ADLAWAN vs.

TOMOL, 184 SCRA 31 This is a special civil action for certiorari and mandamus seeking to annul : [a] the Order dated December 20, 1982 of respondent Judge Valeriano P. Tomol, Branch XI of CFI-Cebu, now Branch XI, RTCCebu, in Civil Case No. R-21761, entitled "Aboitiz and Company, Inc. v. Adlawan, et al" denying the motion of the defendant to require the Provincial Sheriff of Cebu to deliver to him the properties seized by the Sheriff of Davao City and [b] the Order dated September 4, 1982 of Judge Ceferino F. Dulay, Branch XVI of the Court of First Instance of Cebu, now Branch XXVII, RTC-Cebu, Lapu-Lapu City, in Civil Case No. 619-L between the same parties, denying for lack of merit petitioner's Omnibus Motion to reconsider, dissolve and set aside the Writ of seizure and Replevin. The antecedent facts are as follows: Petitioner Eleazar A. Adlawan, a private contractor, was awarded by the National Irrigation Administration (NIA) and the Bureau of Public Highways (BPH) contracts for the construction of various infrastructure projects of the government to perform his obligations thereunder, petitioner sought financial assistance and support from private respondent Aboitiz and Company, Inc. For failure of petitioner to pay the installments and amortizations, private respondent filed on May 13, 1982 before the Court of First Instance of Cebu a complaint 1 for the collection of a sum of money and damages including an ex-parte application for the issuance of a writ of preliminary attachment against the property of petitioner as defendant therein. The Executive Judge without notice and hearing issued an order 2 on May 14, 1982 directing the issuance of a writ of preliminary attachment against all the properties of petitioner, real and personal, upon the filing of an attachment bond for Four Million Pesos. The case, docketed as Civil Case No. R21761 was raffled and later assigned to Branch XI of the Court of First Instance of Cebu, presided by respondent Judge Valeriano P. Tomol. On May 26, 1982, writs of preliminary attachment were issued addressed to the Sheriffs of Cebu, Davao City, Quezon City, Davao del Sur and Davao del Norte, directing them to attach the real and personal properties of petitioner within their respective jurisdictions. On the strength of the writ of preliminary attachment, the bulk of petitioner's property in Davao City was attached.

Subsequently, private respondent filed an Urgent Exparte Motions 3 asking the court that it be allowed to take possession and custody of the attached properties to protect its interest and to avoid any damage or deterioration considering that the sheriff has no proper place to store or deposit said properties. This was granted by respondent Judge on May 28, 1982 for being meritorious. Meanwhile, petitioner before submitting an answer to the complaint, filed a Motion for a Bill of Particulars 4 and to Set Aside the ExParte Writ of Preliminary Attachment 5 which was opposed by private respondent. Finding that the discharge of the writ of attachment is unavoidable on the ground that it was issued ex-parte, without notice and hearing, based principally on the alleged removal or disposition by the defendants of their properties with intent to defraud the plaintiff, which allegation was limited to a bare assertion and not persuasively substantial, respondent Judge issued an Orders 6 dated July 6, 1982, the dispositive portion of which reads: Accordingly, the Order of May 14, 1982 granting the writ of preliminary attachment is lifted andvacated. The writs issued on 26 May 1982, are dissolved and recalled and the properties levied and seized by the Sheriffs of Cebu and Davao City are discharged and released. SO ORDERED. (Emphasis supplied) In view of the foregoing, private respondent Aboitiz and Company, Inc. filed an Urgent Ex-Parte Motion 7 dated July 7, 1982 praying for a stay of the July 6, 1982 Order dissolving the writ of preliminary attachment, thus maintaining the status quo. Private respondent further prayed for the court to direct the sheriff of Davao City to desist and/or stop the enforcement or implementation of the order lifting the attachment and to grant them fifteen (15) days to elevate the matter to the Appellate Court. Consequently, respondent Judge Tomol issued on the same day an Orders 8 granting the motion prayed for by private respondent Aboitiz and Company, Inc. Thus, the July 6, 1982 Order was stayed. In the meantime, three (3) Deputy Sheriffs of Cebu implemented the Order lifting the Writ of Attachment and were able to pull out some personal properties of petitioner Adlawan. They were not able to take

out all the attached properties in view of the subsequent Order of respondent judge to stay its implementation. As petitioner's Motion for a Bill of Particulars was not immediately acted upon, he was not able to file an answer or interpose any counterclaim. For this reason, petitioner filed an Application for Award of Damages dated July 9, 1982 asking for a reasonable rental on the attached heavy construction equipment, machineries and other properties at the rate of P30,000.00 per day from the date of seizure until said properties are actually returned to his possession and control. 9 Before the court a quo could act on the motions of petitioner Adlawan, and before he could file an answer, his motion for a bill of particulars not having been acted upon, private respondent Aboitiz and Company, Inc., filed on July 13, 1982 a Notice of Dismissal or Withdrawal of Complaint 10 as a matter of right in accordance with Section 1, Rule 17 of the Rules of Court. Respondent Judge Tomol issued an Order 11 dated July 15, 1982, the dispositive portion of which reads: Accordingly, the termination of this case upon the notice of dismissal voluntarily filed by the plaintiff is hereby confirmed. For emphasis, all orders of this Court issued prior to the filing of said notice of dismissal are each and all rendered functus officio. By the same token, all pending incidents, particularly the defendant's motion for a bill of particulars and their petition for damages against the Plaintiffs attachment bond, are now beyond the competence of this Court to consider for being moot and academic. SO ORDERED Petitioner Adlawan filed a Motion 12 dated July 28, 1982 praying for the issuance of an order to the Provincial Sheriff of Cebu to implement and enforce the Order of respondent Judge dated July 6, 1982 dissolving the writ of preliminary attachment and to secure the delivery of the attached properties to the petitioner. Respondent Judge issued an Order 13 dated December 20, 1982 denying the Motion in view of the institution by private respondent Aboitiz and Company, Inc. of a civil case (No. 619-L) for delivery of Personal

Properties with Replevin and Damages before the Court of First Instance of Cebu, Branch XVI in Lapu-Lapu City on July 13, 1982 and the filing of petitioner Adlawan of a case for damages (Civil Case No. 22265) before the Court of First Instance of Cebu, Branch X, in connection with the seizure of his properties under the writ of preliminary attachment. With regard to the replevin case filed by private respondent Aboitiz and Company, Inc., the Court of First Instance of Cebu, Branch XVI, Lapu-Lapu City, issued an Order 14 for the seizure and delivery of the properties described therein to the private respondent. The seized properties were thus delivered to private respondent by the Clerk of Court and Ex-officio Provincial Sheriff on July 24, 1982. Petitioner filed an Omnibus Motion 15 dated July 17, 1982 to reconsider, dissolve and set aside the Writ of Seizure and Replevin and to direct that the properties seized be returned to petitioner as well as to dismiss the complaint. In support of this motion, petitioner alleged, among others, that private respondent's office is situated in Cebu City while petitioner is a resident of mainland Cebu, particularly Minglanilla therefore the Court of First Instance of Cebu stationed in Lapu-Lapu should not accept the case. Furthermore, he alleged that the same personal properties seized are in custodia legis by virtue of a writ of preliminary attachment issued by the Court of First Instance of Cebu, Branch XI, presided by respondent Judge Tomol. The Court of First Instance of Cebu, Branch XVI in Lapu-Lapu City, presided by Judge Ceferino E. Dulay denied the Omnibus Motion for lack of merit on September 4, 1982. Petitioner Adlawan filed a Motion for Reconsideration but the same was denied. Hence, the present petition for certiorari and mandamus impleading respondent Judge Valeriano P. Tomol as Presiding Judge of Branch XI of the Court of First Instance of Cebu (now Branch XI, RTC-Cebu) and Branch XVI, CFI-Cebu presided by Judge Ceferino E. Dulay in Lapu-Lapu City (now Branch XXVII of RTC Cebu in Lapu-Lapu) and private respondent Aboitiz and Company, Inc. The issues raised by petitioner Adlawan are the following, to wit: 1) After the attachment of petitioner's properties was dissolved and discharged because it was found by respondent Judge to be wrongful and illegal, does it not constitute grave and manifest abuse of discretion on

the part of the same respondent judge TO REFUSE to implement his own order for the return of the attached properties to petitioner simply because private respondent suddenly dismissed its complaint? 2) On the other hand, the court, after having deprived petitioner possession and enjoyment of his properties, by reason of an attachment which, subsequently, was dissolved and discharged, was it not the clear, specific and inescapable duty of that same court, to order that said properties be returned and restored to the possession and enjoyment of petitioner? 3) Are not the attached properties of petitioner under the custodia legis of the attaching court Branch XI, CFI-Cebu (now Branch XI, RTC-Cebu) and, therefore, subject to its jurisdiction and control? If so, does it not constitute grave and manifest abuse of discretion on the part of the attaching court to literally wash his (sic) hands off any duty or responsibility by considering himself (sic) as having been divested of authority to deal with such properties? 4) Did not the Lapu-Lapu Branch of CFI-Cebu act, without or in excess of his (sic) jurisdiction or, at least, with grave abuse of discretion, in taking cognizance of the replevin case which involves properties already in custodia legis of Branch XI of CFI-Cebu? 5) On the other hand, was it not the clear, specific and inescapable duty of the Lapu-Lapu Branch of CFICebu, to dismiss the replevin case and dissolve the writ of replevin, not only because of the principle of custodia legis but also because it was in clear violation of Adm. Order No. 6 of this Honorable Supreme Court, which amends Adm. Orders No. 147 and 328 of the Department (now Ministry) of Justice? 16 From the recital of facts may be gleamed a series of peculiar events and circumstances requiring examination and looking into in order that justice and equity may be subserved.

Petitioner's properties were attached on the strength of the writs of preliminary attachment issued without notice and hearing by the executive judge. These attached properties were given to the custody of private respondent, Aboitiz and Company, Inc. Petitioner then filed a Motion to Dissolve the Writ of Attachment which was granted by respondent Judge Tomol. Thus, petitioner was able to recover some of his properties. But on the following day, this order was stayed by the same respondent judge leaving the rest of petitioner's properties with private respondent. Later, private respondent withdrew its complaint which was confirmed by respondent Judge Tomol. Petitioner Adlawan filed a motion to have the rest of his properties returned but respondent judge refused to act on said motion due to cases filed by both parties in the different branches of the Court of First Instance of Cebu relating to the same case. After a careful examination of the records of the case We rule in favor of petitioner Adlawan. There is no question that the order dated July 6, 1982 of respondent Judge Valeriano P. Tomol, Jr. lifting and vacating the order granting the writ of preliminary attachment is a valid order, issued while he had jurisdiction over the case. The execution of aforesaid order of July 6, 1982 was stayed for a period of fifteen (15) days on motion of the plaintiff to enable the latter to question the propriety or impropriety of the same in the appellate court. Instead, plaintiff filed a civil case for delivery of Personal Properties with Replevin and Damages with another branch of the CFI of Cebu. Accordingly, having failed to appeal or question the aforementioned order in the appellate court as originally manifested, the same became final and executory. Section 1, Rule 39 of the Revised Rules of Court provides: Execution upon final judgment or orders. Execution shall issue upon a judgment or order that finally disposes of the action or proceeding. Such execution shall issue as a matter of right upon the expiration of the period to appeal therefrom if no appeal has been perfected. It is basic that once a judgment becomes final, the prevailing party is entitled as a matter of right to a Writ of Execution, and the issuance thereof is the Court's ministerial duty." 17

But as earlier stated, the reasons advanced by respondent Judge Tomol for denying the enforcement of his order dated July 6, 1982 which lifted the writ of attachment and the restoration of the seized properties to the defendant petitioner herein are: [a] the filing by private respondent of Civil Case No. 619-L with Branch XVI of CFILapu-Lapu City for delivery of Personal Properties with Replevin and Damages which as a consequence, the same properties involved in this case were seized under a writ of replevin upon order of aforesaid court and [b] the filing by petitioner of Civil Case No. 22265 before Branch X of the Court of First Instance of Cebu, for damages. Hence, the issues in this case center on the nature and purpose of the writ of attachment. A writ of preliminary attachment is a provisional remedy issued upon order of the court where an action is pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by the Sheriff as security for the satisfaction of whatever judgment might be secured in said action by the attaching creditor against the defendant. 18 The provisional remedy of attachment is available in order that the defendant may not dispose of his property attached, and thus secure the satisfaction of any judgment that may be secured by plaintiff from defendant. 19The purpose and function of an attachment or garnishment is two-fold. First, it seizes upon property of an alleged debtor in advance of final judgment and holds it subject to appropriation thus prevents the loss or dissipation of the property by fraud or otherwise. Second, it subjects to the payment of a creditor's claim property of the debtor in those cases where personal service cannot be obtained upon the debtor. 20 This remedy is to secure a contingent lien on defendant's property until plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction, or to make some provision for unsecured debts in cases where the means of satisfaction thereof are liable to be removed beyond the jurisdiction, or improperly disposed of or concealed, or otherwise placed beyond the reach of creditors. 21 Attachment is an ancillary remedy. It is not sought for its own sake but rather to enable the attaching party to realize upon relief sought and expected to be granted in the main or principal pal action. 22

The remedy of attachment is adjunct to the main suit, therefore, it can have no independent existence apart from a suit on a claim of the plaintiff against the defendant. In other words, a attachment or garnishment is generally ancillary to, and dependent on, a principal proceeding, either at law or in equity, which has for its purpose a determination of the justice of creditor's demand. 23 Thus, this Court ruled that upon levy by attachment of the property in question by order of the Court, said property fell into custodia legis of that court for purposes of that civil case only. Any relief against such attachment and the execution an issuance of a writ of possession that ensued subsequently could be disposed of only in that case. 24 More specifically, it was held that courts have no jurisdiction to order the delivery of personal property (replevin) to the plaintiff if the property is under attachment. 25 Only courts having supervisory control or superior jurisdiction in the premises, have the right to interfere with and change possession of property in custodia legis. 26 More recently, this Court ruled that the garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property a lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia legis under the sole control of such court. 27 During the life of the attachment, the attached property continues in the custody of the law, the attaching officer being entitled to its possession and liability for its safe keeping. 28 Based on the above-cited principles, it is obvious that the writ of preliminary attachment issued is already dissolved and rendered nonexistent in view of the withdrawal of the complaint by Aboitiz and Company, Inc. More importantly, even if the writ of attachment can be considered independently of the main case, the same, having been improperly issued as found by respondent Judge Tomol himself, is null and void and cannot be a justification for holding petitioners' properties in custodia legis any longer. To reiterate, an attachment is but an incident to a suit; and unless the suit can be maintained, the attachment must fall.

When Aboitiz and Company, Inc. withdrew its complaint, the attachment ceased to have a leg to stand on. The attached properties of petitioner Adlawan which are in the custody of private respondent Aboitiz should be returned to petitioner. This is only proper and equitable and in consonance with the rules and principles of law. The parties, by the withdrawal of the complaint, should be placed in the same standing as they were before the filing of the same. Petitioner also questions the jurisdiction of the CFI of Cebu stationed in Lapu-Lapu City to hear the replevin case filed by private respondent in view of the fact that petitioner is a resident of Minglanilla, Cebu while private respondent's principal place of business is in Cebu City. Obviously, the question posed by petitioner is venue. A reading of the Omnibus Motion filed by petitioner, then defendant therein, would reveal that he not only questioned the jurisdiction of the court but likewise alleged non-jurisdictional grounds for dismissing the replevin case, such as the amount of the bond put up by Aboitiz & Co. as grossly insufficient and that the same properties are involved both in the replevin case and in the original collection case with preliminary attachment. Thus, in so doing, the court acquired jurisdiction over him. In the case of Wang Laboratories, Inc. vs. Mendoza 29 this Court held: Even though the defendant objects to the jurisdiction of the court, if at the same time he alleges any nonjurisdictional ground for dismissing the action, the court acquires jurisdiction over him. Furthermore, in the case of City of Cebu v. Consolacion, 30 We held that: . . . any of the branches of the Court of First Instance of the Province of Cebu, whether stationed in the city of the same name or in any of the municipalities of the province would be proper venue for its trial and determination, it being admitted that the parties are residents of the Province of Cebu . . . Finally, the employment by counsel for private respondent of dubious procedural maneuvers as what transpired in the case at bar obviously to continue the wrongful and illegal possession and custody of petitioner's properties even after the dissolution of the attachment is to

say the least, hardly commendable if not a form of "forum shopping", to seek the court where he may possibly obtain favorable judgment. 31 It may therefore be stated that the right to come before the Courts to redress a grievance or right a wrong should be exercised with prudence and good faith. In the case of Indianapolis v. Chase National Bank, Trustee, 314 U.S. 69, it is opined that "Litigation is the pursuit of practical ends, not a game of chess." WHEREFORE, in view of the foregoing, this Court rules that the attached properties left in the custody of private respondent Aboitiz and Company, Inc. be returned to petitioner Eleazar V. Adlawan without prejudice to the outcome of the cases filed by both parties. SO ORDERED.

DAVAO LIGHT & POWER CO. vs. CA, 204 SCRA 343 Subject of the appellate proceedings at bar is the decision of the Court of Appeals in CA-G.R. Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna v. Davao Light & Power Co., Inc.," promulgated on May 4, 1990.1 That decision nullified and set aside the writ of preliminary attachment issued by the Regional Trial Court of Davao City 2 in Civil Case No. 19513-89 on application of the plaintiff (Davao Light & Power Co.), before the service of summons on the defendants (herein respondents Queensland Co., Inc. and Adarna). Following is the chronology of the undisputed material facts culled from the Appellate Tribunal's judgment of May 4, 1990. 1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light) filed a verified complaint for recovery of a sum of money and damages against Queensland Hotel, etc. and Teodorico Adarna (docketed as Civil Case No. 19513-89). The complaint contained an ex parte application for a writ of preliminary attachment.

2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by raffle, issued an Order granting theex parte application and fixing the attachment bond at P4,600,513.37. 3. On May 11, 1989 the attachment bond having been submitted by Davao Light, the writ of attachment issued. 4. On May 12, 1989, the summons and a copy of the complaint, as well as the writ of attachment and a copy of the attachment bond, were served on defendants Queensland and Adarna; and pursuant to the writ, the sheriff seized properties belonging to the latter. 5. On September 6, 1989, defendants Queensland and Adarna filed a motion to discharge the attachment for lack of jurisdiction to issue the same because at the time the order of attachment was promulgated (May 3, 1989) and the attachment writ issued (May 11, 1989), the Trial Court had not yet acquired jurisdiction over the cause and over the persons of the defendants. 6. On September 14, 1989, Davao Light filed an opposition to the motion to discharge attachment. 7. On September 19, 1989, the Trial Court issued an Order denying the motion to discharge. This Order of September 19, 1989 was successfully challenged by Queensland and Adarna in a special civil action of certiorari instituted by them in the Court of Appeals. The Order was, as aforestated, annulled by the Court of Appeals in its Decision of May 4, 1990. The Appellate Court's decision closed with the following disposition: . . . the Orders dated May 3, 1989 granting the issuance of a writ of preliminary attachment, dated September 19, 1989 denying the motion to discharge attachment; dated November 7, 1989 denying petitioner's motion for reconsideration; as well as all other orders emanating therefrom, specially the Writ of Attachment dated May 11, 1989 and Notice of Levy on Preliminary Attachment dated May 11, 1989, are hereby declared null and void and the attachment hereby ordered DISCHARGED.

The Appellate Tribunal declared that . . . While it is true that a prayer for the issuance of a writ of preliminary attachment may be included m the complaint, as is usually done, it is likewise true that the Court does not acquire jurisdiction over the person of the defendant until he is duly summoned or voluntarily appears, and adding the phrase that it be issued "ex parte" does not confer said jurisdiction before actual summons had been made, nor retroact jurisdiction upon summons being made. . . . It went on to say, citing Sievert v. Court of Appeals, 3 that "in a proceedings in attachment," the "critical time which must be identified is . . . when the trial court acquires authority under law to act coercively against the defendant or his property . . .;" and that "the critical time is the of the vesting of jurisdiction in the court over the person of the defendant in the main case." Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Light seeks in the present appellate proceedings. The question is whether or not a writ of preliminary attachment may issue ex parte against a defendant before acquisition of jurisdiction of the latter's person by service of summons or his voluntary submission to the Court's authority. The Court rules that the question must be answered in the affirmative and that consequently, the petition for review will have to be granted. It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of the plaintiff has been vested in the court, but before the acquisition of jurisdiction over the person of the defendant (either by service of summons or his voluntary submission to the court's authority), nothing can be validly done by the plaintiff or the court. It is wrong to assume that the validity of acts done during this period should be defendant on, or held in suspension until, the actual obtention of jurisdiction over the defendant's person. The obtention by the court of jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person of the plaintiff or over the subject-matter or nature of the action, or the res or object hereof.

An action or proceeding is commenced by the filing of the complaint or other initiatory pleading. 4 By that act, the jurisdiction of the court over the subject matter or nature of the action or proceeding is invoked or called into activity; 5 and it is thus that the court acquires jurisdiction over said subject matter or nature of the action. 6 And it is by that self-same act of the plaintiff (or petitioner) of filing the complaint (or other appropriate pleading) by which he signifies his submission to the court's power and authority that jurisdiction is acquired by the court over his person. 7 On the other hand, jurisdiction over the person of the defendant is obtained, as above stated, by the service of summons or other coercive process upon him or by his voluntary submission to the authority of the court. 8 The events that follow the filing of the complaint as a matter of routine are well known. After the complaint is filed, summons issues to the defendant, the summons is then transmitted to the sheriff, and finally, service of the summons is effected on the defendant in any of the ways authorized by the Rules of Court. There is thus ordinarily some appreciable interval of time between the day of the filing of the complaint and the day of service of summons of the defendant. During this period, different acts may be done by the plaintiff or by the Court, which are unquestionable validity and propriety. Among these, for example, are the appointment of a guardian ad litem, 9 the grant of authority to the plaintiff to prosecute the suit as a pauper litigant, 10 the amendment of the complaint by the plaintiff as a matter of right without leave of court, 11 authorization by the Court of service of summons by publication, 12 the dismissal of the action by the plaintiff on mere notice. 13 This, too, is true with regard to the provisional remedies of preliminary attachment, preliminary injunction, receivership or replevin. 14 They may be validly and properly applied for and granted even before the defendant is summoned or is heard from. A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of which a plaintiff or other party may, at the commencement of the action or at any time thereafter, have the property of the adverse party taken into the custody of the court as security for the satisfaction of any judgment that may be recovered. 15 It is a remedy which is purely statutory in respect of which the law requires a strict construction of the provisions granting it. 16 Withal no principle, statutory or jurisprudential, prohibits

its issuance by any court before acquisition of jurisdiction over the person of the defendant. Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time thereafter." 17The phase, "at the commencement of the action," obviously refers to the date of the filing of the complaint which, as above pointed out, is the date that marks "the commencement of the action;" 18 and the reference plainly is to a time before summons is served on the defendant, or even before summons issues. What the rule is saying quite clearly is that after an action is properly commenced by the filing of the complaint and the payment of all requisite docket and other fees the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counter-claim, cross-claim, third-party claim) and for the Trial Court to issue the writ ex-parteat the commencement of the action if it finds the application otherwise sufficient in form and substance. In Toledo v. Burgos, 19 this Court ruled that a hearing on a motion or application for preliminary attachment is not generally necessary unless otherwise directed by the Trial Court in its discretion. 20 And in Filinvest Credit Corporation v. Relova, 21 the Court declared that "(n)othing in the Rules of Court makes notice and hearing indispensable and mandatory requisites for the issuance of a writ of attachment." The only pre-requisite is that the Court be satisfied, upon consideration of "the affidavit of the applicant or of some other person who personally knows the facts, that a sufficient cause of action exists, that the case is one of those mentioned in Section 1 . . . (Rule 57), that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the applicant, or the value of the property the possession of which he is entitled to recover, is as much as the sum for which the order (of attachment) is granted above all legal counterclaims." 22 If the court be so satisfied, the "order of attachment shall be granted," 23 and the writ shall issue upon the applicant's posting of "a bond executed to the adverse party in an amount to be fixed by the judge, not exceeding the plaintiffs claim, conditioned that the latter will pay all the costs which may be

adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto." 24 In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18, 1989, 25 this Court had occasion to emphasize the postulate that no hearing is required on an application for preliminary attachment, with notice to the defendant, for the reason that this "would defeat the objective of the remedy . . . (since the) time which such a hearing would take, could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues." As observed by a former member of this Court, 26 such a procedure would warn absconding debtorsdefendants of the commencement of the suit against them and the probable seizure of their properties, and thus give them the advantage of time to hide their assets, leaving the creditor-plaintiff holding the proverbial empty bag; it would place the creditor-applicant in danger of losing any security for a favorable judgment and thus give him only an illusory victory. Withal, ample modes of recourse against a preliminary attachment are secured by law to the defendant. The relative ease with which a preliminary attachment may be obtained is matched and paralleled by the relative facility with which the attachment may legitimately be prevented or frustrated. These modes of recourse against preliminary attachments granted by Rule 57 were discussed at some length by the separate opinion in Mindanao Savings & Loans Asso. Inc. v. CA., supra. That separate opinion stressed that there are two (2) ways of discharging an attachment: first, by the posting of a counterbond; and second, by a showing of its improper or irregular issuance. 1.0. The submission of a counterbond is an efficacious mode of lifting an attachment already enforced against property, or even of preventing its enforcement altogether. 1.1. When property has already been seized under attachment, the attachment may be discharged upon counterbond in accordance with Section 12 of Rule 57.

