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G.R. No. L-252             March 30, 1946

TRANQUILINO CALO and DOROTEO SAN JOSE, petitioners, vs.ARSENIO C. ROLDAN, Judge of First Instance of Laguna, REGINO RELOVA and TEODULA BARTOLOME,respondents.

Facts:

1. That the plaintiffs and the defendants are all of legal age, Filipino citizens, and residents of Pila, Laguna; the plaintiffs are husband and wife..

2. That the plaintiff spouses are the owners and the possessors of the following described parcels of land, to wit:.

3. That parcel No. (a) described above is now an unplanted rice land and parcel No. (b) described in the complaint is a coconut land, both under the possession of the plaintiffs..

4. That the defendants, without any legal right whatsoever and in connivance with each other, through the use of force, stealth, threats and intimidation, intend or are intending to enter and work or harvest whatever existing fruits may now be found in the lands above-mentioned in violation of plaintiff's in this case ineffectual..

5. That unless defendants are barred, restrained, enjoined, and prohibited from entering or harvesting the lands or working therein through ex-parte injunction, the plaintiffs will suffer injustice, damages and irreparable injury to their great prejudice..

6. That the plaintiffs are offering a bond in their application for ex-parte injunction in the amount of P2,000, subject to the approval of this Hon. Court, which bond is attached hereto marked as Annex A and made an integral part of this complaint..

7. That on or about June 26, 1945, the defendants, through force, destroyed and took away the madre-cacao fencer, and barbed wires built on the northwestern portion of the land designated as parcel No. (b) of this complaint to the damage and prejudice of the plaintiffs in the amount of at least P200..

Wherefore, it is respectfully prayed:.

(b) That a writ of preliminary injunction be issued ex-parte immediately restraining, enjoining and prohibiting the defendants, their agents, servants, representatives, attorneys, and, (or) other persons acting for and in their behalf, from entering in, interfering with and/or in any wise taking any participation in the harvest of the lands belonging to the plaintiffs; or in any wise working the lands above-described;

The defendants filed an opposition, on the ground that they are owners of the lands and have been in actual possession thereof since the year 1925; and their answer to the complaint filed on August 14, 1945, they reiterate that they are the owners and were then in actual possession of said property, and that the plaintiffs have never been in possession thereof.

the Court of First Instance of Laguna, denied the petition on the ground that the defendants were in actual possession of said lands. A motion for reconsideration was filed by plaintiffs, but said motion had not yet, up to the hearing of the present case, been decided

The plaintiffs (respondents) filed on September 4, 1945, a reply to defendants' answer in which, among others, they reiterate their allegation in the complaint that they are possessors in good faith of the properties in question.

plaintiffs filed an urgent petition ex-parte praying that plaintiffs' motion for reconsideration of the order denying their petition for preliminary injunction be granted and or for the appointment of a receiver of the properties described in the complaint, on the ground that (a) the plaintiffs have an interest in the properties in question, and the fruits thereof were in danger of being lost unless a receiver was appointed; and that (b) the appointment of a receiver was the most convenient and feasible means of preserving, administering and or disposing of the properties in litigation which included their fruits.

the court appointed a receiver in the case.

ISSUE:

whether or not the respondent judge acted in excess of his jurisdiction or with grave abuse of discretion in issuing the order appointing a receiver

HELD:

In the present case wherein plaintiffs alleged that they are the owners and were in actual possession of the lands described in the complaint and their fruits, the action of injunction filed by them is the proper and adequate remedy in law, for a judgment in favor of plaintiffs would quiet their title to said lands..

The provisional remedies denominated attachment, preliminary injunction, receivership, and delivery of personal property, provided in Rules 59, 60, 61, and 62 of the Rules of Court, respectively, are remedies to which parties litigant may resort for the preservation or protection of their rights or interest, and for no other purpose, during the pendency of the principal action. If an action, by its nature, does not require such protection or preservation, said remedies can not be applied for and granted. To each kind of action or actions a proper provisional remedy is provided for by law. The Rules of Court clearly specify the case in which they may be properly granted. .

Attachment may be issued only in the case or actions specifically stated in section 1, Rule 59, in order that the defendant may not dispose of his property attached, and thus secure the satisfaction of any judgment that may be recovered by plaintiff from defendant. For that reason a property subject of litigation between the parties, or claimed by plaintiff as his, can not be attached upon motion of the same plaintiff..

The special remedy of preliminary prohibitory injunction lies when the plaintiff's principal action is an ordinary action of injunction, that is, when the relief demanded in the plaintiff's complaint consists in restraining the commission or continuance of the act complained of, either perpetually or for a limited period, and the other conditions required by section 3 of Rule 60 are present. The purpose of this provisional remedy is to preserve the status quo of the things subject of the action or the relation between the parties, in order to protect the rights of the plaintiff respecting the subject of the action during the pendency of the suit. Because, otherwise or if no preliminary prohibition injunction were issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards

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granting the relief sought by the plaintiff. But, as this court has repeatedly held, a writ of preliminary injunction should not be granted to take the property out of the possession of one party to place it in the hands of another whose title has not been clearly established..

Undoubtedly, according to law, the provisional remedy proper to plaintiffs' action of injunction is a preliminary prohibitory injunction, if plaintiff's theory, as set forth in the complaint, that he is the owner and in actual possession of the premises is correct. But as the lower court found at the hearing of the said petition for preliminary injunction that the defendants were in possession of the lands, the lower court acted in accordance with law in denying the petition, although their motion for reconsideration, which was still pending at the time the petition in the present case was heard in this court, plaintiffs insist that they are in actual possession of the lands and, therefore, of the fruits thereof.

From the foregoing it appears evident that the respondent judge acted in excess of his jurisdiction in appointing a receiver. Appointment of a receiver is not proper or does not lie in an action of injunction such as the one filed by the plaintiff. The litigation or issue raised by plaintiffs in their complaint is not the ownership or possession of the lands and their fruits. It is whether or not defendants intend or were intending to enter or work or harvest whatever existing fruits could then be found in the lands described in the complaint, alleged to be the exclusive property and in the actual possession of the plaintiffs. It is a matter not only of law but of plain common sense that a plaintiff will not and legally can not ask for the appointment or receiver of property which he alleges to belong to him and to be actually in his possession. For the owner and possessor of a property is more interested than persons in preserving and administering it.

Because relief by way of receivership is equitable in nature, and a court of equity will not ordinarily appoint a receiver where the rights of the parties depend on the determination of adverse claims of legal title to real property and one party is in possession

In view of all the foregoing, we hold that the respondent Judge Arsenio C. Roldan of the Court of First Instance of Laguna has exceeded his jurisdiction in appointing a receiver in the present case, and therefore the order of said respondent judge appointing the receiver, as well as all other orders and proceedings of the court presided over by said judge in connection with the receivership, are null and void.

G.R. No. 185734               July 3, 2013

ALFREDO C. LIM, JR., PETITIONER, vs.SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO, RESPONDENTS.

The Facts

On August 22, 2005, Lim, Jr. filed a complaint5 for sum of money with prayer for the issuance of a writ of preliminary attachment before the RTC, seeking to recover from respondents-spouses Tito S. Lazaro and Carmen T. Lazaro (Sps. Lazaro) the sum of P2,160,000.00, which represented the amounts stated in several dishonored checks issued by the latter to the former, as well as interests, attorney’s fees, and costs. The RTC granted the writ of preliminary attachment application6 and upon the posting of the required P2,160,000.00 bond,7 issued the corresponding writ on October 14, 2005.8 In this accord, three (3) parcels of land situated in Bulacan, covered by Transfer Certificates of Title (TCT) Nos. T-64940, T-64939, and T-86369 (subject TCTs), registered in the names of Sps. Lazaro, were levied upon.9

In their Answer with Counterclaim,10 Sps. Lazaro averred, among others, that Lim, Jr. had no cause of action against them since: (a) Colim Merchandise (Colim), and not Lim, Jr., was the payee of the fifteen (15) Metrobank checks; and (b) the PNB and Real Bank checks were not drawn by them, but by Virgilio Arcinas and Elizabeth Ramos, respectively. While they admit their indebtedness to Colim, Sps. Lazaro alleged that the same had already been substantially reduced on account of previous payments which were apparently misapplied. They likewise argued that no fraud should be imputed against them as the aforesaid checks issued to Colim were merely intended as a form of collateral.11 Hinged on the same grounds, Sps. Lazaro equally opposed the issuance of a writ of preliminary attachment.12

Nonetheless, on September 22, 2006, the parties entered into a Compromise Agreement13 whereby Sps. Lazaro agreed to pay Lim, Jr. the amount of P2,351,064.80 on an installment basis, following a schedule of payments covering the period from September 2006 until October 2013, under the following terms, among others: (a) that should the financial condition of Sps. Lazaro improve, the monthly installments shall be increased in order to hasten the full payment of the entire obligation;14 and (b) that Sps. Lazaro’s failure to pay any installment due or the dishonor of any of the postdated checks delivered in payment thereof shall make the whole obligation immediately due and demandable.

Subsequently, Sps. Lazaro filed an Omnibus Motion,17 seeking to lift the writ of preliminary attachment annotated on the subject TCTs, which the RTC granted

Lim, Jr. filed a motion for reconsideration19 which was, however, denied

the CA rendered the assailed decision,22 finding no grave abuse of discretion on the RTC’s part.

The Issue Before the Court

The sole issue in this case is whether or not the writ of preliminary attachment was properly lifted.

The Court’s Ruling

The petition is meritorious.

By its nature, preliminary attachment, under Rule 57 of the Rules of Court (Rule 57), is an ancillary remedy applied for not for its own sake but to enable the attaching party to realize upon the relief

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sought and expected to be granted in the main or principal action; it is a measure auxiliary or incidental to the main action. As such, it is available during its pendency which may be resorted to by a litigant to preserve and protect certain rights and interests during the interim, awaiting the ultimate effects of a final judgment in the case.26 In addition, attachment is also availed of in order to acquire jurisdiction over the action by actual or constructive seizure of the property in those instances where personal or substituted service of summons on the defendant cannot be effected.27

In this relation, while the provisions of Rule 57 are silent on the length of time within which an attachment lien shall continue to subsist after the rendition of a final judgment, jurisprudence dictates that the said lien continues until the debt is paid, or the sale is had under execution issued on the judgment or until the judgment is satisfied, or the attachment discharged or vacated in the same manner provided by law.28

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

Records indicate that while the parties have entered into a compromise agreement which had already been approved by the RTC in its January 5, 2007 Amended Decision, the obligations thereunder have yet to be fully complied with – particularly, the payment of the total compromise amount of P2,351,064.80.

In fine, the Court holds that the writ of preliminary attachment subject of this case should be restored and its annotation revived in the subject TCTs, re-vesting unto Lim, Jr. his preferential lien over the properties covered by the same as it were before the cancellation of the said writ. Lest it be misunderstood, the lien or security obtained by an attachment even before judgment, is in the nature of a vested interest which affords specific security for the satisfaction of the debt put in suit.30 Verily, the lifting of the attachment lien would be tantamount to an abdication of Lim, Jr.’s rights over Sps. Lazaro’s properties which the Court, absent any justifiable ground therefor, cannot allow.

WHEREFORE, the petition is GRANTED.

G.R. No. L-48080             August 31, 1942

JOSE DE BORJA, petitioner, vs.SERVILLANO PLATON and FRANCISCO DE BORJA, respondents.

, petitioner brought a civil action in the Court of First Instance of Rizal against Hermogena Romero, Francisco de Borja, Josefa Tangco and Crisanto de Borja to annul a second sale by Francisco de Borja to Hermogena Romero, of a large estate known as the Hacienda Jalajala, and to recover damages in the amount of P25,000.

In these causes for counter-claim and cross-complaint, it was alleged that plaintiff, being a son of defendants Francisco de Borja and Josefa Tangco, had been entrusted with the administration of the extensive interests of his parents, but had been unfaithful to his trust. Said defendants, therefore, prayed, inter alia, that the spouses Borja and Tangco be declared owners of the Hacienda Jalajala in question; that plaintiff be required to render an accounting of the products of said hacienda that he had received and to pay said spouses at least P100,000 illegally retained by him; that plaintiff be ordered to account for the proceed of rice and bran and to pay at least P700,000 unlawfully retained by him; that plaintiff be made to deliver P20,000 which he had collected from a debtor of said spouses; that plaintiff be likewise ordered to pay another sum of P9,034 collected by him from the same debtor; and that plaintiff be required to turn over to defendants Francisco de Borja and Josefa Tangco the amount of P40,000 collected by him as indemnity of an insurance policy on property belonging to said spouses.

On July 27, 1940, Francisco de Borja and his wife filed their petition for preliminary attachment to cover their third, fourth, and fifth, grounds for cross-complaint, involving a total of P69,035. In said motion, the defendants Borja and wife stated that they did not include the first and second causes for cross-complaint because the visible property of plaintiff that could then be attached was only worth about P2,000.

The order for preliminary attachment is questioned upon several grounds, among which are: (1) that no writ of attachment can be issued in favor of a defendant who presents a counterclaim; (2) and the defendants' affidavit was fatally defective.

On the first point, we believe a writ of preliminary attachment may be issued in favor of a defendant who sets up a counterclaim. For the purpose of the protection afforded by such attachment, it is immaterial whether the defendants Borja and wife simply presented a counterclaim or brought a separate civil action against Jose de Borja, plaintiff in the previous case and petitioner herein. To lay down a subtle distinction would be to sanction that formalism and that technicality which are discountenanced by the modern laws of procedure for the sake of speedy and substantial justice. In the present case we see no reason why the order of the trial court should be disturbed, this question being a matter within its discretion and we find no grave abuse of that discretion.

G.R. No. 155504               June 26, 2009

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PROFESSIONAL VIDEO, INC., Petitioner, vs.TECHNICAL EDUCATION AND SKILLS DEVELOPMENT AUTHORITY, Respondent.

THE FACTUAL BACKGROUND

PROVI is an entity engaged in the sale of high technology equipment, information technology products and broadcast devices, including the supply of plastic card printing and security facilities.

TESDA is an instrumentality of the government established under Republic Act (R.A.) No. 7796 (the TESDA Act of 1994) and attached to the Department of Labor and Employment (DOLE) to "develop and establish a national system of skills standardization, testing, and certification in the country."6 To fulfill this mandate, it sought to issue security-printed certification and/or identification polyvinyl (PVC) cards to trainees who have passed the certification process.

TESDA’s Pre-Qualification Bids Award Committee (PBAC) conducted two (2) public biddings on June 25, 1999 and July 22, 1999 for the printing and encoding of PVC cards. A failure of bidding resulted in both instances since only two (2) bidders – PROVI and Sirex Phils. Corp. – submitted proposals.

Due to the failed bidding, the PBAC recommended that TESDA enter into a negotiated contract with PROVI. On December 29, 1999, TESDA and PROVI signed and executed their "Contract Agreement Project: PVC ID Card Issuance" (the Contract Agreement) for the provision of goods and services in the printing and encoding of PVC cards.7 Under this Contract Agreement, PROVI was to provide TESDA with the system and equipment compliant with the specifications defined in the Technical Proposal. In return, TESDA would pay PROVI the amount of Thirty-Nine Million Four Hundred and Seventy-Five Thousand Pesos (P39,475,000) within fifteen (15) days after TESDA’s acceptance of the contracted goods and services.

On August 24, 2000, TESDA and PROVI executed an "Addendum to the Contract Agreement Project: PVC ID Card Issuance" (Addendum),8 whose terms bound PROVI to deliver one hundred percent (100%) of the enumerated supplies to TESDA

TESDA in turn undertook to pay PROVI thirty percent (30%) of the total cost of the supplies within thirty (30) days after receipt and acceptance of the contracted supplies, with the balance payable within thirty (30) days after the initial payment.

PROVI further alleged that out of TESDA’s liability of P39,475,000.00, TESDA paid PROVI only P3,739,500.00, leaving an outstanding balance of P35,735,500.00, as evidenced by PROVI’s Statement of Account.9 Despite the two demand letters dated March 8 and April 27, 2001 that PROVI sent TESDA,10 the outstanding balance remained unpaid.

On July 11, 2001, PROVI filed with the RTC a complaint for sum of money with damages against TESDA. PROVI additionally prayed for the issuance of a writ of preliminary attachment/garnishment against TESDA.

TESDA responded on July 24, 2001 by filing a Motion to Discharge/Quash the Writ of Attachment, arguing mainly that public funds cannot be the subject of garnishment.12 The RTC denied TESDA’s motion, and subsequently ordered the manager of the Land Bank of the Philippines to produce TESDA’s bank statement for the garnishment of the covered amount.13

Faced with these rulings, TESDA filed a Petition for Certiorari with the CA to question the RTC orders, imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the trial court for issuing a writ of preliminary attachment against TESDA’s public funds.14

The CA set aside the RTC’s orders

THE PETITION

The petition submits to this Court the single issue of whether or not the writ of attachment against TESDA and its funds, to cover PROVI’s claim against TESDA, is valid

THE COURT’S RULING

, we resolve to DENY PROVI’s petition for lack of merit.

TESDA is an instrumentality of the government undertaking governmental functions.

Under these terms, both constitutional and statutory, we do not believe that the role and status of TESDA can seriously be contested: it is an unincorporated instrumentality of the government, directly attached to the DOLE through the participation of the Secretary of Labor as its Chairman, for the performance of governmental functions – i.e., the handling of formal and non-formal education and training, and skills development. As an unincorporated instrumentality operating under a specific charter, it is equipped with both express and implied powers,25 and all State immunities fully apply to it.26

TESDA, as an agency of the State, cannot be sued without its consent.

TESDA’s funds are public in character, hence exempt from attachment or garnishment.

Even assuming that TESDA entered into a proprietary contract with PROVI and thereby gave its implied consent to be sued, TESDA’s funds are still public in nature and, thus, cannot be the valid subject of a writ of garnishment or attachment.

