FIRST DIVISION

[G.R. No. 115678. February 23, 2001]

PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. HON. COURT OF APPEALS

and BERNARDINO VILLANUEVA, respondents.

[G.R. No. 119723. February 23, 2001]

PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. HON. COURT OF APPEALS

and FILIPINAS TEXTILE MILLS, INC., respondents.

DECISION

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. 32863i[1] and the other against its March 31, 1995 Decision in CA-G.R. SP No.
32762.ii[2] Both Decisions set aside and nullified the August 11, 1993 Orderiii[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,iv[4] contending that violation of the
trust receipts law constitutes estafa, thus providing ground for the issuance of a writ of
preliminary attachment; specifically under paragraphs b and d, Section 1, Rule 57 of the Revised
Rules of Court. Petitioner further claimed that attachment was necessary since private
respondents were disposing of their properties to its detriment as a creditor. Finally, petitioner
offered to post a bond for the issuance of such writ of attachment.

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

Both petitions were granted, albeit on different grounds. In CA-G.R. SP No. 32762, respondent
Court of Appeals ruled that the lower court was guilty of grave abuse of discretion in not
conducting a hearing on the application for a writ of preliminary attachment and not requiring
petitioner to substantiate its allegations of fraud, embezzlement or misappropriation. On the other
hand, in CA-G.R. SP No. 32863, respondent Court of Appeals found that the grounds cited by
petitioner in its Motion do not provide sufficient basis for the issuance of a writ of preliminary
attachment, they being mere general averments. 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 consolidatedv[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 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.vi[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 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 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;

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.vii[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
above motion for issuance of a writ of preliminary attachment;

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 sub-paragraphs 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,viii[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 debtors inability to pay or to comply with the
obligations.ix[9] On the other hand, as stressed, above, fraud may be gleaned from a preconceived
plan or intention not to pay. This does not appear to be so in the case at bar. In fact, it is alleged
by private respondents that out of the total P419,613.96 covered by the subject trust receipts, the
amount of P400,000.00 had already been paid, leaving only P19,613.96 as balance. Hence,
regardless of the arguments regarding penalty and interest, it can hardly be said that private
respondents harbored a preconceived plan or intention not to pay petitioner.
The Court of Appeals was correct, therefore, in its finding in CA-G.R. SP No. 32863 that neither
petitioners Motion or its supporting Affidavit provides sufficient basis for the issuance of the writ
of attachment prayed for.

We also agree with respondent Court of Appeals in CA-G.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, petitioners Motion for Attachment fails to meet the standard set forth in D.P. Lub
Oil Marketing Center, Inc. v. Nicolas,x[10] in applications for attachment. In the said case, this
Court cautioned --

The petitioners 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 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.,xi[11] not only was petitioners
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.xii[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.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.
 iG.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: chanRoblesvirtualLawlibrary

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.

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 1703 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 fill-in 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 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 in Cosiquien:
"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 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, his Alien
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, 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 Vice-President 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 sole-ownership 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 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 court14 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;
ChanRoblesVirtualawlibrary

that the case is one of those mentioned in Section 117 hereof; ChanRoblesVirtualawlibrary

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 with Watercraft was terminated on 07 March 2002.

11. [Sometime] thereafter, that is, in or about June 2002, the Defendant pulled out the Knotty 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 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 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 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 creditors thus 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; ChanRoblesVirtualawlibrary

b. The Defendant is a British national who may easily leave the country at will; ChanRoblesVirtualawlibrary
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 circumstances of the alleged fraud because fraudulent intent cannot
be inferred from the debtor's mere non-payment of the debt or failure to comply with his obligation.28
The 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 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.39chanrobl esvirtuallawlibrary

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. chanroblesvirtuallawlibrary

Velasco, Jr., (Chairperson), Villarama, Jr., Perez,* and Jardeleza, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-50378 September 30, 1982

FILINVEST CREDIT CORPORATION, petitioner,

vs.
THE HONORABLE JUDGE BENJAMIN RELOVA (In his capacity as Presiding Judge of
the Court of First Instance of Manila, Branch XI) and ERNESTO SALAZAR, respondents.

