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Provisional Remedies/Cases Full Text/Rule 571

G.R. No. L-252

March 30, 1946

TRANQUILINO
CALO
and
DOROTEO
SAN
JOSE, petitioners,
vs.
ARSENIO C. ROLDAN, Judge of First Instance of
Laguna,
REGINO
RELOVA
and
TEODULA
BARTOLOME,respondents.
Zosimo
D.
Tanalega
for
petitioners.
Estanislao A. Fernandez for respondents Relova and
Bartolome.
No appearance for respondent Judge.
FERIA, J.:
This is a petition for writ of certiorari against the
respondent Judge Arsenio C. Roldan of the Court First
Instance of Laguna, on the ground that the latter has
exceeded his jurisdiction or acted with grave abuse of
discretion in appointing a receiver of certain lands and
their fruits which, according to the complainant filed by
the other respondents, as plaintiffs, against petitioners,
as defendants, in case No. 7951, were in the actual
possession of and belong to said plaintiffs.
The complaint filed by plaintiffs and respondents against
defendants and petitioners in the Court of First Instance
of Laguna reads as follows:
1. That the plaintiffs and the defendants are all
of legal age, Filipino citizens, and residents of
Pila, Laguna; the plaintiffs are husband and
wife..
2. That the plaintiff spouses are the owners and
the possessors of the following described parcels
of land, to wit:.
xxx

xxx

xxx

3. That parcel No. (a) described above is now an


unplanted rice land and parcel No. (b) described
in the complaint is a coconut land, both under
the possession of the plaintiffs..
4. That the defendants, without any legal right
whatsoever and in connivance with each other,
through the use of force, stealth, threats and
intimidation, intend or are intending to enter and
work or harvest whatever existing fruits may
now be found in the lands above-mentioned in
violation of plaintiff's in this case ineffectual..
5. That unless defendants are barred, restrained,
enjoined, and prohibited from entering or
harvesting the lands or working therein through
ex-parte injunction, the plaintiffs will suffer
injustice, damages and irreparable injury to their
great prejudice..
6. That the plaintiffs are offering a bond in their
application for ex-parte injunction in the amount
of P2,000, subject to the approval of this Hon.
Court, which bond is attached hereto marked as
Annex A and made an integral part of this
complaint..
7. That on or about June 26, 1945, the
defendants, through force, destroyed and took
away the madre-cacao fencer, and barbed wires
built on the northwestern portion of the land
designated as parcel No. (b) of this complaint to
the damage and prejudice of the plaintiffs in the
amount of at least P200..
Wherefore, it is respectfully prayed:.
(a) That the accompanying bond in the amount
of P2,000 be approved;

CHRISSY SABELLA

(b) That a writ of preliminary injunction be


issued ex-parte immediately
restraining,
enjoining and prohibiting the defendants, their
agents, servants, representatives, attorneys,
and, (or) other persons acting for and in their
behalf, from entering in, interfering with and/or
in any wise taking any participation in the
harvest of the lands belonging to the plaintiffs;
or in any wise working the lands abovedescribed;
(c) That judgment be rendered, after due
hearing, declaring the preliminary injunction
final;.
(d) That the defendants be condemned jointly
and severally to pay the plaintiffs the sum of
P200 as damages; and.
(e) That plaintiffs be given such other and
further relief just and equitable with costs of suit
to the defendants.
The defendants filed an opposition dated August 8, 1945,
to the issuance of the writ of preliminary injunction
prayed for in the above-quoted complaint, on the ground
that they are owners of the lands and have been in actual
possession thereof since the year 1925; and their answer
to the complaint filed on August 14, 1945, they reiterate
that they are the owners and were then in actual
possession of said property, and that the plaintiffs have
never been in possession thereof.
The hearing of the petition for preliminary injunction was
held on August 9, 1945, at which evidence was
introduced by both parties. After the hearing, Judge
Rilloraza, then presiding over the Court of First Instance
of Laguna, denied the petition on the ground that the
defendants were in actual possession of said lands. A
motion for reconsideration was filed by plaintiffs on
August 20, 1945, but said motion had not yet, up to the
hearing of the present case, been decided either by Judge
Rilloraza, who was assigned to another court, or by the
respondent judge.
The plaintiffs (respondents) filed on September 4, 1945, a
reply to defendants' answer in which, among others, they
reiterate their allegation in the complaint that they are
possessors in good faith of the properties in question.
And on December 17, plaintiffs filed an urgent
petition ex-parte praying that plaintiffs' motion for
reconsideration of the order denying their petition for
preliminary injunction be granted and or for the
appointment of a receiver of the properties described in
the complaint, on the ground that (a) the plaintiffs have
an interest in the properties in question, and the fruits
thereof were in danger of being lost unless a receiver was
appointed; and that (b) the appointment of a receiver was
the most convenient and feasible means of preserving,
administering and or disposing of the properties in
litigation which included their fruits. Respondents Judge
Roldan, on the same date, December 17, 1945, decided
that the court would consider the motion for
reconsideration in due time, and granted the petition for
appointment of and appointed a receiver in the case.
The question to be determined in the present special civil
action of certiorari is, whether or not the respondent
judge acted in excess of his jurisdiction or with grave
abuse of discretion in issuing the order appointing a
receiver in the case No. 7951 of the Court of First
Instance of Laguna; for it is evident that there is no
appeal or any other plain, speedy, and adequate remedy
in the ordinary course of the law against the said order,
which is an incidental or interlocutory one.
It is a truism in legal procedure that what determines the
nature of an action filed in the courts are the facts alleged
in the complaint as constituting the cause of the action.
The facts averred as a defense in the defendant's answer
do not and can not determine or change the nature of the
plaintiff's action. The theory adopted by the plaintiff in his
complaint is one thing, and that of the defendant in his
answer is another. The plaintiff has to establish or prove
his theory or cause of action in order to obtain the

Provisional Remedies/Cases Full Text/Rule 572

remedy he prays for; and the defendant his theory, if


necessary, in order to defeat the claim or action of the
plaintiff..
According to the complaint filed in the said case No.
7951, the plaintiff's action is one of ordinary injunction,
for the plaintiffs allege that they are the owners of the
lands therein described, and were in actual possession
thereof, and that "the defendants without any legal right
whatever and in connivance with each other, through the
use of force, stealth, threat and intimidation, intend or are
intending to enter and work or harvest whatever existing
fruits may be found in the lands above mentioned in
violation of plaintiffs' proprietary rights thereto;" and
prays "that the defendants, their agents, servants,
representatives, and other persons acting for or in their
behalf, be restrained, enjoined and prohibited from
entering in, interfering with, or in any way taking any
participation in the harvest of the lands above describe
belonging to the plaintiffs."
That this is the nature of plaintiffs' action corroborated by
the fact that they petitioned in the same complaint for a
preliminary prohibitory injunction, which was denied by
the court in its order dated August 17, 1945, and that the
plaintiffs, in their motion for reconsideration of said order
filed on August 20 of the same year, and in their urgent
petition dated December 17, moving the court to grant
said motion for reconsideration, reiterated that they were
actual possessors of the land in question.
The fact that plaintiffs, in their reply dated September 4,
after reiterating their allegation or claim that they are the
owners in fee simple and possessors in good faith of the
properties in question, pray that they be declared the
owners in fee simple, has not changed the nature of the
action alleged in the complaint or added a new cause of
action thereto; because the allegations in plaintiffs' reply
were in answer to defendants' defenses, and the nature
of plaintiffs' cause of action, as set forth in their
complaint, was not and could not be amended or
changed by the reply, which plaintiffs had the right to
present as a matter of course. A plaintiff can not, after
defendant's answer, amend his complaint by changing
the cause of action or adding a new one without
previously obtaining leave of court (section 2, Rule 17)..
Respondents' contention in paragraph I of their answer
that the action filed by them against petitioners in the
case No. 7951 of the Court of First Instance of Laguna is
not only for injunction, but also to quiet title over the two
parcels of land described in the complaint, is untenable
for the reasons stated in the previous paragraph. Besides,
an equitable action to quiet title, in order to prevent
harrassment by continued assertion of adverse title, or to
protect the plaintiff's legal title and possession, may be
filed in courts of equity (and our courts are also of
equity), only where no other remedy at law exists or
where the legal remedy invokable would not afford
adequate remedy (32 Cyc., 1306, 1307). In the present
case wherein plaintiffs alleged that they are the owners
and were in actual possession of the lands described in
the complaint and their fruits, the action of injunction
filed by them is the proper and adequate remedy in law,
for a judgment in favor of plaintiffs would quiet their title
to said lands..
The provisional remedies denominated attachment,
preliminary injunction, receivership, and delivery of
personal property, provided in Rules 59, 60, 61, and 62 of
the Rules of Court, respectively, are remedies to which
parties litigant may resort for the preservation or
protection of their rights or interest, and for no other
purpose, during the pendency of the principal action. If an
action, by its nature, does not require such protection or
preservation, said remedies can not be applied for and
granted. To each kind of action or actions a proper
provisional remedy is provided for by law. The Rules of
Court clearly specify the case in which they may be
properly granted. .
Attachment may be issued only in the case or actions
specifically stated in section 1, Rule 59, in order that the
defendant may not dispose of his property attached, and
thus secure the satisfaction of any judgment that may be
recovered by plaintiff from defendant. For that reason a
property subject of litigation between the parties, or
claimed by plaintiff as his, can not be attached upon
motion of the same plaintiff..

CHRISSY SABELLA

The special remedy of preliminary prohibitory injunction


lies when the plaintiff's principal action is an ordinary
action of injunction, that is, when the relief demanded in
the plaintiff's complaint consists in restraining the
commission or continuance of the act complained of,
either perpetually or for a limited period, and the other
conditions required by section 3 of Rule 60 are present.
The purpose of this provisional remedy is to preserve
the status quo of the things subject of the action or the
relation between the parties, in order to protect the rights
of the plaintiff respecting the subject of the action during
the pendency of the suit. Because, otherwise or if no
preliminary prohibition injunction were issued, the
defendant may, before final judgment, do or continue the
doing of the act which the plaintiff asks the court to
restrain, and thus make ineffectual the final judgment
rendered afterwards granting the relief sought by the
plaintiff. But, as this court has repeatedly held, a writ of
preliminary injunction should not be granted to take the
property out of the possession of one party to place it in
the hands of another whose title has not been clearly
established..
A receiver may be appointed to take charge of personal
or real property which is the subject of an ordinary civil
action, when it appears that the party applying for the
appointment of a receiver has an interest in the property
or fund which is the subject of the action or litigation, and
that such property or fund is in danger of being lost,
removed or materially injured unless a receiver is
appointed to guard and preserve it (section 1 [b], Rule
61); or when it appears that the appointment of a
receiver is the most convenient and feasible means of
preserving, administering or disposing of the property in
litigation (section 1 [e] of said Rule). The property or fund
must, therefore be in litigation according to the
allegations of the complaint, and the object of appointing
a receiver is to secure and preserve the property or thing
in controversy pending the litigation. Of course, if it is not
in litigation and is in actual possession of the plaintiff, the
latter can not apply for and obtain the appointment of a
receiver thereof, for there would be no reason for such
appointment.
Delivery of personal property as a provisional remedy
consists in the delivery, by order of the court, of a
personal property by the defendant to the plaintiff, who
shall give a bond to assure the return thereof or the
payment of damages to the defendant in the plaintiff's
action to recover possession of the same property fails, in
order to protect the plaintiff's right of possession of said
property, or prevent the defendant from damaging,
destroying or disposing of the same during the pendency
of the suit.
Undoubtedly, according to law, the provisional remedy
proper to plaintiffs' action of injunction is a preliminary
prohibitory injunction, if plaintiff's theory, as set forth in
the complaint, that he is the owner and in actual
possession of the premises is correct. But as the lower
court found at the hearing of the said petition for
preliminary injunction that the defendants were in
possession of the lands, the lower court acted in
accordance with law in denying the petition, although
their motion for reconsideration, which was still pending
at the time the petition in the present case was heard in
this court, plaintiffs insist that they are in actual
possession of the lands and, therefore, of the fruits
thereof.
From the foregoing it appears evident that the respondent
judge acted in excess of his jurisdiction in appointing a
receiver in case No. 7951 of the Court of First Instance of
Laguna. Appointment of a receiver is not proper or does
not lie in an action of injunction such as the one filed by
the plaintiff. The petition for appointment of a receiver
filed by the plaintiffs (Exhibit I of the petition) is based on
the ground that it is the most convenient and feasible
means of preserving, administering and disposing of the
properties in litigation; and according to plaintiffs' theory
or allegations in their complaint, neither the lands nor the
palay harvested therein, are in litigation. The litigation or
issue raised by plaintiffs in their complaint is not the
ownership or possession of the lands and their fruits. It is
whether or not defendants intend or were intending to
enter or work or harvest whatever existing fruits could
then be found in the lands described in the complaint,
alleged to be the exclusive property and in the actual
possession of the plaintiffs. It is a matter not only of law
but of plain common sense that a plaintiff will not and

Provisional Remedies/Cases Full Text/Rule 573

legally can not ask for the appointment or receiver of


property which he alleges to belong to him and to be
actually in his possession. For the owner and possessor of
a property is more interested than persons in preserving
and administering it.
Besides, even if the plaintiffs had amended their
complaint and alleged that the lands and palay harvested
therein are being claimed by the defendants, and
consequently the ownership and possession thereof were
in litigation, it appearing that the defendants (now
petitioners) were in possession of the lands and had
planted the crop or palay harvested therein, as alleged in
paragraph 6 (a) and (b) of the petition filed in this court
and not denied by the respondent in paragraph 2 of his
answer, the respondent judge would have acted in excess
of his jurisdiction or with a grave abuse of discretion in
appointing a receiver thereof. Because relief by way of
receivership is equitable in nature, and a court of equity
will not ordinarily appoint a receiver where the rights of
the parties depend on the determination of adverse
claims of legal title to real property and one party is in
possession (53 C. J., p. 26). The present case falls within
this rule..

BRIONES,
con
PARAS, M., conforme:

quien

esta

conforme

Estoy conforme con la parte dispositiva por la unica


razon, breve pero lucidamente expuesta en la ponencia,
de que cuando hay controversia sobre el titulo de
propiedad noo debe utilizarse el nombramiento de
depositario para pertubar el status quo transladando la
posesion del terreno litigioso de una parte a otra.
Solamente cuando el dominio es indisputable
verbigracia, hay de por medio un titulo Torrens cabe
nombrar un depositario para los fines espicificos
senalados por la ley, entre ellos principalmente la
preservacion del objeto litigioso cuando corre el peligro
de danarse o echarse a perder.
A.M. No. RTJ-05-1898

January 31, 2005

CHARLTON
TAN, complainant,
vs.
JUDGE ABEDNEGO O. ADRE, respondent.
DECISION

In the case of Mendoza vs. Arellano and B. de Arellano,


this court said:
Appointments of receivers of real estate in cases
of this kind lie largely in the sound discretion of
the court, and where the effect of such an
appointment is to take real estate out of the
possession of the defendant before the final
adjudication of the rights of the parties, the
appointment should be made only in extreme
cases and on a clear showing of necessity
therefor in order to save the plaintiff from grave
and irremediable loss or damage. (34 Cyc., 51,
and cases there cited.) No such showing has
been made in this case as would justify us in
interfering with the exercise by trial judge of his
discretion in denying the application for receiver.
(36 Phil., 59, 63, 64.).
Although the petition is silent on the matter, as the
respondents in their answer allege that the Court of First
Instance of Laguna has appointed a receiver in another
case No. 7989 of said court, instituted by the respondents
Relova against Roberto Calo and his brothers and sisters,
children of Sofia de Oca and Tranquilino Calo (petitioner in
this case), and submitted copy of the complaint filed by
the plaintiffs (now respondents) in case No. 7989 (Exhibit
9 of the respondents' answer), we may properly express
and do hereby express here our opinion, in order to avoid
multiplicity of suits, that as the cause of action alleged in
the in the complaint filed by the respondents Relova in
the other case is substantially the same as the cause of
action averred in the complaint filed in the present case,
the order of the Court of First Instance of Laguna
appointing a receiver in said case No. 7989 was issued in
excess of its jurisdiction, and is therefore null and void.
In view of all the foregoing, we hold that the respondent
Judge Arsenio C. Roldan of the Court of First Instance of
Laguna has exceeded his jurisdiction in appointing a
receiver in the present case, and therefore the order of
said respondent judge appointing the receiver, as well as
all other orders and proceedings of the court presided
over by said judge in connection with the receivership,
are null and void.
As to the petitioners' petition that respondents Relova be
punished for contempt of court for having disobeyed the
injunction issued by this court against the respondents
requiring them to desist and refrain from enforcing the
order of receivership and entering the palay therein, it
appearing from the evidence in the record that the palay
was harvested by the receiver and not by said
respondents, the petition for contempt of court is denied.
So ordered, with costs against the respondents.
Moran, C. J., Ozaeta, Jaranilla, De Joya, Pablo, Perfecto,
Hilado, and Bengzon, JJ., concur.
Separate Opinions

CHRISSY SABELLA

CHICO-NAZARIO, J.:
The instant administrative complaint arose from the
affidavit-complaint1 of Charlton Tan, charging Judge
Abednego O. Adre, Regional Trial Court of Quezon City,
Branch 88, with grave abuse of authority and gross
ignorance of the law filed before the Office of the Court
Administrator (OCA).
Complainant Charlton Tan was the respondent in
a habeas corpus case2 filed by his wife Rosana Reyes-Tan.
On 24 March 2004, after giving due course to the petition,
respondent judge issued the writ prayed for and ordered
complainant to bring before the court the body of their
daughter, Charlene Reyes Tan on 26 March 2004. 3 On the
scheduled date of hearing,4 the court provisionally turned
over the custody of the child to the mother. A motion for
reconsideration5 praying for the return of the child to
complainant or a shared custody be given to the parents
was filed on 20 April 2004. When the motion was heard
on 26 April 2004, the case was rescheduled to 03 August
2004, as Mrs. Tan was indisposed. 6 Allegedly sensing the
partiality of respondent judge, complainant on 25 May
2004 filed a motion7 to inhibit him, but the same was
denied in an Order dated 15 June 2004.8
In his verified complaint dated 29 June 2004, complainant
alleged that respondent judge acted with grave abuse of
authority under the following circumstances: 1) when he
at once issued the Order 9 granting the issuance of a writ
ofhabeas corpus commanding him to appear before the
court on 26 March 2004 at 8:30 in the morning and bring
with him the subject minor, without first conducting a
hearing for that purpose; 2) when he hurriedly turned
over the custody of their daughter to his wife Rosana on
the day of the hearing on 12 April 2004, immediately
after their respective lawyers entered their appearances,
without first hearing his side; and 3) respondent judge
should have considered the fitness of Rosana as a
mother, as the latter is not qualified because she is
working in Japan and only comes to the Philippines for a
five (5) to ten (10) days vacation; that she is now
involved with another man, a Canadian named Marc
Beauclair; and she does not possess the financial
capacity to support Charlene.1awphi1.nt
Complainant questions the issuance of the Order 10 dated
26 April 2004, re-setting the hearing of the case on 03
August 2004 or an interval of four (4) months after
respondent judge awarded provisional custody in favor of
his wife to the detriment of his daughter. He added that
respondent judge would be retiring on 10 July 2004, and
this would unduly delay the case for he would have
retired before the case can be heard and it may take time

Provisional Remedies/Cases Full Text/Rule 574

before a new judge will be appointed. Complainant also


assails the denial of his motion for inhibition.
According to the complainant, the
respondent judge showed abuse of
ignorance of the law.

actuations of
authority and

In his comment,11 respondent judge denied the


complainants allegations and maintained that the
questioned order finds support in law and jurisprudence.
On 12 October 2004, the OCA submitted its
report12 recommending the dismissal of the complaint for
lack of merit.
The Court finds the recommendation of the OCA to be
well-taken.
The issues to be addressed in this complaint are: (1)
whether or not the order of respondent judge issuing the
writ constitutes abuse of authority; and (2) whether or not
the order of respondent judge ordering the provisional
custody of the four-year old child to her mother
constitutes ignorance of the law.
Complainant asserts13 that respondent judge acted with
grave abuse of authority when he ordered the issuance of
the writ, commanding him to appear before the court and
bring with him the subject minor, without first conducting
a hearing.
The contention is without merit.
A close scrutiny of Section 5, Rule 102 of the Rules of Civil
Procedure on Habeas Corpus, shows that a court may
grant the writ if it appears upon presentation of the
petition that the writ ought to be issued. Thus, Section 5
states:
SEC. 5. When the writ must be granted and issued.
A court or judge authorized to grant the writ
must, when a petition therefor is presented and it
appears that the writ ought to issue, grant the
same forthwith, and immediately thereupon the
clerk of court shall issue the writ under the seal of
the court; or in case of emergency, the judge may
issue the writ under his own hand, and may depute
any officer or person to serve it.
Clearly therefore, respondent judge was well within his
authority when he issued the writ as no hearing is
required before a writ may be issued.
Anent the grant of provisional custody of the minor, We
find the same proper.1a\^/phi1.net
The law grants the mother the custody of a child under
seven (7) years of age.14 In the case at bar, it is
uncontroverted that the child subject of the habeas
corpus case is only four years old, thus, the custody
should be given to the mother. Be it noted also that the
questioned order was only provisional. As the term
implies, "provisional" means temporary, preliminary or
tentative.15 The provisional custody granted to the mother
of the child does not preclude complainant from proving
the "compelling reasons" cited by him which can be
properly ventilated in a full-blown hearing scheduled by
the court for that purpose. We find the judges actuation
in conformity with existing law and jurisprudence.
The acts of a judge which pertain to his judicial functions
are not subject to disciplinary power unless they are
committed with fraud, dishonesty, corruption or bad
faith.16 As a matter of policy, in the absence of fraud,
dishonesty or corruption, the acts of a judge in his judicial
capacity are not subject to disciplinary action even

CHRISSY SABELLA

though such acts are erroneous.17 Otherwise, a judicial


office would be untenable, for "no one called upon to try
the facts or interpret the law in the administration of
justice can be infallible."18 He cannot be subjected to
liability - civil, criminal, or administrative - for any of his
official acts, no matter how erroneous, as long as he acts
in good faith. In such a case, the remedy of the aggrieved
party is not to file an administrative complaint against the
judge but to elevate the error to the higher court for
review and correction,19 because an administrative
complaint is not an appropriate remedy where judicial
recourse is still available.20 The court has to be shown
acts or conduct of the judge clearly indicative of
arbitrariness or prejudice before the latter can be
branded the stigma of being biased and partial. 21 Not
every error or mistake that a judge committed in the
performance of his duties renders him liable, unless he is
shown to have acted in bad faith or with deliberate intent
to do an injustice.22 Otherwise, perhaps, no judge,
however competent, honest or dedicated he may be, can
ever hope to retire from the judiciary with an
unblemished record.23
For liability to attach for ignorance of the law, the
assailed order of a judge must not only be erroneous;
more importantly, it must be motivated by bad faith,
dishonesty, hatred or some other similar motive. 24 In the
case at bar, the questioned orders were issued after
considering the pleadings filed by the parties. The orders
were not issued without rhyme and reason. Respondent
judge issued the questioned orders in apparent good faith
without any proof or showing of malice, corrupt motives
or improper consideration. There is not a scintilla of
evidence, not even a remote indication, that the
respondent judge, in issuing the questioned orders, was
impelled by ill-will, malice, revenge, personal animosity,
impulse to do injustice, greed, corrupt consideration or
other similar motive. As a matter of public policy then,
the acts of the judge in the case at bar in his official
capacity are not subject to disciplinary action since good
faith and absence of malice, corrupt motives or improper
considerations, are sufficient defenses in which a judge
charged with ignorance of the law can find refuge. 25
It must be stressed that an administrative complaint
against a judge cannot be pursued simultaneously with
the judicial remedies accorded to parties aggrieved by his
erroneous order or judgment. Administrative remedies
are neither alternative nor cumulative to judicial review
where such review is available to the aggrieved parties
and the same has not been resolved with finality until
there is a final declaration by the appellate court that the
challenged order or judgment is manifestly erroneous,
there will be no basis to conclude whether respondent
judge is administratively liable.26 In the case at bar, if
complainant felt prejudiced by the order of respondent
judge, he should have waited for the presentation of
evidence in the hearing set for that purpose. In the event
that respondent judge renders an adverse decision, he
can file an appeal in the appropriate court, and not an
administrative complaint against the judge.
Assuming in gratia argumenti that the questioned orders
were erroneous, it must be remembered that mere error
of judgment is not a ground for disciplinary
proceeding.27 Thus, respondent judge cannot be held
liable, for if any error is involved, it is only an error of
judgment.
Gross ignorance of the law is a serious accusation, and a
person who accuses a judge of this very serious offense
must be sure of the grounds for the accusation. When an
administrative charge against a judge or any personnel of
the court has no basis whatsoever, this Court will not
hesitate to protect him against any groundless accusation
that trifles with judicial processes. We will not shirk from
our responsibility of imposing discipline upon employees
and officials of the Judiciary, but neither shall we hesitate
to shield the same officials or employees from unfounded

Provisional Remedies/Cases Full Text/Rule 575

suits that only serve to disrupt rather than promote the


orderly administration of justice.28
WHEREFORE, the instant administrative complaint is
DISMISSED for utter lack of merit.
SO ORDERED.
G.R. No. 177486

December 21, 2009

PURISIMO
vs.
NELSON BARAQUIA, Respondent.

BUYCO, Petitioner,

DECISION
CARPIO MORALES, J.:
Nelson Baraquia (respondent) filed before the Regional
Trial Court (RTC) of Iloilo City a complaint 1 against
Dominico Buyco and Clemente Buyco (Buycos), for the
establishment of a permanent right of way, injunction and
damages with preliminary injunction and temporary
restraining order, to enjoin the Buycos from closing off a
private road within their property which he has been
using to go to and from the public highway to access his
poultry farm.
The Buycos died during the pendency of the case, and
were substituted by Purisimo Buyco (petitioner) and his
brother Gonzalo.
Branch 39 of the Iloilo RTC granted
application for preliminary injunction.

respondents

By Decision2 of February 14, 2007, the trial court


dismissed respondents complaint for failure to establish
the concurrence of the essential requisites for the
establishment of an easement of right of way under
Articles 649 and 650 of the Civil Code. 3 It accordingly
lifted the writ of preliminary injunction.
Respondent filed a notice of appeal of the trial courts
decision. Petitioner filed too a notice of partial appeal
bearing on to the non-award of prayer for damages.
Respondent later filed with the trial court a motion to cite
petitioner and his brother Gonzalo in contempt, alleging
that they had closed off the subject road, thus violating
the writ of preliminary injunction. The trial court, by
Resolution of March 13, 2007,4 noting that respondent
received on March 5, 2007 his copy of its decision while
petitioner received his on February 21, 2007, held that
the February 14, 2007 decision had not yet become final
and executory, hence, the writ of preliminary injunction
remained to be valid, efficacious and obligatory,
rendering petitioners act of closing the road on March 1,
2007 an indirect contempt of court. It thus declared
petitioner and his brother in contempt of court.
Petitioner moved for reconsideration of the trial courts
March 13, 2007 Resolution, contending that a preliminary
injunction, once quashed, ceases to exist, and that he
and his brother cannot be held guilty of indirect contempt
by mere motion.
By Resolution5 of April 18, 2007, the trial court set
aside the
March
13,
2007
Resolution
and granted petitioners motion for reconsideration,
ruling that petitioner and his brother cannot be held in
contempt of court by mere motion and not by verified
petition.
On the lifetime of the writ of preliminary injunction, the
trial court held that it is its "illumined opinion that the

CHRISSY SABELLA

matter of whether a writ of preliminary injunction remains


valid until the decision annulling the same attains finality
is not firmly entrenched in jurisprudence, contrary to
the position of the defendants." It thereupon quoted a
portion of the ruling in the 2006 case of Lee v. Court of
Appeals,6 to wit:
Furthermore, notwithstanding the stand of both parties,
the fact remains that the Decision of the Court of Appeals
annulling the grant of preliminary injunction in favor of
petitioners has not yet become final on 14 December
2000. In fact, such Decision has not yet become final and
executory even on the very date of this Decision, in view
of petitioners appeal with us under Rule 45 of the 1997
Rules of Civil Procedure. The preliminary injunction,
therefore, issued by the trial court remains valid until the
Decision of the Court of Appeals annulling the same
attains finality, and violation thereof constitutes indirect
contempt which, however, requires either a formal charge
or a verified petition.7 (underscoring in the original
decision)
Hence, this petition for review, raising a question of law
whether the lifting of a writ of preliminary injunction due
to the dismissal of the complaint is immediately
executory, even if the dismissal of the complaint is
pending appeal.
The petition is meritorious.
A writ of preliminary injunction is an order granted at any
stage of an action or proceeding prior to the judgment or
final order, requiring a party or a court, agency or a
person to refrain from a particular act or acts.8 It is
merely a provisional remedy, adjunct to the main case
subject to the latters outcome. 9 It is not a cause of action
in itself.10Being an ancillary or auxiliary remedy, it is
available during the pendency of the action which may be
resorted to by a litigant to preserve and protect certain
rights and interests therein pending rendition, and for
purposes of the ultimate effects, of a final judgment in
the case.
The writ is provisional because it constitutes a temporary
measure availed of during the pendency of the action and
it is ancillary because it is a mere incident in and is
dependent upon the result of the main action.11
It is well-settled that the sole object of a preliminary
injunction, whether prohibitory or mandatory, is to
preserve thestatus quo until the merits of the case can be
heard. It is usually granted when it is made to appear that
there is a substantial controversy between the parties
and one of them is committing an act or threatening the
immediate commission of an act that will cause
irreparable injury or destroy the status quo of the
controversy before a full hearing can be had on the
merits of the case.12
Indubitably, in the case at bar, the writ of preliminary
injunction was granted by the lower court upon
respondents showing that he and his poultry business
would be injured by the closure of the subject road. After
trial, however, the lower court found that respondent was
not entitled to the easement of right of way prayed for,
having failed to prove the essential requisites for such
entitlement, hence, the writ was lifted.1avvphi1
The present case having been heard and found
dismissible as it was in fact dismissed, the writ of
preliminary injunction is deemed lifted, its purpose as a
provisional remedy having been served, the appeal
therefrom notwithstanding.
Unionbank v. Court of Appeals13 enlightens:

Provisional Remedies/Cases Full Text/Rule 576

"x x x a dismissal, discontinuance or non-suit of an action


in which a restraining order or temporary injunction has
been granted operates as a dissolution of the restraining
order or temporary injunction," regardless of whether the
period for filing a motion for reconsideration of the order
dismissing the case or appeal therefrom has expired. The
rationale therefor is that even in cases where an appeal is
taken from a judgment dismissing an action on the
merits,the appeal does not suspend the judgment, hence
the general rule applies that a temporary injunction
terminates automatically on the dismissal of the action."
(italics, emphasis and underscoring supplied)
The lower courts citation of Lee v. Court of Appeals 14 is
misplaced. In Lee, unlike in the present case, the original
complaint for specific performance and cancellation of
real estate mortgage was not yet decided on the
merits by the lower court. Thus, the preliminary injunction
therein issued subsisted pending appeal of an incident.
There being no indication that the appellate court issued
an injunction in respondents favor, the writ of preliminary
injunction issued on December 1, 1999 by the trial court
was automatically dissolved upon the dismissal of Civil
Case No. 26015.
WHEREFORE, the petition is GRANTED. The Resolution
dated April 18, 2007 of the trial court is REVERSED. The
writ of preliminary injunction which Branch 39 of the Iloilo
Regional Trial Court issued on December 1, 1999 was
automatically dissolved upon its dismissal by Decision of
February 14, 2007 of Civil Case No. 26015.
SO ORDERED.
G.R. No. 134241

August 11, 2003

DAVID
REYES
(Substituted
by
Victoria
R.
Fabella), petitioner,
vs.
JOSE LIM, CHUY CHENG KENG and HARRISON
LUMBER, INC., respondents.
CARPIO, J.:
The Case
This is a petition for review on certiorari of the
Decision1 dated 12 May 1998 of the Court of Appeals in
CA-G.R. SP No. 46224. The Court of Appeals dismissed the
petition for certiorari assailing the Orders dated 6 March
1997, 3 July 1997 and 3 October 1997 of the Regional
Trial Court of Paranaque, Branch 260 2 ("trial court") in
Civil Case No. 95-032.
The Facts
On 23 March 1995, petitioner David Reyes ("Reyes") filed
before the trial court a complaint for annulment of
contract and damages against respondents Jose Lim
("Lim"), Chuy Cheng Keng ("Keng") and Harrison Lumber,
Inc. ("Harrison Lumber").
The complaint3 alleged that on 7 November 1994, Reyes
as seller and Lim as buyer entered into a contract to sell
("Contract to Sell") a parcel of land ("Property") located
along F.B. Harrison Street, Pasay City. Harrison Lumber
occupied the Property as lessee with a monthly rental of
P35,000. The Contract to Sell provided for the following
terms and conditions:
1. The total consideration for the purchase of the
aforedescribed parcel of land together with the
perimeter walls found therein is TWENTY EIGHT
MILLION (P28,000,000.00) PESOS payable as
follows:

CHRISSY SABELLA

(a) TEN MILLION (P10,000,000.00) PESOS upon


signing of this Contract to Sell;
(b) The balance of EIGHTEEN MILLION
(P18,000,000.00) PESOS shall be paid on or
before March 8, 1995 at 9:30 A.M. at a bank to
be designated by the Buyer but upon the
complete vacation of all the tenants or
occupants of the property and execution of the
Deed of Absolute Sale. However, if the tenants
or occupants have vacated the premises earlier
than March 8, 1995, the VENDOR shall give the
VENDEE at least one week advance notice for
the payment of the balance and execution of the
Deed of Absolute Sale.
2. That in the event, the tenants or occupants of
the premises subject of this sale shall not vacate
the premises on March 8, 1995 as stated above,
the VENDEE shall withhold the payment of the
balance of P18,000,000.00 and the VENDOR
agrees to pay a penalty of Four percent (4%) per
month to the herein VENDEE based on the
amount of the downpayment of TEN MILLION
(P10,000,000.00) PESOS until the complete
vacation of the premises by the tenants therein.4
The complaint claimed that Reyes had informed Harrison
Lumber to vacate the Property before the end of January
1995. Reyes also informed Keng 5 and Harrison Lumber
that if they failed to vacate by 8 March 1995, he would
hold them liable for the penalty of P400,000 a month as
provided in the Contract to Sell. The complaint further
alleged that Lim connived with Harrison Lumber not to
vacate the Property until the P400,000 monthly penalty
would have accumulated and equaled the unpaid
purchase price of P18,000,000.
On 3 May 1995, Keng and Harrison Lumber filed their
Answer6 denying they connived with Lim to defraud
Reyes. Keng and Harrison Lumber alleged that Reyes
approved their request for an extension of time to vacate
the Property due to their difficulty in finding a new
location for their business. Harrison Lumber claimed that
as of March 1995, it had already started transferring
some of its merchandise to its new business location in
Malabon.7
On 31 May 1995, Lim filed his Answer 8 stating that he
was ready and willing to pay the balance of the purchase
price on or before 8 March 1995. Lim requested a
meeting with Reyes through the latters daughter on the
signing of the Deed of Absolute Sale and the payment of
the balance but Reyes kept postponing their meeting. On
9 March 1995, Reyes offered to return the P10 million
down payment to Lim because Reyes was having
problems in removing the lessee from the Property. Lim
rejected Reyes offer and proceeded to verify the status
of Reyes title to the Property. Lim learned that Reyes had
already sold the Property to Line One Foods Corporation
("Line One") on 1 March 1995 for P16,782,840. After the
registration of the Deed of Absolute Sale, the Register of
Deeds issued to Line One TCT No. 134767 covering the
Property. Lim denied conniving with Keng and Harrison
Lumber to defraud Reyes.
On 2 November 1995, Reyes filed a Motion for Leave to
File Amended Complaint due to supervening facts. These
included the filing by Lim of a complaint for estafa
against Reyes as well as an action for specific
performance and nullification of sale and title plus
damages before another trial court.9 The trial court
granted the motion in an Order dated 23 November 1995.
In his Amended Answer dated 18 January 1996, 10 Lim
prayed for the cancellation of the Contract to Sell and for
the issuance of a writ of preliminary attachment against
Reyes. The trial court denied the prayer for a writ of

Provisional Remedies/Cases Full Text/Rule 577

preliminary attachment in an Order dated 7 October


1996.
On 6 March 1997, Lim requested in open court that Reyes
be ordered to deposit the P10 million down payment with
the cashier of the Regional Trial Court of Paraaque. The
trial court granted this motion.
On 25 March 1997, Reyes filed a Motion to Set Aside the
Order dated 6 March 1997 on the ground the Order
practically granted the reliefs Lim prayed for in his
Amended Answer.11 The trial court denied Reyes motion
in an Order12 dated 3 July 1997. Citing Article 1385 of the
Civil Code, the trial court ruled that an action for
rescission could prosper only if the party demanding
rescission can return whatever he may be obliged to
restore should the court grant the rescission.
The trial court denied Reyes Motion for Reconsideration
in its Order13 dated 3 October 1997. In the same order,
the trial court directed Reyes to deposit the P10 million
down payment with the Clerk of Court on or before 30
October 1997.
On 8 December 1997, Reyes 14 filed a Petition for
Certiorari15 with the Court of Appeals. Reyes prayed that
the Orders of the trial court dated 6 March 1997, 3 July
1997 and 3 October 1997 be set aside for having been
issued with grave abuse of discretion amounting to lack
of jurisdiction. On 12 May 1998, the Court of Appeals
dismissed the petition for lack of merit.
Hence, this petition for review.
The Ruling of the Court of Appeals
The Court of Appeals ruled the trial court could validly
issue the assailed orders in the exercise of its equity
jurisdiction. The court may grant equitable reliefs to
breathe life and force to substantive law such as Article
138516of the Civil Code since the provisional remedies
under the Rules of Court do not apply to this case.
The Court of Appeals held the assailed orders merely
directed Reyes to deposit the P10 million to the custody
of the trial court to protect the interest of Lim who paid
the amount to Reyes as down payment. This did not
mean the money would be returned automatically to Lim.
The Issues
Reyes raises the following issues:
1. Whether the Court of Appeals erred in holding
the trial court could issue the questioned Orders
dated March 6, 1997, July 3, 1997 and October 3,
1997, requiring petitioner David Reyes to deposit
the
amount
of
Ten
Million
Pesos
(P10,000,000.00) during the pendency of the
action, when deposit is not among the
provisional remedies enumerated in Rule 57 to
61 of the 1997 Rules on Civil Procedure.
2. Whether the Court of Appeals erred in finding
the trial court could issue the questioned Orders
on grounds of equity when there is an applicable
law on the matter, that is, Rules 57 to 61 of the
1997 Rules on Civil Procedure.17

Civil Procedure. Reyes stresses the enumeration in the


Rules is exclusive. Not one of the provisional remedies in
Rules 57 to 6118 applies to this case. Reyes argues that a
court cannot apply equity and require deposit if the law
already prescribes the specific provisional remedies which
do not include deposit. Reyes invokes the principle that
equity is "applied only in the absence of, and never
against, statutory law or x x x judicial rules of
procedure."19 Reyes adds the fact that the provisional
remedies do not include deposit is a matter of dura lex
sed lex.20
The instant case, however, is precisely one where there is
a hiatus in the law and in the Rules of Court. If left alone,
the hiatus will result in unjust enrichment to Reyes at the
expense of Lim. The hiatus may also imperil restitution,
which is a precondition to the rescission of the Contract to
Sell that Reyes himself seeks. This is not a case of equity
overruling a positive provision of law or judicial rule for
there is none that governs this particular case. This is a
case of silence or insufficiency of the law and the Rules of
Court. In this case, Article 9 of the Civil Code expressly
mandates the courts to make a ruling despite the
"silence, obscurity or insufficiency of the laws." 21 This
calls for the application of equity,22 which "fills the open
spaces in the law."23
Thus, the trial court in the exercise of its equity
jurisdiction may validly order the deposit of the P10
million down payment in court. The purpose of the
exercise of equity jurisdiction in this case is to prevent
unjust enrichment and to ensure restitution. Equity
jurisdiction aims to do complete justice in cases where a
court of law is unable to adapt its judgments to the
special circumstances of a case because of the
inflexibility of its statutory or legal jurisdiction. 24Equity is
the principle by which substantial justice may be attained
in cases where the prescribed or customary forms of
ordinary law are inadequate.25
Reyes is seeking rescission of the Contract to Sell. In his
amended answer, Lim is also seeking cancellation of the
Contract to Sell. The trial court then ordered Reyes to
deposit in court the P10 million down payment that Lim
made under the Contract to Sell. Reyes admits receipt of
the P10 million down payment but opposes the order to
deposit the amount in court. Reyes contends that prior to
a judgment annulling the Contract to Sell, he has the
"right to use, possess and enjoy" 26 the P10 million as its
"owner"27 unless the court orders its preliminary
attachment.28
To subscribe to Reyes contention will unjustly enrich
Reyes at the expense of Lim. Reyes sold to Line One the
Property even before the balance of P18 million under the
Contract to Sell with Lim became due on 8 March 1995.
On 1 March 1995, Reyes signed a Deed of Absolute
Sale29 in favor of Line One. On 3 March 1995, the Register
of Deeds issued TCT No. 13476730 in the name of Line
One.31 Reyes cannot claim ownership of the P10 million
down payment because Reyes had already sold to
another buyer the Property for which Lim made the down
payment. In fact, in his Comment 32 dated 20 March 1996,
Reyes reiterated his offer to return to Lim the P10 million
down payment.

Reyes contentions are without merit.

On balance, it is unreasonable and unjust for Reyes to


object to the deposit of the P10 million down payment.
The application of equity always involves a balancing of
the equities in a particular case, a matter addressed to
the sound discretion of the court. Here, we find the
equities weigh heavily in favor of Lim, who paid the P10
million down payment in good faith only to discover later
that Reyes had subsequently sold the Property to another
buyer.

Reyes points out that deposit is not among the


provisional remedies enumerated in the 1997 Rules of

In Eternal Gardens Memorial Parks Corp. v.


IAC,33 this Court held the plaintiff could not continue to

The Courts Ruling

CHRISSY SABELLA

Provisional Remedies/Cases Full Text/Rule 578

benefit from the property or funds in litigation during the


pendency of the suit at the expense of whomever the
court might ultimately adjudge as the lawful owner. The
Court declared:
In the case at bar, a careful analysis of the records will
show that petitioner admitted among others in its
complaint in Interpleader that it is still obligated to pay
certain amounts to private respondent; that it claims no
interest in such amounts due and is willing to pay
whoever is declared entitled to said amounts. x x x
Under the circumstances, there appears to be no
plausible reason for petitioners objections to the deposit
of the amounts in litigation after having asked for the
assistance of the lower court by filing a complaint for
interpleader where the deposit of aforesaid amounts is
not only required by the nature of the action but is a
contractual obligation of the petitioner under the Land
Development Program (Rollo, p. 252).
There is also no plausible or justifiable reason for Reyes to
object to the deposit of the P10 million down payment in
court. The Contract to Sell can no longer be enforced
because Reyes himself subsequently sold the Property to
Line One. Both Reyes and Lim are now seeking rescission
of the Contract to Sell. Under Article 1385 of the Civil
Code, rescission creates the obligation to return the
things that are the object of the contract. Rescission is
possible only when the person demanding rescission can
return whatever he may be obliged to restore. A court of
equity will not rescind a contract unless there is
restitution, that is, the parties are restored to the status
quo ante.34
Thus, since Reyes is demanding to rescind the Contract to
Sell, he cannot refuse to deposit the P10 million down
payment in court.35 Such deposit will ensure restitution of
the P10 million to its rightful owner. Lim, on the other
hand, has nothing to refund, as he has not received
anything under the Contract to Sell.36
In Government of the Philippine Islands v. Wagner
and Cleland Wagner,37 the Court ruled the refund of
amounts received under a contract is a precondition to
the rescission of the contract. The Court declared:
The Government, having asked for rescission,
must restore to the defendants whatever it has
received under the contract. It will only be just if,
as a condition to rescission, the Government be
required to refund to the defendants an amount
equal to the purchase price, plus the sums
expended by them in improving the land. (Civil
Code, art. 1295.)
The principle that no person may unjustly enrich himself
at the expense of another is embodied in Article 22 38 of
the Civil Code. This principle applies not only to
substantive rights but also to procedural remedies. One
condition for invoking this principle is that the aggrieved
party has no other action based on contract, quasicontract, crime, quasi-delict or any other provision of
law.39 Courts can extend this condition to the hiatus in the
Rules of Court where the aggrieved party, during the
pendency of the case, has no other recourse based on the
provisional remedies of the Rules of Court.
Thus, a court may not permit a seller to retain, pendente
lite, money paid by a buyer if the seller himself seeks
rescission of the sale because he has subsequently sold
the same property to another buyer.40 By seeking
rescission, a seller necessarily offers to return what he
has received from the buyer. Such a seller may not take
back his offer if the court deems it equitable, to prevent
unjust enrichment and ensure restitution, to put the
money in judicial deposit.

CHRISSY SABELLA

There is unjust enrichment when a person unjustly retains


a benefit to the loss of another, or when a person retains
money or property of another against the fundamental
principles of justice, equity and good conscience. 41 In this
case, it was just, equitable and proper for the trial court
to order the deposit of the P10 million down payment to
prevent unjust enrichment by Reyes at the expense of
Lim.42
WHEREFORE, we AFFIRM the Decision of the Court of
Appeals.
SO ORDERED.
RULE 57: PRELIMINARY ATTACHMENT
G.R. No. 93262 December 29, 1991
DAVAO LIGHT & POWER CO., INC., petitioner,
vs.
THE COURT OF APPEALS, QUEENSLAND HOTEL or
MOTEL or QUEENSLAND TOURIST INN, and
TEODORICO ADARNA, respondents.
Breva & Breva Law Offices for petitioner.
Goc-Ong & Associates for private respondents.
NARVASA, J.:p
Subject of the appellate proceedings at bar is the decision
of the Court of Appeals in CA-G.R. Sp. No. 1967 entitled
"Queensland Hotel, Inc., etc. and Adarna v. Davao Light &
Power Co., Inc.," promulgated on May 4, 1990. 1 That
decision nullified and set aside the writ of preliminary
attachment issued by the Regional Trial Court of Davao
City 2 in Civil Case No. 19513-89 on application of the
plaintiff (Davao Light & Power Co.), before the service of
summons on the defendants (herein respondents
Queensland Co., Inc. and Adarna).
Following is the chronology of the undisputed material
facts culled from the Appellate Tribunal's judgment of May
4, 1990.
1. On May 2, 1989 Davao Light & Power Co., Inc.
(hereafter, simply Davao Light) filed a verified complaint
for recovery of a sum of money and damages against
Queensland Hotel, etc. and Teodorico Adarna (docketed
as Civil Case No. 19513-89). The complaint contained
an ex parte application for a writ of preliminary
attachment.
2. On May 3, 1989 Judge Nartatez, to whose branch the
case was assigned by raffle, issued an Order granting
the ex parte application and fixing the attachment bond
at P4,600,513.37.
3. On May 11, 1989 the attachment bond having been
submitted by Davao Light, the writ of attachment issued.
4. On May 12, 1989, the summons and a copy of the
complaint, as well as the writ of attachment and a copy of
the attachment bond, were served on defendants
Queensland and Adarna; and pursuant to the writ, the
sheriff seized properties belonging to the latter.
5. On September 6, 1989, defendants Queensland and
Adarna filed a motion to discharge the attachment for
lack of jurisdiction to issue the same because at the time
the order of attachment was promulgated (May 3, 1989)
and the attachment writ issued (May 11, 1989), the Trial
Court had not yet acquired jurisdiction over the cause and
over the persons of the defendants.

