RULE 57 new case
denied by the RTC in its Order,10 dated August 12, 2013.
G.R. No. 219345, January 30, 2017
SECURITY BANK CORPORATION, Petitioner, v.
GREAT WALL COMMERCIAL PRESS COMPANY,
INC., ALFREDO BURIEL ATIENZA, FREDINO CHENG
ATIENZA AND SPS. FREDERICK CHENG ATIENZA
AND MONICA CU ATIENZA, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to
reverse and set aside the December 12, 2014 Decision1
and June 26, 2015 Resolution2 of the Court of Appeals
(CA) in CA-G.R. SP No. 131714, which lifted the writ of
preliminary attachment issued by the Regional Trial
Court, Branch 59, Makati City (RTC), in Civil Case No.
13-570, in favor of petitioner Security Bank Corporation
(Security Bank).
The Antecedents
On May 15, 2013, Security Bank filed a Complaint for
Sum of Money (with Application for Issuance of a Writ of
Preliminary Attachment)3 against respondents Great Wall
Commercial Press Company, Inc. (Great Wall) and its
sureties, Alfredo Buriel Atienza, Fredino Cheng Atienza,
and Spouses Frederick Cheng Atienza and Monica Cu
Atienza (respondents), before the RTC. The complaint
sought to recover from respondents their unpaid
obligations under a credit facility covered by several trust
receipts and surety agreements, as well as interests,
attorney's fees and costs. Security Bank argued that in
spite of the lapse of the maturity date of the obligations
from December 11, 2012 to May 7, 2013, respondents
failed to pay their obligations. The total principal amount
sought was P10,000,000.00. On May 31, 2013, after due
hearing, the RTC granted the application for a writ of
preliminary attachment of Security Bank, which then
posted a bond in the amount of P10,000,000.00.
On June 3, 2013, respondents filed their Motion to Lift
Writ of Preliminary Attachment Ad Cautelam,4 claiming
that the writ was issued with grave abuse of discretion
based on the following grounds: (1) Security Bank's
allegations in its application did not show a prima facie
basis therefor; (2) the application and the accompanying
affidavits failed to allege at least one circumstance which
would show fraudulent intent on their part; and (3) the
general imputation of fraud was contradicted by their
efforts to secure an approval for a loan restructure.5
The RTC Orders
In its Order,6 dated July 4, 2013, the RTC denied
respondents' motion to lift, explaining that the Credit
Agreement7 and the Continuing Suretyship Agreement8
contained provisions on representations and warranties;
that the said representations and warranties were the
very reasons why Security Bank decided to extend the
loan; that respondents executed various trust receipt
agreements but did not pay or return the goods covered
by the trust receipts in violation thereof; that they failed to
explain why the goods subject of the trust receipts were
not returned and the proceeds of sale thereof remitted;
and that it was clear that respondents committed fraud in
the performance of the obligation.9
Respondents filed a motion for reconsideration, but it was
Dissatisfied, respondents filed a petition for certiorari
before the CA seeking to reverse and set aside the RTC
orders denying their motion to lift the writ of preliminary
attachment issued.
The CA Ruling
In its assailed decision, dated December 12, 2014, the
CA lifted the writ of preliminary attachment. The appellate
court explained that the allegations of Security Bank were
insufficient to warrant the provisional remedy of
preliminary attachment. It pointed out that fraudulent
intent could not be inferred from a debtor's inability to pay
or comply with its obligations. The CA opined that the
non-return of the proceeds of the sale and/or the goods
subject of the trust receipts did not, by itself, constitute
fraud and that, at most, these were only averments for the
award of damages once substantiated by competent
evidence. It also stressed that respondents' act of offering
a repayment proposal negated the allegation of fraud.
The CA held that fraud must be present at the time of
contracting the obligation, not thereafter, and that the
rules on the issuance of a writ of attachment must be
construed strictly against the applicant. It disposed the
case in this wise:
WHEREFORE, for the foregoing reasons, the instant
petition is GRANTED. Accordingly, the attachment over
any property of petitioners by the writ of preliminary
attachment is ordered LIFTED effective upon the finality
of this Decision. No costs.
SO ORDERED.11
Security Bank moved for reconsideration but its motion
was denied by the CA in its assailed resolution, dated
June 26, 2015.
Hence, this petition raising the lone
ISSUE
WHETHER OR NOT THE COURT OF APPEALS
ERRED IN NULLIFYING THE WRIT OF PRELIMINARY
ATTACHMENT ISSUED BY THE TRIAL COURT.
Security Bank argues that there are sufficient factual and
legal bases to justify the issuance of the writ of preliminary
attachment. It claims that it was misled by respondents,
who employed fraud in contracting their obligation, as
they made the bank believe that they had the capacity to
pay; that respondents also committed fraud in the
performance of their obligation when they failed to turn
over the goods subject of the trust receipt agreements,13
or remit the proceeds thereof despite demands; and that
these were not mere allegations in the complaint but facts
that were testified to by its witness and supported by
written documents.
Security Bank added that respondents' effort to settle
their outstanding obligation was just a subterfuge to
conceal their real intention of not honoring their
commitment and to delay any legal action that the bank
would take against them; that respondents submitted a
repayment proposal through a letter, dated January 23,
2013, knowing fully well that they were already in default;
that they requested a meeting to discuss their proposal
but they failed to show up and meet with the bank's
representative; and that respondents did not submit any
supporting documents to back up their repayment
proposal.
In their Comment,14 respondents countered that there
was insufficient basis for the issuance of the writ of
preliminary attachment against them; that the mere failure
to pay their obligation was not an act of fraud; that the
application for the issuance of the writ of preliminary
attachment, the affidavit of merit and judicial affidavit
merely cited general allegations of fraud and Security
Bank failed to sufficiently show the factual circumstances
constituting fraud. Moreover, respondents claimed that
they did not commit fraud because they were earnestly
negotiating with Security Bank for a loan restructuring as
shown by their Letter,15 dated January 23, 2013, and
email correspondences.
In its Reply,16 Security Bank stressed that respondents
misled them on their financial capacity and ability to pay
their obligations. It emphasized that there were specific
allegations in its complaint and its witness testified that
respondents committed fraud, specifically their failure to
comply with the trust receipt agreements, that they would
turn over the goods covered by the trust receipt
agreements or the proceeds thereof to Security Bank.
The Court's Ruling
The Court finds merit in the petition.
Preliminary Attachment
A writ of preliminary attachment is a provisional remedy
issued upon the order of the court where an action is
pending. Through the writ, the property or properties of
the defendant may be levied upon and held thereafter by
the sheriff as security for the satisfaction of whatever
judgment might be secured by the attaching creditor
against the defendant. The provisional remedy of
attachment is available in order that the defendant may
not dispose of the property attached, and thus prevent the
satisfaction of any judgment that may be secured by the
plaintiff from the former.17
In this case, Security Bank relied on Section 1 (d), Rule
57 of the Rules of Court as basis of its application for a
writ of preliminary attachment. It reads:
RULE 57
Preliminary Attachment
Section 1. Grounds upon which attachment may issue. —
At the commencement of the action or at any time before
entry of judgment, a plaintiff or any proper party may have
the property of the adverse party attached as security for
the satisfaction of any judgment that may be recovered in
the following cases:
xxx
(d) In an action against a party who has been guilty of a
fraud in contracting the debt or incurring the obligation
upon which the action is brought, or in the performance
thereof;
xxx
For a writ of preliminary attachment to issue under the
above-quoted rule, the applicant must sufficiently show
the factual circumstances of the alleged fraud. It is settled
that fraudulent intent cannot be inferred from the debtor's
mere non-payment of the debt or failure to comply with
his obligation.18
While fraud cannot be presumed, it need not be proved
by direct evidence and can well be inferred from attendant
circumstances. Fraud by its nature is not a thing
susceptible of ocular observation or readily demonstrable
physically; it must of necessity be proved in many cases
by inferences from circumstances shown to have been
involved in the transaction in question.19
The allegations of Security Bank in support of its
application for a writ of preliminary attachment are as
follow:
15. During the negotiation for the approval of the loan
application/ renewal of Respondents the latter through
Alfredo Buriel Atienza, Fredino Cheng Atienza and Sps.
Frederick Cheng Atienza and Monica Cu Atienza,
assured SBC that the loan obligation covered by the
several Trust Receipts shall be paid in full on or before its
maturity date pursuant to the terms and conditions of the
aforesaid trust receipts. However, Respondents as well
as the sureties failed to pay the aforesaid obligation.
16. In addition, the assurance to pay in full the obligation
is further solidified by the warranty of solvency provisions
of the Credit Agreement, the pertinent portion of which
states that:
"5. Representations at Warranties. - The Borrower further
represents and warrants that xxxe) The maintenance of
the Credit Facility is premised on the Borrower's
continued ability to service its obligations to its creditors.
Accordingly, the Borrower hereby warrants that while any
of the Credit Obligations remain unpaid, the Borrower
shall at all times have sufficient liquid assets to meet
operating requirements and pay all its/his debts as they
fall due. Failure of the Borrower to pay any maturing
interest, principal or other charges under the Credit
Facility shall be conclusive evidence of violation of this
warranty."
17. To allay whatever fear or apprehension of herein
plaintiff on the commitment of Respondents to honor its
obligations, defendants-sureties likewise executed a
"Continuing Suretyship Agreement.
18. Under paragraph 3 of the said Suretyship Agreement,
it is provided that:
"3. Liability of the Surety - The liability of the Surety is
solidary, direct and immediate and not contingent upon
the pursuit by SBC of whatever remedies it may have
against the Borrower or the collateral/liens it may
possess. If any of the Guaranteed Obligations is not paid
or performed on due date (at stated maturity or by
acceleration), or upon the occurrence of any of the events
of default under Section 5 hereof and/or under the Credit
Instruments, the Surety shall without need for any notice,
demand or any other act or deed, immediately and
automatically become liable therefor and the Surety shall
pay and perform the same."
19. Thus, in the light of the representation made by
Respondents Commercial Press Co, Inc., Alfredo Buriel
Atienza, Fredino Cheng Atienza and Sps. Frederick
Cheng Atienza and Monica Cu Atienza that the loan shall
be paid in full on or before maturity, coupled by the
warranty of solvency embodied in the Credit Agreement
as well as the execution of the Continuing Suretyship
Agreement, the loan application was eventually
approved.
20. Needless to say that without said representations and
warranties, including the Continuing Suretyship
Agreement, the plaintiff would not have approved and
granted the credit facility to Respondents. It is thus clear
that Respondents, Alfredo Buriel Atienza, Fredino Cheng
Atienza and Sps. Frederick Cheng Atienza and Monica
Cu Atienza, misled SBC and employed fraud in
contracting said obligation.
21. Respondents, through its Vice President Fredino
Cheng Atienza, likewise executed various Trust Receipt
Agreements with the plaintiff whereby it bound itself under
the following provision:
"2. In consideration of the delivery to the Entrustee of the
possession of the Goods/Documents, the Entrustee
hereby agrees and undertakes, in accordance with the
provisions of the Presidential Decree No. 115; (i) to hold
in trust for the Bank the Goods/Documents; (ii) to sell the
Goods for cash only for the account and benefit of the
Bank, and without authority to make any other disposition
of the Goods/Documents or any part thereof, or to create
a lien thereon; (iii) to turn over to the Bank, without need
of demand, the proceeds of the sale of the Goods to the
extent of the amount of obligation specified above (the
"Obligation"), including the interest thereon, and other
amounts owing by the Entrustee to the Bank under this
Trust Receipt, on or before the maturity date above-
mentioned (the "Maturity Date"); or (iv) to return, on or
before Maturity Date, without need of demand and at the
Entrustee's expense, the Goods/Documents to the Bank,
in the event of non-sale of the Goods."
