Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 185734 July 3, 2013

ALFREDO C. LIM, JR., PETITIONER,

vs.
SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO, RESPONDENTS.

RESOLUTION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the July 10, 2008 Decision2 and December 18, 2008
Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 100270, affirming the March 29, 2007 Order4 of the
Regional Trial Court of Quezon City, Branch 223 (RTC), which lifted the writ of preliminary attachment issued in
favor of petitioner Alfredo C. Lim, Jr. (Lim, Jr.).

The Facts

On August 22, 2005, Lim, Jr. filed a complaint5 for sum of money with prayer for the issuance of a writ of preliminary
attachment before the RTC, seeking to recover from respondents-spouses Tito S. Lazaro and Carmen T. Lazaro
(Sps. Lazaro) the sum of ₱2,160,000.00, which represented the amounts stated in several dishonored checks
issued by the latter to the former, as well as interests, attorney’s fees, and costs. The RTC granted the writ of
preliminary attachment application6 and upon the posting of the required ₱2,160,000.00 bond,7 issued the
corresponding writ on October 14, 2005.8 In this accord, three (3) parcels of land situated in Bulacan, covered by
Transfer Certificates of Title (TCT) Nos. T-64940, T-64939, and T-86369 (subject TCTs), registered in the names of
Sps. Lazaro, were levied upon.9

In their Answer with Counterclaim,10 Sps. Lazaro averred, among others, that Lim, Jr. had no cause of action
against them since: (a) Colim Merchandise (Colim), and not Lim, Jr., was the payee of the fifteen (15) Metrobank
checks; and (b) the PNB and Real Bank checks were not drawn by them, but by Virgilio Arcinas and Elizabeth
Ramos, respectively. While they admit their indebtedness to Colim, Sps. Lazaro alleged that the same had already
been substantially reduced on account of previous payments which were apparently misapplied. In this regard, they
sought for an accounting and reconciliation of records to determine the actual amount due. They likewise argued
that no fraud should be imputed against them as the aforesaid checks issued to Colim were merely intended as a
form of collateral.11 Hinged on the same grounds, Sps. Lazaro equally opposed the issuance of a writ of preliminary
attachment.12

Nonetheless, on September 22, 2006, the parties entered into a Compromise Agreement13 whereby Sps. Lazaro
agreed to pay Lim, Jr. the amount of ₱2,351,064.80 on an installment basis, following a schedule of payments
covering the period from September 2006 until October 2013, under the following terms, among others: (a) that
should the financial condition of Sps. Lazaro improve, the monthly installments shall be increased in order to hasten
the full payment of the entire obligation;14 and (b) that Sps. Lazaro’s failure to pay any installment due or the
dishonor of any of the postdated checks delivered in payment thereof shall make the whole obligation immediately
due and demandable.

The aforesaid compromise agreement was approved by the RTC in its October 31, 2006 Decision15 and January 5,
2007 Amended Decision.16

Subsequently, Sps. Lazaro filed an Omnibus Motion,17 seeking to lift the writ of preliminary attachment annotated on
the subject TCTs, which the RTC granted on March 29, 2007.18 It ruled that a writ of preliminary attachment is a
mere provisional or ancillary remedy, resorted to by a litigant to protect and preserve certain rights and interests
pending final judgment. Considering that the case had already been considered closed and terminated by the
rendition of the January 5, 2007 Amended Decision on the basis of the September 22, 2006 compromise
agreement, the writ of preliminary attachment should be lifted and quashed. Consequently, it ordered the Registry
of Deeds of Bulacan to cancel the writ’s annotation on the subject TCTs.

Lim, Jr. filed a motion for reconsideration19 which was, however, denied on July 26, 2007,20 prompting him to file a
petition for certiorari21 before the CA.

The CA Ruling

On July 10, 2008, the CA rendered the assailed decision,22 finding no grave abuse of discretion on the RTC’s part. It
observed that a writ of preliminary attachment may only be issued at the commencement of the action or at any
time before entry of judgment. Thus, since the principal cause of action had already been declared closed and
terminated by the RTC, the provisional or ancillary remedy of preliminary attachment would have no leg to stand on,
necessitating its discharge.23

Aggrieved, Lim, Jr. moved for reconsideration24 which was likewise denied by the CA in its December 18, 2008
Resolution.25

Hence, the instant petition.

The Issue Before the Court

The sole issue in this case is whether or not the writ of preliminary attachment was properly lifted.

The Court’s Ruling

The petition is meritorious.

By its nature, preliminary attachment, under Rule 57 of the Rules of Court (Rule 57), is an ancillary remedy applied
for not for its own sake but to enable the attaching party to realize upon the relief sought and expected to be
granted in the main or principal action; it is a measure auxiliary or incidental to the main action. As such, it is
available during its pendency which may be resorted to by a litigant to preserve and protect certain rights and
interests during the interim, awaiting the ultimate effects of a final judgment in the case.26 In addition, attachment is
also availed of in order 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.27

In this relation, while the provisions of Rule 57 are silent on the length of time within which an attachment lien shall
continue to subsist after the rendition of a final judgment, jurisprudence dictates that the said lien continues until the
debt is paid, or the sale is had under execution issued on the judgment or until the judgment is satisfied, or the
attachment discharged or vacated in the same manner provided by law.28

Applying these principles, the Court finds that the discharge of the writ of preliminary attachment against the
properties of Sps. Lazaro was improper.

Records indicate that while the parties have entered into a compromise agreement which had already been
approved by the RTC in its January 5, 2007 Amended Decision, the obligations thereunder have yet to be fully
complied with – particularly, the payment of the total compromise amount of ₱2,351,064.80. Hence, given that the
foregoing debt remains unpaid, the attachment of Sps. Lazaro’s properties should have continued to subsist.

In Chemphil Export & Import Corporation v. CA,29 the Court pronounced that a writ of attachment is not extinguished
by the execution of a compromise agreement between the parties, viz:

Did the compromise agreement between Antonio Garcia and the consortium discharge the latter’s attachment lien
over the disputed shares?

CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the dismissal of the case, dies a
natural death. Thus, when the consortium entered into a compromise agreement, which resulted in the termination
of their case, the disputed shares were released from garnishment.
We disagree. To subscribe to CEIC’s contentions would be to totally disregard the concept and purpose of a
preliminary attachment.

xxxx

The case at bench admits of peculiar character in the sense that it involves a compromise agreement. Nonetheless,
x x x. The parties to the compromise agreement should not be deprived of the protection provided by an attachment
lien especially in an instance where one reneges on his obligations under the agreement, as in the case at bench,
where Antonio Garcia failed to hold up his own end of the deal, so to speak.

xxxx

If we were to rule otherwise, we would in effect create a back door by which a debtor can easily escape his
creditors. Consequently, we would be faced with an anomalous situation where a debtor, in order to buy time to
dispose of his properties, would enter into a compromise agreement he has no intention of honoring in the first
place. The purpose of the provisional remedy of attachment would thus be lost. It would become, in analogy, a
declawed and toothless tiger. (Emphasis and underscoring supplied; citations omitted)

In fine, the Court holds that the writ of preliminary attachment subject of this case should be restored and its
annotation revived in the subject TCTs, re-vesting unto Lim, Jr. his preferential lien over the properties covered by
the same as it were before the cancellation of the said writ. Lest it be misunderstood, the lien or security obtained
by an attachment even before judgment, is in the nature of a vested interest which affords specific security for the
satisfaction of the debt put in suit.30 Verily, the lifting of the attachment lien would be tantamount to an abdication of
Lim, Jr.’s rights over Sps. Lazaro’s properties which the Court, absent any justifiable ground therefor, cannot allow.

WHEREFORE, the petition is GRANTED. The July 10, 2008 Decision and the December 18, 2008 Resolution of the
Court of Appeals in CA-G.R. SP No. 100270 are REVERSED and SET ASIDE, and the March 29, 2007 Order of
the Regional Trial Court of Quezon City, Branch 223 is NULLIFIED. Accordingly, the trial court is directed to
RESTORE the attachment lien over Transfer Certificates of Title Nos. T-64940, T-64939, and T-86369, in favor of
petitioner Alfredo C. Lim, Jr.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 190028 February 26, 2014

LETICIA P. LIGON, Petitioner,

vs.
THE REGIONAL TRIAL COURT, BRANCH 56 AT MAKATI CITY AND ITS PRESIDING JUDGE, JUDGE
REYNALDO M. LAIGO, SHERIFF IV LUCITO V. ALEJO, ATTY. SILVERIO GARING, MR. LEONARDO J. TING,
AND MR. BENITO G. TECHICO, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 is the Decision2 dated October 30, 2009 of the Court of Appeals (CA)
in CA-G.R. SP No. 106175, finding no grave abuse of discretion on the part of the Regional Trial Court of Makati
City, Branch 56 (Makati City RTC) in issuing the following orders (Assailed Orders) in Civil Case No. 03-186:

(a) the Order3 dated February 9, 2007 which directed the Register of Deeds of Muntinlupa City, respondent
Atty. Silverio Garing (Atty. Garing), to (1) register the Officer's
 Final Deed of Sale issued by respondent SheriffLucito V. Alejo (Sheriff Alejo) on October 27, 2006 in favor
of the highest bidder, respondent Leonardo J. Ting (Ting), (2) cancel Transfer Certificate of Title (TCT) No.
8502/T44 in the name of Spouses Rosario and Saturnino Baladjay (Sps. Baladjay), and (3) issue a new
certificate of title in favor of Ting, free from any liens and encumbrances;

(b) the Order4 dated March 20, 2007 which directed Atty. Garing to comply with the February 9, 2007 Order
under pain of contempt of court; and

(c) the Order5 dated April 25, 2007 which reiterated the directive to Atty. Garing to issue a new title in favor
of Ting after the latter’s payment of capital gains, documentary and transfer taxes, as required.

The Facts

On November 20, 2002, petitioner Leticia P. Ligon (Ligon) filed an amended complaint6 before the Regional Trial
Court of Quezon City, Branch 101 (Quezon City RTC) for collection of sum of money and damages, rescission of
contract, and nullification of title with prayer for the issuance of a writ of preliminary attachment, docketed as Civil
Case No. Q-10-48145 (Quezon City Case), against Sps. Baladjay, a certain Olivia Marasigan (Marasigan), Polished
Arrow Holdings, Inc. (Polished Arrow), and its incorporators,7 namely, Spouses Julius Gonzalo and Charaine
Doreece Anne Fuentebella (Sps. Fuentebella), Ma. Linda Mendoza (Mendoza), Barbara C. Clavo (Clavo), Bayani
E. Arit, Jr. (Arit, Jr.), and Peter M. Kairuz (Kairuz), as well as the latter’s spouses (individual defendants).

In her complaint, Ligon alleged, inter alia, that Rosario Baladjay (Rosario) enticed her to extend a short-term loan in
the amount of ₱3,000,000.00, payable in a month’s time and secured by an Allied Bank post-dated check for the
same amount.8 Ligon likewise claimed that Rosario, as further enticement for the loan extension, represented that
she and her husband Saturnino were in the process of selling their property in Ayala Alabang Village, Muntinlupa
City (subject property), covered by a clean title, i.e., TCT No. 85029 in the name of Rosario Baladjay, married to
Saturnino Baladjay, and that the proceeds of the said sale could easily pay-off the loan.10 Unfortunately, the Allied
Bank check was dishonored upon presentment and, despite assurances to replace it with cash, Rosario failed to do
so. Moreover, Ligon discovered that the subject property had already been transferred to Polished Arrow, alleged to
be a dummy corporation of Sps. Baladjay and the individual defendants (defendants). As a result, TCT No. 8502
was cancelled and replaced on October 11, 2002 by TCT No. 927311 in the name of Polished Arrow. Thus, Ligon
prayed that all defendants be held solidarily liable to pay her the amount of ₱3,000,000.00, with interest due, as well
as ₱1,000,000.00 as attorney’s fees and another ₱1,000,000.00 by way of moral and exemplary damages.
Asserting that the transfer of the subject property to Polished Arrow was made in fraud of Sps. Baladjay’s creditors,
Ligon also prayed that the said transfer be nullified, and that a writ of preliminary attachment be issued in the interim
against defendants’ assets, including the subject property. Subsequently, an Amended Writ of Preliminary
Attachment12 was issued on November 26, 2002, and annotated on the dorsal portion13 of TCT No. 9273 on
December 3, 2002 (December 3, 2002 attachment annotation).

On February 18, 2003, a similar complaint for collection of sum of money, damages, and cancellation of title with
prayer for issuance of a writ of preliminary attachment was lodged before the Makati City RTC, docketed as Civil
Case No. 03-186 (Makati City Case), by Spouses Cecilia and Gil Vicente (Sps. Vicente) against Sps. Baladjay,
Polished Arrow, and other corporations.14 In that case, it was established that Sps. Baladjay solicited millions of
pesos in investments from Sps. Vicente using conduit companies that were controlled by Rosario, as President and
Chairperson. During the proceedings therein, a writ of preliminary attachment also against the subject property was
issued and annotated on the dorsal portion of TCT No. 9273 on March 12, 2003. Thereafter, but before the Quezon
City Case was concluded, the Makati City RTC rendered a Decision15 dated December 9, 2004 (December 9, 2004
Decision), rescinding the transfer of the subject property from Sps. Baladjay to Polished Arrow upon a finding that
the same was made in fraud of creditors.16 Consequently, the Makati City RTC directed the Register of Deeds of
Muntinlupa City to: (a) cancel TCT No. 9273 in the name of Polished Arrow; and (b) restore TCT No. 8502 "in its
previous condition" in the name of Rosario Baladjay, married to Saturnino Baladjay.

Meanwhile, in the pending Quezon City Case, Polished Arrow and the individual defendants (with the exception of
Marasigan) were successively dropped17 as party-defendants, after it was established that they, by themselves
directly or through other persons, had no more ownership, interest, title, or claim over the subject property. The
parties stipulated on the existence of the December 9, 2004 Decision of the Makati City RTC, and the fact that the
same was no longer questioned by defendants Sps. Fuentebella, Arit, Jr., and Polished Arrow were made
conditions for their dropping as party-defendants in the case.18 In view of the foregoing, the Quezon City Case
proceeded only against Sps. Baladjay and Marasigan and, after due proceedings, the Quezon City RTC rendered a
Decision19dated March 26, 2008 (March 26, 2008 Decision), directing Sps. Baladjay to pay Ligon the amount of
₱3,000,000.00 with interest, as well as attorney’s fees and costs of suit.

On September 25, 2008, the March 26, 2008 Decision of the Quezon City RTC became final and
executory.20However, when Ligon sought its execution, she discovered that the December 3, 2002 attachment
annotation had been deleted from TCT No. 9273 when the subject property was sold by way of public auction on
September 9, 2005 to the highest bidder, respondent Ting, for the amount of ₱9,000,000.00 during the execution
proceedings in the Makati City Case, as evidenced by the Officer’s Final Deed of Sale21 dated October 27, 2006
(Officer’s Final Deed of Sale) issued by Sheriff Alejo. In this regard, Ligon learned that the Makati City RTC had
issued its first assailed Order22 dated February 9, 2007 (First Assailed Order), directing Atty. Garing, as the Register
of Deeds of Muntinlupa City, to: (a) register the Officer’s Final Deed of Sale on the official Record Book of the
Register of Deeds of Muntinlupa City; and (b) cancel TCT No. 8502 in the name of Sps. Baladjay and issue a new
title in the name of Ting, free from any liens and encumbrances.

Atty. Garing manifested23 before the Makati City RTC that it submitted the matter en consulta24 to the Land
Registration Authority (LRA) as he was uncertain whether the annotations on TCT No. 9273 should be carried over
to TCT No. 8502. In response to the manifestation, the Makati City RTC issued its second assailed Order25 dated
March 20, 2007 (Second Assailed Order), directing Atty. Garing to comply with the First Assailed Order under pain
of contempt. It explained that it could not allow the LRA to carry over all annotations previously annotated on TCT
No. 9273 in the name of Polished Arrow as said course of action would run counter to its December 9, 2004
Decision which specifically ordered the cancellation of said TCT and the restoration of TCT No. 8502 in its previous
condition. It further clarified that:26

[I]f there were liens or encumbrances annotated on TCT No. 8502 in the name of Rosario Baladjay when the same
was cancelled and TCT No. 9273 was issued by the Register of Deeds of Muntinlupa City in favor of Polished Arrow
Holdings, Inc. based on the Deed of Absolute Sale executed between the former and the latter, only such liens or
encumbrances will have to be carried over to the new Transfer Certificate of Title that he (Atty. Garing) is mandated
to immediately issue in favor of Leonardo J. Ting even as the Order of the Court dated February 9, 2007 decreed
that a new TCT be issued in the name of Mr. Leonardo J. Ting, free from any encumbrance. On the other hand, if
TCT No. 8502 in the name of Rosario Baladjay was free from any liens or encumbrances when the same was
cancelled and TCT No. 9273 was issued by the Register of Deeds of Muntinlupa City in favor of Polished Arrow
Holdings, Inc. by virtue of that Deed of Absolute Sale executed between Rosario Baladjay and Polished Arrow
Holdings, Inc., it necessarily follows that the new Transfer of Certificate of Title that the said Registrar of Deeds is
duty bound to issue immediately in favor of Leonardo Ting will also be freed from any liens and encumbrances, as
simple as that. (Emphases and underscoring supplied)

Based on the foregoing, it pronounced that it was Atty. Garing’s ministerial duty "to promptly cancel TCT No.
8502/T-44 in the name of defendant-spouses Baladjay and to issue a new Transfer Certificate of Title in the name
of the highest bidder, Leonardo J. Ting."27

Separately, Ting filed a motion before the Makati City RTC on account of Atty. Garing’s letter28 dated March 26,
2006 requiring him to comply with certain documentary requirements and to pay the appropriate capital gains,
documentary stamp and transfer taxes before a new title could be issued in his name. In its third assailed
Order29dated April 25, 2007 (Third Assailed Order), the Makati City RTC directed Ting to pay the aforesaid taxes
and ordered Atty. Garing to immediately cancel TCT No. 8502 and issue a new title in the former’s name.

On June 7, 2007, Atty. Garing issued TCT No. 1975630 in the name of Ting, free from any liens and encumbrances.
Later, Ting sold31 the subject property to respondent Benito G. Techico (Techico), resulting in the cancellation of
TCT No. 19756 and the issuance of TCT No. 3100132 in Techico’s name.

In view of the preceding circumstances, Ligon filed, inter alia, a certiorari petition33 against respondent Presiding
Judge Reynaldo Laigo (Judge Laigo), Sheriff Alejo, Atty. Garing, Ting, and Techico (respondents), alleging, among
others, that the Makati City RTC committed grave abuse of discretion in issuing the Assailed Orders. In this relation,
she prayed that the said orders be declared null and void for having been issued in violation of her right to due
process, and resulting in (a) the deletion of the December 3, 2002 attachment annotation on TCT No. 9273 which
evidences her prior attachment lien over the subject property, and (b) the issuance of new titles in the names of
Ting and Techico.
Consolidated with Ligon’s certiorari petition is a complaint for indirect contempt34 against respondents, whereby it
was alleged that the latter unlawfully interfered with the court processes of the Quezon City RTC, particularly by
deleting the December 3, 2002 attachment annotation on TCT No. 9273 which thereby prevented the execution of
the Quezon City RTC’s March 26, 2008 Decision.

The CA Ruling

In a Decision35 dated October 30, 2009, the CA dismissed Ligon’s certiorari petition, finding that the Makati City RTC
did not gravely abuse its discretion in issuing the Assailed Orders, adding further that the same was tantamount to a
collateral attack against the titles of both Ting and Techico, which is prohibited under Section 4836 of Presidential
Decree No. (PD) 1529.37 Likewise, it dismissed the indirect contempt charge for lack of sufficient basis, emphasizing
that the Assailed Orders were issued prior to the Quezon City RTC’s Decision, meaning that the said issuances
could not have been issued in disregard of the latter decision.

Aggrieved, Ligon filed the present petition.

The Issues Before the Court

The Court resolves the following essential issues: (a) whether or not the CA erred in ruling that the Makati City RTC
did not gravely abuse its discretion in issuing the Assailed Orders; and (b) whether or not Judge Laigo should be
cited in contempt and penalized administratively.

The Court’s Ruling

The petition is partly meritorious.

A. Issuance of the Assailed Orders vis-à-vis

Grave Abuse of Discretion.

