PROV REM ORIGINALS (1) GOODLUCK BESHIE!
Subsequently, private respondent filed an Urgent Ex-
<3
G.R. No. L-63225 April 3, 1990
ELEAZAR V. ADLAWAN, petitioner,
vs.
HON. JUDGE VALERIANO P. TOMOL, as Presiding
Judge of Branch XI of RTC-Cebu (formerly Branch
XI, CFI-Cebu), Branch XXVII of RTC-Cebu, with
Station in Lapu-Lapu City (formerly Branch XVI,
CFI-Cebu, Presided over by former Judge
Ceferino E. Dulay), and ABOITIZ COMPANY,
INC., respondents.
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, RTC-Cebu, 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.
parte 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 Ex-Parte 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 and vacated. 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 8granting 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 CFI-Cebu, 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 CFI-Lapu-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. 19 The purpose and function of an
attachment or garnishment is two-fold. First, it seizes
upon property of an alleged debtor in advance of final
judgment and holds it subject to appropriation thus
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 non-existent 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 non-jurisdictional 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.
DAVAO LIGHT & POWER CO., INC., petitioner,
vs.
THE COURT OF APPEALS, QUEENSLAND HOTEL or
MOTEL or QUEENSLAND TOURIST INN, and
TEODORICO ADARNA, respondents.
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
the ex parte application and fixing the attachment
bond at P4,600,513.37.
3. On May 11, 1989 the attachment bond having been
submitted by Davao Light, the writ of attachment
issued.
4. On May 12, 1989, the summons and a copy of the
complaint, as well as the writ of attachment and a copy
of the attachment bond, were served on defendants
Queensland and Adarna; and pursuant to the writ, the
sheriff seized properties belonging to the latter.
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." 17 The 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-parte at the commencement of the
action if it finds the application otherwise sufficient in
form and substance.
In Toledo v. Burgos, 19 this Court ruled that a hearing
on a motion or application for preliminary attachment
is not generally necessary unless otherwise directed by
the Trial Court in its discretion. 20 And in Filinvest
Credit Corporation v. Relova, 21 the Court declared
that "(n)othing in the Rules of Court makes notice and
hearing indispensable and mandatory requisites for the
issuance of a writ of attachment." The only pre-
requisite is that the Court be satisfied, upon
consideration of "the affidavit of the applicant or of
some other person who personally knows the facts,
that a sufficient cause of action exists, that the case is
one of those mentioned in Section 1 . . . (Rule 57), that
there is no other sufficient security for the claim sought
to be enforced by the action, and that the amount due
to the applicant, or the value of the property the
possession of which he is entitled to recover, is as
much as the sum for which the order (of attachment) is
granted above all legal counterclaims." 22 If the court
be so satisfied, the "order of attachment shall be
granted," 23 and the writ shall issue upon the
applicant's posting of "a bond executed to the adverse
party in an amount to be fixed by the judge, not
exceeding the plaintiffs claim, conditioned that the
latter will pay all the costs which may be adjudged to
the adverse party and all damages which he may
sustain by reason of the attachment, if the court shall
finally adjudge that the applicant was not entitled
thereto." 24
In Mindanao Savings & Loan Association, Inc. v. Court
of Appeals, decided on April 18, 1989, 25 this Court
had occasion to emphasize the postulate that no
hearing is required on an application for preliminary
attachment, with notice to the defendant, for the
reason that this "would defeat the objective of the
remedy . . . (since the) time which such a hearing
would take, could be enough to enable the defendant
to abscond or dispose of his property before a writ of
attachment issues." As observed by a former member
of this Court, 26 such a procedure would warn
absconding debtors-defendants of the commencement
of the suit against them and the probable seizure of
their properties, and thus give them the advantage of
time to hide their assets, leaving the creditor-plaintiff
holding the proverbial empty bag; it would place the
creditor-applicant in danger of losing any security for a
favorable judgment and thus give him only an illusory
victory.
Withal, ample modes of recourse against a preliminary
attachment are secured by law to the defendant. The
relative ease with which a preliminary attachment may
be obtained is matched and paralleled by the relative
facility with which the attachment may legitimately be
prevented or frustrated. These modes of recourse
against preliminary attachments granted by Rule 57
were discussed at some length by the separate opinion
in Mindanao Savings & Loans Asso. Inc. v. CA., supra.
That separate opinion stressed that there are two (2)
ways of discharging an attachment: first, by the
posting of a counterbond; and second, by a showing of
its improper or irregular issuance.
1.0. The submission of a counterbond is an efficacious
mode of lifting an attachment already enforced against
property, or even of preventing its enforcement
altogether.
1.1. When property has already been seized under
attachment, the attachment may be discharged upon
counterbond in accordance with Section 12 of Rule 57.
Sec. 12. Discharge of attachment upon
giving counterbond. At any time
after an order of attachment has been
granted, the party whose property has
been attached or the person appearing
in his behalf, may, upon reasonable
notice to the applicant, apply to the
judge who granted the order, or to the
judge of the court in which the action is
pending, for an order discharging the
attachment wholly or in part on the
security given . . . in an amount equal
to the value of the property attached
as determined by the judge to secure
the payment of any judgment that the
attaching creditor may recover in the
action. . . .
1.2. But even before actual levy on property, seizure
under attachment may be prevented also upon
counterbond. The defendant need not wait until his
property is seized before seeking the discharge of the
attachment by a counterbond. This is made possible by
Section 5 of Rule 57.
Sec. 5. Manner of attaching property.
The officer executing the order shall
without delay attach, to await
judgment and execution in the action,
all the properties of the party against
whom the order is issued in the
province, not exempt from execution,
or so much thereof as may be sufficient
to satisfy the applicant's
demand, unless the former makes a
deposit with the clerk or judge of the
court from which the order issued, or
gives a counter-bond executed to the
applicant, in an amount sufficient to
satisfy such demand besides costs, or
in an amount equal to the value of the
property which is about to be attached,
to secure payment to the applicant of
any judgment which he may recover in
the action. . . . (Emphasis supplied)
2.0. Aside from the filing of a counterbond, a
preliminary attachment may also be lifted or
discharged on the ground that it has been irregularly or
improperly issued, in accordance with Section 13 of
Rule 57. Like the first, this second mode of lifting an
attachment may be resorted to even before any
property has been levied on. Indeed, it may be availed
of after property has been released from a levy on
attachment, as is made clear by said Section 13, viz.:
Sec. 13. Discharge of attachment for
improper or irregular issuance. The
party whose property has been
attached may also, at any time
either BEFORE or AFTER the release of
the attached property, or before any
attachment shall have been actually
levied, upon reasonable notice to the
attaching creditor, apply to the judge
who granted the order, or to the judge
of the court in which the action is
pending, for an order to discharge the
attachment on the ground that the
same was improperly or irregularly
issued. If the motion be made on
affidavits on the part of the party
whose property has been attached, but
not otherwise, the attaching creditor
may oppose the same by counter-
affidavits or other evidence in addition
to that on which the attachment was
made. . . . (Emphasis supplied)
This is so because "(a)s pointed out in Calderon
v. I.A.C., 155 SCRA 531 (1987), The attachment debtor
cannot be deemed to have waived any defect in the
issuance of the attachment writ by simply availing
himself of one way of discharging the attachment writ,
instead of the other. Moreover, the filing of a
counterbond is a speedier way of discharging the
attachment writ maliciously sought out by the
attaching creditor instead of the other way, which, in
most instances . . . would require presentation of
evidence in a fullblown trial on the merits, and cannot
easily be settled in a pending incident of the case." 27
It may not be amiss to here reiterate other related
principles dealt with in Mindanao Savings & Loans
Asso. Inc. v. C.A., supra., 28 to wit:
(a) When an attachment may not be
dissolved by a showing of its irregular
or improper issuance:
. . . (W)hen the preliminary attachment
is issued upon a ground which is at the
same time the applicant's cause of
action; e.g., "an action for money or
property embezzled or fraudulently
misapplied or converted to his own use
by a public officer, or an officer of a
corporation, or an attorney, factor,
broker, agent, or clerk, in the course of
his employment as such, or by any
other person in a fiduciary capacity, or
for a willful violation of duty." (Sec. 1
[b], Rule 57), or "an action against a
party who has been guilty of fraud m
contracting the debt or incurring the
obligation upon which the action is
brought" (Sec. 1 [d], Rule 57), the
defendant is not allowed to file a
motion to dissolve the attachment
under Section 13 of Rule 57 by offering
to show the falsity of the factual
averments in the plaintiff's application
and affidavits on which the writ was
based and consequently that the
writ based thereon had been
improperly or irregularly issued (SEE
 Benitez v. I.A.C., 154 SCRA 41) the
reason being that the hearing on such
a motion for dissolution of the writ
would be tantamount to a trial of the
merits of the action. In other words, the
merits of the action would be
ventilated at a mere hearing of a
motion, instead of at the regular trial.
Therefore, when the writ of attachment
is of this nature, the only way it can be
dissolved is by a counterbond (G.B. Inc.
v. Sanchez, 98 Phil. 886).
(b) Effect of the dissolution of a preliminary
attachment on the plaintiffs attachment bond:
. . . The dissolution of the preliminary
attachment upon security given, or a
showing of its irregular or improper
issuance, does not of course operate to
discharge the sureties on plaintiff's own
attachment bond. The reason is simple.
That bond is "executed to the adverse
party, . . . conditioned that the . . .
(applicant) will pay all the costs which
may be adjudged to the adverse party
and all damages which he may sustain
by reason of the attachment, if the
court shall finally adjudge that the
applicant was not entitled thereto"
(SEC. 4, Rule 57). Hence, until that
determination is made, as to the
applicant's entitlement to the
attachment, his bond must stand and
cannot be with-drawn.
With respect to the other provisional remedies, i.e.,
preliminary injunction (Rule 58), receivership (Rule 59),
replevin or delivery of personal property (Rule 60), the
rule is the same: they may also issue ex parte. 29
It goes without saying that whatever be the acts done
by the Court prior to the acquisition of jurisdiction over
the person of defendant, as above indicated
issuance of summons, order of attachment and writ of
attachment (and/or appointments of guardian ad
litem, or grant of authority to the plaintiff to prosecute
the suit as a pauper litigant, or amendment of the
complaint by the plaintiff as a matter of right without
leave of court 30 and however valid and proper they
might otherwise be, these do not and cannot bind and
affect the defendant until and unless jurisdiction over
his person is eventually obtained by the court, either
by 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.
19513-89 against Queensland Hotel or Motel or
Queensland Tourist Inn and Teodorico Adarna are
hereby REINSTATED. Costs against private respondents.
G.R. Nos. 112438-39 December 12, 1995
CHEMPHIL EXPORT & IMPORT CORPORATION
(CEIC), petitioner,
vs.
THE HONORABLE COURT OF APPEALS JAIME Y.
GONZALES, as Assignee of the Bank of the
Philippine Islands (BPI), RIZAL COMMERCIAL
BANKING CORPORATION (RCBC), LAND BANK OF
THE PHILIPPINES (LBP), PHILIPPINE COMMERCIAL
& INTERNATIONAL BANK (PCIB) and THE
PHILIPPINE INVESTMENT SYSTEM ORGANIZATION
(PISO), respondents.
G.R. No. 113394 December 12, 1995
PHILIPPINE COMMERCIAL INDUSTRIAL BANK
(AND ITS ASSIGNEE JAIME Y.
GONZALES) petitioner,
vs.
HONORABLE COURT OR APPEALS and CHEMPHIL
EXPORT AND IMPORT CORPORATION
(CEIC), respondents.
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" (CA-G.R. CV No. 26511).
The dispositive portion of the assailed decision reads,
thus:
WHEREFORE, this Court resolves in
these consolidated cases as follows:
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 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
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
order. 24
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 attachment lien subsists. When the consortium,
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
and mandamus 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
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 COURT OF APPEALS
GRAVELY ERRED:
(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 Court in Samahang
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 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 THAT CERTIORARI 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-in-interest, 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
preference provided 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. Such collateral 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
that certiorari 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
the certiorari 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.
CITIZENS SURETY & INSURANCE COMPANY,
INC., Petitioner, v. HON. JUDGE A. MELENCIO-
HERRERA, SANTIAGO DACANAY, and JOSEFINA
DACANAY, Respondents.
Dayos, Tesoro & Gloria, Jr. for Petitioner.

Respondent Judge for and in his own behalf.
SYLLABUS
1. REMEDIAL LAW; JURISDICTION; ACTION IN
PERSONAM; PERSONAL SERVICE OF SUMMONS
REQUIRED. We agree with respondent Judge that the
action of plaintiff petitioner, being in personam, the
Court could not validly acquire jurisdiction on a non-
appearing defendant, absent a personal service of
summons within the forum. We have explicitly so ruled
in Pantaleon v. Asuncion, 105 Phil. 765, pointing out
without such personal service, any judgment on a non-
appearing defendant would be violative of due process.
In the aforecited case this Court, through Justice
Roberto Concepcion, now Chief Justice, ruled as
follows: . . . "It is a well-settled principle of
Constitutional Law that, in an action strictly in
personam, like the one at bar, personal service of
summons, within the forum, is essential to the
acquisition of jurisdiction over the person of the
defendant, who does not voluntary submit himself to
the authority of the court. In other words, summons by
publication cannot consistently with the due process
clause in the Bill of Rights confer upon the court
jurisdiction over said defendants.Due process of law
requires personal service to support a personal
judgment, and, when the proceeding is strictly in
personam brought to determine the personal rights
and obligations of the parties, personal service within
the state or a voluntary appearance in the case is
essential to the acquisition of jurisdiction so as to
constitute compliance with the constitutional
requirement of due process. . . .Although a state
legislature has more control over the form of service on
its own residents than nonresidents, it has been held
that in actions in personam . . . service by publication
on resident defendants who are personally within the
state and can be found therein is not "due process of
law," and statute allowing it is unconstitutional. (16A
C.J.S., pp. 786, 789; Emphasis our)"
2. CIVIL LAW; OBLIGATIONS AND CONTRACTS;
CREDITORS; REMEDY AGAINST ABSCONDING DEBTORS.
The proper recourse for a creditor in the same
situation as petitioner is to locate properties, real or
personal, of the resident defendant debtor with
unknown address and cause them to be attached
under Rule 57, Sec. l(f), in which case, the enactment
converts the action into a proceeding in rem or quasi in
rem and the summons by publication may then
accordingly be deemed valid and effective But because
debtors who abscond and conceal themselves are also
quite adept at concealing their properties, the
dismissal of the case below by respondent Judge
should be set aside and the case held pending in the
courts archives, until petitioner as plaintiff succeed in
determining the whereabouts of the defendants
person or properties and causes valid summons to be
served personally or by publication as the case may
be. In this manner, the tolling of the period of
prescription for as long as the debtor remains in hiding
would properly be a matter of court record, and he can
not emerge after a sufficient lapse of time from the
dismissal of the case to profit from his own misdeed
and claim prescription of his just debt.
DECISION
REYES, J.B.L., J.:
Petitioner Citizens Surety & Insurance Company, Inc.
seeks review of an order of respondent Judge in Civil
Case No. 77134 of the Court of First Instance of Manila,
Branch XVII, entitled "Citizens Surety & Insurance Co.,
Inc. v. Santiago Dacanay and Josefina Dacanay,"
dismissing the complaint for lack of proper service of
summons upon defendants.