Despite the above covenants, defendants failed to pay
nor return the goods subject of the Trust Receipt
Agreements.
22. Knowing fully well that they are already in default,
Respondents and defendants sureties submitted a
repayment proposal through their letter dated January 23,
2013. Through their lawyer, they likewise requested the
bank for a meeting to discuss their proposal. However, as
it turned out, the proposed repayment proposal for their
loan was only intended to delay legal action against them.
They failed to meet with the Bank's representative and
neither did they submit supporting documents to back up
their repayment proposal.20
To support its allegation of fraud, Security Bank attached
the Affidavit21 of German Vincent Pulgar IV (Pulgar), the
Manager of the Remedial Management Division of the
said bank. He detailed how respondents represented to
Security Bank that they would pay the loans upon their
maturity date. Pulgar added that respondents signed the
Credit Agreement which contained the Warranty of
Solvency and several Trust Receipt Agreements in favor
of Security Bank. The said trust receipts were attached to
the complaint which stated that respondents were
obligated to turn over to Security Bank the proceeds of
the sale of the good or to return the goods. The several
demand letters sent by Security Bank to respondents,
which were unheeded, were likewise attached to the
complaint. These pieces of evidence were presented by
Security Bank during the hearing of the application for the
issuance of a writ of preliminary attachment in the RTC.
After a judicious study of the records, the Court finds that
Security Bank was able to substantiate its factual
allegation of fraud, particularly, the violation of the trust
receipt agreements, to warrant the issuance of the writ of
preliminary attachment.
There were violations of the
trust receipts agreements . While the Court agrees that
mere violations of the warranties and representations
contained in the credit agreement and the continuing
suretyship agreement do not constitute fraud under
Section 1(d) of Rule 57 of the Rules of Court, the same
cannot be said with respect to the violation of the trust
receipts agreements.
A trust receipt transaction is one where the entrustee has
the obligation to deliver to the entruster the price of the
sale, or if the merchandise is not sold, to return the
merchandise to the entruster. There are, therefore, two
obligations in a trust receipt transaction: the first refers to
money received under the obligation involving the duty to
turn it over (entregarla) to the owner of the merchandise
sold, while the second refers to the merchandise received
under the obligation to "return" it (devolvera) to the
owner.22 The obligations under the trust receipts are
governed by a special law, Presidential Decree (P.D.) No.
115, and non-compliance have particular legal
consequences.
Failure of the entrustee to turn over the proceeds of the
sale of the goods, covered by the trust receipt to the
entruster or to return said goods if they were not disposed
of in accordance with the terms of the trust receipt shall
be punishable as estafa under Article 315 (1) of the
Revised Penal Code, without need of proving intent to
defraud.23 The offense punished under P.D. No. 115 is in
the nature of malum prohibitum. Mere failure to deliver the
proceeds of the sale or the goods, if not sold, constitutes
a criminal offense that causes prejudice not only to
another, but more to the public interest.24
The present case, however, only deals with the civil fraud
in the non-compliance with the trust receipts to warrant
the issuance of a writ of preliminary attached. A fortiori, in
a civil case involving a trust receipt, the entrustee's failure
to comply with its obligations under the trust receipt
constitute as civil fraud provided that it is alleged, and
substantiated with specificity, in the complaint, its
attachments and supporting evidence.
Security Bank's complaint stated that Great Wall, through
its Vice President Fredino Cheng Atienza, executed
various trust receipt agreements in relation to its loan
transactions. The trust receipts stated that in
consideration of the delivery to the entrustee (Great Wall)
of the possession of the goods, it obligates itself to hold
in trust for the bank the goods, to sell the goods for the
benefit of the bank, to turn over the proceeds of the sale
to the bank, and to return the goods to the bank in the
event of non-sale. By signing the trust receipt
agreements, respondents fully acknowledged the
consequences under the law once they failed to abide by
their obligations therein. The said trust receipt
agreements were attached to the complaint.
Upon the maturity date, however, respondents failed to
deliver the proceeds of the sale to Security Bank or to
return the goods in case of non-sale. Security Bank sent
a final demand letter to respondents, which was also
attached to the complaint, but it was unheeded.
Curiously, in their letter, dated January 23, 2013,
respondents did not explain their reason for non-
compliance with their obligations under the trust receipts;
rather, they simply stated that Great Wall was having a
sudden drop of its income. Such unsubstantiated excuse
cannot vindicate respondents from their failure to fulfill
their duties under the trust receipts.
In addition, Security Bank attached Pulgar's affidavit,
which substantiated its allegation that respondents failed
to comply with its obligations under the trust receipts.
During the hearing before the RTC, Security Bank
presented him and his judicial affidavit. Regarding the
trust receipts, he testified:
Q: Do you have any other basis in saying that you have
grounds for attachment?
A: Yes, defendants not only failed to pay but they also
failed to return the goods covered by the Trust Receipt.
Q: What do you mean by failure to return the goods?
A: They executed several TRs where they obligated to
turn over the proceeds of sale of goods or pay the value
thereof or return the goods themselves if they are unable
to pay.
Q: What happened in this case?
A: Defendants failed to pay the value of the goods
covered by the TRs and they likewise failed to return the
goods without any explanation. Hence, obviously they
misappropriated the proceeds of the sale of goods.25
The Court is of the view that Security Bank's allegations
of violation of the trust receipts in its complaint was
specific and sufficient to assert fraud on the part of
respondents. These allegations were duly substantiated
by the attachments thereto and the testimony of Security
Bank's witness.
The case of Philippine Bank of
Communications v. Court of
Appeals is inapplicable
The CA cited Philippine Bank of Communications v. Court
of Appeals26 (PBCom) to bolster its argument that
fraudulent intent cannot be inferred from a debtor's
inability to pay or comply with its obligations and that there
must be proof of a preconceived plan not to pay.27
At face value, PBCom and the present case may show a
semblance of similarity. Thus, the CA cannot be faulted
for relying on the said case. A closer scrutiny of these two
cases, however, shows that their similarity is more
apparent than real.
In PBCom, the applicant for the writ of preliminary
attachment simply stated in its motion that the defendant
therein failed to remit the proceeds or return the goods
subject of the trust receipt and attached an ambiguous
affidavit stating that the case was covered by Sections
1(b) and (d) of Rule 57. Obviously, these allegations and
attachments are too general and vague to prove that the
defendant committed fraud. Likewise, there was no
hearing conducted in the RTC before it granted the
issuance of the writ of preliminary attachment. Thus, the
Court had no option but to lift the said writ.
In contrast, the complaint in the present case explained
in detail the factual circumstances surrounding the
execution of the trust receipts, its contents and the
subsequent violation thereof. Security Bank attached
supporting annexes and presented its witness during the
hearing in the RTC to substantiate the specific violation
of trust receipts by respondents. Security Bank took great
lengths to explain the contents of the trust receipt and
show that respondents expressed their conformity to it.
When the obligation became due, respondents did not
satisfactorily explain the non-compliance of their
obligations, and, despite a final demand, they did not fulfill
their obligations under the trust receipts. Clearly, PBCom
is inapplicable in the present case.
Fraud in the performance of
the obligation must be
considered
The CA stated in the assailed decision that under Section
1(d) of Rule 57, fraud must only be present at the time of
contracting the obligation, and not thereafter. Hence, the
CA did not consider the allegation of fraud - that
respondents offered a repayment proposal but
questionably failed to attend the meeting with Security
Bank regarding the said proposal - because these acts
were done after contracting the obligation.
In this regard, the CA erred.
Previously, Section 1(d), Rule 57 of the 1964 Rules of
Court provided that a writ of preliminary attachment may
be issued "[i]n an action against a party who has been
guilty of a fraud in contracting the debt or incurring the
obligation upon which the action is brought xxx" Thus, the
fraud that justified the issuance of a writ of preliminary
attachment then was only fraud committed in contracting
an obligation (dolo casuante).28 When the 1997 Rules of
Civil Procedure was issued by the Court, Section 1(d) of
Rule 57 conspicuously included the phrase "in the
performance thereof." Hence, the fraud committed in the
performance of the obligation (dolo incidente) was
included as a ground for the issuance of a writ of
preliminary attachment.29
This significant change in Section 1(d) of Rule 57 was
recognized recently in Republic v. Mega Pacific
eSolutions, Inc.30 The Court stated therein that "[a]n
amendment to the Rules of Court added the phrase "in
the performance thereof to include within the scope of the
grounds for issuance of a writ of preliminary attachment
those instances relating to fraud in the performance of the
obligation."
Accordingly, the alleged fraud committed by respondents
in the performance of their obligation should have been
considered by the CA. Security Bank detailed in its
complaint that respondents, knowing fully well that they
were in default, submitted a Repayment Proposal.31
Then, they requested for a meeting with the bank to
discuss their proposal. For unknown reasons, they did not
meet the representatives of the Security Bank.
Respondents even attached to its Motion to Lift Writ of
Preliminary Attachment Ad Cautelam32 the
correspondence they had with Security Bank, which
revealed that they did not meet the representatives of the
latter despite providing a specific date to discuss the
proposed repayment scheme. Respondents merely
offered lame excuses to justify their absence in the
arranged meeting and, ultimately, they failed to clarify the
non-compliance with their commitments. Such acts bared
that respondents were not sincere in paying their
obligation despite their maturity, substantiating the
allegations of fraud in the performance thereof.
These circumstances of the fraud committed by
respondents in the performance of their obligation
undoubtedly support the issuance of a writ of preliminary
attachment in favor of Security Bank.
Final Note
While the Court finds that Security Bank has
substantiated its allegation of fraud against respondents
to warrant the issuance of writ or preliminary attachment,
this finding should not in any manner affect the merits of
the principal case. The writ of preliminary attachment is
only a provisional remedy, which is not a cause of action
in itself but is merely adjunct to a main suit.33
WHEREFORE, the December 12, 2014 Decision and the
June 26, 2015 Resolution of the Court of Appeals in CA-
G.R. SP No. 131714 are REVERSED and SET ASIDE.
The issuance of the writ of preliminary attachment by the
Regional Trial Court, Branch 59, Makati City, in Civil Case
No. 13-570, pursuant to its May 31, 2013 Order, is upheld.
SO ORDERED.
Carpio, (Chairperson), Peralta, Leonen, and Jardeleza,
JJ., concur.
FIRST DIVISION
G.R. No. 193572, April 04, 2018
TSUNEISHI HEAVY INDUSTRIES (CEBU), INC.,
Petitioner, v. MIS MARITIME CORPORATION,
Respondent.
DECISION
JARDELEZA, J.:
This is a petition for review on certiorari1 under Rule 45 of
the Rules of Court filed by petitioner Tsuneishi Heavy
Industries (Cebu), Inc. (Tsuneishi) challenging the
Decision2 of the Court of Appeals (CA) in CA-G.R. CEB-
SP No. 03956 dated October 7, 2009 and its Resolution3
dated August 26, 2010. The CA Decision reversed three
Orders of Branch 7 of the Regional Trial Court (RTC),
Cebu City dated April 15, 2008, July 7, 2008, and
December 11, 2008, respectively.4 The Resolution
denied Tsuneishi's motion for reconsideration.