Attachment is defined as a provisional remedy by which the property of an adverse party is taken into legal custody,
either at the commencement of an action or at any time thereafter, as a security for the satisfaction of any judgment
that may be recovered by the plaintiff or any proper party.38 Case law instructs that an attachment is a proceeding in
rem, and, hence, is against the particular property, enforceable against the whole world. Accordingly, 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. Such a proceeding, in effect, means that the property attached is an
indebted thing and a virtual condemnation of it to pay the owner’s debt. 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.39 Thus, a prior registration40 of an attachment lien creates a
preference,41 such that when an attachment has been duly levied upon a property, a purchaser thereof subsequent
to the attachment takes the property subject to the said attachment.42 As provided under PD 1529, said registration
operates as a form of constructive notice to all persons.43

Applying these principles to this case, the Court finds that the CA erred in holding that the RTC did not gravely
abuse its discretion in issuing the Assailed Orders as these issuances essentially disregarded, inter alia, Ligon’s
prior attachment lien over the subject property patently anathema to the nature of attachment proceedings which is
well-established in law and jurisprudence.44 In this case, Ligon, in order to secure the satisfaction of a favorable
judgment in the Quezon City Case, applied for and was eventually able to secure a writ of preliminary
attachment45over the subject property on November 25, 2002, which was later annotated on the dorsal portion46 of
TCT No. 9273 in the name of Polished Arrow on December 3, 2002. Notwithstanding the subsequent cancellation of
TCT No. 9273 due to the Makati City RTC’s December 9, 2004 Decision rescinding the transfer of the subject
property from Sps. Baladjay to Polished Arrow upon a finding that the same was made in fraud of creditors, Ligon’s
attachment lien over the subject property continued to subsist since the attachment she had earlier secured binds
the property itself, and, hence, continues until the judgment debt of Sps. Baladjay to Ligon as adjudged in the
Quezon City Case is satisfied, or the attachment discharged or vacated in some manner provided by law. The grave
abuse of discretion of the Makati City RTC lies with its directive to issue a new certificate of title in the name of Ting
(i.e., TCT No. 19756),47 free from any liens and encumbrances. This course of action clearly negates the efficacy of
Ligon’s attachment lien and, also, defies the legal characterization of attachment proceedings. It bears noting that
Ligon’s claim, secured by the aforesaid attachment, is against Sps. Baladjay whose ownership over the subject
property had been effectively restored in view of the RTC’s rescission of the property’s previous sale to Polished
Arrow.48Thus, Sps. Ligon’s attachment lien against Sps. Baladjay as well as their successors-in-interest should have
been preserved, and the annotation thereof carried over to any subsequent certificate of title,49 the most recent of
which as it appears on record is TCT No. 31001 in the name of Techico, without prejudice to the latter’s right to
protect his own ownership interest over the subject property.

That said, the Court now proceeds to resolve the second and final issue on indirect contempt.

B. Indirect Contempt Charges.

While the Court agrees with Ligon’s position on the issue of grave abuse of discretion, it holds an opposite view
anent its complaint for indirect contempt against Judge Laigo and/or the respondents in this case.

Contempt of court has been defined as a willful disregard or disobedience of a public authority. In its broad sense,
contempt is a disregard of, or disobedience to, the rules or orders of a legislative or judicial body or an interruption
of its proceedings by disorderly behavior or insolent language in its presence or so near thereto as to disturb its
proceedings or to impair the respect due to such a body. In its restricted and more usual sense, contempt
comprehends a despising of the authority, justice, or dignity of a court.50

Contempt of court is of two (2) kinds, namely: direct and indirect contempt. Indirect contempt or constructive
1âwphi1

contempt is that which is committed out of the presence of the court. Any improper conduct tending, directly or
indirectly, to impede, obstruct, or degrade the administration of justice would constitute indirect contempt.51

The indirect contempt charges in this case involve an invocation of paragraphs b, c, and d, Section 3, Rule 71 of the
Rules of Court which read as follows:

Section 3. Indirect contempt to be punished after charge and hearing. — After a charge in writing has been filed,
and an opportunity given to the respondent to comment thereon within such period as may be fixed by the court and
to be heard by himself or counsel, a person guilty of any of the following acts may be punished for indirect
contempt:

xxxx

(b) Disobedience of or resistance to a lawful writ, x x x;

(c) Any abuse of or any unlawful interference with the processes or proceedings of a court not constituting
direct contempt under section 1 of this Rule;

(d) Any improper conduct tending, directly or indirectly, to impede, obstruct, or degrade the administration of
justice;

Examining the petition, the Court finds that Ligon failed to sufficiently show how the acts of each of the respondents,
or more specifically, Judge Laigo, constituted any of the acts punishable under the foregoing section tending
towards a wilful disregard or disobedience of a public authority. In issuing the Assailed Orders, Judge Laigo merely
performed his judicial functions pursuant to the December 9, 2004 Decision in the Makati City Case which had
already attained finality. Thus, without Ligon's proper substantiation, considering too that Judge Laigo's official acts
are accorded with the presumption of regularity,52 the Court is constrained to dismiss the indirect contempt charges
in this case.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated October 30, 2009 of the Court of Appeals in
CA-G.R. SP No. 106175 is REVERSED and SET ASIDE. Accordingly, the Assailed Orders subject of this case are
hereby declared NULL and VOID only insofar as they relate to the issuance of Transfer Certificate of Title No.
19756 in the name of respondent Leonardo J. Ting free from any liens and encumbrances. The Register of Deeds
of Muntinlupa City is DIRECTED to carry over and annotate on TCT No. 31001 in the name of respondent Benito G.
Techico the original attachment lien of petitioner Leticia P. Ligon as described in this Decision. The indirect
contempt charges are, however, DISMISSED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 166759 November 25, 2009

SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR RESOURCES,
INC.,Petitioners,
vs.
NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and NIKKI NORLIN
SATSATIN, Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari assailing the Decision1 dated November 23, 2004 of the Court of Appeals
(CA) in CA-G.R. SP No. 83595, and its Resolution2 dated January 18, 2005, denying petitioners’ motion for
reconsideration.

The factual and procedural antecedents are as follows:

The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario Torres (Mario) each own adjacent 20,000
square meters track of land situated at Barrio Lankaan, Dasmariñas, Cavite, covered by Transfer Certificate of Title
(TCT) Nos. 251267,3 251266,4 and 251265,5 respectively.

Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners’ mother, Agripina Aledia, if she wanted to sell their
lands. After consultation with her daughters, daughter-in-law, and grandchildren, Agripina agreed to sell the
properties. Petitioners, thus, authorized Nicanor, through a Special Power of Attorney, to negotiate for the sale of
the properties.6

Sometime in 1999, Nicanor offered to sell the properties to Solar Resources, Inc. (Solar). Solar allegedly agreed to
purchase the three parcels of land, together with the 10,000-square-meter property owned by a certain Rustica
Aledia, for ₱35,000,000.00. Petitioners alleged that Nicanor was supposed to remit to them the total amount of
₱28,000,000.00 or ₱9,333,333.00 each to Sofia, Fructosa, and the heirs of Mario.

Petitioners claimed that Solar has already paid the entire purchase price of ₱35,000,000.00 to Nicanor in Thirty-Two
(32) post-dated checks which the latter encashed/deposited on their respective due dates. Petitioners added that
they also learned that during the period from January 2000 to April 2002, Nicanor allegedly acquired a house and
lot at Vista Grande BF Resort Village, Las Piñas City and a car, which he registered in the names of his
unemployed children, Nikki Normel Satsatin and Nikki Norlin Satsatin. However, notwithstanding the receipt of the
entire payment for the subject property, Nicanor only remitted the total amount of ₱9,000,000.00, leaving an
unremitted balance of ₱19,000,000.00. Despite repeated verbal and written demands, Nicanor failed to remit to
them the balance of ₱19,000,000.00.

Consequently, on October 25, 2002, petitioners filed before the regional trial court (RTC) a Complaint7 for sum of
money and damages, against Nicanor, Ermilinda Satsatin, Nikki Normel Satsatin, and Nikki Norlin Satsatin. The
case was docketed as Civil Case No. 2694-02, and raffled to RTC, Branch 90, Dasmariñas, Cavite.

On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ of Attachment,8 alleging among
other things: that respondents are about to depart the Philippines; that they have properties, real and personal in
Metro Manila and in the nearby provinces; that the amount due them is P19,000,000.00 above all other claims; that
there is no other sufficient security for the claim sought to be enforced; and that they are willing to post a bond fixed
by the court to answer for all costs which may be adjudged to the respondents and all damages which respondents
may sustain by reason of the attachment prayed for, if it shall be finally adjudged that petitioners are not entitled
thereto.

On October 30, 2002, the trial court issued an Order9 directing the petitioners to post a bond in the amount of
₱7,000,000.00 before the court issues the writ of attachment, the dispositive portion of which reads as follows:

WHEREFORE, premises considered, and finding the present complaint and motion sufficient in form and
substance, this Court hereby directs the herein plaintiffs to post a bond, pursuant to Section 3, Rule 57 of the 1997
Rules of Civil Procedure, in the amount of Seven Million Pesos (P7,000,000.00), before the Writ of Attachment
issues.10

On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff,11 informing the court that they have
already filed an attachment bond. They also prayed that a sheriff be deputized to serve the writ of attachment that
would be issued by the court.

In the Order12 dated November 15, 2002, the RTC granted the above motion and deputized the sheriff, together with
police security assistance, to serve the writ of attachment.

Thereafter, the RTC issued a Writ of Attachment13 dated November 15, 2002, directing the sheriff to attach the
estate, real or personal, of the respondents, the decretal portion of which reads:

WE, THEREFORE, command you to attach the estate, real or personal, not exempt from execution, of the said
defendants, in your province, to the value of said demands, and that you safely keep the same according to the said
Rule, unless the defendants give security to pay such judgment as may be recovered on the said action, in the
manner provided by the said Rule, provided that your legal fees and all necessary expenses are fully paid.

You shall return this writ with your proceedings indorsed hereon within twenty (20) days from the date of receipt
hereof.

GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day of November, 2002, at Imus for Dasmariñas,
Cavite, Philippines.14

On November 19, 2002, a copy of the writ of attachment was served upon the respondents. On the same date, the
sheriff levied the real and personal properties of the respondent, including household appliances, cars, and a parcel
of land located at Las Piñas, Manila.15

On November 21, 2002, summons, together with a copy of the complaint, was served upon the respondents.16

On November 29, 2002, respondents filed their Answer.17

On the same day respondents filed their answer, they also filed a Motion to Discharge Writ of Attachment18anchored
on the following grounds: the bond was issued before the issuance of the writ of attachment; the writ of attachment
was issued before the summons was received by the respondents; the sheriff did not serve copies of the application
for attachment, order of attachment, plaintiffs’ affidavit, and attachment bond, to the respondents; the sheriff did not
submit a sheriff’s return in violation of the Rules; and the grounds cited for the issuance of the writ are baseless and
devoid of merit. In the alternative, respondents offered to post a counter-bond for the lifting of the writ of
attachment.19

On March 11, 2003, after the parties filed their respective pleadings, the RTC issued an Order20 denying the motion,
but at the same time, directing the respondents to file a counter-bond, to wit:

WHEREFORE, premises considered, after the pertinent pleadings of the parties have been taken into account, the
herein defendants are hereby directed to file a counter-bond executed to the attaching party, in the amount of
Seven Million Pesos (₱7,000,000.00), to secure the payment of any judgment that the attaching party may recover
in the action, with notice on the attaching party, whereas, the Motion to Discharge Writ of Attachment is DENIED.

SO ORDERED.21
Thereafter, respondents filed a motion for reconsideration and/or motion for clarification of the above order. On April
3, 2003, the RTC issued another Order22 which reads:

In view of the Urgent Motion For Reconsideration And/Or Motion For Clarification of the Order of this Court dated
March 11, 2003, denying their Motion to Discharge Writ of Attachment filed by the defendants through counsel Atty.
Franco L. Loyola, the Motion to Discharge Writ of Attachment is denied until after the defendants have posted the
counter-bond in the amount of Seven Million Pesos (₱7,000,000.00).

The defendants, once again, is directed to file their counter-bond of Seven Million Pesos (₱7,000,000.00), if it so
desires, in order to discharge the Writ of Attachment.

SO ORDERED.

On December 15, 2003, respondents filed an Urgent Motion to Lift/Set Aside Order Dated March [11], 2003,23 which
the RTC denied in an Order24 of even date, the dispositive portion of which reads:

WHEREFORE, premises considered, defendants’ Urgent Motion to Lift/Set Aside Order Dated March 23, 2003
(With Manifestation to Dissolve Writ of Attachment) is hereby DENIED for lack of Merit.

SO ORDERED.

Respondents filed an Urgent Motion for Reconsideration,25 but it was denied in the Order26 dated March 3, 2004.

Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and Prohibition with Preliminary
Injunction and Temporary Restraining Order27 under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No.
83595, anchored on the following grounds:

(1) public respondents committed grave abuse of discretion amounting to lack of or in excess of jurisdiction
in failing to notice that the lower court has no jurisdiction over the person and subject matter of the complaint
when the subject Writ of Attachment was issued;

(2) public respondents committed grave abuse of discretion amounting to lack of or in excess of jurisdiction
in granting the issuance of the Writ of Attachment despite non-compliance with the formal requisites for the
issuance of the bond and the Writ of Attachment.28

Respondents argued that the subject writ was improper and irregular having been issued and enforced without the
lower court acquiring jurisdiction over the persons of the respondents. They maintained that the writ of attachment
was implemented without serving upon them the summons together with the complaint. They also argued that the
bond issued in favor of the petitioners was defective, because the bonding company failed to obtain the proper
clearance that it can transact business with the RTC of Dasmariñas, Cavite. They added that the various clearances
which were issued in favor of the bonding company were applicable only in the courts of the cities of Pasay, Pasig,
Manila, and Makati, but not in the RTC, Imus, Cavite.29

On November 23, 2003, the CA rendered the assailed Decision in favor of the respondents, finding grave abuse of
discretion amounting to lack of or in excess of jurisdiction on the part of the RTC in issuing the Orders dated
December 15, 2003 and March 3, 2004. The decretal portion of the Decision reads:

WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed Orders are hereby nullified and
set aside. The levy on the properties of the petitioners pursuant to the Writ of Attachment issued by the lower court
is hereby LIFTED.

SO ORDERED.30

Petitioners filed a Motion for Reconsideration,31 but it was denied in the Resolution32 dated January 18, 2005.

Hence, this petition assigning the following errors:

 I.

THE HONORABLE COURT OF APPEALS ERRED IN ORDERING THE LIFTING OF THE WRIT OF
ATTACHMENT PURSUANT TO SECTION 13, RULE 57 OF THE REVISED RULES OF CIVIL PROCEDURE.

II.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PUBLIC RESPONDENT COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN GRANTING
THE WRIT OF ATTACHMENT DESPITE THE BOND BEING INSUFFICIENT AND HAVING BEEN IMPROPERLY
ISSUED.

III.

THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING THE PETITION BY REASON OF
ESTOPPEL, LACHES AND PRESCRIPTION AND IN HOLDING THAT THE WRIT OF ATTACHMENT WAS
IMPROPERLY AND IRREGULARLY ENFORCED IN VIOLATION OF SECTION 5, RULE 57 OF THE REVISED
RULES OF COURT.

IV.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRINCIPLE OF ESTOPPEL WILL
NOT LIE AGAINST RESPONDENTS.

Petitioners maintain that in the case at bar, as in the case of FCY Construction Group, Inc. v. Court of Appeals,33the
only way the subject writ of attachment can be dissolved is by a counter-bond. They claim that the respondents are
not allowed to file a motion to dissolve the attachment under Section 13, Rule 57 of the Rules of Court. Otherwise,
the hearing on the motion for the dissolution of the writ would be tantamount to a trial on the merits, considering that
the writ of preliminary attachment was issued upon a ground which is, at the same time, the applicant’s cause of
action.

Petitioners insist that the determination of the existence of grounds to discharge a writ of attachment rests in the
sound discretion of the lower court. They argue that the Certification34 issued by the Office of the Administrator and
the Certifications35 issued by the clerks of court of the RTCs of Dasmariñas and Imus, Cavite, would show that the
bonds offered by Western Guaranty Corporation, the bonding company which issued the bond, may be accepted by
the RTCs of Dasmariñas and Imus, Cavite, and that the said bonding company has no pending liability with the
government.

Petitioners contend that respondents are barred by estoppel, laches, and prescription from questioning the orders of
the RTC issuing the writ of attachment. They also maintain that the issue whether there was impropriety or
irregularity in the issuance of the orders is moot and academic, considering that the attachment bond questioned by
the respondent had already expired on November 14, 2003 and petitioners have renewed the attachment bond
covering the period from November 14, 2003 to November 14, 2004, and further renewed to cover the period of
November 14, 2004 to November 14, 2005.

The petition is bereft of merit.

A writ of preliminary attachment is defined as a provisional remedy issued upon order of the court where an action
is pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by
the sheriff as security for the satisfaction of whatever judgment that might be secured in the said action by the
attaching creditor against the defendant.36

In the case at bar, the CA correctly found that there was grave abuse of discretion amounting to lack of or in excess
of jurisdiction on the part of the trial court in approving the bond posted by petitioners despite the fact that not all the
requisites for its approval were complied with. In accepting a surety bond, it is necessary that all the requisites for its
approval are met; otherwise, the bond should be rejected.37
Every bond should be accompanied by a clearance from the Supreme Court showing that the company concerned
is qualified to transact business which is valid only for thirty (30) days from the date of its issuance.38 However, it is
apparent that the Certification39 issued by the Office of the Court Administrator (OCA) at the time the bond was
issued would clearly show that the bonds offered by Western Guaranty Corporation may be accepted only in the
RTCs of the cities of Makati, Pasay, and Pasig. Therefore, the surety bond issued by the bonding company should
not have been accepted by the RTC of Dasmariñas, Branch 90, since the certification secured by the bonding
company from the OCA at the time of the issuance of the bond certified that it may only be accepted in the above-
mentioned cities. Thus, the trial court acted with grave abuse of discretion amounting to lack of or in excess of
jurisdiction when it issued the writ of attachment founded on the said bond.

Moreover, in provisional remedies, particularly that of preliminary attachment, the distinction between the issuance
and the implementation of the writ of attachment is of utmost importance to the validity of the writ. The distinction is
indispensably necessary to determine when jurisdiction over the person of the defendant should be acquired in
order to validly implement the writ of attachment upon his person.

This Court has long put to rest the issue of when jurisdiction over the person of the defendant should be acquired in
cases where a party resorts to provisional remedies. A party to a suit may, at any time after filing the complaint,
avail of the provisional remedies under the Rules of Court. Specifically, Rule 57 on preliminary attachment speaks
of the grant of the remedy "at the commencement of the action or at any time before entry of judgment."40 This
phrase refers to the date of the filing of the complaint, which is the moment that marks "the commencement of the
action." The reference plainly is to a time before summons is served on the defendant, or even before summons
issues.41

In Davao Light & Power Co., Inc. v. Court of Appeals,42 this Court clarified the actual time when jurisdiction should
be had:

It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the
person of defendant x x x issuance of summons, order of attachment and writ of attachment x x x these do not
and cannot bind and affect the defendant until and unless jurisdiction over his person is eventually
obtained by the court, either by service on him of summons or other coercive process or his voluntary submission
to the 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 as well as a copy of the complaint x x x. (Emphasis supplied.)

In Cuartero v. Court of Appeals,43 this Court held that the grant of the provisional remedy of attachment involves
three stages: first, the court issues the order granting the application; second, the writ of attachment issues
pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it is not
necessary that jurisdiction over the person of the defendant be first obtained. However, once the implementation of
the writ commences, the court must have acquired jurisdiction over the defendant, for without such jurisdiction, the
court has no power and authority to act in any manner against the defendant. Any order issuing from the Court will
not bind the defendant.44

Thus, it is indispensable not only for the acquisition of jurisdiction over the person of the defendant, but also upon
consideration of fairness, to apprise the defendant of the complaint against him and the issuance of a writ of
preliminary attachment and the grounds therefor that prior or contemporaneously to the serving of the writ of
attachment, service of summons, together with a copy of the complaint, the application for attachment, the
applicant’s affidavit and bond, and the order must be served upon him.

In the instant case, assuming arguendo that the trial court validly issued the writ of attachment on November 15,
2002, which was implemented on November 19, 2002, it is to be noted that the summons, together with a copy of
the complaint, was served only on November 21, 2002.