Sec. 12. Discharge of attachment upon giving counterbond. At any time after an order of attachment has been granted, the party whose property has been attached or the person appearing in his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given . . . in an amount equal to the value of the property attached as determined by the judge to secure the payment of any judgment that the attaching creditor may recover in the action. . . . 1.2. But even before actual levy on property, seizure under attachment may be prevented also upon counterbond. The defendant need not wait until his property is seized before seeking the discharge of the attachment by a counterbond. This is made possible by Section 5 of Rule 57. Sec. 5. Manner of attaching property. The officer executing the order shall without delay attach, to await judgment and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the applicant, in an amount sufficient to satisfy such demand besides costs, or in an amount equal to the value of the property which is about to be attached, to secure payment to the applicant of any judgment which he may recover in the action. . . . (Emphasis supplied) 2.0. Aside from the filing of a counterbond, a preliminary attachment may also be lifted or discharged on the ground that it has been irregularly or improperly issued, in accordance with Section 13 of Rule 57. Like the first, this second mode of lifting an attachment may be resorted to even before any property has been levied on. Indeed, it may be availed of after property has been released from a levy on attachment, as is made clear by said Section 13, viz.:

Sec. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached may also, at any time either BEFORE or AFTER the release of the attached property, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counteraffidavits or other evidence in addition to that on which the attachment was made. . . . (Emphasis supplied) This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987), The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor instead of the other way, which, in most instances . . . would require presentation of evidence in a fullblown trial on the merits, and cannot easily be settled in a pending incident of the case." 27 It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings & Loans Asso. Inc. v.C.A., supra., 28 to wit: (a) When an attachment may not be dissolved by a showing of its irregular or improper issuance: . . . (W)hen the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty." (Sec. 1 [b], Rule 57), or "an action

against a party who has been guilty of fraud m contracting the debt or incurring the obligation upon which the action is brought" (Sec. 1 [d], Rule 57), the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiff's application and affidavits on which the writ was based and consequently that the writ based thereon had been improperly or irregularly issued (SEE Benitez v. I.A.C., 154 SCRA 41) the reason being that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counterbond (G.B. Inc. v. Sanchez, 98 Phil. 886). (b) Effect of the dissolution of a preliminary attachment on the plaintiffs attachment bond: . . . The dissolution of the preliminary attachment upon security given, or a showing of its irregular or improper issuance, does not of course operate to discharge the sureties on plaintiff's own attachment bond. The reason is simple. That bond is "executed to the adverse party, . . . conditioned that the . . . (applicant) will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto" (SEC. 4, Rule 57). Hence, until that determination is made, as to the applicant's entitlement to the attachment, his bond must stand and cannot be with-drawn. With respect to the other provisional remedies, i.e., preliminary injunction (Rule 58), receivership (Rule 59), replevin or delivery of personal property (Rule 60), the rule is the same: they may also issue ex parte. 29 It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of defendant, as

above indicated issuance of summons, order of attachment and writ of attachment (and/or appointments of guardian ad litem, or grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment of the complaint by the plaintiff as a matter of right without leave of court 30 and however valid and proper they might otherwise be, these do not and cannot bind and affect the defendant until and unless jurisdiction over his person is eventually obtained by the court, either by service on him of summons or other coercive process or his voluntary submission to the court's authority. Hence, when the sheriff or other proper officer commences implementation of the writ of attachment, it is essential that he serve on the defendant not only a copy of the applicant's affidavit and attachment bond, and of the order of attachment, as explicity required by Section 5 of Rule 57, but also the summons addressed to said defendant as well as a copy of the complaint and order for appointment of guardian ad litem, if any, as also explicity directed by Section 3, Rule 14 of the Rules of Court. Service of all such documents is indispensable not only for the acquisition of jurisdiction over the person of the defendant, but also upon considerations of fairness, to apprise the defendant of the complaint against him, of the issuance of a writ of preliminary attachment and the grounds therefor and thus accord him the opportunity to prevent attachment of his property by the posting of a counterbond in an amount equal to the plaintiff's claim in the complaint pursuant to Section 5 (or Section 12), Rule 57, or dissolving it by causing dismissal of the complaint itself on any of the grounds set forth in Rule 16, or demonstrating the insufficiency of the applicant's affidavit or bond in accordance with Section 13, Rule 57. It was on account of the failure to comply with this fundamental requirement of service of summons and the other documents above indicated that writs of attachment issued by the Trial Court ex parte were struck down by this Court's Third Division in two (2) cases, namely: Sievert v. Court of Appeals, 31 and BAC Manufacturing and Sales Corporation v. Court of Appeals, et al. 32 In contrast to the case at bar where the summons and a copy of the complaint, as well as the order and writ of attachment and the attachment bond were served on the defendant in Sievert, levy on attachment was attempted notwithstanding that only the petition for issuance of the writ of preliminary attachment was served on the defendant, without any prior or accompanying summons and copy of the complaint; and in BAC Manufacturing and Sales Corporation, neither the summons nor the order granting the preliminary attachment or the writ of

attachment itself was served on the defendant "before or at the time the levy was made." For the guidance of all concerned, the Court reiterates and reaffirms the proposition that writs of attachment may properly issue ex parte provided that the Court is satisfied that the relevant requisites therefor have been fulfilled by the applicant, although it may, in its discretion, require prior hearing on the application with notice to the defendant; but that levy on property pursuant to the writ thus issued may not be validly effected unless preceded, or contemporaneously accompanied, by service on the defendant of summons, a copy of the complaint (and of the appointment of guardian ad litem, if any), the application for attachment (if not incorporated in but submitted separately from the complaint), the order of attachment, and the plaintiff's attachment bond. WHEREFORE, the petition is GRANTED; the challenged decision of the Court of Appeals is hereby REVERSED, and the order and writ of attachment issued by Hon. Milagros C. Nartatez, Presiding Judge of Branch 8, Regional Trial Court of Davao City in Civil Case No. 1951389 against Queensland Hotel or Motel or Queensland Tourist Inn and Teodorico Adarna are hereby REINSTATED. Costs against private respondents. SO ORDERED.

CHEMPHIL EXPORT & IMPORT CO. vs. CA, 251 SCRA 257 Before us is a legal tug-of-war between the Chemphil Export and Import Corporation (hereinafter referred to as CEIC), on one side, and the PISO and Jaime Gonzales as assignee of the Bank of the Philippine Islands (BPI), Rizal Commercial Banking Corporation (RCBC), Land Bank of the Philippines (LBP) and Philippine Commercial International Bank (PCIB), on the other (hereinafter referred to as the consortium), over 1,717,678 shares of stock (hereinafter referred to as the "disputed shares") in the Chemical Industries of the Philippines (Chemphil/CIP).

Our task is to determine who is the rightful owner of the disputed shares. Pursuant to our resolution dated 30 May 1994, the instant case is a consolidation of two petitions for review filed before us as follows: In G.R. Nos. 112438-39, CEIC seeks the reversal of the decision of the Court of Appeals (former Twelfth Division) promulgated on 30 June 1993 and its resolution of 29 October 1993, denying petitioner's motion for reconsideration in the consolidated cases entitled "Dynetics, Inc., et al. v. PISO, et al." (CA-G.R. No. 20467) and "Dynetics, Inc., et al. v. PISO, et al.; CEIC, Intervenor-Appellee" (CAG.R. CV No. 26511). The dispositive portion of the assailed decision reads, thus: WHEREFORE, this Court consolidated cases as follows: resolves in these

In G.R. No. 113394, PCIB and its assignee, Jaime Gonzales, ask for the annulment of the Court of Appeals' decision (former Special Ninth Division) promulgated on 26 March 1993 in "PCIB v. Hon. Job B. Madayag & CEIC" (CA-G.R. SP NO. 20474) dismissing the petition for certiorari, prohibition and mandamus filed by PCIB and of said court's resolution dated 11 January 1994 denying their motion for reconsideration of its decision. 2 The antecedent facts leading to the aforementioned controversies are as follows: On September 25, 1984, Dynetics, Inc. and Antonio M. Garcia filed a complaint for declaratory relief and/or injunction against the PISO, BPI, LBP, PCIB and RCBC or the consortium with the Regional Trial Court of Makati, Branch 45 (Civil Case No. 8527), seeking judicial declaration, construction and interpretation of the validity of the surety agreement that Dynetics and Garcia had entered into with the consortium and to perpetually enjoin the latter from claiming, collecting and enforcing any purported obligations which Dynetics and Garcia might have undertaken in said agreement. 3 The consortium filed their respective answers with counterclaims alleging that the surety agreement in question was valid and binding and that Dynetics and Garcia were liable under the terms of the said agreement. It likewise applied for the issuance of a writ of preliminary attachment against Dynetics and Garcia. 4 Seven months later, or on 23 April 1985, Dynetics, Antonio Garcia and Matrix Management & Trading Corporation filed a complaint for declaratory relief and/or injunction against the Security Bank & Trust Co. (SBTC case) before the Regional Trial Court of Makati, Branch 135 docketed as Civil Case No. 10398. 5 On 2 July 1985, the trial court granted SBTC's prayer for the issuance of a writ of preliminary attachment and on 9 July 1985, a notice of garnishment covering Garcia's shares in CIP/Chemphil (including the disputed shares) was served on Chemphil through its then President. The notice of garnishment was duly annotated in the stock and transfer books of Chemphil on the same date. 6 On 6 September 1985, the writ of attachment in favor of SBTC was lifted. However, the same was reinstated on 30 October 1985. 7

1. The Orders of the Regional Trial Court, dated March 25, 1988, and May 20, 1988, subject of CA-G.R. CV No. 10467, are SET ASIDE and judgment is hereby rendered in favor of the consortium and against appellee Dynetics, Inc., the amount of the judgment, to be determined by Regional Trial Court, taking into account the value of assets that the consortium may have already recovered and shall have recovered in accordance with the other portions of this decision. 2. The Orders of the Regional Trial Court dated December 19, 1989 and March 5, 1990 are hereby REVERSED and SET ASIDE and judgment is hereby rendered confirming the ownership of the consortium over the Chemphil shares of stock, subject of CA-G.R. CV No. 26511, and the Order dated September 4, 1989, is reinstated. No pronouncement as to costs. SO ORDERED. 1

In the meantime, on 12 July 1985, the Regional Trial Court in Civil Case No. 8527 (the consortium case) denied the application of Dynetics and Garcia for preliminary injunction and instead granted the consortium's prayer for a consolidated writ of preliminary attachment. Hence, on 19 July 1985, after the consortium had filed the required bond, a writ of attachment was issued and various real and personal properties of Dynetics and Garcia were garnished, including the disputed shares. 8 This garnishment, however, was not annotated in Chemphil's stock and transfer book. On 8 September 1987, PCIB filed a motion to dismiss the complaint of Dynetics and Garcia for lack of interest to prosecute and to submit its counterclaims for decision, adopting the evidence it had adduced at the hearing of its application for preliminary attachment. 9 On 25 March 1988, the Regional Trial Court dismissed the complaint of Dynetics and Garcia in Civil Case No. 8527, as well as the counterclaims of the consortium, thus: Resolving defendant's, Philippine Commercial International Bank, MOTION TO DISMISS WITH MOTION TO SUBMIT DEFENDANT PCIBANK's COUNTERCLAIM FOR DECISION, dated September 7, 1987: (1) The motion to dismiss is granted; and the instant case is hereby ordered dismissed pursuant to Sec. 3, Rule 17 of the Revised Rules of Court, plaintiff having failed to comply with the order dated July 16, 1987, and having not taken further steps to prosecute the case; and (2) The motion to submit said defendant's counterclaim for decision is denied; there is no need; said counterclaim is likewise dismissed under the authority of Dalman vs. City Court of Dipolog City, L-63194, January 21, 1985, wherein the Supreme Court stated that if the civil case is dismissed, so also is the counterclaim filed therein. "A person cannot eat his cake and have it at the same time" (p. 645, record, Vol. I).10

The motions for reconsideration filed by the consortium were, likewise, denied by the trial court in its order dated 20 May 1988: The Court could have stood pat on its order dated 25 March 1988, in regard to which the defendants-banks concerned filed motions for reconsideration. However, inasmuch as plaintiffs commented on said motions that: "3). In any event, so as not to unduly foreclose on the rights of the respective parties to refile and prosecute their respective causes of action, plaintiffs manifest their conformity to the modification of this Honorable Court's order to indicate that the dismissal of the complaint and the counterclaims is without prejudice." (p. 2, plaintiffs' COMMENT etc. dated May 20, 1988). The Court is inclined to so modify the said order. WHEREFORE , the order issued on March 25, 1988, is hereby modified in the sense that the dismissal of the complaint as well as of the counterclaims of defendants RCBC, LBP, PCIB and BPI shall be considered as without prejudice (p. 675, record, Vol. I). 11 Unsatisfied with the aforementioned order, the consortium appealed to the Court of Appeals, docketed as CA-G.R. CV No. 20467. On 17 January 1989 during the pendency of consortium's appeal in CA-G.R. CV No. 20467, Antonio Garcia and the consortium entered into a Compromise Agreement which the Court of Appeals approved on 22 May 1989 and became the basis of its judgment by compromise. Antonio Garcia was dropped as a party to the appeal leaving the consortium to proceed solely against Dynetics, Inc. 12 On 27 June 1989, entry of judgment was made by the Clerk of Court. 13 Hereunder quoted are the salient portions of said compromise agreement: xxx xxx xxx 3. Defendants, in consideration of avoiding an extended litigation, having agreed to limit their claim

against plaintiff Antonio M. Garcia to a principal sum of P145 Million immediately demandable and to waive all other claims to interest, penalties, attorney's fees and other charges. The aforesaid compromise amount of indebtedness of P145 Million shall earn interest of eighteen percent (18%) from the date of this Compromise. 4. Plaintiff Antonio M. Garcia and herein defendants have no further claims against each other. 5. This Compromise shall be without prejudice to such claims as the parties herein may have against plaintiff Dynetics, Inc. 6. Plaintiff Antonio M. Garcia shall have two (2) months from date of this Compromise within which to work for the entry and participation of his other creditor, Security Bank and Trust Co., into this Compromise. Upon the expiration of this period, without Security Bank and Trust Co. having joined, this Compromise shall be submitted to the Court for its information and approval (pp. 27, 28-31, rollo, CA-G.R. CV No. 10467). 14 It appears that on 15 July 1988, Antonio Garcia under a Deed of Sale transferred to Ferro Chemicals, Inc. (FCI) the disputed shares and other properties for P79,207,331.28. It was agreed upon that part of the purchase price shall be paid by FCI directly to SBTC for whatever judgment credits that may be adjudged in the latter's favor and against Antonio Garcia in the aforementioned SBTC case. 15 On 6 March 1989, FCI, through its President Antonio M. Garcia, issued a Bank of America Check No. 860114 in favor of SBTC in the amount of P35,462,869.62. 16 SBTC refused to accept the check claiming that the amount was not sufficient to discharge the debt. The check was thus consigned by Antonio Garcia and Dynetics with the Regional Trial Court as payment of their judgment debt in the SBTC case. 17 On 26 June 1989, FCI assigned its 4,119,614 shares in Chemphil, which included the disputed shares, to petitioner CEIC. The shares were registered and recorded in the corporate books of Chemphil in

CEIC's name and the corresponding stock certificates were issued to it. 18 Meanwhile, Antonio Garcia, in the consortium case, failed to comply with the terms of the compromise agreement he entered into with the consortium on 17 January 1989. As a result, on 18 July 1989, the consortium filed a motion for execution which was granted by the trial court on 11 August 1989. Among Garcia's properties that were levied upon on execution were his 1,717,678 shares in Chemphil (the disputed shares) previously garnished on 19 July 1985. 19 On 22 August 1989, the consortium acquired the disputed shares of stock at the public auction sale conducted by the sheriff for P85,000,000.00. 20 On same day, a Certificate of Sale covering the disputed shares was issued to it. On 30 August 1989, 21 the consortium filed a motion (dated 29 August 1989) to order the corporate secretary of Chemphil to enter in its stock and transfer books the sheriff's certificate of sale dated 22 August 1989, and to issue new certificates of stock in the name of the banks concerned. The trial court granted said motion in its order dated 4 September 1989, thus: For being legally proper, defendant's MOTION TO ORDER THE CORPORATE SECRETARY OF CHEMICAL INDUSTRIES OF THE PHILS., INC. (CHEMPIL) TO ENTER IN THE STOCK AND TRANSFER BOOKS OF CHEMPHIL THE SHERIFF'S CERTIFICATE OF SALE DATED AUGUST 22, 1989 AND TO ISSUE NEW CERTIFICATES OF STOCK IN THE NAME OF THE DEFENDANT BANKS, dated August 29, 1989, is hereby granted. WHEREFORE, the corporate secretary of the aforesaid corporation, or whoever is acting for and in his behalf, is hereby ordered to (1) record and/or register the Certificate of Sale dated August 22, 1989 issued by Deputy Sheriff Cristobal S. Jabson of this Court; (2) to cancel the certificates of stock of plaintiff Antonio M. Garcia and all those which may have subsequently been issued in replacement and/or in substitution thereof; and (3) to issue in lieu of the said shares new

shares of stock in the name of the defendant Banks, namely, PCIB, BPI, RCBC, LBP and PISO bank in such proportion as their respective claims would appear in this suit (p. 82, record, Vol. II). 22 On 26 September 1989, CEIC filed a motion to intervene (dated 25 September 1989) in the consortium case seeking the recall of the abovementioned order on grounds that it is the rightful owner of the disputed shares. 23 It further alleged that the disputed shares were previously owned by Antonio M. Garcia but subsequently sold by him on 15 July 1988 to Ferro Chemicals, Inc. (FCI) which in turn assigned the same to CEIC in an agreement dated 26 June 1989. On 27 September 1989, the trial court granted CEIC's motion allowing it to intervene, but limited only to the incidents covered by the order dated 4 September 1989. In the same order, the trial court directed Chemphil's corporate secretary to temporarily refrain from implementing the 4 September 1989 24 order. On 2 October 1989, the consortium filed their opposition to CEIC's motion for intervention alleging that their attachment lien over the disputed shares of stocks must prevail over the private sale in favor of the CEIC considering that said shares of stock were garnished in the consortium's favor as early as 19 July 1985. 25 On 4 October 1989, the consortium filed their opposition to CEIC's motion to set aside the 4 September 1989 order and moved to lift the 27 September 1989 order. 26 On 12 October 1989, the consortium filed a manifestation and motion to lift the 27 September 1989 order, to reinstate the 4 September 1989 order and to direct CEIC to surrender the disputed stock certificates of Chemphil in its possession within twenty-four (24) hours, failing in which the President, Corporate Secretary and stock and transfer agent of Chemphil be directed to register the names of the banks making up the consortium as owners of said shares, sign the new certificates of stocks evidencing their ownership over said shares and to immediately deliver the stock certificates to them. 27

Resolving the foregoing motions, the trial court rendered an order dated 19 December 1989, the dispositive portion of which reads as follows: WHEREFORE, premises considered, the Urgent Motion dated September 25, 1989 filed by CEIC is hereby GRANTED. Accordingly, the Order of September 4, 1989, is hereby SET ASIDE, and any and all acts of the Corporate Secretary of CHEMPHIL and/or whoever is acting for and in his behalf, as may have already been done, carried out or implemented pursuant to the Order of September 4, 1989, are hereby nullified. PERFORCE, the CONSORTIUM'S Motions dated October 3, 1989 and October 11, 1989, are both hereby denied for lack of merit. The Cease and Desist Order dated September 27, 1989, is hereby AFFIRMED and made PERMANENT. SO ORDERED. 28 In so ruling, the trial court ratiocinated in this wise: xxx xxx xxx After careful and assiduous consideration of the facts and applicable law and jurisprudence, the Court holds that CEIC's Urgent Motion to Set Aside the Order of September 4, 1989 is impressed with merit. The CONSORTIUM has admitted that the writ of attachment/garnishment issued on July 19, 1985 on the shares of stock belonging to plaintiff Antonio M. Garcia was not annotated and registered in the stock and transfer books of CHEMPHIL. On the other hand, the prior attachment issued in favor of SBTC on July 2, 1985 by Branch 135 of this Court in Civil Case No. 10398, against the same CHEMPHIL shares of Antonio M. Garcia, was duly registered and annotated in the stock and transfer books of CHEMPHIL. The matter of

non-recording of the Consortium's attachment in Chemphil's stock and transfer book on the shares of Antonio M. Garcia assumes significance considering CEIC's position that FCI and later CEIC acquired the CHEMPHIL shares of Antonio M. Garcia without knowledge of the attachment of the CONSORTIUM. This is also important as CEIC claims that it has been subrogated to the rights of SBTC since CEIC's predecessor-in-interest, the FCI, had paid SBTC the amount of P35,462,869.12 pursuant to the Deed of Sale and Purchase of Shares of Stock executed by Antonio M. Garcia on July 15, 1988. By reason of such payment, sale with the knowledge and consent of Antonio M. Garcia, FCI and CEIC, as party-in-interest to FCI, are subrogated by operation of law to the rights of SBTC. The Court is not unaware of the citation in CEIC's reply that "as between two (2) attaching creditors, the one whose claims was first registered on the books of the corporation enjoy priority." (Samahang Magsasaka, Inc. vs. Chua Gan, 96 Phil. 974.) The Court holds that a levy on the shares of corporate stock to be valid and binding on third persons, the notice of attachment or garnishment must be registered and annotated in the stock and transfer books of the corporation, more so when the shares of the corporation are listed and traded in the stock exchange, as in this case. As a matter of fact, in the CONSORTIUM's motion of August 30, 1989, they specifically move to "order the Corporate Secretary of CHEMPHIL to enter in the stock and transfer books of CHEMPHIL the Sheriff's Certificate of Sale dated August 22, 1989." This goes to show that, contrary to the arguments of the CONSORTIUM, in order that attachment, garnishment and/or encumbrances affecting rights and ownership on shares of a corporation to be valid and binding, the same has to be recorded in the stock and transfer books. Since neither CEIC nor FCI had notice of the CONSORTIUM's attachment of July 19, 1985, CEIC's shares of stock in CHEMPHIL, legally acquired from

Antonio M. Garcia, cannot be levied upon in execution to satisfy his judgment debts. At the time of the Sheriff's levy on execution, Antonio M. Garcia has no more in CHEMPHIL which could be levied upon. 29 xxx xxx xxx On 23 January 1990, the consortium and PCIB filed separate motions for reconsideration of the aforestated order which were opposed by petitioner CEIC. 30 On 5 March 1990, the trial court denied the motions for reconsideration. 31 On 16 March 1990, the consortium appealed to the Court of Appeals (CA-G.R. No. 26511). In its Resolution dated 9 August 1990, the Court of Appeals consolidated CA-G.R. No. 26511 with CA-G.R. No. 20467. 32 The issues raised in the two cases, as formulated by the Court of Appeals, are as follows: I WHETHER OR NOT, UNDER THE PECULIAR CIRCUMSTANCES OF THE CASE, THE TRIAL COURT ERRED IN DISMISSING THE COUNTERCLAIMS OF THE CONSORTIUM IN CIVIL CASE NO. 8527; II WHETHER OR NOT THE DISMISSAL OF CIVIL CASE NO. 8527 RESULTED IN THE DISCHARGE OF THE WRIT OF ATTACHMENT ISSUED THEREIN EVEN AS THE CONSORTIUM APPEALED THE ORDER DISMISSING CIVIL CASE NO. 8527; III

WHETHER OR NOT THE JUDGMENT BASED ON COMPROMISE RENDERED BY THIS COURT ON MAY 22, 1989 HAD THE EFFECT OF DISCHARGING THE ATTACHMENTS ISSUED IN CIVIL CASE NO. 8527; IV WHETHER OR NOT THE ATTACHMENT OF SHARES OF STOCK, IN ORDER TO BIND THIRD PERSONS, MUST BE RECORDED IN THE STOCK AND TRANSFER BOOK OF THE CORPORATION; AND V WHETHER OR NOT FERRO CHEMICALS, INC. (FCI), AND ITS SUCCESSOR-IN-INTEREST, CEIC, WERE SUBROGATED TO THE RIGHTS OF SECURITY BANK & TRUST COMPANY (SBTC) IN A SEPARATE CIVIL ACTION. (This issue appears to be material as SBTC is alleged to have obtained an earlier attachment over the same Chemphil shares that the consortium seeks to recover in the case at bar). 33 On 6 April 1990, the PCIB separately filed with the Court of Appeals a petition for certiorari, prohibition andmandamus with a prayer for the issuance of a writ of preliminary injunction (CA-G.R. No. SP-20474), likewise, assailing the very same orders dated 19 December 1989 and 5 March 1990, subject of CA-G.R. No. 26511. 34 On 30 June 1993, the Court of Appeals (Twelfth Division) in CA-G.R. No. 26511 and CA-G.R. No. 20467 rendered a decision reversing the orders of the trial court and confirming the ownership of the consortium over the disputed shares. CEIC's motion for reconsideration was denied on 29 October 1993. 35 In ruling for the consortium, the Court of Appeals made the following ratiocination: 36

On the first issue, it ruled that the evidence offered by the consortium in support of its counterclaims, coupled with the failure of Dynetics and Garcia to prosecute their case, was sufficient basis for the RTC to pass upon and determine the consortium's counterclaims. The Court of Appeals found no application for the ruling in Dalman v. City Court of Dipolog, 134 SCRA 243 (1985) that "a person cannot eat his cake and have it at the same time. If the civil case is dismissed, so also is the counterclaim filed therein" because the factual background of the present action is different. In the instant case, both Dynetics and Garcia and the consortium presented testimonial and documentary evidence which clearly should have supported a judgment on the merits in favor of the consortium. As the consortium correctly argued, the net atrocious effect of the Regional Trial Court's ruling is that it allows a situation where a party litigant is forced to plead and prove compulsory counterclaims only to be denied those counterclaims on account of the adverse party's failure to prosecute his case. Verily, the consortium had no alternative but to present its counterclaims in Civil Case No. 8527 since its counterclaims are compulsory in nature. On the second issue, the Court of Appeals opined that unless a writ of attachment is lifted by a special order specifically providing for the discharge thereof, or unless a case has been finally dismissed against the party in whose favor the attachment has been issued, the attachment lien subsists. When the consortium, therefore, took an appeal from the Regional Trial Court's orders of March 25, 1988 and May 20, 1988, such appeal had the effect of preserving the consortium's attachment liens secured at the inception of Civil Case No. 8527, invoking the rule in Olib v. Pastoral,188 SCRA 692 (1988) that where the main action is appealed, the attachment issued in the said main case is also considered appealed.

Anent the third issue, the compromise agreement between the consortium and Garcia dated 17 January 1989 did not result in the abandonment of its attachment lien over his properties. Said agreement was approved by the Court of Appeals in a Resolution dated 22 May 1989. The judgment based on the compromise agreement had the effect of preserving the said attachment lien as security for the satisfaction of said judgment (citing BF Homes, Inc. v. CA, 190 SCRA 262, [1990]). As to the fourth issue, the Court of Appeals agreed with the consortium's position that the attachment of shares of stock in a corporation need not be recorded in the corporation's stock and transfer book in order to bind third persons. Section 7(d), Rule 57 of the Rules of Court was complied with by the consortium (through the Sheriff of the trial court) when the notice of garnishment over the Chemphil shares of Garcia was served on the president of Chemphil on July 19, 1985. Indeed, to bind third persons, no law requires that an attachment of shares of stock be recorded in the stock and transfer book of a corporation. The statement attributed by the Regional Trial Court to the Supreme Court in Samahang Magsasaka, Inc.vs. Gonzalo Chua Guan, G.R. No. L-7252, February 25, 1955 (unreported), to the effect that "as between two attaching creditors, the one whose claim was registered first on the books of the corporation enjoys priority," is an obiter dictum that does not modify the procedure laid down in Section 7(d), Rule 57 of the Rules of Court. Therefore, ruled the Court of Appeals, the attachment made over the Chemphil shares in the name of Garcia on July 19, 1985 was made in accordance with law and the lien created thereby remained valid and subsisting at the time Garcia sold those shares to FCI (predecessor-in-interest of appellee CEIC) in 1988.