The record is to the effect that petitioner had filed its
complaint in the Court below, alleging that at request
of defendant Santiago Dacanay, the plaintiff Surety
Company had issued its Surety Bonds Nos. 4942 and
4944, the first, in favor of Gregorio Fajardo to
guarantee payment of a P5,000-promissory note
executed by said Dacanay, and the second, in favor of
Manufacturers Bank & Trust Co., to guarantee payment
of another promissory note in like amount; that in
consideration of said bonds, Santiago and Josefina
Dacanay executed Indemnity Agreements, binding
themselves jointly and severally to indemnify plaintiff
for any losses, costs and expenses which it might
sustain in connection with the issuance of the bonds
aforesaid, with interest at 12% per annum; that as
additional security, the Dacanays mortgaged to
plaintiff a parcel of land in Baguio City, covered by
Certificate of Title No. T-8116, the mortgage having
been duly recorded; that the promissory notes were not
paid .and as a result, plaintiff Surety was compelled to
pay P5,000.00 to Gregorio Fajardo and P4,081.69 to the
Manufacturers Bank; that the Dacanays failed to
reimburse the Surety for such payments, whereupon
the Surety caused the extrajudicial foreclosure of the
mortgage to pay its claim of P12,941.69 representing
its payments, interest and stipulated liquidated
damages: that at the foreclosure sale, the land
mortgaged was sold to plaintiff, as highest bidder, for
the sum of P2,000.00 leaving an unsatisfied balance
of P10,491.69, that plaintiff sought to recover from
defendants Dacanay, plus 10% thereof as attorneys
fees, and the costs.
At petitioners request, respondent Judge caused
summons to be made by publication in the newspaper
Philippines Herald. But despite the publication and
deposit of a prepaid copy of the complaint at the
Manila post office, defendants did not appear within
the period of 60 days from last publication, as required
by the summons.
Plaintiff then asked that defendants be declared in
default; but :instead, the Judge, by order of May 16,
1970, asked it to show cause why the action should not
be dismissed, the suit being in personam and
defendants not having appeared. Then, on May 29,
1970, respondent Judge dismissed the case, despite
plaintiff Suretys argument that the summons by
publication was sufficient and valid under section 16 of
Rule 14 of the Revised Rules of Court.
We agree with respondent Judge that the action of
plaintiff petitioner, being in personam, the Court could
not validly acquire jurisdiction on a non-appearing
defendant, absent a personal service of summons
within the forum. We have explicitly so ruled in
Pantaleon v. Asuncin, 105 Phil. 765, pointing out
without such personal service, any judgment on a non-
appearing defendant would be violative of due process.
In the aforecited case this Court, through Justice
Roberto Concepcin, now Chief Justice, ruled as
follows:jgc:chanrobles.com.ph
"Apart from the foregoing, it is well-settled principle of
Constitutional Law that, in an action strictly in
personam, like the one at bar, personal service of
summons, within the forum. is essential to the
acquisition of jurisdiction over the person of the
defendant, who does not voluntarily submit himself to
the authority of the court. In other words, summons by
publication cannot consistently with the due process
clause in the Bill of Rights confer upon the court
jurisdiction over said defendants.
Due process of law requires personal service to
support a personal judgment, and. when the
proceeding is strictly in personam brought to
determine the personal rights and obligations of the
parties, personal service within the state or a voluntary
appearance in the case is essential to the acquisition of
jurisdiction so as to constitute compliance with the
constitutional requirement of due process. . . .
Although a state legislature has more control over the
form of service on its own residents than nonresidents,
it has been held that in actions in personam . . . service
by publication on resident defendants, who are
personally within the state and can be found therein is
not "due process of law," and a statute allowing it is
unconstitutional. (16A C.J.S., pp. 786, 789; Emphasis
ours.)"
The proper recourse for a creditor in the same situation
as petitioner is to locate properties, real or personal, of
the resident defendant debtor with unknown address
and cause them to be attached under Rule 57,
section 1(f), in which case, the attachment converts
the action into a proceeding in rem or quasi in rem and
the summons by publication may then accordingly be
deemed valid and effective.
But because debtors who abscond and conceal
themselves are also quite adept at concealing their
properties, the dismissal of the case below by
respondent Judge should be set aside and the case
held pending in the courts archives, until petitioner as
plaintiff succeeds in determining the whereabouts of
the defendants person or properties and causes valid
summons to be served personally or by publication as
the case may be. In this manner, the tolling of the
period of prescription for as long as the debtor remains
in hiding would properly be a matter of court records
and he can not emerge after a sufficient lapse of time
from the dismissal of the case to profit from his own
misdeed and claim prescription of his just debt.
WHEREFORE, the order of dismissal of the case issued
by the Court below is hereby set aside, and in the
interest of justice, the proceedings are ordered
suspended, to be held pending until the plaintiff
petitioner succeeds in ascertaining the whereabouts of
the defendants and/or locating properties of the same,
to enable proper summons to be issued conformably to
this Opinion. No costs.
MERCEDES GRUENBERG and ALBERT
GRUENBERG, petitioners,
vs.
HONORABLE COURT OF APPEALS, HONORABLE
LINO L. AOVER and ELDA R.
FLORES, respondents.
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.
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
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. Q-18444, 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. Q-18444 are
DISSOLVED. The other related orders issued in
connection with the writ of attachment are SET ASIDE.
ALBERTO SIEVERT, petitioner,
vs.
COURT OF APPEALS, HON. JUDGE ARTEMON D.
LUNA and AURELIO CAMPOSANO, respondents.
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:
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 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 to enable the attaching
party to realize upon relief sought and expected to
be granted in the main or principal action . 4 A court
which has not acquired jurisdiction over the person
of defendant, cannot bind that defendant whether in
the main case or in any ancillary proceeding such as
attachment proceedings. The service of a petition
for preliminary attachment without the prior or
simultaneous service of summons and a copy of the
complaint in the main case and that is what
happened in this case does not of course confer
jurisdiction upon the issuing court over the person
of the defendant.
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.
SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF
MARIO TORRES and SOLAR RESOURCES, INC.
Petitioners, - versus - NICANOR SATSATIN,
EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL
SATSATIN and NIKKI NORLIN SATSATIN,
Respondents.
This is a petition for review
on certiorari assailing the Decision[1] dated November
23, 2004 of the Court of Appeals (CA) in CA-G.R. SP No.
83595, and its Resolution[2] dated January 18, 2005,
denying petitioners motion for reconsideration.
The factual and procedural antecedents are as
follows:
The siblings Sofia Torres (Sofia), Fructosa Torres
(Fructosa), and Mario Torres (Mario) each own adjacent
20,000 square meters track of land situated at Barrio
Lankaan, Dasmarias, Cavite, covered by Transfer
Certificate of Title (TCT) Nos. 251267,[3] 251266,[4] and
251265,[5] respectively.
Sometime in 1997, Nicanor Satsatin (Nicanor) asked
petitioners mother, Agripina Aledia, if she wanted to
sell their lands. After consultation with her daughters,
daughter-in-law, and grandchildren, Agripina agreed to
sell the properties. Petitioners, thus, authorized
Nicanor, through a Special Power of Attorney, to
negotiate for the sale of the properties.[6]
Sometime in 1999, Nicanor offered to sell the
properties to Solar Resources, Inc. (Solar). Solar
allegedly agreed to purchase the three parcels of land,
together with the 10,000-square-meter property owned
by a certain Rustica Aledia,
for P35,000,000.00. Petitioners alleged that Nicanor
was supposed to remit to them the total amount
of P28,000,000.00 or P9,333,333.00 each to Sofia,
Fructosa, and the heirs of Mario.
Petitioners claimed that Solar has already paid the
entire purchase price of P35,000,000.00 to Nicanor in
Thirty-Two (32) post-dated checks which the latter
encashed/deposited on their respective due
dates.Petitioners added that they also learned that
during the period from January 2000 to April 2002,
Nicanor allegedly acquired a house and lot at Vista
Grande BF Resort Village, Las Pinas City and a car,
which he registered in the names of his unemployed
children, Nikki Normel Satsatin and Nikki Norlin
Satsatin. However, notwithstanding the receipt of the
entire payment for the subject property, Nicanor only
remitted the total amount of P9,000,000.00, leaving an
unremitted balance of P19,000,000.00. Despite
repeated verbal and written demands, Nicanor failed to
remit to them the balance of P19,000,000.00.
Consequently, on October 25, 2002, petitioners filed
before the regional trial court (RTC) a Complaint[7] for
sum of money and damages, against Nicanor,
Ermilinda Satsatin, Nikki Normel Satsatin, and Nikki
Norlin Satsatin. The case was docketed as Civil Case
No. 2694-02, and raffled to RTC, Branch 90,
Dasmarias, Cavite.
On October 30, 2002, petitioners filed an Ex-
Parte Motion for the Issuance of a Writ of Attachment,
[8]
alleging among other things: that respondents are
about to depart the Philippines; that they have
properties, real and personal in Metro Manila and in the
nearby provinces; that the amount due them
is P19,000,000.00 above all other claims; that there is
no other sufficient security for the claim sought to be
enforced; and that they are willing to post a bond fixed
by the court to answer for all costs which may be
adjudged to the respondents and all damages which
respondents may sustain by reason of the attachment
prayed for, if it shall be finally adjudged that
petitioners are not entitled thereto.
On October 30, 2002, the trial court issued an
Order[9] directing the petitioners to post a bond in the
amount of P7,000,000.00 before the court issues the
writ of attachment, the dispositive portion of which
reads as follows:
WHEREFORE, premises
considered, and finding the present
complaint and motion sufficient in form
and substance, this Court hereby
directs the herein plaintiffs to post a
bond, pursuant to Section 3, Rule 57 of
the 1997 Rules of Civil Procedure, in
the amount of Seven Million Pesos
(P7,000,000.00), before the Writ of
Attachment issues.[10]
On November 15, 2002, petitioners filed a Motion for
Deputation of Sheriff,[11] informing the court that they
have already filed an attachment bond. They also
prayed that a sheriff be deputized to serve the writ of
attachment that would be issued by the court.
In the Order[12] dated November 15, 2002, the
RTC granted the above motion and deputized the
sheriff, together with police security assistance, to
serve the writ of attachment.
Thereafter, the RTC issued a Writ of
Attachment[13] dated November 15, 2002, directing the
sheriff to attach the estate, real or personal, of the
respondents, the decretal portion of which reads:
WE, THEREFORE, command you to
attach the estate, real or personal, not
exempt from execution, of the said
defendants, in your province, to the
value of said demands, and that you
safely keep the same according to the
said Rule, unless the defendants give
security to pay such judgment as may
be recovered on the said action, in the
manner provided by the said Rule,
provided that your legal fees and all
necessary expenses are fully paid.
You shall return this writ with your
proceedings indorsed hereon within
twenty (20) days from the date of
receipt hereof.
GIVEN UNDER MY HAND AND SEAL
of this Court, this 15th day of
November, 2002, at Imus for
Dasmarias, Cavite, Philippines.[14]
On November 19, 2002, a copy of the writ of
attachment was served upon the respondents. On the
same date, the sheriff levied the real and personal
properties of the respondent, including household
appliances, cars, and a parcel of land located at Las
Pias, Manila.[15]
On November 21, 2002, summons, together
with a copy of the complaint, was served upon the
respondents.[16]
On November 29, 2002, respondents filed their
Answer.[17]
On the same day respondents filed their
answer, they also filed a Motion to Discharge Writ of
Attachment[18] anchored on the following grounds: the
bond was issued before the issuance of the writ of
attachment; the writ of attachment was issued before
the summons was received by the respondents; the
sheriff did not serve copies of the application for
attachment, order of attachment, plaintiffs affidavit,
and attachment bond, to the respondents; the sheriff
did not submit a sheriffs return in violation of the Rules;
and the grounds cited for the issuance of the writ are
baseless and devoid of merit. In the alternative,
respondents offered to post a counter-bond for the
lifting of the writ of attachment.[19]
On March 11, 2003, after the parties filed their
respective pleadings, the RTC issued an
Order[20]denying the motion, but at the same time,
directing the respondents to file a counter-bond, to wit:
WHEREFORE, premises
considered, after the pertinent
pleadings of the parties have been
taken into account, the herein
defendants are hereby directed to file a
counter-bond executed to the attaching
party, in the amount of Seven Million
Pesos (P7,000,000.00), to secure the
payment of any judgment that the
attaching party may recover in the
action, with notice on the attaching
party, whereas, the Motion to
Discharge Writ of Attachment is
DENIED.
SO ORDERED.[21]
Thereafter, respondents filed a motion for
reconsideration and/or motion for clarification of the
above order. On April 3, 2003, the RTC issued another
Order[22] which reads:
In view of the Urgent Motion For
Reconsideration And/Or Motion For
Clarification of the Order of this Court
dated March 11, 2003, denying their
Motion to Discharge Writ of Attachment
filed by the defendants through
counsel Atty. Franco L. Loyola, the
Motion to Discharge Writ of Attachment
is denied until after the defendants
have posted the counter-bond in the
amount of Seven Million Pesos
(P7,000,000.00).
The defendants, once again, is
directed to file their counter-bond of
Seven Million Pesos (P7,000,000.00), if
it so desires, in order to discharge the
Writ of Attachment.
SO ORDERED.
On December 15, 2003, respondents filed an
Urgent Motion to Lift/Set Aside Order Dated March [11],
2003,[23] which the RTC denied in an Order [24] of even
date, the dispositive portion of which reads:
WHEREFORE, premises
considered, defendants Urgent Motion
to Lift/Set Aside Order Dated March 23,
2003 (With Manifestation to Dissolve
Writ of Attachment) is hereby DENIED
for lack of Merit.
SO ORDERED.
Respondents filed an Urgent Motion for
Reconsideration,[25] but it was denied in the
Order[26] dated March 3, 2004.
Aggrieved, respondents filed before the CA a
Petition for Certiorari, Mandamus and Prohibition with
Preliminary Injunction and Temporary Restraining
Order[27] under Rule 65 of the Rules of Court, docketed
as CA-G.R. SP No. 83595, anchored on the following
grounds:
(1) public respondents committed
grave abuse of discretion amounting to
lack of or in excess of jurisdiction in
 failing to notice that the lower court
has no jurisdiction over the person and
subject matter of the complaint when
the subject Writ of Attachment was
issued;
(2) public respondents committed
grave abuse of discretion amounting to
lack of or in excess of jurisdiction in
granting the issuance of the Writ of
Attachment despite non-compliance
with the formal requisites for the
issuance of the bond and the Writ of
Attachment.[28]
Respondents argued that the subject writ was
improper and irregular having been issued and
enforced without the lower court acquiring jurisdiction
over the persons of the respondents. They maintained
that the writ of attachment was implemented without
serving upon them the summons together with the
complaint.They also argued that the bond issued in
favor of the petitioners was defective, because the
bonding company failed to obtain the proper clearance
that it can transact business with the RTC of
Dasmarias, Cavite. They added that the various
clearances which were issued in favor of the bonding
company were applicable only in the courts of the
cities of Pasay, Pasig, Manila, and Makati, but not in the
RTC, Imus, Cavite.[29]
On November 23, 2003, the CA rendered the
assailed Decision in favor of the respondents, finding
grave abuse of discretion amounting to lack of or in
excess of jurisdiction on the part of the RTC in issuing
the Orders dated December 15, 2003 and March 3,
2004. The decretal portion of the Decision reads:
WHEREFORE, the instant petition
is hereby GRANTED. Accordingly, the
assailed Orders are hereby nullified and
set aside. The levy on the properties of
the petitioners pursuant to the Writ of
Attachment issued by the lower court is
hereby LIFTED.
SO ORDERED.[30]
Petitioners filed a Motion for Reconsideration,
but it was denied in the Resolution [32] dated January
[31]
18, 2005.
Hence, this petition assigning the following
errors:
I.