As pointed out by TESDA in its Memorandum,40 the garnished funds constitute TESDA’s lifeblood – in government parlance, its MOOE41 – whose withholding via a writ of attachment, even on a temporary basis, would paralyze TESDA’s functions and services. As well, these funds also include TESDA’s Personal Services funds from which salaries of TESDA personnel are sourced. Again and for obvious reasons, the release of these funds cannot be delayed.

PROVI has not shown that it is entitled to the writ of attachment.

Even without the benefit of any immunity from suit, the attachment of TESDA funds should not have been granted, as PROVI failed to prove that TESDA "fraudulently misapplied or converted funds allocated under the Certificate as to Availability of Funds." Section 1, Rule 57 of the Rules of Court sets forth the grounds for issuance of a writ of preliminary attachment, as follows:

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

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(a) In an action for recovery of a specified amount of money or damages, other than moral and exemplary, on a cause of action arising from law, contract, quasi-contract, delict or quasi-delict against a party who is about to depart from the Philippines with intent to defraud his creditors;

(b) In an action for money or property embezzled or fraudulently misapplied or converted to his use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty;

(c) In an action to recover the possession of property unjustly or fraudulently taken, detained or converted, when the property or any part thereof, has been concealed, removed or disposed of to prevent its being found or taken by the applicant or an authorized person;

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

(e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors;

(f) In an action against a party who does not reside and is not found in the Philippines, or on whom summons may be served by publication. [Emphasis supplied.]

Jurisprudence teaches us that the rule on the issuance of a writ of attachment must be construed strictly in favor of the defendant. Attachment, a harsh remedy, must be issued only on concrete and specific grounds and not on general averments merely quoting the words of the pertinent rules.42 Thus, the applicant’s affidavit must contain statements clearly showing that the ground relied upon for the attachment exists.

Section 1(b), Rule 57 of the Rules of Court, that PROVI relied upon, applies only where money or property has been embezzled or converted by a public officer, an officer of a corporation, or some other person who took advantage of his fiduciary position or who willfully violated his duty.

PROVI, in this case, never entrusted any money or property to TESDA. While the Contract Agreement is supported by a Certificate as to Availability of Funds (Certificate) issued by the Chief of TESDA’s Accounting Division, this Certificate does not automatically confer ownership over the funds to PROVI. Absent any actual disbursement, these funds form part of TESDA’s public funds, and TESDA’s failure to pay PROVI the amount stated in the Certificate cannot be construed as an act of fraudulent misapplication or embezzlement.

Section 1 (d), Rule 57 of the Rules of Court applies where a party is guilty of fraud in contracting a debt or incurring an obligation, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought. In Wee v. Tankiansee,43 we held that for a writ of attachment to issue under this Rule, the applicant must sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor’s mere non-payment of the debt or failure to comply with his obligation. The affidavit, being the foundation of the writ, must contain particulars showing how the imputed fraud was committed for the court to decide whether or not to issue the writ. To reiterate, a writ of attachment can only be granted on concrete and specific grounds and not on general averments merely quoting the words of the rules.44

For all these reasons, we support the appellate court’s conclusion that no valid ground exists to support the grant of the writ of attachment against TESDA. WHEREFORE, premises considered, we hereby DENY the petition

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G.R. No. 104405 May 13, 1993

LIBERTY INSURANCE CORPORATION, petitioner, vs.THE HONORABLE COURT OF APPEALS, HON. NAPOLEON K. FLOJO, Presiding Judge of Branch II, RTC Manila; ATILLA ARKIN, the CITY SHERIFF OF MANILA, the REGISTER OF DEEDS OF MANILA and the REGISTER OF DEEDS OF MAKATI, METRO MANILA, respondents.

Facts:

May 4, 1988 Jose H. Imperial Organizations, Pty., thru Atty. Jose H. Imperial entered into an agreement with Coca-Cola Bottlers Philippines to promote two concerts featuring a group known as "Earth, Wind and Fire" on June 12 and 13, 1988 with Coca-Cola sponsoring the concerts and the former promoting the same.

To ensure compliance with the terms of the agreement, Coca-Cola required Imperial Organizations to put up a performance bond. Petitioner Liberty Insurance, upon application of Imperial Organization put up the performance bond in the amount of Three Million Pesos (P3,000,000.00), the principal condition of which was to "fully and faithfully guarantee the terms and conditions" of the agreement dated May 24, 1988 entered into between Coca-Cola and Imperial Organizations. More particularly, the bond was to guarantee the return to Coca-Cola of "whatever portion of the cash sponsorship and cash advances to be made by Coca-Cola to finance the holding of the concerts on the dates aforesaid . . . ." (Rollo, pp. 37)

In turn, and as a condition for the issuance of said performance bond, petitioner required Imperial Organizations, Jose H. Imperial, Atilla Arkin, and Carmen Madlangbayan to execute an indemnity agreement in its favor to indemnify it for any and all damages including attorney's fees which the petitioner may incur by reason of the issuance of the bond.

It appears that while the concerts took place, Imperial Organizations and private respondents failed to comply with their obligations to Coca Cola, as a result of which petitioner became liable upon its performance bond paying Coca-Cola Three Million Pesos. Petitioner, demanded reimbursement from Imperial, Arkin And Madlangbayan based on their indemnity bond but to no avail.

On August 7, 1988 petitioner filed with the Regional Trial Court, National Capital Region, Branch 2, Manila a complaint for damages with application for the issuance of a writ of preliminary attachment against private respondents.

On September 20, 1988, the Trial Court thru the Hon. Rosario A. de Leon, issued an order allowing the issuance of the writ,

On May 10, 1989 respondent Arkin filed a motion to Quash/ Recall Writ of Attachment. On October 19, 1989, the trial court, this time presided by respondent judge Napoleon K. Flojo, denied the motion,

After more than a year, or on December 14, 1990, Arkin filed a Motion for Reconsideration of the aforementioned order of denial.

On March 6, 1991, respondent judge reversed his earlier ruling and instead issued two orders, (1) granting Arkin's Motion for Reconsideration and directing the lifting of the writ of preliminary attachment earlier issued, and (2) ordering the deputy sheriff assigned to said court to immediately discharge or lift said writ.

Aggrieved, petitioner filed a special civil action for certiorari with respondent Court of Appeals to set aside the above orders of respondent judge.

Respondent court dismissed the petition on the ground that the filing of the said petition was premature considering that there was yet a remedy available in the ordinary course of law, i.e., filing a motion for reconsideration of the challenged orders.

ISSUES:

1) Whether or not the writ of preliminary attachment in question was properly or regularly issued and 2) Whether or not petitioner's failure to file a motion for reconsideration of the questioned orders of the court a quo bars the filing of a special civil action for certiorari before the respondent court.

HELD:

In an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought, Section 1 (d) of Rule 57 authorizes the plaintiff or any proper party to have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered therein. Thus:

Rule 57, Sec. 1. Grounds upon which attachment mayissue. —

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

To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the circumstances attendant in each case (Republic v. Gonzales, 13 SCRA 633 [1965]).

Here, it has been established that all the collaterals given by the respondent Arkin as security for the bond were either fraudulent or heavily encumbered.

It is therefore clear that fraud was present when private respondent, among others, entered into an indemnity agreement with petitioner. The actuations of respondent Arkin indubitably lead to the conclusion that he never entertained the idea of fulfilling his obligations under the agreement and was bent on defrauding petitioner from the very beginning.

Under the circumstances, we perceive no impropriety or irregularity in the issuance of the writ of attachment especially so where petitioner has fully complied with the requirements for the issuance thereof.

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On the contrary, what we see as having been attended by irregularity is the assailed order of respondent judge lifting the writ of attachment based on grounds which are contradicted by the evidence on record. Such being the case, respondent Arkin's claim that the writ of attachment has been irregularly issued should not have merited serious consideration by respondent judge.

Be that as it may, the instant case being "an action against a party who has been guilty of fraud in contracting the obligation upon which the action is brought", respondent Arkin is not allowed to file a motion to dissolve the attachment on the ground that the writ has been improperly or irregularly issued.

Through the order for the "immediate" lifting of the writ, respondent Judge, in one swift stroke, completely subverted the valid order of attachment issued after a finding of fraud, which finding he himself has declared as supported by substantial evidence. We hold that respondent judge in issuing the contested orders has acted capriciously, whimsically and arbitrarily and with grave abuse of discretion amounting to lack or in excess of jurisdiction correctible by the special writ of certiorari.

WHEREFORE, the petition is GRANTED.

G.R. No. L-23237             November 14, 1925

WALTER E. OLSEN & CO., plaintiff-appellee, vs.WALTER E. OLSEN, defendant-appellant.

ISSUES

The first question that arises is whether or not an order denying a motion for the annulment of a preliminary attachment may be reviewed through an appeal.

The preliminary attachment is an auxiliary remedy the granting of which lies within the sound discretion of the judge taking cognizance of the principal case upon whose existence it depends. The order of the judge denying a motion for the annulment of a writ of preliminary attachment, being of an incidental or interlocutory and auxiliary character, cannot be the subject of an appeal independently from the principal case, because our procedural law now in force authorizes an appeal only from a final judgement which gives an end to the litigation. (Section 143, Act No. 190: 3 C. J., 549 par. 389.) This lack of ordinary remedy through an appeal does not mean, however, that any excess a lower court may commit in the exercise of its jurisdiction is without remedy; because there are the especial remedies, such as certiorari, for the purpose. (Leung Ben vs. O'Brien, 38 Phil., 182.)

While it is true that an order denying a motion for the annulment of a preliminary attachment is not subject to review through an appeal independently from the principal case, it not consisting a final order, yet when the writ of preliminary attachment becomes final by virtue of a final judgment rendered in the principal case, said writ is subject to review jointly with the judgment rendered in the principal case through an ordinary appeal. The appellate court has the power to revoke or confirm said order, in like manner as a judgment on the merits; because it is a ruling to which an exception may be taken, and therefore is subject to review in an appeal by bill of exceptions. (Secs. 141-143, Act No. 190.) The fact that section 441 of the Code of Civil Procedure does not provide any remedy against the granting or denial of a motion for the annulment of a writ of preliminary attachment, except in case of excess of jurisdiction, does not confer upon said order a final and irrevocable character, taking it out from the general provisions as to appeal and review, for a special provision is necessary for that purpose.

Having arrived at the conclusion that an order denying a motion for the annulment of a preliminary attachment may be reviewed in an appeal taken from a final judgment rendered in the principal case, in which said order was entered as an auxiliary remedy, we will now turn to consider the question whether or not the trial court committed error in denying the motion for the annulment of the preliminary attachment levied upon the property of the defendant-appellant.

It is admitted by the defendant-appellant that he is indebted to the plaintiff-appellee corporation in the sum of P66,207.62, but denies that he has contracted said debt fraudulently.

The evidence shows that the defendant-appellant was president-treasurer and general manager of the plaintiff-appellee corporation and exercised direct and almost exclusive supervision over its function, funds and books of account until about the month of August, 1921. During that time he has been taking money of the corporation without being duly authorized to do so either by the board of directors or by the by-laws, the money taken by him having amounted to the considerable sum of P66,207.62. The defendant-appellant attempted to justify his conduct, alleging that the withdrawal of the funds of the corporation for his personal use was made in his current account with said corporation, in whose treasury he deposited his own money and the certificates of title of his shares, as well as of his estate, and that at the first meeting of the stockholders, which took place on February 1, 1919, a statement of his account with a debit balance was submitted and approved.

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As a trustee of said corporation, it was his duty to see by all legal means possible that the interests of the stockholders were protected, and should not abuse the extraordinary opportunity which his triple position offered him to dispose of the funds of the corporation. Ordinary delicacy required that in the disposition of the funds of the corporation for his personal use, he should be very careful, so as to do it in such a way as would be compatible with the interest of the stockholders and his fiduciary character.

For the foregoing, and no error having been found in the judgment appealed from, the same is hereby affirmed, with the costs against the defendant-appellant. So ordered.

G.R. No. 123358           February 1, 2000

FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU, petitioners, vs.THE COURT OF APPEALS, THE HON. JOSE C. DE LA RAMA, Presiding Judge, Branch 139, Regional Trial Court, NCJR, Makati City, Metro-Manila, and LEY CONSTRUCTION AND DEVELOPMENT CORPORATION,respondents.

FACTS:

On June 29, 1993, private respondent Ley Construction and Development Corporation filed a Complaint for collection of a sum of money with application for preliminary attachment against petitioner FCY Construction Group, Inc. and Francis C. Yu with the Makati Regional Trial Court which was docketed as Civil Case No. 93-2112. Private respondent alleged that it had a joint venture agreement with petitioner FCY Construction Group, Inc. (wherein petitioner Francis C. Yu served as President) over the Tandang Sora Commonwealth Flyover government project, for which it had provided funds and construction materials. The Complaint was filed in order to compel petitioners to pay its half share in the collections received in the project as well as those yet to be received therein. In support of its application for a writ of attachment, private respondent alleged that petitioners were guilty of fraud in incurring the obligation and had fraudulently misapplied or converted the money paid them, to which it had an equal share.

On July 6, 1993, following an ex-parte hearing, the lower court issued an Order for the issuance of a writ of preliminary attachment, conditioned upon the filing of a P7,000,000.00 attachment bond.

Petitioners moved for the lifting of the writ of preliminary attachment on the following grounds: (1) the attachment was heard, issued and implemented even before service of summons upon them; (2) failure of the attaching officer to serve a copy of the affidavit of merit upon them; and (3) that there was no fraud in incurring the obligation.

On May 25, 1994, the lower court issued another Order denying petitioners' Motion to Lift Attachment.1 

Subsequently, petitioners filed a Motion for Reconsideration2 as well as an Omnibus Motion for Leave to file Amended Answer and/or to delete Francis C. Yu as party-defendant.3

With the denial of both Motions by the lower court on September 4, 1994,4 petitioners filed a Petition for Certioraribefore the Court of Appeals on September 16, 1994.5 The Petition was, however, denied

RULING:

Hence, the instant Petition.

It is evident that the questioned writ of attachment was anchored upon Section 1(d), Rule 57 of the Revised Rules of Court, to wit —

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

x x x           x x x           x x x

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(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 x x           x x x

Thus, petitioners' argument that "the inducement was the mouth-watering temptation of a DPWH promise of a "new project after the Tandang Sora Flyover project will be finished" is clearly off-tangent as such inducement, if any, came not at the inception of the obligation.

Similarly, petitioners' arguments that it was private respondent who admittedly prepared the letter embodying the alleged joint venture agreement9 and had petitioner Francis Yu sign it must fail. The written agreement referred to was signed by petitioner Francis Yu only on January 5, 1993, long after the project had commenced. Thus, it was only a written confirmation of an arrangement that had already been existing and operational. Similarly then, such written confirmation did not occur at the inception of the obligation sued upon.

In Liberty Insurance Corporation vs. Court Appeals,10 this Court, discussing Section 1(d), Rule 57, cautioned as follows —

To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the circumstances attendant in each case. (Republic v. Gonzales, 13 SCRA 633).

From the foregoing, therefore, the alleged inducement by the DPWH officials upon private respondent as well as the circumstances surrounding the execution of the joint venture agreement, both appear immaterial as they were not committed upon contracting the obligation sued upon but occurred long after the obligation has been established.

The fact that petitioners have paid a substantial amount of money to private respondent cannot save the day for them either.

Finally, considering that the writ of preliminary attachment has been issued on account of allegations of fraud in contracting the obligation upon which the action is brought petitioners' efforts to have the writ of preliminary attachment dissolved on the ground that it was improperly or irregularly issued is in vain. Indeed, in Liberty Insurance Corporation, supra, which cited Mindanao Savings and Loan Assoc. vs. Court of Appeals (172 SCRA 480), we ruled —

. . ., when the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action: e.g., . . . an action against a party who has been guilty of fraud in contracting the debtor incurring the obligation upon which the action is brought, the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiffs application and affidavits on which the writ was based and consequently that the writ based therein had been improperly or irregularly issued — the reason being that the hearing on such motion for dissolution of the writ would be tantamount to a trial on the

merits. In other words, the merits of the action would be ventilated at a mere hearing of a motion; instead of the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counterbond.

We now come to the issue of whether or not petitioner Francis Yu should remain as party-defendant.

. We agree that petitioner Francis Yu cannot be made liable in his individual capacity if he indeed entered into and signed the contract in his official capacity as President, in the absence of stipulation to that effect, due to the personality of the corporation being separate and distinct from the persons composing it.12 However, while we agree that petitioner Francis Yu cannot be held solidarily liable with petitioner corporation merely because he is the President thereof and was involved in the transactions with private corporation, we also note that there exists instances when corporate officers may be held personally liable for corporate acts.

Stated differently, whether or not petitioner Francis Yu should be held personally and solidarily liable with petitioner corporation is a matter that should be left to the trial court's discretion, dependent as it is on evidence during trial.

WHEREFORE, in view of the foregoing, the instant Petition is hereby DISMISSED. No pronouncement as to costs.

G.R. No. 171741               November 27, 2009

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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.

The Facts

Lara’s Gifts and Decors Inc. (LGD) and Metro, Inc. are corporations engaged in the business of manufacturing, producing, selling and exporting handicrafts. Luis Villafuerte, Jr. and Lara Maria R. Villafuerte are the president and vice-president of LGD respectively. Frederick Juan and Liza Juan are the principal officers of Metro, Inc.

Sometime in 2001, petitioners and respondents agreed that respondents would endorse to petitioners purchase orders received by respondents from their buyers in the United States of America in exchange for a 15% commission, to be shared equally by respondents and James R. Paddon (JRP), LGD’s agent. The terms of the agreement were later embodied in an e-mail labeled as the "2001 Agreement."4

In May 2003, respondents filed with the Regional Trial Court, Branch 197, Las Piñas City (trial court) a complaint against petitioners for sum of money and damages with a prayer for the issuance of a writ of preliminary attachment. Subsequently, respondents filed an amended complaint5 and alleged that, as of July 2002, petitioners defrauded them in the amount of $521,841.62.. Respondents also prayed for the issuance of a writ of preliminary attachment.

