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PRELIMINARY ATTACHMENT G.R. No.

125027 August 12, 2002

ANITA MANGILA vs. COURT OF APPEALS and LORETA GUINA CARPIO, J.: The Case Petition forreview on certiorari under Rule 45, seeking to set aside the Decision1of the CA affirming the Decision2 of the RTC, Br 108, Pasay City. The trial court upheld the writ of attachment and the declaration of default on petitioner while ordering her to pay private respondent P109,376.95 plus 18 percent interest per annum, 25 percent attorneys fees and costs of suit. The Facts Petitioner Anita Mangila ("petitioner" for brevity) is an exporter of sea foods and doing business under the name and style of Seafoods Products. Private respondent Loreta Guina ("private respondent" for brevity) is the President and General Manager of Air Swift International, a single registered proprietorship engaged in the freight forwarding business. Sometime in January 1988, petitioner contracted the freight forwarding services of private respondent for shipment of petitioners products, such as crabs, prawns and assorted fishes, to Guam (USA) where petitioner maintains an outlet. Petitioner agreed to pay private respondent cash on delivery. Private respondents invoice stipulates a charge of 18 percent interest per annum on all overdue accounts. In case of suit, the same invoice stipulates attorneys fees equivalent to 25 percent of the amount due plus costs of suit.3 On the first shipment, petitioner requested for seven days within which to pay private respondent. However, for the next three shipments, March 17, 24 and 31, 1988, petitioner failed to pay private respondent shipping charges amounting to P109, 376.95.4 Despite several demands, petitioner never paid private respondent. Thus, on June 10, 1988, private respondent filed Civil Case No. 5875 before the Regional Trial Court of Pasay City for collection of sum of money. On August 1, 1988, the sheriff filed his Sheriffs Return showing that summons was not served on petitioner. A woman found at petitioners house informed the sheriff that petitioner transferred her residence to Sto. Nio, Guagua, Pampanga. The sheriff found out further that petitioner had left the Philippines for Guam.5 Thus, on September 13, 1988, construing petitioners departure from the Philippines as done with intent to defraud her creditors, private respondent filed a Motion for Preliminary Attachment. On September 26, 1988, the trial court issued an Order of Preliminary Attachment6 against petitioner. The following day, the trial court issued a Writ of Preliminary Attachment. The trial court granted the request of its sheriff for assistance from their counterparts in RTC, Pampanga. Thus, on October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga served on petitioners household help in San Fernando, Pampanga, the Notice of Levy with the Order, Affidavit and Bond.7 On November 7, 1988, petitioner filed an Urgent Motion to Discharge Attachment8 without submitting herself to the

jurisdiction of the trial court. She pointed out that up to then, she had not been served a copy of the Complaint and the summons. Hence, petitioner claimed the court had not acquired jurisdiction over her person.9 In the hearing of the Urgent Motion to Discharge Attachment on November 11, 1988, private respondent sought and was granted a re-setting to December 9, 1988. On that date, private respondents counsel did not appear, so the Urgent Motion to Discharge Attachment was deemed submitted for resolution.10 The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon filing of petitioners counter-bond. The trial court, however, did not rule on the question of jurisdiction and on the validity of the writ of preliminary attachment. On December 26, 1988, private respondent applied for an alias summons, which the trial court issued on January 19, 1989.11 It was only on January 26, 1989 that summons was finally served on petitioner.12 On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of improper venue. Private respondents invoice for the freight forwarding service stipulates that "if court litigation becomes necessary to enforce collection xxx the agreed venue for such action is Makati, Metro Manila."13 Private respondent filed an Opposition asserting that although "Makati" appears as the stipulated venue, the same was merely an inadvertence by the printing press whose general manager executed an affidavit14 admitting such inadvertence. Moreover, private respondent claimed that petitioner knew that private respondent was holding office in Pasay City and not in Makati.15 The lower court, finding credence in private respondents assertion, denied the Motion to Dismiss and gave petitioner five days to file her Answer. Petitioner filed a Motion for Reconsideration but this too was denied. Petitioner filed her Answer16 on June 16, 1989, maintaining her contention that the venue was improperly laid. On June 26, 1989, the trial court issued an Order setting the pre-trial for July 18, 1989 at 8:30 a.m. and requiring the parties to submit their pre-trial briefs. Meanwhile, private respondent filed a Motion to Sell Attached Properties but the trial court denied the motion. On motion of petitioner, the trial court issued an Order resetting the pre-trial from July 18, 1989 to August 24, 1989 at 8:30 a.m.. On August 24, 1989, the day of the pre-trial, the trial court issued an Order17 terminating the pre-trial and allowing the private respondent to present evidence ex-parte on September 12, 1989 at 8:30 a.m.. The Order stated that when the case was called for pre-trial at 8:31 a.m., only the counsel for private respondent appeared. Upon the trial courts second call 20 minutes later, petitioners counsel was still nowhere to be found. Thus, upon motion of private respondent, the pre-trial was considered terminated. On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order terminating the pre-trial. Petitioner explained that her counsel arrived 5 minutes after the second call, as shown by the transcript of stenographic notes, and was late because of heavy traffic. Petitioner claims that the lower court erred in allowing private respondent to present

evidence ex-parte since there was no Order considering the petitioner as in default. Petitioner contends that the Order of August 24, 1989 did not state that petitioner was declared as in default but still the court allowed private respondent to present evidence ex-parte.18 On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled the presentation of private respondents evidence ex-parte on October 10, 1989.1wphi1.nt On October 10, 1989, petitioner filed an Omnibus Motion stating that the presentation of evidence ex-parte should be suspended because there was no declaration of petitioner as in default and petitioners counsel was not absent, but merely late. On October 18, 1989, the trial court denied the Omnibus Motion.19 On November 20, 1989, the petitioner received a copy of the Decision of November 10, 1989, ordering petitioner to pay respondent P109,376.95 plus 18 percent interest per annum, 25 percent attorneys fees and costs of suit. Private respondent filed a Motion for Execution Pending Appeal but the trial court denied the same. The Ruling of the Court of Appeals On December 15, 1995, the Court of Appeals rendered a decision affirming the decision of the trial court. The Court of Appeals upheld the validity of the issuance of the writ of attachment and sustained the filing of the action in the RTC of Pasay. The Court of Appeals also affirmed the declaration of default on petitioner and concluded that the trial court did not commit any reversible error. Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals denied the same in a Resolution dated May 20, 1996. Hence, this petition. The Issues The issues raised by petitioner may be restated as follows: I.WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF ATTACHMENT WAS IMPROPERLY ISSUED AND SERVED; II. WHETHER THERE WAS A VALID DECLARATION OF DEFAULT; III. WHETHER THERE WAS IMPROPER VENUE. IV. WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS OBLIGED TO PAY P109, 376.95, PLUS ATTORNEYS FEES.20 The Ruling of the Court Improper Issuance and Service of Writ of Attachment Petitioner ascribes several errors to the issuance and implementation of the writ of attachment. Among petitioners arguments are: first, there was no ground for the issuance of the writ since the intent to defraud her creditors had not been established; second, the value of the properties levied exceeded the value of private respondents claim. However, the crux of petitioners arguments rests on the question of the validity of the writ of attachment. Because of failure to serve summons on her before or simultaneously with the writs implementation, petitioner claims that the trial court had not acquired jurisdiction over her person and thus the service of the writ is void.

As a preliminary note, a distinction should be made between issuance and implementation of the writ of attachment. It is necessary to distinguish between the two to determine when jurisdiction over the person of the defendant should be acquired to validly implement the writ. This distinction is crucial in resolving whether there is merit in petitioners argument. This Court has long settled 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 thereafter."21 This phrase refers to the date of 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. In Davao Light & Power Co., Inc. v. Court of Appeals,22 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 - issuance of summons, order of attachment and writ of attachment - 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 commencesimplementation 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 xxx." (Emphasis supplied.) Furthermore, we have 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.23 In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and implemented on October 28, 1988. However, the alias summons was served only on January 26, 1989 or almost three months after the implementation of the writ of attachment. The trial court had the authority to issue the Writ of Attachment on September 27 since a motion for its issuance can be filed "at the commencement of the action." However, on the day the writ was implemented, the trial court should have, previously or simultaneously with the implementation of the writ, acquired jurisdiction over the petitioner. Yet, as was

shown in the records of the case, the summons was actually served on petitioner several months after the writ had been implemented. Private respondent, nevertheless, claims that the prior or contemporaneous service of summons contemplated in Section 5 of Rule 57 provides for exceptions. Among such exceptions are "where the summons could not be served personally or by substituted service despite diligent efforts or where the defendant is a resident temporarily absent therefrom x x x." Private respondent asserts that when she commenced this action, she tried to serve summons on petitioner but the latter could not be located at her customary address in Kamuning, Quezon City or at her new address in Guagua, Pampanga.24 Furthermore, respondent claims that petitioner was not even in Pampanga; rather, she was in Guam purportedly on a business trip. Private respondent never showed that she effected substituted service on petitioner after her personal service failed. Likewise, if it were true that private respondent could not ascertain the whereabouts of petitioner after a diligent inquiry, still she had some other recourse under the Rules of Civil Procedure. The rules provide for certain remedies in cases where personal service could not be effected on a party. Section 14, Rule 14 of the Rules of Court provides that whenever the defendants "whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in a newspaper of general circulation x x x." Thus, if petitioners whereabouts could not be ascertained after the sheriff had served the summons at her given address, then respondent could have immediately asked the court for service of summons by publication on petitioner.25 Moreover, as private respondent also claims that petitioner was abroad at the time of the service of summons, this made petitioner a resident who is temporarily out of the country. This is the exact situation contemplated in Section 16,26 Rule 14 of the Rules of Civil Procedure, providing for service of summons by publication. In conclusion, we hold that the alias summons belatedly served on petitioner 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 petitioner without first obtaining jurisdiction over her 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.27 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. Improper Venue Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in private respondents invoice which contains the following: "3. If court litigation becomes necessary to enforce collection, an additional equivalent (sic) to 25% of the principal amount will be charged. The agreed venue for such action is Makati, Metro Manila, Philippines."28

