated August 24, 1982 and October 10, 1983 issued by the
then Court of First Instance of Rizal Branch LII *** (now Regional Trial Court of
Quezon City Branch XCLVll ****) in Civil Case No. Q-35128, granting a writ of
preliminary attachment and directing the sheriff assigned therein to attach the
properties of defendants Uy and Cabang (herein petitioners); and denying
defendants' motion to dismiss.

xxx xxx xxx

On April 12, 1982, a third party claim was filed by Wilson Ting and Yu Hon (private
respondents herein) in the same Civil Case No. Q-34782, addressed to petitioner
Cabang asserting ownership over the properties attached at No. 65 Speaker Perez
St., Quezon City (other than those attached at No. 296 Palanca St., Manila). The
third party claim specifically enumerated the properties, as reflected in the Partial
Sheriffs Return dated April 1 3, 1 982, belonging to the plaintiffs (private
respondents herein).

The antecedent facts of the case as found by the Court of Appeals are as follows:
On March 24, 1982, Esteban B. Uy, Jr. (herein petitioner) filed a complaint against Sy
Yuk Tat for sum of money, damages, with preliminary attachment, docketed as Civil
Case No. Q-34782 ("the first case" for short) in the then Court of First Instance of
Rizal, Branch LII, Quezon City (the case was later assigned to the Regional Trial Court
of Quezon City, Branch XCVII now presided over by respondent Judge). On the same
day, upon plaintiff filing a bond of P232,780.00 said court issued a writ of
preliminary attachment and appointed Deputy Sheriff Nilo S. Cabang (co-petitioner

On the same day that petitioner Cabang filed his Partial Sheriffs Return (April 19,
1982) the third party claimants and Yu filed a motion to dissolve the
aforementioned writ of preliminary attachment in the same Civil Case No. Q-34782;
alleging among others, that being the absolute owners of the personal properties
listed in their third party claim which were illegally seized from them they were
willing to file a counterbond for the return thereof; which motion was opposed by
plaintiff Uy.
37 | P a g e

On April 29, 1982, then CFI Judge Jose P. Castro rendered judgment by default in
said Civil Case No. Q-34782 in favor of plaintiff Uy.

Subsequently, on July 2, 1982, in the case a quo the court denied defendants', Uy
and Cabang, motion to quash or dissolve the status quo order.

Meanwhile, on May 5, 1982, third party claimants Wilson Ting and Yu Hon filed a
complaint for Damages with application for preliminary injunction against Esteban
Uy and Nilo Cabang (co-petitioners herein) in the then Court of First Instance of
Rizal, Branch 52, Quezon City ('the court a quo' for short) which case was docketed
as Civil Case No. Q-35128 ('the second case' for short). The complaint alleged inter
alia that the plaintiffs are the owners of the personal properties reflected in the
Partial Sheriffs Return dated April 13, 1983 which have been attached and seized by
defendant Cabang. In this second civil case, the court a quo (then presided over by
CFI Judge Concepcion B. Buencamino) issued an order on May 5, 1982, stating
among other things, the following:

Meanwhile, the first case on July 12, 1982, Cabang filed another partial sheriffs
return this time stating among others that the judgment in that case had been
partially satisfied, and that in the public auction sale held on July 6, 1982, certain
personal properties had been sold to plaintiff Esteban Uy, Jr., the winning bidder for
P15,000.00 while the other properties were sold in the amount of P200,000.00 in
cash with Bernabe Ortiz of No. 97 Industrial Avenue, Northern Hill, Malabon Manila
as the highest bidder.

Considering that it will take time before this Court could act upon said prayers for
the issuance of a Writ of Preliminary Injunction, the parties are hereby ordered to
maintain the STATUS QUO in this case with respect to the properties attached and
subject of this action alleged to belong to the plaintiffs" (Rollo, p. 133)

Back to the case a quo, on August 23, 1982, plaintiffs Ting and Yu Hon filed a motion
for preliminary attachment alleging this ground: "In the case at bar, which, is one 'to
recover possession of personal properties unjustly detained, ... the property... has
been ... removed ... (and) disposed of to prevent its being found or taken by the
applicant or an officer" and/or said defendants are guilty of fraud in disposing of the
property for the taking, (or) detention ... of which the action is brought (Sec. 1(c)
and (d), Rule 57, Rules of Court)

Meanwhile, in the first case, where a judgment by default had been rendered, the
first court issued an order striking off from the records all pleadings filed by the third
party claimants.

Acting on such motion the court a quo, on August 24, 1 982, issued the disputed
order granting the writ of preliminary attachment prayed for by the plaintiffs
(Wilson Ting and Yu Hon), stating that:

With respect to the case in the court a quo, defendants Uy and Cabang filed their
answer with counterclaim.

Let a writ of preliminary attachment issue upon the plaintiffs putting up a bond in
the amount of P1,430,070.00, which shall be furnished to each of the defendants
with copies of the verified application therewith, and the sheriff assigned to this
court, Danilo Del Mundo, shall forthwith attach such properties of the defendants
not exempt from execution, sufficient to satisfy the applicants' demand. (Rollo, p.
247)

Meanwhile, in the first case, plaintiff Uy on June 7, 1982, filed an ex-parte motion
for writ of execution which was granted the following day, June 8, 1982.
On the same day (June 7, 1982) that plaintiff Uy filed his exparte motion for writ of
execution he and Cabang filed a motion to quash or dissolve status quo order in the
case a quo as defendants therein on the ground that the court "has no jurisdiction
to interfere with properties under custodia legis on orders of a court of co-equal and
co-ordinate jurisdiction" and that plaintiffs' complaint is not for recovery of
properties in question.
On June 24, 1982, plaintiff Uy in the first case filed his ex parte motion to authorize
Sheriff to sell the attached properties enumerated in Sheriff Cabang's partial return
filed on April 19, 1982, on the ground that the properties under custodia legis were
perishable especially those taken from No. 65 Speaker Perez, Quezon City.

On August 31, 1982, in the same case a quo, defendant Uy filed an urgent motion to
quash and/or dissolve preliminary attachment which motion was opposed by
plaintiffs Ting and Yu Hon.
About half a year later, on February 21, 1982, in the case a quo, defendant Uy filed a
motion for preliminary hearing on affirmative defenses as motion to dismiss.
Following an exchange of subsequent papers between the parties, the court a quo
issued the other disputed order which denied defendant Uy's motion to dismiss on
October 10, 1983. The motion to quash was also denied by the court a quo on
December 9, 1983. Defendant Uy filed a motion for reconsideration on both Orders.
38 | P a g e

Finally, on February 15, 1985, respondent Judge issued two Orders denying both
motions for reconsideration. (CA decision, Rollo, p. 109-122)
Thereafter, petitioners Esteban Uy, Jr. and Nilo Cabang filed with the Court of
Appeals a petition for Certiorari and Prohibition with prayer for a Writ of Preliminary
Injunction or a Restraining Order to annul and set aside the two orders issued by the
then CFI of Rizal Branch 52.
In its decision, the Court of Appeals dismissed the petition, the dispositive portion of
which reads:
WHEREFORE, finding respondent Judge not to have committed a grave abuse of
discretion amounting to lack or excess of jurisdiction in issuing the order dated
August 24, 1982, denying petitioners' motion to quash the writ of preliminary
attachment, and the order dated October 10, 1983, denying petitioners' motion to
dismiss the complaint a quo, we hereby deny the instant petition, and therefore
dismiss the same. No pronouncement as to cost. (Rollo, pp. 132-133)
Hence, the instant petition.
In the resolution of October 16, 1989, the Court gave due course to the petition and
required both parties to submit simultaneous memoranda within thirty days from
notice (Rollo, p. 190). Private respondents filed their memorandum on December 6,
1989 (Ibid., p. 192) while petitioners filed their memorandum on January 5, 1990
(Ibid., p. 208)
The main issue in this case is whether or not properties levied and seized by virtue
of a writ of attachment and later by a writ of execution, were under custodia
legis and therefore not subject to the jurisdiction of another co-equal court where a
third party claimant claimed ownership of the same properties.
The issue has long been laid to rest in the case of Manila Herald Publishing Co. Inc. v.
Ramos (88 Phil. 94 [1951]) where the Court filed that while it is true that property in
custody of the law may not be interfered with, without the permission of the proper
court, this rule is confined to cases where the property belongs to the defendant or
one in which the defendant has proprietary interests. But when the Sheriff, acting
beyond the bounds of his office seizes a stranger's property, the rule does not apply
and interference with his custody is not interference with another court's order of
attachment.

It has been seen that a separate action by the third party who claims to be the
owner of the property attached is appropriate. If this is so, it must be admitted that
the judge trying such action may render judgment ordering the sheriff or whoever
has in possession of the attached property to deliver it to the plaintiff claimant or
desist from seizing it. It follows further that the court may make an interlocutory
order, upon the filing of such bond as may be necessary, to release the property
pending final adjudication of the title. Jurisdiction over an action includes
jurisdiction on interlocutory matter incidental to the cause and deemed necessary
to preserve the subject matter of the suit or protect the parties' interests. This is
self-evident. (Manila Herald Publishing Co. Inc. v. Ramos, supra).
The foregoing ruling was reiterated in the later case of Traders Royal Bank v. IAC
(133 SCRA 141 [1984]) and even more recently in the case of Escovilla v. C.A. G.R.
No. 84497, November 6, 1989, where this Court stressed:
The power of the court in the execution of judgments extends only over properties
unquestionably belonging to the judgment debtor. The levy by the sheriff of a
property by virtue of a writ of attachment may be considered as made under the
authority of the court only when the property levied upon belongs to the defendant.
If he attaches properties other than those of the defendant, he acts beyond the
limits of this authority. The court issuing a writ of execution is supposed to enforce
its authority only over properties of the judgment debtor. 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.
Neither can petitioner complain that they were denied their day in court when the
Regional Trial Court issued a writ of preliminary attachment without hearing as it is
well settled that its issuance may be made by the court ex parte. As clearly
explained by this Court, no grave abuse of discretion can be ascribed to respondent
Judge in the issuance of a writ of attachment without notice to petitioners as there
is nothing in the Rules of Court which makes notice and hearing indispensable and
mandatory requisites in its issuance. (Filinvest Credit Corp. v. Relova, 117 SCRA 420
[1982]; Belisle Investment & Finance Co. Inc. v. State Investment House, Inc. 151
SCRA 631 [1987]; Toledo v. Burgos, 168 SCRA 513 [1988]).
In addition, petitioner's motion to quash or discharge the questioned attachment in
the court a quo is in effect a motion for reconsideration which cured any defect of
absence of notice. (Dormitorio v. Fernandez, 72 SCRA 388 [1976]).

Under the circumstances, this Court categorically stated:

39 | P a g e

Estoppel is likewise unavailing in the case at bar by the mere fact that private
respondent Ting (complainant in the court a quo) pointed the items and
merchandise taken from the Mansion House and nearby Bodega which were levied
and hauled by Special Sheriff Cabang, where in the report of said Sheriff made
earlier on April 6, 1982, he stated that on the same occasion referred to in his Partial
Return, private respondents denied Sy Yuk Tat's ownership over the goods in
question. (Rollo, pp. 203-204).
In like manner, the sale of the disputed properties at the public auction, in
satisfaction of a judgment of a co-equal court does not render the case moot and
academic. The undeviating ruling of this Court in such cases is that attachment and
sale of properties belonging to a third person is void because such properties cannot
be attached and sold at public auction for the purpose of enforcing a judgment
against the judgment debtor. (Orosco v. Nepomuceno, 57 Phil. 1007 [1932-33]).

interpretation of the Rules holding that a straight-jacket application will do more

injustice. (Pan-Am Airways v. Espiritu, 69 SCRA 45 [1976]).
PREMISES CONSIDERED, the petition is hereby DENIED and the assailed decision of
the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.

The other issues in this case deserve scant consideration.

On the issue of the expiration of the restraining order, there is no argument that the
life span of the status quoorder automatically expires on the 20th day and no
judicial declaration to that effect is necessary (Paras v. Roura, 163 SCRA 1 [1988]).
But such fact is of no consequence in so far as the propriety of the questioned
attachment is concerned. As found by the Court of Appeals, the grounds invoked by
respondents for said attachment did not depend at all upon the continuing efficacy
of the restraining order.
As to petitioner's contention that the complaint filed by private respondent in the
lower court is merely seeking an ancillary remedy of injunction which is not a cause
of action itself, the Court of Appeals correctly observed that the object of private
respondents' complaint is injunction although the ancillary remedy of preliminary
injunction was also prayed for during the pendency of the proceeding.
Finally, the non-joinder of the husband of private respondent, Yu Hon as well as her
failure to verify the complaint does not warrant dismissal of the complaint for they
are mere formal requirements which could be immediately cured without prejudice
to the rights of the petitioners. This Court frowns on the resort to technicalities to
defeat substantial justice. Thus, the Court states that the rules of procedure are
intended to promote not to defeat substantial justice, and therefore, they should
not be applied in a very rigid and technical sense. (Angel v. Inopiquez, G.R. 66712,
January 13, 1989). Again on another occasion where an appeal should have been
dismissed for non-compliance with the Rules, the Court relaxed the rigid
40 | P a g e

the total amount ofP28,000,000.00 or P9,333,333.00 each to Sofia, Fructosa, and

the heirs of Mario.

Torres v. Satsatin

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 166759

November 25, 2009

SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR

RESOURCES, INC., Petitioners,
vs.
NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and
NIKKI NORLIN SATSATIN,Respondents.
DECISION
PERALTA, J.:
1

This is a petition for review on certiorari assailing the Decision dated November 23,
2
2004 of the Court of Appeals (CA) in CA-G.R. SP No. 83595, and its Resolution 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, Dasmarias, Cavite, covered by Transfer Certificate of Title (TCT) Nos.
3
4
5
251267, 251266, and 251265, respectively.

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 Pias 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
7
(RTC) a Complaint 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, Dasmarias, Cavite.
On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ
8
of Attachment, 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.
9

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
6
negotiate for the sale of the properties.
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

On October 30, 2002, the trial court issued an Order directing the petitioners to
post a bond in the amount ofP7,000,000.00 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
10
issues.

41 | P a g e

On November 15, 2002, petitioners filed a Motion for Deputation of

11
Sheriff, 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.
12

In the Order 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.
13

Thereafter, the RTC issued a Writ of Attachment 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,
14
at Imus for Dasmarias, Cavite, Philippines.
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
15
at Las Pias, Manila.
On November 21, 2002, summons, together with a copy of the complaint, was
16
served upon the respondents.
On November 29, 2002, respondents filed their Answer.

17

On the same day respondents filed their answer, they also filed a Motion to
18
Discharge Writ of Attachment 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
sheriffs 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
19
post a counter-bond for the lifting of the writ of attachment.
On March 11, 2003, after the parties filed their respective pleadings, the RTC issued
20
an Order 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
22
Order 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
23
24
Dated March [11], 2003, which the RTC denied in an Order 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.
42 | P a g e

31

SO ORDERED.
25

Respondents filed an Urgent Motion for Reconsideration, but it was denied in the
26
Order dated March 3, 2004.
Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and
27
Prohibition with Preliminary Injunction and Temporary Restraining Order 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
28
of Attachment.
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 Dasmarias, Cavite. They added that the various clearances which
were issued in favor of the bonding company were applicable only in the courts of
29
the cities of Pasay, Pasig, Manila, and Makati, but not in the RTC, Imus, Cavite.
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, but it was denied in the

32
Resolution 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
33
Group, Inc. v. Court of Appeals, 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 applicants
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
34
the Certification issued by the Office of the Administrator and the
43 | P a g e

35

Certifications issued by the clerks of court of the RTCs of Dasmarias 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
Dasmarias 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
36
action by the attaching creditor against the defendant.
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
37
all the requisites for its approval are met; otherwise, the bond should be rejected.
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
38
thirty (30) days from the date of its issuance. However, it is apparent that the
39
Certification 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 Dasmarias, 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
40
or at any time before entry of judgment." 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
41
defendant, or even before summons issues.
42

In Davao Light & Power Co., Inc. v. Court of Appeals, 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 courts 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
applicants affidavit and attachment bond, and of the order of attachment, as
explicitly required by Section 5 of Rule 57, but also thesummons addressed to said
defendant as well as a copy of the complaint x x x. (Emphasis supplied.)
43

In Cuartero v. Court of Appeals, 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
44 | P a g e

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.
44
Any order issuing from the Court will not bind the defendant.
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 applicants 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 applicants cause of action in the main case,
since an anomalous situation would result if the issues of the main case would be
ventilated and resolved in a mere hearing of a motion. However, the same is not
applicable in the case bar. It is clear from the respondents pleadings that the
grounds on which they base the lifting of the writ of attachment are the
irregularities in its issuance and in the service of the writ; not petitioners cause of
action.1avvphi1

Further, petitioners contention that respondents are barred by estoppel, laches,

and prescription from questioning the orders of the RTC issuing the writ of
attachment and that the issue has become moot and academic by the renewal of
the attachment bond covering after its expiration, is devoid of merit. As correctly
held by the CA:
There are two ways of discharging the attachment. First, to file a counter-bond in
accordance with Section 12 of Rule 57. Second[,] [t]o quash the attachment on the
ground that it was irregularly or improvidently issued, as provided for in Section 13
of the same rule. Whether the attachment was discharged by either of the two ways
indicated in the law, the attachment debtor cannot be deemed to have waived any
defect in the issuance of the attachment writ by simply availing himself of one way
of discharging the attachment writ, instead of the other. The filing of a counter-bond
is merely a speedier way of discharging the attachment writ instead of the other
45
way.
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
46
allow for retroactivity of a belated service.
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.