Provisional Remedies/Cases Full Text/Rule 579

6. On September 14, 1989, Davao Light filed an


opposition to the motion to discharge attachment.
7. On September 19, 1989, the Trial Court issued an
Order denying the motion to discharge.
This Order of September 19, 1989 was successfully
challenged by Queensland and Adarna in a special civil
action of certiorari instituted by them in the Court of
Appeals. The Order was, as aforestated, annulled by the
Court of Appeals in its Decision of May 4, 1990. The
Appellate Court's decision closed with the following
disposition:
. . . the Orders dated May 3, 1989
granting the issuance of a writ of
preliminary
attachment,
dated
September 19, 1989 denying the
motion to discharge attachment; dated
November 7, 1989 denying petitioner's
motion for reconsideration; as well as
all other orders emanating therefrom,
specially the Writ of Attachment dated
May 11, 1989 and Notice of Levy on
Preliminary Attachment dated May 11,
1989, are hereby declared null and void
and the attachment hereby ordered
DISCHARGED.
The Appellate Tribunal declared that
. . . While it is true that a prayer for the
issuance of a writ of preliminary
attachment may be included m the
complaint, as is usually done, it is
likewise true that the Court does not
acquire jurisdiction over the person of
the defendant until he is duly
summoned or voluntarily appears, and
adding the phrase that it be issued "ex
parte" does not confer said jurisdiction
before actual summons had been
made, nor retroact jurisdiction upon
summons being made. . . .
It went on to say, citing Sievert v. Court of
Appeals, 3 that
"in
a
proceedings
in
attachment," the "critical time which must be
identified is . . . when the trial court acquires
authority under law to act coercively against the
defendant or his property . . .;" and that "the
critical time is the of the vesting of jurisdiction in
the court over the person of the defendant in the
main case."
Reversal of this Decision of the Court of Appeals of May 4,
1990 is what Davao Light seeks in the present appellate
proceedings.
The question is whether or not a writ of preliminary
attachment may issue ex parte against a defendant
before acquisition of jurisdiction of the latter's person by
service of summons or his voluntary submission to the
Court's authority.
The Court rules that the question must be answered in
the affirmative and that consequently, the petition for
review will have to be granted.
It is incorrect to theorize that after an action or
proceeding has been commenced and jurisdiction over
the person of the plaintiff has been vested in the
court, but before the acquisition of jurisdiction over the
person of the defendant (either by service of summons or
his voluntary submission to the court's authority), nothing
can be validly done by the plaintiff or the court. It is
wrong to assume that the validity of acts done during this

CHRISSY SABELLA

period should be defendant on, or held in suspension


until, the actual obtention of jurisdiction over the
defendant's person. The obtention by the court of
jurisdiction over the person of the defendant is one thing;
quite another is the acquisition of jurisdiction over the
person of the plaintiff or over the subject-matter or
nature of the action, or the res or object hereof.
An action or proceeding is commenced by the filing of the
complaint or other initiatory pleading. 4 By that act, the
jurisdiction of the court over the subject matter or nature
of the action or proceeding is invoked or called into
activity; 5 and it is thus that the court acquires
jurisdiction over said subject matter or nature of the
action. 6 And it is by that self-same act of the plaintiff (or
petitioner) of filing the complaint (or other appropriate
pleading) by which he signifies his submission to the
court's power and authority that jurisdiction is acquired
by the court over his person. 7 On the other hand,
jurisdiction over the person of the defendant is obtained,
as above stated, by the service of summons or other
coercive process upon him or by his voluntary submission
to the authority of the court. 8
The events that follow the filing of the complaint as a
matter of routine are well known. After the complaint is
filed, summons issues to the defendant, the summons is
then transmitted to the sheriff, and finally, service of the
summons is effected on the defendant in any of the ways
authorized by the Rules of Court. There is thus ordinarily
some appreciable interval of time between the day of the
filing of the complaint and the day of service of summons
of the defendant. During this period, different acts may
be done by the plaintiff or by the Court, which are
unquestionable validity and propriety. Among these, for
example, are the appointment of a guardian ad
litem, 9 the grant of authority to the plaintiff to prosecute
the suit as a pauper litigant, 10 the amendment of the
complaint by the plaintiff as a matter of right without
leave of court,11 authorization by the Court of service of
summons by publication, 12 the dismissal of the action
by the plaintiff on mere notice. 13
This, too, is true with regard to the provisional remedies
of preliminary attachment, preliminary injunction,
receivership or replevin. 14 They may be validly and
properly applied for and granted even before the
defendant is summoned or is heard from.
A preliminary attachment may be defined, paraphrasing
the Rules of Court, as the provisional remedy in virtue of
which a plaintiff or other party may, at the
commencement of the action or at any time thereafter,
have the property of the adverse party taken into the
custody of the court as security for the satisfaction of any
judgment that may be recovered. 15 It is a remedy which
is purely statutory in respect of which the law requires a
strict construction of the provisions granting it. 16 Withal
no principle, statutory or jurisprudential, prohibits its
issuance by any court before acquisition of jurisdiction
over the person of the defendant.
Rule 57 in fact speaks of the grant of the remedy "at the
commencement of the action or at any time
thereafter." 17The phase, "at the commencement of the
action," obviously refers to the date of the filing of the
complaint which, as above pointed out, is the date that
marks "the commencement of the action;" 18 and the
reference plainly is to a time before summons is served
on the defendant, or even before summons issues. What
the rule is saying quite clearly is that after an action is
properly commenced by the filing of the complaint and
the payment of all requisite docket and other fees the
plaintiff may apply for and obtain a writ of preliminary
attachment upon fulfillment of the pertinent requisites
laid down by law, and that he may do so at any time,
either before or after service of summons on the
defendant. And this indeed, has been the immemorial

Provisional Remedies/Cases Full Text/Rule 5710

practice sanctioned by the courts: for the plaintiff or other


proper party to incorporate the application for
attachment in the complaint or other appropriate
pleading (counter-claim, cross-claim, third-party claim)
and for the Trial Court to issue the writ ex-parte at the
commencement of the action if it finds the application
otherwise sufficient in form and substance.
In Toledo v. Burgos, 19 this Court ruled that a hearing on
a motion or application for preliminary attachment is not
generally necessary unless otherwise directed by the Trial
Court in its discretion. 20 And in Filinvest Credit
Corporation v. Relova, 21 the Court declared that
"(n)othing in the Rules of Court makes notice and hearing
indispensable and mandatory requisites for the issuance
of a writ of attachment." The only pre-requisite is that the
Court be satisfied, upon consideration of "the affidavit of
the applicant or of some other person who personally
knows the facts, that a sufficient cause of action exists,
that the case is one of those mentioned in Section 1 . . .
(Rule 57), that there is no other sufficient security for the
claim sought to be enforced by the action, and that the
amount due to the applicant, or the value of the property
the possession of which he is entitled to recover, is as
much as the sum for which the order (of attachment) is
granted above all legal counterclaims." 22 If the court be
so satisfied, the "order of attachment shall be
granted," 23 and the writ shall issue upon the applicant's
posting of "a bond executed to the adverse party in an
amount to be fixed by the judge, not exceeding the
plaintiffs claim, conditioned that the latter will pay all the
costs which may be adjudged to the adverse party and all
damages which he may sustain by reason of the
attachment, if the court shall finally adjudge that the
applicant was not entitled thereto." 24
In Mindanao Savings & Loan Association, Inc. v. Court of
Appeals, decided on April 18, 1989, 25 this Court had
occasion to emphasize the postulate that no hearing is
required on an application for preliminary attachment,
with notice to the defendant, for the reason that this
"would defeat the objective of the remedy . . . (since the)
time which such a hearing would take, could be enough
to enable the defendant to abscond or dispose of his
property before a writ of attachment issues." As observed
by a former member of this Court, 26 such a procedure
would warn absconding debtors-defendants of the
commencement of the suit against them and the
probable seizure of their properties, and thus give them
the advantage of time to hide their assets, leaving the
creditor-plaintiff holding the proverbial empty bag; it
would place the creditor-applicant in danger of losing any
security for a favorable judgment and thus give him only
an illusory victory.
Withal, ample modes of recourse against a preliminary
attachment are secured by law to the defendant. The
relative ease with which a preliminary attachment may
be obtained is matched and paralleled by the relative
facility with which the attachment may legitimately be
prevented or frustrated. These modes of recourse against
preliminary attachments granted by Rule 57 were
discussed at some length by the separate opinion
in Mindanao Savings & Loans Asso. Inc. v. CA., supra.
That separate opinion stressed that there are two (2)
ways of discharging an attachment: first, by the posting
of a counterbond; and second, by a showing of its
improper or irregular issuance.
1.0. The submission of a counterbond is an efficacious
mode of lifting an attachment already enforced against
property, or even of preventing its enforcement
altogether.
1.1. When property has already been seized under
attachment, the attachment may be discharged upon
counterbond in accordance with Section 12 of Rule 57.

CHRISSY SABELLA

Sec. 12. Discharge of attachment upon


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

Provisional Remedies/Cases Full Text/Rule 5711

This is so because "(a)s pointed out in Calderon v. I.A.C.,


155 SCRA 531 (1987), The attachment debtor cannot be
deemed to have waived any defect in the issuance of the
attachment writ by simply availing himself of one way of
discharging the attachment writ, instead of the other.
Moreover, the filing of a counterbond is a speedier way of
discharging the attachment writ maliciously sought out
by the attaching creditor instead of the other way, which,
in most instances . . . would require presentation of
evidence in a fullblown trial on the merits, and cannot
easily be settled in a pending incident of the case." 27
It may not be amiss to here reiterate other related
principles dealt with in Mindanao Savings & Loans
Asso. Inc. v.C.A., supra., 28 to wit:
(a) When an attachment may not be
dissolved by a showing of its irregular
or improper issuance:
. . . (W)hen the preliminary attachment
is issued upon a ground which is at the
same time the applicant's cause of
action; e.g., "an action for money or
property embezzled or fraudulently
misapplied or converted to his own use
by a public officer, or an officer of a
corporation, or an attorney, factor,
broker, agent, or clerk, in the course of
his employment as such, or by any
other person in a fiduciary capacity, or
for a willful violation of duty." (Sec. 1
[b], Rule 57), or "an action against a
party who has been guilty of fraud m
contracting the debt or incurring the
obligation upon which the action is
brought" (Sec. 1 [d], Rule 57), the
defendant is not allowed to file a
motion to dissolve the attachment
under Section 13 of Rule 57 by offering
to show the falsity of the factual
averments in the plaintiff's application
and affidavits on which the writ was
based and consequently that the writ
based thereon had been improperly or
irregularly issued (SEE Benitez v. I.A.C.,
154 SCRA 41) the reason being that
the hearing on such a motion for
dissolution of the writ would be
tantamount to a trial of the merits of
the action. In other words, the merits of
the action would be ventilated at a
mere hearing of a motion, instead of at
the regular trial. Therefore, when the
writ of attachment is of this nature, the
only way it can be dissolved is by a
counterbond (G.B. Inc. v. Sanchez, 98
Phil. 886).
(b) Effect of the dissolution of a preliminary attachment
on the plaintiffs attachment bond:
. . . The dissolution of the preliminary
attachment upon security given, or a
showing of its irregular or improper
issuance, does not of course operate to
discharge the sureties on plaintiff's own
attachment bond. The reason is simple.
That bond is "executed to the adverse
party, . . . conditioned that the . . .
(applicant) will pay all the costs which
may be adjudged to the adverse party
and all damages which he may sustain
by reason of the attachment, if the
court shall finally adjudge that the
applicant was not entitled thereto"
(SEC. 4, Rule 57). Hence, until that
determination is made, as to the

CHRISSY SABELLA

applicant's
entitlement
to
the
attachment, his bond must stand and
cannot be with-drawn.
With respect to the other provisional remedies, i.e.,
preliminary injunction (Rule 58), receivership (Rule 59),
replevin or delivery of personal property (Rule 60), the
rule is the same: they may also issue ex parte. 29
It goes without saying that whatever be the acts done by
the Court prior to the acquisition of jurisdiction over the
person of defendant, as above indicated issuance of
summons, order of attachment and writ of attachment
(and/or appointments of guardian ad litem, or grant of
authority to the plaintiff to prosecute the suit as a pauper
litigant, or amendment of the complaint by the plaintiff as
a matter of right without leave of court 30 and
however valid and proper they might otherwise be, these
do not and cannot bind and affect the defendant until and
unless jurisdiction over his person is eventually obtained
by the court, either by service on him of summons or
other coercive process or his voluntary submission to the
court's authority. Hence, when the sheriff or other proper
officer commences implementation of the writ of
attachment, it is essential that he serve on the defendant
not only a copy of the applicant's affidavit and
attachment bond, and of the order of attachment, as
explicity required by Section 5 of Rule 57, but also the
summons addressed to said defendant as well as a copy
of the complaint and order for appointment of
guardian ad litem, if any, as also explicity directed by
Section 3, Rule 14 of the Rules of Court. Service of all
such documents is indispensable not only for the
acquisition of jurisdiction over the person of the
defendant, but also upon considerations of fairness, to
apprise the defendant of the complaint against him, of
the issuance of a writ of preliminary attachment and the
grounds therefor and thus accord him the opportunity to
prevent attachment of his property by the posting of a
counterbond in an amount equal to the plaintiff's claim in
the complaint pursuant to Section 5 (or Section 12), Rule
57, or dissolving it by causing dismissal of the complaint
itself on any of the grounds set forth in Rule 16, or
demonstrating the insufficiency of the applicant's
affidavit or bond in accordance with Section 13, Rule 57.
It was on account of the failure to comply with this
fundamental requirement of service of summons and the
other documents above indicated that writs of
attachment issued by the Trial Court ex parte were struck
down by this Court's Third Division in two (2) cases,
namely: Sievert
v. Court
of
Appeals, 31 and BAC
Manufacturing and Sales Corporation v.Court of Appeals,
et al. 32 In contrast to the case at bar where the
summons and a copy of the complaint, as well as the
order and writ of attachment and the attachment bond
were served on the defendant in Sievert, levy on
attachment was attempted notwithstanding that only the
petition for issuance of the writ of preliminary attachment
was served on the defendant, without any prior or
accompanying summons and copy of the complaint; and
in BAC Manufacturing and Sales Corporation, neither the
summons nor the order granting the preliminary
attachment or the writ of attachment itself was served on
the defendant "before or at the time the levy was made."
For the guidance of all concerned, the Court reiterates
and reaffirms the proposition that writs of attachment
may properly issue ex parte provided that the Court is
satisfied that the relevant requisites therefor have been
fulfilled by the applicant, although it may, in its
discretion, require prior hearing on the application with
notice to the defendant; but that levy on property
pursuant to the writ thus issued may not be validly
effected
unless preceded, or contemporaneously
accompanied, by service on the defendant of summons, a
copy of the complaint (and of the appointment of
guardian ad litem, if any), the application for attachment
(if not incorporated in but submitted separately from the

Provisional Remedies/Cases Full Text/Rule 5712

complaint), the order of attachment, and the plaintiff's


attachment bond.
WHEREFORE, the petition is GRANTED; the challenged
decision of the Court of Appeals is hereby REVERSED, and
the order and writ of attachment issued by Hon. Milagros
C. Nartatez, Presiding Judge of Branch 8, Regional Trial
Court of Davao City in Civil Case No. 19513-89 against
Queensland Hotel or Motel or Queensland Tourist Inn and
Teodorico Adarna are hereby REINSTATED. Costs against
private respondents.
SO ORDERED.
G.R. No. L-48080
JOSE
DE
vs.
SERVILLANO
PLATON
BORJA, respondents.

August 31, 1942


BORJA, petitioner,
and

FRANCISCO

Vicente
J.
Francisco
for
E.
V.
Filamor
for
No appearance for respondent judge

DE

petitioner.
respondents.

BOCOBO, J.:
Petitioner seeks the setting aside of an order of
preliminary attachment issued on November 6, 1940, and
reiterated on January 13, 1941, by the respondent Judge
of the Court of First Instance against petitioner's
properties.
On August 12, 1936, petitioner brought a civil action in
the Court of First Instance of Rizal against Hermogena
Romero, Francisco de Borja, Josefa Tangco and Crisanto
de Borja to annul a second sale by Francisco de Borja to
Hermogena Romero, of a large estate known as the
Hacienda Jalajala, and to recover damages in the amount
of P25,000. On August 29, 1936, Francisco de Borja and
his wife Josefa Tangco filed an answer with three
counterclaims, and on September 29, 1936, they
presented two more counterclaims. Trial began
September 30, 1936. Under date of August 4, 1937,
defendants Francisco de Borja, Josefa Tangco and Crisanto
de Borja submitted their amended answer, consisting of a
general denial, special defenses, and five counterclaims
and cross-complaints. In these causes for counter-claim
and cross-complaint, it was alleged that plaintiff, being a
son of defendants Francisco de Borja and Josefa Tangco,
had been entrusted with the administration of the
extensive interests of his parents, but had been unfaithful
to his trust. Said defendants, therefore, prayed, inter alia,
that the spouses Borja and Tangco be declared owners of
the Hacienda Jalajala in question; that plaintiff be
required to render an accounting of the products of said
hacienda that he had received and to pay said spouses at
least P100,000 illegally retained by him; that plaintiff be
ordered to account for the proceed of rice and bran and
to pay at least P700,000 unlawfully retained by him; that
plaintiff be made to deliver P20,000 which he had
collected from a debtor of said spouses; that plaintiff be
likewise ordered to pay another sum of P9,034 collected
by him from the same debtor; and that plaintiff be
required to turn over to defendants Francisco de Borja
and Josefa Tangco the amount of P40,000 collected by
him as indemnity of an insurance policy on property
belonging to said spouses.
On July 27, 1940, Francisco de Borja and his wife filed
their petition for preliminary attachment to cover their
third, fourth, and fifth, grounds for cross-complaint,
involving a total of P69,035. In said motion, the
defendants Borja and wife stated that they did not
include the first and second causes for cross-complaint
because the visible property of plaintiff that could then be
attached was only worth about P2,000. On August 21,

CHRISSY SABELLA

1940, plaintiff presented an amended answer setting up a


counterclaim against defendants Borja and wife in the
sum of P99,175.46.
The order for preliminary attachment is questioned upon
several grounds, among which are: (1) that no writ of
attachment can be issued in favor of a defendant who
presents a counterclaim; (2) and the defendants' affidavit
was fatally defective.
On the first point, we believe a writ of preliminary
attachment may be issued in favor of a defendant who
sets up a counterclaim. For the purpose of the protection
afforded by such attachment, it is immaterial whether the
defendants Borja and wife simply presented a
counterclaim or brought a separate civil action against
Jose de Borja, plaintiff in the previous case and petitioner
herein. To lay down a subtle distinction would be to
sanction that formalism and that technicality which are
discountenanced by the modern laws of procedure for the
sake of speedy and substantial justice. In the present
case we see no reason why the order of the trial court
should be disturbed, this question being a matter within
its discretion and we find no grave abuse of that
discretion.
As to be the second objection of petitioner, his counsel
strenuously advances the theory that the affidavit
attached to the petition for a writ of preliminary
attachment was fatally defective because it failed to
allege that "the amount due to the plaintiff is as much as
the sum for which the order is granted above all legal
counterclaims" as required in section 426, Code of Civil
Procedure and section 3, Rule 59, Rules of Court.
Petitioner contends that his counterclaim against that of
Francisco de Borja and wife being P99,175.46 whereas
the latter's counterclaim totalled only P69,035, the
omission of the allegation referred to is a serious defect.
The trial court found, however, that the counterclaim of
Francisco de Borja and wife exceed those of the petitioner
Jose de Borja. It should be borne in mind that the
aggregate counterclaims of Francisco de Borja and wife
amounted to P869,000, which exceeds petitioner's
counterclaim by P769,000 in round figures. Moreover, as
the trial court had before it the evidence adduce by both
sides, the petition for a writ of preliminary attachment
having been filed four years after the trial had begun, we
presume that the lower court, having in mind such
evidence, ordered the attachment accordingly.
The order appealed from is hereby affirmed, with costs
against the petitioner. So ordered.
G.R. No. L-61011 October 18, 1990
INSULAR
BANK
OF
ASIA
&
AMERICA,
INCORPORATED, petitioner,
vs.
HONORABLE COURT OF APPEALS, and COMMERCIAL
CREDIT CORPORATION, respondents.
Sycip, Salazar, Feliciano & Hernandez for petitioner.
Augusto Kalaw for private respondent.
PADILLA, J.:
Petitioner Insular Bank of Asia and America (IBAA) made a
money market placement with respondent Commercial
Credit Corporation (CCC) on 12 December 1980 in the
amount of P1,877,053.03. In consideration of such
placement, Commercial Credit Corporation executed a
Non Negotiable Repurchase Agreement whereby it
conveyed to IBAA securities issued by International
Corporate Bank (Interbank) with a face value of
P2,000,000.00 and with a maturity date of 22 April 1981.
The parties (IBAA and CCC) also executed a resale

Provisional Remedies/Cases Full Text/Rule 5713

agreement which bound IBAA to re-sell to CCC the


Interbank securities for P2,000,000.00 on 22 April 1981.
On due date (22 April 1981), CCC caused to be issued to
IBAA a Commercial Bank and Trust Co. (CBTC) cashier's
check for P2,000,000.00 which was, however, dishonored
upon presentment for being drawn against uncollected
deposits.
On 18 May 1981, IBAA advised CCC of the dishonor and
demanded cash payment. In its reply, CCC admitted
difficulty in replacing the dishonored check and proposed
payment on a staggered basis, attaching to the proposal
a copy of a Central Bank letter approving its (CCC's)
request for additional standby credit facility to meet its
maturing money market placements.
Due to CCC's failure to meet its obligation despite
demands, on 24 August 1981, IBAA filed an action for
recovery of sum of money with a prayer for the issuance
of a writ of preliminary attachment before the CFI of Rizal,
Pasig, Branch X (docketed as Civil Case No. L-42585),
claiming that:
14. This is an action for money or
property embezzled or fraudulently
misapplied or converted to his own use
by defendant in a fiduciary capacity, or
for a willful violation of duty; this is an
action against defendant who has been
guilty of fraud in contracting the debt or
incurring the obligation upon which the
action is brought, or in concealing or
disposing of the property for the taking,
detention or conversion of which the
action is brought; this is an action
against defendant who has removed or
disposed of his property, or is about to
do so, with intent to defraud his
creditors. 1
On 20 October 1981, the CFI of Rizal issued an order
granting the preliminary attachment against real and
personal properties of CCC. On 19 November 1981, CCC
filed a petition for certiorari with the Court of Appeals,
docketed as CA-G.R. No. SP-13376-SCA, alleging grave
abuse of discretion amounting to lack of jurisdiction on
the part of the RTC of Rizal in the issuance of the
attachment order.
Despite the issuance of a status quo order from the Court
of Appeals, deposits of CCC with Bank of the Philippine
Islands and Far East Bank and Trust Co. were garnished.
Heavy equipment used in the construction of CCC's
building in Makati and its office equipment were attached.
Two (2) urgent motions and a supplemental pleading were
filed by CCC with the Court of Appeals praying for release
of the garnished funds and attached equipment. IBAA
reiterated its apprehension over CCC's financial viability
and ability to pay 2 besides, IBAA claimed, it (CCC) never
had any serious intention to pay at the inception of the
money market placement transaction such that the
intention to defraud the bank (IBAA) was very apparent.
The circumstances in the case at bar fall, according to
IBAA, under Rule 57, Section 1 (d), 3 of the Rules of Court.
In setting aside the RTC order of attachment, the Court of
Appeals, in its decision, * held:
Petitioner (meaning,
CCC) operates as an
on-going
concern.
While it is apparent
that it is in a financial
crisis with the Central
Bank's grant of an
additional
standby
credit facility of P20
million in favor of the

CHRISSY SABELLA

latter, the attachment


of its property will
unduly hinder any
transaction where it
can
regain
its
financial solvency to
meet
its
obligations. ...
xxx xxx xxx
It
is
true
that
petitioner failed to
pay
the
private
respondent the sum
of P2,000,000.00 due
to
its
financial
difficulty at the time
of the maturity date
for the payment of
P2,000,000.00 but We
find no reason to
uphold the order of
attachment issued by
the respondent judge
on October 20, 1981
where there is no
showing
that
the
petitioner
was
performing acts to
defraud its creditors
or by disposing its
assets
to
the
prejudice
of
its
creditors or persons
who may have a
claim to its assets. On
the other hand, the
withdrawal
of
petitioner's
bank
deposits in the Far
East Bank and Trust
Company (which were
then subject to the
garnishment
proceedings by the
respondent
Deputy
Sheriff) was intended
to
finance
the
operations
of
the
petitioner as an ongoing
concern,
in
payment of wages of
its employees.
Not satisfied with the Court of Appeals decision, the
present petition for review was filed by petitioner bank.
There is insufficient merit in the petition. Essentially, the
only question is whether or not the questioned Court of
Appeals decision setting aside the order of the CFI of
Rizal, Branch X, Pasig granting a writ of preliminary
attachment upon a complaint for collection of a sum of
money which the respondent CCC allegedly fraudulently
contracted and now has difficulty paying, is in accordance
with law or a reversible error.
The purpose of attachment is to secure a contingent lien
on defendant's property until plaintiff can obtain a
judgment and have such property applied to its
satisfaction or to make provision for unsecured debts in
such cases where the means of satisfaction thereof are
liable to be removed beyond the jurisdiction or improperly
disposed of (by fraud or otherwise) or concealed or
placed beyond the reach of creditors . 4
Petitioner claims that at the time the obligation was
incurred by respondent CCC the latter already had the

Provisional Remedies/Cases Full Text/Rule 5714

fraudulent intent not to pay the obligation or


indebtedness. This contention is not borne out by the
records. Upon the other hand, respondent CCC has not
denied that it was undergoing financial difficulties and
had in fact called a creditor's meeting 5 to make full
disclosure of its business condition and negotiate for
payment of its outstanding obligations. Petitioner also
claims there was an incipient misrepresentation regarding
respondent's capacity to pay. The Court of Appeals found,
on the other hand, that there was no dissipation of
assets, in fact, respondent's withdrawal of money from
Far East Bank and Trust Co. was intended to finance its
operations. Inability to pay, we rule, is not necessarily
synonymous with fraudulent intent not to honor an
admitted obligation.
There is thus no reversible error in the questioned Court
of Appeals decision which we find to be in accordance
with law.
WHEREFORE, the petition is DENIED. The Court of Appeals
decision in CA-G.R. No. SP-13376-SCA is AFFIRMEDin toto.
SO ORDERED.
G.R. No. 175587

September 21, 2007

PHILIPPINE
COMMERCIAL
INTERNATIONAL
BANK, Petitioner,
vs.
JOSEPH ANTHONY M. ALEJANDRO, Respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the May 31, 2006
Decision1 of the Court of Appeals in CA-G.R. CV No. 78200
affirming the August 30, 2000 Decision2 of the Regional
Trial Court of Makati, which granted respondent Joseph
Anthony M. Alejandros claim for damages arising from
petitioner Philippine Commercial International Banks
(PCIB) invalid garnishment of respondents deposits.
On October 23, 1997, petitioner filed against respondent
a complaint3 for sum of money with prayer for the
issuance of a writ of preliminary attachment. Said
complaint alleged that on September 10, 1997,
respondent, a resident of Hong Kong, executed in favor of
petitioner a promissory note obligating himself to
payP249,828,588.90 plus interest. In view of the
fluctuations in the foreign exchange rates which resulted
in the insufficiency of the deposits assigned by
respondent as security for the loan, petitioner requested
the latter to put up additional security for the loan.
Respondent, however, sought a reconsideration of said
request pointing out petitioners alleged mishandling of
his account due to its failure to carry out his instruction to
close his account as early as April 1997, when the
prevailing rate of exchange of the US Dollar to Japanese
yen was US$1.00:JPY127.50.4 It appears that the amount
of P249,828,588.90 was the consolidated amount of a
series of yen loans granted by petitioner to respondent
during the months of February and April 1997.5
In praying for the issuance of a writ of preliminary
attachment under Section 1 paragraphs (e) and (f) of Rule
57 of the Rules of Court, petitioner alleged that (1)
respondent fraudulently withdrew his unassigned
deposits notwithstanding his verbal promise to PCIB
Assistant Vice President Corazon B. Nepomuceno not to
withdraw the same prior to their assignment as security
for the loan; and (2) that respondent is not a resident of
the Philippines. The application for the issuance of a writ
was supported with the affidavit of Nepomuceno.6

CHRISSY SABELLA

On October 24, 1997, the trial court granted the


application and issued the writ ex parte 7 after petitioner
posted a bond in the amount of P18,798,734.69, issued
by Prudential Guarantee & Assurance Inc., under Bond
No. HO-46764-97. On the same date, the bank deposits of
respondent with Rizal Commercial Banking Corporation
(RCBC) were garnished. On October 27, 1997,
respondent, through counsel, filed a manifestation
informing the court that he is voluntarily submitting to its
jurisdiction.8
Subsequently, respondent filed a motion to quash 9 the
writ contending that the withdrawal of his unassigned
deposits was not fraudulent as it was approved by
petitioner. He also alleged that petitioner knew that he
maintains a permanent residence at Calle Victoria, Ciudad
Regina, Batasan Hills, Quezon City, and an office address
in Makati City at the Law Firm Romulo Mabanta
Buenaventura Sayoc & De los Angeles, 10 where he is a
partner. In both addresses, petitioner regularly
communicated with him through its representatives.
Respondent added that he is the managing partner of the
Hong Kong branch of said Law Firm; that his stay in Hong
Kong is only temporary; and that he frequently travels
back to the Philippines.
On December 24, 1997, the trial court issued an order
quashing the writ and holding that the withdrawal of
respondents unassigned deposits was not intended to
defraud petitioner. It also found that the representatives
of petitioner personally transacted with respondent
through his home address in Quezon City and/or his office
in Makati City. It thus concluded that petitioner
misrepresented and suppressed the facts regarding
respondents residence considering that it has personal
and official knowledge that for purposes of service of
summons, respondents residence and office addresses
are located in the Philippines. The dispositive portion of
the courts decision is as follows:
WHEREFORE, the URGENT MOTION TO QUASH, being
meritorious, is hereby GRANTED, and the ORDER of 24
October 1997 is hereby RECONSIDERED and SET ASIDE
and the WRIT OF attachment of the same is hereby
DISCHARGED.
SO ORDERED.11
With
the
denial12 of
petitioners
motion
for
reconsideration, it elevated the case to the Court of
Appeals (CA-G.R. SP No. 50748) via a petition for
certiorari. On May 10, 1999, the petition was dismissed
for failure to prove that the trial court abused its
discretion in issuing the aforesaid order.13 Petitioner filed
a motion for reconsideration but was denied on October
28, 1999.14 On petition with this Court, the case was
dismissed for late filing in a minute resolution (G.R. No.
140605) dated January 19, 2000.15 Petitioner filed a
motion for reconsideration but was likewise denied with
finality on March 6, 2000.16
Meanwhile, on May 20, 1998, respondent filed a claim for
damages in the amount of P25 Million 17 on the
attachment bond (posted by Prudential Guarantee &
Assurance, Inc., under JCL(4) No. 01081, Bond No. HO46764-97) on account of the wrongful garnishment of his
deposits.
He
presented
evidence
showing
that
hisP150,000.00 RCBC check payable to his counsel as
attorneys fees, was dishonored by reason of the
garnishment of his deposits. He also testified that he is a
graduate of the Ateneo de Manila University in 1982 with
a double degree of Economics and Management
Engineering and of the University of the Philippines in
1987 with the degree of Bachelor of Laws. Respondent
likewise presented witnesses to prove that he is a well
known lawyer in the business community both in the
Philippines and in Hong Kong.18 For its part, the lone
witness presented by petitioner was Nepomuceno who

Provisional Remedies/Cases Full Text/Rule 5715

claimed that she acted in good faith in alleging that


respondent is a resident of Hong Kong.19
On August 30, 2000, the trial court awarded damages to
respondent in the amount of P25 Million without
specifying the basis thereof, thus:
WHEREFORE, premises above considered, and defendant
having duly established his claim in the amount
ofP25,000,000.00, judgment is hereby rendered ordering
Prudential Guarantee & [Assurance] Co., which is
solidarily liable with plaintiff to pay defendant the full
amount of bond under Prudential Guarantee & Assurance,
Inc. JCL(4) No. 01081, [Bond No. HO-46764-97], dated 24
October 1997 in the amount of P18,798,734.69. And,
considering that the amount of the bond is insufficient to
fully satisfy the award for damages, plaintiff is hereby
ordered to pay defendant the amount of P6,201,265.31.
SO ORDERED.20
The trial court denied petitioners
reconsideration on October 24, 2000.21

motion

for

Petitioner elevated the case to the Court of Appeals which


affirmed the findings of the trial court. It held that in
claiming that respondent was not a resident of the
Philippines, petitioner cannot be said to have been in
good faith considering that its knowledge of respondents
Philippine residence and office address goes into the very
issue of the trial courts jurisdiction which would have
been defective had respondent not voluntarily appeared
before it.
The Court of Appeals, however, reduced the amount of
damages awarded to petitioner and specified their basis.
The dispositive portion of the decision of the Court of
Appeals states:
WHEREFORE, the appeal is PARTIALLY GRANTED and the
decision appealed from is hereby MODIFIED. The award of
damages in the amount of P25,000,000.00 is deleted. In
lieu thereof, Prudential Guarantee & [Assurance, Inc.],
which is solidarily liable with appellant [herein petitioner],
is
ORDERED
to
pay
appellee
[herein
respondent] P2,000,000.00
as
nominal
damages; P5,000,000.00
as
moral
damages;
and P1,000,000.00 as attorneys fees, to be satisfied
against the attachment bond under Prudential Guarantee
& Assurance, Inc. JCL (4) No. 01081.
SO ORDERED.22
Both parties moved for reconsideration. On November 21,
2006, the Court of Appeals denied petitioners motion for
reconsideration but granted that of respondents by
ordering petitioner to pay additional P5Million as
exemplary damages.23
Hence, the instant petition.
At the outset, it must be noted that the ruling of the trial
court that petitioner is not entitled to a writ of attachment
because respondent is a resident of the Philippines and
that his act of withdrawing his deposits with petitioner
was without intent to defraud, can no longer be passed
upon by this Court. More importantly, the conclusions of
the court that petitioner bank misrepresented that
respondent was residing out of the Philippines and
suppressed the fact that respondent has a permanent
residence in Metro Manila where he may be served with
summons, are now beyond the power of this Court to
review having been the subject of a final and executory
order. Said findings were sustained by the Court of
Appeals in CA-G.R. SP No. 50784 and by this Court in G.R.
No. 140605. The rule on conclusiveness of judgment,
which obtains under the premises, precludes the

CHRISSY SABELLA

relitigation of a particular fact or issue in another action


between the same parties even if based on a different
claim or cause of action. The judgment in the prior action
operates as estoppel as to those matters in issue or
points controverted, upon the determination of which the
finding or judgment was rendered. The previous judgment
is conclusive in the second case, as to those matters
actually
and
directly
controverted
and
determined.24 Hence, the issues of misrepresentation by
petitioner and the residence of respondent for purposes
of service of summons can no longer be questioned by
petitioner in this case.
The core issue for resolution is whether petitioner bank is
liable for damages for the improper issuance of the writ of
attachment against respondent.
We rule in the affirmative.
Notwithstanding the final judgment that petitioner is
guilty of misrepresentation and suppression of a material
fact, the latter contends that it acted in good faith.
Petitioner also contends that even if respondent is
considered a resident of the Philippines, attachment is
still proper under Section 1, paragraph (f), Rule 57 of the
Rules of Court since he (respondent) is a resident who is
temporarily out of the Philippines upon whom service of
summons may be effected by publication.
Petitioners contentions are without merit.
While the final order of the trial court which quashed the
writ did not categorically use the word "bad faith" in
characterizing the representations of petitioner, the tenor
of said order evidently considers the latter to have acted
in bad faith by resorting to a deliberate strategy to
mislead the court. Thus
In the hearings of the motion, and oral arguments of
counsels before the Court, it appears that plaintiff BANK
through its contracting officers Vice President Corazon B.
Nepomuceno and Executive Vice President Jose Ramon F.
Revilla, personally transacted with defendant mainly
through defendants permanent residence in METROMANILA, either in defendants home address in Quezon
City or his main business address at the Romulo Mabanta
Buenaventura Sayoc & Delos Angeles in MAKATI and
while at times follow ups were made through defendants
temporary home and business addresses in Hongkong. It
is therefore clear that plaintiff could not deny their
personal and official knowledge that defendants
permanent and official residence for purposes of service
of summons is in the Philippines. In fact, this finding is
further confirmed by the letter of Mr. JOHN GOKONGWEI,
JR. Chairman, Executive Committee of plaintiff BANK, in
his letter dated 6 October 1997 on the subject loan to
defendant of the same law firm was addressed to the
ROMULO LAW FIRM in MAKATI.
[Anent the] second ground of attachment x x x [t]he
Court finds that the amount withdrawn was not part of
defendants peso deposits assigned with the bank to
secure the loan and as proof that the withdrawal was not
intended to defraud plaintiff as creditor is that plaintiff
approved and allowed said withdrawals. It is even noted
that when the Court granted the prayer for attachment it
was mainly on the first ground under Section 1(f) of Rule
57 of the 1997 Rules of Civil Procedure, that defendant
resides out of the Philippines.
On the above findings, it is obvious that plaintiff already
knew from the beginning the deficiency of its second
ground for attachment [i.e.,] disposing properties with
intent to defraud his creditors, and therefore plaintiff had
to resort to this misrepresentation that defendant was
residing out of the Philippines and suppressed the fact
that defendants permanent residence is in METRO
MANILA where he could be served with summons.

Provisional Remedies/Cases Full Text/Rule 5716

On
the
above
findings,
and
mainly
on
the
misrepresentations made by plaintiff on the grounds for
the issuance of the attachment in the verified complaint,
the Court concludes that defendant has duly proven its
grounds in the MOTION and that plaintiff is not entitled to
the attachment.25

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 may be
recovered in the following cases:

Petitioner is therefore barred by the principle of


conclusiveness of judgment from again invoking good
faith in the application for the issuance of the writ.
Similarly, in the case of Hanil Development Co., Ltd. v.
Court of Appeals,26the Court debunked the claim of good
faith by a party who maliciously sought the issuance of a
writ of attachment, the bad faith of said party having
been previously determined in a final decision which
voided the assailed writ. Thus

(a) In an action for the recovery of a specified


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

Apropos the Application for Judgment on the Attachment


Bond, Escobar claims in its petition that the award of
attorneys fees and injunction bond premium in favor of
Hanil is [contrary] to law and jurisprudence. It contends
that no malice or bad faith may be imputed to it in
procuring the writ.
Escobars protestation is now too late in the day. The
question of the illegality of the attachment and Escobars
bad faith in obtaining it has long been settled in one of
the earlier incidents of this case. The Court of Appeals, in
its decision rendered on February 3, 1983 in C.A.-G.R. No.
SP-14512, voided the challenged writ, having been issued
with grave abuse of discretion. Escobars bad faith in
procuring the writ cannot be doubted. Its Petition for the
Issuance of Preliminary Attachment made such damning
allegations that: Hanil was already able to secure a
complete release of its final collection from the MPWH; it
has moved out some of its heavy equipments for
unknown destination, and it may leave the country
anytime. Worse, its Ex Parte Motion to Resolve Petition
alleged that "after personal verification by (Escobar) of
(Hanils) equipment in Cagayan de Oro City, it appears
that the equipments were no longer existing from their
compound." All these allegations of Escobar were found
to be totally baseless and untrue.
Even assuming that the trial court did not make a
categorical pronouncement of misrepresentation and
suppression of material facts on the part of petitioner, the
factual backdrop of this case does not support
petitioners claim of good faith. The facts and
circumstances omitted are highly material and relevant to
the grant or denial of writ of attachment applied for.
Finally, there is no merit in petitioners contention that
respondent can be considered a resident who is
temporarily out of the Philippines upon whom service of
summons may be effected by publication, and therefore
qualifies as among those against whom a writ of
attachment may be issued under Section 1, paragraph (f),
Rule 57 of the Rules of Court which provides:
(f) In an action against a party x x x on whom summons
may be served by publication.
In so arguing, petitioner attempts to give the impression
that although it erroneously invoked the ground that
respondent does not reside in the Philippines, it should
not be made to pay damages because it is in fact entitled
to a writ of attachment had it invoked the proper ground
under Rule 57. However, even on this alternative ground,
petitioner is still not entitled to the issuance of a writ of
attachment.
The circumstances under which a writ of preliminary
attachment may be issued are set forth in Section 1, Rule
57 of the Rules of Court, to wit:

CHRISSY SABELLA

(b) In an action for money or property embezzled


or fraudulently misapplied or converted to his
own use by a public officer, or an officer of a
corporation or an attorney, factor, broker, agent,
or clerk, in the course of his employment as
such, or by any other person in a fiduciary
capacity, or for a willful violation of duty;
(c) In an action to recover the possession of
personal property unjustly or fraudulently taken,
detained, or converted, when the property, or
any part thereof, has been concealed, removed,
or disposed of to prevent its being found or
taken by the applicant or an authorized person;
(d) In an action against a party who has been
guilty of a fraud in contracting the debt or
incurring the obligation upon which the action is
brought, or in the performance thereof;
(e) In an action against a party who has removed
or disposed of his property, or is about to do so,
with intent to defraud his creditors;
(f) In an action against a party who resides out of
the Philippines, or on whom summons may be
served by publication.
The purposes of preliminary attachment are: (1) to seize
the property of the debtor in advance of final judgment
and to hold it for purposes of satisfying said judgment, as
in the grounds stated in paragraphs (a) to (e) of Section
1, Rule 57 of the Rules of Court; or (2) to acquire
jurisdiction over the action by actual or constructive
seizure of the property in those instances where personal
or substituted service of summons on the defendant
cannot be effected, as in paragraph (f) of the same
provision.27
Corollarily, in actions in personam, such as the instant
case for collection of sum of money,28 summons must be
served by personal or substituted service, otherwise the
court will not acquire jurisdiction over the defendant. In
case the defendant does not reside and is not found in
the Philippines (and hence personal and substituted
service cannot be effected), the remedy of the plaintiff in
order for the court to acquire jurisdiction to try the case is
to convert the action into a proceeding in rem or quasi in
rem by attaching the property of the defendant. 29 Thus, in
order to acquire jurisdiction in actions in personam where
defendant resides out of and is not found in the
Philippines, it becomes a matter of course for the court to
convert the action into a proceeding in rem or quasi in
rem by attaching the defendants property. The service of
summons in this case (which may be by publication
coupled with the sending by registered mail of the copy
of the summons and the court order to the last known
address of the defendant), is no longer for the purpose of
acquiring jurisdiction but for compliance with the
requirements of due process.30

Provisional Remedies/Cases Full Text/Rule 5717

However, where the defendant is a resident who is


temporarily out of the Philippines, attachment of his/her
property in an action in personam, is not always
necessary in order for the court to acquire jurisdiction to
hear the case.
Section 16, Rule 14 of the Rules of Court reads:
Sec. 16. Residents temporarily out of the Philippines.
When an action is commenced against a defendant who
ordinarily resides within the Philippines, but who is
temporarily out of it, service may, by leave of court, be
also effected out of the Philippines, as under the
preceding section.
The preceding section referred to in the above provision
is Section 15 which provides for extraterritorial service
(a) personal service out of the Philippines, (b) publication
coupled with the sending by registered mail of the copy
of the summons and the court order to the last known
address of the defendant; or (c) in any other manner
which the court may deem sufficient.
In Montalban v. Maximo,31 however, the Court held that
substituted service of summons (under the present
Section 7, Rule 14 of the Rules of Court) is the normal
mode of service of summons that will confer jurisdiction
on the court over the person of residents temporarily out
of the Philippines. Meaning, service of summons may be
effected by (a) leaving copies of the summons at the
defendants residence with some person of suitable
discretion residing therein, or (b) by leaving copies at the
defendants office or regular place of business with some
competent person in charge thereof. 32 Hence, the court
may acquire jurisdiction over an action in personam by
mere substituted service without need of attaching the
property of the defendant.
The rationale in providing for substituted service as the
normal mode of service for residents temporarily out of
the Philippines, was expounded in Montalban v.
Maximo,33 in this wise:
A man temporarily absent from this country leaves a
definite place of residence, a dwelling where he lives, a
local base, so to speak, to which any inquiry about him
may be directed and where he is bound to return. Where
one temporarily absents himself, he leaves his affairs in
the hands of one who may be reasonably expected to act
in his place and stead; to do all that is necessary to
protect his interests; and to communicate with him from
time to time any incident of importance that may affect
him or his business or his affairs. It is usual for such a
man to leave at his home or with his business associates
information as to where he may be contacted in the event
a question that affects him crops up.
Thus, in actions in personam against residents
temporarily out of the Philippines, the court need not
always attach the defendants property in order to have
authority to try the case. Where the plaintiff seeks to
attach the defendants property and to resort to the
concomitant service of summons by publication, the
same must be with prior leave, precisely because, if the
sole purpose of the attachment is for the court to acquire
jurisdiction, the latter must determine whether from the
allegations in the complaint, substituted service (to
persons of suitable discretion at the defendants
residence or to a competent person in charge of his office
or regular place of business) will suffice, or whether there
is a need to attach the property of the defendant and
resort to service of summons by publication in order for
the court to acquire jurisdiction over the case and to
comply with the requirements of due process.
In the instant case, it must be stressed that the writ was
issued by the trial court mainly on the representation of
petitioner that respondent is not a resident of the

CHRISSY SABELLA

Philippines.34 Obviously, the trial courts issuance of the


writ was for the sole purpose of acquiring jurisdiction to
hear and decide the case. Had the allegations in the
complaint disclosed that respondent has a residence in
Quezon City and an office in Makati City, the trial court, if
only for the purpose of acquiring jurisdiction, could have
served summons by substituted service on the said
addresses, instead of attaching the property of the
defendant. The rules on the application of a writ of
attachment must be strictly construed in favor of the
defendant. For attachment is harsh, extraordinary, and
summary in nature; it is a rigorous remedy which exposes
the debtor to humiliation and annoyance. 35 It should be
resorted to only when necessary and as a last remedy.
It is clear from the foregoing that even on the allegation
that respondent is a resident temporarily out of the
Philippines, petitioner is still not entitled to a writ of
attachment because the trial court could acquire
jurisdiction over the case by substituted service instead
of attaching the property of the defendant. The
misrepresentation of petitioner that respondent does not
reside in the Philippines and its omission of his local
addresses was thus a deliberate move to ensure that the
application for the writ will be granted.
In light of the foregoing, the Court of Appeals properly
sustained the finding of the trial court that petitioner is
liable for damages for the wrongful issuance of a writ of
attachment against respondent.
Anent the actual damages, the Court of Appeals is correct
in not awarding the same inasmuch as the respondent
failed to establish the amount garnished by petitioner. It
is a well settled rule that one who has been injured by a
wrongful attachment can recover damages for the actual
loss resulting therefrom. But for such losses to be
recoverable, they must constitute actual damages duly
established by competent proofs, which are, however,
wanting in the present case.36
Nevertheless, nominal damages may be awarded to a
plaintiff whose right has been violated or invaded by the
defendant, for the purpose of vindicating or recognizing
that right, and not for indemnifying the plaintiff for any
loss suffered by him. Its award is thus not for the purpose
of indemnification for a loss but for the recognition and
vindication of a right. Indeed, nominal damages are
damages in name only and not in fact. 37 They are
recoverable where some injury has been done but the
pecuniary value of the damage is not shown by evidence
and are thus subject to the discretion of the court
according to the circumstances of the case.38
In this case, the award of nominal damages is proper
considering that the right of respondent to use his money
has been violated by its garnishment. The amount of
nominal damages must, however, be reduced from P2
million to P50,000.00 considering the short period of 2
months during which the writ was in effect as well as the
lack of evidence as to the amount garnished.1wphi1
Likewise, the award of attorneys fees is proper when a
party is compelled to incur expenses to lift a wrongfully
issued writ of attachment. The basis of the award thereof
is also the amount of money garnished, and the length of
time respondents have been deprived of the use of their
money by reason of the wrongful attachment. 39 It may
also be based upon (1) the amount and the character of
the services rendered; (2) the labor, time and trouble
involved; (3) the nature and importance of the litigation
and business in which the services were rendered; (4) the
responsibility imposed; (5) the amount of money and the
value of the property affected by the controversy or
involved in the employment; (6) the skill and the
experience called for in the performance of the services;
(7) the professional character and the social standing of
the attorney; (8) the results secured, it being a

Provisional Remedies/Cases Full Text/Rule 5718

recognized rule that an attorney may properly charge a


much larger fee when it is contingent than when it is
not.40
All the aforementioned weighed, and considering the
short period of time it took to have the writ lifted, the
favorable decisions of the courts below, the absence of
evidence as to the professional character and the social
standing of the attorney handling the case and the
amount garnished, the award of attorneys fees should be
fixed not at P1 Million, but only at P200,000.00.
The courts below correctly awarded moral damages on
account of petitioners misrepresentation and bad faith;
however, we find the award in the amount of P5 Million
excessive. Moral damages are to be fixed upon the
discretion of the court taking into consideration the
educational, social and financial standing of the
parties.41 Moral damages are not intended to enrich a
complainant at the expense of a defendant. 42 They are
awarded only to enable the injured party to obtain
means, diversion or amusements that will serve to
obviate the moral suffering he has undergone, by reason
of petitioners culpable action. Moral damages must be
commensurate with the loss or injury suffered. Hence, the
award of moral damages is reduced to P500,000.00.
Considering petitioners bad faith in securing the writ of
attachment, we sustain the award of exemplary damages
by way of example or correction for public good. This
should deter parties in litigations from resorting to
baseless and preposterous allegations to obtain writs of
attachments. While as a general rule, the liability on the
attachment bond is limited to actual (or in some cases,
temperate or nominal) damages, exemplary damages
may be recovered where the attachment was established
to be maliciously sued out.43 Nevertheless, the award of
exemplary damages in this case should be reduced
from P5M to P500,000.00.
Finally, contrary to the claim of petitioner, the instant
case for damages by reason of the invalid issuance of the
writ, survives the dismissal of the main case for sum of
money. Suffice it to state that the claim for damages
arising from such wrongful attachment may arise and be
decided separately from the merits of the main action. 44
WHEREFORE, the petition is PARTIALLY GRANTED. The
May 31, 2006 Decision of the Court of Appeals in CA-G.R.
CV No. 78200 is AFFIRMED with MODIFICATIONS. As
modified, petitioner Philippine Commercial International
Bank is ordered to pay respondent Joseph Anthony M.
Alejandro the following amounts: P50,000.00 as nominal
damages, P200,000.00
as
attorneys
fees;
and P500,000.00 as moral damages, and P500,000.00 as
exemplary damages, to be satisfied against the
attachment bond issued by Prudential Guarantee &
Assurance Inc.,45 under JCL (4) No. 01081, Bond No. HO46764-97.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 175587

October 24, 2008

PHILIPPINE
COMMERCIAL
INTERNATIONAL
BANK, Petitioner,
vs.
JOSEPH ANTHONY M. ALEJANDRO, Respondent.

This resolves the motion for reconsideration of


respondent praying for an increase in the amount of
damages awarded in his favor in our September 21, 2007
Decision.
Respondent argues that the award of nominal damages of
P50,000.00 should be increased to P2 Million based on
the P18,798,734.69 preliminary attachment bond posted
by petitioner; that his social/professional standing
warrants the award of moral damages in the amount of
P5 Million instead of P500,000.00; that attorneys fees of
P1 Million and not P200,000.00 should be awarded
considering the nature of the case, the services rendered
by the counsel, and the latters professional standing; and
that the P500,000.00 exemplary damages should be
increased to deter petitioner from securing writs of
attachment without basis.
The contentions are without merit.
The award of P500,000.00 as moral damages is
commensurate to the anxiety and inconvenience suffered
by respondent.1avvphi1 To award him the amount of P5
Million under the circumstances is scandalously
excessive. Other than the self-serving allegations that he
suffered untold humiliation when he disclosed to his
clients the pendency of the attachment case, respondent
did not present any witness to whom he made such
disclosure. He thus failed to prove by preponderance of
evidence the degree of moral suffering or injury he
suffered to convince the Court to increase the award. To
arrive at a judicious approximation of emotional or moral
injury, competent and substantial proof of the suffering
experienced must be laid before the court. Essential to
this approximation are definitefindings as to what the
alleged moral damages suffered consisted of; otherwise,
such damages would become a penalty rather than a
compensation for actual injury suffered.1
Likewise, the award of P50,000.00 as nominal damages is
proper under the circumstances. Nominal damages are
not intended as indemnification for any loss suffered. It is
an award decreed to vindicate the violation of a right; 2 it
could be properly based on the duration of the period
during which the plaintiff was prevented from exercising
such right. In the instant case, the amount of the bond
posted does not prove the actual sum garnished. The
period of two months during which respondent was
prevented from using the subject bank deposits is thus
the most appropriate yardstick in determining the amount
of nominal damages. Under the circumstances, the
amount of P2 Million being claimed by respondent is
excessive and without basis.
Professional standing of a counsel, to be properly
considered as one of the factors in determining the award
of attorneys fees, should be established during trial
proper, where the other party could raise objections and
cross-examine the witnesses. It is thus too late for
respondent to present evidence of this nature at this
stage of the proceedings. Besides, the issue in this case is
simple, i.e., the propriety of the garnishment of
respondents deposits, which does not merit an award of
P1 Million as attorneys fees.
As for exemplary damages, the Courts award of
P500,000.00 is reasonable and sufficient to discourage
petitioner from resorting to unfounded assertions in
securing writs of attachment. Exemplary damages are
imposed not to enrich one party or impoverish another
but to serve as a deterrent against or as a negative
incentive to curb socially deleterious actions.3

RESOLUTION
YNARES-SANTIAGO, J.:

WHEREFORE, respondents
motion
reconsideration is DENIED with finality.
SO ORDERED.