THE HONORABLE COURT OF APPEALS
ERRED IN ORDERING THE LIFTING OF
THE WRIT OF ATTACHMENT PURSUANT
TO SECTION 13, RULE 57 OF THE
REVISED RULES OF CIVIL PROCEDURE.
II.
THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT PUBLIC
RESPONDENT COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO
LACK OF OR IN EXCESS OF
JURISDICTION IN GRANTING THE WRIT
OF ATTACHMENT DESPITE THE BOND
BEING INSUFFICIENT AND HAVING BEEN
IMPROPERLY ISSUED.
III.
THE HONORABLE COURT OF APPEALS
ERRED IN NOT DISMISSING THE
PETITION BY REASON OF ESTOPPEL,
LACHES AND PRESCRIPTION AND IN
HOLDING THAT THE WRIT OF
ATTACHMENT WAS IMPROPERLY AND
IRREGULARLY ENFORCED IN VIOLATION
OF SECTION 5, RULE 57 OF THE
REVISED RULES OF COURT.
IV.
THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT THE
PRINCIPLE OF ESTOPPEL WILL NOT LIE
AGAINST RESPONDENTS.
Petitioners maintain that in the case at bar, as
in the case of FCY Construction Group, Inc. v. Court of
Appeals,[33] the only way the subject writ of attachment
can be dissolved is by a counter-bond. They claim that
the respondents are not allowed to file a motion to
dissolve the attachment under Section 13, Rule 57 of
the Rules of Court. Otherwise, the hearing on the
motion for the dissolution of the writ would be
tantamount to a trial on the merits, considering that
the writ of preliminary attachment was issued upon a
ground which is, at the same time, the applicants
cause of action.
Petitioners insist that the determination of the
existence of grounds to discharge a writ of attachment
rests in the sound discretion of the lower court. They
argue that the Certification[34] issued by the Office of
the Administrator and the Certifications [35] issued by
the clerks of court of the RTCs of Dasmarias and Imus,
Cavite, would show that the bonds offered by Western
Guaranty Corporation, the bonding company which
issued the bond, may be accepted by the RTCs of
Dasmarias and Imus, Cavite, and that the said bonding
company has no pending liability with the government.
Petitioners contend that respondents are
barred by estoppel, laches, and prescription from
questioning the orders of the RTC issuing the writ of
attachment. They also maintain that the issue whether
there was impropriety or irregularity in the issuance of
the orders is moot and academic, considering that the
attachment bond questioned by the respondent had
already expired on November 14, 2003 and petitioners
have renewed the attachment bond covering the
period from November 14, 2003 to November 14,
2004, and further renewed to cover the period of
November 14, 2004 to November 14, 2005.
The petition is bereft of merit.
 A writ of preliminary attachment is defined as a
provisional remedy issued upon order of the court
where an action is pending to be levied upon the
property or properties of the defendant therein, the
same to be held thereafter by the sheriff as security for
the satisfaction of whatever judgment that might be
secured in the said action by the attaching creditor
against the defendant.[36]
In the case at bar, the CA correctly found that
there was grave abuse of discretion amounting to lack
of or in excess of jurisdiction on the part of the trial
court in approving the bond posted by petitioners
despite the fact that not all the requisites for its
approval were complied with. In accepting a surety
bond, it is necessary that all the requisites for its
approval are met; otherwise, the bond should be
rejected.[37]
Every bond should be accompanied by a
clearance from the Supreme Court showing that the
company concerned is qualified to transact business
which is valid only for thirty (30) days from the date of
its issuance.[38] However, it is apparent that the
Certification[39] issued by the Office of the Court
Administrator (OCA) at the time the bond was issued
would clearly show that the bonds offered by Western
Guaranty Corporation may be accepted only in the
RTCs of the cities of Makati, Pasay,
and Pasig. Therefore, the surety bond issued by the
bonding company should not have been accepted by
the RTC of Dasmarias, Branch 90, since the certification
secured by the bonding company from the OCA at the
time of the issuance of the bond certified that it may
only be accepted in the above-mentioned cities. Thus,
the trial court acted with grave abuse of discretion
amounting to lack of or in excess of jurisdiction when it
issued the writ of attachment founded on the said
bond.
Moreover, in provisional remedies, particularly
that of preliminary attachment, the distinction between
the issuance and the implementation of the writ of
attachment is of utmost importance to the validity of
the writ. The distinction is indispensably necessary to
determine when jurisdiction over the person of the
defendant should be acquired in order to validly
implement the writ of attachment upon his person.
This Court has long put to rest the issue of
when jurisdiction over the person of the defendant
should be acquired in cases where a party resorts to
provisional remedies. A party to a suit may, at any time
after filing the complaint, avail of the provisional
remedies under the Rules of Court. Specifically, Rule 57
on preliminary attachment speaks of the grant of the
remedy at the commencement of the action or at any
time before entry of judgment.[40] This phrase refers to
the date of the filing of the complaint, which is the
moment that marks the commencement of the action.
The reference plainly is to a time before summons is
served on the defendant, or even before summons
issues.[41]
In Davao Light & Power Co., Inc. v. Court of
Appeals,[42] this Court clarified the actual time when
jurisdiction should be had:
It goes without saying that whatever be
the acts done by the Court prior to the
acquisition of jurisdiction over the person of
defendant x x x issuance of summons, order
of attachment and writ of attachment x x
x these do not and cannot bind and
affect the defendant until and unless
jurisdiction over his person is eventually
obtained by the court, either by service on
him of summons or other coercive process or
his voluntary submission to the courts
authority. Hence, when the sheriff or other
proper officer commences implementation of
the writ of attachment, it is essential that he
serve on the defendant not only a copy of the
applicants affidavit and attachment bond,
and of the order of attachment, as explicitly
required by Section 5 of Rule 57, but also
the summons addressed to said defendant
as well as a copy of the complaint x x x.
(Emphasis supplied.)
In Cuartero v. Court of Appeals,[43] this Court
held that the grant of the provisional remedy of
attachment involves three stages: first, the court
issues the order granting the application; second, the
writ of attachment issues pursuant to the order
granting the writ; and third, the writ is
implemented. For the initial two stages, it is not
necessary that jurisdiction over the person of the
defendant be first obtained. However, once the
implementation of the writ commences, the court must
have acquired jurisdiction over the defendant, for
without such jurisdiction, the court has no power and
authority to act in any manner against the defendant.
Any order issuing from the Court will not bind the
defendant.[44]
Thus, it is indispensable not only for the
acquisition of jurisdiction over the person of the
defendant, but also upon consideration of fairness, to
apprise the defendant of the complaint against him
and the issuance of a writ of preliminary attachment
and the grounds therefor that prior or
contemporaneously to the serving of the writ of
attachment, service of summons, together with a copy
of the complaint, the application for attachment, the
applicants affidavit and bond, and the order must be
served upon him.
In the instant case, assuming arguendo that
the trial court validly issued the writ of attachment on
November 15, 2002, which was implemented on
November 19, 2002, it is to be noted that the
summons, together with a copy of the complaint, was
served only on November 21, 2002.
At the time the trial court issued the writ of
attachment on November 15, 2002, it can validly to do
so since the motion for its issuance can be filed at the
commencement of the action or at any time before
entry of judgment. However, at the time the writ was
implemented, the trial court has not acquired
jurisdiction over the persons of the respondent since no
summons was yet served upon them. The proper
officer should have previously or simultaneously with
the implementation of the writ of attachment, served a
copy of the summons upon the respondents in order
for the trial court to have acquired jurisdiction upon
them and for the writ to have binding
effect. Consequently, even if the writ of attachment
was validly issued, it was improperly or irregularly
enforced and, therefore, cannot bind and affect the
respondents.
Moreover, although there is truth in the
petitioners contention that an attachment may not be
dissolved by a showing of its irregular or improper
issuance if it is upon a ground which is at the same
time the applicants cause of action in the main case,
since an anomalous situation would result if the issues
of the main case would be ventilated and resolved in a
mere hearing of a motion. However, the same is not
applicable in the case bar. It is clear from the
respondents pleadings that the grounds on which they
base the lifting of the writ of attachment are the
irregularities in its issuance and in the service of the
writ; not petitioners cause of action.
Further, petitioners contention that
respondents are barred by estoppel, laches, and
prescription from questioning the orders of the RTC
issuing the writ of attachment and that the issue has
become moot and academic by the renewal of the
attachment bond covering after its expiration, is devoid
of merit. As correctly held by the CA:
There are two ways of discharging
the attachment. First, to file a counter-
bond in accordance with Section 12 of
Rule 57. Second[,] [t]o quash the
attachment on the ground that it was
irregularly or improvidently issued, as
provided for in Section 13 of the same
rule. Whether the attachment was
discharged by either of the two ways
indicated in the law, the attachment
debtor cannot be deemed to have
waived any defect in the issuance of
the attachment writ by simply availing
himself of one way of discharging the
attachment writ, instead of the
other. The filing of a counter-bond is
merely a speedier way of discharging
the attachment writ instead of the
other way.[45]
Moreover, again assuming arguendo that the
writ of attachment was validly issued, although the trial
court later acquired jurisdiction over the respondents
by service of the summons upon them, such belated
service of summons on respondents cannot be deemed
to have cured the fatal defect in the enforcement of
the writ. The trial court cannot enforce such a coercive
process on respondents without first obtaining
jurisdiction over their person. The preliminary writ of
attachment must be served after or simultaneous with
the service of summons on the defendant whether by
personal service, substituted service or by publication
as warranted by the circumstances of the case. The
subsequent service of summons does not confer a
retroactive acquisition of jurisdiction over her person
because the law does not allow for retroactivity of a
belated service.[46]
WHEREFORE, premises considered, the
petition is DENIED. The Decision and Resolution of the
Court of Appeals dated November 23,
2004 and January 18, 2005, respectively, in CA-G.R. SP
No. 83595 are AFFIRMED.
K.O. GLASS CONSTRUCTION CO., INC., petitioner,
vs.
THE HONORABLE MANUEL VALENZUELA, Judge of
the Court of First Instance of Rizal, and ANTONIO
D. PINZON, respondents.
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. 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 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 said defendant. Plaintiff also avers
under oath that there is no sufficient security
 for his claim against the defendant in 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
said defendants. Plaintiff also avers under oath
that there is no sufficient security for his claim
against the defendants 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 counter-
claims." 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.
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
counter-bond 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.
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.
WALTER E. OLSEN & CO., plaintiff-appellee,
vs.
WALTER E. OLSEN, defendant-appellant.
This is an appeal taken by the defendant from a
judgment of the Court of First Instance of Manila,
sentencing him to pay plaintiff corporation the sum of
P66,207.62 with legal interest thereon at the rate of 6
per cent per annum from February 1, 1923, the date of
the filing of the complaint, until full payment and the
costs, and dismissing the cross-complaint and
counterclaim set up by him.
As ground of his appeal, the defendant assigns four
errors as committed by the trial court, to wit: (1) The
holding that the defendant-appellant contracted
fraudulently the debt which the plaintiff-appellee seeks
to recover in its complaint; (2) its failure to set aside
the writ of preliminary attachment issued by it ex
parte; (3) the fact of it not having absolved the
defendant from the complaint of the plaintiff
corporation and of not having given judgment for the
defendant and against the plaintiff for the amount of
his counterclaim, after deducing the debt due from him
to the plaintiff corporation in the sum of P66,207.62;
and (4) its action in denying the motion for new trial of
the defendant.
As the first two supposed errors are intimately
connected with each other, we will discuss them jointly.
The first question that arises is whether or not an order
denying a motion for the annulment of a preliminary
attachment may be reviewed through an appeal.
The preliminary attachment is an auxiliary remedy the
granting of which lies within the sound discretion of the
judge taking cognizance of the principal case upon
whose existence it depends. The order of the judge
denying a motion for the annulment of a writ of
preliminary attachment, being of an incidental or
interlocutory and auxiliary character, cannot be the
subject of an appeal independently from the principal
case, because our procedural law now in force
authorizes an appeal only from a final judgement which
gives an end to the litigation. (Section 143, Act No.
190: 3 C. J., 549 par. 389.) This lack of ordinary remedy
through an appeal does not mean, however, that any
excess a lower court may commit in the exercise of its
jurisdiction is without remedy; because there are the
especial remedies, such as certiorari, for the purpose.
(Leung Ben vs. O'Brien, 38 Phil., 182.)
While it is true that an order denying a motion for the
annulment of a preliminary attachment is not subject
to review through an appeal independently from the
principal case, it not consisting a final order, yet when
the writ of preliminary attachment becomes final by
virtue of a final judgment rendered in the principal
case, said writ is subject to review jointly with the
judgment rendered in the principal case through an
ordinary appeal. The appellate court has the power to
revoke or confirm said order, in like manner as a
judgment on the merits; because it is a ruling to which
an exception may be taken, and therefore is subject to
review in an appeal by bill of exceptions. (Secs. 141-
143, Act No. 190.) The fact that section 441 of the
Code of Civil Procedure does not provide any remedy
against the granting or denial of a motion for the
annulment of a writ of preliminary attachment, except
in case of excess of jurisdiction, does not confer upon
said order a final and irrevocable character, taking it
out from the general provisions as to appeal and
review, for a special provision is necessary for that
purpose.
Having arrived at the conclusion that an order
denying a motion for the annulment of a
preliminary attachment may be reviewed in an
appeal taken from a final judgment rendered in
the principal case, in which said order was
entered as an auxiliary remedy, we will now turn to
consider the question whether or not the trial court
committed error in denying the motion for the
annulment of the preliminary attachment levied upon
the property of the defendant-appellant.
It is admitted by the defendant-appellant that he is
indebted to the plaintiff-appellee corporation in the
sum of P66,207.62, but denies that he has contracted
said debt fraudulently.
The evidence shows that the defendant-appellant was
president-treasurer and general manager of the
plaintiff-appellee corporation and exercised direct and
almost exclusive supervision over its function, funds
and books of account until about the month of August,
1921. During that time he has been taking money
of the corporation without being duly authorized
to do so either by the board of directors or by
the by-laws, the money taken by him having
amounted to the considerable sum of
P66,207.62. Of this sum, P19,000 was invested in
the purchase of the house and lot now under
attachment in this case, and P50,000 in the
purchase of 500 shares of stock of Prising at the
price of P100 per share for himself and Marker. A
few days afterwards he began to sell the
ordinary shares of the corporation for P430 each.
The defendant-appellant attempted to justify his
conduct, alleging that the withdrawal of the funds of
the corporation for his personal use was made in his
current account with said corporation, in whose
treasury he deposited his own money and the
certificates of title of his shares, as well as of his
estate, and that at the first meeting of the
stockholders, which took place on February 1, 1919, a
statement of his account with a debit balance was
submitted and approved.
Having, as he had, absolute and almost exclusive
control over the function of the corporation and its
funds by virtue of his triple capacity as president,
treasurer and general manager, the defendant-
appellant should have been more scrupulous in the
application of the funds of said corporation to his own
use. As a trustee of said corporation, it was his duty to
see by all legal means possible that the interests of the
stockholders were protected, and should not abuse the
extraordinary opportunity which his triple position
offered him to dispose of the funds of the corporation.