45 | P a g e

equally by respondents and James R. Paddon (JRP), LGDs agent. The terms of the
4
agreement were later embodied in an e-mail labeled as the "2001 Agreement."

Metro, Inc. v. Lara's Gifts and Decors, Inc.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 171741

November 27, 2009

METRO, INC. and SPOUSES FREDERICK JUAN and LIZA JUAN, Petitioners,
vs.
LARA'S GIFTS AND DECORS, INC., LUIS VILLAFUERTE, JR. and LARA MARIA R.
VILLAFUERTE, Respondents.
DECISION
CARPIO, J.:
The Case
1

This is a petition for review of the 29 September 2004 Decision and 2 March 2006
3
Resolution of the Court of Appeals in CA-G.R. SP No. 79475. In its 29 September
2004 Decision, the Court of Appeals granted the petition for certiorari of
respondents Laras Gifts and Decors, Inc., Luis Villafuerte, Jr., and Lara Maria R.
Villafuerte (respondents). In its 2 March 2006 Resolution, the Court of Appeals
denied the motion for reconsideration of petitioners Metro, Inc., Frederick Juan and
Liza Juan (petitioners).
The Facts
Laras Gifts and Decors Inc. (LGD) and Metro, Inc. are corporations engaged in the
business of manufacturing, producing, selling and exporting handicrafts. Luis
Villafuerte, Jr. and Lara Maria R. Villafuerte are the president and vice-president of
LGD respectively. Frederick Juan and Liza Juan are the principal officers of Metro,
Inc.
Sometime in 2001, petitioners and respondents agreed that respondents would
endorse to petitioners purchase orders received by respondents from their buyers in
the United States of America in exchange for a 15% commission, to be shared

In May 2003, respondents filed with the Regional Trial Court, Branch 197, Las Pias
City (trial court) a complaint against petitioners for sum of money and damages with
a prayer for the issuance of a writ of preliminary attachment. Subsequently,
5
respondents filed an amended complaint and alleged that, as of July 2002,
petitioners defrauded them in the amount of $521,841.62. Respondents also prayed
for P1,000,000 as moral damages,P1,000,000 as exemplary damages and 10% of the
judgment award as attorneys fees. Respondents also prayed for the issuance of a
writ of preliminary attachment.
6

In its 23 June 2003 Order, the trial court granted respondents prayer and issued
the writ of attachment against the properties and assets of petitioners. The 23 June
2003 Order provides:
WHEREFORE, let a Writ of Preliminary Attachment issue against the properties and
assets of Defendant METRO, INC. and against the properties and assets of
Defendant SPOUSES FREDERICK AND LIZA JUAN not exempt from execution, as may
be sufficient to satisfy the applicants demand of US$521,841.62 US Dollars or its
equivalent in Pesos upon actual attachment, which is about P27 Million, unless such
Defendants make a deposit or give a bond in an amount equal to P27 Million to
satisfy the applicants demand exclusive of costs, upon posting by the Plaintiffs of a
Bond for Preliminary Attachment in the amount of twenty five million pesos
(P25,000,000.00), subject to the approval of this Court.
SO ORDERED.

On 26 June 2003, petitioners filed a motion to discharge the writ of attachment.

Petitioners argued that the writ of attachment should be discharged on the
following grounds: (1) that the 2001 agreement was not a valid contract because it
did not show that there was a meeting of the minds between the parties; (2)
assuming that the 2001 agreement was a valid contract, the same was inadmissible
because respondents failed to authenticate it in accordance with the Rules on
Electronic Evidence; (3) that respondents failed to substantiate their allegations of
fraud with specific acts or deeds showing how petitioners defrauded them; and (4)
that respondents failed to establish that the unpaid commissions were already due
and demandable.

46 | P a g e

After considering the arguments of the parties, the trial court granted petitioners
8
motion and lifted the writ of attachment. The 12 August 2003 Order of the trial
court provides:
Premises considered, after having taken a second hard look at the Order dated June
23, 2003 granting plaintiffs application for the issuance of a writ of preliminary
attachment, the Court holds that the issuance of a writ of preliminary attachment in
this case is not justified.
WHEREFORE, the writ of preliminary attachment issued in the instant case is hereby
ordered immediately discharged and/or lifted.
SO ORDERED.

Respondents filed a motion for reconsideration. In its 10 September 2003 Order, the
trial court denied the motion.
Respondents filed a petition for certiorari before the Court of Appeals. Respondents
alleged that the trial court gravely abused its discretion when it ordered the
discharge of the writ of attachment without requiring petitioners to post a counterbond.
In its 29 September 2004 Decision, the Court of Appeals granted respondents
petition. The 29 September 2004 Decision provides:
WHEREFORE, finding merit in the petition, We GRANT the same. The assailed Orders
are hereby ANNULLED and SET ASIDE. However, the issued Writ of Preliminary
Attachment may be ordered discharged upon the filing by the private respondents
of the proper counter-bond pursuant to Section 12, Rule 57 of the Rules of Civil
Procedure.
SO ORDERED.

brought, or in the performance thereof. The trial court found no proof that
petitioners were motivated by malice in entering into the 2001 agreement. The trial
court also declared that petitioners failure to fully comply with their obligation,
absent other facts or circumstances to indicate evil intent, does not automatically
amount to fraud. Consequently, the trial court ordered the discharge of the writ of
attachment for lack of evidence of fraud.
The 29 September 2004 Decision of the Court of Appeals
According to the Court Appeals, the trial court gravely abused its discretion when it
ordered the discharge of the writ of attachment without requiring petitioners to
post a counter-bond. The Court of Appeals said that when the writ of attachment is
issued upon a ground which is at the same time also the applicants cause of action,
courts are precluded from hearing the motion for dissolution of the writ when such
hearing would necessarily force a trial on the merits of a case on a mere
11
motion. The Court of Appeals pointed out that, in this case, fraud was not only
alleged as the ground for the issuance of the writ of attachment, but was actually
the core of respondents complaint. The Court of Appeals declared that the only way
that the writ of attachment can be discharged is by posting a counter-bond in
12
accordance with Section 12, Rule 57 of the Rules of Court.
The Issue
Petitioners raise the question of whether the writ of attachment issued by the trial
court was improperly issued such that it may be discharged without the filing of a
counter-bond.
The Ruling of the Court
The petition has no merit.

10

Petitioners filed a motion for reconsideration. In its 2 March 2006 Resolution, the
Court of Appeals denied the motion.
Hence, this petition.
The 12 August 2003 Order of the Trial Court
According to the trial court, respondents failed to sufficiently show that petitioners
were guilty of fraud either in incurring the obligation upon which the action was

Petitioners contend that the writ of attachment was improperly issued because
respondents amended complaint failed to allege specific acts or circumstances
constitutive of fraud. Petitioners insist that the improperly issued writ of attachment
may be discharged without the necessity of filing a counter-bond. Petitioners also
argue that respondents failed to show that the writ of attachment was issued upon
a ground which is at the same time also respondents cause of action. Petitioners
maintain that respondents amended complaint was not an action based on fraud
but was a simple case for collection of sum of money plus damages.

47 | P a g e

On the other hand, respondents argue that the Court of Appeals did not err in ruling
that the writ of attachment can only be discharged by filing a counter-bond.
13
According to respondents, petitioners cannot avail of Section 13, Rule 57 of the
Rules of Court to have the attachment set aside because the ground for the issuance
of the writ of attachment is also the basis of respondents amended complaint.
Respondents assert that the amended complaint is a complaint for damages for the
breach of obligation and acts of fraud committed by petitioners.1 a vv p h i 1

5. Sometime in early 2001, defendant Frederick Juan approached plaintiff spouses

and asked them to help defendants export business. Defendants enticed plaintiffs
to enter into a business deal. He proposed to plaintiff spouses the following:
a. That plaintiffs transfer and endorse to defendant Metro some of the Purchase
Orders (POs) they will receive from their US buyers;
b. That defendants will sell exclusively and "only thru" plaintiffs for their US buyer;

In this case, the basis of respondents application for the issuance of a writ of
preliminary attachment is Section 1(d), Rule 57 of the Rules of Court which provides:

xxx

SEC. 1. Grounds upon which attachment may issue. At the commencement of the
action or at any time before entry of judgment, a plaintiff or any proper party may
have the property of the adverse party attached as security for the satisfaction of
any judgment that maybe recovered in the following cases: x x x

6. After several discussions on the matter and further inducement on the part of
defendant spouses, plaintiff spouses agreed. Thus, on April 21, 2001, defendant
spouses confirmed and finalized the agreement in a letter-document entitled "2001
Agreement" they emailed to plaintiff spouses, a copy of which is hereto attached
asAnnex "A".

(d) In an action against a party who has been guilty of fraud in contracting the debt
or incurring the obligation upon which the action is brought, or in the performance
thereof; x x x
14

In Liberty Insurance Corporation v. Court of Appeals, we explained:

To sustain an attachment on this ground, it must be shown that the debtor in
contracting the debt or incurring the obligation intended to defraud the creditor.
The fraud must relate to the execution of the agreement and must have been the
reason which induced the other party into giving consent which he would not have
otherwise given. To constitute a ground for attachment in Section 1(d), Rule 57 of
the Rules of Court, fraud should be committed upon contracting the obligation sued
upon. A debt is fraudulently contracted if at the time of contracting it the debtor has
15
a preconceived plan or intention not to pay, as it is in this case.
The applicant for a writ of preliminary attachment must sufficiently show the factual
circumstances of the alleged fraud because fraudulent intent cannot be inferred
from the debtors mere non-payment of the debt or failure to comply with his
16
obligation.
In their amended complaint, respondents alleged the following in support of their
prayer for a writ of preliminary attachment:

xxx
20. Defendants are guilty of fraud committed both at the inception of the
agreement and in the performance of the obligation. Through machinations and
schemes, defendants successfully enticed plaintiffs to enter into the 2001
Agreement. In order to secure plaintiffs full trust in them and lure plaintiffs to
endorse more POs and increase the volume of the orders, defendants during the
early part, remitted to plaintiffs shares under the Agreement.
21. However, soon thereafter, just when the orders increased and the amount
involved likewise increased, defendants suddenly, without any justifiable reasons
and in pure bad faith and fraud, abandoned their contractual obligations to remit to
plaintiffs their shares. And worse, defendants transacted directly with plaintiffs
foreign buyer to the latters exclusion and damage. Clearly, defendants planned
everything from the beginning, employed ploy and machinations to defraud
plaintiffs, and consequently take from them a valuable client.
22. Defendants are likewise guilty of fraud by violating the trust and confidence
reposed upon them by plaintiffs. Defendants received the proceeds of plaintiffs LCs
with the clear obligation of remitting 15% thereof to the plaintiffs. Their refusal and
failure to remit the said amount despite demand constitutes a breach of trust
17
amounting to malice and fraud. (Emphasis and underscoring in the original)
(Boldfacing and italicization supplied)
48 | P a g e

We rule that respondents allegation that petitioners undertook to sell exclusively

and only through JRP/LGD for Target Stores Corporation but that petitioners
transacted directly with respondents foreign buyer is sufficient allegation of fraud
to support their application for a writ of preliminary attachment. Since the writ of
preliminary attachment was properly issued, the only way it can be dissolved is by
filing a counter-bond in accordance with Section 12, Rule 57 of the Rules of Court.
Moreover, the reliance of the Court of Appeals in the cases of Chuidian v.
18
19
Sandiganbayan, FCY Construction Group, Inc. v. Court of Appeals, and Liberty
20
Insurance Corporation v. Court of Appeals is proper. The rule that "when the writ
of attachment is issued upon a ground which is at the same time the applicants
cause of action, the only other way the writ can be lifted or dissolved is by a
21
counter-bond" is applicable in this case. It is clear that in respondents amended
complaint of fraud is not only alleged as a ground for the issuance of the writ of
preliminary attachment, but it is also the core of respondents complaint. The fear of
the Court of Appeals that petitioners could force a trial on the merits of the case on
the strength of a mere motion to dissolve the attachment has a basis.
WHEREFORE, we DENY the petition. We AFFIRM the 29 September 2004 Decision
and 2 March 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 79475.
SO ORDERED.

49 | P a g e

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
11
checks issued to Colim were merely intended as a form of collateral. Hinged on the
same grounds, Sps. Lazaro equally opposed the issuance of a writ of preliminary
12
attachment.

Lim v. Sps. Lazaro

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 185734

July 3, 2013

ALFREDO C. LIM, JR., PETITIONER,

vs.
SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO, RESPONDENTS.
RESOLUTION
PERLAS-BERNABE, J.:
1

Assailed in this petition for review on certiorari are the July 10, 2008 Decision and
3
December 18, 2008 Resolution of the Court of Appeals (CA) in CA-G.R. SP No.
4
100270, affirming the March 29, 2007 Order 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.).

Nonetheless, on September 22, 2006, the parties entered into a Compromise

13
Agreement 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
14
entire obligation; and (b) that Sps. Lazaros 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,
15
16
2006 Decision and January 5, 2007 Amended Decision.
17

The Facts
5

On August 22, 2005, Lim, Jr. filed a complaint 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, attorneys fees, and
6
costs. The RTC granted the writ of preliminary attachment application and upon the
7
posting of the required P2,160,000.00 bond, issued the corresponding writ on
8
October 14, 2005. 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
9
(subject TCTs), registered in the names of Sps. Lazaro, were levied upon.

Subsequently, Sps. Lazaro filed an Omnibus Motion, seeking to lift the writ of
preliminary attachment annotated on the subject TCTs, which the RTC granted on
18
March 29, 2007. 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 writs
annotation on the subject TCTs.
19

Lim, Jr. filed a motion for reconsideration which was, however, denied on July 26,
20
21
2007, prompting him to file a petition for certiorari before the CA.

10

In their Answer with Counterclaim, 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

The CA Ruling

50 | P a g e

22

On July 10, 2008, the CA rendered the assailed decision, finding no grave abuse of
discretion on the RTCs 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
23
attachment would have no leg to stand on, necessitating its discharge.
24

Aggrieved, Lim, Jr. moved for reconsideration which was likewise denied by the CA
25
in its December 18, 2008 Resolution.

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. Lazaros
properties should have continued to subsist.
29

In Chemphil Export & Import Corporation v. CA, the Court pronounced that a writ
of attachment is not extinguished by the execution of a compromise agreement
between the parties, viz:

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 Courts 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
26
effects of a final judgment in the case. 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
27
the defendant cannot be effected.

Did the compromise agreement between Antonio Garcia and the consortium
discharge the latters 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 CEICs 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

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
28
law.
Applying these principles, the Court finds that the discharge of the writ of
preliminary attachment against the properties of Sps. Lazaro was improper.

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)
51 | P a g e

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
30
suit. Verily, the lifting of the attachment lien would be tantamount to an
abdication of Lim, Jr.s rights over Sps. Lazaros 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, T64939, and T-86369, in favor of petitioner Alfredo C. Lim, Jr.
SO ORDERED.
Carpio, (Chairperson), Brion, Del Castillo, Perez, and Perlas-Bernabe, JJ., concur.