At the time the trial court issued the writ of attachment on November 15, 2002, it can validly to do so since the
motion for its issuance can be filed "at the commencement of the action or at any time before entry of judgment."
However, at the time the writ was implemented, the trial court has not acquired jurisdiction over the persons of the
respondent since no summons was yet served upon them. The proper officer should have previously or
simultaneously with the implementation of the writ of attachment, served a copy of the summons upon the
respondents in order for the trial court to have acquired jurisdiction upon them and for the writ to have binding
effect. Consequently, even if the writ of attachment was validly issued, it was improperly or irregularly enforced and,
therefore, cannot bind and affect the respondents.

Moreover, although there is truth in the petitioners’ contention that an attachment may not be dissolved by a
showing of its irregular or improper issuance if it is upon a ground which is at the same time the applicant’s cause of
action in the main case, since an anomalous situation would result if the issues of the main case would be
ventilated and resolved in a mere hearing of a motion. However, the same is not applicable in the case bar. It is
clear from the respondents’ pleadings that the grounds on which they base the lifting of the writ of attachment are
the irregularities in its issuance and in the service of the writ; not petitioners’ cause of action.
1avv phi 1

Further, petitioners’ contention that respondents are barred by estoppel, laches, and prescription from questioning
the orders of the RTC issuing the writ of attachment and that the issue has become moot and academic by the
renewal of the attachment bond covering after its expiration, is devoid of merit. As correctly held by the CA:

There are two ways of discharging the attachment. First, to file a counter-bond in accordance with Section 12 of
Rule 57. Second[,] [t]o quash the attachment on the ground that it was irregularly or improvidently issued, as
provided for in Section 13 of the same rule. Whether the attachment was discharged by either of the two ways
indicated in the law, the attachment debtor cannot be deemed to have waived any defect in the issuance of the
attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. The
filing of a counter-bond is merely a speedier way of discharging the attachment writ instead of the other way.45

Moreover, again assuming arguendo that the writ of attachment was validly issued, although the trial court later
acquired jurisdiction over the respondents by service of the summons upon them, such belated service of summons
on respondents cannot be deemed to have cured the fatal defect in the enforcement of the writ. The trial court
cannot enforce such a coercive process on respondents without first obtaining jurisdiction over their person. The
preliminary writ of attachment must be served after or simultaneous with the service of summons on the defendant
whether by personal service, substituted service or by publication as warranted by the circumstances of the case.
The subsequent service of summons does not confer a retroactive acquisition of jurisdiction over her person
because the law does not allow for retroactivity of a belated service.46

WHEREFORE, premises considered, the petition is DENIED. The Decision and Resolution of the Court of Appeals
dated November 23, 2004 and January 18, 2005, respectively, in CA-G.R. SP No. 83595 are AFFIRMED.

SO ORDERED.

G.R. No. 125027 August 12, 2002

ANITA MANGILA, petitioner,

vs.
COURT OF APPEALS and LORETA GUINA, respondents.

CARPIO, J.:

The Case

This is a petition fore review on certiorari under Rule 45 of the Rules of Court, seeking to set aside the Decision1 of
the Court of Appeals affirming the Decision2 of the Regional Trial Court, Branch 108, Pasay City. The trial court
upheld the writ of attachment and the declaration of default on petitioner while ordering her to pay private
respondent P109,376.95 plus 18 percent interest per annum, 25 percent attorney’s fees and costs of suit.

The Facts

Petitioner Anita Mangila ("petitioner" for brevity) is an exporter of sea foods and doing business under the name and
style of Seafoods Products. Private respondent Loreta Guina ("private respondent" for brevity) is the President and
General Manager of Air Swift International, a single registered proprietorship engaged in the freight forwarding
business.
Sometime in January 1988, petitioner contracted the freight forwarding services of private respondent for shipment
of petitioner’s products, such as crabs, prawns and assorted fishes, to Guam (USA) where petitioner maintains an
outlet. Petitioner agreed to pay private respondent cash on delivery. Private respondent’s invoice stipulates a
charge of 18 percent interest per annum on all overdue accounts. In case of suit, the same invoice stipulates
attorney’s fees equivalent to 25 percent of the amount due plus costs of suit.3

On the first shipment, petitioner requested for seven days within which to pay private respondent. However, for the
next three shipments, March 17, 24 and 31, 1988, petitioner failed to pay private respondent shipping charges
amounting to P109, 376.95.4

Despite several demands, petitioner never paid private respondent. Thus, on June 10, 1988, private respondent
filed Civil Case No. 5875 before the Regional Trial Court of Pasay City for collection of sum of money.

On August 1, 1988, the sheriff filed his Sheriff’s Return showing that summons was not served on petitioner. A
woman found at petitioner’s house informed the sheriff that petitioner transferred her residence to Sto. Niño,
Guagua, Pampanga. The sheriff found out further that petitioner had left the Philippines for Guam.5

Thus, on September 13, 1988, construing petitioner’s departure from the Philippines as done with intent to defraud
her creditors, private respondent filed a Motion for Preliminary Attachment. On September 26, 1988, the trial court
issued an Order of Preliminary Attachment6 against petitioner. The following day, the trial court issued a Writ of
Preliminary Attachment.

The trial court granted the request of its sheriff for assistance from their counterparts in RTC, Pampanga. Thus, on
October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga served on petitioner’s household help in San
Fernando, Pampanga, the Notice of Levy with the Order, Affidavit and Bond.7

On November 7, 1988, petitioner filed an Urgent Motion to Discharge Attachment8 without submitting herself to the
jurisdiction of the trial court. She pointed out that up to then, she had not been served a copy of the Complaint and
the summons. Hence, petitioner claimed the court had not acquired jurisdiction over her person.9

In the hearing of the Urgent Motion to Discharge Attachment on November 11, 1988, private respondent sought and
was granted a re-setting to December 9, 1988. On that date, private respondent’s counsel did not appear, so the
Urgent Motion to Discharge Attachment was deemed submitted for resolution.10

The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon filing of petitioner’s counter-
bond. The trial court, however, did not rule on the question of jurisdiction and on the validity of the writ of preliminary
attachment.

On December 26, 1988, private respondent applied for an alias summons, which the trial court issued on January
19, 1989.11 It was only on January 26, 1989 that summons was finally served on petitioner.12

On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of improper venue. Private
respondent’s invoice for the freight forwarding service stipulates that "if court litigation becomes necessary to
enforce collection xxx the agreed venue for such action is Makati, Metro Manila."13 Private respondent filed an
Opposition asserting that although "Makati" appears as the stipulated venue, the same was merely an inadvertence
by the printing press whose general manager executed an affidavit14 admitting such inadvertence. Moreover, private
respondent claimed that petitioner knew that private respondent was holding office in Pasay City and not in
Makati.15 The lower court, finding credence in private respondent’s assertion, denied the Motion to Dismiss and
gave petitioner five days to file her Answer. Petitioner filed a Motion for Reconsideration but this too was denied.

Petitioner filed her Answer16 on June 16, 1989, maintaining her contention that the venue was improperly laid.

On June 26, 1989, the trial court issued an Order setting the pre-trial for July 18, 1989 at 8:30 a.m. and requiring the
parties to submit their pre-trial briefs. Meanwhile, private respondent filed a Motion to Sell Attached Properties but
the trial court denied the motion.

On motion of petitioner, the trial court issued an Order resetting the pre-trial from July 18, 1989 to August 24, 1989
at 8:30 a.m..
On August 24, 1989, the day of the pre-trial, the trial court issued an Order17 terminating the pre-trial and allowing
the private respondent to present evidence ex-parte on September 12, 1989 at 8:30 a.m.. The Order stated that
when the case was called for pre-trial at 8:31 a.m., only the counsel for private respondent appeared. Upon the trial
court’s second call 20 minutes later, petitioner’s counsel was still nowhere to be found. Thus, upon motion of private
respondent, the pre-trial was considered terminated.

On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order terminating the pre-trial.
Petitioner explained that her counsel arrived 5 minutes after the second call, as shown by the transcript of
stenographic notes, and was late because of heavy traffic. Petitioner claims that the lower court erred in allowing
private respondent to present evidence ex-parte since there was no Order considering the petitioner as in default.
Petitioner contends that the Order of August 24, 1989 did not state that petitioner was declared as in default but still
the court allowed private respondent to present evidence ex-parte.18

On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled the presentation of private
respondent’s evidence ex-parte on October 10, 1989. 1âwphi1.nêt

On October 10, 1989, petitioner filed an Omnibus Motion stating that the presentation of evidence ex-parte should
be suspended because there was no declaration of petitioner as in default and petitioner’s counsel was not absent,
but merely late.

On October 18, 1989, the trial court denied the Omnibus Motion.19

On November 20, 1989, the petitioner received a copy of the Decision of November 10, 1989, ordering petitioner to
pay respondent P109,376.95 plus 18 percent interest per annum, 25 percent attorney’s fees and costs of suit.
Private respondent filed a Motion for Execution Pending Appeal but the trial court denied the same.

The Ruling of the Court of Appeals

On December 15, 1995, the Court of Appeals rendered a decision affirming the decision of the trial court. The Court
of Appeals upheld the validity of the issuance of the writ of attachment and sustained the filing of the action in the
RTC of Pasay. The Court of Appeals also affirmed the declaration of default on petitioner and concluded that the
trial court did not commit any reversible error.

Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals denied the same in a
Resolution dated May 20, 1996.

Hence, this petition.

The Issues

The issues raised by petitioner may be re-stated as follows:

I.

WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF ATTACHMENT WAS
IMPROPERLY ISSUED AND SERVED;

II.

WHETHER THERE WAS A VALID DECLARATION OF DEFAULT;

III.

WHETHER THERE WAS IMPROPER VENUE.

IV.
 WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS OBLIGED TO PAY
P109, 376.95, PLUS ATTORNEY’S FEES.20

The Ruling of the Court

Improper Issuance and Service of Writ of Attachment

Petitioner ascribes several errors to the issuance and implementation of the writ of attachment. Among petitioner’s
arguments are: first, there was no ground for the issuance of the writ since the intent to defraud her creditors had
not been established; second, the value of the properties levied exceeded the value of private respondent’s claim.
However, the crux of petitioner’s arguments rests on the question of the validity of the writ of attachment. Because
of failure to serve summons on her before or simultaneously with the writ’s implementation, petitioner claims that
the trial court had not acquired jurisdiction over her person and thus the service of the writ is void.

As a preliminary note, a distinction should be made between issuance and implementation of the writ of attachment.
It is necessary to distinguish between the two to determine when jurisdiction over the person of the defendant
should be acquired to validly implement the writ. This distinction is crucial in resolving whether there is merit in
petitioner’s argument.

This Court has long settled the issue of when jurisdiction over the person of the defendant should be acquired in
cases where a party resorts to provisional remedies. A party to a suit may, at any time after filing the complaint,
avail of the provisional remedies under the Rules of Court. Specifically, Rule 57 on preliminary attachment speaks
of the grant of the remedy "at the commencement of the action or at any time thereafter."21 This phrase refers
to the date of filing of the complaint which is the moment that marks "the commencement of the action." The
reference plainly is to a time before summons is served on the defendant, or even before summons issues.

In Davao Light & Power Co., Inc. v. Court of Appeals,22 this Court clarified the actual time when jurisdiction
should be had:

"It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction
over the person of defendant - issuance of summons, order of attachment and writ of attachment -
these do not and cannot bind and affect the defendant until and unless jurisdiction over his person
is eventually obtained by the court, either by service on him of summons or other coercive process or his
voluntary submission to the 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 as well as a copy of the
complaint xxx." (Emphasis supplied.)

Furthermore, we have held that the grant of the provisional remedy of attachment involves three stages: first, the
court issues the order granting the application; second, the writ of attachment issues pursuant to the order granting
the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over
the person of the defendant be first obtained. However, once the implementation of the writ
commences, the court must have acquired jurisdiction over the defendant for without such jurisdiction, the court
has no power and authority to act in any manner against the defendant. Any order issuing from the Court will not
bind the defendant.23

In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and implemented on
October 28, 1988. However, the alias summons was served only on January 26, 1989 or almost three months
after the implementation of the writ of attachment.

The trial court had the authority to issue the Writ of Attachment on September 27 since a motion for its issuance can
be filed "at the commencement of the action." However, on the day the writ was implemented, the trial court should
have, previously or simultaneously with the implementation of the writ, acquired jurisdiction over the petitioner. Yet,
as was shown in the records of the case, the summons was actually served on petitioner several months after the
writ had been implemented.
Private respondent, nevertheless, claims that the prior or contemporaneous service of summons contemplated in
Section 5 of Rule 57 provides for exceptions. Among such exceptions are "where the summons could not be served
personally or by substituted service despite diligent efforts or where the defendant is a resident temporarily absent
therefrom x x x." Private respondent asserts that when she commenced this action, she tried to serve summons on
petitioner but the latter could not be located at her customary address in Kamuning, Quezon City or at her new
address in Guagua, Pampanga.24 Furthermore, respondent claims that petitioner was not even in Pampanga;
rather, she was in Guam purportedly on a business trip.

Private respondent never showed that she effected substituted service on petitioner after her personal service
failed. Likewise, if it were true that private respondent could not ascertain the whereabouts of petitioner after a
diligent inquiry, still she had some other recourse under the Rules of Civil Procedure.

The rules provide for certain remedies in cases where personal service could not be effected on a party. Section 14,
Rule 14 of the Rules of Court provides that whenever the defendant’s "whereabouts are unknown and cannot be
ascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in a newspaper
of general circulation x x x." Thus, if petitioner’s whereabouts could not be ascertained after the sheriff had served
the summons at her given address, then respondent could have immediately asked the court for service of
summons by publication on petitioner.25

Moreover, as private respondent also claims that petitioner was abroad at the time of the service of summons, this
made petitioner a resident who is temporarily out of the country. This is the exact situation contemplated in Section
16,26 Rule 14 of the Rules of Civil Procedure, providing for service of summons by publication.

In conclusion, we hold that the alias summons belatedly served on petitioner cannot be deemed to have cured the
fatal defect in the enforcement of the writ. The trial court cannot enforce such a coercive process on petitioner
without first obtaining jurisdiction over her person. The preliminary writ of attachment must be served after or
simultaneous with the service of summons on the defendant whether by personal service, substituted service or by
publication as warranted by the circumstances of the case.27 The subsequent service of summons does not confer a
retroactive acquisition of jurisdiction over her person because the law does not allow for retroactivity of a belated
service.

Improper Venue

Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in private respondent’s invoice
which contains the following:

"3. If court litigation becomes necessary to enforce collection, an additional equivalent (sic) to 25% of the
principal amount will be charged. The agreed venue for such action is Makati, Metro Manila, Philippines."28

Based on this provision, petitioner contends that the action should have been instituted in the RTC of Makati and to
do otherwise would be a ground for the dismissal of the case.

We resolve to dismiss the case on the ground of improper venue but not for the reason stated by petitioner.

The Rules of Court provide that parties to an action may agree in writing on the venue on which an action should be
brought.29 However, a mere stipulation on the venue of an action is not enough to preclude parties from bringing a
case in other venues.30 The parties must be able to show that such stipulation is exclusive. Thus, absent words that
show the parties’ intention to restrict the filing of a suit in a particular place, courts will allow the filing of a case in
any venue, as long as jurisdictional requirements are followed. Venue stipulations in a contract, while considered
valid and enforceable, do not as a rule supersede the general rule set forth in Rule 4 of the Revised Rules of
Court.31 In the absence of qualifying or restrictive words, they should be considered merely as an agreement on
additional forum, not as limiting venue to the specified place.32

In the instant case, the stipulation does not limit the venue exclusively to Makati. There are no qualifying or
restrictive words in the invoice that would evince the intention of the parties that Makati is the "only or exclusive"
venue where the action could be instituted. We therefore agree with private respondent that Makati is not the only
venue where this case could be filed.
Nevertheless, we hold that Pasay is not the proper venue for this case.

Under the 1997 Rules of Civil Procedure, the general rule is venue in personal actions is "where the defendant or
any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election
of the plaintiff."33 The exception to this rule is when the parties agree on an exclusive venue other than the places
mentioned in the rules. But, as we have discussed, this exception is not applicable in this case. Hence, following the
general rule, the instant case may be brought in the place of residence of the plaintiff or defendant, at the election of
the plaintiff (private respondent herein).

In the instant case, the residence of private respondent (plaintiff in the lower court) was not alleged in the complaint.
Rather, what was alleged was the postal address of her sole proprietorship, Air Swift International. It was only when
private respondent testified in court, after petitioner was declared in default, that she mentioned her residence to be
in Better Living Subdivision, Parañaque City.

In the earlier case of Sy v. Tyson Enterprises, Inc.,34 the reverse happened. The plaintiff in that case was Tyson
Enterprises, Inc., a corporation owned and managed by Dominador Ti. The complaint, however, did not allege the
office or place of business of the corporation, which was in Binondo, Manila. What was alleged was the residence of
Dominador Ti, who lived in San Juan, Rizal. The case was filed in the Court of First Instance of Rizal, Pasig. The
Court there held that the evident purpose of alleging the address of the corporation’s president and manager was to
justify the filing of the suit in Rizal, Pasig instead of in Manila. Thus, the Court ruled that there was no question that
venue was improperly laid in that case and held that the place of business of Tyson Enterpises, Inc. is considered
as its residence for purposes of venue. Furthermore, the Court held that the residence of its president is not the
residence of the corporation because a corporation has a personality separate and distinct from that of its officers
and stockholders.

In the instant case, it was established in the lower court that petitioner resides in San Fernando, Pampanga35 while
private respondent resides in Parañaque City.36 However, this case was brought in Pasay City, where the business
of private respondent is found. This would have been permissible had private respondent’s business been a
corporation, just like the case in Sy v. Tyson Enterprises, Inc. However, as admitted by private respondent in her
Complaint37 in the lower court, her business is a sole proprietorship, and as such, does not have a separate juridical
personality that could enable it to file a suit in court.38 In fact, there is no law authorizing sole proprietorships to file a
suit in court.39

A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the owner
of the enterprise.40 The law merely recognizes the existence of a sole proprietorship as a form of business
organization conducted for profit by a single individual and requires its proprietor or owner to secure licenses and
permits, register its business name, and pay taxes to the national government.41 The law does not vest a separate
legal personality on the sole proprietorship or empower it to file or defend an action in court.42

Thus, not being vested with legal personality to file this case, the sole proprietorship is not the plaintiff in this case
but rather Loreta Guina in her personal capacity. In fact, the complaint in the lower court acknowledges in its
caption that the plaintiff and defendant are Loreta Guina and Anita Mangila, respectively. The title of the petition
before us does not state, and rightly so, Anita Mangila v. Air Swift International, but rather Anita Mangila v. Loreta
Guina. Logically then, it is the residence of private respondent Guina, the proprietor with the juridical personality,
which should be considered as one of the proper venues for this case.

All these considered, private respondent should have filed this case either in San Fernando, Pampanga (petitioner’s
residence) or Parañaque (private respondent’s residence). Since private respondent (complainant below) filed this
case in Pasay, we hold that the case should be dismissed on the ground of improper venue.

Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court, petitioner expressly stated
that she was filing the motion without submitting to the jurisdiction of the court. At that time, petitioner had not been
served the summons and a copy of the complaint.43 Thereafter, petitioner timely filed a Motion to Dismiss44 on the
ground of improper venue. Rule 16, Section 1 of the Rules of Court provides that a motion to dismiss may be filed
"[W]ithin the time for but before filing the answer to the complaint or pleading asserting a claim." Petitioner even
raised the issue of improper venue in his Answer45 as a special and affirmative defense. Petitioner also continued to
raise the issue of improper venue in her Petition for Review46 before this Court. We thus hold that the dismissal of
this case on the ground of improper venue is warranted.
The rules on venue, like other procedural rules, are designed to insure a just and orderly administration of justice or
the impartial and evenhanded determination of every action and proceeding. Obviously, this objective will not be
attained if the plaintiff is given unrestricted freedom to choose where to file the complaint or petition.47

We find no reason to rule on the other issues raised by petitioner. 1âwphi1.nêt

WHEREFORE, the petition is GRANTED on the grounds of improper venue and invalidity of the service of the writ
of attachment. The decision of the Court of Appeals and the order of respondent judge denying the motion to
dismiss are REVERSED and SET ASIDE. Civil Case No. 5875 is hereby dismissed without prejudice to refiling it in
the proper venue. The attached properties of petitioner are ordered returned to her immediately.

SO ORDERED.