In its 23 June 2003 Order,6 the trial court granted respondents’ prayer and issued the writ of attachment against the properties and assets of petitioners.

On 26 June 2003, petitioners filed a motion to discharge the writ of attachment. Petitioners argued that the writ of attachment should be discharged on the following grounds: (1) that the 2001 agreement was not a valid contract because it did not show that there was a meeting of the minds between the parties; (2) assuming that the 2001 agreement was a valid contract, the same was inadmissible because respondents failed to authenticate it in accordance with the Rules on Electronic Evidence; (3) that respondents failed to substantiate their allegations of fraud with specific acts or deeds showing how petitioners defrauded them; and (4) that respondents failed to establish that the unpaid commissions were already due and demandable.

After considering the arguments of the parties, the trial court granted petitioners’ motion and lifted the writ of attachment.

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.

In its 29 September 2004 Decision, the Court of Appeals granted respondents’ petition. The 29 September 2004 Decision provides:

Petitioners filed a motion for reconsideration. In its 2 March 2006 Resolution, the Court of Appeals denied the motion.

Hence, this petition.

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.

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

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

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

In Liberty Insurance Corporation v. Court of Appeals,14 we explained:

To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1(d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case.15

The applicant for a writ of preliminary attachment must sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor’s mere non-payment of the debt or failure to comply with his obligation.16

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.

. The rule that "when the writ of attachment is issued upon a ground which is at the same time the applicant’s cause of action, the only other way the writ can be lifted or dissolved is by a counter-bond"21 is applicable in this case. It is clear that in respondents’ amended complaint of fraud is not only alleged as a ground for the issuance of the writ of preliminary attachment, but it is also the core of respondents’ complaint. The fear of the Court of Appeals that petitioners could force a trial on the merits of the case on the strength of a mere motion to dissolve the attachment has a basis.

G.R. No. 164800               July 22, 2009

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REPUBLIC OF THE PHILIPPINES, Petitioner, vs.ESTATE OF ALFONSO LIM, SR., ALFONSO LIM, JR., TEODORO Q. PENA, FERDINAND E. MARCOS (now deceased and Represented by his Estate/Heirs), IMELDA R. MARCOS, TAGGAT INDUSTRIES, INC., PAMPLONA REDWOOD VENEER, INC., SOUTHERN PLYWOOD, WESTERN CAGAYAN LUMBER, ACME PLYWOOD, VETERAN WOODWORK, INC., SIERRA MADRE WOOD INDUSTRIES, INC., and TROPICAL PHILIPPINES WOOD INDUSTRIES, INC., Respondent.

The Facts

On October 2, 1991, in Civil Case No. 0030, the Republic, represented by the Presidential Commission on Good Government (PCGG), filed before the Sandiganbayan, Second Division, an Amended Complaint for reconveyance, reversion, accounting, restitution, and damages. In it, the Republic averred that Alfonso Lim, Sr. (now deceased) and Alfonso Lim, Jr., acting by themselves and/or in unlawful collusion with Ferdinand E. Marcos and Imelda R. Marcos, and taking undue advantage of their relationship, influence, and connection with the latter, embarked upon devices and stratagems to unjustly enrich themselves at the expense of the Republic and the Filipino people. Among other acts, the Lims were alleged to have:

(a) actively solicited and obtained, upon the personal behest of [the Marcoses], with the active collaboration of Teodoro Q. Peña, who was then Minister of Natural Resources, additional timber concession in favor of Taggat Industries, Inc. (TAGGAT) and Pamplona Redwood Veneer, Inc. (PAMPLONA), corporations beneficially held and controlled by Alfonso Lim and Alfonso Lim, Jr., which, in addition to other areas already awarded to TAGGAT and PAMPLONA, resulted in their concession holdings in excess of the allowable limits prescribed under Section 11, Article XIV of the 1973 Constitution;

(b) actively solicited and obtained, upon the personal behest of [the Marcoses], a management contract in favor of TAGGAT to operate and manage the logging concessions of Veterans Woodwork, Inc. (VETERANS), Sierra Madre Wood Industries, Inc. (SIERRA MADRE), and Tropical Philippines Wood Industries, Inc. (TROPICAL) over and above the objections of VETERANS;

(c) obtained a permit to cut down a certain number of Narra and Amaciga trees, and, on the very same day, was likewise given an authorization by Ferdinand E. Marcos to export the same, in violation of existing ban against cutting and export of the aforesaid trees;

(d) obtained, in favor of PAMPLONA, a syndicated loan in the amount of millions of US dollars from a consortium of international banks, secured by the guarantee of the National Investment and Development Corporation (NIDC), a subsidiary of the Philippine National Bank; and in view of the default by PAMPLONA in the payment of its principal and/or interest amortizations, the loan was converted, under the debt rescheduling arrangement between Republic and its foreign creditor banks, into a public sector obligation of Republic, to the grave and irreparable damage of the Republic and the Filipino people.

The Republic also alleged that the foregoing acts, singly or collectively, constituted grave and gross abuse of official position and authority, flagrant breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, and violation of the Constitution and laws of the Republic to the grave and irreparable damage to it and its citizens.

As its main prayer, the Republic asked for the reconveyance of all funds and property impressed with constructive trust in favor of the Republic and the Filipino people, "as well as funds and other property acquired with [respondents’] abuse of right and power and through unjust

enrichment, including but not limited to the properties listed in Annex "A" of the Complaint together with the accruing income or increment from date of acquisition until final judgment."

Meanwhile, Lim, Sr. passed away. On June 22, 1998, his estate filed a motion to lift the sequestration4 over certain real properties5 contending that the PCGG impleaded him owing to his alleged association with former Pres. Marcos. The estate would add, however, that Lim, Sr. secured title over almost all of his real properties thus sequestered way back in 1948, long before the Marcoses came to power.

To the motion to lift, the Republic interposed an opposition, alleging that the sequestered lots and titles stand as security for the satisfaction of any judgment the Republic may obtain against the estate of Lim, Sr., his family, or his group of companies.

By Resolution6 dated March 17, 2001, the Sandiganbayan lifted the sequestration order in question

In time, the Republic sought but was later denied reconsideration of the sequestration-lifting resolution of the Sandiganbayan.7

(1) Sometime in January 2002, the estate of Lim, Sr., Ruthie Lim, and two others, as defendants a quo, filed a Demurrer to Evidence10 dated January 14, 2002, on the ground of either irrelevancy or immateriality of the Republic’s evidence

(2) On July 4, 2002, the Sandiganbayan denied the Republic’s motion for reconsideration of the graft court’s resolution lifting the sequestration order.12

(3) In an obvious bid to counter the effects of the lifting of the sequestration, the Republic, on September 9, 2002, filed a Motion for the Issuance of a Writ of Preliminary Attachment13 against respondents in the amount of its claim. The Republic alleged that respondent Lims "were guilty of fraud in incurring various legal obligations which the present action has been brought," by "taking undue advantage of their relationship, influence and connection with the [Marcoses]" to unjustly enriched themselves to the prejudice of the Republic.

(4) On March 28, 2003, the Sandiganbayan, stating that bare allegations of the commission of fraud by respondents in incurring the aforesaid obligations are not sufficient for the granting of the writ of preliminary attachment, denied, via a Resolution,14 the corresponding motion.

In due time, the Republic interposed a motion seeking reconsideration of the Sandiganbayan’s March 28, 2003 denial action.15

(5) By Resolution dated July 17, 2003, the Sandiganbayan denied respondents’ demurrer to evidence.16

Forthwith, the estate of Lim, Sr., Taggat Industries, Inc. (TAGGAT), and Pamplona Redwood Veneer, Inc. (PAMPLONA), followed later by Lim, Jr., respectfully moved for reconsideration of the July 17, 2003 Resolution.

(6) On June 18, 2004, the Sandiganbayan resolved to affirm the denial of the respondents’ demurrer to evidence. It also denied in its March 28, 2003 resolution the Republic’s motion for the issuance of a writ of preliminary attachment.17

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The Issues

The two interrelated issues petitioner Republic tenders boils down to: whether the Sandiganbayan, in the light of the denial of respondents’ demurrer to evidence, acted with grave abuse of discretion amounting to lack or excess of jurisdiction in not considering that the evidence already on record support the issuance of a writ or preliminary attachment.

The Court’s Ruling

An assiduous review of the antecedent facts and factual findings and conclusions of the Sandiganbayan relative to the denial of demurrer to evidence and the writ of preliminary injunction compels this Court to grant the instant petition.

Nature of Preliminary Attachment

Attachment is an ancillary remedy applied for not for its own sake but to enable the attaching party to realize upon relief sought and expected to be granted in the main or principal action;19 it is a measure auxiliary or incidental to the main action. As such, it is available during the pendency of the action which may be resorted to by a litigant to preserve and protect certain rights and interests therein pending rendition, and for purposes of the ultimate effects, of a final judgment in the case. As a corollary proposition, an order granting an application for a writ of preliminary attachment cannot, owing to the incidental or auxiliary nature of such order, be the subject of an appeal independently of the main action.20

The instant case is one of those mentioned in Sec. 1, Rule 57 of the Rules, specifically the section’s paragraph "d," wherein a writ of preliminary attachment may be issued. It 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:

x x x x

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

For a writ of attachment to issue under the above-quoted rule, the applicant must sufficiently show the factual circumstances of the alleged fraud.

Fraud may be defined as the voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission. 21 In its general sense, fraud is deemed to comprise anything calculated to deceive, including all acts and omissions and concealment involving a breach of legal or equitable duty, trust, or confidence justly reposed, resulting in damage to another, or by which an undue and unconscientious advantage is taken of another.22 Fraud is also described as embracing all multifarious means which human ingenuity can device, and which are resorted to by one individual to secure an advantage over another by false suggestions or by suppression of truth and includes all surprise, trick, cunning, dissembling, and any unfair way by which another is cheated.23 Fraudulent, on the other hand, connotes intentionally wrongful, dishonest, or unfair.24

In the case at bar, the Republic has, to us, sufficiently discharged the burden of demonstrating the commission of fraud committed by respondents Lims as a condition sine qua non for the issuance of a writ of preliminary attachment. The main supporting proving document is the Republic’s Exhibit "B" which the Sandiganbayan unqualifiedly admitted in evidence. And the fraud or fraudulent scheme principally came in the form of Lim, Sr. holding and/or operating logging concessions which far exceeded the allowable area prescribed under the 1973 Constitution.

Indeed, the Lims’ availment and enjoyment of logging concessions grossly in excess of constitutional limits amount to a voluntary execution of a wrongful act, if not a serious breach of legal duty. By their acts, the Lims veritably defrauded and cheated the Filipino people––the ultimate beneficiaries of the country’s natural resources.

Denial of Demurrer to Evidence Indicativeof the Commission of Fraudulent Acts

The evidence that clearly supports the issuance of a writ of preliminary attachment sought by Republic is already on record before the Sandiganbayan. As a matter of fact, the anti-graft court already ruled and considered that the evidence so far presented by the Republic had been sufficient to support a finding that respondents had committed illegal and fraudulent acts against the Republic and the Filipino people. This was the tenor of the Sandiganbayan’s resolution denying the respondents’ demurrer to evidence.

In the case at bar, when the Sandiganbayan denied respondents’ demurrer to evidence, it in effect ruled that the evidence presented by the prosecution is, absent a countervailing evidence, prima facie sufficient to support an adverse verdict against them for amassing illegal wealth.

Sandiganbayan Did Not ConsiderEvidence in Denying Attachment

Given the foregoing pronouncement from the Sandiganbayan, the Court is completely at a loss to understand the graft court’s denial of the Republic’s plea for the ancillary remedy of preliminary attachment. The wrongful act––the fraud perpetuated by Lim Sr. and/or his corporations on the Republic––is written over or easily deducible from the adverted Maceda decision and Exhibit "E." While fraud cannot be presumed, it need not be proved by direct evidence and it can well be inferred from attendant circumstances.38 Withal, we cannot but agree with the Republic’s contention that the Sandiganbayan’s denial of its motion for a writ of preliminary attachment constitutes grave and patent abuse of discretion amounting to lack or excess of jurisdiction.

A scrutiny of the above-quoted July 17, 2003 Resolution readily shows that the Sandiganbayan indeed considered the evidence presented and offered by the Republic, specifically Exhibits "B" and "E" which convincingly show the finding that respondents’ acts were tainted with fraud in the acquisition of the logging concessions due to their close association with the Marcoses.

It is incongruous, therefore, for the Sandiganbayan to deny the writ of preliminary attachment when the pieces of evidence on record which it used and based its findings and conclusions in denying the demurrer to evidence were the same ones which demonstrate the propriety of the writ of preliminary attachment. Clearly, the Republic has complied with and satisfied the legal obligation to show the specific acts constitutive of the alleged fraud committed by respondents. The denial of the prayed writ, thus, evidently constitutes grave abuse of discretion on the part of Sandiganbayan. After all, "attachment is a mere provisional remedy to ensure the safety and preservation of the thing attached until the plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction."39 Indeed, the properties of respondents sought to be subjected to the ancillary writ of preliminary attachment are not only in danger of being lost but should be

13

placed under custodia legis to answer for any liabilities that may be adjudged against them in the instant case.

WHEREFORE, the Sandiganbayan Resolutions dated March 28, 2003 and June 18, 2004 are hereby REVERSEDand SET ASIDE. 

G.R. No. 170674               August 24, 2009

FOUNDATION SPECIALISTS, INC., Petitioner, vs.

BETONVAL READY CONCRETE, INC. and STRONGHOLD INSURANCE CO., INC., Respondents.

FACTS

On separate dates, petitioner Foundation Specialists, Inc. (FSI) and respondent Betonval Ready Concrete, Inc. (Betonval) executed three contracts1 for the delivery of ready mixed concrete by Betonval to FSI. The basic stipulations were: (a) for FSI to supply the cement to be made into ready mixed concrete; (b) for FSI to pay Betonval within seven days after presentation of the invoices plus 30% interest p.a. in case of overdue payments and (c) a credit limit of P600,000 for FSI.

Betonval delivered the ready mixed concrete pursuant to the contracts but FSI failed to pay its outstanding balances starting January 1992. As an accommodation to FSI, Betonval extended the seven day credit period to 45 days.2

On September 1, 1992, Betonval demanded from FSI its balance of P2,349,460.3 Betonval informed FSI that further defaults would leave it no other choice but to impose the stipulated interest for late payments and take appropriate legal action to protect its interest.4 While maintaining that it was still verifying the correctness of Betonval’s claims, FSI sent Betonval a proposed schedule of payments devised with a liability for late payments fixed at 24% p.a.5

Thereafter, FSI paid Betonval according to the terms of its proposed schedule of payments. It was able to reduce its debt to P1,114,203.34 as of July 1993, inclusive of the 24% annual interest computed from the due date of the invoices.6 Nevertheless, it failed to fully settle its obligation.

Betonval thereafter filed an action for sum of money and damages in the Regional Trial Court (RTC).7 It also applied for the issuance of a writ of preliminary attachment alleging that FSI employed fraud when it contracted with Betonval and that it was disposing of its assets in fraud of its creditors.

FSI denied Betonval’s allegations and moved for the dismissal of the complaint. The amount claimed was allegedly not due and demandable because they were still reconciling their respective records. FSI also filed a counterclaim and prayed for actual damages, alleging that its other projects were delayed when Betonval attached its properties and garnished its bank accounts. It likewise prayed for moral and exemplary damages and attorney’s fees.

The RTC issued a writ of preliminary attachment and approved the P500,000 bond of respondent Stronghold Insurance Co., Inc. (Stronghold). FSI filed a counterbond of P500,000 thereby discharging the writ of preliminary attachment, except with respect to FSI’s excavator, crawler crane and Isuzu pick-up truck, which remained incustodia legis.8 An additional counterbond of P350,000 lifted the garnishment of FSI’s receivables from the Department of Public Works and Highways.

On January 29, 1999, the RTC ruled for Betonval.9 However, it awarded P200,000 compensatory damages to FSI on the ground that the attachment of its properties was improper.10

FSI and Stronghold separately filed motions for reconsideration while Betonval filed a motion for clarification and reconsideration. In an order dated May 19, 1999, the RTC denied the motions for reconsideration of Betonval and Stronghold. However, the January 29, 1999 decision was modified in that the award of actual or compensatory damages to FSI was increased to P1.5 million.11

All parties appealed to the Court of Appeals (CA). However, only the respective appeals of Betonval and Stronghold were given due course

14

FSI’s motion for reconsideration was denied.14

ISSUES:

In this petition for review on certiorari,15 FSI prays for the following:

(a) decrease the rate of imposable interest on the P1,114,203.34 award to Betonval, from 12% to 6% p.a.from date of judicial demand or filing of the complaint until the full amount is paid;

(b) deduct [from the award to Betonval] the cost or value of unused cement based on [its] invoice stating 1,307.45 bags computed at the prevailing price;

(c) award actual and compensatory damages at P3,242,771.29;

(d) hold Betonval and Stronghold jointly and severally liable to pay such actual and compensatory damages;

(e) hold Betonval liable for whatever Stronghold may be held liable under the attachment bond and

(f) affirm in toto the rest of the order.16

The petition has no merit..