52 | P a g e

Allied Banking Corp. v. South Pacific Sugar Corp.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 163692

February 4, 2008

ALLIED BANKING CORPORATION, petitioner,

vs.
SOUTH PACIFIC SUGAR CORPORATION, MARGARITA CHUA SIA, AGOSTO SIA, LIN
FAR CHUA, GERRY CHUA, SIU DY CHUA, and ANTONIO CHUA, respondents.
DECISION
QUISUMBING, J.:
1

The instant petition assails the Decision dated February 3, 2004 and the
2
Resolution dated May 13, 2004 of the Court of Appeals in CA-G.R. SP No. 68619.
The appellate court had found no grave abuse of discretion on the part of the
Regional Trial Court (RTC) of Makati City, Branch 148, in discharging the writ of
preliminary attachment it previously granted, and dismissed the petition for
certiorari. The motion for reconsideration was denied.
The factual antecedents of this case are as follows:
South Pacific Sugar Corporation (South Pacific), on March 23, 1999, issued three
3
promissory notes totalingP96,000,000 to the petitioner, Allied Banking Corporation
(hereafter Allied Bank), to secure payment of loans contracted during the same
period. Respondents Margarita Chua Sia, Agosto Sia, Lin Far Chua, Gerry Chua, Siu
Dy
Chua,
and
Antonio
Chua
(guarantors)
executed
continuing
guaranty/comprehensive surety agreements binding themselves solidarily with the
corporation. On maturity, South Pacific and its guarantors failed to honor their
respective covenants.
On January 26, 2001, Allied Bank filed a complaint for collection of a sum of money
with a prayer for the issuance of a writ of preliminary attachment against

respondents. Allied Bank prayed in its complaint (1) that upon its filing, a writ of
preliminary attachment be issued ex parte against all leviable properties of the
respondents as may be sufficient to satisfy petitioners claim; and (2) that the
respondents be ordered to pay petitioner P90,000,000 plus interest and charges, as
well as attorneys fees and costs of suit.
During the ex parte hearing for the issuance of a writ of preliminary attachment,
Allied Banks lone witness, Account Officer Marilou T. Go, testified that Allied Bank
approved the corporations application for credit facilities on the latters
representation that (1) it was in good fiscal condition and had positive business
projections as stated in a voluminous Information Memorandum, and that (2) it
would use the loan to fund the operations of the sugar refinery. Go further testified
that Allied Bank discovered soon after that these representations were false; that
the loans were allegedly "diverted to illegitimate purposes;" that as of January 2001,
the loan amounted to P90 million; that based on a project study by a consulting
company, Seed Capital Ventures, Inc., South Pacific was suffering losses and
incurring debts in the millions; that there had been no credit investigation to
appraise the corporations business operations; and that Allied Bank relied on the
4
financial statements of the corporation.
Thereafter, the trial court granted the attachment and Allied Bank posted the
requisite bond.
The respondents filed a motion to discharge the attachment with an urgent motion
to defer further the implementation of the writ, grounded upon the arguments that
(1) the evidence of fraud was insufficient and self-serving; and (2) there was no
evidence that South Pacific used the loan for other purposes. The respondents
pointed out that they have been dealing with Allied Bank since 1995, and had paid a
total of P210 million out of a maximum exposure of about P300 million, and that
the P90 million subject of the pending suit constitutes merely the balance of their
5
loan.
The trial court granted the respondents motion to defer the implementation of the
writ of attachment. Allied Bank opposed the motion. After hearing, the court
6
7
granted the motion to discharge and denied the motion for reconsideration.
On certiorari, Allied Bank averred that the trial court acted with precipitate haste in
deciding the motion to discharge the attachment without its written opposition, and
with grave abuse of discretion in dissolving the writ without requiring the

53 | P a g e

guarantors to post a counter-bond. Finally, it asserted that the trial court failed to
appreciate evidence of respondents fraud.
The Court of Appeals, however, affirmed the trial courts order. It ruled that Allied
Bank was not denied its day in court since it was allowed to argue its position during
the hearing on the motion and was given ample opportunity to file its opposition.
However, Allied Bank failed to take advantage of the period given to it. Instead of
filing its opposition within the time allowed by the Court, Allied Bank filed a motion
for extension of time by registered mail. Then, it filed its opposition also only by
registered mail notwithstanding that it was forewarned that the motion to discharge
the attachment would be considered submitted for resolution with or without the
8
parties respective position papers.
On the issue of discharge of the writ notwithstanding fraud, the Court of Appeals
held that the inability of respondents to pay does not amount to a fraudulent intent.
The Court of Appeals stated that Allied Bank failed to justify the grant of a writ of
attachment. Essentially, it found wanting such evidence as would establish fraud as
9
required before a writ of attachment may be granted under Section 1, Rule 57 of
the 1997 Rules of Civil Procedure. It found that "the core of the prayer for the
attachment was the failure of the respondents to pay their obligations on maturity
date," not fraudulent intent to evade their commitments; and that the "inability to
pay ones creditors is not necessarily synonymous with fraudulent intent not to
10
honor an obligation." The appellate court added that Allied Bank was aware of the
corporations financial standing and capacity to pay its loans when Allied Bank
granted credit facilities to it. The appellate court noted that respondents had
disclosed their financial standing through the Information Memorandum they
submitted. The trial court, therefore, committed no grave error, said the appellate
court.
Having failed to obtain a reversal by its motion for reconsideration before the
appellate court, Allied Bank now interposes this appeal through a petition for
review, raising the following issues:
I.
THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THERE WAS NO
INTENTION ON [THE] PART OF RESPONDENTS TO DEFRAUD THE PETITIONER.
II.

THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING THAT A COUNTERBOND WAS NECESSARY FOR THE DISCHARGE OF THE WRIT OF PRELIMINARY
ATTACHMENT.
III.
THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING THAT THE COURT A
QUO COMMITTED GRAVE ABUSE OF DISCRETION IN DISCHARGING THE WRIT OF
PRELIMINARY ATTACHMENT WITHOUT AFFORDING THE PETITIONER THE REQUISITE
11
DUE PROCESS OF LAW.
The ultimate issue raised in this petition is whether there was fraud committed by
respondents against petitioner bank such that a writ of attachment may be issued
against respondents.
Allied Bank contends that respondents were guilty of fraud in contracting for their
loan amounting to about P90 million and in performing their obligations under said
loan, as sufficiently testified to by its lone witness. Respondents counter that they
had no fraudulent intent in such contract for loan nor in the performance of
obligations thereunder.
A thorough examination of witness Marilou Gos testimony, however, reveals that
her testimony did not detail how respondents induced or deceived Allied Bank into
granting the loans. She mentioned an Information Memorandum which allegedly
misled Allied Bank to grant the loan. She claimed that promising financial
projections in said Memorandum guaranteeing South Pacifics present and future
capacity to pay convinced Allied Bank to approve the loan. Yet, the Information
Memorandum was never presented in evidence. Neither was its existence proved,
nor its authorship authenticated, much less its contents shown to explain how the
information could have enticed, misinformed or deceived Allied Bank. The alleged
content of the document, which was not identified nor formally offered in evidence,
is technically pure hearsay. It cannot be admitted or considered as the proof of
12
petitioners contention.
Next, the witness of petitioner, Marilou Go, cited a project study prepared by a
certain consulting firm, Seed Capital Ventures, Inc.. According to petitioner, the
project study suggested that only about 60% of South Pacifics mill and refinery was
being utilized to capacity, leading Allied Bank to suspect that the loan was being
diverted to other purposes. Yet, again, the project study was neither presented nor
offered in evidence, hence testimony on it is just hearsay.
54 | P a g e

The same witness also testified that South Pacific was indebted in millions of pesos
to several other banks, but then again, no documentary evidence or other proof was
presented to establish such fact. Hence, the witness testimony remains
uncorroborated.
In our considered view, without presenting the documents adverted to by
petitioners lone witness, Allied Banks allegations of fraud amount to no more than
mere conjectures. Yet there is no showing why Allied Bank, being in the business of
loans, could not obtain and present the necessary documents in support of its
allegations. Thus, we are in agreement that the Court of Appeals was correct in
finding that the testimony of Allied Banks witness failed to show that respondents
indebtedness was incurred fraudulently.
Moreover, even a cursory examination of the banks complaint will reveal that it
cited no factual circumstance to show fraud on the part of respondents. The
complaint only had a general statement in the Prayer for the Issuance of a Writ of
Preliminary Attachment, reproduced in the attached affidavit of petitioners witness
Go who stated as follows:
xxxx
4. Defendants committed fraud in contracting the obligations upon which the
present action is based and in the performance thereof. Among others, defendants
induced plaintiff to grant the subject loans to defendant corporation by wilfully and
deliberately misrepresenting that, one, the proceeds of the loans would be used as
additional working capital and, two, they would be in a financial position to pay, and
would most certainly pay, the loan obligations on their maturity dates. In truth,
defendants had no intention of honoring their commitments as shown by the fact
that upon their receipt of the proceeds of the loans, they diverted the same to
illegitimate purposes and then brazenly ignored and resisted plaintiffs lawful
13
demands for them to settle their past due loan obligations;
xxxx
Such general averment will not suffice to support the issuance of the writ of
preliminary attachment. It is necessary to recite in what particular manner an
applicant for the writ of attachment was defrauded. In a prayer for a writ of
attachment, as already held by this Court:
It is not enough for the complaint to ritualistically cite, as here, that the
defendants are "guilty of fraud in contracting an obligation." An order of

attachment cannot be issued on a general averment, such as one ceremoniously

quoting from a pertinent rule. The need for a recitation of factual circumstances
that support the application becomes more compelling here considering that the
ground relied upon is "fraud in contracting an obligation." The complaint utterly
failed to even give a hint about what constituted the fraud and how it was
14
perpetrated. Fraud cannot be presumed. (Emphasis supplied.)
Likewise, written contracts are presumed to have been entered into voluntarily and
15
for a sufficient consideration. Section 1, Rule 131 of the Rules of Court instructs
that each party must prove his own affirmative allegations. To repeat, in this
jurisdiction, fraud is never presumed. Moreover, written contracts such as the
documents executed by the parties in the present case, are presumed to have been
16
entered into for a sufficient consideration.
In this instance, the transaction between the bank and its client appears to have
commenced rather regularly and aboveboard. The parties have been transacting
business with each other since 1995. Up until the present case, it appears Allied
Bank had not complained of any wrongdoing by this client. It also appears that
South Pacific had availed of a total of P300 million in credit accommodations from
Allied Bank, P210 million of which has already been paid a fact Allied Bank did not
17
deny nor object to. Allied Bank even admitted that of the outstanding loan of P96
million, P6 million had been paid. These facts hardly point to the direction of fraud.
Allied Bank claims repeatedly that the fact that P210 million out of P300 million has
been paid does not discount the possibility that respondents indeed committed
fraud in their assumption and/or the performance of their obligations. Yet, it never
denied such fact of payment of the P210 million. As the Court of Appeals pointedly
held,
The inability to pay ones creditors is not necessarily synonymous with
fraudulent intent not to honor an obligation. There must be factual allegations as
to how fraud was committed. Fraud may be gleaned from a preconceived plan or
intention not to pay. Unfortunately, this does not appear to be so in the case at
bench. In fact, in its complaint the petitioner alleged that the private respondents
had a total obligation of P96,000,000.00 covered by three (3) separate promissory
notes, out of which, they paid onlyP6,000,000.00 leaving an unpaid outstanding
obligation in the sum of P90,000,000.00. There was no mention at all that the
indebtedness was incurred in consequence of fraud; neither does it show in the
testimony of petitioners witness, Marilou T. Go, as summarized by the public
respondent in the order dated February 20, 2001, that there exists a preconceived
55 | P a g e

plan or intention not to pay their obligation in defraudation of the

18
petitioner. (Emphasis supplied.)
We take this opportunity to reiterate that an application for a writ of attachment,
19
being a harsh remedy, is to be construed strictly in favor of the defendant. For by
it, the reputation of the debtor may be seriously prejudiced. Thus, caution must be
exercised in granting the writ. There must be more compelling reasons to justify
attachment beyond a mere general assertion of fraud. This must be so lest we,
20
21
as Garcia v. Reyes puts it, be "spinning tight webs on gossamer filigrees."
We need not tarry further to discuss the other issues raised in the petition for being
moot on account of the foregoing pronouncement.
Again, we stress that this Court gives credence to the factual findings of the trial
court when supported by the evidence and gives them more weight still when the
22
same are affirmed by the Court of Appeals.
WHEREFORE, the instant petition is DENIED for lack of merit. The Decision dated
February 3, 2004 and the Resolution dated May 13, 2004 of the Court of Appeals in
23
CA-G.R. SP No. 68619 are AFFIRMED. The Order dated May 23, 2001 of the
Regional Trial Court of Makati City, Branch 148, discharging the writ of preliminary
attachment in Civil Case No. 01-121 is UPHELD. No pronouncement as to costs.
SO ORDERED.
Carpio, Carpio-Morales, Tinga, Velasco, Jr., JJ., concur.

56 | P a g e

Phil. Bank of Communications v. CA

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 115678

February 23, 2001

PHILIPPINES BANK OF COMMUNICATIONS, petitioner,

vs.
HON. COURT OF APPEALS and BERNARDINO VILLANUEVA, respondents.
x ---------------------------------------- x
G.R. No. 119723

February 23, 2001

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

vs.
HON. COURT OF APPEALS and FILIPINAS TEXTILE MILLS, INC., respondents.
YNARES-SANTIAGO, J.:
Before us are consolidated petitions for review both filed by Philippine Bank of
Communications; one against the May 24, 1994 Decision of respondent Court of
1
Appeals in CA-G.R. SP No. 32863 and the other against its March 31, 1995 Decision
2
in CA-G.R. SP No. 32762. Both Decisions set aside and nullified the August 11, 1993
3
Order of the Regional Trial Court of Manila, Branch 7, granting the issuance of a
writ of preliminary attachment in Civil Case No. 91-56711.
The case commenced with the filing by petitioner, on April 8, 1991, of a Complaint
against private respondent Bernardino Villanueva, private respondent Filipinas
Textile Mills and one Sochi Villanueva (now deceased) before the Regional Trial
Court of Manila. In the said Complaint, petitioner sought the payment of
P2,244,926.30 representing the proceeds or value of various textile goods, the
purchase of which was covered by irrevocable letters of credit and trust receipts
executed by petitioner with private respondent Filipinas Textile Mills as obligor;
which, in turn, were covered by surety agreements executed by private respondent
Bernardino Villanueva and Sochi Villanueva. In their Answer, private respondents

admitted the existence of the surety agreements and trust receipts but countered
that they had already made payments on the amount demanded and that the
interest and other charges imposed by petitioner were onerous.
4

On May 31, 1993, petitioner filed a Motion for Attachment, contending that
violation of the trust receipts law constitutes estafa, thus providing ground for the
issuance of a writ of preliminary attachment; specifically under paragraphs "b" and
"d," Section 1, Rule 57 of the Revised Rules of Court. Petitioner further claimed that
attachment was necessary since private respondents were disposing of their
properties to its detriment as a creditor. Finally, petitioner offered to post a bond
for the issuance of such writ of attachment.
The Motion was duly opposed by private respondents and, after the filing of a Reply
thereto by petitioner, the lower court issued its August 11, 1993 Order for the
issuance of a writ of preliminary attachment, conditioned upon the filing of an
attachment bond. Following the denial of the Motion for Reconsideration filed by
private respondent Filipinas Textile Mills, both private respondents filed separate
petitions for certiorari before respondent Court assailing the order granting the writ
of preliminary attachment.1wphi1.nt
Both petitions were granted, albeit on different grounds. In CA-G.R. SP No. 32762,
respondent Court of Appeals ruled that the lower court was guilty of grave abuse of
discretion in not conducting a hearing on the application for a writ of preliminary
attachment and not requiring petitioner to substantiate its allegations of fraud,
embezzlement or misappropriation. On the other hand, in CA-G.R. SP No. 32863,
respondent Court of Appeals found that the grounds cited by petitioner in its
Motion do not provide sufficient basis for the issuance of a writ of preliminary
attachment, they being mere general averments. Respondent Court of appeals held
that neither embezzlement, misappropriation nor incipient fraud may be presumed;
they must be established in order for a writ of preliminary attachment to issue.
5

Hence, the instant consolidated petitions charging that respondent Court of

Appeals erred in
"1. Holding that there was no sufficient basis for the issuance of the writ of
preliminary attachment in spite of the allegations of fraud, embezzlement and
misappropriation of the proceeds or goods entrusted to the private respondents;
2. Disregarding the fact that the failure of FTMI and Villanueva to remit the proceeds
or return the goods entrusted, in violation of private respondents' fiduciary duty as
57 | P a g e

entrustee, constitute embezzlement or misappropriation which is a valid ground for

6
the issuance of a writ of preliminary attachment."
We find no merit in the instant petitions.
To begin with, we are in accord with respondent Court of Appeals in CA-G.R. SP No.
32863 that the Motion for Attachment filed by petitioner and its supporting affidavit
did not sufficiently establish the grounds relied upon in applying for the writ of
preliminary attachment.
The Motion for Attachment of petitioner states that
1. The instant case is based on the failure of defendants as entrustee to pay or remit
the proceeds of the goods entrusted by plaintiff to defendant as evidenced by the
trust receipts (Annexes "B", "C" and "D" of the complaint), nor to return the goods
entrusted thereto, in violation of their fiduciary duty as agent or entrustee;
2. Under Section 13 of P.D. 115, as amended, violation of the trust receipt law
constitute(s) estafa (fraud and/or deceit) punishable under Article 315 par. 1[b] of
the Revised Penal Code;
3. On account of the foregoing, there exist(s) valid ground for the issuance of a writ
of preliminary attachment under Section 1 of Rule 57 of the Revised Rules of Court
particularly under sub-paragraphs "b" and "d", i.e. for embezzlement or fraudulent
misapplication or conversion of money (proceeds) or property (goods entrusted) by
an agent (entrustee) in violation of his fiduciary duty as such, and against a party
who has been guilty of fraud in contracting or incurring the debt or obligation;
4. The issuance of a writ of preliminary attachment is likewise urgently necessary as
there exist(s) no sufficient security for the satisfaction of any judgment that may be
rendered against the defendants as the latter appears to have disposed of their
properties to the detriment of the creditors like the herein plaintiff;
5. Herein plaintiff is willing to post a bond in the amount fixed by this Honorable
Court as a condition to the issuance of a writ of preliminary attachment against the
properties of the defendants.
Section 1 (b) and (d), Rule 57 of the then controlling Revised Rules of Court,
provides, to wit