Based on this provision, petitioner contends that the action should have been instituted in the RTC of Makati and to do otherwise would be a ground for the dismissal of the case. We resolve to dismiss the case on the ground of improper venue but not for the reason stated by petitioner. The Rules of Court provide that parties to an action may agree in writing on the venue on which an action should be brought.29 However, a mere stipulation on the venue of an action is not enough to preclude parties from bringing a case in other venues.30 The parties must be able to show that such stipulation is exclusive. Thus, absent words that show the parties intention to restrict the filing of a suit in a particular place, courts will allow the filing of a case in any venue, as long as jurisdictional requirements are followed. Venue stipulations in a contract, while considered valid and enforceable, do not as a rule supersede the general rule set forth in Rule 4 of the Revised Rules of Court.31 In the absence of qualifying or restrictive words, they should be considered merely as an agreement on additional forum, not as limiting venue to the specified place.32 In the instant case, the stipulation does not limit the venue exclusively to Makati. There are no qualifying or restrictive words in the invoice that would evince the intention of the parties that Makati is the "only or exclusive" venue where the action could be instituted. We therefore agree with private respondent that Makati is not the only venue where this case could be filed. Nevertheless, we hold that Pasay is not the proper venue for this case. Under the 1997 Rules of Civil Procedure, the general rule is venue in personal actions is "where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff."33 The exception to this rule is when the parties agree on an exclusive venue other than the places mentioned in the rules. But, as we have discussed, this exception is not applicable in this case. Hence, following the general rule, the instant case may be brought in the place of residence of the plaintiff or defendant, at the election of the plaintiff (private respondent herein). In the instant case, the residence of private respondent (plaintiff in the lower court) was not alleged in the complaint. Rather, what was alleged was the postal address of her sole proprietorship, Air Swift International. It was only when private respondent testified in court, after petitioner was declared in default, that she mentioned her residence to be in Better Living Subdivision, Paraaque City. In the earlier case of Sy v. Tyson Enterprises, Inc.,34 the reverse happened. The plaintiff in that case was Tyson Enterprises, Inc., a corporation owned and managed by Dominador Ti. The complaint, however, did not allege the office or place of business of the corporation, which was in Binondo, Manila. What was alleged was the residence of Dominador Ti, who lived in San Juan, Rizal. The case was filed in the Court of First Instance of Rizal, Pasig. The Court there held that the evident purpose of alleging the address of the corporations president and manager was to justify the filing of the suit in Rizal, Pasig instead of in Manila. Thus, the Court ruled that there was no question that venue was improperly laid in that case and held that the place of business of Tyson Enterpises, Inc. is considered as its residence for purposes of venue. Furthermore, the Court held that the residence of its president is not the

residence of the corporation because a corporation has a personality separate and distinct from that of its officers and stockholders. In the instant case, it was established in the lower court that petitioner resides in San Fernando, Pampanga35while private respondent resides in Paraaque City.36 However, this case was brought in Pasay City, where the business of private respondent is found. This would have been permissible had private respondents business been a corporation, just like the case in Sy v. Tyson Enterprises, Inc. However, as admitted by private respondent in her Complaint37 in the lower court, her business is a sole proprietorship, and as such, does not have a separate juridical personality that could enable it to file a suit in court.38 In fact, there is no law authorizing sole proprietorships to file a suit in court.39 A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the owner of the enterprise.40 The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual and requires its proprietor or owner to secure licenses and permits, register its business name, and pay taxes to the national government.41 The law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court.42 Thus, not being vested with legal personality to file this case, the sole proprietorship is not the plaintiff in this case but rather Loreta Guina in her personal capacity. In fact, the complaint in the lower court acknowledges in its caption that the plaintiff and defendant are Loreta Guina and Anita Mangila, respectively. The title of the petition before us does not state, and rightly so, Anita Mangila v. Air Swift International, but rather Anita Mangila v. Loreta Guina. Logically then, it is the residence of private respondent Guina, the proprietor with the juridical personality, which should be considered as one of the proper venues for this case. All these considered, private respondent should have filed this case either in San Fernando, Pampanga (petitioners residence) or Paraaque (private respondents residence). Since private respondent (complainant below) filed this case in Pasay, we hold that the case should be dismissed on the ground of improper venue. Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court, petitioner expressly stated that she was filing the motion without submitting to the jurisdiction of the court. At that time, petitioner had not been served the summons and a copy of the complaint.43 Thereafter, petitioner timely filed a Motion to Dismiss44 on the ground of improper venue. Rule 16, Section 1 of the Rules of Court provides that a motion to dismiss may be filed "[W]ithin the time for but before filing the answer to the complaint or pleading asserting a claim." Petitioner even raised the issue of improper venue in his Answer45 as a special and affirmative defense. Petitioner also continued to raise the issue of improper venue in her Petition for Review46 before this Court. We thus hold that the dismissal of this case on the ground of improper venue is warranted. The rules on venue, like other procedural rules, are designed to insure a just and orderly administration of justice or the impartial and evenhanded determination of every action and proceeding. Obviously, this objective will not be attained if

the plaintiff is given unrestricted freedom to choose where to file the complaint or petition.47 We find no reason to rule on the other issues raised by petitioner.1wphi1.nt WHEREFORE, the petition is GRANTED on the grounds of improper venue and invalidity of the service of the writ of attachment. The decision of the Court of Appeals and the order of respondent judge denying the motion to dismiss are REVERSED and SET ASIDE. Civil Case No. 5875 is hereby dismissed without prejudice to refiling it in the proper venue. The attached properties of petitioner are ordered returned to her immediately. SO ORDERED.Puno, Panganiban, and JJ., concur. SandovalGutierrez, J., On leave. G.R. No. 139941 January 19, 2001 VICENTE B. CHUIDIAN vs. SANDIGANBAYAN (Fifth Division) and the REPUBLIC OF THE PHILIPPINES , respondents. YNARES-SANTIAGO, J.: The instant petition arises from transactions that were entered into by the government in the penultimate days of the Marcos administration. Petitioner Vicente B. Chuidian was alleged to be a dummy or nominee of Ferdinand and Imelda Marcos in several companies said to have been illegally acquired by the Marcos spouses. As a favored business associate of the Marcoses, Chuidian allegedly used false pretenses to induce the officers of the Philippine Export and Foreign Loan Guarantee Corporation (PHILGUARANTEE), the Board of Investments (BOI) and the Central Bank, to facilitate the procurement and issuance of a loan guarantee in favor of the Asian Reliability Company, Incorporated (ARCI) sometime in September 1980. ARCI, 98% of which was allegedly owned by Chuidian, was granted a loan guarantee of Twenty-Five Million U.S. Dollars (US$25,000,000.00).1wphi1.nt While ARCI represented to Philguarantee that the loan proceeds would be used to establish five inter-related projects in the Philippines, Chuidian reneged on the approved business plan and instead invested the proceeds of the loan in corporations operating in the United States, more particularly Dynetics, Incorporated and Interlek, Incorporated. Although ARCI had received the proceeds of the loan guaranteed by Philguarantee, the former defaulted in the payments thereof, compelling Philguarantee to undertake payments for the same. Consequently, in June 1985, Philguarantee sued Chuidian before the Santa Clara County Superior Court,1 charging that in violation of the terms of the loan, Chuidian not only defaulted in payment, but also misused the funds by investing them in Silicon Valley corporations and using them for his personal benefit. For his part, Chuidian claimed that he himself was a victim of the systematic plunder perpetrated by the Marcoses as he was the true owner of these companies, and that he had in fact instituted an action before the Federal Courts of the United States to recover the companies which the Marcoses had illegally wrested from him.2 On November 27, 1985, or three (3) months before the successful people's revolt that toppled the Marcos dictatorship, Philguarantee entered into a compromise agreement with Chuidian whereby petitioner Chuidian shall assign and surrender title to all his companies in favor of the Philippine

government. In return, Philguarantee shall absolve Chuidian from all civil and criminal liability, and in so doing, desist from pursuing any suit against Chuidian concerning the payments Philguarantee had made on Chuidian's defaulted loans. It was further stipulated that instead of Chuidian reimbursing the payments made by Philguarantee arising from Chuidian's default, the Philippine government shall pay Chuidian the amount of Five Million Three Hundred Thousand Dollars (US$5,300,000.00). Initial payment of Five Hundred Thousand Dollars (US$500,000.00) was actually received by Chuidian, as well as succeeding payment of Two Hundred Thousand Dollars (US$200,000.00). The remaining balance of Four Million Six Hundred Thousand Dollars (US$4,600,000.00) was to be paid through an irrevocable Letter of Credit (L/C) from which Chuidian would draw One Hundred Thousand Dollars (US$100,000.00) monthly.3 Accordingly, on December 12, 1985, L/C No. SSD-005-85 was issued for the said amount by the Philippine National Bank (PNB). Subsequently, Chuidian was able to make two (2) monthly drawings from said L/C at the Los Angeles branch of the PNB.4 With the advent of the Aquino administration, the newlyestablished Presidential Commission on Good Government (PCGG) exerted earnest efforts to search and recover money, gold, properties, stocks and other assets suspected as having been illegally acquired by the Marcoses, their relatives and cronies. Petitioner Chuidian was among those whose assets were sequestered by the PCGG. On May 30, 1986, the PCGG issued a Sequestration Order5 directing the PNB to place under its custody, for and in behalf of the PCGG, the irrevocable L/C (No. SSD-005-85). Although Chuidian was then residing in the United States, his name was placed in the Department of Foreign Affairs' Hold Order list.6 In the meantime, Philguarantee filed a motion before the Superior Court of Santa Clara County of California in Civil Case Nos. 575867 and 577697 seeking to vacate the stipulated judgment containing the settlement between Philguarantee and Chuidian on the grounds that: (a) Philguarantee was compelled by the Marcos administration to agree to the terms of the settlement which was highly unfavorable to Philguarantee and grossly disadvantageous to the government; (b) Chuidian blackmailed Marcos into pursuing and concluding the settlement agreement by threatening to expose the fact that the Marcoses made investments in Chuidian's American enterprises; and (c) the Aquino administration had ordered Philguarantee not to make further payments on the L/C to Chuidian. After considering the factual matters before it, the said court concluded that Philguarantee "had not carried its burden of showing that the settlement between the parties should be set aside."7 On appeal, the Sixth Appellate District of the Court of Appeal of the State of California affirmed the judgment of the Superior Court of Sta. Clara County denying Philguarantee's motion to vacate the stipulated judgment based on the settlement agreement.8 After payment on the L/C was frozen by the PCGG, Chuidian filed before the United States District Court, Central District of California, an action against PNB seeking, among others, to compel PNB to pay the proceeds of the L/C. PNB countered that it cannot be held liable for a breach of contract under principles of illegality, international comity and act of state, and thus it is excused from payment of the L/C. Philguarantee intervened in said action, raising the same issues

and arguments it had earlier raised in the action before the Santa Clara Superior Court, alleging that PNB was excused from making payments on the L/C since the settlement was void due to illegality, duress and fraud.9 The Federal Court rendered judgment ruling: (1) in favor of PNB excusing the said bank from making payment on the L/C; and (2) in Chuidian's favor by denying intervenor Philguarantee's action to set aside the settlement agreement.10 Meanwhile, on February 27, 1987, a Deed of Transfer11 was executed between then Secretary of Finance Jaime V. Ongpin and then PNB President Edgardo B. Espiritu, to facilitate the rehabilitation of PNB, among others, as part of the government's economic recovery program. The said Deed of Transfer provided for the transfer to the government of certain assets of PNB in exchange for which the government would assume certain liabilities of PNB.12 Among those liabilities which the government assumed were unused commercial L/C's and Deferred L/C's, including SSD-005-85 listed under Dynetics, Incorporated in favor of Chuidian in the amount of Four Million Four Hundred Thousand Dollars (US$4,400,000.00).13 On July 30, 1987, the government filed before the Sandiganbayan Civil Case No. 0027 against the Marcos spouses, several government officials who served under the Marcos administration, and a number of individuals known to be cronies of the Marcoses, including Chuidian. The complaint sought the reconveyance, reversion, accounting and restitution of all forms of wealth allegedly procured illegally and stashed away by the defendants. In particular, the complaint charged that Chuidian, by himself and/or in conspiracy with the Marcos spouses, engaged in "devices, schemes and stratagems" by: (1) forming corporations for the purpose of hiding and avoiding discovery of illegally obtained assets; (2) pillaging the coffers of government financial institutions such as the Philguarantee; and (3) executing the court settlement between Philguarantee and Chuidian which was grossly disadvantageous to the government and the Filipino people. In fine, the PCGG averred that the above-stated acts of Chuidian committed in unlawful concert with the other defendants constituted "gross abuse of official position of authority, flagrant breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of the Constitution and laws" of the land.14 While the case was pending, on March 17, 1993, the Republic of the Philippines filed a motion for issuance of a writ of attachment15 over the L/C, citing as grounds therefor the following: (1) Chuidian embezzled or fraudulently misapplied the funds of ARCI acting in a fiduciary capacity, justifying issuance of the writ under Section 1(b), Rule 57 of the Rules of Court; (2) The writ is justified under Section 1(d) of the same rule as Chuidian is guilty of fraud in contracting the debt or incurring the obligation upon which the action was brought, or that he concealed or disposed of the property that is the subject of the action; (3) Chuidian has removed or disposed of his property with the intent of defrauding the plaintiff as justified under Section 1(c) of Rule 57; and