G.R. No. 139941 January 19, 2001

VICENTE B. CHUIDIAN, petitioner,

vs.
SANDIGANBAYAN (Fifth Division) and the REPUBLIC OF THE PHILIPPINES, respondents.

YNARES-SANTIAGO, J.:

The instant petition arises from transactions that were entered into by the government in the penultimate days of the
Marcos administration. Petitioner Vicente B. Chuidian was alleged to be a dummy or nominee of Ferdinand and
Imelda Marcos in several companies said to have been illegally acquired by the Marcos spouses. As a favored
business associate of the Marcoses, Chuidian allegedly used false pretenses to induce the officers of the Philippine
Export and Foreign Loan Guarantee Corporation (PHILGUARANTEE), the Board of Investments (BOI) and the
Central Bank, to facilitate the procurement and issuance of a loan guarantee in favor of the Asian Reliability
Company, Incorporated (ARCI) sometime in September 1980. ARCI, 98% of which was allegedly owned by
Chuidian, was granted a loan guarantee of Twenty-Five Million U.S. Dollars (US$25,000,000.00). 1âwphi1.nêt

While ARCI represented to Philguarantee that the loan proceeds would be used to establish five inter-related
projects in the Philippines, Chuidian reneged on the approved business plan and instead invested the proceeds of
the loan in corporations operating in the United States, more particularly Dynetics, Incorporated and Interlek,
Incorporated. Although ARCI had received the proceeds of the loan guaranteed by Philguarantee, the former
defaulted in the payments thereof, compelling Philguarantee to undertake payments for the same. Consequently, in
June 1985, Philguarantee sued Chuidian before the Santa Clara County Superior Court,1 charging that in violation
of the terms of the loan, Chuidian not only defaulted in payment, but also misused the funds by investing them in
Silicon Valley corporations and using them for his personal benefit.

For his part, Chuidian claimed that he himself was a victim of the systematic plunder perpetrated by the Marcoses
as he was the true owner of these companies, and that he had in fact instituted an action before the Federal Courts
of the United States to recover the companies which the Marcoses had illegally wrested from him.2

On November 27, 1985, or three (3) months before the successful people's revolt that toppled the Marcos
dictatorship, Philguarantee entered into a compromise agreement with Chuidian whereby petitioner Chuidian shall
assign and surrender title to all his companies in favor of the Philippine government. In return, Philguarantee shall
absolve Chuidian from all civil and criminal liability, and in so doing, desist from pursuing any suit against Chuidian
concerning the payments Philguarantee had made on Chuidian's defaulted loans.

It was further stipulated that instead of Chuidian reimbursing the payments made by Philguarantee arising from
Chuidian's default, the Philippine government shall pay Chuidian the amount of Five Million Three Hundred
Thousand Dollars (US$5,300,000.00). Initial payment of Five Hundred Thousand Dollars (US$500,000.00) was
actually received by Chuidian, as well as succeeding payment of Two Hundred Thousand Dollars (US$200,000.00).
The remaining balance of Four Million Six Hundred Thousand Dollars (US$4,600,000.00) was to be paid through an
irrevocable Letter of Credit (L/C) from which Chuidian would draw One Hundred Thousand Dollars (US$100,000.00)
monthly.3 Accordingly, on December 12, 1985, L/C No. SSD-005-85 was issued for the said amount by the
Philippine National Bank (PNB). Subsequently, Chuidian was able to make two (2) monthly drawings from said L/C
at the Los Angeles branch of the PNB.4
With the advent of the Aquino administration, the newly-established Presidential Commission on Good Government
(PCGG) exerted earnest efforts to search and recover money, gold, properties, stocks and other assets suspected
as having been illegally acquired by the Marcoses, their relatives and cronies.

Petitioner Chuidian was among those whose assets were sequestered by the PCGG. On May 30, 1986, the PCGG
issued a Sequestration Order5 directing the PNB to place under its custody, for and in behalf of the PCGG, the
irrevocable L/C (No. SSD-005-85). Although Chuidian was then residing in the United States, his name was placed
in the Department of Foreign Affairs' Hold Order list.6

In the meantime, Philguarantee filed a motion before the Superior Court of Santa Clara County of California in Civil
Case Nos. 575867 and 577697 seeking to vacate the stipulated judgment containing the settlement between
Philguarantee and Chuidian on the grounds that: (a) Philguarantee was compelled by the Marcos administration to
agree to the terms of the settlement which was highly unfavorable to Philguarantee and grossly disadvantageous to
the government; (b) Chuidian blackmailed Marcos into pursuing and concluding the settlement agreement by
threatening to expose the fact that the Marcoses made investments in Chuidian's American enterprises; and (c) the
Aquino administration had ordered Philguarantee not to make further payments on the L/C to Chuidian. After
considering the factual matters before it, the said court concluded that Philguarantee "had not carried its burden of
showing that the settlement between the parties should be set aside."7 On appeal, the Sixth Appellate District of the
Court of Appeal of the State of California affirmed the judgment of the Superior Court of Sta. Clara County denying
Philguarantee's motion to vacate the stipulated judgment based on the settlement agreement.8

After payment on the L/C was frozen by the PCGG, Chuidian filed before the United States District Court, Central
District of California, an action against PNB seeking, among others, to compel PNB to pay the proceeds of the L/C.
PNB countered that it cannot be held liable for a breach of contract under principles of illegality, international comity
and act of state, and thus it is excused from payment of the L/C. Philguarantee intervened in said action, raising the
same issues and arguments it had earlier raised in the action before the Santa Clara Superior Court, alleging that
PNB was excused from making payments on the L/C since the settlement was void due to illegality, duress and
fraud.9

The Federal Court rendered judgment ruling: (1) in favor of PNB excusing the said bank from making payment on
the L/C; and (2) in Chuidian's favor by denying intervenor Philguarantee's action to set aside the settlement
agreement.10

Meanwhile, on February 27, 1987, a Deed of Transfer11 was executed between then Secretary of Finance Jaime V.
Ongpin and then PNB President Edgardo B. Espiritu, to facilitate the rehabilitation of PNB, among others, as part of
the government's economic recovery program. The said Deed of Transfer provided for the transfer to the
government of certain assets of PNB in exchange for which the government would assume certain liabilities of
PNB.12 Among those liabilities which the government assumed were unused commercial L/C's and Deferred L/C's,
including SSD-005-85 listed under Dynetics, Incorporated in favor of Chuidian in the amount of Four Million Four
Hundred Thousand Dollars (US$4,400,000.00).13

On July 30, 1987, the government filed before the Sandiganbayan Civil Case No. 0027 against the Marcos
spouses, several government officials who served under the Marcos administration, and a number of individuals
known to be cronies of the Marcoses, including Chuidian. The complaint sought the reconveyance, reversion,
accounting and restitution of all forms of wealth allegedly procured illegally and stashed away by the defendants.

In particular, the complaint charged that Chuidian, by himself and/or in conspiracy with the Marcos spouses,
engaged in "devices, schemes and stratagems" by: (1) forming corporations for the purpose of hiding and avoiding
discovery of illegally obtained assets; (2) pillaging the coffers of government financial institutions such as the
Philguarantee; and (3) executing the court settlement between Philguarantee and Chuidian which was grossly
disadvantageous to the government and the Filipino people.

In fine, the PCGG averred that the above-stated acts of Chuidian committed in unlawful concert with the other
defendants constituted "gross abuse of official position of authority, flagrant breach of public trust and fiduciary
obligations, brazen abuse of right and power, unjust enrichment, violation of the Constitution and laws" of the land.14

While the case was pending, on March 17, 1993, the Republic of the Philippines filed a motion for issuance of a writ
of attachment15 over the L/C, citing as grounds therefor the following:
 (1) Chuidian embezzled or fraudulently misapplied the funds of ARCI acting in a fiduciary capacity, justifying
issuance of the writ under Section 1(b), Rule 57 of the Rules of Court;

(2) The writ is justified under Section 1(d) of the same rule as Chuidian is guilty of fraud in contracting the
debt or incurring the obligation upon which the action was brought, or that he concealed or disposed of the
property that is the subject of the action;

(3) Chuidian has removed or disposed of his property with the intent of defrauding the plaintiff as justified
under Section 1(c) of Rule 57; and

(4) Chuidian is residing out of the country or one on whom summons may be served by publication, which
justifies the writ of attachment prayed for under Section 1(e) of the same rule.

The Republic also averred that should the action brought by Chuidian before the U.S. District Court of California to
compel payment of the L/C prosper, inspite of the sequestration of the said L/C, Chuidian can ask the said foreign
court to compel the PNB Los Angeles branch to pay the proceeds of the L/C. Eventually, Philguarantee will be
made to shoulder the expense resulting in further damage to the government. Thus, there was an urgent need for
the writ of attachment to place the L/C under the custody of the Sandiganbayan so the same may be preserved as
security for the satisfaction of judgment in the case before said court.

Chuidian opposed the motion for issuance of the writ of attachment, contending that:

(1) The plaintiff's affidavit appended to the motion was in form and substance fatally defective;

(2) Section 1(b) of Rule 57 does not apply since there was no fiduciary relationship between the plaintiff and
Chuidian;

(3) While Chuidian does not admit fraud on his part, if ever there was breach of contract, such fraud must be
present at the time the contract is entered into;

(4) Chuidian has not removed or disposed of his property in the absence of any intent to defraud plaintiff;

(5) Chuidian's absence from the country does not necessarily make him a non-resident; and

(6) Service of summons by publication cannot be used to justify the issuance of the writ since Chuidian had
already submitted to the jurisdiction of the Court by way of a motion to lift the freeze order filed through his
counsel.

On July 14, 1993, the Sandiganbayan issued a Resolution ordering the issuance of a writ of attachment against L/C
No. SSD-005-85 as security for the satisfaction of judgment.16 The Sandiganbayan's ruling was based on its
disquisition of the five points of contention raised by the parties. On the first issue, the Sandiganbayan found that
although no separate affidavit was attached to the motion, the motion itself contained all the requisites of an
affidavit, and the verification thereof is deemed a substantial compliance of Rule 57, Section 3 of the Rules of Court.

Anent the second contention, the Sandiganbayan ruled that there was no fiduciary relationship existing between
Chuidian and the Republic, but only between Chuidian and ARCI. Since the Republic is not privy to the fiduciary
relationship between Chuidian and ARCI, it cannot invoke Section 1(b) of Rule 57.

On the third issue of fraud on the part of Chuidian in contracting the loan, or in concealing or disposing of the
subject property, the Sandiganbayan held that there was a prima facie case of fraud committed by Chuidian,
justifying the issuance of the writ of attachment. The Sandiganbayan also adopted the Republic's position that since
it was compelled to pay, through Philguarantee, the bank loans taken out by Chuidian, the proceeds of which were
fraudulently diverted, it is entitled to the issuance of the writ of attachment to protect its rights as creditor.

Assuming that there is truth to the government's allegation that Chuidian has removed or disposed of his property
with the intent to defraud, the Sandiganbayan held that the writ of attachment is warranted, applying Section 1(e) of
Rule 57. Besides, the Rules provide for sufficient security should the owner of the property attached suffer damage
or prejudice caused by the attachment.17

Chuidian's absence from the country was considered by the Sandiganbayan to be "the most potent insofar as the
relief being sought is concerned."18 Taking judicial notice of the admitted fact that Chuidian was residing outside of
the country, the Sandiganbayan observed that:

"x x x no explanation whatsoever was given by him as to his absence from the country, or as to his homecoming
plans in the future. It may be added, moreover, that he has no definite or clearcut plan to return to the country at this
juncture – given the manner by which he has submitted himself to the jurisdiction of the court."19

Thus, the Sandiganbayan ruled that even if Chuidian is one who ordinarily resides in the Philippines, but is
temporarily living outside, he is still subject to the provisional remedy of attachment.

Accordingly, an order of attachment20 was issued by the Sandiganbayan on July 19, 1993, ordering the
Sandiganbayan Sheriff to attach PNB L/C No. SSD-005-85 for safekeeping pursuant to the Rules of Court as
security for the satisfaction of judgment in Sandiganbayan Civil Case No. 0027.

On August 11, 1997, or almost four (4) years after the issuance of the order of attachment, Chuidian filed a motion
to lift the attachment based on the following grounds:

First, he had returned to the Philippines; hence, the Sandiganbayan's "most potent ground" for the issuance of the
writ of preliminary attachment no longer existed. Since his absence in the past was the very foundation of the
Sandiganbayan's writ of preliminary attachment, his presence in the country warrants the immediate lifting thereof.

Second, there was no evidence at all of initial fraud or subsequent concealment except for the affidavit submitted by
the PCGG Chairman citing mere "belief and information" and "not on knowledge of the facts." Moreover, this
statement is hearsay since the PCGG Chairman was not a witness to the litigated incidents, was never presented
as a witness by the Republic and thus was not subject to cross-examination.

Third, Chuidian denies that he ever disposed of his assets to defraud the Republic, and there is nothing in the
records that support the Sandiganbayan's erroneous conclusion on the matter. Fourth, Chuidian belied the
allegation that he was also a defendant in "other related criminal action," for in fact, he had "never been a defendant
in any prosecution of any sort in the Philippines."21 Moreover, he could not have personally appeared in any other
action because he had been deprived of his right to a travel document by the government.

Fifth, the preliminary attachment was, in the first place, unwarranted because he was not "guilty of fraud in
contracting the debt or incurring the obligation". In fact, the L/C was not a product of fraudulent transactions, but
was the result of a US Court-approved settlement. Although he was accused of employing blackmail tactics to
procure the settlement, the California Supreme Court ruled otherwise. And in relation thereto, he cites as a sixth
ground the fact that all these allegations of fraud and wrongdoing had already been dealt with in actions before the
State and Federal Courts of California. While it cannot technically be considered as forum shopping, it is
nevertheless a "form of suit multiplicity over the same issues, parties and subject matter." 22 These foreign
judgments constitute res judicata which warrant the dismissal of the case itself.

Chuidian further contends that should the attachment be allowed to continue, he will be deprived of his property
without due process. The L/C was payment to Chuidian in exchange for the assets he turned over to the Republic
pursuant to the terms of the settlement in Case No. 575867. Said assets, however, had already been sold by the
Republic and cannot be returned to Chuidian should the government succeed in depriving him of the proceeds of
the L/C. Since said assets were disposed of without his or the Sandiganbayan's consent, it is the Republic who is
fraudulently disposing of assets.

Finally, Chuidian stressed that throughout the four (4) years that the preliminary attachment had been in effect, the
government had not set the case for hearing. Under Rule 17, Section 3, the case itself should be dismissed for
laches owing to the Republic's failure to prosecute its action for an unreasonable length of time. Accordingly, the
preliminary attachment, being only a temporary or ancillary remedy, must be lifted and the PNB ordered to
immediately pay the proceeds of the L/C to Chuidian.
Subsequently, on August 20, 1997, Chuidian filed a motion to require the Republic to deposit the L/C in an interest
bearing account.23 Annex "D"; Rollo, pp. 77-79.23 He pointed out to the Sandiganbayan that the face amount of the
L/C had, since its attachment, become fully demandable and payable. However, since the amount is just lying
dormant in the PNB, without earning any interest, he proposed that it would be to the benefit of all if the
Sandiganbayan requires PNB to deposit the full amount to a Sandiganbayan trust account at any bank in order to
earn interest while awaiting judgment of the action.

The Republic opposed Chuidian's motion to lift attachment, alleging that Chuidian's absence was not the only
ground for the attachment and, therefore, his belated appearance before the Sandiganbayan is not a sufficient
reason to lift the attachment. Moreover, allowing the foreign judgment as a basis for the lifting of the attachment
would essentially amount to an abdication of the jurisdiction of the Sandiganbayan to hear and decide the ill gotten
wealth cases lodged before it in deference to the judgment of foreign courts.

In a Resolution promulgated on November 13, 1998, the Sandiganbayan denied Chuidian's motion to lift
attachment.24

On the same day, the Sandiganbayan issued another Resolution denying Chuidian's motion to require deposit of
the attached L/C in an interest bearing account.25

In a motion seeking a reconsideration of the first resolution, Chuidian assailed the Sandiganbayan's finding that the
issues raised in his motion to lift attachment had already been dealt with in the earlier resolution dated July 14, 1993
granting the application for the writ of preliminary attachment based on the following grounds:

First, Chuidian was out of the country in 1993, but is now presently residing in the country.

Second, the Sandiganbayan could not have known then that his absence was due to the non-renewal of his
passport at the instance of the PCGG. Neither was it revealed that the Republic had already disposed of Chuidian's
assets ceded to the Republic in exchange for the L/C. The foreign judgment was not an issue then because at that
time, said judgment had not yet been issued and much less final. Furthermore, the authority of the PCGG
Commissioner to subscribe as a knowledgeable witness relative to the issuance of the writ of preliminary
attachment was raised for the first time in the motion to lift the attachment. Finally, the issue of laches could not
have been raised then because it was the Republic's subsequent neglect or failure to prosecute despite the passing
of the years that gave rise to laches.26

Chuidian also moved for a reconsideration of the Sandiganbayan resolution denying the motion to require deposit of
the L/C into an interest bearing account. He argued that contrary to the Sandiganbayan's pronouncement, allowing
the deposit would not amount to a virtual recognition of his right over the L/C, for he is not asking for payment but
simply requesting that it be deposited in an account under the control of the Sandiganbayan. He further stressed
that the Sandiganbayan abdicated its bounden duty to rule on an issue when it found "that his motion will render
nugatory the purpose of sequestration and freeze orders over the L/C." Considering that his assets had already
been sold by the Republic, he claimed that the Sandiganbayan's refusal to exercise its fiduciary duty over attached
assets will cause him irreparable injury. Lastly, the Sandiganbayan's position that Chuidian was not the owner but a
mere payee-beneficiary of the L/C issued in his favor negates overwhelming jurisprudence on the Negotiable
Instruments Law, while at the same time obliterating his rights of ownership under the Civil Code.27

On July 13, 1999, the Sandiganbayan gave due course to Chuidian's plea for the attached L/C to be deposited in an
interest-bearing account, on the ground that it will redound to the benefit of both parties.

The Sandiganbayan declared the national government as the principal obligor of the L/C even though the liability
remained in the books of the PNB for accounting and monitoring purposes.

The Sandiganbayan, however, denied Chuidian's motion for reconsideration of the denial of his motion to lift
attachment, agreeing in full with the government's apriorisms that:

x x x (1) it is a matter of record that the Court granted the application for writ of attachment upon grounds other than
defendant's absence in the Philippine territory. In its Resolution dated July 14, 1993, the Court found a prima facie
case of fraud committed by defendant Chuidian, and that defendant has recovered or disposed of his property with
the intent of defrauding plaintiff; (2) Chuidian's belated presence in the Philippines cannot be invoked to secure the
lifting of attachment. The rule is specific that it applies to a party who is about to depart from the Philippines with
intent to defraud his creditors. Chuidian's stay in the country is uncertain and he may leave at will because he holds
a foreign passport; and (3) Chuidian's other ground, sufficiency of former PCGG Chairman Gunigundo's verification
of the complaint, has been met fairly and squarely in the Resolution of July 14, 1993.28

Hence, the instant petition for certiorari contending that the respondent Sandiganbayan committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it ruled that:

1) Most of the issues raised in the motion to lift attachment had been substantially addressed in the previous
resolutions dated July 14, 1993 and August 26, 1998, while the rest were of no imperative relevance as to
affect the Sandiganbayan's disposition; and

2) PNB was relieved of the obligation to pay on its own L/C by virtue of Presidential Proclamation No. 50.