SECTION 1. Grounds upon which attachment may issue. A plaintiff or any proper
party may, at the commencement of the action or at any time thereafter, have the
property of the adverse party attached as security for the satisfaction of any
judgment that may be recovered in the following cases:
xxx

xxx

xxx

(b) In an action for money or property embezzled or fraudulently misapplied or

converted to his us by a public officer, or an officer of a corporation, or an attorney,
factor, broker, agent or clerk, in the course of his employment as such, or by any
other person in a fiduciary capacity, or for a willful violation of duty;
xxx

xxx

xxx

(d) In an action against a party who has been guilty of fraud in contracting the debt
or incurring the obligation upon which the action is brought, or in concealing or
disposing of the property for the taking, detention or conversion of which the action
is brought;
xxx

xxx

xxx

While the Motion refers to the transaction complained of as involving trust receipts,
the violation of the terms of which is qualified by law as constituting estafa, it does
not follow that a writ of attachment can and should automatically issue. Petitioner
cannot merely cite Section 1(b) and (d), Rule 57, of the Revised Rules of Court, as
mere reproduction of the rules, without more, cannot serve as good ground for
issuing a writ of attachment. An order of attachment cannot be issued on a general
7
averment, such as one ceremoniously quoting from a pertinent rule.
The supporting Affidavit is even less instructive. It merely states, as follows
I, DOMINGO S. AURE, of legal age, married, with address at No. 214-216 Juan Luna
Street, Binondo, Manila, after having been sworn in accordance with law, do hereby
depose and say, THAT:
1.
I am the Assistant Manager for Central Collection Units Acquired Assets
Section of the plaintiff, Philippine Bank of Communications, and as such I have
caused the preparation of the above motion for issuance of a writ of preliminary
attachment;

58 | P a g e

2.
I have read and understood its contents which are true and correct of my own
knowledge;
3.
There exist(s) sufficient cause of action against the defendants in the instant
case;
4.
The instant case is one of those mentioned in Section 1 of Rule 57 of the
Revised Rules of Court wherein a writ of preliminary attachment may be issued
against the defendants, particularly subparagraphs "b" and "d" of said section;
5.
There is no other sufficient security for the claim sought to be enforced by the
instant case and the amount due to herein plaintiff or the value of the property
sought to be recovered is as much as the sum for which the order for attachment is
granted, above all legal counterclaims.
Again, it lacks particulars upon which the court can discern whether or not a writ of
attachment should issue.
Petitioner cannot insist that its allegation that private respondents failed to remit
the proceeds of the sale of the entrusted goods nor to return the same is sufficient
for attachment to issue. We note that petitioner anchors its application upon
Section 1(d), Rule 57. This particular provision was adequately explained in Liberty
8
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
9
inability to pay or to comply with the obligations. On the other hand, as stressed,
above, fraud may be gleaned from a preconceived plan or intention not to pay. This

does not appear to be so in the case at bar. In fact, it is alleged by private

respondents that out of the total P419,613.96 covered by the subject trust receipts,
the amount of P400,000.00 had already been paid, leaving only P19,613.96 as
balance. Hence, regardless of the arguments regarding penalty and interest, it can
hardly be said that private respondents harbored a preconceived plan or intention
not to pay petitioner.
The Court of Appeals was correct, therefore, in its finding in CA-G.R. SP No. 32863
that neither petitioner's Motion or its supporting Affidavit provides sufficient basis
for the issuance of the writ of attachment prayed for.
We also agree with respondent Court of Appeals in CA-G.R. SP No. 32762 that the
lower court should have conducted a hearing and required private petitioner to
substantiate its allegations of fraud, embezzlement and misappropriation.
To reiterate, petitioner's Motion for Attachment fails to meet the standard set
10
in D.P. Lub Oil Marketing Center, Inc. v. Nicolas, in applications for attachment. In
the said case, this Court cautioned
The petitioner's prayer for a writ of preliminary attachment hinges on the
allegations in paragraph 16 of the complaint and paragraph 4 of the affidavit of
Daniel Pe which are couched in general terms devoid of particulars of time, persons
and places to support support such a serious assertion that "defendants are
disposing of their properties in fraud of creditors." There is thus the necessity of
giving to the private respondents an opportunity to ventilate their side in a hearing,
in accordance with due process, in order to determine the truthfulness of the
allegations. But no hearing was afforded to the private respondents the writ having
been issued ex parte. A writ of attachment can only be granted on concrete and
specific grounds and not on general averments merely quoting the words of the
rules.
11

As was frowned upon in D.P. Lub Oil Marketing Center, Inc., not only was
petitioner's application defective for having merely given general averments; what is
worse, there was no hearing to afford private respondents an opportunity to
ventilate their side, in accordance with due process, in order to determine the
truthfulness of the allegations of petitioner. As already mentioned, private
respondents claimed that substantial payments were made on the proceeds of the
trust receipts sued upon. They also refuted the allegations of fraud, embezzlement
and misappropriation by averring that private respondent Filipinas Textile Mills
could not have done these as it had ceased its operations starting in June of 1984
59 | P a g e

due to workers' strike. These are matters which should have been addressed in a
preliminary hearing to guide the lower court to a judicious exercise of its discretion
regarding the attachment prayed for. On this score, respondent Court of Appeals
was correct in setting aside the issued writ of preliminary attachment.
Time and again, we have held that the rules on the issuance of a writ of attachment
must be construed strictly against the applicants. This stringency is required because
the remedy of attachment is harsh, extraordinary and summary in nature. If all the
requisites for the granting of the writ are not present, then the court which issues it
12
acts in excess of its jurisdiction.
WHEREFORE, for the foregoing reasons, the instant petitions are DENIED. The
decision of the Court of Appeals in CA-G.R. SP No. 32863 and CA-G.R. SP No. 32762
are AFFIRMED. No pronouncement as to costs.1wphi1.nt
SO ORDERED.
Davide, Jr., Puno, Kapunan, and Pardo, JJ., concur.

60 | P a g e

Sps. Santiago v. Allied Banking Corp.

Republic of the Philippines

SUPREME COURT
Manila

petitioner Santiago Tanchan (Santiago), for himself and as attorney-in-fact of his

wife and co-petitioner Rufina Tanchan (Rufina) under a Special Power of Attorney,
dated April 30, 1993, which grants Santiago authority to:

SPOUSES SANTIAGO and RUFINA TANCHAN, petitioners

vs.
ALLIED BANKING CORPORATION, respondent.

x x x borrow and/or contract debts and obligations involving, affecting or creating a

charge or liability on, or which may involve, affect or create a liability on the
Property and/or my interest therein, whether or not such debt/s or obligation/s
contracted or to be contracted will benefit me or the family, and to sign, execute
and deliver in my name to or in favor of any party, under such terms and conditions
as my attorney-in-fact may deem necessary, appropriate or convenient, any and all
documents instruments or contract/s (including without limitations, promissory
notes, loan agreements, assignments, surety or guaranty undertakings, security
10
agreements) involving, affecting or creating a charge or liability on the Property."

DECISION

The liability of the sureties under both CG/CSAs is limited to Php150,000,000.00.

AUSTRIA-MARTINEZ, J.:

Exhibit "G" and all the Philippine peso promissory notes, including Exhibit "H", are
secured not only by the two CG/CSAs but also by a Real Estate Mortgage executed
on February 14, 1997 by Henry, for himself and as the legal guardian of the minors
Henry Paul L. Tanchan and Don Henry L. Tanchan; his wife Ma. Julie Ann; and
Spouses Pablo and Milagros Lim, over real properties registered in their names
under Transfer Certificates of Title No. 115804, No. 111149, No. 110672 and No.
12
3815, all located in Cebu City.

THIRD DIVISION
G.R. No. 164510

November 25, 2005

By way of Petition for Review under Rule 45 of the Rules of Court, spouses Santiago
and Rufina Tanchan (petitioners) seek the modification of the June 15, 2004
1
Decision of the Court of Appeals (CA) which affirmed the August 3, 2001
2
3
Decision and August 8, 2002 Order of Branch 137, Regional Trial Court (RTC),
4
Makati in Civil Case No. 98-2468.
The relevant facts are of record.
For value received, Cebu Foremost Construction, Inc. (Foremost), through its
Chairman and President Henry Tanchan (Henry) and his spouse, Vice-President and
Treasurer Ma. Julie Ann Tanchan (Ma. Julie Ann) executed and delivered to Allied
5
Banking Corporation (respondent) seven US$ promissory notes, including
6
Promissory Note No. 0051-97-03696 (Exhibit "G") for US$379,000.00, at 9.50%
interest rate per annum, due on February 9, 1998.
Foremost also issued to respondent several Philippine peso promissory
7
notes covering various loans in the aggregate amount of Php28,900,000.00,
including Promissory Note No. 0051-97-03688 (Exhibit "H") for PhpP16,500,000.00,
8
at an interest rate of 14.5% per annum, due on February 9, 1998.
All the foregoing promissory notes are secured by two Continuing Guaranty/
Comprehensive Surety Agreements (CG/CSA) executed in the personal capacities of
spouses Henry and Ma. Julie Ann (Spouses Tanchan) and Henry's brother, herein

11

In separate final demand letters, both dated May 14, 1998, respondent sought from
Foremost payment of US$1,054,000.00, as the outstanding principal balance,
exclusive of interest and charges, of its obligations under the seven US$ promissory
13
notes,and PhP28,900,000.00 under its Philippine peso promissory notes. Separate
14
demands for payment were also made upon Spouses Tanchan and the
15
petitioners as sureties.
In a letter dated April 6, 1998, Foremost offered to cede to respondent, by way
of dacion en pago, the mortgaged real properties in full payment of its loan
16
obligations.
On August 3, 1998, respondent instituted the extra-judicial foreclosure of the real
estate mortgage to satisfy its claim against Foremost in the aggregate "amount of
Php55,578,826.77, inclusive of interest, other charges and attorney's fees,
equivalent to 10% of the total amount due as of May 3, 1998, plus the costs and
17
expenses of foreclosure." At the public auction sale, respondent's bid of only
61 | P a g e

Php37,745,283.67 for all the mortgaged properties, including the buildings and
18
improvements thereon, was adjudged the sole and highest bid.

In support of its application for issuance of a writ of preliminary attachment,

respondent submitted an Affidavit executed by Elmer Elumbaring (Elumbaring),
Branch Cashier/Loans Supervisor, Cebu, Jakosalem Branch, stating that:

On October 13, 1998, respondent filed with the RTC a Complaint for Collection of
Sum of Money with Petition for Issuance of Writ of Preliminary Injunction against
Foremost, Spouses Tanchan and herein petitioners (collectively referred to as
Foremost, et al.), praying that they be ordered to pay, jointly and severally, the
19
following amounts:
Promissory Note
0051-96-09495

0051-96-17617

4. Defendants [Foremost, et al.] committed fraud in contracting the obligations

upon which the action is brought in that: a) to induce plaintiff [respondent] to grant
the credit accommodation they represented to the plaintiff [respondent] that they
were in a financial position to pay their obligations on maturity date in consideration
of which plaintiff [respondent] granted the credit accommodations. It turned out,
Amount
however, that they were not in such financial position when they failed to pay their
obligations on maturity date; b) they falsely represented that the proceeds of the
US$ 80,000.00 plus interest at the rate of 11.4% per annum from December 29,
Loan would be used as additional working capital in consideration of which, plaintiff
1997 until fully paid and a penalty charge on the unpaid interest at the rate of 1%
[respondent] granted the loans but when defendants [Foremost, et al.] received the
per month reckoned from December 29, 1997 until fully paid and a penalty charge
said proceeds, they diverted the same to a purpose other than that for which they
on the unpaid principal reckoned from May 28, 1998 until fully paid.
were intended as shown by the fact that defendants [Foremost, et al.] were not able
to fully pay the obligations at its maturity date;
US$110,000.00 plus interest at the rate of 11.4% per annum and a penalty charge
at the rate of 1% per month, all reckoned from December 29, 1997
until fully
paid.
5. There
is no
security whatsoever for the claim plaintiff [respondent] seeks to

0051-96-19008

enforce by this action, and only by the issuance of a writ of preliminary attachment
US$250,000.00 plus interest at the rate of 11.4% per annum and a penalty charge
20
can its interest be protected.
at the rate of 1% per month all reckoned from November 30, 1997 until fully paid.

0051-96-24801

The application for writ of preliminary attachment was granted by the RTC in an
US$115,000.00 plus interest at the rate of 11.4% per annum and a penalty charge
Order dated November 3, 1998, to wit:
at the rate of 1% per month all reckoned from December 29, 1997 until fully paid.

0051-96-00603

WHEREFORE, finding plaintiff's [respondent's] application for the issuance of a writ

US$75,000.00 plus interest at the rate of 11.4% per annum andof
a preliminary
penalty charge
at
attachment
sufficient in form and substance, and the ground set forth
the rate of 1% per month all reckoned from December 29, 1997therein
until fully
paid.
being among those allowed by the Rules (Rule 57, Sec. 1 [e]), let a Writ of

0051-97-02444

0051-97-03696
(Exhibit "G")

0051-97-03688
(Exhibit "H")

Preliminary Attachment issue against the properties of defendants Cebu Foremost

US$45,000.00 plus interest at the rate of 11.4% per annum and a penalty charge at
Construction, Incorporated, Santiago Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan
the rate of 1% per month all reckoned from December 29, 1997 until fully paid.
and Ma. Julie Ann T. Tanchan, upon plaintiff's [respondent's] filing of a bond in the
amount of FIFTY-FOUR MILLION (P54,000,000.00) PESOS, conditioned to answer for
US$379,000.00 plus interest at the rate of 11.4% per annum reckoned from January
whatever damage that the said defendants [Foremost, et al.] may suffer by reason
8, 1998 until fully paid and a penalty charge at the rate of 1% per month from
of the issuance of said writ should the Court finally adjudge that plaintiff
February 9, 1998 until fully paid.
[respondent] was not entitled thereto.
PhpP7,466,795.67 plus interest at the rate of 20% per annum and a penalty charge
21
SO ORDERED.
at the rate of 3% per month from August 10, 1998. (Emphasis supplied)
22

Respondent also prayed for payment of attorney's fees equivalent to 25% of the
total amount due, expenses and costs of suit,

Thus, armed with a writ of attachment, the sheriff levied several parcels of land
23
registered in the name of Foremost, et al.

62 | P a g e

24

In their Amended Answer with Counterclaim, Foremost, et al. acknowledged the

authenticity and due execution of the promissory notes but denied liability for the
amounts alleged in the Complaint, the computation of which they dispute due to
the arbitrariness of the imposition of new interest rates. They impugned the cause
of action of respondent to collect the amount due under Exhibit "G" and Exhibit "H"
in view of the bank's prior extra-judicial foreclosure of the securities thereon, which
25
recourse bars collection of the amounts due on the same promissory notes.
Foremost, et al. questioned the inclusion of Rufina as a party-defendant even when
she was not bound by the CG/CSAs which her husband Santiago signed in excess of
his authority under the special power of attorney to contract loans for the family but
26
not to guarantee loans obtained by third persons.
The issuance of the writ of preliminary attachment was likewise objected to by
Foremost on the ground that it contracted the loans in good faith but was prevented
from paying the same only because of the economic crisis that beset the country.
On the part of Spouses Tanchan and herein petitioners, they claim that they had no
personal participation or influence in the loan transactions except to ensure its
payment; hence, they could not have practiced fraud upon respondent because they
27
did not personally contract the loans with it. Thus, each sought payment of
Php100,000,000.00 as moral damages for the emotional and mental vexation visited
upon them by respondent in causing the unwarranted preliminary attachment of
28
their properties.
At the pre-trial, respondent submitted an Amended Pre-trial Brief where it admitted
that Foremost's Exhibit "G" and Exhibit "H" were among those secured by the real
29
estate mortgage that it earlierforeclosed, but the proceeds of the foreclosure sale
satisfied only part of the amounts due on said promissory notes and left a deficiency
30
which is now the subject of their complaint.
The RTC issued a Pre-trial Order which limited the issues to be resolved to the
following:
1. Does the [respondent] have a cause of action with respect to the promissory
31
32
notes marked as [Exhibits] G and H ?
2. Is [petitioner] Rufina C. Tanchan liable on the basis of the Continuing
Guaranty/Comprehensive Surety Agreements because of her authority from [sic]
Santiago Tanchan, Jr. was limited to borrow money only for the benefit of the
family?