CHRISSY SABELLA

for

partial

Provisional Remedies/Cases Full Text/Rule 5719

G.R. No. L-34548 November 29, 1988


RIZAL
COMMERCIAL
BANKING
CORPORATION, petitioner,
vs.
THE HONORABLE PACIFICO P. DE CASTRO and
PHILIPPINE
VIRGINIA
TOBACCO
ADMINISTRATION,respondents
Meer, Meer & Meer for petitioner.
The Solicitor General for respondents.
CORTES, J.:
The crux of the instant controversy dwells on the liability
of a bank for releasing its depositor's funds upon orders
of the court, pursuant to a writ of garnishment. If in
compliance with the court order, the bank delivered the
garnished amount to the sheriff, who in turn delivered it
to the judgment creditor, but subsequently, the order of
the court directing payment was set aside by the same
judge, should the bank be held solidarily liable with the
judgment creditor to its depositor for reimbursement of
the garnished funds? The Court does not think so.
In Civil Case No. Q-12785 of the Court of First Instance of
Rizal, Quezon City Branch IX entitled "Badoc Planters, Inc.
versus Philippine Virginia Tobacco Administration, et al.,"
which was an action for recovery of unpaid tobacco
deliveries, an Order (Partial Judgment) was issued on
January 15, 1970 by the Hon. Lourdes P. San Diego, then
Presiding Judge, ordering the defendants therein to pay
jointly and severally, the plaintiff Badoc Planters, Inc.
(hereinafter referred to as "BADOC") within 48 hours the
aggregate amount of P206,916.76, with legal interests
thereon.
On January 26,1970, BADOC filed an Urgent Ex-Parte
Motion for a Writ of Execution of the said Partial Judgment
which was granted on the same day by the herein
respondent judge who acted in place of the Hon. Judge
San Diego who had just been elevated as a Justice of the
Court of Appeals. Accordingly, the Branch Clerk of Court
on the very same day, issued a Writ of Execution
addressed to Special Sheriff Faustino Rigor, who then
issued a Notice of Garnishment addressed to the General
Manager and/or Cashier of Rizal Commercial Banking
Corporation (hereinafter referred to as RCBC), the
petitioner in this case, requesting a reply within five (5)
days to said garnishment as to any property which the
Philippine Virginia Tobacco Administration (hereinafter
referred to as "PVTA") might have in the possession or
control of petitioner or of any debts owing by the
petitioner to said defendant. Upon receipt of such Notice,
RCBC notified PVTA thereof to enable the PVTA to take the
necessary steps for the protection of its own interest
[Record on Appeal, p. 36]
Upon an Urgent Ex-Parte Motion dated January 27, 1970
filed by BADOC, the respondent Judge issued an Order
granting the Ex-Parte Motion and directing the herein
petitioner "to deliver in check the amount garnished to
Sheriff Faustino Rigor and Sheriff Rigor in turn is ordered
to cash the check and deliver the amount to the plaintiff's
representative and/or counsel on record." [Record on
Appeal, p. 20; Rollo, p. 5.] In compliance with said Order,
petitioner delivered to Sheriff Rigor a certified check in
the sum of P 206,916.76.
Respondent PVTA filed a Motion for Reconsideration dated
February 26,1970 which was granted in an Order dated
April 6,1970, setting aside the Orders of Execution and of
Payment and the Writ of Execution and ordering
petitioner and BADOC "to restore, jointly and severally,
the account of PVTA with the said bank in the same
condition and state it was before the issuance of the

CHRISSY SABELLA

aforesaid Orders by reimbursing the PVTA of the amount


of P 206, 916.76 with interests at the legal rate from
January 27, 1970 until fully paid to the account of the
PVTA This is without prejudice to the right of plaintiff to
move for the execution of the partial judgment pending
appeal in case the motion for reconsideration is denied
and appeal is taken from the said partial judgment."
[Record on Appeal, p. 58]
The Motion for Reconsideration of the said Order of April
6, 1970 filed by herein petitioner was denied in the Order
of respondent judge dated June 10, 1970 and on June 19,
1970, which was within the period for perfecting an
appeal, the herein petitioner filed a Notice of Appeal to
the Court of Appeals from the said Orders.
This case was then certified by the Court of Appeals to
this Honorable Court, involving as it does purely
questions of law.
The petitioner raises two principal queries in the instant
case: 1) Whether or not PVTA funds are public funds not
subject to garnishment; and 2) Whether or not the
respondent Judge correctly ordered the herein petitioner
to reimburse the amount paid to the Special Sheriff by
virtue of the execution issued pursuant to the
Order/Partial Judgment dated January 15, 1970.
The record reveals that on February 2, 1970, private
respondent PVTA filed a Motion for Reconsideration of the
Order/ Partial Judgment of January 15, 1970. This was
granted and the aforementioned Partial Judgment was set
aside. The case was set for hearings on November 4, 9
and 11, 1970 [Rollo, pp. 205-207.] However, in view of
the failure of plaintiff BADOC to appear on the said dates,
the lower court ordered the dismissal of the case against
PVTA for failure to prosecute [Rollo, p. 208.]
It must be noted that the Order of respondent Judge
dated April 6, 1970 directing the plaintiff to reimburse
PVTA t e amount of P206,916.76 with interests
became final as to said plaintiff who failed to even file a
motion for reconsideration, much less to appeal from the
said Order. Consequently, the order to restore the
account of PVTA with RCBC in the same condition and
state it was before the issuance of the questioned orders
must be upheld as to the plaintiff, BADOC.
However, the questioned Order of April 6, 1970 must be
set aside insofar as it ordered the petitioner RCBC, jointly
and severally with BADOC, to reimburse PVTA.
The petitioner merely obeyed a mandatory directive from
the respondent Judge dated January 27, 1970, ordering
petitioner 94 "to deliver in check the amount garnished to
Sheriff Faustino Rigor and Sheriff Rigor is in turn ordered
to cash the check and deliver the amount to the plaintiffs
representative and/or counsel on record." [Record on
Appeal, p. 20.]
PVTA however claims that the manner in which the bank
complied with the Sheriffs Notice of Garnishment
indicated breach of trust and dereliction of duty on the
part of the bank as custodian of government funds. It
insistently urges that the premature delivery of the
garnished amount by RCBC to the special sheriff even in
the absence of a demand to deliver made by the latter,
before the expiration of the five-day period given to reply
to the Notice of Garnishment, without any reply having
been given thereto nor any prior authorization from its
depositor, PVTA and even if the court's order of January
27, 1970 did not require the bank to immediately deliver
the garnished amount constitutes such lack of prudence
as to make it answerable jointly and severally with the
plaintiff for the wrongful release of the money from the
deposit of the PVTA. The respondent Judge in his
controverted Order sustained such contention and
blamed RCBC for the supposed "hasty release of the

Provisional Remedies/Cases Full Text/Rule 5720

amount from the deposit of the PVTA without giving PVTA


a chance to take proper steps by informing it of the action
being taken against its deposit, thereby observing with
prudence the five-day period given to it by the sheriff."
[Rollo, p. 81.]
Such allegations must be rejected for lack of merit. In the
first place, it should be pointed out that RCBC did not
deliver the amount on the strength solely of a Notice of
Garnishment; rather, the release of the funds was made
pursuant to the aforesaid Order of January 27, 1970.
While the Notice of Garnishment dated January 26, 1970
contained no demand of payment as it was a mere
request for petitioner to withold any funds of the PVTA
then in its possession, the Order of January 27, 1970
categorically required the delivery in check of the amount
garnished to the special sheriff, Faustino Rigor.
In the second place, the bank had already filed a reply to
the Notice of Garnishment stating that it had in its
custody funds belonging to the PVTA, which, in fact was
the basis of the plaintiff in filing a motion to secure
delivery of the garnished amount to the sheriff. [See
Rollo, p. 93.]
Lastly, the bank, upon the receipt of the Notice of
Garnishment, duly informed PVTA thereof to enable the
latter to take the necessary steps for the protection of its
own interest [Record on Appeal, p. 36]
It is important to stress, at this juncture, that there was
nothing irregular in the delivery of the funds of PVTA by
check to the sheriff, whose custody is equivalent to the
custody of the court, he being a court officer. The order of
the court dated January 27, 1970 was composed of two
parts, requiring: 1) RCBC to deliver in check the amount
garnished to the designated sheriff and 2) the sheriff in
turn to cash the check and deliver the amount to the
plaintiffs representative and/or counsel on record. It must
be noted that in delivering the garnished amount in check
to the sheriff, the RCBC did not thereby make any
payment, for the law mandates that delivery of a check
does not produce the effect of payment until it has been
cashed. [Article 1249, Civil Code.]
Moreover, by virtue of the order of garnishment, the
same was placed in custodia legis and therefore, from
that time on, RCBC was holding the funds subject to the
orders of the court a quo. That the sheriff, upon delivery
of the check to him by RCBC encashed it and turned over
the proceeds thereof to the plaintiff was no longer the
concern of RCBC as the responsibility over the garnished
funds passed to the court. Thus, no breach of trust or
dereliction of duty can be attributed to RCBC in delivering
its depositor's funds pursuant to a court order which was
merely in the exercise of its power of control over such
funds.
... The garnishment of property to
satisfy a writ of execution operates as
an attachment and fastens upon the
property a lien by which the property is
brought under the jurisdiction of the
court issuing the writ. It is brought
into custodia legis, under the sole
control of such court [De Leon v.
Salvador, G.R. Nos. L-30871 and L31603, December 28,1970, 36 SCRA
567, 574.]
The respondent judge however, censured the petitioner
for having released the funds "simply on the strength of
the Order of the court which. far from ordering an
immediate release of the amount involved, merely serves
as a standing authority to make the release at the proper
time as prescribed by the rules." [Rollo, p. 81.]

CHRISSY SABELLA

This argument deserves no serious consideration. As


stated earlier, the order directing the bank to deliver the
amount to the sheriff was distinct and separate from the
order directing the sheriff to encash the said check. The
bank had no choice but to comply with the order
demanding delivery of the garnished amount in check.
The very tenor of the order called for immediate
compliance therewith. On the other hand, the bank
cannot be held liable for the subsequent encashment of
the check as this was upon order of the court in the
exercise of its power of control over the funds placed
in custodia legis by virtue of the garnishment.
In a recent decision [Engineering Construction Inc., v.
National Power Corporation, G.R. No. L-34589, June 29,
1988] penned by the now Chief Justice Marcelo Fernan,
this Court absolved a garnishee from any liability for
prompt compliance with its order for the delivery of the
garnished funds. The rationale behind such ruling
deserves emphasis in the present case:
But while partial restitution is warranted
in favor of NPC, we find that the
Appellate Court erred in not absolving
MERALCO, the garnishee, from its
obligations to NPC with respect to the
payment of ECI of P 1,114,543.23, thus
in effect subjecting MERALCO to double
liability. MERALCO should not have been
faulted for its prompt obedience to a
writ of garnishment. Unless there are
compelling reasons such as: a defect on
the face of the writ or actual knowledge
on the part of the garnishee of lack of
entitlement on the part of the
garnisher, it is not incumbent upon the
garnishee to inquire or to judge for
itself whether or not the order for the
advance execution of a judgment is
valid.
Section 8, Rule 57 of the Rules of Court
provides:
Effect of attachment
of debts and credits.
All persons having
in their possession or
under their control
any credits or other
similar
personal
property belonging to
the
party
against
whom attachment is
issued, or owing any
debts to the same, all
the time of service
upon them of a copy
of
the
order
of
attachment
and
notice as provided in
the last preceding
section, shall be liable
to the applicant for
the amount of such
credits, debts or other
property, until the
attachment
be
discharged, or any
judgment recovered
by him be satisfied,
unless such property
be
delivered
or
transferred, or such
debts be paid, to the
clerk, sheriff or other
proper officer of the
court
issuing
the
attachment.

Provisional Remedies/Cases Full Text/Rule 5721

Garnishment is considered as a specie


of attachment for reaching credits
belonging to the judgment debtor and
owing to him from a stranger to the
litigation. Under the above-cited rule,
the garnishee [the third person] is
obliged to deliver the credits, etc. to the
proper officer issuing the writ and "the
law exempts from liability the person
having in his possession or under his
control any credits or other personal
property belonging to the defendant, ...,
if such property be delivered or
transferred, ..., to the clerk, sheriff, or
other officer of the court in which the
action is pending. [3 Moran, Comments
on the Rules of Court 34 (1970 ed.)]
Applying the foregoing to the case at bar, MERALCO, as
garnishee, after having been judicially compelled to pay
the amount of the judgment represented by funds in its
possession belonging to the judgment debtor or NPC,
should be released from all responsibilities over such
amount after delivery thereof to the sheriff. The reason
for the rule is self-evident. To expose garnishees to risks
for obeying court orders and processes would only
undermine the administration of justice. [Emphasis
supplied.]
The aforequoted ruling thus bolsters RCBC's stand that its
immediate compliance with the lower court's order should
not have been met with the harsh penalty of joint and
several liability. Nor can its liability to reimburse PVTA of
the amount delivered in check be premised upon the
subsequent declaration of nullity of the order of delivery.
As correctly pointed out by the petitioner:
xxx xxx xxx
That the respondent Judge, after his
Order was enforced, saw fit to recall
said Order and decree its nullity, should
not prejudice one who dutifully abided
by it, the presumption being that
judicial orders are valid and issued in
the regular performance of the duties of
the Court" [Section 5(m) Rule 131,
Revised Rules of Court]. This should
operate with greater force in relation to
the herein petitioner which, not being a
party in the case, was just called upon
to perform an act in accordance with a
judicial flat. A contrary view will invite
disrespect for the majesty of the law
and induce reluctance in complying
with judicial orders out of fear that said
orders
might
be
subsequently
invalidated and thereby expose one to
suffer some penalty or prejudice for
obeying the same. And this is what will
happen were the controversial orders to
be sustained. We need not underscore
the danger of this as a precedent.
xxx xxx xxx
[ Brief for the Petitioner, Rollo, p. 212;
Emphasis supplied.]
From the foregoing, it may be concluded that the charge
of breach of trust and/or dereliction of duty as well as lack
of prudence in effecting the immediate payment of the
garnished amount is totally unfounded. Upon receipt of
the Notice of Garnishment, RCBC duly informed PVTA
thereof to enable the latter to take the necessary steps
for its protection. However, right on the very next day
after its receipt of such notice, RCBC was already served
with the Order requiring delivery of the garnished

CHRISSY SABELLA

amount. Confronted as it was with a mandatory directive,


disobedience to which exposed it to a contempt order, it
had no choice but to comply.
The respondent Judge nevertheless held that the liability
of RCBC for the reimbursement of the garnished amount
is predicated on the ruling of the Supreme Court in the
case of Commissioner of Public Highways v. Hon. San
Diego [G.R. No. L-30098, February 18, 1970, 31 SCRA
616] which he found practically on all fours with the case
at bar.
The Court disagrees.
The said case which reiterated the rule in Republic v.
Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA 899]
that government funds and properties may not be seized
under writs of execution or garnishment to satisfy such
judgment is definitely distinguishable from the case at
bar.
In the Commissioner of Public Highways case [supra], the
bank which precipitately allowed the garnishment and
delivery of the funds failed to inform its depositor thereof,
charged as it was with knowledge of the nullity of the writ
of execution and notice of garnishment against
government funds. In the aforementioned case, the funds
involved belonged to the Bureau of Public Highways,
which being an arm of the executive branch of the
government, has no personality of its own separate from
the
National
Government.
The
funds
involved
were government fundscovered by the rule on exemption
from execution.
This brings us to the first issue raised by the petitioner:
Are the PVTA funds public funds exempt from
garnishment? The Court holds that they are not.
Republic Act No. 2265 created the PVTA as an ordinary
corporation with all the attributes of a corporate entity
subject to the provisions of the Corporation Law. Hence, it
possesses the power "to sue and be sued" and "to
acquire and hold such assets and incur such liabilities
resulting directly from operations authorized by the
provisions of this Act or as essential to the proper conduct
of such operations." [Section 3, Republic Act No. 2265.]
Among the specific powers vested in the PVTA are: 1) to
buy Virginia tobacco grown in the Philippines for resale to
local bona fide tobacco manufacturers and leaf tobacco
dealers [Section 4(b), R.A. No. 2265]; 2) to contracts of
any kind as may be necessary or incidental to the
attainment of its purpose with any person, firm or
corporation, with the Government of the Philippines or
with any foreign government, subject to existing laws
[Section 4(h), R.A. No. 22651; and 3) generally, to
exercise all the powers of a corporation under the
Corporation Law, insofar as they are not inconsistent with
the provisions of this Act [Section 4(k), R.A. No. 2265.]
From the foregoing, it is clear that PVTA has been
endowed with a personality distinct and separate from
the government which owns and controls it. Accordingly,
this Court has heretofore declared that the funds of the
PVTA can be garnished since "funds of public corporation
which can sue and be sued were not exempt from
garnishment" [Philippine National Bank v. Pabalan, G.R.
No. L-33112, June 15, 1978, 83 SCRA 595, 598.]
In National Shipyards and Steel Corp. v. CIR [G.R. No. L17874, August 31, 1964, 8 SCRA 781], this Court held
that the allegation to the effect that the funds of the
NASSCO are public funds of the government and that as
such, the same may not be garnished, attached or levied
upon is untenable for, as a government-owned or
controlled corporation, it has a personality of its own,
distinct and separate from that of the government. This

Provisional Remedies/Cases Full Text/Rule 5722

court has likewise ruled that other govemment-owned


and controlled corporations like National Coal Company,
the National Waterworks and Sewerage Authority
(NAWASA), the National Coconut Corporation (NACOCO)
the National Rice and Corn Corporation (NARIC) and the
Price Stabilization Council (PRISCO) which possess
attributes similar to those of the PVTA are clothed with
personalities of their own, separate and distinct from that
of the government [National Coal Company v. Collector of
Internal Revenue, 46 Phil. 583 (1924); Bacani and Matoto
v. National Coconut Corporation et al., 100 Phil. 471
(1956); Reotan v. National Rice & Corn Corporation, G.R.
No. L-16223, February 27, 1962, 4 SCRA 418.] The
rationale in vesting it with a separate personality is not
difficult to find. It is well-settled that when the
government enters into commercial business, it abandons
its sovereign capacity and is to be treated like any other
corporation [Manila Hotel Employees' Association v.
Manila Hotel Co. and CIR, 73 Phil. 734 (1941).]
Accordingly, as emphatically expressed by this Court in a
1978 decision, "garnishment was the appropriate remedy
for the prevailing party which could proceed against the
funds of a corporate entity even if owned or controlled by
the government" inasmuch as "by engaging in a
particular business thru the instrumentality of a
corporation, the government divests itself pro hac vice of
its sovereign character, so as to render the corporation
subject to the rules of law governing private corporations"
[Philippine National Bank v. CIR, G.R No. L-32667, January
31, 1978, 81 SCRA 314, 319.]
Furthermore, in the case of PVTA, the law has expressly
allowed it funds to answer for various obligations,
including the one sought to be enforced by plaintiff
BADOC in this case (i.e. for unpaid deliveries of tobacco).
Republic Act No. 4155, which discounted the erstwhile
support given by the Central Bank to PVTA, established in
lieu thereof a "Tobacco Fund" to be collected from the
proceeds of fifty per centum of the tariff or taxes of
imported leaf tobacco and also fifty per centum of the
specific taxes on locally manufactured Virginia type
cigarettes.
Section 5 of Republic Act No. 4155 provides that this fund
shall be expended for the support or payment of:
1. Indebtedness of the Philippine
Virginia Tobacco Administration and the
former
Agricultural
Credit
and
Cooperative Financing Administration to
FACOMAS and farmers and planters
regarding Virginia tobacco transactions
in previous years;
2. Indebtedness of the Philippine
Virginia Tobacco Administration and the
former
Agricultural
Credit
and
Cooperative Financing Administration to
the Central Bank in gradual amounts
regarding Virginia tobacco transactions
in previous years;
3. Continuation of the Philippine Virginia
Tobacco Administration support and
subsidy
operationsincluding
the
purchase of locally grown and produced
Virginia leaf tobacco, at the present
support
and
subsidy
prices,
its
procurement,
redrying,
handling,
warehousing and disposal thereof, and
the redrying plants trading within the
purview of their contracts;
4.
Operational,
office
and
field
expenses, and the establishment of the
Tobacco Research and Grading Institute.
[Emphasis supplied.]

CHRISSY SABELLA

Inasmuch as the Tobacco Fund, a special fund, was by


law, earmarked specifically to answer obligations incurred
by PVTA in connection with its proprietary and
commercial operations authorized under the law, it
follows that said funds may be proceeded against by
ordinary judicial processes such as execution and
garnishment. If such funds cannot be executed upon or
garnished pursuant to a judgment sustaining the liability
of the PVTA to answer for its obligations, then the purpose
of the law in creating the PVTA would be defeated. For it
was declared to be a national policy, with respect to the
local Virginia tobacco industry, to encourage the
production of local Virginia tobacco of the qualities
needed and in quantities marketable in both domestic
and foreign markets, to establish this industry on an
efficient and economic basis, and to create a climate
conducive to local cigarette manufacture of the qualities
desired by the consuming public, blending imported and
native Virginia leaf tobacco to improve the quality of
locally manufactured cigarettes [Section 1, Republic Act
No. 4155.]
The Commissioner of Public Highways case is thus
distinguishable from the case at bar. In said case, the
Philippine National Bank (PNB) as custodian of funds
belonging to the Bureau of Public Highways, an agency of
the government, was chargeable with knowledge of the
exemption of such government funds from execution and
garnishment pursuant to the elementary precept that
public funds cannot be disbursed without the
appropriation required by law. On the other hand, the
same cannot hold true for RCBC as the funds entrusted to
its custody, which belong to a public corporation, are in
the nature of private funds insofar as their susceptibility
to garnishment is concerned. Hence, RCBC cannot be
charged with lack of prudence for immediately complying
with the order to deliver the garnished amount. Since the
funds in its custody are precisely meant for the payment
of lawfully-incurred obligations, RCBC cannot rightfully
resist a court order to enforce payment of such
obligations. That such court order subsequently turned
out to have been erroneously issued should not operate
to the detriment of one who complied with its clear order.
Finally, it is contended that RCBC was bound to inquire
into the legality and propriety of the Writ of Execution and
Notice of Garnishment issued against the funds of the
PVTA deposited with said bank. But the bank was in no
position to question the legality of the garnishment since
it was not even a party to the case. As correctly pointed
out by the petitioner, it had neither the personality nor
the interest to assail or controvert the orders of
respondent Judge. It had no choice but to obey the same
inasmuch as it had no standing at all to impugn the
validity of the partial judgment rendered in favor of the
plaintiff or of the processes issued in execution of such
judgment.
RCBC cannot therefore be compelled to make restitution
solidarily with the plaintiff BADOC. Plaintiff BADOC alone
was responsible for the issuance of the Writ of Execution
and Order of Payment and so, the plaintiff alone should
bear the consequences of a subsequent annulment of
such court orders; hence, only the plaintiff can be ordered
to restore the account of the PVTA.
WHEREFORE, the petition is hereby granted and the
petitioner is ABSOLVED from any liability to respondent
PVTA for reimbursement of the funds garnished. The
questioned Order of the respondent Judge ordering the
petitioner, jointly and severally with BADOC, to restore
the account of PVTA are modified accordingly.
SO ORDERED.
G.R. No. 133303

February 17, 2005

Provisional Remedies/Cases Full Text/Rule 5723

BERNARDO
VALDEVIESO, petitioner,
vs.
CANDELARIO
DAMALERIO
AND
AUREA
C.
DAMALERIO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review under Rule 45 of
the Rules of Court, seeking to set aside the 25 September
1997 Decision and the 10 February 1998 Resolution of
the Court of Appeals in CA-G.R. SP No. 43082 entitled,
"Candelario Damalerio and Aurea Damalerio v. Honorable
Antonio S. Alano, et al."1
There is no dispute as to the following facts:
On 05 December 1995, Bernardo Valdevieso (petitioner)
bought from spouses Lorenzo and Elenita Uy a parcel of
land consisting of 10,000 square meters, more or less,
located at Bo. Tambler, General Santos City, and covered
by Transfer Certificate of Title (TCT) No. T-30586.2
The deed of sale was not registered, nor was the title of
the land transferred to petitioner.3
On 07 December 1995, the said property was
immediately declared by petitioner for taxation purposes
as Tax Declaration No. l6205 with the City Assessors
Office.4
It came to pass that on 19 April 1996, spouses Candelario
and Aurea Damalerio (respondents) filed with the
Regional Trial Court (RTC) of General Santos City, a
complaint for a sum of money against spouses Lorenzo
and Elenita Uy docketed as Civil Case No. 5748 with
application for the issuance of a Writ of Preliminary
Attachment.5
On 23 April 1996, the trial court issued a Writ of
Preliminary Attachment by virtue of which the property,
then still in the name of Lorenzo Uy but which had
already been sold to petitioner, was levied. The levy was
duly recorded in the Register of Deeds of General Santos
City and annotated upon TCT No. T-30586.6
On 06 June 1996, TCT No. T-30586 in the name of Lorenzo
Uy was cancelled and, in lieu thereof, TCT No. T-74439
was issued in the name of petitioner.7 This new TCT
carried with it the attachment in favor of respondents.
On 14 August 1996, petitioner filed a third-party claim in
Civil Case No. 5748 to discharge or annul the attachment
levied on the property covered by TCT No. T-74439 on the
ground that the said property belongs to him and no
longer to Lorenzo and Elenita Uy.8
In a resolution dated 21 October 1996, the trial court
ruled for the petitioner.9 Citing Manliguez v. Court of
Appeals10 and Santos v. Bayhon,11 it held that the levy of
the property by virtue of attachment is lawful only when
the levied property indubitably belongs to the defendant.
Applying the rulings in the cited cases, it opined that
although defendant Lorenzo Uy remained the registered
owner of the property attached, yet the fact was that he
was no longer the owner thereof as it was already sold
earlier to petitioner, hence, the writ of attachment was
unlawful.1awphi1.nt
Respondents sought reconsideration thereof which was
denied by the trial court in a resolution dated 03 January
1997.12
From the unfavorable resolution of the trial court in the
third-party claim, respondents appealed to the Court of

CHRISSY SABELLA

Appeals. The appellate court reversed the resolution and


by judgment promulgated on 25 September 1997, it
declared that an attachment or levy of execution, though
posterior to the sale, but if registered before the sale is
registered, takes precedence over the sale. 13 The writ of
attachment in favor of the respondents, being recorded
ahead of the sale to petitioner, will therefore take
precedence.
Petitioner moved for reconsideration but this was denied
by the Court of Appeals in its Resolution of 10 February
1998.14
Hence, this Petition for Review on Certiorari.
The sole issue in this case is whether or not a registered
writ of attachment on the land is a superior lien over that
of an earlier unregistered deed of sale.
Petitioner maintains that he has a superior right over the
questioned property because when the same was
attached on 23 April 1996, this property was no longer
owned by spouses Uy against whom attachment was
issued as it was already sold to petitioner on 05
December 1995. The ownership thereof was already
transferred to petitioner pursuant to Article 1477 15 in
relation to Article 149816 of the Civil Code.
Dismissing the allegation that he slept on his rights by
not immediately registering at least an adverse claim
based on his deed of sale, petitioner avers that he
promptly worked out for the transfer of registration in his
name. The slight delay in the registration, he claims was
not due to his fault but attributable to the process
involved in the registration of property such as the
issuance of the Department of Agrarian Reform clearance
which was effected only after compliance with several
requirements.1awphi1.nt
Considering the peculiar facts and circumstances
obtaining in this case, petitioner submits it would be in
accord with justice and equity to declare him as having a
superior right to the disputed property than the
respondents.
Respondents maintain the contrary view. They aver that
registration of a deed of sale is the operative act which
binds the land and creates a lien thereon. Before the
registration of the deed, the property is not bound insofar
as third persons are concerned. Since the writ of
attachment in favor of respondents was registered earlier
than the deed of sale to petitioner, respondents were of
the belief that their registered writ of attachment on the
subject property enjoys preference and priority over
petitioners earlier unregistered deed of sale over the
same property. They also contend that Articles 1477 and
1498 of the Civil Code as cited by petitioner are not
applicable to the case because said provisions apply only
as between the parties to the deed of sale. These
provisions do not apply to, nor bind, third parties, like
respondents, because what affects or binds third parties
is the registration of the instrument in the Register of
Deeds. Furthermore, respondents argue that petitioner
cannot invoke equity in his favor unless the following
conditions are met: (a) the absence of specific provision
of a law on the matter; and (b) if the person who invokes
it is not guilty of delay. Both conditions have not been
met, however, since there is a law on the subject
matter, i.e., Section 51 of Presidential Decree No. 1529,
and that petitioner allegedly slept on his rights by not
immediately registering an adverse claim based on his
deed of sale.
We agree with the respondents.
The law applicable to the facts of this case is Section 51
of P.D. No. 1529. Said Section provides:

Provisional Remedies/Cases Full Text/Rule 5724

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 Register 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 city where the land lies.
It is to be noted that though the subject land was deeded
to petitioner as early as 05 December 1995, it was not
until 06 June 1996 that the conveyance was registered,
and, during that interregnum, the land was subjected to a
levy on attachment. It should also be observed that, at
the time of the attachment of the property on 23 April
1996, the spouses Uy were still the registered owners of
said property. Under the cited law, the execution of the
deed of sale in favor of petitioner was not enough as a
succeeding step had to be taken, which was the
registration of the sale from the spouses Uy to him.
Insofar as third persons are concerned, what validly
transfers or conveys a persons interest in real property is
the registration of the deed. Thus, when petitioner bought
the property on 05 December 1995, it was, at that point,
no more than a private transaction between him and the
spouses Uy. It needed to be registered before it could
bind third parties, including respondents. When the
registration finally took place on 06 June 1996, it was
already too late because, by then, the levy in favor of
respondents, pursuant to the preliminary attachment
ordered by the General Santos City RTC, had already been
annotated on the title.
The settled rule is that levy on attachment, duly
registered, takes preference over a prior unregistered
sale.17 This result is a necessary consequence of the fact
that the property involved was duly covered by the
Torrens system which works under the fundamental
principle that registration is the operative act which gives
validity to the transfer or creates a lien upon the land. 18
The preference created by the levy on attachment is not
diminished even by the subsequent registration of the
prior sale. This is so because an attachment is a
proceeding in rem.19 It is against the particular property,
enforceable against the whole world. The attaching
creditor acquires a specific lien on the attached property
which nothing can subsequently destroy except the very
dissolution of the attachment or levy itself. 20 Such a
proceeding, in effect, means that the property attached is
an indebted thing and a virtual condemnation of it to pay
the owners debt.21 The lien continues until the debt is
paid, or sale is had under execution issued on the
judgment, or until the judgment is satisfied, or the
attachment discharged or vacated in some manner
provided by law.
Thus, in the registry, the attachment in favor of
respondents appeared in the nature of a real lien when
petitioner had his purchase recorded. The effect of the
notation of said lien was to subject and subordinate the
right of petitioner, as purchaser, to the lien. Petitioner
acquired ownership of the land only from the date of the
recording of his title in the register, and the right of
ownership which he inscribed was not absolute but a
limited right, subject to a prior registered lien of
respondents, a right which is preferred and superior to
that of petitioner.22

CHRISSY SABELLA

Anent petitioners reliance on the rulings laid down


in Manliguez v. Court of Appeals and Santos v. Bayhon,
we find the same to be misplaced. These cases did not
deal at all with the dilemma at hand, i.e. the question of
whether or not a registered writ of attachment on land is
superior to that of an earlier unregistered deed of sale.
In Santos, what was involved were machinery and pieces
of equipment which were executed upon pursuant to the
favorable ruling of the National Labor Relations
Commission. A third party claimed that the machinery
were already sold to her, but it does not appear in the
facts
of
the
case
if
such
sale
was
ever
registered.l^vvphi1.net Manliguez is similar to Santos,
except that the former involved buildings and
improvements on a piece of land. To stress, in both cited
cases, the registration of the sale, if any, of the subject
properties was never in issue.1awphi1.nt
As to petitioners invocation of equity, we cannot, at this
instance, yield to such principle in the presence of a law
clearly applicable to the case. We reiterate that this
Court, while aware of its equity jurisdiction, is first and
foremost, a court of law.23 While equity might tilt on the
side of one party, the same cannot be enforced so as to
overrule positive provisions of law in favor of the
other.24 Equity cannot supplant or contravene the
law.25 The rule must stand no matter how harsh it may
seem. Dura lex sed lex.
WHEREFORE, the appealed Decision of the Court of
Appeals in CA-G.R. SP No. 43082 dated 25 September
1997, and its Resolution dated 10 February 1998, are
hereby AFFIRMED. No costs.
SO ORDERED.
G.R. No. 161417

February 8, 2007

MA.
TERESA
CHAVES
BIACO, Petitioner,
vs.
PHILIPPINE COUNTRYSIDE RURAL BANK, Respondent.
DECISION
TINGA, J.:
Petitioner, Ma. Teresa Chaves Biaco, seeks a review of the
Decision1 of the Court of Appeals in CA-G.R. No. 67489
dated August 27, 2003, which denied her petition for
annulment of judgment, and the Resolution 2 dated
December 15, 2003 which denied her motion for
reconsideration.
The facts as succinctly stated by the Court of Appeals are
as follows:
Ernesto Biaco is the husband of petitioner Ma. Teresa
Chaves Biaco. While employed in the Philippine
Countryside Rural Bank (PCRB) as branch manager,
Ernesto obtained several loans from the respondent bank
as evidenced by the following promissory notes:
Feb. 17, 1998

P 65,000.00

Mar. 18, 1998

30,000.00

May 6, 1998

60,000.00

May 20, 1998

350,000.00

July 30, 1998

155,000.00

Sept. 8, 1998

40,000.00

Sept. 8, 1998

120,000.00

As security for the payment of the said loans, Ernesto


executed a real estate mortgage in favor of the bank
covering the parcel of land described in Original
Certificate of Title (OCT) No. P-14423. The real estate
mortgages bore the signatures of the spouses Biaco.

Provisional Remedies/Cases Full Text/Rule 5725

When Ernesto failed to settle the above-mentioned loans


on its due date, respondent bank through counsel sent
him a written demand on September 28, 1999. The
amount due as of September 30, 1999 had already
reached ONE MILLION EIGHTY THOUSAND SIX HUNDRED
SEVENTY SIX AND FIFTY CENTAVOS (P1,080,676.50).
The written demand, however, proved futile.
On February 22, 2000, respondent bank filed a complaint
for foreclosure of mortgage against the spouses Ernesto
and Teresa Biaco before the RTC of Misamis Oriental.
Summons was served to the spouses Biaco through
Ernesto at his office (Export and Industry Bank) located at
Jofelmor Bldg., Mortola Street, Cagayan de Oro City.
Ernesto received the summons but for unknown reasons,
he failed to file an answer. Hence, the spouses Biaco were
declared in default upon motion of the respondent bank.
The respondent bank was allowed to present its
evidence ex parte before the Branch Clerk of Court who
was then appointed by the court as Commissioner.
Arturo Toring, the branch manager of the respondent
bank, testified that the spouses Biaco had been obtaining
loans from the bank since 1996 to 1998. The loans for the
years 1996-1997 had already been paid by the spouses
Biaco, leaving behind a balance of P1,260,304.33
representing the 1998 loans. The amount being claimed
is inclusive of interests, penalties and service charges as
agreed upon by the parties. The appraisal value of the
land subject of the mortgage is only P150,000.00 as
reported by the Assessors Office.
Based on the report of the Commissioner, the respondent
judge ordered as follows:
WHEREFORE, judgment is hereby rendered ordering
defendants spouses ERNESTO R. BIACO and MA. THERESA
[CHAVES] BIACO to pay plaintiff bank within a period of
not less than ninety (90) days nor more than one hundred
(100) days from receipt of this decision the loan of ONE
MILLION TWO HUNDRED SIXTY THOUSAND THREE
HUNDRED FOUR PESOS and THIRTY THREE CENTAVOS
(P1,260,304.33) plus litigation expenses in the amount of
SEVEN THOUSAND SIX HUNDRED FORTY PESOS
(P7,640.00) and attorneys fees in the amount of TWO
HUNDRED FIFTY TWO THOUSAND THIRTY PESOS and
FORTY THREE CENTAVOS (P252,030.43) and cost of this
suit.
In case of non-payment within the period, the Sheriff of
this Court is ordered to sell at public auction the
mortgaged Lot, a parcel of registered land (Lot 35802,
Cad. 237 {Lot No. 12388-B, Csd-10-002342-D}), located
at Gasi, Laguindingan, Misamis Oriental and covered by
TCT No. P-14423 to satisfy the mortgage debt, and the
surplus if there be any should be delivered to the
defendants spouses ERNESTO and MA. THERESA
[CHAVES] BIACO. In the event however[,] that the
proceeds of the auction sale of the mortgage[d] property
is not enough to pay the outstanding obligation, the
defendants are ordered to pay any deficiency of the
judgment as their personal liability.
SO ORDERED.
On July 12, 2000, the sheriff personally served the abovementioned judgment to Ernesto Biaco at his office at
Export and Industry Bank. The spouses Biaco did not
appeal from the adverse decision of the trial court. On
October 13, 2000, the respondent bank filed an ex
parte motion for execution to direct the sheriff to sell the
mortgaged lot at public auction. The respondent bank
alleged that the order of the court requiring the spouses
Biaco to pay within a period of 90 days had passed, thus
making it necessary to sell the mortgaged lot at public
auction, as previously mentioned in the order of the
court. The motion for execution was granted by the trial
court per Order dated October 20, 2000.
On October 31, 2000, the sheriff served a copy of the writ
of execution to the spouses Biaco at their residence in
#92 9th Street, Nazareth, Cagayan de Oro City. The writ
of execution was personally received by Ernesto. By
virtue of the writ of execution issued by the trial court,
the mortgaged property was sold at public auction in

CHRISSY SABELLA

favor of the respondent bank in the amount of ONE


HUNDRED FIFTY THOUSAND PESOS (P150,000.00).
The amount of the property sold at public auction being
insufficient to cover the full amount of the obligation, the
respondent bank filed an "ex parte motion for judgment"
praying for the issuance of a writ of execution against the
other properties of the spouses Biaco for the full
settlement of the remaining obligation. Granting the
motion, the court ordered that a writ of execution be
issued against the spouses Biaco to enforce and satisfy
the judgment of the court for the balance of ONE MILLION
THREE HUNDRED SIXTY NINE THOUSAND NINE HUNDRED
SEVENTY FOUR PESOS AND SEVENTY CENTAVOS
(P1,369,974.70).
The sheriff executed two (2) notices of levy against
properties registered under the name of petitioner Ma.
Teresa Chaves Biaco. However, the notices of levy were
denied registration because Ma. Teresa had already sold
the two (2) properties to her daughters on April 11,
2001.3
Petitioner sought the annulment of the Regional Trial
Court decision contending that extrinsic fraud prevented
her from participating in the judicial foreclosure
proceedings. According to her, she came to know about
the judgment in the case only after the lapse of more
than six (6) months after its finality. She claimed that
extrinsic fraud was perpetrated against her because the
bank failed to verify the authenticity of her signature on
the real estate mortgage and did not inquire into the
reason for the absence of her signature on the promissory
notes. She moreover asserted that the trial court failed to
acquire jurisdiction because summons were served on her
through her husband without any explanation as to why
personal service could not be made.
The Court of Appeals considered the two circumstances
that kept petitioner in the dark about the judicial
foreclosure proceedings: (1) the failure of the sheriff to
personally serve summons on petitioner; and (2)
petitioners husbands concealment of his knowledge of
the foreclosure proceedings. On the validity of the service
of summons, the appellate court ruled that judicial
foreclosure proceedings are actions quasi in rem. As such,
jurisdiction over the person of the defendant is not
essential as long as the court acquires jurisdiction over
the res.Noting that the spouses Biaco were not opposing
parties in the case, the Court of Appeals further ruled that
the fraud committed by one against the other cannot be
considered extrinsic fraud.
Her motion for reconsideration having been denied,
petitioner filed the instant Petition for Review, 4 asserting
that even if the action is quasi in rem, personal service of
summons is essential in order to afford her due process.
The substituted service made by the sheriff at her
husbands office cannot be deemed proper service absent
any explanation that efforts had been made to personally
serve summons upon her but that such efforts failed.
Petitioner contends that extrinsic fraud was perpetrated
not so much by her husband, who did not inform her of
the judicial foreclosure proceedings, but by the sheriff
who allegedly connived with her husband to just leave a
copy of the summons intended for her at the latters
office.
Petitioner further argues that the deficiency judgment is a
personal judgment which should be deemed void for lack
of jurisdiction over her person.
Respondent
PCRB
filed
its
Comment,5 essentially
reiterating the appellate courts ruling. Respondent avers
that service of summons upon the defendant is not
necessary in actions quasi in rem it being sufficient that
the court acquire jurisdiction over the res. As regards the
alleged conspiracy between petitioners husband and the
sheriff, respondent counters that this is a new argument
which cannot be raised for the first time in the instant
petition.
We required the parties to file their respective
memoranda in the Resolution6 dated August 18, 2004.
Accordingly, petitioner filed her Memorandum7 dated
October
10,
2004,
while
respondent
filed
its
Memorandum for Respondent8 dated September 9, 2004.

Provisional Remedies/Cases Full Text/Rule 5726

Annulment of judgment is a recourse equitable in


character, allowed only in exceptional cases as where
there is no available or other adequate remedy.
Jurisprudence and Sec. 2, Rule 47 of the 1997 Rules of
Civil Procedure (Rules of Court) provide that judgments
may be annulled only on grounds of extrinsic fraud and
lack of jurisdiction or denial of due process.9
Petitioner asserts that extrinsic fraud consisted in her
husbands concealment of the loans which he obtained
from respondent PCRB; the filing of the complaint for
judicial foreclosure of mortgage; service of summons;
rendition of judgment by default; and all other
proceedings which took place until the writ of
garnishment was served.10
Extrinsic fraud exists when there is a fraudulent act
committed by the prevailing party outside of the trial of
the case, whereby the defeated party was prevented
from presenting fully his side of the case by fraud or
deception
practiced
on
him
by
the prevailing
party.11 Extrinsic fraud is present where the unsuccessful
party had been prevented from exhibiting fully his case,
by fraud or deception practiced on him by
his opponent, as by keeping him away from court, a false
promise of a compromise; or where the defendant never
had knowledge of the suit, being kept in ignorance by the
acts of the plaintiff; or where an attorney fraudulently or
without authority assumes to represent a party and
connives at his defeat; or where the attorney regularly
employed corruptly sells out his clients interest to the
other side. The overriding consideration is that the
fraudulent scheme of the prevailing litigantprevented a
party from having his day in court.12
With these considerations, the appellate court acted well
in ruling that there was no fraud perpetrated by
respondent bank upon petitioner, noting that the spouses
Biaco were co-defendants in the case and shared the
same interest. Whatever fact or circumstance concealed
by the husband from the wife cannot be attributed to
respondent bank.
Moreover, petitioners allegation that her signature on the
promissory notes was forged does not evince extrinsic
fraud. It is well-settled that the use of forged instruments
during trial is not extrinsic fraud because such evidence
does not preclude the participation of any party in the
proceedings.13
The question of whether the trial court has jurisdiction
depends on the nature of the action, i.e., whether the
action is in personam, in rem, or quasi in rem. The rules
on service of summons under Rule 14 of the Rules of
Court likewise apply according to the nature of the action.
An action in personam is an action against a person on
the basis of his personal liability. An action in rem is an
action against the thing itself instead of against the
person. An action quasi in rem is one wherein an
individual is named as defendant and the purpose of the
proceeding is to subject his interest therein to the
obligation or lien burdening the property.14
In an action in personam, jurisdiction over the person of
the defendant is necessary for the court to validly try and
decide the case. In a proceeding in rem or quasi in rem,
jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court provided
that the court acquires jurisdiction over the res.
Jurisdiction over the res is acquired either (1) by the
seizure of the property under legal process, whereby it is
brought into actual custody of the law; or (2) as a result
of the institution of legal proceedings, in which the power
of the court is recognized and made effective. 15
Nonetheless, summons must be served upon the
defendant not for the purpose of vesting the court with
jurisdiction but merely for satisfying the due process
requirements.16
A resident defendant who does not voluntarily appear in
court, such as petitioner in this case, must be personally
served with summons as provided under Sec. 6, Rule 14
of the Rules of Court. If she cannot be personally served
with summons within a reasonable time, substituted
service may be effected (1) by leaving copies of the

CHRISSY SABELLA

summons at the defendants residence with some person


of suitable age and discretion then residing therein, or (2)
by leaving the copies at defendants office or regular
place of business with some competent person in charge
thereof in accordance with Sec. 7, Rule 14 of the Rules of
Court.
In this case, the judicial foreclosure proceeding instituted
by respondent PCRB undoubtedly vested the trial court
with jurisdiction over the res. A judicial foreclosure
proceeding is an action quasi in rem. As such, jurisdiction
over the person of petitioner is not required, it being
sufficient that the trial court is vested with jurisdiction
over the subject matter.
There is a dimension to this case though that needs to be
delved into. Petitioner avers that she was not personally
served summons. Instead, summons was served to her
through her husband at his office without any explanation
as to why the particular surrogate service was resorted
to. The Sheriffs Return of Service dated March 21, 2000
states:
xxxx
That on March 16, 2000, the undersigned served the
copies of Summons, complaint and its annexes to the
defendants Sps. Ernesto R. & Ma. Teresa Ch. Biaco thru
Ernesto R. Biaco[,] defendant of the above-entitled case
at his office EXPORT & INDUSTRY BANK, Jofelmore Bldg.[,]
Mortola St., Cagayan de Oro City and he acknowledged
receipt thereof as evidenced with his signature appearing
on the original copy of the Summons.17[Emphasis
supplied]
Without ruling on petitioners allegation that her husband
and the sheriff connived to prevent summons from being
served upon her personally, we can see that petitioner
was denied due process and was not able to participate in
the judicial foreclosure proceedings as a consequence.
The violation of petitioners constitutional right to due
process arising from want of valid service of summons on
her warrants the annulment of the judgment of the trial
court.
There is more, the trial court granted respondent
PCRBs ex-parte motion for deficiency judgment and
ordered the issuance of a writ of execution against the
spouses Biaco to satisfy the remaining balance of the
award. In short, the trial court went beyond its jurisdiction
over the res and rendered a personal judgment against
the
spouses
Biaco.
This
cannot
be
countenanced.1awphil.net
In Sahagun v. Court of Appeals,18 suit was brought against
a non-resident defendant, Abelardo Sahagun, and a writ
of attachment was issued and subsequently levied on a
house and lot registered in his name. Claiming ownership
of the house, his wife, Carmelita Sahagun, filed a motion
to intervene. For failure of plaintiff to serve summons
extraterritorially upon Abelardo, the complaint was
dismissed without prejudice.
Subsequently, plaintiff filed a motion for leave to serve
summons by publication upon Abelardo. The trial court
granted the motion. Plaintiff later filed an amended
complaint against Abelardo, this time impleading
Carmelita and Rallye as additional defendants. Summons
was served on Abelardo through publication in the Manila
Evening Post. Abelardo failed to file an answer and was
declared in default. Carmelita went on certiorari to the
Court of Appeals assailing as grave abuse of discretion
the declaration of default of Abelardo. The Court of
Appeals
dismissed
the
petition
and
denied
reconsideration.
In her petition with this Court, Carmelita raised the issue
of whether the trial court acquired jurisdiction over her
husband, a non-resident defendant, by the publication of
summons in a newspaper of general circulation in the
Philippines. The Court sustained the correctness of
extrajudicial service of summons by publication in such
newspaper.
The Court explained, citing El Banco Espaol-Filipino v.
Palanca,19 that foreclosure and attachment proceedings
are both actions quasi in rem. As such, jurisdiction over

Provisional Remedies/Cases Full Text/Rule 5727

the person of the (non-resident) defendant is not


essential. Service of summons on a non-resident
defendant who is not found in the country is required, not
for purposes of physically acquiring jurisdiction over his
person but simply in pursuance of the requirements of
fair play, so that he may be informed of the pendency of
the action against him and the possibility that property
belonging to him or in which he has an interest may be
subjected to a judgment in favor of a resident, and that
he may thereby be accorded an opportunity to defend in
the action, should he be so minded.
Significantly, the Court went on to rule, citing De Midgely
v. Ferandos, et. al.20 and Perkins v. Dizon, et al. 21 that in a
proceeding in rem or quasi in rem, the only relief that
may be granted by the court against a defendant over
whose person it has not acquired jurisdiction either by
valid service of summons or by voluntary submission to
its jurisdiction, is limited to the res.
Similarly, in this case, while the trial court acquired
jurisdiction over the res, its jurisdiction is limited to a
rendition of judgment on the res. It cannot extend its
jurisdiction beyond the res and issue a judgment
enforcing petitioners personal liability. In doing so
without first having acquired jurisdiction over the person
of petitioner, as it did, the trial court violated her
constitutional right to due process, warranting the
annulment of the judgment rendered in the case.
WHEREFORE, the instant petition is GRANTED. The
Decision dated August 27, 2003 and the Resolution dated
December 15, 2003 of the Court of Appeals in CA-G.R. SP
No. 67489 are SET ASIDE. The Judgment dated July 11,
2000 and Order dated February 9, 2001 of the Regional
Trial Court of Cagayan de Oro City, Branch 20, are
likewise SET ASIDE.
SO ORDERED.
G.R. No. 155868

February 6, 2007

SPOUSES GREGORIO and JOSEFA YU, Petitioners,


vs.
NGO YET TE, doing business under the name and
style, ESSENTIAL MANUFACTURING, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review on Certiorari under Rule
45 of the Rules of Court assailing the March 21, 2001
Decision1 of the Court of Appeals (CA) in CA-G.R. CV No.
522462 and its October 14, 2002 Resolution.3
The antecedent facts are not disputed.
Spouses Gregorio and Josefa Yu (Spouses Yu) purchased
from Ngo Yet Te (Te) bars of detergent soap
worthP594,240.00, and issued to the latter three
postdated checks 4 as payment of the purchase price.
When Te presented the checks at maturity for
encashment, said checks were returned dishonored and
stamped "ACCOUNT CLOSED".5 Te demanded6 payment
from Spouses Yu but the latter did not heed her demands.
Acting through her son and attorney-in-fact, Charry Sy
(Sy), Te filed with the Regional Trial Court (RTC), Branch
75, Valenzuela, Metro Manila, a Complaint, 7 docketed as
Civil Case No. 4061-V-93, for Collection of Sum of Money
and Damages with Prayer for Preliminary Attachment.
In support of her prayer for preliminary attachment, Te
attached to her Complaint an Affidavit executed by Sy
that Spouses Yu were guilty of fraud in entering into the
purchase agreement for they never intended to pay the
contract price, and that, based on reliable information,
they were about to move or dispose of their properties to
defraud their creditors.8

CHRISSY SABELLA

Upon Tes posting of an attachment bond,9 the RTC issued


an Order of Attachment/Levy10 dated March 29, 1993 on
the basis of which Sheriff Constancio Alimurung (Sheriff
Alimurung) of RTC, Branch 19, Cebu City levied and
attached Spouses Yus properties in Cebu City consisting
of one parcel of land (known as Lot No. 11) 11 and four
units of motor vehicle, specifically, a Toyota Ford Fierra, a
jeep, a Canter delivery van, and a passenger bus.12
On April 21, 1993, Spouses Yu filed an Answer13 with
counterclaim for damages arising from the wrongful
attachment of their properties, specifically, actual
damages amounting to P1,500.00 per day; moral
damages,P1,000,000.00;
and
exemplary
damages, P50,000.00. They also sought payment
of P120,000.00 as attorneys fees and P80,000.00 as
litigation expenses.14 On the same date, Spouses Yu filed
an Urgent Motion to Dissolve Writ of Preliminary
Attachment.15 They also filed a Claim Against Surety
Bond16 in which they demanded payment from Visayan
Surety and Insurance Corporation (Visayan Surety), the
surety which issued the attachment bond, of the sum
of P594,240.00, representing the damages they allegedly
sustained as a consequence of the wrongful attachment
of their properties.
While the RTC did not resolve the Claim Against Surety
Bond, it issued an Order 17 dated May 3, 1993, discharging
from attachment the Toyota Ford Fierra, jeep, and Canter
delivery van on humanitarian grounds, but maintaining
custody of Lot No. 11 and the passenger bus. Spouses Yu
filed a Motion for Reconsideration 18 which the RTC
denied.19
Dissatisfied, they filed with the CA a Petition
for Certiorari,20 docketed as CA-G.R. SP No. 31230, in
which a Decision21 was rendered on September 14, 1993,
lifting the RTC Order of Attachment on their remaining
properties. It reads in part:
In the case before Us, the complaint and the
accompanying affidavit in support of the application for
the writ only contains general averments. Neither
pleading states in particular how the fraud was
committed or the badges of fraud purportedly committed
by the petitioners to establish that the latter never had
an intention to pay the obligation; neither is there a
statement of the particular acts committed to show that
the petitioners are in fact disposing of their properties to
defraud creditors. x x x.
xxxx
Moreover, at the hearing on the motion to discharge the
order of attachment x x x petitioners presented evidence
showing that private respondent has been extending
multi-million peso credit facilities to the petitioners for the
past seven years and that the latter have consistently
settled their obligations. This was not denied by private
respondent. Neither does the private respondent contest
the petitioners allegations that they have been recently
robbed of properties of substantial value, hence their
inability to pay on time. By the respondent courts own
pronouncements, it appears that the order of attachment
was upheld because of the admitted financial reverses
the petitioner is undergoing.
This is reversible error. Insolvency is not a ground for
attachment especially when defendant has not been
shown to have committed any act intended to defraud its
creditors x x x.
For lack of factual basis to justify its issuance, the writ of
preliminary attachment issued by the respondent court
was improvidently issued and should be discharged. 22

Provisional Remedies/Cases Full Text/Rule 5728

From said CA Decision, Te


Reconsideration but to no avail.23

filed

Motion

for

Te filed with us a Petition for Review on Certiorari24 but we


denied the same in a Resolution dated June 8, 1994 for
having been filed late and for failure to show that a
reversible error was committed by the CA.25 Entry of
Judgment of our June 8, 1994 Resolution was made on
July 22, 1994.26 Thus, the finding of the CA in its
September 14, 1993 Decision in CA-G.R. SP No. 31230 on
the wrongfulness of the attachment/levy of the properties
of Spouses Yu became conclusive and binding.
However, on July 20, 1994, the RTC, apparently not
informed of the SC Decision, rendered a Decision, the
dispositive portion of which reads:
WHEREFORE, premises considered, the Court finds that
the plaintiff has established a valid civil cause of action
against the defendants, and therefore, renders this
judgment in favor of the plaintiff and against the
defendants, and hereby orders the following:
1) Defendants are hereby ordered or directed to
pay the plaintiff the sum of P549,404.00, with
interest from the date of the filing of this case
(March 3, 1993);
2) The Court, for reasons aforestated, hereby
denies the grant of damages to the plaintiff;
3) The Court hereby adjudicates a reasonable
attorneys
fees
and
litigation
expenses
of P10,000.00 in favor of the plaintiff;
4) On the counterclaim, this Court declines to
rule on this, considering that the question of the
attachment which allegedly gave rise to the
damages incurred by the defendants is being
determined by the Supreme Court.
SO ORDERED.27 (Emphasis ours)
Spouses Yu filed with the RTC a Motion for
Reconsideration28 questioning the disposition of their
counterclaim. They also filed a Manifestation 29 informing
the RTC of our June 8, 1994 Resolution in G.R. No.
114700.
The RTC issued an Order dated August 9, 1994, which
read:
xxxx
(2) With regard the counter claim filed by the
defendants against the plaintiff for the alleged
improvident issuance of this Court thru its
former Presiding Judge (Honorable Emilio
Leachon, Jr.), the same has been ruled with
definiteness by the Supreme Court that, indeed,
the issuance by the Court of the writ of
preliminary attachment appears to have been
improvidently done, but nowhere in the
decision of the Supreme Court and for that
matter, the Court of Appeals decision
which was in effect sustained by the High
Court, contains any ruling or directive or
imposition, of any damages to be paid by
the plaintiff to the defendants, in other
words, both the High Court and the CA, merely
declared the previous issuance of the writ of
attachment by this Court thru its former
presiding judge to be improvidently issued, but it
did not award any damages of any kind to the
defendants, hence, unless the High Court or the
CA rules on this, this Court coud not grant any

CHRISSY SABELLA

damages by virtue of the improvident


attachment made by this Court thru its former
presiding judge, which was claimed by the
defendants in their counter claim.
(3) This Court hereby reiterates in toto its
Decision
in
this
case
dated
July
20,
1994. 30 (Emphasis ours)
The RTC also issued an Order dated December 2,
1994,31 denying the Motion for Reconsideration of
Spouses Yu.32
In the same December 2, 1994 Order, the RTC granted
two motions filed by Te, a Motion to Correct and to
Include Specific Amount for Interest and a Motion for
Execution Pending Appeal.33 The RTC also denied Spouses
Yus Notice of Appeal34 from the July 20, 1994 Decision
and August 9, 1994 Order of the RTC.
From said December 2, 1994 RTC Order, Spouses Yu filed
another Notice of Appeal 35 which the RTC also denied in
an Order36 dated January 5, 1995.
Spouses Yu filed with the CA a Petition 37 for Certiorari,
Prohibition and Mandamus, docketed as CA-G.R. SP No.
36205, questioning the denial of their Notices of Appeal;
and seeking the modification of the July 20, 1994
Decision and the issuance of a Writ of Execution. The CA
granted the Petition in a Decision38 dated June 22, 1995.
Hence, Spouses Yu filed with the CA an appeal39 docketed
as CA-G.R. CV No. 52246, questioning only that portion of
the July 20, 1994 Decision where the RTC declined to rule
on their counterclaim for damages.40However, Spouses Yu
did not dispute the specific monetary awards granted to
respondent Te; and therefore, the same have become
final and executory.
Although in the herein assailed Decision 41 dated March
21, 2001, the CA affirmed in toto the RTC Decision, it
nonetheless made a ruling on the counterclaim of
Spouses Yu by declaring that the latter had failed to
adduce sufficient evidence of their entitlement to
damages.
Spouses Yu filed a Motion for Reconsideration42 but the CA
denied it in the herein assailed Resolution43 dated
October 14, 2002.
Spouses Yu filed the present Petition raising the following
issues:
I. Whether or not the appellate court erred in not
holding that the writ of attachment was procured
in bad faith, after it was established by final
judgment that there was no true ground therefor.
II. Whether or not the appellate court erred in
refusing to award actual, moral and exemplary
damages after it was established by final
judgment that the writ of attachment was
procured with no true ground for its issuance. 44
There is one preliminary matter to set straight before we
resolve the foregoing issues.
According to respondent Te,45 regardless of the evidence
presented by Spouses Yu, their counterclaim was
correctly dismissed for failure to comply with the
procedure laid down in Section 20 of Rule 57. Te contends
that as Visayan Surety was not notified of the
counterclaim, no judgment thereon could be validly
rendered.
Such argument is not only flawed, it is also specious.