Labaquis, Loyola & Angara Law Offices for petitioner.

Cecilio D. Ignacio for respondents.

GUERRERO, J.:

This is a special civil action for certiorari, with prayer for restraining order or preliminary
injunction, filed by petitioner Filinvest Credit Corporation seeking to annul the Orders issued
by respondent Judge dated February 2, 1979 and April 4, 1979 in Civil Case No. 109900.

As shown by the records, the antecedents of the instant Petition are as follows:

On August 2, 1977, Filinvest Credit Corporation (hereinafter referred to as FILINVEST) filed a

complaint in the lower court against defendants Rallye Motor Co., Inc. (hereinafter referred to
as RALLYE) and Emesto Salazar for the collection of a sum of money with damages and
preliminary writ of attachment. From the allegations of the complaint, 1 it appears that in payment
of a motor vehicle described as: "One (1) Unit MAZDA DIESEL SCHOOL BUS, Model: E4100, Serial No.:
EXC43P-02356, Motor No.: Y-13676," Salazar executed a promissory note dated May 5, 1977 in favor of
RALLYE for the amount of P99,828.00. To secure the note, Salazar also executed in favor of RALLYE a deed of
chattel mortgage over the above described motor vehicle. On May 7, 1977, RALLYE, for valuable consideration,
assigned all its rights, title and interest to the aforementioned note and mortgage to FILINVEST. Thereafter,
FILINVEST came to know that RALLYE had not delivered the motor vehicle subject of the chattel mortgage to
Salazar, "as the said vehicle (had) been the subject of a sales agreement between the codefendants." Salazar
defaulted in complying with the terms and conditions of the aforesaid promissory note and chattel mortgage.
RALLYE, as assignor who guaranteed the validity of the obligation, also failed and refused to pay FILINVEST
despite demand. According to FILINVEST, the defendants intentionally, fraudulently and with malice concealed
from it the fact that there was no vehicle delivered under the documents negotiated and assigned to it, otherwise,
it would not have accepted the negotiation and assignment of the rights and interest covered by the promissory
note and chattel mortgage. Praying for a writ of preliminary attachment, FILINVEST submitted with its complaint
the affidavit of one Gil Mananghaya, pertinent portions of which read thus:

That he is the Collection Manager, Automotive Division of Filinvest Credit Corporation;

That in the performance of his duties, he came to know of the account of Ernesto Salazar, which
is covered by a Promissory Note and secured by a Chattel Mortgage, which documents together
with all the rights and interest thereto were assigned by Rallye Motor Co., Inc.;

That for failure to pay a stipulated installment, and the fact that the principal debtor, Ernesto
Salazar, and the assignor, Rallye Motor Co., Inc. concealed the fact that there was really no
motor vehicle mortgaged under the terms of the Promissory Note and the Chattel Mortgage, the
entire amount of the obligation stated in the Promissory Note becomes due and demandable,
which Ernesto Salazar and Rallye Motor Co., Inc. failed and refused to pay, so much so that a
sufficient cause of action really exists for Filinvest Credit Corporation to institute the
corresponding complaint against said person and entity;

That the case is one of those mentioned in Section 1, Rule 57 of his Rules of Court, particularly
an action against parties who have been guilty of a fraud in contracting the debt or incurring the
obligation upon which the action is brought;

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 Filinvest Credit Corporation is as much as the sum for
which the order is granted above all legal counterclaims;

2
That this affidavit is executed for the purpose of securing a writ of attachment from the court.

The specific provision adverted to in the above Affidavit is Section 1(d) of Rule 57 which includes "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" as one of the cases in which 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."