3. Is the unilateral increase of the interest rate of [respondent] valid?

4. What is the amount and nature of the damages that should be adjudged against
33
the losing party in favor of the prevailing party?
As directed by the RTC in its Pre-trial Order, both parties presented affidavits in lieu
of direct examination of their witnesses.
For respondent, Fresnido Bandilla (Bandilla), Manager, Legal Department, testified
that the obligations of Foremost which were secured by the real estate mortgage
had amounted to Php61,155,339.36 as of the date of the foreclosure sale, and that
with respondent's bid of only Php37,745,283.67 being adjudged the lone and
34
highest bid, there remained an unpaid balance of Php23,415,115.69. Elumbaring
35
corroborated Bandilla's testimony.
On the other hand, Henry averred that even in the wake of the Asian financial crisis,
Foremost struggled to meet interest payments on its loan obligations with
respondent, but the point came when there were no more construction jobs to be
36
had, and Foremost was constrained to default on its obligations.
Santiago testified that he and his spouse could not have defrauded respondent
because they did not directly contract the loans with it but merely acted as sureties.
Thus, the issuance of the writ of attachment against their properties was arbitrary,
37
and brought upon them social humiliation and emotional torment.
38

After the parties submitted their respective memoranda, the RTC rendered its
August 31, 2001 Decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering defendants Cebu Foremost
Construction, Inc., Santiago Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan and Ma.
Julie Ann Tanchan, solidarily, [to] pay plaintiff Allied Banking Corporation the
following amounts: (1) US $80,000.00, plus 8.75 % interest per annum from 7 June
1996 to 6 May 1997, 9.5% interest per annum from 7 May 1997 until fully paid, and
1% penalty per month on the amount due from maturity date and until fully paid;
(2) US $110,00.00, plus 8.75% interest per annum from 24 September to 29 May
1997, 9.5% interest per annum from 30 May 1997 until fully paid, and 1% penalty
per month on the amount due from maturity date until fully paid; (3) US
$570,000.00, plus 8.75% interest per annum from 8 October 1996 to 29 May 1997,
9.5% interest per annum from 30 May 1997 until fully paid, and 1% penalty per
month on the amount due from maturity date until fully paid; (4) US $115,000.00
plus 9.5% interest per month from 12 December 1996 until fully paid, and 1%
63 | P a g e

penalty per month on the amount due from maturity date until fully paid; (5) US
$75,000.00, plus 9.5% interest per annum from 7 January 1997 until fully paid, and
1% penalty per month on the amount due from maturity date until fully paid; (7) US
$379,000.00, plus 9.5% interest per annum from 12 February 1997 to 8 December
1997, 11.4% interest per annum from 9 December 1997 until fully paid, and 1%
penalty per month on the amount due from maturity date until fully paid;
(8) P7,582,945.85, plus 28.5% interest per annum, and 3% penalty per month, from
the foreclosure sale on 10 August 1998 until fully paid; (9) attorney's fees equivalent
to 10% of the amount due plaintiff. However, the liability of defendants' Santiago
Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan and Ma. Julie Ann T. Tanchan is
limited toP150,00,000.00 only.
Defendants' counterclaims are dismissed for lack of sufficient merit.
SO ORDERED.

marked as Exhibits "G" and "H", the [respondent] is barred from filing an action for
collection of the same;
2. The lower court erred in not holding that Rufina Tanchan did not authorize her
husband, Santiago J. Tanchan, Jr. to sign the Continuing Guaranty/ Comprehensive
Surety Agreement marked as Exhibit "I"; and
3. The lower court erred in not lifting the writ of preliminary attachment and
granting the claim for damages of the individual defendants by virtue of the
44
wrongful issuance of the writ of preliminary attachment.
The CA dismissed the appeal in the June 15, 2004 Decision assailed herein.
Only petitioners took the present recourse to raise the following issues:

39

Foremost, et al. filed a Motion for Partial Reconsideration of Decision on the ground
that respondent failed to state a cause of action for the payment of any deficiency
account under Exhibit "G" and Exhibit "H". Its Complaint does not contain any
allegation regarding a deficiency account; nor even an allusion to the foreclosure
sale conducted in partial satisfaction of said promissory notes. Although in its
Amended Pre-trial Brief, respondent mentioned that a deficiency account remained
after the foreclosure of the real estate mortgage, such statement did not have the
effect of amending the Complaint itself. Neither did the testimonies of Bandilla and
Elumbaring about a deficiency account take the place of a specific allegation of such
cause of action in the Complaint. Thus, in the absence of an allegation in the
Complaint of a cause of action for the payment of a deficiency account, the RTC had
40
no factual or legal basis to grant such claim.
Spouses Tanchan and herein petitioners also filed a Motion to Lift the Writ of
41
Preliminary Attachment.
42

The RTC denied the Motion to Lift the Writ of Attachment in an Order dated
43
September 25, 2001, and the Motion for Partial Reconsideration, in an Order dated
August 8, 2002.
Foremost, et al. appealedto the CA under the following assignment of errors:
1. The lower court erred in not holding that having opted to extra-judicially foreclose
the real estate mortgage which was executed to secure the promissory notes

I. Whether or not the petitioners as mere sureties of the loans obtained by Cebu
Foremost Construction, Inc. were guilty of fraud in incurring the obligations so that a
writ of preliminary attachment may be issued against them?
II. Whether or not the respondent may claim for deficiency judgment on its seventh
and eight causes of action, not having alleged in its complaint that said loans were
secured by a real estate mortgage and after the foreclosure there was a deficiency
as in fact in its complaint, the respondent sought full recovery of the promissory
notes subject of its seventh and eighth cause of action?
III. Whether or not the lower court and the Court of Appeals erred in not awarding
petitioners damages for the wrongful issuance of a writ of preliminary attachment
45
against them?
Being interrelated, the first and third issues will be resolved jointly.
The issues involve the validity of the writ of preliminary attachment as against the
properties of petitioners only, but not as against the properties of Foremost and
Spouses Tanchan, neither of whom appealed before the Court. The discussion that
follows, therefore, shall pertain only to the effect of the writ on petitioners.
One of the grounds cited by the CA in refusing to discharge the writ of attachment is
that "it is now too late for [petitioners] to question the validity of the writ" because
46
they waited three long years to have it lifted or discharged.
Under Section 13, Rule 57 of the Rules of Court, a party whose property has been
ordered attached may file a motion "with the court in which the action is pending"
64 | P a g e

for the discharge of the attachment on the ground that it has been improperly
issued or enforced. In addition, said party may file, under Section 20, Rule 57, a
claim for damages on account of improper attachment within the following periods:
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.

(d) In an action against a party who has been guilty of a fraud in contracting the debt
or incurring the obligation upon which the action is brought, or in concealing or
disposing of the property for the taking, detention or conversion of which the action
is brought;
x x x x.
and on the basis solely of respondent's allegations in its Complaint "that defendants
[Foremost, et al.] failed to pay their obligations on maturity dates, with the amount
of US$1,054,000.00 and Php7,466795.69 remaining unpaid; that defendants are
disposing/concealing their properties with intent to defraud the plaintiff and/or are
guilty of fraud in the performance of their obligations; and that there is no security
51
whatsoever for the claim sought to be enforced."

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
47
the application to be heard and decided by the trial court. (Emphasis supplied)

Petitioners argue that the foregoing allegations are not sufficient to justify issuance
of the writ, especially in the absence of findings that they, as sureties, participated
in specific fraudulent acts in the execution and performance of the loan agreements
52
with respondent.

Records reveal that the RTC issued the writ of preliminary attachment on November
48
3, 1998, and as early as March 23, 1999, in their Amended Answer with
49
Counterclaim, petitioners already sought the discharge of the writ. Moreover,
after the RTC rendered its Decision on August 3, 2001 but before appeal therefrom
was perfected, petitioners filed on August 23, 2001 a Motion to Lift the Writ of
Preliminary Attachment, reiterating their objection to the writ and seeking payment
50
of damages for its wrongful issuance.

In refusing to lift the writ, the RTC held that the lack of a specific factual finding of
fraud in its decision is not among the grounds provided under Sections 12 and 13,
53
Rule 57 of the Rules of Court for the discharge of the writ. The CA agreed for the
reason that the RTC's affirmative action on the complaint filed by respondent
signifies its agreement with the allegations found therein that Foremost, et al.,
including herein petitioners, committed fraudulent acts in procuring loans from
54
respondent.

Clearly, petitioners' opposition to the writ was timely.

Both courts are in error.

The question now is whether petitioner has a valid reason to have the writ
discharged and to claim damages.

The present case fits perfectly into the mold of Allied Banking Corporation v. South
55
Pacific Sugar Corporation, where a writ of preliminary attachment issued in favor of
Allied Banking Corporation was discharged by the lower courts for lack of evidence
of fraud. In sustaining the discharge of the writ, the Court held:

It should be borne in mind that the questioned writ of preliminary attachment was
issued by the RTC under Section 1(d), Rule 57 of the Rules of Court, to wit Sec. 1. Grounds upon which attachment may issue. - A plaintiff or any proper party
may, at the commencement of the action or at any time thereafter, have the
property of the adverse party attached as security for the satisfaction of any
judgment that may be recovered in the following cases:

Moreover, even a cursory examination of the bank's complaint will reveal that it
cited no factual circumstance to show fraud on the part of respondents. The
complaint only had a general statement in the Prayer for the Issuance of a Writ of
Preliminary Attachment, reproduced in the attached affidavit of petitioner's witness
Go who stated as follows:

xxxx

xxxx
65 | P a g e

4. Defendants committed fraud in contracting the obligations upon which the

present action is based and in the performance thereof. Among others, defendants
induced plaintiff to grant the subject loans to defendant corporation by willfully and
deliberately misrepresenting that, one, the proceeds of the loans would be used as
additional working capital and, two, they would be in a financial position to pay, and
would most certainly pay, the loan obligations on their maturity dates. In truth,
defendants had no intention of honoring their commitments as shown by the fact
that upon their receipt of the proceeds of the loans, they diverted the same to
illegitimate purposes and then brazenly ignored and resisted plaintiff's lawful
demands for them to settle their past due loan obligations
xxxx
Such general averment will not suffice to support the issuance of the writ of
preliminary attachment. It is necessary to recite in what particular manner an
applicant for the writ of attachment was defrauded x x x.
Likewise, written contracts are presumed to have been entered into voluntarily and
for a sufficient consideration. Section 1, Rule 131 of the Rules of Court instructs that
each party must prove his own affirmative allegations. To repeat, in this jurisdiction,
fraud is never presumed. Moreover, written contracts such as the documents
executed by the parties in the present case, are presumed to have been entered
into for a sufficient consideration. (Citations omitted)
In the aforecited case -- as in the present case -- the bank presented the testimony
of its account officer who processed the loan application, but the Court discarded
her testimony for it did not detail how the corporation induced or deceived the bank
56
into granting the loans.

which, by the way, explains why this Court, in G.R. No. 162928, affirmed the writ of
attachment issued against the latter. As to the participation of respondent in the
said transaction, the affidavit merely states that respondent, an officer and
director of Wincorp, connived with the other defendants in the civil case to defraud
petitioner of his money placements. No other factual averment or circumstance
details how respondent committed a fraud or how he connived with the other
defendants to commit a fraud in the transaction sued upon. In other words,
petitioner has not shown any specific act or deed to support the allegation that
respondent is guilty of fraud.
The affidavit, being the foundation of the writ, must contain such particulars as to
how the fraud imputed to respondent was committed for the court to decide
whether or not to issue the writ. Absent any statement of other factual
circumstances to show that respondent, at the time of contracting the obligation,
had a preconceived plan or intention not to pay, or without any showing of how
respondent committed the alleged fraud, the general averment in the affidavit that
respondent is an officer and director of Wincorp who allegedly connived with the
other defendants to commit a fraud, is insufficient to support the issuance of a writ
of preliminary attachment x x x. Verily, the mere fact that respondent is an officer
and director of the company does not necessarily give rise to the inference that he
committed a fraud or that he connived with the other defendants to commit a
fraud. While under certain circumstances, courts may treat a corporation as a
mere aggroupment of persons, to whom liability will directly attach, this is only
done when the wrongdoing has been clearly and convincingly established.
(Emphasis supplied)
Indeed, a writ of preliminary attachment is too harsh a provisional remedy to
58

57

Also apropos is Ng Wee v. Tankiansee where the appellate court was questioned
for discharging a writ of preliminary attachment to the extent that it affected the
properties of respondent Tankiansee, a corporate officer of Wincorp, both
defendants in the complaint for damages which petitioner Ng Wee had filed with
the trial court. In holding that the appellate court correctly spared respondent
Tankiansee from the writ of preliminary attachment, the Court cited the following
basis:
In the instant case, petitioner's October 12, 2000 Affidavit is bereft of any factual
statement that respondent committed a fraud. The affidavit narrated only the
alleged fraudulent transaction between Wincorp and Virata and/or Power Merge,

be issued based on mere abstractions of fraud. Rather, the rules require that for
the writ to issue, there must be a recitation of clear and concrete factual
circumstances manifesting that the debtor practiced fraud upon the creditor at the
time of the execution of their agreement in that said debtor had a pre-conceived
59
plan or intention not to pay the creditor. Being a state of mind, fraud cannot be
merely inferred from a bare allegation of non-payment of debt or non-performance
60
of obligation.
As shown in Ng Wee, the requirement becomes all the more stringent when the
application for preliminary attachment is directed against a defendant officer of a
defendant corporation, for it will not be inferred from the affiliation of one to the
other that the officer participated in or facilitated in any fraudulent practice
66 | P a g e

attributed to the corporation. There must be evidence clear and convincing that the
officer committed a fraud or connived with the corporation to commit a fraud; only
then may the properties of said officer, along with those of the corporation, be held
under a writ of preliminary attachment.
There is every reason to extend the foregoing rule, by analogy, to a mere surety of
the defendant. A surety's involvement is marginal to the principal agreement
between the defendant and the plaintiff; hence, in order for the surety to be subject
to a proceeding for issuance of a writ of preliminary attachment, it must be shown
that said surety participated in or facilitated the fraudulent practice of the
defendant, such as by offering a security solely to induce the plaintiff to enter into
the agreement with the defendant.
There is neither allegation nor innuendo in the Complaint of respondent or the
Affidavit of Elumbaring that petitioners as sureties or officers of Foremost
participated in or facilitated the commission of fraud by Foremost, et al. against
respondent. In fact, there is no mention of petitioners, much less a recital of their
role or influence in the execution of the loan agreements. The RTC cited an
allegation that petitioners are disposing/concealing their properties with intent to
defraud respondent, but there is no hint of such scheme in the five paragraphs of
61
62
the Complaint or in the four corners of the Affidavit of Elumbaring. All that is
alleged is that Foremost obtained loans from respondent but failed to pay the same,
but as the Court has repeatedly held, no fraud can be inferred from a mere failure to
63
pay a loan.
In fine, there was no factual basis for the issuance of a writ of preliminary
attachment against the properties of petitioners. The immediate dissolution of the
writ is called for.
In so ruling, however, the Court does not go so far as to grant petitioners' claim for
moral damages. A wrongful attachment may give rise to liability for moral damages
but evidence must be adduced not only of the torment and humiliation brought
upon the defendant by the attaching party but also of the latter's bad faith or malice
64
in causing the wrongful attachment, such as evidence that the latter deliberately
65
made false statements in its application for attachment. Absent such evidence of
66
malice, the attaching party cannot be held liable for moral damages.
In the present case, petitioners cite the allegations made by respondent in its
application for attachment as evidence of bad faith. However, the allegations in
question contain nothing but the stark truth that Foremost obtained loans and that

it failed to pay. The Court fails to see any malice in such bare allegations as would
make respondent liable to petitioners for moral damages.
To recapitulate, the Court partly dissolves the writ of preliminary attachment for
having wrongfully issued against the properties of petitioners who were not shown
to have committed fraud in the execution of the loan agreements between
Foremost and respondent, but declines to award moral damages to petitioners in
the absence of evidence that respondent acted with malice in causing the wrongful
issuance of the writ.
The second issue involves that portion of the August 3, 2001 RTC Decision awarding
respondent "(7) US $379,000.00, plus 9.5% interest per annum from 12 February
1997 to 8 December 1997, 11.4% interest per annum from 9 December 1997 until
fully paid, and 1% penalty per month on the amount due from maturity date until
fully paid" under Promissory Note No. 0051-97-03696, and "(8)P7,582,945.85, plus
28.5% interest per annum, and 3% penalty per month, from the foreclosure sale on
10 August 1998 until fully paid" under Promissory Note No. 0051-97-03688.
Petitioners argue that respondent is barred from claiming any amount under the
Promissory Notes, Exhibits "G" and "H", because it had already elected to foreclose
on the mortgage security, and it failed to allege in its pleadings that a deficiency
remained after the public auction sale of the securities and that what it is seeking is
67
the payment of such deficiency.
There is no question that a mortgage creditor has a single cause of action against a
mortgagor debtor, which is to recover the debt; but it has the option of either filing
a personal action for collection of sum of money or instituting a real action to
68
foreclose on the mortgage security. An election of the first bars recourse to the
second; otherwise, there would be multiplicity of suits in which the debtor would be
tossed from one venue to another, depending on the location of the mortgaged
69
properties and the residence of the parties. On the other hand, a creditor who
elects to foreclose on the mortgage may yet file an independent civil action for
recovery of whatever deficiency may remain in the outstanding obligation of the
debtor, after deducting the price obtained in the sale of the mortgaged properties at
70
public auction. The complaint, though, must specifically allege that what is being
71
sought is the recovery of the deficiency, or that in the pre-trial, such claim be
72
raised as an issue.
Contrary to petitioners' argument, it is clear from the allegations in the Complaint
that what respondent sought was the payment of the deficiency amount under the
67 | P a g e

subject promissory notes. In particular, while the Promissory Note, Exhibit "H", is for
the amount of Php16,500,000.00, what respondent sought to recover was only
Php7,582,945.85, consistent with the fact that part of said promissory note has been
satisfied from the proceeds of the extra-judicial foreclosure. While the exact phrase
"deficiency account" is not employed in the Complaint, the intention of respondent
to recover the same is borne out by its allegations.
More importantly, in the Pre-trial Order issued by the RTC, the right of respondent
to recover the deficiency account under the subject promissory notes was raised as
a specific issue.
WHEREFORE, the petition is PARTLY GRANTED. The June 15, 2004 Decision of the
Court of Appeals is MODIFIED to the effect that the November 3, 1998 Writ of
Preliminary Attachment is LIFTED and DISSOLVED insofar as it affects the properties
of petitioners Spouses Santiago and Rufina Tanchan.
No costs.
SO ORDERED.