Provisional Remedies/Cases Full Text/Rule 5729

As stated earlier, Spouses Yu filed a Claim Against Surety


Bond on the same day they filed their Answer and Urgent
Motion
to
Dissolve
Writ
of
Preliminary
Attachment.46 Further, the records reveal that on June 18,
1993, Spouses Yu filed with the RTC a Motion to Give
Notice to Surety.47 The RTC granted the Motion in an
Order48dated June 23, 1993. Accordingly, Visayan Surety
was notified of the pre-trial conference to apprise it of a
pending claim against its attachment bond. Visayan
Surety received the notice on July 12, 1993 as shown by a
registry return receipt attached to the records.49
Moreover, even if it were true that Visayan Surety was left
in the proceedings a quo, such omission is not fatal to the
cause of Spouses Yu. In Malayan Insurance Company, Inc.
v. Salas,50 we held that "x x x if the surety was not given
notice when the claim for damages against the principal
in the replevin bond was heard, then as a matter of
procedural due process the surety is entitled to be heard
when the judgment for damages against the principal is
sought to be enforced against the suretys replevin
bond."51 This remedy is applicable for the procedures
governing claims for damages
on an attachment bond and on a replevin bond are the
same.52
We now proceed to resolve the issues jointly.
Spouses Yu contend that they are entitled to their
counterclaim for damages as a matter of right in view of
the finality of our June 8, 1994 Resolution in G.R. No.
114700 which affirmed the finding of the CA in its
September 14, 1993 Decision in CA-G.R. SP No. 31230
that respondent Te had wrongfully caused the attachment
of their properties. Citing Javellana v. D.O. Plaza
Enterprises, Inc.,53 they argue that they should be
awarded damages based solely on the CA finding that the
attachment was illegal for it already suggests that Te
acted with malice when she applied for attachment. And
even if we were to assume that Te did not act with malice,
still she should be held liable for the aggravation she
inflicted when she applied for attachment even when she
was clearly not entitled to it.54
That is a rather limited understanding of Javellana. The
counterclaim disputed therein was not for moral damages
and therefore, there was no need to prove malice. As
early as in Lazatin v. Twao, 55 we laid down the rule that
where there is wrongful attachment, the attachment
defendant may recover actual damages even without
proof that the attachment plaintiff acted in bad faith in
obtaining the attachment. However, if it is alleged and
established that the attachment was not merely wrongful
but also malicious, the attachment defendant may
recover moral damages and exemplary damages as
well. 56 Either way, the wrongfulness of the attachment
does not warrant the automatic award of damages to the
attachment defendant; the latter must first discharge the
burden of proving the nature and extent of the loss or
injury incurred by reason of the wrongful attachment.57
In fine, the CA finding that the attachment of the
properties of Spouses Yu was wrongful did not relieve
Spouses Yu of the burden of proving the factual basis of
their counterclaim for damages.
To merit an award of actual damages arising from a
wrongful attachment, the attachment defendant must
prove, with the best evidence obtainable, the fact of loss
or injury suffered and the amount thereof. 58 Such loss or
injury must be of the kind which is not only capable of
proof but must actually be proved with a reasonable
degree of certainty. As to its amount, the same must be
measurable based on specific facts, and not on
guesswork or speculation. 59 In particular, if the claim for
actual damages covers unrealized profits, the amount of
unrealized profits must be estalished and supported by

CHRISSY SABELLA

independent evidence of the mean income of the


business undertaking interrupted by the illegal seizure. 60
Spouses Yu insist that the evidence they presented met
the foregoing standards. They point to the lists of their
daily net income from the operation of said passenger
bus based on used ticket stubs61 issued to their
passengers. They also cite unused ticket stubs as proof of
income foregone when the bus was wrongfully
seized.62 They further cite the unrebutted testimony of
Josefa Yu that, in the day-to-day operation of their
passenger bus, they use up at least three ticket stubs and
earn a minimum daily income of P1,500.00.63
In ruling that Spouses Yu failed to adduce sufficient
evidence to support their counterclaim for actual
damages, the CA stated, thus:
In this case, the actual damages cannot be determined.
Defendant-appellant Josefa Yu testified on supposed lost
profits without clear and appreciable explanation. Despite
her submission of the used and unused ticket stubs, there
was no evidence on the daily net income, the routes plied
by the bus and the average fares for each route. The
submitted basis is too speculative and conjectural. No
reports regarding the average actual profits and other
evidence of profitability necessary to prove the amount of
actual damages were presented. Thus, the Court a quodid
not err in not awarding damages in favor of defendantsappellants.64
We usually defer to the expertise of the CA, especially
when it concurs with the factual findings of the
RTC.65Indeed, findings of fact may be passed upon and
reviewed by the Supreme Court in the following
instances: (1) when the conclusion is a finding grounded
entirely on speculations, surmises, or conjectures; (2)
when the inference made is manifestly mistaken, absurd,
or impossible; (3) where there is a grave abuse of
discretion in the appreciation of facts; (4) when judgment
is based on a misapprehension of facts; (5) when the
lower court, in making its findings, went beyond the
issues of the case and such findings are contrary to the
admissions of both appellant and appellee; (6) when the
factual findings of the CA are contrary to those of the trial
court; (7) when the findings of fact are themselves
conflicting; (8) when the findings of fact are conclusions
made without a citation of specific evidence on which
they are based; (9) when the facts set forth in the petition
as well as in the petitioners main and reply briefs are not
disputed by the respondents; (10) when the findings of
fact of the lower court are premised on the supposed
absence of evidence and are contradicted by the
evidence on record.66 However, the present case does not
fall under any of the exceptions. We are in full accord with
the CA that Spouses Yu failed to prove their counterclaim.
Spouses Yus claim for unrealized income of P1,500.00
per day was based on their computation of their average
daily income for the year 1992. Said computation in turn
is based on the value of three ticket stubs sold over only
five separate days in 1992.67 By no stretch of the
imagination can we consider ticket sales for five days
sufficient evidence of the average daily income of the
passenger bus, much less its mean income. Not even the
unrebutted testimony of Josefa Yu can add credence to
such
evidence
for
the
testimony
itself
lacks
corroboration.68
Besides,
based
on
the
August
29,
1994
Manifestation69 filed by Sheriff Alimurung, it would appear
that long before the passenger bus was placed under
preliminary attachment in Civil Case No. 4061-V-93, the
same had been previously attached by the Sheriff of
Mandaue City in connection with another case and that it
was placed in the Cebu Bonded Warehousing Corporation,
Cebu City. Thus, Spouses Yu cannot complain that they
were unreasonably deprived of the use of the passenger

Provisional Remedies/Cases Full Text/Rule 5730

bus by reason of the subsequent wrongful attachment


issued in Civil Case No. 4061-V-93. Nor can they also
attribute to the wrongful attachment their failure to earn
income or profit from the operation of the passenger bus.
Moreover, petitioners did not present evidence as to the
damages they suffered by reason of the wrongful
attachment of Lot No. 11.
Nonetheless, we recognize that Spouses Yu suffered some
form of pecuniary loss when their properties were
wrongfully seized, although the amount thereof cannot be
definitively ascertained. Hence, an award of temperate or
moderate damages in the amount of P50,000.00 is in
order.70
As to moral and exemplary damages, to merit an award
thereof, it must be shown that the wrongful attachment
was obtained by the attachment plaintiff with malice or
bad faith, such as by appending a false affidavit to his
application.71
Spouses Yu argue that malice attended the issuance of
the attachment bond as shown by the fact that Te
deliberately appended to her application for preliminary
attachment an Affidavit where Sy perjured himself by
stating that they had no intention to pay their obligations
even when he knew this to be untrue given that they had
always paid their obligations; and by accusing them of
disposing of their properties to defraud their creditors
even when he knew this to be false, considering that the
location of said properties was known to him.72
The testimony of petitioner Josefa Yu herself negates their
claim for moral and exemplary damages. On crossexamination she testified, thus:
Q: Did you ever deposit any amount at that time to fund
the check?
A: We requested that it be replaced and staggered into
smaller amounts.
COURT: Did you fund it or not?
Atty. Ferrer: The three checks involved?
Atty. Florido: Already answered. She said that they were
not able to fund it.
Atty. Ferrer: And as a matter of fact, you went to the bank
to close your account?
A: We closed account with the bank because we
transferred the account to another bank.
Q: How much money did you transfer from that bank to
which the three checks were drawn to this new bank?
A: I dont know how much was there but we transferred
already to the Solid Bank.
Q: Who transferred?
A: My daughter, sir.73 (Emphasis ours)
Based on the foregoing testimony, it is not difficult to
understand why Te concluded that Spouses Yu never
intended to pay their obligation for they had available
funds in their bank but chose to transfer said funds
instead of cover the checks they issued. Thus, we cannot
attribute malice nor bad faith to Te in applying for the
attachment writ. We cannot hold her liable for moral and
exemplary damages.

CHRISSY SABELLA

As a rule, attorneys fees cannot be awarded when moral


and exemplary damages are not granted, the exception
however is when a party incurred expenses to lift a
wrongfully
issued
writ
of
attachment.1awphi1.net74 Without a doubt, Spouses Yu
waged a protracted legal battle to fight off the illegal
attachment of their properties and pursue their claims for
damages. It is only just and equitable that they be
awarded reasonable attorneys fees in the amount
ofP30,000.00.
In sum, we affirm the dismissal of the counterclaim of
petitioners Spouses Yu for actual, moral, and exemplary
damages. However, we grant them temperate damages
and attorneys fees.
WHEREFORE, the petition is partly GRANTED. The March
21,
2001
Decision
of
the Court of
Appeals
is AFFIRMEDwith the MODIFICATION that petitioners
counterclaim is PARTLY GRANTED. Gregorio Yu and
Josefa Yu are awarded P50,000.00 temperate damages
and P30,000.00 attorneys fees.
No costs.
SO ORDERED.
G.R. No. 84481 April 18, 1989
MINDANAO SAVINGS & LOAN ASSOCIATION, INC.
(formerly Davao Savings & Loan Association) &
FRANCISCO
VILLAMOR, petitioners,
vs.
HON. COURT OF APPEALS, POLY R. MERCADO, and
JUAN P. MERCADO, respondents.
Villarica, Tiongco & Caboverde Law Office for petitioners.
A B C Law Offices for private respondents.
GRIO-AQUINO, J.:
On September 10, 1986, private respondents filed in the
Regional Trial Court of Davao City, a complaint against
defendants D.S. Homes, Inc., and its directors, Laurentino
G. Cuevas, Saturnino R. Petalcorin, Engr. Uldarico D.
Dumdum, Aurora P. De Leon, Ramon D. Basa, Francisco D.
Villamor, Richard F. Magallanes, Geronimo S. Palermo
Felicisima V. Ramos and Eugenio M. De los Santos
(hereinafter referred to as D.S. Homes, et al.) for
"Rescission of Contract and Damages" with a prayer for
the issuance of a writ of preliminary attachment,
docketed as Civil Case No. 18263.
On September 28, 1986, Judge Dinopol issued an order
granting ex parte the application for a writ of preliminary
attachment.
On September 22, 1986, the private respondents
amended their complaint and on October 10, 1986, filed a
second amended complaint impleading as additional
defendants herein petitioners Davao Savings & Loan
Association, Inc. and its president, Francisco Villamor, but
dropping Eugenio M. De los Santos.
On November 5, 1986, Judge Dinopol issued ex parte an
amended order of attachment against all the defendants
named in the second amended complaint, including the
petitioners but excluding Eugenio C. de los Santos.
D. S. Homes. Inc., et al. and the Davao Savings & Loan
Association (later renamed Mindanao Savings & Loan
Association, Inc. or "MSLA") and Francisco Villamor filed
separate motions to quash the writ of attachment. When
their motions were denied by the Court, D.S. Homes, Inc.,
et al. offered a counterbond in the amount of

Provisional Remedies/Cases Full Text/Rule 5731

Pl,752,861.41 per certificate issued by the Land Bank of


the Philippines, a banking partner of petitioner MSLA The
lower court accepted the Land Bank Certificate of .
Deposit for Pl,752,861.41 as counterbond and lifted the
writ of preliminary attachment on June 5, 1987 (Annex V)
On July 29, 1987, MSLA and Villamor filed in the Court of
Appeals a petition for certiorari (Annex A) to annul the
order of attachment and the denial of their motion to
quash the same (CA-G.R. SP No. 12467). The petitioners
alleged that the trial court acted in excess of its
jurisdiction in issuing the ex parte orders of preliminary
attachment and in denying their motion to quash the writ
of attachment, D.S. Homes, Inc., et al. did not join them.
On May 5, 1988, the Court of Appeals dismissed the
petition for certiorari and remanded the records of Civil
Case No. 18263 to the Regional Trial Court of Davao City,
Branch 13, for expeditious proceedings. It held:
Objections against the writ may no
longer be invoked once a counterbond
is filed for its lifting or dissolution.
The grounds invoked for the issuance of
the writ form the core of the complaint
and it is right away obvious that a trial
on the merits was necessary. The merits
of a main action are not triable in a
motion to discharge an attachment
otherwise an applicant for dissolution
could force a trial on the merits on his
motion (4 Am. Jur., Sec. 635, 934, cited
in G.G. Inc. vs. Sanchez, et al., 98 Phil.
886, 890, 891). (Annex B, p. 185, Rollo.)
Dissatisfied, the petitioners appealed to this Court.
A careful consideration of the petition for review fails to
yield any novel legal questions for this Court to resolve.
The only requisites for the issuance of a writ of
preliminary attachment under Section 3, Rule 57 of the
Rules of Court are the affidavit and bond of the applicant.
SEC. 3. Affidavit and bond required .
An order of attachment shall be granted
only when it is made to appear by the
affidavit of the applicant, or of some
other person who personally knows the
facts, that a sufficient cause of action
exists that the case is one of those
mentioned in section 1 hereof, that
there is no other sufficient security for
the claim sought to be enforced by the
action, and that the amount due to the
applicant, or the value of the. property
the possession of which he is entitled to
recover, is as much as the sum for
which the order is granted above all
legal counterclaims. The affidavit, and
the bond required by the next
succeeding section must be duly filed
with the clerk or judge of the court
before the order issues.
No notice to the adverse party or hearing of the
application is required. As a matter of fact a hearing
would defeat the purpose of this provisional remedy. The
time which such a hearing would take, could be enough
to enable the defendant to abscond or dispose of his
property
before
a
writ
of
attachment
issues.
Nevertheless, while no hearing is required by the Rules of
Court for the issuance of an attachment (Belisle
Investment & Finance Co., Inc. vs. State Investment
House, Inc., 72927, June 30, 1987; Filinvest Credit Corp.
vs. Relova, 11 7 SCRA 420), a motion to quash the writ

CHRISSY SABELLA

may not be granted without "reasonable notice to the


applicant" and only "after hearing" (Secs. 12 and 13, Rule
57, Rules of Court).
The Court of Appeals did not err in holding that objections
to the impropriety or irregularity of the writ of attachment
"may no longer be invoked once a counterbond is filed,"
when the ground for the issuance of the writ forms the
core of the complaint.
Indeed, after the defendant has obtained the discharge of
the writ of attachment by filing a counterbond under
Section 12, Rule 57 of the Rules of Court, he may not file
another motion under Section 13, Rule 57 to quash the
writ for impropriety or irregularity in issuing it.
The reason is simple. The writ had already been quashed
by filing a counterbond, hence, another motion to quash
it would be pointless. Moreover, as the Court of Appeals
correctly observed, when the ground for the issuance of
the writ is also the core of the complaint, the question of
whether the plaintiff was entitled to the writ can only be
determined after, not before, a full-blown trial on the
merits of the case. This accords with our ruling G.B. Inc.
vs. Sanchez, 98 Phil. 886 that: "The merits of a main
action are not triable in a motion to discharge an
attachment, otherwise an applicant for the dissolution
could force a trial on the merits of the case on this
motion."
May the defendant, after procuring the dissolution of the
attachment by filing a counterbond, ask for the
cancellation of the counterbond on the ground that the
order of attachment was improperly issued? That
question was answered by this Court when it ruled in Uy
Kimpang vs. Javier, 65 Phil. 170, that "the obligors in the
bond are absolutely liable for the amount of any
judgment that the plaintiff may recover in the
action without reference to the question of whether the
attachment was rightfully or wrongfully issued."
The liability of the surety on the counterbond subsists
until the Court shall have finally absolved the defendant
from the plaintiff s claims. Only then may the
counterbond be released. The same rule applies to the
plaintiffs attachment bond. "The liability of the surety on
the bond subsists because the final reckoning is when the
Court shall finally adjudge that the attaching creditor was
not entitled to the issuance of the attachment writ,"
(Calderon vs. Intermediate Appellate Court, 155 SCRA
531.)
WHEREFORE, finding no reversible error in the decision of
the Court of Appeals in CA-G.R. SP No. 12467, the petition
for review is denied for lack of merit with costs against
the petitioners.
SO ORDERED.
Cruz, Gancayco and Medialdea, JJ., concur.
Separate Opinions
NARVASA, J.: Concurring And Dissenting Opinion
I agree that the decision of the Court of Appeals subject
of the appeal in this case should be affirmed. I write this
separate opinion simply to stress certain principles
relative to the discharge of preliminary attachments so
that our own decision or that thereby affirmed be not
applied to juridical situations beyond their intendment,
which may well result from the statement that "after the
defendant has obtained the discharge of the writ of
attachment by filing a counterbond under Section 12,
Rule 57 of the Rules of Court, he may not file another
motion under Section 13, Rule 57 to quash the writ for
impropriety or irregularity in issuing it."

Provisional Remedies/Cases Full Text/Rule 5732

Rule 57 specifies in clear terms the modes by which a


preliminary attachment may be discharged at the
instance of the party against whom it has been issued.
The first is by the submission of a counterbond or
security. The second is by a demonstration of the
attachment's improper or irregular issuance.
1.0. The discharge of an attachment on security given is
governed by Section 12 of the Rule.
SEC 12. Discharge of attachment upon
giving counterbond. At any time after
an order of attachment has been
granted, the party whose property has
been attached, or the person appearing
in his behalf, may, upon reasonable
notice to the applicant, apply to the
judge who granted the order, or to the
judge of the court in which the action is
pending, for an order discharging the
attachment wholly or in part on the
security given .. in an amount equal to
the value of the property attached as
determined by the judge to secure the
payment of any judgment that the
attaching creditor may recover in the
action. .. .
This mode of dissolution presents no apparent difficulty. It
applies when there has already been a seizure of property
by the sheriff. All that is entailed is the presentation of a
motion to the proper court, seeking approval of a cash or
surety bond in an amount equivalent to the value of the
property seized and the lifting of the attachment on the
basis thereof. The counter-bond stands, according to the
cited section, "in place of the property so released."
1.1. But a party need not wait until his property has been
seized before seeking its dissolution upon security. In fact
he may prevent the seizure of his property under
attachment by giving security in an amount sufficient to
satisfy the claims against him. The relevant provision of
the Rule is Section 5. 1
SEC. 5. Manner of attaching property .
The officer executing the order shall
without delay attach, to await judgment
and execution in the action, all the
properties of the party against whom
the order is issued in the province, not
exempt from execution, or so much
thereof as may be sufficient to satisfy
the applicant's demand, unless the
former makes a deposit with the clerk
or judge of the court from which the
order issued, or gives a counter-bond
executed to the applicant, in an amount
sufficient to satisfy such demand
besides costs or in an amount equal to
the value of the property which is about
to be attached, to secure payment to
the applicant of any judgment which he
may recover in the action. .. .
2.0. The second way of lifting a preliminary attachment is
by proving its irregular or improper issuance, under
Section 13 of Rule 57. Like the first, this second mode
may be availed of even before any property has been
actually attached. It may even be resorted to after the
property has already been released from the levy on
attachment, as the pertinent provision makes clear. 2
SEC. 13. Discharge of attachment for
improper or irregular issuance. The
party whose property has been
attached may also, at any time
either before or after the release of the
attached properly, or before any

CHRISSY SABELLA

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. .. .
As pointed out in Calderon v. I.A.C. 155 SCRA 531 (1987),
"The attachment debtor cannot be deemed to have
waived any defect in the issuance of the attachment writ
by simply availing himself of one way of discharging the
attachment writ, instead of the other. Moreover, the filing
of a counterbond is a speedier way of discharging the
attachment writ maliciously sought out by the attaching
creditor instead of the other way, which, in most
instances .. would require presentation of evidence in a
fullblown trial on the merits and cannot easily be settled
in a pending incident of the case."
3.0. However, when the preliminary attachment is issued
upon a ground which is at the same time the applicant's
cause of action; e.g., "an action for money or property
embezzled or fraudulently misapplied or converted to his
own use by a public officer, or an officer of a corporation,
or an attorney, factor, broker, agent, or clerk, in the
course of his employment as such, or by any other person
in a fiduciary capacity, or for a willful violation of
duty," 3or "an action against a party who has been guilty
of fraud in contracting the debt or incurring the obligation
upon which the action is brought, 4 the defendant is not
allowed to file a motion to dissolve the attachment under
Section 13 of Rule 57 by offering to show the falsity of the
factual averments in the plaintiffs application and
affidavits on which the writ was based and
consequently that the writ based thereon had been
improperly or irregularly issued 5 the reason being that
the hearing on such a motion for dissolution of the writ
would be tantamount to a trial of the merits of the action.
In other words, the merits of the action would be
ventilated at a mere hearing of a motion, instead of at
the regular trial. Therefore, when the writ of attachment
is of this nature, the only way it can be dissolved is by a
counter-bond. 6
4.0. The dissolution of the preliminary attachment upon
security given, or a showing of its irregular or improper
issuance, does not of course operate to discharge the
sureties on plaintiffs own attachment bond. The reason is
simple. That bond is 'executed to the adverse party, ..
conditioned that the .. (applicant) will pay all the costs
which may be adjudged to the adverse party and all
damages which he may sustain by reason of the
attachment, if the court shall finally adjudge that the
applicant was not entitled thereto." 7 Hence, until that
determination is made, as to the applicant's entitlement
to the attachment, his bond must stand and cannot be
withdrawn.
G.R. No. 107303 February 23, 1995
EMMANUEL C. OATE and ECON HOLDINGS
CORPORATION,
petitioners,
vs.
HON. ZEUS C. ABROGAR, as Presiding Judge of
Branch 150 of the Regional Trial Court of Makati,
and SUN LIFE ASSURANCE COMPANY OF CANADA,
respondents.

Provisional Remedies/Cases Full Text/Rule 5733

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

summons and the complaint were served on petitioners


Oate and Econ Holdings Corporation (Econ) on January
9, 1992, Deputy Sheriff Arturo C. Flores had already
served on January 3, 1992 notices of garnishment on the
PNB Head office 2 and on all its Metro Manila branches and
an A.B capital. 3 In addition he made other levies before
the service of summons on petitioners, to wit:

RESOLUTION

On January 6, 1992, he served notices of garnishment


on the Urban Bank Head Office and all its Metro Manila
branches, 4 and on the BPI. 5

MENDOZA, J.:
These are motions separately filed by petitioners, seeking
reconsideration of the decision of the Second Division
holding that although the levy on attachment of
petitioners' properties had been made before the trial
court acquired jurisdiction over them, the subsequent
service of summons on them cured the invalidity of the
attachment.

On the same day, he levied on attachment Oate's


condominium unit at the Amorsolo Apartments
Condominium
Project,
covered
by
Condominium
Certificate of Title No. S-1758. 6

The motions were referred to the Court en banc in view of


the fact that in another decision rendered by the Third
Division on the same question, it was held that the
subsequent acquisition of jurisdiction over the person of a
defendant does not render valid the previous attachment
of his property. 1 The Court en bancaccepted the referral
and now issues this resolution.

On January 8, 1992, he attached Oate's lot, consisting


of 1,256 square meters, at the Ayala-Alabang Subdivision,
Alabang, Muntinlupa, covered by TCT No. 112673. 8

Petitioners maintain that, in accordance with prior


decisions of this Court, the attachment of their properties
was void because the trial court had not at that time
acquired jurisdiction over them and that the subsequent
service of summons on them did not cure the invalidity of
the levy. They further contend that the examination of the
books and ledgers of the Bank of the Philippine Islands
(BPI), the Philippine National Bank (PNB) and the Urban
Bank was a "fishing expedition" which the trial court
should not have authorized because petitioner Emmanuel
C. Oate, whose accounts were examined, was not a
signatory to any of the documents evidencing the
transaction between Sun Life Assurance of Canada (Sun
Life) and Brunner Development Corporation (Brunner).
On the other hand private respondent Sun Life stresses
the fact that the trial court eventually acquired
jurisdiction over petitioners and contends that this cured
the invalidity of the attachment of petitioners' properties.
With respect to the second contention of petitioners,
private respondent argues that the examination of
petitioner Oate's bank account was justified because it
was he who signed checks transferring huge amounts
from Brunner's account in the Urban Bank to the PNB and
the BPI.
I
At the outset, it should be stated that the Court does not
in the least doubt the validity of the writ of attachment
issued in these cases. The fact that a criminal complaint
for estafa which Sun Life had filed against petitioner
Oate and Noel L. Dio, president of Brunner, was
dismissed by the Office of the Provincial Prosecutor is
immaterial to the resolution of the motions for
reconsideration. In the first place, the dismissal, although
later affirmed by the Department of Justice, is pending
reconsideration. In the second place, since the issue in
the case below is precisely whether petitioners were
guilty of fraud in contracting their obligation, resolution of
the question must await the trial of the main case.
However, we find petitioners' contention respecting the
validity of the attachment of their properties to be well
taken. We hold that the attachment of petitioners'
properties prior to the acquisition of jurisdiction by the
respondent court is void and that the subsequent service
of summons on petitioners did not cure the invalidity of
such attachment. The records show that before the

CHRISSY SABELLA

On January 7, 1992, he served notice of garnishment


on the Union Bank of the Philippines. 7

First. The Deputy Sheriff claims that he had tried to serve


the summons with a copy of the complaint on petitioners
on January 3, 1992 but that there was no one in the
offices of petitioners on whom he could make a service.
This is denied by petitioners who claim that their office
was always open and that Adeliza M. Jaranilla, Econ's
Chief Accountant who eventually received summons on
behalf of Oate and Econ, was present that day.
Whatever the truth is, the fact is that no other attempt
was made by the sheriff to serve the summons except
on January 9, 1992, in the case of Oate and Econ, and
on January 16, 1992, in the case of Dio. Meantime, he
made several levies, which indicates a predisposition to
serve the writ of attachment in anticipation of
the eventual acquisition by the court of jurisdiction over
petitioners.
Second. Private respondent invokes the ruling in Davao
Light & Power Co. v. Court of Appeals 9 in support of its
contention that the subsequent acquisition of jurisdiction
by the court cured the defect in the proceedings for
attachment. It cites the following portion of the decision
in Davao Light and Power, written by Justice, now Chief
Justice, Narvasa:
It goes without saying that whatever be
the acts done by the Court prior to the
acquisition of jurisdiction over the
person of the defendant, as above
indicated issuance of summons,
order of attachment and writ of
attachment (and/or appointment of
guardian ad litem, or grant of authority
to the plaintiff to prosecute the suit as a
pauper litigant, or amendment of the
complaint by the plaintiff as a matter of
right without leave of court and
however valid and proper they might
otherwise be, these do not and cannot
bind and affect the defendant until and
unless jurisdiction over his person
is eventually obtained by the court,
either by service on him of summons or
other coercive process or his voluntary
submission to the court's authority.
Hence,when the sheriff or other proper
officer commences implementation of
the writ of attachment, it is essential
that he serve on the defendant not only
a copy of the applicant's affidavit and
attachment bond, and of the order of
attachment, as explicitly required by
Section 5 of Rule 57, but also the
summons addressed to said defendant

Provisional Remedies/Cases Full Text/Rule 5734

as well as a copy of the complaint and


order for appointment of guardian ad
litem, if any, as also explicitly directed
by Section 3, Rule 14 of the Rules of
Court. 10
It is clear from the above excerpt, however, that while the
petition for a writ of preliminary attachment may
be granted and the writ itself issued before the defendant
is summoned, the writ of attachment cannot
beimplemented until jurisdiction over the person of the
defendant is obtained. As this Court explained, "levy on
property pursuant to the writ thus issued may not be
validly
effected
unless
preceded,
orcontemporaneously accompanied, by service on the
defendant of summons, a copy of the complaint (and of
the appointment of guardian ad litem, if any), the
application for attachment (if not incorporated in but
submitted separately from the complaint), the order of
attachment, and the plaintiff's attachment bond." 11
Further clarification on this point was made in Cuartero
v. Court of Appeals, 12 in which it was held:
It must be emphasized that the grant of
the provisional remedy of attachment
practically involves three stages; first,
the court issues the order granting the
application;
second,
the
writ
of
attachment issues pursuant to the
order granting the writ; and third, the
writ is implemented. For the initial two
stages, it is not necessary that
jurisdiction over the person of the
defendant should first be obtained.
However, once the implementation
commences, it is required that the court
must have acquired jurisdiction over
the
defendant
for
without
such
jurisdiction, the court has no power and
authority to act in any manner against
the defendant. Any order issuing from
the Court will not bind the defendant.
Private respondent argues that the case of Cuartero itself
provides for an exception as shown in the statement that
"the court [in issuing the writ of preliminary attachment]
cannot bind and affect the defendant until jurisdiction
is eventually obtained" and that since petitioners were
subsequently served with summons, no question can be
raised against the validity of the attachment of
petitioners' properties before such service.
The statement in question has been taken out of context.
The full statement reads:
It is clear from our pronouncements
that a writ of preliminary attachment
may issue even before summons is
served upon the defendant. However,
we have likewise ruled that the writ
cannot bind and affect the defendant
until jurisdiction over his person is
eventually obtained. Therefore, it is
required that when proper officer
commences implementation of the writ
of attachment service of summons
should be simultaneously made. 13
Indeed, as this Court through its First Division has ruled
on facts similar to those in these cases, the attachment of
properties before the service of summons on the
defendant is invalid, even though the court later acquires
jurisdiction over the defendant. 14 At the very least, then,
the
writ
of
attachment
must
be
servedsimultaneously with the service of summons
before the writ may be enforced. As the properties of the
petitioners were attached by the sheriff before he had

CHRISSY SABELLA

served the summons on them, the levies made must be


considered void.
Third. Nor can the attachment of petitioners' properties
before the service of summons on them was made be
justified an the ground that unless the writ was then
enforced, petitioners would be alerted and might dispose
of their properties before summons could be served on
them.
The Rules of Court do not require that issuance of the writ
be kept a secret until it can be enforced. Otherwise in no
case may the service of summons on the defendant
precede the levy on attachment. To the contrary, Rule 57,
13 allows the defendant to move to discharge the
attachment even before any attachment is actually levied
upon, thus negating any inference that before its
enforcement, the issuance of the writ must be kept
secret.
Rule
57,
13 provides:
Sec. 13. Discharge of attachment for
improper or irregular issuance. The
party whose property has been
attached may also, at any time either
before or after the release of the
attached
property,
or before
any
attachment shall have been actually
levied, upon reasonable notice to the
attaching creditor, apply to the judge
who granted the order, or to the judge
of the court in which the action is
pending, for an order to discharge the
attachment on the ground that the
same was improperly or irregularly
issued. . . . (Emphasis added).
As this Court pointed out in Davao Light and Power, 15 the
lifting of an attachment "may be resorted to even before
any property has been levied on."
It is indeed true that proceedings for the issuance of a
writ of attachment are generally ex parte. In Mindanao
Savings and Loans Ass'n v. Court of Appeals 16 it was held
that no hearing is required for the issuance of a writ of
attachment because this "would defeat the objective of
the remedy [because] the time which such hearing would
take could be enough to enable the defendant to abscond
or dispose of his property before a writ of attachment
issues." It is not, however, notice to defendant that is
sought to be avoided but the "time which such hearing
would take" because of the possibility that defendant
may delay the hearing to be able to dispose of his
properties. On the contrary there may in fact be a need
for a hearing before the writ is issued as where the issue
of fraudulent disposal of property is raised. 17 It is not true
that there should be no hearing lest a defendant learns of
the application for attachment and he remove's his
properties before the writ can be enforced.
On the other hand, to authorize the attachment of
property even before jurisdiction over the person of the
defendant is acquired through the service of summons or
his voluntary appearance could lead to abuse. It is
entirely possible that the defendant may not know of the
filing of a case against him and consequently may not be
able to take steps to protect his interests.
Nor may sheriff's failure to abide by the law be excused
on the pretext that after all the court later acquired
jurisdiction over petitioners. More important than the
need for insuring success in the enforcement of the writ is
the need for affirming a principle by insisting on that
"most fundamental of all requisites the jurisdiction of
the court issuing attachment over the person of the
defendant." 18 It may be that the same result would follow
from requiring that a new writ be served all over again.

Provisional Remedies/Cases Full Text/Rule 5735

The symbolic significance of such an act, however, is that


it would affirm our commitment to the rule of law. 19

other proper officer on such terms as


may be just, having reference to any
lien thereon or claims against the same,
to await the judgment in the action.

II
We likewise find petitioners' second contention to be
meritorious. The records show that, on January 21, 1992,
respondent judge ordered the examination of the books
of accounts and ledgers of Brunner at the Urban Bank,
Legaspi Village branch, and on January 30, 199 the
records of account of petitioner Oate at the BPI, even as
he ordered the PNB to produce the records regarding
certain checks deposited in it.
First. Sun Life defends these court orders on the ground
that the money paid by it to Brunner was subsequently
withdrawn from the Urban Bank after it had been
deposited by Brunner and then transferred to BPI and to
the unnamed account in the petitioner Oate's account in
the BPI and to the unnamed account in the PNB.
The issue before the trial court, however, concerns the
nature of the transaction between petitioner Brunner and
Sun Life. In its complaint, Sun Life alleges that Oate, in
his personal capacity and as president of Econ, offered to
sell to Sun Life P46,990,000.00 worth of treasury bills
owned by Econ and Brunner at the discounted price of
P39,526,500.82; that on November 27, 1991, Sun Life
paid the price by means of a check payable to Brunner;
that Brunner, through its president Noel L. Dio, issued to
it a receipt with undertaking to deliver the treasury bills
to Sun Life; and that on December 4, 1991, Brunner and
Dio delivered instead a promissory note, dated
November 27, 1991, in which it was made to appear that
the transaction was a money placement instead of sale of
treasury bills.
Thus the issue is whether the money paid to Brunner was
the consideration for the sale of treasury bills, as Sun Life
claims, or whether it was money intended for placement,
as petitioners allege. Petitioners do not deny receipt of
P39,526,500.82 from Sun Life. Hence, whether the
transaction is considered a sale or money placement does
not make the money the "subject matter of litigation"
within the meaning of 2 of Republic Act No. 1405 which
prohibits the disclosure or inquiry into bank deposits
except "in cases where the money deposited or invested
is the subject matter of litigation." Nor will it matter
whether the money was "swindled" as Sun Life contends.
Second. The examination of bank books and records
cannot be justified under Rule 57, 10. This provision
states:
Sec. 10. Examination of party whose
property is attached and persons
indebted to him or controlling his
property; delivery of property to officer.
Any person owing debts to the party
whose property is attached or having in
his possession or under his control any
credit or other personal property
belonging to such party, may be
required to attend before the court in
which the action is pending, or before a
commissioner appointed by the court,
and be examined on oath respecting
the same. The party whose property is
attached may also be required to
attend for the purpose of giving
information respecting his property, and
may be examined on oath. The court
may, after such examination, order
personal property capable of manual
delivery belonging to him, in the
possession of the person so required to
attend before the court, to be delivered
to the clerk of the court, sheriff, or

CHRISSY SABELLA

Since, as already stated, the attachment of petitioners'


properties was invalid, the examination ordered in
connection with such attachment must likewise be
considered invalid. Under Rule 57, 10, as quoted above,
such examination is only proper where the property of the
person examined has been validly attached.
WHEREFORE, the decision dated February 21, 1994 is
RECONSIDERED and SET ASIDE and another one is
rendered GRANTING the petitions for certiorari and
SETTING ASIDE the orders dated February 26, 1992 and
September 9, 1992, insofar as they authorize the
attachment of petitioners' properties and the examination
of bank books and records pertaining to their accounts,
and ORDERING respondent Judge Zeus C. Abrogar
(1) forthwith to issue an alias writ of attachment upon the
same bond furnished by respondent Sun Life Assurance
Company of Canada;
(2) direct the sheriff to lift the levy under the original writ
of attachment and simultaneously levy on the same
properties pursuant to the alias writ so issued; and
(3) take such steps as may be necessary to insure that
there will be no intervening period between the lifting of
the original attachment and the subsequent levy under
the alias writ.
Petitioners may file the necessary counterbond to prevent
subsequent levy or to dissolve the attachment after such
levy.
SO ORDERED.
G.R. No. 144740 August 31, 2005
SECURITY
PACIFIC
ASSURANCE
CORPORATION, Petitioners,
vs.
THE HON. AMELIA TRIA-INFANTE, In her official
capacity as Presiding Judge, Regional Trial Court,
Branch
9,
Manila;
THE
PEOPLE
OF
THE
PHILIPPINES, represented by Spouses REYNALDO
and ZENAIDA ANZURES; and REYNALDO R.
BUAZON, In his official capacity as Sheriff IV,
Regional Trial Court, Branch 9, Manila,Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review on certiorari, assailing
the Decision1 and Resolution2 of the Court of Appeals in
CA-G.R. SP No. 58147, dated 16 June 2000 and 22 August
2000, respectively. The said Decision and Resolution
declared that there was no grave abuse of discretion on
the part of respondent Judge in issuing the assailed order
dated 31 March 2000, which was the subject in CA-G.R.
SP No. 58147.
THE FACTS
The factual milieu of the instant case can be traced from
this Courts decision in G.R. No. 106214 promulgated on
05 September 1997.
On 26 August 1988, Reynaldo Anzures instituted a
complaint against Teresita Villaluz (Villaluz) for violation of
Batas Pambansa Blg. 22. The criminal information was

Provisional Remedies/Cases Full Text/Rule 5736

brought before the Regional Trial Court, City of Manila,


and raffled off to Branch 9, then presided over by Judge
Edilberto G. Sandoval, docketed as Criminal Case No. 8969257.

Reynaldo Anzures, through the private prosecutor, filed a


Motion to Proceed with Garnishment, 15 which was
opposed by petitioner16 contending that it should not be
held liable on the counter-attachment bond.

An Ex-Parte Motion for Preliminary Attachment3 dated 06


March 1989 was filed by Reynaldo Anzures praying that
pending the hearing on the merits of the case, a Writ of
Preliminary Attachment be issued ordering the sheriff to
attach the properties of Villaluz in accordance with the
Rules.

The trial court, in its Order dated 31 March


2000,17 granted the Motion to Proceed with Garnishment.
The sheriff issued a Follow-Up of Garnishment 18 addressed
to the President/General Manager of petitioner dated 03
April 2000.