Anent the last issue, the Court of Appeals rejected CEIC's subrogation theory based on Art. 1302 (2) of the New Civil Code stating that the obligation to SBTC was paid by Garcia himself and not by a third party (FCI). The Court of Appeals further opined that while the check used to pay SBTC was a FCI corporate check, it was funds of Garcia in FCI that was used to pay off SBTC. That the funds used to pay off SBTC were funds of Garcia has not been refuted by FCI or CEIC. It is clear, therefore, that there was an attempt on the part of Garcia to use FCI and CEIC as convenient vehicles to deny the consortium its right to make itself whole through an execution sale of the Chemphil shares attached by the consortium at the inception of Civil Case No. 8527. The consortium, therefore, is entitled to the issuance of the Chemphil shares of stock in its favor. The Regional Trial Court's order of September 4, 1989, should, therefore, be reinstated in toto. Accordingly, the question of whether or not the attachment lien in favor of SBTC in the SBTC case is superior to the attachment lien in favor of the consortium in Civil Case No. 8527 becomes immaterial with respect to the right of intervenor-appellee CEIC. The said issue would have been relevant had CEIC established its subrogation to the rights of SBTC. On 26 March 1993, the Court of Appeals (Special Ninth Division) in CA-G.R. No. SP 20474 rendered a decision denying due course to and dismissing PCIB's petition for certiorari on grounds that PCIB violated the rule against forum-shopping and that no grave abuse of discretion was committed by respondent Regional Trial Court in issuing its assailed orders dated 19 December 1989 and 5 March 1990. PCIB's motion for reconsideration was denied on 11 January 1994. 37 On 7 July 1993, the consortium, with the exception of PISO, assigned without recourse all its rights and interests in the disputed shares to Jaime Gonzales. 38

On 3 January 1994, CEIC filed the instant petition for review docketed as G.R. Nos. 112438-39 and assigned the following errors: I. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN SETTING ASIDE AND REVERSING THE ORDERS OF THE REGIONAL TRIAL COURT DATED DECEMBER 5, 1989 AND MARCH 5, 1990 AND IN NOT CONFIRMING PETITIONER'S OWNERSHIP OVER THE DISPUTED CHEMPHIL SHARES AGAINST THE FRIVOLOUS AND UNFOUNDED CLAIMS OF THE CONSORTIUM. II. THE RESPONDENT GRAVELY ERRED: COURT OF APPEALS

Court inSamahang Magsasaka, Inc. vs. Gonzalo Chua Guan, 96 Phil. 974 that as between two attaching creditors, the one whose claim was registered first in the books of the corporation enjoys priority, and which respondent Court erroneously characterized as mere obiter dictum; (3) In not holding that the dismissal of the appeal of the Consortium from the order of the trial court dismissing its counterclaim against Antonio M. Garcia and the finality of the compromise agreement which ended the litigation between the Consortium and Antonio M. Garcia in the Dynetics case had ipso jure discharged the Consortium's purported attachment over the disputed shares. III. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT CEIC HAD BEEN SUBROGATED TO THE RIGHTS OF SBTC SINCE CEIC'S PREDECESSOR IN INTEREST HAD PAID SBTC PURSUANT TO THE DEED OF SALE AND PURCHASE OF STOCK EXECUTED BY ANTONIO M. GARCIA ON JULY 15, 1988, AND THAT BY REASON OF SUCH PAYMENT, WITH THE CONSENT AND KNOWLEDGE OF ANTONIO M. GARCIA, FCI AND CEIC, AS PARTY IN INTEREST TO FCI, WERE SUBROGATED BY OPERATION OF LAW TO THE RIGHTS OF SBTC. IV. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED AND MADE UNWARRANTED INFERENCES AND CONCLUSIONS, WITHOUT ANY SUPPORTING EVIDENCE, THAT THERE WAS AN

(1) In not holding that the Consortium's attachment over the disputed Chemphil shares did not vest any priority right in its favor and cannot bind third parties since admittedly its attachment on 19 July 1985 was not recorded in the stock and transfer books of Chemphil, and subordinate to the attachment of SBTC which SBTC registered and annotated in the stock and transfer books of Chemphil on 2 July 1985, and that the Consortium's attachment failed to comply with Sec. 7(d), Rule 57 of the Rules as evidenced by the notice of garnishment of the deputy sheriff of the trial court dated 19 July 1985 (annex "D") which the sheriff served on a certain Thelly Ruiz who was neither President nor managing agent of Chemphil; (2) In not applying the case law enunciated by this Honorable Supreme

ATTEMPT ON THE PART OF ANTONIO M. GARCIA TO USE FCI AND CEIC AS CONVENIENT VEHICLES TO DENY THE CONSORTIUM ITS RIGHTS TO MAKE ITSELF WHOLE THROUGH AN EXECUTION OF THE CHEMPHIL SHARES PURPORTEDLY ATTACHED BY THE CONSORTIUM ON 19 JULY 1985. 39 On 2 March 1994, PCIB filed its own petition for review docketed as G.R. No. 113394 wherein it raised the following issues: I. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN RENDERING THE DECISION AND RESOLUTION IN QUESTION (ANNEXES A AND B) IN DEFIANCE OF LAW AND JURISPRUDENCE BY FINDING RESPONDENT CEIC AS HAVING BEEN SUBROGATED TO THE RIGHTS OF SBTC BY THE PAYMENT BY FCI OF GARCIA'S DEBTS TO THE LATTER DESPITE THE FACT THAT A. FCI PAID THE SBTC DEBT BY VIRTUE OF A CONTRACT BETWEEN FCI AND GARCIA, THUS, LEGAL SUBROGATION DOES NOT ARISE; B. THE SBTC DEBT WAS PAID BY GARCIA HIMSELF AND NOT BY FCI, HENCE, SUBROGATION BY PAYMENT COULD NOT HAVE OCCURRED; C. FCI DID NOT ACQUIRE ANY RIGHT OVER THE DISPUTED SHARES AS SBTC HAD NOT YET LEVIED UPON NOR BOUGHT THOSE SHARES ON EXECUTION. ACCORDINGLY, WHAT FCI ACQUIRED FROM SBTC WAS SIMPLY A JUDGMENT CREDIT AND AN ATTACHMENT LIEN TO SECURE ITS SATISFACTION. II. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN SUSTAINING

THE ORDERS OF THE TRIAL COURT DATED DECEMBER 19, 1989 AND MARCH 5, 1990 WHICH DENIED PETITIONER'S OWNERSHIP OVER THE DISPUTED SHARES NOTWITHSTANDING PROVISIONS OF LAW AND EXTANT JURISPRUDENCE ON THE MATTER THAT PETITIONER AND THE CONSORTIUM HAVE PREFERRED SENIOR RIGHTS THEREOVER. III. RESPONDENT COURT OF APPEAL COMMITTED SERIOUS ERROR IN CONCLUDING THAT THE DISMISSAL OF THE COMPLAINT AND THE COUNTERCLAIM IN CIVIL CASE NO. 8527 ALSO RESULTED IN THE DISCHARGE OF THE WRIT OF ATTACHMENT DESPITE THE RULINGS OF THIS HONORABLE COURT IN BF HOMES VS. COURT OF APPEALS, G.R. NOS. 76879 AND 77143, OCTOBER 3, 1990, 190 SCRA 262, AND IN OLIB VS. PASTORAL, G.R. NO. 81120, AUGUST 20, 1990, 188 SCRA 692 TO THE CONTRARY. IV. RESPONDENT COURT OF APPEALS EXCEEDED ITS JURISDICTION IN RULING ON THE MERITS OF THE MAIN CASE NOTWITHSTANDING THAT THOSE MATTERS WERE NOT ON APPEAL BEFORE IT. V. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT PETITIONER IS GUILTY OF FORUM SHOPPING DESPITE THE FACT THAT SC CIRCULAR NO. 28-91 WAS NOT YET IN FORCE AND EFFECT AT THE TIME THE PETITION WAS FILED BEFORE RESPONDENT APPELLATE COURT, AND THAT ITS COUNSEL AT THAT TIME HAD ADEQUATE BASIS TO BELIEVE THATCERTIORARI AND NOT AN APPEAL OF THE TRIAL COURT'S ORDERS WAS THE APPROPRIATE RELIEF.40 As previously stated, the issue boils down to who is legally entitled to the disputed shares of Chemphil. We shall resolve this controversy by

examining the validity of the claims of each party and, thus, determine whose claim has priority. CEIC's claim CEIC traces its claim over the disputed shares to the attachment lien obtained by SBTC on 2 July 1985 against Antonio Garcia in Civil Case No. 10398. It avers that when FCI, CEIC's predecessor-ininterest, paid SBTC the due obligations of Garcia to the said bank pursuant to the Deed of Absolute Sale and Purchase of Shares of Stock, 41FCI, and later CEIC, was subrogated to the rights of SBTC, particularly to the latter's aforementioned attachment lien over the disputed shares. CEIC argues that SBTC's attachment lien is superior as it was obtained on 2 July 1985, ahead of the consortium's purported attachment on 19 July 1985. More importantly, said CEIC lien was duly recorded in the stock and transfer books of Chemphil. CEIC's subrogation theory is unavailing. By definition, subrogation is "the transfer of all the rights of the creditor to a third person, who substitutes him in all his rights. It may either be legal or conventional. Legal subrogation is that which takes place without agreement but by operation of law because of certain acts; this is the subrogation referred to in article 1302. Conventional subrogation is that which takes place by agreement of the parties . . ." 42 CEIC's theory is premised on Art. 1302 (2) of the Civil Code which states: Art. 1302. It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred, even without the debtor's knowledge; (2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;

(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share. (Emphasis ours.) Despite, however, its multitudinous arguments, CEIC presents an erroneous interpretation of the concept of subrogation. An analysis of the situations involved would reveal the clear inapplicability of Art. 1302 (2). Antonio Garcia sold the disputed shares to FCI for a consideration of P79,207,331.28. FCI, however, did not pay the entire amount to Garcia as it was obligated to deliver part of the purchase price directly to SBTC pursuant to the following stipulation in the Deed of Sale: Manner of Payment Payment of the Purchase Price shall be made in accordance with the following order of preferenceprovided that in no instance shall the total amount paid by the Buyer exceed the Purchase Price: a. Buyer shall pay directly to the Security Bank and Trust Co. the amount determined by the Supreme Court as due and owing in favor of the said bank by the Seller. The foregoing amount shall be paid within fifteen (15) days from the date the decision of the Supreme Court in the case entitled "Antonio M. Garcia, et al. vs. Court of Appeals, et al." G.R. Nos. 82282-83 becomes final and executory. 43 (Emphasis ours.) Hence, when FCI issued the BA check to SBTC in the amount of P35,462,869.62 to pay Garcia's indebtedness to the said bank, it was in effect paying with Garcia's money, no longer with its own, because said amount was part of the purchase price which FCI owed Garcia in payment for the sale of the disputed shares by the latter to the former. The money "paid" by FCI to SBTC, thus properly belonged to Garcia. It is as if Garcia himself paid his own debt to SBTC but through a third party FCI.

It is, therefore, of no consequence that what was used to pay SBTC was a corporate check of FCI. As we have earlier stated, said check no longer represented FCI funds but Garcia's money, being as it was part of FCI's payment for the acquisition of the disputed shares. The FCI check should not be taken at face value, the attendant circumstances must also be considered. The aforequoted contractual stipulation in the Deed of Sale dated 15 July 1988 between Antonio Garcia and FCI is nothing more but an arrangement for the sake of convenience. Payment was to be effected in the aforesaid manner so as to prevent money from changing hands needlessly. Besides, the very purpose of Garcia in selling the disputed shares and his other properties was to "settle certain civil suits filed against him." 44 Since the money used to discharge Garcia's debt rightfully belonged to him, FCI cannot be considered a third party payor under Art. 1302 (2). It was but a conduit, or as aptly categorized by respondents, merely an agent as defined in Art. 1868 of the Civil Code: Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. FCI was merely fulfilling its obligation under the aforementioned Deed of Sale. Additionally, FCI is not a disinterested party as required by Art. 1302 (2) since the benefits of the extinguishment of the obligation would redound to none other but itself. 45 Payment of the judgment debt to SBTC resulted in the discharge of the attachment lien on the disputed shares purchased by FCI. The latter would then have a free and "clean" title to said shares. In sum, CEIC, for its failure to fulfill the requirements of Art. 1302 (2), was not subrogated to the rights of SBTC against Antonio Garcia and did not acquire SBTC's attachment lien over the disputed shares which, in turn, had already been lifted or discharged upon satisfaction by Garcia, through FCI, of his debt to the said bank. 46

The rule laid down in the case of Samahang Magsasaka, Inc. v. Chua Guan, 47 that as between two attaching creditors the one whose claim was registered ahead on the books of the corporation enjoys priority, clearly has no application in the case at bench. As we have amply discussed, since CEIC was not subrogated to SBTC's right as attaching creditor, which right in turn, had already terminated after Garcia paid his debt to SBTC, it cannot, therefore, be categorized as an attaching creditor in the present controversy. CEIC cannot resurrect and claim a right which no longer exists. The issue in the instant case, then, is priority between an attaching creditor (the consortium) and a purchaser (FCI/CEIC) of the disputed shares of stock and not between two attaching creditors the subject matter of the aforestated Samahang Magsasaka case. CEIC, likewise, argues that the consortium's attachment lien over the disputed Chemphil shares is null and void and not binding on third parties due to the latter's failure to register said lien in the stock and transfer books of Chemphil as mandated by the rule laid down by the Samahang Magsasaka v. Chua Guan. 48 The attachment lien acquired by the consortium is valid and effective. Both the Revised Rules of Court and the Corporation Code do not require annotation in the corporation's stock and transfer books for the attachment of shares of stock to be valid and binding on the corporation and third party. Section 74 of the Corporation Code which enumerates the instances where registration in the stock and transfer books of a corporation provides: Sec. 74. Books to be kept; stock transfer agent. xxx xxx xxx Stock corporations must also keep a book to be known as the stock and transfer book, in which must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any settlement; a statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made;

and such other entries as the by-laws may prescribe. The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open for inspection by any director or stockholder of the corporation at reasonable hours on business days. (Emphasis ours.) xxx xxx xxx Section 63 of the same Code states: Sec. 63. Certificate of stock and transfer of shares. The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred. No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation. (Emphasis ours.) Are attachments of shares of stock included in the term "transfer" as provided in Sec. 63 of the Corporation Code? We rule in the negative. As succinctly declared in the case of Monserrat v. Ceron, 49 "chattel mortgage over shares of stock need not be registered in the corporation's stock and transfer book inasmuch as chattel mortgage over shares of stock does not involve a "transfer of shares," and that only absolute transfers of shares of stock are required to be recorded in the corporation's stock and transfer book in order to have "force and effect as against third persons."

xxx xxx xxx The word "transferencia" (transfer) is defined by the "Diccionario de la Academia de la Lengua Castellana" as "accion y efecto de transfeir" (the act and effect of transferring); and the verb "transferir", as "ceder or renunciar en otro el derecho o dominio que se tiene sobre una cosa, haciendole dueno de ella" (to assign or waive the right in, or absolute ownership of, a thing in favor of another, making him the owner thereof). In the Law Dictionary of "Words and Phrases", third series, volume 7, p. 5867, the word "transfer" is defined as follows: "Transfer" means any act by which property of one person is vested in another, and "transfer of shares", as used in Uniform Stock Transfer Act (Comp. St. Supp. 690), implies any means whereby one may be divested of and another acquire ownership of stock. (Wallach vs. Stein [N.J.], 136 A., 209, 210.) xxx xxx xxx In the case of Noble vs. Ft. Smith Wholesale Grocery Co. (127 Pac., 14, 17; 34 Okl., 662; 46 L.R.A. [N.S.], 455), cited in Words and Phrases, second series, vol. 4, p. 978, the following appears: A "transfer" is the act by which the owner of a thing delivers it to another with the intent of passing the rights which he has in it to the latter, and a chattel mortgage is not within the meaning of such term. xxx xxx xxx. 50

Although the Monserrat case refers to a chattel mortgage over shares of stock, the same may be applied to the attachment of the disputed shares of stock in the present controversy since an attachment does not constitute an absolute conveyance of property but is primarily used as a means "to seize the debtor's property in order to secure the debt or claim of the creditor in the event that a judgment is rendered." 51 Known commentators on the Corporation Code expound, thus: xxx xxx xxx Shares of stock being personal property, may be the subject matter of pledge and chattel mortgage. Suchcollateral transfers are however not covered by the registration requirement of Section 63, since our Supreme Court has held that such provision applies only to absolute transfers thus, the registration in the corporate books of pledges and chattel mortgages of shares cannot have any legal effect. 52 (Emphasis ours.) xxx xxx xxx The requirement that the transfer shall be recorded in the books of the corporation to be valid as against third persons has reference only to absolute transfers or absolute conveyance of the ownership or title to a share. Consequently, the entry or notation on the books of the corporation of pledges and chattel mortgages on shares is not necessary to their validity (although it is advisable to do so) since they do not involve absolute alienation of ownership of stock (Monserrat vs. Ceron, 58 Phil. 469 [1933]; Chua Guan vs. Samahang Magsasaka, Inc., 62 Phil. 472 [1935].) To affect third persons, it is enough that the date and description of the shares pledged appear in a public instrument. (Art. 2096, Civil Code.) With respect to a chattel mortgage constituted on shares of stock, what is necessary is its

registration in the Chattel Mortgage Registry. (Act No. 1508 and Art. 2140, Civil Code.) 53 CEIC's reliance on the Samahang Magsasaka case is misplaced. Nowhere in the said decision was it categorically stated that annotation of the attachment in the corporate books is mandatory for its validity and for the purpose of giving notice to third persons. The only basis, then, for petitioner CEIC's claim is the Deed of Sale under which it purchased the disputed shares. It is, however, a settled rule that a purchaser of attached property acquires it subject to an attachment legally and validly levied thereon. 54 Our corollary inquiry is whether or not the consortium has indeed a prior valid and existing attachment lien over the disputed shares. Jaime Gonzales' /Consortium's Claim Is the consortium's attachment lien over the disputed shares valid? CEIC vigorously argues that the consortium's writ of attachment over the disputed shares of Chemphil is null and void, insisting as it does, that the notice of garnishment was not validly served on the designated officers on 19 July 1985. To support its contention, CEIC presented the sheriff's notice of garnishment 55 dated 19 July 1985 which showed on its face that said notice was received by one Thelly Ruiz who was neither the president nor managing agent of Chemphil. It makes no difference, CEIC further avers, that Thelly Ruiz was the secretary of the President of Chemphil, for under the above-quoted provision she is not among the officers so authorized or designated to be served with the notice of garnishment. We cannot subscribe to such a narrow view of the rule on proper service of writs of attachment. A secretary's major function is to assist his or her superior. He/she is in effect an extension of the latter. Obviously, as such, one of her duties is to receive letters and notices for and in behalf of her superior, as in the case at bench. The notice of garnishment was

addressed to and was actually received by Chemphil's president through his secretary who formally received it for him. Thus, in one case, 56 we ruled that the secretary of the president may be considered an "agent" of the corporation and held that service of summons on him is binding on the corporation. Moreover, the service and receipt of the notice of garnishment on 19 July 1985 was duly acknowledged and confirmed by the corporate secretary of Chemphil, Rolando Navarro and his successor Avelino Cruz through their respective certifications dated 15 August 1989 57 and 21 August 1989. 58 We rule, therefore, that there was substantial compliance with Sec. 7(d), Rule 57 of the Rules of Court. Did the compromise agreement between Antonio Garcia and the consortium discharge the latter's attachment lien over the disputed shares? CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the dismissal of the case, dies a natural death. Thus, when the consortium entered into a compromise agreement, 59 which resulted in the termination of their case, the disputed shares were released from garnishment. We disagree. To subscribe to CEIC's contentions would be to totally disregard the concept and purpose of a preliminary attachment. A writ of preliminary attachment is a provisional remedy issued upon order of the court where an action is pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by the Sheriff as security for the satisfaction of whatever judgment might be secured in said action by the attaching creditor against the defendant. 60 (Emphasis ours.) Attachment is a juridical institution which has for its purpose to secure the outcome of the trial, that is, the satisfaction of the pecuniary obligation really contracted by a person or believed to have been

contracted by him, either by virtue of a civil obligation emanating from contract or from law, or by virtue of some crime or misdemeanor that he might have committed, and the writ issued, granted it, is executed by attaching and safely keeping all the movable property of the defendant, or so much thereof may be sufficient to satisfy the plaintiff's demands . . . 61 (Emphasis ours.) The chief purpose of the remedy of attachment is to secure a contingent lien on defendant's property until plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction, or to make some provision for unsecured debts in cases where the means of satisfaction thereof are liable to be removed beyond the jurisdiction, or improperly disposed of or concealed, or otherwise placed beyond the reach of creditors. 62 (Emphasis ours.) We reiterate the rule laid down in BF Homes, Inc. v. CA 63 that an attachment lien continues until the debt is paid, or sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in the same manner provided by law. We expounded in said case that: The appointment of a rehabilitation receiver who took control and custody of BF has not necessarily secured the claims of Roa and Mendoza. In the event that the receivership is terminated with such claims not having been satisfied, the creditors may also find themselves without security therefor in the civil action because of the dissolution of the attachment. This should not be permitted. Having previously obtained the issuance of the writ in good faith, they should not be deprived of its protection if the rehabilitation plan does not succeed and the civil action is resumed. xxx xxx xxx As we ruled in Government of the Philippine Islands v. Mercado:

Attachment is in the nature of a proceeding in rem. It is against the particular property. The attaching creditor thereby acquires specific lien upon the attached property which ripens into a judgment against the res when the order of sale is made. Such a proceeding is in effect a finding that the property attached is an indebted thing and a virtual condemnation of it to pay the owner's debt. The law does not provide the length of time an attachment lien shall continue after the rendition of judgment, and it must therefore necessarily continue until the debt is paid, or sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in some manner provided by law. It has been held that the lien obtained by attachment stands upon as high equitable grounds as a mortgage lien: The lien or security obtained by an attachment even before judgment, is a fixed and positive security, a specific lien, and, although whether it will ever be made available to the creditor depends on contingencies, its existence is in no way contingent, conditioned or inchoate. It is a vested interest, an actual and substantial security, affording specific security for satisfaction of the debt put in suit, which constitutes a cloud on the legal title, and is as specific as if created by virtue of a voluntary act of the debtor and stands upon as high equitable grounds as a mortgage. (Corpus Juris Secundum, 433, and authorities therein cited.)

xxx xxx xxx The case at bench admits of a peculiar character in the sense that it involves a compromise agreement. Nonetheless, the rule established in the aforequoted cases still applies, even more so since the terms of the agreement have to be complied with in full by the parties thereto. The parties to the compromise agreement should not be deprived of the protection provided by an attachment lien especially in an instance where one reneges on his obligations under the agreement, as in the case at bench, where Antonio Garcia failed to hold up his own end of the deal, so to speak. Moreover, a violation of the terms and conditions of a compromise agreement entitles the aggrieved party to a writ of execution. In Abenojar & Tana v. CA, et al., 64 we held: The non-fulfillment of the terms and conditions of a compromise agreement approved by the Court justifies execution thereof and the issuance of the writ for said purpose is the Court's ministerial duty enforceable by mandamus. Likewise we ruled in Canonizado v. Benitez: 65 A judicial compromise may be enforced by a writ of execution. If a party fails or refuses to abide by the compromise, the other party may enforce the compromise or regard it as rescinded and insist upon his original demand. If we were to rule otherwise, we would in effect create a back door by which a debtor can easily escape his creditors. Consequently, we would be faced with an anomalous situation where a debtor, in order to buy time to dispose of his properties, would enter into a compromise agreement he has no intention of honoring in the first place. The purpose of the provisional remedy of attachment would thus be lost. It would become, in analogy, a declawed and toothless tiger.

From the foregoing, it is clear that the consortium and/or its assignee Jaime Gonzales have the better right over the disputed shares. When CEIC purchased the disputed shares from Antonio Garcia on 15 July 1988, it took the shares subject to the prior, valid and existing attachment lien in favor of and obtained by the consortium. Forum Shopping in G.R. No. 113394 We uphold the decision of the Court of Appeals finding PCIB guilty of forum-shopping. 66 The Court of Appeals opined: True it is, that petitioner PCIB was not a party to the appeal made by the four other banks belonging to the consortium, but equally true is the rule that where the rights and liabilities of the parties appealing are so interwoven and dependent on each other as to be inseparable, a reversal of the appealed decision as to those who appealed, operates as a reversal to all and will inure to the benefit of those who did not join the appeal (Tropical Homes vs. Fortun, 169 SCRA 80, p. 90, citing Alling vs. Wenzel, 133 111. 264-278; 4 C.J. 1206). Such principal, premised upon communality of interest of the parties, is recognized in this jurisdiction (Director of Lands vs. Reyes, 69 SCRA 415). The four other banks which were part of the consortium, filed their notice of appeal under date of March 16, 1990, furnishing a copy thereof upon the lawyers of petitioner. The petition for certiorari in the present case was filed on April 10, 1990, long after the other members of the consortium had appealed from the assailed order of December 19, 1989. We view with skepticism PCIB's contention that it did not join the consortium because it "honestly believed thatcertiorari was the more efficacious and speedy relief available under the circumstances." 67 Rule 65 of the Revised Rules of Court is not difficult to understand. Certiorari is available only if there is no appeal or other plain, speedy and adequate remedy in the ordinary course of law. Hence, in instituting a separate petition for certiorari, PCIB has deliberately resorted to forum-shopping.

PCIB cannot hide behind the subterfuge that Supreme Court Circular 28-91 was not yet in force when it filed thecertiorari proceedings in the Court of Appeals. The rule against forum-shopping has long been established. 68Supreme Court Circular 28-91 merely formalized the prohibition and provided the appropriate penalties against transgressors. It alarms us to realize that we have to constantly repeat our warning against forum-shopping. We cannot over-emphasize its ill-effects, one of which is aptly demonstrated in the case at bench where we are confronted with two divisions of the Court of Appeals issuing contradictory decisions 69 one in favor of CEIC and the other in favor of the consortium/Jaime Gonzales. Forum-shopping or the act of a party against whom an adverse judgment has been rendered in one forum, of seeking another (and possibly favorable) opinion in another forum (other than by appeal or the special civil action of certiorari), or the institution of two (2) or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition, 70 has been characterized as an act of malpractice that is prohibited and condemned as trifling with the Courts and abusing their processes. It constitutes improper conduct which tends to degrade the administration of justice. It has also been aptly described as deplorable because it adds to the congestion of the already heavily burdened dockets of the courts. 71 WHEREFORE, premises considered the appealed decision in G.R. Nos. 112438-39 is hereby AFFIRMED and the appealed decision in G.R. No. 113394, insofar as it adjudged the CEIC the rightful owner of the disputed shares, is hereby REVERSED. Moreover, for wantonly resorting to forum-shopping, PCIB is hereby REPRIMANDED and WARNED that a repetition of the same or similar acts in the future shall be dealt with more severely. SO ORDERED.

CITIZEN SURETY & INSURANCE CO. vs. MELENCIO-HERRERA,

38 SCRA 369

On March 1, 1974, petitioners filed their answer to the complaint. Under date of February 7, 1976, private respondent filed a 'Motion for Issuance of Writ of Preliminary Attachment' against the properties of petitioners, alleging, among others, that the latter are indebted to her in the principal amount of P13,000.00, which, according to her, she seeks to recover in Civil Case No. Q-18444. On March 1, 1976, petitioners filed their opposition to the motion for the issuance of writ of preliminary attachment, alleging among others, that Civil Case No. Q-18444 is an action for annulment of sale and recovery of the house and lot mentioned therein, and not for recovery of sum of money. It is contended that a writ of preliminary attachment is not the proper remedy for the protection of the rights of the estate. In the same opposition, petitioners refuted the allegations of private respondent in her motion that the complaint in Civil Case No. Q-18444 is one for collection of a sum of money allegedly contracted fraudulently by petitioners. On March 26, 1976, respondent Judge issued an order, granting the motion of private respondent and issuing a writ of preliminary attachment against the properties of petitioners, respondent Judge stating that no opposition had been filed to the motion. In the latter part of July, 1976, respondent Sheriff and/or his deputies served on petitioners and the managers of the Hollywood Theater, Palace Theater and Illusion Theatre a writ of preliminary attachment and notice of garnishment against petitioners and personally in favor of respondent Flores. It is alleged that the order of respondent Judge was not received by petitioners' new counsel but upon being informed by petitioners of the writ of preliminary attachment and notice of garnishment, petitioners'new

GRUENBERG vs. CA, 168 SCRA 692 This is a petition to review the decision of the Court of Appeals, now Intermediate Appellate Court, which affirmed the order for the issuance of a writ of preliminary attachment, and other related orders of the then Court of First Instance of Rizal in Civil Case No. Q-18444. The antecedent facts are summarized by the appellate court as follows: Petitioners are the defendants and private respondent is the plaintiff in Civil Case No. Q-18444, Court of First Instance of Rizal, Branch XVII-B-Quezon City, for annulment of sale, recovery of ownership and possession of the house and lot situated at No. 24 Scout Limbaga, Diliman, Quezon City, the same, allegedly, having been sold in fraud of creditors. Private respondent filed the complaint in Civil Case No. Q18444, in her capacity as the administratrix of the intestate estate of the late William Gruenberg. It is alleged in the complaint in Civil Case No. Q-18444 that the house and lot in question, which were sold to defendant Albert Gruenberg (one of the petitioners), form part of the conjugal partnership of the Gruenberg spouses, which must answer for the obligations that deceased William Gruenberg might have incurred during his lifetime in his capacity as manager and administrator of the conjugal partnership; and that the sale of the house and lot before the death of William Gruenberg, when at that time two creditors had already filed suits against him for collection of unpaid obligations, and the latter had unpaid obligation to plaintiff Elda R, Flores (private respondent) in the amount of P13,000.00, exclusive of interest and collection charges, patently and clearly can no longer be paid or liquidated.

counsel promptly went to the court of respondent Judge and then and there he discovered that petitioners' opposition to the motion was not attached to the record, because the same was forwarded to Branch XVIII to which Civil Case No. Q-18444 was originally assigned, On July 30, 1976, petitioners filed (a) a motion for reconsideration of the order granting the motion for the issuance of a writ of preliminary attachment, and (b) a motion to recall the writ of preliminary attachment and notice of garnishment, on the ground that it is not true that petitioners did not oppose the motion of private respondent, and that there is no valid basis to grant the motion. On August 16, 1976, respondent Judge issued an order, denying the motions of petitioners. On October 28, 1976, respondent Judge issued an order, requiring petitioners to appear before his court to explain why they should not be punished for contempt for denying or disobeying the lawful processes of the court. The issuance of the "show cause" order prompted the petitioners to file a petition for certiorari with writ of preliminary injunction in the Court of Appeals. The petition was dismissed. Hence, the instant petition The issues raised to us are embodied in the petitioners' assignments of errors as follows: I. THE COURT OF APPEALS ERRED IN OVERLOOKING THE FACT THAT WRIT OF PRELIMINARY ATTACHMENT COULD ONLY BE GRANTED TO SECURE THE SATISFACTION OF A JUDGMENT IN A CASE IN WHICH SAID WRIT IS PRAYED FOR;

II. THE COURT ERRED IN SUSTAINING THE ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT FOR THE PERSONAL BENEFIT OF PRIVATE RESPONDENT IN CIVIL CASE NO. Q18444, NOTWITHSTANDING THE FACT THAT SAID RESPONDENT INSTITUTED SAID ACTION NOT IN HER PERSONAL CAPACITY, BUT AS ADMINISTRATRIX OF THE ESTATE OF THE LATE WILLIAM GRUENBERG, SR.; III. THE COURT OF APPEALS ERRED IN RULING THAT PETITIONERS CAN BE CITED FOR CONTEMPT FOR THE ALLEGED FAILURE TO COMPLY WITH THE NOTICE OF GARNISHMENT ADDRESSED TO THIRD PARTIES. The issues are interrelated and may be discussed together. They all focus on the proprietary of the writ of attachment and garnishment against the petitioners' properties issued by the trial court and affirmed by the appellate court. In her affidavit supporting the motion for a writ of preliminary attachment, the private respondent stated that her case "... is one of the situations covered by Section 1 (d), Rule 57 of the Rules of Court whereby a writ of preliminary attachment may issue." Section 1 (d), Rule 57 provides: Grounds upon which attachment may issue.A plaintiff or any proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: xxx xxx xxx (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.

xxx xxx xxx There are various reasons why this petition should prosper. Private respondent Elda R. Flores, as a claimant for P13,000.00 against the estate of William Gruenberg, Sr., was appointed administratrix of the estate of the deceased. In her capacity as administratrix, she filed Civil Case No. Q-18444 against the petitioners. This main case was for the annulment of a deed of sale executed by the late William Gruenberg, Sr., in favor of Albert Gruenberg and for the recovery of possession and ownership of the house and lot involved in that sale. The motion for a writ of preliminary attachment filed by Flores, however, states: 1. Defendants are indebted to plaintiff in the amount of P13,000.00 exclusive of accrued interest and collection charges, which plaintiff seeks to recover in the instant action; and 2. Defendants are guilty of fraud in contracting the debt or incurring the obligation due plaintiff in that they conspired and confederated with each other as mother End son to defraud other creditors one of whom is plaintiff, by simulating the sale of house and lot situated at No. 24 Scout Limbaga Street, Quezon City ... . While the respondent filed the motion in her capacity as administratrix of the Gruenberg estate, the motion for a writ of attachment and its supporting affidavit show that the attachment was intended to secure only her P13,000.00 claim against the estate. Obviously, this cannot be done. A writ of attachment is a remedy ancillary to the principal proceeding. The well-entrenched principle is that: Attachment is a juridical institution which has for its purpose to secure the outcome of the trial, that is, the satisfaction of the pecuniary obligation really contracted by a person or believed to have been

contracted by him, either by virtue of a civil obligation emanating from contract or from law, or by virtue of some crime or misdemeanor that he might have committed, and the writ issued, granted it, is executed by attaching and safely keeping all the movable property of the defendant, or so much thereof as may be sufficient to satisfy the plaintiff's demands ... . (Guzman v. Catolico, et al., 65 Phil. 257). The purpose behind the filing of the complaint was to recover a piece of property allegedly belonging to the intestate estate of the deceased. Hence, any writ of attachment necessary to secure the judgment must be related to the protection of the estate. The writ may not issue if only to protect the personal interests of the private respondent as a creditor of that estate. The records show that the private respondent's interest in the estate is to recover a debt based on a contract with the deceased Gruenberg, For this reason, she instituted the special proceedings for the settlement of the intestate estate resulting to her appointment as administratrix. Under these circumstances, the private respondent's remedy to recover the outstanding debt of the deceased is to follow the procedure in Rule 86 on claims against an estate. As a matter of fact, if an administrator has a claim against an estate, Section 8 of Rule 86 calls for the appointment of a special administrator to defend the estate against such claim. A court order which violates the Rules constitutes grave abuse of discretion as it wrecks the orderly procedure prescribed for the settlement of claims against deceased persons designed to protect the interests of the creditors of the decedent. (See Dy v. Enage, 70 SCRA 96). Allowing the private respondent in the annulment case to attach the petitioners' properties for the benefit of her P13,000.00 claim against the estate would give her an undue advantage over other creditors against the estate, Moreover, the P13,000.00 claim of the respondent cannot be settled in the case for annulment of the deed of sale, wherein the writ of attachment is sought. What she seeks to be secured is not the judgment in the main case but a mere claim against the estate which is still to be considered and adjudicated by the court.