FSI’s contention is untenable. It neither alleged any discrepancies in nor objected to the accounts within a reasonable time.18 As held by the RTC, FSI was deemed to have admitted the truth and correctness of the entries in the invoices since:

[N]o attempts were made to reconcile [FSI’s] own record with [Betonval] until after the filing of the complaint, inspite of claims in [FSI’s] Answer about its significance, and despite having had plenty of opportunity to do so from the time of receipt of the invoices or demand letters from [Betonval]. [FSI’s] excuse that it was impractical to reconcile accounts during the middle of transactions is defeated by the absence of any showing on record that a formal request to reconcile was issued to [Betonval] despite the completion of deliveries or [FSI’s] discovery of the alleged discrepancies, as well as its failure to initiate any meeting with [Betonval], including one which the parties were directed to hold for that purpose by the Court.  Since [FSI] failed to prove the correctness of its entries against those in [Betonval’s] invoices, its record is self-serving. xxx (emphasis supplied)

In view of FSI’s failure to dispute this finding of the RTC because of its failure to perfect its appeal, FSI is now estopped from raising this issue. There is no cogent reason to depart from the RTC’s finding.

Undaunted, FSI retracts. Instead of claiming the balance of the unused cement as reflected in its records, it now bases its claim on the invoices of Betonval. 

FSI contends that this declaration has become final and executory and must be implemented in the name of substantial justice. Betonval, however, avers that that the issue on the alleged unused cement was never raised as an affirmative defense in its answer or in its motion for reconsideration

to the January 29, 1999 decision. Neither was this issue raised in the CA. Hence, FSI must not be allowed to broach it for the first time in this Court. Betonval is correct.

In this case, there was no award in favor of FSI of the value of the balance of the unused cement as reflected in the invoices.

The Applicable InterestRate is 24% p.a.

There is no dispute that FSI and Betonval stipulated the payment of a 30% p.a. interest in case of overdue payments. There is likewise no doubt that FSI failed to pay Betonval on time.

FSI acknowledged its indebtedness to Betonval in the principal amount of P1,114,203.34. However, FSI opposed the CA’s imposition of a 24% p.a. interest on the award to Betonval allegedly because: (a) the grant to FSI of a 45-day credit extension novated the contracts insofar as FSI’s obligation to pay any interest was concerned; (b) Betonval waived its right to enforce the payment of the 30% p.a. interest when it granted FSI a new credit term and (c) Betonval’s prayer for a 24% p.a. interest instead of 30%, resulted in a situation where, in effect, no interest rate was supposedly stipulated, thus necessitating the imposition only of the legal interest rate of 6% p.a. from judicial demand.

FSI’s contentions have no merit.

Novation is one of the modes of extinguishing an obligation.21 It is done by the substitution or change of the obligation by a subsequent one which extinguishes the first, either by changing the object or principal conditions, or by substituting the person of the debtor, or by subrogating a third person in the rights of the creditor.

. Extinctive novation is never presumed; there must be an express intention to novate; in cases where it is implied, the acts of the parties must clearly demonstrate their intent to dissolve the old obligation as the moving consideration for the emergence of the new one.

The grant by Betonval to FSI of a 45-day credit extension did not novate the contracts so as to extinguish the latter. There was no incompatibility between them. There was no intention by the parties to supersede the obligations under the contracts. In fact, the intention of the 45-day credit extension was precisely to revive the old obligation after the original period expired with the obligation unfulfilled. The grant of a 45-day credit period merely modified the contracts by extending the period within which FSI was allowed to settle its obligation. Since the contracts remained the source of FSI’s obligation to Betonval, the stipulation to pay 30% p.a. interest likewise remained.

Obviously, the extension given to FSI was triggered by its own request, to help it through its financial difficulties. FSI would now want to take advantage of that generous accommodation by claiming that its liability for interest was extinguished by its creditor’s benevolence.

Neither did Betonval waive the stipulated interest rate of 30% p.a., as FSI erroneously claims. A waiver is a voluntary and intentional relinquishment or abandonment of a known legal right or privilege.25 A waiver must be couched in clear and unequivocal terms which leave no doubt as to the intention of a party to give up a right or benefit which legally pertains to him.26 FSI did not adduce proof that a valid waiver was made by Betonval. FSI’s claim is therefore baseless.

Parties are bound by the express stipulations of their contract as well as by what is required by the nature of the obligation in keeping with good faith, usage and law.27 Corollarily, if parties to a contract expressly provide for a particular rate of interest, then that interest shall be applied.28

15

It is clear that Betonval and FSI agreed on the payment of interest. It is beyond comprehension how Betonval’s prayer for a 24% interest on FSI’s balance could have resulted in a situation as if no interest rate had been agreed upon. Besides, FSI’s proposed schedule of payments (September 3, 1992),29 referring to Betonval’s statement of account,30 contained computations of FSI’s arrears and billings with 24% p.a. interest.

There can be no other conclusion but that Betonval had reduced the imposable interest rate from 30% to 24% p.a. and this reduced interest rate was accepted, albeit impliedly, by FSI when it proposed a new schedule of payments and, in fact, actually made payments to Betonval with 24% p.a. interest. By its own actions, therefore, FSI is estopped from questioning the imposable rate of interest.

We likewise hold that the imposition of a 12% p.a. interest on the award to Betonval (in addition to the 24% p.a. interest) in the assailed judgment is proper.

There was Improper Attachment of FSI’s Properties

Betonval’s application for the issuance of the writ of preliminary attachment was based on Section 1(d) and (e), Rule 57 of the Rules of Court.32  Moreover, we agree with the RTC and the CA that FSI’s properties were improperly attached. Betonval was not able to sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from FSI’s mere nonpayment of the debt or failure to comply with its obligation. In Ng Wee v. Tankiansee,33 we held that the applicant must be able to demonstrate that the debtor intended to defraud the creditor. Furthermore:

The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the circumstances attendant in each case.34

In other words, mere failure to pay its debt is, of and by itself, not enough to justify an attachment of the debtor’s properties. A fraudulent intention not to pay (or not to comply with the obligation) must be present.

G.R. No. L-35990 June 17, 1981

ABOITIZ & COMPANY, INC., HONORABLE VICENTE N. CUSI JR., Judge of the Court of First Instance of Davao, and the PROVINCIAL SHERIFF OF DAVAO DEL SUR, petitioners, vs.COTABATO BUS COMPANY, INC., respondent.

FACTS 

The instant petition stemmed from Civil Case No. 7329 of the Court of First Instance of Davao (Branch 1) in which a writ of preliminary attachment was issued ex-parte by the Court on the strength of an affidavit of merit attached to the verified complaint filed by petitioner herein, Aboitiz & Co., Inc., on November 2, 1971, as plaintiff in said case, for the collection of money in the sum of P

155,739.41, which defendant therein, the respondent in the instant case, Cotabato Bus Co., owed the said petitioner.

By virtue of the writ of preliminary attachment, the provincial sheriff attached personal properties of the defendant bus company consisting of some buses, machinery and equipment. The ground for the issuance of the writ is, as alleged in the complaint and the affidavit of merit executed by the Assistant Manager of petitioner, that the defendant "has removed or disposed of its properties or assets, or is about to do so, with intent to defraud its creditors."

Respondent company filed in the lower court an "Urgent Motion to Dissolve or Quash Writ of Attachment" to which was attached an affidavit executed by its Assistant Manager, Baldovino Lagbao, alleging among other things that "the Cotabato Bus Company has not been selling or disposing of its properties, neither does it intend to do so, much less to defraud its creditors; that also the Cotabato Bus Company, Inc. has been acquiring and buying more assets". An opposition and a supplemental opposition were filed to the urgent motion. The lower court denied the motion A motion for reconsideration was filed by the defendant bus company but the lower court denied it. Hence, the defendant went to the Court of Appeals on a petition for certiorari alleging grave abuse of discretion on the part of herein respondent Judge, Hon. Vicente R. Cusi Jr. On giving due course to the petition, the Court of Appeals issued a restraining order restraining the trial court from enforcing further the writ of attachment and from proceeding with the hearing of Civil Case No. 7329. In its decision promulgated on October 3, 1971, the Court of Appeals declared "null and void the order/writ of attachment dated November 3, 1971 and the orders of December 2, 1971, as well as that of December 11, 1971, ordered the release of the attached properties, and made the restraining order originally issued permanent.

ISSUES:

The questions raised are mainly, if not solely, factual revolving on whether respondent bus company has in fact removed its properties, or is about to do so, in fraud of its creditors.

whether the writ of attachment was properly issued upon a showing that defendant is on the verge of insolvency and may no longer satisfy its just debts without issuing the writ.

HELD

Going forthwith to this question of whether insolvency, which petitioners in effect claims to have been proven by the evidence, particularly by company's bank account which has been reduced to nil, may be a ground for the issuance of a writ of attachment, the respondent Court of Appeals correctly took its position in the negative on the strength of the explicit ruling of this Court in Max Chamorro & Co. vs. Philippine Ready Mix Concrete Company, Inc. and Hon. Manuel P. Barcelona. 2

It is an undisputed fact that, as averred by petitioner itself, the several buses attached are nearly junks. However, upon permission by the sheriff, five of them were repaired, but they were substituted with five buses which were also in the same condition as the five repaired ones before the repair. This cannot be the removal intended as ground for the issuance of a writ of attachment under section 1 (e), Rule 57, of the Rules of Court. The repair of the five buses was evidently motivated by a desire to serve the interest of the riding public, clearly not to defraud its creditors, as there is no showing that they were not put on the run after their repairs, as was the obvious purpose of their substitution to be placed in running condition.

Moreover, as the buses were mortgaged to the DBP, their removal or disposal as alleged by petitioner to provide the basis for its prayer for the issuance of a writ of attachment should be very remote, if not nil. If removal of the buses had in fact been committed, which seems to exist only in

16

petitioner's apprehensive imagination, the DBP should not have failed to take proper court action, both civil and criminal, which apparently has not been done.

In the main, therefore, We find that the respondent Court of Appeals has not committed any reversible error, much less grave abuse of discretion, except that the restraining order issued by it should not have included restraining the trial court from hearing the case, altogether. Accordingly, the instant petition is hereby denied,

G.R. No. L-67715 July 11, 1986

WILLIAM ALAIN MIAILHE and THE HON. FELIX V. BARBERS, in his capacity as Presiding Judge, RTC of Manila, Branch XXXIII, petitioners-appellants, vs.ELAINE M. DE LENCQUESAING and HERVE DE LENCQUESAING, respondents-appellees.

FACTS:

Petitioner William Alain Miailhe, his sisters Monique Miailhe Sichere, Elaine Miailhe de Lencquesaing and their mother, Madame Victoria D. Miailhe are co-owners of several registered real properties located in Metro Manila. By common consent of the said co-owners, petitioner William Alain has been administering said properties since 1960. As Madame Victoria D. Miailhe, her daughter Monique and son William Alain (herein petitioner) failed to secure an out-of court partition thereof due to the unwillingness or opposition of respondent Elaine, they filed in the Court of First Instance of Manila (now Regional Trial Court) an action for Partition,

. Among the issues presented in the partition case was the matter of petitioner's account as administrator of the properties sought to be partitioned. But while the said administrator's account was still being examined, respondent Elaine filed a motion praying that the sum of P203,167.36 which allegedly appeared as a cash balance in her favor as of December 31, 1982, be ordered delivered to her by petitioner William Alain. Against the opposition of petitioner and the other co-owners, Judge Pedro Ramirez granted the motion in his Order dated December 19, 1983 which order is now the subject of a certiorari

Meanwhile however, and more specifically on February 28, 1983, respondent Elaine filed a criminal complaint for estafa against petitioner William Alain, with the office of the City Fiscal of Manila, alleging in her supporting affidavit that on the face of the very account submitted by him as Administrator, he had misappropriated considerable amounts, which should have been turned over to her as her share in the net rentals of the common properties.

On April 12, 1983, petitioner Alain filed a verified complaint against respondent Elaine, for Damages in the amount of P2,000,000.00 and attorney's fees of P250,000.00 allegedly sustained by him by reason of the filing by respondent (then defendant) of a criminal complaint for estafa, solely for the purpose of embarrassing petitioner (then plaintiff) and besmirching his honor and reputation as a private person and as an Honorary Consul of the Republic of the Philippine's in the City of Bordeaux, France. , petitioner prayed for the issuance of a writ of preliminary attachment of the properties of respondent consisting of 1/6 undivided interests in certain real properties in the City of Manila on the ground that "respondent-defendant is a non-resident of the Philippines", pursuant to paragraph (f), Section 1, Rule 57, in relation to Section 17, Rule 14 of the Revised Rules of Court.

On April 14, 1983, Judge Barbers granted petitioner's application for preliminary attachment upon a bond to be filed by petitioner in the amount of P2,000,000.00. Petitioner filed said bond and upon its approval, the Writ of Preliminary Attachment was issued On May 17, 1983, respondent thru counsel filed a motion to lift or dissolve the writ of attachment on the ground that the complaint did no

t comply with the provisions of Sec. 3 of Rule 57, Rules of Court and that petitioner's claim was for unliquidated damages. The motion to lift attachment having been denied, respondent filed with the Intermediate Appellate Court a special action for certiorari under AC-G.R. SP No. 01914 alleging that Judge Barbers had acted with grave abuse of discretion in the premises. On April 4, 1984, the IAC issued its now assailed Decision declaring null and void the aforesaid Writ of preliminary attachment. Petitioner filed a motion for the reconsideration of the Decision but it was denied

ISSUES

We find the petition meritless. The most important issue raised by petitioner is whether or not the Intermediate Appellate Court erred in construing Section 1 par. (f) Rule 57 of the Rules of Court to be applicable only in case the claim of the plaintiff is for liquidated damages (and therefore not where he seeks to recover unliquidated damages arising from a crime or tort).

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HELD:

We agree. Section 1 of Rule 57 of the Rules of Court provides —

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

(a) In an action for the recovery of money or damages on a cause of action arising fromcontract, express or implied, against a party who is about to depart from the Philippines with intent to defraud his creditors;

(b) In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty;

(c) In an action to recover the possession of personal property unjustly detained, when the property, or any part thereof, has been concealed. removed, or disposed of to prevent its being found or taken by the applicant or an officer;

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

(e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors;

(f) In an action against a party who resides out of the Philippines, or on whom summons may be served by publication. (emphasis supplied)

While it is true that from the aforequoted provision attachment may issue "in an action against a party who resides out of the Philippines, " irrespective of the nature of the action or suit, and while it is also true that in the case ofCu Unjieng, et al vs. Albert, 58 Phil. 495, it was held that "each of the six grounds treated ante is independent of the others," still it is imperative that the amount sought be liquidated.

In view of the foregoing, the Decision appealed from is hereby AFFIRMED.

G.R. No. 75466 December 19, 1988

ANTONIO TOLEDO, petitioner, vs.HON. JOSE P. BURGOS, Presiding Judge of Branch XXV of the Regional Trial Court of Cebu, Region VII, and PERCY CASTRO, respondents.

FACTS:

A complaint for Delivery of Personal Property was commenced by petitioner on 14 June 1985 against respondent Castro but was subsequently denied. In connection therewith, a writ of Replevin was applied for. Petitioner's subsequent reconsideration having been likewise denied, he went to the then Intermediate Appellate Court on certiorari. The latter Court denied the same on 30 April 1986. *

Subsequently, on 14 May 1986, petitioner applied for the issuance of a writ of preliminary attachment with the Court below, and which was requested by the former's counsel for it to be considered in the morning of 6 June 1986 "With or without the attendance of counsel and without oral arguments" (p. 28, Rollo). In said application, it was alleged that respondent Castro, among others, "has removed and has deposed (sic) or is about to depose (sic) of her property with intent to defraud the herein plaintiff" (p. 24, Rollo). To support such allegation, an affidavit of one Rudolfo Inot (p. 29, Rollo) was attached to the application to prove that respondent Castro and her spouse insistently offered to sell to him two (2) motor vehicles.

On the hearing of 6 June 1986, neither petitioner nor his counsel appeared.. On the same date, respondent judge denied the application.

On 17 June 1986, petitioner moved to reconsider the above denial. Once more, counsel for petitioner requested that the consideration of said motion be scheduled in the morning session of 23 June 1986 "without need of argument or appearance of counsel" (p. 35, Rollo). But like before, petitioner and his counsel failed to appearThe respondent judge then issued another order dated 23 June 1986 denying petitioner's motion. Hence, this present petition was filed on 12 August 1986.

The sole issue in this case concerns the propriety of the respondent judge's denial of petitioner's application for a writ of attachment.

We disagree With the petitioner's accusations. Contrary to his claims, the respondent judge acted well within his powers and in the highest regard for justice. Respondent judge acted correctly in denying petitioner's "Application for Issuance of a Writ of Preliminary attachment". There was no need for him to, as against petitioner's claim, set a hearing on the said application. This is because the issuance of a writ of preliminary attachment may be made by the Court ex parte.

And even if said notice is indeed necessary, petitioner can only blame himself for failing to attend the scheduled hearing of 6 June 1986. This is because it was he, through his counsel, who requested that the application be set for consideration and approval by the Court on the said date. It was, therefore, his duty to be present in Court on that date. Inasmuch as a writ of preliminary attachment may be issued without hearing, the judge before whom the application is made has full discretion in considering the supporting evidence proffered by the applicant. And in dealing with the affidavit of Mr. Inot, the respondent judge was empowered to decide whether or not such should be given credit.

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.

18

FACTS:

The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario Torres (Mario) each own adjacent 20,000 square meters track of land

Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners’ mother, Agripina Aledia, if she wanted to sell their lands. After consultation with her daughters, daughter-in-law, and grandchildren, Agripina agreed to sell the properties. Petitioners, thus, authorized Nicanor, through a Special Power of Attorney, to negotiate for the sale of the properties.6

Sometime in 1999, Nicanor offered to sell the properties to Solar Resources, Inc. (Solar). Solar allegedly agreed to purchase the three parcels of land, together with the 10,000-square-meter property owned by a certain Rustica Aledia, for P35,000,000.00. Petitioners alleged that Nicanor was supposed to remit to them the total amount ofP28,000,000.00 or P9,333,333.00 each to Sofia, Fructosa, and the heirs of Mario.