On 03 July 1989, the trial court issued an Order 4 for the


issuance of a writ of preliminary attachment "upon
complainants posting of a bond which is hereby fixed
at P2,123,400.00 and the Courts approval of the same
under the condition prescribed by Sec. 4 of Rule 57 of the
Rules of Court."
An attachment bond5 was thereafter posted by Reynaldo
Anzures and approved by the court. Thereafter, the
sheriff attached certain properties of Villaluz, which were
duly annotated on the corresponding certificates of title.
On 25 May 1990, the trial court rendered a Decision 6 on
the case acquitting Villaluz of the crime charged, but held
her civilly liable. The dispositive portion of the said
decision is reproduced hereunder:
WHEREFORE, premises considered, judgment is hereby
rendered ACQUITTING the accused TERESITA E. VILLALUZ
with cost de oficio. As to the civil aspect of the case
however, accused is ordered to pay complainant
Reynaldo Anzures the sum of TWO MILLION ONE
HUNDRED TWENTY THREE THOUSAND FOUR HUNDRED
(P2,123,400.00) PESOS with legal rate of interest from
December 18, 1987 until fully paid, the sum of
P50,000.00 as attorneys fees and the cost of suit. 7
Villaluz interposed an appeal with the Court of Appeals,
and on 30 April 1992, the latter rendered its
Decision,8 the dispositive portion of which partly reads:
WHEREFORE, in CA-G.R. CV No. 28780, the Decision of
the Regional Trial Court of Manila, Branch 9, dated May
25, 1990, as to the civil aspect of Criminal Case No. 8969257, is hereby AFFIRMED, in all respects.
The case was elevated to the Supreme Court (G.R. No.
106214), and during its pendency, Villaluz posted a
counter-bond in the amount of P2,500,000.00 issued by
petitioner Security Pacific Assurance Corporation.9Villaluz,
on the same date10 of the counter-bond, filed an Urgent
Motion to Discharge Attachment.11
On 05 September 1997, we promulgated our decision in
G.R. No. 106214, affirming in toto the decision of the
Court of Appeals.
In view of the finality of this Courts decision in G.R. No.
106214, the private complainant moved for execution of
judgment before the trial court.12
On 07 May 1999, the trial court, now presided over by
respondent Judge, issued a Writ of Execution. 13
Sheriff Reynaldo R. Buazon tried to serve the writ of
execution upon Villaluz, but the latter no longer resided in
her given address. This being the case, the sheriff sent a
Notice of Garnishment upon petitioner at its office in
Makati City, by virtue of the counter-bond posted by
Villaluz with said insurance corporation in the amount
ofP2,500,000.00. As reported by the sheriff, petitioner
refused to assume its obligation on the counter-bond it
posted for the discharge of the attachment made by
Villaluz.14

CHRISSY SABELLA

On 07 April 2000, petitioner filed a Petition


for Certiorari with Preliminary Injunction and/or Temporary
Restraining Order19 with the Court of Appeals, seeking the
nullification of the trial courts order dated 31 March 2000
granting the motion to proceed with garnishment. Villaluz
was also named as petitioner. The petitioners contended
that the respondent Judge, in issuing the order dated 31
March 2000, and the sheriff committed grave abuse of
discretion and grave errors of law in proceeding against
the petitioner corporation on its counter-attachment
bond, despite the fact that said bond was not approved
by the Supreme Court, and that the condition by which
said bond was issued did not happen.20
On 16 June 2000, the Court of Appeals rendered a
Decision,21 the dispositive portion of which reads:
WHEREFORE, premises considered, the Court finds no
grave abuse of discretion on the part of respondent judge
in issuing the assailed order. Hence, the petition is
dismissed.
A Motion for Reconsideration22 was filed by petitioner, but
was denied for lack of merit by the Court of Appeals in its
Resolution23 dated 22 August 2000.
Undeterred, petitioner filed the instant petition under
Rule 45 of the 1997 Rules of Civil Procedure, with Urgent
Application for a Writ of Preliminary Injunction and/or
Temporary Restraining Order.24
On 13 December 2000, this Court issued a
Resolution25 requiring the private respondents to file their
Comment to the Petition, which they did. Petitioner was
required to file its Reply26 thereafter.
Meanwhile, on 17 January 2001, petitioner and the
spouses Reynaldo and Zenaida Anzures executed a
Memorandum of Understanding (MOU). 27 In it, it was
stipulated that as of said date, the total amount
garnished
from
petitioner
had
amounted
to P1,541,063.85, and so the remaining amount still
sought to be executed wasP958,936.15.28 Petitioner
tendered and paid the amount of P300,000.00 upon
signing of the MOU, and the balance of P658,936.15 was
to be paid in installment at P100,000.00 at the end of
each month from February 2001 up to July 2001. At the
end of August 2001, the amount of P58,936.00 would
have to be paid. This would make the aggregate amount
paid to the private respondents P2,500,000.00.29 There
was, however, a proviso in the MOU which states that
"this contract shall not be construed as a waiver or
abandonment of the appellate review pending before the
Supreme Court and that it will be subject to all such
interim orders and final outcome of said case."
On 13 August 2001, the instant petition was given due
course, and the parties were obliged to submit their
respective Memoranda.30
ISSUES
The petitioner raises
resolution of this Court:

the

following

issues

for

the

Provisional Remedies/Cases Full Text/Rule 5737

Main Issue - WHETHER OR NOT THE COURT OF Appeals


committed reversible error in affirming the 31 march
2000 order of public respondent judge which allowed
execution on the counter-bond issued by the petitioner.
Corollary Issues (1) WHETHER OR NOT THE COURT OF
APPEALS CORRECTLY RULED THAT THE ATTACHMENT ON
THE PROPERTY OF VILLALUZ WAS DISCHARGED WITHOUT
NEED OF COURT APPROVAL OF THE COUNTER-BOND
POSTED; and (2) WHETHER OR NOT THE COURT OF
APPEALS CORRECTLY RULED THAT THE ATTACHMENT ON
THE PROPERTY OF VILLALUZ WAS DISCHARGED BY THE
MERE ACT OF POSTING THE COUNTER-BOND.
THE COURTS RULING
Petitioner seeks to escape liability by contending, in the
main, that the writ of attachment which was earlier
issued against the real properties of Villaluz was not
discharged. Since the writ was not discharged, then its
liability did not accrue. The alleged failure of this Court in
G.R. No. 106214 to approve the counter-bond and to
cause the discharge of the attachment against Villaluz
prevented the happening of a condition upon which the
counter-bonds issuance was premised, such that
petitioner should not be held liable thereon.31
Petitioner further asserts that the agreement between it
and Villaluz is not a suretyship agreement in the sense
that petitioner has become an additional debtor in
relation to private respondents. It is merely waiving its
right of excussion32 that would ordinarily apply to counterbond guarantors as originally contemplated in Section 12,
Rule 57 of the 1997 Rules.
In their Comment,33 the private respondents assert that
the filing of the counter-bond by Villaluz had already ipso
facto discharged the attachment on the properties and
made the petitioner liable on the bond. Upon acceptance
of the premium, there was already an express contract
for surety between Villaluz and petitioner in the amount
ofP2,500,000.00
to
answer
for
any
adverse
judgment/decision against Villaluz.
Petitioner filed a Reply34 dated 09 May 2001 to private
respondents Comment, admitting the binding effect of
the bond as between the parties thereto. What it did not
subscribe to was the theory that the attachment was ipso
facto or automatically discharged by the mere filing of the
bond in court. Such theory, according to petitioner, has
no foundation. Without an order of discharge of
attachment and approval of the bond, petitioner submits
that its stipulated liability on said bond, premised on their
occurrence, could not possibly arise, for to hold otherwise
would be to trample upon the statutorily guaranteed right
of the parties to contractual autonomy.
Based on the circumstances present in this case, we find
no compelling reason to reverse the ruling of the Court of
Appeals.
Over the years, in a number of cases, we have made
certain pronouncements about counter-bonds.
In Tijam v. Sibonghanoy,35 as reiterated in Vanguard
Assurance Corp. v. Court of Appeals,36 we held:
. . . [A]fter the judgment for the plaintiff has become
executory and the execution is returned unsatisfied, as
in this case, the liability of the bond automatically
attaches and, in failure of the surety to satisfy the
judgment against the defendant despite demand
therefore, writ of execution may issue against the surety
to enforce the obligation of the bond.
In Luzon Steel Coporation v. Sia, et al.:

CHRISSY SABELLA

37

. . . [C]ounterbonds posted to obtain the lifting of a writ of


attachment is due to these bonds being security for the
payment of any judgment that the attaching party may
obtain; they are thus mere replacements of the property
formerly attached, and just as the latter may be levied
upon after final judgment in the case in order to realize
the amount adjudged, so is the liability of the
countersureties ascertainable after the judgment has
become final. . . .
In Imperial Insurance, Inc. v. De Los Angeles,38 we ruled:
. . . Section 17, Rule 57 of the Rules of Court cannot be
construed that an "execution against the debtor be first
returned unsatisfied even if the bond were a solidary one,
for a procedural may not amend the substantive law
expressed in the Civil Code, and further would nullify the
express stipulation of the parties that the suretys
obligation should be solidary with that of the defendant.
In Philippine British Assurance Co., Inc. v. Intermediate
Appellate Court,39 we further held that "the counterbond
is intended to secure the payment of any judgment that
the attaching creditor may recover in the action."
Petitioner does not deny that the contract between it and
Villaluz is one of surety. However, it points out that the
kind of surety agreement between them is one that
merely waives its right of excussion. This cannot be so.
The counter-bond itself states that the parties jointly and
severally bind themselves to secure the payment of any
judgment that the plaintiff may recover against the
defendant in the action. A surety is considered in law as
being the same party as the debtor in relation to
whatever is adjudged touching the obligation of the
latter, and their liabilities are interwoven as to be
inseparable.40
Suretyship is a contractual relation resulting from an
agreement whereby one person, the surety, engages to
be answerable for the debt, default or miscarriage of
another, known as the principal. The suretys obligation is
not an original and direct one for the performance of his
own act, but merely accessory or collateral to the
obligation contracted by the principal. Nevertheless,
although the contract of a surety is in essence secondary
only to a valid principal obligation, his liability to the
creditor or promise of the principal is said to be direct,
primary and absolute; in other words, he is directly and
equally bound with the principal. The surety therefore
becomes liable for the debt or duty of another although
he possesses no direct or personal interest over the
obligations nor does he receive any benefit therefrom.41
In view of the nature and purpose of a surety agreement,
petitioner, thus, is barred from disclaiming liability.
Petitioners argument that the mere filing of a counterbond in this case cannot automatically discharge the
attachment without first an order of discharge and
approval of the bond, is lame.
Under the Rules, there are two (2) ways to secure the
discharge of an attachment. First, the party whose
property has been attached or a person appearing on his
behalf may post a security. Second, said party may show
that the order of attachment was improperly or irregularly
issued.42 The first applies in the instant case. Section 12,
Rule 57,43 provides:
SEC. 12. Discharge of attachment upon giving counterbond. After a writ of attachment has been enforced, the
party whose property has been attached, or the person
appearing on his behalf, may move for the discharge of
the attachment wholly or in part on the security given.
The court shall, after due notice and hearing, order the
discharge of the attachment if the movant makes a cash

Provisional Remedies/Cases Full Text/Rule 5738

deposit, or files a counter-bond executed to the attaching


party with the clerk of the court where the application is
made, in an amount equal to that fixed by the court in the
order of attachment, exclusive of costs. But if the
attachment is sought to be discharged with respect to a
particular property, the counter-bond shall be equal to the
value of that property as determined by the court. In
either case, the cash deposit or the counter-bond shall
secure the payment of any judgment that the attaching
party may recover in the action. A notice of the deposit
shall forthwith be served on the attaching party. 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
to the person appearing on his behalf, the deposit or
counter-bond aforesaid standing in place of the property
so released. Should such counter-bond for any reason be
found to be or become insufficient, and the party
furnishing the same fail to file an additional counter-bond,
the attaching party may apply for a new order of
attachment.
It should be noted that in G.R. No. 106214, per our
Resolution dated 15 January 1997,44 we permitted Villaluz
to file a counter-attachment bond. On 17 February
1997,45 we required the private respondents to comment
on the sufficiency of the counter-bond posted by Villaluz.
It is quite palpable that the necessary steps in the
discharge of an attachment upon giving counter-bond
have been taken. To require a specific order for the
discharge of the attachment when this Court, in our
decision in G.R. No. 106214, had already declared that
the petitioner is solidarily bound with Villaluz would be
mere surplusage. Thus:
During the pendency of this petition, a counterattachment bond was filed by petitioner Villaluz before
this Court to discharge the attachment earlier issued by
the trial court. Said bond amounting to P2.5 million was
furnished by Security Pacific Assurance, Corp. which
agreed to bind itself "jointly and severally" with petitioner
for "any judgment" that may be recovered by private
respondent against the former.46
We are not unmindful of our ruling in the case of Belisle
Investment and Finance Co., Inc. v. State Investment
House, Inc.,47 where we held:
. . . [T]he Court of Appeals correctly ruled that the mere
posting of a counterbond does not automatically
discharge the writ of attachment. It is only after hearing
and after the judge has ordered the discharge of the
attachment if a cash deposit is made or a counterbond is
executed to the attaching creditor is filed, that the writ of
attachment is properly discharged under Section 12, Rule
57 of the Rules of Court.
The ruling in Belisle, at first glance, would suggest an
error in the assailed ruling of the Court of Appeals
because there was no specific resolution discharging the
attachment and approving the counter-bond. As aboveexplained, however, consideration of our decision in G.R.
No. 106214 in its entirety will readily show that this Court
has virtually discharged the attachment after all the
parties therein have been heard on the matter.
On this score, we hew to the pertinent ratiocination of the
Court of Appeals as regards the heretofore cited provision
of Section 12, Rule 57 of the 1997 Rules of Civil
Procedure, on the discharge of attachment upon giving
counter-bond:
. . . The filing of the counter-attachment bond by
petitioner Villaluz has discharged the attachment on the
properties and made the petitioner corporation liable on
the counter-attachment bond. This can be gleaned from

CHRISSY SABELLA

the "DEFENDANTS BOND FOR THE DISSOLUTION OF


ATTACHMENT", which states that Security Pacific
Assurance Corporation, as surety, in consideration of the
dissolution of the said attachment jointly and severally,
binds itself with petitioner Villaluz for any judgment that
may be recovered by private respondent Anzures against
petitioner Villaluz.
The contract of surety is only between petitioner Villaluz
and petitioner corporation. The petitioner corporation
cannot escape liability by stating that a court approval is
needed before it can be made liable. This defense can
only be availed by petitioner corporation against
petitioner Villaluz but not against third persons who are
not parties to the contract of surety. The petitioners hold
themselves out as jointly and severally liable without any
conditions
in
the
counter-attachment
bond. The
petitioner corporation cannot impose requisites
before it can be made liable when the law clearly
does
not
require
such
requisites
to
be
fulfilled.48 (Emphases supplied.)
Verily, a judgment must be read in its entirety, and it
must be construed as a whole so as to bring all of its
parts into harmony as far as this can be done by fair and
reasonable interpretation and so as to give effect to every
word and part, if possible, and to effectuate the intention
and purpose of the Court, consistent with the provisions
of the organic law.49
Insurance companies are prone to invent excuses to
avoid their just obligation.50 It seems that this statement
very well fits the instant case.
WHEREFORE, in view of all the foregoing, the Decision
and Resolution of the Court of Appeals dated 16 June
2000 and 22 August 2000, respectively, are both
AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 181721, September 09, 2015
WATERCRAFT
VENTURE
CORPORATION,
REPRESENTED BY ITS VICE-PRESIDENT, ROSARIO E.
RAOA, Petitioner, v. ALFRED
RAYMOND
WOLFE, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of
the Rules of Court, seeking to reverse and set aside the
Court of Appeals (CA) Resolution1 dated January 24, 2008
denying the motion for reconsideration of its
Decision2 dated September 27, 2007 in CA-G.R. SP No.
97804.
The facts are as follows:
Petitioner Watercraft Venture Corporation (Watercraft) is
engaged in the business of building, repairing, storing
and maintaining yachts, boats and other pleasure crafts
at the Subic Bay Freeport Zone, Subic, Zambales. In
connection with its operations and maintenance of boat
storage facilities, it charges a boat storage fee of Two
Hundred Seventy-Two US Dollars (US$272.00) per month
with interest of 4% per month for unpaid charges.
Sometime in June 1997, Watercraft hired respondent
Alfred Raymond Wolfe (Wolfe), a British national and
resident of Subic Bay Freeport Zone, Zambales, as its
Shipyard Manager.
During his empolyment, Wolfe stored the sailboat, Knotty
Gull, within Watercraft1 s boat storage facilities, but
never
paid
for
the
storage
fees.
On March 7, 2002, Watercraft terminated the employment
of
Wolfe.

Provisional Remedies/Cases Full Text/Rule 5739

Sometime in June 2002, Wolfe pulled out his sailboat from


Watercraft's storage facilities after signing a Boat Pull-Out
Clearance dated June 29, 2002 where he allegedly
acknowledged the outstanding obligation of Sixteen
Thousand Three Hundred and Twenty-Four and 82/100 US
Dollars (US$16,324.82) representing unpaid boat storage
fees for the period of June 1997 to June 2002. Despite
repeated demands, he failed to pay the said amount.
Thus, on July 7, 2005, Watercraft filed against Wolfe a
Complaint for Collection of Sum of Money with Damages
with an Application for the Issuance of a Writ of
Preliminary Attachment. The case was docketed as Civil
Case No. 4534-MN, and raffled to Branch 170 3 of the
Regional Trial Court (RTC) of Malabon City.
In his Answer, Wolfe claimed he was hired as Service and
Repair Manager, instead of Shipyard Manager. He denied
owing
Watercraft
the amount of US$16,324.82
representing storage fees for the sailboat. He explained
that the sailboat was purchased in February 1998 as part
of an agreement between him and Watercraft1 s then
General Manager, Barry Bailey, and its President, Ricky
Sandoval, for it to be repaired and used as training or fillin project for the staff, and to be sold later on. He added
that pursuant to a central Listing Agreement for the sale
of the sailboat, he was appointed as agent, placed in
possession thereof and entitled to a ten percent (10%)
sales commission. He insisted that nowhere in the
agreement was there a stipulation that berthing and
storage fees will be charged during the entire time that
the sailboat was in Watercraft's dockyard. Thus, he
claimed to have been surprised when he received five (5)
invoices billing him for the said fees two (2) months after
his services were terminated. Fie pointed out that the
complaint was an offshoot of an illegal dismissal case he
filed against Watercraft which had been decided in his
favor
by
the
Labor
Arbiter.
Meanwhile, finding Watercraft's ex-parte application for
writ of preliminary attachment sufficient in form and in
substance pursuant to Section 1 of Rule 57 of the Rules
of Court, the RTC granted the same in the Order dated
July 15, 2005, thus:
WHEREFORE, let a Writ of Preliminary Attachment be
issued accordingly in favor of the plaintiff, Watercraft
Ventures Corporation conditioned upon the filing of
attachment bond in the amount of Three Million Two
Hundred Thirty-One Thousand Five Hundred and
Eighty-Nine
and
25/100
Pesos
(Php3,231,589.25) and the said writ be served
simultaneously with the summons, copies of the
complaint, application for attachment, applicant's
affidavit and bond, and this Order upon the defendant.
SO ORDERED.4
Pursuant to the Order dated July 15, 2005, the Writ of
Attachment dated August 3, 2005 and the Notice of
Attachment dated August 5, 2005 were issued, and
Wolfe's two vehicles, a gray Mercedes Benz with plate
number XGJ 819 and a maroon Toyota Corolla with plate
number TFW 110, were levied upon.
On August 12, 2005, Wolfe's accounts at the Bank of the
Philippine Islands were also garnished.
By virtue of the Notice of Attachment and Levy dated
September 5, 2005, a white Dodge pick-up truck with
plate number XXL 111 was also levied upon. However, a
certain Jeremy Simpson filed a Motion for Leave of Court
to Intervene, claiming that he is the owner of the truck as
shown by a duly-notarized Deed of Sale executed on
August 4, 2005, the Certificate of Registration No.
3628665-1 and the Official Receipt No. 271839105.
On November 8, 2005, Wolfe filed a Motion to Discharge
the Writ of Attachment, arguing that Watercraft failed to
show the existence of fraud and that the mere failure to
pay or perform an obligation does not amount to fraud.
Me also claimed that he is not a flight risk for the
following reasons: (1) contrary to the claim that his
Special Working Visa expired in April 2005, his Special
Subic Working Visa and Alien Certificate of Registration
are valid until April 25, 2007 and May 11, 2006,
respectively; (2) he and his family have been residing in
the Philippines since 1997; (3) he is an existing
stockholder and officer of Wolfe Marine Corporation
which is registered with the Securities and Exchange

CHRISSY SABELLA

Commission, and a consultant of "Sudeco/Ayala" projects


in Subic, a member of the Multipartite Committee for the
new port development in Subic, and the Subic Chamber
of Commerce; and (4) he intends to finish prosecuting his
pending labor case against Watercraft. On even date,
Watercraft also filed a Motion for Preliminary Hearing of
its affirmative defenses of forum shopping,litis pendentia,
and laches.
In an Order dated March 20, 2006, the RTC denied
Wolfe's Motion to Discharge Writ of Attachment and
Motion for Preliminary Hearing for lack of merit.
Wolfe filed a motion for reconsideration, but the RTC also
denied it for lack of merit in an Order dated November
10,
2006.
Aggrieved,
Wolfe
filed
a
petition
for certiorari before the CA.
The CA granted Wolfe's petition in a Decision dated
September 2007, the dispositive portion of which reads:
WHEREFORE, the Order dated March 20, 2006 and the
Order dated November 10, 2006 of respondent Judge are
hereby ANNULLED and SET ASIDE. Accordingly, the
Writ of Attachment issued on August 3, 2005, the Notice
of Attachment dated August 5, 2005 and the Notice of
Attachment and Levy dated September 5, 2005 are
hereby also declared NULL and VOID, and private
respondent is DIRECTED to return to their owners the
vehicles that were attached pursuant to the Writ.
SO ORDERED.5
The CA ruled that the act of issuing the writ of
preliminary attachment ex-parte constitutes grave abuse
of discretion on the part of the RTC, thus:
x x x In Cosiquien [v. Court of Appeals], the Supreme
Court held that:
"Where a judge issues a fatally defective writ of
preliminary attachment based on an affidavit
which failed to allege the requisites prescribed for
the issuance of the writ of preliminary attachment,
renders the writ of preliminary attachment issued
against the property of the defendant fatally
defective. The judge issuing it is deemed to have
acted in excess of jurisdiction. In fact, the defect
cannot even be cured by amendment. Since the
attachment is a harsh and rigorous remedy which
exposed the debtor to humiliation and annoyance, the
rule authorizing its issuance must be strictly construed in
favor of defendant. It is the duty of the court before
issuing the Avrit to ensure that all the requisites of
the law have been complied with. Otherwise, a
judge acquires no jurisdiction to issue the writ."
(emphasis supplied)
In the instant case, the Affidavit of Merit executed by
Rosario E. Raoa, Watercraft's Vice-President, failed to
show fraudulent intent on the part of Wolfe to defraud
the company. It merely enumerated the circumstances
tending to show the alleged possibility of Wolfe's flight
from the country. And upon Wolfe's filing of the Motion to
Discharge the Writ, what the respondent Judge should
have done was to determine, through a hearing, whether
the allegations of fraud were true. As further held
inCosiquien:
"When a judge issues a writ of preliminary
attachment ex-parte, it is incumbent on him, upon
proper challenge of his order to determine
whether or not the same was improvidently issued.
If the party against whom the writ is prayed for
squarely controverts the allegation of fraud, it is
incumbent on the applicant to prove his allegation.
The burden of proving that there indeed was fraud
lies with the party making such allegation. This
finds support in Section 1, Rule 131 Rules of Court. In
this jurisdiction, fraud is never presumed."
(Emphasis supplied)
As correctly noted by Wolfe, although Sec. 1 of Rule 57
allows a party to invoke fraud as a ground for the
issuance of a writ of attachment, the Rules require that in
all averments of fraud, the circumstances constituting
fraud must be stated with particularity, pursuant to Rule
8, Section 5. The Complaint merely stated, in paragraph
23 thereof that "For failing to pay the use [of] facilities
and services in the form of boat storage fees, the
Defendant is clearly guilty of fraud which entitles the
Plaintiff to a Writ of Preliminary Attachment upon the
property of the Defendant as security for the satisfaction

Provisional Remedies/Cases Full Text/Rule 5740

of any judgment herein." This allegation does not


constitute fraud as contemplated by law, fraud being the
"generic term embracing all multifarious means which
human ingenuity can devise, and which are resorted to
by one individual to secure an advantage over another by
false suggestions or by suppression of truth and includes
all surprise, trick, cunning, dissembling and any unfair
way by which another is cheated." In this instance,
Wolfe's mere failure to pay the boat storage fees does
not necessarily amount to fraud, absent any showing that
such failure was due to [insidious] machinations and
intent on his part to defraud Watercraft of the amount
due it.
As to the allegation that Wolfe is a flight risk, thereby
warranting the issuance of the writ, the same lacks merit.
The mere fact that Wolfe is a British national does not
automatically mean that he would leave the country at
will. As Wolfe avers, he and his family had been staying
in the Philippines since 1997, with his daughters studying
at a local school. He also claims to be an existing
stockholder and officer of Wolfe Marine Corporation, a
SEC-registered corporation, as well as a consultant of
projects in the Subic Area, a member of the Multipartite
Committee for the new port development in Subic, and a
member of the Subic Chamber of Commerce. More
importantly, Wolfe has a pending labor case against
Watercraft - a fact which the company glaringly failed to
mention in its complaint - which Wolfe claims to want to
prosecute until its very end. The said circumstances, as
well as the existence of said labor case where Wolfe
stands not only to be vindicated for his alleged illegal
dismissal, but also to receive recompense, should have
convinced the trial court that Wolfe would not want to
leave the country at will just because a suit for the
collection of the alleged unpaid boat storage fees has
been filed against him by Watercraft.
Neither should the fact that Wolfe's Special Working Visa
expired in April 2005 lead automatically to the conclusion
that he would leave the country. It is worth noting that all
visas issued by the government to foreigners staying in
the Philippines have expiration periods. These visas,
however, may be renewed, subject to the requirements of
the law. In Wolfe's case, he indeed renewed his visa, as
shown by Special Working Visa No. 05-WV-0124P issued
by the Subic Bay Metropolitan Authority Visa Processing
Office on April 25, 2005, and with validity of two (2) years
therefrom.
Moreover,
hisAlien
Certificate
of
Registration was valid up to May 11, 2006.
Based on the foregoing, it is therefore clear that the writ
was improvidently issued. It is well to emphasize that
"[T]he rules on the issuance of a writ of attachment must
be construed strictly against the applicants. This
stringency is required because the remedy of attachment
is harsh, extraordinary and summary in nature. If all the
requisites for the granting of the writ are not present,
then the court which issues it acts in excess of its
jurisdiction. Thus, in this case, Watercraft failed to meet
all the requisites for the issuance of the writ. Thus, in
granting the same, respondent Judge acted with grave
abuse of discretion.6
In a Resolution dated January 24, 2008, the CA denied
Watercraft's motion for reconsideration of its Decision,
there being no new or significant issues raised in the
motion.
Dissatisfied with the CA Decision and Resolution,
Watercraft filed this petition for review on certiorari,
raising these two issues:
I.
WHETHER THE EX-PARTE ISSUANCE OF THE PRELIMINARY
ATTACHMENT BY THE TRIAL COURT IN FAVOR OF THE
PETITIONER IS VALID.
II.
WHETHER THE ALLEGATIONS IN THE AFFIDAVIT OF MERIT
CONCERNING FRAUD ARE SUFFICIENT TO WARRANT THE
ISSUANCE OF A PRELIMINARY WRIT OF ATTACHMENT BY
THE TRIAL COURT IN FAVOR OF THE PETITIONER.7
Watercraft argues that the CA erred in holding that the
RTC committed grave abuse of discretion in issuing the
writ of preliminary attachment, and in finding that the
affidavit of merit only enumerated circumstances tending
to show the possibility of Wolfe's flight from the country,

CHRISSY SABELLA

but failed to show fraudulent intent on his part to defraud


the company.
Stressing that its application for such writ was anchored
on two (2) grounds under Section 1, 8 Rule 57, Watercraft
insists that, contrary to the CA ruling, its affidavit of merit
sufficiently averred with particularity the circumstances
constituting fraud as a common element of said grounds.
Watercraft points out that its affidavit of merit shows that
from 1997, soon after Wolfe's employment as Shipyard
Manager, up to 2002, when his employment was
terminated, or for a period of five (5) years, not once did
he pay the cost for the use of the company's boat storage
facilities, despite knowledge of obligation and obvious
ability to pay by reason of his position.
Watercraft adds that its affidavit clearly stated that
Wolfe, in an attempt to avoid settling of his outstanding
obligations to the company, signed a Boat Pull-Out
Clearance where he merely acknowledged but did not
pay Sixteen Thousand Three Hundred and Twenty-Four
and 82/100 US Dollars (US$16,324.82) representing
unpaid boat storage fees for the period commencing June
1997 to June 2002. It avers that the execution of such
clearance enabled Wolfe to pull out his boat from the
company storage facilities without payment of storage
fees.
Watercraft also faults the CA in finding no merit in its
allegation that Wolfe is a flight risk. It avers that he was
supposed to stay and work in the country for a limited
period, and will eventually leave; that despite the fact
that his wife and children reside in the country, he can
still leave with them anytime; and that his work in the
country will not prevent him from leaving, thereby
defeating the purpose of the action, especially since he
had denied responsibility for his outstanding obligations.
It submits that the CA overlooked paragraph 28 of its
Complaint which alleged that "[i]n support of the
foregoing allegations and the prayer for the issuance of a
Writ of Preliminary Attachment in the instant case, the
Plaintiff has attached hereto the Affidavit of the VicePresident of the Plaintiff, MS. ROSARIO E. RANOA x x x." 9
Watercraft asserts that it has sufficiently complied with
the only requisites for the issuance of the writ of
preliminary attachment under Section 3, Rule 57 of the
Rules of Court, i.e., affidavit of merit and bond of the
applicant. It posits that contrary to the CA ruling, there is
no requirement that evidence must first be offered before
a court can grant such writ on the basis of Section 1 (d)
of Rule 57, and that the rules only require an affidavit
showing that the case is one of those mentioned in
Section 1, Rule 57. It notes that although a party is
entitled to oppose an application for the issuance of the
writ or to move for the discharge thereof by controverting
the allegations of fraud, such rule does not apply when
the same allegations constituting fraud are the very facts
disputed in the main action, as in this case.
Watercraft also points out the inconsistent stance of
Wolfe with regard to the ownership and possession of the
sailboat. Contrary to Wolfe's Answer that the purchase of
the sailboat was made pursuant to a three (3)-way
partnership agreement between him and its General
Manager and Executive Vice-President, Barry Bailey, and
its President, Ricky Sandoval, Watercraft claims that he
made a complete turnaround and exhibited acts of soleownership by signing the Boat Pull-Out Clearance in order
to retrieve the sailboat. It argues that common sense and
logic would dictate that he should have invoked the
existence of the partnership to answer the demand for
payment of the storage fees.
Watercraft contends that in order to pre-empt whatever
action it may decide to take with respect to the sailboat
in relation to his liabilities, Wolfe accomplished in no time
the clearance that paved the way for its removal from the
company's premises without paying his outstanding
obligations. It claims that such act reveals a fraudulent
intent to use the company storage facilities without
payment of storage fees, and constitutes unjust
enrichment.
The petition lacks 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

Provisional Remedies/Cases Full Text/Rule 5741

action
by
the
attaching
creditor
against
the
defendant.10 However, it should be resorted to only when
necessary and as a last remedy because it exposes the
debtor to humiliation and annoyance. 11 It must be
granted only on concrete and specific grounds and not
merely on general averments quoting the words of the
rules.12 Since attachment is harsh, extraordinary, and
summary in nature,13 the rules on the application of a writ
of attachment must be strictly construed in favor of the
defendant.
For the issuance of an ex-parte issuance of the
preliminary attachment to be valid, an affidavit of merit
and an applicant's bond must be filed with the court 14 in
which the action is pending. Such bond executed to the
adverse party in the amount fixed by the court is subject
to the conditions that the applicant will pay: (1) all costs
which may be adjudged to the adverse party; and (2) all
damages which such party may sustain by reason of the
attachment, if the court shall finally adjudge that the
applicant was not entitled thereto.15 As to the requisite
affidavit of merit, Section 3,16 Rule 57 of the Rules of
Court states that an order of attachment shall be granted
only when it appears in the affidavit of the applicant, or
of some other person who personally knows the facts:
that a sufficient cause of action exists; that the case is
one of those mentioned in Section 117 hereof; that there
is no other sufficient security for the claim sought to be
enforced
by
the
action;
and
that the amount due to the applicant, or the value of the
property the possession of which he is entitled to recover,
is as much as the sum for which the order is granted
above all legal counterclaims.
The mere filing of an affidavit reciting the facts required
by Section 3, Rule 57, however, is not enough to compel
the judge to grant the writ of preliminary attachment.
Whether or not the affidavit sufficiently established facts
therein stated is a question to be determined by the
court in the exercise of its discretion. 18 "The sufficiency or
insufficiency of an affidavit depends upon the amount of
credit given it by the judge, and its acceptance or
rejection, upon his sound discretion." 19 Thus, in reviewing
the conflicting findings of the CA and the RTC on the
pivotal issue of whether or not Watercraft's affidavit of
merit sufficiently established facts which constitute as
grounds upon which attachment may be issued under
Section 1 (a)20 and (d),21 Rule 57, the Court will examine
the Affidavit of Preliminary Attachment22 of Rosario E.
Raoa, its Vice-President, which reiterated the following
allegations in its complaint to substantiate the application
for a writ of preliminary attachment:
xxxx
4. Sometime in June 1997, the Defendant was hired as
Watercraft's Shipyard Manager.
5. Soon thereafter, the Defendant placed his sailboat,
the Knotty Gull, within the boat storage facilities of
Watercraft for purposes of storage and safekeeping.
6. Despite having been employed by Watercraft, the
Defendant was not exempted from paying Watercraft
boat storage fees for the use of the said storage facilities.
7. By virtue of his then position and employment with
Watercraft, the Defendant was very much knowledgeable
of the foregoing fact.
8. All throughout his employment with Watercraft, the
Defendant used the boat storage facilities of Watercraft
for his Knotty Gull.
9. However, all throughout the said period of his
employment, the Defendant never paid the boat storage
fees in favor of the Plaintiff.
10. The Defendant's contract of employment
Watercraft was terminated on 07 March 2002.

with

11. [Sometime] thereafter, that is, in or about June 2002,


the Defendant pulled out theKnotty Gull from the boat
storage facilities of Watercraft.
12. Instead of settling in full his outstanding obligations
concerning unpaid storage fees before pulling our
the Knotty Gull, the Defendant signed a Boat Pull-Out
Clearance dated 29 June 2002 wherein he merely
acknowledged the then outstanding balance of Sixteen
Thousand Three Hundred and Twenty-four and 82/100 US
Dollars (US$16,324.82), representing unpaid boat storage

CHRISSY SABELLA

fees for the period commencing June 1997 to June 2002,


that he owed Watercraft.
13. By reason of Defendant's mere accomplishment of
the said Boat Pull-Out Clearance with acknowledgment of
his outstanding obligation to Watercraft in unpaid boat
storage fees, Mr. Franz Urbanek, then the Shipyard
Manager who replaced the Defendant, contrary to
company policy, rules and regulations, permitted the
latter to physically pull out his boat from the storage
facilities of the Plaintiff without paying any portion of his
outstanding obligation in storage fees.
14. Several demands were then made upon the
Defendant for him to settle his outstanding obligations to
the Plaintiff in unpaid storage fees but the same went
unheeded.
15. As of 02 April 2005, the outstanding obligation of the
Defendant to the Plaintiff in unpaid boat storage fees
stands at Three Million Two Hundred Thirty-One Thousand
Five Hundred and Eighty-Nine and 25/100 Pesos
(Php3,231,589.25) inclusive of interest charges.
16. For failing to pay for the use [of] facilities and
servicesin the form of boat storage facilitiesduly
enjoyed by him and for failing and refusing to fulfill his
promise to pay for the said boat storage fees, the
Defendant is clearly guilty of fraud which entitles the
Plaintiff to a Writ of Preliminary Attachment upon the
property of the Defendant as security for the satisfaction
of any judgment in its favor in accordance with the
provisions of Paragraph (d), Section 1, Rule 57 of the
Rules of Court.
17. The instant case clearly falls under the said provision
of law.
18. Furthermore, lawful factual and legal grounds exist
which show that the Defendant may have departed or
is about to depart the country to defraud his
creditorsthus rendering it imperative that a Writ of
Preliminary Attachment be issued in favor of the Plaintiff
in the instant case.
19. The possibility of flight on the part of the Defendant is
heightened by the existence of the following
circumstances:
a. The Special Working Visa issued in favor of the
Defendant expired in April 2005;
b. The Defendant is a British national who may easily
leave
the
country
at
will;
c. The Defendant has no real properties and visible,
permanent business or employment in the Philippines;
and
e. The house last known to have been occupied by the
Defendant is merely being rented by him.
20. All told, the Defendant is a very serious flight risk
which fact will certainly render for naught the capacity of
the Plaintiff to recover in the instant case.23
After a careful perusal of the foregoing; allegations, the
Court agrees with the CA that Watercraft failed to state
with particularity the circumstances constituting fraud, as
required by Section 5,24 Rule 8 of the Rules of Court, and
that Wolfe's mere failure to pay the boat storage fees
does not necessarily amount to fraud, absent any
showing that such failure was due to insidious
machinations and intent on his part to defraud Watercraft
of the amount due it.
In Liberty Insurance Corporation v. Court of Appeals, 25 the
Court explained that to constitute a ground for
attachment in Section 1(d), Rule 57 of the Rules of Court,
it must be shown that the debtor in contracting the debt
or incurring the obligation intended to defraud the
creditor. A debt is fraudulently contracted if at the time of
contracting it, the debtor has a preconceived plan or
intention not to pay. "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."26
Fraudulent intent is not a physical entity, but a condition
of the mind beyond the reach of the senses, usually kept
secret, very unlikely to be confessed, and therefore, can
only be proved by unguarded expressions, conduct and
circumstances.27 Thus, the applicant for a writ of
preliminary attachment must sufficiently show the factual

Provisional Remedies/Cases Full Text/Rule 5742

circumstances of the alleged fraud because fraudulent


intent cannot be inferred from the debtor's mere nonpayment of the debt or failure to comply with his
obligation.28The particulars of such circumstances
necessarily include the time, persons, places and specific
acts of fraud committed.29 An affidavit which does not
contain concrete and specific grounds is inadequate to
sustain the issuance of such writ. In fact, mere general
averments render the writ defective and the court that
ordered its issuance acted with grave abuse of discretion
amounting to excess of jurisdiction.30
In this case, Watercraft's Affidavit of Preliminary
Attachment does not contain specific allegations of other
factual circumstances to show that Wolfe, at the time of
contracting the obligation, had a preconceived plan or
intention not to pay. Neither can it be inferred from such
affidavit the particulars of why he was guilty of fraud in
the performance of such obligation. To be specific,
Watercraft's following allegation is unsupported by any
particular averment of circumstances that will show why
or how such inference or conclusion was arrived at, to
wit: "16. For failing to pay for the use [of] facilities and
services - in the form of boat storage facilities - duly
enjoyed by him and for failing and refusing to fulfill his
promise to pay for the said boat storage fees, the
Defendant is clearly guilty of fraud x x x." 31 It is not an
allegation of essential facts constituting Watercraft's
causes of action, but a mere conclusion of law.
With respect to Section 1 (a),32 Rule 57, the other ground
invoked by Watercraft for the issuance of the writ of
preliminary attachment, the Court finds no compelling
reason to depart from the CA's exhaustive ruling to the
effect that such writ is unnecessary because Wolfe is not
a flight risk, thus:
As to the allegation that Wolfe is a (light risk, thereby
warranting the issuance of the writ, the same lacks merit.
The mere fact that Wolfe is a British national does not
automatically mean that he would leave the country at
will. As Wolfe avers, he and his family had been staying
in the Philippines since 1997, with his daughters studying
at a local school. He also claims to be an existing
stockholder and officer of Wolfe Marine Corporation, a
SEC - registered corporation, as well as a consultant of
projects in the Subic Area, a member of the Multipartite
Committee for the new port development in Subic, and a
member of the Subic Chamber of Commerce. More
importantly, Wolfe has a pending labor case against
Watercraft - a fact which the company glaringly failed to
mention in its complaint - which Wolfe claims to want to
prosecute until its very end. The said circumstances, as
well as the existence of said labor case where Wolfe
stands not only to be vindicated for his alleged illegal
dismissal, but also to receive recompense, should have
convinced the trial court that Wolfe would not want to
leave the country at will just because a suit for the
collection of the alleged unpaid boat storage fees has
been filed against him by Watercraft.
Neither should the fact that Wolfe's Special Working Visa
expired in April 2005 lead automatically to the conclusion
that he would leave the country. It is worth noting that all
visas issued by the government to foreigner staying in
the Philippines have expiration periods. These visas,
however, may be renewed, subject to the requirements of
the law. In Wolfe's case, he indeed renewed his visa, as
shown by Special Working Visa No. 05-WV-0124P issued
by the Subic Bay Metropolitan Authority Visa Processing
Office on April 25, 2005, and with validity of two (2) years
therefrom.
Moreover,
his Alien
Certificate
of
Registration was valid up to May 11, 2006.33
Meanwhile,
Watercraft's
reliance
on Chuidian
v.
Sandiganbayan34 is displaced. It is well settled 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 plaintiffs application and
affidavits on which the writ was based - and
consequently that the writ based thereon had been

CHRISSY SABELLA

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.35
Be that as it may, the foregoing rule is not applicable in
this case because when Wolfe filed a motion to dissolve
the writ of preliminary attachment, he did not offer to
show the falsity of the factual averments in Watercraft's
application and affidavit on which the writ was based.
Instead, he sought the discharge of the writ on the
ground that Watercraft failed to particularly allege any
circumstance amounting to fraud. No trial on the merits
of the action at a mere hearing of such motion will be had
since only the sufficiency of the factual averments in the
application and affidavit of merit will be examined in
order to find out whether or not Wolfe was guilty of fraud
in contracting the debt or incurring the obligation upon
which the action is brought, or in the performance
thereof.
Furthermore, the other ground upon which the writ of
preliminary attachment was issued by the RTC is not at
the same time the applicant's cause of action.
Assuming arguendo that the RTC was correct in issuing
such writ on the ground that Watercraft's complaint
involves an action for the recovery of a specified amount
of money or damages against a party, like Wolfe, who is
about to depart from the Philippines with intent to
defraud his creditors, the Court stresses that the
circumstances36 cited in support thereof are merely
allegations in support of its application for such
writ.37 Such circumstances, however, are neither the core
of Watercraft's complaint for collection of sum of money
and damages, nor one of its three (3) causes of action
therein.38
All told, the CA correctly ruled that Watercraft failed to
meet one of the requisites for the issuance of a writ of
preliminary attachment, i.e., that the case is one of those
mentioned in Section 1 of Rule 57, and that the RTC
gravely abused its discretion in improvidently issuing
such writ. Watercraft failed to particularly state in its
affidavit of merit the circumstances constituting intent to
defraud creditors on the part of Wolfe in contracting or in
the performance of his purported obligation to pay boat
storage fees, as well as to establish that he is a flight risk.
Indeed, if all the requisites for granting such writ are not
present, then the court which issues it acts in excess of
its jurisdiction.39chanroblesvirtuallawlibrary
WHEREFORE,
premises
considered,
the
petition
is DENIED. The Court of Appeals Decision dated
September 27, 2007 and its Resolution dated January 24,
2008 in CA-G.R. SP No. 97804, are AFFIRMED.
SO ORDERED.
G.R. No. 154106

June 29, 2004

D.M. WENCESLAO and ASSOCIATES, INC., and/or


DOMINADOR
S.
DAYRIT, petitioners,
vs.
READYCON
TRADING
AND
CONSTRUCTION
CORP., respondent.
DECISION
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 decision 3 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.

Provisional Remedies/Cases Full Text/Rule 5743

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 co-petitioner 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

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.

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 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.

CHRISSY SABELLA

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;

Provisional Remedies/Cases Full Text/Rule 5744

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

CHRISSY SABELLA

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

Provisional Remedies/Cases Full Text/Rule 5745

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.

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.
G.R. NO. 123638

June 15, 2005

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

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.

Thru this appeal via a petition for review on certiorari


under Rule 45 of the Rules of Court, petitioner Insular
Savings Bank seeks to set aside the D E C I S I O
N1 dated October 9, 1995 of the Court of Appeals
in CA-G.R. SP No. 34876 and its resolution dated
January 24, 1996,2 denying petitioners motion for
reconsideration.

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:

The assailed decision of October 9, 1995 cleared the


Regional Trial Court (RTC) at Makati, Branch 135, of
committing, as petitioner alleged, grave abuse of
discretion in denying petitioners motion to discharge
attachment by counter-bond in Civil Case No. 92-145,
while the equally assailed resolution of January 24, 1996
denied petitioners motion for reconsideration.

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.

CHRISSY SABELLA

The undisputed facts are summarized in the appellate


courts decision3 under review, as follows:
"On December 11, 1991, respondent Bank [Far East Bank
and Trust Company] instituted Arbitration Case No. 91069 against petitioner [Insular Savings Bank] before the
Arbitration Committee of the Philippine Clearing House
Corporation [PCHC]. The dispute between the parties
involved three [unfunded] checks with a total value
ofP25,200,000.00. The checks were drawn against
respondent Bank and were presented by petitioner for
clearing. As respondent Bank returned the checks beyond
the reglementary period, [but after petitioners account
with PCHC was credited with the amount of
P25,200,000.00] petitioner refused to refund the money
to respondent Bank. While the dispute was pending
arbitration, on January 17, 1992, respondent Bank
instituted Civil Case No. 92-145 in the Regional Trial
Court of Makati and prayed for the issuance of a writ of
preliminary attachment. On January 22, 1992, Branch 133
of the Regional Trial Court of Makati issued an Order
granting the application for preliminary attachment upon
posting by respondent Bank of an attachment bond in the
amount of P6,000,000.00. On January 27, 1992, Branch
133 of the Regional Trial Court of Makati issued a writ of
preliminary
attachment
for
the
amount
of P25,200,000.00. During the hearing on February 11,

Provisional Remedies/Cases Full Text/Rule 5746

1992 before the Arbitration Committee of the Philippine


Clearing House Corporation, petitioner and respondent
Bank agreed to temporarily divide between them the
disputed amount of P25,200,000.00 while the dispute has
not yet been resolved. As a result, the sum
ofP12,600,000.00 is in the possession of respondent
Bank. On March 9, 1994, petitioner filed a motion to
discharge attachment by counter-bond in the amount
of P12,600,000.00. On June 13, 1994, respondent
Judge issued the first assailed order denying the
motion. On June 27, 1994, petitioner filed a motion
for reconsideration which was denied in the second
assailed order dated July 20, 1994" (Emphasis and
words in bracket added).
From the order denying its motion to discharge
attachment by counter-bond, petitioner went to the Court
of Appeals on a petition for certiorari thereat docketed as
CA-G.R. SP No. 34876, ascribing on the trial court the
commission of grave abuse of discretion amounting to
lack of jurisdiction.
While acknowledging that "[R]espondent Judge may have
erred in his Order of June 13, 1994 that the counter-bond
should be in the amount of P27,237,700.00", in that he
erroneously factored in, in arriving at such amount,
unliquidated claim items, such as actual and exemplary
damages, legal interest, attorneys fees and expenses of
litigation, the CA, in the herein assailed decision dated
October 9, 1995, nonetheless denied due course to and
dismissed the petition. For, according to the appellate
court, the RTCs order may be defended by, among
others, the provision of Section 12 of Rule 57 of the Rules
of Court, infra. The CA added that, assuming that the RTC
erred on the matter of computing the amount of the
discharging counter-bond, its error does not amount to
grave abuse of discretion.
With its motion for reconsideration having been similarly
denied, petitioner is now with us, faulting the appellate
court, as follows:
"I. THE COURT OF APPEALS ERRED IN NOT
RULING THAT THE PRINCIPAL AMOUNT CLAIMED
BY RESPONDENT BANK SHOULD BE THE BASIS
FOR COMPUTING THE AMOUNT OF THE
COUNTER-BOND,
FOR
THE
PRELIMINARY
ATTACHMENT WAS ISSUED FOR THE SAID
AMOUNT ONLY.
"II. THE COURT OF APPEALS ERRED IN NOT
RULING THAT THE ARGUMENT THAT THE
AMOUNT OF THE COUNTER-BOND SHOULD BE
BASED ON THE VALUE OF THE PROPERTY
ATTACHED CANNOT BE RAISED FOR THE FIRST
TIME IN THE COURT OF APPEALS.
"III. THE COURT OF APPEALS ERRED IN RULING
THAT THE AMOUNT OF THE COUNTER-BOND
SHOULD BE BASED ON THE VALUE OF THE
PROPERTY ATTACHED EVEN IF IT WILL RESULT IN
MAKING THE AMOUNT OF THE COUNTER-BOND
EXCEED THE AMOUNT FOR WHICH PRELIMINARY
ATTACHMENT WAS ISSUED."
Simply put, the issue is whether or not the CA erred in not
ruling that the trial court committed grave abuse of
discretion in denying petitioners motion to discharge
attachment
by
counter-bond
in
the
amount
ofP12,600,000.00.
Says the trial court in its Order of June 13, 1994:
"xxx (T)he counter-bond posted by [petitioner] Insular
Savings Bank should include the unsecured portion of
[respondents] claim of P12,600,000.00 as agreed by
means of arbitration between [respondent] and

CHRISSY SABELLA

[petitioner]; Actual damages at 25% percent per annum


of unsecured amount of claim from October 21, 1991 in
the amount ofP7,827,500.00; Legal interest of 12%
percent per annum from October 21, 1991 in the amount
of P3,805,200.00; Exemplary damages in the amount
of P2,000,000.00; and attorneys fees and expenses of
litigation in the amount of P1,000,000.00 with a total
amount of P27,237,700.00 (Adlawan vs. Tomol, 184 SCRA
31 (1990)".
Petitioner, on the other hand, argues that the starting
point in computing the amount of counter-bond is the
amount of the respondents demand or claim only, in this
case P25,200,000.00, excluding contingent expenses and
unliquidated amount of damages. And since there was a
mutual agreement between the parties to temporarily,
but equally, divide between themselves the said amount
pending and subject to the final outcome of the
arbitration, the amount of P12,600,000.00 should, so
petitioner argues, be the basis for computing the amount
of the counter-bond.
The Court rules for the petitioner.
The then pertinent provision of Rule 57 (Preliminary
Attachment) of the Rules of Court under which the
appellate court issued its assailed decision and resolution,
provides as follows:
"SEC. 12. Discharge of attachment upon giving counterbond. At any time after an order of attachment has
been granted, the party whose property has been
attached, . . . may upon reasonable notice to the
applicant, apply to the judge who granted the order or to
the judge of the court which the action is pending, for an
order discharging the attachment wholly or in part on the
security given. The judge shall, after hearing, order the
discharge of the attachment if a cash deposit is made, or
a counter-bond executed to the attaching creditor is filed,
on behalf of the adverse party, with the clerk or judge of
the court where the application is made in an amount
equal to the value of the property attached as
determined by the judge, to secure the payment of
any judgment that the attaching creditor may
recover in the action. x x x . Should such counter-bond
for any reason be found to be, or become insufficient, and
the party furnishing the same fail to file an additional
counter-bond, the attaching party may apply for a new
order of attachment"4 (Emphasis supplied).4
As may be noted, the amount of the counter-attachment
bond is, under the terms of the aforequoted Section 12,
to be measured against the value of the attached
property, as determined by the judge to secure the
payment of any judgment that the attaching creditor may
recover in the action. Albeit not explicitly stated in the
same section and without necessarily diminishing the
sound discretion of the issuing judge on matters of bond
approval, there can be no serious objection, in turn, to the
proposition that the attached property - and logically the
counter-bond necessary to discharge the lien on such
property - should as much as possible correspond in value
to, or approximately match the attaching creditors
principal claim. Else, excessive attachment, which ought
to be avoided at all times, shall ensue. As we held
in Asuncion vs. Court of Appeals:5
"We, however, find the counter-attachment bond in the
amount of P301,935.41 required of the private
respondent by the trial court as rather excessive under
the circumstances. Considering that the principal
amounts claimed by the petitioner . . . total only
P185,685.00, and that he had posted a bond of only
P80,000.00 for the issuance of the writ of preliminary
attachment, we deem it reasonable to lower the amount
of the counter-attachment bond to be posted by the
private respondent . . . to the sum of P185,685.00."

Provisional Remedies/Cases Full Text/Rule 5747

The following excerpts from Herrera, REMEDIAL LAW, Vol.


VII, 1997 ed., p. 61, citing retired Justice Jose Y. Feria,
drive home the same point articulated in Asuncion:

the trial court to base the amount of the counter-bond on


a figure beyond theP25,200,000.00 threshold, as later
reduced to P12,600,200.00.

"The sheriff is required to attach only so much of the


property of the party against whom the order is issued as
may be sufficient to satisfy the applicants demand, the
amount of which is stated in the order, unless a deposit
is made or a counter-bond is given equal to said
amount. However, if the value of the property to be
attached is less than the amount of the demand, the
amount of the applicants bond may be equal to the value
of said property, and the amount of the adverse
partys deposit or counter-bond may be equal to
the applicants bond. The writ of preliminary
attachment is issued upon approval of the requisite
bond". (Emphasis supplied).1avvphi1.net

The trial court, therefore, committed grave abuse of


discretion when it denied petitioners motion to discharge
attachment
by
counter-bond
in
the
amount
of P12,600,000.00, an amount more than double the
attachment bond required of, and given by, respondent.
As a necessary consequence, the Court of Appeals
committed reversible error when it dismissed petitioners
recourse thereto in CA-G.R. SP No. 34876.