Judge Jorge R. Coquia (now Justice of the Court of Appeals), then presiding Judge of the lower court, granted
the prayer for a writ of attachment in an Order dated August 17, 1977 stating that:

Finding the complaint sufficient in form and substance, and in view of the sworn statement of Gil
Mananghaya, Collection Manager of the plaintiff that defendants have committed fraud in
securing the obligation and are now avoiding payment of the same, let a writ of attachment issue
upon the plaintiff's filing of a bond in the sum of P97,000.00.

3
In the meantime, let summons issue on the defendants.
More than a year later, in an Urgent Motion dated December 11, 1978, 4 defendant Salazar prayed that the writ
of preliminary attachment issued ex parte and implemented solely against his property be recalled and/or
quashed. He argued that when he signed the promissory note and chattel mortgage on May 5, 1977 in favor of
RALLYE, FILINVEST was hot vet his creditor or obligee, therefore, he could not be said to have committed fraud
when he contracted the obligation on May 5, 1977. Salazar added that as the motor vehicle which was the object
of the chattel mortgage and the consideration for the promissory note had admittedly not been delivered to him
by RALLYE, his repudiation of the loan and mortgage is more justifiable.

FILINVEST filed an Opposition, but on February 2, 1979, the court a quo, this time presided over by herein
respondent Judge, ordered the dissolution and setting aside of the writ of preliminary attachment issued on
August 17, 1977 and the return to defendant Salazar of all his properties attached by the Sheriff by virtue of the
said writ. In this Order, respondent Judge explained that:

When the incident was called for hearing, the Court announced that, as a matter of procedure,
when a motion to quash a writ of preliminary attachment is filed, it is incumbent upon the plaintiff
to prove the truth of the allegations which were the basis for the issuance of said writ. In this
hearing, counsel for the plaintiff manifested that he was not going to present evidence in support
of the allegation of fraud. He maintained that it should be the defendant who should prove the
truth of his allegation in the motion to dissolve the said writ. The Court disagrees. 5

FILINVEST filed a Motion for Reconsideration of the above Order, and was subsequently allowed to adduce
evidence to prove that Salazar committed fraud as alleged in the affidavit of Gil Mananghaya earlier quoted. This
notwithstanding, respondent Judge denied the Motion in an Order dated April 4, 1979 reasoning thus:

The plaintiff's evidence show that the defendant Rallye Motor assigned to the former defendant
Salazar's promissory note and chattel mortgage by virtue of which plaintiff discounted the note.
Defendant Salazar refused to pay the plaintiff for the reason that Rallye Motor has not delivered
to Salazar the motor vehicle which he bought from Rallye. It is the position of plaintiff that
defendant Salazar was in conspiracy with Rallye Motor in defrauding plaintiff.

Ernesto Salazar, on his part complained that he was himself defrauded, because while he
signed a promissory note and chattel mortgage over the motor vehicle which he bought from
Rallye Motor, Rallye Motor did not deliver to him the personal property he bought; that the
address and existence of Rallye Motor can no longer be found.

While it is true that the plaintiff may have been defrauded in this transaction, it having paid
Rallye Motor the amount of the promissory note, there is no evidence that Ernesto Salazar had
connived or in any way conspired with Rallye Motor in the assignment of the promissory note to
the plaintiff, because of which the plaintiff paid Rallye Motor the amount of the promissory note.
Defendant Ernesto Salazar was himself a victim of fraud. Rallye Motor was the only party which
committed it. 6