The Rules of Court specifically provide for the remedies of a defendant whose property or asset has been attached.
As has been consistently ruled by this Court, the determination of the existence of grounds to discharge a writ of
attachment rests in the sound discretion of the lower courts.29

The question in this case is: What can the herein petitioner do to quash the attachment of the L/C? There are two
courses of action available to the petitioner:

First. To file a counterbond in accordance with Rule 57, Section 12, which provides:

SEC. 12. Discharge of attachment upon giving counterbond. – At anytime after an order of attachment has been
granted, the party whose property has been attached, or the person appearing on his behalf, may, upon reasonable
notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is
pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after
hearing, order the discharge of the attachment if a cash deposit is made, or a counterbond executed to the
attaching creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is
made, in an amount equal to the value of the property attached as determined by the judge, to secure the payment
of any judgment that the attaching creditor may recover in the action. Upon the filing of such counter-bond, copy
thereof shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in
accordance with the provisions of this section the property attached, or the proceeds of any sale thereof, shall be
delivered to the party making the deposit or giving the counter-bond, or the person appearing on his behalf, the
deposit or counter-bond aforesaid standing in place of the property so released. Should such counterbond for any
reason be found to be, or become, insufficient, and the party furnishing the same fail to file an additional counter-
bond, the attaching creditor may apply for a new order of attachment. 1âwphi1.nêt

or

Second. To quash the attachment on the ground that it was irregularly or improvidently issued, as provided for in
Section 13 of the same Rule:

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

It would appear that petitioner chose the latter because the grounds he raised assail the propriety of the issuance of
the writ of attachment. By his own admission, however, he repeatedly acknowledged that his justifications to
warrant the lifting of the attachment are facts or events that came to light or took place after the writ of attachment
had already been implemented.
More particularly, petitioner emphasized that four (4) years after the writ was issued, he had returned to the
Philippines. Yet while he noted that he would have returned earlier but for the cancellation of his passport by the
PCGG, he was not barred from returning to the Philippines. Then he informed the Sandiganbayan that while the
case against him was pending, but after the attachment had already been executed, the government lost two (2)
cases for fraud lodged against him before the U.S. Courts, thus invoking res judicata. Next, he also pointed out that
the government is estopped from pursuing the case against him for failing to prosecute for the number of years that
it had been pending litigation.

It is clear that these grounds have nothing to do with the issuance of the writ of attachment. Much less do they
attack the issuance of the writ at that time as improper or irregular. And yet, the rule contemplates that the defect
must be in the very issuance of the attachment writ. For instance, the attachment may be discharged under Section
13 of Rule 57 when it is proven that the allegations of the complaint were deceptively framed,30 or when the
complaint fails to state a cause of action.31 Supervening events which may or may not justify the discharge of the
writ are not within the purview of this particular rule.

In the instant case, there is no showing that the issuance of the writ of attachment was attended by impropriety or
irregularity. Apart from seeking a reconsideration of the resolution granting the application for the writ, petitioner no
longer questioned the writ itself. For four (4) long years he kept silent and did not exercise any of the remedies
available to a defendant whose property or asset has been attached. It is rather too late in the day for petitioner to
question the propriety of the issuance of the writ.

Petitioner also makes capital of the two foreign judgments which he claims warrant the application of the principle
of res judicata. The first judgment, in Civil Case Nos. 575867 and 577697 brought by Philguarantee before the
Santa Clara Country Superior Court, denied Philguarantee's prayer to set aside the stipulated judgment wherein
Philguarantee and Chuidian agreed on the subject attached L/C. On March 14, 1990, the Court of Appeal of the
State of California affirmed the Superior Court's judgment. The said judgment became the subject of a petition for
review by the California Supreme Court. There is no showing, however, of any final judgment by the California
Supreme Court. The records, including petitioner's pleadings, are bereft of any evidence to show that there is a final
foreign judgment which the Philippine courts must defer to. Hence, res judicata finds no application in this instance
because it is a requisite that the former judgment or order must be final.32

Second, petitioner cites the judgment of the United States District Court in Civil Case 86-2255 RSWL brought by
petitioner Chuidian against PNB to compel the latter to pay the L/C. The said Court's judgment, while it ruled in
favor of petitioner on the matter of Philguarantee's action-in-intervention to set aside the settlement agreement, also
ruled in favor of PNB, to wit:

Under Executive Order No. 1, the PCGG is vested by the Philippine President with the power to enforce its
directives and orders by contempt proceedings. Under Executive Order No. 2, the PCGG is empowered to freeze
any, and all assets, funds and property illegally acquired by former President Marcos or his close friends and
business associates.

On March 11, 1986, PNB/Manila received an order from the PCGG ordering PNB to freeze any further drawings on
the L/C. The freeze order has remained in effect and was followed by a sequestration order issued by the PCGG.
Subsequently, Chuidian's Philippine counsel filed a series of challenges to the freeze and sequestration orders,
which challenges were unsuccessful as the orders were found valid by the Philippine Supreme Court. The freeze
and sequestration orders are presently in effect. Thus, under the PCGG order and Executive Orders Nos. 1 and 2,
performance by PNB would be illegal under Philippine Law. Therefore PNB is excused from performance of the L/C
agreement as long as the freeze and sequestration orders remain in effect. (Underscoring ours)

xxx xxx xxx

Chuidian argues that the fact that the L/C was issued pursuant to a settlement in California, that the negotiations for
which occurred in California, and that two of the payments were made at PNB/LA, compels the conclusion that the
act of prohibiting payment of the L/C occurred in Los Angeles. However, the majority of the evidence
and Tchacoshand Sabbatino compel the opposite conclusion. The L/C was issued in Manila, such was done at the
request of a Philippine government instrumentality for the benefit of a Philippine citizen, the L/C was to be
performed in the Philippines, all significant events relating to the issuance and implementation of the L/C occurred
in the Philippines, the L/C agreement provided that the L/C was to be construed according to laws of the
Philippines, and the Philippine government certainly has an interest in preventing the L/C from being remitted in that
it would be the release of funds that are potentially illgotten gains. Accordingly, the Court finds that the PCGG
orders are acts of state that must be respected by this Court, and thus PNB is excused from making payment on the
L/C as long as the freeze and sequestration orders remain in effect.33 (Underscoring ours)

Petitioner's own evidence strengthens the government's position that the L/C is under the jurisdiction of the
Philippine government and that the U.S. Courts recognize the authority of the Republic to sequester and freeze said
L/C. Hence, the foreign judgments relied upon by petitioner do not constitute a bar to the Republic's action to
recover whatever alleged ill-gotten wealth petitioner may have acquired.

Petitioner may argue, albeit belatedly, that he also raised the issue that there was no evidence of fraud on record
other than the affidavit of PCGG Chairman Gunigundo. This issue of fraud, however, touches on the very merits of
the main case which accuses petitioner of committing fraudulent acts in his dealings with the government.
Moreover, this alleged fraud was one of the grounds for the application of the writ, and the Sandiganbayan granted
said application after it found a prima facie case of fraud committed by petitioner.

In fine, fraud was not only one of the grounds for the issuance of the preliminary attachment, it was at the same
time the government's cause of action in the main case.

We have uniformly held that:

x x x when the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of
action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own use by a
public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his
employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty," or "an action
against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action
is brought," the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by
offering to show the falsity of the factual averments in the plaintiff's application and affidavits on which the writ was
based – and consequently that the writ based thereon had been improperly or irregularly issued – the reason being
that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action.
In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular
trial.34 (Underscoring ours)

Thus, this Court has time and again ruled that the merits of the action in which a writ of preliminary attachment has
been issued are not triable on a motion for dissolution of the attachment, otherwise an applicant for the lifting of the
writ could force a trial of the merits of the case on a mere motion.35

It is not the Republic's fault that the litigation has been protracted. There is as yet no evidence of fraud on the part of
petitioner. Petitioner is only one of the twenty-three (23) defendants in the main action. As such, the litigation would
take longer than most cases. Petitioner cannot invoke this delay in the proceedings as an excuse for not seeking
the proper recourse in having the writ of attachment lifted in due time. If ever laches set in, it was petitioner, not the
government, who failed to take action within a reasonable time period. Challenging the issuance of the writ of
attachment four (4) years after its implementation showed petitioner's apparent indifference towards the
proceedings before the Sandiganbayan.

In sum, petitioner has failed to convince this Court that the Sandiganbayan gravely abused its discretion in a
whimsical, capricious and arbitrary manner. There are no compelling reasons to warrant the immediate lifting of the
attachment even as the main case is still pending. On the other hand, allowing the discharge of the attachment at
this stage of the proceedings would put in jeopardy the right of the attaching party to realize upon the relief sought
and expected to be granted in the main or principal action. It would have the effect of prejudging the main case.

The attachment is a mere provisional remedy to ensure the safety and preservation of the thing attached until the
plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction.36 To
discharge the attachment at this stage of the proceedings would render inutile any favorable judgment should the
government prevail in the principal action against petitioner. Thus, the Sandiganbayan, in issuing the questioned
resolutions, which are interlocutory in nature, committed no grave abuse of discretion amounting to lack or excess
of jurisdiction. As long as the Sandiganbayan acted within its jurisdiction, any alleged errors committed in the
exercise of its jurisdiction will amount to nothing more than errors of judgment which are reviewable by timely
appeal and not by special civil action of certiorari.37
Moreover, we have held that when the writ of attachment is issued upon a ground which is at the same time the
applicant's cause of action, the only other way the writ can be lifted or dissolved is by a counterbond, in accordance
with Section 12 of the same rule.38 This recourse, however, was not availed of by petitioner, as noted by the
Solicitor General in his comment.39

To reiterate, there are only two ways of quashing a writ of attachment: (a) by filing a counterbond immediately; or
(b) by moving to quash on the ground of improper and irregular issuance.40 These grounds for the dissolution of an
attachment are fixed in Rule 57 of the Rules of Court and the power of the Court to dissolve an attachment is
circumscribed by the grounds specified therein.41 Petitioner's motion to lift attachment failed to demonstrate any
infirmity or defect in the issuance of the writ of attachment; neither did he file a counterbond.

Finally, we come to the matter of depositing the Letter of Credit in an interest-bearing account. We agree with the
Sandiganbayan that any interest that the proceeds of the L/C may earn while the case is being litigated would
redound to the benefit of whichever party will prevail, the Philippine government included. Thus, we affirm the
Sandiganbayan's ruling that the proceeds of the L/C should be deposited in an interest bearing account with the
Land Bank of the Philippines for the account of the Sandiganbayan in escrow until ordered released by the said
Court.

We find no legal reason, however, to release the PNB from any liability thereunder. The Deed of Transfer, whereby
certain liabilities of PNB were transferred to the national government, cannot affect the said L/C since there was no
valid substitution of debtor. Article 1293 of the New Civil Code provides:

Novation which consists in substituting a new debtor in the place of the original one, may be made without the
knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor
gives him the rights mentioned in Articles 1236 and 1237.

Accordingly, any substitution of debtor must be with the consent of the creditor, whose consent thereto cannot just
be presumed. Even though Presidential Proclamation No. 50 can be considered an "insuperable cause", it does not
necessarily make the contracts and obligations affected thereby exceptions to the above-quoted law, such that the
substitution of debtor can be validly made even without the consent of the creditor. Presidential Proclamation No. 50
was not intended to set aside laws that govern the very lifeblood of the nation's commerce and economy. In fact, the
Deed of Transfer that was executed between PNB and the government pursuant to the said Presidential
Proclamation specifically stated that it shall be deemed effective only upon compliance with several conditions, one
of which requires that:

(b) the BANK shall have secured such governmental and creditors' approvals as may be necessary to establish the
consummation, legality and enforceability of the transactions contemplated hereby."

The validity of this Deed of Transfer is not disputed. Thus, PNB is estopped from denying its liability thereunder
considering that neither the PNB nor the government bothered to secure petitioner's consent to the substitution of
debtors. We are not unmindful that any effort to secure petitioner's consent at that time would, in effect, be deemed
an admission that the L/C is valid and binding. Even the Sandiganbayan found that: 36 Sta. Ines Melale Forest
Products Corp. v. Macaraig, Jr., 299 SCRA 491, 515 (1998).

x x x Movant has basis in pointing out that inasmuch as the L/C was issued in his favor, he is presumed to be the
lawful payee-beneficiary of the L/C until such time that the plaintiff successfully proves that said L/C is ill-gotten and
he has no right over the same.42

In Republic v. Sandiganbayan,43 we held that the provisional remedies, such as freeze orders and sequestration,
were not "meant to deprive the owner or possessor of his title or any right to the property sequestered, frozen or
taken over and vest it in the sequestering agency, the Government or other person."

Thus, until such time that the government is able to successfully prove that petitioner has no right to claim the
proceeds of the L/C, he is deemed to be the lawful payee-beneficiary of said L/C, for which any substitution of
debtor requires his consent. The Sandiganbayan thus erred in relieving PNB of its liability as the original debtor.

WHEREFORE, in view of all the foregoing, the petition is DISMISSED. The Resolutions of the Sandiganbayan
dated November 6, 1998 and July 2, 1999 are AFFIRMED. The PNB is DIRECTED to remit to the Sandiganbayan
the proceeds of Letter of Credit No. SFD-005-85 in the amount of U.S. $4.4 million within fifteen (15) days from
notice hereof, the same to be placed under special time deposit with the Land Bank of the Philippines, for the
account of Sandiganbayan in escrow for the person or persons, natural or juridical, who shall eventually be
adjudged lawfully entitled thereto, the same to earn interest at the current legal bank rates. The principal and its
interest shall remain in said account until ordered released by the Court in accordance with law. 1âwphi1.nêt

No costs.

SO ORDERED.

HIRD DIVISION

G.R. No. 203530, April 13, 2015

LUZON DEVELOPMENT BANK, TOMAS CLEMENTE, JR., AND OSCAR RAMIREZ, Petitioners, v.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 Decision 1 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.

The factual antecedents, as found by the CA, are as follows: chanrobles vir tuallawli brar y

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 bank's accounts in BPI Family Bank, Calamba, Laguna in the amount of P28,597,472.70 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: chanrobles virtuallawlibr ar y

"WHEREFORE, the PETITION FOR CERTIORARI is GRANTED.

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 counterbond 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. 01-100046.

Costs of suit to be paid by the respondents. SO ORDERED.

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 counterbond which was opposed by respondent Erlinda.

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 counterbond. 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: chanrobl es virtuallawli brar y

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 cralawl awlibr ar y

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

Hence, petitioners filed this present petition raising the following grounds: chanrobles vir tuallawli brar y

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 FIONORABLE 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 cral awlawlibr ar y

Simply stated, the issue for our resolution is whether the CA erred in affirming the RTC's 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 applicant's 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 applicant's 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 applicant's 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 petitioner's 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. Tria-Infante,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 counterbond 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 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.
cralawred

WHEREFORE, premises considered, the instant petition is DENIED. The Decision dated March 27, 2012 and Resolution dated September 11,
2012 of the Court of Appeals are hereby AFFIRMED.

SO ORDERED. c hanrobl es virtuallawli brar y

G.R. No. 203240, March 18, 2015

NORTHERN ISLANDS, CO., INC., Petitioner, v. SPOUSES DENNIS AND CHERYLIN* GARCIA, DOING BUSINESS UNDER THE NAME
AND STYLE “ECOLAMP MULTI RESOURCES,”, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated January 19, 2012 and the Resolution3 dated August 24, 2012 of the
Court of Appeals (CA) in CA-G.R. SP No. 97448, ordering the Regional Trial Court of Quezon City, Branch 215 (RTC) to appoint a
commissioner to determine the value of the attached properties of respondents Spouses Dennis and Cherylin Garcia (respondents), and to
discharge any excessive attachment found thereby.

The Facts

On September 23, 2005, petitioner Northern Islands Co., Inc. (petitioner) filed a Complaint 4 with application for a writ of preliminary attachment,
before the RTC against respondents, docketed as Civil Case No. Q-05-53699 (Main Case), which was subsequently amended5 on October 25,
2005.6 It alleged that: (a) from March to July 2004, petitioner caused the delivery to respondents of various appliances in the aggregate amount
of P8,040,825.17;7 (b) the goods were transported, shipped, and delivered by Sulpicio Lines, Inc., and were accepted in good order and
condition by respondents’ representatives; 8 (c) the parties agreed that the goods delivered were payable within 120 days, and that the unpaid
amounts would earn interest at a rate of eighteen percent (18%) per annum;9 (d) however, the value of the goods were not paid by respondents
despite repeated demands;10 and (e) respondents fraudulently asserted that petitioner had no proof that they had indeed received the quantity
of the subject goods.11

In connection with the application for a writ of preliminary attachment, petitioner posted a bond, through Visayan Surety and Insurance
Corporation, in the amount of ?8,040,825.17. On November 7, 2005, the RTC issued the writ sought for. 12

Instead of filing an answer, respondents filed on November 11, 2001, an Urgent Motion for Extension of Time to File Proper Pleading and
Motion for Discovery (Production and Inspection) 13 (November 11, 2001 Motion), asking the RTC to allow them to photocopy and personally
examine the original invoices, delivery cargo receipts, and bills of lading attached to the Amended Complaint, claiming that they could not
“come up with an intelligent answer” without being presented with the originals of such documents. 14

Thereafter, or on January 11, 2006, respondents filed a Motion to Discharge Excess Attachment, 15alleging that the attachment previously
ordered by the RTC exceeded by P9,232,564.56 given that the estimated value of the attached properties, including the garnished bank
accounts, as assessed by their appraiser, Gaudioso W. Lapaz (Lapaz), amounted to P17,273,409.73, while the attachment bond is only in the
amount of P8,040,825.17.16

In an Order17 dated February 28, 2006, the RTC denied the November 11, 2001 Motion, and, instead, directed respondents to file their answer,
which the latter complied with through the filing of their Answer Ad Cautelam Ex Abudante with Compulsory Counterclaim18 on April 3, 2006.
Despite this, respondents again filed a Motion for Leave of Court to File Motion for Discovery (Production and Inspection) 19 (Motion for
Discovery) on April 7, 2006.20

The RTC Ruling

In an Order21 dated June 21, 2006, the RTC, among others, denied the Motion to Discharge Excess Attachment, finding that the appraisal
made by Lapaz was not reflective of the true valuation of the properties, adding too that the bond posted by petitioner stands as sufficient
security for whatever damages respondents may sustain by reason of the attachment. 22

On the other hand, the RTC granted the Motion for Discovery in accordance with Rule 27 of the Rules of Court, despite petitioner’s claim that it
did not have the originals of the documents being sought. 23

However, no production or inspection was conducted on July 10, 2006 as the RTC directed since respondents received the copy of the above
order only on July 11, 2006.24
On July 25, 2006, respondents filed a Motion for Partial Reconsideration of the Order dated June 21, 2006, specifically assailing the denial of
their Motion to Discharge Excess Attachment. In this relation, they prayed that the RTC refer to a commissioner, pursuant to Rule 32 of the
Rules of Court, the factual determination of the total aggregate amount of respondents’ attached properties so as to ascertain if the attachment
was excessive. Also, they prayed that the order for production and inspection be modified and that petitioner be ordered to produce the
original documents anew for their inspection and copying. 25

The foregoing motion was, however, denied by the RTC in an Order26 dated August 23, 2006 for lack of merit. Thus, respondents elevated the
matter to the CA via petition for certiorari and mandamus,27docketed as CA-G.R. SP No. 97448 (Certiorari Case).

In the interim, the RTC rendered a Decision28 dated September 21, 2011 in the Main Case. Essentially, it dismissed petitioner’s Amended
Complaint due to the absence of any evidence to prove that respondents had agreed to the pricing of the subject goods. 29

The RTC’s September 21, 2011 Decision was later appealed30 by petitioner before the CA on October 27, 2011. Finding that the Notice of
Appeal was seasonably filed, with the payment of the appropriate docket fees, the RTC, in an Order 31 dated January 25, 2012, ordered the
elevation of the entire records of the Main Case to the CA. The appeal was then raffled to the CA’s Eighth Division, and docketed as CA-G.R.
CV No. 98237. On the other hand, records do not show that respondents filed any appeal. 32

The CA Ruling in the Certiorari Case

Meanwhile, the CA, in a Decision33 dated January 19, 2012, partly granted the certiorari petition of respondents, ordering the RTC to appoint a
commissioner as provided under Rule 32 of the Rules of Court as well as the subsequent discharge of any excess attachment if so found
therein, and, on the other hand, denying respondents’ Motion for Discovery. 34

It held that: (a) on the issue of attachment, trial by commissioners under Rule 32 of the Rules of Court was proper so that the parties may finally
settle their conflicting valuations;35 and (b) on the matter of discovery, petitioner could not be compelled to produce the originals sought by
respondents for inspection since they were not in the former’s possession. 36

Aggrieved, petitioner filed a Motion for Partial Reconsideration 37 on February 13, 2012 but was, however, denied in a Resolution 38 dated
August 24, 2012, hence, the present petition.

The Issues Before the Court

The issues presented for the Court’s resolution are: (a) whether the RTC had lost jurisdiction over the matter of the preliminary attachment after
petitioner appealed the decision in the Main Case, and thereafter ordered the transmittal of the records to the CA; and (b) whether the CA erred
in ordering the appointment of a commissioner and the subsequent discharge of any excess attachment found by said commissioner.

The Court’s Ruling

The petition is meritorious.