Ordinary delicacy required that in the disposition of the
funds of the corporation for his personal use, he should
be very careful, so as to do it in such a way as would
be compatible with the interest of the stockholders and
his fiduciary character. And let it not also be said that
he did every thing openly and with the security of his
shares of stock, because as he could dispose of the
funds of the corporation so he could dispose of his won
shares and with greater freedom. And let it not also be
said that other officers of the corporation, such as the
vice-president, the secretary and other chiefs and
employees, were doing the same thing, because that
does not show but that his bad example had spread
among his subordinates and all believed themselves
with the same right as their chief to dispose of the
funds of the corporation for their personal use,
although it were merely by way of loan, without any
security of whatever kind of course. The approval of his
account at the first meeting of the stockholders cannot
be considered as a justification of his conduct, nor does
it remove every suspicion of bad faith, because the
corporation was constituted exclusively by the
defendant-appellant himself and his cospeculator,
Marker, and nothing else could be expected from it. As
to the debt he owed to the corporation, Walter E. Olsen
was in effect a lender and a borrower at the same time.
The conduct of the defendant-appellant in connection
with the funds of the corporation he represented was
more than an irregularity; and while it is not sufficiently
serious to constitute a criminal fraud, it is undoubtedly
a fraud of a civil character, because it is an abuse of
confidence to the damage of the corporation and its
stockholders, and constitutes one of the grounds
enumerated in section 424, in connection with section
412, of the Code of Civil Procedure for the issuance of a
preliminary attachment, and the order of the Court of
First Instance of Manila, denying the motion for the
annulment of the injunction in question, is in
accordance with law. lawph!1.net
As to the counterclaim set up by the defendant-
appellant, we have nothing to add to the
considerations of the trial court which we make ours.
For the foregoing, and no error having been found in
the judgment appealed from, the same is hereby
affirmed, with the costs against the defendant-
appellant. So ordered.
ABOITIZ & COMPANY, INC., HONORABLE VICENTE ERROR I
N. CUSI JR., Judge of the Court of First Instance
of Davao, and the PROVINCIAL SHERIFF OF THE COURT OF APPEALS ERRED IN
DAVAO DEL SUR, petitioners, HASTILY AND PERFUNCTORILY
vs. RENDERING, ON OCTOBER 3, 1971, A
COTABATO BUS COMPANY, INC., respondent. DECISION WITHOUT CONSIDERING
MOST OF THE EVIDENCE SUCH THAT
The instant petition stemmed from Civil Case No. 7329
of the Court of First Instance of Davao (Branch 1) in l) EVEN AN IMPORTANT FACT,
which a writ of preliminary attachment was issued ex- ESTABLISHED BY DOCUMENTARY
parte by the Court on the strength of an affidavit of EVIDENCE AND NOT DENIED BY
merit attached to the verified complaint filed by RESPONDENT, IS MENTIONED ONLY AS
petitioner herein, Aboitiz & Co., Inc., on November 2, A "CLAIM" OF PETITIONER COMPANY;
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 2) THE DECISION CONTAINS NO
Bus Co., owed the said petitioner. DISCUSSION AND APPRECIATION OF
THE FACTS AS PROVED, ASSEMBLED
AND PRESENTED BY PETITIONER
By virtue of the writ of preliminary attachment, the COMPANY SHOWING IN THEIR
provincial sheriff attached personal properties of the TOTALITY THAT RESPONDENT HAS
defendant bus company consisting of some buses, REMOVED, DIVERTED OR DISPOSED OF
machinery and equipment. The ground for the issuance ITS BANK DEPOSITS, INCOME AND
of the writ is, as alleged in the complaint and the OTHER LIQUID ASSETS WITH INTENT TO
affidavit of merit executed by the Assistant Manager of DEFRAUD ITS CREDITORS, ESPECIALLY
petitioner, that the defendant "has removed or ITS UNSECURED SUPPLIERS;
disposed of its properties or assets, or is about to do
so, with intent to defraud its creditors."
3) THE DECISION IGNORES THE
SIGNIFICANCE OF THE REFUSAL OF
Respondent company filed in the lower court an RESPONDENT TO PERMIT, UNDER REP.
"Urgent Motion to Dissolve or Quash Writ of ACT NO. 1405, THE METROPOLITAN
Attachment" to which was attached an affidavit BANK & TRUST CO. TO BRING, IN
executed by its Assistant Manager, Baldovino Lagbao, COMPLIANCE WITH A subpoena DUCES
alleging among other things that "the Cotabato Bus TECUM TO THE TRIAL COURT ALL THE
Company has not been selling or disposing of its RECORDS OF RESPONDENT'S DEPOSITS
properties, neither does it intend to do so, much less to AND WITHDRAWALS UNDER ITS
defraud its creditors; that also the Cotabato Bus CURRENT AND SAVINGS ACCOUNTS
Company, Inc. has been acquiring and buying more (NOW NIL) FOR EXAMINATION BY
assets". An opposition and a supplemental opposition PETITIONER COMPANY FOR THE
were filed to the urgent motion. The lower court denied PURPOSE OF SHOWING DIRECTLY THE
the motion stating in its Order that "the testimony of REMOVAL, DIVERSION OR DISPOSAL OF
Baldovino Lagbao, witness for the defendant, RESPONDENT'S DEPOSITS AND INCOME
corroborates the facts in the plaintiff's affidavit instead WITH INTENT TO DEFRAUD ITS
of disproving or showing them to be untrue." CREDITORS.

A motion for reconsideration was filed by the defendant ERROR II

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 THE COURT OF APPEALS ERRED IN NOT
part of herein respondent Judge, Hon. Vicente R. Cusi Jr. APPRECIATING THE FACTS THAT
On giving due course to the petition, the Court of RESPONDENT'S BANK DEPOSITS ARE
Appeals issued a restraining order restraining the trial NIL AS PROOF WHICH - TOGETHER
court from enforcing further the writ of attachment and WITH RESPONDENT'S ADMISSION OF
from proceeding with the hearing of Civil Case No. AN INCOME OF FROM P10,000.00 to P
7329. In its decision promulgated on October 3, 1971, 14,000.00 A DAY AND THE EVIDENCE
the Court of Appeals declared "null and void the THAT IT CANNOT PRODUCE P 634.00
order/writ of attachment dated November 3, 1971 and WITHOUT USING A PERSONAL CHECK
the orders of December 2, 1971, as well as that of OF ITS PRESIDENT AND MAJORITY
December 11, 1971, ordered the release of the STOCKHOLDER, AND OTHER EVIDENCE
attached properties, and made the restraining order SHOWS THE REMOVAL OR
originally issued permanent. CHANNELING OF ITS INCOME TO THE
LATTER.
The present recourse is an appeal by certiorari from
the decision of the Court of Appeals reversing the ERROR III
assailed orders of the Court of First Instance of Davao,
(Branch I), petitioner assigning against the lower court THE COURT OF APPEALS ERRED IN NOT
the following errors: 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 non-
payment 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.
ISABELO iCARPIO, petitioner,
vs.
HON. HIGINIO MACADAEG, as presiding Judge of
Branch X, Court of First Instance of Manila;
OSCAR C. ABAYA, Provincial Sheriff of Rizal and
City Sheriff of Manila, respondents.
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
parte motion 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.
SPOUSES SANTIAGO and RUFINA
TANCHAN, petitioners
vs.
ALLIED BANKING CORPORATION, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
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,5 including
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 co-petitioner 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-in-fact may deem
necessary, appropriate or convenient, any and
all documents instruments or contract/s
(including without limitations, promissory
notes, loan agreements, assignments, surety or
guaranty undertakings, security 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
notes.13 Separate demands for payment were also
made upon Spouses Tanchan14and 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- Respondent also prayed for payment of attorney's fees
judicial foreclosure of the real estate mortgage to equivalent to 25% of the total amount due, expenses
satisfy its claim against Foremost in the aggregate and costs of suit,
"amount of Php55,578,826.77, inclusive of interest,
other charges and attorney's fees, equivalent to 10% of In support of its application for issuance of a writ of
the total amount due as of May 3, 1998, plus the costs preliminary attachment, respondent submitted an
and expenses of foreclosure."17At the public auction Affidavit executed by Elmer Elumbaring (Elumbaring),
sale, respondent's bid of only Php37,745,283.67 for all Branch Cashier/Loans Supervisor, Cebu, Jakosalem
the mortgaged properties, including the buildings and Branch, stating that:
improvements thereon,18 was adjudged the sole and
highest bid.
4. Defendants [Foremost, et al.] committed
fraud in contracting the obligations upon which
On October 13, 1998, respondent filed with the RTC a the action is brought in that: a) to induce
Complaint for Collection of Sum of Money with Petition plaintiff [respondent] to grant the credit
for Issuance of Writ of Preliminary Injunction against accommodation they represented to the
Foremost, Spouses Tanchan and herein petitioners plaintiff [respondent] that they were in a
(collectively referred to as Foremost, et al.), praying financial position to pay their obligations on
that they be ordered to pay, jointly and severally, the maturity date in consideration of which plaintiff
following amounts:19 [respondent] granted the credit
accommodations. It turned out, however, that
they were not in such financial position when
Promissory Note Amount 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
0051-96-09495 which,
US$ 80,000.00 plus interest at the rate plaintiff
of 11.4% per[respondent]
annum fromgranted
Decemberthe 29,
loans
1997 unti
but when
paid and a penalty charge on the unpaid interestdefendants
at the rate [Foremost, et al.]reckoned
of 1% per month
December 29, 1997 until fully paid andreceived
a penalty the said proceeds,
charge theyprincipal
on the unpaid divertedreckoned
the from
28, 1998 until fully paid. 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;
0051-96-17617 US$110,000.00 plus interest at the rate of 11.4% per annum and a penalty charge at the rate
per month, all reckoned from December 5. 29, 1997
There until
is no fully paid.
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
0051-96-19008 US$250,000.00 plus interest at the rate of 11.4%20per annum and a penalty charge at the rate
protected.
per month all reckoned from November 30, 1997 until fully paid.

The application for writ of preliminary attachment was

granted by the RTC in an Order dated November 3,
0051-96-24801 US$115,000.00 plus interest at1998,
the rate of 11.4% per annum and a penalty charge at the rate
to wit:
per month all reckoned from December 29, 1997 until fully paid.
WHEREFORE, finding plaintiff's [respondent's]
application for the issuance of a writ of
preliminary attachment sufficient in form and
0051-96-00603 US$75,000.00 plus interest at the rate of 11.4% per annum and a penalty charge at the rate
substance, and the ground set forth therein
per month all reckoned from December 29, 1997 until fully paid.
being among those allowed by the Rules (Rule
57, Sec. 1 [e]), let a Writ of Preliminary
Attachment issue against the properties of
0051-97-02444 US$45,000.00 plus interest at the ratedefendants
of 11.4% per Cebu
annum Foremost
and a penaltyConstruction,
charge at the rate
Incorporated, Santiago
per month all reckoned from December 29, 1997 until fully paid. 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
0051-97-03696 US$379,000.00 plus interest at the rate(P54,000,000.00)
of 11.4% per annumPESOS, conditioned
reckoned to 8, 1998
from January
(Exhibit "G") answer
fully paid and a penalty charge at the rate of 1%forper
whatever damage
month from that9, the
February 1998said
until fully p
defendants [Foremost, et al.] may suffer by
reason of the issuance of said writ should the
Court finally adjudge that plaintiff [respondent]
0051-97-03688 PhpP7,466,795.67 plus interest at the wasrate
notofentitled
20% per annum and a penalty charge at the r
thereto.
(Exhibit "H") 3% per month from August 10, 1998. (Emphasis supplied)
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
party-defendant even when she was not bound by the
CG/CSAs which her husband Santiago signed in excess
of his authority under the special power of attorney to
contract loans for the family but 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 Complaint 61 or in
the four corners of the Affidavit of Elumbaring. 62 All that
is alleged is that Foremost obtained loans from
respondent but failed to pay the same, but as the Court
has repeatedly held, no fraud can be inferred from a
mere failure to 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. 70 The
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 and DISSOLVED insofar as it affects the
properties of petitioners Spouses Santiago and Rufina
Tanchan.
PERLA COMPANIA DE SEGUROS, INC., petitioner,
vs.
HON. JOSE R. RAMOLETE, PRIMITIVA Y. PALMES,
HONORATO BORBON, SR., OFFICE OF THE
PROVINCIAL SHERIFF, PROVINCE OF
CEBU, respondents.
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: 14 the judgment debtor, who
is the original creditor of the garnishee is, through
service of the writ of garnishment, substituted by the
judgment creditor who thereby becomes creditor of the
garnishee. Garnishment has also been described as a
warning to a person having in his possession property
or credits of the judgment debtor, not to pay the
money or deliver the property to the latter, but rather
to appear and answer the plaintiff's suit. 15
In order that the trial court may validly acquire
jurisdiction to bind the person of the garnishee, it is not
necessary that summons be served upon him. The
garnishee need not be impleaded as a party to the
case. All that is necessary for the trial court lawfully to
bind the person of the garnishee or any person who
has in his possession credits belonging to the judgment
debtor is service upon him of the writ of garnishment.
The Rules of Court themselves do not require that the
garnishee be served with summons or impleaded in the
case in order to make him liable.
Rule 39, Section 15 provides:
Sec. 15. Execution of money
judgments. The officer must enforce
an execution of a money judgment by
levying on all the property, real or
personal of every name and nature
whatsoever, and which may be
disposed of for value, of the judgment
debtor not exempt from execution . . .
Real property, stocks, shares, debts,
credits, and other personal property,
or any interest in either real or
personal property, may be levied on in
like manner and with like effect as
under a writ of attachment. (Emphasis
supplied).
Rule 57, Section 7(e) in turn reads:
Sec. 7. Attachment of real and personal
property; recording thereof.
Properties shall be attached by the
officer executing the order in the
following manner:
xxx xxx xxx
(e) Debts and credits, and other
personal property not capable of
manual delivery, by leaving with the
person owing such debts, or having his
possession or under his control such
credits or other personal property, or
with his agent, a copy of the order, and
notice that the debts owing by him to
the party against whom attachment is
issued, and the credits and other
personal property in his possession, or
under his control, belonging to said
party, are attached in pursuance of
such order;
xxx xxx xxx
(Emphasis supplied)
Through service of the writ of garnishment, the
garnishee becomes a "virtual party" to, or a "forced
intervenor" in, the case and the trial court thereby
acquires jurisdiction to bind him to compliance with all
orders and processes of the trial court with a view to
the complete satisfaction of the judgment of the court.
In Bautista v. Barredo, 16 the Court, through Mr. Justice
Bautista Angelo, held:
While it is true that defendant Jose M.
Barredo was not a party in Civil Case
No. 1636 when it was instituted by
appellant against the Philippine Ready
Mix Concrete Company, Inc.,
however, jurisdiction was acquired
over him by the court and he became a
virtual party to the case when, after
final judgment was rendered in said
case against the company, the sheriff
served upon him a writ of garnishment
in behalf of appellant. Thus, as held by
this Court in the case of Tayabas Land
Company vs. Sharruf, 41 Phil. 382, the
proceeding by garnishment is a species
of attachment for reaching credits
belonging to the judgment debtor and
owing to him from a stranger to the
litigation. By means of the citation, the
stranger becomes a forced intervenor;
and the court, having acquired
jurisdiction over him by means of the
citation, requires him to pay his debt,
not to his former creditor, but to the
new creditor, who is creditor in the
main litigation. (Emphasis supplied).
In Rizal Commercial Banking Corporation v. De
Castro, 17 the Court stressed that the asset or credit
garnished is thereupon subjected to a specific lien:
The garnishment of property to satisfy
a writ of execution operates as an
attachment and fastens upon the
property a lien by which the property is
brought under the jurisdiction of the
court issuing the writ. It is brought
into custodia legis, under the sole
control of such
court. 18 (Emphasis supplied)
In the present case, there can be no doubt, therefore,
that the trial court actually acquired jurisdiction over
petitioner Perla when it was served with the writ of
garnishment of the third-party liability insurance policy
it had issued in favor of judgment debtor Nelia
Enriquez. Perla cannot successfully evade liability
thereon by such a contention.