Turning to the case at bar, the records show that the


principal claim of respondent, as plaintiff a quo, is in the
amount of P25,200,000.00,6 representing the three (3)
unfunded checks drawn against, and presented for
clearing to, respondent bank. Jurisprudence teaches that
a writ of attachment cannot be issued for moral and
exemplary damages, and other unliquidated or
contingent claim.7
The order of attachment dated January 22, 1992 fixed the
bond to be posted by respondent, as applicant,
atP6,000,000.00. The writ of attachment issued on
January 27, 1992, in turn, expressly indicated that
petitioner is justly indebted to respondent in the amount
of P25,200,000.00.8 On February 11, 1992, before the
Arbitration Committee of the Philippine Clearing House
Corporation, petitioner and respondent, however, agreed
to equally divide between themselves, albeit on a
temporary basis, the disputed amount of P25,200,000.00,
subject to the outcome of the arbitration proceedings.
Thus, the release by petitioner of the amount
of P12,600,000.00 to respondent. On March 7, 1994,
petitioner filed a motion to discharge attachment by
counter-bond in the amount ofP12,600,000.009 which, to
petitioner, is the extent that respondent may actually be
prejudiced in the event its basic complaint for recovery of
money against petitioner prospers.
As things stood, therefore, respondents principal claim
against petitioner immediately prior to the filing of the
motion to discharge attachment has effectively been
pruned down to P12,600,000.00. The trial court was fully
aware of this reality. Accordingly, it should have allowed a
total discharge of the attachment on a counter-bond
based on the reduced claim of respondent. If a portion of
the claim is already secured, we see no justifiable reason
why such portion should still be subject of counter-bond.
It may be that a counter-bond is intended to secure the
payment of any judgment that the attaching party may
recover in the main action. Simple common sense, if not
consideration of fair play, however, dictates that a part of
a possible judgment that has veritably been preemptively
satisfied or secured need not be covered by the counterbond.
With the view we take of this case, the trial court, in
requiring petitioner to post a counter-bond in the amount
ofP27,237,700.00,
obviously glossed over one certain fundamental. We refer
to the fact that the attachment respondent applied for
and the corresponding writ issued was only for the
amount of P25.2 Million. Respondent, it bears to stress,
did not pray for attachment on its other claims,
contingent and unliquidated as they were. Then, too, the
attaching writ rightly excluded such claims. While the
records do not indicate, let alone provide a clear answer
as to the actual value of the property levied upon, it may
reasonably be assumed that it is equal to respondents
principal claim. Be that as it may, it was simply unjust for

CHRISSY SABELLA

It bears to stress, as a final consideration, that the


certiorari proceedings before the appellate court and the
denial of the motion to discharge attachment subject of
such proceedings, transpired under the old rules on
preliminary
attachment
which
has
since
been
revised.10 And unlike the former Section 12 of Rule 57 of
the Rules of Court where the value of the property
attached shall be the defining measure in the
computation of the discharging counter-attachment bond,
the present less stringent Section 12 of Rule 57 provides
that the court shall order the discharge of attachment if
the movant "makes a cash deposit, or files a counterbond . . . in an amount equal to that fixed by the court in
the order of attachment, exclusive of costs." Not being in
the nature of a penal statute, the Rules of Court cannot
be given retroactive effect.11
This disposition should be taken in the light of then
Section 12, Rule 57 of the Rules of Court.
WHEREFORE,
the
instant
petition
is GRANTED.
Accordingly, the assailed decision and resolution of the
Courts of Appeals are hereby REVERSED and SET
ASIDE, along with the orders dated June 13, 1994 and
July 20, 1994 of the Regional Trial Court at Makati, Branch
135, in Civil Case No. 92-145 insofar they denied
petitioners motion to discharge attachment by counterbond in the amount of P12,600,000.00, and a new one
entered GRANTINGsuch motion upon the reposting of
the same counter-bond.
SO ORDERED.
G.R. No. L-48756 September 11, 1982
K.O. GLASS CONSTRUCTION CO., INC., petitioner,
vs.
THE HONORABLE MANUEL VALENZUELA, Judge of
the Court of First Instance of Rizal, and ANTONIO
D. PINZON, respondents.
Guillermo E. Aragones for petitioner.
Ruben V. Lopez for respondent Antonio D. Pinzon.
CONCEPCION, JR., J.:
Petition for certiorari to annul and set aside the writ of
preliminary attachment issued by the respondent Judge in
Civil Case No. 5902-P of the Court of First Instance of
Rizal, entitled: Antonio D. Pinzon plaintiff, versus K.O.
Glass Construction Co., Inc., and Kenneth O. Glass,
defendants, and for the release of the amount of
P37,190.00, which had been deposited with the Clerk of
Court, to the petitioner.
On October 6, 1977, an action was instituted in the Court
of First Instance of Rizal by Antonio D. Pinzon to recover
from Kenneth O. Glass the sum of P37,190.00, alleged to
be the agreed rentals of his truck, as well as the value of
spare parts which have not been returned to him upon
termination of the lease. In his verified complaint, the
plaintiff asked for an attachment against the property of

Provisional Remedies/Cases Full Text/Rule 5748

the defendant consisting of collectibles and payables with


the Philippine Geothermal, Inc., on the grounds that the
defendant is a foreigner; that he has sufficient cause of
action against the said defendant; and that there is no
sufficient security for his claim against the defendant in
the event a judgment is rendered in his favor. 1
Finding the petition to be sufficient in form and
substance, the respondent Judge ordered the issuance of
a writ of attachment against the properties of the
defendant upon the plaintiff's filing of a bond in the
amount of P37,190.00.2
Thereupon, on November 22, 1977, the defendant
Kenneth O. Glass moved to quash the writ of attachment
on the grounds that there is no cause of action against
him since the transactions or claims of the plaintiff were
entered into by and between the plaintiff and the K.O.
Glass Construction Co., Inc., a corporation duly organized
and existing under Philippine laws; that there is no
ground for the issuance of the writ of preliminary
attachment as defendant Kenneth O. Glass never
intended to leave the Philippines, and even if he does,
plaintiff can not be prejudiced thereby because his claims
are against a corporation which has sufficient funds and
property to satisfy his claim; and that the money being
garnished belongs to the K.O. Glass Corporation Co., Inc.
and not to defendant Kenneth O. Glass. 3
By reason thereof, Pinzon amended his complaint to
include K.O. Glass Construction Co., Inc. as co-defendant
of Kenneth O. Glass. 4
On January 26, 1978, the defendants therein filed a
supplementary motion to discharge and/or dissolve the
writ of preliminary attachment upon the ground that the
affidavit filed in support of the motion for preliminary
attachment was not sufficient or wanting in law for the
reason that: (1) the affidavit did not state that the
amount of plaintiff's claim was above all legal set-offs or
counterclaims, as required by Sec. 3, Rule 57 of the
Revised Rules of Court; (2) the affidavit did not state that
there is no other sufficient security for the claim sought to
be recovered by the action as also required by said Sec.
3; and (3) the affidavit did not specify any of the grounds
enumerated in Sec. 1 of Rule 57, 5 but, the respondent
Judge denied the motion and ordered the Philippine
Geothermal, Inc. to deliver and deposit with the Clerk of
Court the amount of P37,190.00 immediately upon
receipt of the order which amount shall remain so
deposited to await the judgment to be rendered in the
case. 6
On June 19, 1978, the defendants therein filed a bond in
the amount of P37,190.00 and asked the court for the
release of the same amount deposited with the Clerk of
Court, 7 but, the respondent Judge did not order the
release of the money deposited. 8
Hence, the present recourse. As prayed for, the Court
issued a temporary restraining order, restraining the
respondent Judge from further proceeding with the trial of
the case. 9
We find merit in the petition. The respondent Judge
gravely abused his discretion in issuing the writ of
preliminary attachment and in not ordering the release of
the money which had been deposited with the Clerk of
Court for the following reasons:
First, there was no ground for the issuance of the writ of
preliminary attachment. Section 1, Rule 57 of the Revised
Rules of Court, which enumerates the grounds for the
issuance of a writ of preliminary attachment, reads, as
follows:

CHRISSY SABELLA

Sec. 1. Grounds upon which attachment


may issue. A plaintiff or any proper
party may, at the commencement of
the action or at any time thereafter,
have the property of the adverse party
attached as security for the satisfaction
of any judgment that may be recovered
in the following cases:
(a) In an action for the recovery of
money or damages on a cause of action
arising from contract, express or
implied, against a party who is about to
depart from the Philippines with intent
to defraud his creditor;
(b) In an action for money or property
embezzled or fraudulently misapplied
or converted to his own use by a public
officer, or an officer of a corporation, or
an attorney, factor, broker, agent, or
clerk, in the course of his employment
as such, or by any other person in a
fiduciary capacity, or for a willful
violation of duty;
(c) In an action to recover the
possession
of
personal
property
unjustly detained, when the property, or
any part thereof, has been concealed,
removed, or disposed of to prevent its
being found or taken by the applicant or
an officer;
(d) In an action against the party who
has been guilty of a fraud in contracting
the debt or incurring the obligation
upon which the action is brought, or in
concealing or disposing of the property
for the taking, detention or conversion
of which the action is brought;
(e) In an action against a party who has
removed or disposed of his property, or
is about to do so, with intent to defraud
his creditors;
(f) In an action against a party who
resides out of the Philippines, or on
whom summons may be served by
publication.
In ordering the issuance of the controversial writ of
preliminary attachment, the respondent Judge said and
We quote:
The plaintiff filed a complaint for a sum
of money with prayer for Writ of
Preliminary
Attachment
dated
September 14, 1977, alleging that the
defendant who is a foreigner may, at
any time, depart from the Philippines
with intent to defraud his creditors
including the plaintiff herein; that there
is no sufficient security for the claim
sought to be enforced by this action;
that the amount due the plaintiff is as
much as the sum for which an order of
attachment is sought to be granted;
and that defendant has sufficient
leviable assets in the Philippines
consisting of collectibles and payables
due from Philippine Geothermal, Inc.,
which may be disposed of at any time,
by defendant if no Writ of Preliminary
Attachment may be issued. Finding said
motion and petition to be sufficient in
form and substance. 10

Provisional Remedies/Cases Full Text/Rule 5749

Pinzon however, did not allege that the defendant


Kenneth O. Glass "is a foreigner (who) may, at any time,
depart from the Philippines with intent to defraud his
creditors including the plaintiff." He merely stated that
the defendant Kenneth O. Glass is a foreigner. The
pertinent portion of the complaint reads, as follows:
15. Plaintiff hereby avers under oath
that defendant is a foreigner and that
said defendant has a valid and just
obligation to plaintiff in the total sum of
P32,290.00 arising out from his failure
to pay (i) service charges for the
hauling of construction materials; (ii)
rentals for the lease of plaintiff's Isuzu
Cargo truck, and (iii) total cost of the
missing/destroyed spare parts of said
leased unit; hence, a sufficient cause of
action exists against said defendant.
Plaintiff also avers under oath that
there is no sufficient security for his
claim against the defendant in the
event a judgment be rendered in favor
of the plaintiff. however, defendant has
sufficient assets in the Philippines in the
form of collectible and payables due
from the Philippine Geothermal, Inc.
with office address at Citibank Center,
Paseo de Roxas, Makati, Metro Manila,
but which properties, if not timely
attached,
may
be
disposed
of
bydefendants and
would
render
ineffectual the reliefs prayed for by
plaintiff in this Complaint. 11
In his Amended Complaint, Pinzon alleged the following:
15. Plaintiff hereby avers under oath
that defendant GLASS is an American
citizen who controls most, if not all, the
affairs of defendant CORPORATION.
Defendants CORPORATION and GLASS
have a valid and just obligation to
plaintiff in the total sum of P32,290.00
arising out for their failure to pay (i)
service
charges
for
hauling
of
construction materials, (ii) rentals for
the lease of plaintiff's Isuzu Cargo truck,
and
(iii)
total
cost
of
the
missing/destroyed spare parts of said
leased unit: hence, a sufficient cause of
action exist against said defendants.
Plaintiff also avers under oath that
there is no sufficient security for his
claim against the defendants in the
event a judgment be rendered in favor
of the plaintiff. however, defendant
CORPORATION has sufficient assets in
the Philippines in the form of
collectibles and payables due from the
Philippine Geothermal., Inc. with office
address at Citibank Center, Paseo de
Roxas, Makati, Metro Manila, but which
properties, if not timely attached, may
be disposed of by defendants and
would render ineffectual the reliefs
prayed
for
by
plaintiff
in
this
Complaint. 12
There being no showing, much less an allegation, that the
defendants are about to depart from the Philippines with
intent to defraud their creditor, or that they are nonresident aliens, the attachment of their properties is not
justified.
Second, the affidavit submitted by Pinzon does not
comply with the Rules. Under the Rules, an affidavit for
attachment must state that (a) sufficient cause of action

CHRISSY SABELLA

exists, (b) the case is one of those mentioned in Section I


(a) of Rule 57; (c) there is no other sufficient security 'or
the claim sought to be enforced by the action, and (d) the
amount due to the applicant for attachment or the value
of the property the possession of which he is entitled to
recover, is as much as the sum for which the order is
granted above all legal counterclaims. Section 3, Rule 57
of the Revised Rules of Court reads. as follows:
Section 3. Affidavit and bond required.
An order of attachment shall be
granted only when it is made to appear
by the affidavit of the applicant, or of
some person who personally knows the
facts, that a sufficient cause of action
exists that the case is one of those
mentioned in Section 1 hereof; that
there is no other sufficient security for
the claim sought to be enforced by the
action, and that the amount due to the
applicant, or the value of the property
the possession of which he is entitled to
recover, is as much as the sum for
which the order is granted above all
legal counterclaims. The affidavit, and
the bond required by the next
succeeding section, must be duly filed
with the clerk or judge of the court
before the order issues.
In his affidavit, Pinzon stated the following:
I, ANTONIO D. PINZON Filipino, of legal
age, married and with residence and
postal address at 1422 A. Mabini Street,
Ermita, Manila, subscribing under oath,
depose and states that.
1. On October 6,1977,I filed with the
Court of First Instance of Rizal, Pasay
City Branch, a case against Kenneth O.
Glass entitled 'ANTONIO D. PINZON vs.
KENNETH O. GLASS', docketed as Civil
Case No. 5902-P;
2. My Complaint against Kenneth O.
Glass is based on several causes of
action, namely:
(i) On February 15, 1977, we mutually
agreed that I undertake to haul his
construction materials from Manila to
his construction project in Bulalo, Bay,
Laguna
and
vice-versa,
for
a
consideration of P50.00 per hour;
(ii) Also, on June 18, 1977, we entered
into a separate agreement whereby my
Isuzu cargo truck will be leased to him
for a consideration of P4,000.00 a
month payable on the 15th day of each
month;
(iii) On September 7, 1977, after
making use of my Isuzu truck, he
surrendered the same without paying
the monthly rentals for the leased Isuzu
truck and the peso equivalent of the
spare parts that were either destroyed
or misappropriated by him;
3. As of today, October 11, 1977, Mr.
Kenneth 0. Glass still owes me the total
sum of P32,290.00 representing his
obligation arising from the hauling of
his construction materials, monthly
rentals for the lease Isuzu truck and the

Provisional Remedies/Cases Full Text/Rule 5750

peso equivalent of the spare parts that


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

CHRISSY SABELLA

give the plaintiff security for any judgment that may be


obtained against the defendant. 15
WHEREFORE, the petition is GRANTED and the writ
prayed for is issued. The orders issued by the respondent
Judge on October 11, 19719, January 26, 1978, and
February 3, 1978 in Civil Case No. 5902-P of the Court of
First Instance of Rizal, insofar as they relate to the
issuance of the writ of preliminary attachment, should be
as they are hereby ANNULLED and SET ASIDE and the
respondents are hereby ordered to forthwith release the
garnished amount of P37,190.00 to the petitioner. The
temporary restraining order, heretofore issued, is hereby
lifted and set aside. Costs against the private respondent
Antonio D. Pinzon.
SO ORDERED.
G.R. No. 115678

February 23, 2001

PHILIPPINES
BANK
COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS and
VILLANUEVA, respondents.

OF

BERNARDINO

x ---------------------------------------- x
G.R. No. 119723

February 23, 2001

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,


vs.
HON. COURT OF APPEALS and FILIPINAS TEXTILE
MILLS, INC., respondents.
YNARES-SANTIAGO, J.:
Before us are consolidated petitions for review both filed
by Philippine Bank of Communications; one against the
May 24, 1994 Decision of respondent Court of Appeals in
CA-G.R. SP No. 328631 and the other against its March 31,
1995 Decision in CA-G.R. SP No. 32762. 2 Both Decisions
set aside and nullified the August 11, 1993 Order 3 of the
Regional Trial Court of Manila, Branch 7, granting the
issuance of a writ of preliminary attachment in Civil Case
No. 91-56711.
The case commenced with the filing by petitioner, on
April 8, 1991, of a Complaint against private respondent
Bernardino Villanueva, private respondent Filipinas Textile
Mills and one Sochi Villanueva (now deceased) before the
Regional Trial Court of Manila. In the said Complaint,
petitioner sought the payment of P2,244,926.30
representing the proceeds or value of various textile
goods, the purchase of which was covered by irrevocable
letters of credit and trust receipts executed by petitioner
with private respondent Filipinas Textile Mills as obligor;
which, in turn, were covered by surety agreements
executed by private respondent Bernardino Villanueva
and Sochi Villanueva. In their Answer, private
respondents admitted the existence of the surety
agreements and trust receipts but countered that they
had already made payments on the amount demanded
and that the interest and other charges imposed by
petitioner were onerous.
On May 31, 1993, petitioner filed a Motion for
Attachment,4 contending that violation of the trust
receipts law constitutes estafa, thus providing ground for
the issuance of a writ of preliminary attachment;
specifically under paragraphs "b" and "d," Section 1, Rule
57 of the Revised Rules of Court. Petitioner further
claimed that attachment was necessary since private
respondents were disposing of their properties to its
detriment as a creditor. Finally, petitioner offered to post
a bond for the issuance of such writ of attachment.

Provisional Remedies/Cases Full Text/Rule 5751

The Motion was duly opposed by private respondents


and, after the filing of a Reply thereto by petitioner, the
lower court issued its August 11, 1993 Order for the
issuance of a writ of preliminary attachment, conditioned
upon the filing of an attachment bond. Following the
denial of the Motion for Reconsideration filed by private
respondent
Filipinas
Textile
Mills,
both
private
respondents filed separate petitions for certiorari before
respondent Court assailing the order granting the writ of
preliminary attachment.1wphi1.nt
Both petitions were granted, albeit on different grounds.
In CA-G.R. SP No. 32762, respondent Court of Appeals
ruled that the lower court was guilty of grave abuse of
discretion in not conducting a hearing on the application
for a writ of preliminary attachment and not requiring
petitioner to substantiate its allegations of fraud,
embezzlement or misappropriation. On the other hand, in
CA-G.R. SP No. 32863, respondent Court of Appeals found
that the grounds cited by petitioner in its Motion do not
provide sufficient basis for the issuance of a writ of
preliminary attachment, they being mere general
averments. Respondent Court of appeals held that neither
embezzlement, misappropriation nor incipient fraud may
be presumed; they must be established in order for a writ
of preliminary attachment to issue.
Hence, the instant consolidated 5 petitions charging that
respondent Court of Appeals erred in
"1. Holding that there was no sufficient basis for
the issuance of the writ of preliminary
attachment in spite of the allegations of fraud,
embezzlement and misappropriation of the
proceeds or goods entrusted to the private
respondents;
2. Disregarding the fact that the failure of FTMI
and Villanueva to remit the proceeds or return
the goods entrusted, in violation of private
respondents' fiduciary duty as entrustee,
constitute embezzlement or misappropriation
which is a valid ground for the issuance of a writ
of preliminary attachment."6
We find no merit in the instant petitions.
To begin with, we are in accord with respondent Court of
Appeals in CA-G.R. SP No. 32863 that the Motion for
Attachment filed by petitioner and its supporting affidavit
did not sufficiently establish the grounds relied upon in
applying for the writ of preliminary attachment.
The Motion for Attachment of petitioner states that
1. The instant case is based on the failure of
defendants as entrustee to pay or remit the
proceeds of the goods entrusted by plaintiff to
defendant as evidenced by the trust receipts
(Annexes "B", "C" and "D" of the complaint), nor
to return the goods entrusted thereto, in
violation of their fiduciary duty as agent or
entrustee;
2. Under Section 13 of P.D. 115, as amended,
violation of the trust receipt law constitute(s)
estafa (fraud and/or deceit) punishable under
Article 315 par. 1[b] of the Revised Penal Code;
3. On account of the foregoing, there exist(s)
valid ground for the issuance of a writ of
preliminary attachment under Section 1 of Rule
57 of the Revised Rules of Court particularly
under sub-paragraphs "b" and "d", i.e. for
embezzlement or fraudulent misapplication or
conversion of money (proceeds) or property
(goods entrusted) by an agent (entrustee) in

CHRISSY SABELLA

violation of his fiduciary duty as such, and


against a party who has been guilty of fraud in
contracting or incurring the debt or obligation;
4. The issuance of a writ of preliminary
attachment is likewise urgently necessary as
there exist(s) no sufficient security for the
satisfaction of any judgment that may be
rendered against the defendants as the latter
appears to have disposed of their properties to
the detriment of the creditors like the herein
plaintiff;
5. Herein plaintiff is willing to post a bond in the
amount fixed by this Honorable Court as a
condition to the issuance of a writ of preliminary
attachment against the properties of the
defendants.
Section 1 (b) and (d), Rule 57 of the then controlling
Revised Rules of Court, provides, to wit
SECTION 1. Grounds upon which attachment
may issue. A plaintiff or any proper party may,
at the commencement of the action or at any
time thereafter, have the property of the
adverse party attached as security for the
satisfaction of any judgment that may be
recovered in the following cases:
xxx

xxx

xxx

(b) In an action for money or property embezzled


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

xxx

xxx

(d) In an action against a party who has been


guilty of fraud in contracting the debt or
incurring the obligation upon which the action is
brought, or in concealing or disposing of the
property for the taking, detention or conversion
of which the action is brought;
xxx

xxx

xxx

While the Motion refers to the transaction complained of


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

Provisional Remedies/Cases Full Text/Rule 5752

above motion for issuance


preliminary attachment;

of

writ

of

2.
I have read and understood its contents
which are true and correct of my own
knowledge;
3.
There exist(s) sufficient cause of action
against the defendants in the instant case;
4.
The instant case is one of those
mentioned in Section 1 of Rule 57 of the Revised
Rules of Court wherein a writ of preliminary
attachment may be issued against the
defendants, particularly subparagraphs "b" and
"d" of said section;
5.
There is no other sufficient security for the
claim sought to be enforced by the instant case
and the amount due to herein plaintiff or the
value of the property sought to be recovered is
as much as the sum for which the order for
attachment is granted, above all legal
counterclaims.
Again, it lacks particulars upon which the court can
discern whether or not a writ of attachment should issue.
Petitioner cannot insist that its allegation that private
respondents failed to remit the proceeds of the sale of the
entrusted goods nor to return the same is sufficient for
attachment to issue. We note that petitioner anchors its
application upon Section 1(d), Rule 57. This particular
provision was adequately explained in Liberty Insurance
Corporation v. Court of Appeals,8 as follows
To sustain an attachment on this ground, it must
be shown that the debtor in contracting the debt
or incurring the obligation intended to defraud
the creditor. The fraud must relate to the
execution of the agreement and must have been
the reason which induced the other party into
giving consent which he would not have
otherwise given. To constitute a ground for
attachment in Section 1 (d), Rule 57 of the Rules
of Court, fraud should be committed upon
contracting the obligation sued upon. A debt is
fraudulently contracted if at the time of
contracting
it
the
debtor
has
a
preconceived plan or intention not to pay,
as it is in this case. Fraud is a state of mind and
need not be proved by direct evidence but may
be inferred from the circumstances attendant in
each case (Republic v. Gonzales, 13 SCRA 633).
(Emphasis ours)
We find an absence of factual allegations as to how the
fraud alleged by petitioner was committed. As correctly
held by respondent Court of Appeals, such fraudulent
intent not to honor the admitted obligation cannot be
inferred from the debtor's inability to pay or to comply
with the obligations.9 On the other hand, as stressed,
above, fraud may be gleaned from a preconceived plan or
intention not to pay. This does not appear to be so in the
case at bar. In fact, it is alleged by private respondents
that out of the total P419,613.96 covered by the subject
trust receipts, the amount of P400,000.00 had already
been paid, leaving only P19,613.96 as balance. Hence,
regardless of the arguments regarding penalty and
interest, it can hardly be said that private respondents
harbored a preconceived plan or intention not to pay
petitioner.

We also agree with respondent Court of Appeals in CAG.R. SP No. 32762 that the lower court should have
conducted a hearing and required private petitioner to
substantiate its allegations of fraud, embezzlement and
misappropriation.
To reiterate, petitioner's Motion for Attachment fails to
meet the standard set in D.P. Lub Oil Marketing Center,
Inc. v. Nicolas,10 in applications for attachment. In the said
case, this Court cautioned
The petitioner's prayer for a writ of preliminary
attachment hinges on the allegations in
paragraph 16 of the complaint and paragraph 4
of the affidavit of Daniel Pe which are couched in
general terms devoid of particulars of time,
persons and places to support support such a
serious assertion that "defendants are disposing
of their properties in fraud of creditors." There is
thus the necessity of giving to the private
respondents an opportunity to ventilate their
side in a hearing, in accordance with due
process, in order to determine the truthfulness of
the allegations. But no hearing was afforded to
the private respondents the writ having been
issued ex parte. A writ of attachment can only
be granted on concrete and specific grounds and
not on general averments merely quoting the
words of the rules.
As was frowned upon in D.P. Lub Oil Marketing Center,
Inc.,11 not only was petitioner's application defective for
having merely given general averments; what is worse,
there was no hearing to afford private respondents an
opportunity to ventilate their side, in accordance with due
process, in order to determine the truthfulness of the
allegations of petitioner. As already mentioned, private
respondents claimed that substantial payments were
made on the proceeds of the trust receipts sued upon.
They also refuted the allegations of fraud, embezzlement
and misappropriation by averring that private respondent
Filipinas Textile Mills could not have done these as it had
ceased its operations starting in June of 1984 due to
workers' strike. These are matters which should have
been addressed in a preliminary hearing to guide the
lower court to a judicious exercise of its discretion
regarding the attachment prayed for. On this score,
respondent Court of Appeals was correct in setting aside
the issued writ of preliminary attachment.
Time and again, we have held that the rules on the
issuance of a writ of attachment must be construed
strictly against the applicants. This stringency is required
because the remedy of attachment is harsh,
extraordinary and summary in nature. If all the requisites
for the granting of the writ are not present, then the court
which issues it acts in excess of its jurisdiction.12
WHEREFORE, for the foregoing reasons, the instant
petitions are DENIED. The decision of the Court of
Appeals in CA-G.R. SP No. 32863 and CA-G.R. SP No.
32762
are AFFIRMED. No
pronouncement
as
to
costs.1wphi1.nt
SO ORDERED.
G.R. No. L-28297 March 30, 1970
ELPIDIO
JAVELLANA, plaintiff-appellant,
vs.
D. O. PLAZA ENTERPRISES, INC., defendant-appellee.
Ramon A. Gonzales for plaintiff-appellant.

The Court of Appeals was correct, therefore, in its finding


in CA-G.R. SP No. 32863 that neither petitioner's Motion
or its supporting Affidavit provides sufficient basis for the
issuance of the writ of attachment prayed for.

CHRISSY SABELLA

Hermosisima, Maramara and Sol for defendant-appellee.


REYES, J.B.L., J.:

Provisional Remedies/Cases Full Text/Rule 5753

Direct appeal, on points of law, from an order of the Court


of First Instance of Manila, in its Civil Case No. 46762,
modifying an earlier decision for the plaintiff by reducing
the rate of interest on the sum adjudged, and also the
attorney's fees; and by ordering the plaintiff to pay
damages to the defendant on account of a preliminary
attachment obtained by the former upon the latter's
counterclaim.
The complaint in the aforesaid civil case was for
collection of the sum of P43,017.32 representing balance
due on purchases of wire ropes, tractors and diesel parts
made by the defendant-appellee, D. O. Plaza Enterprises,
Inc., from the plaintiff-appellant, Elpidio Javellana. The
complaint prayed that the defendant be ordered to pay
the said sum of P43,017.32, with legal interest, plus
attorney's fees in the sum of P5,000.00; it also prayed for
a writ of preliminary attachment.
Upon plaintiff's putting up a bond, the trial court, on 15
April 1961, issued a writ of attachment. On 20 May 1961,
the defendant moved to discharge the attachment on the
ground that it was improperly issued. The motion was
denied.
On 7 November 1961, the defendant filed its answer and
counter-claimed
for
damages
arising
from
the
attachment. The plaintiff answered and interposed a
counterclaim to the counterclaim.
After some years, or on 27 April 1966, the defendant
moved for the dissolution of the preliminary attachment.
Upon its filing a counterbond, the court, on 7 May 1966,
dissolved the attachment.
On 3 November 1966, the plaintiff filed a motion to admit
his amended complaint, which the court granted on 12
November 1966. In this amended complaint, the plaintiff
averred that of the sum of P43,017.32 alleged in the
original complaint, the defendant has paid P3,900.00,
thereby leaving a balance of P39,117.32 unpaid, but that,
as indicated by invoices, defendant's purchases were
payable within thirty (30) days and were to bear interest
of 12% per annum plus 25% attorney's fees. The
amended complaint accordingly prayed for the increased
amounts. Defendant did not answer this amended
complaint.
After trial, the court, on 15 June 1967, rendered
judgment. It found the following facts:
.... During the period from 23 July 1959
to 30 July 1960, defendant, in a series
of transactions, purchased from plaintiff
wire ropes, tractors and diesel spare
parts, (in) payment for which he issued
several
checks
amounting
to
P43,017.32, which, when presented to
the bank, were dishonored for lack of
funds. Defendant substituted these
checks with another set of checks for
the same amount, but again, the same
were dishonored for lack of funds, as
evidenced by Exhibits A to M, except for
one check in the amount of P3,900.00
as evidenced by Exhibit C. Thus, the
principal obligation was reduced to
P39,117.32. At the time of the issuance
of the said checks, the defendant never
informed plaintiff that it had funds to
back them up. Plaintiff made demands
to
defendant
for
payment,
but
defendant pleaded for time and
liberalization of payment, which was
rejected
by
the
plaintiff.
The
transactions in question were covered
by invoices listed in Exhibit P, a sample
of which is evidenced by Exhibit C,

CHRISSY SABELLA

wherein said transactions were for 30day term, 12% interest per annum to be
charged from date of invoice, and 25%
attorney's fees in case of litigation.
The defendant claims that there were
other transactions between plaintiff and
defendant involving the amount of
P196,828.58; that it had no intention
not to pay the checks it issued upon
presentment; and that it suffered
damages in the amount of P14,800.00
by reason of the attachment.
xxx xxx xxx
The counterclaim for damages arising
from the attachment is without merit.
The defendant was manifestly in bad
faith when it issued two sets of
bouncing
checks.
Hence,
the
attachment was not improper, contrary
to defendant's claim.
The dispositive portion of the decision decreed:
WHEREFORE, judgment is
hereby
rendered for the plaintiff and against
the defendant, ordering the latter to
pay the former the sum of P39,117.32
with interest at 12% per annum from 14
April 1961, the date of the filing of the
original complaint, until final payment,
plus 25% of the principal indebtedness
as attorney's fees and costs of suit.
The counterclaim as well as the
counterclaim to the counter claim are
hereby dismissed for lack of merit.
On 28 June 1967, the defendant moved to reconsider.
Over the objection of the plaintiff, the court issued an
order dated 10 August 1967, now the subject of the
present appeal, modifying the previous decision, in the
manner following:
WHEREFORE, the dispositive part of the
decision rendered in this case is hereby
modified as follows:
(a) By ordering the defendant to pay
plaintiff the sum of P39,117.20 plus the
legal interest therein from the filing of
the complaint until the amount is fully
paid.
(b) Ordering the plaintiff to pay
defendant the sum of P16,190.00, the
amount of damages suffered by the
defendant on account of the preliminary
attachment of the defendant; and
(c) By ordering the defendant to pay
P5,000.00 as attorney's fees.
Without pronouncement as to costs.
Plaintiff-appellant assigns the following errors: the
reduction of the attorney's fees, the reduction of the
interest, and the grant to the defendant of damages
arising from the attachment.
The first two assigned errors are well taken. The court a
quo reduced the interest stated in its previous decision
from 12% to mere legal interest and the attorney's fees
from 25% to P5,000.00 on the basis of estoppel, the

Provisional Remedies/Cases Full Text/Rule 5754

ground therefor being that the reduced amounts were


those alleged, hence admitted, by the plaintiff in his
original complaint. This was error. The original complaint
was not formally offered in evidence. Having been
amended, the original complaint lost its character as a
judicial admission, which would have required no proof,
and became merely an extrajudicial admission, the
admissibility of which, as evidence, requires its formal
offer.

SIDDCOR
(now
MEGA
PACIFIC)
INSURANCE
CORPORATION, Petitioners,
vs.
FELICIAD SANDOVAL VDA. DE CARLOS and TEOFILO
CARLOS II, Respondent.

Pleadings superseded or amended


disappear from the record as judicial
admissions. However, any statement
contained therein may be considered as
an extrajudicial admission, and as such,
in order that the court may take it into
consideration, it should be offered
formality in evidence. (5 Moran 58,
citing Lucido v. Calupitan, 27 Phil. 148;
Bastida v. Menzi, 58 Phil. 188.)

SIDDCOR
(now
MEGA
PACIFIC)
INSURANCE
CORPORATION, Petitioners,
vs.
HON. COURT OF APPEALS (FORMER SPECIAL
FOURTH DIVISION), HON. ALBERTO L. LERMA and/or
the REGIONAL TRIAL COURT OF THE CITY OF
MUNTINLUPA, BRANCH 256, FELICIDAD SANDOVAL,
also known as FELICIDAD S. VDA. DE CARLOS OR
FELICIDAD S. CARLOS OR FELICIDAD SANDOVAL
CARLOS OR FELICIDAD SANDOVAL VDA. DE CARLOS
and TEOFILO CARLOS II, Respondent.

Where amended pleadings have been


filed,
allegations
in
the
original
pleadings can have no effect, unless
formally offered in evidence. (Jones on
Evidence, Sec. 273.)
Since the record does not show that the complaint
(marked as Exhibit 115) was admitted in evidence, there
is no proof of estoppel on the part of the plaintiff on his
allegations in the complaint. Not only this, but since the
stipulation for 12% interest on balance due and the 25%
counsel fees appear on the invoices themselves, appellee
Plaza Enterprises cannot fairly claim that it was deceived
or misled by the pleadings of appellant. Even more, the
original plea for P5,000.00 as attorney's fees is only
contained in the prayer of the original complaint, and it is
a well established rule that the prayer for relief, although
part of the complaint, is no part of the cause of action
and does not give character, the plaintiff being entitled to
as much relief as the facts warrant (Rosales vs. Reyes, 25
Phil. 495; Aguilar vs. Rubiato, 40 Phil. 470).
But the appellant's last assigned error is without merit.
Although the defendant was found to be in bad faith in
issuing two (2) sets of bouncing checks in payment for its
indebtedness, such bad faith was not related to his
having incurred the obligation in favor of the plaintiff but
to defendant's failure to perform said obligation. There
was, therefore, no ground for the plaintiff to attach the
defendant's properties on the ground of fraud. That the
plaintiff acted in good faith in securing attachment does
not relieve him from the damages that the defendant
sustained by reason of the attachment because he, the
plaintiff, was, in the first place, not entitled to
attachments, the element of malice was unnecessary (3
Moran, Rules of Court, 19).
FOR THE FOREGOING REASONS, the appealed order is
hereby reversed insofar as it reduced the amount of
attorney's fees and the interest on the principal sum
adjudged in the original decision dated 15 June 1967; but
the order is affirmed in all other respects. No costs.
G.R. No. 135830 September 30, 2005
JUAN
DE
DIOS
CARLOS, Petitioners,
vs.
FELICIDAD SANDOVAL, also known as FELICIDAD S.
VDA. DE CARLOS or FELICIDAD S. CARLOS or
FELICIDAD SANDOVAL DE CARLOS, and TEOFILO
CARLOS II, Respondent.
x-------------------------------------------------------------------x
G.R. No. 136035

CHRISSY SABELLA

x------------------------------------------------------------------x
G.R. No. 137743

DECISION
Tinga, J.:
These consolidated petitions emanated from a civil case
filed by Juan de Dios Carlos ("Carlos") against
respondents Felicidad Sandoval ("Sandoval") and Teofilo
Carlos II (Teofilo II) docketed with the Regional Trial Court
(RTC) of Muntinlupa City as Civil Case No. 95-135.
In his Complaint before the RTC, Carlos asserted that he
was the sole surviving compulsory heir of his parents,
Felix B. Carlos and Felipa Elemia,1 who had acquired
during their marriage, six parcels of land (subject
properties). His brother, Teofilo ("Teofilo"), died intestate
in 1992. At the time of his death, Teofilo was apparently
married to Sandoval, and cohabiting with her and their
child, respondent Teofilo II. Nonetheless, Carlos alleged in
hisComplaint that Teofilo and Sandoval were not validly
married as they had not obtained any marriage
license.2Furthermore, Carlos also asserted that Teofilo II
could not be considered as Teofilos child. As a result,
Carlos concluded that he was also the sole heir of his
brother Teofilo, since the latter had died without leaving
any heirs.
Carlos also claimed that Teofilo, prior to their father
Felixs death in 1963, developed a scheme to save the
elder Carloss estate from inheritance taxes. Under the
scheme, the properties of the father would be transferred
to Teofilo who would, in turn, see to it that the shares of
the legal heirs are protected and delivered to them. Felix
assented to the plan, and the subject properties were
transferred in the name of Teofilo. After Teofilos death,
Carlos entered into certain agreements with Sandoval in
connection with the subject properties. Carlos did so,
believing that the latter was the lawful wife of his brother
Teofilo. Subsequently though, Carlos discovered that
Sandoval and his brother were never validly married, as
their marriage was contracted without a marriage
license.3
Carlos now sought to nullify these agreements with
Sandoval for want of consideration, the premise for these
contracts being non-existent. Thus, Carlos prayed of the
RTC to declare the alleged marriage between Teofilo and
Sandoval void ab initio, provided that Teofilo died without
issue, order that new titles covering the subject
properties be issued in the name of Carlos, and require
Sandoval
to
restitute
Carlos
in
the
amount
ofP18,924,800.00.4
Carlos likewise prayed for the issuance of the provisional
relief of preliminary attachment. The RTC issued
anOrder dated 7 September 1995 granting the prayer for
preliminary attachment, and on 15 September 1995, a
writ of preliminary attachment. Carlos posted a bond
for P20,000,000.00 issued by herein petitioner
SIDDCOR Insurance Corporation (SIDDCOR).5 Shortly
thereafter, a Notice of Garnishment was served upon the
Philippine National Bank (PNB) over the deposit accounts
maintained by respondents.

Provisional Remedies/Cases Full Text/Rule 5755

Respondents filed an Urgent Motion to Discharge the Writ


of Attachment, which was opposed by Carlos. On 4
December 1995, the RTC rendered an order denying the
motion. This caused respondents to file a Petition for
Certiorari with the Court of Appeals, seeking to set aside
the RTC order granting the writ of preliminary attachment
denying the motion for the discharge of the writ. This
case was docketed as CA-G.R. SP No. 39267.6
On 27 February 1996, the Court of Appeals Second
Division promulgated its Decision in CA-G.R. SP No.
39267,wherein it granted the Petition for Certiorari and
ordered the discharge and dissolution of the Writ of
Attachment and Notice of Garnishment. 7 The Court of
Appeals found that there was no sufficient cause of action
to warrant the preliminary attachment, since Carlos had
merely alleged general averments in order to support his
prayer.8 Carlos elevated the said Decision to this Court by
way of Petition for Review on Certiorari, which was
docketed as G.R. No. L-125717. In a Resolution dated 21
October 1996, the Court denied Carloss Petition, and
thus the Court of Appeals Decision ordering the
dissolution of the Writ of Attachment and Notice of
Garnishment became final.
In
the
meantime,
the
hearing
on
Carloss Complaint ensued before the RTC. Respondents
duly filed their Answerand thereafter filed a Motion for
Summary Judgment. Carlos opposed the motion and
countered with his ownMotion for Summary Judgment. On
8 April 1996, the RTC rendered a summary judgment in
favor of Carlos. Carloss victory was wholesale, with the
RTC making the following pronouncements:
1. Declaring the marriage between defendant Felicidad
Sandoval and Teofilo Carlos solemnized at Silang, Cavite,
on May 14, 1962, evidenced by the Marriage Contract
submitted in this case, null and void ab initio for lack of
the requisite marriage license;
2. Declaring that the defendant minor, Teofilo S. Carlos II,
is not the natural, illegitimate, or legally adopted child of
the late Teofilo E. Carlos;
3. Ordering defendant Sandoval to pay and restitute to
plaintiff the sum of P18,924,800.00, together with the
interest thereon at the legal rate from date of filing of the
instant complaint until fully paid;
4. Declaring plaintiff as the sole and exclusive owner of
the parcel of land, less the portion adjudicated to the
plaintiffs in Civil Case No. 11975, covered by TCT No.
139061 of the Register of Deeds of Makati City, and
ordering said Register of Deeds to cancel said title and to
issue another title in the sole name of plaintiff herein;
5. Declaring the Contract, Annex K of the Complaint,
between plaintiff and defendant Sandoval null and void,
and ordering the Register of Deeds of Makati City to
cancel TCT No. 139058 in the name of Teofilo Carlos, and
to issue another title in the sole name of the plaintiff
herein;
6. Declaring the Contract, Annex M of the Complaint,
between plaintiff and defendant Sandoval null and void;
7. Ordering the cancellation of TCT No. 210877 in the
names of defendant Sandoval and defendant minor
Teofilo S. Carlos II and ordering the Register of Deeds of
Manila to issue another title in the exclusive name of
plaintiff herein.
8. Ordering the cancellation of TCT No. 210878 in the
names of defendant Sandoval and defendant minor
Teofilo S. Carlos II and ordering the Register of Deeds of
Manila to issue another title in the sole name of plaintiff
herein.9

denied in anOrder dated 20 May 1996. Respondents then


appealed the RTC Decision to the Court of Appeals,
wherein such appeal was docketed as CA-G.R. CV No.
53229. The case was raffled to the appellate courts
Fourteenth Division for completion of records. Sandoval
and Carlos also filed a Petition for Certiorari with
Temporary Restraining Orderdated 2 June 1996. This
special civil action primarily attacked the allowance of
execution pending appeal, and prayed for the annulment
of the Order granting execution pending appeal, and of
the Writ of Execution
On 10 December 1996, in CA-G.R. CV No. 53229,
respondents filed a Motion for Judgment On the
Attachment Bond. They noted that the Court of Appeals
had already ruled that the Writ of Preliminary
Attachment issued by the RTC was improperly granted
and that its Decision, as affirmed by the Supreme Court,
had attained finality. Accordingly, they were entitled to
damages under Section 20, Rule 57 of the then Rules of
Civil Procedure, which governed claims for damages on
account of unlawful attachment. In support of their
allegation of damages, they cite the Notice of
Garnishment served on PNB Malolos Branch, where
Felicidad Carlos maintained
deposits amounting to P15,546,121.98.11 Also presented
in support of the motion was a Notice of
Delivery/Payment by the RTC Sheriff, directing the PNB
Malolos Branch to deliver the amounts previously
garnished by virtue of the Writ of Execution dated 27 May
1996;12 a Manifestation filed by PNB dated 19 July 1996 in
CA-G.R. SP No. 40819, stating that PNB had already
delivered to the RTC Sheriff on 27 June 1996 the amount
of P15,384,509.98 drawn against the accounts of Carlos;
and a Certification to the same effect issued by the PNB
Malolos Branch. In an Addendum to Motion for Judgment
on the Attachment Bond, respondents additionally prayed
for moral and exemplary damages.13
After various pleadings were duly filed by the parties, the
Court of Appeals Special Fourth Division issued
aResolution dated 23 March 1998, certifying that all the
necessary pleadings have been filed, and that the case
may already be referred to the Raffle Committee for
assignment to a ponente for study and report. The
sameResolution likewise denied without elaboration
a Motion to Dismiss on the ground of forum-shopping filed
earlier by Carlos.14
On
such
denial,
Carlos
filed
a Motion
for
Reconsideration. Respondents likewise filed a Motion for
Partial Reconsideration dated 17 April 1998, arguing that
under the Revised Internal Rules of the Court of Appeals
(RIRCA), the case may be re-raffled for assignment for
study and report only after there is a resolution that the
case is deemed submitted for decision.15 They pointed out
that re-raffle could not yet be effected, as there were still
pending
incidents,
particularly
the
motions
for
reconsideration of Carlos and themselves, as well as
the Motion for Judgment on Attachment Bond.
On 26 June 1998, the Court of Appeals Former Special
Fourth Division promulgated two resolutions. 16 The first, in
response to Carloss Motion for Reconsideration, again
denied Carloss Motion to Dismiss the Appeal and Motion
for Suspension, but explained the reasons for such denial.
The second resolution is at the center of the present
petitions.
The
assailed Resolution agreed
with
respondents that it was first necessary to resolve the
pending incidents before the case could be re-raffled for
study and report. Accordingly, the Court of Appeals

Upon promulgation of the Summary Judgment, Carlos


moved before the RTC for execution pending appeal. The
RTC granted the motion for execution pending appeal
upon the filing of a bond.10 On 27 May 1996, the RTC
issued a Writ of Execution.

proceeded to rule on these pending incidents. While the


first resolution dwelt on the pending motions filed by
Carlos, this Resolution tackled the other matter left
unresolved, the Motion for Judgment on Attachment
Bond. The Court of Appeals found the claim for damages
meritorious, citing the earlier decisions ruling that Carlos
was not entitled to the preliminary attachment. Invoking
Section 20, Rule 57 of the Rules of Court, as well as
jurisprudence,17 the Court of Appeals ruled that it was not
necessary for the determination of damages on the
injunction bond to await the decision on appeal.

Meanwhile,
respondents
filed
a Motion
for
Reconsideration of the Summary Judgment, which was

The Court of Appeals then proceeded to determine to


what damages respondents were entitled to. In ruling that

CHRISSY SABELLA

Provisional Remedies/Cases Full Text/Rule 5756

the award of actual damages was warranted, the court


noted:
It is also not disputed that the PNB, on June 27, 1996,
issued two managers checks: MC No. 938541
forP4,932,621.09 and MC 938542 for P10,451,888.89
payable to the order of "Luis C. Bucayon II, Sheriff IV, RTC,
Branch 256, Muntinlupa", duly received by the latter in
the total amount of PESOS FIFTEEN MILLION THREE
HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED NINE
& 98/100 (P15,384,509.98), drawn against the accounts
of Ms. Felicidad Sandoval Vda. de Carlos which were
earlier garnished for the satisfaction of the abovementioned writ of attachment (Annex "E", Motion for
Judgment on the Attachment Bond, pp. 7-8)18
....
The contention of [Carlos] that the writ of attachment was
not implemented falls flat on the face of the
manifestation of PNB that the delivery of the
garnished P15,384,509.98 to him was effected through
the sheriff.19
The Court of Appeals found that moral and exemplary
damages were not warranted, there being no malice in
pursuing the attachment. The appellate court also found
the claim of P2,000,000.00 for attorneys fees as
excessive, and reduced the sum by half. Correspondingly,
the dispositive portion of the assailed Resolution reads:
WHEREFORE, premises considered, judgment is hereby
rendered against the attachment bond, ordering
SIDDCOR INSURANCE CORPORATION and plaintiffappellee to pay defendants-appellants, jointly and
severally, the sum of P15,384,509.98 and 12% interest
per annum from June 27, 1996 when the unlawful
garnishment
was
effected
until
fully
paid
and P1,000,000.00 as attorneys fees with 6% interest
thereon from the trial courts decision on April 8, 1986
until fully paid.
SO ORDERED.20
Both Carlos and SIDDCOR filed their respective motions
for reconsideration of the Resolution. For their part,
respondents filed a Motion for Immediate Execution dated
7 August 1998 in regard to the Resolution of 26 June 1998
awarding them damages.
In the Resolution dated 10 October 1998,21 the Court of
Appeals denied the motions for reconsideration and
granted the Motion for Immediate Execution. In granting
the Motion for Immediate Execution, the Court of Appeals
cited the reasons that the appeal to be undertaken from
the 26 June 1998 Resolution was patently dilatory; that
there were no material and substantial defenses against
the motion for judgment on the attachment bond,
rendering the appeal pro-forma and dilatory; that
Sandoval was of advanced age and might not enjoy the
fruits of the judgment on the attachment bond; and that
immediate execution would end her suffering due to the
arbitrary garnishment of her account pursuant to an
improper attachment.22
In its Motion for Reconsideration, SIDDCOR explicitly
assailed the allowance of the Motion for Immediate
Execution.23 This was denied by the Court of Appeals in
a Resolution dated 22 December 1998.24
From these antecedents, the following petitions were filed
before this Court:
G.R. No. 135830
This Appeal by Certiorari with Prayer for Temporary
Restraining
Order/Preliminary
Injunction dated
26
October 1998 filed by Carlos assailed the two resolutions
of the Court of Appeals both dated 26 June 1998, as well
as theResolution of 10 October 1998, which denied
Carloss motion for reconsideration. Carlos argues that
the Court of Appeals, through the Former Special Fourth
Division, could not have resolved the Motion for Judgment
on the Attachment Bond since the case had not yet been
re-raffled under the two-raffle system for study and
report; that the Court of Appeals erred in resolving the

CHRISSY SABELLA

motion without conducting any hearing; that the Court of


Appeals had no jurisdiction over the motion as the
docketing fees had not yet been filed; that the motion for
judgment, which did not contain any certification against
forum-shopping, was an application subject to the
requirements of certification against forum-shopping; that
there was no supporting evidence to support the award of
damages; and that the Court of Appeals committed grave
abuse of discretion in denying the Motion for
Reconsideration without adverting to specific reasons
mentioned for the denial of each issue.25
Carlos likewise ascribes grave abuse of discretion to the
Court of Appeals in its other Resolution dated 26 June
1998 for its refusal to dismiss CA-G.R. CV No. 53229 on
the ground of forum-shopping, adding that the appellate
court should have deferred resolution of the Motion for
Judgment on the Attachment Bond considering the
prejudicial question raised in Carloss motion to dismiss
the main case on the ground of forum-shopping.
G.R. No. 136035
This concerns a Petition for Review filed by SIDDCOR,
likewise challenging the Resolution of 26 June 1998 of the
Court
of
Appeals
and
the
10
October
1998 Resolution wherein
Siddcors Motion
for
Reconsideration, among others, was denied. Siddcor
argues therein that the Court of Appeals erred in ruling on
the motion for damages without awaiting judgment in the
main case; granting that damages may be awarded,
these should encompass only such damages incurred
during the pendency of the appeal; and that a hearing
was necessary to prove the claim for damages and the
appellate court erred in granting the award for damages
despite lack of hearing.
G.R. No. 137743
The third petition for adjudication, a Petition for Certiorari
under Rule 65 with Prayer for Temporary Restraining
Order or Preliminary Injunction, was also filed by
SIDDCOR. This petition, dated 8 March 1999, specifically
assails the allowance by the Court of Appeals of the
immediate execution of the award of damages, made
through the resolutions dated 10 October 1998 and 22
December 1998.
SIDDCOR hereunder argues that Section 2, Rule 39 of the
Rules of Civil Procedure requires that execution of a
judgment or final order pending appeal may be made
only on motion of the prevailing party and may be made
"even before the expiration of the period to
appeal."26 Respondents had argued in their Motion for
Immediate Execution that the judgment sought to be
executed (that on the attachment bond) was interlocutory
and not appealable, yet cited rulings on execution
pending appeal under Section 2, Rule 39 in support of
their position. SIDDCOR cites this inconsistency as proof
of a change of theory on the part of respondents which
could not be done for the theories are incompatible. Such
being the case, SIDDCOR argues, the Court of Appeals
gravely abused its discretion in granting immediate
execution since respondents had filed its motion on the
premise that the award on the judgment bond was
interlocutory and not appealable. SIDDCOR also claims
that the judgment on the attachment bond is not
interlocutory, citing Stronghold Insurance Co., Inc. v.
Court of Appeals27 wherein it was ruled that such indeed
constitutes a final and appealable order.
SIDDCOR points out that no hearing was conducted on
the Motion
for
Immediate
Execution despite
the
requirement in Section 2, Rule 39 that "discretionary
execution may only issue upon good reasons to be stated
in a special order after due hearing." SIDDCOR likewise
notes that the motion granting immediate execution was
granted in the very same resolution which had denied the
motion for reconsideration of the resolution sought to be
immediately executed. For SIDDCOR, such constituted a
denial of procedural due process insofar as its statutory
right to appeal was concerned, as the resolution that it
intended to appeal from was already the subject of
immediate execution.
Finally, SIDDCOR contests the special reasons cited by
the Court of Appeals in granting the Motion for Immediate
Execution.

Provisional Remedies/Cases Full Text/Rule 5757

Facts Arising Subsequent to the Filing of Instant Petitions


On 7 May 1999, the Court of Appeals issued a Writ of
Execution directing the enforcement of the judgment on
the attachment bond.28 However, in a Resolution dated 9
June 1999, this Court through the First Division issued
aTemporary Restraining Order, enjoining the enforcement
of the said Writ of Execution.
On 15 October 2002, the Court of Appeals First Division
rendered a Decision29 on the merits of CA-G.R. CV No.
53229, setting aside the Summary Judgment and ordering
the remand of the case for further proceedings. 30 Both
parties
filed
their
respective
motions
for
reconsideration.31 In addition, Carlos filed a motion to
inhibit the author of the assailed decision, Justice Rebecca
de Guia-Salvador,32 who thereafter agreed to inhibit
herself.33 Then on 7 August 2003, the Court of Appeals
Former First Division issued a Resolution deferring action
on the motions for reconsideration in light of the
temporary restraining order issued by this Court until the
resolution of the present petitions.
The factual background may be complicated, but the
court need only concern itself with the propriety of the
judgment on the attachment bond and the subsequent
moves to secure immediate execution of such judgment.
Should this Court be called upon to tackle the merits of
the original action, Carloss complaint, it shall be in the
review of the final resolution of the Court of Appeals in
CA-G.R. CV No. 53229.

be insufficient or fail to fully satisfy the award. (Emphasis


supplied.)
Section 20 essentially allows the application to be filed at
any time before the judgment becomes executory. It
should be filed in the same case that is the main action,
and cannot be instituted separately. 34 It should be filed
with the court having jurisdiction over the case at the
time of the application.35 The remedy provided by law is
exclusive and by failing to file a motion for the
determination of the damages on time and while the
judgment is still under the control of the court, the
claimant loses his right to damages.36
There is no question in this case that the Motion for
Judgment on the Attachment Bond filed by respondents
on 10 December 1996 was properly filed since it was filed
with the Court of Appeals during the pendency of the
appeal in the main case and also as an incident thereto.
The core questions though lie in the proper interpretation
of the condition under Section 20, Rule 57 that reads:
"Such damages may be awarded only after proper
hearing and shall be included in the judgment on the
main case." Petitioners assert that there was no proper
hearing on the application for damages and that the
Court of Appeals had wrongfully acted on the application
in that it resolved it prior to the rendition of the main
judgment.
"Such Damages May Be Awarded
Only After Proper Hearing."