Respondent MIS Maritime Corporation (MIS) contracted
Tsuneishi to dry dock and repair its vessel M/T MIS-1
through an Agreement dated March 22, 2006.5 On March
23, 2006, the vessel dry docked in Tsuneishi's shipyard.
Tsuneishi rendered the required services. However,
about a month later and while the vessel was still dry
docked, Tsuneishi conducted an engine test on M/T MIS-
1. The vessel's engine emitted smoke. The parties
eventually discovered that this was caused by a burnt
crank journal. The crankpin also showed hairline cracks
due to defective lubrication or deterioration. Tsuneishi
insists that the damage was not its fault while MIS insists
on the contrary. Nevertheless, as an act of good will,
Tsuneishi paid for the vessel's new engine crankshaft,
crankpin, and main bearings.6
Tsuneishi billed MIS the amount of US$318,571.50 for
payment of its repair and dry docking services. MIS
refused to pay this amount. Instead, it demanded that
Tsuneishi pay US$471,462.60 as payment for the income
that the vessel lost in the six months that it was not
operational and dry docked at Tsuneishi's shipyard. It
also asked that its claim be set off against the amount
billed by Tsuneishi. MIS further insisted that after the set
off, Tsuneishi still had the obligation to pay it the amount
of US$152,891.10.7 Tsuneishi rejected MIS' demands. It
delivered the vessel to MIS in September 2006.8 On
November 6, 2006, MIS signed an Agreement for Final
Price.9 However, despite repeated demands, MIS refused
to pay Tsuneishi the amount billed under their contract.
Tsuneishi claims that MIS also caused M/T White
Cattleya, a vessel owned by Cattleya Shipping Panama
S.A. (Cattleya Shipping), to stop its payment for the
services Tsuneishi rendered for the repair and dry
docking of the vessel.10
MIS argued that it lost revenues because of the engine
damage in its vessel. This damage occurred while the
vessel was dry docked and being serviced at Tsuneishi's
yard. MIS insisted that since this arose out of Tsuneishi's
negligence, it should pay for MIS' lost income. Tsuneishi
offered to pay 50% of the amount demanded but MIS
refused any partial payment.11
On April 10, 2008, Tsuneishi filed a complaint12 against
MIS before the RTC. This complaint stated that it is
invoking the admiralty jurisdiction of the RTC to enforce a
maritime lien under Section 21 of the Ship Mortgage
Decree of 197813 (Ship Mortgage Decree). It also alleged
as a cause of action MIS' unjustified refusal to pay the
amount it owes Tsuneishi under their contract. The
complaint included a prayer for the issuance of arrest
order/writ of preliminary attachment. To support this
prayer, the complaint alleged that Section 21 of the Ship
Mortgage Decree as well as Rule 57 of the Rules of Court
on attachment authorize the issuance of an order of arrest
of vessel and/or writ of preliminary attachment.14
In particular, Tsuneishi argued that Section 21 of the Ship
Mortgage Decree provides for a maritime lien in favor of
any person who furnishes repair or provides use of a dry
dock for a vessel. Section 21 states that this may be
enforced through an action in rem. Further, Tsuneishi and
MIS' contract granted Tsuneishi the right to take
possession, control and custody of the vessel in case of
default of payment. Paragraph 9 of this contract further
states that Tsuneishi may dispose of the vessel and apply
the proceeds to the unpaid repair bill.15
Finally, Tsuneishi's complaint alleges that there are
sufficient grounds for the issuance of a writ of preliminary
attachment. In particular, it claims that MIS is guilty of
fraud in the performance of its obligation. The complaint
states:
40. x x x Under the factual milieu, it is wrongful for
defendant MIS Maritime to take undue advantage of an
unfortunate occurrence by withholding payment of what
is justly due to plaintiff under law and contract. Defendant
MIS Maritime knew or ought to have known that its claim
for lost revenues was unliquidated and could not be set-
off or legally compensated against the dry-docking and
repair bill which was liquidated and already fixed and
acknowledged by the parties.
41. Defendant CATTLEYA SHIPPING'S actions and
actuations in performing its obligation were clearly
fraudulent because, firstly, it had no business getting
involved as far as the M/T MIS-1 incident was concerned;
secondly, no incident of any sort occurred when its vessel
M/T WHITE CATTLEYA was dry docked and repaired. It
had no claim against the plaintiff. Yet, it (defendant
Cattleya Shipping) allowed itself to be used by defendant
MIS Maritime when it willfully and unlawfully stopped
paying plaintiff, and conspired to make good defendant
MIS Maritime's threat to "withhold payment of any and all
billings that you (plaintiff) may have against our fleet of
vessels which include those registered under Cattleya
Shipping Panama S.A. (MT White Cattleya) x x x.16
17
Tsuneishi also filed the Affidavit of its employee Lionel
T. Bitera (Bitera Affidavit), in accordance with the
requirement for the issuance of a writ of preliminary
attachment under Rule 57 of the Rules of Court. The
Bitera Affidavit stated that Tsuneishi performed dry
docking and repair services for M/T MIS-1 and M/T White
Cattleya. It also alleged that after Tsuneishi performed all
the services required, MIS and Cattleya refused to pay
their obligation. According to the Bitera Affidavit, this
refusal to pay constitutes fraud because:
d. The breach of the obligation was willful. In the case of
M/T MIS-1 no single installment payment was made
despite the fact that the vessel was accepted fully dry
docked and with a brand new engine crankshaft installed
by the yard free of charge to the Owner. MIS Maritime
Corporation was blaming the yard for the damage
sustained by the engine crank shaft on 25 April 2006
when the engine was started in preparation for sea trial.
When the incident happened the drydocking had already
been completed and the vessel was already in anchorage
position for sea trial under the management and
supervisory control of the Master and engineers of the
vessel. Besides, the incident was not due to the fault of
the yard. It was eventually traced to dirty lube oil or
defective main engine lubricating oil which was the
lookout and responsibility of the vessel's engineers.
x x x x
e. The action taken by MIS Maritime Corporation in
setting off its drydocking obligation against their claim for
alleged lost revenues was unilaterally done, and without
legal and factual basis for while, on one hand, the
drydocking bill was for a fixed and agreed amount, the
claim of MIS Maritime for lost revenues, on the other
hand, was not liquidated as it was for a gross amount, x
x x
f. Cattleya Shipping for its part had nothing to do with the
dry docking of M/T MIS-1. There was no incident
whatsoever during the dry docking of its vessel M/T
WHITE CATTLEYA. In fact, after this vessel was
satisfactorily dry docked and delivered to its Owner
(Cattleya Shipping) the latter started paying the monthly
installments without any complaint whatsoever, x x x18
The RTC issued a writ of preliminary attachment in an
Order19 dated April 15, 2008 (First Order) without hearing.
Consequently, MIS' condominium units located in the
financial district of Makati, cash deposits with various
banks, charter hire receivables from Shell amounting to
P26.6 Million and MT MIS-1 were attached.20
MIS filed a motion to discharge the attachment.21 The
RTC denied this motion in an Order[22 dated July 7, 2008
(Second Order). MIS filed a motion for reconsideration
which the RTC also denied in an Order23 dated December
11, 2008 (Third Order).
MIS then filed a special civil action for certiorari24 before
the CA assailing the three Orders. MIS argued that the
RTC acted with grave abuse of discretion when it ordered
the issuance of a preliminary writ of attachment and
denied MIS' motion to discharge and motion for
reconsideration.
The CA ruled in favor of MIS. It reversed the three
assailed Orders after finding that the RTC acted with
grave abuse of discretion in issuing the writ of preliminary
attachment.25
According to the CA, the Bitera Affidavit lacked the
required allegation that MIS has no sufficient security for
Tsuneishi's claim. In fact, the CA held that the evidence
on record shows that MIS has sufficient properties to
cover the claim. It also relied on jurisprudence stating that
when an affidavit does not contain the allegations
required under the rules for the issuance of a writ of
attachment and the court nevertheless issues the writ, the
RTC is deemed to have acted with grave abuse of
discretion. Consequently, the writ of preliminary
attachment is fatally defective.26 The CA further
highlighted that a writ of preliminary attachment is a harsh
and rigorous remedy. Thus, the rules must be strictly
construed. Courts have the duty to ensure that all the
requisites are complied with.27
The CA also found that the RTC ordered the issuance of
the writ of preliminary attachment despite Tsuneishi's
failure to prove the presence of fraud. It held that the bare
and unsubstantiated allegation in the Bitera Affidavit that
MIS willfully refused to pay its obligation is not sufficient
to establish prima facie fraud. The CA emphasized that a
debtor's mere inability to pay is not fraud. Moreover,
Tsuneishi's allegations of fraud were general. Thus, they
failed to comply with the requirement in the Rules of Court
that in averments of fraud, the circumstances constituting
it must be alleged with particularity. The CA added that
while notice and hearing are not required for the issuance
of a writ of preliminary attachment, it may become
necessary in instances where the applicant makes grave
accusations based on grounds alleged in general terms.
The CA also found that Tsuneishi failed to comply with
the requirement that the affidavit must state that MIS has
no other sufficient security to cover the amount of its
obligation.28
The CA disposed of the case, thus:
WHEREFORE, the petition is GRANTED. The three (3)
Orders dated April 15, 2008, July 7, 2008 and December
11, 2008, respectively, of the Regional Trial Court,
Branch 7, Cebu City, in Civil Case No. CEB-34250, are
ANNULLED and SET ASIDE.29 (Emphasis in the original,
citations omitted.)
Tsuneishi filed this petition for review on certiorari under
Rule 45 of the Rules of Court challenging the CA's ruling.
Tsuneishi pleads that this case involves a novel question
of law. It argues that while Section 21 of the Ship
Mortgage Decree grants it a maritime lien, the law itself,
unfortunately, does not provide for the procedure for its
enforcement. It posits that to give meaning to this
maritime lien, this Court must rule that the procedure for
its enforcement is Rule 57 of the Rules of Court on the
issuance of the writ of preliminary attachment. Thus, it
proposes that aside from the identified grounds for the
issuance of a writ of preliminary attachment in the Rules
of Court, the maritime character of this action should be
considered as another basis to issue the writ.30
To support its application for the issuance of a writ of
preliminary attachment, Tsuneishi also invokes a
provision in its contract with MIS which states that:
In case of default, either in payment or in violation of the
warranties stated in Section 11, by the Owner, the Owner
hereby appoints the Contractor as its duly authorized
attorney in fact with full power and authority to take
possession, control, and custody of the said Subject
Vessel and / or any of the Subject Vessel's accessories
and equipment, or other assets of the Owner, without
resorting to court action; and that the Owner hereby
empowers the Contractor to take custody of the same
until the obligation of the Owner to the Contractor is fully
paid and settled to the satisfaction of the Contractor. x x
x31 (Underscoring omitted.)
It insists that the writ of preliminary attachment must be
issued so as to give effect to this provision in the contract.