Petitioners claimed that Solar has already paid the entire purchase price of P35,000,000.00 to Nicanor in Thirty-Two (32) post-dated checks which the latter encashed/deposited on their respective due dates. Petitioners added that they also learned that during the period from January 2000 to April 2002, Nicanor allegedly acquired a house and lot at Vista Grande BF Resort Village, Las Piñas City and a car, which he registered in the names of his unemployed children, Nikki Normel Satsatin and Nikki Norlin Satsatin. However, notwithstanding the receipt of the entire payment for the subject property, Nicanor only remitted the total amount of P9,000,000.00, leaving an unremitted balance of P19,000,000.00. Despite repeated verbal and written demands, Nicanor failed to remit to them the balance of P19,000,000.00.

Consequently, on October 25, 2002, petitioners filed before the regional trial court (RTC) a Complaint7 for sum of money and damages, against Nicanor, Ermilinda Satsatin, Nikki Normel Satsatin, and Nikki Norlin Satsatin.

On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ of Attachment,8 alleging among other things: that respondents are about to depart the Philippines; that they have properties, real and personal in Metro Manila and in the nearby provinces; that the amount due them is P19,000,000.00 above all other claims; that there is no other sufficient security for the claim sought to be enforced; and that they are willing to post a bond fixed by the court to answer for all costs which may be adjudged to the respondents and all damages which respondents may sustain by reason of the attachment prayed for, if it shall be finally adjudged that petitioners are not entitled thereto.

On October 30, 2002, the trial court issued an Order9 directing the petitioners to post a bond in the amount ofP7,000,000.00 before the court issues the writ of attachment,

On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff,11 informing the court that they have already filed an attachment bond. They also prayed that a sheriff be deputized to serve the writ of attachment that would be issued by the court.

In the Order12 dated November 15, 2002, the RTC granted the above motion and deputized the sheriff, together with police security assistance, to serve the writ of attachment.

Thereafter, the RTC issued a Writ of Attachment13 dated November 15, 2002, directing the sheriff to attach the estate, real or personal, of the respondents, the decretal portion of which reads:

On November 19, 2002, a copy of the writ of attachment was served upon the respondents. On the same date, the sheriff levied the real and personal properties of the respondent, including household appliances, cars, and a parcel of land located at Las Piñas, Manila.15

On November 21, 2002, summons, together with a copy of the complaint, was served upon the respondents.16

On November 29, 2002, respondents filed their Answer.17

On the same day respondents filed their answer, they also filed a Motion to Discharge Writ of Attachment18anchored on the following grounds: the bond was issued before the issuance of the writ of attachment; the writ of attachment was issued before the summons was received by the respondents; the sheriff did not serve copies of the application for attachment, order of attachment, plaintiffs’ affidavit, and attachment bond, to the respondents; the sheriff did not submit a sheriff’s return in violation of the Rules; and the grounds cited for the issuance of the writ are baseless and devoid of merit. In the alternative, respondents offered to post a counter-bond for the lifting of the writ of attachment.19

On March 11, 2003, after the parties filed their respective pleadings, the RTC issued an Order20 denying the motion, but at the same time, directing the respondents to file a counter-bond,

Thereafter, respondents filed a motion for reconsideration and/or motion for clarification of the above order. On April 3, 2003, the RTC issued another Order22 

On December 15, 2003, respondents filed an Urgent Motion to Lift/Set Aside Order Dated March [11], 2003,23which the RTC denied in an Order24 of even date,

Respondents filed an Urgent Motion for Reconsideration,25 but it was denied in the Order26 dated March 3, 2004.

Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and Prohibition with Preliminary Injunction and Temporary Restraining Order27 under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 83595, anchored on the following grounds:

(1) public respondents committed grave abuse of discretion amounting to lack of or in excess of jurisdiction in failing to notice that the lower court has no jurisdiction over the person and subject matter of the complaint when the subject Writ of Attachment was issued;

(2) public respondents committed grave abuse of discretion amounting to lack of or in excess of jurisdiction in granting the issuance of the Writ of Attachment despite non-compliance with the formal requisites for the issuance of the bond and the Writ of Attachment.28

CA rendered the assailed Decision in favor of the respondents,

Petitioners filed a Motion for Reconsideration,31 but it was denied in the Resolution32 

ISSUES:

Hence, this petition assigning the following errors:

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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.

HELD:

The petition is bereft of merit.

A writ of preliminary attachment is defined as a provisional remedy issued upon order of the court where an action is pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by the sheriff as security for the satisfaction of whatever judgment that might be secured in the said action by the attaching creditor against the defendant.36

In the case at bar, the CA correctly found that there was grave abuse of discretion amounting to lack of or in excess of jurisdiction on the part of the trial court in approving the bond posted by petitioners despite the fact that not all the requisites for its approval were complied with. In accepting a surety bond, it is necessary that all the requisites for its approval are met; otherwise, the bond should be rejected.37

Every bond should be accompanied by a clearance from the Supreme Court showing that the company concerned is qualified to transact business which is valid only for thirty (30) days from the date of its issuance.38 However, it is apparent that the Certification39 issued by the Office of the Court Administrator (OCA) at the time the bond was issued would clearly show that the bonds offered by Western Guaranty Corporation may be accepted only in the RTCs of the cities of Makati, Pasay, and Pasig. Therefore, the surety bond issued by the bonding company should not have been accepted by the RTC of Dasmariñas, Branch 90, since the certification secured by the bonding company from the OCA at the time of the issuance of the bond certified that it may only be accepted in the above-mentioned cities. Thus, the trial court acted with grave abuse of discretion amounting to lack of or in excess of jurisdiction when it issued the writ of attachment founded on the said bond.

Moreover, in provisional remedies, particularly that of preliminary attachment, the distinction between the issuance and the implementation of the writ of attachment is of utmost importance to the validity of the writ. The distinction is indispensably necessary to determine when jurisdiction over the person of the defendant should be acquired in order to validly implement the writ of attachment upon his person.

A party to a suit may, at any time after filing the complaint, avail of the provisional remedies under the Rules of Court. Specifically, Rule 57 on preliminary attachment speaks of the grant of the remedy "at the commencement of the action or at any time before entry of judgment."40 This phrase refers to the date of the filing of the complaint, which is the moment that marks "the commencement of the action." The reference plainly is to a time before summons is served on the defendant, or even before summons issues.41

Thus, it is indispensable not only for the acquisition of jurisdiction over the person of the defendant, but also upon consideration of fairness, to apprise the defendant of the complaint against him and the issuance of a writ of preliminary attachment and the grounds therefor that prior or contemporaneously to the serving of the writ of attachment, service of summons, together with a copy of the complaint, the application for attachment, the applicant’s affidavit and bond, and the order must be served upon him.

In the instant case, assuming arguendo that the trial court validly issued the writ of attachment on November 15, 2002, which was implemented on November 19, 2002, it is to be noted that the summons, together with a copy of the complaint, was served only on November 21, 2002.

At the time the trial court issued the writ of attachment on November 15, 2002, it can validly to do so since the motion for its issuance can be filed "at the commencement of the action or at any time before entry of judgment." However, at the time the writ was implemented, the trial court has not acquired jurisdiction over the persons of the respondent since no summons was yet served upon them. The proper officer should have previously or simultaneously with the implementation of the writ of attachment, served a copy of the summons upon the respondents in order for the trial court to have acquired jurisdiction upon them and for the writ to have binding effect. Consequently, even if the writ of attachment was validly issued, it was improperly or irregularly enforced and, therefore, cannot bind and affect the respondents.

Moreover, although there is truth in the petitioners’ contention that an attachment may not be dissolved by a showing of its irregular or improper issuance if it is upon a ground which is at the same time the applicant’s cause of action in the main case, since an anomalous situation would result if the issues of the main case would be ventilated and resolved in a mere hearing of a motion. However, the same is not applicable in the case bar. It is clear from the respondents’ pleadings that the grounds on which they base the lifting of the writ of attachment are the irregularities in its issuance and in the service of the writ; not petitioners’ cause of action.

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.

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.

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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.

FACTS:

filing by petitioner, on April 8, 1991, of a Complaint against private respondent Bernardino Villanueva, private respondent Filipinas Textile Mills and one Sochi Villanueva (now deceased) before the Regional Trial Court of Manila. In the said Complaint, petitioner sought the payment of P2,244,926.30 representing the proceeds or value of various textile goods, the purchase of which was covered by irrevocable letters of credit and trust receipts executed by petitioner with private respondent Filipinas Textile Mills as obligor; which, in turn, were covered by surety agreements executed by private respondent Bernardino Villanueva and Sochi Villanueva. In their Answer, private respondents admitted the existence of the surety agreements and trust receipts but countered that they had already made payments on the amount demanded and that the interest and other charges imposed by petitioner were onerous.

On May 31, 1993, petitioner filed a Motion for Attachment,4 contending that violation of the trust receipts law constitutes estafa, thus providing ground for the issuance of a writ of preliminary attachment; specifically under paragraphs "b" and "d," Section 1, Rule 57 of the Revised Rules of Court. Petitioner further claimed that attachment was necessary since private respondents were disposing of their properties to its detriment as a creditor. Finally, petitioner offered to post a bond for the issuance of such writ of attachment.

The Motion was duly opposed by private respondents and, after the filing of a Reply thereto by petitioner, the lower court issued its August 11, 1993 Order for the issuance of a writ of preliminary attachment, conditioned upon the filing of an attachment bond. Following the denial of the Motion for Reconsideration filed by private respondent Filipinas Textile Mills, both private respondents filed separate petitions for certiorari before respondent Court assailing the order granting the writ of preliminary attachment.

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.

ISSUE:

Hence, the instant consolidated5 petitions charging that respondent Court of Appeals erred in –

"1. Holding that there was no sufficient basis for the issuance of the writ of preliminary attachment in spite of the allegations of fraud, embezzlement and misappropriation of the proceeds or goods entrusted to the private respondents;

2. Disregarding the fact that the failure of FTMI and Villanueva to remit the proceeds or return the goods entrusted, in violation of private respondents' fiduciary duty as entrustee, constitute embezzlement or misappropriation which is a valid ground for the issuance of a writ of preliminary attachment."6

We find no merit in the instant petitions.

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.

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Section 1 (b) and (d), Rule 57 of the then controlling Revised Rules of Court, provides, to wit –

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

(b) In an action for money or property embezzled or fraudulently misapplied or converted to his us by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty;

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

While the Motion refers to the transaction complained of as involving trust receipts, the violation of the terms of which is qualified by law as constituting estafa, it does not follow that a writ of attachment can and should automatically issue. Petitioner cannot merely cite Section 1(b) and (d), Rule 57, of the Revised Rules of Court, as mere reproduction of the rules, without more, cannot serve as good ground for issuing a writ of attachment. An order of attachment cannot be issued on a general averment, such as one ceremoniously quoting from a pertinent rule.7

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.

We find an absence of factual allegations as to how the fraud alleged by petitioner was committed. As correctly held by respondent Court of Appeals, such fraudulent intent not to honor the admitted obligation cannot be inferred from the debtor's inability to pay or to comply with the obligations. 9 On the other hand, as stressed, above, fraud may be gleaned from a preconceived plan or intention not to pay. This does not appear to be so in the case at bar. In fact, it is alleged by private respondents that out of the total P419,613.96 covered by the subject trust receipts, the amount of P400,000.00 had already been paid, leaving only P19,613.96 as balance. Hence, regardless of the arguments regarding penalty and interest, it can hardly be said that private respondents harbored a preconceived plan or intention not to pay petitioner.

The Court of Appeals was correct, therefore, in its finding in CA-G.R. SP No. 32863 that neither petitioner's Motion or its supporting Affidavit provides sufficient basis for the issuance of the writ of attachment prayed for.

the lower court should have conducted a hearing and required private petitioner to substantiate its allegations of fraud, embezzlement and misappropriation.

As was frowned upon in D.P. Lub Oil Marketing Center, Inc.,11 not only was petitioner's application defective for having merely given general averments; what is worse, there was no hearing to afford private respondents an opportunity to ventilate their side, in accordance with due process, in order to determine the truthfulness of the allegations of petitioner. As already mentioned, private respondents claimed that substantial payments were made on the proceeds of the trust receipts sued upon. They also refuted the allegations of fraud, embezzlement and misappropriation by

averring that private respondent Filipinas Textile Mills could not have done these as it had ceased its operations starting in June of 1984 due to workers' strike. These are matters which should have been addressed in a preliminary hearing to guide the lower court to a judicious exercise of its discretion regarding the attachment prayed for. On this score, respondent Court of Appeals was correct in setting aside the issued writ of preliminary attachment.

WHEREFORE, for the foregoing reasons, the instant petitions are DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 32863 and CA-G.R. SP No. 32762 are AFFIRMED. No pronouncement as to costs.1âwphi1.nêt

SO ORDERED.

G.R. No. 167741               July 12, 2007

REPUBLIC OF THE PHILIPPINES, 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.

FACTS:

On October 29, 2004, the Sandiganbayan issued a resolution ordering the issuance of a writ of preliminary attachment against the properties of the Garcias upon the filing by the Republic of a P1 million attachment bond.5On November 2, 2004, the Republic posted the required attachment bond to avoid any delay in the issuance of the writ as well as to promptly protect and secure its claim.

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

In a resolution dated January 14, 2005, the Sandiganbayan ruled that there was nothing in the Rules of Court that exempted the Republic from filing an attachment bond.

The Sandiganbayan denied the Republic’s motion. Reconsideration was also denied

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

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

Sec. 3. Affidavit and bond required. – An order of attachment shall be granted only when it appears by the affidavit of the applicant, or of some other person who personally knows the facts, that a sufficient cause of action exists, that the case is one of those mentioned in section 1 hereof, that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to applicant, or the value of the property the possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The affidavit, and the bond required by the next succeeding section, must be duly filed with the court before the order issues.

Sec. 4. Condition of applicant’s bond. – The party applying for the order must thereafter give a bond executed to the adverse party in the amount fixed by the court in its order granting the issuance of the writ, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto. (emphasis supplied)

Under these provisions, before a writ of attachment may issue, a bond must first be filed to answer for all costs which may be adjudged to the adverse party and for the damages he may sustain by reason of the attachment. However, this rule does not cover the State. In Tolentino,7 this Court declared that the State as represented by the government is exempt from filing an attachment bond on the theory that it is always solvent.

In other words, the issuance of a writ of preliminary attachment is conditioned on the filing of a bond unless the applicant is the State. Where the State is the applicant, the filing of the attachment bond is excused.9

The attachment bond is contingent on and answerable for all costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment should the court finally rule that the applicant is not entitled to the writ of attachment. Thus, it is a security for the payment of the costs and damages to which the adverse party may be entitled in case there is a subsequent finding that the applicant is not entitled to the writ. The Republic of the Philippines need not give this security as it is presumed to be always solvent and able to meet its obligations.

The Sandiganbayan thus erred when it disregarded the foregoing presumption and instead ruled that the Republic should file an attachment bond. The error was not simply an error of judgment but grave abuse of discretion.

There is grave abuse of discretion when an act is done contrary to the Constitution, the law or jurisprudence.10Here, the Sandiganbayan’s January 14, 2005 resolution was clearly contrary to Tolentino.

Worse, the Sandiganbayan transgressed the Constitution and arrogated upon itself a power that it did not by law possess.

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.

The Constitution mandates that only this Court sitting en banc may modify or reverse a doctrine or principle of law laid down by the Court in a decision rendered en banc or in division. Any court, the Sandiganbayan included, which renders a decision in violation of this constitutional precept exceeds its jurisdiction.

Therefore, the Sandiganbayan could not have validly "reexamined," much less reversed, Tolentino. By doing something it could not validly do, the Sandiganbayan acted ultra vires and committed grave abuse of discretion.

The fact was, the revisions of the Rules of Court on attachment, particularly those pertaining to the filing of an attachment bond, did not quash Tolentino.

Tolentino applied Sec. 247 of Act No. 190 which provided:

Sec. 247. Obligation for damages in case of attachment. – Before the order is made, the party applying for it, or some person on his behalf, must execute to the defendant an obligation in an amount to be fixed by the judge, or justice of the peace, and with sufficient surety  to be approved by him, which obligation shall be for a sum not less than two hundred dollars, and not exceeding the amount claimed by the plaintiff, that the plaintiff will pay all the costs which may be adjudged to the defendant, and all damages which he may sustain by reason of the attachment, if the same shall finally be adjudged to have been wrongful or without sufficient cause. (emphasis supplied)

Contrary to the pronouncement of the Sandiganbayan, Section 247 of Act No. 190 explicitly required the execution of an attachment bond before a writ of preliminary attachment could be issued.

The relevant provisions of Act No. 190 on attachment were later substantially adopted as Sections 313 and 4, Rule 59 of the 1940 Rules of Court.

Clearly, the filing of an attachment bond before the issuance of a writ of preliminary attachment was expressly required under the relevant provisions of both the 1940 and 1964 Rules of Court.

Commentaries on Sections 3 and 4 of the 1964 Rules of Court uniformly cited  Tolentino. They stated that the government is exempt from filing an attachment bond14 and that the State need not file an attachment bond.15

Where the Republic of the Philippines as a party to an action asks for a writ of attachment against the properties of a defendant, it need not furnish a bond. This is so because the State is presumed to be solvent.16

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When plaintiff is the Republic of the Philippines, it need not file a bond when it applies for a preliminary attachment. This is on the premise that the State is solvent.17

And then again, we note the significant fact that Sections 3 and 4, Rule 57 of the 1964 Rules of Court were substantially incorporated as Sections 3 and 4, Rule 57 of the present (1997) Rules of Court.18 There is thus no reason why the Republic should be made to file an attachment bond.

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.

A.M. No. P-11-2986               June 13, 2012 (Formerly A.M. OCA IPI No. 10-3460-P)

SPOUSES RAINER TIU and JENNIFER TIU, Complainants, vs.VIRGILIO F. VILLAR, Sheriff IV, Regional Trial Court, Office of the Clerk of Court, Pasay City, Respondent.