(4) Chuidian is residing out of the country or one on whom summons may be served by publication, which justifies the writ of attachment prayed for under Section 1(e) of the same rule. The Republic also averred that should the action brought by Chuidian before the U.S. District Court of California to compel payment of the L/C prosper, inspite of the sequestration of the said L/C, Chuidian can ask the said foreign court to compel the PNB Los Angeles branch to pay the proceeds of the L/C. Eventually, Philguarantee will be made to shoulder the expense resulting in further damage to the government. Thus, there was an urgent need for the writ of attachment to place the L/C under the custody of the Sandiganbayan so the same may be preserved as security for the satisfaction of judgment in the case before said court. Chuidian opposed the motion for issuance of the writ of attachment, contending that: (1) The plaintiff's affidavit appended to the motion was in form and substance fatally defective; (2) Section 1(b) of Rule 57 does not apply since there was no fiduciary relationship between the plaintiff and Chuidian; (3) While Chuidian does not admit fraud on his part, if ever there was breach of contract, such fraud must be present at the time the contract is entered into; (4) Chuidian has not removed or disposed of his property in the absence of any intent to defraud plaintiff; (5) Chuidian's absence from the country does not necessarily make him a non-resident; and (6) Service of summons by publication cannot be used to justify the issuance of the writ since Chuidian had already submitted to the jurisdiction of the Court by way of a motion to lift the freeze order filed through his counsel. On July 14, 1993, the Sandiganbayan issued a Resolution ordering the issuance of a writ of attachment against L/C No. SSD-005-85 as security for the satisfaction of judgment.16 The Sandiganbayan's ruling was based on its disquisition of the five points of contention raised by the parties. On the first issue, the Sandiganbayan found that although no separate affidavit was attached to the motion, the motion itself contained all the requisites of an affidavit, and the verification thereof is deemed a substantial compliance of Rule 57, Section 3 of the Rules of Court. Anent the second contention, the Sandiganbayan ruled that there was no fiduciary relationship existing between Chuidian and the Republic, but only between Chuidian and ARCI. Since the Republic is not privy to the fiduciary relationship between Chuidian and ARCI, it cannot invoke Section 1(b) of Rule 57. On the third issue of fraud on the part of Chuidian in contracting the loan, or in concealing or disposing of the subject property, the Sandiganbayan held that there was a prima facie case of fraud committed by Chuidian, justifying the issuance of the writ of attachment. The Sandiganbayan also adopted the Republic's position that since it was compelled to pay, through Philguarantee, the bank loans taken out by Chuidian, the proceeds of which were fraudulently diverted, it is

entitled to the issuance of the writ of attachment to protect its rights as creditor. Assuming that there is truth to the government's allegation that Chuidian has removed or disposed of his property with the intent to defraud, the Sandiganbayan held that the writ of attachment is warranted, applying Section 1(e) of Rule 57. Besides, the Rules provide for sufficient security should the owner of the property attached suffer damage or prejudice caused by the attachment.17 Chuidian's absence from the country was considered by the Sandiganbayan to be "the most potent insofar as the relief being sought is concerned."18 Taking judicial notice of the admitted fact that Chuidian was residing outside of the country, the Sandiganbayan observed that: "x x x no explanation whatsoever was given by him as to his absence from the country, or as to his homecoming plans in the future. It may be added, moreover, that he has no definite or clearcut plan to return to the country at this juncture given the manner by which he has submitted himself to the jurisdiction of the court."19 Thus, the Sandiganbayan ruled that even if Chuidian is one who ordinarily resides in the Philippines, but is temporarily living outside, he is still subject to the provisional remedy of attachment. Accordingly, an order of attachment20 was issued by the Sandiganbayan on July 19, 1993, ordering the Sandiganbayan Sheriff to attach PNB L/C No. SSD-005-85 for safekeeping pursuant to the Rules of Court as security for the satisfaction of judgment in Sandiganbayan Civil Case No. 0027. On August 11, 1997, or almost four (4) years after the issuance of the order of attachment, Chuidian filed a motion to lift the attachment based on the following grounds: First, he had returned to the Philippines; hence, the Sandiganbayan's "most potent ground" for the issuance of the writ of preliminary attachment no longer existed. Since his absence in the past was the very foundation of the Sandiganbayan's writ of preliminary attachment, his presence in the country warrants the immediate lifting thereof. Second, there was no evidence at all of initial fraud or subsequent concealment except for the affidavit submitted by the PCGG Chairman citing mere "belief and information" and "not on knowledge of the facts." Moreover, this statement is hearsay since the PCGG Chairman was not a witness to the litigated incidents, was never presented as a witness by the Republic and thus was not subject to cross-examination. Third, Chuidian denies that he ever disposed of his assets to defraud the Republic, and there is nothing in the records that support the Sandiganbayan's erroneous conclusion on the matter. Fourth, Chuidian belied the allegation that he was also a defendant in "other related criminal action," for in fact, he had "never been a defendant in any prosecution of any sort in the Philippines."21 Moreover, he could not have personally appeared in any other action because he had been deprived of his right to a travel document by the government. Fifth, the preliminary attachment was, in the first place, unwarranted because he was not "guilty of fraud in contracting the debt or incurring the obligation". In fact, the L/C was not a product of fraudulent transactions, but was the result of a US Court-approved settlement. Although he was accused of employing blackmail tactics to procure the settlement, the

California Supreme Court ruled otherwise. And in relation thereto, he cites as a sixth ground the fact that all these allegations of fraud and wrongdoing had already been dealt with in actions before the State and Federal Courts of California. While it cannot technically be considered as forum shopping, it is nevertheless a "form of suit multiplicity over the same issues, parties and subject matter." 22 These foreign judgments constitute res judicata which warrant the dismissal of the case itself. Chuidian further contends that should the attachment be allowed to continue, he will be deprived of his property without due process. The L/C was payment to Chuidian in exchange for the assets he turned over to the Republic pursuant to the terms of the settlement in Case No. 575867. Said assets, however, had already been sold by the Republic and cannot be returned to Chuidian should the government succeed in depriving him of the proceeds of the L/C. Since said assets were disposed of without his or the Sandiganbayan's consent, it is the Republic who is fraudulently disposing of assets. Finally, Chuidian stressed that throughout the four (4) years that the preliminary attachment had been in effect, the government had not set the case for hearing. Under Rule 17, Section 3, the case itself should be dismissed for laches owing to the Republic's failure to prosecute its action for an unreasonable length of time. Accordingly, the preliminary attachment, being only a temporary or ancillary remedy, must be lifted and the PNB ordered to immediately pay the proceeds of the L/C to Chuidian. Subsequently, on August 20, 1997, Chuidian filed a motion to require the Republic to deposit the L/C in an interest bearing account.23 Annex "D"; Rollo, pp. 77-79.23 He pointed out to the Sandiganbayan that the face amount of the L/C had, since its attachment, become fully demandable and payable. However, since the amount is just lying dormant in the PNB, without earning any interest, he proposed that it would be to the benefit of all if the Sandiganbayan requires PNB to deposit the full amount to a Sandiganbayan trust account at any bank in order to earn interest while awaiting judgment of the action. The Republic opposed Chuidian's motion to lift attachment, alleging that Chuidian's absence was not the only ground for the attachment and, therefore, his belated appearance before the Sandiganbayan is not a sufficient reason to lift the attachment. Moreover, allowing the foreign judgment as a basis for the lifting of the attachment would essentially amount to an abdication of the jurisdiction of the Sandiganbayan to hear and decide the ill gotten wealth cases lodged before it in deference to the judgment of foreign courts. In a Resolution promulgated on November 13, 1998, the Sandiganbayan denied Chuidian's motion to lift attachment.24 On the same day, the Sandiganbayan issued another Resolution denying Chuidian's motion to require deposit of the attached L/C in an interest bearing account.25 In a motion seeking a reconsideration of the first resolution, Chuidian assailed the Sandiganbayan's finding that the issues raised in his motion to lift attachment had already been dealt with in the earlier resolution dated July 14, 1993 granting the application for the writ of preliminary attachment based on the following grounds: First, Chuidian was out of the country in 1993, but is now presently residing in the country.

Second, the Sandiganbayan could not have known then that his absence was due to the non-renewal of his passport at the instance of the PCGG. Neither was it revealed that the Republic had already disposed of Chuidian's assets ceded to the Republic in exchange for the L/C. The foreign judgment was not an issue then because at that time, said judgment had not yet been issued and much less final. Furthermore, the authority of the PCGG Commissioner to subscribe as a knowledgeable witness relative to the issuance of the writ of preliminary attachment was raised for the first time in the motion to lift the attachment. Finally, the issue of laches could not have been raised then because it was the Republic's subsequent neglect or failure to prosecute despite the passing of the years that gave rise to laches.26 Chuidian also moved for a reconsideration of the Sandiganbayan resolution denying the motion to require deposit of the L/C into an interest bearing account. He argued that contrary to the Sandiganbayan's pronouncement, allowing the deposit would not amount to a virtual recognition of his right over the L/C, for he is not asking for payment but simply requesting that it be deposited in an account under the control of the Sandiganbayan. He further stressed that the Sandiganbayan abdicated its bounden duty to rule on an issue when it found "that his motion will render nugatory the purpose of sequestration and freeze orders over the L/C." Considering that his assets had already been sold by the Republic, he claimed that the Sandiganbayan's refusal to exercise its fiduciary duty over attached assets will cause him irreparable injury. Lastly, the Sandiganbayan's position that Chuidian was not the owner but a mere payee-beneficiary of the L/C issued in his favor negates overwhelming jurisprudence on the Negotiable Instruments Law, while at the same time obliterating his rights of ownership under the Civil Code.27 On July 13, 1999, the Sandiganbayan gave due course to Chuidian's plea for the attached L/C to be deposited in an interest-bearing account, on the ground that it will redound to the benefit of both parties. The Sandiganbayan declared the national government as the principal obligor of the L/C even though the liability remained in the books of the PNB for accounting and monitoring purposes. The Sandiganbayan, however, denied Chuidian's motion for reconsideration of the denial of his motion to lift attachment, agreeing in full with the government's apriorisms that: x x x (1) it is a matter of record that the Court granted the application for writ of attachment upon grounds other than defendant's absence in the Philippine territory. In its Resolution dated July 14, 1993, the Court found a prima facie case of fraud committed by defendant Chuidian, and that defendant has recovered or disposed of his property with the intent of defrauding plaintiff; (2) Chuidian's belated presence in the Philippines cannot be invoked to secure the lifting of attachment. The rule is specific that it applies to a party who is about to depart from the Philippines with intent to defraud his creditors. Chuidian's stay in the country is uncertain and he may leave at will because he holds a foreign passport; and (3) Chuidian's other ground, sufficiency of former PCGG Chairman Gunigundo's verification of the complaint, has been met fairly and squarely in the Resolution of July 14, 1993.28 Hence, the instant petition for certiorari contending that the respondent Sandiganbayan committed grave abuse of