From the above order denying reconsideration and ordering the sheriff to return to Salazar the personal property
attached by virtue of the writ of preliminary attachment issued on August 17, 1977, FILINVEST filed the instant
Petition on April 19, 1979. On July 16, 1979, petitioner FILINVEST also filed an Urgent Petition for Restraining
Order 7 alleging, among others, that pending this certiorari proceeding in this court, private respondent Salazar
filed a Motion for Contempt of Court in the court below directed against FILINVEST and four other persons
allegedly for their failure to obey the Order of respondent Judge dated April 4, 1979, which Order is the subject of
this Petition. On July 23, 1979, this Court issued a temporary restraining order "enjoining respondent Judge or
any person or persons acting in his behalf from hearing private respondent's motion for contempt in Civil Case
No. 109900, entitled, 'Filinvest Credit Corporation, Plaintiff, versus The Rallye Motor Co., Inc., et al., Defendants'
of the Court of First Instance of Manila, Branch XI. " 8

Petitioner FILINVEST in its MEMORANDUM contends that respondent Judge erred:

 (1) In dissolving the writ of preliminary attachment already enforced by the Sheriff of Manila
without Salazar's posting a counter-replevin bond as required by Rule 57, Section 12; and

(2) In finding that there was no fraud on the part of Salazar, despite evidence in abundance to
show the fraud perpetrated by Salazar at the very inception of the contract.

It is urged in petitioner's first assignment of error that the writ of preliminary attachment having been validly and
properly issued by the lower court on August 17, 1977, the same may only be dissolved, quashed or recalled by
the posting of a counter-replevin bond under Section 12, Rule 57 of the Revised Rules of Court which provides
that:

Section 12. Discharge of Attachment upon, gluing 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 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. ...

Citing the above provision, petitioner contends that the court below should not have issued the Orders dated
February 2, 1979 and April 4, 1979 for failure of private respondent Salazar to make a cash deposit or to file a
counter-bond.

On the other hand, private respondent counters that the subject writ of preliminary attachment was improperly or
irregularly issued in the first place, in that it was issued ex parte without notice to him and without hearing.

We do not agree with the contention of private respondent. Nothing in the Rules of Court makes notice and
hearing indispensable and mandatory requisites for the issuance of a writ of attachment. The statement in the
case of Blue Green Waters, Inc. vs. Hon. Sundiam and Tan 9 cited by private respondent, to the effect that the
order of attachment issued without notice to therein petitioner Blue Green Waters, Inc. and without giving it a
chance to prove that it was not fraudulently disposing of its properties is irregular, gives the wrong implication. As
clarified in the separate opinion of Mr. Justice Claudio Teehankee in the same cited case, 10 a writ of attachment
may be issued ex parte. Sections 3 and 4, Rule 57, merely require that an applicant for an order of attachment
file an affidavit and a bond: the affidavit to be executed by the applicant himself or some other person who
personally knows the facts and to show that (1) there is a sufficient cause of action, (2) the case is one of those
mentioned in Section 1 of Rule 57, (3) there is no other sufficient security for the claim sought to be enforced,
and (4) the amount claimed in the action is as much as the sum for which the order is granted above all legal
counterclaims; and the bond to be "executed to the adverse party in an amount fixed by the judge, not exceeding
the applicant's claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse party
and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the
applicant was not entitled thereto."

We agree, however, with private respondents contention that a writ of attachment may be discharged without the
necessity of filing the cash deposit or counter-bond required by Section 12, Rule 57, cited by petitioner. The
following provision of the same Rule allows it:

Sec. 13. Discharge of attachment for improper or irregular issuance.The party whose property
has been attached may also, at any time either before or after the release of the attached
property, or before any attachment shall have been actually levied, upon reasonable notice to
the attaching creditor, apply to the judge who granted the order, or to the judge of the court in
which the action is pending, for an order to discharge the attachment on the ground that the
same was improperly or irregularly issued. If the motion be made on affidavits on the part of the
party whose property has been attached, but not otherwise, the attaching creditor may oppose
 the same by counter-affidavits or other evidence in addition to that on which the attachment was
made. After hearing, the judge shall order the discharge of the attachment if it appears that it
was improperly or irregularly issued and the defect is not cured forthwith."(Emphasis supplied)