The rules on the issuance of a writ of attachment must be construed strictly in favor of the defendant. The remedy of attachment is harsh, extraordinary, and summary in nature. If all the requisites for the issuance of the writ are not present, the court which issues it acts in excess of its jurisdiction. In Salas v. Adil (90 SCRA 121), we stated: A preliminary attachment is a rigorous remedy, which exposes the debtor to humiliation and annoyance, such it should not be abused as to cause unnecessary prejudice. It is, therefore, the duty of the court, before issuing the writ, to ensure that all the requisites of the law have been complied with; otherwise the judge acts in excess of his jurisdiction and the writ so issued shall be null and void. (Guzman v. Catolico, 65 Phil. 257, 261). xxx xxx xxx Considering the gravity of the allegation that herein petitioners have removed or disposed of their properties or are about to do so with intent to defraud their creditors, and further considering that the affidavit in support of the preliminary attachment merely states such ground in general terms, without specific allegations of circumstances to show the reason why plaintiffs believe that defendants are disposing of their properties in fraud of creditors, it was incumbent upon respondent Judge to give notice to petitioners and to allow them to present their position at a hearing wherein evidence is to be received. Following the principle of strict compliance with all requisites, this Court has also ruled that "when the facts, or some of them, stated in the plaintiff's affidavit are shown by the defendant to be untrue, the writ may be considered as improperly or irregularly issued." (National Coconut Corporation V. Pecson, et al., 90 Phil. 809). The February 7, 1976 motion for issuance of a writ of preliminary attachment and the affidavit of preliminary attachment are misleading. First, the private respondent states that the "defendants are indebted

to plaintiff in the amount of P13,000.00" exclusive of interests and collection charges. Then, she avers that the "defendants are guilty of fraud in contracting the debt or incurring the obligation due plaintiff ". The facts in the motion and the affidavit are deceptively framed. The obligation which the respondent seeks to secure by an attachment was between her and the late William Gruenberg, Sr. What she seeks to establish as fraudulent was the sale between the late Mr. Gruenberg and his son. These are two entirely distinct transactions. One of the reasons for granting the motion for the issuance of a writ of preliminary attachment was the court's finding that the petitioners' failed to file an opposition thereto. It turns out, however, that the petitioners filed a timely opposition to the motion but it was filed in another branch of the court where the case had earlier been assigned. Nevertheless, despite this timely opposition, the motion for reconsideration of the order for the issuance of a writ of preliminary attachment, was summarily denied for lack of merit. We also note that the order which directed the issuance of a writ of preliminary attachment merely recited the grounds alleged in the private respondent's motion without any specific details as to the supposed fraud committed by the petitioners when they contracted the debt and the alleged disposition or concealment by the petitioners of their properties. The order of the trial court disregards the rule that attachment being a harsh remedy, it must be issued on concrete and specific grounds and not on general averments merely quoting the words of the pertinent rules. (Dy v. Enage, supra). The absence of specific grounds highlights the fact that the petitioners are not indebted to respondent Flores. It was the late William Gruenberg who incurred the alleged indebtedness and it is his estate which owes Flores. The validity of the claim of Flores will have to be threshed out in the special proceedings, not in the case for annulment of the deed of sale. Finally, the transaction sought to be annulled in the main case refers to a questioned sale of a house and lot. It would have been sufficient to annotate a notice of lis pendens in the title to that property. Assuming the trial court could validly attach the house and lot involved in the sale, we see no justification why the attachment should reach out to the petitioners' interests in the Hollywood Theatre, the Palace Theatre, and the Illusion Theatre. The petitioners also point out that

there is no showing of any attempt on their part to conceal or to dispose of the house and lot nor of any change in the title or condition of the property. Considering all the foregoing, we find the writ of preliminary attachment to have been improvidently issued. WHEREFORE, the petition is hereby GRANTED. The decision of the former Court of Appeals is SET ASIDE. The writ of preliminary attachment and the notice of garnishment issued in Civil Case No. Q18444 are DISSOLVED. The other related orders issued in connection with the writ of attachment are SET ASIDE. SO ORDERED.

Under Section 1, Rule 57, Rules of Court, it is clear that 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 the security for the satisfaction of any judgment ..." This rule would overrule the contention that this Court has no jurisdiction to act on the application, although if counsel for defendant so desire, she is given five (5) days from today within which to submit her further position why the writ should not be issued, upon the receipt of which or expiration of the period, the pending incident shall be considered submitted for resolution. (Underscoring in the original) 1 Thereupon, on the same day, petitioner filed a Petition for certiorari with the Court of Appeals. On 13 July 1988, the respondent appellate court rendered a decision, notable principally for its brevity, dismissing the Petition. The relevant portion of the Court of Appeals' decision is quoted below: The grounds raised in this petition state that the court a quo had not acquired jurisdiction over defendant (now petitioner) since no summons had been served on him, and that respondent Judge had committed a grave abuse of discretion in issuing the questioned order without jurisdiction. In short, the issue presented to us is whether respondent Judge may issue a writ of preliminary attachment against petitioner before summons is served on the latter. We rule for respondent Judge. Under Sec. 1, Rule 57, it is clear that, at the commencement of the action, a party may have the property of the adverse party attached as security. The resolution of this issue depends, therefore, on what is meant by "Commencement of the action." Moran, citing American jurisprudence on this point, stated thus: "Commencement of action. Action is commenced by filing of the complaint, even though summons is not

SIEVERT vs. CA, 168 SCRA 692

On 18 May 1988 petitioner Alberto Sievert a citizen and resident of the Philippines received by mail a Petition for Issuance of a Preliminary Attachment filed with the Regional Trial Court of Manila Branch 32 in Civil Case No. 88-44346. Petitioner had not previously received any summons and any copy of a complaint against him in Civil Case No. 88-44346. On the day set for hearing of the Petition for a Preliminary Writ of Attachment, petitioner's counsel went before the trial court and entered a special appearance for the limited purpose of objecting to the jurisdiction of the court. He simultaneously filed a written objection to the jurisdiction of the trial court to hear or act upon the Petition for Issuance of a Preliminary Writ of Attachment. In this written objection, petitioner prayed for denial of that Petition for lack of jurisdiction over the person of the petitioner (defendant therein) upon the ground that since no summons had been served upon him in the main case, no jurisdiction over the person of the petitioner had been acquired by the trial court. The trial court denied the petitioner's objection and issued in open court an order which, in relevant part, read as follows:

issued until a later date." (Comment on the Rules of Court, Vol. I, p. 150, 1979). Thus, a writ of preliminary attachment may issue upon filing of the complaint even before issuance of the summons. WHEREFORE, for lack of merit, the petition is hereby denied and, accordingly, dismissed. (Emphasis supplied) 2 The petitioner is now before this Court on a Petition for Review on Certiorari, assailing the above-quoted decision of the Court of Appeals. The petitioner assigns two (2) errors: 1. The proceedings taken and the order issued on plaintiffs petition for attachment prior to the service of summons on the defendant were contrary to law and jurisprudence and violated the defendant's right to due process. 2. The Court of Appeals committed a grave abuse of discretion amounting to lack of jurisdiction in ruling that a writ of preliminary attachment may issue upon filing of the complaint even prior to issuance of the summons. 3 The two (2) assignments of error relate to the single issue which we perceive to be at stake here, that is, whether a court which has not acquired jurisdiction over the person of the defendant in the main case, may bind such defendant or his property by issuing a writ of preliminary attachment. Both the trial court and the Court of Appeals held that the defendant may be bound by a writ of preliminary attachment even before summons together with a copy of the complaint in the main case has been validly served upon him. We are unable to agree with the respondent courts. There is no question that a writ of preliminary attachment may be applied for a plaintiff "at the commencement of the action or at any time thereafter" in the cases enumerated in Section 1 of Rule 57 of

the Revised Rules of Court. The issue posed in this case, however, is not to be resolved by determining when an action may be regarded as having been commenced, a point in time which, in any case, is not necessarily fixed and Identical regardless of the specific purpose for which the deter. nation is to be made. The critical time which must be Identified is, rather, when the trial court acquires authority under law to act coercively against the defendant or his property in a proceeding in attachment. We believe and so hold that critical time is the time of the vesting of jurisdiction in the court over the person of the defendant in the main case.

Attachment is an ancillary remedy. It is not sought for its own sake but rather t the attaching party to realize upon relief sought and expected to be grante main or principal action . 4 A court which has not acquired jurisdiction over th of defendant, cannot bind that defendant whether in the main case or in any proceeding such as attachment proceedings. The service of a petition for pre attachment without the prior or simultaneous service of summons and a cop complaint in the main case and that is what happened in this case doe course confer jurisdiction upon the issuing court over the person of the defend Ordinarily, the prayer in a petition for a writ of preliminary attachment is embodied or incorporated in the main complaint itself as one of the forms of relief sought in such complaint. Thus, valid service of summons and a copy of the complaint will in such case vest jurisdiction in the court over the defendant both for purposes of the main case and for purposes of the ancillary remedy of attachment. In such case, notice of the main case is at the same time notice of the auxiliary proceeding in attachment. Where, however, the petition for a writ of preliminary attachment is embodied in a discrete pleading, such petition must be served either simultaneously with service of summons and a copy of the main complaint, or after jurisdiction over the defendant has already been acquired by such service of summons. Notice of the separate attachment petition is not notice of the main action. Put a little differently, jurisdiction whether ratione personae or ratione materiae in an attachment proceeding is ancillary to jurisdiction ratione personae or ratione materiae in the main action against the defendant. If a court has no jurisdiction over the subject matter or over the person of the defendant in the principal action, it simply has no jurisdiction to issue a writ of preliminary attachment against the defendant or his property.

It is basic that the requirements of the Rules of Court for issuance of preliminary attachment must be strictly and faithfully complied with in view of the nature of this provisional remedy. In Salas v. Adil, 5 this Court described preliminary attachment as a rigorous remedy which exposes the debtor to humiliation and annoyance, such [that] it should not be abused as to cause unnecessary prejudice. It is, therefore; the duty of the court, before issuing the writ, to ensure that all the requisites of the law have been complied with; otherwise the judge acts in excess of his jurisdiction and the writ so issued shall be null and void. (Emphasis supplied ) 6 The above words apply with greater force in respect of that most fundamental of requisites, the jurisdiction of the court issuing attachment over the person of the defendant. In the case at bar, the want of jurisdiction of the trial court to proceed in the main case against the defendant is quite clear. It is not disputed that neither service of summons with a copy of the complaint nor voluntary appearance of petitioner Sievert was had in this case. Yet, the trial court proceeded to hear the petition for issuance of the writ. This is reversible error and must be corrected on certiorari. WHEREFORE, the Petition for Review on certiorari is GRANTED due course and the Order of the trial court dated 20 May 1988 and the Decision of the Court of Appeals dated 13 July 1988 are hereby SET ASIDE and ANNULLED. No pronouncement as to costs. SO ORDERED.

Glass, defendants, and for the release of the amount of P37,190.00, which had been deposited with the Clerk of Court, to the petitioner. On October 6, 1977, an action was instituted in the Court of First Instance of Rizal by Antonio D. Pinzon to recover from Kenneth O. Glass the sum of P37,190.00, alleged to be the agreed rentals of his truck, as well as the value of spare parts which have not been returned to him upon termination of the lease. In his verified complaint, the plaintiff asked for an attachment against the property of the defendant consisting of collectibles and payables with the Philippine Geothermal, Inc., on the grounds that the defendant is a foreigner; that he has sufficient cause of action against the said defendant; and that there is no sufficient security for his claim against the defendant in the event a judgment is rendered in his favor. 1 Finding the petition to be sufficient in form and substance, the respondent Judge ordered the issuance of a writ of attachment against the properties of the defendant upon the plaintiff's filing of a bond in the amount of P37,190.00. 2 Thereupon, on November 22, 1977, the defendant Kenneth O. Glass moved to quash the writ of attachment on the grounds that there is no cause of action against him since the transactions or claims of the plaintiff were entered into by and between the plaintiff and the K.O. Glass Construction Co., Inc., a corporation duly organized and existing under Philippine laws; that there is no ground for the issuance of the writ of preliminary attachment as defendant Kenneth O. Glass never intended to leave the Philippines, and even if he does, plaintiff can not be prejudiced thereby because his claims are against a corporation which has sufficient funds and property to satisfy his claim; and that the money being garnished belongs to the K.O. Glass Corporation Co., Inc. and not to defendant Kenneth O. Glass. 3 By reason thereof, Pinzon amended his complaint to include K.O. Glass Construction Co., Inc. as co-defendant of Kenneth O. Glass. 4 On January 26, 1978, the defendants therein filed a supplementary motion to discharge and/or dissolve the writ of preliminary attachment upon the ground that the affidavit filed in support of the motion for preliminary attachment was not sufficient or wanting in law for the reason that: (1) the affidavit did not state that the amount of plaintiff's claim was above all legal set-offs or counterclaims, as required by

K.O. GLASS CONST. CO., INC. vs. VALENZUELA, 116 SCRA 563 Petition for certiorari to annul and set aside the writ of preliminary attachment issued by the respondent Judge in Civil Case No. 5902-P of the Court of First Instance of Rizal, entitled: Antonio D. Pinzon plaintiff, versus K.O. Glass Construction Co., Inc., and Kenneth O.

Sec. 3, Rule 57 of the Revised Rules of Court; (2) the affidavit did not state that there is no other sufficient security for the claim sought to be recovered by the action as also required by said Sec. 3; and (3) the affidavit did not specify any of the grounds enumerated in Sec. 1 of Rule 57, 5 but, the respondent Judge denied the motion and ordered the Philippine Geothermal, Inc. to deliver and deposit with the Clerk of Court the amount of P37,190.00 immediately upon receipt of the order which amount shall remain so deposited to await the judgment to be rendered in the case. 6 On June 19, 1978, the defendants therein filed a bond in the amount of P37,190.00 and asked the court for the release of the same amount deposited with the Clerk of Court, 7 but, the respondent Judge did not order the release of the money deposited. 8 Hence, the present recourse. As prayed for, the Court issued a temporary restraining order, restraining the respondent Judge from further proceeding with the trial of the case. 9 We find merit in the petition. The respondent Judge gravely abused his discretion in issuing the writ of preliminary attachment and in not ordering the release of the money which had been deposited with the Clerk of Court for the following reasons: First, there was no ground for the issuance of the writ of preliminary attachment. Section 1, Rule 57 of the Revised Rules of Court, which enumerates the grounds for the issuance of a writ of preliminary attachment, reads, as follows: 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 from contract, express or implied, against a party who is about to depart from the Philippines with intent to defraud his creditor;

(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 the 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. In ordering the issuance of the controversial writ of preliminary attachment, the respondent Judge said and We quote: The plaintiff filed a complaint for a sum of money with prayer for Writ of Preliminary Attachment dated September 14, 1977, alleging that the defendant who is a foreigner may, at any time, depart from the Philippines with intent to defraud his creditors including the plaintiff herein; that there is no sufficient security for the claim sought to be enforced by this action; that the amount due the plaintiff is as much as the sum for which an order of attachment is sought to be granted; and that defendant has sufficient leviable assets in the Philippines consisting of collectibles and payables due from Philippine Geothermal, Inc., which may be

disposed of at any time, by defendant if no Writ of Preliminary Attachment may be issued. Finding said motion and petition to be sufficient in form and substance. 10 Pinzon however, did not allege that the defendant Kenneth O. Glass "is a foreigner (who) may, at any time, depart from the Philippines with intent to defraud his creditors including the plaintiff." He merely stated that the defendant Kenneth O. Glass is a foreigner. The pertinent portion of the complaint reads, as follows: 15. Plaintiff hereby avers under oath that defendant is a foreigner and that said defendant has a valid and just obligation to plaintiff in the total sum of P32,290.00 arising out from his failure to pay (i) service charges for the hauling of construction materials; (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed spare parts of said leased unit; hence, a sufficient cause of action exists against saiddefendant. Plaintiff also avers under oath that there is no sufficient security for his claim against the defendantin the event a judgment be rendered in favor of the plaintiff. however, defendant has sufficient assets in the Philippines in the form of collectible and payables due from the Philippine Geothermal, Inc. with office address at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be disposed of by defendants and would render ineffectual the reliefs prayed for by plaintiff in this Complaint. 11 In his Amended Complaint, Pinzon alleged the following: 15. Plaintiff hereby avers under oath that defendant GLASS is an American citizen who controls most, if not all, the affairs of defendant CORPORATION. Defendants CORPORATION and GLASS have a valid and just obligation to plaintiff in the total sum of P32,290.00 arising out for their failure to pay (i) service charges for hauling of construction materials, (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed spare parts of

said leased unit: hence, a sufficient cause of action exist against saiddefendants. Plaintiff also avers under oath that there is no sufficient security for his claim against thedefendants in the event a judgment be rendered in favor of the plaintiff. however, defendant CORPORATION has sufficient assets in the Philippines in the form of collectibles and payables due from the Philippine Geothermal., Inc. with office address at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be disposed of by defendants and would render ineffectual the reliefs prayed for by plaintiff in this Complaint. 12 There being no showing, much less an allegation, that the defendants are about to depart from the Philippines with intent to defraud their creditor, or that they are non-resident aliens, the attachment of their properties is not justified. Second, the affidavit submitted by Pinzon does not comply with the Rules. Under the Rules, an affidavit for attachment must state that (a) sufficient cause of action exists, (b) the case is one of those mentioned in Section I (a) of Rule 57; (c) there is no other sufficient security 'or the claim sought to be enforced by the action, and (d) the amount due to the applicant for attachment 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. Section 3, Rule 57 of the Revised Rules of Court reads. as follows: Section 3. Affidavit and bond required.An order of attachment shall be granted only when it is made to appear by the affidavit of the applicant, or of some person who personally knows the facts, that a sufficient cause of action exists that the case is one of those mentioned in Section 1 hereof; that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the applicant, or the value of the property the possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The affidavit, and the bond required by the next succeeding

section, must be duly filed with the clerk or judge of the court before the order issues. In his affidavit, Pinzon stated the following: I, ANTONIO D. PINZON Filipino, of legal age, married and with residence and postal address at 1422 A. Mabini Street, Ermita, Manila, subscribing under oath, depose and states that. 1. On October 6,1977,I filed with the Court of First Instance of Rizal, Pasay City Branch, a case against Kenneth O. Glass entitled 'ANTONIO D. PINZON vs. KENNETH O. GLASS', docketed as Civil Case No. 5902-P; 2. My Complaint against Kenneth O. Glass is based on several causes of action, namely: (i) On February 15, 1977, we mutually agreed that I undertake to haul his construction materials from Manila to his construction project in Bulalo, Bay, Laguna and vice-versa, for a consideration of P50.00 per hour; (ii) Also, on June 18, 1977, we entered into a separate agreement whereby my Isuzu cargo truck will be leased to him for a consideration of P4,000.00 a month payable on the 15th day of each month; (iii) On September 7, 1977, after making use of my Isuzu truck, he surrendered the same without paying the monthly rentals for the leased Isuzu truck and the peso equivalent of the spare parts that were either destroyed or misappropriated by him; 3. As of today, October 11, 1977, Mr. Kenneth 0. Glass still owes me the total sum of P32,290.00 representing his obligation arising from the hauling of his construction materials, monthly rentals for the lease

Isuzu truck and the peso equivalent of the spare parts that were either destroyed or misappropriated by him; 4. I am executing this Affidavit to attest to the truthfulness of the foregoing and in compliance with the provisions of Rule 57 of the Revised Rules of Court. 13 While Pinzon may have stated in his affidavit that a sufficient cause of action exists against the defendant Kenneth O. Glass, he did not state therein that "the case is one of those mentioned in Section 1 hereof; that there is no other sufficient security for the claim sought to be enforced by the action; and that the amount due to the applicant is as much as the sum for which the order granted above all legal counterclaims." It has been held that the failure to allege in the affidavit the requisites prescribed for the issuance of a writ of preliminary attachment, renders the writ of preliminary attachment issued against the property of the defendant fatally defective, and the judge issuing it is deemed to have acted in excess of his jurisdiction. 14 Finally, it appears that the petitioner has filed a counterbond in the amount of P37,190.00 to answer for any judgment that may be rendered against the defendant. Upon receipt of the counter-bond the respondent Judge should have discharged the attachment pursuant to Section 12, Rule 57 of the Revised Rules of Court which reads, as follows: Section 12. Discharge of attachment upon giving counterbond.At any time after an order of attachment has been granted, the party whose property has been attached, or the person appearing on his behalf, may upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge of the attachment if a cash deposit is made or a counterbond executed to the attaching creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made, in an amount equal to the value of the property attached as determined by the judge, to secure the payment of any judgment that the attaching creditor may recover in the

action. Upon the filing of such counter-bond, copy thereof shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance with the provisions of this section the property attached, or the proceeds of any sale thereof, shall be delivered to the party making the deposit or giving the counter-bond, or the person appearing on his behalf, the deposit or counter-bond aforesaid standing in the place of the property so released. Should such counter-bond for any reason be found to be, or become, insufficient, and the party furnishing the same fail to file an additional counterbond the attaching creditor may apply for a new order of attachment. The filing of the counter-bond will serve the purpose of preserving the defendant's property and at the same time give the plaintiff security for any judgment that may be obtained against the defendant. 15 WHEREFORE, the petition is GRANTED and the writ prayed for is issued. The orders issued by the respondent Judge on October 11, 19719, January 26, 1978, and February 3, 1978 in Civil Case No. 5902-P of the Court of First Instance of Rizal, insofar as they relate to the issuance of the writ of preliminary attachment, should be as they are hereby ANNULLED and SET ASIDE and the respondents are hereby ordered to forthwith release the garnished amount of P37,190.00 to the petitioner. The temporary restraining order, heretofore issued, is hereby lifted and set aside. Costs against the private respondent Antonio D. Pinzon. SO ORDERED.