discretion amounting to lack or excess of jurisdiction when it ruled that: 1) Most of the issues raised in the motion to lift attachment had been substantially addressed in the previous resolutions dated July 14, 1993 and August 26, 1998, while the rest were of no imperative relevance as to affect the Sandiganbayan's disposition; and 2) PNB was relieved of the obligation to pay on its own L/C by virtue of Presidential Proclamation No. 50. The Rules of Court specifically provide for the remedies of a defendant whose property or asset has been attached. As has been consistently ruled by this Court, the determination of the existence of grounds to discharge a writ of attachment rests in the sound discretion of the lower courts.29 The question in this case is: What can the herein petitioner do to quash the attachment of the L/C? There are two courses of action available to the petitioner: First. To file a counterbond in accordance with Rule 57, Section 12, which provides: SEC. 12. Discharge of attachment upon giving counterbond. At anytime 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 place of the property so released. Should such counterbond 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.1wphi1.nt or Second. To quash the attachment on the ground that it was irregularly or improvidently issued, as provided for in Section 13 of the same Rule: 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. After hearing, the judge shall order the discharge of the attachment if it appears that it was improperly or irregularly issued and the defect is not cured forthwith. It would appear that petitioner chose the latter because the grounds he raised assail the propriety of the issuance of the writ of attachment. By his own admission, however, he repeatedly acknowledged that his justifications to warrant the lifting of the attachment are facts or events that came to light or took place after the writ of attachment had already been implemented. More particularly, petitioner emphasized that four (4) years after the writ was issued, he had returned to the Philippines. Yet while he noted that he would have returned earlier but for the cancellation of his passport by the PCGG, he was not barred from returning to the Philippines. Then he informed the Sandiganbayan that while the case against him was pending, but after the attachment had already been executed, the government lost two (2) cases for fraud lodged against him before the U.S. Courts, thus invoking res judicata. Next, he also pointed out that the government is estopped from pursuing the case against him for failing to prosecute for the number of years that it had been pending litigation. It is clear that these grounds have nothing to do with the issuance of the writ of attachment. Much less do they attack the issuance of the writ at that time as improper or irregular. And yet, the rule contemplates that the defect must be in the very issuance of the attachment writ. For instance, the attachment may be discharged under Section 13 of Rule 57 when it is proven that the allegations of the complaint were deceptively framed,30 or when the complaint fails to state a cause of action.31 Supervening events which may or may not justify the discharge of the writ are not within the purview of this particular rule. In the instant case, there is no showing that the issuance of the writ of attachment was attended by impropriety or irregularity. Apart from seeking a reconsideration of the resolution granting the application for the writ, petitioner no longer questioned the writ itself. For four (4) long years he kept silent and did not exercise any of the remedies available to a defendant whose property or asset has been attached. It is rather too late in the day for petitioner to question the propriety of the issuance of the writ. Petitioner also makes capital of the two foreign judgments which he claims warrant the application of the principle of res judicata. The first judgment, in Civil Case Nos. 575867 and 577697 brought by Philguarantee before the Santa Clara Country Superior Court, denied Philguarantee's prayer to set aside the stipulated judgment wherein Philguarantee and Chuidian agreed on the subject attached L/C. On March 14, 1990, the Court of Appeal of the State of California affirmed the Superior Court's judgment. The said judgment became the subject of a petition for review by the California Supreme Court. There is no showing, however, of any final judgment by the California Supreme Court. The records, including petitioner's pleadings, are bereft of any evidence to show that there is a final foreign judgment which the Philippine courts must defer to. Hence, res judicata finds no application in this instance because it is a requisite that the former judgment or order must be final.32

Second, petitioner cites the judgment of the United States District Court in Civil Case 86-2255 RSWL brought by petitioner Chuidian against PNB to compel the latter to pay the L/C. The said Court's judgment, while it ruled in favor of petitioner on the matter of Philguarantee's action-in-intervention to set aside the settlement agreement, also ruled in favor of PNB, to wit: Under Executive Order No. 1, the PCGG is vested by the Philippine President with the power to enforce its directives and orders by contempt proceedings. Under Executive Order No. 2, the PCGG is empowered to freeze any, and all assets, funds and property illegally acquired by former President Marcos or his close friends and business associates. On March 11, 1986, PNB/Manila received an order from the PCGG ordering PNB to freeze any further drawings on the L/C. The freeze order has remained in effect and was followed by a sequestration order issued by the PCGG. Subsequently, Chuidian's Philippine counsel filed a series of challenges to the freeze and sequestration orders, which challenges were unsuccessful as the orders were found valid by the Philippine Supreme Court. The freeze and sequestration orders are presently in effect. Thus, under the PCGG order and Executive Orders Nos. 1 and 2, performance by PNB would be illegal under Philippine Law. Therefore PNB is excused from performance of the L/C agreement as long as the freeze and sequestration orders remain in effect. (Underscoring ours) xxx xxx xxx Chuidian argues that the fact that the L/C was issued pursuant to a settlement in California, that the negotiations for which occurred in California, and that two of the payments were made at PNB/LA, compels the conclusion that the act of prohibiting payment of the L/C occurred in Los Angeles. However, the majority of the evidence andTchacosh and Sabbatino compel the opposite conclusion. The L/C was issued in Manila, such was done at the request of a Philippine government instrumentality for the benefit of a Philippine citizen, the L/C was to be performed in the Philippines, all significant events relating to the issuance and implementation of the L/C occurred in the Philippines, the L/C agreement provided that the L/C was to be construed according to laws of the Philippines, and the Philippine government certainly has an interest in preventing the L/C from being remitted in that it would be the release of funds that are potentially illgotten gains. Accordingly, the Court finds that the PCGG orders are acts of state that must be respected by this Court, and thus PNB is excused from making payment on the L/C as long as the freeze and sequestration orders remain in effect.33 (Underscoring ours) Petitioner's own evidence strengthens the government's position that the L/C is under the jurisdiction of the Philippine government and that the U.S. Courts recognize the authority of the Republic to sequester and freeze said L/C. Hence, the foreign judgments relied upon by petitioner do not constitute a bar to the Republic's action to recover whatever alleged ill-gotten wealth petitioner may have acquired. Petitioner may argue, albeit belatedly, that he also raised the issue that there was no evidence of fraud on record other than the affidavit of PCGG Chairman Gunigundo. This issue of fraud, however, touches on the very merits of the main case which accuses petitioner of committing fraudulent acts in his dealings with the government. Moreover, this alleged fraud was one of the grounds for the application of the writ, and the

Sandiganbayan granted said application after it found a prima facie case of fraud committed by petitioner. In fine, fraud was not only one of the grounds for the issuance of the preliminary attachment, it was at the same time the government's cause of action in the main case. We have uniformly held that: x x x when the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty," or "an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought," 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 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.34 (Underscoring ours) Thus, this Court has time and again ruled that the merits of the action in which a writ of preliminary attachment has been issued are not triable on a motion for dissolution of the attachment, otherwise an applicant for the lifting of the writ could force a trial of the merits of the case on a mere motion.35 It is not the Republic's fault that the litigation has been protracted. There is as yet no evidence of fraud on the part of petitioner. Petitioner is only one of the twenty-three (23) defendants in the main action. As such, the litigation would take longer than most cases. Petitioner cannot invoke this delay in the proceedings as an excuse for not seeking the proper recourse in having the writ of attachment lifted in due time. If ever laches set in, it was petitioner, not the government, who failed to take action within a reasonable time period. Challenging the issuance of the writ of attachment four (4) years after its implementation showed petitioner's apparent indifference towards the proceedings before the Sandiganbayan. In sum, petitioner has failed to convince this Court that the Sandiganbayan gravely abused its discretion in a whimsical, capricious and arbitrary manner. There are no compelling reasons to warrant the immediate lifting of the attachment even as the main case is still pending. On the other hand, allowing the discharge of the attachment at this stage of the proceedings would put in jeopardy the right of the attaching party to realize upon the relief sought and expected to be granted in the main or principal action. It would have the effect of prejudging the main case. The attachment is a mere provisional remedy to ensure the safety and preservation of the thing attached until the plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction.36To discharge the attachment at this stage of the proceedings would render inutile any favorable judgment should the government prevail in the principal action against petitioner. Thus, the Sandiganbayan, in issuing the questioned resolutions, which are interlocutory in nature, committed no grave abuse of discretion amounting to

lack or excess of jurisdiction. As long as the Sandiganbayan acted within its jurisdiction, any alleged errors committed in the exercise of its jurisdiction will amount to nothing more than errors of judgment which are reviewable by timely appeal and not by special civil action of certiorari.37 Moreover, we have held that when the writ of attachment is issued upon a ground which is at the same time the applicant's cause of action, the only other way the writ can be lifted or dissolved is by a counterbond, in accordance with Section 12 of the same rule.38 This recourse, however, was not availed of by petitioner, as noted by the Solicitor General in his comment.39 To reiterate, there are only two ways of quashing a writ of attachment: (a) by filing a counterbond immediately; or (b) by moving to quash on the ground of improper and irregular issuance.40 These grounds for the dissolution of an attachment are fixed in Rule 57 of the Rules of Court and the power of the Court to dissolve an attachment is circumscribed by the grounds specified therein.41 Petitioner's motion to lift attachment failed to demonstrate any infirmity or defect in the issuance of the writ of attachment; neither did he file a counterbond. Finally, we come to the matter of depositing the Letter of Credit in an interest-bearing account. We agree with the Sandiganbayan that any interest that the proceeds of the L/C may earn while the case is being litigated would redound to the benefit of whichever party will prevail, the Philippine government included. Thus, we affirm the Sandiganbayan's ruling that the proceeds of the L/C should be deposited in an interest bearing account with the Land Bank of the Philippines for the account of the Sandiganbayan in escrow until ordered released by the said Court. We find no legal reason, however, to release the PNB from any liability thereunder. The Deed of Transfer, whereby certain liabilities of PNB were transferred to the national government, cannot affect the said L/C since there was no valid substitution of debtor. Article 1293 of the New Civil Code provides: Novation which consists in substituting a new debtor in the place of the original one, may be made without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237. Accordingly, any substitution of debtor must be with the consent of the creditor, whose consent thereto cannot just be presumed. Even though Presidential Proclamation No. 50 can be considered an "insuperable cause", it does not necessarily make the contracts and obligations affected thereby exceptions to the above-quoted law, such that the substitution of debtor can be validly made even without the consent of the creditor. Presidential Proclamation No. 50 was not intended to set aside laws that govern the very lifeblood of the nation's commerce and economy. In fact, the Deed of Transfer that was executed between PNB and the government pursuant to the said Presidential Proclamation specifically stated that it shall be deemed effective only upon compliance with several conditions, one of which requires that: (b) the BANK shall have secured such governmental and creditors' approvals as may be necessary to establish the consummation, legality and enforceability of the transactions contemplated hereby." The validity of this Deed of Transfer is not disputed. Thus, PNB is estopped from denying its liability thereunder