FACTS

Henry Sia (Sia) and Hankook Industrial Sales Co. filed a Complaint for Sum of Money and Damages with prayer for Preliminary Attachment against Classique Concept International Corporation (Classique),First Global Ventures, Inc. (First Global) and herein complainants, spouses

Rainer and Jennifer Tiu (Spouses Tiu), In its Order2 dated February 25, 2010, the RTC granted the prayer for the issuance of a writ of preliminary attachment.

Preliminarily, on March 17, 2010, Sheriff Villar served copies of the summons, complaint and the writ of preliminary attachment to Spouses Tiu

The copies were received by Grace Tan Bauco (Bauco), who introduced herself as the company’s General Manager and Caretaker, after efforts to personally serve them to Spouses Tiu failed. Thereafter, Sheriff Villar attached the personal properties found in said address.

Unperturbed, Spouses Tiu moved to have the case against them dismissed on the ground of improper venue.3

In its Order4 dated July 8, 2010, the RTC granted the motion and ordered the release of the attached properties in favor of Spouses Tiu.

The motion for reconsideration filed by the group of Sia was denied by the RTC in a subsequent order6  return the attached items to Spouses Tiu.

Sheriff Virgilio Villar is directed to immediately return to defendants the seized items.7

Acting on the RTC’s directive, Sheriff Villar submitted his Sheriff’s Report with Urgent Prayer for Issuance of Clarificatory Order.8 He wanted to be clarified on whether or not he should wait for the trial court’s order to attain finality before returning the attached personal properties.

In the meantime, Sia filed his Notice of Appeal and Very Urgent Motion to Stay Enforcement of Order to Return Seized Properties while Spouses Tiu filed an Urgent Ex-Parte Motion to Cite Sheriff Virgilio Villar in Contempt of Court.9

Not contented with the motion, Spouses Tiu also lodged the present administrative complaint10 against Sheriff Villar for his alleged questionable actions regarding the implementation of the writ of attachment against them.

First, Spouses Tui alleged that there was no proper service of summons upon them by Sheriff Villar before the writ of attachment was implemented.. Second, they averred that Sheriff Villar improperly implemented the writ against them without prior coordination with the Sheriff’s Office of Pasig City. Third, they insinuated that Sheriff Villar asked for money for the release of their seized properties. Fourth, they charged that Sheriff Villar maliciously refused to return their attached properties despite the RTC’s clear directive after the case against them was dismissed.

Sheriff Villar denied all the charges against him.

Incidentally, the RTC, in its Order12 dated August 17, 2010, gave due course to the Notice of Appeal and stated that by virtue of Sia’s timely appeal it had no recourse but to elevate the entire records of the case, including the issue of the return of Spouses Tiu’s attached properties, to the Court of Appeals.

the Court resolved to re-docket the administrative complaint into a regular administrative matter and referred the same to the Executive Judge of the Regional Trial Court, Pasay City for investigation, report and recommendation.

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In his Report and Recommendation16  Executive Judge Edwin B. Ramizo (Judge Ramizo) recommended the dismissal of the administrative complaint

After a careful examination of the records, the Court agrees with the recommendation of Judge Ramizo that the complaint against Sheriff Villar be dismissed.

t there was a valid substituted service of summons. As a rule, personal service of summons is preferred as against substituted service. Thus, substituted service can only be resorted to by the process server only if personal service cannot be made promptly. Most importantly, the proof of substituted service of summons must (a) indicate the impossibility of service of summons within a reasonable time; (b) specify the efforts exerted to locate the defendant; and (c) state that the summons was served upon a person of sufficient age and discretion who is residing in the address, or who is in charge of the office or regular place of business, of the defendant. It is likewise required that the pertinent facts proving these circumstances be stated in the proof of service or in the officer’s return.17

Based on the records, Sheriff Villar exhausted efforts to personally serve the summons to Spouses Tiu as indicated in his Sheriff’s Return of Summons18 

In the case at bench, documentary evidence indeed discloses that Sheriff Villar of Pasay City coordinated with the Sheriff of Pasig City, in compliance with Administrative Circular No. 12, before he implemented the writ of preliminary attachment. In the Certification20 dated November 17, 2011, the Clerk of Court of Pasig City attested to the fact that Sheriff Villar formally coordinated with their office in connection with the implementation of the writ of attachment. Attached to said certification is a certified true copy of Sheriff Villar’s request for coordination21dated March 12, 2010, on which the word "received" was stamped by the Office of the Clerk of Court and Ex-officio Sheriff, RTC-Pasig City.

As to Sheriff Villar’s failure to effect the immediate release of the attached properties despite the RTC’s order of release, the Court finds the explanation of the respondent sheriff acceptable enough as not to earn a sanction from the Court.

By law, sheriffs are obligated to maintain possession of the seized properties absent any instruction to the contrary. In this case, the writ of preliminary attachment authorizing the trial court to legally hold the attached items was set aside by the RTC Order dated July 8, 2010 specifically ordering Sheriff Villar to immediately release the seized items to Spouses Tiu. Pertinently, Rule 57, Section 19 of the Rules of Civil Procedure provides:

SEC. 19. Disposition of attached property where judgment is for party against whom attachment was issued.—Ifjudgment be rendered against the attaching party, all the proceeds of sales and money collected or received by the sheriff, 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 instruction of the trial court was clear and simple. Sheriff Villar was to return the seized properties to Spouses Tiu. He should have followed the court’s order immediately. He had no discretion to wait for the finality of the court’s order of dismissal before discharging the order of attachment. Nevertheless, Sheriff Villar showed no deliberate defiance of, or disobedience to, the court’s order of release. Records show that he took the proper step under the circumstances. He filed with the trial court his Sheriff’s Report with Urgent Prayer for the Issuance of a Clarificatory Order. The Court perceives nothing amiss in consulting the judge before taking action on a matter of which he is not an expert.

G.R. No. L-7717             April 27, 1956

G.B., INC., ETC., petitioner, vs.THE HONORABLE JUDGE CONRADO V. SANCHEZ, ET AL., respondents.

FACTS

Petitioner herein G.B. Inc. is the Trustee of Juan Luna Subdivision Inc. Allison Gibbs is the President of the petitioner and manager of Juan Luna Subdivision, Inc. Before December 31, 1953, herein respondent Juan T. Chuidian and Allison Gibbs were partners of the law firm "Gibbs, Gibbs, Chuidian and Quasha", the retaining counsel of Juan Luna Subdivision, Inc. On June 18, 1948, a loan of P40,000 was granted by Juan Luna Subdivision, Inc. to respondent Chuidian, and an

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"Agreement to sell" was executed on that date whereby respondent Chuidian acknowledge the receipt of said amount for which he agreed and promised to transfer within 60 days to Juan Luna Subdivision, Inc. the land which he bought from one Florence Shuster the loan thus obtained. On June 19, 1948, respondent Chuidian addressed a letter to Juan Luna Subdivision, Inc. indicating his intention to secure a loan from the Rehabilitation Finance Corporation with which to pay his debt to Juan Luna Subdivision, Inc. On May 5, 1953, in his letter to Juan Luna Subdivision, Inc. respondent Chuidian acknowledged his indebtedness of P53,817.72, representing balance of principal and interest. Instead of conveying the land bought from Florence Shuster to Juan Luna Subdivision, Inc. respondent Chuidian sold the same to Elenita Hernandez for P25,000 in order to pay his wife's gambling death. On December 1, 1953, Allison Gibbs and respondent Chuidian ceased to be law partners. On March 4, 1954, the petitioner filed a complaint against respondent Chuidian in the Court of First Instance of Manila, Civil Case No. 22183, for the collection of his indebtedness based on his "Agreement to Sell". At the commencement of the action, the petitioner asked for the issuance ex-parte of a writ of preliminary attachment which as granted by the court upon the filing by the petitioner of a bond of P57,000. On March 12, 1954, respondent Chuidian filed a "Motion to Discharge Attachment" based on the ground that said attachment was improperly issued, to which the petitioner filed an opposition on March 16, 1954. On March 31, 1954, the petition filed an urgent motion praying that respondent Chuidian's "Motion to Discharge Attachment" be denied or that it be granted after the filing of a counter bound or that the hearing of said "Motion to Discharge Attachment" be held after respondent Chuidian shall have filed an answer to the complaint. The respondent Judge of the Court of First Instance of Manila denied petitioner's urgent motion and set the hearing of the "Motion to Discharge Attachment"

On April 22, 1954, the respondent Judge issued an order granting respondent Chuidian's "Motion to Discharge Attachment" under section 13 of Rule 59 of the Rules of Court. A motion for reconsideration having been denied, the petitioner filed the present petition for certiorari with preliminary injunction. On May 4, 1954, this Court issued the preliminary injunction prayed for, restraining the respondent Judge and the sheriff of the City of Manila from enforcing the order of April 22, 1945, discharging the writ of attachment.

The grounds advanced by the petitioner for the issuance of the writ of attachment were (a) respondent Chuidian converted to his own use the land which he bought in a fiduciary capacity for Juan Luna Subdivision, Inc.; (b) that respondent Chuidian is guilty of fraud in contracting his indebtedness and incurring the obligations upon which the action is brought; and (c) that respondent Chuidian has removed or disposed of his property or is about to do so with intent to defraud his creditor.

HELD:

In holding that there was no fraud on the part of respondent Chuidian, the respondent Judge held as follows: "It must be borne in mind that defendant did not pocket the money — no money passed hands with that conveyance to Elenita Hernandez. The conveyance was in the form of a dacion en pago. Defendant was practically driven to the wall the family name must be reserved. If defendant received actually that sum of P25,000 consideration for the conveyance, perhaps there may yet be reason for branding defendant as a fraud. But such was not the case.' It is evident, however, that the fact that respondent Chuidian did not pocked the money paid for the conveyance by Elenita Hernandez, is immaterial, inasmuch as the petitioner was deprived of the same amount of P25,000, assuming that under its complaint respondent Chuidian was in fact indebted to the petitioner in the manner stated in said complaint.

We are, therefore, of the opinion that, from what has been said, in a view of the return of the sheriff showing financial instability on the part of respondent Chuidian, the most that the respondent Judge could have done in his favor — to which the petitioner has expressed its agreement — was to discharge the attachment in question upon the filing upon respondent Chuidian of a counter bond in the sum of P57,000, under section 12 of Rule 59 of the Rules of Court. This would have

accomplished respondent Chuidian's purpose of preserving his property and family name, at the same time giving the petitioner security for any judgment that it may obtain against him. We are constrained to hold the respondent Judge acted with grave abuse of discretion.

Wherefore, the order of the respondent Judge dated April 22, 1954, is hereby set aside, and the writ of preliminary attachment issued on March 4, 1954 maintained.

So ordered with costs against respondent Juan T. Chuidian.

G.R. NO. 123638               June 15, 2005

INSULAR SAVINGS BANK, Petitioner, vs.COURT OF APPEALS, JUDGE OMAR U. AMIN, in his capacity as Presiding Judge of Branch 135 of the Regional Trial Court of Makati, and FAR EAST BANK AND TRUST COMPANY, Respondents.

FACTS:

"On December 11, 1991, respondent Bank [Far East Bank and Trust Company] instituted Arbitration Case No. 91-069 against petitioner [Insular Savings Bank] before the Arbitration Committee of the Philippine Clearing House Corporation [PCHC]. The dispute between the parties involved three [unfunded] checks with a total value ofP25,200,000.00. The checks were drawn against respondent

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Bank and were presented by petitioner for clearing. As respondent Bank returned the checks beyond the reglementary period, [but after petitioner’s account with PCHC was credited with the amount of P25,200,000.00] petitioner refused to refund the money to respondent Bank. While the dispute was pending arbitration, on January 17, 1992, respondent Bank instituted Civil Case No. 92-145 in the Regional Trial Court of Makati and prayed for the issuance of a writ of preliminary attachment. On January 22, 1992, Branch 133 of the Regional Trial Court of Makati issued an Order granting the application for preliminary attachment upon posting by respondent Bank of an attachment bond in the amount of P6,000,000.00. On January 27, 1992, Branch 133 of the Regional Trial Court of Makati issued a writ of preliminary attachment for the amount of P25,200,000.00. During the hearing on February 11, 1992 before the Arbitration Committee of the Philippine Clearing House Corporation, petitioner and respondent Bank agreed to temporarily divide between them the disputed amount of P25,200,000.00 while the dispute has not yet been resolved. As a result, the sum ofP12,600,000.00 is in the possession of respondent Bank. On March 9, 1994, petitioner filed a motion to discharge attachment by counter-bond in the amount of P12,600,000.00. On June 13, 1994, respondent Judge issued the first assailed order denying the motion. On June 27, 1994, petitioner filed a motion for reconsideration which was denied in the second assailed order dated July 20, 1994" (Emphasis and words in bracket added).

From the order denying its motion to discharge attachment by counter-bond, petitioner went to the Court of Appeals on a petition for certiorari thereat docketed as CA-G.R. SP No. 34876, ascribing on the trial court the commission of grave abuse of discretion amounting to lack of jurisdiction.

CA, in the herein assailed decision dated October 9, 1995, nonetheless denied due course to and dismissed the petition.

ISSUE:

Simply put, the issue is whether or not the CA erred in not ruling that the trial court committed grave abuse of discretion in denying petitioner’s motion to discharge attachment by counter-bond in the amount ofP12,600,000.00.

HELD:

The Court rules for the petitioner.

The then pertinent provision of Rule 57 (Preliminary Attachment) of the Rules of Court under which the appellate court issued its assailed decision and resolution, provides as follows:

"SEC. 12. Discharge of attachment upon giving counter-bond. – At any time after an order of attachment has been granted, the party whose property has been attached, . . . may upon reasonable notice to the applicant, apply to the judge who granted the order or to the judge of the court which the action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge of the attachment if a cash deposit is made, or a counter-bond executed to the attaching creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made in an amount equal to the value of the property attached as determined by the judge, to secure the payment of any judgment that the attaching creditor may recover in the action. x x x . Should such counter-bond for any reason be found to be, or become insufficient, and the party furnishing the same fail to file an additional counter-bond, the attaching party may apply for a new order of attachment"4 (Emphasis supplied).4

As may be noted, the amount of the counter-attachment bond is, under the terms of the aforequoted Section 12, to be measured against the value of the attached property, as determined by the judge

to secure the payment of any judgment that the attaching creditor may recover in the action. Albeit not explicitly stated in the same section and without necessarily diminishing the sound discretion of the issuing judge on matters of bond approval, there can be no serious objection, in turn, to the proposition that the attached property - and logically the counter-bond necessary to discharge the lien on such property - should as much as possible correspond in value to, or approximately match the attaching creditor’s principal claim. Else, excessive attachment, which ought to be avoided at all times, shall ensue.

The following excerpts from Herrera, REMEDIAL LAW, Vol. VII, 1997 ed., p. 61, citing retired Justice Jose Y. Feria, drive home the same point articulated in Asuncion:

"The sheriff is required to attach only so much of the property of the party against whom the order is issued as may be sufficient to satisfy the applicant’s demand, the amount of which is stated in the order, unless a deposit is made or a counter-bond is given equal to said amount. However, if the value of the property to be attached is less than the amount of the demand, the amount of the applicant’s bond may be equal to the value of said property, and the amount of the adverse party’s deposit or counter-bond may be equal to the applicant’s bond. The writ of preliminary attachment is issued upon approval of the requisite bond". (Emphasis supplied).

Turning to the case at bar, the records show that the principal claim of respondent, as plaintiff  a quo, is in the amount of P25,200,000.00,6 representing the three (3) unfunded checks drawn against, and presented for clearing to, respondent bank. Jurisprudence teaches that a writ of attachment cannot be issued for moral and exemplary damages, and other unliquidated or contingent claim.7

As things stood, therefore, respondent’s principal claim against petitioner immediately prior to the filing of the motion to discharge attachment has effectively been pruned down to P12,600,000.00. The trial court was fully aware of this reality. Accordingly, it should have allowed a total discharge of the attachment on a counter-bond based on the reduced claim of respondent. If a portion of the claim is already secured, we see no justifiable reason why such portion should still be subject of counter-bond. It may be that a counter-bond is intended to secure the payment of any judgment that the attaching party may recover in the main action. Simple common sense, if not consideration of fair play, however, dictates that a part of a possible judgment that has veritably been preemptively satisfied or secured need not be covered by the counter-bond.

With the view we take of this case, the trial court, in requiring petitioner to post a counter-bond in the amount ofP27,237,700.00, obviously glossed over one certain fundamental. We refer to the fact that the attachment respondent applied for and the corresponding writ issued was only for the amount of P25.2 Million. Respondent, it bears to stress, did not pray for attachment on its other claims, contingent and unliquidated as they were. Then, too, the attaching writ rightly excluded such claims. While the records do not indicate, let alone provide a clear answer as to the actual value of the property levied upon, it may reasonably be assumed that it is equal to respondent’s principal claim. Be that as it may, it was simply unjust for the trial court to base the amount of the counter-bond on a figure beyond the P25,200,000.00 threshold, as later reduced to P12,600,200.00.

The trial court, therefore, committed grave abuse of discretion when it denied petitioner’s motion to discharge attachment by counter-bond in the amount of P12,600,000.00, an amount more than double the attachment bond required of, and given by, respondent. As a necessary consequence, the Court of Appeals committed reversible error when it dismissed petitioner’s recourse thereto

WHEREFORE, the instant petition is GRANTED.

27

G.R. No. 171750               January 25, 2012

UNITED PULP AND PAPER CO., INC., Petitioner, vs.ACROPOLIS CENTRAL GUARANTY CORPORATION, Respondent.