Consolidation of Issues in
G.R. Nos. 135830 and 136035
The petitions in G.R. Nos. 135830 and 136035 are
concerned with the award of damages on the attachment
bond. They may be treated separately from the petition in
G.R. No. 137743, which relates to the immediate
execution of the said award.
We consolidate the main issues in G.R. Nos. 135830 and
136035, as follows: (1) whether the assailed judgment on
the attachment bond could have been rendered, as it
was, prior to the adjudication of the main case; (2)
whether the Court of Appeals properly complied with the
hearing requirement under Section 20, Rule 57 prior to its
judgment on the attachment bond; and (3) whether the
Court of Appeals properly ascertained the amount of
damages it awarded in the judgment on the attachment
bond.
Resolving these issues requires the determination of the
proper scope and import of Section 20, Rule 57 of the
1997 Rules of Civil Procedure. The provision governs the
disposal of claims for damages on account of improper,
irregular or excessive attachment.
SECTION 20. Claim for damages on account of improper,
irregular or excessive attachment.An application for
damages on account of improper, irregular or excessive
attachment must be filed before the trial or before appeal
is perfected or before the judgment becomes executory,
with due notice to the attaching obligee or his surety or
sureties, setting forth the facts showing his right to
damages and the amount thereof. Such damages may
be awarded only after proper hearing and shall be
included in the judgment on the main case.
If the judgment of the appellate court be favorable to the
party against whom the attachment was issued, he must
claim damages sustained during the pendency of the
appeal by filing an application in the appellate court with
notice to the party in whose favor the attachment was
issued or his surety or sureties, before the judgment of
the appellate court becomes executory. The appellate
court may allow the application to be heard and decided
by the trial court.
Nothing herein contained shall prevent the party against
whom the attachment was issued from recovering in the
same action the damages awarded to him from any
property of the attaching obligee not exempt from
execution should the bond or deposit given by the latter

CHRISSY SABELLA

We first discuss whether the "proper hearing"


requirement under Section 20, Rule 57 had been satisfied
prior to the award by the Court of Appeals of damages on
the attachment bond.
Section 20 of Rule 57 requires that there be a "proper
hearing" before the application for damages on the
attachment bond may be granted. The hearing
requirement ties with the indispensable demand of
procedural due process. Due notice to the adverse party
and its surety setting forth the facts supporting the
applicant's right to damages and the amount thereof
under the bond is essential. No judgment for damages
may be entered and executed against the surety without
giving it an opportunity to be heard as to the reality or
reasonableness of the damages resulting from the
wrongful issuance of the writ.37
In Paramount Insurance v. Court of Appeals,38 the Court
held that under the rule, it was neither mandatory nor
fatal that there should be a separate hearing in order that
damages upon the bond can be claimed, ascertained and
awarded.39 What is necessary only is for the attaching
party and his surety or sureties to be duly notified and
given the opportunity to be heard.40
In this case, both Carlos and SIDDCOR were duly notified
by the appellate court of the Motion for Judgment on the
Attachment Bond and were required to file their
respective comments thereto.41 Carlos and SIDDCOR filed
their respective comments in opposition to private
respondents motion.42 Clearly, all the relevant parties
had been afforded the bare right to be heard on the
matter.
Concededly, the facts of this case differ from that
in Paramount, wherein the award of damages was
predicated under Section 8, Rule 58, and the trial on the
merits included the claim for damages on the attachment
bond. The Court did note therein that the counsel of the
surety was present during the hearings.43 In this case,
unlike inParamount, there were no open court hearings
conducted by the Court of Appeals, and it is precisely this
absence that the petitioners assert as fatal.
Plainly, there is no express requirement under the rule
that the hearing be done in open court, or that the parties
be allowed to confront adverse witnesses to the claim of
damages on the bond. The proper scope of the hearing
requirement was explained before Paramount in Peroxide
Philippines Corp. v. Court of Appeals,44 thus:

Provisional Remedies/Cases Full Text/Rule 5758

. . . [It] is undeniable that when the attachment is


challenged for having been illegally or improperly issued,
there must be a hearing with the burden of proof to
sustain the writ being on the attaching creditor. That
hearing embraces not only the right to present evidence
but also a reasonable opportunity to know the claims of
the opposing parties and meet them. The right to submit
arguments implies that opportunity, otherwise the right
would be a barren one. It means a fair and open hearing.
From this pronouncement, we can discern that the
"proper hearing" contemplated would not merely
encompass the right of the parties to submit their
respective positions, but also to present evidence in
support of their claims, and to rebut the submissions and
evidence of the adverse party. This is especially crucial
considering that the necessary elements to be
established in an application for damages are essentially
factual: namely, the fact of damage or injury, and the
quantifiable amount of damages sustained. Such matters
cannot be established on the mere say-so of the
applicant, but require evidentiary support. At the same
time, there was no equivocal statement from the Court
in Peroxide that the hearing required under the rule
should be a full-blown hearing on the merits
In this case, we rule that the demands of a "proper
hearing" were satisfied as of the time the Court of
Appeals rendered its assailed judgment on the
attachment bond. The circumstances in this case that we
consider particularly telling are the settled premises that
the judicial finding on the wrongfulness of the attachment
was then already conclusive and beyond review, and that
the amount of actual damages sustained was likewise
indubitable as it indeed could be found in the official case
record in CA-G.R. CV No. 53229. As a result, petitioners
would have been precluded from either raising the
defenses that the preliminary attachment was valid or
disputing the amount of actual damages sustained by
reason of the garnishment. The only matter of
controversy that could be litigable through the traditional
hearing would be the matter of moral and exemplary
damages, but the Court of Appeals appropriately chose
not to award such damages.
Moreover, petitioners were afforded the opportunity to
counter the arguments extended by the respondents.
They fully availed of that right by submitting their
respective comments/oppositions. In fine, the due process
guarantee has been satisfied in this case.
It should be noted that this case poses a situation
different from what is normally contemplated under
Section 20, Rule 57wherein the very wrongfulness of
the attachment remains one of the issues in contention in
the main case. In such a case, there would be a greater
demand for a more extensive hearing on the application
of damages. The modality of hearing should remain
within the discretion of the court having jurisdiction to
hear the application for damages. The only demand,
concordant to due process, would be the satisfaction of
the right to be heard, to present evidence, and to rebut
the evidence and arguments of the opposing party.
Some disquisition is necessary on whether or not, as
petitioners submit, a full-blown hearing in open court is
compulsory under Section 20, Rule 57. To impose this as a
mandatory requirement would ultimately prove too
onerous to our judicial system. Perhaps such a demand
would be less burdensome on the regional trial courts,
which, as a matter of routine, receive testimonial or
documentary evidence offered de novo, and to formulate
conclusions on the admissibility and credibility of the
same.
However, a different situation applies if it is the Court of
Appeals or the Supreme Court before which the
application for damages is filed. Both these courts, which
are capacitated to receive and act on such actions, are
generally not triers of facts, and do not, in the course of
daily routine, conduct hearings. It is partly for such
reason that Section 20, Rule 57 authorizes these
appellate courts to refer the application for damages to
the trial court for hearing and decision. The trial courts
are functionally attuned to ascertain and evaluate at the
first instance the necessary factual premises that would
establish the right to damages. Still, reference of the
application for damages to the trial court is discretionary
on the part of the appellate courts. The latter, despite

CHRISSY SABELLA

their traditional appellate jurisdiction and review function,


are still empowered under Section 20 to rule on the
application for damages, notwithstanding the factual
dimension such question presents.
To impose as mandatory on the Court of Appeals or the
Supreme Court to hear the application for damages
through full-blown hearings in open court is supremely
unwise and beyond the demands of Section 20, Rule 57.
The effect would be unduly disruptive on the daily
workflow of appellate courts such as the Court of Appeals
and the Supreme Court, which rarely conduct open court
hearings. Neither could the Court see what is so markedly
special about an application for damages, fact-oriented
as it may be, that would require it to be heard by the
appellate courts in open court when no such mandatory
rule applies to other judicial matters for resolution that
are also factual in nature.
For example, the review of death penalty convictions by
the Court of Appeals and the Supreme Court necessitates
a thorough evaluation of the evidence presented,
notwithstanding the prior factual appreciation made by
the trial court.45 Notwithstanding the factual nature of the
questions involved, there is no rule requiring the Court of
Appeals or the Supreme Court to call death penalty cases
for hearing or oral argument. If no such mandatory rule
for hearing is imposed on the appellate courts when the
supreme penalty of death is involved, why then should an
exceptional rule be imposed in the case for the relatively
insignificant application for damages on the attachment
bond?
If open court hearings are ever resorted to by appellate
courts, such result from the exercise of discretion rather
than by imposition by statute or procedural rule. Indeed,
there is no existing statute, procedural rule, or
jurisprudential fiat that makes it mandatory on the Court
of Appeals or the Supreme Court to conduct an opencourt hearing on any matter for resolution. There is
nothing demonstrably urgent with an application for
damages under Section 20, Rule 57 that would
necessitate this Court to adopt an unprecedented rule
mandating itself or the Court of Appeals to conduct fullblown open court hearings on a particular type of action.
This pronouncement does not contradict our ruling
in Hanil Development v. IAC,46 which Carlos interprets as
requiring the Court of Appeals to conduct a proper
hearing on an application for damages on the attachment
bond. Hanil concerned the refusal by the Intermediate
Appellate Court (now Court of Appeals) to take
cognizance of the application for damages on the
attachment bond, such refusal being reversed by the
Court, which ruled that the Intermediate Appellate Court
(IAC) had jurisdiction to accept and rule on such
application. While the Court therein recognized that the
IAC was empowered to try cases and conduct hearings, or
otherwise perform acts necessary to resolve factual
issues in cases,47 it did not require the appellate court to
conduct a hearing in open court, but merely to reinstate
the application for damages.
Admittedly, the dispositive portion of Hanil required the
Court of Appeals to conduct hearings on the application
for damages,48 but nowhere in the decision was a general
rule laid down mandating the appellate court to conduct
such hearings in open court. The ascertainment of the
need to conduct full-blown hearings is best left to the
discretion of the appellate court which chooses to hear
the application. At the same time, the Court cautions the
appellate courts to carefully exercise their discretion in
determining the need for open-court hearings on the
application for damages on the attachment bond. The
Court does not sanction the indolent award of damages
on the attachment bond by the appellate court without
affording the adverse party and the bonding company
concerned the opportunity to present their sides and
adduce evidence in their behalf, or on the basis of
unsubstantiated evidence.
"And Shall be Included in the
Judgment on the Main Case"
Section 20, Rule 57 does state that the award of damages
shall be included in the judgment on the main case, and

Provisional Remedies/Cases Full Text/Rule 5759

seemingly indicates that it should not be rendered prior


to the adjudication of the main case.

the ponente for study and report,"53 and such observation


is in conformity with Section 20.

The rule, which guarantees a right to damages incurred


by reason of wrongful attachment, has long been
recognized in this jurisdiction.49 Under Section 20, Rule 57
of the 1964 Rules of Court, it was provided that there
must be first a judgment on the action in favor of the
party against whom attachment was issued before
damages can be claimed by such party. 50 The Court
however subsequently clarified that under the rule,
"recovery for damages may be had by the party thus
prejudiced by the wrongful attachment, even if the
judgment be adverse to him."51

However, this reasoning was assailed by respondents,


who argued that the motion for judgment on the
attachment bond was a pending incident that should be
decided before the case can be re-raffled to a ponente for
decision. Respondents may be generally correct on the
point that a case can only be deemed submitted for
decision only after all pending incidents are resolved. Yet
since Section 20, Rule 57 provides that their application
for damages on the attachment bond "shall be included in
the judgment on the main case," it is clear that the award
for damages need not be resolved before the case is
submitted for decision, but should instead be resolved
and included in the judgment on the main case, or the
decision on the Appeal by Certiorari filed by the
respondents.

The language used in the 1997 revision of the Rules of


Civil Procedure leaves no doubt that there is no longer
need for a favorable judgment in favor of the party
against whom attachment was issued in order that
damages may be awarded. It is indubitable that even a
party who loses the action in main but is able to establish
a right to damages by reason of improper, irregular, or
excessive attachment may be entitled to damages. This
bolsters the notion that the claim for damages arising
from such wrongful attachment may arise and be decided
separately from the merits of the main action. As noted
by the Court in Philippine Charter Insurance Corp. v.
Court of Appeals:52
The surety does not, to be sure, become liable on its bond
simply because judgment is subsequently rendered
against the party who obtained the preliminary
attachment. The surety becomes liable only when
and if "the court shall finally adjudge that the
applicant was not entitled to the attachment." This
is so regardless of the nature and character of the
judgment on the merits of the principal claims,
counterclaims or cross-claims, etc. asserted by the
parties against each other. Indeed, since an
applicant's cause of action may be entirely
different from the ground relied upon by him for a
preliminary attachment, it may well be that
although the evidence warrants judgment in favor
of said applicant, the proofs may nevertheless also
establish that said applicant's proferred ground for
attachment was inexistent or specious and hence,
the writ should not have issued at all; i.e., he was
not entitled thereto in the first place. In that event, the
final verdict should logically award to the applicant the
relief sought in his basic pleading, but at the same time
sentence himusually on the basis of a counterclaimto
pay damages caused to his adversary by the wrongful
attachment. [Emphasis supplied.]
Moreover, a separate ruleSection 8, Rule 58 covers
instances when it is the trial court that awards damages
upon the bond for preliminary injunction of the adverse
party. Tellingly, it requires that the amount of damages to
be awarded be claimed, ascertained, and awarded under
the same procedure prescribed in Section 20 of Rule 57.
In this case, we are confronted with a situation wherein
the determination that the attachment was wrongful did
not come from the trial court, or any court having
jurisdiction over the main action. It was rendered by the
Court of Appeals in the exercise of its certiorari
jurisdiction in the original action reviewing the propriety
of
the
issuance
of
the Writ
of
Preliminary
Attachment against the private respondents. Said ruling
attained finality when it was affirmed by this Court.
The courts are thus bound to respect the conclusiveness
of this final judgment, deeming as it does the allowance
by the RTC of preliminary attachment as improper. This
conclusion is no longer subject to review, even by the
court called upon to resolve the application for damages
on the attachment bond. The only matter left for
adjudication is the proper amount of damages.
Nevertheless, Section 20, Rule 57 explicitly provides that
the award for damages be included in the judgment on
the main case. This point was apparently not lost on the
Court of Appeals when it rendered its Resolution dated 23
March 1998, certifying that the case may now be referred
to the Raffle Committee for assignment to a ponente. The
appellate court stated therein: "The Resolution of
defendants-appellants motion for judgment on the
attachment may be incorporated in the decision by

CHRISSY SABELLA

Thus, the action of the Court of Appeals in resolving the


application for damages even before the main judgment
was issued does not conform to Section 20, Rule 57.
However, the special particular circumstances of this case
lead us to rule that such error is not mortal to the award
of damages.
As noted earlier, the award of damages was made after a
proper hearing had occurred wherein all the concerned
parties had been given the opportunity to present their
arguments and evidence in support and in rebuttal of the
application for damages. The premature award of
damages does not negate the fact that the parties were
accorded due process, and indeed availed of their right to
be heard.
Moreover, we are compelled to appreciate the particular
circumstance in this case that the right of private
respondents to acquire relief through the award of
damages on account of the wrongful preliminary
attachment has been conclusively affirmed by the highest
court of the land. This differs from the normal situation
under Section 20, Rule 57 wherein the court having
jurisdiction over the main action is still required to
ascertain whether the applicant actually has a right to
damages. To mandatorily require that the award of
damages be included in the judgment in the main case
makes all the sense if the right to damages would be
ascertained at the same time the main judgment is made.
However, when the said right is already made viable by
reason of a final judgment which is no longer subject to
review, there should be no unnecessary impediments to
its immediate implementation.
And finally, any ruling on our part voiding the award of
damages solely for the reason that it was not included in
the judgment on the main case, and remanding the
motion to the Court of Appeals for proper adjudication
together with the main case may exhibit fealty to the
letter of the procedural rule, but not its avowed aims of
promoting a just and speedy disposition of every action
and proceeding. After all, if we were to compel the Court
of Appeals to decide again on the application for
damages and incorporate its ruling in the judgment on
the main action, the appellate court will be examining
exactly the same evidence and applying exactly the same
rules as it already did when it issued the assailed
resolution awarding damages on the bond. This would be
unnecessarily redundant especially considering that the
Supreme Court had already affirmed that there was
wrongful attachment in this case.
There is also the fact that remanding the question of
damages, singly for the purpose of adhering to the letter
of the procedural rule, would further prolong the
resolution of the main case, which has been with the
Court of Appeals for more than nine years now. 54 Our
Rules of Court precisely requires liberal construction of
the procedural rules to promote the objective of securing
a just, speedy and inexpensive disposition of every action
and proceeding.55 With this precept, all the more
justification is supplied for allowing the award for
damages despite its apparent prematurity, if it is in all
other respects proper.
The same reasons apply in resolving the question of
whether the Court of Appeals could have decided
the Motion
for
Judgment
on
the
Attachment
Bond considering that the case had not yet been re-

Provisional Remedies/Cases Full Text/Rule 5760

raffled under the two-raffle system for study and report.


Under Section 5, Rule 3 of the RIRCA, a case filed with the
Court of Appeals undergoes two raffles for assignment to
a particular Justice. The first raffle is made for completion
of records.56Afterwards, "all raffled appealed cases, the
records of which have been completed and submitted for
decision, shall be re-raffled for assignment to a Justice for
study and report."57
The fact that Section 20, Rule 57 provides that the award
of damages on the attachment bond "shall be included in
the judgment on the main case" necessarily implies that
it is to be made only after the case has been re-raffled for
study and report, and concurrently decided with the
judgment of the ponente in the main case. Again, the
Court of Appeals failed to consider Section 20, Rule 57
when it acted upon the application even before the
second raffle was made.
Had Section 20, Rule 57 been faithfully complied with, a
different Justice of the Court of Appeals would have
penned the ruling on the application for damages, in
accordance with the RIRCA. Yet this circumstance does
not outweigh the other considerations earlier mentioned
that would warrant a liberal interpretation of the
procedural rules in favor of respondents. The parties had
adduced all their arguments and evidence before the
Court of Appeals, and indeed, these were appreciated on
first instance by Justice Demetria, who eventually penned
the assailed resolutions. There was already a final
determination that the attachment was wrongful. And any
delay brought about by requiring that it be the ponencia,
determined after the second raffle, who decides the
application for damages may bear pro forma adherence
to the letter of the rule, but would only cause the delay of
the resolution of this long-pending case. Procedural rules
are designed, and must therefore be so interpreted as, to
give effect to lawful and valid claims and not to frustrate
them.58
Even SIDDCOR acknowledges that there are recognized
instances where the award of damages or judgment on
the attachment bond may not be included in the decision
on the main case, such as if the main case was dismissed
for lack of jurisdiction and no claim for damages could
have been presented in the main case.59
Scope of Damages
Properly Awardable
Next, we examine the particular award of damages made
in this case, consisting of P15,384,509.98, plus interest,
as well as P1,000,000.00 as attorneys fees. There seems
to be no dispute that the former amount constituted the
amount drawn against the account of Sandoval by reason
of the writ of execution issued by the trial court on 27
May 1996. This fact was confirmed by the PNB, in
its Manifestation dated 19 July 1996, confirming the
garnishment.
Respondents burden in proving damages in this case was
considerably lessened by the fact that there was already
a final judgment, no longer subject to review, that the
preliminary attachment allowed by the trial court was
indeed wrongful. Hence, all that was necessary to be
proved was the amount of damage actually sustained by
respondents by reason of the wrongful attachment. It is
unquestioned that by virtue of the writ of preliminary
attachment, a Notice of Garnishment was served upon
the PNB over deposit accounts maintained by
respondents. Said Notice of Garnishment placed under
the control of the RTC all the accounts maintained by
respondents, and prevented the transfer or disposition of
these
accounts.60 Then
the
subsequent Writ
of
Execution dated 27 May 1996 ordered the delivery to
Carlos of these accounts earlier subjected to
garnishment.61
Clearly, the amount of actual pecuniary loss sustained by
respondents
has
been
well
established.
TheManifestation submitted by the PNB further affirmed
the actual amount seized by Carlos, an amount which
could not have been acquired had it not been for the writ
of preliminary attachment which was wrongfully issued.

CHRISSY SABELLA

Carlos lamely argues in his petition that there was no


concrete or supporting evidence to justify the amount of
actual damages, a claim that is belied by the official case
records. The more substantive argument is presented by
SIDDCOR, which submits that any damages that may be
awarded to respondents can include only those that were
incurred, if any, during the pendency of the appeal. But
this contention is belied by Section 4, Rule 57 of the 1997
Rules of Civil Procedure, which provides that the bond
issued for preliminary attachment is conditioned that the
applicant "will pay all the costs which may be adjudged to
the adverse party and all damages which he may
sustain by reason of the attachment, if the court
shall finally adjudge that the applicant was not
entitled thereto."62
The case Paramount Insurance Corp. v. Court of
Appeals63 is instructive. It discusses the scope of the bond
executed by upon an application for preliminary
injunction,64 which similarly covers "all damages which
[may be] sustain[ed] by reason of the injunction or
temporary restraining order if the court should finally
decide that the applicant was not entitled thereto." 65 The
surety in that case claimed that it could be liable "only to
the amount of damages accruing from the time the
injunction bond was issued until the termination of the
case, and not from the time the suit was
commenced."66 In rebutting this claim, the Court ruled:
. . . . Rule 58, Section 4(b), provides that a bond is
executed in favor of the party enjoined to answer for all
damages which he may sustain by reason of the
injunction. This Court already had occasion to rule on this
matter in Mendoza v. Cruz, where it held that "(t)he
injunction bond is intended as a security for damages in
case it is finally decided that the injunction ought not to
have been granted. It is designed to cover all
damages which the party enjoined can possibly
suffer. Its principal purpose is to protect the
enjoined party against loss or damage by reason of
an injunction." No distinction was made as to when
the damages should have been incurred.67
Our ruling in Philippine Charter Insurance Corp. v. Court
of Appeals, relied upon by the Court of Appeals, squarely
applies to this case:
Under the circumstances, too, there can be no gainsaying
the suretys full awareness of its undertakings under its
bond: that, as the law puts it: "the plaintiff will pay all
costs which may be adjudged to the defendant(s), and all
damages which may be sustained by reason of the
attachment, if the same shall finally be adjudged to have
been wrongful and without cause," and that those
damages plainly comprehended not only those sustained
during the trial of the action but also those during the
pendency of the appeal. This is the law, and this is how
the surety's liability should be understood. The surety's
liability may be enforced whether the application for
damages for wrongful attachment be submitted in the
original proceedings before the Trial Court, or on appeal,
so long as the judgment has not become executory. The
surety's liability is not and cannot be limited to the
damages caused by the improper attachment only
during the pendency of the appeal. That would be
absurd. The plain and patent intendment of the law
is that the surety shall answer for all damages that
the party may suffer as a result of the illicit
attachment, for all the time that the attachment
was in force; from levy to dissolution. . . .
The fact that the second paragraph of the rule
speaks only of "damages sustained during the
pendency of the appeal" is of no moment; it
obviously proceeds from the assumption in the
first paragraph that the award for the damages
suffered during the pendency of the case in the
trial court was in fact "included in the final
judgment" (or applied for therein before the appeal was
perfected or the judgment became executory); hence, it
states that the damages additionally suffered thereafter,
i.e., during the pendency of the appeal, should be
claimed before the judgment of the appellate tribunal
becomes executory. It however bears repeating that
where. as in the case at bar, the judgment of the
Trial Court has expressly or impliedly sustained the
attachment and thus has given rise to no occasion
to speak of, much less, file an application for
damages for wrongful attachment, and it is only in

Provisional Remedies/Cases Full Text/Rule 5761

the decision of the Court of Appeals that the


attachment is declared wrongful and that the
applicant "was not entitled thereto," the rule is, as
it should be, that it is entirely proper at this time
for the application for damages for such wrongful
attachment to be filedi.e., for all the damages
sustained thereby, during all the time that it was in
force, not only during the pendency of the appeal. .
. .68
The rule is thus well-settled that the bond issued upon an
application for preliminary attachment answers for all
damages, incurred at whatever stage, which are
sustained by reason of the attachment. The award of
actual damages by the Court of Appeals is thus proper in
amount. However, we disagree that the rate of legal
interest be counted from the date of the "unlawful
garnishment," or on 27 June 1996. Properly, interest
should start to accrue only from the moment it had been
finally determined that the attachment was unlawful,
since it is on that basis that the right to damages comes
to existence. In this case, legal interest commences from
the date the Court of Appeals decision in CA-G.R. SP No.
39267 became final, by reason of its affirmation by this
Court.
The award of attorneys fees in the amount
of P1,000,000.00 is also questioned before this Court,
considering that the Court of Appeals did not award moral
or exemplary damages. The general rule may be that an
award of attorneys fees should be deleted where the
award of moral and exemplary damages are
eliminated.69Nonetheless, attorneys fees may be
awarded under the Civil Code where the court deems it
just and equitable that attorneys fees and expenses of
litigation should be recovered,70 even if moral and
exemplary damages are unavailing.71
Particularly, the Court has recognized as just and
equitable that attorney's fees be awarded when a party is
compelled to incur expenses to lift a wrongfully issued
writ of attachment.72 The amount of money garnished,
and the length of time respondents have been deprived
from use of their money by reason of the wrongful
attachment, all militate towards a finding that attorneys
fees are just and equitable under the circumstances.
However, we deem the amount of P1,000,000.00 as
excessive, and modify the award of attorneys fees
to P500,000.00 which represents merely approximately
three percent of the actual damages suffered by and
awarded to respondents. We also delete the imposition of
legal interest made by the Court of Appeals on the
awarded attorneys fees.
Other Issues Raised in G.R. No. 135830
The issues raised in G.R. No. 136035 have been
dispensed with, and the remaining issues in G.R. No.
135830 are relatively minor. There is no need to dwell at
length on them.
Carlos insists that respondents were liable to have paid
docket fees upon filing of their Motion for Judgment on
Attachment Bond, on the theory that they claimed therein
for the first time the alleged damages resulting from the
dissolved attachment. The said motion is characterized as
an initiatory proceeding because it is claimed therein for
the first time, the damages arising from the attachment.
In the same vein, Carlos argues that the absence of a
certification against forum-shopping attached to the
motion renders the said motion as fatal. Again, it is
pointed out that initiatory pleadings must contain the said
certification against forum-shopping.
Our ruling in Santo Tomas University Hospital v. Surla 73 is
instructive. It was argued therein that the requirement of
the certification against forum-shopping, as contained in
Administrative Circular No. 04-94,74 covered compulsory
counterclaims. The Court ruled otherwise:
It bears stressing, once again, that the real office of
Administrative Circular No. 04-94, made effective on 01
April 1994, is to curb the malpractice commonly referred
to also as forum-shopping. . . . The language of the
circular distinctly suggests that it is primarily intended to
cover an initiatory pleading or an incipient application of
a party asserting a claim for relief.

CHRISSY SABELLA

It should not be too difficult, the foregoing


rationale of the circular aptly taken, to sustain the
view that the circular in question has not, in fact,
been contemplated to include a kind of claim
which, by its very nature as being auxiliary to the
proceeding in the suit and as deriving its
substantive and jurisdictional support therefrom,
can only be appropriately pleaded in the answer
and not remain outstanding for independent
resolution except by the court where the main case
pends. Prescinding from the foregoing, the proviso in the
second paragraph of Section 5, Rule 8, of the 1997 Rules
of Civil Procedure, i.e., that the violation of the anti-forum
shopping rule "shall not be curable by mere amendment .
. . but shall be cause for the dismissal of the case without
prejudice," being predicated on the applicability of the
need
for
a
certification
against
forum
shopping,obviously does not include a claim which
cannot
be
independently
set
up.75 (Emphasis
supplied.)
It is clear that under Section 20, Rule 57, the application
for damages on the attachment bond cannot be
independently set up, but must be filed in the main case,
before the judgment therein becomes final and
executory. Santo Tomas squarely applies in determining
that no certification against forum-shopping was required
in the Motion for Judgment on the Attachment Bond. The
same reasoning also sustains a ruling that neither legal
fees were required for the filing of the said motion.
Section 1, Rule 141 of the Rules of Court provides that
legal fees are prescribed upon the filing of the pleading or
other application which initiates an action or
proceeding.76Since the said application for judgment on
the attachment bond cannot be considered as an
initiatory pleading, as it cannot be independently set up
from the main action, it is not likewise chargeable with
legal fees.
As to the issue relating to the other Resolution dated 26
June 1998 denying the motion to dismiss appeal on the
ground of forum-shopping, we find Carloss arguments as
unmeritorious. Forum-shopping allegedly existed because
petitioners had filed two cases before the Court of
Appeals, CA-G.R. CV No. 53229, and the Petition for
Certiorari with Temporary Restraining Order dated 2 June
1996 attacking the allowance of execution pending
appeal. Evidently, the two causes of action in these two
petitions are different, CA-G.R. CV No. 53229 being an
appeal from the Summary Judgment rendered by the RTC,
and the second petition assailing the subsequent
allowance by the RTC of execution pending appeal. There
is no identity between these two causes of action that
would warrant a finding of forum-shopping.
Issues Raised in G.R. No. 137743
To recount, respondents, having obtained a favorable
decision on their Motion for Judgment on the Attachment
Bond, filed a Motion for Immediate Execution of the
award of damages. This was granted by the Court of
Appeals in its Resolution dated 16 October 1998, said
resolution now specifically assailed by SIDDCOR in G.R.
No. 137743.
In their Motion for Immediate Execution, respondents
theory in seeking the immediate execution of the award
of damages was that said award was not subject to
appeal, the ruling thereupon being an interlocutory
order.77 This position was not adopted by the Court of
Appeals in its 16 October 1998 Resolution, which was
otherwise favorably disposed to respondents. Instead, the
Court of Appeals predicated the immediate execution on
the following grounds: (1) that the judicial finding that the
writ of preliminary attachment was wrongful was already
final and beyond review; (2) there were no material and
substantial defenses against the motion for the issuance
of the judgment bond; (3) Sandoval was elderly and
sickly, without means of livelihood and may not be able
to enjoy the fruits of the judgment on the attachment
bond; (4) that immediate execution would end her
suffering caused by the arbitrary garnishment of her PNB
account.
There is no doubt that a judgment on the attachment
bond is a final and appealable order. As stated earlier, it
is, under normal course, included in the main judgment,
which in turn is final and appealable. Respondents admit
that they had erred in earlier characterizing the said

Provisional Remedies/Cases Full Text/Rule 5762

judgment as an interlocutory order. Still, SIDDCOR argues


that such earlier error is fatal, and that the Court of
Appeals abused its discretion in ruling on the motion on a
theory different from that urged on by respondents.
By no means could respondents be deemed as estopped
from changing their legal theory, since the rule on
estoppel applies to questions of fact and not questions of
law.78 Moreover, courts are empowered to decide cases
even if the parties raise legal rationales other than that
which would actually apply in the case. The basis of
whether respondents are entitled to immediate execution
arises from law, particularly Section 2(a), Rule 39 of the
Rules of Court, and not solely on whatever allegations
may be raised by the movant.
Thus, we find no grave abuse of discretion on the part of
the Court of Appeals, even though it allowed execution
pending appeal on a legal basis different from that
originally adduced by respondents. After all, the
reasoning ultimately employed by the appellate court is
correct, and it hardly would be judicious to require the
lower court to adhere to the movants erroneous
ratiocination and preclude the proper application of the
law.
We need not review in length the justification of the Court
of Appeals in allowing execution pending appeal. The
standard set under Section 2(a), Rule 39 merely requires
"good reasons," a "special order," and "due hearing." Due
hearing would not require a hearing in open court, but
simply the right to be heard, which SIDDCOR availed of
when it filed its opposition to the motion for immediate
execution. The Resolution dated 16 October 1998
satisfies the "special order" requirement, and it does
enumerate at length the "good reasons" for allowing
execution pending appeal. As to the appreciation of "good
reasons," we simply note that the advanced age alone of
Sandoval would have sufficiently justified execution
pending
appeal,
pursuant
to
the
well-settled
jurisprudential
rule.79 The
wrongfulness
of
the
attachment, and the length of time respondents have
been deprived of their money by reason of the wrongful
attachment further justifies execution pending appeal
under these circumstances.
WHEREFORE, the petitions are DISMISSED. The Temporary
Restraining Order issued in the Resolution dated 9 June
1999 is hereby LIFTED. The assailed Resolution of the
Court of Appeals Special Fourth Division dated 26 June
1998 is AFFIRMED with the MODIFICATIONS that the legal
interest on the award of actual damages should
commence from the date of the finality of the Decision of
the Court of Appeals in CA G.R. SP No. 39267 and that the
award of attorneys fees is in the amount of P500,000.
Costs against petitioners.
SO ORDERED.
G.R. No. 158271

April 8, 2008

CHINA
BANKING
CORPORATION, petitioner,
vs.
ASIAN
CONSTRUCTION
and
DEVELOPMENT
CORPORATION, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before
the
Court
is
a
Petition
for
Review
on Certiorari under Rule 45 of the Rules of Court filed by
petitioner China Banking Corporation (China Bank)
seeking to annul the Resolution 1 dated October 14, 2002
and the Resolution2dated May 16, 2003 of the Court of
Appeals (CA) in CA-G.R. CV No. 72175.

On April 12, 1999, alleging that ACDC failed to comply


with its obligations under the Omnibus Credit Line, China
Bank filed a Complaint4 for recovery of sum of money and
damages with prayer for the issuance of writ of
preliminary attachment before the Regional Trial Court
(RTC) of Makati, Branch 138, docketed as Civil Case No.
99-796. In the Complaint, China Bank claimed that ACDC,
after collecting and receiving the proceeds or receivables
from the various construction contracts and purportedly
holding them in trust for China Bank under several Deeds
of Assignment, misappropriated, converted, and used the
funds for its own purpose and benefit, instead of
remitting or delivering them to China Bank.5
On April 22, 1999, the RTC issued an Order 6 granting
China Banks prayer for writ of preliminary attachment.
Consequently, as shown in the Sheriffs Report 7 dated
June 14, 1999, the writ of preliminary attachment was
implemented levying personal properties of ACDC, i.e.,
vans, dump trucks, cement mixers, cargo trucks, utility
vehicles, machinery, equipment and office machines and
fixtures.
On March 27, 2000, upon motion of China Bank, the RTC
issued a Summary Judgment8 in favor of China Bank.
ACDC filed its Notice of Appeal9 dated April 24, 2000.
On June 15, 2000, China Bank filed a Motion to Take
Custody of Attached Properties with Motion for Grant of
Authority to Sell to the Branch Sheriff 10 with the RTC,
praying that it be allowed to take custody of ACDCs
properties for the purpose of selling them in an
auction.11 On June 20, 2000, ACDC filed its Opposition 12 to
the June 15, 2000 Motion arguing that there can be no
sale of the latters attached properties in the absence of a
final and executory judgment against ACDC.
On August 25, 2000, China Bank partially appealed the
Summary Judgment for not awarding interest on one of its
promissory notes.13 Records of the case were elevated to
the CA.14
On April 18, 2002, China Bank filed a Motion for Leave for
Grant of Authority to Sell Attached Properties 15 which the
CA denied in the herein assailed Resolution dated October
14, 2002.
According to the CA, selling the attached properties prior
to final judgment of the appealed case is premature and
contrary to the intent and purpose of preliminary
attachment for the following reasons: first, the records
reveal that the attached properties subject of the motion
are not perishable in nature; and second, while the sale of
the attached properties may serve the interest of China
Bank, it will not be so for ACDC. The CA recognized China
Banks apprehension that by the time a final judgment is
rendered, the attached properties would be worthless.
However, the CA also acknowledged that since ACDC is a
corporation engaged in a construction business, the
preservation of the properties is of paramount
importance; and that in the event that the decision of the
lower court is reversed and a final judgment rendered in
favor ACDC, great prejudice will result if the attached
properties were already sold.
China Bank filed a Motion for Reconsideration 16 which was
denied in the herein assailed CA Resolution 17 dated May
16, 2003.
Hence, the present petition for review on certiorari, on
the following ground:

The facts of the case:


On July 24, 1996, China Bank granted respondent Asian
Construction and Development Corporation (ACDC) an
Omnibus Credit Line in the amount of P90,000,000.00.3

CHRISSY SABELLA

THE
THE
and
THE
THE

HONORABLE COURT OF APPEALS RENDERED


QUESTIONED RESOLUTIONS (ANNEXES "A"
"B") IN A MANNER NOT IN ACCORD WITH
PROVISIONS OF SECTION 11, RULE 57 OF
RULES OF CIVIL PROCEDURE, AS IT SHELVED

Provisional Remedies/Cases Full Text/Rule 5763

THE DEMANDS OF EQUITY BY ARBITRARILY


DISALLOWING THE SALE OF THE ATTACHED
PROPERTIES, UPHOLDING ONLY THE INTEREST
OF RESPONDENT, IN UTTER PARTIALITY.18
Considering that the herein assailed CA Resolutions are
interlocutory in nature as they do not dispose of the case
completely but leave something to be done upon the
merits,19 the proper remedy should have been by way of
petition for certiorari under Rule 65, as provided for in
Section 1 (b), Rule 41 of the Rules of Court, as amended
by A.M. No. 07-7-12-SC,20 which provides:
Section 1. Subject of appeal. - An appeal may be
taken from a judgment or final order that
completely disposes of the case, or of a
particular matter therein when declared by these
Rules to be appealable.
No appeal may be taken from:
xxxx
(b) An interlocutory order;
xxxx
In any of the foregoing instances, the aggrieved
party may file an appropriate special civil
action as provided in Rule 65. (Emphasis
supplied).
The present petition for review on certiorari should have
been dismissed outright. However, in many instances, the
Court has treated a petition for review on certiorari under
Rule 45 as a petition for certiorari under Rule 65 of the
Rules of Court, such as in cases where the subject of the
recourse was one of jurisdiction, or the act complained of
was perpetrated by a court with grave abuse of discretion
amounting to lack or excess of jurisdiction. 21 The present
petition does not involve any issue on jurisdiction, neither
does it show that the CA committed grave abuse of
discretion in denying the motion to sell the attached
property.
Section 11, Rule 57 of the Rules of Court provides:
Sec. 11. When attached property may be sold
after levy on attachment and before entry of
judgment.-Whenever it shall be made to appear
to the court in which the action is pending, upon
hearing with notice to both parties, that the
property attached is perishable, or that the
interests of all the parties to the actionwill
be subserved by the sale thereof, the court may
order such property to be sold at public auction
in such manner as it may direct, and the
proceeds of such sale to be deposited in court to
abide the judgment in the action. (Emphasis
supplied)
Thus, an attached property may be sold after levy on
attachment and before entry of judgment whenever it
shall be made to appear to the court in which the action
is pending, upon hearing with notice to both parties,
that the attached property is perishable or that the
interests of all the parties to the action will be
subserved by the sale of the attached property.
In its Memorandum,22 China Bank argues that the CAs
notion of perishable property, which pertains only to
those goods which rot and decay and lose their value if
not speedily put to their intended use, 23 is a strict and
stringent interpretation that would betray the purpose for
which
the
preliminary
attachment
was
engrafted.24 CitingWitherspoon v. Cross,25 China Bank

CHRISSY SABELLA

invokes the definition of "perishable property" laid down


by the Supreme Court of California as goods which decay
and lose their value if not speedily put to their intended
use; but where the time contemplated is necessarily long,
the term may embrace property liable merely to material
depreciation in value from other causes than such decay.
As stated in the Sheriffs Report26 and Notices of Levy on
Properties,27 all of
ACDCs properties which were levied are personal
properties consisting of used vehicles, i.e., vans, dump
trucks, cement mixers, cargo trucks, utility vehicles,
machinery, equipment and office machines and fixtures.
China Bank insists that the attached properties, all placed
inside ACDCs stockyard located at Silang, Cavite and the
branch office in Mayamot, Antipolo City, are totally
exposed to natural elements and adverse weather
conditions.28 Thus, China Bank argues, that should the
attached properties be allowed to depreciate, perish or
rot while the main case is pending, the attached
properties will continue losing their worth thereby
rendering the rules on preliminary attachment nugatory.
The issue hinges on the determination whether the
vehicles, office machines and fixtures are "perishable
property" under Section 11, Rules 57 of the Rules of
Court, which is actually one of first impression. No local
jurisprudence or authoritative work has touched upon this
matter. This being so, an examination of foreign laws and
jurisprudence, particularly those of the United States
where some of our laws and rules were patterned after, is
in order.29
In Mossler Acceptance Co. v. Denmark,30 an order of the
lower court in directing the sale of attached properties,
consisting of 20 automobiles and 2 airplanes, was
reversed by the Supreme Court of Louisiana. In support of
its
contention
that
automobiles
are
perishable, Mossler offered testimony to the effect that
automobile tires tend to dry-rot in storage, batteries to
deteriorate, crankcases to become damaged, paint and
upholstery to fade, that generally automobiles tend to
depreciate while in storage.31 Rejecting these arguments,
the Supreme Court of Louisiana held that while there
might be a depreciation in the value of a car during
storage, depending largely on existing economic
conditions, there would be no material deterioration of
the car itself or any of its appurtenances if the car was
properly cared for, and therefore it could not be said that
automobiles were of a perishable nature within the
intendment of the statute, which could only be invoked
when the property attached and seized was of a
perishable nature.32
With respect to the determination of the question on
whether the attached office furniture, office equipment,
accessories and supplies are perishable properties, the
Supreme Court of Alabama in McCreery v. Berney
National Bank33 discussed the "perishable" nature of the
attached properties, consisting of shelving, stock of
drygoods and a complete set of store fixtures, consisting
of counters iron safe, desk and showcases, to be within
the meaning of "perishable" property under the Alabama
Code which authorizes a court, on motion of either party,
to order the sale, in advance of judgment, of perishable
property which had been levied on by a writ of
attachment.34
In McCreery, the Supreme Court of Alabama rejected the
argument that the sale of the attached property was void
because the term "perishable" property, as used in the
statute, meant only such property as contained in itself
the elements of speedy decay, such as fruits, fish, fresh
meats, etc.35 The Supreme Court of Alabama held that
whatever may be the character of the property, if the
court is satisfied that, either by reason of its perishable
nature, or because of the expense of keeping it until the

Provisional Remedies/Cases Full Text/Rule 5764

termination of the litigation, it will prove, or be likely to


prove, fruitless to the creditor, and that the purpose of its
original seizure will probably be frustrated, the sale of the
attached property is justified.
McCreery applied the doctrine in Millards Admrs. v.
Hall36 where the Supreme Court of Alabama held that an
attached property is perishable "if it is shown that, by
keeping the article, it will necessarily become, or is likely
to become, worthless to the creditor, and by consequence
to the debtor, then it is embraced by the statute. It
matters not, in our opinion, what the subject matter is. It
may be cotton bales, live stock, hardware provisions or
dry
goods."
Although
the
statute
under
which Millards was decided used the words "likely to
waste or be destroyed by keeping," instead of the word
"perishable," the reasons given for the construction
placed on the statute apply equally to the Alabama Code
which uses the term "perishable."37
In the Motion for Leave for Grant of Authority to Sell
Attached Properties38 filed before the CA, China Bank
alleged that the attached properties are placed in
locations where they are totally exposed to the natural
elements and adverse weather conditions since their
attachment in 1999;39 that as a result, the attached
properties have gravely deteriorated with corrosions
eating them up, with weeds germinating and growing
thereon and their engines and motors stock up; 40 and that
the same holds true to the office furniture, office
equipment, accessories and supplies.41 No evidence,
however, were submitted by China Bank to support and
substantiate these claims before the CA.
Notably, in the Petition filed before the Court, China Bank,
for the first time, included as annexes, 42 photographs of
the attached properties which were alleged to be recently
taken, in an attempt to convince the Court of the
deteriorated condition of the attached properties.
The determination on whether the attached vehicles are
properly cared for, and the burden to show that, by
keeping the attached office furniture, office equipment
and supplies, it will necessarily become, or is likely to
become, worthless to China Bank, and by consequence to
ACDC, are factual issues requiring reception of evidence
which
the
Court
cannot
do
in
a
petition
for certiorari. Factual issues are beyond the scope
of certioraribecause they do not involve any jurisdictional
issue.43
As a rule, only jurisdictional questions may be raised in a
petition for certiorari, including matters of grave abuse of
discretion
which
are
equivalent
to
lack
of
jurisdiction.44 The office of the writ of certiorari has been
reduced to the correction of defects of jurisdiction solely
and cannot legally be used for any other purpose.45

properties presented before the Court, for the first time


on appeal, cannot be considered by the Court.
China Bank argues that if the CA allowed the attached
properties to be sold, whatever monetary value which the
attached properties still have will be realized and saved
for both parties.49 China Bank further claims that should
ACDC prevail in the final judgment 50 of the collection suit,
ACDC can proceed with the bond posted by China
Bank.51 The Court finds said arguments to be specious
and misplaced.
Section 4, Rule 57 of the Rules of Court provides:
Section 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 the
damages which he may sustain by reason of the
attachment, if the court shall finally adjudge that
the applicant was not entitled thereto.
It is clear from the foregoing provision that the bond
posted by China Bank answers only for the payment of all
damages which ACDC may sustain if the court shall finally
adjudge that China Bank was not entitled to attachment.
The liability attaches if "the plaintiff is not entitled to the
attachment because the requirements entitling him to the
writ are wanting," or "if the plaintiff has no right to the
attachment because the facts stated in his affidavit, or
some of them are untrue."52 Clearly, ACDC can only claim
from the bond for all the damages which it may sustain
by reason of the attachment and not because of the sale
of the attached properties prior to final judgment.
Sale of attached property before final judgment is an
equitable remedy provided for the convenience of the
parties and preservation of the property. 53 To repeat, the
Court finds that the issue of whether the sale of attached
properties is for the convenience of the parties and that
the interests of all the parties will be subserved by the
said sale is a question of fact. Again, the foregoing issue
can only be resolved upon examination of the evidence
presented by both parties which the Court cannot do in a
petition for certiorari under Rule 65 of the Rules of Court.
WHEREFORE, the petition is DENIED. The assailed
Resolutions of the Court of Appeals dated October 14,
2002 and May 16, 2003 in CA-G.R. CV No. 72175 are
hereby AFFIRMED.
SO ORDERED.
G.R. No. 203530

Certiorari is truly an extraordinary remedy and, in this


jurisdiction, its use is restricted to truly extraordinary
cases - cases in which the action of the inferior court is
wholly void; where any further steps in the case would
result in a waste of time and money and would produce
no result whatever; where the parties, or their privies,
would be utterly deceived; where a final judgment or
decree would be nought but a snare and delusion,
deciding
nothing, protecting
nobody,
a
judicial
pretension, a recorded falsehood, a standing menace. It is
only to avoid such results as these that a writ of certiorari
is issuable; and even here an appeal will lie if the
aggrieved party prefers to prosecute it.46
Moreover, the Court held in JAM Transportation Co., Inc. v.
Flores47 that it is well-settled, too well-settled to require a
citation of jurisprudence, that this Court does not make
findings of facts specially on evidence raised for the first
time on appeal.48 The Court will not make an exception in
the case at bar. Hence, the photographs of the attached

CHRISSY SABELLA

April 13, 2015

LUZON DEVELOPMENT BANK, TOMAS CLEMENTE,


JR.,
and
OSCAR
RAMIREZ, Petitioners,
vs.
ERLINDA KRISHNAN, Respondent.
DECISION
PERALTA J.:
This is a Petition for Review on Certiorari under Rule 45 of
the 1997 Rules of Civil Procedure praying for the
annulment of the Decision1 dated March 27, 2012 and
Resolution2 dated September 11, 2012 of the Court of
Appeals (CA) in CA-G.R. SP No. 120664, which affirmed
the Orders dated September 24, 2010 and May 26, 2011,
respectively, of Branch 30, Regional Trial Court (RTC)
-Manila.

Provisional Remedies/Cases Full Text/Rule 5765

The factual antecedents, as found by the CA, are as


follows:
Petitioners Luzon Development Bank, Tomas Clemente,
and Oscar Ramirez (hereafter petitioners) are the
respondents in the complaint for Collection of Sum of
Money and Damages filed by respondent Erlinda
Khrishnan (hereafter respondent Erlinda) on February 7,
2001. Respondent Erlinda claimed that she is a client of
respondent bank wherein she maintained several
accounts including time deposits. On several occasions,
when respondent Erlinda presented her Time Deposits
Certificates amounting to P28,597,472.70 for payment
because they have become due, petitioners refused to
honor them for the reason that they were fraudulent.
Respondent Erlinda likewise applied for a Preliminary Writ
of Attachment which the RTC granted on February 27,
2001.
By virtue of the writ, petitioner banks accounts in BPI
Family Bank, Calamba, Laguna in the amount
ofP28,597,472.70
and
its
account
amounting
to P49,000,000.00 in the Central Bank were garnished.
On March 9, 2001, petitioners filed an urgent ex-parte
Motion to Recall Quash and/or Lift Attachment or
Garnishment (in excess of amounts in the writ).
Respondent Erlinda opposed the motion.
On August 15, 2001, petitioners filed an Omnibus Motion
seeking the substitution of their garnished account with
government securities and the immediate resolution of
their motion to discharge attachment and setting the
motion for hearing, which respondent Erlinda opposed.
On May 22, 2002, the RTC resolved the pending incidents
and required the petitioners to justify their motion to
discharge the attachment. During pre-trial on May 23,
2002, respondents requested additional time to file a
supplemental motion to justify their earlier motions which
was granted and gave petitioners ten (10) days from
receipt within which to comment or opposed (sic) it.
On September 8, 2003, the RTC issued an order lifting the
attachment to which respondent Erlinda filed a motion for
reconsideration. Respondent Erlinda also filed a Motion
for Inhibition. On December 18, 2003, the RTC denied the
motion for reconsideration but granted the motion for
inhibition. The said Order was questioned by respondent
Erlinda by way of Petition for Certiorari before the 7th
Division which rendered a decision on November 15,
2006, the dispositive portion of which reads as follows:
"WHEREFORE,
GRANTED.

the

PETITION

FOR

CERTIORARI

is

THE ORDERS dated September 8, 2003, and December


18, 2003 are NULLIFIED and SET ASIDE.
The private respondents, as defendants in Civil Case No.
01-100046 entitled Erlinda C. Krishnan v. Luzon
Development Bank, et al., are ORDERED to file a counter
bond in accordance with Sec. 12, Rule 57, 1997 Rules of
Civil Procedure, within 10 days from the finality of this
decision; otherwise, the REGIONAL TRIAL COURT, BRANCH
36, in Manila shall immediately reinstate the writ of
attachment issued and implemented in Civil Case No. 01100046.
Costs of suit to be paid by the respondents.

Petitioners subsequent motion for reconsideration was


denied. Thereafter, their petition and motion for
reconsideration before the Supreme Court were likewise
denied.
On May 09, 2008, respondent judge issued an Order
directing respondent Erlinda to file a new attachment
bond in the amount of P35,000,000.00 and petitioners to
file a counterbond within ten days from notice of the filing
and approval of the bond of respondent Erlinda.
Petitioners moved for the reconsideration of the said
Order which respondent judge denied and granted a
period of fifteen days for respondent Erlinda to file an
attachment bond.
Respondent Erlinda filed her attachment bond on June 25,
2009 in the amount of P35,000,000.00 through Visayan
Surety and Insurance Corporation which was approved by
respondent on July 7, 2009.
Meanwhile, on July 3, 2009, petitioners filed an Omnibus
Motion praying that a hearing be held to determine the
sufficiency of the attachment bond and they be allowed
to deposit Certificates of Title of real property, and the
issuance of the writ of attachment be held in abeyance.
On July 20, 2009, petitioners filed a motion for extension
of time to comply and/or file the appropriate pleading and
to hold in abeyance the reinstatement of the writ of
attachment.
On January 28, 2010, petitioners filed a motion to admit
bank property in lieu of counter bond which was opposed
by respondent Erlinda.1avvphi1
On September 24, 2010, respondent judge denied
petitioners motion in the assailed Order. Their
subsequent motion for reconsideration was denied on
May 26, 2011.
On June 27, 2011, respondent judge issued an Order
reinstating the Writ of Attachment dated March 1, 2001
for failure of petitioners to file the required counter bond.
Respondent judge also issued an amended Reinstated
Writ of Attachment directing respondent Sheriff Oscar L.
Rojas (hereafter respondent Sheriff) to attach the real
estate or personal properties of petitioners in the amount
of P28,597,472.70. On June 30, 2011, the sheriff served
the Notice of Garnishment and the Amended Reinstated
Writ of Attachment.
On July 4, 2011, petitioners filed an urgent motion to
recall, suspend or hold in abeyance and re-examination of
the amended reinstated writ of preliminary attachment of
June 27, 2011 which was opposed by respondent Erlinda.
On July 19, 2011, respondent Sheriff issued a Sheriffs
Partial Report. Thereafter, petitioners filed this petition for
certiorari x x x.
In a Decision dated March 27, 2012,the CA dismissed
petitioners certiorari petition and affirmed the Orders of
the RTC reinstating the Writ of Attachment for failure of
petitioners to file the required counter-bond. The CA ruled
that the RTC judge committed no grave abuse of
discretion in denying petitioners motion to admit bank
property in lieu of counter-bond, thus, it held:
WHEREFORE, premises considered, the petition is
DISMISSED and accordingly, DENIED DUE COURSE. The
Orders dated September 24, 2010 and May 26, 2011 are
hereby AFFIRMED. SO ORDERED.3

SO ORDERED.
Petitioners filed a motion for reconsideration against said
decision, but the same was denied in a Resolution dated
September 11, 2012.