The foregoing provision grants an aggrieved party relief from baseless and unjustifiable attachments procured,
among others, upon false allegations, without having to file any cash deposit or counter-bond. In the instant case
the order of attachment was granted upon the allegation of petitioner, as plaintiff in the court below, that private
respondent RALLYE, the defendants, had committed "fraud in contracting the debt or incurring the obligation
upon which the action is brought," covered by Section i(d), Rule 57, earlier quoted. Subsequent to the issuance
of the attachment order on August 17, 1977, private respondent filed in the lower court an "Urgent Motion for the
Recall and Quashal of the Writ of Preliminary Attachment on (his property)" dated December 11, 1978 11
precisely upon the assertion that there was "absolutely no fraud on (his) part" in contracting the obligation sued
upon by petitioner. Private respondent was in effect claiming that petitioner's allegation of fraud was false, that
hence there was no ground for attachment, and that therefore the attachment order was "improperly or
irregularly issued." This Court was held that "(i)f the grounds upon which the attachment was issued were not
true ..., the defendant has his remedy by immediately presenting a motion for the dissolution of the same. 12 We
find that private respondent's abovementioned Urgent Motion was filed under option 13, Rule 57.

The last sentence of the said provision, however, indicates that a hearing must be conducted by the judge for the
purpose of determining whether or not there reality was a defect in the issuance of the attachment. The question
is: At this hearing, on whom does the burden of proof lie? Under the circumstances of the present case, We
sustain the ruling of the court a quo in its questioned Order dated February 2, 1979 that it should be the plaintiff
(attaching creditor), who should prove his allegation of fraud. This pronouncement finds support in the first
sentence of Section 1, Rule 131, which states that: "Each party must prove his own affirmative allegations." The
last part of the same provision also provides that: "The burden of proof lies on the party who would be defeated if
no evidence were given on either side." It must be b rne in mind that in this jurisdiction, fraud is never
presumed. FRAUS EST IdIOS ET NON PRAESUMENDA. 13 Indeed, private transactions are presumed to have
been fair and regular. 14 Likewise, written contracts such as the documents executed by the parties in the instant
case, are presumed to have been entered into for a sufficient consideration. 15

In a similar case of Villongco, et al., vs. Hon. Panlilio, et al., 16 a writ of preliminary attachment was issued ex
parte in a case for damages on the strength of the affidavit of therein petitioners to the effect that therein
respondents had concealed, removed or disposed of their properties, credits or accounts collectible to defraud
their creditors. Subsequently, the lower court dissolved the writ of attachment. This was questioned in a certiorari
proceeding wherein this Court held, inter alia, that:

The affidavit supporting the petition for the issuance of the preliminary attachment may have
been sufficient to justify the issuance of the preliminary writ, but it cannot be considered as proof
of the allegations contained in the affidavit. The reason is obvious. The allegations are mere
conclusions of law, not statement of facts. No acts of the defendants are ever mentioned in the
affidavit to show or prove the supposed concealment to defraud creditors. Said allegations are
affirmative allegations, which plaintiffs had the obligation to prove ... 17

It appears from the records that both herein private parties did in fact adduce evidence to support their
respective claims. 18 Attached to the instant Petition as its Annex "H" 19 is a Memorandum filed by herein
petitioner FILINVEST in the court below on March 20, 1979. After private respondent filed his Comment to the
Petition, 20 petitioner filed a Reply 21 ,attaching another copy of the aforesaid Memorandum as Annex "A" 22 In this
case on February 28, 1979 and March 1, 1979, the plaintiff (FILINVEST) presented in evidence documentary
exhibits "marked Exhibit A, A- I, B, B-1, B-2, B-3, B-4, C, C-1, D, E, F, G and G-1. The Memorandum goes on to
state that FILINVEST presented as its witness defendant Salazar himself who testified that he signed Exhibits A,
B, C, D, E and G; that he is a holder of a master's degree in Business Administration and is himself a very
careful and prudent person; that he does not sign post-dated documents; that he does not sign contracts which
do not reflect the truth or which are irregular on their face, that he intended to purchase a school bus from Rallye
Motors Co., Inc. from whom he had already acquired one unit; that he had been dealing with Abel Sahagun,
manager of RALLYE, whom he had known for a long time that he intended to purchase the school bus on
installment basis so he applied for financing with the FILINVEST; that he knew his application was approved; that
with his experience as a business executive, he knew that under a financing arrangement, upon approval of his
application, when he signed Exhibits A, B, C, D, E and G, the financing company (FILINVEST) would release the
proceeds of the loan to RALLYE and that he would be obligated to pay the installments to FILINVEST; that he
signed Exhibits A, B and C simultaneously; that it was his wife who was always transacting business with
RALLYE and Abel Sahagun. 23