68 | P a g e

On December 7, 2004, the Republic filed a motion for partial reconsideration of the
October 29, 2004 resolution claiming that it was exempt from filing an attachment
bond and praying for the release thereof.

RP v. Maj. Gen. Garcia

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 167741

July 12, 2007

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
MAJ. GEN. CARLOS FLORES GARCIA, CLARITA DEPAKAKIBO GARCIA, IAN CARL
DEPAKAKIBO GARCIA, JUAN PAULO DEPAKAKIBO GARCIA, TIMOTHY DEPAKAKIBO
GARCIA and THE SANDIGANBAYAN (FOURTH DIVISION), Respondents.

In a resolution dated January 14, 2005, the Sandiganbayan ruled that there was
nothing in the Rules of Court that exempted the Republic from filing an attachment
6
bond. It reexamined Tolentino v. Carlos which was invoked by the Republic to
justify its claimed exemption. That case was decided under the old Code of Civil
Procedure enacted more than a century ago.
The Sandiganbayan denied the Republics motion. Reconsideration was also denied
in a resolution dated March 2, 2005.
As already stated, these two resolutions (January 14, 2005 and March 2, 2005) are
the subject of the present petition.

DECISION

Did the Sandiganbayan commit grave abuse of discretion when it rejected the
Republics claim of exemption from the filing of an attachment bond? Yes.

CORONA, J.:

Sections 3 and 4, Rule 57 of the Rules of Court provide:

1

This petition for certiorari assails the January 14, 2005 and March 2, 2005
2
resolutions of the Fourth Division of the Sandiganbayan in Civil Case No. 0193
entitled Republic of the Philippines v. Maj. Gen. Carlos Flores Garcia, Clarita
Depakakibo Garcia, Ian Carl Depakakibo Garcia, Juan Paulo Depakakibo
Garcia and Timothy Mark Depakakibo Garcia.
Civil Case No. 0193 was a petition for forfeiture of unlawfully acquired properties,
with a verified urgent ex-parte application for the issuance of a writ of preliminary
attachment, filed by the Republic of the Philippines against Maj. Gen. Carlos F.
3
4
Garcia, his wife and children in the Sandiganbayan on October 27, 2004. In praying
for the issuance of a writ of preliminary attachment, the Republic maintained that,
as a sovereign political entity, it was exempt from filing the required attachment
bond.
On October 29, 2004, the Sandiganbayan issued a resolution ordering the issuance
of a writ of preliminary attachment against the properties of the Garcias upon the
5
filing by the Republic of a P1 million attachment bond. On November 2, 2004, the
Republic posted the required attachment bond to avoid any delay in the issuance of
the writ as well as to promptly protect and secure its claim.

Sec. 3. Affidavit and bond required. An order of attachment shall be granted only
when it appears by the affidavit of the applicant, or of some other person who
personally knows the facts, that a sufficient cause of action exists, that the case is
one of those mentioned in section 1 hereof, that there is no other sufficient security
for the claim sought to be enforced by the action, and that the amount due to
applicant, or the value of the property the possession of which he is entitled to
recover, is as much as the sum for which the order is granted above all legal
counterclaims. The affidavit, and the bond required by the next succeeding section,
must be duly filed with the court before the order issues.
Sec. 4. Condition of applicants bond. The party applying for the order must
thereafter give a bond executed to the adverse party in the amount fixed by the
court in its order granting the issuance of the writ, conditioned that the latter will
pay all the costs which may be adjudged to the adverse party and all damages which
he may sustain by reason of the attachment, if the court shall finally adjudge that
the applicant was not entitled thereto. (emphasis supplied)
Under these provisions, before a writ of attachment may issue, a bond must first be
filed to answer for all costs which may be adjudged to the adverse party and for the
damages he may sustain by reason of the attachment. However, this rule does not
69 | P a g e

cover the State. In Tolentino, this Court declared that the State as represented by
the government is exempt from filing an attachment bond on the theory that it is
always solvent.
2. Section 427 of the Code of Civil Procedure provides that before the issuance of a
writ of attachment, the applicant therefor or any person in his name, should file a
bond in favor of the defendant for an amount not less than P400 nor more than the
amount of the claim, answerable for damages in case it is shown that the
attachment was obtained illegally or without sufficient cause; but in the case at bar
the one who applied for and obtained the attachment is the Commonwealth of
the Philippines, as plaintiff, and under the theory that the State is always solvent it
was not bound to post the required bond and the respondent judge did not exceed
8
his jurisdiction in exempting it from such requirement. x x x (emphasis supplied)
In other words, the issuance of a writ of preliminary attachment is conditioned on
the filing of a bond unless the applicant is the State. Where the State is the
9
applicant, the filing of the attachment bond is excused.
The attachment bond is contingent on and answerable for all costs which may be
adjudged to the adverse party and all damages which he may sustain by reason of
the attachment should the court finally rule that the applicant is not entitled to the
writ of attachment. Thus, it is a security for the payment of the costs and damages
to which the adverse party may be entitled in case there is a subsequent finding that
the applicant is not entitled to the writ. The Republic of the Philippines need not
give this security as it is presumed to be always solvent and able to meet its
obligations.
The Sandiganbayan thus erred when it disregarded the foregoing presumption and
instead ruled that the Republic should file an attachment bond. The error was not
simply an error of judgment but grave abuse of discretion.
There is grave abuse of discretion when an act is done contrary to the Constitution,
10
the law or jurisprudence. Here, the Sandiganbayans January 14, 2005 resolution
was clearly contrary to Tolentino.
Worse, the Sandiganbayan transgressed the Constitution and arrogated upon itself a
power that it did not by law possess. All courts must take their bearings from the
decisions and rulings of this Court. Tolentino has not been superseded or reversed.
Thus, it is existing jurisprudence and continues to form an important part of our
11
legal system. Surprisingly, the Sandiganbayan declared that Tolentino "need(ed) to

be carefully reexamined in the light of the changes that the rule on attachment ha(d)
12
undergone through the years." According to the court a quo:
[Tolentino] was decided by the Supreme Court employing the old Code of Civil
Procedure (Act No. 190) which was enacted by the Philippine Commission on August
7, 1901 or more than a century ago.
That was then, this is now. The provisions of the old Code of Civil Procedure
governing attachment have been substantially modified in the subsequent Rules of
Court. In fact, Rule 57 of the present 1997 Rules of Civil Procedure is an expanded
modification of the provisions of the old Code of Civil Procedure governing
attachment. Unlike the old Code of Civil Procedure, the present 1997 Rules of Civil
Procedure is noticeably explicit in its requirement that the party applying for an
order of attachment should file a bond.
On this, Article VIII, Section 4(3) of the Constitution provides:
(3) Cases or matters heard by a division shall be decided or resolved with the
concurrence of majority of the Members who actually took part in the deliberations
on the issues in the case and voted thereon, and in no case without the concurrence
of at least three of such Members. When the required number is not obtained, the
case shall be decided en banc; Provided, that no doctrine or principle of law laid
down by the court in a decision rendered en banc or in division may be modified
or reversed except by the court sitting en banc. (emphasis supplied)
The Constitution mandates that only this Court sitting en banc may modify or
reverse a doctrine or principle of law laid down by the Court in a decision
rendered en banc or in division. Any court, the Sandiganbayan included, which
renders a decision in violation of this constitutional precept exceeds its jurisdiction.
Therefore, the Sandiganbayan could not have validly "reexamined," much less
reversed, Tolentino. By doing something it could not validly do, the Sandiganbayan
acted ultra vires and committed grave abuse of discretion.
The fact was, the revisions of the Rules of Court on attachment, particularly those
pertaining to the filing of an attachment bond, did not quash Tolentino.
Tolentino applied Sec. 247 of Act No. 190 which provided:
Sec. 247. Obligation for damages in case of attachment. Before the order is made,
the party applying for it, or some person on his behalf, must execute to the
70 | P a g e

defendant an obligation in an amount to be fixed by the judge, or justice of the

peace, and with sufficient surety to be approved by him, which obligation shall be
for a sum not less than two hundred dollars, and not exceeding the amount claimed
by the plaintiff, that the plaintiff will pay all the costs which may be adjudged to the
defendant, and all damages which he may sustain by reason of the attachment, if
the same shall finally be adjudged to have been wrongful or without sufficient
cause. (emphasis supplied)
Contrary to the pronouncement of the Sandiganbayan, Section 247 of Act No. 190
explicitly required the execution of an attachment bond before a writ of preliminary
attachment could be issued.
The relevant provisions of Act No. 190 on attachment were later substantially
13
adopted as Sections 3 and 4, Rule 59 of the 1940 Rules of Court.
Sec. 3. Order issued only when affidavit and bond filed. An order of attachment
shall be granted only when it is made to appear by the affidavit of the plaintiff, or of
some other person who personally knows the facts, that the case is one of those
mentioned in section 1 hereof, that there is no other sufficient security for the claim
sought to be enforced by the action, and that the amount due to the plaintiff, or the
value of the property which he is entitled to recover possession of, is as much as the
sum for which the order is granted above all legal counterclaims; which affidavit,
and the bond required by the next succeeding section, must be duly filed with the
clerk or judge of the court before the order issues. (emphasis supplied)
Sec. 4. Bond required from plaintiff. The party applying for the order must give a
bond executed to the defendant in an amount to be fixed by the judge, not
exceeding the plaintiffs claim, that the plaintiff will pay all the costs which may be
adjudged to the defendant and all damages which he may sustain by reason of the
attachment, if the court shall finally adjudge that the plaintiff was not entitled
thereto.
And with the promulgation of the 1964 Rules of Court, the rules on attachment
were renumbered as Rule 57, remaining substantially the same:
Sec. 3. Affidavit and bond required. An order of attachment shall be granted only
when it appears by the affidavit of the applicant, or of some other person who
personally knows the facts, that a sufficient cause of action exists, that the case is
one of those mentioned in section 1 hereof, that there is no other sufficient security
for the claim sought to be enforced by the action, and that the amount due to

applicant, or the value of the property the possession of which he is entitled to

recover, is as much as the sum for which the order is granted above all legal
counterclaims. The affidavit, and the bond required by the next succeeding section,
must be duly filed with the clerk or judge of the court before the order issues.
(emphasis supplied)
Sec. 4. Condition of applicants bond. The party applying for the order must
thereafter give a bond executed to the adverse party in an amount to be fixed by
the judge, not exceeding the applicants claim, conditioned that the latter will pay all
the costs which may be adjudged to the adverse party and all damages which he
may sustain by reason of the attachment, if the court shall finally adjudge that the
applicant was not entitled thereto.
Clearly, the filing of an attachment bond before the issuance of a writ of preliminary
attachment was expressly required under the relevant provisions of both the 1940
and 1964 Rules of Court.
Commentaries on Sections 3 and 4 of the 1964 Rules of Court uniformly
cited Tolentino. They stated that the government is exempt from filing an
14
15
attachment bond and that the State need not file an attachment bond.
Where the Republic of the Philippines as a party to an action asks for a writ of
attachment against the properties of a defendant, it need not furnish a bond. This is
16
so because the State is presumed to be solvent.
When plaintiff is the Republic of the Philippines, it need not file a bond when it
applies for a preliminary attachment. This is on the premise that the State is
17
solvent.
And then again, we note the significant fact that Sections 3 and 4, Rule 57 of the
1964 Rules of Court were substantially incorporated as Sections 3 and 4, Rule 57 of
18
the present (1997) Rules of Court. There is thus no reason why the Republic should
be made to file an attachment bond.1avvphi1
19

In fact, in Spouses Badillo v. Hon. Tayag, a fairly recent case, this Court declared
that, when the State litigates, it is not required to put up a bond for damages or
even an appeal bond because it is presumed to be solvent. In other words, the State
20
is not required to file a bond because it is capable of paying its obligations.
The pronouncement in Spouses Badillo applies in this case even if Spouses
Badillo involved the filing of a supersedeas bond. The pronouncement that the State
71 | P a g e

"is not required to put up a bond for damages or even an appeal bond" is general
enough to encompass attachment bonds. Moreover, the purpose of an attachment
bond (to answer for all costs and damages which the adverse party may sustain by
reason of the attachment if the court finally rules that the applicant is not entitled to
the writ) and a supersedeas bond (to answer for damages to the winning party in
case the appeal is found frivolous) is essentially the same.1awphil.zw+
In filing forfeiture cases against erring public officials and employees, the Office of
the Ombudsman performs the States sovereign functions of enforcing laws,
guarding and protecting the integrity of the public service and addressing the
problem of corruption in the bureaucracy.
The filing of an application for the issuance of a writ of preliminary attachment is a
necessary incident in forfeiture cases. It is needed to protect the interest of the
government and to prevent the removal, concealment and disposition of properties
in the hands of unscrupulous public officers. Otherwise, even if the government
subsequently wins the case, it will be left holding an empty bag.
Accordingly, the petition is hereby GRANTED. The January 14, 2005 and March 2,
2005 resolutions of the Sandiganbayan are REVERSED and SET ASIDE. The Republic
of the Philippines is declared exempt from the payment or filing of an attachment
bond for the issuance of a writ of preliminary attachment issued in Civil Case No.
0193. The Sandiganbayan is hereby ordered to release the P1,000,000 bond posted
by the Republic of the Philippines to the Office of the Ombudsman.
SO ORDERED.

72 | P a g e

Sps. Yu v. Ngo Yet Te

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 155868

February 6, 2007

SPOUSES GREGORIO and JOSEFA YU, Petitioners,

vs.
NGO YET TE, doing business under the name and style, ESSENTIAL
MANUFACTURING, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
1
assailing the March 21, 2001 Decision of the Court of Appeals (CA) in CA-G.R. CV
2
3
No. 52246 and its October 14, 2002 Resolution.
The antecedent facts are not disputed.
Spouses Gregorio and Josefa Yu (Spouses Yu) purchased from Ngo Yet Te (Te) bars of
detergent soap worthP594,240.00, and issued to the latter three postdated
4
checks as payment of the purchase price. When Te presented the checks at
maturity for encashment, said checks were returned dishonored and stamped
5
6
"ACCOUNT CLOSED". Te demanded payment from Spouses Yu but the latter did
not heed her demands. Acting through her son and attorney-in-fact, Charry Sy (Sy),
Te filed with the Regional Trial Court (RTC), Branch 75, Valenzuela, Metro Manila, a
7
Complaint, docketed as Civil Case No. 4061-V-93, for Collection of Sum of Money
and Damages with Prayer for Preliminary Attachment.
In support of her prayer for preliminary attachment, Te attached to her Complaint
an Affidavit executed by Sy that Spouses Yu were guilty of fraud in entering into the
purchase agreement for they never intended to pay the contract price, and that,
based on reliable information, they were about to move or dispose of their
8
properties to defraud their creditors.

Upon Tes posting of an attachment bond, the RTC issued an Order of

10
Attachment/Levy dated March 29, 1993 on the basis of which Sheriff Constancio
Alimurung (Sheriff Alimurung) of RTC, Branch 19, Cebu City levied and attached
Spouses Yus properties in Cebu City consisting of one parcel of land (known as Lot
11
No. 11) and four units of motor vehicle, specifically, a Toyota Ford Fierra, a jeep, a
12
Canter delivery van, and a passenger bus.
13

On April 21, 1993, Spouses Yu filed an Answer with counterclaim for damages
arising from the wrongful attachment of their properties, specifically, actual
damages amounting to P1,500.00 per day; moral damages,P1,000,000.00; and
exemplary damages, P50,000.00. They also sought payment of P120,000.00 as
14
attorneys fees and P80,000.00 as litigation expenses. On the same date, Spouses
15
Yu filed an Urgent Motion to Dissolve Writ of Preliminary Attachment. They also
16
filed a Claim Against Surety Bond in which they demanded payment from Visayan
Surety and Insurance Corporation (Visayan Surety), the surety which issued the
attachment bond, of the sum of P594,240.00, representing the damages they
allegedly sustained as a consequence of the wrongful attachment of their
properties.
While the RTC did not resolve the Claim Against Surety Bond, it issued an
17
Order dated May 3, 1993, discharging from attachment the Toyota Ford Fierra,
jeep, and Canter delivery van on humanitarian grounds, but maintaining custody of
Lot No. 11 and the passenger bus. Spouses Yu filed a Motion for
18
19
Reconsideration which the RTC denied.
20

Dissatisfied, they filed with the CA a Petition for Certiorari, docketed as CA-G.R. SP
21
No. 31230, in which a Decision was rendered on September 14, 1993, lifting the
RTC Order of Attachment on their remaining properties. It reads in part:
In the case before Us, the complaint and the accompanying affidavit in support of
the application for the writ only contains general averments. Neither pleading states
in particular how the fraud was committed or the badges of fraud purportedly
committed by the petitioners to establish that the latter never had an intention to
pay the obligation; neither is there a statement of the particular acts committed to
show that the petitioners are in fact disposing of their properties to defraud
creditors. x x x.
xxxx

73 | P a g e

Moreover, at the hearing on the motion to discharge the order of attachment x x x

petitioners presented evidence showing that private respondent has been extending
multi-million peso credit facilities to the petitioners for the past seven years and
that the latter have consistently settled their obligations. This was not denied by
private respondent. Neither does the private respondent contest the petitioners
allegations that they have been recently robbed of properties of substantial value,
hence their inability to pay on time. By the respondent courts own
pronouncements, it appears that the order of attachment was upheld because of
the admitted financial reverses the petitioner is undergoing.
This is reversible error. Insolvency is not a ground for attachment especially when
defendant has not been shown to have committed any act intended to defraud its
creditors x x x.
For lack of factual basis to justify its issuance, the writ of preliminary attachment
issued by the respondent court was improvidently issued and should be
22
discharged.
From said CA Decision, Te filed a Motion for Reconsideration but to no avail.