The Facts

On May 14, 2002, United Pulp and Paper Co., Inc. (UPPC) filed a civil case for collection of the amount ofP42,844,353.14 against Unibox Packaging Corporation (Unibox) and Vicente Ortega (Ortega) before the Regional Trial Court of Makati, Branch 148 (RTC).3 UPPC also prayed for a Writ of Preliminary Attachment against the properties of Unibox and Ortega for the reason that the latter were on the verge of insolvency and were transferring assets in fraud of creditors.4 On August 29, 2002, the RTC issued the Writ of Attachment5 after UPPC posted a bond in the same amount of its claim. By virtue of the said writ, several properties and assets of Unibox and Ortega were attached.6

On October 10, 2002, Unibox and Ortega filed their Motion for the Discharge of Attachment,7 praying that they be allowed to file a counter-bond in the amount of P42,844,353.14 and that the writ of preliminary attachment be discharged after the filing of such bond. Although this was opposed by UPPC, the RTC, in its Order dated October 25, 2002, granted the said motion for the discharge of the writ of attachment subject to the condition that Unibox and Ortega file a counter-bond.8 Thus, on November 21, 2002, respondent Acropolis Central Guaranty Corporation (Acropolis) issued the Defendant’s Bond for Dissolution of Attachment9 in the amount ofP42,844,353.14 in favor of Unibox.

Not satisfied with the counter-bond issued by Acropolis, UPPC filed its Manifestation and Motion to Discharge the Counter-Bond10 

For that reason, UPPC prayed for the discharge of the counter-bond and the reinstatement of the attachment. In its December 10, 2002 Order,11 the RTC denied UPPC’s Motion to Discharge Counter-Bond and, instead, approved and admitted the counter-bond posted by Acropolis. Accordingly, it ordered the sheriff to cause the lifting of the attachment on the properties of Unibox and Ortega.

On September 29, 2003, Unibox, Ortega and UPPC executed a compromise agreement,12 wherein Unibox and Ortega acknowledged their obligation to UPPC in the amount of P35,089,544.00 as of August 31, 2003, inclusive of the principal and the accrued interest, and bound themselves to pay the said amount in accordance with a schedule of payments agreed upon by the parties. Consequently, the RTC promulgated its Judgment13 dated October 2, 2003 approving the compromise agreement.

For failure of Unibox and Ortega to pay the required amounts for the months of May and June 2004 despite demand by UPPC, the latter filed its Motion for Execution14 to satisfy the remaining unpaid balance. In the July 30, 2004 Order,15 the RTC acted favorably on the said motion and, on August 4, 2004, it issued the requested Writ of Execution.16

The sheriff then proceeded to enforce the Writ of Execution. It was discovered, however, that Unibox had already ceased its business operation and all of its assets had been foreclosed by its creditor bank. Moreover, the responses of the selected banks which were served with notices of garnishment indicated that Unibox and Ortega no longer had funds available for garnishment. The sheriff also proceeded to the residence of Ortega to serve the writ but he was denied entry to the premises. Despite his efforts, the sheriff reported in his November 4, 2008 Partial Return17 that there was no satisfaction of the remaining unpaid balance by Unibox and Ortega.

On the basis of the said return, UPPC filed its Motion to Order Surety to Pay Amount of Counter-Bond18 directed at Acropolis. On November 30, 2004, the RTC issued its Order19 granting the motion and ordering Acropolis to comply with the terms of its counter-bond and pay UPPC the unpaid balance of the judgment in the amount ofP27,048,568.78 with interest of 12% per annum from default.

Thereafter, on December 13, 2004, Acropolis filed its Manifestation and Very Urgent Motion for Reconsideration,20 arguing that it could not be made to pay the amount of the counter-bond because it did not receive a demand for payment from UPPC. Furthermore, it reasoned that its obligation had been discharged by virtue of the novation of its obligation pursuant to the compromise agreement executed by UPPC, Unibox and Ortega.

the RTC denied the motion for reconsideration for lack of merit and for having been filed three days after the date set for the hearing on the said motion.22

28

Aggrieved, Acropolis filed a petition for certiorari before the CA with a prayer for the issuance of a Temporary Restraining Order and Writ of Preliminary Injunction.23 On November 17, 2005, the CA rendered its Decision24granting the petition,

UPPC then filed a motion for reconsideration but it was denied by the CA in its Resolution dated March 1, 2006.28

The Issues

(1) Whether UPPC failed to make the required demand and notice upon Acropolis; and

(2) Whether the execution of the compromise agreement between UPPC and Unibox and Ortega was tantamount to a novation which had the effect of releasing Acropolis from its obligation under the counter-attachment bond.

The Court’s Ruling

UPPC complied with the twin requirements of notice and demand

On the recovery upon the counter-bond, the Court finds merit in the arguments of the petitioner.

Section 17, Rule 57 of the Rules of Court sets forth the procedure for the recovery from a surety on a counter-bond:

Sec. 17. Recovery upon the counter-bond. – When the judgment has become executory, the surety or sureties on any counter-bond given pursuant to the provisions of this Rule to secure the payment of the judgment shall become charged on such counter-bond and bound to pay the judgment obligee upon demand the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing on the same action.

From a reading of the abovequoted provision, it is evident that a surety on a counter-bond given to secure the payment of a judgment becomes liable for the payment of the amount due upon: (1) demand made upon the surety; and (2) notice and summary hearing on the same action. After a careful scrutiny of the records of the case, the Court is of the view that UPPC indeed complied with these twin requirements.

This Court has consistently held that the filing of a complaint constitutes a judicial demand.32 Accordingly, the filing by UPPC of the Motion to Order Surety to Pay Amount of Counter-Bond was already a demand upon Acropolis, as surety, for the payment of the amount due, pursuant to the terms of the bond. In said bond, Acropolis bound itself in the sum of P 42,844,353.14 to secure the payment of any judgment that UPPC might recover against Unibox and Ortega.33

Furthermore, an examination of the records reveals that the motion was filed by UPPC on November 11, 2004 and was set for hearing on November 19, 2004.34 Acropolis was duly notified of the hearing and it was personally served a copy of the motion on November 11, 2004, 35 contrary to its claim that it did not receive a copy of the motion.

On November 19, 2004, the case was reset for hearing on November 30, 2004. The minutes of the hearing on both dates show that only the counsel for UPPC was present. Thus, Acropolis was given

the opportunity to defend itself. That it chose to ignore its day in court is no longer the fault of the RTC and of UPPC.

No novation despite compromise agreement; Acropolis still liable under the terms of the counter-bond

On this issue, the Court finds for UPPC also.

The terms of the Bond for Dissolution of Attachment issued by Unibox and Acropolis in favor of UPPC are clear and leave no room for ambiguity:

Based on the foregoing, Acropolis voluntarily bound itself with Unibox to be solidarily liable to answer for ANY judgment which UPPC may recover from Unibox in its civil case for collection. Its counter-bond was issued in consideration of the dissolution of the writ of attachment on the properties of Unibox and Ortega. The counter-bond then replaced the properties to ensure recovery by UPPC from Unibox and Ortega. It would be the height of injustice to allow Acropolis to evade its obligation to UPPC, especially after the latter has already secured a favorable judgment.

The italicized expressions constitute the key to the entire problem. Whether the judgment be rendered after trial on the merits or upon compromise, such judgment undoubtedly may be made effective upon the property released; and since the counterbond merely stands in the place of such property, there is no reason why the judgment should not be made effective against the counterbond regardless of the manner how the judgment was obtained.

The argument of Acropolis that its obligation under the counter-bond was novated by the compromise agreement is, thus, untenable.

Nothing in the compromise agreement indicates, or even hints at, releasing Acropolis from its obligation to pay UPPC after the latter has obtained a favorable judgment. Clearly, there is no incompatibility between the compromise agreement and the counter-bond. Neither can novation be presumed in this case.

All things considered, Acropolis, as surety under the terms of the counter-bond it issued, should be held liable for the payment of the unpaid balance due to UPPC.

Three-day notice rule, not a hard and fast rule

Although this issue has been obviated by our disposition of the two main issues, the Court would like to point out that the three-day notice requirement is not a hard and fast rule and substantial compliance is allowed.

The law is clear that it intends for the other party to receive a copy of the written motion at least three days before the date set for its hearing. The purpose of the three (3)-day notice requirement, which was established not for the benefit of the movant but rather for the adverse party, is to avoid surprises upon the latter and to grant it sufficient time to study the motion and to enable it to meet the arguments interposed therein.47 In Preysler, Jr. v. Manila Southcoast Development Corporation,48 the Court restated the ruling that "the date of the hearing should be at least three days after receipt of the notice of hearing by the other parties."

It is not, however, a hard and fast rule. Where a party has been given the opportunity to be heard, the time to study the motion and oppose it, there is compliance with the rule.

29

The test is the presence of the opportunity to be heard, as well as to have time to study the motion and meaningfully oppose or controvert the grounds upon which it is based. Considering the circumstances of the present case, we believe that the requirements of procedural due process were substantially complied with, and that the compliance justified a departure from a literal application of the rule on notice of hearing.50 [Emphasis supplied]

In the case at bench, the RTC gave UPPC sufficient time to file its comment on the motion. On January 14, 2005, UPPC filed its Opposition to the motion, discussing the issues raised by Acropolis in its motion. Thus, UPPC’s right to due process was not violated because it was afforded the chance to argue its position.

WHEREFORE, the petition is GRANTED.

G.R. No. 130223               August 19, 2009

RURAL BANK OF STA. BARBARA [PANGASINAN], INC., Petitioner, vs.THE MANILA MISSION OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS, INC., Respondent.

FACTS:

Spouses Tomas and Maria Soliven (spouses Soliven) were the registered owners, under Transfer Certificate of Title (TCT) No. T-125213, of a parcel of land located in Barangay Maninding, Sta. Barbara, Pangasinan (subject property). On 18 May 1992, the spouses Soliven sold the subject property to respondent Manila Mission of the Church of Jesus Christ of Latter Day Saints, Inc. (Manila Mission). However, it was only on 28 April 1994 when TCT No. T-125213 in the name of the spouses Soliven was cancelled, and TCT No. 195616 was issued in the name of respondent.

In the meantime, on 15 April 1993, petitioner Rural Bank of Sta. Barbara (Pangasinan), Inc. filed with the RTC a Complaint against the spouses Soliven for a sum of money, docketed as Civil Case No. D-10583. The Complaint of petitioner included a prayer for the issuance of a Writ of Preliminary Attachment.

In an Order dated 7 May 1993, the RTC ordered the issuance of the Writ of Attachment petitioner prayed for

Upon the filing by petitioner of the required bond, the RTC issued the Writ of Attachment on 21 May 1993. Acting on the authority of said Writ, Sheriff Reynaldo C. Daray attached the subject property, which was then still covered by TCT No. T-125213 in the name of the spouses Soliven. While Civil Case No. D-10583 was still pending before the RTC, respondent executed an Affidavit claiming title and ownership over the subject property, and requested the Ex-Officio Provincial and City Sheriff to release the said property from attachment. The Sheriff, however, advised respondent to file a motion directly with the RTC.

On 16 March 1995, respondent filed with the RTC, in Civil Case No. D-10583, a Motion to Release Property from Attachment, to which petitioner, in turn, filed an Opposition. After hearing, the RTC issued an Order on 9 October 1995 discharging the subject property from attachment.

Petitioner filed a Motion for Reconsideration of the 9 October 1995 Order of the RTC, arguing that it had a better right over the subject property and that the filing by respondent with the RTC, in Civil Case No. D-10583, of a Motion to Release Property from Attachment, was the improper remedy. In an Order dated 27 February 1996, the RTC denied the Motion for Reconsideration of petitioner for lack of merit.

On 12 April 1997, petitioner filed a Petition for Certiorari with this Court, alleging that the RTC committed grave abuse of discretion, amounting to lack or excess of jurisdiction, in canceling the Writ of Attachment and ordering the release of the subject property. The Petition was docketed as G.R. No. 124343. In a Resolution dated 27 May 1997, this Court referred the case to the Court of Appeals for appropriate action.

the Court of Appeals issued the assailed Decision dismissing the Petition.

Hence, petitioner again comes before this Court via the present Petition for Review, contending that the Court of Appeals erred in not finding grave abuse of discretion on the part of the RTC when the latter directed the release of the subject property from attachment.

We agree with the Court of Appeals on this score. The filing by respondent of the Motion to Release Property from Attachment was made on the advice of the Sheriff upon whom respondent served its Affidavit of Title and Ownership. Respondent should not be faulted for merely heeding the Sheriff’s advice. Apparently, the Sheriff, instead of acting upon the third-party claim of respondent on his own, would rather have some direction from the RTC. Indeed, the Sheriff is an officer of the RTC and may be directed by the said court to allow the third-party claim of respondent. Therefore, the filing of the Motion in question can be deemed as a mere continuation of the third-party claim of respondent, in the form of its Affidavit of Title and Ownership, served upon the Sheriff, in accord with the first paragraph of Section 14, Rule 57 of the Rules of Court.

Alternatively, we may also consider the Motion to Release Property from Attachment, filed by respondent before the RTC, as a Motion for Intervention in Civil Case No. D-10583, pursuant to the second paragraph of Section 14, Rule 56, in relation to Rule 19 of the Rules of Court. Respondent, to vindicate its claim to the subject property, may intervene in the same case, i.e., Civil Case No. D-10583, instituted by petitioner against the spouses Soliven, in which the said property was attached.

30

Respondent has the personality to intervene, as it "is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof." 5 The RTC, in acting upon and granting the Motion to Release Property from Attachment in its Order dated 9 October 1995, is deemed to have allowed respondent to intervene in Civil Case No. D-10583.

Moreover, it may do petitioner well to remember that rules of procedure are merely tools designed to facilitate the attainment of justice. They were conceived and promulgated to effectively aid the court in the dispensation of justice. Hence, even if the Motion to Release Property from Attachment does not strictly comply with Section 14, Rule 56 of the Rules of Court, the RTC may still allow and act upon said Motion to render substantive justice.

This leads us to the substantive issue in this case, on which between the two transactions should be given priority: the previous yet unregistered sale of the subject property by the spouses Soliven to respondent, or the subsequent but duly annotated attachment of the same property by petitioner.

ISSUE

The sole issue in this case is whether or not a registered writ of attachment on the land is a superior lien over that of an earlier unregistered deed of sale.

The settled rule is that levy on attachment, duly registered, takes preference over a prior unregistered sale. This result is a necessary consequence of the fact that the property involved was duly covered by the Torrens system which works under the fundamental principle that registration is the operative act which gives validity to the transfer or creates a lien upon the land.

The preference created by the levy on attachment is not diminished even by the subsequent registration of the prior sale. This is so because an attachment is a proceeding in rem. It is against the particular property, enforceable against the whole world. The attaching creditor acquires a specific lien on the attached property which nothing can subsequently destroy except the very dissolution of the attachment or levy itself. Such a proceeding, in effect, means that the property attached is an indebted thing and a virtual condemnation of it to pay the owner’s debt. The lien continues until the debt is paid, or sale is had under execution issued on the judgment, or until the judgment is satisfied, or the attachment discharged or vacated in some manner provided by law.

Thus, in the registry, the attachment in favor of respondents appeared in the nature of a real lien when petitioner had his purchase recorded. The effect of the notation of said lien was to subject and subordinate the right of petitioner, as purchaser, to the lien. Petitioner acquired ownership of the land only from the date of the recording of his title in the register, and the right of ownership which he inscribed was not absolute but a limited right, subject to a prior registered lien of respondents, a right which is preferred and superior to that of petitioner.9

It is settled, therefore, that a duly registered levy on attachment takes preference over a prior unregistered sale.

In the case at bar, respondent averred in its Motion to Release Property from Attachment that the construction of a church edifice on the subject property was about to be finished at the time the Writ of Preliminary Attachment was implemented on 24 May 1993, and that the construction of the church was actually completed by mid-1993. Respondent asserts that since petitioner did not deny these allegations, much less adduce evidence to the contrary, then the latter tacitly recognized the construction of the church.

Petitioner contends, on the other hand, that respondent failed to present evidence to prove the fact that a church had already been constructed on the subject property by the time the said property was attached, thus, constituting notice to petitioner of the claim or right of respondent to the same.

Was there, at the time of the attachment, knowledge on the part of petitioner Rural Bank of the interest of respondent Manila Mission on the subject property?

In sum, our decisions in Ruiz v. Court of Appeals and Valdevieso v. Damalerio oblige us to rule that the duly registered levy on attachment by petitioner Rural Bank takes preference over the prior but then unregistered sale of respondent Manila Mission. There was likewise no evidence of knowledge on the part of petitioner Rural Bank of any third-party interest in the subject property at the time of the attachment. We are, therefore, constrained to grant the instant Petition for Review and nullify the Orders of the RTC discharging the subject property from attachment.

Nevertheless, respondent Manila Mission would not be left without remedy. It could file a counter-bond pursuant to Section 12, Rule 5711 of the Rules of Court in order to discharge the attachment. If respondent Manila Mission fails to do the same and the property ends up being subjected to execution, respondent can redeem the property and seek reimbursement from the spouses Soliven.

WHEREFORE, the instant Petition for Review on Certiorari is hereby GRANTED.

G.R. No. 173297               March 6, 2013

STRONGHOLD INSURANCE COMPANY, INC., Petitioner, vs.TOMAS CUENCA, MARCELINA CUENCA, MILAGROS CUENCA, BRAMIE T. TAYACTAC, and MANUEL D. MARANON, JR., Respondents.