Without disputing the above summary of evidence, private respondent Salazar states in his Comment that "the
same evidence proferred by (petitioner's) counsel was adopted by (private respondent) Ernesto Salazar during
the proceedings. 24

According to the court a quo in its assailed order of April 4, 1979, Emesto Salazar "was himself defrauded
because while he signed the promissory note and the chattel mortgage over the vehicle which he bought from
Rallye Motors, RALLYE did not deliver to him the personal property he bought." And since no fraud was
committed by Salazar, the court accordingly ordered the sheriff to return to Salazar the properties attached by
virtue of the writ of preliminary attachment issued on August 17, 1977.

We do not agree. Considering the claim of respondent Salazar that Rallye Motors did not deliver the motor
vehicle to him, it follows that the Invoice, Exhibit "C", for the motor vehicle and the Receipt, Exhibit "G", for its
delivery and both signed by Salazar, Exhibits "C-1 " and "G-1", were fictitious. It also follows that the Promissory
Note, Exhibit "A", to pay the price of the undelivered vehicle was without consideration and therefore fake; the
Chattel Mortgage, Exhibit "B", over the non-existent vehicle was likewise a fraud; the registration of the vehicle in
the name of Salazar was a falsity and the assignment of the promissory note by RALLYE with the conforme of
respondent Salazar in favor of petitioner over the undelivered motor vehicle was fraudulent and a falsification.

Respondent Salazar, knowing that no motor vehicle was delivered to him by RALLYE, executed and committed
all the above acts as shown the exhibits enumerated above. He agreed and consented to the assignment by
RALLYE of the fictitious promissory note and the fraudulent chattel mortgage, affixing his signature thereto, in
favor of petitioner FILINVEST who, in the ordinary course of business, relied on the regularity and validity of the
transaction. Respondent had previously applied for financing assistance from petitioner FILINVEST as shown in
Exhibits "E " and "E-1 " and his application was approved, thus he negotiated for the acquisition of the motor
vehicle in question from Rallye Motors. Since he claimed that the motor vehicle was not delivered to him, then he
was duty-bound to reveal that to FILINVEST, it being material in inducing the latter to accept the assignment of
the promissory note and the chattel mortgage. More than that, good faith as well as commercial usages or
customs require the disclosure of facts and circumstances which go into the very object and consideration of the
contractual obligation. We rule that the failure of respondent Salazar to disclose the material fact of non-delivery
of the motor vehicle, there being a duty on his part to reveal them, constitutes fraud. (Article 1339, New Civil
Code).

We hold that the court a quo committed grave abuse of discretion in dissolving and setting aside the writ of
preliminary attachment issued on August 17, 1977.

WHEREFORE, IN VIEW OF THE FOREGOING, the appealed Orders of the lower court dated February 2, 1979
and April 4, 1979 are hereby REVERSED and SET ASIDE. The temporary restraining order issued by Us on July
23, 1979 is hereby made permanent. No costs.

Petition granted.

SO ORDERED.

Barredo (Chairman), Aquino, Concepcion, Jr., Santos, De Castro and Escolin, JJ., concur.

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