considering that neither the PNB nor the government bothered to secure petitioner's consent to the substitution of debtors. We are not unmindful that any effort to secure petitioner's consent at that time would, in effect, be deemed an admission that the L/C is valid and binding. Even the Sandiganbayan found that: 36 Sta. Ines Melale Forest Products Corp. v. Macaraig, Jr., 299 SCRA 491, 515 (1998). x x x Movant has basis in pointing out that inasmuch as the L/C was issued in his favor, he is presumed to be the lawful payee-beneficiary of the L/C until such time that the plaintiff successfully proves that said L/C is ill-gotten and he has no right over the same.42 In Republic v. Sandiganbayan,43 we held that the provisional remedies, such as freeze orders and sequestration, were not "meant to deprive the owner or possessor of his title or any right to the property sequestered, frozen or taken over and vest it in the sequestering agency, the Government or other person." Thus, until such time that the government is able to successfully prove that petitioner has no right to claim the proceeds of the L/C, he is deemed to be the lawful payeebeneficiary of said L/C, for which any substitution of debtor requires his consent. The Sandiganbayan thus erred in relieving PNB of its liability as the original debtor. WHEREFORE, in view of all the foregoing, the petition is DISMISSED. The Resolutions of the Sandiganbayan dated November 6, 1998 and July 2, 1999 are AFFIRMED. The PNB is DIRECTED to remit to the Sandiganbayan the proceeds of Letter of Credit No. SFD-005-85 in the amount of U.S. $4.4 million within fifteen (15) days from notice hereof, the same to be placed under special time deposit with the Land Bank of the Philippines, for the account of Sandiganbayan in escrow for the person or persons, natural or juridical, who shall eventually be adjudged lawfully entitled thereto, the same to earn interest at the current legal bank rates. The principal and its interest shall remain in said account until ordered released by the Court in accordance with law. No costs. SO ORDERED. Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur. G.R. No. 156580 June 14, 2004 LUZ DU vs. STRONGHOLD INSURANCE Promulgated: CO., INC., PANGANIBAN, J.: Preference is given to a duly registered attachment over a subsequent notice of lis pendens, even if the beneficiary of the notice acquired the subject property before the registration of the attachment. Under the torrens system, the auction sale of an attached realty retroacts to the date the levy was registered. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the March 19, 2002 Decision2 and the December 5, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 50884. The CA disposed as follows: "Parenthetically, when the decision in Civil Case No. 90-1848 became final and executory, levy on execution issued and the attached property sold at public auction, the latter retroacts to the date of the levy. Said the High Court:

In line with the same principle, it was held that where a preliminary attachment in favor of A was recorded on November 11, 1932, and the private sale of the attached property in favor of B was executed on May 29, 1933, the attachment lien has priority over the private sale, which means that the purchaser took the property subject to such attachment lien and to all of its consequences, one of which is the subsequent sale on execution (Tambao v. Suy, 52 Phil. 237). The auction sale being a necessary sequel to the levy, it enjoys the same preference as the attachment lien enjoys over the private sale. In other words, the auction sale retroacts to the date of the levy. [Were] the rule be otherwise, the preference enjoyed by the levy of execution would be meaningless and illusory(Capistrano v. Phil. Nat. Bank, 101 Phil. 1117). (Underscoring supplied) "By and large, We find no reversible error in the appealed decision. "IN VIEW OF ALL THE FOREGOING, the instant appeal is ordered DISMISSED. No pronouncement as to cost."4 The questioned Resolution, on the other hand, denied petitioners Motion for Reconsideration. The Facts The CA narrated the facts as follows: "x x x Aurora Olarte de Leon was the registered owner of Lot No. 10-A (LRC Psd 336366) per Transfer Certificate of Title No. 582/T-3. Sometime in January 1989, De Leon sold the property to Luz Du under a Conditional Deed of Sale wherein said vendee paid a down payment of P75,000.00 leaving a balance ofP95,000.00. "Then again, on April 28, 1989, Aurora de Leon sold [the] same property to spouses Enrique and Rosita Caliwag without prior notice to Luz Du. As a result, Transfer Certificate of Title No. 582/T-3 was cancelled and Transfer Certificate of Title No. 2200 was issued in favor of the Caliwag spouses. "Meanwhile, Stronghold Insurance Corp., Inc. x x x commenced Civil Case No. 90-1848 against spouses Rosita and Enrique Caliwag et al., for allegedly defrauding Stronghold and misappropriating the companys fund by falsifying and simulating purchases of documentary stamps. The action was accompanied by a prayer for a writ of preliminary attachment duly annotated at the back of Transfer Certificate of Title No. 2200 on August 7, 1990. "On her part, on December 21, 1990, Luz Du initiated Civil Case No. 60319 against Aurora de Leon and the spouses Caliwag for the annulment of the sale by De Leon in favor of the Caliwags, anchored on the earlier mentioned Deed of Conditional Sale. "On January 3, 1991, Luz Du caused the annotation of a Notice Of Lis Pendens at the back of Transfer Certificate of Title No. 2200. "On February 11, 1991, the decision was handed down in Civil Case No. 90-1848 in favor

of Stronghold,ordering the spouses Caliwag jointly and severally to pay the plaintiff P8,691,681.60, among others. When the decision became final and executory, on March 12, 1991, a notice of levy on execution was annotated on Transfer Certificate of Title No. 2200 and the attached property was sold in a public auction. On [August] 5, 1991,5 the certificate of sale and the final Deed of Sale in favor of Stronghold were inscribed and annotated leading to the cancellation of Transfer Certificate of Title No. 2200 and in lieu thereof, Transfer Certificate of Title No. 6444 was issued in the name of Stronghold. "It came to pass that on August 5, 1992, Luz Du too was able to secure a favorable judgment in Civil Case No. 60319 and which became final and executory sometime in 1993, as well. "Under the above historical backdrop, Luz Du commenced the present case (docketed as Civil Case No. 64645) to cancel Transfer Certificate of Title No. 6444 in the name of Stronghold with damages claiming priority rights over the property by virtue of her Notice Of Lis Pendens under Entry No. 13305 and inscribed on January 3, 1991, and the final and executory decision in Civil Case No. 60319 she filed against spouses Enrique and Rosita Caliwag. According to Luz Du, despite her said notice of lis pendens annotated,Stronghold still proceeded with the execution of the decision in Civil Case No. 90-1848 against the subject lot and ultimately the issuance of Transfer Certificate of Title No. 6444 in its (Strongholds) name."6 The trial court ruled that Stronghold had superior rights over the property because of the prior registration of the latters notice of levy on attachment on Transfer Certificate of Title (TCT) No. 2200. For this reason, it found no basis to nullify TCT No. 6444, which was issued in the name of respondent after the latter had purchased the property in a public auction. Ruling of the Court of Appeals Sustaining the trial court in toto, the CA held that Strongholds notice of levy on attachment had been registered almost five (5) months before petitioners notice of lis pendens. Hence, respondent enjoyed priority in time. Such registration, the appellate court added, constituted constructive notice to petitioner and all third persons from the time of Strongholds entry, as provided under the Land Registration Act -- now the Property Registration Decree. The CA also held that respondent was a purchaser in good faith. The necessary sequels of execution and sale retroacted to the time when Stronghold registered its notice of levy on attachment, at a time when there was nothing on TCT No. 2200 that would show any defect in the title or any adverse claim over the property. Hence, this Petition.7 Issues Petitioner submits the following issues for our consideration: "I."Whether a Notice of Levy on Attachment on the property is a superior lien over that of the unregistered right of a buyer of a property in possession pursuant to a Deed of Conditional Sale. "II."Whether the acquisition of the subject property by Respondent Stronghold was tainted with bad faith."8

The Courts Ruling The Petition has no merit. Main Issue: Superiority of Rights Petitioner submits that her unregistered right over the property by way of a prior conditional sale in 1989 enjoys preference over the lien of Stronghold -- a lien that was created by the registration of respondents levy on attachment in 1990. Maintaining that the ruling in Capistrano v. PNB was improperly applied by the Court of Appeals, petitioner avers that unlike the circumstances in that case, the property herein had been sold to herbefore the levy. We do not agree. The preference given to a duly registered levy on attachment or execution over a prior unregistered sale is wellsettled in our jurisdiction. As early as Gomez v. Levy Hermanos,9 this Court has held that an attachment that is duly annotated on a certificate of title is superior to the right of a prior but unregistered buyer. In that case, the Court explained as follows: "x x x. It is true that she bought the lots with pacto de retro but the fact of her purchase was not noted on the certificates of title until long after the attachment and its inscription on the certificates. In the registry, therefore, the attachment appeared in the nature of a real lien when Apolonia Gomez had her purchase recorded. The legal effect of the notation of said lien was to subject and subordinate the right of Apolonia Gomez, as purchaser, to the lien. She acquired the ownership of the said parcels only from the date of the recording of her title in the register, which took place on November 21, 1932 (sec. 51 of Act No. 496; LiongWong-Shih vs. Sunico and Peterson, 8 Phil. 91; Tabigue vs. Green, 11 Phil. 102; Buzon vs. Lucauco, 13 Phil. 354; and Worcester vs. Ocampo and Ocampo, 34 Phil. 646), and the right of ownership which she inscribed was not an absolute but a limited right, subject to a prior registered lien, by virtue of which Levy Hermanos, Inc. was entitled to the execution of the judgment credit over the lands in question, a right which is preferred and superior to that of the plaintiff (sec, 51, Act No. 496 and decisions cited above). x x x"10 Indeed, the subsequent sale of the property to the attaching creditor must, of necessity, retroact to the date of the levy. Otherwise, the preference created by the levy would be meaningless and illusory, as reiterated in Defensor v. Brillo:11 "x x x. The doctrine is well-settled that a levy on execution duly registered takes preference over a prior unregistered sale; and that even if the prior sale is subsequently registered before the sale in execution but after the levy was duly made, the validity of the execution sale should be maintained, because it retroacts to the date of the levy; otherwise, the preference created by the levy would be meaningless and illusory. "Even assuming, therefore, that the entry of appellants sales in the books of the Register of Deeds on November 5, 1949 operated to convey the lands to them even without the corresponding entry in the owners duplicate titles, the levy on execution on the same lots in Civil Case No. 1182 on August 3, 1949, and their subsequent sale to appellee Brillo (which retroacts to the date of the levy) still takes precedence over and

must be preferred to appellants deeds of sale which were registered only on November 5, 1949. "This result is a necessary consequence of the fact that the properties herein involved were duly registered under Act No. 496, and of the fundamental principle that registration is the operative act that conveys and binds lands covered by Torrens titles (sections 50, 51, Act 496). Hence, if appellants became owners of the properties in question by virtue of the recording of the conveyances in their favor, their title arose already subject to the levy in favor of the appellee, which had been noted ahead in the records of the Register of Deeds."12 (Citations omitted, italics supplied) The Court has steadfastly adhered to the governing principle set forth in Sections 51 and 52 of Presidential Decree No. 1529:13 "SEC. 51. Conveyance and other dealings by registered owner. - An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Registry of Deeds to make registration. "The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or the city where the land lies. "SEC. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering."(Italics supplied)1avvphil.net As the property in this case was covered by the torrens system, the registration of Strongholds attachment14 was the operative act that gave validity to the transfer and created a lien upon the land in favor of respondent.15 Capistrano Ruling Correctly Applied The preference created by the levy on attachment is not diminished even by the subsequent registration of the prior sale.16 That was the import of Capistrano v. PNB,17 which held that precedence should be given to a levy on attachment or execution, whose registration was before that of the prior sale. In Capistrano, the sale of the land in question -- though made as far back as 1946 -- was registered only in 1953, after the property had already been subjected to a levy on execution by the Philippine National Bank. The present case is not much different. The stipulation of facts shows that Stronghold had already registered its levy on attachment before petitioner

annotated her notice of lis pendens. As in Capistrano, she invokes the alleged superior right of a prior unregistered buyer to overcome respondents lien. If either the third-party claim or the subsequent registration of the prior sale was insufficient to defeat the previously registered attachment lien, as ruled by the Court in Capistrano, it follows that a notice of lis pendens is likewise insufficient for the same purpose. Such notice does not establish a lien or an encumbrance on the property affected. 18 As the name suggests, a notice of lis pendens with respect to a disputed property is intended merely to inform third persons that any of their transactions in connection therewith -- if entered into subsequent to the notation -- would be subject to the result of the suit. In view of the foregoing, applied Capistrano, as follows: the CA correctly