Every interest which the judgment debtor may have in
property may be subjected to execution.19 In the
instant case, the judgment debtor Nelia Enriquez
clearly had an interest in the proceeds of the third-
party liability insurance contract. In a 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 invokes Economic 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.
LEELIN, MARKETING CORPORATION, plaintiff-
appellant,
vs.
C & S AGRO DEVELOPMENT COMPANY, MARIO
SANTOS & AURELIO CARTANO, defendants,
BELFAST SURETY & INSURANCE CO.,
INC., bondsman-appellee.
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 have been wrongful and
without sufficient cause. 1 (Emphasis
supplied )
Defendants having failed to appear for trial, a
commissioner appointed by the Court received the
evidence. In due course, decision was rendered
ordering defendants:
... 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
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.

MINDANAO SAVINGS & LOAN ASSOCIATION, INC.
(formerly Davao Savings & Loan Association) &
FRANCISCO VILLAMOR, petitioners,
vs.
HON. COURT OF APPEALS, POLY R. MERCADO,
and JUAN P. MERCADO, respondents.
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.
JOSE D. CALDERON, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, GEORGE
SCHULZE, GEORGE SCHULZE, JR., ANTONIO C.
AMOR, MANUEL A. MOZO, and VICTOR M.
NALUZ, respondents.
G. R. No. 73916 November 11, 1987
FIRST INTEGRATED BONDING AND INSURANCE
COMPANY, INC., petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, GEORGE
SCHULZE, ANTONIO C. AMOR, MANUEL A. MOZO
and VICTOR M. NALUZ, respondents.
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 Schulze and Amor was reduced. The dispositive portion
to defraud his creditors. of the judgment of affirmance and modification reads:

To support the petition for preliminary attachment, the WHEREFORE, the judgment of the lower court is
petitioner posted a surety bond of P1,475,840.00. On modified as follows:
October 28, 1977, the trial court issued a writ of
preliminary attachment, whereupon properties of the To defendant-appellee George Schulze:
private respondents were attached and their bank P650,000.00 as moral damages and
deposits were garnished. P200,000.00 as exemplary damages.

On November 10, 1977, petitioner Calderon filed an To defendant-appellee Antonio C. Amor:

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
P150,000.00 as moral damages and
P30,000.00 as exemplary damages,
An other dispositions in the judgment appealed from,
including the dismissal of the amended complainant
are hereby affirmed in toto.
SO ORDERED.
In his petition, petitioner Calderon asserts, among
other things, that the court below erred:
I
IN HOLDING THAT THE PETITIONER FAILED TO
ESTABLISH HIS CLAIMS.
II
IN HOLDING THAT THE PRELIMINARY ATTACHMENT HAD
BEEN WRONGFULLY AND MALICIOUSLY SUED OUT.
III
IN HOLDING THAT THE PETITIONER IS LIABLE NOT ONLY
FOR ACTUAL DAMAGES BUT MORAL AND EX-
EXEMPLARY DAMAGES AS WELL.
On the other hand, petitioner Insurance Company
raises the following issues:
I
WHETHER OR NOT THE PETITIONER SURETY IS LIABLE
FOR DAMAGES ON ITS CONTRACTED SURETYSHIP
NOTWITHSTANDING THE DISSOLUTION OF THE WRIT OF
PRELIMINARY ATTACHMENT, AS A CON. SEQUENCE OF
THE FILING OF THE DEFENDANT'S COUNTER- BOND,
WHEREBY LEVIED PROPERTIES WERE ORDERED BY THE
COURT RETURNED TO PRIVATE RESPONDENTS AND THE
NOTICES OF GARNISHMENT ISSUED IN CONNECTION
THEREWITH ORDERED LIFTED.
II
WHETHER OR NOT THE SUBSEQUENT FILING BY
PRIVATE RESPONDENTS OF A COUNTER-BOND TO
DISCHARGE THE WRIT OF PRELIMINARY ATTACHMENT
CONSTITUTE A WAIVER ON ANY DEFECT IN THE
ISSUANCE OF THE ATTACHMENT WRIT.
III
WHETHER OR NOT A SURETY IS A GUARANTOR OF THE
EXISTENCE OF A GOOD CAUSE OF ACTION IN THE
COMPLAINT.
The petition is devoid of merit.
Whether or not the amount of P1,475,840.00 was duly
disclosed as an outstanding liability of LBC or was
misappropriated by private respondent Schulze is
purely a factual issue. That Calderon was clearly in bad
faith when he asked for the attachment is indicated by
the fact that he failed to appear in court to support his
charge of misappropriation by Schulze, and in effect,
preventing his being cross-examined, no document on
the charges was presented by him.
What the Appellate Court found in this regard need not
be further elaborated upon. The Appellate Court ruled:
... 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 contract-
warranty that said corporation had no obligations or
liabilities except those appearing in the books and
records of the said corporation. Indeed, appellant
Calderon never appeared in the trial court to
substantiate the charges in his verified complaints and
in his affidavit to support his petition for the issuance
of a writ of attachment. He distanced himself from the
appellees and avoided cross-examination regarding his
sworn allegations. ...
... But even though appellant Calderon failed to prove
his serious charges of fraud, malice and bad faith, the
appellees took it upon themselves to show that they
did not conceal or withhold from appellant's knowledge
the deposits made by Philippine Refining Co., Inc. with
Luzon Brokerage Corporation and that they did not
withdraw and misappropriate the deposits made by
Philippine Refining Co., Inc. with Luzon Brokerage
Corporation.
The books and records of Luzon Brokerage Corporation
on which the Financial Statement of Luzon Brokerage
Corporation, as of October 31, 1976 was prepared by
the auditing firm retained by appellant Calderon
himself (Exhibit 1), disclose that the liabilities of Luzon
Brokerage Corporation in the total amount of
P4,574,498.32 appear under the heading 'Customers
Deposit' (Exhibit 1-A) this amount includes the deposit
of Philippine Refining Co., Inc. in the sum of
Pl,475,840.00.
But appellant Calderon contends that this financial
statement was dated February 4, 1977 (see Exhibit 1-
C). There is nothing commendable in this argument
because the bases of the financial statement were the
books, records and documents of Luzon Brokerage
Corporation for the period ending October 31, 1976,
which were all turned over to and examined by
appellant Calderon and his executive, legal and
financial staffs. There is also no merit in the contention
of appellant Calderon that the appellees have
tampered the books of Luzon Brokerage Corporation
because there is no proof to back this charge, let alone
the fact that appellant Calderon did not even present
the said books to support his charge.
As stated above, the amount of customers' deposits in
the sum of P4,574,498.32 includes the deposits of
Philippine Refining Co., Inc. (Exhibits 46-A, 46-B, 46-C,
46-D, 46-E, 46-F, 46-G, 46-H, 46-1, 46-J, t.s.n. July 23,
1980, pp. 12-13, 14-15). The amounts deposited by
Philippine Refining Co., Inc. on various dates with Luzon
Brokerage Corporation made before the execution of
the sale were all entered in three other corporate
books of Luzon Brokerage Corporation namely, the
Cash Receipts Register (Exhibits 39-A-1 to 39-K-1 and
39-A-1-B to 39-K-1-B), the Journal Vouchers (Exhibits 42
to 46 and 42-A to 43- A), and the Customer's Deposit
Ledger (Exhibit 46-A to 46-J) ... .
Thus, the claim of appellant Calderon that the deposits
made by Philippine Refining Co., Inc. with Luzon
Brokerage Corporation of P406,430.00 on August 24,
1976 (Exhibit N P53,640.00 on October 13, 1976
(Exhibit 0), P406,430.00 on September 8, 1976 (Exhibit
P P199,508.00 on September 24, 1976 (Exhibit Q
P52,738.00 on October 22, 1976 (Exhibit R and
P264,436.00 on October 7, 1976 (Exhibit S) were not
entered in the books of Luzon Brokerage Corporation, is
completely without merit. ... (pp. 85-87, Rollo)
It is evident from the foregoing that the attachment
was maliciously sued out and that as already pointed
out Schulze was not in bad faith.
While as a general rule, the liability on the attachment
bond is limited to actual damages, moral and
exemplary damages may be recovered where the
attachment was alleged to be maliciously sued out and
established to be so.(Lazatin vs. Twano et al,
L-12736, July 31, 1961).
In the instant case, the issues of wrongful and
malicious suing out of the writ of preliminary
attachment were joined not only in private
respondents' motion to discharge the attachment but
also in their answer to the amended complaint (p. 38,
Rollo). The trial court observed that the books and
records of Luzon Brokerage Corporation disclose that
the liabilities of the said corporation in the total
amount of P4,574,498.32 appear under the heading
"Customs Deposit" (Exhibit 1-A) and this amount
includes the deposit of Philippine Refining Co., Inc. in
the sum of P1,475,840.00 (p. 26, Rollo). On the other
hand, plaintiff never appeared in court, and failed to
produce any evidence to substantiate his charges (p.
26, Rollo).
Well settled is the rule that the factual findings of the
trial court are entitled to great weight and respect on
appeal, especially when established by unrebutted
testimonial and documentary evidence, as in this case.
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.
TOWERS ASSURANCE CORPORATION, petitioner,
vs.
ORORAMA SUPERMART, ITS OWNER-PROPRIETOR,
SEE HONG and JUDGE BENJAMIN K. GOROSPE,
Presiding Judge, Court of First Instance of
Misamis Oriental, Branch I, respondents.
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 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.
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.
MANILA HERALD PUBLISHING CO., INC., doing
business under the name of Evening Herald
Publishing Co., Inc., and Printers, Inc., petitioner,
vs.
SIMEON RAMOS, Judge of the Court of First
Instance of Manila, MACARIO A. OFILADA, Sheriff
of City of Manila, ANTONIO QUIRINO and ALTO
SURETY AND INSURANCE CO., INC., respondents.
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 aggregating P90,000. With the filing of this
suit, the plaintiff secured a 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 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 third-
party 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
cannot 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.
BA FINANCE CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, AUGUSTO
YULO, LILY YULO (doing business under the name
and style of A & L INDUSTRIES), respondents.
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 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.
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 B-1, 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.
JUAN DE DIOS CARLOS,
Petitioner, versus
FELICIDAD SANDOVAL,
These consolidated petitions emanated from a civil
case filed by Juan de Dios Carlos (Carlos) against
respondents Felicidad Sandoval (Sandoval) and Teofilo
Carlos II (Teofilo II) docketed with the Regional Trial
Court (RTC) of Muntinlupa City as Civil Case No. 95-135.
In his Complaint before the RTC, Carlos asserted that
he was the sole surviving compulsory heir of his
parents, Felix B. Carlos and Felipa Elemia, [1] who had
acquired during their marriage, six parcels of land
(subject properties). His brother, Teofilo (Teofilo), died
intestate in 1992. At the time of his death, Teofilo was
apparently married to Sandoval, and cohabiting with
her and their child, respondent Teofilo II. Nonetheless,
Carlos alleged in his Complaint that Teofilo and
Sandoval were not validly married as they had not
obtained any marriage license.[2] Furthermore, Carlos
also asserted that Teofilo II could not be considered as
Teofilos child. As a result, Carlos concluded that he was
also the sole heir of his brother Teofilo, since the latter
had died without leaving any heirs.
Carlos also claimed that Teofilo, prior to their father
Felixs death in 1963, developed a scheme to save the
elder Carlos estate from inheritance taxes. Under the
scheme, the properties of the father would be
transferred to Teofilo who would, in turn, see to it that
the shares of the legal heirs are protected and
delivered to them. Felix assented to the plan, and the
subject properties were transferred in the name of
Teofilo. After Teofilos death, Carlos entered into certain
agreements with Sandoval in connection with the
subject properties. Carlos did so, believing that the
latter was the lawful wife of his brother Teofilo.
Subsequently though, Carlos discovered that Sandoval
and his brother were never validly married, as their
marriage was contracted without a marriage license. [3]
Carlos now sought to nullify these agreements
with Sandoval for want of consideration, the premise
for these contracts being non-existent. Thus, Carlos
prayed of the RTC to declare the alleged marriage
between Teofilo and Sandoval void ab initio, provided
that Teofilo died without issue, order that new titles
covering the subject properties be issued in the name
of Carlos, and require Sandoval to restitute Carlos in
the amount of P18,924,800.00.[4]
Carlos likewise prayed for the issuance of the
provisional relief of preliminary attachment. The RTC
issued an Order dated 7 September 1995 granting the
prayer for preliminary attachment, and on 15
September 1995, a writ of preliminary attachment.
Carlos posted a bond for P20,000,000.00 issued by
herein petitioner
SIDDCOR Insurance Corporation (SIDDCOR).[5] Shortly
thereafter, a Notice of Garnishment was served upon
the Philippine National Bank (PNB) over the deposit
accounts maintained by respondents.
Respondents filed an Urgent Motion to
Discharge the Writ of Attachment, which was opposed
by Carlos. On 4 December 1995, the RTC rendered an
order denying the motion. This caused respondents to
file a Petition for Certiorari with the Court of Appeals,
seeking to set aside the RTC order granting the writ of
preliminary attachment denying the motion for the
discharge of the writ. This case was docketed as CA-
G.R. SP No. 39267.[6]
On 27 February 1996, the Court of Appeals
Second Division promulgated its Decision in CA-G.R. SP
No. 39267, wherein it granted the Petition for
Certiorari and ordered the discharge and dissolution of
the Writ of Attachment and Notice of Garnishment.
[7]
The Court of Appeals found that there was no
sufficient cause of action to warrant the preliminary
attachment, since Carlos had merely alleged general
averments in order to support his prayer. [8] Carlos
elevated the said Decision to this Court by way
of Petition for Review on Certiorari, which was
docketed as G.R. No. L-125717. In
a Resolution dated 21 October 1996, the Court denied
Carloss Petition, and thus the Court of
Appeals Decision ordering the dissolution of the Writ of
Attachment and Notice of Garnishment became final.
In the meantime, the hearing on
Carloss Complaint ensued before the RTC. Respondents
duly filed their Answer and thereafter filed a Motion for
Summary Judgment. Carlos opposed the motion and
countered with his own Motion for Summary Judgment.
On 8 April 1996, the RTC rendered a summary
judgment in favor of Carlos. Carlos victory was
wholesale, with the RTC making the following
pronouncements:
1. Declaring the marriage between
defendant Felicidad Sandoval and Teofilo
Carlos solemnized at Silang, Cavite, on May
14, 1962, evidenced by the Marriage
Contract submitted in this case, null and
void ab initio for lack of the requisite
marriage license;
2. Declaring that the defendant
minor, Teofilo S. Carlos II, is not the natural,
illegitimate, or legally adopted child of the
late Teofilo E. Carlos;
 3. Ordering defendant Sandoval to
pay and restitute to plaintiff the sum
of P18,924,800.00, together with the
interest thereon at the legal rate from date
of filing of the instant complaint until fully
paid;
4. Declaring plaintiff as the sole and
exclusive owner of the parcel of land, less
the portion adjudicated to the plaintiffs in
Civil Case No. 11975, covered by TCT No.
139061 of the Register of Deeds of Makati
City, and ordering said Register of Deeds to
cancel said title and to issue another title in
the sole name of plaintiff herein;
5. Declaring the Contract, Annex K
of the Complaint, between plaintiff and
defendant Sandoval null and void, and
ordering the Register of Deeds of Makati
City to cancel TCT No. 139058 in the name
of Teofilo Carlos, and to issue another title
in the sole name of the plaintiff herein;
6. Declaring the Contract, Annex M
of the Complaint, between plaintiff and
defendant Sandoval null and void;
7. Ordering the cancellation of TCT
No. 210877 in the names of defendant
Sandoval and defendant minor Teofilo S.