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 stating in its Order that "the testimony of Baldovino Lagbao, witness for the defendant, corroborates the facts in the plaintiff's affidavit instead of disproving or showing them to be untrue." 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

OLSEN & CO. vs. OLSEN, 48 Phil. 238

ABOITIZ vs. COTABATO BUS CO., 105 SCRA 88

the attached properties, and made the restraining order originally issued permanent. The present recourse is an appeal by certiorari from the decision of the Court of Appeals reversing the assailed orders of the Court of First Instance of Davao, (Branch I), petitioner assigning against the lower court the following errors: ERROR I THE COURT OF APPEALS ERRED IN HASTILY AND PERFUNCTORILY RENDERING, ON OCTOBER 3, 1971, A DECISION WITHOUT CONSIDERING MOST OF THE EVIDENCE SUCH THAT l) EVEN AN IMPORTANT FACT, ESTABLISHED BY DOCUMENTARY EVIDENCE AND NOT DENIED BY RESPONDENT, IS MENTIONED ONLY AS A "CLAIM" OF PETITIONER COMPANY; 2) THE DECISION CONTAINS NO DISCUSSION AND APPRECIATION OF THE FACTS AS PROVED, ASSEMBLED AND PRESENTED BY PETITIONER COMPANY SHOWING IN THEIR TOTALITY THAT RESPONDENT HAS REMOVED, DIVERTED OR DISPOSED OF ITS BANK DEPOSITS, INCOME AND OTHER LIQUID ASSETS WITH INTENT TO DEFRAUD ITS CREDITORS, ESPECIALLY ITS UNSECURED SUPPLIERS; 3) THE DECISION IGNORES THE SIGNIFICANCE OF THE REFUSAL OF RESPONDENT TO PERMIT, UNDER REP. ACT NO. 1405, THE METROPOLITAN BANK & TRUST CO. TO BRING, IN COMPLIANCE WITH A subpoena DUCES TECUM TO THE TRIAL COURT ALL THE RECORDS OF RESPONDENT'S DEPOSITS AND WITHDRAWALS UNDER ITS CURRENT AND SAVINGS ACCOUNTS (NOW NIL) FOR EXAMINATION BY PETITIONER COMPANY FOR THE PURPOSE OF SHOWING DIRECTLY THE REMOVAL, DIVERSION OR DISPOSAL OF

RESPONDENT'S DEPOSITS AND INCOME WITH INTENT TO DEFRAUD ITS CREDITORS. ERROR II THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE FACTS THAT RESPONDENT'S BANK DEPOSITS ARE NIL AS PROOF WHICH TOGETHER WITH RESPONDENT'S ADMISSION OF AN INCOME OF FROM P10,000.00 to P 14,000.00 A DAY AND THE EVIDENCE THAT IT CANNOT PRODUCE P 634.00 WITHOUT USING A PERSONAL CHECK OF ITS PRESIDENT AND MAJORITY STOCKHOLDER, AND OTHER EVIDENCE SHOWS THE REMOVAL OR CHANNELING OF ITS INCOME TO THE LATTER. ERROR III THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE RESCUE AND REMOVAL BY RESPONDENT OF FIVE ATTACHED BUSES, DURING THE DEPENDENCY OF ITS MOTION TO DISSOLVE THE ATTACHMENT IN THE, TRIAL COURT, AS A FURTHER ACT OF REMOVAL OF PROPERTIES BY RESPONDENT WITH INTENT TO DEFRAUD PETITIONER COMPANY, FOR WHOSE BENEFIT SAID BUSES HAD BEEN ATTACHED. 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. This being so, the findings of the Court of Appeals on said issues of facts are generally considered conclusive and final, and should no longer be disturbed. However, We gave due course to the petition because it raises also a legal question of 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. This may be inferred from the emphasis laid by petitioner on the fact that even for the measly amount of P 634.00 payment thereof was made with a personal check of the respondent company's president and majority stockholder, and its debts to several creditors, including secured ones

like the DBP, have remained unpaid, despite its supposed daily income of an average of P 12,000.00, as declared by its assistant manager, Baldovino Lagbao. 1 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 Petitioner, however, disclaims any intention of advancing the theory that insolvency is a ground for the issuance of a writ of attachment , 3 and insists that its evidence -is intended to prove his assertion that respondent company has disposed, or is about to dispose, of its properties, in fraud of its creditors. Aside from the reference petitioner had made to respondent company's "nil" bank account, as if to show removal of company's funds, petitioner also cited the alleged nonpayment of its other creditors, including secured creditors like the DBP to which all its buses have been mortgaged, despite its daily income averaging P12,000.00, and the rescue and removal of five attached buses. 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 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. The dwindling of respondent's bank account despite its daily income of from P10,000.00 to P14,000.00 is easily explained by its having to meet heavy operating expenses, which include salaries and wages of employees and workers. If, indeed the income of the company were sufficiently profitable, it should not allow its buses to fall into disuse by lack of repairs. It should also maintain a good credit standing with its suppliers of equipment, and other needs of the company to keep its business a going concern. Petitioner is only one of the suppliers. It is, indeed, extremely hard to remove the buses, machinery and other equipments which respondent company have to own and keep to be able to engage and continue in the operation of its transportation business. The sale or other form of disposition of any of this kind of property is not difficult of detection or discovery, and strangely, petitioner, has adduced no proof of any sale or transfer of any of them, which should have been easily obtainable. 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, but the trial court is hereby ordered to immediately proceed with the hearing of Civil Case No. 7329 and decide it in accordance with the law and the evidence. No special pronouncement as to costs. SO ORDERED.

CARPIO vs. MACADAEG, 9 SCRA 552 Isabelo Carpio filed this petition for certiorari and prohibition to annul and stop implementation of respondent Judge's orders of October 24 and November 25, 1960, directing the sale of five race horses and goods previously attached upon motion of respondent Oscar Abaya. We issued a writ of preliminary injunction to restrain the sale, with instructions to respondent Sheriff of Rizal to allow the daily training of

the said horses and their participation in races whenever they were included in the racing programs. On January 17, 1960 respondent Oscar Abaya filed a complaint against petitioner for the recovery of various sums aggregating P25,000 (Civil Case No. 42450, C.F.I. Manila). Before summons was served, and upon ex partemotion of respondent Abaya (Annex B), respondent Judge issued two orders of attachment dated February 8 (Annex C-1) and February 10, 1960 (Annex C), pursuant to which the Sheriff of Manila garnished goods consisting of hardware imported by petitioner, and the Sheriff of Rizal seized petitioner's five racing horses named Mohamad, Mohamad's Pride, Magic Spell, Nashua and Sirius. On February 12, 1960 petitioner filed an urgent petition to discharge the orders of attachment (Annex 1). Acting thereon, respondent Judge, on March 11, 1960, set aside the two orders of February 8 and 10, 1960 (Annex F). Upon two motions of respondent Abaya (Annexes H and 1), respondent Judge, on March 29, 1960, set aside his order of March 11, 1960 (Annex K). Though no new petition was filed for issuance of a writ of attachment and no new order or alias writ of attachment was issued, respondent Sheriff of Manila garnished the aforementioned goods and respondent Sheriff of Rizal attached the five racing horses. Upon petition of respondent Abaya (Annex L), respondent Judge issued an order directing the sale at public auction of the five racing horses (Annex M). However, the sale was halted by petitioner's putting up a bond of P4,000 and the horses were released to him by respondent Sheriff of Rizal. Upon motion of respondent Abaya (Annex R), respondent Judge, on October 24, 1960, ordered the increase of the bond to P10,000, and ordered respondent Sheriff of Rizal to proceed with the sale of the horses should petitioner failed to file the additional bond of P6,000 (Annex S). Motions filed by petitioner seeking reconsideration of the said order of October 24 were denied by respondent Judge on November 25, 1960 (Annex X). So, respondent Sheriff of Rizal advertised the sale at public auction of the five racing horses. Upon motion of respondent Abaya (Annex T), and despite the opposition of petitioner(Annex U), respondent Judge, on the same day November 25 issued an order authorizing the sale of the garnished goods (Annex Z).

Petitioner seeks annulment of the order of October 24, 1960 ordering him to file an additional bond of P6,000; the order of November 25, 1960 denying his motion for reconsideration of the order of October 24; and the order of the same date authorizing the sale of the garnished goods, on the ground that in issuing them respondent Judge acted without jurisdiction and/or with grave abuse of discretion. Respondent Judge should not have issued the two writs of preliminary attachment (Annexes C and C-1) on Abaya's simple allegation that the petitioner was about to dispose of his property, thereby leaving no security for the satisfaction of any judgment.1 Mere removal or disposal of property, by itself, is not ground for issuance of preliminary attachment, notwithstanding absence of any security for the satisfaction of any judgment against the defendant. The removal or disposal, to justify preliminary attachment, must have been made with intent to defraud defendant's creditors.2 Respondent Judge in fact corrected himself. Acting on petitioner's motion to discharge attachment and apparently believing the correctness of the grounds alleged therein,3 he set aside the orders of attachment (Order of March 11, 1960, Annex F). But reversing himself again, he set aside his order of March 11, 1960 (Annex K, dated March 29, 1960.4 This he did apparently on Abaya's contention that petitioner was about to remove or dispose of his property in order to defraud his creditors, as examples of which disposals he pointed to the alleged sale of the horses and of petitioner's office furniture (Abaya's motion for reconsideration dated March 15, 1960, Annex H). These averments of fraudulent disposals were controverted by petitioner who, in his opposition to Abaya's motions for reconsideration (Annex J), reiterated the defenses against preliminary attachment which he had previously enumerated in his petition to discharge the two orders of attachment. Thus the question of fraudulent disposal was put in issue; and respondent Judge, before issuing the preliminary attachment anew, should have given the parties opportunity to prove their respective claims or, at the very least, should have provided petitioner with the chance to show that he had not been disposing of his property in fraud of creditors.5 But for much more than the above reason, respondent Judge should not have again ordered the issuance of the writ of preliminary

attachment since Abaya never made any affidavit as required by Rule 59, Rules of Court, which states that: SEC. 3. Order issued only when affidavit and bond filed An order of attachment shall be granted when it is made to appear by the affidavit of the plaintiff, or of some other person who personally knows the facts, that a sufficient cause of action exists, that the case is one of those mentioned in section 1 hereof, that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the plaintiff, or the value of the property which he is entitled to recover the possession of, is as much as the sum for which the order is granted above all legal counterclaims; which affidavit, and the bond required by the next succeeding section, must be duly filed with the clerk or judge of the court before the order issues. For the purposes of issuance of preliminary attachment, the affidavit (Annex B-1) attached to Abaya's motion therefor (Annex B), as we have said, is not sufficient, and it does not appear that he ever executed another affidavit that complies with the above section. None appears attached either to his motion for reconsideration dated March 15, 1960 (Annex H) or to his motion for reconsideration dated March 16, 1960 (Annex I), upon which the order of attachment (Annex K) was based. Having construed that the preliminary attachment should not have been ordered, we believe it is no longer necessary to discuss the subsequent actuations of respondent Judge which were all based on the erroneous assumption that his order of March 29, 1960 was valid (Annex K). WHEREFORE, the order of March 29, 1960 and all succeeding orders of respondent Judge with respect to said preliminary attachment, are hereby declared null and void; the attached properties are ordered released; and the preliminary injunction issued by this Court is made permanent. Costs against respondent Abaya. By way of Petition for Review under Rule 45 of the Rules of Court, spouses Santiago and Rufina Tanchan (petitioners) seek the modification of the June 15, 2004 Decision1of the Court of Appeals (CA) which affirmed the August 3, 2001 Decision2 and August 8, 2002 Order3 of Branch 137, Regional Trial Court (RTC), Makati in Civil Case No. 98-2468.4 The relevant facts are of record. For value received, Cebu Foremost Construction, Inc. (Foremost), through its Chairman and President Henry Tanchan (Henry) and his spouse, Vice-President and Treasurer Ma. Julie Ann Tanchan (Ma. Julie Ann) executed and delivered to Allied Banking Corporation (respondent) seven US$ promissory notes,5including Promissory Note No. 0051-97-036966 (Exhibit "G") for US$379,000.00, at 9.50% interest rate per annum, due on February 9, 1998. Foremost also issued to respondent several Philippine peso promissory notes7 covering various loans in the aggregate amount of Php28,900,000.00, including Promissory Note No. 0051-97-03688 (Exhibit "H") for PhpP16,500,000.00, at an interest rate of 14.5% per annum, due on February 9, 1998.8 All the foregoing promissory notes are secured by two Continuing Guaranty/ Comprehensive Surety Agreements (CG/CSA) executed in the personal capacities of spouses Henry and Ma. Julie Ann (Spouses Tanchan) and Henry's brother, herein petitioner Santiago Tanchan (Santiago),9for himself and as attorney-in-fact of his wife and copetitioner Rufina Tanchan (Rufina) under a Special Power of Attorney, dated April 30, 1993, which grants Santiago authority to: x x x borrow and/or contract debts and obligations involving, affecting or creating a charge or liability on, or which may involve, affect or create a liability on the Property and/or my interest therein, whether or not such debt/s or obligation/s contracted or to be contracted will benefit me or the family, and to sign, execute and deliver in my name to or in favor of any party, under such terms and conditions as my attorney-infact may deem necessary, appropriate or convenient, any and all documents instruments or contract/s (including without

SPS. TANCHAN vs. ALLIED BANK, 571 SCRA 512

limitations, promissory notes, loan agreements, assignments, surety or guaranty undertakings, security agreements) involving, affecting or creating a charge or liability on the Property."10 The liability of the sureties under both CG/CSAs is limited to Php150,000,000.00.11 Exhibit "G" and all the Philippine peso promissory notes, including Exhibit "H", are secured not only by the two CG/CSAs but also by a Real Estate Mortgage executed on February 14, 1997 by Henry, for himself and as the legal guardian of the minors Henry Paul L. Tanchan and Don Henry L. Tanchan; his wife Ma. Julie Ann; and Spouses Pablo and Milagros Lim, over real properties registered in their names under Transfer Certificates of Title No. 115804, No. 111149, No. 110672 and No. 3815, all located in Cebu City.12 In separate final demand letters, both dated May 14, 1998, respondent sought from Foremost payment of US$1,054,000.00, as the outstanding principal balance, exclusive of interest and charges, of its obligations under the seven US$ promissory notes,and PhP28,900,000.00 under its Philippine peso promissory 13 notes. Separate demands for payment were also made upon Spouses Tanchan14 and the petitioners15 as sureties. In a letter dated April 6, 1998, Foremost offered to cede to respondent, by way of dacion en pago, the mortgaged real properties in full payment of its loan obligations.16 On August 3, 1998, respondent instituted the extra-judicial foreclosure of the real estate mortgage to satisfy its claim against Foremost in the aggregate "amount of Php55,578,826.77, inclusive of interest, other charges and attorney's fees, equivalent to 10% of the total amount due as of May 3, 1998, plus the costs and expenses of foreclosure."17At the public auction sale, respondent's bid of only Php37,745,283.67 for all the mortgaged properties, including the buildings and improvements thereon,18was adjudged the sole and highest bid. On October 13, 1998, respondent filed with the RTC a Complaint for Collection of Sum of Money with Petition for Issuance of Writ of Preliminary Injunction against Foremost, Spouses Tanchan and

herein petitioners (collectively referred to as Foremost, et al.), praying that they be ordered to pay, jointly and severally, the following amounts:19

Promissory Note Amount 0051-96-09495 US$ 80,000.00 plus interest at the rate of 11.4% December 29, 1997 until fully paid and a penalty unpaid interest at the rate of 1% per month reckoned 29, 1997 until fully paid and a penalty charge on the reckoned from May 28, 1998 until fully paid. 0051-96-17617 US$110,000.00 plus interest at the rate of 11.4% p penalty charge at the rate of 1% per month, al December 29, 1997 until fully paid. 0051-96-19008 US$250,000.00 plus interest at the rate of 11.4% p penalty charge at the rate of 1% per month all November 30, 1997 until fully paid. 0051-96-24801 US$115,000.00 plus interest at the rate of 11.4% p penalty charge at the rate of 1% per month all December 29, 1997 until fully paid. 0051-96-00603 US$75,000.00 plus interest at the rate of 11.4% p penalty charge at the rate of 1% per month all December 29, 1997 until fully paid. 0051-97-02444 US$45,000.00 plus interest at the rate of 11.4% p penalty charge at the rate of 1% per month all December 29, 1997 until fully paid. 0051-97-03696 US$379,000.00 plus interest at the rate of 11. (Exhibit "G") reckoned from January 8, 1998 until fully paid and a p the rate of 1% per month from February 9, 1998 until 0051-97-03688 PhpP7,466,795.67 plus interest at the rate of 20% p (Exhibit "H") penalty charge at the rate of 3% per month from A (Emphasis supplied) Respondent also prayed for payment of attorney's fees equivalent to 25% of the total amount due, expenses and costs of suit, In support of its application for issuance of a writ of preliminary attachment, respondent submitted an Affidavit executed by Elmer Elumbaring (Elumbaring), Branch Cashier/Loans Supervisor, Cebu, Jakosalem Branch, stating that:

4. Defendants [Foremost, et al.] committed fraud in contracting the obligations upon which the action is brought in that: a) to induce plaintiff [respondent] to grant the credit accommodation they represented to the plaintiff [respondent] that they were in a financial position to pay their obligations on maturity date in consideration of which plaintiff [respondent] granted the credit accommodations. It turned out, however, that they were not in such financial position when they failed to pay their obligations on maturity date; b) they falsely represented that the proceeds of the Loan would be used as additional working capital in consideration of which, plaintiff [respondent] granted the loans but when defendants [Foremost, et al.] received the said proceeds, they diverted the same to a purpose other than that for which they were intended as shown by the fact that defendants [Foremost, et al.] were not able to fully pay the obligations at its maturity date; 5. There is no security whatsoever for the claim plaintiff [respondent] seeks to enforce by this action, and only by the issuance of a writ of preliminary attachment can its interest be protected.20 The application for writ of preliminary attachment was granted by the RTC in an Order dated November 3, 1998, to wit: WHEREFORE, finding plaintiff's [respondent's] application for the issuance of a writ of preliminary attachment sufficient in form and substance, and the ground set forth therein being among those allowed by the Rules (Rule 57, Sec. 1 [e]), let a Writ of Preliminary Attachment issue against the properties of defendants Cebu Foremost Construction, Incorporated, Santiago Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan and Ma. Julie Ann T. Tanchan, upon plaintiff's [respondent's] filing of a bond in the amount of FIFTY-FOUR MILLION (P54,000,000.00) PESOS, conditioned to answer for whatever damage that the said defendants [Foremost, et al.] may suffer by reason of the issuance of said writ should the Court finally adjudge that plaintiff [respondent] was not entitled thereto. SO ORDERED.21

Thus, armed with a writ of attachment,22 the sheriff levied several parcels of land registered in the name of Foremost, et al.23 In their Amended Answer with Counterclaim,24 Foremost, et al. acknowledged the authenticity and due execution of the promissory notes but denied liability for the amounts alleged in the Complaint, the computation of which they dispute due to the arbitrariness of the imposition of new interest rates. They impugned the cause of action of respondent to collect the amount due under Exhibit "G" and Exhibit "H" in view of the bank's prior extra-judicial foreclosure of the securities thereon, which recourse bars collection of the amounts due on the same promissory notes.25 Foremost, et al. questioned the inclusion of Rufina as a partydefendant even when she was not bound by the CG/CSAs which her husband Santiago signed in excess of his authority under the special power of attorney to contract loans for the family but not to guarantee loans obtained by third persons.26 The issuance of the writ of preliminary attachment was likewise objected to by Foremost on the ground that it contracted the loans in good faith but was prevented from paying the same only because of the economic crisis that beset the country. On the part of Spouses Tanchan and herein petitioners, they claim that they had no personal participation or influence in the loan transactions except to ensure its payment; hence, they could not have practiced fraud upon respondent because they did not personally contract the loans with it.27 Thus, each sought payment of Php100,000,000.00 as moral damages for the emotional and mental vexation visited upon them by respondent in causing the unwarranted preliminary attachment of their properties.28 At the pre-trial, respondent submitted an Amended Pre-trial Brief where it admitted that Foremost's Exhibit "G" and Exhibit "H" were among those secured by the real estate mortgage29that it earlierforeclosed, but the proceeds of the foreclosure sale satisfied only part of the amounts due on said promissory notes and left a deficiency which is now the subject of their complaint.30 The RTC issued a Pre-trial Order which limited the issues to be resolved to the following:

1. Does the [respondent] have a cause of action with respect to the promissory notes marked as [Exhibits] G31 and H32? 2. Is [petitioner] Rufina C. Tanchan liable on the basis of the Continuing Guaranty/Comprehensive Surety Agreements because of her authority from [sic] Santiago Tanchan, Jr. was limited to borrow money only for the benefit of the family? 3. Is the unilateral increase of the interest rate of [respondent] valid? 4. What is the amount and nature of the damages that should be adjudged against the losing party in favor of the prevailing party?33 As directed by the RTC in its Pre-trial Order, both parties presented affidavits in lieu of direct examination of their witnesses. For respondent, Fresnido Bandilla (Bandilla), Manager, Legal Department, testified that the obligations of Foremost which were secured by the real estate mortgage had amounted to Php61,155,339.36 as of the date of the foreclosure sale, and that with respondent's bid of only Php37,745,283.67 being adjudged the lone and highest bid, there remained an unpaid balance of Php23,415,115.69.34 Elumbaring corroborated Bandilla's testimony.35 On the other hand, Henry averred that even in the wake of the Asian financial crisis, Foremost struggled to meet interest payments on its loan obligations with respondent, but the point came when there were no more construction jobs to be had, and Foremost was constrained to default on its obligations.36 Santiago testified that he and his spouse could not have defrauded respondent because they did not directly contract the loans with it but merely acted as sureties. Thus, the issuance of the writ of attachment against their properties was arbitrary, and brought upon them social humiliation and emotional torment.37 After the parties submitted their respective memoranda,38the RTC rendered its August 31, 2001 Decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered ordering defendants Cebu Foremost Construction, Inc., Santiago Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan and Ma. Julie Ann Tanchan, solidarily, [to] pay plaintiff Allied Banking Corporation the following amounts: (1) US $80,000.00, plus 8.75 % interest per annum from 7 June 1996 to 6 May 1997, 9.5% interest per annum from 7 May 1997 until fully paid, and 1% penalty per month on the amount due from maturity date and until fully paid; (2) US $110,00.00, plus 8.75% interest per annum from 24 September to 29 May 1997, 9.5% interest per annum from 30 May 1997 until fully paid, and 1% penalty per month on the amount due from maturity date until fully paid; (3) US $570,000.00, plus 8.75% interest per annum from 8 October 1996 to 29 May 1997, 9.5% interest per annum from 30 May 1997 until fully paid, and 1% penalty per month on the amount due from maturity date until fully paid; (4) US $115,000.00 plus 9.5% interest per month from 12 December 1996 until fully paid, and 1% penalty per month on the amount due from maturity date until fully paid; (5) US $75,000.00, plus 9.5% interest per annum from 7 January 1997 until fully paid, and 1% penalty per month on the amount due from maturity date until fully paid; (7) US $379,000.00, plus 9.5% interest per annum from 12 February 1997 to 8 December 1997, 11.4% interest per annum from 9 December 1997 until fully paid, and 1% penalty per month on the amount due from maturity date until fully paid; (8) P7,582,945.85, plus 28.5% interest per annum, and 3% penalty per month, from the foreclosure sale on 10 August 1998 until fully paid; (9) attorney's fees equivalent to 10% of the amount due plaintiff. However, the liability of defendants' Santiago Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan and Ma. Julie Ann T. Tanchan is limited to P150,00,000.00 only. Defendants' counterclaims are dismissed for lack of sufficient merit. SO ORDERED.39 Foremost, et al. filed a Motion for Partial Reconsideration of Decision on the ground that respondent failed to state a cause of action for the payment of any deficiency account under Exhibit "G" and Exhibit "H". Its Complaint does not contain any allegation regarding a deficiency

account; nor even an allusion to the foreclosure sale conducted in partial satisfaction of said promissory notes. Although in its Amended Pre-trial Brief, respondent mentioned that a deficiency account remained after the foreclosure of the real estate mortgage, such statement did not have the effect of amending the Complaint itself. Neither did the testimonies of Bandilla and Elumbaring about a deficiency account take the place of a specific allegation of such cause of action in the Complaint. Thus, in the absence of an allegation in the Complaint of a cause of action for the payment of a deficiency account, the RTC had no factual or legal basis to grant such claim.40 Spouses Tanchan and herein petitioners also filed a Motion to Lift the Writ of Preliminary Attachment.41 The RTC denied the Motion to Lift the Writ of Attachment in an Order42 dated September 25, 2001, and the Motion for Partial Reconsideration, in an Order43dated August 8, 2002. Foremost, et al. appealedto the CA under the following assignment of errors: 1. The lower court erred in not holding that having opted to extra-judicially foreclose the real estate mortgage which was executed to secure the promissory notes marked as Exhibits "G" and "H", the [respondent] is barred from filing an action for collection of the same; 2. The lower court erred in not holding that Rufina Tanchan did not authorize her husband, Santiago J. Tanchan, Jr. to sign the Continuing Guaranty/ Comprehensive Surety Agreement marked as Exhibit "I"; and 3. The lower court erred in not lifting the writ of preliminary attachment and granting the claim for damages of the individual defendants by virtue of the wrongful issuance of the writ of preliminary attachment.44 The CA dismissed the appeal in the June 15, 2004 Decision assailed herein.

Only petitioners took the present recourse to raise the following issues: I. Whether or not the petitioners as mere sureties of the loans obtained by Cebu Foremost Construction, Inc. were guilty of fraud in incurring the obligations so that a writ of preliminary attachment may be issued against them? II. Whether or not the respondent may claim for deficiency judgment on its seventh and eight causes of action, not having alleged in its complaint that said loans were secured by a real estate mortgage and after the foreclosure there was a deficiency as in fact in its complaint, the respondent sought full recovery of the promissory notes subject of its seventh and eighth cause of action? III. Whether or not the lower court and the Court of Appeals erred in not awarding petitioners damages for the wrongful issuance of a writ of preliminary attachment against them?45 Being interrelated, the first and third issues will be resolved jointly. The issues involve the validity of the writ of preliminary attachment as against the properties of petitioners only, but not as against the properties of Foremost and Spouses Tanchan, neither of whom appealed before the Court. The discussion that follows, therefore, shall pertain only to the effect of the writ on petitioners. One of the grounds cited by the CA in refusing to discharge the writ of attachment is that "it is now too late for [petitioners] to question the validity of the writ" because they waited three long years to have it lifted or discharged.46 Under Section 13, Rule 57 of the Rules of Court, a party whose property has been ordered attached may file a motion "with the court in which the action is pending" for the discharge of the attachment on the ground that it has been improperly issued or enforced. In addition, said party may file, under Section 20, Rule 57, a claim for damages on account of improper attachment within the following periods:

Sec. 20. Claim for damages on account of improper, irregular or excessive attachment. - An application for damages on account of improper, irregular or excessive attachment must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching obligee or his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. Such damages may be awarded only after proper hearing and shall be included in the judgment on the main case. If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages sustained during the pendency of the appeal by filing an application in the appellate court with notice to the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court.47 (Emphasis supplied) Records reveal that the RTC issued the writ of preliminary attachment on November 3, 1998,48 and as early as March 23, 1999, in their Amended Answer with Counterclaim, petitioners already sought the discharge of the writ.49 Moreover, after the RTC rendered its Decision on August 3, 2001 but before appeal therefrom was perfected, petitioners filed on August 23, 2001 a Motion to Lift the Writ of Preliminary Attachment, reiterating their objection to the writ and seeking payment of damages for its wrongful issuance.50 Clearly, petitioners' opposition to the writ was timely. The question now is whether petitioner has a valid reason to have the writ discharged and to claim damages. It should be borne in mind that the questioned writ of preliminary attachment was issued by the RTC under Section 1(d), Rule 57 of the Rules of Court, to wit Sec. 1. Grounds upon which attachment may issue. - A plaintiff or any proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases:

xxxx (d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought; x x x x. and on the basis solely of respondent's allegations in its Complaint "that defendants [Foremost, et al.] failed to pay their obligations on maturity dates, with the amount of US$1,054,000.00 and Php7,466795.69 remaining unpaid; that defendants are disposing/concealing their properties with intent to defraud the plaintiff and/or are guilty of fraud in the performance of their obligations; and that there is no security whatsoever for the claim sought to be enforced."51 Petitioners argue that the foregoing allegations are not sufficient to justify issuance of the writ, especially in the absence of findings that they, as sureties, participated in specific fraudulent acts in the execution and performance of the loan agreements with respondent. 52 In refusing to lift the writ, the RTC held that the lack of a specific factual finding of fraud in its decision is not among the grounds provided under Sections 12 and 13, Rule 57 of the Rules of Court for the discharge of the writ.53 The CA agreed for the reason that the RTC's affirmative action on the complaint filed by respondent signifies its agreement with the allegations found therein that Foremost, et al., including herein petitioners, committed fraudulent acts in procuring loans from respondent.54 Both courts are in error. The present case fits perfectly into the mold of Allied Banking Corporation v. South Pacific Sugar Corporation,55where a writ of preliminary attachment issued in favor of Allied Banking Corporation was discharged by the lower courts for lack of evidence of fraud. In sustaining the discharge of the writ, the Court held:

Moreover, even a cursory examination of the bank's complaint will reveal that it cited no factual circumstance to show fraud on the part of respondents. The complaint only had a general statement in the Prayer for the Issuance of a Writ of Preliminary Attachment, reproduced in the attached affidavit of petitioner's witness Go who stated as follows: xxxx 4. Defendants committed fraud in contracting the obligations upon which the present action is based and in the performance thereof. Among others, defendants induced plaintiff to grant the subject loans to defendant corporation by willfully and deliberately misrepresenting that, one, the proceeds of the loans would be used as additional working capital and, two, they would be in a financial position to pay, and would most certainly pay, the loan obligations on their maturity dates. In truth, defendants had no intention of honoring their commitments as shown by the fact that upon their receipt of the proceeds of the loans, they diverted the same to illegitimate purposes and then brazenly ignored and resisted plaintiff's lawful demands for them to settle their past due loan obligations xxxx Such general averment will not suffice to support the issuance of the writ of preliminary attachment. It is necessary to recite in what particular manner an applicant for the writ of attachment was defrauded x x x. Likewise, written contracts are presumed to have been entered into voluntarily and for a sufficient consideration. Section 1, Rule 131 of the Rules of Court instructs that each party must prove his own affirmative allegations. To repeat, in this jurisdiction, fraud is never presumed. Moreover, written contracts such as the documents executed by the parties in the present case, are presumed to have been entered into for a sufficient consideration. (Citations omitted)

In the aforecited case -- as in the present case -- the bank presented the testimony of its account officer who processed the loan application, but the Court discarded her testimony for it did not detail how the corporation induced or deceived the bank into granting the loans.56 Also apropos is Ng Wee v. Tankiansee57 where the appellate court was questioned for discharging a writ of preliminary attachment to the extent that it affected the properties of respondent Tankiansee, a corporate officer of Wincorp, both defendants in the complaint for damages which petitioner Ng Wee had filed with the trial court. In holding that the appellate court correctly spared respondent Tankiansee from the writ of preliminary attachment, the Court cited the following basis: In the instant case, petitioner's October 12, 2000 Affidavit is bereft of any factual statement that respondent committed a fraud. The affidavit narrated only the alleged fraudulent transaction between Wincorp and Virata and/or Power Merge, which, by the way, explains why this Court, in G.R. No. 162928, affirmed the writ of attachment issued against the latter. As to the participation of respondent in the said transaction, the affidavit merely states that respondent, an officer and director of Wincorp, connived with the other defendants in the civil case to defraud petitioner of his money placements. No other factual averment or circumstance details how respondent committed a fraud or how he connived with the other defendants to commit a fraud in the transaction sued upon. In other words, petitioner has not shown any specific act or deed to support the allegation that respondent is guilty of fraud. The affidavit, being the foundation of the writ, must contain such particulars as to how the fraud imputed to respondent was committed for the court to decide whether or not to issue the writ. Absent any statement of other factual circumstances to show that respondent, at the time of contracting the obligation, had a preconceived plan or intention not to pay, or without any showing of how respondent committed the alleged fraud, the general averment in the affidavit that respondent is an officer and director of Wincorp who allegedly connived with the other defendants to commit a fraud, is insufficient to

support the issuance of a writ of preliminary attachment x x x.Verily, the mere fact that respondent is an officer and director of the company does not necessarily give rise to the inference that he committed a fraud or that he connived with the other defendants to commit a fraud. While under certain circumstances, courts may treat a corporation as a mere aggroupment of persons, to whom liability will directly attach, this is only done when the wrongdoing has been clearly and convincingly established. (Emphasis supplied) Indeed, a writ of preliminary attachment is too harsh a provisional remedy to be issued based on mere abstractions of fraud.58 Rather, the rules require that for the writ to issue, there must be a recitation of clear and concrete factual circumstances manifesting that the debtor practiced fraud upon the creditor at the time of the execution of their agreement in that said debtor had a pre-conceived plan or intention not to pay the creditor.59Being a state of mind, fraud cannot be merely inferred from a bare allegation of non-payment of debt or non-performance of obligation.60 As shown in Ng Wee, the requirement becomes all the more stringent when the application for preliminary attachment is directed against a defendant officer of a defendant corporation, for it will not be inferred from the affiliation of one to the other that the officer participated in or facilitated in any fraudulent practice attributed to the corporation. There must be evidence clear and convincing that the officer committed a fraud or connived with the corporation to commit a fraud; only then may the properties of said officer, along with those of the corporation, be held under a writ of preliminary attachment. There is every reason to extend the foregoing rule, by analogy, to a mere surety of the defendant. A surety's involvement is marginal to the principal agreement between the defendant and the plaintiff; hence, in order for the surety to be subject to a proceeding for issuance of a writ of preliminary attachment, it must be shown that said surety participated in or facilitated the fraudulent practice of the defendant, such as by offering a security solely to induce the plaintiff to enter into the agreement with the defendant.