Tsuneishi also disputes the CA's finding that it Failed to
show fraud in MIS' performance of its obligation. It opines
that MIS' failure to comply with its obligation does not
arise from a mere inability to pay. If that were the case,
then the CA would be correct in saying that MIS
committed no fraud. However, MIS' breach of its
obligation in this case amounts to a gross unwillingness
to pay amounting to fraud.32
Tsuneishi adds that the CA erred in holding that the RTC
acted with grave abuse of discretion when it failed to
conduct a hearing prior to the issuance of the writ of
preliminary attachment. It insisted that the Rules of Court,
as well as jurisprudence, does not require a hearing prior
to issuance.33
Finally, Tsuneishi disagrees with the ruling of the CA that
it did not comply with the requirements under the rules
because the Bitera Affidavit did not state that MIS has no
other sufficient security. This was already stated in
Tsuneishi's complaint filed before the RTC. Thus, the
rules should be applied liberally in favor of rendering
justice.34
In its comment,35 MIS challenges Tsuneishi's argument
that its petition raises a novel question of law. According
to MIS, the issue in this case is simple. A reading of
Tsuneishi's complaint shows that it prayed for the
issuance of a writ of preliminary attachment under Rule
57 of the Rules of Court or arrest of vessel to enforce its
maritime lien under the Ship Mortgage Decree.36 Thus,
Tsuneishi knew from the start that a remedy exists for the
enforcement of its maritime lien—through an arrest of
vessel under the Ship Mortgage Decree. However, the
RTC itself characterized the complaint as a collection of
sum of money with prayer for the issuance of a writ of
preliminary attachment. Thus, what it issued was a writ of
preliminary attachment. Unfortunately for Tsuneishi, the
CA reversed the RTC because it found that the element
of fraud was not duly established. Thus, there was no
ground for the issuance of a writ of preliminary
attachment.37
MIS insists that Tsuneishi is raising this alleged novel
question of law for the first time before this Court in an
attempt to skirt the issue that it failed to sufficiently
establish that MIS acted with fraud in the performance of
its obligation. MIS contends that fraud cannot be inferred
from a debtor's mere inability to pay. There is no
distinction between inability and a refusal to pay where
the refusal is based on its claim that Tsuneishi damaged
its vessel. According to MIS, its vessel arrived at
Tsuneishi's shipyard on its own power. Its engine incurred
damage while it was under Tsuneishi's custody. Thus,
Tsuneishi is presumed negligent.38
MIS further highlights that Tsuneishi completed the dry
docking in April 2006. It was during this time that the
damage in the vessel's engine was discovered. The
vessel was turned over to MIS only in September 2006.
Thus, it had lost a significant amount of revenue during
the period that it was off-hire. Because of this, it
demanded payment from Tsuneishi which the latter
rejected.39
Hence, MIS argues that this is not a situation where, after
Tsuneishi rendered services, MIS simply absconded. MIS
has the right to demand for the indemnification of its lost
revenue due to Tsuneishi's negligence.[40
MIS further adds that the CA correctly held that there was
no statement in the Bitera Affidavit that MIS had no
adequate security to cover the amount being demanded
by Tsuneishi. Tsuneishi cannot validly argue that this
allegation is found in its complaint and that this should be
deemed compliance with the requirement under Rule
57.41
Further, in its motion to discharge the preliminary
attachment, MIS presented proof that it has the financial
capacity to pay any liability arising from Tsuneishi's
claims. In fact, there was an excessive levy of MIS'
properties. This is proof in itself that MIS has adequate
security to cover Tsuneishi's claims. Finally, MIS agrees
with the CA that the RTC should have conducted a
hearing. While it is true that a hearing is not required by
the Rules of Court, jurisprudence provides that a hearing
is necessary where the allegations in the complaint and
the affidavit are mere general averments. Further, where
a motion to discharge directly contests the allegation in
the complaint and affidavit, the applicant has the burden
of proving its claims of fraud.42
There are two central questions presented for the Court
to resolve, namely: (1) whether a maritime lien under
Section 21 of the Ship Mortgage Decree may be enforced
through a writ of preliminary attachment under Rule 57 of
the Rules of Court; and (2) whether the CA correctly ruled
that Tsuneishi failed to comply with the requirements for
the issuance of a writ of preliminary injunction.
We deny the petition.
We begin by classifying the legal concepts of lien,
maritime lien and the provisional remedy of preliminary
attachment.
A lien is a "legal claim or charge on property, either real
or personal, as a collateral or security for the payment of
some debt or obligation."43 It attaches to a property by
operation of law and once attached, it follows the property
until it is discharged. What it does is to give the party in
whose favor the lien exists the right to have a debt
satisfied out of a particular thing. It is a legal claim or
charge on the property which functions as a collateral or
security for the payment of the obligation.44
Section 21 of the Ship Mortgage Decree establishes a
lien. It states:
Sec. 21. Maritime Lien for Necessaries; Persons entitled
to such Lien. – Any person furnishing repairs, supplies,
towage, use of dry dock or marine railway, or other
necessaries to any vessel, whether foreign or domestic,
upon the order of the owner of such vessel, or of a person
authorized by the owner, shall have a maritime lien on the
vessel, which may be enforced by suit in rem and it shall
be necessary to allege or prove that credit was given to
the vessel.
In practical terms, this means that the holder of the lien
has the right to bring an action to seek the sale of the
vessel and the application of the proceeds of this sale to
the outstanding obligation. Through this lien, a person
who furnishes repair, supplies, towage, use of dry dock or
marine railway, or other necessaries to any vessel, in
accordance with the requirements under Section 21, is
able to obtain security for the payment of the obligation to
him.
A party who has a lien in his or her favor has a remedy in
law to hold the property liable for the payment of the
obligation. A lienholder has the remedy of filing an action
in court for the enforcement of the lien. In such action, a
lienholder must establish that the obligation and the
corresponding lien exist before he or she can demand
that the property subject to the lien be sold for the
payment of the obligation. Thus, a lien functions as a form
of security for an obligation.
Liens, as in the case of a maritime lien, arise in
accordance with the provision of particular laws providing
for their creation, such as the Ship Mortgage Decree
which clearly states that certain persons who provide
services or materials can possess a lien over a vessel.
The Rules of Court also provide for a provisional remedy
which effectively operates as a lien. This is found in Rule
57 which governs the procedure for the issuance of a writ
of preliminary attachment.
A writ of preliminary attachment is a provisional remedy
issued by a court where an action is pending. In simple
terms, a writ of preliminary attachment allows the levy of
a property which shall then be held by the sheriff. This
property will stand as security for the satisfaction of the
judgment that the court may render in favor of the
attaching party. In Republic v. Mega Pacific eSolutions
(Republic),45 we explained that the purpose of a writ of
preliminary attachment is twofold:
First, it seizes upon property of an alleged debtor in
advance of final judgment and holds it subject to
appropriation, thereby preventing the loss or dissipation
of the property through fraud or other means. Second, it
subjects the property of the debtor to the payment of a
creditor's claim, in those cases in which personal service
upon the debtor cannot be obtained. This remedy is
meant to secure a contingent lien on the defendant's
property until the plaintiff can, by appropriate
proceedings, obtain a judgment and have the
property applied to its satisfaction, or to make some
provision for unsecured debts in cases in which the
means of satisfaction thereof arc liable to be removed
beyond the jurisdiction, or improperly disposed of or
concealed, or otherwise placed beyond the reach of
creditors.46 (Citations omitted, emphasis supplied. Italics
in the original.)
As we said, a writ of preliminary attachment effectively
functions as a lien. This is crucial to resolving Tsuneishi's
alleged novel question of law in this case. Tsuneishi is
correct that the Ship Mortgage Decree does not provide
for the specific procedure through which a maritime lien
can be enforced. Its error is in insisting that a maritime
lien can only be operationalized by granting a writ of
preliminary attachment under Rule 57 of the Rules of
Court. Tsuneishi argues that the existence of a maritime
lien should be considered as another ground for the
issuance of a writ of preliminary attachment under the
Rules of Court.
Tsuneishi's argument is rooted on a faulty understanding
of a lien and a writ of preliminary attachment. As we said,
a maritime lien exists in accordance with the provision of
the Ship Mortgage Decree. It is enforced by filing a
proceeding in court. When a maritime lien exists, this
means that the party in whose favor the lien was
established may ask the court to enforce it by ordering
the sale of the subject property and using the proceeds to
settle the obligation.
On the other hand, a writ of preliminary attachment is
issued precisely to create a lien. When a party moves for
its issuance, the party is effectively asking the court to
attach a property and hold it liable for any judgment that
the court may render in his or her favor. This is similar to
what a lien does. It functions as a security for the payment
of an obligation. In Quasha Asperilla Ancheta Valmonte
Peña & Marcos v. Juan,47 we held:
An attachment proceeding is for the purpose of creating
a lien on the property to serve as security for the payment
of the creditors' claim. Hence, where a lien already exists,
as in this case a maritime lien, the same is already
equivalent to an attachment. x x x48
To be clear, we repeat that when a lien already exists, this
is already equivalent to an attachment. This is where
Tsuneishi's argument fails. Clearly, because it claims a
maritime lien in accordance with the Ship Mortgage
Decree, all Tsuneishi had to do is to file a proper action in
court for its enforcement. The issuance of a writ of
preliminary attachment on the pretext that it is the only
means to enforce a maritime lien is superfluous. The
reason that the Ship Mortgage Decree does not provide
for a detailed procedure for the enforcement of a maritime
lien is because it is not necessary. Section 21 already
provides for the simple procedure—file an action in rem
before the court.
To our mind, this alleged novel question of law is a mere
device to remedy the error committed by Tsuneishi in the
proceedings before the trial court regarding the issuance
of a writ of preliminary attachment. We note that the
attachment before the trial court extended to other
properties other than the lien itself, such as bank
accounts and real property. Clearly, what was prayed for
in the proceedings below was not an attachment for the
enforcement of a maritime lien but an attachment, plain
and simple.
II
Tsuneishi's underlying difficulty is whether it succeeded
in proving that it complied with the requirements lor the
issuance of a writ of preliminary attachment. This is the
only true question before us. In particular, we must
determine whether the Bitera Affidavit stated that MIS
lacked sufficient properties to cover the obligation and
whether MIS acted with fraud in refusing to pay.
At the onset, we note that these questions dwell on
whether there was sufficient evidence to prove that
Tsuneishi complied with the requirements for the
issuance of a writ of preliminary attachment. Sufficiency
of evidence is a question of fact which this Court cannot
review in a Rule 45 petition. We are not a trier of fact.
Nevertheless, we have examined the record before us
and we agree with the factual findings of the CA.
The record clearly shows that the Bitera Affidavit does not
state that MIS has no other sufficient security for the claim
sought to be enforced. This is a requirement under
Section 3, Rule 57 of the Rules of Court. We cannot agree
with Tsuneishi's insistence that this allegation need not
be stated in the affidavit since it was already found in the
complaint. The rules are clear and unequivocal. There is
no basis for Tsuneishi's position. Nor is it entitled to the
liberal application of the rules. Not only has Tsuneishi
failed to justify its omission to include this allegation, the
facts also do not warrant the setting aside of technical
rules. Further, rules governing the issuance of a writ of
preliminary attachment are strictly construed.
We also agree with the CA's factual finding that MIS did
not act with fraud in refusing to pay the obligation. We
emphasize that when fraud is invoked as a ground for the
issuance of a writ of preliminary attachment under Rule
57 of the Rules of Court, there must be evidence clearly
showing the factual circumstances of the alleged fraud.49
Fraud cannot be presumed from a party's mere failure to
comply with his or her obligation. Moreover, the Rules of
Court require that in all averments of fraud, the
circumstances constituting it must be stated with
particularity.50
In Republic, we defined fraud as:
[A]s the voluntary execution of a wrongful act or a wilful
omission, while knowing and intending the effects that
naturally and necessarily arise from that act or omission.