Antecedents

On January 19, 1998, Marañon filed a complaint in the RTC against the Cuencas for the collection of a sum of money and damages. His complaint, docketed as Civil Case No. 98-023, included an application for the issuance of a writ of preliminary attachment.3 On January 26, 1998, the RTC granted the application for the issuance of the writ of preliminary attachment conditioned upon the posting of a bond of P1,000,000.00 executed in favor of the Cuencas. Less than a month later, Marañon amended the complaint to implead Tayactac as a defendant.4

31

On February 11, 1998, Marañon posted SICI Bond No. 68427 JCL (4) No. 02370 in the amount of P1,000,000.00 issued by Stronghold Insurance. Two days later, the RTC issued the writ of preliminary attachment.5 The sheriff served the writ, the summons and a copy of the complaint on the Cuencas on the same day. The service of the writ, summons and copy of the complaint were made on Tayactac on February 16, 1998.6

Enforcing the writ of preliminary attachment on February 16 and February 17, 1998, the sheriff levied upon the equipment, supplies, materials and various other personal property belonging to Arc Cuisine, Inc. that were found in the leased corporate office-cum-commissary or kitchen of the corporation.7 On February 19, 1998, the sheriff submitted a report on his proceedings,8 and filed an ex parte motion seeking the transfer of the levied properties to a safe place. The RTC granted the ex parte motion on February 23, 1998.9

On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion to Dismiss and to Quash Writ of Preliminary Attachment on the grounds that: (1) the action involved intra-corporate matters that were within the original and exclusive jurisdiction of the Securities and Exchange Commission (SEC); and (2) there was another action pending in the SEC as well as a criminal complaint in the Office of the City Prosecutor of Parañaque City.10

On March 5, 1998, Marañon opposed the motion.11

On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ of Preliminary Attachment, stating that the action, being one for the recovery of a sum of money and damages, was within its jurisdiction.12

Under date of September 3, 1998, the Cuencas and Tayactac moved for the reconsideration of the denial of their Motion to Dismiss and to Quash Writ of Preliminary Attachment, but the RTC denied their motion for reconsideration

Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on certiorari and prohibition to challenge the August 10, 1998 and September 16, 1998 orders of the RTC on the basis of being issued with grave abuse of discretion amounting to lack or excess of jurisdiction

CA promulgated its assailed decision in C.A.-G.R. SP No. 49288,14 granting the petition. It annulled and set aside the challenged orders, and dismissed the amended complaint in

On December 27, 1999, the CA remanded to the RTC for hearing and resolution of the Cuencas and Tayactac’s claim for the damages sustained from the enforcement of the writ of preliminary attachment.15

On February 17, 2000,16 the sheriff reported to the RTC,

On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to Deliver Attached Properties and to Set Case for Hearing,17  Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn, the Cuencas and Tayactac filed their reply on May 5, 2000.

On May 25, 2000, Marañon filed his own comment/opposition to the Motion to Require Sheriff to Deliver Attached Properties and to Set Case for Hearing of the Cuencas and Tayactac, arguing that because the attached properties belonged to Arc Cuisine, Inc. 50% of the stockholding of which he and his relatives owned, it should follow that 50% of the value of the missing attached properties constituted liquidating dividends that should remain with and belong to him. Accordingly, he prayed that he should be required to return only P100,000.00 to the Cuencas and Tayactac.18

On June 5, 2000, the RTC commanded Marañon to surrender all the attached properties to the RTC through the sheriff within 10 days from notice; and directed the Cuencas and Tayactac to submit the affidavits of their witnesses in support of their claim for damages.19

On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and Compliance.20

Ruling of the RTC

After trial, the RTC rendered its judgment on April 28, 2003, holding Marañon and Stronghold Insurance jointly and solidarily liable for damages to the Cuencas and Tayactac

Ruling of the CA

On January 31, 2006, the CA, finding no reversible error, promulgated its decision affirming the judgment of the RTC.23

Issues

Hence, this appeal by petition for review on certiorari by Stronghold Insurance, which submits that:

I.

THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR AND DECIDED QUESTIONS OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND APPLICABLE DECISIONS OF THE HONORABLE COURT CONSIDERING THAT THE COURT OF APPEALS AFFIRMED THE ERRONEOUS DECISION OF THE TRIAL COURT HOLDING RESPONDENT MARA[Ñ]ON AND PETITIONER STRONGHOLD JOINTLY AND SOLIDARILY LIABLE TO PAY THE RESPONDENTS CUENCA, et al., FOR PURPORTED DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT, DESPITE THE FACT THAT:

A) RESPONDENT CUENCA et al., ARE NOT THE OWNERS OF THE PROPERTIES ATTACHED AND THUS, ARE NOT THE PROPER PARTIES TO CLAIM ANY PURPORTED DAMAGES ARISING THEREFROM.

B) THE PURPORTED DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT WERE CAUSED BY THE NEGLIGENCE OF THE BRANCH SHERIFF OF THE TRIAL COURT AND HIS FAILURE TO COMPLY WITH THE PROVISIONS OF THE RULES OF COURT PERTAINING TO THE ATTACHMENT OF PROPERTIES.

C) THE TRIAL COURT GRAVELY ERRED WHEN IT HELD PETITIONER STRONGHOLD TO BE SOLIDARILY LIABLE WITH RESPONDENT MARA[Ñ]ON TO RESPONDENTS CUENCA et al., FOR MORAL DAMAGES, EXEMPLARY DAMAGES, ATTORNEY’S FEES AND COST OF SUIT DESPITE THE FACT THAT THE GUARANTY OF PETITIONER STRONGHOLD PURSUANT TO ITS SURETY BOND IS LIMITED ONLY TO THE AMOUNT OF P1,000,000.00.

II

32

IN ANY EVENT, THE DECISION OF THE COURT APPEALS SHOULD HAVE HELD RESPONDENT MARA[Ñ]ON TO BE LIABLE TO INDEMNIFY PETITIONER STRONGHOLD FOR ALL PAYMENTS, DAMAGES, COSTS, LOSSES, PENALTIES, CHARGES AND EXPENSES IT SUSTAINED IN CONNECTION WITH THE INSTANT CASE, PURSUANT TO THE INDEMNITY AGREEMENT ENTERED INTO BY PETITIONER STRONGHOLD AND RESPONDENT MARA[Ñ]ON.24

On their part, the Cuencas and Tayactac counter:

A. Having actively participated in the trial and appellate proceedings of this case before the Regional Trial Court and the Court of Appeals, respectively, petitioner Stronghold is legally and effectively BARRED by ESTOPPEL from raising for the first time on appeal before this Honorable Court a defense and/or issue not raised below.25

B. Even assuming arguendo without admitting that the principle of estoppel is not applicable in this instant case, the assailed Decision and Resolution find firm basis in law considering that the writ of attachment issued and enforced against herein respondents has been declared ILLEGAL, NULL AND VOID for having been issued beyond the jurisdiction of the trial court.

C. There having been a factual and legal finding of the illegality of the issuance and consequently, the enforcement of the writ of attachment, Maranon and his surety Stronghold, consistent with the facts and the law, including the contract of suretyship they entered into, are JOINTLY AND SEVERALLY liable for the damages sustained by herein respondents by reason thereof.

D. Contrary to the allegations of Stronghold, its liability as surety under the attachment bond without which the writ of attachment shall not issue and be enforced against herein respondent if prescribed by law. In like manner, the obligations and liability on the attachment bond are also prescribed by law and not left to the discretion or will of the contracting parties to the prejudice of the persons against whom the writ was issued.

E. Contrary to the allegations of Stronghold, its liability for the damages sustained by herein respondents is both a statutory and contractual obligation and for which, it cannot escape accountability and liability in favor of the person against whom the illegal writ of attachment was issued and enforced. To allow Stronghold to delay, excuse or exempt itself from liability is unconstitutional, unlawful, and contrary to the basic tenets of equity and fair play.

F. While the liability of Stronghold as surety indeed covers the principal amount of P1,000,000.00, nothing in the law and the contract between the parties limit or exempt Stronghold from liability for other damages. Including costs of suit and interest.26

Ruling

The petition for review is meritorious.

There is no question that a litigation should be disallowed immediately if it involves a person without any interest at stake, for it would be futile and meaningless to still proceed and render a judgment where there is no actual controversy to be thereby determined.

Where the plaintiff is not the real party in interest, the ground for the motion to dismiss is lack of cause of action.31The reason for this is that the courts ought not to pass upon questions not derived from any actual controversy. Truly, a person having no material interest to protect cannot invoke the jurisdiction of the court as the plaintiff in an action.32 Nor does a court acquire jurisdiction over a case where the real party in interest is not present or impleaded.

There is no dispute that the properties subject to the levy on attachment belonged to Arc Cuisine, Inc. alone, not to the Cuencas and Tayactac in their own right. They were only stockholders of Arc Cuisine, Inc., which had a personality distinct and separate from that of any or all of them.42 The damages occasioned to the properties by the levy on attachment, wrongful or not, prejudiced Arc Cuisine, Inc., not them. As such, only Arc Cuisine, Inc. had the right under the substantive law to claim and recover such damages. This right could not also be asserted by the Cuencas and Tayactac unless they did so in the name of the corporation itself. But that did not happen herein, because Arc Cuisine, Inc. was not even joined in the action either as an original party or as an intervenor.

The Cuencas and Tayactac were clearly not vested with any direct interest in the personal properties coming under the levy on attachment by virtue alone of their being stockholders in Arc Cuisine, Inc. Their stockholdings represented only their proportionate or aliquot interest in the properties of the corporation, but did not vest in them any legal right or title to any specific properties of the corporation. Without doubt, Arc Cuisine, Inc. remained the owner as a distinct legal person.43

Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuencas and Tayactac lacked the legal personality to claim the damages sustained from the levy of the former’s properties.

In the present case, the plaintiff stockholders have brought the action not for the benefit of the corporation but for their own benefit, since they ask that the defendant make good the losses occasioned by his mismanagement and pay to them the value of their respective participation in the corporate assets on the basis of their respective holdings. Clearly, this cannot be done until all corporate debts, if there be any, are paid and the existence of the corporation terminated by the limitation of its charter or by lawful dissolution in view of the provisions of section 16 of the Corporation Law. (Emphasis ours)

It results that plaintiffs complaint shows no cause of action in their favor so that the lower court did not err in dismissing the complaint on that ground.

While plaintiffs ask for remedy to which they are not entitled unless the requirement of section 16 of the Corporation Law be first complied with, we note that the action stated in their complaint is susceptible of being converted into a derivative suit for the benefit of the corporation by a mere change in the prayer. Such amendment, however, is not possible now, since the complaint has been filed in the wrong court, so that the same has to be dismissed.46

That Marañon knew that Arc Cuisine, Inc. owned the properties levied on attachment but he still excluded Arc Cuisine, Inc. from his complaint was of no consequence now. The Cuencas and Tayactac still had no right of action even if the affected properties were then under their custody at the time of the attachment, considering that their custody was only incidental to the operation of the corporation.

It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine, Inc. a proper action to recover damages resulting from the attachment. Such action would be one directly brought in the name of the corporation. Yet, that was not true here, for, instead, the Cuencas and Tayactac presented the claim in their own names.

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In view of the outcome just reached, the Court deems it unnecessary to give any extensive consideration to the remaining issues.

WHEREFORE, the Court GRANTS the petition for review;

G.R. No. 175350               June 13, 2012

EQUITABLE BANKING CORPORATION, INC. Petitioner, vs.SPECIAL STEEL PRODUCTS, and AUGUSTO L. PARDO, Respondents.

Factual Antecedents

Respondent Special Steel Products, Inc. (SSPI) is a private domestic corporation selling steel products. Its co-respondent Augusto L. Pardo (Pardo) is SSPI’s President and majority stockholder.2

International Copra Export Corporation (Interco) is its regular customer.3

Jose Isidoro4 Uy, alias Jolly Uy (Uy), is an Interco employee, in charge of the purchasing department, and the son-in-law of its majority stockholder.5

Petitioner Equitable Banking Corporation (Equitable or bank) is a private domestic corporation engaged in banking6 and is the depository bank of Interco and of Uy.

In 1991, SSPI sold welding electrodes to Interco,

In payment for the above welding electrodes, Interco issued three checks payable to the order of SSPI on July 10, 1991,10 July 16, 1991,11 and July 29, 1991.12 Each check was crossed with the notation "account payee only" and was drawn against Equitable. The records do not identify the signatory for these three checks, or explain how Uy, Interco’s purchasing officer, came into possession of these checks.

The records only disclose that Uy presented each crossed check to Equitable on the day of its issuance and claimed that he had good title thereto.13 He demanded the deposit of the checks in his personal accounts in Equitable, Account No. 18841-2 and Account No. 03474-0.14

Equitable acceded to Uy’s demands

In October 1991, SSPI reminded Interco of the unpaid welding electrodes, amounting to P985,234.98.19 It reiterated its demand on January 14, 1992.20 SSPI explained its immediate need for payment as it was experiencing some financial crisis of its own. Interco replied that it had already issued three checks payable to SSPI and drawn against Equitable. SSPI denied receipt of these checks.

On August 6, 1992, SSPI requested information from Equitable regarding the three checks. The bank refused to give any information invoking the confidentiality of deposits.21

The records do not disclose the circumstances surrounding Interco’s and SSPI’s eventual discovery of Uy’s scheme. Nevertheless, it was determined that Uy, not SSPI, received the proceeds of the three checks that were payable to SSPI. Thus, on June 30, 1993 (twenty-three months after the issuance of the three checks), Interco finally paid the value of the three checks to SSPI, plus a portion of the accrued interests. Interco refused to pay the entire accrued interest of P767,345.64 on the ground that it was not responsible for the delay. Thus, SSPI was unable to collect  P437,040.35 (at the contracted rate of 36% per annum) in interest income.22

SSPI and its president, Pardo, filed a complaint for damages with application for a writ of preliminary attachment against Uy and Equitable Bank. The complaint alleged that the three crossed checks, all payable to the order of SSPI and with the notation "account payee only," could be deposited and encashed by SSPI only. However, due to Uy’s fraudulent representations, and Equitable’s indispensable connivance or gross negligence, the restrictive nature of the checks was ignored and the checks were deposited in Uy’s account. Had the defendants not diverted the three checks in July 1991, the plaintiffs could have used them in their business and earned money from them. Thus, the plaintiffs prayed for an award of actual damages consisting of the unrealized interest income from the proceeds of the checks for the two-year period that the defendants withheld the proceeds from them (from July 1991 up to June 1993).23

In his personal capacity, Pardo claimed an award of P3 million as moral damages from the defendants.

SSPI and Pardo also prayed for exemplary damages and attorney’s fees.25

In support of their application for preliminary attachment, the plaintiffs alleged that the defendants are guilty of fraud in incurring the obligation upon which the action was brought and that there is no sufficient security for the claim sought to be enforced in this action.26

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The trial court granted plaintiffs’ application.27 It issued the writ of preliminary attachment on September 20, 1993,28 upon the filing of plaintiffs’ bond for P500,000.00. The sheriff served and implemented the writ against the personal properties of both defendants.29

Upon Equitable’s motion and filing of a counter-bond, however, the trial court eventually discharged the attachment30 against it.31

Equitable then argued for the dismissal of the complaint for lack of cause of action

Meanwhile, Uy answered that the checks were negotiated to him; that he is a holder for value of the checks and that he has a good title thereto.37 He did not, however, explain how he obtained the checks, from whom he obtained his title, and the value for which he received them. During trial, Uy did not present any evidence but adopted Equitable’s evidence as his own.

Ruling of the Regional Trial Court 38

judgment is hereby rendered in favor of plaintiffs Special Steel Products, Inc., and Augusto L. Pardo and against defendants Equitable Banking Corporation [and] Jose Isidoro Uy,

The appellate court found no merit in Equitable’s appeal.

Issues

1. Whether SSPI has a cause of action against Equitable for quasi-delict;

2. Whether SSPI can recover, as actual damages, the stipulated 36% per annum interest from Equitable;

3. Whether speculative fears and imagined scenarios, which cause sleepless nights, may be the basis for the award of moral damages; and

4. Whether the attachment of Equitable’s personal properties was wrongful.

Our Ruling

Preliminary attachment

Equitable next assails as error the trial court’s dismissal of its counter-claim for wrongful preliminary attachment. It maintains that, contrary to SSPI’s allegation in its application for the writ, there is no showing whatsoever that Equitable was guilty of fraud in allowing Uy to deposit the checks. Thus, the trial court should not have issued the writ of preliminary attachment in favor of SSPI. The wrongful attachment compelled Equitable to incur expenses for a counter-bond, amounting to P30,204.26, and caused it to sustain damage, amounting to P5 million, to its goodwill and business credit.70

The above affidavit and the allegations of the complaint are bereft of specific and definite allegations of fraud against Equitable that would justify the attachment of its properties. In fact, SSPI admits its uncertainty whether Equitable’s participation in the transactions involved fraud or was a result of its negligence. Despite such uncertainty with respect to Equitable’s participation, SSPI applied for and obtained a preliminary attachment of Equitable’s properties on the ground of fraud. We believe that

such preliminary attachment was wrongful. "[A] writ of preliminary attachment is too harsh a provisional remedy to be issued based on mere abstractions of fraud. Rather, the rules require that for the writ to issue, there must be a recitation of clear and concrete factual circumstances manifesting that the debtor practiced fraud upon the creditor at the time of the execution of their agreement in that said debtor had a preconceived plan or intention not to pay the creditor." 74 No proof was adduced tending to show that Equitable had a preconceived plan not to pay SSPI or had knowingly participated in Uy’s scheme.

That the plaintiffs eventually obtained a judgment in their favor does not detract from the wrongfulness of the preliminary attachment.

For such wrongful preliminary attachment, plaintiffs may be held liable for damages. However, Equitable is entitled only to such damages as its evidence would allow,76 for the wrongfulness of an attachment does not automatically warrant the award of damages. The debtor still has the burden of proving the nature and extent of the injury that it suffered by reason of the wrongful attachment.77

The Court has gone over the records and found that Equitable has duly proved its claim for, and is entitled to recover, actual damages. In order to lift the wrongful attachment of Equitable’s properties, the bank was compelled to pay the total amount of P30,204.26 in premiums for a counter-bond.78 However, Equitable failed to prove that it sustained damage to its "goodwill and business credit" in consequence of the alleged wrongful attachment. There was no proof of Equitable’s contention that respondents’ actions caused it public embarrassment and a bank run.