There is neither allegation nor innuendo in the Complaint of respondent or the Affidavit of Elumbaring that petitioners as sureties or officers of Foremost participated in or facilitated the commission of fraud by Foremost, et al. against respondent. In fact, there is no mention of petitioners, much less a recital of their role or influence in the execution of the loan agreements. The RTC cited an allegation that petitioners are disposing/concealing their properties with intent to defraud respondent, but there is no hint of such scheme in the five paragraphs of the Complaint61 or in the four corners of the Affidavit of Elumbaring.62All that is alleged is that Foremost obtained loans from respondent but failed to pay the same, but as the Court has repeatedly held, no fraud can be inferred from a mere failure to pay a loan.63 In fine, there was no factual basis for the issuance of a writ of preliminary attachment against the properties of petitioners. The immediate dissolution of the writ is called for. In so ruling, however, the Court does not go so far as to grant petitioners' claim for moral damages. A wrongful attachment may give rise to liability for moral damages but evidence must be adduced not only of the torment and humiliation brought upon the defendant by the attaching party but also of the latter's bad faith or malice in causing the wrongful attachment,64 such as evidence that the latter deliberately made false statements in its application for attachment.65Absent such evidence of malice, the attaching party cannot be held liable for moral damages.66 In the present case, petitioners cite the allegations made by respondent in its application for attachment as evidence of bad faith. However, the allegations in question contain nothing but the stark truth that Foremost obtained loans and that it failed to pay. The Court fails to see any malice in such bare allegations as would make respondent liable to petitioners for moral damages. To recapitulate, the Court partly dissolves the writ of preliminary attachment for having wrongfully issued against the properties of petitioners who were not shown to have committed fraud in the execution of the loan agreements between Foremost and respondent, but declines to award moral damages to petitioners in the absence of evidence that respondent acted with malice in causing the wrongful issuance of the writ.

The second issue involves that portion of the August 3, 2001 RTC Decision awarding respondent "(7) US $379,000.00, plus 9.5% interest per annum from 12 February 1997 to 8 December 1997, 11.4% interest per annum from 9 December 1997 until fully paid, and 1% penalty per month on the amount due from maturity date until fully paid" under Promissory Note No. 0051-97-03696, and "(8) P7,582,945.85, plus 28.5% interest per annum, and 3% penalty per month, from the foreclosure sale on 10 August 1998 until fully paid" under Promissory Note No. 0051-97-03688. Petitioners argue that respondent is barred from claiming any amount under the Promissory Notes, Exhibits "G" and "H", because it had already elected to foreclose on the mortgage security, and it failed to allege in its pleadings that a deficiency remained after the public auction sale of the securities and that what it is seeking is the payment of such deficiency.67 There is no question that a mortgage creditor has a single cause of action against a mortgagor debtor, which is to recover the debt; but it has the option of either filing a personal action for collection of sum of money or instituting a real action to foreclose on the mortgage security.68An election of the first bars recourse to the second; otherwise, there would be multiplicity of suits in which the debtor would be tossed from one venue to another, depending on the location of the mortgaged properties and the residence of the parties.69On the other hand, a creditor who elects to foreclose on the mortgage may yet file an independent civil action for recovery of whatever deficiency may remain in the outstanding obligation of the debtor, after deducting the price obtained in the sale of the mortgaged properties at public auction.70The complaint, though, must specifically allege that what is being sought is the recovery of the deficiency,71 or that in the pre-trial, such claim be raised as an issue.72 Contrary to petitioners' argument, it is clear from the allegations in the Complaint that what respondent sought was the payment of the deficiency amount under the subject promissory notes. In particular, while the Promissory Note, Exhibit "H", is for the amount of Php16,500,000.00, what respondent sought to recover was only Php7,582,945.85, consistent with the fact that part of said promissory note has been satisfied from the proceeds of the extra-judicial foreclosure. While the exact phrase "deficiency account" is not

employed in the Complaint, the intention of respondent to recover the same is borne out by its allegations. More importantly, in the Pre-trial Order issued by the RTC, the right of respondent to recover the deficiency account under the subject promissory notes was raised as a specific issue. WHEREFORE, the petition is PARTLY GRANTED. The June 15, 2004 Decisionof the Court of Appeals is MODIFIED to the effect that the November 3, 1998 Writ of Preliminary Attachment is LIFTED andDISSOLVED insofar as it affects the properties of petitioners Spouses Santiago and Rufina Tanchan. No costs. SO ORDERED.

PERLA COMPANIA DE SEGUROS, INC. vs. REMOLETE, 203 SCRA 487

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

down Calixto Palmes. He died as a result of cardio-respiratory arrest due to a crushed chest. 4 The accident also caused physical injuries on the part of Adeudatus Borbon who was then only two (2) years old. On 25 June 1976, private respondents Primitiva Palmes (widow of Calixto Palmes) and Honorato Borbon, Sr. (father of minor Adeudatus Borbon) filed a complaint 5 against Cosme Casas and Nelia Enriquez (assisted by her husband Leonardo Enriquez) before the then Court of First Instance of Cebu, Branch 3, claiming actual, moral, nominal and exemplary damages as a result of the accident. The claim of private respondent Honorato Borbon, Sr., being distinct and separate from that of co-plaintiff Primitiva Palmes, and the amount thereof falling properly within the jurisdiction of the inferior court, respondent Judge Jose R. Ramolete ordered the Borbon claim excluded from the complaint, without prejudice to its being filed with the proper inferior court. On 4 April 1977, the Court of First Instance rendered a Decision 6 in favor of private respondent Primitiva Palmes, ordering common carrier Nelia Enriquez to pay her P10,000.00 as moral damages, P12,000.00 as compensatory damages for the death of Calixto Palmes, P3,000.00 as exemplary damages, P5,000.00 as actual damages, and P1,000.00 as attorney's fees. The judgment of the trial court became final and executory and a writ of execution was thereafter issued. The writ of execution was, however, returned unsatisfied. Consequently, the judgment debtor Nelia Enriquez was summoned before the trial court for examination on 23 July 1979. She declared under oath that the Cimarron PUJ registered in her name was covered by a third-party liability insurance policy issued by petitioner Perla. Thus, on 31 July 1979, private respondent Palmes filed a motion for garnishment 7 praying that an order of garnishment be issued against the insurance policy issued by petitioner in favor of the judgment debtor. On 6 August 1979, respondent Judge issued an Order 8 directing the Provincial Sheriff or his deputy to garnish the third-party liability insurance policy. Petitioner then appeared before the trial court and moved for reconsideration of the 6 August 1979 Order and for quashal of the writ

of garnishment, 9 alleging that the writ was void on the ground that it (Perla) was not a party to the case and that jurisdiction over its person had never been acquired by the trial court by service of summons or by any process. The trial court denied petitioner's motion.10 An Order for issuance of an alias writ of garnishment was subsequently issued on 8 April 1980. 11 More than two (2) years later, the present Petition for Certiorari and Prohibition was filed with this Court on 25 June 1982 alleging grave abuse of discretion on the part of respondent Judge Ramolete in ordering garnishment of the third-party liability insurance contract issued by petitioner Perla in favor of the judgment debtor, Nelia Enriquez. The Petition should have been dismissed forthwith for having been filed way out of time but, for reasons which do not appear on the record, was nonetheless entertained. In this Petition, petitioner Perla reiterates its contention that its insurance contract cannot be subjected to garnishment or execution to satisfy the judgment in Civil Case No. R-15391 because petitioner was not a party to the case and the trial court did not acquire jurisdiction over petitioner's person. Perla further argues that the writ of garnishment had been issued solely on the basis of the testimony of the judgment debtor during the examination on 23 July 1979 to the effect that the Cimarron PUJ was covered by a third-party liability insurance issued by Perla, without granting it the opportunity to set up any defenses which it may have under the insurance contract; and that the proceedings taken against petitioner are contrary to the procedure laid down in Economic Insurance Company, Inc. v. Torres, et al., 12 which held that under Rule 39, Section 45, the Court "may only authorize" the judgment creditor to institute an action against a third person who holds property belonging to the judgment debtor. We find no grave abuse of discretion or act in excess of or without jurisdiction on the part of respondent Judge Ramolete in ordering the garnishment of the judgment debtor's third-party liability insurance. Garnishment has been defined as a species of attachment for reaching any property or credits pertaining or payable to a judgment debtor. 13 In legal contemplation, it is a forced novation by the substitution of creditors: 14the judgment debtor, who is the original creditor of the garnishee is, through service of the writ of garnishment, substituted by the judgment creditor who thereby becomes creditor of

the garnishee. Garnishment has also been described as a warning to a person having in his possession property or credits of the judgment debtor, not to pay the money or deliver the property to the latter, but rather to appear and answer the plaintiff's suit. 15 In order that the trial court may validly acquire jurisdiction to bind the person of the garnishee, it is not necessary that summons be served upon him. The garnishee need not be impleaded as a party to the case. All that is necessary for the trial court lawfully to bind the person of the garnishee or any person who has in his possession credits belonging to the judgment debtor is service upon him of the writ of garnishment. The Rules of Court themselves do not require that the garnishee be served with summons or impleaded in the case in order to make him liable. Rule 39, Section 15 provides: Sec. 15. Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the property, real or personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution . . . Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied on in like manner and with like effect as under a writ of attachment. (Emphasis supplied). Rule 57, Section 7(e) in turn reads: Sec. 7. Attachment of real and personal property; recording thereof. Properties shall be attached by the officer executing the order in the following manner: xxx xxx xxx

(e) Debts and credits, and other personal property not capable of manual delivery, by leaving with the person owing such debts, or having his possession or under his control such credits or other personal property, or with his agent, a copy of the order, and notice that the debts owing by him to the party against whom attachment is issued, and the credits and other personal property in his possession, or under his control, belonging to said party, are attached in pursuance of such order; xxx xxx xxx (Emphasis supplied) Through service of the writ of garnishment, the garnishee becomes a "virtual party" to, or a "forced intervenor" in, the case and the trial court thereby acquires jurisdiction to bind him to compliance with all orders and processes of the trial court with a view to the complete satisfaction of the judgment of the court. In Bautista v. Barredo, 16 the Court, through Mr. Justice Bautista Angelo, held: While it is true that defendant Jose M. Barredo was not a party in Civil Case No. 1636 when it was instituted by appellant against the Philippine Ready Mix Concrete Company, Inc., however, jurisdiction was acquired over him by the court and he became a virtual party to the case when, after final judgment was rendered in said case against the company, the sheriff served upon him a writ of garnishment in behalf of appellant. Thus, as held by this Court in the case of Tayabas Land Company vs. Sharruf, 41 Phil. 382, the proceeding by garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. By means of the citation, the stranger becomes a forced intervenor; and the court, having acquired jurisdiction over him by means of the citation, requires him to pay his debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. (Emphasis supplied).

In Rizal Commercial Banking Corporation v. De Castro, 17 the Court stressed that the asset or credit garnished is thereupon subjected to a specific lien: The garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property a lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia legis, under the sole control of such court. 18 (Emphasis supplied) In the present case, there can be no doubt, therefore, that the trial court actually acquired jurisdiction over petitioner Perla when it was served with the writ of garnishment of the third-party liability insurance policy it had issued in favor of judgment debtor Nelia Enriquez. Perla cannot successfully evade liability thereon by such a contention. Every interest which the judgment debtor may have in property may be subjected to execution.19 In the instant case, the judgment debtor Nelia Enriquez clearly had an interest in the proceeds of the thirdparty liability insurance contract. In a third-party liability insurance contract, the insurer assumes the obligation of paying the injured third party to whom the insured is liable. 20 The insurer becomes liable as soon as the liability of the insured to the injured third person attaches. Prior payment by the insured to the injured third person is not necessary in order that the obligation of the insurer may arise. From the moment that the insured became liable to the third person, the insured acquired an interest in the insurance contract, which interest may be garnished like any other credit. 21 Petitioner also contends that in order that it may be held liable under the third-party liability insurance, a separate action should have been commenced by private respondents to establish petitioner's liability. Petitioner invokesEconomic Insurance Company, Inc. vs. Torres, 22 which stated: It is clear from Section 45, Rule 39 that if a persons alleged to have property of the judgment debtor or to be indebted to him claims an interest in the property adverse to him or denies the debt, the court may only authorize the judgment creditor to institute an action

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

assailed Orders of the trial court are hereby AFFIRMED. Costs against petitioner. This Decision is immediately executory. SO ORDERED. MINDANAO SAVINGS & LOAN ASSO. vs. CA, 172 SCRA 480 On September 10, 1986, private respondents filed in the Regional Trial Court of Davao City, a complaint against defendants D.S. Homes, Inc., and its directors, Laurentino G. Cuevas, Saturnino R. Petalcorin, Engr. Uldarico D. Dumdum, Aurora P. De Leon, Ramon D. Basa, Francisco D. Villamor, Richard F. Magallanes, Geronimo S. Palermo Felicisima V. Ramos and Eugenio M. De los Santos (hereinafter referred to as D.S. Homes, et al.) for "Rescission of Contract and Damages" with a prayer for the issuance of a writ of preliminary attachment, docketed as Civil Case No. 18263. On September 28, 1986, Judge Dinopol issued an order granting ex parte the application for a writ of preliminary attachment. On September 22, 1986, the private respondents amended their complaint and on October 10, 1986, filed a second amended complaint impleading as additional defendants herein petitioners Davao Savings & Loan Association, Inc. and its president, Francisco Villamor, but dropping Eugenio M. De los Santos. On November 5, 1986, Judge Dinopol issued ex parte an amended order of attachment against all the defendants named in the second amended complaint, including the petitioners but excluding Eugenio C. de los Santos. D. S. Homes. Inc., et al. and the Davao Savings & Loan Association (later renamed Mindanao Savings & Loan Association, Inc. or "MSLA") and Francisco Villamor filed separate motions to quash the writ of attachment. When their motions were denied by the Court, D.S. Homes, Inc., et al. offered a counterbond in the amount of Pl,752,861.41 per certificate issued by the Land Bank of the Philippines, a banking partner of petitioner MSLA The lower court accepted the Land Bank Certificate of . Deposit for Pl,752,861.41 as counterbond and lifted the writ of preliminary attachment on June 5, 1987 (Annex V)

On July 29, 1987, MSLA and Villamor filed in the Court of Appeals a petition for certiorari (Annex A) to annul the order of attachment and the denial of their motion to quash the same (CA-G.R. SP No. 12467). The petitioners alleged that the trial court acted in excess of its jurisdiction in issuing the ex parte orders of preliminary attachment and in denying their motion to quash the writ of attachment, D.S. Homes, Inc., et al. did not join them. On May 5, 1988, the Court of Appeals dismissed the petition for certiorari and remanded the records of Civil Case No. 18263 to the Regional Trial Court of Davao City, Branch 13, for expeditious proceedings. It held: Objections against the writ may no longer be invoked once a counterbond is filed for its lifting or dissolution. The grounds invoked for the issuance of the writ form the core of the complaint and it is right away obvious that a trial on the merits was necessary. The merits of a main action are not triable in a motion to discharge an attachment otherwise an applicant for dissolution could force a trial on the merits on his motion (4 Am. Jur., Sec. 635, 934, cited in G.G. Inc. vs. Sanchez, et al., 98 Phil. 886, 890, 891). (Annex B, p. 185, Rollo.) Dissatisfied, the petitioners appealed to this Court. A careful consideration of the petition for review fails to yield any novel legal questions for this Court to resolve. The only requisites for the issuance of a writ of preliminary attachment under Section 3, Rule 57 of the Rules of Court are the affidavit and bond of the applicant. SEC. 3. Affidavit and bond required . An order of attachment shall be granted only when it is made to appear by the affidavit of the applicant, or of some other person who personally knows the facts, that a sufficient cause of action exists that the case is one of those mentioned in section 1 hereof, that there is no other sufficient security for the claim sought to be

enforced by the action, and that the amount due to the applicant, or the value of the. property the possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The affidavit, and the bond required by the next succeeding section must be duly filed with the clerk or judge of the court before the order issues. No notice to the adverse party or hearing of the application is required. As a matter of fact a hearing would defeat the purpose of this provisional remedy. The time which such a hearing would take, could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues. Nevertheless, while no hearing is required by the Rules of Court for the issuance of an attachment (Belisle Investment & Finance Co., Inc. vs. State Investment House, Inc., 72927, June 30, 1987; Filinvest Credit Corp. vs. Relova, 11 7 SCRA 420), a motion to quash the writ may not be granted without "reasonable notice to the applicant" and only "after hearing" (Secs. 12 and 13, Rule 57, Rules of Court). The Court of Appeals did not err in holding that objections to the impropriety or irregularity of the writ of attachment "may no longer be invoked once a counterbond is filed," when the ground for the issuance of the writ forms the core of the complaint. Indeed, after the defendant has obtained the discharge of the writ of attachment by filing a counterbond under Section 12, Rule 57 of the Rules of Court, he may not file another motion under Section 13, Rule 57 to quash the writ for impropriety or irregularity in issuing it. The reason is simple. The writ had already been quashed by filing a counterbond, hence, another motion to quash it would be pointless. Moreover, as the Court of Appeals correctly observed, when the ground for the issuance of the writ is also the core of the complaint, the question of whether the plaintiff was entitled to the writ can only be determined after, not before, a full-blown trial on the merits of the case. This accords with our ruling G.B. Inc. vs. Sanchez, 98 Phil. 886 that: "The merits of a main action are not triable in a motion to discharge an attachment, otherwise an applicant for the dissolution could force a trial on the merits of the case on this motion."

May the defendant, after procuring the dissolution of the attachment by filing a counterbond, ask for the cancellation of the counterbond on the ground that the order of attachment was improperly issued? That question was answered by this Court when it ruled in Uy Kimpang vs. Javier, 65 Phil. 170, that "the obligors in the bond are absolutely liable for the amount of any judgment that the plaintiff may recover in the action without reference to the question of whether the attachment was rightfully or wrongfully issued." The liability of the surety on the counterbond subsists until the Court shall have finally absolved the defendant from the plaintiff s claims. Only then may the counterbond be released. The same rule applies to the plaintiffs attachment bond. "The liability of the surety on the bond subsists because the final reckoning is when the Court shall finally adjudge that the attaching creditor was not entitled to the issuance of the attachment writ," (Calderon vs. Intermediate Appellate Court, 155 SCRA 531.) WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. SP No. 12467, the petition for review is denied for lack of merit with costs against the petitioners. SO ORDERED. Cruz, Gancayco and Medialdea, JJ., concur.

Separate Opinions

NARVASA, J.: Concurring And Dissenting Opinion I agree that the decision of the Court of Appeals subject of the appeal in this case should be affirmed. I write this separate opinion simply to stress certain principles relative to the discharge of preliminary attachments so that our own decision or that thereby affirmed be not applied to juridical situations beyond their intendment, which may well

result from the statement that "after the defendant has obtained the discharge of the writ of attachment by filing a counterbond under Section 12, Rule 57 of the Rules of Court, he may not file another motion under Section 13, Rule 57 to quash the writ for impropriety or irregularity in issuing it." Rule 57 specifies in clear terms the modes by which a preliminary attachment may be discharged at the instance of the party against whom it has been issued. The first is by the submission of a counterbond or security. The second is by a demonstration of the attachment's improper or irregular issuance. 1.0. The discharge of an attachment on security given is governed by Section 12 of the Rule. SEC 12. Discharge of attachment upon giving counterbond. At any time after an order of attachment has been granted, the party whose property has been attached, or the person appearing in his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given .. in an amount equal to the value of the property attached as determined by the judge to secure the payment of any judgment that the attaching creditor may recover in the action. .. . This mode of dissolution presents no apparent difficulty. It applies when there has already been a seizure of property by the sheriff. All that is entailed is the presentation of a motion to the proper court, seeking approval of a cash or surety bond in an amount equivalent to the value of the property seized and the lifting of the attachment on the basis thereof. The counter-bond stands, according to the cited section, "in place of the property so released." 1.1. But a party need not wait until his property has been seized before seeking its dissolution upon security. In fact he may prevent the seizure of his property under attachment by giving security in an amount sufficient to satisfy the claims against him. The relevant provision of the Rule is Section 5. 1

SEC. 5. Manner of attaching property . The officer executing the order shall without delay attach, to await judgment and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the applicant, in an amount sufficient to satisfy such demand besides costs or in an amount equal to the value of the property which is about to be attached, to secure payment to the applicant of any judgment which he may recover in the action. .. . 2.0. The second way of lifting a preliminary attachment is by proving its irregular or improper issuance, under Section 13 of Rule 57. Like the first, this second mode may be availed of even before any property has been actually attached. It may even be resorted to after the property has already been released from the levy on attachment, as the pertinent provision makes clear. 2 SEC. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached may also, at any time either before or after the release of the attached properly, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counteraffidavits or other evidence in addition to that on which the attachment was made. .. . As pointed out in Calderon v. I.A.C. 155 SCRA 531 (1987), "The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other.

Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor instead of the other way, which, in most instances .. would require presentation of evidence in a fullblown trial on the merits and cannot easily be settled in a pending incident of the case." 3.0. However, when the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty," 3or "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, 4 the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiffs application and affidavits on which the writ was based and consequently that the writ based thereon had been improperly or irregularly issued 5 the reason being that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counter-bond. 6 4.0. The dissolution of the preliminary attachment upon security given, or a showing of its irregular or improper issuance, does not of course operate to discharge the sureties on plaintiffs own attachment bond. The reason is simple. That bond is 'executed to the adverse party, .. conditioned that the .. (applicant) will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto." 7 Hence, until that determination is made, as to the applicant's entitlement to the attachment, his bond must stand and cannot be withdrawn.