In its general sense, fraud is deemed to comprise
anything calculated to deceive — including all acts and
omission and concealment involving a breach of legal or
equitable duty, trust, or confidence justly reposed —
resulting in damage to or in undue advantage over
another. Fraud is also described as embracing all
multifarious means that human ingenuity can device, and
is resorted to for the purpose of securing an advantage
over another by false suggestions or by suppression of
truth; and it includes all surprise, trick, cunning,
dissembling, and any other unfair way by which another
is cheated.51 (Citations omitted.)
By way of example, in Metro, Inc. v. Lara's Gifts and
Decors, Inc.,52 we ruled that the factual circumstances
surrounding the parties' transaction clearly showed fraud.
In this case, the petitioners entered into an agreement
with respondents where the respondents agreed that they
will endorse their purchase orders from their foreign
buyers to the petitioners in order to help the latter's export
business. The petitioners initially promised that they will
transact only with the respondents and never directly
contact respondents' foreign buyers. To convince
respondents that they should trust the petitioners,
petitioners even initially remitted shares to the
respondents in accordance with their agreement.
However, as soon as there was a noticeable increase in
the volume of purchase orders from respondents' foreign
buyers, petitioners abandoned their contractual obligation
to respondents and directly transacted with respondents'
foreign buyers. We found in this case that the
respondents' allegation (that the petitioners undertook to
sell exclusively through respondents but then transacted
directly with respondents' foreign buyer) is sufficient
allegation of fraud to support the issuance of a writ of
preliminary attachment.53
In contrast, in PCL Industries Manufacturing Corporation
v. Court of Appeals,54 we found no fraud that would
warrant the issuance of a writ of preliminary attachment.
In that case, petitioner purchased printing ink materials
from the private respondent. However, petitioner found
that the materials delivered were defective and thus
refused to pay its obligation under the sales contract.
Private respondent insisted that petitioner's refusal to pay
after the materials were delivered to it amounted to fraud.
We disagreed. We emphasized our repeated and
consistent ruling that the mere fact of failure to pay after
the obligation to do so has become due and despite
several demands is not enough to warrant the issuance
of a writ of preliminary attachment.55
An examination of the Bitera Affidavit reveals that it failed
to allege the existence of fraud with sufficient specificity.
The affidavit merely states that MIS refused to pay its
obligation because it demanded a set off between its
obligation to Tsuneishi and Tsuneishi's liability for MIS'
losses caused by the delay in the turn-over of the vessel.
The affidavit insists that this demand for set off was not
legally possible. Clearly, there is nothing in the affidavit
that even approximates any act of fraud which MIS
committed in the performance of its obligation. MIS'
position was clear: Tsuneishi caused the damage in the
vessel's engine which delayed its trip and should thus be
liable for its losses. There is no showing that MIS
performed any act to deceive or defraud Tsuneishi.
In Watercraft Venture Corporation v. Wolfe,56 we ruled
that an affidavit which does not contain concrete and
specific grounds showing fraud is inadequate to sustain
the issuance of the writ of preliminary attachment.57
Moreover, the record tells a different story.
The record shows that Tsuneishi released the vessel in
September 2006. MIS signed the Agreement of the Final
Price only in November 2006. Thus, Tsuneishi's claim
that MIS' act of signing the document and making it
believe that MIS will pay the amount stated is the
fraudulent act which induced it to release the vessel
cannot stand. Tsuneishi agreed to release the vessel
even before MIS signed the document. It was thus not the
act which induced Tsuneishi to turn over the vessel.
Further, Tsuneishi is well aware of MIS' claims. It appears
from the record, and as admitted by MIS in its pleadings,
that the reason for its refusal to pay is its claim that its
obligation should be set off against Tsuneishi's liability for
the losses that MIS incurred for the unwarranted delay in
the turn-over of the vessel. MIS insists that Tsuneishi is
liable for the damage on the vessel. This is not an act of
fraud. It is not an intentional act or a willful omission
calculated to deceive and injure Tsuneishi. MIS is
asserting a claim which it believes it has the right to do so
under the law. Whether MIS' position is legally tenable is
a different matter. It is an issue fit for the court to decide.
Notably, MIS filed this as a counterclaim in the case
pending before the RTC.58
Whether MIS is legally correct should be threshed out
there.
Even assuming that MIS is wrong in refusing to pay
Tsuneishi, this is nevertheless not the fraud contemplated
in Section 1(d), Rule 57 of the Rules of Court. Civil law
grants Tsuneishi various remedies in the event that the
trial court rules in its favor such as the payment of the
obligation, damages and legal interest. The issuance of a
writ of preliminary attachment is not one of those
remedies.
There is a reason why a writ of preliminary attachment is
available only in specific cases enumerated under
Section 1 of Rule 57. As it entails interfering with property
prior to a determination of actual liability, it is issued with
great caution and only when warranted by the
circumstances. As we said in Ng Wee v. Tankiansee,59
the rules on the issuance of the writ of preliminary
attachment as a provisional remedy are strictly construed
against the applicant because it exposes the debtor to
humiliation and annoyance.60
Moreover, we highlight that this petition for review on
certiorari arose out of a Decision of the CA in a Rule 65
petition. In cases like this, this Court's duty is only to
ascertain whether the CA was correct in ruling that the
RTC acted with grave abuse of discretion amounting to
lack or excess of jurisdiction.
Jurisprudence has consistently held that a court that
issues a writ of preliminary attachment when the
requisites are not present acts in excess of its
jurisdiction.61 In Philippine Bank of Communications v.
Court of Appeals,62 we highlighted:
Time and again, we have held that the rules on the
issuance of a writ of attachment must be construed strictly
against the applicants. This stringency is required
because the remedy of attachment is harsh, extraordinary
and summary in nature. If all the requisites for the
granting of the writ are not present, then the court which
issues it acts in excess of its jurisdiction. 63 (Citation
omitted.)
In accordance with consistent jurisprudence, we must
thus affirm the ruling of the CA that the RTC, in issuing a
writ of preliminary attachment when the requisites under
the Rules of Court were clearly not present, acted with
grave abuse of discretion.
WHEREFORE, in view of the foregoing, the petition is
DENIED. The Decision of the Court of Appeals dated
October 7, 2009 and its Resolution dated August 26,
2010 are AFFIRMED.
SO ORDERED.
Leonardo-De Castro, (Acting Chairperson),** Del Castillo,
Jardeleza, and Tijam, JJ., concur.
Sereno, C.J., (Chairperson), on leave.
RULE 58 new case
G.R. No. 207938, October 11, 2017
EVY CONSTRUCTION AND DEVELOPMENT
CORPORATION,, Petitioner, v. VALIANT ROLL
FORMING SALES CORPORATION, Respondent.
DECISION
LEONEN, J.:
In every application for provisional injunctive relief, the
applicant must establish the actual and existing right
sought to be protected. The applicant must also establish
the urgency of a writ's issuance to prevent grave and
irreparable injury. Failure to do so will warrant the court's
denial of the application. Moreover, the application for the
issuance of a writ of preliminary injunction may be denied
in the same summary hearing as the application for the
issuance of the temporary restraining order if the
applicant fails to establish requisites for the entitlement of
the writ.
This is a Petition for Review on Certiorari1 assailing the
October 22, 2012 Decision2 and June 25, 2013
Resolution3 of the Court of Appeals in CA-G.R. SP No.
112737. The assailed judgments found that the Regional
Trial Court did not gravely abuse its discretion when it
denied Evy Construction and Development Corporation's
(Evy Construction) application for the issuance of a
temporary restraining order. This application sought to
restrain the Register of Deeds from compelling Evy
Construction to surrender its owner's copy of Transfer
Certificate of Title (TCT) No. 168590 and from further
annotating encumbrances relative to a civil case between
its predecessor-in-interest and a third party.
On September 4, 2007, Evy Construction purchased a
parcel of land covered by TCT No. 134890 in Lipa,
Batangas from Linda N. Ang (Ang) and Senen T. Uyan
(Uyan). They executed a Deed of Absolute Sale, which
was notarized on September 11, 2007. At the time of the
sale, no lien or encumbrance was annotated on the title,
except for a notice of adverse claim filed by Ang.4
On September 18, 2007, the Register of Deeds annotated
a Notice of Levy on Attachment on TCT No. 134890.5 This
annotation was by virtue of the Writ of Preliminary
Attachment issued by Branch 46, Regional Trial Court,
San Fernando, Pampanga in Civil Case No. 13442
entitled Valiant Roll Forming Sales Corporation v. Angeli
Lumber and Hardware, Inc., and Linda Ngo Ang.6 Two (2)
other encumbrances were also annotated on the title.7
Evy Construction registered the Deed of Absolute Sale
with the Register of Deeds on November 20, 2007. TCT
No. 168590 was issued in its name; however, it contained
the annotation of the prior Notice of Levy on Attachment,
as well as a Notice of Attachment/Levy upon Realty dated
October 2, 2007 and a Notice of Levy on Preliminary
Attachment dated November 8, 2007.8
Subsequently, the Regional Trial Court rendered a
Decision in Civil Case No. 13442 in favor of Valiant Roll
Forming Sales Corporation (Valiant). A Writ of Execution
and a Notice of Levy were issued against the property
covered by TCT No. 134890.9
Evy Construction filed a Notice of Third-Party Claim in
Civil Case No. 13442, informing the court that it had
already filed with the sheriff an Affidavit of
Title/Ownership on May 20, 2008, in accordance with
Rule 57 of the Rules of Court.10 Valiant posted an
Indemnity Bond of P745,700.00 to answer for any
damages that Evy Construction may suffer should
execution of the Regional Trial Court Decision proceed.11
By virtue of the July 18, 2008 Writ of Execution issued in
Civil Case No. 13442, the Sheriff issued a Notice of Sale
on Execution of Real Property of Ang's properties,
including the property covered by TCT No. 134890.12 A
Certificate of Sale was eventually issued to Valiant as the
winning bidder of the property covered by TCT No.
134890.13
On October 29, 2009, Evy Construction filed with the
Regional Trial Court of Lipa City, Batangas its Complaint
for Quieting of Title/Removal of Cloud, Annulment of
Execution Sale and Certificate of Sale, and Damages,
with application for temporary restraining order and/or
preliminary injunction.14
It prayed for the issuance of a temporary restraining order
and/or writ of preliminary injunction to enjoin the Register
of Deeds from compelling it to surrender its copy of TCT
No. 168590 and from annotating any further transactions
relating to Civil Case No. 13442.15
In the hearing for its application for the issuance of a
temporary restraining order, Evy Construction claimed
that it would suffer great and irreparable injury if the
Register of Deeds were restrained from compelling it to
surrender the owner's duplicate copy of TCT No. 168590.
It claimed that potential investors interested in developing
the property "[would] back out of their investment plans if
there [was a] cloud of doubt hovering over the title on the
property."16
On November 9, 2009, the Regional Trial Court issued an
Order denying the application for the issuance of a
temporary restraining order for having no legal basis. Evy
Construction's Motion for Reconsideration was likewise
denied in an Order dated December 11, 2009.17 Hence, it
filed a Petition for Certiorari18 with the Court of Appeals.
On October 22, 2012, the Court of Appeals rendered its
Decision.19 It held that Evy Construction failed to
sufficiently establish its right to the issuance of a
temporary restraining order.