23

24

Te filed with us a Petition for Review on Certiorari but we denied the same in a
Resolution dated June 8, 1994 for having been filed late and for failure to show that
25
a reversible error was committed by the CA. Entry of Judgment of our June 8, 1994
26
Resolution was made on July 22, 1994. Thus, the finding of the CA in its September
14, 1993 Decision in CA-G.R. SP No. 31230 on the wrongfulness of the
attachment/levy of the properties of Spouses Yu became conclusive and binding.
However, on July 20, 1994, the RTC, apparently not informed of the SC Decision,
rendered a Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the Court finds that the plaintiff has established
a valid civil cause of action against the defendants, and therefore, renders this
judgment in favor of the plaintiff and against the defendants, and hereby orders the
following:

3) The Court hereby adjudicates a reasonable attorneys fees and litigation expenses
of P10,000.00 in favor of the plaintiff;
4) On the counterclaim, this Court declines to rule on this, considering that the
question of the attachment which allegedly gave rise to the damages incurred by
the defendants is being determined by the Supreme Court.
27

SO ORDERED. (Emphasis ours)

28

Spouses Yu filed with the RTC a Motion for Reconsideration questioning the
29
disposition of their counterclaim. They also filed a Manifestation informing the RTC
of our June 8, 1994 Resolution in G.R. No. 114700.
The RTC issued an Order dated August 9, 1994, which read:
xxxx
(2) With regard the counter claim filed by the defendants against the plaintiff for the
alleged improvident issuance of this Court thru its former Presiding Judge
(Honorable Emilio Leachon, Jr.), the same has been ruled with definiteness by the
Supreme Court that, indeed, the issuance by the Court of the writ of preliminary
attachment appears to have been improvidently done, but nowhere in the decision
of the Supreme Court and for that matter, the Court of Appeals decision which
was in effect sustained by the High Court, contains any ruling or directive or
imposition, of any damages to be paid by the plaintiff to the defendants, in other
words, both the High Court and the CA, merely declared the previous issuance of the
writ of attachment by this Court thru its former presiding judge to be improvidently
issued, but it did not award any damages of any kind to the defendants, hence,
unless the High Court or the CA rules on this, this Court coud not grant any damages
by virtue of the improvident attachment made by this Court thru its former
presiding judge, which was claimed by the defendants in their counter claim.
(3) This Court hereby reiterates in toto its Decision in this case dated July 20,
30
1994. (Emphasis ours)
31

1) Defendants are hereby ordered or directed to pay the plaintiff the sum
of P549,404.00, with interest from the date of the filing of this case (March 3, 1993);

The RTC also issued an Order dated December 2, 1994, denying the Motion for
32
Reconsideration of Spouses Yu.

2) The Court, for reasons aforestated, hereby denies the grant of damages to the
plaintiff;

In the same December 2, 1994 Order, the RTC granted two motions filed by Te, a
Motion to Correct and to Include Specific Amount for Interest and a Motion for

74 | P a g e

33

Execution Pending Appeal. The RTC also denied Spouses Yus Notice of
34
Appeal from the July 20, 1994 Decision and August 9, 1994 Order of the RTC.

laid down in Section 20 of Rule 57. Te contends that as Visayan Surety was not
notified of the counterclaim, no judgment thereon could be validly rendered.

From said December 2, 1994 RTC Order, Spouses Yu filed another Notice of
35
36
Appeal which the RTC also denied in an Order dated January 5, 1995.

Such argument is not only flawed, it is also specious.

37

Spouses Yu filed with the CA a Petition for Certiorari, Prohibition and Mandamus,
docketed as CA-G.R. SP No. 36205, questioning the denial of their Notices of Appeal;
and seeking the modification of the July 20, 1994 Decision and the issuance of a Writ
38
of Execution. The CA granted the Petition in a Decision dated June 22, 1995.
39

Hence, Spouses Yu filed with the CA an appeal docketed as CA-G.R. CV No. 52246,
questioning only that portion of the July 20, 1994 Decision where the RTC declined
40
to rule on their counterclaim for damages. However, Spouses Yu did not dispute
the specific monetary awards granted to respondent Te; and therefore, the same
have become final and executory.
41

Although in the herein assailed Decision dated March 21, 2001, the CA affirmed in
toto the RTC Decision, it nonetheless made a ruling on the counterclaim of Spouses
Yu by declaring that the latter had failed to adduce sufficient evidence of their
entitlement to damages.
42

Spouses Yu filed a Motion for Reconsideration but the CA denied it in the herein
43
assailed Resolution dated October 14, 2002.

As stated earlier, Spouses Yu filed a Claim Against Surety Bond on the same day they
filed their Answer and Urgent Motion to Dissolve Writ of Preliminary
46
Attachment. Further, the records reveal that on June 18, 1993, Spouses Yu filed
47
with the RTC a Motion to Give Notice to Surety. The RTC granted the Motion in an
48
Order dated June 23, 1993. Accordingly, Visayan Surety was notified of the pre-trial
conference to apprise it of a pending claim against its attachment bond. Visayan
Surety received the notice on July 12, 1993 as shown by a registry return receipt
49
attached to the records.
Moreover, even if it were true that Visayan Surety was left in the proceedings a quo,
such omission is not fatal to the cause of Spouses Yu. In Malayan Insurance
50
Company, Inc. v. Salas, we held that "x x x if the surety was not given notice when
the claim for damages against the principal in the replevin bond was heard, then as
a matter of procedural due process the surety is entitled to be heard when the
judgment for damages against the principal is sought to be enforced against the
51
suretys replevin bond." This remedy is applicable for the procedures governing
claims for damages
52

on an attachment bond and on a replevin bond are the same.

Spouses Yu filed the present Petition raising the following issues:

We now proceed to resolve the issues jointly.

I. Whether or not the appellate court erred in not holding that the writ of
attachment was procured in bad faith, after it was established by final judgment
that there was no true ground therefor.

Spouses Yu contend that they are entitled to their counterclaim for damages as a
matter of right in view of the finality of our June 8, 1994 Resolution in G.R. No.
114700 which affirmed the finding of the CA in its September 14, 1993 Decision in
CA-G.R. SP No. 31230 that respondent Te had wrongfully caused the attachment of
53
their properties. Citing Javellana v. D.O. Plaza Enterprises, Inc., they argue that
they should be awarded damages based solely on the CA finding that the
attachment was illegal for it already suggests that Te acted with malice when she
applied for attachment. And even if we were to assume that Te did not act with
malice, still she should be held liable for the aggravation she inflicted when she
54
applied for attachment even when she was clearly not entitled to it.

II. Whether or not the appellate court erred in refusing to award actual, moral and
exemplary damages after it was established by final judgment that the writ of
44
attachment was procured with no true ground for its issuance.
There is one preliminary matter to set straight before we resolve the foregoing
issues.
45

According to respondent Te, regardless of the evidence presented by Spouses Yu,

their counterclaim was correctly dismissed for failure to comply with the procedure

That is a rather limited understanding of Javellana. The counterclaim disputed

therein was not for moral damages and therefore, there was no need to prove
55
malice. As early as in Lazatin v. Twao, we laid down the rule that where there is
75 | P a g e

wrongful attachment, the attachment defendant may recover actual damages even
without proof that the attachment plaintiff acted in bad faith in obtaining the
attachment. However, if it is alleged and established that the attachment was not
merely wrongful but also malicious, the attachment defendant may recover moral
56
damages and exemplary damages as well. Either way, the wrongfulness of the
attachment does not warrant the automatic award of damages to the attachment
defendant; the latter must first discharge the burden of proving the nature and
57
extent of the loss or injury incurred by reason of the wrongful attachment.
In fine, the CA finding that the attachment of the properties of Spouses Yu was
wrongful did not relieve Spouses Yu of the burden of proving the factual basis of
their counterclaim for damages.
To merit an award of actual damages arising from a wrongful attachment, the
attachment defendant must prove, with the best evidence obtainable, the fact of
58
loss or injury suffered and the amount thereof. Such loss or injury must be of the
kind which is not only capable of proof but must actually be proved with a
reasonable degree of certainty. As to its amount, the same must be measurable
59
based on specific facts, and not on guesswork or speculation. In particular, if the
claim for actual damages covers unrealized profits, the amount of unrealized profits
must be estalished and supported by independent evidence of the mean income of
60
the business undertaking interrupted by the illegal seizure.
Spouses Yu insist that the evidence they presented met the foregoing standards.
They point to the lists of their daily net income from the operation of said passenger
61
bus based on used ticket stubs issued to their passengers. They also cite unused
62
ticket stubs as proof of income foregone when the bus was wrongfully seized. They
further cite the unrebutted testimony of Josefa Yu that, in the day-to-day operation
of their passenger bus, they use up at least three ticket stubs and earn a minimum
63
daily income of P1,500.00.
In ruling that Spouses Yu failed to adduce sufficient evidence to support their
counterclaim for actual damages, the CA stated, thus:
In this case, the actual damages cannot be determined. Defendant-appellant Josefa
Yu testified on supposed lost profits without clear and appreciable explanation.
Despite her submission of the used and unused ticket stubs, there was no evidence
on the daily net income, the routes plied by the bus and the average fares for each
route. The submitted basis is too speculative and conjectural. No reports regarding
the average actual profits and other evidence of profitability necessary to prove the

amount of actual damages were presented. Thus, the Court a quodid not err in not
64
awarding damages in favor of defendants-appellants.
We usually defer to the expertise of the CA, especially when it concurs with the
65
factual findings of the RTC. Indeed, findings of fact may be passed upon and
reviewed by the Supreme Court in the following instances: (1) when the conclusion
is a finding grounded entirely on speculations, surmises, or conjectures; (2) when
the inference made is manifestly mistaken, absurd, or impossible; (3) where there is
a grave abuse of discretion in the appreciation of facts; (4) when judgment is based
on a misapprehension of facts; (5) when the lower court, in making its findings, went
beyond the issues of the case and such findings are contrary to the admissions of
both appellant and appellee; (6) when the factual findings of the CA are contrary to
those of the trial court; (7) when the findings of fact are themselves conflicting; (8)
when the findings of fact are conclusions made without a citation of specific
evidence on which they are based; (9) when the facts set forth in the petition as well
as in the petitioners main and reply briefs are not disputed by the respondents; (10)
when the findings of fact of the lower court are premised on the supposed absence
66
of evidence and are contradicted by the evidence on record. However, the present
case does not fall under any of the exceptions. We are in full accord with the CA that
Spouses Yu failed to prove their counterclaim.
Spouses Yus claim for unrealized income of P1,500.00 per day was based on their
computation of their average daily income for the year 1992. Said computation in
turn is based on the value of three ticket stubs sold over only five separate days in
67
1992. By no stretch of the imagination can we consider ticket sales for five days
sufficient evidence of the average daily income of the passenger bus, much less its
mean income. Not even the unrebutted testimony of Josefa Yu can add credence to
68
such evidence for the testimony itself lacks corroboration.
69

Besides, based on the August 29, 1994 Manifestation filed by Sheriff Alimurung, it
would appear that long before the passenger bus was placed under preliminary
attachment in Civil Case No. 4061-V-93, the same had been previously attached by
the Sheriff of Mandaue City in connection with another case and that it was placed
in the Cebu Bonded Warehousing Corporation, Cebu City. Thus, Spouses Yu cannot
complain that they were unreasonably deprived of the use of the passenger bus by
reason of the subsequent wrongful attachment issued in Civil Case No. 4061-V-93.
Nor can they also attribute to the wrongful attachment their failure to earn income
or profit from the operation of the passenger bus.

76 | P a g e

Moreover, petitioners did not present evidence as to the damages they suffered by
reason of the wrongful attachment of Lot No. 11.

Q: Who transferred?
73

A: My daughter, sir. (Emphasis ours)

Nonetheless, we recognize that Spouses Yu suffered some form of pecuniary loss
when their properties were wrongfully seized, although the amount thereof cannot
be definitively ascertained. Hence, an award of temperate or moderate damages in
70
the amount of P50,000.00 is in order.
As to moral and exemplary damages, to merit an award thereof, it must be shown
that the wrongful attachment was obtained by the attachment plaintiff with malice
71
or bad faith, such as by appending a false affidavit to his application.
Spouses Yu argue that malice attended the issuance of the attachment bond as
shown by the fact that Te deliberately appended to her application for preliminary
attachment an Affidavit where Sy perjured himself by stating that they had no
intention to pay their obligations even when he knew this to be untrue given that
they had always paid their obligations; and by accusing them of disposing of their
properties to defraud their creditors even when he knew this to be false,
72
considering that the location of said properties was known to him.
The testimony of petitioner Josefa Yu herself negates their claim for moral and
exemplary damages. On cross-examination she testified, thus:
Q: Did you ever deposit any amount at that time to fund the check?

Based on the foregoing testimony, it is not difficult to understand why Te concluded

that Spouses Yu never intended to pay their obligation for they had available funds
in their bank but chose to transfer said funds instead of cover the checks they
issued. Thus, we cannot attribute malice nor bad faith to Te in applying for the
attachment writ. We cannot hold her liable for moral and exemplary damages.
As a rule, attorneys fees cannot be awarded when moral and exemplary damages
are not granted, the exception however is when a party incurred expenses to lift a
74
wrongfully issued writ of attachment.1awphi1.net Without a doubt, Spouses Yu
waged a protracted legal battle to fight off the illegal attachment of their properties
and pursue their claims for damages. It is only just and equitable that they be
awarded reasonable attorneys fees in the amount ofP30,000.00.
In sum, we affirm the dismissal of the counterclaim of petitioners Spouses Yu for
actual, moral, and exemplary damages. However, we grant them temperate
damages and attorneys fees.
WHEREFORE, the petition is partly GRANTED. The March 21, 2001 Decision of the
Court of Appeals is AFFIRMEDwith the MODIFICATION that petitioners
counterclaim is PARTLY GRANTED. Gregorio Yu and Josefa Yu are
awarded P50,000.00 temperate damages and P30,000.00 attorneys fees.

A: We requested that it be replaced and staggered into smaller amounts.

No costs.
COURT: Did you fund it or not?
SO ORDERED.
Atty. Ferrer: The three checks involved?
Atty. Florido: Already answered. She said that they were not able to fund it.
Atty. Ferrer: And as a matter of fact, you went to the bank to close your account?
A: We closed account with the bank because we transferred the account to another
bank.
Q: How much money did you transfer from that bank to which the three checks
were drawn to this new bank?
A: I dont know how much was there but we transferred already to the Solid Bank.
77 | P a g e

Silangan Textitle Manu. Corp. v. Demetria

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 166719

0239992

1-07-99

288,771.00

0239994

1-12-99

200,025.00

0239995

1-12-99

287,748.00

0296801

1-29-99

207,970.00

0296802

1-30-99

206,127.00

0296803

2-01-99

316,577.00

March 12, 2007

SILANGAN TEXTILE MANUFACTURING CORPORATION, TRADEWORLD SYNERGY,

*
INCORPORATED, and CELLU INDUSTRIES, INCORPORATED, Petitioners,
vs.
HON. AVELINO G. DEMETRIA, PRESIDING JUDGE, REGIONAL TRIAL COURT, LIPA
CITY, BRANCH 85, and LUZON SPINNING MILLS, INCORPORATED, Respondents.
DECISION
CHICO-NAZARIO, J.:
Luzon Spinning Mills, Incorporated (LSMI) filed before the Regional Trial Court (RTC)
of Lipa City, Branch 85, a Complaint dated 23 August 2000, for Collection of Sum of
1
Money against Silangan Textile Manufacturing Corporation (STMC). In its
Complaint, LSMI alleged that from 19 November 1998 to 14 June 1999, Anita, Jimmy
and Benito, all surnamed Silangan, in their capacity as stockholders and officers of
STMC ordered 111,161.60 kilograms of yarn, valued in the total amount
of P9,999,845.00. The yarns were delivered at the office of STMC as evidenced by
2
delivery receipts. In payment of the yarns, STMC issued 34 postdated checks in the
total amount ofP9,999,845.00. Among these postdated checks are the following:

TOTAL

2,370,405.00

When presented for payment, the foregoing postdated checks were dishonored for
the reason, "Drawn Against Insufficient Fund" (DAIF). LSMI demanded from STMC
4
the immediate payment of the obligation. STMC failed and refused to heed the
demand of LSMI; hence, the latter filed the Complaint before the RTC.
In accordance with the prayer of LSMI, and finding the same to be sufficient in form
and substance, the RTC issued a writ of preliminary attachment against STMCs
5
properties. In this connection, a notice of attachment on the properties in the
name of STMC covered by Transfer Certificates of Title No. 202686 and No. 202685
6
was issued.
Apparently, LSMI had already previously instituted before the Municipal Trial Court
(MTC) of Lipa City, Branch 1, criminal cases against the Silangans for violation of
Batas Pambansa Blg. 22. Thus, STMC was prompted to file a Motion, praying to
dismiss the civil Complaint before the RTC, to cite STMCs lawyer for contempt for
forum shopping, and to discharge the writ of preliminary attachment issued by the
7
trial court. After LSMI filed its Comment/Opposition to the motion of STMC, the
8
RTC resolved the said motion by denying it for lack of merit.