Section 9, Rule 41 of the Rules of Court provides that in appeals by notice of appeal, the court loses jurisdiction over the case upon the
perfection of the appeals filed in due time and the expiration of the time to appeal of the other parties.

In this case, petitioner had duly perfected its appeal of the RTC’s September 21, 2011 Decision resolving the Main Case through the timely
filing of its Notice of Appeal dated October 27, 2011, together with the payment of the appropriate docket fees. The RTC, in an Order 39 dated
January 25, 2012, had actually confirmed this fact, and thereby ordered the elevation of the entire records to the CA. Meanwhile, records do
not show that respondents filed any appeal, resulting in the lapse of its own period to appeal therefrom. Thus, based on Section 9, Rule 41, it
cannot be seriously doubted that the RTC had already lost jurisdiction over the Main Case.

With the RTC’s loss of jurisdiction over the Main Case necessarily comes its loss of jurisdiction over all matters merely ancillary thereto. Thus,
the propriety of conducting a trial by commissioners in order to determine the excessiveness of the subject preliminary attachment, being a
mere ancillary matter to the Main Case, is now mooted by its supervening appeal in CA-G.R. CV No. 98237.

Note that in Sps. Olib v. Judge Pastoral,40 the Court, in view of the nature of a preliminary attachment, definitively ruled that the attachment
itself cannot be the subject of a separate action independent of the principal action because the attachment was only an incident of such
action, viz.:

Attachment is defined as a provisional remedy by which the property of an adverse party is taken into legal custody, either at the
commencement of an action or at any time thereafter, as a security for the satisfaction of any judgment that may be recovered by the plaintiff or
any proper party.

It is an auxiliary remedy and cannot have an independent existence apart from the main suit or claim instituted by the plaintiff against the
defendant. Being merely ancillary to a principal proceeding, the attachment must fail if the suit itself cannot be maintained as the
purpose of the writ can no longer be justified.

The consequence is that where the main action is appealed, the attachment which may have been issued as an incident of that action, is also
considered appealed and so also removed from the jurisdiction of the court a quo. The attachment itself cannot be the subject of a
separate action independent of the principal action because the attachment was only an incident of such action.41 (Emphases
supplied)

That being said, it is now unnecessary to discuss the other issues raised herein. In fine, the petition is granted and the assailed CA rulings are
set aside.
WHEREFORE, the petition is GRANTED. The Decision dated January 19, 2012 and the Resolution dated August 24, 2012 of the Court of
Appeals in CA-G.R. SP No. 97448 are hereby SET ASIDE.

SO ORDERED.

G.R. No. 212025, July 01, 2015

EXCELLENT QUALITY APPAREL, INC., Petitioner, v. VISAYAN SURETY & INSURANCE CORPORATION, AND FAR EASTERN SURETY
& INSURANCE CO., INC., Respondents.

DECISION

MENDOZA, J.:

The present case involves the wrongful attachment and release of the petitioner's funds to the adverse party and its plight to recover the same.
It seems that when misfortune poured down from the skies, the petitioner received a handful. The scales of justice, however, do not tilt based
on chance; rather on the proper application of law, jurisprudence and justice.

This is a petition for review on certiorari seeking to reverse and set aside the October 21, 2013 Decision 1and the April 1, 2014 Resolution2 of
the Court of Appeals (CA), in CA-G.R. CV No. 95421, which affirmed the January 15, 20103 and May 19, 20104 Orders of the Regional Trial
Court of Manila, Branch 32 (RTC), in Civil Case No. 04-108940.

The Facts

On March 26, 1996, petitioner Excellent Quality Apparel, Inc. (petitioner), then represented by Max L.F. Ying (Ying), Vice-President for
Productions, and Alfiero R. Orden, Treasurer, entered into a contract with Multi-Rich Builders (Multi-Rich), a single proprietorship, represented
by Wilson G. Chua, its President and General Manager, for the construction of a garment factory within the Cavite Philippine Economic Zone
Authority (CPEZA). The duration of the project was for a maximum period of five (5) months or 150 consecutive calendar days. Included in the
contract was an Arbitration Clause in case of dispute.

On November 27, 1996, the construction of the factory building was completed.

On February 20, 1997, Win Multi-Rich Builders, Inc. (Win Multi-Rich) was incorporated with the Securities and Exchange Commission (SEC).

On January 26, 2004, Win Multi-Rich filed a complaint for sum of money and damages against petitioner and Ying before the RTC. 5 It also
prayed for the issuance of a writ of attachment, claiming that Ying was about to abscond and that petitioner had an impending closure.

Win Multi-Rich then secured the necessary bond in the amount of P8,634,448.20 from respondent Visayan Surety and Insurance Corporation
(Visayan Surety)6 In the Order,7 dated February 2, 2004, the RTC issued a writ of preliminary attachment in favor of Win Multi-Rich.

To prevent the enforcement of the writ of preliminary attachment on its equipment and machinery, petitioner issued Equitable PCI Bank Check
No. 160149,8 dated February 16, 2004, in the amount of P8,634,448.20 payable to the Clerk of Court of the RTC.

On February 19, 2004, petitioner filed its Omnibus Motion, 9 seeking to discharge the attachment. Petitioner also questioned the jurisdiction of
the RTC due to the presence of the Arbitration Clause in the contract. It asserted that the case should have been referred first to the
Construction Industry Arbitration Commission (CIAC) pursuant to Executive Order (E.O.) No. 1008.

The motion, however, was denied by the RTC in its Order, 10 dated April 12, 2004, because the issues of the case could be resolved after a full-
blown trial.

On April 26, 2004, petitioner filed its Answer with Compulsory Counterclaim 11 before the RTC. It denied the material allegation of the complaint
and sought the immediate lifting of the writ of attachment. It also prayed that the bond filed by Win Multi-Rich to support its application for
attachment be held to satisfy petitioner's claim for damages due to the improper issuance of such writ.

On April 29, 2004, the RTC issued another order 12 directing the deposit of the garnished funds of petitioner to the cashier of the Clerk of Court
of the RTC.

Win Multi-Rich then filed a motion,13 dated April 29, 2004, to release petitioner's cash deposit to it. Notably, the motion was granted by the RTC
in the Order,14 dated May 3, 2004. Subsequently, on May 7, 2004, Win Multi-Rich posted Surety Bond No. 1019815 issued by respondent Far
Eastern Surety and Insurance Co., Inc. (FESICO) for the amount of P9,000,000.00, to secure the withdrawal of the cash deposited by
petitioner. Thus, Win Multi-Rich was able to receive the funds of petitioner even before the trial began.

On June 18, 2004, petitioner filed a petition for certiorari16 under Rule 65 of the 1997 Rules of Civil Procedure before the CA. The petition
sought to. annul and set aside the April 12, 2004 and April 29, 2004 Orders of the RTC. Petitioner then filed its Supplemental Manifestation and
Motion,17 asserting that its cash deposit with the RTC was turned over to Win Multi-Rich.

On March 14, 2006, the CA rendered a decision, 18annulling the April 12 2004 and April 29, 2004 Orders of the RTC. It ruled, however, that the
RTC had jurisdiction over the case inspite of the arbitration clause because it was a suit for collection of sum of money. The dispositive portion
of which reads:
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IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby GRANTED. The Orders dated April 12, 2004 and April 29, 2004 of
respondent judge are hereby ANNULLED and SET ASIDE. Accordingly, the writ of preliminary injunction is hereby MADE PERMANENT.
SO ORDERED.19
Petitioner filed a motion for reconsideration arguing, among others, that the CA decision failed to state an order to return the garnished amount
of P8,634,448.[20], which was taken from its bank account and given to Win Multi-Rich. In its Resolution,20 dated October 11, 2006, the CA
denied the motion.

Aggrieved, petitioner elevated the matter to the Court by way of a petition for review on certiorari under Rule 45, docketed as G.R. No. 175048.

On February 10, 2009, in G.R. No. 175048, the Court promulgated a decision 21 in favor of petitioner and held: first, that Win Multi-Rich was not
a real party in interest; second, that the RTC should not have taken cognizance of the collection suit because the presence of the arbitration
clause vested jurisdiction on the CIAC over all construction disputes between petitioner and Multi-Rich; and lastly, that Win Multi-Rich could not
retain the garnished amount, as the RTC did not have jurisdiction to issue the questioned writ of attachment and to order the release of the
funds. The dispositive portion reads:
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WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is hereby MODIFIED. Civil Case No. 04-108940 is
DISMISSED. Win Multi-Rich Builders, Inc. is ORDERED to return the garnished amount of EIGHT MILLION SIX HUNDRED THIRTY FOUR
THOUSAND FOUR HUNDRED FORTY-EIGHT PESOS AND TWENTY CENTAVOS (P8,634,448.20), which was turned over by the Regional
Trial Court, to petitioner with legal interest of 12 percent (12%) per annum upon finality of this Decision until payment.

SO ORDERED.22
Win Multi-Rich filed a motion for reconsideration but it was denied by the Court in its April 20, 2009 Resolution. 23 Pursuant to an entry of
judgment,24 the Court's decision became final and executory on June 2, 2009.

On June 26, 2009, petitioner moved for execution thereof, praying for the return of its cash deposit and, in the event of refusal of Win Multi-Rich
to comply, to hold Visayan Surety and FESICO liable under their respective bonds. 25 redarclaw

Win Multi-Rich, Visayan Surety and FESICO were served with copies of the motion for execution. 26During the August 7, 2009 hearing on the
motion for execution, counsels for petitioner, Win Multi-Rich and FESICO were present.27 The hearing, however, was reset to September 16,
2009. On the said date, Win Multi-Rich, Visayan Surety and FESICO were given fifteen (15) days to submit their respective comments or
oppositions to the motion for execution.28 redarclaw

On October 15, 2009, Win Multi-Rich opposed the motion for execution29 because the cash deposit awarded to it by the RTC had been paid to
suppliers and the said amount was long overdue and demandable.

The RTC granted the motion for execution in an Order,30 dated October 19, 2009, and issued a writ of execution. 31 Visayan Surety and
FESICO separately moved for reconsideration of the RTC order.

The RTC Ruling

On January 15, 2010, the RTC issued the order, 32 granting the surety respondents' motion for reconsideration and lifting its October 19, 2009
Order insofar as it granted the motion for execution against Visayan Surety and FESICO. The RTC absolved the surety respondents because
petitioner did not file a motion for judgment on the attachment bond before the finality of judgment, thus, violating the surety respondents' right
to due process. It further held that the execution against the surety respondents would go beyond the terms of the judgment sought to be
executed considering that the Court decision pertained to Win Multi-Rich only.

Petitioner moved for reconsideration, but its motion was denied by the RTC in its May 19, 2010 Order. 33 redarclaw

Undaunted, petitioner appealed before the CA, arguing that there was no violation of the right to due process because the liability of the surety
respondents were based on the bonds issued by them.

The CA Ruling

In the assailed decision, dated October 21, 2013, the CA found petitioner's appeal without merit. Citing Section 20, Rule 57 of the 1997 Rules
of Civil Procedure (Section 20, Rule 57), the CA held that petitioner failed to timely claim damages against the surety before the decision of the
Court became final and executory. It further stated that a court judgment could not bind persons who were not parties to the action as the
records showed that Visayan Surety and FESICO were neither impleaded nor informed of the proceedings before the Court in G.R. No.
175048. It was the view of the CA that "[hjaving failed to observe very elementary rules of procedure which are mandatory, [petitioner] caused
its own predicament."

Petitioner filed a motion for reconsideration, but it was denied by the CA in the assailed April 1, 2014 Resolution.

Hence, this present petition, anchored on the following

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STATEMENT OF ISSUES

THE ASSAILED DECISION AND THE ASSAILED RESOLUTION OF THE COURT OF APPEALS SHOULD BE REVERSED AND SET
ASIDE FOR BEING CONTRARY TO LAW AND JURISPRUDENCE CONSIDERING THAT THE RIGHT TO DUE PROCESS OF THE TWO
SURETY COMPANIES WILL NOT BE VIOLATED IF EXECUTION OF THE JUDGMENT AGAINST THEM IS ALLOWED.

II

THE ASSAILED DECISION AND THE ASSAILED RESOLUTION OF THE COURT OF APPEALS SHOULD BE REVERSED AND SET
ASIDE FOR BEING CONTRARY TO LAW AND JURISPRUDENCE CONSIDERING THAT TO ALLOW THE EXECUTION AGAINST THE
TWO SURETY COMPANIES WOULD GIVE FULL EFFECT TO THE TERMS OF THE JUDGMENT.34
Petitioner contends that Visayan Surety and FESICO could be held liable because the Court, in G.R. No. 175048, ruled that it cannot allow Win
Multi-Rich to retain the garnished amount turned over by the RTC, which had no jurisdiction to issue the questioned writ of attachment.
Petitioner argues that if Win Multi-Rich fails or refuses to refund or return the cash deposit, then Visayan Surety and FESICO must be held
liable under their respective bonds. Also, petitioner claims that the surety bond of FESICO is not covered by Section 20, Rule 57 because it did
not pertain to the writ of attachment itself, but on the withdrawal of the cash deposit.

On October 3, 2014, Visayan Surety filed its Comment. 35 It asserted that no application for damages was filed before the Court in G.R. No.
175048. Thus, there was no occasion to direct the RTC to hear and decide the claim for damages, which constituted a violation of its right to
due process. Also, Visayan Surety contended that Section 20, Rule 57 provided a mandatory rule that an application for damages must be filed
before the judgment becomes final and executory.

On October 8, 2014, FESICO filed its Comment.36 It averred that petitioner failed to comply with Section 20, Rule 57 of the Rules of Court
because the hearing on the motion for execution was conducted after the decision in G.R. No. 175048 had already become final and
executory. It also stated that petitioner failed to implead the surety respondents as parties in G.R. No. 175048.

On January 26, 2015, petitioner filed its Consolidated Reply. 37 It stressed that because the highest court of the land had directed the return of
the wrongfully garnished amount to petitioner, proceedings on the application under Section 20, Rule 57, became no longer necessary.

The Court's Ruling

The petition is partly meritorious.

There was an application for damages; but there was no notice given to Visayan Surety

By its nature, preliminary attachment, under Rule 57 of the Rules of Court, "is an ancillary remedy applied for not for its own sake but to enable
the attaching party to realize upon relief sought and expected to be granted in the main or principal action; it is a measure auxiliary or incidental
to the main action. As such, 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. 38 In addition,
attachment is also availed of in order 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." 39 redarclaw

The party applying for the order of attachment 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.40 The purpose of an attachment bond is to answer for all costs and damages which the adverse party
may sustain by reason of the attachment if the court finally rules that the applicant is not entitled to the writ. 41 redarclaw

In this case, the attachment bond was issued by Visayan Surety in order for Win Multi-Rich to secure the issuance of the writ of attachment.
Hence, any application for damages arising from the improper, irregular or excessive attachment shall be governed by Section 20, Rule 57,
which provides:
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Sec. 20. Claim for damages on account of improper, irregular or excessive attachment.

An application for damages on account of improper, irregular or excessive attachment must be filed before the trial or before appeal is
perfected or before the judgment becomes executory, with due notice to the attaching party and 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 party not exempt from execution should the bond or deposit given by the latter be insufficient
or fail to fully satisfy the award.
The history of Section 20, Rule 57 was discussed in Malayan Insurance, Inc. v. Salas42 In that case, the Court explained that Section 20, Rule
57 was a revised version of Section 20, Rule 59 of the 1940 Rules of Court, which, in turn, was a consolidation of Sections 170, 177, 223, 272,
and 439 of the Code of Civil Procedure regarding the damages recoverable in case of wrongful issuance of the writs of preliminary injunction,
attachment, mandamus and replevin and the appointment of a receiver.

Thus, the current provision of Section 20, Rule 57 of the 1997 Rules of Civil Procedure covers application for damages against improper
attachment, preliminary injunction, receivership, and replevin. 43Consequently, jurisprudence concerning application for damages against
preliminary injunction, receivership and replevin bonds can be equally applied in the present case.

In a catena of cases,44 the Court has cited the requisites under Section 20, Rule 57 in order to claim damages against the bond, as follows:
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1. The application for damages must be filed in the same case where the bond was issued; chanR obles virtualLawlibrar y

2. Such application for damages must be filed before the entry of judgment; and

3. After hearing with notice to the surety.

The first and second requisites, as stated above, relate to the application for damages against the bond. An application for damages must be
filed in the same case where the bond was issued, either (a) before the trial or (b) before the appeal is perfected or (c) before the judgment
becomes executory.45 The usual procedure is to file an application for damages with due notice to the other party and his sureties. The other
method would be to incorporate the application in the answer with compulsory counterclaim.46 redarclaw

The purpose of requiring the application for damages to be filed in the same proceeding is to avoid the multiplicity of suit and forum shopping. It
is also required to file the application against the bond before the finality of the decision to prevent the alteration of the immutable judgment. 47
redarclaw

In Paramount Insurance Corp. v. CA,48 the Court allowed an application for damages incorporated in the answer with compulsory counterclaim
of the defendant therein. The sureties were properly notified of the hearing and were given their day in court.

Conversely, in the recent case of Advent Capital and Finance Corp. v. Young,49 the application for damages against the bond was not allowed.
The respondent therein filed his omnibus motion claiming damages against surety after the dismissal order issued by the trial court had
attained finality.

In the present petition, the Court holds that petitioner sufficiently incorporated an application for damages against the wrongful attachment in its
answer with compulsory counterclaim filed before the RTC. Petitioner alleged that the issuance of the improper writ of attachment caused it
actual damages in the amount of at least P3,000,000.00. It added that the Equitable PCI Bank Check No. 160149 it issued to the RTC Clerk of
Court, to lift the improper writ of attachment, should be returned to it. 50 Evidently, these allegations constitute petitioner's application for
damages arising from the wrongful attachment, and the said application was timely filed as it was filed before the finality of judgment.

The next requisite that must be satisfied by petitioner to hold Visayan Surety liable would be that the judgment against the wrongful attachment
was promulgated after the hearing with notice to the surety. Certainly, the surety must be given prior notice and an opportunity to be heard with
respect to the application for damages before the finality of the judgment. The Court rules that petitioner did not satisfy this crucial element.

Section 20, Rule 57 specifically requires that the application for damages against the wrongful attachment, whether filed before the trial court or
appellate court, must be with due notice to the attaching party and his surety or sureties. Such damages may be awarded only after proper
hearing and shall be included in the judgment on the main case.

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 indispensable. The surety should be given an opportunity to be heard as to the reality or reasonableness of the damages resulting
from the wrongful issuance of the writ. In the absence of due notice to the surety, therefore, no judgment for damages may be entered and
executed against it.51 redarclaw

In the old case of Visayan Surety and Insurance Corp. v. Pascual,52 the application for damages was made before the finality of judgment, but
the surety was not given due notice. The Court allowed such application under Section 20, Rule 59 of the 1940 Rules of Court because there
was no rule which stated that the failure to give to the surety due notice of the application for damages would release the surety from the
obligation of the bond.53 redarclaw

The case of Visayan Surety and Insurance Corp. v. Pascual, however, was abandoned in the subsequent rulings of the Court because this was
contrary to the explicit provision of Section 20, Rule 57. 54 redarcl aw

In People Surety and Insurance Co. v. CA,55 the defendant therein filed an application for damages during the trial but the surety was not
notified. The Court denied the application and stated that "it is now well settled that a court has no jurisdiction to entertain any proceeding
seeking to hold a surety liable upon its bond, where the surety has not been given notice of the proceedings for damages against the principal
and the judgment holding the latter liable has already become final." 56 redarclaw

In Plaridel Surety & Insurance Co. v. De Los Angeles,57 a motion for execution against the bond of the surety was filed after the finality of
judgment. The petitioner therein asserted that the motion for execution was a sufficient notification to the surety of its application for damages.
The Court ruled, that "[t]his notification, however, which was made after almost a year after the promulgation of the judgment by the Court of
Appeals, did not cure the tardiness of the claim upon the liability of the surety, which, by mandate of the Rules, should have been included in
the judgment."58 redarclaw

In the present case, petitioner's answer with compulsory counterclaim, which contained the application for damages, was not served on
Visayan Surety.59 Also, a perusal of the records60 revealed that Visayan Surety was not furnished any copies of the pleadings, motions,
processes, and judgments concerned with the application for damages against the surety bond. Visayan Surety was only notified of the
application when the motion for execution was filed by petitioner on June 29, 2009, after the judgment in G.R. No. 175048 had become final
and executory on June 2, 2009.