Carlos II and ordering the Register of Deeds
of Manila to issue another title in the
exclusive name of plaintiff herein.
8. Ordering the cancellation of TCT
No. 210878 in the names of defendant
Sandoval and defendant minor Teofilo S.
Carlos II and ordering the Register of Deeds
of Manila to issue another title in the sole
name of plaintiff herein.[9]
Upon promulgation of the Summary Judgment, Carlos
moved before the RTC for execution pending appeal.
The RTC granted the motion for execution pending
appeal upon the filing of a bond.[10] On 27 May 1996,
the RTC issued a Writ of Execution.
Meanwhile, respondents filed a Motion for
Reconsideration of the Summary Judgment, which was
denied in an Order dated 20 May 1996. Respondents
then appealed the RTC Decision to the Court of
Appeals, wherein such appeal was docketed as CA-G.R.
CV No. 53229. The case was raffled to the appellate
courts Fourteenth Division for completion of records.
Sandoval and Carlos also filed a Petition for
Certiorari with Temporary Restraining Order dated 2
June 1996. This special civil action primarily attacked
the allowance of execution pending appeal, and prayed
for the annulment of the Order granting execution
pending appeal, and of the Writ of Execution
On 10 December 1996, in CA-G.R. CV No. 53229,
respondents filed a Motion for Judgment On the
Attachment Bond. They noted that the Court of Appeals
had already ruled that the Writ of Preliminary
Attachment issued by the RTC was improperly granted
and that its Decision, as affirmed by the Supreme
Court, had attained finality. Accordingly, they were
entitled to damages under Section 20, Rule 57 of the
then Rules of Civil Procedure, which governed claims
for damages on account of unlawful attachment. In
support of their allegation of damages, they cite the
Notice of Garnishment served on PNB Malolos
Branch, where Felicidad Carlos maintained deposits
amounting to P15,546,121.98.[11] Also presented in
support of the motion was a Notice of
Delivery/Payment by the RTC Sheriff, directing the PNB
Malolos Branch to deliver the amounts previously
garnished by virtue of the Writ of Execution dated 27
May 1996;[12] a Manifestation filed by PNB dated 19 July
1996 in CA-G.R. SP No. 40819, stating that PNB had
already delivered to the RTC Sheriff on 27 June 1996
the amount of P15,384,509.98 drawn against the
accounts of Carlos; and a Certification to the same
effect issued by the PNB Malolos Branch. In
an Addendum to Motion for Judgment on the
Attachment Bond, respondents additionally prayed for
moral and exemplary damages.[13]
After various pleadings were duly filed by the parties,
the Court of Appeals Special Fourth Division issued
a Resolution dated 23 March 1998, certifying that all
the necessary pleadings have been filed, and that the
case may already be referred to the Raffle Committee
for assignment to a ponente for study and report. The
same Resolution likewise denied without elaboration
a Motion to Dismiss on the ground of forum-shopping
filed earlier by Carlos.[14]
On such denial, Carlos filed a Motion for
Reconsideration. Respondents likewise filed a Motion
for Partial Reconsideration dated 17 April 1998, arguing
that under the Revised Internal Rules of the Court of
Appeals (RIRCA), the case may be re-raffled for
assignment for study and report only after there is a
resolution that the case is deemed submitted for
decision.[15] They pointed out that re-raffle could not yet
be effected, as there were still pending incidents,
particularly the motions for reconsideration of Carlos
and themselves, as well as the Motion for Judgment on
Attachment Bond.
On 26 June 1998, the Court of Appeals Former Special
Fourth Division promulgated two resolutions.[16] The
first, in response to Carloss Motion for Reconsideration,
again denied Carloss Motion to Dismiss the Appeal
and Motion for Suspension, but explained the reasons
for such denial.
The second resolution is at the center of the present
petitions. The assailed Resolution agreed with
respondents that it was first necessary to resolve the
pending incidents before the case could be re-raffled
for study and report. Accordingly, the Court of Appeals
proceeded to rule on these pending incidents. While
the first resolution dwelt on the pending motions filed
by Carlos, this Resolution tackled the other matter left
unresolved, the Motion for Judgment on Attachment
Bond. The Court of Appeals found the claim for
damages meritorious, citing the earlier decisions ruling
that Carlos was not entitled to the preliminary
attachment. Invoking Section 20, Rule 57 of the Rules
of Court, as well as jurisprudence,[17] the Court of
Appeals ruled that it was not necessary for the
determination of damages on the injunction bond to
await the decision on appeal.
The Court of Appeals then proceeded to determine to
what damages respondents were entitled to. In ruling
that the award of actual damages was warranted, the
court noted:
It is also not disputed that the PNB,
on June 27, 1996, issued two
managers checks: MC No. 938541
for P4,932,621.09 and MC 938542
for P10,451,888.89 payable to the
order of Luis C. Bucayon II, Sheriff
IV, RTC, Branch 256, Muntinlupa,
duly received by the latter in the
total amount of PESOS FIFTEEN
MILLION THREE HUNDRED EIGHTY
FOUR THOUSAND FIVE HUNDRED
NINE & 98/100 (P15,384,509.98),
drawn against the accounts of Ms.
Felicidad Sandoval Vda. de Carlos
which were earlier garnished for the
satisfaction of the above-mentioned
writ of attachment (Annex E, Motion
for Judgment on the Attachment
Bond, pp. 7-8)[18]
....
The contention of [Carlos] that the
writ of attachment was not
implemented falls flat on the face
of the manifestation of PNB that the
delivery of the
garnished P15,384,509.98 to him
was effected through the sheriff.[19]
The Court of Appeals found that moral and exemplary
damages were not warranted, there being no malice in
pursuing the attachment. The appellate court also
found the claim of P2,000,000.00 for attorneys fees as
excessive, and reduced the sum by half.
Correspondingly, the dispositive portion of the
assailed Resolution reads:
WHEREFORE, premises considered, judgment
is hereby rendered against the
attachment bond, ordering SIDDCOR
INSURANCE CORPORATION and
plaintiff-appellee to pay defendants-
appellants, jointly and severally, the
sum of P15,384,509.98 and 12%
interest per annum from June 27,
1996 when the unlawful garnishment
was effected until fully paid
and P1,000,000.00 as attorneys fees
with 6% interest thereon from the trial
courts decision on April 8, 1986 until
fully paid.
SO ORDERED.[20]
Both Carlos and SIDDCOR filed their respective
motions for reconsideration of the Resolution. For their
part, respondents filed a Motion for Immediate
Execution dated 7 August 1998 in regard to
the Resolution of 26 June 1998 awarding them
damages.
In the Resolution dated 10 October 1998,[21] the
Court of Appeals denied the motions for
reconsideration and granted the Motion for Immediate
Execution. In granting the Motion for Immediate
Execution, the Court of Appeals cited the reasons that
the appeal to be undertaken from the 26 June
1998 Resolution was patently dilatory; that there were
no material and substantial defenses against the
motion for judgment on the attachment bond,
rendering the appeal pro-forma and dilatory; that
Sandoval was of advanced age and might not
enjoy the fruits of the judgment on the
attachment bond; and that immediate execution
would end her suffering due to the arbitrary
garnishment of her account pursuant to an
improper attachment.[22]
In its Motion for Reconsideration, SIDDCOR
explicitly assailed the allowance of the Motion for
Immediate Execution.[23] This was denied by the Court
of Appeals in a Resolution dated 22 December 1998.[24]
From these antecedents, the following petitions were
filed before this Court:
G.R. No. 135830
This Appeal by Certiorari with Prayer for Temporary
Restraining Order/Preliminary Injunction dated 26
October 1998 filed by Carlos assailed the two
resolutions of the Court of Appeals both dated 26 June
1998, as well as the Resolution of 10 October 1998,
which denied Carlos motion for reconsideration. Carlos
argues that the Court of Appeals, through the Former
Special Fourth Division, could not have resolved
the Motion for Judgment on the Attachment Bond since
the case had not yet been re-raffled under the two-
raffle system for study and report; that the Court of
Appeals erred in resolving the motion without
conducting any hearing; that the Court of Appeals had
no jurisdiction over the motion as the docketing fees
had not yet been filed; that the motion for judgment,
which did not contain any certification against forum-
shopping, was an application subject to the
requirements of certification against forum-shopping;
that there was no supporting evidence to support the
award of damages; and that the Court of Appeals
committed grave abuse of discretion in denying
the Motion for Reconsideration without adverting to
specific reasons mentioned for the denial of each issue.
[25]
Carlos likewise ascribes grave abuse of discretion to
the Court of Appeals in its other Resolution dated 26
June 1998 for its refusal to dismiss CA-G.R. CV No.
53229 on the ground of forum-shopping, adding that
the appellate court should have deferred resolution of
the Motion for Judgment on the Attachment
Bond considering the prejudicial question raised in
Carloss motion to dismiss the main case on the ground
of forum-shopping.
G.R. No. 136035
This concerns a Petition for Review filed by SIDDCOR,
likewise challenging the Resolution of 26 June 1998 of
the Court of Appeals and the 10 October
1998 Resolution wherein Siddcors Motion for
Reconsideration, among others, was denied. Siddcor
argues therein that the Court of Appeals erred in ruling
on the motion for damages without awaiting judgment
in the main case; granting that damages may be
awarded, these should encompass only such damages
incurred during the pendency of the appeal; and that a
hearing was necessary to prove the claim for damages
and the appellate court erred in granting the award for
damages despite lack of hearing.
G.R. No. 137743
The third petition for adjudication, a Petition for
Certiorari under Rule 65 with Prayer for Temporary
Restraining Order or Preliminary Injunction, was also
filed by SIDDCOR. This petition, dated 8 March 1999,
specifically assails the allowance by the Court of
Appeals of the immediate execution of the award of
damages, made through the resolutions dated 10
October 1998 and 22 December 1998.
SIDDCOR hereunder argues that Section 2, Rule
39 of the Rules of Civil Procedure requires that
execution of a judgment or final order pending appeal
may be made only on motion of the prevailing party
and may be made even before the expiration of the
period to appeal.[26] Respondents had argued in
their Motion for Immediate Execution that the
judgment sought to be executed (that on the
attachment bond) was interlocutory and not
appealable, yet cited rulings on execution pending
appeal under Section 2, Rule 39 in support of their
position. SIDDCOR cites this inconsistency as proof of a
change of theory on the part of respondents which
could not be done for the theories are incompatible.
Such being the case, SIDDCOR argues, the Court of
Appeals gravely abused its discretion in granting
immediate execution since respondents had filed its
motion on the premise that the award on the judgment
bond was interlocutory and not appealable. SIDDCOR
also claims that the judgment on the attachment bond
is not interlocutory, citing Stronghold Insurance Co.,
Inc. v. Court of Appeals[27] wherein it was ruled that
such indeed constitutes a final and appealable order.
SIDDCOR points out that no hearing was
conducted on the Motion for Immediate
Execution despite the requirement in Section 2, Rule 39
that discretionary execution may only issue upon good
reasons to be stated in a special order after due
hearing. SIDDCOR likewise notes that the motion
granting immediate execution was granted in the very
same resolution which had denied the motion for
reconsideration of the resolution sought to be
immediately executed. For SIDDCOR, such constituted
a denial of procedural due process insofar as its
statutory right to appeal was concerned, as the
resolution that it intended to appeal from was already
the subject of immediate execution.
Finally, SIDDCOR contests the special reasons
cited by the Court of Appeals in granting the Motion for
Immediate Execution.
Facts Arising Subsequent to the Filing of
Instant Petitions
On 7 May 1999, the Court of Appeals issued
a Writ of Execution directing the enforcement of the
judgment on the attachment bond.[28] However, in
a Resolution dated 9 June 1999, this Court through the
First Division issued a Temporary Restraining Order,
enjoining the enforcement of the said Writ of
Execution.
On 15 October 2002, the Court of Appeals First
Division rendered a Decision[29] on the merits of CA-G.R.
CV No. 53229, setting aside the Summary
Judgment and ordering the remand of the case for
further proceedings.[30] Both parties filed their
respective motions for reconsideration. [31] In addition,
Carlos filed a motion to inhibit the author of the
assailed decision, Justice Rebecca de Guia-Salvador,
[32]
who thereafter agreed to inhibit herself. [33] Then on 7
August 2003, the Court of Appeals Former First Division
issued a Resolution deferring action on the motions for
reconsideration in light of the temporary restraining
order issued by this Court until the resolution of the
present petitions.
The factual background may be complicated,
but the court need only concern itself with the
propriety of the judgment on the attachment bond and
the subsequent moves to secure immediate execution
of such judgment. Should this Court be called upon to
tackle the merits of the original action, Carloss
complaint, it shall be in the review of the final
resolution of the Court of Appeals in CA-G.R. CV No.
53229.
Consolidation of Issues in
G.R. Nos. 135830 and 136035
The petitions in G.R. Nos. 135830 and 136035
are concerned with the award of damages on the
attachment bond. They may be treated separately from
the petition in G.R. No. 137743, which relates to the
immediate execution of the said award.
We consolidate the main issues in G.R. Nos.
135830 and 136035, as follows: (1) whether the
assailed judgment on the attachment bond could have
been rendered, as it was, prior to the adjudication of
the main case; (2) whether the Court of Appeals
properly complied with the hearing requirement under
Section 20, Rule 57 prior to its judgment on the
attachment bond; and (3) whether the Court of Appeals
properly ascertained the amount of damages it
awarded in the judgment on the attachment bond.
Resolving these issues requires the
determination of the proper scope and import of
Section 20, Rule 57 of the 1997 Rules of Civil
Procedure. The provision governs the disposal of claims
for damages on account of improper, irregular or
excessive attachment.
SECTION 20. Claim for damages on
account of improper, irregular or excessive
attachment. An application for damages on
account of improper, irregular or excessive
attachment must be filed before the trial or
 before appeal is perfected or before the
judgment becomes executory, with due
notice to the attaching obligee or his surety
or sureties, setting forth the facts showing
his right to damages and the amount
thereof. Such damages may be awarded
only after proper hearing and shall be
included in the judgment on the main
case.
If the judgment of the appellate
court be favorable to the party against
whom the attachment was issued, he must
claim damages sustained during the
pendency of the appeal by filing an
application in the appellate court with
notice to the party in whose favor the
attachment was issued or his surety or
sureties, before the judgment of the
appellate court becomes executory. The
appellate court may allow the application
to be heard and decided by the trial court.
Nothing herein contained shall
prevent the party against whom the
attachment was issued from recovering in
the same action the damages awarded to
him from any property of the attaching
obligee not exempt from execution should
the bond or deposit given by the latter be
insufficient or fail to fully satisfy the award.
(Emphasis supplied.)
Section 20 essentially allows the application to
be filed at any time before the judgment becomes
executory. It should be filed in the same case that is
the main action, and cannot be instituted separately.
[34]
It should be filed with the court having jurisdiction
over the case at the time of the application.[35] The
remedy provided by law is exclusive and by failing to
file a motion for the determination of the damages on
time and while the judgment is still under the control of
the court, the claimant loses his right to damages. [36]
There is no question in this case that
the Motion for Judgment on the Attachment Bond filed
by respondents on 10 December 1996 was properly
filed since it was filed with the Court of Appeals during
the pendency of the appeal in the main case and also
as an incident thereto. The core questions though lie in
the proper interpretation of the condition under Section
20, Rule 57 that reads: Such damages may be awarded
only after proper hearing and shall be included in the
judgment on the main case. Petitioners assert that
there was no proper hearing on the application for
damages and that the Court of Appeals had wrongfully
acted on the application in that it resolved it prior to
the rendition of the main judgment.