CHRISSY SABELLA

Provisional Remedies/Cases Full Text/Rule 5766

Hence, petitioners filed this present petition raising the


following grounds:
IN THE FIRST ASSAILED ORDER THE HONORABLE COURT
OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION
WHEN IT MISCONSTRUED AND FAILED TO RULE ON THE
CORRECT LEGAL ISSUE PRESENTED IN THE PETITION FOR
CERTIORARI.4
IN THE SECOND ASSAILED ORDER THE HONORABLE
COURT OF APPEALS AGAIN ACTED WITH GRAVE ABUSE OF
DISCRETION WHEN IT FAILED TO PRESENT ANY LEGAL
BASIS FOR STATING THAT RULE 39 OF THE REVISED
RULES OF COURT DOES NOT APPLY.5
Simply stated, the issue for our resolution is whether the
CA erred in affirming the RTCs decision which denied
petitioners motion praying that bank property be
deposited in lieu of cash or a counter-bond.
In their petition, petitioners contend that it has the option
to deposit real property, in lieu of cash or a counter-bond,
to secure any contingent lien on its property in the event
respondent wins the case. They argue that Section 2 of
Rule 57 only mentions the term "deposit," thus, it cannot
only be confined or construed to refer to cash.
We rule in the negative.
Section 2, Rule 57 of the Rules of Court explicitly states
that "[a]n order of attachment may be issued either ex
parte or upon motion with notice and hearing by the court
in which the action is pending, or by the Court of Appeals
or the Supreme Court, and must require the sheriff of the
court to attach so much of the property in the Philippines
of the party against whom it is issued, not exempt from
execution, as may be sufficient to satisfy the applicants
demand, unless such party makes deposit or gives a bond
as hereinafter provided in an amount equal to that fixed
in the order, which may be the amount sufficient to
satisfy the applicants demand or the value of the
property to be attached as stated by the applicant,
exclusive of costs."
Section 5 of the same Rule likewise states that "[t]he
sheriff enforcing the writ shall without delay and with all
reasonable diligence attach, to await judgment and
execution in the action, only so much of the property in
the Philippines of the party against whom the writ is
issued, not exempt from execution, as may be sufficient
to satisfy the applicants demand, unless the former
makes a deposit with the court from which the writ is
issued, or gives a counter-bond executed to the applicant,
in an amount equal to the bond fixed by the court in the
order of attachment or to the value of the property to be
attached, exclusive of costs."
From the foregoing, it is evidently clear that once the writ
of attachment has been issued, the only remedy of the
petitioners in lifting the same is through a cash deposit or
the filing of the counter-bond. Thus, the Court holds that
petitioners argument that it has the option to deposit
real property instead of depositing cash or filing a
counter-bond to discharge the attachment or stay the
implementation thereof is unmeritorious.
In fact, in Security Pacific Assurance Corporation v. TriaInfante,6 we held that one of the ways to secure the
discharge of an attachment is for the party whose
property has been attached or a person appearing on his
behalf, to post a counter bond or make the requisite cash
deposit in an amount equal to that fixed by the court in
the order of attachment.7
Apropos, the trial court aptly ruled that while it is true
that the word deposit cannot only be confined or
construed to refer to cash, a broader interpretation

CHRISSY SABELLA

thereof is not justified in the present case for the reason


that a party seeking a stay of the attachment under
Section 5 is required to make a deposit in an amount
equal to the bond fixed by the court in the order of
attachment or to the value of the property to be
attached. The proximate relation of the word "deposit"
and "amount" is unmistakable in Section 5 of Rule 57.
Plainly, in construing said words, it can be safely
concluded that Section 5 requires the deposit of money
as the word "amount" commonly refers to or is regularly
associated with a sum of money.
In Alcazar v. Arante,8 we held that in construing words
and phrases used in a statute, the general rule is that, in
the absence of legislative intent to the contrary, they
should be given their plain, ordinary and common usage
meaning. The words should be read and considered in
their natural, ordinary, commonly-accepted and most
obvious signification, according to good and approved
usage and without resorting to forced or subtle
construction. Words are presumed to have been
employed by the lawmaker in their ordinary and common
use and acceptation.9 Thus, petitioners should not give a
special or technical interpretation to a word which is
otherwise construed in its ordinary sense by the law and
broaden the signification of the term "deposit" to include
that of real properties.
WHEREFORE, premises considered, the instant petit10n is
DENIED. The Decision dated March 27, 2012 and
Resolution dated September 11, 2012 of the Court of
Appeals are hereby AFFIRMED.
SO ORDERED.
A.M. No. RTJ-06-1999
December 8, 2010
(Formerly OCA IPI No. 03-1903-RTJ)
BANGKO SENTRAL NG PILIPINAS, Complainant,
vs.
Executive Judge ENRICO A. LANZANAS, Regional
Trial Court, Branch 7, Manila, Clerk of Court
JENNIFER DELA CRUZ-BUENDIA and Deputy Sheriff
CARMELO V. CACHERO, Regional Trial Court, Office
of the Clerk of Court, Manila, Respondents.
DECISION
BRION, J.:
Before the Court is the administrative complaint
instituted, on November 12, 2003,1 by the Bangko Sentral
ng Pilipinas (BSP) against Executive Judge Enrico A.
Lanzanas,2 Regional Trial Court (RTC), Branch 7, Manila;
Clerk of Court Jennifer dela Cruz-Buendia and Sheriff
Carmelo V. Cachero, RTC, Office of the Clerk of Court
(OCC), for "their culpable violation of the duties of their
office when they usurped the functions of the Presiding
Judge of RTC-Manila, Br. 12 Pairing Judge Hon. Cesar
Solis[,] by allowing the withdrawal and release from the
custody of the court garnished funds in the total amount
of PESOS: NINETY-SEVEN MILLION THREE HUNDRED
EIGHTY-EIGHT THOUSAND FOUR HUNDRED SIXTY-EIGHT &
35/100
(P97,388,468.35)
to
Philippine
Bank
of
Communications (PBCOM) and its counsel of record who
are not parties to the case."3
Specifically, the BSP asked that the respondents be made
liable, as follows:
1. Cachero
a. fraudulently causing the release of
the P97,388,468.35 from the custody of
the RTC, Manila, Branch 12, in Civil Case
No. 99-95993;

Provisional Remedies/Cases Full Text/Rule 5767

b. usurpation of authority;
c. malversation of public funds;
d. causing
government;

undue

e. disclosing or
information; and

injury

using

to

the

confidential

f. falsification of public records.

voucher, dated May 14, 2003, 7 in the amount


of P82,634,281.23. The amount was covered by LBP
Check No. 175255, also dated May 14, 2003, and cosigned by Judge Lanzanas and dela Cruz-Buendia. The
voucher named PBCOM as the claimant, and receipt of
the money was acknowledged by Atty. Cesar D. Ramirez,
PBCOMs Vice-President for the Legal Division.
The BSP noted that the disbursement voucher contained
a certification which states:
CERTIFIED: Adequate available funds/budgetary allotment
in the amount of P(illegible) expenditure properly
certified; supported by documents marked (x) per
checklist on back hereof[.]

2. Dela Cruz-Buendia
a. usurpation of judicial functions;
b. malversation of public funds;
c. violation of her duties as clerk of
court;
d. causing
government;

undue

e. disclosing or
information; and

injury

using

to

the

confidential

f. falsification of public records.


3. Judge Lanzanas for gross negligence in the
performance of his duties.
The Antecedents
The Office of the Court Administrator (OCA) conducted an
investigation of the complaint and submitted a
report/recommendation to then Chief Justice Artemio V.
Panganiban on March 27, 2006.4 The facts, based on the
report and the records, are summarized below.
The BSP is the plaintiff in Civil Case No. 99-95993,
entitled Bangko Sentral ng Pilipinas v. Orient Commercial
Banking Corporation, et al. The BSP alleged that, on
January 19, 2000, Judge Rosmari D. Carandang (presently
Court of Appeals Associate Justice) of the RTC, Branch 12,
Manila, issued a Writ of Attachment5 against the assets
and properties of the defendants, Orient Commercial
Banking Corporation, Jose C. Go, Vicente C. Go, Gotesco
Properties, Inc. and Go Tong Electrical Supply, Inc. The
writ was served, among others, on the various malls
owned by the defendants, resulting in the garnishment of
the rentals of the tenants. By order of the court, the
corresponding check payments of the mall tenants were
deposited to the Land Bank of the Philippines (LBP)
account of the RTC, Manila, under the management and
custody of dela Cruz-Buendia.
Defendant Jose C. Go and his wife Elvy T. Go are also the
defendants in Civil Case No. 01-101190, filed by PBCOM,
which was pending before the RTC, Branch 42, Manila.
On May 23, 2003, when the BSPs counsel, Fe B.
Macalino, inquired into the status of Civil Case No. 9995993, she was allegedly informed by the personnel of
the RTC, Branch 12, Manila, that portions of the subject
funds (P85,631,690.38) had been withdrawn and released
to PBCOM on the basis of a Notice to Deliver Garnished
Amount, dated May 12, 2003, served by Cachero, 6 based
on the writ of execution issued by Judge Guillermo G.
Purganan of the RTC, Branch 42, Manila, in Civil Case No.
01-101190, Philippine Bank of Communications v.
Spouses Jose C. Go and Elvy T. Go.
In compliance with the notice, Lilia C. Santiago, then
cashier of the RTC, Manila, prepared a disbursement

CHRISSY SABELLA

The BSP questioned the certification, claiming that as of


the date of the disbursement voucher (May 14, 2003), the
records of the case had been brought to the Court of
Appeals on April 22, 2003, in view of the defendants
appeal in Civil Case No. 01-101190.8
On May 15, 2003, Cachero, issued notice to deliver
garnished amount of P11,756,777.97 in favor of PBCOMs
lawyer, Atty. Crisostomo M. Delos Reyes, in Civil Case No.
01-101190. The notice, like the first one, was addressed
to the Clerk of Court and Ex-Officio Sheriff of the RTC,
Manila (Dela Cruz-Buendia), with a notation that the
"garnishment was effected on the deposit made in Civil
Case No. 99-95993."9
On
May
16,
2003,
LBP
Check
No.
175239
for P11,344,990.74, signed by Judge Lanzanas, was
issued in the name of PBCOM. Atty. delos Reyes
acknowledged receipt of the check.10
On the same day, May 16, 2003, dela Cruz-Buendia made
another withdrawal from the garnished funds for the
amount of P29,491.94, covered by LBP Check No. 175296
dated June 4, 2003, and signed by Judge Lanzanas and
dela Cruz-Buendia. The payee was the "Clerk of Court
RTC-Manila on General Fund." The BSP claimed that on
the official receipt covering the payment of the
commission, Atty. delos Reyes was named as the payor,
although the receipt referred to LBP Check No. 175296
which was issued by Judge Lanzanas and dela CruzBuendia. The BSP also claimed that the receipt was
falsified by making it appear that Atty. Delos Reyes was
the payee when he did not pay any amount as
beneficiary of the award.
The BSP further alleged that on May 14, 2003, Santiago
issued another disbursement voucher,11 amounting
toP214,179.22, representing withdrawal of commission on
deposit for the garnished amount of P85,631,690.38, in
favor of PBCOM. The withdrawal was made through LBP
Check No. 175292 dated June 4, 2003. On June 5, 2003, a
certain Rodrigo Tan was named payor in the official
receipt which indicated the mode of payment to be LBP
Check No. 175292 dated June 4, 2003.12
On June 5, 2003, the office of dela Cruz-Buendia again
issued a disbursement voucher, for P1,712,713.00,
allegedly representing withdrawal of the Sheriff
Percentage of Collections of the Garnished Account
ofP85,631,690.38,13 which was covered by LBP Check No.
175292 dated June 4, 2003. Official receipt no. 18269397
bore the name of Tan as payor.14
Also on June 5, 2003, dela Cruz-Buendia issued another
disbursement
voucher,
for P428,178.45,
allegedly
representing the withdrawal of the Sheriff Percentage of
Collection, and covered by LBP Check No. 175293 dated
June 4, 2003,15 as indicated in the official receipt which,
again, made Tan as the payor.16

Provisional Remedies/Cases Full Text/Rule 5768

The BSP wondered what the connection of Tan was with


the unauthorized release of its garnished funds
considering that Tan was not a party to the PBCOM case;
neither was he a party to the BSP case.
The BSP protested that the withdrawals from the
garnished rental payments in Civil Case No. 99-95993
were irregular as a court has no power to lift a writ of
preliminary attachment by a co-equal court. It stressed
that the RTC, Manila, Branch 42, no longer had jurisdiction
over the case involving PBCOM and the Spouses Go
because the case records were transmitted to the Court
of Appeals on March 7, 2003.17
The
Respondents
Judge Lanzanas

Comments

On January 28, 2004, Judge Lanzanas filed his


comment18 to the complaint. He strongly denied that he
had committed any improper or illegal act in connection
with the withdrawal of the funds in dispute.
He claimed that the checks he signed were personally
brought to his office by dela Cruz-Buendia and Cachero,
but he had nothing to do with the preparation of the
checks, vouchers and other supporting documents. He
allegedly signed the checks as a matter of duty and out
of respect for the writ of execution issued by Judge
Purganan of the RTC, Manila, Branch 42. He saw nothing
in the checks or in the supporting documents which
would invite suspicion that something was wrong. He
signed the checks in a ministerial capacity as executive
judge, especially as he was not told that there was any
controversy regarding the amount to be paid to PBCOM.
Additionally, Judge Lanzanas explained that the amount
released to PBCOM is still intact, and a Manifestation with
Urgent Motion to Return and Restrain 19 had already been
filed by the BSP to recover the amount. He stressed that
the manifestation did not include his office as respondent.
Lastly, he pointed out that he was also a respondent in a
similar complaint, with the same facts and issues, filed by
Gotesco Properties, Inc., through Imelda P. delos Santos,
docketed as OCA IPI No. 03-1809-RTJ.
Clerk of Court Dela Cruz-Buendia
Dela Cruz-Buendia filed her comment on March 29,
2004.20 She explained that on May 12, 2003, the OCC,
RTC, Manila, was served with a copy of a Notice to Deliver
Garnished Amount for P85,631,690.38, signed by
Cachero. Attached to the notice was the order of Judge
Purganan of the RTC, Manila, Branch 42, granting
PBCOMs Motion for Execution Pending Appeal and the
corresponding writ of execution. On May 15, 2003, a
second
Notice
to
Deliver
Garnished
Amount
for P11,344,990.74 was served on the OCC.
Finding the two notices and their supporting papers to be
in order, dela Cruz-Buendia referred the documents to the
OCC cashier for proper disposition. The cashier then
prepared the check vouchers, one for P82,634,281.23,
net of the legal fees paid by PBCOM, and the other
for P11,344,990.74, after having been satisfied that
money deposits did exist.
Thereafter, and in accordance with the OCC standard
operating procedures, the checks, including the
supporting attachments, were brought to the Office of
Judge Lanzanas for his approval and signature. After
Judge Lanzanas signed the checks, they were brought
back to the OCC for release.
Dela Cruz-Buendia argued that her act of preparing the
two (2) checks, as well as other related acts, cannot be
the basis of the charges BSP brought against her. She
claimed that she acted in good faith in preparing the

CHRISSY SABELLA

checks for the approval and signature of Judge Lanzanas,


considering, as she alleged, that all the documents that
were submitted to the OCC were complete and in order;
she was mandated to comply with the writ of execution, a
court order which on its face was regular, having been
issued by competent authority. In signing the checks in
question, she strictly observed the procedure prescribed
under the 2002 Revised Manual for Clerks of Court. She
argued that for this reason, she could not be made liable
for usurpation of judicial functions, nor for violation of her
official duties as clerk of court.
Dela Cruz-Buendia further alleged that the release of the
questioned funds to PBCOM was done in line with her
ministerial duty as clerk of court. Therefore, the release
was in good faith, especially after she had been assured
that the amount was garnished and identified as
belonging to parties against whom the notice of
garnishment was enforced.
Dela Cruz-Buendia likewise denied BSPs charge of
malversation of public funds as the bank had not shown
that she had appropriated or misappropriated, nor had
she consented to or permitted any other person to take
the garnished funds in question, even by BSPs admission
that all the amounts covered by the issued checks were
all released to PBCOM. She stressed that she did not
conspire with the sheriff and the executive judge in
committing the acts complained of as it was clearly
shown that she had no participation whatsoever in the
disposition of Civil Case No. 99-95993, except to obey
lawful orders of the court.
The respondent clerk of court likewise denied the charge
of disclosing or using confidential information, claiming
that the information regarding the deposit of the
garnished funds in the OCC was not confidential as it was
furnished to the sheriff, upon his request, by the previous
clerk of court. Neither could she be made liable for
falsification of public records for certifying documents; it
was her ministerial duty to sign these documents
considering that they had been checked and initialed by
court personnel.
Sheriff Cachero
On March 8, 2004, the respondent sheriff submitted his
comment.21 Like the clerk of court, he professed good
faith for his role in the implementation of the writ of
execution issued by Judge Purganan in Civil Case No. 01101190. He added that it was his ministerial duty to see
to the writs implementation. A writ of execution is
enforceable even pending appeal, conditioned on the
posting of a surety bond to answer for damages in the
event of a reversal by the appellate court. In this
instance, there was in fact a surety bond. Additionally,
Cachero contended that the compromise agreement
entered into by the BSP and the Orient Commercial
Banking Corporation, and the claim or lien made by
PBCOM on the interests of Jose C. Go and Elvy T. Go on
the garnished deposits indicated that the Gotesco group
of companies funds and Jose C. Gos funds referred to
one and the same garnished amount, thereby validating
PBCOMs claim.
The OCA Report and Related Incidents
In a Memorandum dated March 24, 2006, 22 the OCA
recommended that:
1. The complaint be re-docketed as a regular
administrative matter;
2. The charges against Judge Enrico Lanzanas be
dismissed for insufficiency of evidence;

Provisional Remedies/Cases Full Text/Rule 5769

3. Respondent Deputy Sheriff Carmelo V.


Cachero be suspended for six (6) months for
simple misconduct;
4. Respondent Clerk of Court Jennifer H. dela
Cruz-Buendia be penalized with a fine
of P10,000.00 for simple neglect of duty; and
5. Both Cachero and dela Cruz-Buendia be
sternly warned against the commission of a
similar offense.

inadvertence was not gross enough to merit sanction as


he had no participation in the preparation of the checks;
he merely signed them in a ministerial capacity as
executive judge, but (6) the same conclusion cannot be
said of his co-respondents who are claiming good faith
and compliance with the procedure, set forth in the Rules
of Court, in the withdrawal and subsequent release of the
subject funds.
Rule 57, Section 7(e) of the Rules of Court provides:
xxxx

On June 7, 2006, 23 the Court resolved to: (1) re-docket


the complaint as a regular administrative matter; (2)
dismiss the charge against Judge Lanzanas for
insufficiency of evidence; and (3) require the parties to
manifest whether they were willing to submit the case for
decision.
On July 17, 2006, Cachero filed a Manifestation before the
Court,24 stating that the amount released to PBCOM in
Civil
Case
No.
01-101190,
in
the
amount
of P103,184,629.44, was returned to the RTC, Manila,
Branch 12, by virtue of an order of the same Court; 25 the
BSP and the Ever Gotesco Resources Holdings, Inc.
withdrew the entire amount on the strength of another
court order dated January 14, 200426 and after the release
of the amount, this Court considered closed and
terminated the administrative complaint filed by the
Gotesco Properties, Inc. in OCA IPI No. 03-1809-RTJ.
Cachero prayed that the present complaint be dismissed.
In a parallel move, dela Cruz-Buendia filed, on September
21, 2006, a Manifestation, Supplemental Comment and
Partial Motion for Reconsideration.27 She reiterated that
the acts complained of in this case were ministerial and,
for this reason, she could not look beyond the face of the
issued writ and the subsequent notices of garnishment,
and determine the legality or regularity of the documents.
She argued that there is no particular law or rule which
categorically prohibits the garnishment of property
in custodia legis. In any event, she maintained that it was
Cachero who effected the writ of execution and the
garnishment.
In her partial motion for reconsideration, dela CruzBuendia called attention to the Courts Resolution dated
June 7, 2006,28 stating that it dismissed all the
administrative charges against Judge Lanzanas. She
posited that such dismissal should have carried with it
also the dismissal of the charges against her because she
committed the acts complained of in the performance of
ministerial duty the same justification given by Judge
Lanzanas in signing the checks.

If the property sought to be attached is in custodia legis,


a copy of the writ of attachment shall be filed with the
proper court or quasi-judicial agency, and notice of the
attachment served upon the custodian of such property.
No evidence or record in the present case exists showing
that the above provision had been complied with when
Cachero asked for the release of the garnished funds. No
copy of the writ of attachment was filed with the proper
court, the RTC, Branch 12, Manila, in Civil Case No. 9995993. The disputed funds were clearly under the
custody of Branch 12, not Branch 42.
As the OCA noted, the respondent sheriff should have
known that the funds he garnished were in custodia
legisand do not belong to the defendants in Civil Case No.
01-101190, considering that he (Cachero) himself was
among a group of sheriffs deputized to implement the
writ of garnishment issued by the RTC, Branch 12, Manila,
in Civil Case No. 99-95993.
Dela Cruz-Buendia, on the other hand, cannot claim that
she was not aware that the garnished amounts do not
belong to Spouses Jose C. Go and Elvy T. Go. The notice of
garnishment, dated July 23, 2001, 30 issued by Cachero
was addressed to the Clerk of Court, RTC, Manila. The
notice covered the goods, effects, money and other
properties belonging to Spouses Jose C. Go and Elvy T. Go
in her possession or control that were deposited under
Civil Case No. 99-95993. The reply, dated July 27, 2001,
of then Clerk of Court31 Jesusa P. Maningas reads:
In reply to the Notice of Garnishment received by this
office on July 26, 2001 pursuant to the Writ of Attachment
in Civil Case No. 01-101190, entitled "Philippine Bank of
Communication versus Spouses Jose C. Go and Elvy T.
Go," please be informed that this office is in receipt of an
order from the Hon. [Rosmari] D. Carandang dated
February 7, 2000 in connection with Civil Case No. 9995993 entitled "Bangko Sentral ng Pilipinas versus Orient
Commercial Banking Corporation, et al.," (Please see
attached copy of the said Order and Writ of Attachment).

The Courts Ruling


In our Resolution of June 7, 2006,29 we made the following
observations: (1) the present administrative matter
involves the alleged irregular withdrawals of funds
in custodia legis; (2) the funds consist of the garnished
amounts representing rental payments from lessees of
defendants Orient Commercial Banking Corporation, et al.
in Civil Case No. 99-95993 (Bangko Sentral ng Pilipinas v.
Orient Commercial Banking Corporation, et al.) held
in custodia legis by the RTC, Branch 12, Manila, by virtue
of a writ of attachment; (3) said garnished amounts,
totaling aboutP85M, were subsequently released in favor
of the PBCOM in Civil Case No. 01-101190 (PBCOM v. Jose
C. Go, et al.), pursuant to a writ of execution pending
appeal issued by Judge Guillermo Purganan, RTC, Branch
42, Manila; (4) clearly, said release was irregular as the
garnished amounts were under the custody of the RTC,
Branch 12, Manila, pursuant to the writ of attachment
earlier issued by Judge Carandang of the same court
against the defendants in Civil Case No. 99-95993, which
cannot be interfered with without the permission of the
proper court (Branch 12); (5) respondent Judge Lanzanas

CHRISSY SABELLA

Judge
Carandangs
order,
dated
February
2000,32 mentioned in the above reply states:

7,

The Clerk of Court, acting as ex-officio Sheriff of Regional


Trial Court of Manila, is hereby directed that before any
rental payment from the lessees of any one or all of the
above-named defendants shall be received in accordance
with the Notice of Garnishment pursuant to the Writ of
Attachment issued by this Court on January 19, 2000 x x
x the said payment should be referred first to this Court
for the issuance of appropriate Order to Receive Payment
for the Courts proper control and accounting of the
amount garnished; payments shall be turned over by the
Branch Sheriff of this Court to your office for issuance of
appropriate official receipt.
Without doubt, the funds that were released by the OCC,
at the time the Notices to Deliver Garnished Amount were
filed by Cachero, were in custodia legis, by virtue of the
Writ of Attachment issued by Judge Carandang, RTC,

Provisional Remedies/Cases Full Text/Rule 5770

Branch 12, Manila, against the defendants in Civil Case


No. 99-95993.
In Traders Royal Bank v. Intermediate Appellate
Court,33 we declared that "property in the custody of the
law cannot be interfered with without the custody of the
proper court and properly legally attached is property
incustodia legis."
Sheriff Cachero cannot feign ignorance of the true nature
of the funds he garnished. Cachero himself was
deputized, among other sheriffs, to implement the writ of
garnishment issued by Judge Carandang of the RTC,
Branch 12, Manila, in Civil Case No. 99-95993, a case
where Jose Go was one among several defendants, unlike
in Civil Case No. 01-101190 where only he and his wife
Elvy were the defendants. The garnished funds, therefore,
in Civil Case No. 99-95993 cannot be said to belong to the
spouses Go or, at the very least, do not belong to them
solely. Further, Cachero received official notification that
the funds in question were already the subject of a notice
of garnishment issued, on January 19, 2000, by Judge
Carandang in Civil Case No. 99-95993, as contained in
the Order of the Judge,34 attached to the reply35 of RTC
Clerk of Court Jesusa P. Maningas to Cacheros notice of
garnishment.36
Cachero erred in garnishing the funds in dispute, in his
haste to enforce the writ of execution issued by Judge
Purganan of the RTC, Branch 42, Manila, in Civil Case No.
01-101190, for reasons only known to him. He forgot that
the very same funds were under the custody of another
court, the RTC, Branch 12, Manila, which earlier issued a
writ of attachment over the same funds. He cannot now
be heard that he was just performing a ministerial
function. He knew or should have known about the true
character of the funds he garnished. As the OCA noted,
he was among a group of sheriffs who were deputized to
implement the writ of attachment issued by Judge
Carandang of the RTC, Branch 12, Manila.
For garnishing funds in custodia legis, in violation of the
Rules of Court and jurisprudence, Cachero deserves to be
sanctioned.
He
exhibited
incompetence
in
the
performance of his duties. Under the Civil Service
rules,37inefficiency and incompetence are punishable with
suspension for six (6) months and one (1) day to one (1)
year for the first offense, and dismissal for the second
offense. Considering that several incidents are involved
and the nature of the infractions, i.e., on a matter so
basic for a sheriff to miss, we deem a penalty in the
middle of the range, or nine (9) months suspension, to be
the appropriate penalty.
Clerk of Court and Ex-Officio Sheriff dela Cruz-Buendia
likewise cannot avoid liability by hiding behind the mantle
of "performance of a ministerial duty." She cannot merely
say that she found the supporting papers for the release
of the funds to be in order. Like Cachero, she knew or
should have known that the funds were under the
custody of Judge Carandang of the RTC, Branch 12,
Manila, who, as early as February 7, 2000, issued an
order38 directing the Clerk of Court, RTC, Manila, to refer
to the court all payments from lessees of the defendants
in Civil Case No. 99-95993 to the court, for its proper
control. If as she said, her 15 years of service in the
judiciary have been marked by competence on her
part,39 we wonder why she did not check the background
of the documents presented to her, especially in light of
Judge Carandangs order and the big amounts
involved.1avvphi1
Dela Cruz-Buendia simply overlooked the need for her to
carefully examine the papers brought to her by
Cachero.1avvphi1 She should have exercised prudence
before taking action on the papers. Funds in custodia
legis pass through her office en route to safekeeping (in
depository banks) and for purpose of release. We, thus,

CHRISSY SABELLA

find her liable for neglect in the performance of her


duties. Under the Rules, simple neglect of duty is a less
grave offense penalized with suspension for one month
and one day to six months for the first offense, and
dismissal for the second.40 Suspension in the middle of
the range or three months likewise appears to be in
order for dela Cruz-Buendia.
For the foregoing reasons, the charges of usurpation of
authority, malversation of public funds, causing undue
injury to the government, disclosing or using confidential
information and falsification of public records against
Cachero and dela Cruz-Buendia are dismissed for lack of
evidence.
In conclusion, we reiterate the rule that the conduct of
every employee of the judiciary must be at all times
characterized with propriety and decorum and, above all
else, it must be above and beyond suspicion. 41 This must
be the benchmark by which all personnel in the courts
should be measured for "the image of a court of justice is
necessarily mirrored in the conduct, official or otherwise,
of the men and women, who work thereat, from the judge
to the last and lowest of its personnel."42
WHEREFORE, premises considered, Deputy Sheriff
Carmelo V. Cachero is found GUILTY OF INEFFICIENCY
AND INCOMPETENCE IN THE PERFORMANCE OF
OFFICIAL DUTIES, and is SUSPENDED for nine (9)
months without pay. Clerk of Court Jennifer H. dela CruzBuendia is declared GUILTY OF SIMPLE NEGLECT OF
DUTY and isSUSPENDED for three (3) months without
pay.
Both of them are STERNLY
commission of a similar offense.

WARNED against

the

The other charges against Cachero and dela Cruz-Buendia


are DISMISSED for lack of evidence.
SO ORDERED.
G.R. No. 158997

October 6, 2008

FORT
BONIFACIO
CORPORATION petitioner,
vs.
YLLAS LENDING CORPORATION
LAURAYA,
in
his
official
President, respondents.

DEVELOPMENT

and JOSE
capacity

S.
as

DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari 1 of the Orders
issued on 7 March 2003 2 and 3 July 20033 by Branch 59 of
the Regional Trial Court of Makati City (trial court) in Civil
Case No. 01-1452. The trial court's orders dismissed Fort
Bonifacio Development Corporation's (FBDC) third party
claim and denied FBDC's Motion to Intervene and Admit
Complaint in Intervention.
The Facts
On 24 April 1998, FBDC executed a lease contract in favor
of Tirreno, Inc. (Tirreno) over a unit at the Entertainment
Center - Phase 1 of the Bonifacio Global City in Taguig,
Metro Manila. The parties had the lease contract
notarized on the day of its execution. Tirreno used the
leased premises for Savoia Ristorante and La Strega Bar.

Provisional Remedies/Cases Full Text/Rule 5771

Two provisions in the lease contract are pertinent to the


present case: Section 20, which is about the
consequences in case of default of the lessee, and
Section 22, which is about the lien on the properties of
the lease. The pertinent portion of Section 20 reads:
Section 20. Default of the Lessee
20.1 The LESSEE shall be deemed to be in
default within the meaning of this Contract in
case:
(i) The LESSEE fails to fully pay on time any
rental, utility and service charge or other
financial obligation of the LESSEE under this
Contract;
xxx
20.2 Without prejudice to any of the rights of the
LESSOR under this Contract, in case of default of
the LESSEE, the lessor shall have the right to:
(i) Terminate this Contract immediately upon
written notice to the LESSEE, without need of
any judicial action or declaration;

as Civil Case No. 01-1452, against Tirreno, Eloisa Poblete


Todaro (Eloisa), and Antonio D. Todaro (Antonio), in their
personal and individual capacities, and in Eloisa's official
capacity as President. In their complaint, respondents
alleged that they lent a total of P1.5 million to Tirreno,
Eloisa, and Antonio. On 9 November 2000, Tirreno, Eloisa
and Antonio executed a Deed of Chattel Mortgage in
favor of respondents as security for the loan. The
following properties are covered by the Chattel Mortgage:
a. Furniture, Fixtures and Equipment of Savoia
Ristorante and La Strega Bar, a restaurant
owned and managed by [Tirreno], inclusive of
the leasehold right of [Tirreno] over its rented
building where [the] same is presently located.
b. Goodwill over the aforesaid restaurant,
including its business name, business sign, logo,
and any and all interest therein.
c. Eighteen (18) items of paintings made by
Florentine Master, Gino Tili, which are fixtures in
the above-named restaurant.
The details and descriptions of the above items
are specified in Annex "A" which is hereto
attached and forms as an integral part of this
Chattel Mortgage instrument.4

xxx
Section 22, on the other hand, reads:
Section 22. Lien on the Properties of the Lessee
Upon the termination of this Contract or the
expiration of the Lease Period without the
rentals, charges and/or damages, if any, being
fully paid or settled, the LESSOR shall have the
right to retain possession of the properties of the
LESSEE used or situated in the Leased Premises
and the LESSEE hereby authorizes the LESSOR
to offset the prevailing value thereof as
appraised by the LESSOR against any unpaid
rentals, charges and/or damages. If the LESSOR
does not want to use said properties, it may
instead sell the same to third parties and apply
the proceeds thereof against any unpaid rentals,
charges and/or damages.
Tirreno began to default in its lease payments in 1999. By
July
2000,
Tirreno
was
already
in
arrears
byP5,027,337.91. FBDC and Tirreno entered into a
settlement agreement on 8 August 2000. Despite the
execution of the settlement agreement, FBDC found need
to send Tirreno a written notice of termination dated 19
September 2000 due to Tirreno's alleged failure to settle
its outstanding obligations. On 29 September 2000, FBDC
entered and occupied the leased premises. FBDC also
appropriated the equipment and properties left by Tirreno
pursuant to Section 22 of their Contract of Lease as
partial payment for Tirreno's outstanding obligations.
Tirreno filed an action for forcible entry against FBDC
before the Municipal Trial Court of Taguig. Tirreno also
filed a complaint for specific performance with a prayer
for the issuance of a temporary restraining order and/or a
writ of preliminary injunction against FBDC before the
Regional Trial Court (RTC) of Pasig City. The RTC of Pasig
City dismissed Tirreno's complaint for forum-shopping.

In the Deed of Chattel Mortgage, Tirreno, Eloisa, and


Antonio made the following warranties to respondents:
1. WARRANTIES: The MORTGAGOR
declares and warrants that:

hereby

a. The MORTGAGOR is the absolute owner of the


above named properties subject of this
mortgage, free from all liens and encumbrances.
b. There exist no transaction or documents
affecting the same previously presented for,
and/or pending transaction.5
Despite FBDC's service upon him of an affidavit of
and third party claim, the sheriff proceeded with
seizure of certain items from FBDC's premises.
sheriff's partial return indicated the seizure of
following items from FBDC:

title
the
The
the

A. FIXTURES
(2) - Smaller Murano Chandeliers
(1) - Main Murano Chandelier
B. EQUIPMENT
(13) - Uni-Air Split Type 2HP Air Cond.
(2) - Uni-Air Split Type 1HP Air Cond.
(3) - Uni-Air Window Type 2HP Air Cond.
(56) - Chairs
(1) - Table

On 4 March 2002, Yllas Lending Corporation and Jose S.


Lauraya, in his official capacity as President,
(respondents) caused the sheriff of Branch 59 of the trial
court to serve an alias writ of seizure against FBDC. On
the same day, FBDC served on the sheriff an affidavit of
title and third party claim. FBDC found out that on 27
September 2001, respondents filed a complaint for
Foreclosure of Chattel Mortgage with Replevin, docketed

CHRISSY SABELLA

(2) - boxes - Kitchen equipments [sic]6


The sheriff delivered the seized properties to
respondents. FBDC questioned the propriety of the
seizure and delivery of the properties to respondents
without an indemnity bond before the trial court. FBDC
argued that when respondents and Tirreno entered into

Provisional Remedies/Cases Full Text/Rule 5772

the chattel mortgage agreement on 9 November 2000,


Tirreno no longer owned the mortgaged properties as
FBDC already enforced its lien on 29 September 2000.
In ruling on FBDC's motion for leave to intervene and to
admit complaint in intervention, the trial court stated the
facts as follows:
Before this Court are two pending incidents, to
wit: 1) [FBDC's] Third-Party Claim over the
properties of [Tirreno] which were seized and
delivered by the sheriff of this Court to
[respondents]; and 2) FBDC's Motion to
Intervene
and
to
Admit
Complaint
in
Intervention.
Third party claimant, FBDC, anchors its claim
over the subject properties on Sections 20.2(i)
and 22 of the Contract of Lease executed by
[FBDC] with Tirreno. Pursuant to said Contract of
Lease, FBDC took possession of the leased
premises and proceeded to sell to third parties
the properties found therein and appropriated
the proceeds thereof to pay the unpaid lease
rentals of [Tirreno].
FBDC, likewise filed a Motion to Admit its
Complaint-in-Intervention.
In Opposition to the third-party claim and the
motion to intervene, [respondents] posit that the
basis of [FBDC's] third party claim being
anchored on the aforesaid Contract [of] Lease is
baseless. [Respondents] contend that the
stipulation of the contract of lease partakes of a
pledge which is void under Article 2088 of the
Civil Code for being pactum commissorium.
xxx
By reason of the failure of [Tirreno] to pay its
lease rental and fees due in the amount
of P5,027,337.91, after having notified [Tirreno]
of the termination of the lease, x x x FBDC took
possession of [Tirreno.'s] properties found in the
premises and sold those which were not of use
to it. Meanwhile, [respondents], as mortgagee of
said properties, filed an action for foreclosure of
the chattel mortgage with replevin and caused
the seizure of the same properties which [FBDC]
took and appropriated in payment of [Tirreno's]
unpaid lease rentals.7
The Ruling of the Trial Court
In its order dated 7 March 2003, the trial court stated that
the present case raises the questions of who has a better
right over the properties of Tirreno and whether FBDC has
a right to intervene in respondents' complaint for
foreclosure of chattel mortgage.
In deciding against FBDC, the trial court declared that
Section 22 of the lease contract between FBDC and
Tirreno is void under Article 2088 of the Civil Code. 8 The
trial court stated that Section 22 of the lease contract
pledges the properties found in the leased premises as
security for the payment of the unpaid rentals. Moreover,
Section 22 provides for the automatic appropriation of the
properties owned by Tirreno in the event of its default in
the payment of monthly rentals to FBDC. Since Section 22
is void, it cannot vest title of ownership over the seized
properties. Therefore, FBDC cannot assert that its right is
superior to respondents, who are the mortgagees of the
disputed properties.
The trial court quoted from Bayer Phils. v. Agana9 to
justify its ruling that FBDC should have filed a separate

CHRISSY SABELLA

complaint against respondents instead of filing a motion


to intervene. The trial court quoted from Bayer as follows:
In other words, construing Section 17 of Rule 39
of the Revised Rules of Court (now Section 16 of
the 1997 Rules on Civil Procedure), the rights of
third-party claimants over certain properties
levied upon by the sheriff to satisfy the
judgment may not be taken up in the case where
such claims are presented but in a separate and
independent action instituted by the claimants.10
The dispositive portion of the trial court's decision reads:
WHEREFORE, premises considered, [FBDC's]
Third Party Claim is hereby DISMISSED. Likewise,
the Motion to Intervene and Admit Complaint in
Intervention is DENIED.11
FBDC filed a motion for reconsideration on 9 May 2003.
The trial court denied FBDC's motion for reconsideration
in an order dated 3 July 2003. FBDC filed the present
petition before this Court to review pure questions of law.
The Issues
FBDC alleges that the trial court erred in the following:
1. Dismissing FBDC's third party claim upon the
trial court's erroneous interpretation that FBDC
has no right of ownership over the subject
properties because Section 22 of the contract of
lease is void for being a pledge and a pactum
commissorium;
2. Denying FBDC intervention on the ground that
its proper remedy as third party claimant over
the subject properties is to file a separate action;
and
3. Depriving FBDC of its properties without due
process of law when the trial court erroneously
dismissed FBDC's third party claim, denied
FBDC's intervention, and did not require the
posting of an indemnity bond for FBDC's
protection.12
The Ruling of the Court
The petition has merit.
Taking
of
Lessee's
without Judicial Intervention

Properties

We reproduce Section 22 of the Lease Contract below for


easy reference:
Section 22. Lien on the Properties of the Lessee
Upon the termination of this Contract or the
expiration of the Lease Period without the
rentals, charges and/or damages, if any, being
fully paid or settled, the LESSOR shall have the
right to retain possession of the properties of the
LESSEE used or situated in the Leased Premises
and the LESSEE hereby authorizes the LESSOR
to offset the prevailing value thereof as
appraised by the LESSOR against any unpaid
rentals, charges and/or damages. If the LESSOR
does not want to use said properties, it may
instead sell the same to third parties and apply
the proceeds thereof against any unpaid rentals,
charges and/or damages.

Provisional Remedies/Cases Full Text/Rule 5773

Respondents, as well as the trial court, contend that


Section 22 constitutes a pactum commissorium, a void
stipulation in a pledge contract. FBDC, on the other hand,
states that Section 22 is merely a dacion en pago.
Articles 2085 and 2093 of the Civil Code enumerate the
requisites essential to a contract of pledge: (1) the pledge
is constituted to secure the fulfillment of a principal
obligation; (2) the pledgor is the absolute owner of the
thing pledged; (3) the persons constituting the pledge
have the free disposal of their property or have legal
authorization for the purpose; and (4) the thing pledged
is placed in the possession of the creditor, or of a third
person by common agreement. Article 2088 of the Civil
Code prohibits the creditor from appropriating or
disposing the things pledged, and any contrary
stipulation is void.
On the other hand, Article 1245 of the Civil Code
defines dacion en pago, or dation in payment, as the
alienation of property to the creditor in satisfaction of a
debt in money. Dacion en pago is governed by the law on
sales.Philippine National Bank v. Pineda 13 held that dation
in payment requires delivery and transmission of
ownership of a thing owned by the debtor to the creditor
as an accepted equivalent of the performance of the
obligation. There is no dation in payment when there is
no transfer of ownership in the creditor's favor, as when
the possession of the thing is merely given to the creditor
by way of security.
Section 22, as worded, gives FBDC a means to collect
payment from Tirreno in case of termination of the lease
contract or the expiration of the lease period and there
are unpaid rentals, charges, or damages. The existence of
a contract of pledge, however, does not arise just
because FBDC has means of collecting past due rent from
Tirreno other than direct payment. The trial court
concluded that Section 22 constitutes a pledge because
of the presence of the first three requisites of a pledge:
Tirreno's properties in the leased premises secure
Tirreno's lease payments; Tirreno is the absolute owner of
the said properties; and the persons representing Tirreno
have legal authority to constitute the pledge. However,
the fourth requisite, that the thing pledged is
placed in the possession of the creditor, is
absent. There is non-compliance with the fourth requisite
even if Tirreno's personal properties are found in FBDC's
real property. Tirreno's personal properties are in FBDC's
real property because of the Contract of Lease, which
gives Tirreno possession of the personal properties. Since
Section 22 is not a contract of pledge, there is no pactum
commissorium.
FBDC admits that it took Tirreno's properties from the
leased premises without judicial intervention after
terminating the Contract of Lease in accordance with
Section 20.2. FBDC further justifies its action by stating
that Section 22 is a forfeiture clause in the Contract of
Lease and that Section 22 gives FBDC a remedy against
Tirreno's failure to comply with its obligations. FBDC
claims that Section 22 authorizes FBDC to take whatever
properties that Tirreno left to pay off Tirreno's obligations.

xxx
Judicial permission to cancel the agreement was
not, therefore necessary because of the express
stipulation in the contract of [lease] that the
[lessor], in case of failure of the [lessee] to
comply with the terms and conditions thereof,
can take-over the possession of the leased
premises, thereby cancelling the contract of sublease. Resort to judicial action is necessary only
in the absence of a special provision granting
the power of cancellation.14
A lease contract may contain a forfeiture clause. Country
Bankers Insurance Corp. v. Court of Appeals upheld the
validity of a forfeiture clause as follows:
A provision which calls for the forfeiture of the
remaining deposit still in the possession of the
lessor, without prejudice to any other obligation
still owing, in the event of the termination or
cancellation of the agreement by reason of the
lessee's violation of any of the terms and
conditions of the agreement is a penal clause
that may be validly entered into. A penal clause
is an accessory obligation which the parties
attach to a principal obligation for the purpose of
insuring the performance thereof by imposing on
the debtor a special prestation (generally
consisting in the payment of a sum of money) in
case the obligation is not fulfilled or is irregularly
or inadequately fulfilled.15
In Country Bankers, we allowed the forfeiture of the
lessee's advance deposit of lease payment. Such a
deposit may also be construed as a guarantee of
payment, and thus answerable for any unpaid rent or
charges still outstanding at any termination of the lease.
In the same manner, we allow FBDC's forfeiture of
Tirreno's properties in the leased premises. By agreement
between FBDC and Tirreno, the properties are answerable
for any unpaid rent or charges at any termination of the
lease. Such agreement is not contrary to law, morals,
good customs, or public policy. Forfeiture of the properties
is the only security that FBDC may apply in case of
Tirreno's default in its obligations.
Intervention versus Separate Action
Respondents posit that the right to intervene, although
permissible, is not an absolute right. Respondents agree
with the trial court's ruling that FBDC's proper remedy is
not intervention but the filing of a separate action.
Moreover, respondents allege that FBDC was accorded by
the trial court of the opportunity to defend its claim of
ownership in court through pleadings and hearings set for
the purpose. FBDC, on the other hand, insists that a third
party claimant may vindicate his rights over properties
taken in an action for replevin by intervening in the
replevin action itself.
We agree with FBDC.

We agree with FBDC.


A lease contract may be terminated without judicial
intervention. Consing v. Jamandre upheld the validity of a
contractually-stipulated termination clause:
This stipulation is in the nature of a resolutory
condition, for upon the exercise by the [lessor] of
his right to take possession of the leased
property, the contract is deemed terminated.
This kind of contractual stipulation is not illegal,
there being nothing in the law proscribing such
kind of agreement.

CHRISSY SABELLA

Both the trial court and respondents relied on our ruling


in Bayer Phils. v. Agana16 to justify their opposition to
FBDC's intervention and to insist on FBDC's filing of a
separate action. In Bayer, we declared that the rights of
third party claimants over certain properties levied upon
by the sheriff to satisfy the judgment may not be taken
up in the case where such claims are presented, but in a
separate and independent action instituted by the
claimants. However, both respondents and the trial court
overlooked the circumstances behind the ruling
in Bayer, which makes the Bayer ruling inapplicable to the
present case. The third party in Bayer filed his claim

Provisional Remedies/Cases Full Text/Rule 5774

during execution; in the present case, FBDC filed for


intervention during the trial.
The timing of the filing of the third party claim is
important because the timing determines the remedies
that a third party is allowed to file. A third party claimant
under Section 16 of Rule 39 (Execution, Satisfaction and
Effect of Judgments)17 of the 1997 Rules of Civil Procedure
may vindicate his claim to the property in a separate
action, because intervention is no longer allowed as
judgment has already been rendered. A third party
claimant under Section 14 of Rule 57 (Preliminary
Attachment)18 of the 1997 Rules of Civil Procedure, on the
other hand, may vindicate his claim to the property by
intervention because he has a legal interest in the matter
in litigation.19
We allow FBDC's intervention in the present case because
FBDC satisfied the requirements of Section 1, Rule 19
(Intervention) of the 1997 Rules of Civil Procedure, which
reads as follows:

the mortgagor's default on, the chattel mortgage


that, among other things, can properly uphold
the right to replevy the property. The burden to
establish a valid justification for that action lies
with the plaintiff [-mortgagee]. An adverse
possessor, who is not the mortgagor,
cannot just be deprived of his possession,
let alone be bound by the terms of the
chattel mortgage contract, simply because
the mortgagee brings up an action for
replevin.20(Emphasis added)
FBDC exercised its lien to Tirreno's properties even before
respondents and Tirreno executed their Deed of Chattel
Mortgage. FBDC is adversely affected by the disposition
of the properties seized by the sheriff. Moreover, FBDC's
intervention in the present case will result in a complete
adjudication of the issues brought about by Tirreno's
creation of multiple liens on the same properties and
subsequent default in its obligations.
Sheriff's Indemnity Bond

Section 1. Who may intervene. - A person who


has a legal interest in the matter in litigation, or
in the success of either of the parties, or an
interest against both, or is so situated as to be
adversely affected by a distribution or other
disposition of property in the custody of the
court or of an officer thereof may, with leave of
court, be allowed to intervene in the action. The
court shall consider whether or not the
intervention will unduly delay or prejudice the
adjudication of the rights of the original parties,
and whether or not the intervenor's rights may
be fully protected in a separate proceeding.
Although intervention is not mandatory, nothing in the
Rules proscribes intervention. The trial court's objection
against FBDC's intervention has been set aside by our
ruling that Section 22 of the lease contract is not pactum
commissorium.
Indeed, contrary to respondents' contentions, we ruled
in BA Finance Corporation v. Court of Appeals that where
the mortgagee's right to the possession of the specific
property is evident, the action need only be maintained
against the possessor of the property. However, where
the mortgagee's right to possession is put to great doubt,
as when a contending party might contest the legal bases
for mortgagee's cause of action or an adverse and
independent claim of ownership or right of possession is
raised by the contending party, it could become essential
to have other persons involved and accordingly
impleaded for a complete determination and resolution of
the controversy. Thus:
A chattel mortgagee, unlike a pledgee, need not
be in, nor entitled to, the possession of the
property, unless and until the mortgagor
defaults and the mortgagee thereupon seeks to
foreclose thereon. Since the mortgagee's right of
possession is conditioned upon the actual
default which itself may be controverted, the
inclusion of other parties, like the debtor or the
mortgagor himself, may be required in order to
allow a full and conclusive determination of the
case. When the mortgagee seeks a replevin in
order to effect the eventual foreclosure of the
mortgage, it is not only the existence of, but also

CHRISSY SABELLA

FBDC laments the failure of the trial court to require


respondents to file an indemnity bond for FBDC's
protection. The trial court, on the other hand, did not
mention the indemnity bond in its Orders dated 7 March
2003 and 3 July 2003.
Pursuant to Section 14 of Rule 57, the sheriff is not
obligated to turn over to respondents the properties
subject of this case in view of respondents' failure to file a
bond. The bond in Section 14 of Rule 57 (proceedings
where property is claimed by third person) is different
from the bond in Section 3 of the same rule (affidavit and
bond). Under Section 14 of Rule 57, the purpose of the
bond is to indemnify the sheriff against any claim by the
intervenor to the property seized or for damages arising
from such seizure, which the sheriff was making and for
which the sheriff was directly responsible to the third
party. Section 3, Rule 57, on the other hand, refers to the
attachment bond to assure the return of defendant's
personal property or the payment of damages to the
defendant if the plaintiff's action to recover possession of
the same property fails, in order to protect the plaintiff's
right of possession of said property, or prevent the
defendant from destroying the same during the pendency
of the suit.
Because of the absence of the indemnity bond in the
present case, FBDC may also hold the sheriff for damages
for the taking or keeping of the properties seized from
FBDC.
WHEREFORE, we GRANT the
petition.
We SET
ASIDE the Orders dated 7 March 2003 and 3 July 2003 of
Branch 59 of the Regional Trial Court of Makati City in
Civil Case No. 01-1452 dismissing Fort Bonifacio
Development Corporation's Third Party Claim and denying
Fort Bonifacio Development Corporation's Motion to
Intervene and Admit Complaint in Intervention.
We REINSTATE Fort Bonifacio Development Corporation's
Third Party Claim andGRANT its Motion to Intervene and
Admit Complaint in Intervention. Fort Bonifacio
Development Corporation may hold the Sheriff liable for
the seizure and delivery of the properties subject of this
case because of the lack of an indemnity bond.
SO ORDERED.

Provisional Remedies/Cases Full Text/Rule 5775

CHRISSY SABELLA