Clearly, petitioner failed to comply with the requisites under Section 20, Rule 57 because Visayan Surety was not given due notice on the
application for damages before the finality of judgment. The subsequent motion for execution, which sought to implicate Visayan Surety, cannot
alter the immutable judgment anymore.

FESICO's bond is not covered by Section 20, Rule 57

While Visayan Surety could not be held liable under Section 20, Rule 57, the same cannot be said of FESICO. In the case at bench, to forestall
the enforcement of the writ of preliminary attachment, petitioner issued Equitable PCI Bank Check No. 160149, dated February 16, 2004, in the
amount of P8,634,448.20 payable to the Clerk of Court of the RTC. Pursuant to the RTC Order, dated April 29, 2004, the garnished funds of
petitioner were deposited to the cashier of the Clerk of Court of the RTC. The procedure to discharge the writ of preliminary attachment is
stated in Section 12, Rule 57, to wit: Lawli brar yofCRAl aw

Sec. 12. Discharge of attachment upon giving counterbond.

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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 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 to 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.

[Emphasis Supplied]
Win Multi-Rich, however, took a step further and filed a motion to release petitioner's cash deposit to it. Immediately, the RTC granted the
motion and directed Win Multi-Rich to post a bond in favor of petitioner in the amount of P9,000,000.00 to answer for the damages which the
latter may sustain should the court decide that Win Multi-Rich was not entitled to the relief sought. Subsequently, Win Multi-Rich filed a surety
bond of FESICO before the RTC and was able to obtain the P8,634,448.20 cash deposit of petitioner, even before the trial commenced.

Strictly speaking, the surety bond of FESICO is not covered by any of the provisions in Rule 57 of the Rules of Court because, in the first place,
Win Multi-Rich should not have filed its motion to release the cash deposit of petitioner and the RTC should not have granted the same. The
release of the cash deposit to the attaching party is anathema to the basic tenets of a preliminary attachment.

The chief purpose of the remedy of attachment is to secure a contingent lien on defendant's property until plaintiff can, by appropriate
proceedings, obtain a judgment and have such property applied to its satisfaction, or to make some provision for unsecured debts in cases
where the means of satisfaction thereof are liable to be removed beyond the jurisdiction, or improperly disposed of or concealed, or otherwise
placed beyond the reach of creditors.61 The garnished funds or attached properties could only be released to the attaching party after a
judgment in his favor is obtained. Under no circumstance, whatsoever, can the garnished funds or attached properties, under the
custody of the sheriff or the clerk of court, be released to the attaching party before the promulgation of judgment.

Cash deposits and counterbonds posted by the defendant to lift the writ of attachment is a security for the payment of any judgment that the
attaching party may obtain; they are, thus, mere replacements of the property previously attached. 62 Accordingly, the P8,634,448.20 cash
deposit of petitioner, as replacement of the properties to be attached, should never have been released to Win Multi-Rich.

Nevertheless, the Court must determine the nature of the surety bond of FESICO. The cash deposit or the counter-bond was supposed to
secure the payment of any judgment that the attaching party may recover in the action. 63 In this case, however, Win Multi-Rich was able to
withdraw the cash deposit and, in exchange, it posted a surety bond of FESICO in favor of petitioner to answer for the damages that the latter
may sustain. Corollarily, the surety bond of FESICO substituted the cash deposit of petitioner as a security for the judgment. Thus, to claim
damages from the surety bond of FESICO, Section 17, Rule 57 could be applied. It reads:
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Sec. 17. Recovery upon the counter-bond.

When the judgment has become executory, the surety or sureties on any counter-bond given pursuant to the provisions of this Rule to secure
the payment of the judgment shall become charged on such counter-bond and bound to pay the judgment obligee upon demand the amount
due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action.
From a reading of the above-quoted provision, it is evident that a surety on a counter-bond given to secure the payment of a judgment
becomes liable for the payment of the amount due upon: (1) demand made upon the surety; and (2) notice and summary hearing on the same
action.64 Noticeably, unlike Section 20, Rule 57, which requires notice and hearing before the finality of the judgment in an application for
damages, Section 17, Rule 57 allows a party to claim damages on the surety bond after the judgment has become executory. 65 redarcl aw

The question remains, in contrast to Section 20, why does Section 17 sanction the notice and hearing to the surety after the finality of
judgment? The answer lies in the kind of damages sought to be enforced against the bond.

Under Section 20, Rule 57, in relation to Section 4 therein, 66 the surety bond shall answer for all the costs which may be adjudged to the
adverse party and all damages which he may sustain by reason of the attachment. In other words, the damages sought to be enforced against
the surety bond are unliquidated. Necessarily, a notice and hearing before the finality of judgment must be undertaken to properly determine
the amount of damages that was suffered by the defendant due to the improper attachment. These damages to be imposed against the
attaching party and his sureties are different from the principal case, and must be included in the judgment.

On the other hand, under Section 17, Rule 57, in relation to Section 12 therein, the cash deposit or the counter-bond shall secure the payment
of any judgment that the attaching party may recover in the action. Stated differently, the damages sought to be charged against the surety
bond are liquidated. The final judgment had already determined the amount to be awarded to the winning litigant on the main action. Thus,
there is nothing left to do but to execute the judgment against the losing party, or in case of insufficiency, against its sureties.

Here, the Court is convinced that a demand against FESICO had been made, and that it was given due notice and an opportunity to be heard
on its defense. First, petitioner filed a motion for execution on June 29, 2009, a copy of which was furnished to FESICO;67second, petitioner
filed a manifestation,68 dated July 13, 2009, that FESICO was duly served with the said motion and notified of the hearing on August 7,
2009; third, during the August 7, 2009 hearing on the motion for execution, the counsels for petitioner, Win Multi-Rich and FESICO were all
present;69fourth, in an Order, dated September 16, 2009, FESICO was given fifteen (15) days to submit its comment or opposition to the motion
for execution;70 and lastly, FESICO filed its comment71 on the motion on October 1, 2009. Based on the foregoing, the requirements under
Section 17, Rule 57 have been more than satisfied.

Indeed, FESICO cannot escape liability on its surety bond issued in favor of petitioner. The purpose of FESICO's bond was to secure the
withdrawal of the cash deposit and to answer any damages that would be inflicted against petitioner in the course of the proceedings.72 Also,
the undertaking73 signed by FESICO stated that the duration of the effeetivity of the bond shall be from its approval by the court until the action
is fully decided, resolved or terminated.

FESICO cannot simply escape liability by invoking that it was not a party in G.R. No. 175048. From the moment that FESICO issued Surety
Bond No. 10198 to Win Multi-Rich and the same was posted before the RTC, the court has acquired jurisdiction over the surety, and the
provisions of Sections 12 and 17 of Rule 57 became operational. Thus, the Court holds that FESICO is solidarity liable under its surety bond
with its principal Win Multi-Rich.

On a final note, the Court reminds the bench and the bar that lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it
deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. There
should be no vested rights in technicalities.74
redarclaw

WHEREFORE, the petition is PARTIALLY GRANTED. The October 21, 2013 Decision and the April 1, 2014 Resolution of the Court of
Appeals in CA-G.R. CV No. 95421 are AFFIRMED WITH MODIFICATION. The Regional Trial Court of Manila, Branch 32 in Civil Case No. 04-
108940 is hereby ordered to proceed with the execution against Far Eastern Surety & Insurance Co., Inc., to the extent of the amount of the
surety bond.

SO ORDERED. cr alawl awlibrar y

G.R. No. 181721

WATERCRAFT VENTURE CORPORATION, represented by its Vice-President, ROSARIO E.

RANOA,Petitioners,
vs.
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
Decision2dated 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 Watercraft'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 Watercraft'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. He 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. He
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 27, 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 writ 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. Rañoa, 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 mpany.

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.
RAÑOA 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 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. 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 57of 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:

1. that a sufficient cause of action exists;

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

3. that there is no other sufficient security for the claim sought to be enforced by the action; and

4. 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. Rañoa, 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 (Php 3,231,589.25) inclusive of interest charges.

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 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;

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
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 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
1âw phi 1

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 misplaced. 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 plaintiff's application and affidavits on which the writ was
based – and consequently that the writ based thereon had been improperly or irregularly issued – the reason being
that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action.
In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular
trial.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.39

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.

.R. No. 193821, November 23, 2015

PHIL-AIR CONDITIONING CENTER, Petitioner, v. RCJ LINES AND ROLANDO ABADILLA, JR., Respondent.

DECISION

BRION, J.:

Phil-Air Conditioning Center (Phil-Air) filed this petition for review on certiorari1 to assail the September 15, 2010 decision2 of the Court of
Appeals (CA) in CA-G.R. CV No. 85866.

The CA affirmed the September 8, 2004 decision of the Regional Trial Court (RTC), Branch 119 of Pasay City, dismissing Phil-Air's complaint
for sum of money with prayer for a writ of preliminary attachment. 3

Designated as Acting Member in lieu of Associate Justice Antonio T. Carpio, per Special Order No. 2282 dated November 13, 2015.

Designated as Acting Chairperson in lieu of Associate Justice Antonio T. Carpio, per Special Order No. 2281 dated November 13, 2015.
 Antecedents

On various dates between March 5, 1990, and August 29, 1990, petitioner Phil-Air sold to respondent RCJ Lines four Carrier Paris 240 air-
conditioning units for buses (units). The units included compressors, condensers, evaporators, switches, wiring, circuit boards, brackets, and
fittings.4

The total purchases amounted to P1,240,000.00 as shown on a sales invoice dated November 5, 1990. 5RCJ Lines paid P400,000.00, leaving a
balance of P840,000.00.6

RCJ Lines accepted the delivery of the units, which Phil-Air then installed after they were inspected by RCJ Lines president Rolando Abadilla,
Sr.7

Phil-Air allegedly performed regular maintenance checks on the units pursuant to the one-year warranty on parts and labor. After some months
from installation, Phil-Air supposedly boosted the capacity of the units by upgrading them to the Carrier Paris 280 model. 8 It also purportedly
repaired the control switch panel of one of the units for an additional cost of P60,000.00. 9

RCJ Lines issued three post-dated checks in favor of Phil-Air to partly cover the unpaid balance: chanRobl es virtual Lawli brar y

Check No. Amount Post-dated

479759 Php 244,998.00 February 28, 1992

479760 Php 244,998.00 March 31, 1992

479761 Php 244,998.00 April 30, 1992

TOTAL Php 734,994.00

cralawl awlibrar y

All the post-dated checks were dishonored when Phil-Air subsequently presented them for payment. Check No. 479759 was returned because
it was drawn against insufficient funds, while Check Nos. 479760 and 479761 were returned because payments were stopped. 10

Before presenting the third check for payment, Phil-Air sent a demand letter11 to Rolando Abadilla, Sr. on April 7, 1992, asking him to fund the
post-dated checks.

On July 17, 1996, Phil-Air demanded payment from Rolando Abadilla, Jr., for the total amount of P734,994.00 plus interest, and attorney's fees
equivalent to 25% of the amount due. Phil-Air warned that it would take court action if payment is not made within five days from demand. 12

In view of the failure of RCJ Lines to pay the balance despite demand, Phil-Air filed on April 1, 1998 the complaint13 for sum of money with
prayer for the issuance of a writ of preliminary attachment. 14 Phil-Air sought to recover from RCJ Lines: chanR obl es virtual Lawlibrar y

a) The total amount of P840,000.00 exclusive of interest for the unpaid delivered air-conditioning
units;

b) The amount of P60,000.00 for the unpaid repair services;

c) The total interest in the amount of P756,000.00 (P840,000.00 x 12% x 7 years + P60,000.00 x
12% x 7 years);

d) The sum equivalent to 25% of the total amount due as attorney's fees, plus P3,000.00 per court
appearance; and

e) Costs of the suit.

In its answer with compulsory counterclaim, 15RCJ Lines admitted that it purchased the units in the total amount of PI,240,000.00 and that it had
only paid P400,000.00. It refused to pay the balance because Phil-Air allegedly breached its warranty.16

RCJ Lines averred that the units did not sufficiently cool the buses despite repeated repairs. Phil-Air purportedly represented that the units
were in accord with RCJ Lines' cooling requirements as shown in Phil-Air's price quotation17 dated August 4, 1989. The price quotation
provided that full payment should be made upon the units' complete installation. Complete installation, according to RCJ Lines, is equivalent to
being in operational condition.

As it turned out, the Carrier Paris 240 model was not suited to the 45 to 49-seater buses operated by RCJ Lines. The units, according to RCJ
Lines, were defective and did not attain full operational condition. 18
Further, RCJ Lines claimed that it was also entitled to be reimbursed for costs and damages occasioned by the enforcement of the writ of
attachment.

RCJ Lines thus urged the RTC to order Phil-Air to pay (1) the replacement costs of the units; (2) lost profits for nine days from April 22 to April
30, 1999, resulting from the attachment of its two buses amounting to P207,000.00; 19 and (3) P64,390.00 for the counter-bond premium, moral
damages, exemplary damages and attorney's fees.

The RTC Ruling

The RTC granted the application for the issuance of a writ of preliminary attachment after Phil-Air posted an attachment bond in the amount of
P1,656,000.00.20 Two buses of RCJ Lines were attached pursuant to the writ dated December 18, 1998. 21 The writ was executed on April 21,
1999.22 The attachment, however, was later lifted when the RTC granted RCJ Lines' urgent motion to discharge the writ of attachment. 23 RCJ
Lines posted a counter-bond in the same amount as the attachment bond. 24

Ruling on the merits after trial, the RTC found that Phil-Air was guilty of laches and estopped from pursuing its claim. It also sustained the
allegation that Phil-Air had breached its warranty.

The dispositive portion of the RTC judgment reads: chanR obl es virtual Lawli brar y

WHEREFORE, judgment is hereby rendered as follows:

A. Dismissing the complaint of plaintiff for lack of merit.

B. Directing the plaintiff to pay the defendants the amount of PI00,000.00 as attorney's fees as they were forced to spend and hire a
lawyer to litigate for seven (7) years in this Court the unfounded and invalid cause of action of plaintiff.

C. Directing the plaintiff to pay P82,274.00 as refund of the premium xxx for defendant's counter-bond for the release of the two buses
which were attached per Writ of Attachment of this Court.

D. Directing the plaintiff to pay P216,000.00 for the lost profits of defendants for the attachment of their two buses as there was no fraud
in the transaction of the parties and plaintiff had no sufficient cause of action for the issuance of the writ of attachment.

E. Dismissing all other claims of defendants as stated in their counter-claims.

F. Costs against plaintiff. SO ORDERED.25
cralawl awlibrar y

The CA Ruling

The CA affirmed the RTC decision in toto.26

First, the CA held that Phil-Air's cause of action was barred by laches. 27

The CA concluded that "Phil-Air's inaction on RCJ Lines' repeated demands and inexplicable failure to comply with its obligations had certainly
led the latter to believe [Phil-Air] was no longer interested in pursuing any claim" and that "[Phil-Air] had been conspicuously silent for so long a
time which is disturbingly unusual for one claiming to have been aggrieved by another."28

Second, the CA held that Phil-Air breached its warranty. The price quotation supposedly warranted that the Carrier Paris 240 model was
suitable for 50-60-passenger coaches and especially recommended for operation in the tropics. 29

The CA gave credence to the testimony of the country manager of Carrier Refrigeration Philippines Inc. (Carrier Philippines) who testified that
the Carrier Paris 240 model is suited for buses with a maximum seating capacity of up to 35 persons; beyond that, the units would not function
properly.30 The CA also found convincing the testimonies of two RCJ Lines employees who testified that they experienced firsthand the
inefficient cooling of the Carrier Paris 240. 31

Relying on these testimonies, the CA found that the four units did not meet the cooling requirements of RCJ Lines. 32

Third, the CA ordered Phil-Air to reimburse the premium on the counter-bond amounting to P82,274.00 since the writ was improvidently issued.

Fourth, the CA affirmed the finding of the RTC that RCJ Lines suffered losses when the RTC attached two of its buses.

The RTC and the CA relied on the testimony of Rolando Abadilla, Jr., who claimed to be in charge of the daily operations of RCJ Lines. He
testified that they suffered losses for nine days as a result of the enforcement of the writ of preliminary attachment. The lost profits purportedly
amounted to P227,280.00. To support this claim, RCJ Lines adduced as evidence the summary of the daily cash collections 33 from the buses
that were not attached, on various dates in August and September 2000. 34

Finally, the CA sustained the award of attorney's fees for PI 00,000.00 in favor of RCJ lines for having been compelled to litigate.

The Petition

First, Phil-Air argues that the doctrine of laches is not applicable when the action is filed within the prescriptive period. Laches, being a doctrine
of equity, should only be applied to fill a void in the law. 35

Phil-Air asserts that it filed the complaint on April 1, 1998, or less than eight years from the execution of the sales invoice dated November 5,
1990. The complaint was thus filed within the ten-year prescriptive period for actions based upon a written contract.

Second, Phil-Air denies that it breached its warranty.

It maintains that all the units were brand new and were accepted by RCJ Lines in good, working, and operational condition. The units were
inspected, tested, and approved by then RCJ Lines president, Rolando Abadilla, Sr., as proved by the delivery receipts in which he affixed his
signature.36

Phil-Air further avers that it was not notified of the alleged breach of warranty. Assuming it breached its warranty, Phil-Air submits that the
action to enforce the warranty had already prescribed.

Third, Phil-Air rejects the CA's order that it must reimburse the premium payment for the counter-bond and the alleged losses suffered by RCJ
Lines. The attachment bond should be answerable for damages, if any.

Respondent's Comment

RCJ Lines reiterates all the arguments it raised in its counterclaim. It admits that it did not pay the balance of the purchase price. 37 It maintains,
however, that it was justified in doing so because Phil-Air breached its warranty. It insists that Phil-Air was guilty of laches because it waited for
eight years to file the collection case.38

Issues

Based on the foregoing, the Court resolves the following issues: chanR oblesvirtualLawlibrar y

(1)Whether the claim of Phil-Air was barred by laches;

(2)Whether Phil-Air should reimburse RCJ Lines for the counter- bond premium and its alleged
unrealized profits;
(3)Whether RCJ Lines proved its alleged unrealized profits arising from the enforcement of the
preliminary writ of attachment; and
(4)Whether RCJ Lines proved that Phil-Air breached its warranty.
Our Ruling

We grant the petition.

Phil-Air's claim is not

barred by laches.

In general, there is no room to apply the concept of laches when the law provides the period within which to enforce a claim or file an action in
court. Phil-Air's complaint for sum of money is based on a written contract of sale. The ten-year prescriptive period under Article 1144 of the
Civil Code thus applies.39

In the present case, both parties admit the existence and validity of the contract of sale. They recognize that the price quotation dated August
4, 1989, contained the terms and conditions of the sale contract. They also agree that the price and description of the units were indicated on
the sales invoice dated November 5, 1990. The sales were in fact consummated on various dates between March 5, 1990 and August 29,
1990, as proved by several delivery receipts.

The Court therefore can resolve whether Phil-Air's action to enforce the contract was timely filed even in the apparent absence of a formal or
notarized deed of sale.40 More significantly, Rolando Abadilla, Jr., admitted under oath that the sale was in writing. 41

We note that Phil-Air filed the complaint with the RTC on April 1, 1998. Counting from the date of the sales invoice, or from the date of the
delivery receipts, or even from the date of the price quotation, it is clear that the complaint was filed within the ten-year prescriptive period.
Contrary to the CA's ruling, laches does not apply.

Laches is defined as the failure or neglect for an unreasonable and unexplained length of time, to do that which by exercising due diligence,
could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it either has abandoned it or declined to assert it. 42

While the CA correctly held that prescription and estoppel by laches are two different concepts, it failed to appreciate the marked distinctions
between the two concepts.

On the one hand, the question of laches is addressed to the sound discretion of the court. 43 The court resolves whether the claimant asserted
its claim within a reasonable time and whether its failure to do so warrants the presumption that it either has abandoned it or declined to
assert it. The court determines the claimant's intent to assert its claim based on its past actions or lack of action. After all, what is invoked in
instances where a party raises laches as a defense is the equity jurisdiction of the court. 44

On the other hand, if the law gives the period within which to enforce a claim or file an action in court, the court confirms whether the claim is
asserted or the action is filed in court within the prescriptive period. The court determines the claimant's intent to assert its claim by simply
measuring the time elapsed from the proper reckoning point (e.g., the date of the written contract) to the filing of the action or assertion of the
claim.