According to the Court of Appeals, Evy Construction
failed to sufficiently establish that it would suffer grave
and irreparable injury if additional recording and
annotation of further transactions, orders, or processes
relating to the sale of the property to Valiant were made
on the title. It observed that the grounds raised already
touched on the merits of its Complaint, resolution of which
would amount to prejudgment of the case.20
The Court of Appeals likewise pointed out that Evy
Construction could still sue for damages if the trial court
eventually finds that the sale of the property to Valiant
was invalid. It also reminded Evy Construction that it had
the remedy of proceeding against the indemnity bond
posted by Valiant for any damages it might suffer as a
result of the sale.21
Evy Construction filed a Motion for Reconsideration,
which was denied by the Court of Appeals in its
Resolution22 dated June 25, 2013. Hence, this Petition23
was filed.
Petitioner argues that it was denied due process when its
application for preliminary injunction was denied in the
same summary proceeding as the denial of its application
for a temporary restraining order.24 Petitioner likewise
submits that it was entitled to the injunctive writ applied
for since "real estate development is an industry built on
trust and public perception."25 It explains that the doubt
cast by the auction sale and its annotation to the title
caused investors to withdraw their investments from
petitioner's housing development project, despite the
expenses it already incurred.26
Petitioner avers that the issuance of an injunctive writ is
necessary to prevent further damage since its "business
reputation and goodwill as a real estate developer, once
tarnished and sullied, cannot be restored."27 It insists that
respondent's indemnity bond in the amount of
P745,700.00 was not only inadequate compared to
petitioner's investment in the property; it was immaterial
since it would be insufficient to restore buyer and investor
confidence in the project or in petitioner's competence
and reputation as a property developer.28
On the other hand, respondent counters that the
application for preliminary injunction was never actually
set for hearing or resolved by the trial court; thus, it was
misleading for petitioner to argue that it was denied due
process by the trial court.29 It maintains that the Court of
Appeals did not err in finding that petitioner failed to
establish the requisites for the issuance of a temporary
restraining order and that petitioner still had adequate
remedies in the indemnity bond.30 Respondent likewise
reiterates the Court of Appeals' finding that petitioner
already touches on the merits of its Complaint before the
trial court, which effectively prejudges the case.31
This Court is asked to resolve the following issues:
First, whether or not petitioner Evy Construction and
Development Corporation was denied due process when
its application for a writ of preliminary injunction was
denied in the same proceeding as its application for a
temporary restraining order; and
Second, whether or not the trial court committed grave
abuse of discretion in denying petitioner Evy Construction
and Development Corporation's application for injunctive
relief.
I In this case, the November 9, 2009 hearing was
Injunction is defined as "a judicial writ, process or
proceeding whereby a patty is ordered to do or refrain
from doing a certain act."32 It may be filed as a main action
before the trial court33 or as a provisional remedy in the
main action.34Bacolod City Water District v. Hon.
Labayen35 expounded:
The main action for injunction is distinct from the
provisional or ancillary remedy of preliminary injunction
which cannot exist except only as part or an incident of
an independent action or proceeding. As a matter of
course, in an action for injunction, the auxiliary remedy of
preliminary injunction, whether prohibitory or mandatory,
may issue. Under the law, the main action for injunction
seeks a judgment embodying a final injunction which is
distinct from, and should not be confused with, the
provisional remedy of preliminary injunction, the sole
object of which is to preserve the status quo until the
merits can be heard. A preliminary injunction is granted
at any stage of an action or proceeding prior to the
judgment or final order. It persists until it is dissolved or
until the termination of the action without the court issuing
a final injunction.36
Petitioner claims that it was denied due process when "no
valid hearing for the application for preliminary injunction
was ever set" by the trial court and it "was NOT even
allowed to present its summary arguments and its witness
in support of its application for a [temporary restraining
order]."37
A temporary restraining order may be issued ex parte "to
preserve the status quo until the hearing of the application
for preliminary injunction[,] which cannot be issued ex
parte."38 Otherwise stated, a trial court may issue a
temporary restraining order even without a prior hearing
for a limited period of 72 hours "if the matter is of extreme
urgency and the applicant will suffer grave injustice and
irreparable injury."39 In this instance, a summary hearing,
separate from the application of the preliminary
injunction, is required only to determine if a 72-hour
temporary restraining order should be extended.40
A trial court may also issue ex parte a temporary
restraining order for 20 days "[i]f it shall appear from facts
shown by affidavits or by the verified application that great
or irreparable injury would result to the applicant before
the matter can be heard on notice."41 The trial court has
20 days from its issuance to resolve the application for
preliminary injunction. If no action is taken on the
application for preliminary injunction during this period,
the temporary restraining order is deemed to have
expired.42 Notably, the Rules do not require that a hearing
on the application for preliminary injunction be conducted
during this period.
While Rule 58, Section 4(d)43 requires that the trial court
conduct a summary hearing in every application for
temporary restraining order regardless of a grant or
denial, Rule 58, Section 5 requires a hearing only if an
application for preliminary injunction is granted. Thus,
Section 5 states that "[n]o preliminary injunction shall be
granted without hearing and prior notice to the party or
person sought to be enjoined," Inversely stated, an
application for preliminary injunction may be denied even
without the conduct of a hearing separate from that of the
summary hearing of an application for the issuance of a
temporary restraining order.
denominated as a "hearing on the application for
temporary restraining order and preliminary injunction."44
Petitioner's counsel was allowed to present its
arguments45 and its witness46 but conceded that the
issues before the trial court were legal in nature.47 Thus,
the trial court resolved that there was no need to present
the witness, which petitioner's counsel accepted without
objection:
COURT
[T]he only issue now is purely legal, so there is no need
to present your witness.
ATTY. LIMBO
Yes[.] Your Honor.
COURT
We are submitting the Motion for Issuance of Temporary
Restraining Order for resolution.
ATTY. LIMBO
Yes, Your Honor.
COURT
Alright, submitted.48
Petitioner cannot insist on a separate hearing for the
application for preliminary injunction, considering that it
accepted that its application would be submitted for
decision without the presentation of its witness. The trial
court did not find any need to conduct a further hearing
on the application for preliminary injunction since
petitioner was unable to substantiate its entitlement to a
temporary restraining order. In any case, even if a
separate hearing was granted, petitioner would have
presented the same arguments and evidence in the
November 9, 2009 hearing. Thus, there can be no denial
of due process if the party alleging it has already been
granted an opportunity to be heard.
II.A
Under Rule 58 of the Rules of Court, a preliminary
injunction "is an order granted at any stage of an action
or proceeding prior to the judgment or final order,
requiring a party or a court, agency or a person to refrain
from a particular act or acts" or an order "requir[ing] the
performance of a particular act or acts."49 It is an ancillary
relief granted by the court where the main action or
proceeding is pending.50
In order to be granted the writ, it must be established:
(a) That the applicant is entitled to the relief
demanded, and the whole or part of such relief
consists in restraining the commission or
continuance of the act or acts complained of, or
in requiring performance of an act or acts, either
for a limited period or perpetually;
(b) That the commission, continuance or non-
performance of the act or acts complained of
during the litigation would probably work
injustice to the applicant; or
(c) That a party, court, agency or a person is doing,
threatening, or is attempting to do, or is
procuring or suffering to be done, some act or
acts probably in violation of the rights of the
applicant respecting the subject of the action or
proceeding, and tending to render the judgment
ineffectual.51
The issuance of a writ of preliminary injunction is
considered an "extraordinary event," being a "strong arm
of equity or a transcendent remedy."52 Thus, the power to
issue the writ "should be exercised sparingly, with utmost
care, and with great caution and deliberation.''53
An injunctive writ is granted only to applicants with "actual
and existing substantial rights"54 or rights in esse. Further,
the applicant must show "that the invasion of the right is
material and substantial and that there is an urgent and
paramount necessity for the writ to prevent serious
damage."55 Thus, the writ will not issue to applicants
whose rights are merely contingent or to compel or
restrain acts that do not give rise to a cause of action.56
In this case, petitioner alleges that as the registered
owner of the property covered by TCT No. 168590, "[i]t
has the undeniable right to the full use and possession [of
it]."57
At the time of the sale between petitioner Evy
Construction, Uyan, and Ang, TCT No. 134890 in Uyan's
and Ang's names did not contain any liens or
encumbrances, except for a notice of adverse claim by
Ang dated January 21, 1999. However, petitioner
admitted that while the Deed of Absolute Sale was
executed on September 4, 2007, the property was only
registered in its name on November 20, 2007.58 The
encumbrances in respondent's favor were annotated on
September 18, 2007, October 2, 2007, and November 8,
2007,59 or when the property was still registered under
Uyan's and Ang's names.
Under the Torrens system of registration, a person who
deals with the registered owner of the property is not
bound to look beyond the title for any liens or
encumbrances that have not been annotated.60 TCT No.
134890 did not contain a notice of lis pendens that could
have warned petitioner that the property was under
litigation.
The sale between petitioner Evy Construction, Uyan, and
Ang was not annotated on TCT No. 134890 at the time of
its sale. A sale of property that is not registered under the
Torrens system is binding only between the buyer and the
seller and does not affect innocent third persons.61 The
Regional Trial Court could not have been faulted for
ordering the annotation of the notice of levy on
attachment on TCT No. 134890 considering that when
the September 18, 2007 Order was issued, the property
was still in Uyan's and Ang's names.
Thus, in determining whether or not petitioner is entitled
to injunctive relief, the courts would have to pass upon the
inevitable issue of which between petitioner and
respondent has the better right over the property, the very
issue to be resolved in the main case.
The facts of this case mirror that of Spouses Chua v. Hon.
Gutierrez,62 where this Court was confronted with the
issue of whether or not a registered lien of attachment is
superior to that of an unregistered deed of sale. In
Spouses Chua, the property was already registered in the
Spouses Chua's names when the property was levied.
Thus, they argued that, not being the judgment debtors,
the property should not have been subjected to an
execution sale.
This Court found the argument unmeritorious and held:
[A] levy on attachment, duly registered, has preference
over a prior unregistered sale and, even if the prior
unregistered sale is subsequently registered before the
sale on execution but after the levy is made, the validity
of the execution sale should be upheld because it
retroacts to the date of levy.63
The prior levy on attachment carries over to the new
certificate of title, effectively placing the buyers in the
position of their vendor under litigation.
However, Spouses Chua stated an exception in that
"[k]nowledge of an unregistered sale is equivalent to
registration."64 If a party presents evidentiary proof that
the judgment creditor had knowledge of a valid sale
between the judgment debtor and an innocent third party,
that knowledge would have the effect of registration on
the judgment creditor.
As in Spouses Chua, respondent's attachment liens
dated September 18, 2007, October 2, 2007, and
November 8, 2007, if valid, may have been superior to
whatever right petitioner may have acquired by virtue of
the Deed of Absolute Sale, which was only registered on
November 20, 2009. However, the validity of the liens and
the validity of the Deed of Absolute Sale are factual
matters that have yet to be resolved by the trial court. The
trial court must also determine whether or not respondent
had prior knowledge of the sale.
Thus, no injunctive writ could be issued pending a final
determination of petitioner's actual and existing right over
the property. The grant of an injunctive writ could operate
as a prejudgment of the main case.
II.B
Even assuming that there is already a final determination
of petitioner's right over the property, petitioner still failed
to prove the urgent and paramount necessity to enjoin the
Register of Deeds from making further annotations on
TCT No. 168590.