Such Damages May Be Awarded
Only After Proper Hearing.
We first discuss whether the proper hearing
requirement under Section 20, Rule 57 had been
satisfied prior to the award by the Court of Appeals of
damages on the attachment bond.
Section 20 of Rule 57 requires that there be a
proper hearing before the application for damages on
the attachment bond may be granted. The hearing
requirement ties with the indispensable demand of
procedural due process. Due notice to the adverse
party and its surety setting forth the facts supporting
the applicant's right to damages and the amount
thereof under the bond is essential. No judgment for
damages may be entered and executed against the
surety without giving it an opportunity to be heard as
to the reality or reasonableness of the damages
resulting from the wrongful issuance of the writ.[37]
In Paramount Insurance v. Court of Appeals,
the Court held that under the rule, it was neither
[38]
mandatory nor fatal that there should be a separate
hearing in order that damages upon the bond can be
claimed, ascertained and awarded.[39] What is
necessary only is for the attaching party and his surety
or sureties to be duly notified and given the
opportunity to be heard.[40]
In this case, both Carlos and SIDDCOR were
duly notified by the appellate court of the Motion for
Judgment on the Attachment Bond and were required
to file their respective comments thereto.[41] Carlos and
SIDDCOR filed their respective comments in opposition
to private respondents motion.[42] Clearly, all the
relevant parties had been afforded the bare right to be
heard on the matter.
Concededly, the facts of this case differ from
that in Paramount, wherein the award of damages was
predicated under Section 8, Rule 58, and the trial on
the merits included the claim for damages on the
attachment bond. The Court did note therein that
the counsel of the surety was present during the
hearings.[43] In this case, unlike in Paramount, there
were no open court hearings conducted by the Court of
Appeals, and it is precisely this absence that the
petitioners assert as fatal.
Plainly, there is no express requirement under
the rule that the hearing be done in open court, or that
the parties be allowed to confront adverse witnesses to
the claim of damages on the bond. The proper scope of
the hearing requirement was explained
before Paramount in Peroxide Philippines Corp. v. Court
of Appeals,[44] thus:
. . . [It] is undeniable that when the
attachment is challenged for having been
illegally or improperly issued, there must
be a hearing with the burden of proof to
sustain the writ being on the attaching
creditor. That hearing embraces not
only the right to present evidence but
also a reasonable opportunity to know
the claims of the opposing parties and
meet them. The right to submit
arguments implies that opportunity,
otherwise the right would be a barren one.
It means a fair and open hearing.
From this pronouncement, we can discern that the
proper hearing contemplated would not merely
encompass the right of the parties to submit their
respective positions, but also to present evidence in
support of their claims, and to rebut the submissions
and evidence of the adverse party. This is especially
crucial considering that the necessary elements to be
established in an application for damages are
essentially factual: namely, the fact of damage or
injury, and the quantifiable amount of damages
sustained. Such matters cannot be established on the
mere say-so of the applicant, but require evidentiary
support. At the same time, there was no equivocal
statement from the Court in Peroxide that the hearing
required under the rule should be a full-blown hearing
on the merits
In this case, we rule that the demands of a proper
hearing were satisfied as of the time the Court of
Appeals rendered its assailed judgment on the
attachment bond. The circumstances in this case that
we consider particularly telling are the settled premises
that the judicial finding on the wrongfulness of the
attachment was then already conclusive and beyond
review, and that the amount of actual damages
sustained was likewise indubitable as it indeed could
be found in the official case record in CA-G.R. CV No.
53229. As a result, petitioners would have been
precluded from either raising the defenses that the
preliminary attachment was valid or disputing the
amount of actual damages sustained by reason of the
garnishment. The only matter of controversy that could
be litigable through the traditional hearing would be
the matter of moral and exemplary damages, but the
Court of Appeals appropriately chose not to award such
damages.
Moreover, petitioners were afforded the opportunity to
counter the arguments extended by the respondents.
They fully availed of that right by submitting their
respective comments/oppositions. In fine, the due
process guarantee has been satisfied in this case.
It should be noted that this case poses a
situation different from what is normally contemplated
under Section 20, Rule 57wherein the very
wrongfulness of the attachment remains one of the
issues in contention in the main case. In such a case,
there would be a greater demand for a more extensive
hearing on the application of damages. The modality of
hearing should remain within the discretion of the court
having jurisdiction to hear the application for damages.
The only demand, concordant to due process, would be
the satisfaction of the right to be heard, to present
evidence, and to rebut the evidence and arguments of
the opposing party.
Some disquisition is necessary on whether or
not, as petitioners submit, a full-blown hearing in open
court is compulsory under Section 20, Rule 57. To
impose this as a mandatory requirement would
ultimately prove too onerous to our judicial system.
Perhaps such a demand would be less burdensome on
the regional trial courts, which, as a matter of routine,
receive testimonial or documentary evidence
offered de novo, and to formulate conclusions on the
admissibility and credibility of the same.
However, a different situation applies if it is the Court
of Appeals or the Supreme Court before which the
application for damages is filed. Both these courts,
which are capacitated to receive and act on such
actions, are generally not triers of facts, and do not, in
the course of daily routine, conduct hearings. It is
partly for such reason that Section 20, Rule 57
authorizes these appellate courts to refer the
application for damages to the trial court for hearing
and decision. The trial courts are functionally attuned
to ascertain and evaluate at the first instance the
necessary factual premises that would establish the
right to damages. Still, reference of the application for
damages to the trial court is discretionary on the part
of the appellate courts. The latter, despite their
traditional appellate jurisdiction and review function,
are still empowered under Section 20 to rule on the
application for damages, notwithstanding the factual
dimension such question presents.
To impose as mandatory on the Court of Appeals or the
Supreme Court to hear the application for damages
through full-blown hearings in open court is supremely
unwise and beyond the demands of Section 20, Rule
57. The effect would be unduly disruptive on the daily
workflow of appellate courts such as the Court of
Appeals and the Supreme Court, which rarely conduct
open court hearings. Neither could the Court see what
is so markedly special about an application for
damages, fact-oriented as it may be, that would
require it to be heard by the appellate courts in open
court when no such mandatory rule applies to other
judicial matters for resolution that are also factual in
nature.
For example, the review of death penalty
convictions by the Court of Appeals and the Supreme
Court necessitates a thorough evaluation of the
evidence presented, notwithstanding the prior factual
appreciation made by the trial court. [45]Notwithstanding
the factual nature of the questions involved, there is no
rule requiring the Court of Appeals or the Supreme
Court to call death penalty cases for hearing or oral
argument. If no such mandatory rule for hearing is
imposed on the appellate courts when the supreme
penalty of death is involved, why then should an
exceptional rule be imposed in the case for the
relatively insignificant application for damages on the
attachment bond?
If open court hearings are ever resorted to by
appellate courts, such result from the exercise of
discretion rather than by imposition by statute or
procedural rule. Indeed, there is no existing statute,
procedural rule, or jurisprudential fiat that makes it
mandatory on the Court of Appeals or the Supreme
Court to conduct an open-court hearing on any matter
for resolution. There is nothing demonstrably urgent
with an application for damages under Section 20, Rule
57 that would necessitate this Court to adopt an
unprecedented rule mandating itself or the Court of
Appeals to conduct full-blown open court hearings on a
particular type of action.
This pronouncement does not contradict our ruling
in Hanil Development v. IAC,[46] which Carlos interprets
as requiring the Court of Appeals to conduct a proper
hearing on an application for damages on the
attachment bond. Hanil concerned the refusal by the
Intermediate Appellate Court (now Court of Appeals) to
take cognizance of the application for damages on the
attachment bond, such refusal being reversed by the
Court, which ruled that the Intermediate Appellate
Court (IAC) had jurisdiction to accept and rule on such
application. While the Court therein recognized that the
IAC was empowered to try cases and conduct hearings,
or otherwise perform acts necessary to resolve factual
issues in cases,[47] it did not require the appellate court
to conduct a hearing in open court, but merely to
reinstate the application for damages.
Admittedly, the dispositive portion
of Hanil required the Court of Appeals to conduct
hearings on the application for damages, [48] but
nowhere in the decision was a general rule laid down
mandating the appellate court to conduct such
hearings in open court. The ascertainment of the need
to conduct full-blown hearings is best left to the
discretion of the appellate court which chooses to hear
the application. At the same time, the Court cautions
the appellate courts to carefully exercise their
discretion in determining the need for open-court
hearings on the application for damages on the
attachment bond. The Court does not sanction the
indolent award of damages on the attachment bond by
the appellate court without affording the adverse party
and the bonding company concerned the opportunity
to present their sides and adduce evidence in their
behalf, or on the basis of unsubstantiated evidence.
And Shall be Included in the
Judgment on the Main Case
Section 20, Rule 57 does state that the award
of damages shall be included in the judgment on the
main case, and seemingly indicates that it should not
be rendered prior to the adjudication of the main case.
The rule, which guarantees a right to damages
incurred by reason of wrongful attachment, has long
been recognized in this jurisdiction.[49] Under Section
20, Rule 57 of the 1964 Rules of Court, it was provided
that there must be first a judgment on the action in
favor of the party against whom attachment was
issued before damages can be claimed by such party.
[50]
The Court however subsequently clarified that under
the rule, recovery for damages may be had by the
party thus prejudiced by the wrongful attachment,
even if the judgment be adverse to him.[51]
The language used in the 1997 revision of the
Rules of Civil Procedure leaves no doubt that there is
no longer need for a favorable judgment in favor of the
party against whom attachment was issued in order
that damages may be awarded. It is indubitable that
even a party who loses the action in main but is able to
establish a right to damages by reason of improper,
irregular, or excessive attachment may be entitled to
damages. This bolsters the notion that the claim for
damages arising from such wrongful attachment may
arise and be decided separately from the merits of the
main action. As noted by the Court in Philippine
Charter Insurance Corp. v. Court of Appeals:[52]
The surety does not, to be sure,
become liable on its bond simply because
judgment is subsequently rendered against
the party who obtained the preliminary
attachment. The surety becomes liable
only when and if "the court shall
finally adjudge that the applicant was
not entitled to the attachment." This
is so regardless of the nature and
character of the judgment on the
merits of the principal claims,
counterclaims or cross-claims, etc.
asserted by the parties against each
other. Indeed, since an applicant's
cause of action may be entirely
different from the ground relied upon
by him for a preliminary attachment, it
may well be that although the
evidence warrants judgment in favor
of said applicant, the proofs may
nevertheless also establish that said
applicant's proferred ground for
attachment was inexistent or specious
and hence, the writ should not have
issued at all; i.e., he was not entitled
thereto in the first place. In that event, the
final verdict should logically award to the
applicant the relief sought in his basic
pleading, but at the same time sentence
him usually on the basis of a
counterclaimto pay damages caused to his
adversary by the wrongful attachment.
[Emphasis supplied.]
Moreover, a separate rule Section 8, Rule 58
covers instances when it is the trial court that awards
damages upon the bond for preliminary injunction of
the adverse party. Tellingly, it requires that the amount
of damages to be awarded be claimed, ascertained,
and awarded under the same procedure prescribed in
Section 20 of Rule 57.
In this case, we are confronted with a situation
wherein the determination that the attachment was
wrongful did not come from the trial court, or any court
having jurisdiction over the main action. It was
rendered by the Court of Appeals in the exercise of its
certiorari jurisdiction in the original action reviewing
the propriety of the issuance of the Writ of Preliminary
Attachment against the private respondents. Said
ruling attained finality when it was affirmed by this
Court.
The courts are thus bound to respect the
conclusiveness of this final judgment, deeming
as it does the allowance by the RTC of
preliminary attachment as improper. This
conclusion is no longer subject to review, even
by the court called upon to resolve the
application for damages on the attachment
bond. The only matter left for adjudication is the
proper amount of damages.
Nevertheless, Section 20, Rule 57 explicitly
provides that the award for damages be included in the
judgment on the main case. This point was apparently
not lost on the Court of Appeals when it rendered
its Resolution dated 23 March 1998, certifying that the
case may now be referred to the Raffle Committee for
assignment to a ponente. The appellate court stated
therein: The Resolution of defendants-appellants
motion for judgment on the attachment may be
incorporated in the decision by the ponente for
study and report,[53] and such observation is in
conformity with Section 20.
However, this reasoning was assailed by
respondents, who argued that the motion for judgment
on the attachment bond was a pending incident that
should be decided before the case can be re-raffled to
a ponente for decision. Respondents may be generally
correct on the point that a case can only be deemed
submitted for decision only after all pending incidents
are resolved. Yet since Section 20, Rule 57 provides
that their application for damages on the attachment
bond shall be included in the judgment on the main
case, it is clear that the award for damages need not
be resolved before the case is submitted for decision,
but should instead be resolved and included in the
judgment on the main case, or the decision on
the Appeal by Certiorari filed by the respondents.
Thus, the action of the Court of Appeals in
resolving the application for damages even before the
main judgment was issued does not conform to Section
20, Rule 57. However, the special particular
circumstances of this case lead us to rule that such
error is not mortal to the award of damages.
As noted earlier, the award of damages was
made after a proper hearing had occurred wherein all
the concerned parties had been given the opportunity
to present their arguments and evidence in support
and in rebuttal of the application for damages. The
premature award of damages does not negate the fact
that the parties were accorded due process, and
indeed availed of their right to be heard.
Moreover, we are compelled to appreciate
the particular circumstance in this case that the
right of private respondents to acquire relief
through the award of damages on account of the
wrongful preliminary attachment has been
conclusively affirmed by the highest court of the
land. This differs from the normal situation under
Section 20, Rule 57 wherein the court having
jurisdiction over the main action is still required to
ascertain whether the applicant actually has a right to
damages. To mandatorily require that the award of
damages be included in the judgment in the main case
makes all the sense if the right to damages would be
ascertained at the same time the main judgment is
made. However, when the said right is already
made viable by reason of a final judgment which
is no longer subject to review, there should be
no unnecessary impediments to its immediate
implementation.
And finally, any ruling on our part voiding the award of
damages solely for the reason that it was not included
in the judgment on the main case, and remanding the
motion to the Court of Appeals for proper adjudication
together with the main case may exhibit fealty to the
letter of the procedural rule, but not its avowed aims of
promoting a just and speedy disposition of every action
and proceeding. After all, if we were to compel the
Court of Appeals to decide again on the application for
damages and incorporate its ruling in the judgment on
the main action, the appellate court will be examining
exactly the same evidence and applying exactly the
same rules as it already did when it issued the assailed
resolution awarding damages on the bond. This would
be unnecessarily redundant especially considering that
the Supreme Court had already affirmed that there was
wrongful attachment in this case.
There is also the fact that remanding the
question of damages, singly for the purpose of
adhering to the letter of the procedural rule, would
further prolong the resolution of the main case, which
has been with the Court of Appeals for more than nine
years now.[54]Our Rules of Court precisely requires
liberal construction of the procedural rules to promote
the objective of securing a just, speedy and
inexpensive disposition of every action and proceeding.
[55]
With this precept, all the more justification is
supplied for allowing the award for damages despite its
apparent prematurity, if it is in all other respects
proper.