In sum, where the law provides the period within which to assert a claim or file an action in court, the assertion of the claim or the filing of
the action in court at any time within the prescriptive period is generally deemed reasonable, and thus, does not call for the application
of laches. As we held in one case, unless reasons of inequitable proportions are adduced, any imputed delay within the prescriptive period
is not delay in law that would bar relief. 45

In Agra, et al. v. Philippine National Bank,46 we held that "[l]aches is a recourse in equity [and] is applied only in the absence, never in
contravention, of statutory law. Thus, laches cannot, as a rule, abate a collection suit filed within the prescriptive period mandated by the Civil
Code."

Agra involved an action for collection of a sum of money arising from an unpaid loan. In resisting payment, the sureties invoked laches and
maintained that the creditor-bank with full knowledge of the deteriorating financial condition of the principal debtor did not take steps to collect
from the latter while still solvent. The sureties thus argued that the creditor-bank's action was barred by laches.

We found that the sureties failed to prove all the elements of laches, namely:

(1) conduct on the part of the defendant or one under whom he claims, giving rise to the situation of
which complaint is made and for which the complainant seeks a remedy;

(2) delay in asserting the complainant's right, the complainant having had knowledge or notice of
defendant's conduct and having been afforded an opportunity to institute a suit;

(3) lack of knowledge or notice on the part of the defendant that the complainant would assert the
right on which he bases his claim; and

(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit
is not held barred.47
cralawl awlibrar y

Examining these elements, we found that only the first element was present. There was no delay (second element) because the creditor-bank
filed the action within the ten-year prescriptive period. Since the claim was timely filed, the defendants did not lack notice that the creditor-bank
would assert its claim (third element). Nor was the assertion of the right deemed injurious to the defendants (fourth element); the creditor-bank
could assert its claim at any time within the prescriptive period.

The same conclusion holds true in the present case; not all the elements of laches are present. To repeat, Phil-Air filed the complaint with the
RTC on April 1, 1998. The time elapsed from August 4, 1989 (the date of the price quotation, which is the earliest possible reckoning point), is
eight years and eight months, well within the ten-year prescriptive period. There was simply no delay (second element of laches) where Phil-Air
can be said to have negligently slept on its rights.

More significantly, there is no basis for laches as the facts of the present case do not give rise to an inequitable situation that calls for the
application of equity and the principle of laches.48

Phil-Air is not directly liable

for the counter-bond premium and
RCJ Lines' alleged unrealized profits.

The CA and the RTC erred when it held Phil-Air directly liable for the counter-bond premium and RCJ Lines' alleged unrealized profits.
Granting that RCJ Lines suffered losses, the judgment award should have been first executed on the attachment bond. Only if the attachment
bond is insufficient to cover the judgment award can Phil-Air be held liable.49

We explain below the purpose of a preliminary attachment, the procedure in obtaining it, and the manner of having it lifted.

A writ of preliminary attachment is a provisional remedy issued by the court where an action is pending to be levied upon the property or
properties of the defendant. The property is held by the sheriff as security for the satisfaction of whatever judgment that might be secured by
the attaching party against the defendant. 50

The grant of the writ is conditioned not only on the finding of the court that there exists a valid ground for its issuance. 51 The Rules also require
the applicant to post a bond.

Section 4 of Rule 57 of the Rules of Civil Procedure (Rules) provides that "the party applying for the order must...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 that may be adjudged to the adverse party and all damages that he may sustain by reason of the attachment, if the court shall
finally adjudge that the applicant was not entitled thereto."

The enforcement of the writ notwithstanding, the party whose property is attached is afforded relief to have the attachment lifted.

There are various modes of discharging an attachment under Rule 57, viz.: (1) by depositing cash or posting a counter-bond under Section
12;52 (2) by proving that the attachment bond was improperly or irregularly issued or enforced, or that the bond is insufficient under Section
13;53 (3) by showing that the attachment is excessive under Section 13; and (4) by claiming that the property is exempt from execution under
Section 2.54

RCJ Lines availed of the first mode by posting a counter-bond.

Under the first mode, the court will order the discharge of the attachment after (1) the movant makes a cash deposit or posts a counter-bond
and (2) the court hears the motion to discharge the attachment with due notice to the adverse party. 55

The amount of the cash deposit or counter-bond must be equal to that fixed by the court in the order of attachment, exclusive of costs. The
cash deposit or counter-bond shall secure the payment of any judgment that the attaching party may recover in the action. 56

The filing of a counter-bond to discharge the attachment applies when there has already been a seizure of property by the sheriff and 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 in place of the property so released.57

To be clear, the discharge of the attachment by depositing cash or posting a counter-bond under Section 12 should not be confused with the
discharge sanctioned under Section 13. Section 13 speaks of discharge on the ground that the writ was improperly or irregularly issued or
enforced, or that the attachment bond is insufficient, or that the attachment is excessive.

To reiterate, the discharge under Section 12 takes effect upon posting of a counter-bond or depositing cash, and after hearing to determine the
sufficiency of the cash deposit or counter-bond. On the other hand, the discharge under Section 13 takes effect only upon showing that the
plaintiffs attachment bond was improperly or irregularly issued, or that the bond is insufficient. The discharge of the attachment under Section
13 must be made only after hearing.58

These differences notwithstanding, the discharge of the preliminary attachment either through Section 12 or Section 13 has no effect on and
does not discharge the attachment bond. The dissolution of the preliminary attachment does not result in the dissolution of the
attachment bond. Justice Narvasa, writing his separate opinion in one case, explained: chanR obles virtualLawlibr ar y

The dissolution of the preliminary attachment upon security given [Section 12], or a showing of its irregular or improper issuance [Section
13], 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."
Hence, until that determination is made, as to the applicant's entitlement to the attachment, his bond must stand and cannot be
withdrawn.59[emphasis and underscoring supplied, citations omitted] cralawlawli brar y

In the present case, the RTC lifted the preliminary attachment after it heard RCJ Lines' urgent motion to discharge attachment and the latter
posted a counter-bond. The RTC found that there was no fraud and Phil-Air had no sufficient cause of action for the issuance of the writ of the
attachment. As a consequence, it ordered Phil-Air to refund the premium payment for the counter-bond and the losses suffered by RCJ Lines
resulting from the enforcement of the writ. The CA affirmed the RTC ruling in toto.

We reverse the CA and RTC rulings.

As discussed above, it is patent that under the Rules, the attachment bond answers for all damages incurred by the party against whom the
attachment was issued.60

Thus, Phil-Air cannot be held directly liable for the costs adjudged to and the damages sustained by RCJ Lines because of the attachment.
Section 4 of Rule 57 positively lays down the rule that the attachment bond 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."

The RTC, instead of declaring Phil-Air liable for the alleged unrealized profits and counter-bond premium, should have ordered the execution of
the judgment award on the attachment bond. To impose direct liability to Phil-Air would defeat the purpose of the attachment bond, which was
not dissolved despite the lifting of the writ of preliminary attachment.

The order to refund the counter-bond premium is likewise erroneous. The premium payment may be deemed a cost incurred by RCJ Lines to
lift the attachment. Such cost may be charged against the attachment bond.

RCJ Lines failed to prove its

alleged unrealized profits.

In finding that RCJ Lines suffered damages because of the attachment, the RTC and the CA gave complete credence to the testimony of
Rolando Abadilla, Jr. He claimed that RCJ Lines lost P216,000.00 in unrealized profits for nine days when the buses were wrongfully seized.

To arrive at this amount, RCJ Lines alleged that a bus travelling from Manila to Ilocos and vice versa earned an average daily income of
P12,000.00. To back this claim, RCJ Lines prepared a summary of the daily cash collections of its nine buses on certain days of August and
September 2000.

The summary of daily cash collections apparently prepared by one RCJ Lines employee was in turn based on the reports of the dispatchers
indicating the number of passengers and the amount of fare collected on a particular trip. Except for one bus which travelled round-trip on
August 22-23, 2000, the daily cash collections all pertained to the round-trip of eight buses on September 2-3, 2000.

These documents are insufficient to prove actual damages.

In Spouses Yu v. Ngo Yet Te,61 we held that if the claim for actual damages covers unrealized profits, the amount of unrealized profits must be
established and supported by independent evidence of the mean income of the business undertaking interrupted by the illegal seizure.
We explained in Spouses Yu that 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. 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. 62

Spouses Yu is on all fours with the present dispute because it also involved a claim for actual damages arising from the illegal attachment of
the claimant's properties, one of which was a passenger bus.

The claimants in that case attempted to prove actual damages by computing the daily average income of its bus operation based on the value
of three ticket stubs sold over five separate days. The claimants likewise cited unused ticket stubs as proof of income foregone when the bus
was wrongfully seized.

We found the claimant's evidence insufficient to prove actual damages. While we recognized that they suffered some damages, we held that
"[b]y 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 [the claimant] can add credence to such evidence for the testimony
itself lacks corroboration."63

Similarly, the evidence adduced by RCJ Lines to show actual damages fell short of the required proof. Its average daily income cannot be
derived from the summary of daily cash collections from only two separate occasions, i.e., August 22-23 and September 2-3, 2000. The data
submitted is too meager and insignificant to conclude that the buses were indeed earning an average daily income of P12,000.00.

More significant, the person who prepared the unsigned summary of daily cash collections was not presented before the RTC to verify and
explain how she arrived at the computation. The dispatchers who prepared the collection reports were likewise not presented; some of the
reports were also unsigned. While the summary was approved by Rolando Abadilla, Jr., his testimony on the alleged unrealized profits was
uncorroborated and self-serving.

Nonetheless, we recognize that RCJ Lines suffered some form of pecuniary loss when two of its buses were wrongfully seized, although the
amount cannot be determined with certainty.

We note that in its prayer for the issuance of the writ of preliminary attachment, Phil-Air alleged that RCJ Lines was guilty of fraud in entering
into the sale transaction. A perusal of the record, however, would show that Phil-Air failed to prove this bare assertion. This justifies an award of
temperate or moderate damages in the amount of Php 50,000.00. 64

The allegation of breach

of express warranty was
notproved.

We are not convinced that Phil-Air breached its express warranty. RCJ Lines had no right to recoupment in diminution of the price. 65

The Civil Code defines an express warranty as any affirmation of fact or any promise by the seller relating to the thing if the natural tendency of
such affirmation or promise is to induce the buyer to purchase the same, and if the buyer purchases the thing relying thereon.66

The question whether there was a breach of warranty is factual. Consequently, the Court should rely on the factual findings of the CA and RTC,
which are generally deemed binding and conclusive to the Court. More so in a Rule 45 petition where only questions of law can be raised.
Further, factual findings of the RTC, when affirmed by the CA, are conclusive on the Court when supported by the evidence on record. 67

The evidence on record does not support the findings of the CA and RTC.

We emphasize that there are recognized cases where the Court can disregard the factual findings of the RTC and CA. In these cases, the
Court draws its own conclusion based on the evidence on record. 68

In this case, Phil-Air denies that it breached its express warranty and strongly argues that the CA and RTC completely ignored its evidence
while it sustained the bare allegations of Rolando Abadilla, Jr.

We agree with Phil-Air. Our examination of the record reveals that the RTC and CA manifestly overlooked certain relevant facts not disputed by
the parties which, if properly considered, would justify a different conclusion.

To prove that Phil-Air breached its express warranty, RCJ Lines presented the following testimonial and documentary evidence: c hanR obl es virtualLawlibr ary

1) Rolando Abadilla, Jr. who claimed that their employees reported the defect of the units to him
and to his late father. His late father allegedly demanded Phil-Air to repair the defects. But
despite repeated verbal demands, Phil-Air purportedly failed to comply with its one-year warranty
on parts and labor.

2) Two RCJ Lines employees who claimed that they experienced firsthand the inefficient cooling of
the units.

3) The general manager of Carrier Philippines who testified that the Carrier 240 model was not
 suitable for buses with a capacity of more than 35 passengers, like those operated by RCJ Lines.

4) Summary of expenses, sales invoices, provisional receipts, and statements of accounts issued
by other suppliers and shops (Car Cool Philippines, Inc. and Sta. Rosa Motor Works, Inc.)
engaged by RCJ Lines during the period of warranty to repair the defective units, amounting to
P208,132.00

5) Commercial invoice for the $68,780.00 US Dollars worth of new units bought from another
supplier after the lapse of warranty to replace the units supplied by Phil-Air.69

In defense, Phil-Air claimed that it regularly checked the units and that during the effectivity of the one-year warranty, RCJ Lines never once
complained of defects; if there were defects, the latter should have demanded Phil-Air to perform its warranty in writing; the reason it had no
proof it made repairs and delivered spare parts was precisely because it was not apprised of any defect; and that the testimonies of the RCJ
Lines witnesses were self-serving.70

The RTC noted that Phil-Air did not present evidence to rebut the allegation of breach. 71 Phil-Air instead opposed the admission of the
documentary evidence of RCJ Lines for failing to comply with the best evidence rule. 72

We hold that the evidence that RCJ Lines submitted failed to prove breach of express warranty.

As to the testimonial evidence

The testimonies of the RCJ Lines witnesses were self-serving and uncorroborated.

The claim of Rolando Abadilla, Jr. that his late father verbally communicated the defects of the units to Phil-Air was hearsay and not
admissible.73 He admitted that he was not around when his father phoned Phil-Air to demand the repair of the units. He likewise admitted that
they did not attempt to personally meet with nor send a letter to Phil-Air to demand the repairs.74

More tellingly, Rolando Abadilla, Jr. admitted that they issued the post-dated checks to Phil-Air to cover the balance of the purchase price
sometime in 1992, viz-

Q. Mr. Witness is it not in this case that you personally issued three (3) checks draws against the
name Rolando Abadilla and Susan or Rolando Abadilla, and this was some time in 1992?

A. Yes, Sir.

Q. And you confirm that these were all dated March 31, April 30 and February 29, 1992?

A. Yes, Sir.

Q. Despite your claim that these air-conditioning units were defective and despite your claim that
these air-conditioning units were not repaired by plaintiff, hence you referred them for repair to
other companies who are not authorized, do you still affirm the fact that you issued the
postdated checks, the total of which is exactly the balance of the purchase price as quoted in
the price quotation, yes or no? [Emphasis supplied]

A. Yes, Sir.75

xxx
cralawl awlibrar y

We note that the alleged repairs made by Car Cool Philippines, Inc. and Sta. Rosa Motor Works, Inc. started in 1991. 76 If RCJ Lines knew as
early as 1991 that the units were defective and that Phil-Air refused to perform its warranty despite repeated demands, we wonder why RCJ
Lines still issued the post-dated checks in 1992 to cover the balance of the purchase price.

The record also reveals that Car Cool Philippines, Inc. and Sta. Rosa Motor Works, Inc. were not authorized by the Carrier brand to repair the
units, a fact not denied by Rolando Abadilla, Jr.77 It was likewise established that some of the parts/items purportedly provided by the other
suppliers were expressly excluded from the list of parts/items that Phil-Air was supposed to supply, again, a fact admitted by Rolando Abadilla,
Jr.78 It was likewise unclear that the repairs made by the other service providers were done on the same buses on which the subject units were
installed.79

We also find glaring the fact that RCJ Lines did not respond to the April 7, 1992 demand letter sent by Phil-Air, viz. -
Dear Mr. Abadilla,

I have been trying to get in touch with you and Junjun the past several weeks but have been unsuccessful xxx The two checks that you used to
partly pay for the four units bus air conditions [sic] were all dishonored by the bank [because they were drawn against insufficient funds].

We are but a small company and our cash flow was adversely affected by the return of the checks, xxx It would mean so much if you could
somehow help us replenished these checks, xxx We look forward to hearing from you Respectfully, we remain.

Yours truly,
cralawl awlibrar y
Ricardo Cokieng

If RCJ Lines was aware all along that the units were defective and that Phil-Air refused to heed its verbaldemands to make repairs, we do not
understand why it ignored Phil-Air's written demand to replenish the returned checks. We also find it unthinkable that RCJ Lines would spend
for parts and services from other suppliers and providers, during the period of warranty, without demanding first in writing that Phil-Air make
good its express warranty.

In this regard, we note that the right of the buyer to the recoupment in the diminution of the price under Article 1599 (1) should be read together
with Article 1586 of the Civil Code,80 which provides that:chanR obl es virtual Lawli brar y

Art. 1586. In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller
from liability in damages or other legal remedy for breach of any promise or warranty in the contract of sale. But, if, after acceptance of the
goods, the buyer fails to give notice to the seller of the breach in any promise of warranty within a reasonable time after the buyer
knows, or ought to know of such breach, the seller shall not be liable therefor. cralawlawlibr ar y

The obvious purpose of the notice is to protect the seller against belated claims. If the seller is not duly notified, he is prevented from making
prompt investigation to determine the cause and extent of his liability. 81 Consequently, he is barred from repairing or rectifying whatever defects
the goods sold had.

RCJ Lines failed to convince us that it notified Phil-Air of the breach of warranty within a reasonable time. In truth, we are not convinced at all
that it had even notified Phil-Air. Although Article 1586 does not require that the notice to the seller be in writing, we cannot accept the claim of
Rolando Abadilla, Jr. that his late father verbally notified Phil-Air of the defects, without violating the rule on hearsay.

Also, the testimonies of the two RCJ Lines employees that they experienced firsthand the insufficient cooling of the units were self-serving and
uncorroborated by a disinterested party.

Further, the reliance of the CA and the RTC on the testimony 82 of the general manager of Carrier Philippines was misplaced and unwarranted.
It appears that the computation of the cooling efficiency of the Carrier 240 model was merely theoretical, based only on the specifications of the
model and not on actual test, viz. —

Q: Have you seen RCJ Bus?

A: I did see.

xxx

Q: With respect to car aircon Paris 240 installed, have you seen this bus?

A: No, I did not.

Q: Mr. Witness, this case involves a particular product a brand of the product that you did not try
[sic] but specifically Paris 240. Have you seen it personally, the four units installed?

A: No I did not.

Q: Even one unit?

A: No Sir.
cralawl awlibrar y

The meat of his testimony centered not on the subject units but on the cooling capacity of the product that Carrier Philippines was then selling
in the market. In fact, he admitted that his role in the company had nothing to do with repairs of air-conditioning units.

On this basis, we do not find his testimony conclusive as to the alleged breach of express warranty. It was too tangential and speculative. We
note that he was not even presented as an expert witness. Even if we assume that the computation of the cooling capacity of the Carrier 240
was accurate, RCJ Lines still failed to prove that it duly and promptly informed Phil-Air of the alleged breach.

On the documentary evidence

The pieces of documentary evidence submitted by RCJ Lines to prove breach of express warranty failed to comply with the best evidence rule.
It is established on record that the sales invoices and provisional receipts issued by the other suppliers and service providers were mere
photocopies.83 The counsel of Phil-Air objected to the admission of the secondary evidence without proof that the originals were indeed lost.
The counsel for RCJ Lines requested that the evidence be conditionally accepted and marked, which the trial court granted.

Nowhere on record, however, was it ever established that the originals were later submitted. It was also not shown that the originals were
indeed lost, which could have justified the submission of secondary evidence. 84 The RTC simply ignored this fact when it finally decided the
case.

Conclusion

Based on the foregoing analysis, we find- that RCJ Lines failed to prove its allegation that Phil-Air breached its express warranty. RCJ Lines is
thus held liable to pay the balance of the purchase price plus interest and attorney's fees. 85 RCJ Lines, however, is entitled to temperate
damages as a result of the wrongful attachment of its buses and to the refund of the premium payment for the counter-bond.

WHEREFORE, in view of the foregoing, we hereby GRANT the petition. The September 15, 2010 decision of the Court of Appeals in CA-G.R.
CV No. 85866 is REVERSED and SET ASIDE.

ACCORDINGLY, RCJ Lines is DIRECTED to pay:

1. Eight Hundred Forty Thousand Pesos (P840,000.00) representing the unpaid balance of the purchase price;

2. Interest of twelve percent (12%) per annum on the unpaid balance to be computed from November 5, 1990 86 until June 30, 2013;

3. Interest of six percent (6%) per annum on the unpaid balance to be computed from July 1, 2013, 87 until fully paid;

4. Attorney's fees in the fixed amount of P30,000.00.88

The total amount to be recovered shall further be subject to the legal interest rate of six percent (6 %) per annum from the finality of this
decision until fully paid.89

The attachment bond posted by Phil-Air shall be levied upon to satisfy the P50,000.00 temperate damages awarded to RCJ Lines and the
P82,274.00 refund of the counter-bond premium.

SO ORDERED. c hanrobl es virtuallawli brar y