Petitioner prays for the issuance of an injunctive writ to
prevent grave and irreparable damage to its reputation as
a real estate developer.65 Indeed, injunctive relief could
be granted to prevent grave and irreparable damage to a
business entity's goodwill and business reputation.66
Injury is considered irreparable if "there is no standard by
which [its] amount can be measured with reasonable
accuracy."67 The injury must be such that its pecuniary
value cannot be estimated, and thus, cannot fairly
compensate for the loss.68 For this reason, the loss of
goodwill and business reputation, being unquantifiable
would be considered as grave and irreparable damage.
In Yu v. Court of Appeals,69 this Court granted an
exclusive distributor's prayer for an injunctive writ to
prevent a competitor from selling the same product on the
ground that the continued sale would "[render] illusory . .
. the very purpose for which the exclusive distributorship
was conceptualized, at the expense of the sole
authorized distributor."70
In Semirara Coal Corporation v. HGL Development
Corporation,71 this Court upheld the issuance of a writ of
mandatory injunction to prevent Semirara Coal
Corporation's (Semirara) continued intrusion on HGL
Development Corporation's (HGL) property. It also found
that Semirara damaged HGL's business standing when it
prevented HGL from operating its cattle-grazing business
on its property, which ''[was] perceived as an inability by
HGL to comply with the demands of its customers and
sow[ed] doubts in HGL's capacity to continue doing
business."72
In Philippine National Bank v. RJ Ventures Realty &
Development Corporation,73 this Court affirmed the
issuance of a writ of preliminary injunction to enjoin the
extrajudicial foreclosure of Rajah Broadcasting Network's
radio equipment pending the resolution of the main case
questioning the mortgage. This Court found that the
foreclosure would stop the operations of Rajah
Broadcasting Network's radio stations. The loss of its
listenership and the damage to its image and reputation
would not be quantifiable, and thus, would be irreparable.
However, in applications for provisional injunctive writs
the applicant must also prove the urgency of the
application. The possibility of a grave and irreparable
injury must be established, at least tentatively to justify
the restraint of the act complained of.74 It is "[a]s the term
itself suggests. . . temporary, subject to the final
disposition of the principal action."75 Its sole objective is
"to preserve the status quo until the merits can be
heard."76
Petitioner alleges that the execution sale and the prior
annotations on its title caused ''crucial investors and
buyers"77 to withdraw, "notwithstanding the considerable
costs and expenses [it] already incurred."78 This is the
grave and irreparable damage it sought to be protected
from. However, the feared "damage" was caused by the
execution sale and the annotations already made on the
title. It even admits that the annotations were "impairing
the progress of [its] housing development."79In other
words, petitioner failed to establish the urgent and
paramount necessity of preventing further annotations on
the title.
Thus, what petitioner actually seeks is the removal of the
annotations on its title, which is precisely what it asked for
in its Complaint for Quieting of Title/Removal of Cloud,
Annulment of Execution Sale and Certificate of Sale, and
Damages before the trial court. Injunctive relief would
have no practical effect considering that the purported
damage it seeks to be protected from has already been
done. Therefore, its proper remedy is not the issuance of
an injunctive writ but to thresh out the merits of its
Complaint before the trial court.
In Cortez-Estrada v. Heirs of Samut,80 this Court held:
[T]he grant or denial of a writ of preliminary injunction in a
pending case rests in sound discretion of the court taking
cognizance of the case since the assessment and
evaluation of evidence towards that end involve findings
of facts left to the said court for its conclusive
determination.81
The court's discretion is not interfered with unless there is
a showing that the grant or denial was tainted with grave
abuse of discretion.82
The trial court, in the exercise of its discretion, denied
petitioner's application for the issuance of a temporary
restraining order and writ of preliminary injunction on the
ground that petitioner would still have sufficient relief in its
prayer for damages in its Complaint.83 In the event that
the annotations on petitioner's title are found by the trial
court to be invalid, petitioner would have adequate relief
in the removal of the annotations and in the award of
damages. Therefore, the trial court acted within the
bounds of its discretion.
WHEREFORE, the Petition is DENIED.
SO ORDERED.
Velasco, Jr., (Chairperson), Bersamin and Gesmundo,
JJ., concur.
Martires, J., on official leave.
G.R. No. 214073, October 04, 2017
BICOL MEDICAL CENTER, REPRESENTED BY DR.
EFREN SJ. NERVA, AND THE DEPARTMENT OF
HEALTH, REPRESENTED BY HEALTH SECRETARY
ENRIQUE T. ONA,, Petitioners, v. NOE B. BOTOR,
CELJUN F. YAP, ISMAEL A. ALBAO, AUGUSTO S.
QUILON, EDGAR F. ESPLANA II, AND JOSEFINA F.
ESPLANA, Respondents.
LEONEN, J.:
Prima facie evidence is evidence that is not rebutted or
contradicted, making it good and sufficient on its face to
establish a fact constituting a party's claim or defense.1
This resolves the Petition for Review2 filed by Bicol
Medical Center and the Department of Health, assailing
the February 28, 2014 Decision3 and August 26, 2014
Resolution4 of the Court of Appeals in CA-G.R. SP No.
129806.
Camarines Sur Provincial Hospital (Provincial Hospital)
was established in 1933 as a 25-bed provincial hospital
located along Mabini Street, now Peñafrancia Avenue,
Naga City. The Camarines Sur Provincial Government
eventually subsidized the operations of a private hospital
located at Concepcion Pequeña, Naga City and
transferred the Provincial Hospital there.5
Road Lot No. 3, which stretched from Panganiban Road
to J. Miranda Avenue, is a service road which leads to the
Provincial Hospital.6
The Provincial Hospital was eventually converted to the
Bicol Regional Training and Teaching Hospital (Training
and Teaching Hospital).7
Sometime in 1982, the Camarines Sur Provincial
Government donated about five (5) hectares of land to the
Ministry of Health, now the Department of Health,8 as
evidenced by Transfer Certificate of Title (TCT) No.
13693.9 The Training and Teaching Hospital and Road
Lot No. 3 were included in this donation.10
The Training and Teaching Hospital became the Bicol
Medical Center (BMC) in 1995.11
Sometime in 2009, BMC constructed a steel gate along
J. Miranda Avenue to control the flow of vehicle and
pedestrian traffic entering the hospital premises.12
On March 21, 2012, Dr. Efren SJ. Nerva (Dr. Nerva), BMC
Chief I, issued Hospital Memorandum No. 0310,13 which
ordered the rerouting of traffic inside the BMC
Compound. Salient portions of this Memorandum read:
To: All Officials and Employees
This Center
Traffic Re-routing inside the BMC
Subject:
Compound
In line with the Traffic Re-routing of the Center, the exit
gate at the MCC Quarters shall be closed and the OPD
Exit Gate shall be used for the exit of pedestrians and
motor vehicles effective April 1, 2012.
For information and dissemination purposes.14
This rerouting scheme closed the steel gate for vehicles
and pedestrians along J. Miranda Avenue, relocating it
from the eastern side of the hospital to the western side
effective April 1, 2012.15 The relocation of this gate was
implemented for security reasons and to make way for
"[m]assive development within the Complex."16
The gate closure drew a lot of criticism from the
community, and on May 19, 2012, Atty. Noe Botor (Atty.
Botor) wrote to Naga City Mayor John Bongat (Mayor
Bongat), asking for the reopening or dismantling of the
gate for being a public nuisance.17
The Sangguniang Panlungsod of Naga City passed a
resolution authorizing Mayor Bongat to dismantle the
gate.18 However, instead of dismantling it, Mayor Bongat
filed a Verified Petition with Prayer for a Writ of
Preliminary Injunction against BMC. The case was
docketed as Civil Case No. 2012-0073 and raffled to
Branch 24, Regional Trial Court, Naga City.19
Atty. Botor, Celjun F. Yap, Ismael A. Albao, Augusto S.
Quilon, Edgar F. Esplana II, and Josefina F. Esplana
(Intervenors) were allowed to intervene and submit their
complaint-in-intervention.20
A few months later, ground-breaking ceremonies for the
construction of the Cancer Center Building21 were
conducted, with construction intended to begin in January
2013. When fully completed, the Cancer Center Building
would take over ''about three-fourths (¾) of the width of
Road Lot No. 3."22
On December 21, 2012, the Regional Trial Court denied
Naga City's application for injunctive relief, ruling that
Naga City failed to prove a clear and unmistakable right
to the writ prayed for.23
On February 22, 2013, the Regional Trial Court denied
the motion for reconsideration filed by the Intervenors.24
Only the Intervenors filed a petition for certiorari before
the Court of Appeals.25
On February 28, 2014, the Court of Appeals granted the
petition and emphasized that only a prima facie showing
of an applicant's right to the writ is required in an
application for writ of injunctive relief.26
The Court of Appeals opined that the Intervenors were
able to prove the public character of Road Lot No. 3,
considering that "the general public had been using [it]
since time immemorial," with even Dr. Nerva admitting
that he passed through it when he was young. The Court
of Appeals also gave due weight to the 1970s Revised
Assessor's Tax Mapping Control Roll and its Identification
Map, which support the Intervenors' assertion of the
public nature of Road Lot No. 3.27
The Court of Appeals concluded that Naga City and the
Intervenors were able to present prima facie evidence of
their right to the writ. However, the Court of Appeals
pointed out that whether or not the Revised Assessor's
Tax Mapping Control Roll should prevail over BMC's title
over the property is a factual matter that should be
threshed out in the trial court.28 The dispositive portion of
the Court of Appeals Decision read:
WHEREFORE, premises considered, the instant petition
is hereby GRANTED. The court a quo is hereby
DIRECTED to issue a writ of mandatory preliminary
injm1ction in the case a quo.
SO ORDERED.29 (Emphasis in the original)
On August 26, 2014, the Court of Appeals30 denied the
motions for reconsideration filed by BMC and the
Department of Health. However, the Court of Appeals
emphasized that the injunction was not directed against
the construction of the Cancer Center Building but against
the relocation of the service road and gate closure.31
On September 29, 2014, petitioners BMC and the
Department of Health filed this Petition for Review on
Certiorari32 before this Court. Petitioners claim that
although Road Lot No. 3 has been open to vehicles and
pedestrians as BMC's service road, it was never intended
for use by the general public and was not owned by Naga
City, as evidenced by the certification issued by the Office
of the City Engineer of Naga City.33
Petitioners assert that they have set up a gate on Road
Lot No. 3, which is closed at night, on weekends, and
during holidays for security reasons and for the welfare of
patients and hospital staff.34
Petitioners maintain that Dr. Nerva's closure of the road
and relocation of the gate was in preparation for the
construction of the Cancer Center Building.35 Thus, the
preliminary mandatory injunction issued by the Court of
Appeals had the effect of halting construction of a
government project, a violation of Presidential Decree No.