SO ORDERED.Davide, Carpio, and Azcuna, JJ., concur. G.R. No. 154106 June 29, 2004

Jr., Ynares-Santiago,

D.M. WENCESLAO and ASSOCIATES, INC., and/or DOMINADOR S. DAYRIT vs. READYCON TRADING AND CONSTRUCTION CORP. QUISUMBING, J.: This petition for review assails the decision1 of the Court of Appeals, dated January 30, 2002, as well as its resolution2 dated June 20, 2002 in CA-GR CV No. 49101, denying petitioners motion for reconsideration. The appellate court affirmed the decision3 of the Regional Trial Court of Pasig City, Branch 165, in Civil Case No. 61159, ordering petitioners to pay the sum of P1,014,110.45 with interest rate of 12% per annum (compounded annually) from August 9, 1991, the date of filing of the complaint, until fully paid to Readycon Trading and Construction Corp., plus damages. Petitioner D.M. Wenceslao and Associates, Inc. (WENCESLAO, for brevity) is a domestic corporation, organized under and existing pursuant to Philippine laws, engaged in the construction business, primarily infrastructure, foundation works, and subdivision development. Its co-petitioner, Dominador Dayrit, is the vice-president of said company.4 Respondent Readycon Trading and Construction Corporation (READYCON, for brevity) is likewise a corporate entity organized in accordance with Philippine laws. Its primary business is the manufacture and sale of asphalt materials.5 The facts of this case are not in dispute. WENCESLAO had a contract with the Public Estates Authority (PEA) for the improvement of the main expressway in the R-1 Toll Project along the Coastal Road in Paraaque City. To fulfill its obligations to the PEA, WENCESLAO entered into a contract with READYCON on April 16, 1991. READYCON agreed to sell to WENCESLAO asphalt materials valued at P1,178,308.75. The contract bore the signature of copetitioner Dominador Dayrit, as signatory officer for WENCESLAO in this agreement. Under the contract, WENCESLAO was bound to pay respondent a twenty percent (20%) downpayment, or P235,661.75, upon delivery of the materials contracted for. The balance of the contract price, amounting to P942,647, was to be paid within fifteen (15) days thereof. It was further stipulated by the parties that respondent was to furnish, deliver, lay, roll the asphalt, and if necessary, make the needed corrections on a prepared base at the jobsite.6 On April 22, 1991, READYCON delivered the assorted asphalt materials worth P1,150,531.75. Accordingly, WENCESLAO paid the downpayment of P235,661.75 to READYCON. Thereafter, READYCON performed its obligation to lay and roll the asphalt materials on the jobsite.7 Fifteen (15) days after performance of said work, READYCON demanded that WENCESLAO pay the balance of the contract price. WENCESLAO, however, ignored said demand. On May 30, 1991, the counsel for READYCON wrote a demand letter to WENCESLAO asking that it make good on the balance it owed. Again, WENCESLAO failed to heed the demand. It did not even bother to reply to the demand letter.8 In view of this development, on July 19, 1991, READYCON filed a complaint with the Regional Trial Court of Pasig City for collection of a sum of money and damages, with prayer for writ of preliminary attachment against D.M. Wenceslao and/or

"x x x the rule now followed is that if the attachment or levy of execution, though posterior to the sale, is registered before the sale is registered, it takes precedence over the latter. "The rule is not altered by the fact that at the time of the execution sale the Philippine National Bank had information that the land levied upon had already been deeded by the judgment debtor and his wife to Capistrano. The auction sale being a necessary sequel to the levy, for this was effected precisely to carry out the sale, the purchase made by the bank at said auction should enjoy the same legal priority that the levy had over the sale in favor of plaintiff. In other words, the auction sale retroacts to the date of the levy. Were the rule otherwise, the preference enjoyed by the levy of execution in a case like the present would be meaningless and illusory."19 (Citations omitted, italics supplied) Second Issue: Taking in Bad Faith We now tackle the next question of petitioner: whether Stronghold was a purchaser in good faith. Suffice it to say that when Stronghold registered its notice of attachment, it did not know that the land being attached had been sold to petitioner. It had no such knowledge precisely because the sale, unlike the attachment, had not been registered. It is settled that a person dealing with registered property may rely on the title and be charged with notice of only such burdens and claims as are annotated thereon.20 This principle applies with more force to this case, absent any allegation or proof that Stronghold had actual knowledge of the sale to petitioner before the registration of its attachment. Thus, the annotation of respondents notice of attachment was a registration in good faith, the kind that made its prior right enforceable.21 Moreover, it is only after the notice of lis pendens is inscribed in the Office of the Register of Deeds that purchasers of the property become bound by the judgment in the case. As Stronghold is deemed to have acquired the property -- not at the time of actual purchase but at the time of the attachment -- it was an innocent purchaser for value and in good faith. WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner.

Dominador Dayrit, docketed as Civil Case No. 61159. READYCON demanded payment ofP1,014,110.45 from petitioners herein with P914,870.75 as the balance of contract price, as well as payment ofP99,239.70, representing another unpaid account.9 As READYCON timely posted the required bond of P1,150,000, its application for the writ of preliminary attachment was granted. On September 5, 1991, the RTC Sheriff attached certain assets of WENCESLAO, particularly, the following heavy equipments: One (1) asphalt paver, one (1) bulldozer, one (1) dozer and one (1) grader.10 On September 16, 1991, WENCESLAO moved for the release of the attached equipments and posted its counter-bond. The trial court granted the motion and directed the RTC Sheriff to return the attached equipments. On September 25, 1991, the Sheriff released the attached heavy machineries to WENCESLAO.11 In the proceedings below, WENCESLAO admitted that it owed READYCON P1,014,110.45 indeed. However, it alleged that their contract was not merely one of sale but also of service, namely, that respondent shall lay the asphalt in accordance with the specifications and standards imposed by and acceptable to the government. WENCESLAO also alleged that since the contract did not indicate this condition with respect to the period within which the balance must be paid, the contract failed to reflect the true intention of the parties.12 It alleged READYCON agreed that the balance in the payments would be settled only after the government had accepted READYCONs work as to its quality in laying the asphalt. By way of counterclaim, WENCESLAO prayed for the payment of damages caused by the filing of READYCONs complaint and the issuance of the writ of attachment despite lack of cause.13 On December 26, 1994, the RTC rendered judgment in this wise: WHEREFORE, judgment is hereby rendered ordering the defendant D.M. Wenceslao & Associates, Inc. to pay plaintiff as follows: 1. The amount of P1,014,110.45 with interest at the rate of 12% per annum (compounded annually) from August 9, 1991, date of filing of the complaint, until fully paid. 2. The amount of P35,000.00 as and for attorneys fees and expenses of litigation. 3. Costs of suit. The counterclaim of the defendants is dismissed for lack of merit.14 Dissatisfied with the decision, the petitioners appealed to the Court of Appeals. The appellate court, however, affirmed in toto the decision of the lower court.15 In denying the appeal, the appellate court found that contrary to WENCESLAOs assertion, malice and bad faith in obtaining a writ of attachment must be proved before a claim for damages on account of wrongful attachment will prosper, citing Philippine Commercial International Bank v. Intermediate Appellate Court, 196 SCRA 29 (1991). The CA stressed that the trial court found neither malice nor bad faith relative to the filing of the complaint and the obtaining of the writ of attachment. Also, according to the CA, petitioners did not

adduce evidence to show that the attachment caused damage to the cited pieces of heavy equipment.16 The appellate court also found that the trial court correctly interpreted the period for payment of the balance. It held that the text of the stipulation that the balance shall be paid within fifteen days is clear and unmistakable. Granting that the sales contract was not merely for supply and delivery but also for service, the balance was already due and demandable when demand was made on May 30, 1991, which was a month after READYCON performed its obligation.17 Hence, the instant petition, wherein petitioners raise the following issues: 1. WHETHER OR NOT QUESTIONS OF FACTS ARE RAISED IN THE APPEAL BY CERTIORARI; 2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENT LIABLE FOR COMPENSATORY DAMAGES FOR THE WRONGFUL ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT; 3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THE OBLIGATION [AS] NOT YET DUE AND DEMANDABLE.18 We find proper for resolution two issues: (1) Is respondent READYCON liable to petitioner WENCESLAO for damages caused by the issuance and enforcement of the writ of preliminary attachment? (2) Was the obligation of WENCESLAO to pay READYCON already due and demandable as of May 30, 1991? On the first issue, petitioners rely mainly on Lazatin v. Twano and Castro, 112 Phil. 733 (1961), reiterated in MC Engineering v. Court of Appeals, 380 SCRA 116 (2002). In Lazatin, we held that actual or compensatory damages may be recovered for wrongful, though not malicious, attachment. Lazatin also held that attorneys fees may be recovered under Article 2208 of the Civil Code.19 Petitioners contend that Lazatin applies in the instant case because the wrongful attachment of WENCESLAOs equipment resulted in a paralysis of its operations, causing it to sustain a loss of P100,000 per day in terms of accomplishment of work. Since the attachment lasted 19 days it suffered a total loss of P1.9 million. Aside from that, it had to spend P50,000 on the pullout of the equipment and another P100,000 to repair and restore them to their former working condition.20 Respondent counters that inasmuch as a preliminary attachment is an available ancillary remedy under the rules, a penalty cannot be meted out for the enforcement of a right, such as in this case when it sought such relief. It stresses that the writ was legally issued by the RTC, upon a finding that READYCON sought the relief without malice or bad faith. Furthermore, WENCESLAO failed to show concrete and credible proof of the damages it suffered. The issuance of a writ and its enforcement entail a rigorous process where the court found that it was not attended by malice or bad faith. It cites Mindanao Savings and Loan Association v. Court of Appeals, 172 SCRA 480 (1989), to the effect where a counter-bond is filed, the right to question the irregularity and propriety of the writ of attachment must be deemed waived since the ground for the issuance of the writ forms the core of the complaint.21