NARVASA, J.: Concurring And Dissenting Opinion I agree that the decision of the Court of Appeals subject of the appeal in this case should be affirmed. I write this separate opinion simply to stress certain principles relative to the discharge of preliminary attachments so that our own decision or that thereby affirmed be not applied to juridical situations beyond their intendment, which may well result from the statement that "after the defendant has obtained the discharge of the writ of attachment by filing a counterbond under Section 12, Rule 57 of the Rules of Court, he may not file another motion under Section 13, Rule 57 to quash the writ for impropriety or irregularity in issuing it." Rule 57 specifies in clear terms the modes by which a preliminary attachment may be discharged at the instance of the party against whom it has been issued. The first is by the submission of a counterbond or security. The second is by a demonstration of the attachment's improper or irregular issuance. 1.0. The discharge of an attachment on security given is governed by Section 12 of the Rule. SEC 12. Discharge of attachment upon giving counterbond. At any time after an order of attachment has been granted, the party whose property has been attached, or the person appearing in his behalf, may, upon reasonable notice to the applicant, apply to the judge e who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given .. in an amount equal to the value of the property attached as determined by the judge to secure the payment of any judgment that the attaching creditor may recover in the action. .. . This mode of dissolution presents no apparent difficulty. It applies when there has already been a seizure of property by the sheriff. All that is entailed is the presentation of a motion to the proper court, seeking approval of a cash or surety bond in an amount equivalent to the value of the property seized and the lifting of the attachment on

Separate Opinions

the basis thereof. The counter- bond stands, according to the cited section, "in place of the property so released." 1.1. But a party need not wait until his property has been seized before seeking its dissolution upon security. In fact he may prevent the seizure of his property under attachment by giving security in an amount sufficient to satisfy the claims against him. The relevant provision of the Rule is Section 5. 1 SEC. 5. Manner of attaching property. The officer executing the order shall without delay attach, to await judgment and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the applicant, in an amount sufficient to satisfy such demand besides costs or in an amount equal to the value of the property which is about to be attached, to secure payment to the applicant of any judgment which he may recover in the action. .. . 2.0. The second way of lifting a preliminary attachment is by proving its irregular or improper issuance, under Section 13 of Rule 57. Like the first, this second mode may be availed of even before any property has been actually attached. It may even be resorted to after the property has already been released from the levy on attachment, as the pertinent provision makes clear. 2 SEC. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached may also, at any time either before or after the release of the attached properly, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose

property has been attached, but not otherwise, the attaching creditor may oppose the same by counteraffidavits or other evidence in addition to that on which the attachment was made. .. . As pointed out in Calderon v. I.A.C. 155 SCRA 531 (1987), "The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor instead of the other way, which, in most instances .. would require presentation of evidence in a fullblown trial on the merits and cannot easily be settled in a pending incident of the case." 3.0. However, when the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty," 3or "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, 4 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 basedand consequently that the writ based thereon had been improperly or irregularly issued 5 the reason being that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counter-bond. 6 4.0. The dissolution of the preliminary attachment upon security given, or a showing of its irregular or improper issuance, does not of course operate to discharge the sureties on plaintiffs own attachment bond. The reason is simple. That bond is 'executed to the adverse party, .. conditioned that the .. (applicant) will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the

applicant was not entitled thereto." 7 Hence, until that determination is made, as to the applicant's entitlement to the attachment, his bond must stand and cannot be withdrawn.

have been wrongful and cause. 1 (Emphasis supplied )

without

sufficient

Defendants having failed to appear for trial, a commissioner appointed by the Court received the evidence. In due course, decision was rendered ordering defendants: LEELIN MARKETING CORP. vs. C&S AGRO DEVT CO., INC., 121 SCRA 725 ... to pay jointly and severally to the plaintiff, Leelin Marketing Corporation, the amounts of P14,020.26 in full payment of their account together with their corresponding interests as of January 15, 1969 with interest at the rate of 12% per annum on the amount of P12,962.17 until fully paid; P3,505.07 as attorney's fees, and Pl,312.25 to indemnify plaintiff of the expenses incurred by it in connection with this case and the writ of preliminary attachment therein. Without pronouncement as to costs. The decision having become final and executory, a writ of execution was issued but the same was returned unsatisfied. LEELIN moved to charge the Surety on its counterbond, setting the motion for hearing. The Surety filed an opposition denying all liability for payment of the monetary judgment. Resolving the motion, the Trial Court "reluctantly" held that the Surety cannot be held liable for the judgment under the terms and conditions set forth in the bond. Said the Court: In the spirit prevailing in Section 20, Rule 57, Revised Rules of Court, we believe, the plaintiff should have notified the surety (Belfast Surety & Insurance Co., Inc.) when it presented its evidence during the trial in the spirit of fairness and to comply with the strict requirements of due process. A day in Court must be given the Surety before it should be adjudged or held liable under the counterbond. This should have been done by the plaintiff either before trial or before entry of the final judgment, i.e., not later than the date when the judgment becomes final and executory. This is the rule and has been reiterated by our Supreme Court in numerous cases. Plaintiff failed to observe or follow this procedure; accordingly, we cannot hold the surety

Is the counterbond put up by a surety company for the discharge of an attachment liable for the money judgment in favor of the judgment creditor? That issue being purely legal, the then Court of Appeals certified the appeal before it to this Tribunal. This was an action originally for a sum of money filed by plaintiff Leelin Marketing Corp. (LEELIN, for short) against defendants Mario Santos and Aurelio Cartano doing business under the name and style of C & S Agro Development Company before the Court of First Instance of Camarines Sur. LEELIN procured a writ of preliminary attachment upon its filing of a bond of P12,962.17, the amount of its claim, by virtue of which the merchandise in the stores of defendants in Tabaco and Legazpi, Albay, one panel car and one sedan car were attached. However, upon presentation by defendants of a counterbond executed by Belfast Surety and Insurance Co., Inc., (the Surety, for brevity) in the amount of P20,000.00, and approved by the Trial Court, the attachment was dissolved. The counterbond provides as follows: WHEREFORE, we Mario Santos, Aurelio Cartao and C & S Development Co., as principals and Belfast Surety & Insurance Co., Inc. of Manila, Philippines, as surety in consideration of the lifting of said attachment hereby jointly and severally bind ourselves in the sum of TWENTY THOUSAND (P20,000.00) PESOS in favor of the plaintiff under the condition that we will pay all costs which may be adjudged to plaintiff and all damages which it may sustain by reason of the attachment, if the same shall finally be adjudged to

liable even if the terms and conditions of the bond were differently words as quoted. ... 2 We reverse. There is an apparent confusion between a bond put up by an attaching creditor for the issuance of writs of attachment covered by Section 4 of Rule 57 of the Rules of Court, and the counterbond given by the adverse party for the discharge of writs of attachment already issued covered by Section 12 of the same Rule 57. It is the bond posted by the attaching creditor under Section 4, Rule 57, in an amount not exceeding its claim, that answers for costs and all damages which may be sustained by the adverse party by reason of the attachment, if the Court shall finally adjudge that the attaching creditor was not entitled thereto. Explicitly, Section 4, Rule 57 provides: Sec. 4. Condition of applicant's bond. The party applying for the order must give a bond executed to the adverse party in an amount to be fixed by the judge, not exceeding the applicant's claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was nnot entitled thereto. And, it is the claim for damages on account of illegal attachment that may be awarded only after the proper hearing and which shall be included in the final judgment. That claim must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety, pursuant to Section 20 of Rule 57 of the Rules of Court, reading: Sec. 20. Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party against whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be

filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. xxx xxx xxx On the other hand, a counterbond under Section 12 of Rule 57 of the Rules of Court is filed by the party whose property has been attached, equal to the value of the property attached, in order to secure the payment of any judgment that the attaching creditor may recover in the action. To discharge attachment upon said counterbond, said Rule explicitly provides: Sec. 12. Discharge of attachment upon giving counterbond. At any time after an order of attachment has been granted, the party whose property has been attached, or the person appearing on his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge of the attachment if a cash deposit is made, or a counterbond executed to the attaching creditor is filed, on behalf of the adverse party, with the clerk-or judge of the court where the application is made, in an amount equal to the value of the property attached as determined by the judge, to secure the payment of any judgment that the attaching creditor may recover in the action. Upon the firing of such counter-bond, copy thereof shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance with the provisions of this section the property attached, or the proceeds of any sale thereof, shall be delivered to the party making the deposit or giving the counter-bond, or the person appearing on his behalf, the deposit or counter-bond aforesaid standing in place of the property so released. Should such counter-bond for any reason be found to be, or become, insufficient, and

the party furnishing the same fail to file an additional counter-bond, the attaching creditor may apply for a new order of attachment. (Emphasis supplied) And, when execution against the principal debtor is returned unsatisfied, Section 17 of Rule 57 allows recovery upon the bond as follows: Sec. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be returned unsatisfied in whole or in part, the surety or sureties on any counterbond 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 to the judgment creditor upon demand, the amount due under the judgment which amount may be recovered from such surety or sureties after notice and summary hearing in the same action. (Emphasis supplied) It is thus clear that the cases cited by the Surety requiring notice of hearing before the finality of the judgment in regards the claim of damages have no applicability in the case at bar. The application by the Trial Court of Section 20, Rule 57, is likewise misplaced. Under Section 17 of Rule 57, in order that the judgment creditor may recover from the Surety on the counterbond, it is necessary (1) that execution be first issued against the principal debtor and that such execution was returned unsatisfied in whole or in part; (2). that the creditor made a demand upon the surety for the satisfaction of the judgment; and (3) the surety be given notice and a summary hearing in the same action as to his hability for the judgment under his counterbond. 3 In the case at bar, we find that LEELIN had substantially complied with the foregoing requisites. A writ of execution had been issued and had been returned unsatisfied. It had filed a motion to charge the Surety on its counterbond. A notice for the hearing of the motion had been served on the Surety and summary hearing was held. It must be conceded that there is nothing in the language or terms of the bond executed by the Surety under which it could be held liable

for the amount of the judgment. Admittedly, too, LEELIN did not contest the words of the bond but remained silent with respect thereto at the time it was presented. As good faith is presumed, we assume that the parties had committed a mutual mistake believing that its terms correctly reflected the purpose for which it had been filed, that is, to secure the discharge of the writ of attachment. Mutual mistake and good faith having attended the execution of the bond, the reformation of the instrument is in order. 4 The Surety should be held estopped from denying that the purpose and intent of the bond was for the lifting of the attachment for that would be allowing it to enrich itself by its own bad faith. 5 By the very wording of its bond, the same was issued "in consideration of the lifting of (the) attachment". A modification of the bond is declared and the provision of section 12 of Rule 57 of the Rules of Court considered read into and embodied in the bond in question. It is not the terms of the bond that control but the provisions of the law requiring the filing of such bond. In statutory or judicial bonds, the rule is "that the statute under which the bond is given shall be read into and considered as a part thereof, and that whatever conditions contrary to law that may be embodied therein will be ruled out and treated as surplusage, the theory being that when a contract of suretyship is entered into pursuant to a statute, the parties are deemed to have had the law in contemplation when the contract was executed." 6 WHEREFORE, the Order appealed from is reversed, and the Court of origin is hereby ordered to proceed with the execution against Belfast Surety and Insurance Co., Inc., to the extent of the amount of the counterbond, with costs against said surety company. SO ORDERED.

CALDERON vs. IAC, 155 SCRA 531

For review on certiorari is respondent appellate Court's decision 1 in AC-G.R. No. 01420, which affirmed the Regional Trial Court's

decision 2 appealed from holding the plaintiff Jose D. Calderon (petitioner herein) and his bondsman the Integrated Bonding and Insurance Company, Inc., jointly and severally liable to pay defendants (private respondents herein), damages caused by the filing by Calderon of the allegedly unwarranted suit and the wrongful and malicious attachment of private respondents' properties. The facts of the case are briefly as follows: On November 2, 1976, petitioner Calderon purchased from the private respondents the following: the Luzon Brokerage Corporation (LBC for brevity) and its five (5) affiliate companies, namely, Luzon Air Freight, Inc., Luzon Port Terminals Services, Inc., Luzon (GS) Warehousing Corporation, GS Industrial Management Corporation, and GS Luzon Trucking Corporation. Twenty one (21) days thereafter or on November 23, 1976, the Bureau of Customs suspended the operations of LBC for failure to pay the amount of P1,475,840.00 representing customs taxes and duties incurred prior to the execution of the sale. In order to lift the suspension Calderon paid the sum of P606,430.00 to the Bureau of Customs. On October 27, 1977, Calderon filed a complaint against private respondents to recover said amount of P1,475,840.00, with damages by reason of breach of warranty. In the same complaint, the petitioner prayed for a preliminary attachment, alleging: that private respondents had deliberately and willfully concealed from his knowledge such staggering liability of the LBC for the purpose of misleading him into buying the six aforesaid companies; and that private respondent Schulze is about to depart from the Philippines in order to defraud his creditors. To support the petition for preliminary attachment, the petitioner posted a surety bond of P1,475,840.00. On October 28, 1977, the trial court issued a writ of preliminary attachment, whereupon properties of the private respondents were attached and their bank deposits were garnished. On November 10, 1977, petitioner Calderon filed an amended complaint, alleging that while the liabilities of LBC are reflected in its books, the aforesaid amount was fraudulently withdrawn and misappropriated by private respondent Schulze. (pp. 7-18, Rollo)

On the other hand, private respondents claimed: that the amount of P1,475,840.00 due to the Bureau of Customs represents the duties and taxes payable out of the advanced payments made by LBC's client, Philippine Refining Company (PRC, for brevity) in August, September and October, 1976, and in the first and second weeks of November 1976, after Calderon himself had taken control of the management of LBC (Exhibit A); that these deposit payments were properly recorded in the books of the corporation and existing as part of the corporate funds; that from the first week of June, 1976 up to October 30, 1976, private respondent Schulze fully disclose and explained to Calderon that these customer's advanced deposit payments (including those of the PRC) are to be paid to the Bureau of Customs when their corresponding customs taxes and duties become due; that during this phase of the negotiation, Calderon and his representatives inspected and studied the corporate books and records at will and learned the daily operations and management of LBC; that the petitioner did not pay out of his own pocket but out of the LBC funds the said amount of P606,430,30 demanded by the Bureau of Customs, as evidenced by a manager's check No. FEBTC 25092 (Exhibits 9, 10, 11 & 38) and another facility negotiated with the Insular Bank of Asia and America (Exhibit K-2); and that private respondents are setting up a counterclaim for actual, moral and exemplary damages as well as attorney's fees, as a consequence of the filing of the baseless suit and the wrongful and malicious attachment of their properties, (pp. 217-221, Rollo) On November 17, 1977, private respondents filed a counterbond, whereupon the trial court issued an order directing the sheriff to return all real and personal properties already levied upon and to lift the notices of garnishment issued in connection with the said attachment (Annex B, p. 42, Rollo). After trial, the trial court dismissed the complaint, holding Calderon and his surety First integrated Bonding and Insurance Co., Inc., jointly and severally liable to pay the damages prayed for by the private respondents. Said decision was affirmed on appeal, although slightly modified in the sense that the award of moral and exemplary damages in favor of private respondents Schulze and Amor was reduced. The dispositive portion of the judgment of affirmance and modification reads:

WHEREFORE, the judgment of the lower court is modified as follows: To defendant-appellee George Schulze: P650,000.00 as moral damages and P200,000.00 as exemplary damages. To defendant-appellee Antonio C. P150,000.00 as moral damages P30,000.00 as exemplary damages, Amor: and

WHETHER OR NOT THE PETITIONER SURETY IS LIABLE FOR DAMAGES ON ITS CONTRACTED SURETYSHIP NOTWITHSTANDING THE DISSOLUTION OF THE WRIT OF PRELIMINARY ATTACHMENT, AS A CON. SEQUENCE OF THE FILING OF THE DEFENDANT'S COUNTER- BOND, WHEREBY LEVIED PROPERTIES WERE ORDERED BY THE COURT RETURNED TO PRIVATE RESPONDENTS AND THE NOTICES OF GARNISHMENT ISSUED IN CONNECTION THEREWITH ORDERED LIFTED. II WHETHER OR NOT THE SUBSEQUENT FILING BY PRIVATE RESPONDENTS OF A COUNTER-BOND TO DISCHARGE THE WRIT OF PRELIMINARY ATTACHMENT CONSTITUTE A WAIVER ON ANY DEFECT IN THE ISSUANCE OF THE ATTACHMENT WRIT. III WHETHER OR NOT A SURETY IS A GUARANTOR OF THE EXISTENCE OF A GOOD CAUSE OF ACTION IN THE COMPLAINT. The petition is devoid of merit. Whether or not the amount of P1,475,840.00 was duly disclosed as an outstanding liability of LBC or was misappropriated by private respondent Schulze is purely a factual issue. That Calderon was clearly in bad faith when he asked for the attachment is indicated by the fact that he failed to appear in court to support his charge of misappropriation by Schulze, and in effect, preventing his being crossexamined, no document on the charges was presented by him. What the Appellate Court found in this regard need not be further elaborated upon. The Appellate Court ruled:

An other dispositions in the judgment appealed from, including the dismissal of the amended complainant are hereby affirmed in toto. SO ORDERED. In his petition, petitioner Calderon asserts, among other things, that the court below erred: I IN HOLDING THAT THE PETITIONER FAILED TO ESTABLISH HIS CLAIMS. II IN HOLDING THAT THE PRELIMINARY ATTACHMENT HAD BEEN WRONGFULLY AND MALICIOUSLY SUED OUT. III IN HOLDING THAT THE PETITIONER IS LIABLE NOT ONLY FOR ACTUAL DAMAGES BUT MORAL AND EX-EXEMPLARY DAMAGES AS WELL. On the other hand, petitioner Insurance Company raises the following issues: I

... The record shows that appellant Calderon failed to produce any evidence in support of his sworn charge that appellee Schulze had deliberately and willfully concealed the liabilities of Luzon Brokerage Corporation. Neither did appellant Calderon prove his sworn charges that appellee Schulze had maliciously and fraudulently withdrawn and misappropriated the amount of Pl,475,840.00 and that an the defendants had maliciously and fraudulently concealed and withheld from him this alleged liability of Luzon Brokerage Corporation in breach of the contractwarranty that said corporation had no obligations or liabilities except those appearing in the books and records of the said corporation. Indeed, appellant Calderon never appeared in the trial court to substantiate the charges in his verified complaints and in his affidavit to support his petition for the issuance of a writ of attachment. He distanced himself from the appellees and avoided cross-examination regarding his sworn allegations. ... ... But even though appellant Calderon failed to prove his serious charges of fraud, malice and bad faith, the appellees took it upon themselves to show that they did not conceal or withhold from appellant's knowledge the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation and that they did not withdraw and misappropriate the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation. The books and records of Luzon Brokerage Corporation on which the Financial Statement of Luzon Brokerage Corporation, as of October 31, 1976 was prepared by the auditing firm retained by appellant Calderon himself (Exhibit 1), disclose that the liabilities of Luzon Brokerage Corporation in the total amount of P4,574,498.32 appear under the heading 'Customers Deposit' (Exhibit 1-A) this amount includes the deposit of Philippine Refining Co., Inc. in the sum of Pl,475,840.00.

But appellant Calderon contends that this financial statement was dated February 4, 1977 (see Exhibit 1C). There is nothing commendable in this argument because the bases of the financial statement were the books, records and documents of Luzon Brokerage Corporation for the period ending October 31, 1976, which were all turned over to and examined by appellant Calderon and his executive, legal and financial staffs. There is also no merit in the contention of appellant Calderon that the appellees have tampered the books of Luzon Brokerage Corporation because there is no proof to back this charge, let alone the fact that appellant Calderon did not even present the said books to support his charge. As stated above, the amount of customers' deposits in the sum of P4,574,498.32 includes the deposits of Philippine Refining Co., Inc. (Exhibits 46-A, 46-B, 46-C, 46-D, 46-E, 46-F, 46-G, 46-H, 46-1, 46-J, t.s.n. July 23, 1980, pp. 12-13, 14-15). The amounts deposited by Philippine Refining Co., Inc. on various dates with Luzon Brokerage Corporation made before the execution of the sale were all entered in three other corporate books of Luzon Brokerage Corporation namely, the Cash Receipts Register (Exhibits 39-A-1 to 39-K-1 and 39-A-1-B to 39-K-1-B), the Journal Vouchers (Exhibits 42 to 46 and 42-A to 43- A), and the Customer's Deposit Ledger (Exhibit 46-A to 46-J) ... . Thus, the claim of appellant Calderon that the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation of P406,430.00 on August 24, 1976 (Exhibit N P53,640.00 on October 13, 1976 (Exhibit 0), P406,430.00 on September 8, 1976 (Exhibit P P199,508.00 on September 24, 1976 (Exhibit Q P52,738.00 on October 22, 1976 (Exhibit R and P264,436.00 on October 7, 1976 (Exhibit S) were not entered in the books of Luzon Brokerage Corporation, is completely without merit. ... (pp. 85-87, Rollo)

It is evident from the foregoing that the attachment was maliciously sued out and that as already pointed out Schulze was not in bad faith. While as a general rule, the liability on the attachment bond is limited to actual damages, moral and exemplary damages may be recovered where the attachment was alleged to be maliciously sued out and established to be so. (Lazatin vs. Twano et al, L-12736, July 31, 1961). In the instant case, the issues of wrongful and malicious suing out of the writ of preliminary attachment were joined not only in private respondents' motion to discharge the attachment but also in their answer to the amended complaint (p. 38, Rollo). The trial court observed that the books and records of Luzon Brokerage Corporation disclose that the liabilities of the said corporation in the total amount of P4,574,498.32 appear under the heading "Customs Deposit" (Exhibit 1-A) and this amount includes the deposit of Philippine Refining Co., Inc. in the sum of P1,475,840.00 (p. 26, Rollo). On the other hand, plaintiff never appeared in court, and failed to produce any evidence to substantiate his charges (p. 26, Rollo). Well settled is the rule that the factual findings of the trial court are entitled to great weight and respect on appeal, especially when established by unrebutted testimonial and documentary evidence, as in this case. Anent the petition of the surety, We say the following: Specifically, petitioner surety contends that the dissolution of the attachment extinguishes its obligation under the bond, for the basis of its liability, which is wrongful attachment, no longer exists, the attachment bond having been rendered void and ineffective, by virtue of Section 12, Rule 57 of the Rules of Court. (p. 5, Petition) While Section 12, Rule 57 of the Rules of Court provides that upon the filing of a counterbond, the attachment is discharged or dissolved, nowhere is it provided that the attachment bond is rendered void and ineffective upon the filing of counterbond. The liability of the attachment bond is defined in Section 4, Rule 57 of the Rules of Court, as follows:

Sec. 4. Condition of applicant's bond. The party applying for the order must give a bond executed to the adverse party in an amount to be fixed by the judge, not exceeding the applicant's claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto. It is clear from the above provision that the responsibility of the surety arises "if the court shall finally adjudge that the plaintiff was not entitled thereto." In Rocco vs. Meads, 96 Phil. Reports 884, we held that the liability attaches if the plaintiff is not entitled to the attachment because the requirements entitling him to the writ are wanting, or if the plaintiff has no right to the attachment because the facts stated in his affidavit, or some of them, are untrue. It is, therefore, evident that upon the dismissal of an attachment wrongfully issued, the surety is liable for damages as a direct result of said attachment. Equally untenable is the Surety's contention that by filing a counterbond, private respondents waived any defect or flaw in the issuance of the attachment writ, for they could have sought, without need of filing any counterbond, the discharge of the attachment if the same was improperly or irregularly issued, as provided in Section 13, Rule 57 of the Rules of Court. Whether the attachment was discharged by either of the two (2) ways indicated in the law, i.e., by filing a counterbond or by showing that the order of attachment was improperly or irregularly issued, the liability of the surety on the attachment bond subsists because the final reckoning is when "the Court shall finally adjudge that the attaching creditor was not entitled" to the issuance of the attachment writ in the first place. The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor instead of the other way, which, in most instances like in the present case, would require presentation of evidence in a full-blown trial on

the merits and cannot easily be settled in a pending incident of the case. We believe, however, that in the light of the factual situation in this case, the damages awarded by the Intermediate Appellate Court are rather excessive. They must be reduced. WHEREFORE, the judgment of said Appellate Court is hereby modified as follows: Both petitioner Calderon and petitioner First Integrated Bonding and Insurance Company, Inc. are hereby ordered to give jointly and severally: 1. Respondent George Schulze, P250,000.00 as moral damages and P50,000.00 as exemplary damages; and 2. Respondent Antonio C. Amor, P50,000.00 as moral damages and P10,000.00 as exemplary damages. The rest of the judgment of the Intermediate Appellate Court is hereby AFFIRMED. SO ORDERED.

sheriff attached the properties of the Ong spouses in Valencia, Bukidnon and in Cagayan de Oro City. To lift the attachment, the Ong spouses filed on March 11, 1976 a counterbond in 'the amount of P 58,400 with Towers Assurance Corporation as surety. In that undertaking, the Ong spouses and Towers Assurance Corporation bound themselves to pay solidarity to See Hong the sum of P 58,400. On March 24, 1976 the Ong spouses filed an answer with a counterclaim. For non-appearance at the pre- trial, the Ong spouses were declared in default. On October 25, 1976, the lower court rendered a decision, ordering not only the Ong spouses but also their surety, Towers Assurance Corporation, to pay solidarily to See Hong the sum of P 58,400. The court also ordered the Ong spouses to pay P 10,000 as litigation expenses and attorney's fees. Ernesto Ong manifested that he did not want to appeal. On March 8, 1977, Ororama Supermart filed a motion for execution. The lower court granted that motion. The writ of execution was issued on March 14 against the judgment debtors and their surety. On March 29, 1977, Towers Assurance Corporation filed the instant petition for certiorari where it assails the decision and writ of execution. We hold that the lower court acted with grave abuse of discretion in issuing a writ of execution against the surety without first giving it an opportunity to be heard as required in Rule 57 of tie Rules of Court which provides: SEC. 17. When execution returned unsatisfied, recovery had upon bound. If the execution be returned unsatisfied in whole or in part, the surety or sureties on any counterbound given pursuant to the provisions of this rule to secure the payment of the judgment shall become charged on such counterbound, and bound to pay to the judgment creditor upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action.

TOWERS ASSURANCE vs. ORORAMA SUPERMART, 80 SCRA 262

This case is about the liability of a surety in a counterbond for the lifting of a writ of preliminary attachment. On February 17, 1976 See Hong, the proprietor of Ororama Supermart in Cagayan de Oro City, sued the spouses Ernesto Ong and Conching Ong in the Court of First Instance of Misamis Oriental for the collection of the sum of P 58,400 plus litigation expenses and attorney's fees (Civil Case No. 4930). See Hong asked for a writ of preliminary attachment. On March 5, 1976, the lower court issued an order of attachment. The deputy

Under section 17, in order that the judgment creditor might recover from the surety on the counterbond, it is necessary (1) that execution be first issued against the principal debtor and that such execution was returned unsatisfied in whole or in part; (2) that the creditor made a demand upon the surety for the satisfaction of the judgment, and (3) that the surety be given notice and a summary hearing in the same action as to his liability for the judgment under his counterbond. The first requisite mentioned above is not applicable to this case because Towers Assurance Corporation assumed a solidary liability for the satisfaction of the judgment. A surety is not entitled to the exhaustion of the properties of the principal debtor (Art. 2959, Civil Code; Luzon Steel Corporation vs. Sia, L-26449, May 15, 1969, 28 SCRA 58, 63). But certainly, the surety is entitled to be heard before an execution can be issued against him since he is not a party in the case involving his principal. Notice and hearing constitute the essence of procedural due process. (Martinez vs. Villacete 116 Phil. 326; Insurance & Surety Co., Inc. vs. Hon. Piccio, 105 Phil. 1192, 1200, Luzon Surety Co., Inc. vs. Beson, L-26865-66, January 30. 1970. 31 SCRA 313). WHEREFORE, the order and writ of execution, insofar as they concern Towers Corporation, are set aside. The lower court is directed to conduct a summary hearing on the surety's liability on its counterbound. No costs. SO ORDERED.

aggregating P90,000. With the filing of this suit, the plaintiff secureda writ of preliminary attachment upon putting up a P50,000 bond, and the Sheriff of the City of Manila levied an attachment upon certain office and printing equipment found in the premises of the Daily Record. Thereafter the Manila Herald Publishing Co. Inc. and Printers, Inc., filed with the sheriff separate third-party claims, alleging that they were the owners of the property attached. Whereupon, the sheriff required of Quirino a counter bound of P41,500 to meet the claim of the Manila Herald Publishing Co., Inc., and another bond of P59,500 to meet the claim of Printers, Inc. These amounts, upon Quirino's motion filed under Section 13, Rule 59, of the Rules of Court, were reduced by the court to P11,000 and P10,000 respectively. Unsuccessful in their attempt to quash the attachment, on October 7, 1950, the Manila Herald Publishing Co., Inc. and Printers, Inc. commenced a joint suit against the sheriff, Quirino and Alto Surety and Insurance Co. Inc., in which the former sought (1) to enjoin the defendants from proceeding with the attachment of the properties above mentioned and (2) P45,000 damages. This suit was docketed as civil case No. 12263. Whereas case No. 11531 was being handled by Judge Sanchez or pending in the branch of the Court presided by him, case No. 12263 fell in the branch of Judge Pecson. On the same date, in virtue of an ex parte motion in case No. 12263 by the Manila Herald Publishing Co. Inc., and Printers, Inc., Judge Pecson issued a writ of preliminary injunction to the sheriff directing him to desist from proceeding with the attachment of the said properties. After the issuance of that preliminary injunction, Antonio Quirino filed an ex parte petition for its dissolution, and Judge Simeon Ramos, to whom case No. 12263 had in the meanwhile been transferred, granted the petition on a bond of P21,000. However Judge Ramos soon set aside the order just mentioned on a motion for reconsideration by the Manila Herald Publishing Co. Inc. and Printer, Inc. and set the matter for hearing for October 14, then continued to October 16. Upon the conclusion of that hearing, Judge Ramos required the parties to submit memoranda on the question whether "the subject

MANILA HERALD PUBLISHING vs. RAMOS, 88 Phil. 94

This is a petition for "certiorari with preliminary injunction" arising upon the following antecedents: Respondent Antonio Quirino filed a libel suit, docketed as civil case No. 11531, against Aproniano G. Borres, Pedro Padilla and Loreto Pastor, editor, managing editor and reporter, respectively, of the Daily Record, a daily newspaper published in Manila, asking damages

matter of civil case No. 12263 should be ventilated in an independent action or by means of a complaint in intervention in civil case No. 11531." Memoranda having been filed, His Honor declared that the suit, in case No. 12263, was "unnecessary, superfluous and illegal" and so dismissed the same. He held that what Manila Herald Publishing Co., Inc., and Printers, Inc., should do was intervene in Case No. 11531. The questions that emerge from these facts and the arguments are: Did Judge Ramos have authority to dismiss case No. 12263 at the stage when it was thrown out of court? Should the Manila Herald Publishing Co., Inc., and Printers, Inc., come as intervernors into the case for libel instead of bringing an independent action? And did Judge Pecson or Judge Ramos have jurisdiction in case No. 12263 to quash the attachment levied in case No. 11531? In case No. 12263, it should be recalled, neither a motion to dismiss nor an answer had been made when the decision under consideration was handed down. The matter then before the court was a motion seeking a provisional or collateral remedy, connected with and incidental to the principal action. It was a motion to dissolve the preliminary injunction granted by Judge Pecson restraining the sheriff from proceeding with the attachment in case No. 11531. The question of dismissal was suggested by Judge Ramos on a ground perceived by His Honor. To all intents and purposes, the dismissal was decreed by the court on its own initiative. Section 1 Rule 8 enumerates the grounds upon which an action may be dismissed, and it specifically ordains that a motion to this end be filed. In the light of this express requirement we do not believe that the court had power to dismiss the case without the requisite motion duly presented. The fact that the parties filed memoranda upon the court's indication or order in which they discussed the proposition that the action was unnecessary and was improperly brought outside and independently of the case for libel did not supply deficiency. Rule 30 of the Rules of Court provides for the cases in which an action may be dismissed, and the inclusion of those therein provided excludes any other, under the familiar maxim, inclusio unius est exclusio alterius. The only instance in which, according to said Rules, the court may dismiss upon the court's own motion an action is, when the "plaintiff fails to appear at the time of the trial or to prosecute his action for an

unreasonable length of time or to comply with the Rules or any order of the court." The Rules of Court are devised as a matter of necessity, intended to be observed with diligence by the courts as well as by the parties for the orderly conduct of litigation and judicial business. In general, it is compliance with these rules which gives the court jurisdiction to act. We are the opinion that the court acted with grave abuse of discretion if not in excess of its jurisdiction in dismissing the case without any formal motion to dismiss. The foregoing conclusions should suffice to dispose of this proceeding for certiorari, but the parties have discussed the second question and we propose to rule upon it if only to put out of the way a probable cause for future controversy and consequent delay in the disposal of the main cause. Section 14 of rule 59, which treats of the steps to betaken when property attached is claimed by the other person than that defendant or his agent, contains the proviso that "Nothing herein contained shall prevent such third person from vindicating his claim to the property by any proper action." What is "proper action"? Section 1 of Rule 2 defines action as "an ordinary suit in court of justice, by which one party prosecutes another for the enforcement or protection of a right, or the prevention or redress of a wrong," while section 2, entitled "Commencement of Action," says that "civil action may be commenced by filing a complaint with the court." "Action" has acquired a well-define, technical meaning, and it is in this restricted sense that the word "action" is used in the above rule. In employing the word "commencement" the rule clearly indicates an action which originates an entire proceeding and puts in motion the instruments of the court calling for summons, answer, etc, and not any intermediary step taken in the course of the proceeding whether by the parties themselves or by a stranger. It would be strange indeed if the framers of the Rules of Court or the Legislature should have employed the term "proper action" instead of "intervention" or equivalent expression if the intention had been just that. It was all the easier, simplier and the more natural to say intervention if that had been the purpose, since the asserted right of the third-party claimant

necessarily grows out of the pending suit, the suit in which the order of attachment was issued. The most liberal view that can be taken in favor of the respondents' position is that intervention as a means of protecting the third-party claimants' right is not exclusive but cumulative and suppletory to the right to bring a new, independent suit. It is significant that there are courts which go so far as to take the view that even where the statute expressly grants the right of intervention is such cases as this, the statute does not extend to owners of property attached, for, under this view, "it is considered that the ownership is not one of the essential questions to be determined in the litigation between plaintiff and defendant;" that "whether the property belongs to defendant or claimant, if determined, is considered as shedding no light upon the question in controversy, namely, that defendant is indebted to plaintiff." (See 7 C. J. S., 545 and footnote No. 89 where extracts from the decision in Lewis vs. Lewis, 10 N. W., 586, a leading case, are printed.) Separate action was indeed said to be the correct and only procedure contemplated by Act No. 190, intervention addition to, but not in substitution of, the old process. The new Rules adopted section 121 of Act No. 190 and added thereto Rule 24 (a) of the Federal Rules of Procedure. Combined, the two modes of redress are now section 1 of Rule 13,1 the last clause of which is the newly added provision. The result is that, whereas, "under the old procedure, the third person could not intervene, he having no interest in the debt (or damages) sued upon by the plaintiff," under the present Rules, "a third person claiming to be the owner of such property may, not only file a thirdparty claim with the sheriff, but also intervene in the action to ask that the writ of attachment be quashed." (I Moran's Comments on the Rules of Court, 3rd Ed., 238, 239.) Yet, the right to inetervene, unlike the right to bring a new action, is not absolute but left to the sound discretion of the court to allow. This qualification makes intervention less preferable to an independent action from the standpoint of the claimants, at least. Because availability of intervention depends upon the court in which Case No. 11531 is pending, there would be assurance for the herein petitioners that they would be permitted to come into that case.