Check No.

Date

Amount

0239973

5-12-99

P317,952.00

0239990

1-05-99

316,125.00

The RTC held that:

0239991

1-05-99

229,110.00

For forum-shopping to exist, both actions must involve the same transactions and
same essential facts and circumstances. There must also be identical causes of
action, subject matter and issues (PRC vs. CA, 292 SCRA 155). Forum-shopping also
78 | P a g e

exists where the elements of litis pendencia are present or where a final judgment
in one case will amount to res judicata in the other (Alejandro vs. CA, 295 SCRA 536).
In the case at bar, the two (2) cases, one for violation of BP 22 and the other for
collection of sum of money although concerning the same amount of money are
distinct litigations, neither involving exactly the same parties nor identical issues.
The accused in the criminal cases for violation of BP 22 are the persons who signed
the worthless checks while the defendants in the instant case are the corporations
which have outstanding obligations to the plaintiff. Hence, there is no identity of
parties in the aforesaid cases.
As to whether or not the requisites prescribed by law for the issuance of a writ of
preliminary attachment have been complied with, record show (sic) that the
contents of the affidavit required for the issuance of a writ of preliminary
attachment were incorporated in the complaint, verified and certified as correct by
Mr. Vicente Africa, Jr. Thus, there was substantial compliance of Section 3, Rule 57
9
of the Rules of Court.
The Motion for Reconsideration and Motion to Discharge Attachment and Admit
10
Counter-bond filed by STMC were denied by the RTC in its Order dated 9 April
11
2001.
STMC elevated the case to the Court of Appeals via a Petition for Certiorari under
12
Rule 65 of the Rules of Court which was dismissed by the appellate court in a
13
Decision dated 25 October 2004, holding that:
But it is also true that when the bounced check involved is issued by a corporation,
B.P. Blg. 22 imposes the criminal liability only on the individual/s who signed the
check, presumably in keeping with the principle that generally only natural persons
may commit a crime. Thus:
"Where the check is drawn by a corporation, company or entity, the person or
persons who actually signed the check in behalf of such drawer shall be liable under
this Act."
We hold, at any rate, that with respect to the civil liability, the corporation
concerned should bear the responsibility, the drawing of the bum check being a
corporate act. And a corporation has a legal personality of its own different from
that of its stockholders/officers who signed the check/s.

Accordingly, since the herein petitioners, as drawers of the checks in question, are
not parties to the criminal cases for violation of B.P. Blg. 22, the private respondent
was and is not prohibited from filing an independent civil action against them.
Moreover, the civil liability of the accused Silangan(s), the signatories of the checks
in the criminal cases, is based on Article 20 of the Civil Code as declared in Banal vs.
Tadeo, Jr.
On the other hand, the liability of petitioners corporations arose from contract.
Under Article 31 of the Civil Code and also Section 1(a), Rule 111 of the 2000 Revised
Rules on Criminal Procedure, the offended party has the right to institute a separate
civil action when its nexus is liability not arising from the crime, like a liability arising
from contract.
In fine, there is no violation of SC Administrative Circular No. 57-97, now Section
1(b) of the 2000 Revised Rules of Criminal Procedure. The civil actions for the
liability of the Silangans as the signatories to the subject checks are deemed
included in the criminal actions filed against them. The separate action filed against
the petitioners corporations for the recovery of the purchase price of the yarn sold
to them did not detract from it as this is an entirely different suit.
xxxx
WHEREFORE, for being deficient both in form and in substance, the instant petition
is DISMISSED, with costs against the petitioners.
STMC filed a Motion for Reconsideration thereon which was denied by the Court of
14
Appeals in a Resolution dated 24 January 2005.
Hence, the instant petition.
STMC submits the following issues for our resolution:
I. Whether or not the Honorable Court of Appeals erred in affirming the conclusion
of public respondent Judge Demetria that the certification against forum-shopping is
inapplicable in this case?
II. Whether or not the Honorable Court of Appeals erred in affirming the conclusion
of the public respondent Judge Demetria when it failed to apply Section 1(b), Rule
111 of the 2000 Revised Rules of Criminal Procedure?

79 | P a g e

III. Whether or not the Honorable Court of Appeals erred in affirming the conclusion
of the public respondent Judge Demetria when it issued the writ of preliminary
attachment in favor of the private respondent.
In its first assigned error, STMC argues that LSMI through its Operation Manager,
Mr. Vicente Africa, failed to certify under oath that he had earlier filed criminal cases
for violation of Batas Pambansa Blg. 22 against the Silangans before the MTC. These
cases are as follows:
Case Number

Name of Accused

(a) 00-0295 to 00- 0299 and 00-305 Anita Silangan and Benito Silangan
(b) 00-0294, 0300-04 and 306-09

(ADEC). The complaint alleged that ADEC purchased from HIMC various electrical
conduits and fittings amounting toP1,622,467.14. ADEC issued several checks in
favor of HIMC as payment. The checks, however, were dishonored by the drawee
bank on the ground of insufficient funds/account closed. Before the filing of the case
for recovery of sum of money before the RTC of Mandaluyong City, HIMC had
already filed separate criminal complaints for violation of Batas Pambansa Blg. 22
against the officers of ADEC, Gil Santillan and Juanito Pamatmat. They were
docketed as I.S. No. 00-01-00304 and I.S. No. 01-00300, respectively, and were both
pending before the Metropolitan Trial Court (MeTC) of Pasig City. These cases
involved the same checks which were the subjects of Civil Case No. MC-01-1493
before the RTC of Mandaluyong City.
In holding that the civil case filed subsequent to the criminal cases was deemed
instituted in the criminal cases, this Court held:

Anita Silangan and Jimmy Silangan

(c) 00-1246

Anita Silangan and Benito Silangan

(d) 99-2145 to 99-2154 99-2154

Anita Silangan and Benito Silangan

The criminal cases for violation of Batas Pambansa Blg. 22 and the collection of sum
of money have the same issues, i.e., the recovery of the subject checks. The
subsequent filing of the civil case for sum of money constitutes forum shopping.
Forum shopping exists when the elements of litis pendentia are present, or when a
final judgment in one case will amount to res judicata in another. There is forum
shopping when the following elements concur: (1) identity of the parties or, at least,
of the parties who represent the same interest in both actions; (2) identity of the
rights asserted and relief prayed for, as the latter is founded on the same set of
facts; and (3) identity of the two preceding particulars, such that any judgment
rendered in the other action will amount to res judicata in the action under
15
consideration or will constitute litis pendentia.

It is clear from the records that the checks involved in I.S. No. 00-01-00304 and I.S.
No. 00-01-00300 are the same checks cited by petitioner in Civil Case No. MC 011493. The Court will certainly not allow petitioner to recover a sum of money twice
based on the same set of checks. Neither will the Court allow it to proceed with two
actions based on the same set of checks to increase its chances of obtaining a
favorable ruling. Such runs counter to the Courts policy against forum shopping
which is a deplorable practice of litigants in resorting to two different fora for the
purpose of obtaining the same relief to increase his chances of obtaining a favorable
judgment. It is a practice that ridicules the judicial process, plays havoc with the
rules on orderly procedure, and is vexatious and unfair to the other parties of the
17
case.
In dismissing Civil Case No. MC-01-1493, this Court applied and interpreted Supreme
Court Circular No. 57-97 effective 16 September 1997, which reads:
1. The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to
necessarily include the corresponding civil action, and no reservation to file such
action separately shall be allowed or recognized.

We grant the petition.

From this Supreme Court Circular was adopted Rule 111(b) of the 2000 Revised
Rules of Criminal Procedure which reads:

The case of Hyatt Industrial Manufacturing Corporation v. Asia Dynamic Electrix

16
Corporation is instructive. In that case, Hyatt Industrial Manufacturing Corporation
(HIMC) instituted before the Regional Trial Court of Mandaluyong City a complaint
for recovery of sum of money against respondent Asia Dynamic Electrix Corporation

(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to
include the corresponding civil action. No reservation to file such civil action
separately shall be allowed.
80 | P a g e

In the Hyatt case, the Court further negated the claim that there are no identity of
parties and causes of action in the criminal and civil complaints for violation of Batas
Pambansa Blg. 22 where a criminal case against the corporate officers is filed ahead
of the civil case against the corporation. The parties in the civil case against the
corporation represent the same interest as the parties in the criminal case. As to the
issue of identity or non-identity of relief sought, this Court held that the criminal
case and the civil case seek to obtain the same relief. Thus:
With the implied institution of the civil liability in the criminal actions before the
Metropolitan Trial Court of Pasig City, the two actions are merged into one
composite proceeding, with the criminal action predominating the civil. The prime
purpose of the criminal action is to punish the offender to deter him and others
from committing the same or similar offense, to isolate him from society, reform or
rehabilitate him or, in general, to maintain social order. The purpose, meanwhile, of
the civil action is for the restitution, reparation or indemnification of the private
offended party for the damage or injury he sustained by reason of the delictual or
felonious act of the accused. Hence, the relief sought in the civil aspect of I.S. No.
00-01-00304 and I.S. No. 00-01-00300 is the same as that sought in Civil Case No.
MC 01-1493, that is, the recovery of the amount of the checks, which, according to
[HIMC], represents the amount to be paid by [ADEC] for its purchases. To allow
[HIMC] to proceed with Civil Case No. MC 01-1493 despite the filing of I.S. 00-0118
00304 and I.S. No. 00-01-00300 might result to a double payment of its claim.
The purpose of Section 1(b) of Rule 111 is explained by Justice Florenz D. Regalado,
former chairman of the Committee tasked with the revision of the Rules of Criminal
Procedure. He clarified that the special rule on Batas Pambansa Blg. 22 cases was
added because the dockets of the courts were clogged with such litigations and
creditors were using the courts as collectors. While ordinarily no filing fees are
charged for actual damages in criminal cases, the rule on the necessary inclusion of
a civil action with the payment of filing fees based on the face value of the check
involved was laid down to prevent the practice of creditors of using the threat of a
19
criminal prosecution to collect on their credit free of charge.
Applying the Hyatt case to the case before us, the dismissal of Civil Case No. 00-0420
before the RTC is warranted. It is not denied that LSMI likewise filed several criminal
complaints against the officers of STMC before the MTC prior to the filing of Civil
Case No. 00-0420. As provided in Supreme Court Circular No. 57-97, as re-echoed in
Rule 111, Section 1(b), of the 2000 Rules of Criminal Procedure, the civil action now

filed against STMC arising from its issuance of the bouncing checks is deemed
instituted in the criminal cases filed against its officers pending before the MTC.
Finally, as to the prayer of STMC for the discharge of the Writ of Preliminary
Attachment issued by the RTC, Rule 57 of the Revised Rules of Court provides:
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:
(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, quasicontract, delict or quasi-delict against a party who is about to depart from the
Philippines with intent to defraud his creditors.
xxxx
SEC. 2. Issuance and contents of order. An 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 applicants 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 applicants demand or the value of the
property to be attached as stated by the applicant, exclusive of costs. Several writs
may be issued at the same time to the sheriffs of the courts of different judicial
regions.
SEC. 3. Affidavit and bond required. An order of attachment shall be granted only
when it appears by the affidavit of the applicant, or of some other person who
personally knows the facts, that a sufficient cause of action exists, that the case is
one of those mentioned in Section 1 hereof, that there is no other sufficient security
for the claim sought to be enforced by the action, and that the amount due to 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 court before the order issues.

81 | P a g e

Attachment is an ancillary remedy. It is not sought for its own sake but rather to
enable the attaching party to realize upon relief sought and expected to be granted
20
in the main or principal action. Being an ancillary or auxiliary remedy, it is available
during the pendency of the action which may be resorted to by a litigant to preserve
and protect certain rights and interests therein pending rendition, and for purposes
of the ultimate effects, of a final judgment in the case. They are provisional because
they constitute temporary measures availed of during the pendency of the action
and they are ancillary because they are mere incidents in and are dependent upon
21
the result of the main action.
A writ of preliminary attachment is a species of provisional remedy. As such, it is a
collateral proceeding, permitted only in connection with a regular action, and as one
of its incidents; one of which is provided for present need, or for the occasion; that
22
is, one adapted to meet a particular exigency. On the basis of the preceding
discussion and the fact that we find the dismissal of Civil Case No. 00-00420 to be in
order, the writ of preliminary attachment issued by the trial court in the said case
23
must perforce be lifted.
Wherefore, premises considered, the petition is GRANTED. The Decision of the
Court of Appeals dated 25 October 2004 and Resolution dated 24 January 2005
affirming the Resolution dated 9 April 2001 of the Regional Trial Court of Lipa City,
Branch 85, are hereby reversed and set aside. Civil Case No. 00-0420 before the
Regional Trial Court of Lipa City, Branch 85, is ordered DISMISSED. The attachment
over the properties by the writ of preliminary attachment issued by the same trial
court is hereby ordered LIFTED.
SO ORDERED.

82 | P a g e

higher courts the matter of the propriety of the issuance of the writ of preliminary
attachment.

PCL Industries Manu. Corp. v. CA

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 147970

March 31, 2006

PCL Industries Manufacturing Corporation, Petitioner,

vs.
The COURT OF APPEALS and ASA Color & Chemical Industries, Inc., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
1

This resolves the petition for certiorari seeking the reversal of the Decision 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 petitioners 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
ofP504,906.00, 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 petitioners motion to dissolve the writ of
preliminary attachment. Petitioners motion for reconsideration of said order was
also denied per Order dated January 2, 1996. Petitioner no longer elevated to the

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 respondents) 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 attorneys fees; and
3) cost of suit.
The counterclaim of defendant is hereby dismissed for insufficiency of evidence.
83 | P a g e

SO ORDERED.

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 courts 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 petitioners finished plastic products. The trial courts 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].
xxxx
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 defendants 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

xxxx
As regards the testimony of defendants witness Jovencio Lim that defendants endusers returned the plastic packaging materials to defendant and defendant had to
reimburse its clients of the amount paid by them and defendant allegedly suffered
3
damages, defendant failed to present sufficient evidence of this allegation. x x x
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 appellees 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 defendantappellant and returned by its customers were printed with the use of the paint
delivered by the plaintiff-appellee. The formers 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
84 | P a g e

"16" - SYNPAC/ASA

representative, the appellant should have taken steps to return them; otherwise
they will be held liable for the value thereof.

"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 appellants 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
appellants 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 appellants 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 appellees 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 appellees

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 appellees letter of demand for payment. Obviously,
the appellants 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,
4
1995. Obviously, no such return was made. (Emphasis supplied)
Petitioner then filed the present petition for review on certiorari on 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
5
NOT REVERSING THE RULING OF THE TRIAL COURT
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 certiorariunder Rule 45,
considering that it was filed within the reglementary period for filing a petition for
85 | P a g e

review on certiorariand 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 courts order, ruling that the
applicants (herein private respondents) 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
6

of Appeals, 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 debtors
7
inability to pay or to comply with the obligations. (Emphasis supplied)

More recently, in Philippine National Construction Corporation v. Dy, 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.
xxxx
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.
xxxx
86 | P a g e

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 debtors 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)
Similarly, in this case, the bare allegations in the applicants 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.
xxxx
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
9
latters prejudices [sic].
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.
10

This Court reiterated in Child Learning Center, Inc. v. Tagario, 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)
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 petitioners 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), petitioners
President, during the period covered by the Work Processes, they had only two
suppliers of ink, CDI Sakada and respondent ASA Color.

87 | P a g e

The Court subjected the records of this case to close scrutiny, but found that
petitioners allegation that the CA judgment is based on misapprehension of facts, is
absolutely unfounded.
There is no testimonial evidence whatsoever to support petitioners belated
explanation that the other names of suppliers appearing on the work processes
are suppliers of plastic materials and not ink. Moreover, petitioners witnesses
contradict each other. Lim claims that during the period covered by the work
11
processes, they had only 2 suppliers of ink, namely, CDI Sakada and ASA Color. On
the other hand, contrary to Lims claim, Victor Montaez, petitioners Head of the
Accounting Department, testified that at that time, they had three or four suppliers
12
of ink materials. 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 "BrownASA" and "Yellow-CDI." Hence, petitioners own evidence reveals that there were at
least two suppliers of ink for that batch of production, as Lim has stated that both
13
ASA and CDI are suppliers of ink materials. Hence, the CA was correct in ruling that
petitioners evidence failed to prove that it was indeed respondent ASA Color who
supplied the defective ink.

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.

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 petitioners 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 petitioners 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
petitioners 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.
88 | P a g e