We find for the respondent on this issue. However, its reliance upon Mindanao Savings and Loan Association is misplaced. It is to be stressed that the posting of a counter-bond is not tantamount to a waiver of the right to damages arising from a wrongful attachment. This we have made clear in previous cases, e.g., Calderon v. Intermediate Appellate Court,22 where we ruled that: 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 party creditor instead of the other way, which in most instances like in the present case, would require presentation of evidence in a fullblown trial on the merits and cannot easily be settled in a pending incident of the case.23 The point in Mindanao Savings, alluded to by respondent, pertained to the propriety of questioning the writ of attachment by filing a motion to quash said writ, after a counter-bond had been posted by the movant. But nowhere in Mindanao Savings did we rule that filing a counter-bond is tantamount to a waiver of the right to seek damages on account of the impropriety or illegality of the writ. We note that the appellate court, citing Philippine Commercial & Industrial Bank, 196 SCRA 29 (1991), stressed that bad faith or malice must first be proven as a condition sine qua non to the award of damages. The appellate court appears to have misread our ruling, for pertinently what this Court stated was as follows: The silence of the decision in GR No. 55381 on whether there was bad faith or malice on the part of the petitioner in securing the writ of attachment does not mean the absence thereof. Only the legality of the issuance of the writ of attachment was brought in issue in that case. Hence, this Court ruled on that issue without a pronouncement that procurement of the writ was attended by bad faith. Proof of bad faith or malice in obtaining a writ of attachment need be proved only in the claim for damages on account of the issuance of the writ. We affirm the finding of the respondent appellate court that malice and bad faith attended the application by PCIB of a writ of attachment.24 Plainly, we laid no hard and fast rule that bad faith or malice must be proved to recover any form of damages. InPhilippine Commercial & Industrial Bank, we found bad faith and malice to be present, thereby warranting the award of moral and exemplary damages. But we denied the award of actual damages for want of evidence to show said damages. For the mere existence of malice and bad faith would not per

se warrant the award of actual or compensatory damages. To grant such damages, sufficient proof thereon is required. Petitioners cite Lazatin and MC Engineering insofar as proof of bad faith and malice as prerequisite to the claim of actual damages is dispensed with. Otherwise stated, in the present case, proof of malice and bad faith are unnecessary because, just like in Lazatin and MC Engineering, what is involved here is the issue of actual and compensatory damages. Nonetheless, we find that petitioner is not entitled to an award of actual or compensatory damages. Unlike Lazatin and MC Engineering, wherein the respective complaints were dismissed for being unmeritorious, the writs of attachment were found to be wrongfully issued, in the present case, both the trial and the appellate courts held that the complaint had merit. Stated differently, the two courts found READYCON entitled to a writ of preliminary attachment as a provisional remedy by which the property of the defendant is taken into custody of the law as a security for the satisfaction of any judgment which the plaintiff may recover.25 Rule 57, Section 4 of the 1997 Rules of Civil Procedure states that: SEC. 4. Condition of applicants bond. - The party applying for the order must thereafter give a bond executed to the adverse party in the amount fixed by the court in its order granting the issuance of the writ, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto (italics for emphasis). In this case, both the RTC and the Court of Appeals found no reason to rule that READYCON was not entitled to issuance of the writ. Neither do we find now that the writ is improper or illegal. If WENCESLAO suffered damages as a result, it is merely because it did not heed the demand letter of the respondent in the first place. WENCESLAO could have averted such damage if it immediately filed a counter-bond or a deposit in order to lift the writ at once. It did not, and must bear its own loss, if any, on that account. On the second issue, WENCESLAO admits that it indeed owed READYCON the amount being claimed by the latter. However, it contends that while the contract provided that the balance was payable within fifteen (15) days, said agreement did not specify when the period begins to run. Therefore, according to petitioner, the appellate court erred when it held the contract clear enough to be understood on its face. WENCESLAO insists that the balance of the purchase price was payable only "upon acceptance of the work by the government." In other words, the real intent of the parties was that it shall be due and demandable only fifteen days after acceptance by the government of the work. This is common practice, according to petitioner. Respondent argues that the stipulation in the sales contract is very clear that it should be paid within fifteen (15) days without any qualifications and conditions. When the terms of a contract are clear and readily understandable, there is no room for construction. Even so, the contention was mooted and rendered academic when, a few days after institution of the complaint, the government accepted the work but WENCESLAO still failed to pay respondent.

Under Article 1582 of the Civil Code, the buyer is obliged to pay the price of the thing sold at the time stipulated in the contract. Both the RTC and the appellate court found that the parties contract stated that the buyer shall pay the manufacturer the amount of P1,178,308.75 in the following manner: 20% downpayment - P235,661.75 Balance payable within fifteen (15) days P942,647.00 Following the rule on interpretation of contracts, no other evidence shall be admissible other than the original document itself,26 except when a party puts in issue in his pleading the failure of the written agreement to express the true intent of the parties.27 This was what the petitioners wanted done. However, to rule on whether the written agreement failed to express the true intent of the parties would entail having this Court reexamine the facts. The findings of the trial court as affirmed by the appellate court on this issue, however, bind us now. For in a petition for certiorari under Rule 45 of the 1997 Rules of Civil Procedure, this Court may not review the findings of fact all over again. Suffice it to say, however, that the findings by the RTC, then affirmed by the CA, that the extra condition being insisted upon by the petitioners is not found in the sales contract between the parties. Hence it cannot be used to qualify the reckoning of the period for payment. Besides, telling against petitioner WENCESLAO is its failure still to pay the unpaid account, despite the fact of the works acceptance by the government already. With submissions of the parties carefully considered, we find no reason to warrant a reversal of the decisions of the lower courts. But since Dominador Dayrit merely acted as representative of D.M. Wenceslao and Associates, Inc., in signing the contract, he could not be made personally liable for the corporations failure to comply with its obligation thereunder. Petitioner WENCESLAO is properly held liable to pay respondent the sum of P1,014,110.45 with interest rate of 12% per annum (compounded annually) from August 9, 1991, the date of filing of the complaint, until fully paid, plus damages. WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV No. 49101, affirming the judgment of the Regional Trial Court of Pasig City, Branch 165, in Civil Case No. 61159, are AFFIRMED. No pronouncement as to costs. SO ORDERED. Puno, Sr., and Tinga, JJ., concur. G.R. No. 166759 Austria-Martinez*, Callejo,

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-squaremeter property owned by a certain Rustica Aledia, for P35,000,000.00. Petitioners alleged that Nicanor was supposed to remit to them the total amount ofP28,000,000.00 or P9,333,333.00 each to Sofia, Fructosa, and the heirs of Mario. Petitioners claimed that Solar has already paid the entire purchase price of P35,000,000.00 to Nicanor in Thirty-Two (32) post-dated checks which the latter encashed/deposited on their respective due dates. Petitioners added that they also learned that during the period from January 2000 to April 2002, Nicanor allegedly acquired a house and lot at Vista Grande BF Resort Village, Las Pias City and a car, which he registered in the names of his unemployed children, Nikki Normel Satsatin and Nikki Norlin Satsatin. However, notwithstanding the receipt of the entire payment for the subject property, Nicanor only remitted the total amount of P9,000,000.00, leaving an unremitted balance of P19,000,000.00. Despite repeated verbal and written demands, Nicanor failed to remit to them the balance of P19,000,000.00. Consequently, on October 25, 2002, petitioners filed before the regional trial court (RTC) a Complaint7 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 Order9 directing the petitioners to post a bond in the amount ofP7,000,000.00 before the court issues the writ of attachment, the dispositive portion of which reads as follows: WHEREFORE, premises considered, and finding the present complaint and motion sufficient in form and substance, this Court hereby directs the herein plaintiffs to post a bond, pursuant to Section 3, Rule 57 of the 1997 Rules of Civil Procedure, in the amount of Seven Million Pesos (P7,000,000.00), before the Writ of Attachment 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

November 25, 2009

SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR RESOURCES, INC. vs. NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and NIKKI NORLIN SATSATIN, PERALTA, J.: This is a petition for review on certiorari assailing the Decision1 dated November 23, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 83595, and its Resolution2 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,

be deputized to serve the writ of attachment that would be issued by the court. In the Order12 dated November 15, 2002, the RTC granted the above motion and deputized the sheriff, together with police security assistance, to serve the writ of attachment. Thereafter, the RTC issued a Writ of Attachment13 dated November 15, 2002, directing the sheriff to attach the estate, real or personal, of the respondents, the decretal portion of which reads: 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 Attachment18anchored on the following grounds: the bond was issued before the issuance of the writ of attachment; the writ of attachment was issued before the summons was received by the respondents; the sheriff did not serve copies of the application for attachment, order of attachment, plaintiffs affidavit, and attachment bond, to the respondents; the sheriff did not submit a 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 Order20 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 Order22 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, 23which the RTC denied in an Order24 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 Order26 dated March 3, 2004. Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and Prohibition with Preliminary Injunction and Temporary Restraining Order27 under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 83595, anchored on the following grounds: (1) public respondents committed grave abuse of discretion amounting to lack of or in excess of jurisdiction in failing to notice that the lower court has no jurisdiction over the person and subject matter of the complaint when the subject Writ of Attachment was issued; (2) public respondents committed grave abuse of discretion amounting to lack of or in excess of jurisdiction in granting the issuance of the Writ of Attachment despite non-compliance with the formal requisites for the issuance of the bond and the Writ of Attachment.28 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,31 but it was denied in the Resolution32 dated January 18, 2005. Hence, this petition assigning the following errors: I. THE HONORABLE COURT OF APPEALS ERRED IN ORDERING THE LIFTING OF THE WRIT OF ATTACHMENT PURSUANT TO SECTION 13, RULE 57 OF THE REVISED RULES OF CIVIL PROCEDURE. II. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN GRANTING THE WRIT OF ATTACHMENT DESPITE THE BOND BEING INSUFFICIENT AND HAVING BEEN IMPROPERLY ISSUED. III. THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING THE PETITION BY REASON OF ESTOPPEL, LACHES AND PRESCRIPTION AND IN HOLDING THAT THE WRIT OF ATTACHMENT WAS IMPROPERLY AND IRREGULARLY ENFORCED IN VIOLATION OF SECTION 5, RULE 57 OF THE REVISED RULES OF COURT. IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRINCIPLE OF ESTOPPEL WILL NOT LIE AGAINST RESPONDENTS. Petitioners maintain that in the case at bar, as in the case of FCY Construction Group, Inc. v. Court of Appeals,33the 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 Certification34 issued by the Office of the Administrator and the Certifications35 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 Certification39 issued by the Office of the Court Administrator (OCA) at the time the bond was issued would clearly show that the bonds offered by Western Guaranty Corporation may be accepted only in the RTCs of the cities of Makati, Pasay, and Pasig. Therefore, the surety bond issued by the bonding company should not have been accepted by the RTC of 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 abovementioned 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 thesummons 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.1avvphi1