Little reflection should disabuse the mind from the assumption that an independent action creates a multiplicity of suits. There can be no multiplicity of suits when the parties in the suit where the attachment was levied are different from the parties in the new action, and so are the issues in the two cases entirely different. In the circumstances, separate action might, indeed, be the more convenient of the two competing modes of redress, in that intervention is more likely to inject confusion into the issues between the parties in the case for debt or damages with which the third-party claimant has nothing to do and thereby retard instead of facilitate the prompt dispatch of the controversy which is underlying objective of the rules of pleading and practice. That is why intervention is subject to the court's discretion. The same reasons which impelled us to decide the second question, just discussed, urge us to take cognizance of and express an opinion on the third. The objection that at once suggests itself entertaining in Case No. 12263 the motion to discharge the preliminary attachment levied in case No. 11531 is that by so doing one judge would intefere with another judge's actuations. The objection is superficial and will not bear analysis. It has been seen that a separate action by the third party who claims to be the owner of the property attached is appropriate. If this is so, it must be admitted that the judge trying such action may render judgment ordering the sheriff of whoever has in possession the attached property to deliver it to the plaintiff-claimant or desist from seizing it. It follows further that the court may make an interlocutory order, upon the filing of such bond as may be necessary, to release the property pending final adjudication of the title. Jurisdiction over an action includes jurisdiction over a interlocutory matter incidental to the cause and deemed necessary to preserve the subject matter of the suit or protect the parties' interests. This is self-evident. The fault with the respondents' argument is that it assumes that the Sheriff is holding the property in question by order of the court handling the case for libel. In reality this is true only to limited extent. That court did not direct the sheriff to attach the particular property in dispute. The order was for the sheriff to attach Borres', Padilla's and Pastor's property. He was not supposed to touch any property other

than that of these defendants', and if he did, he acted beyond the limits of his authority and upon his personal responsibility. It is true of course that property in custody of the law can not be interferred with without the permission of the proper court, and property legally attached is property in custodia legis. But for the reason just stated, this rule is confined to cases where the property belongs to the defendant or one in which the defendant has proprietary interest. When the sheriff acting beyond the bounds of his office seizes a stranger's property, the rule does not apply and interference with his custody is not interference with another court's order of attachment. It may be argued that the third-party claim may be unfounded; but so may it be meritorious, for the matter. Speculations are however beside the point. The title is the very issue in the case for the recovery of property or the dissolution of the attachment, and pending final decision, the court may enter any interlocutory order calculated to preserve the property in litigation and protect the parties' rights and interests. None of what has been said is to be construed as implying that the setting aside of the attachment prayed for by the plaintiffs in Case No. 12263 should be granted. The preceding discussion is intended merely to point out that the court has jurisdiction to act in the premises, not the way the jurisdiction should be exercised. The granting or denial, as the case may be, of the prayer for the dissolution of the attachment would be a proper subject of a new proceeding if the party adversely affected should be dissatisfied. The petition for certiorari is granted with costs against the respondents except the respondent Judge.

petitioner and ordering it to pay damages on the basis of the private respondent's counterclaim. On July 1, 1975, private respondent Augusto Yulo secured a loan from the petitioner in the amount of P591,003.59 as evidenced by a promissory note he signed in his own behalf and as representative of the A & L Industries. Respondent Yulo presented an alleged special power of attorney executed by his wife, respondent Lily Yulo, who manages A & L Industries and under whose name the said business is registered, purportedly authorizing Augusto Yulo to procure the loan and sign the promissory note. About two months prior to the loan, however, Augusto Yulo had already left Lily Yulo and their children and had abandoned their conjugal home. When the obligation became due and demandable, Augusto Yulo failed to pay the same. On October 7, 1975, the petitioner filed its amended complaint against the spouses Augusto and Lily Yulo on the basis of the promissory note. It also prayed for the issuance of a writ of attatchment alleging that the said spouses were guilty of fraud in contracting the debt upon which the action was brought and that the fraud consisted of the spouses' inducing the petitioner to enter into a contract with them by executing a Deed of Assignment in favor of the petitioner, assigning all their rights, titles and interests over a construction contract executed by and between the spouses and A. Soriano Corporation on June 19, 1974 for a consideration of P615,732.50 when, in truth, the spouses did not have any intention of remitting the proceeds of the said construction contract to the petitioner because despite the provisions in the Deed of Assignment that the spouses shall, without compensation or costs, collect and receive in trust for the petitioner all payments made upon the construction contract and shall remit to the petitioner all collections therefrom, the said spouses failed and refuse to remit the collections and instead, misappropriated the proceeds for their own use and benefit, without the knowledge or consent of the petitioner. The trial court issued the writ of attachment prayed for thereby enabling the petitioner to attach the properties of A & L Industries. Apparently not contented with the order, the petitioner filed another motion for the examination of attachment debtor, alleging that the properties attached by the sheriff were not sufficient to secure the satisfaction of any judgment that may be recovered by it in the case. This was likewise granted by the court.

BA FINANCE CORP. vs. CA, 161 SCRA 608

This is a petition for review seeking to set aside the decision of the Court of Appeals which affirmed the decision of the then Court of First Instance of Manila, dismissing the complaint instituted by the

Private respondent Lily Yulo filed her answer with counterclaim, alleging that although Augusta Yulo and she are husband and wife, the former had abandoned her and their children five (5) months before the filing of the complaint; that they were already separated when the promissory note was executed; that her signature in the special power of attorney was forged because she had never authorized Augusto Yulo in any capacity to transact any business for and in behalf of A & L Industries, which is owned by her as a single proprietor, that she never got a single centavo from the proceeds of the loan mentioned in the promissory note; and that as a result of the illegal attachment of her properties, which constituted the assets of the A & L Industries, the latter closed its business and was taken over by the new owner. After hearing, the trial court rendered judgment dismissing the petitioner's complaint against the private respondent Lily Yulo and A & L Industries and ordering the petitioner to pay the respondent Lily Yulo P660,000.00 as actual damages; P500,000.00 as unrealized profits; P300,000.00 as exemplary damages; P30,000.00 as and for attorney's fees; and to pay the costs. The petitioner appealed. The Court of Appeals affirmed the trial court's decision except for the exemplary damages which it reduced from P300,000.00 to P150,000.00 and the attorney's fees which were reduced from P30,000.00 to P20,000.00. In resolving the question of whether or not the trial court erred in holding that the signature of respondent Lily Yulo in the special power of attorney was forged, the Court of Appeals said: The crucial issue to be determined is whether or not the signatures of the appellee Lily Yulo in Exhibits B and B-1 are forged. Atty. Crispin Ordoa, the Notary Public, admitted in open court that the parties in the subject documents did not sign their signatures in his presence. The same were already signed by the supposed parties and their supposed witnesses at the time they were brought to him for ratification. We quote from the records the pertinent testimony of Atty. Ordoa, thus:

Q. This document marked as Exhibit B1, when this was presented to you by that common friend, June Enriquez, it was already typewritten, it was already accomplished, all typewritten.? A. Yes, sir. Q And the parties had already affixed their signatures in this document? A. Yes, sir. Q. In this document marked as Exhibit B although it appears here that this is an acknowledgment, you have not stated here that the principal actually acknowledged this document to be her voluntary act and deed? A This in one of those things that escaped my attention. Actually I have not gone over the second page. I believed it was in order I signed it. (TSN pp. 13-14, Hearing of Nov. 26, 1976). The glaring admission by the Notary Public that he failed to state in the acknowledgment portion of Exhibit B-1 that the appellee Lily Yulo acknowledged the said document to be her own voluntary act and deed, is a very strong and commanding circumstance to show that she did not appear personally before the said Notary Public and did not sign the document. Additionally, the Notary Public admitted that, while June Enriquez is admittedly a mutual friend of his and the defendant Augusta Yulo, and who is also an instrumental witness in said Exhibit B-1., he could not recognize or tell which of the two signatures appearing therein, was the signature of this June Enriquez.

Furthermore, as the issue is one of credibility of a witness, the findings and conclusions of the trial court before whom said witness, Atty. Crispin Ordoa, the Notary Public before whom the questioned document was supposedly ratified and acknowledged, deserve great respect and are seldom disturbed on appeal by appellate tribunals, since it is in the best and peculiar advantage of determining and observing the conduct, demeanor and deportment of a particular witness while he is testifying in court, an opportunity not enjoyed by the appellate courts who merely have to rely on the recorded proceedings which transpired in the court below, and the records are bare of any circumstance of weight, which the trial court had overlooked and which if duly considered, may radically affect the outcome of the case. On the other hand, the appellee Lily Yulo, to back up her claim of forgery of her signature in Exhibit B-1, presented in court a handwriting expert witness in the person of Police Captain Yakal Giron of the Integrated National Police Training Command, and who is also a Document Examiner of the same Command's Crime Laboratory at Fort Bonifacio, Metro Manila. His experience as an examiner of questioned and disputed documents, in our mind, is quite impressive. To qualify him as a handwriting expert, he declared that he underwent extensive and actual studies and examination of disputed or questioned document, both at the National Bureau of Investigation Academy and National Bureau of Investigation Questioned Document Laboratory, respectively, from July 1964, up to his appointment as Document Examiner in June, 1975, and, to further his experience along this line, he attended the 297th Annual Conference of the American Society of Questioned Docurnent Examiners held at Seattle, Washington, in August 1971, as a representative of the Philippines, and likewise conducted an observation of the present and modern trends of crime laboratories in the West Coast, U.S.A., in 1971; that he likewise had conducted actual tests and examination of about 100,000 documents, as

requested by the different courts, administrative, and governmental agencies of the Government, substantial portions of which relate to actual court cases. In concluding that the signatures of the appellee Lily Yulo, in the disputed document in question (Exh. B-1), were all forgeries, and not her genuine signature, the expert witness categorically recited and specified in open court what he observed to be about twelve (12) glaring and material significant differences, in his comparison of the signatures appearing in the genuine specimen signatures of the said appellee and with those appearing in the questioned document (Exhibit B-1). Indeed, we have likewise seen the supposed notable differences, found in the standard or genuine signatures of the appellee which were lifted and obtained in the official files of the government, such as the Bureau of Internal Revenue on her income tax returns, as compared to the pretended signature of the appellee appearing in Exhibits B, B-1. It is also noteworthy to mention that the appellant did not even bother to conduct a cross-examination of the handwriting expert witness, Capt. Giron, neither did the appellant present another handwriting expert, at least to counter-act or balance the appellee's handwriting expert. Prescinding from the foregoing facts, we subscribe fully to the lower court's observations that the signatures of the appellee Lily Yulo in the questioned document (Exh. B-1) were forged. Hence, we find no factual basis to disagree. (pp. 28-30, Rollo) As to the petitioner's contention that even if the signature of Lily Yulo was forged or even if the attached properties were her exclusive property, the same can be made answerable to the obligation because the said properties form part of the conjugal partnership of the spouses Yulo, the appellate court held that these contentions are without merit because there is strong preponderant evidence to show that A & L Industries belongs exclusively to respondent Lily Yulo, namely: a) The Certificate of Registration of A & L Industries, issued by the Bureau of Commerce, showing that said business is a single

proprietorship, and that the registered owner thereof is only Lily Yulo; b) The Mayor's Permit issued in favor of A & L Industries, by the Caloocan City Mayor's Office showing compliance by said single proprietorship company with the City Ordinance governing business establishments; and c) The Special Power of Attorney itself, assuming but without admitting its due execution, is tangible proof that Augusto Yulo has no interest whatsoever in the A & L Industries, otherwise, there would have been no necessity for the Special Power of Attorney if he is a part owner of said single proprietorship. With regard to the award of damages, the Court of Appeals affirmed the findings of the trial court that there was bad faith on the part of the petitioner as to entitle the private respondent to damages as shown not only by the fact that the petitioner did not present the Deed of Assignment or the construction agreement or any evidence whatsoever to support its claim of fraud on the part of the private respondent and to justify the issuance of a preliminary attachment, but also by the following findings: Continuing and elaborating further on the appellant's mala fide actuations in securing the writ of attachment, the lower court stated as follows: Plaintiff not satisfied with the instant case where an order for attachment has already been issued and enforced, on the strength of the same Promissory Note (Exhibit"A"), utilizing the Deed of Chattel Mortgage (Exhibit "4"), filed a foreclosure proceedings before the Office of the Sheriff of Caloocan (Exhibit"6") foreclosing the remaining properties found inside the premises formerly occupied by the A & L Industries. A minute examination of Exhibit "4" will show that the contracting parties thereto, as appearing in par. 1 thereof, are Augusto Yulo, doing business under the style of A & L Industries (should be A & L Glass Industries Corporation), as mortgagor and BA Finance Corporation as

mortgagee, thus the enforcement of the Chattel Mortgage against the property of A & L Industries exclusively owned by Lily T. Yulo appears to be without any factual or legal basis whatsoever. The chattel mortgage, Exhibit "4" and the Promissory Note, Exhibit A, are based on one and the same obligation. Plaintiff tried to enforce as it did enforce its claim into two different modes a single obligation. Aware that defendant Lily Yulo, filed a Motion to Suspend Proceedings by virtue of a complaint she filed with the Court of First Instance of Caloocan, seeking annulment of the Promissory Note, the very basis of the plaintiff in filing this complaint, immediately after the day it filed a Motion for the Issuance of an Alias Writ of Preliminary Attachment . . .Yet, inspite of the knowledge and the filing of this Motion to Suspend Proceedings, the Plaintiff still filed a Motion for the Issuance of a Writ of Attachment dated February 6, 1976 before this court. To add insult to injury, plaintiff even filed a Motion for Examination of the Attachment Debtor, although aware that Lily Yulo had already denied participation in the execution of Exhibits "A" and "B". These incidents and actions taken by plaintiff, to the thinking of the court, are sufficient to prove and establish the element of bad faith and malice on the part of plaintiff which may warrant the award of damages in favor of defendant Lily Yulo. (Ibid., pp. 102-103).<re||an1w> Indeed, the existence of evident bad faith on the appellant's part in

proceeding against the appellee Lily Yulo in the present case, may likewise be distressed on the fact that its officer Mr. Abraham Co, did not even bother to demand the production of at least the duplicate original of the Special Power of Attorney (Exhibit B) and merely contended himself with a mere xerox copy thereof, neither did he require a more specific authority from the A & L Industries to contract the loan in question, since from the very content and recitals of the disputed document, no authority, express or implied, has been delegated or granted to August Yulo to contract a loan, especially with the appellant. (pp. 33-34, Rollo) Concerning the actual damages, the appellate court ruled that the petitioner should have presented evidence to disprove or rebut the private respondent's claim but it remained quiet and chose not to disturb the testimony and the evidence presented by the private respondent to prove her claim. In this petition for certiorari, the petitioner raises three issues. The first issue deals with the appellate court's affirmance of the trial court's findings that the signature of the private respondent on the Special Power of Attorney was forged. According to the petitioner, the Court of Appeals disregarded the direct mandate of Section 23, Rule 132 of the Rules of Court which states in part that evidence of handwriting by comparison may be made "with writings admitted or treated as genuine by the party against whom the evidence is offered, or proved to be genuine to the satisfaction of the judge," and that there is no evidence on record which proves or tends to prove the genuineness of the standards used. There is no merit in this contention. The records show that the signatures which were used as "standards" for comparison with the alleged signature of the private respondent in the Special Power of Attorney were those from the latter's residence certificates in the years 1973, 1974 and 1975, her income tax returns

for the years 1973 and 1975 and from a document on long bond paper dated May 18, 1977. Not only were the signatures in the foregoing documents admitted by the private respondent as hers but most of the said documents were used by the private respondent in her transactions with the government. As was held in the case of Plymouth Saving & Loan Assn. No. 2 v. Kassing (125 NE 488, 494): We believe the true rule deduced from the authorities to be that the genuineness of a "standard" writing may be established (1) by the admission of the person sought to be charged with the disputed writing made at or for the purposes of the trial or by his testimony; (2) by witnesses who saw the standards written or to whom or in whose hearing the person sought to be charged acknowledged the writing thereof; (3) by evidence showing that the reputed writer of the standard has acquiesced in or recognized the same, or that it has been adopted and acted upon by him his business transactions or other concerns.... Furthermore, the judge found such signatures to be sufficient as standards. In the case of Taylor-Wharton Iron & Steel Co. v. Earnshaw (156 N.E. 855, 856), it was held: When a writing is offered as a standard of comparison it is for the presiding judge to decide whether it is the handwriting of the party to be charged. Unless his finding is founded upon error of law, or upon evidence which is, as matter of law, insufficient to justify the finding, this court will not revise it upon exceptions." (Costelo v. Crowell, 139 Mass. 588, 590, 2 N.E. 648; Nuez v. Perry, 113 Mass, 274, 276.) We cannot find any error on the part of the trial judge in using the above documents as standards and also in giving credence to the expert witness presented by the private respondent whose testimony the petitioner failed to rebut and whose credibility it likewise failed to impeach. But more important is the fact that the unrebutted handwriting expert's testimony noted twelve (12) glaring and material differences in the alleged signature of the private respondent in the Special Power of Attorney as compared with the specimen signatures,

something which the appellate court also took into account. In Cesar v. Sandiganbayan (134 SCRA 105, 132), we ruled: Mr. Maniwang pointed to other significant divergences and distinctive characteristics between the sample signatures and the signatures on the questioned checks in his report which the court's Presiding Justice kept mentioning during Maniwang's testimony. In the course of his cross-examination, NBI expert Tabayoyong admitted that he saw the differences between the exemplars used and the questioned signatures but he dismissed the differences because he did not consider them fundamental. We rule that significant differences are more fundamental than a few similarities. A forger always strives to master some similarities. The second issue raised by the petitioner is that while it is true that A & L Industries is a single proprietorship and the registered owner thereof is private respondent Lily Yulo, the said proprietorship was established during the marriage and its assets were also acquired during the same. Therefore, it is presumed that this property forms part of the conjugal partnership of the spouses Augusto and Lily Yulo and thus, could be held liable for the obligations contracted by Augusto Yulo, as administrator of the partnership. There is no dispute that A & L Industries was established during the marriage of Augusta and Lily Yulo and therefore the same is presumed conjugal and the fact that it was registered in the name of only one of the spouses does not destroy its conjugal nature (See Mendoza v. Reyes, 124 SCRA 161, 165). However, for the said property to be held liable, the obligation contracted by the husband must have redounded to the benefit of the conjugal partnership under Article 161 of the Civil Code. In the present case, the obligation which the petitioner is seeking to enforce against the conjugal property managed by the private respondent Lily Yulo was undoubtedly contracted by Augusto Yulo for his own benefit because at the time he incurred the obligation he had already abandoned his family and had left their conjugal home. Worse, he made it appear that he was duly authorized by his wife in behalf of A & L Industries, to procure such loan from the petitioner. Clearly, to make A & L Industries liable now

for the said loan would be unjust and contrary to the express provision of the Civil Code. As we have ruled in Luzon Surety Co., Inc. v. De Gracia (30 SCRA 111, 115-117): As explained in the decision now under review: "It is true that the husband is the administrator of the conjugal property pursuant to the provisions of Art. 163 of the new Civil Code. However, as such administrator the only obligations incurred by the husband that are chargeable against the conjugal property are those incurred in the legitimate pursuit of his career, profession or business with the honest belief that he is doing right for the benefit of the family. This is not true in the case at bar for we believe that the husband in acting as guarantor or surety for another in an indemnity agreement as that involved in this case did not act for the benefit of the conjugal partnership. Such inference is more emphatic in this case, when no proof is presented that Vicente Garcia in acting as surety or guarantor received consideration therefore, which may redound to the benefit of the conjugal partnership.(Ibid, pp. 46-47). xxx xxx xxx xxx xxx xxx In the most categorical language, a conjugal partnership under that provision is liable only for such "debts and obligations contracted by the husband for the benefit of the conjugal partnership." There must be the requisite showing then of some advantage which clearly accrued to the welfare of the spouses. There is none in this case. xxx xxx xxx Moreover, it would negate the plain object of the additional requirement in the present Civil Code that a debt contracted by the husband to bind a conjugal partnership must redound to its benefit. That is still another provision indicative of the solicitude and tender

regard that the law manifests for the family as a unit. Its interest is paramount; its welfare uppermost in the minds of the codifiers and legislators. We, therefore, rule that the petitioner cannot enforce the obligation contracted by Augusto Yulo against his conjugal properties with respondent Lily Yulo. Thus, it follows that the writ of attachment cannot issue against the said properties. Finally, the third issue assails the award of actual damages according to the petitioner, both the lower court and the appellate court overlooked the fact that the properties referred to are still subject to a levy on attachment. They are, therefore, still under custodia legis and thus, the assailed decision should have included a declaration as to who is entitled to the attached properties and that assuming arguendo that the attachment was erroneous, the lower court should have ordered the sheriff to return to the private respondent the attached properties instead of condemning the petitioner to pay the value thereof by way of actual damages. In the case of Lazatin v. Twao (2 SCRA 842, 847), we ruled: xxx xxx xxx ... It should be observed that Sec. 4 of Rule 59, does not prescribed the remedies available to the attachment defendant in case of a wrongful attachment, but merely provides an action for recovery upon the bond, based on the undertaking therein made and not upon the liability arising from a tortuous act, like the malicious suing out of an attachment. Under the first, where malice is not essential, the attachment defendant, is entitled to recover only the actual damages sustained by him by reason of the attachment. Under the second, where the attachment is maliciously sued out, the damages recoverable may include a compensation for every injury to his credit, business or feed (Tyler v. Mahoney, 168 NC 237, 84 SE 362; Pittsburg etc. 5 Wakefield, etc., 135 NC 73, 47 SE 234). ...

The question before us, therefore, is whether the attachment of the properties of A & L Industries was wrongful so as to entitle the petitioner to actual damages only or whether the said attachment was made in bad faith and with malice to warrant the award of other kinds of damages. Moreover, if the private respondent is entitled only to actual damages, was the court justified in ordering the petitioner to pay for the value of the attached properties instead of ordering the return of the said properties to the private respondent Yulo ? Both the trial and appellate courts found that there was bad faith on the part of the petitioner in securing the writ of attachment. We do not think so. "An attachment may be said to be wrongful when, for instance, the plaintiff has no cause of action, or that there is no true ground therefore, or that the plaintiff has a sufficient security other than the property attached, which is tantamout to saying that the plaintiff is not entitled to attachment because the requirements of entitling him to the writ are wanting. (7 C.J.S., 664)" (p. 48, Section 4, Rule 57, Francisco, Revised Rules of Court). Although the petitioner failed to prove the ground relied upon for the issuance of the writ of attachment, this failure cannot be equated with bad faith or malicious intent. The steps which were taken by the petitioner to ensure the security of its claim were premised, on the firm belief that the properties involved could be made answerable for the unpaid obligation due it. There is no question that a loan in the amount of P591,003.59 was borrowed from the bank. We, thus, find that the petitioner is liable only for actual damages and not for exemplary damages and attorney's fees. Respondent Lily Yulo has manifested before this Court that she no longer desires the return of the attached properties since the said attachment caused her to close down the business. From that time she has become a mere employee of the new owner of the premises. She has grave doubts as to the running condition of the attached machineries and equipments considering that the attachment was effected way back in 1975. She states as a matter of fact that the petitioner has already caused the sale of the machineries for fear that they might be destroyed due to prolonged litigation. We, therefore, deem it just and equitable to allow private respondent Lily Yulo to recover actual damages based on the value of the attached properties as proven in the trial court, in the amount of P660,000.00. In turn, if there are any remaining attached properties, they should be permanently released to herein petitioner.

We cannot, however, sustain the award of P500,000.00 representing unrealized profits because this amount was not proved or justified before the trial court. The basis of the alleged unearned profits is too speculative and conjectural to show actual damages for a future period. The private respondent failed to present reports on the average actual profits earned by her business and other evidence of profitability which are necessary to prove her claim for the said amount (See G. A. Machineries, Inc. v. Yaptinchay, 126 SCRA 78, 88). The judgment is therefore set aside insofar as it holds the petitioner liable for P500,000.00 actual damages representing unrealized profits, P150,000.00 for exemplary damages and P20,000.00 for attorney's fees. As stated earlier, the attached properties, should be released in favor of the petitioner. WHEREFORE, the decision of the Court of Appeals is hereby SET ASIDE and the petitioner is ordered to pay the private respondent Lily Yulo the amount of SIX HUNDRED SIXTY THOUSAND PESOS (P660,000.00) as actual damages. The remaining properties subject of the attachment are ordered released in favor of the petitioner. SO ORDERED.