The same reasons apply in resolving the
question of whether the Court of Appeals could have
decided the Motion for Judgment on the Attachment
Bond considering that the case had not yet been re-
raffled under the two-raffle system for study and
report. Under Section 5, Rule 3 of the RIRCA, a case
filed with the Court of Appeals undergoes two raffles
for assignment to a particular Justice. The first raffle is
made for completion of records. [56] Afterwards, all
raffled appealed cases, the records of which have been
completed and submitted for decision, shall be re-
raffled for assignment to a Justice for study and report.
[57]
The fact that Section 20, Rule 57 provides that
the award of damages on the attachment bond shall be
included in the judgment on the main case necessarily
implies that it is to be made only after the case has
been re-raffled for study and report, and concurrently
decided with the judgment of the ponente in the main
case. Again, the Court of Appeals failed to consider
Section 20, Rule 57 when it acted upon the application
even before the second raffle was made.
Had Section 20, Rule 57 been faithfully
complied with, a different Justice of the Court of
Appeals would have penned the ruling on the
application for damages, in accordance with the RIRCA.
Yet this circumstance does not outweigh the other
considerations earlier mentioned that would warrant a
liberal interpretation of the procedural rules in favor of
respondents. The parties had adduced all their
arguments and evidence before the Court of Appeals,
and indeed, these were appreciated on first instance by
Justice Demetria, who eventually penned the assailed
resolutions. There was already a final determination
that the attachment was wrongful. And any delay
brought about by requiring that it be the ponencia,
determined after the second raffle, who decides the
application for damages may bear pro
forma adherence to the letter of the rule, but would
only cause the delay of the resolution of this long-
pending case. Procedural rules are designed, and must
therefore be so interpreted as, to give effect to lawful
and valid claims and not to frustrate them.[58]
 Even SIDDCOR acknowledges that there are
recognized instances where the award of damages or
judgment on the attachment bond may not be included
in the decision on the main case, such as if the main
case was dismissed for lack of jurisdiction and no claim
for damages could have been presented in the main
case.[59]
Scope of Damages
Properly Awardable
Next, we examine the particular award of damages
made in this case, consisting of P15,384,509.98, plus
interest, as well as P1,000,000.00 as attorneys fees.
There seems to be no dispute that the former amount
constituted the amount drawn against the account of
Sandoval by reason of the writ of execution issued by
the trial court on 27 May 1996. This fact was confirmed
by the PNB, in its Manifestation dated 19 July 1996,
confirming the garnishment.
Respondents burden in proving damages in this case
was considerably lessened by the fact that there was
already a final judgment, no longer subject to review,
that the preliminary attachment allowed by the trial
court was indeed wrongful. Hence, all that was
necessary to be proved was the amount of damage
actually sustained by respondents by reason of the
wrongful attachment. It is unquestioned that by virtue
of the writ of preliminary attachment, a Notice of
Garnishment was served upon the PNB over deposit
accounts maintained by respondents. Said Notice of
Garnishment placed under the control of the RTC all the
accounts maintained by respondents, and prevented
the transfer or disposition of these accounts. [60] Then
the subsequent Writ of Execution dated 27 May
1996 ordered the delivery to Carlos of these accounts
earlier subjected to garnishment.[61]
Clearly, the amount of actual pecuniary loss sustained
by respondents has been well established.
The Manifestation submitted by the PNB further
affirmed the actual amount seized by Carlos, an
amount which could not have been acquired had it not
been for the writ of preliminary attachment which was
wrongfully issued.
Carlos lamely argues in his petition that there was no
concrete or supporting evidence to justify the amount
of actual damages, a claim that is belied by the official
case records. The more substantive argument is
presented by SIDDCOR, which submits that any
damages that may be awarded to respondents can
include only those that were incurred, if any, during the
pendency of the appeal. But this contention is belied
by Section 4, Rule 57 of the 1997 Rules of Civil
Procedure, which provides that the bond issued for
preliminary attachment is 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.[62]
The case Paramount Insurance Corp. v. Court of
Appeals[63] is instructive. It discusses the scope of the
bond executed by upon an application for preliminary
injunction,[64] which similarly covers all damages which
[may be] sustain[ed] by reason of the injunction or
temporary restraining order if the court should finally
decide that the applicant was not entitled thereto.
[65]
The surety in that case claimed that it could be
liable only to the amount of damages accruing from the
time the injunction bond was issued until the
termination of the case, and not from the time the suit
was commenced.[66] In rebutting this claim, the Court
ruled:
. . . . Rule 58, Section 4(b), provides that a bond is
executed in favor of the party enjoined to answer
for all damages which he may sustain by reason of
the injunction. This Court already had occasion to
rule on this matter in Mendoza v. Cruz, where it
held that "(t)he injunction bond is intended as a
security for damages in case it is finally decided
that the injunction ought not to have been granted.
It is designed to cover all damages which the
party enjoined can possibly suffer. Its
principal purpose is to protect the enjoined
party against loss or damage by reason of an
injunction." No distinction was made as to
when the damages should have been
incurred.[67]
Our ruling in Philippine Charter Insurance Corp. v.
Court of Appeals, relied upon by the Court of Appeals,
squarely applies to this case:
Under the circumstances, too, there can be
no gainsaying the suretys full awareness of its
undertakings under its bond: that, as the law puts
it: "the plaintiff will pay all costs which may be
adjudged to the defendant(s), and all damages
which may be sustained by reason of the
attachment, if the same shall finally be adjudged to
have been wrongful and without cause," and that
those damages plainly comprehended not only
those sustained during the trial of the action but
also those during the pendency of the appeal. This
is the law, and this is how the surety's liability
should be understood. The surety's liability may be
enforced whether the application for damages for
wrongful attachment be submitted in the original
proceedings before the Trial Court, or on appeal, so
long as the judgment has not become
executory. The surety's liability is not and
cannot be limited to the damages caused by
the improper attachment only during the
pendency of the appeal. That would be
absurd. The plain and patent intendment of
the law is that the surety shall answer for all
damages that the party may suffer as a
result of the illicit attachment, for all the
time that the attachment was in force; from
levy to dissolution. . . .
The fact that the second paragraph of
the rule speaks only of "damages sustained
during the pendency of the appeal" is of no
moment; it obviously proceeds from the
assumption in the first paragraph that the
award for the damages suffered during the
pendency of the case in the trial court was in
fact "included in the final judgment" (or
applied for therein before the appeal was perfected
or the judgment became executory); hence, it
states that the damages additionally suffered
thereafter, i.e., during the pendency of the appeal,
should be claimed before the judgment of the
appellate tribunal becomes executory. It however
bears repeating that where. as in the case at
bar, the judgment of the Trial Court has
expressly or impliedly sustained the
attachment and thus has given rise to no
occasion to speak of, much less, file an
application for damages for wrongful
attachment, and it is only in the decision of
the Court of Appeals that the attachment is
declared wrongful and that the applicant
"was not entitled thereto," the rule is, as it
should be, that it is entirely proper at this
time for the application for damages for such
wrongful attachment to be filedi.e., for all
the damages sustained thereby, during all
the time that it was in force, not only during
the pendency of the appeal. . . .[68]
The rule is thus well-settled that the bond
issued upon an application for preliminary attachment
answers for all damages, incurred at whatever
stage, which are sustained by reason of the
attachment. The award of actual damages by the
Court of Appeals is thus proper in amount. However,
we disagree that the rate of legal interest be counted
from the date of the unlawful garnishment, or on 27
June 1996. Properly, interest should start to
accrue only from the moment it had been finally
determined that the attachment was unlawful,
since it is on that basis that the right to
damages comes to existence. In this case, legal
interest commences from the date the Court of Appeals
decision in CA-G.R. SP No. 39267 became final, by
reason of its affirmation by this Court.
The award of attorneys fees in the amount
of P1,000,000.00 is also questioned before this Court,
considering that the Court of Appeals did not award
moral or exemplary damages. The general rule may be
that an award of attorneys fees should be deleted
where the award of moral and exemplary damages are
eliminated.[69] Nonetheless, attorneys fees may be
awarded under the Civil Code where the court deems it
just and equitable that attorneys fees and expenses of
litigation should be recovered, [70] even if moral and
exemplary damages are unavailing.[71]
Particularly, the Court has recognized as just and
equitable that attorney's fees be awarded when a party
is compelled to incur expenses to lift a wrongfully
issued writ of attachment.[72] The amount of money
garnished, and the length of time respondents have
been deprived from use of their money by reason of
the wrongful attachment, all militate towards a finding
that attorneys fees are just and equitable under the
circumstances. However, we deem the amount
of P1,000,000.00 as excessive, and modify the award
of attorneys fees to P500,000.00 which represents
merely approximately three percent of the actual
damages suffered by and awarded to respondents. We
also delete the imposition of legal interest made by the
Court of Appeals on the awarded attorneys fees.
Other Issues Raised in G.R. No. 135830
The issues raised in G.R. No. 136035 have been
dispensed with, and the remaining issues in G.R. No.
135830 are relatively minor. There is no need to dwell
at length on them.
Carlos insists that respondents were liable to have paid
docket fees upon filing of their Motion for Judgment on
Attachment Bond, on the theory that they claimed
therein for the first time the alleged damages resulting
from the dissolved attachment. The said motion is
characterized as an initiatory proceeding because it is
claimed therein for the first time, the damages arising
from the attachment. In the same vein, Carlos argues
that the absence of a certification against forum-
shopping attached to the motion renders the said
motion as fatal. Again, it is pointed out that initiatory
pleadings must contain the said certification against
forum-shopping.
Our ruling in Santo Tomas University Hospital v.
Surla[73] is instructive. It was argued therein that the
requirement of the certification against forum-
shopping, as contained in Administrative Circular No.
04-94,[74] covered compulsory counterclaims. The Court
ruled otherwise:
It bears stressing, once again, that the
real office of Administrative Circular No. 04-94,
made effective on 01 April 1994, is to curb the
malpractice commonly referred to also as forum-
shopping. . . . The language of the circular
distinctly suggests that it is primarily intended to
cover an initiatory pleading or an incipient
application of a party asserting a claim for relief.
It should not be too difficult, the
foregoing rationale of the circular aptly
taken, to sustain the view that the circular
in question has not, in fact, been
contemplated to include a kind of claim
which, by its very nature as being auxiliary
to the proceeding in the suit and as
deriving its substantive and jurisdictional
support therefrom, can only be
appropriately pleaded in the answer and
not remain outstanding for independent
resolution except by the court where the
main case pends. Prescinding from the
foregoing, the proviso in the second paragraph of
Section 5, Rule 8, of the 1997 Rules of Civil
Procedure, i.e., that the violation of the anti-
forum shopping rule "shall not be curable by
mere amendment . . . but shall be cause for the
dismissal of the case without prejudice," being
predicated on the applicability of the need for a
certification against forum shopping, obviously
does not include a claim which cannot be
independently set up.[75] (Emphasis supplied.)
It is clear that under Section 20, Rule 57, the
application for damages on the attachment bond
cannot be independently set up, but must be
filed in the main case, before the judgment
therein becomes final and executory. Santo
Tomas squarely applies in determining that no
certification against forum-shopping was required in
the Motion for Judgment on the Attachment Bond. The
same reasoning also sustains a ruling that neither legal
fees were required for the filing of the said motion.
Section 1, Rule 141 of the Rules of Court provides that
legal fees are prescribed upon the filing of the pleading
or other application which initiates an action or
proceeding.[76] Since the said application for judgment
on the attachment bond cannot be considered as an
initiatory pleading, as it cannot be independently set
up from the main action, it is not likewise chargeable
with legal fees.
As to the issue relating to the
other Resolution dated 26 June 1998 denying the
motion to dismiss appeal on the ground of forum-
shopping, we find Carlos arguments as unmeritorious.
Forum-shopping allegedly existed because petitioners
had filed two cases before the Court of Appeals, CA-
G.R. CV No. 53229, and the Petition for Certiorari with
Temporary Restraining Order dated 2 June
1996 attacking the allowance of execution pending
appeal. Evidently, the two causes of action in these two
petitions are different, CA-G.R. CV No. 53229 being an
appeal from the Summary Judgment rendered by the
RTC, and the second petition assailing the subsequent
allowance by the RTC of execution pending appeal.
There is no identity between these two causes of action
that would warrant a finding of forum-shopping.
Issues Raised in G.R. No. 137743
To recount, respondents, having obtained a favorable
decision on their Motion for Judgment on the
Attachment Bond, filed a Motion for Immediate
Execution of the award of damages. This was granted
by the Court of Appeals in its Resolution dated 16
October 1998, said resolution now specifically assailed
by SIDDCOR in G.R. No. 137743.
In their Motion for Immediate Execution,
respondents theory in seeking the immediate
execution of the award of damages was that said
award was not subject to appeal, the ruling thereupon
being an interlocutory order. [77] This position was not
adopted by the Court of Appeals in its 16 October
1998 Resolution, which was otherwise favorably
disposed to respondents. Instead, the Court of
Appeals predicated the immediate execution on
the following grounds: (1) that the judicial
finding that the writ of preliminary attachment
was wrongful was already final and beyond
review; (2) there were no material and
substantial defenses against the motion for the
issuance of the judgment bond; (3) Sandoval was
elderly and sickly, without means of livelihood
and may not be able to enjoy the fruits of the
judgment on the attachment bond; (4) that
immediate execution would end her suffering
caused by the arbitrary garnishment of her PNB
account.
There is no doubt that a judgment on the attachment
bond is a final and appealable order. As stated earlier,
it is, under normal course, included in the main
judgment, which in turn is final and appealable.
Respondents admit that they had erred in earlier
characterizing the said judgment as an interlocutory
order. Still, SIDDCOR argues that such earlier error is
fatal, and that the Court of Appeals abused its
discretion in ruling on the motion on a theory different
from that urged on by respondents.
By no means could respondents be deemed as
estopped from changing their legal theory, since the
rule on estoppel applies to questions of fact and not
questions of law.[78]Moreover, courts are empowered to
decide cases even if the parties raise legal rationales
other than that which would actually apply in the case.
The basis of whether respondents are entitled to
immediate execution arises from law, particularly
Section 2(a), Rule 39 of the Rules of Court, and not
solely on whatever allegations may be raised by the
movant.
Thus, we find no grave abuse of discretion on the part
of the Court of Appeals, even though it allowed
execution pending appeal on a legal basis different
from that originally adduced by respondents. After all,
the reasoning ultimately employed by the appellate
court is correct, and it hardly would be judicious to
require the lower court to adhere to the movants
erroneous ratiocination and preclude the proper
application of the law.
We need not review in length the justification of the
Court of Appeals in allowing execution pending appeal.
The standard set under Section 2(a), Rule 39 merely
requires good reasons, a special order, and due
hearing. Due hearing would not require a hearing in
open court, but simply the right to be heard, which
SIDDCOR availed of when it filed its opposition to the
motion for immediate execution.
The Resolution dated 16 October 1998satisfies the
special order requirement, and it does enumerate at
length the good reasons for allowing execution pending
appeal. As to the appreciation of good reasons, we
simply note that the advanced age alone of Sandoval
would have sufficiently justified execution pending
appeal, pursuant to the well-settled jurisprudential rule.
[79]
The wrongfulness of the attachment, and the length
of time respondents have been deprived of their
money by reason of the wrongful attachment further
justifies execution pending appeal under these
circumstances.
WHEREFORE, the petitions are DISMISSED. The
Temporary Restraining Order issued in
the Resolution dated 9 June 1999 is hereby LIFTED. The
assailed Resolution of the Court of Appeals Special
Fourth Division dated 26 June 1998 is AFFIRMED with
the MODIFICATIONS that the legal interest on the award
of actual damages should commence from the date of
the finality of the Decision of the Court of Appeals in CA
G.R. SP No. 39267 and that the award of attorneys fees
is in the amount of P500,000. Costs against petitioners.