Further, petitioners contention that respondents are barred by estoppel, laches, and prescription from questioning the orders of the RTC issuing the writ of attachment and that the issue has become moot and academic by the renewal of the attachment bond covering after its expiration, is devoid of merit. As correctly held by the CA: There are two ways of discharging the attachment. First, to file a counter-bond in accordance with Section 12 of Rule 57. Second[,] [t]o quash the attachment on the ground that it was irregularly or improvidently issued, as provided for in Section 13 of the same rule. Whether the attachment was discharged by either of the two ways indicated in the law, the attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. The filing of a counter-bond is merely a speedier way of discharging the attachment writ instead of the other 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. SO ORDERED.DIOSDADO M. PERALTA Associate Justice G.R. No. 171741 November 27, 2009 METRO, INC. and SPOUSES FREDERICK JUAN and LIZA JUAN, vs. LARA'S GIFTS AND DECORS, INC., LUIS VILLAFUERTE, JR. and LARA MARIA R. VILLAFUERTE, CARPIO, J.: The Case This is a petition for review1 of the 29 September 2004 Decision2 and 2 March 2006 Resolution3 of the Court of Appeals in CA-G.R. SP No. 79475. In its 29 September 2004 Decision, the Court of Appeals granted the petition for certiorari of respondents Laras Gifts and Decors, Inc., Luis Villafuerte, Jr., and Lara Maria R. Villafuerte (respondents). In its 2 March 2006 Resolution, the Court of Appeals denied the motion for reconsideration of petitioners Metro, Inc., Frederick Juan and Liza Juan (petitioners). The Facts Laras Gifts and Decors Inc. (LGD) and Metro, Inc. are corporations engaged in the business of manufacturing, producing, selling and exporting handicrafts. Luis Villafuerte, Jr. and Lara Maria R. Villafuerte are the president and vicepresident of LGD respectively. Frederick Juan and Liza Juan are the principal officers of Metro, Inc. Sometime in 2001, petitioners and respondents agreed that respondents would endorse to petitioners purchase orders received by respondents from their buyers in the United States

of America in exchange for a 15% commission, to be shared equally by respondents and James R. Paddon (JRP), LGDs agent. The terms of the agreement were later embodied in an e-mail labeled as the "2001 Agreement."4 In May 2003, respondents filed with the Regional Trial Court, Branch 197, Las Pias City (trial court) a complaint against petitioners for sum of money and damages with a prayer for the issuance of a writ of preliminary attachment. Subsequently, respondents filed an amended complaint5 and alleged that, as of July 2002, petitioners defrauded them in the amount of $521,841.62. Respondents also prayed for P1,000,000 as moral damages,P1,000,000 as exemplary damages and 10% of the judgment award as a ttorneys fees. Respondents also prayed for the issuance of a writ of preliminary attachment. In its 23 June 2003 Order,6 the trial court granted respondents prayer and issued the writ of attachment against the properties and assets of petitioners. The 23 June 2003 Order provides: WHEREFORE, let a Writ of Preliminary Attachment issue against the properties and assets of Defendant METRO, INC. and against the properties and assets of Defendant SPOUSES FREDERICK AND LIZA JUAN not exempt from execution, as may be sufficient to satisfy the applicants demand of US$521,841.62 US Dollars or its equivalent in Pesos upon actual attachment, which is about P27 Million, unless such Defendants make a deposit or give a bond in an amount equal to P27 Million to satisfy the applicants demand exclusive of costs, upon posting by the Plaintiffs of a Bond for Preliminary Attachment in the amount of twenty five million pesos (P25,000,000.00), subject to the approval of this Court. SO ORDERED.7 On 26 June 2003, petitioners filed a motion to discharge the writ of attachment. Petitioners argued that the writ of attachment should be discharged on the following grounds: (1) that the 2001 agreement was not a valid contract because it did not show that there was a meeting of the minds between the parties; (2) assuming that the 2001 agreement was a valid contract, the same was inadmissible because respondents failed to authenticate it in accordance with the Rules on Electronic Evidence; (3) that respondents failed to substantiate their allegations of fraud with specific acts or deeds showing how petitioners defrauded them; and (4) that respondents failed to establish that the unpaid commissions were already due and demandable. After considering the arguments of the parties, the trial court granted petitioners motion and lifted the writ of attachment. The 12 August 2003 Order8 of the trial court provides: Premises considered, after having taken a second hard look at the Order dated June 23, 2003 granting p laintiffs application for the issuance of a writ of preliminary attachment, the Court holds that the issuance of a writ of preliminary attachment in this case is not justified. WHEREFORE, the writ of preliminary attachment issued in the instant case is hereby ordered immediately discharged and/or lifted. SO ORDERED.9 Respondents filed a motion for reconsideration. In its 10 September 2003 Order, the trial court denied the motion.

Respondents filed a petition for certiorari before the Court of Appeals. Respondents alleged that the trial court gravely abused its discretion when it ordered the discharge of the writ of attachment without requiring petitioners to post a counterbond. In its 29 September 2004 Decision, the Court of Appeals granted respondents petition. The 29 September 2004 Decision provides: WHEREFORE, finding merit in the petition, We GRANT the same. The assailed Orders are hereby ANNULLED and SET ASIDE. However, the issued Writ of Preliminary Attachment may be ordered discharged upon the filing by the private respondents of the proper counter-bond pursuant to Section 12, Rule 57 of the Rules of Civil Procedure. SO ORDERED.10 Petitioners filed a motion for reconsideration. In its 2 March 2006 Resolution, the Court of Appeals denied the motion. Hence, this petition. The 12 August 2003 Order of the Trial Court According to the trial court, respondents failed to sufficiently show that petitioners were guilty of fraud either in incurring the obligation upon which the action was brought, or in the performance thereof. The trial court found no proof that petitioners were motivated by malice in entering into the 2001 agreement. The trial court also declared that petitioners failure to fully comply with their obligation, absent other facts or circumstances to indicate evil intent, does not automatically amount to fraud. Consequently, the trial court ordered the discharge of the writ of attachment for lack of evidence of fraud. The 29 September 2004 Decision of the Court of Appeals According to the Court Appeals, the trial court gravely abused its discretion when it ordered the discharge of the writ of attachment without requiring petitioners to post a counterbond. The Court of Appeals said that when the writ of attachment is issued upon a ground which is at the same time also the applicants cause of action, courts are precluded from hearing the motion for dissolution of the writ when such hearing would necessarily force a trial on the merits of a case on a mere motion.11 The Court of Appeals pointed out that, in this case, fraud was not only alleged as the ground for the issuance of the writ of attachment, but was actually the core of respondents complaint. The Court of Appeals declared that the only way that the writ of attachment can be discharged is by posting a counter-bond in accordance with Section 12,12 Rule 57 of the Rules of Court. The Issue Petitioners raise the question of whether the writ of attachment issued by the trial court was improperly issued such that it may be discharged without the filing of a counter-bond. The Ruling of the Court The petition has no merit. Petitioners contend that the writ of attachment was improperly issued because respondents amended complaint failed to allege specific acts or circumstances constitutive of fraud. Petitioners insist that the improperly issued writ of attachment may be discharged without the necessity of filing a counter-bond. Petitioners also argue that respondents failed to show that the writ of attachment was issued upon a ground which is at the same time also respondents cause of action. Petitioners maintain that respondents amended complaint was

not an action based on fraud but was a simple case for collection of sum of money plus damages. On the other hand, respondents argue that the Court of Appeals did not err in ruling that the writ of attachment can only be discharged by filing a counter-bond. According to respondents, petitioners cannot avail of Section 13,13 Rule 57 of the Rules of Court to have the attachment set aside because the ground for the issuance of the writ of attachment is also the basis of respondents amended complaint. Respondents assert that the amended complaint is a complaint for damages for the breach of obligation and acts of fraud committed by petitioners.1 a vv p h i 1 In this case, the basis of respondents application for the issuance of a writ of preliminary attachment is Section 1(d), Rule 57 of the Rules of Court which provides: SEC. 1. Grounds upon which attachment may issue. At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that maybe recovered in the following cases: x x x (d) In an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof; x x x In Liberty Insurance Corporation v. Court of Appeals,14 we explained: To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1(d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case.15 The applicant for a writ of preliminary attachment must sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtors mere non-payment of the debt or failure to comply with his obligation.16 In their amended complaint, respondents alleged the following in support of their prayer for a writ of preliminary attachment: 5. Sometime in early 2001, defendant Frederick Juan approached plaintiff spouses and asked them to help defendants export business. Defendants enticed plaintiffs to enter into a business deal. He proposed to plaintiff spouses the following: a. That plaintiffs transfer and endorse to defendant Metro some of the Purchase Orders (POs) they will receive from their US buyers; b. That defendants will sell exclusively and "only thru" plaintiffs for their US buyer; xxx 6. After several discussions on the matter and further inducement on the part of defendant spouses, plaintiff spouses agreed. Thus, on April 21, 2001, defendant spouses confirmed and finalized the agreement in a letter-document entitled "2001

Agreement" they emailed to plaintiff spouses, a copy of which is hereto attached asAnnex "A". xxx 20. Defendants are guilty of fraud committed both at the inception of the agreement and in the performance of the obligation. Through machinations and schemes, defendants successfully enticed plaintiffs to enter into the 2001 Agreement. In order to secure plaintiffs full trust in them and lure plaintiffs to endorse more POs and increase the volume of the orders, defendants during the early part, remitted to plaintiffs shares under the Agreement. 21. However, soon thereafter, just when the orders increased and the amount involved likewise increased, defendants suddenly, without any justifiable reasons and in pure bad faith and fraud, abandoned their contractual obligations to remit to plaintiffs their shares. And worse, defendants transacted directly with plaintiffs foreign buyer to the latters exclusion and damage. Clearly, defendants planned everything from the beginning, employed ploy and machinations to defraud plaintiffs, and consequently take from them a valuable client. 22. Defendants are likewise guilty of fraud by violating the trust and confidence reposed upon them by plaintiffs. Defendants received the proceeds of plaintiffs LCs with the clear obligation of remitting 15% thereof to the plaintiffs. Their refusal and failure to remit the said amount despite demand constitutes a breach of trust amounting to malice and fraud.17 (Emphasis and underscoring in the original) (Boldfacing and italicization supplied) We rule that respondents allegation that petitioners undertook to sell exclusively and only through JRP/LGD for Target Stores Corporation but that petitioners transacted directly with respondents foreign buyer is sufficient allegation of fraud to support their application for a writ of preliminary attachment. Since the writ of preliminary attachment was properly issued, the only way it can be dissolved is by filing a counter-bond in accordance with Section 12, Rule 57 of the Rules of Court. Moreover, the reliance of the Court of Appeals in the cases of Chuidian v. Sandiganbayan,18 FCY Construction Group, Inc. v. Court of Appeals,19 and Liberty Insurance Corporation v. Court of Appeals20 is proper. The rule that "when the writ of attachment is issued upon a ground which is at the same time the applicants cause of action, the only other way the writ can be lifted or dissolved is by a counter-bond"21 is applicable in this case. It is clear that in respondents amended complaint of fraud is not only alleged as a ground for the issuance of the writ of preliminary attachment, but it is also the core of respondents complaint. The fear of the Court of Appeals that petitioners could force a trial on the merits of the case on the strength of a mere motion to dissolve the attachment has a basis. WHEREFORE, we DENY the petition. We AFFIRM the 29 September 2004 Decision and 2 March 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 79475. SO ORDERED. ANTONIO T. CARPIO Associate Justice