181836 and this Court's Administrative Circular No. 11-
2000, which reiterated the prohibition on the issuance of
injunctions in cases involving government infrastructure
projects.37
Petitioners claim that the P51,999,475.26 contract for the
Cancer Center Building has been awarded to OCM Steel
Corporation, the winning contractor, and the Notice to
Proceed dated February 3, 2014 has been issued,
signalling the mobilization stage of the construction of the
Cancer Center Building.38
Petitioners emphasize that the Court of Appeals erred in
holding that the injunction over the relocation of the
service road and closure of the gate did not violate
Presidential Decree No. 1818 because the Cancer Center
Building, a government project, will be constructed right
where the gate stands.39
Petitioners point out that the Cancer Center Building will
be constructed along Road Lot No. 3; hence, there is a
need to close this road due to the excavation and
construction, which will make it dangerous for pedestrians
and vehicles alike to pass through.40
Petitioners likewise underscore that the intervenors, now
respondents, failed to support their claim that Road Lot
No. 3 was a public road41 or that they had a clear right to
the injunctive relief prayed for.42 Furthermore,
respondents also allegedly "failed to prove that the
invasion of the[ir] right sought to be protected [was]
material and substantial" and that there was an urgent
necessity for the issuance of the writ to prevent serious
damage.43
Finally, petitioners applied for a temporary restraining
order and/or writ of preliminary injunction to prevent the
reopening of the gate since doing so would affect the
construction of the Cancer Center Building.44
On October 8, 2014, this Court issued two (2)
Resolutions. The first Resolution45 granted petitioners'
motion for extension to file their petition. The second
Resolution46 issued a temporary restraining order
enjoining the implementation of the Court of Appeals
February 28, 2014 Decision and August 26, 2014
Resolution, which directed the Regional Trial Court to
issue a writ of mandatory preliminary injunction on the
closure of Road Lot No. 3. The second Resolution also
required respondents to comment on the petition.47
On January 13, 2015, respondents filed their Comment
on the Petition,48 where they disputed petitioners' claim
that Road Lot No. 3 was always a component or service
road of BMC. Respondents contend that Road Lot No. 3
existed as a public road long before any hospital was
constructed on it and assert that it remains to be a public
road to this day.49
Respondents also dispute petitioners' claim that the road
closure was for the construction of the Cancer Center
Building since Dr. Nerva's memorandum was for no other
purpose than to reroute traffic within the hospital
complex.50
Respondents likewise point out that when they filed their
intervention before the Regional Trial Court and their
petition before the Court of Appeals, there were still no
plans to construct the Cancer Center Building.
Furthermore, BMC allegedly failed to support its claim
that there were indeed plans to build the Cancer Center
Building.51 Nonetheless, respondents explain that they
are not against its construction but are merely asking that
it not be illegally built on a public road.52
Finally, respondents ask that this Court lift its issued
temporary restraining order against the assailed Court of
Appeals Decision and Resolution.53
In its Resolution54 dated February 25, 2015, this Court
noted respondents' comment and denied their prayer to
lift the temporary restraining order. It likewise directed
petitioners to file their reply to the comment.
In their Reply,55 petitioners reiterate their stand that Road
Lot No. 3 is a private property.56 Petitioners also rebut
respondents' assertion that they only belatedly brought
up the construction of the Cancer Center Building
because this project was nonexistent.57 Petitioners
attached photos58 to prove that the construction of the
Cancer Center Building was in progress.59
The single issue to be resolved by this Court is whether
or not the Court of Appeals erred in directing the Regional
Trial Court to issue a writ of preliminary injunction on the
closure of Road Lot No. 3.
The Petition is meritorious.
I
Department of Public Works and Highways v. City
Advertising Ventures Corp.60 defined a writ of preliminary
injunction as follows:
[A] writ of preliminary injunction is an ancillary and
interlocutory order issued as a result of an impartial
determination of the context of both parties. It entails a
procedure for the judge to assess whether the reliefs
prayed for by the complainant will be rendered moot
simply as a result of the parties' having to go through the
full requirements of a case being fully heard on its merits.
Although a trial court judge is given a latitude of
discretion, he or she cannot grant a writ of injunction if
there is no clear legal right materially and substantially
breached from a prima facie evaluation of the evidence of
the complainant. Even if this is present, the trial court
must satisfy itself that the injury to be suffered is
irreparable.61
A writ of preliminary injunction is issued to:
[P]reserve the status quo ante, upon the applicant's
showing of two important requisite conditions, namely: (1)
the right to be protected exists prima facie, and (2) the
acts sought to be enjoined are violative of that right. It
must be proven that the violation sought to be prevented
would cause an irreparable injustice.62
Rule 58, Section 3 of the Rules of Court provides the
instances when a writ of preliminary injunction may be
issued:
Section 3. Grounds for issuance of preliminary injunction.
— A preliminary injunction may be granted when it is
established:
(a) That the applicant is entitled to the relief
demanded, and the whole or part of such relief
consists in restraining the commission or
continuance of the act or acts complained of, or
in requiring the performance of an act or acts,
either for a limited period or perpetually;
(b) That the commission, continuance or non-
performance of the act or acts complained of
during the litigation would probably work
injustice to the applicant; or
(c) That a party, court, agency or a person is doing,
threatening, or is attempting to do, or is
procuring or suffering to be done, some act or
acts probably in violation of the rights of the
applicant respecting the subject of the action or
proceeding, and tending to render the judgment
ineffectual.
Jurisprudence has likewise established that the following
requisites must be proven first before a writ of preliminary
injunction, whether mandatory or prohibitory, may be
issued:
(1) The applicant must have a clear and
unmistakable right to be protected, that is a right
in esse;
(2) There is a material and substantial invasion of
such right;
(3) There is an urgent need for the writ to prevent
irreparable injury to the applicant; and
(4) No other ordinary, speedy, and adequate
remedy exists to prevent the infliction of
irreparable injury.63
In satisfying these requisites, the applicant for the writ
need not substantiate his or her claim with complete and
conclusive evidence since only prima facie evidence64 or
a sampling is required "to give the court an idea of the
justification for the preliminary injunction pending the
decision of the case on the merits."65
Tan v. Hosana66 defines prima facie evidence as
evidence that is "good and sufficient on its face. Such
evidence as, in the judgment of the law, is sufficient to
establish a given fact, or the group or chain of facts
constituting the party's claim or defense and which if not
rebutted or contradicted, will remain sufficient."67
Spouses Nisce v. Equitable PCI Bank68 then discussed
the requisites and the proof required for the issuance of a
writ of preliminary injunction:
The plaintiff praying for a writ of preliminary injunction
must further establish that he or she has a present and
unmistakable right to be protected; that the facts against
which injunction is directed violate such right; and there is
a special and paramount necessity for the writ to prevent
serious damages. In the absence of proof of a legal right
and the injury sustained by the plaintiff, an order for the
issuance of a writ of preliminary injunction will be nullified.
Thus, where the plaintiff's right is doubtful or disputed, a
preliminary injunction is not proper. The possibility of
irreparable damage without proof of an actual existing
right is not a ground for a preliminary injunction.
However, to establish the essential requisites for a
preliminary injunction, the evidence to be submitted by
the plaintiff need not be conclusive and complete. The
plaintiffs are only required to show that they have an
ostensible right to the final relief prayed for in their
complaint. A writ of preliminary injunction is generally
based solely on initial or incomplete evidence. Such
evidence need only be a sampling intended merely to
give the court an evidence of justification for a preliminary
injunction pending the decision on the merits of the case,
and is not conclusive of the principal action which has yet
to be decided.69 (Emphasis supplied, citations omitted)
To prove its clear legal right over the remedy being
sought, Naga City presented before the trial court the
1970s Revised Assessor's Tax Mapping Control Roll and
its Identification Map which both identified Road Lot No.
3 as being in the name of the Province of Camarines
Sur.70 Witnesses' testimonies were also presented to
corroborate Naga City's claims of the public nature of
Road Lot No. 3.71
Respondents claimed that as members of the general
public, they had every right to use Road Lot No. 3, a
public road.72
On the other hand, BMC presented TCT No. 13693,73
which covered a total land area of 53,890m2 within Barrio
Concepcion, Naga City with the Ministry of Health, now
Department of Health, as the registered owner. It is not
disputed that Road Lot No. 3 is part of the property
covered by TCT No. 13693.
BMC likewise presented a certification74 from the City
Engineer of Naga City which read:
This is to certify that the road from Panganiban Drive up
to the entrance and exit gate of Bicol Medical Center is
not included in the list of Inventory of City Road[s] of Naga
City.
Given this 14th day of December 2012 for record and
reference purposes.75
A careful reading of the records convinces this Court that
respondents failed to establish prima facie proof of their
clear legal right to utilize Road Lot No, 3. Whatever right
they sought to establish by proving the public nature of
Road Lot No. 3 was rebutted by the Department of
Health's certificate of title and the City Engineer's
categorical statement that "the road from Panganiban
Drive up to the entrance and exit gate of [BMC] was not
included in the list'' of city roads under Naga City's
control.76
Instead of merely relying on a tax map and claims of
customary use, Naga City or respondents should have
presented a clear legal right to support their claim over
Road Lot No. 3.
Executive Secretary v. Forerunner Multi Resources, Inc.77
explained that a clear legal right which would entitle the
applicant to an injunctive writ "contemplates a right
'clearly founded in or granted by law.' Any hint of doubt or
dispute on the asserted legal right precludes the grant of
preliminary injunctive relief."78
Absent a particular law or statute establishing Naga City's
ownership or control over Road Lot No. 3, the Department
of Health's title over the BMC compound must prevail
over the unsubstantiated claims of Naga City and
respondents. Department of Health's ownership over
Road Lot No. 3, with the concomitant right to use and
enjoy this property, must be respected.
Respondents likewise cannot rely on the supposed
customary use of Road Lot No. 3 by the public to support
their claimed right of unfettered access to the road
because customary use is not one (1) of the sources of
legal obligation;79 hence, it does not ripen into a right.
II
This Court finds that the Court of Appeals erred in limiting
prima facie evidence merely to the evidence presented by
Naga City and respondents and in disregarding
altogether petitioners' evidence,80 which had the effect of
squarely rebutting Naga City and respondents'
assertions. The Court of Appeals failed to appreciate the
nature of the ancillary remedy of a writ of preliminary
injunction as against the ex parte nature of a temporary
restraining order.
During the hearing for the application for writ of
preliminary injunction, the trial court correctly weighed the
evidence presented by both parties before dismissing
Naga City's application:
On 21 December 2012, the court a quo handed down the
first assailed Order denying the application for injunctive
relief. According to said court, Naga City failed to comply
with the jurisprudential requirements for the issuance of
said injunction, to wit: 1) the right of the complainant is
clear and unmistakeable; 2) the invasion of the right is
material and substantial; and 3) urgent and permanent
necessity for the writ to prevent serious damage.
Anent the first requirement, the court a quo noted that
even on the assumption that the 1970's Revised
Assessor's Tax Mapping Control Roll and its Identification
Map were both authentic documents, the same would not
overcome BMC's ownership of the property as evidenced
by its title. BMC 's title covers all property within its
bounds, which naturally included Road Lot No. 3.
The court a quo thereafter proceeded to conclude that
since Naga City failed to clearly establish its right over the
said road, then logically, it would not also be able to show
compliance with the second requisite, which necessitates
a material and substantial invasion of such right.
On the third requirement, the court a quo took into
consideration the testimonies of two of the herein
petitioners, Eliza M. Quilon (hereinafter Quilon) and
Josefina F. Esplana (hereinafter Esplana), who both have
businesses in the area and who said that their respective
enterprises started suffering from losses after the closure
of Road Lot No. 3. However, according to the court a quo,
the losses of Quilon and Esplana hardly qualify as
irreparable injury required by jurisprudence in granting
the writ of preliminary injunction. This is so, as the court
declared, because the alleged business losses that had
been purportedly caused by the closure of Road Lot No.
3 were easily subject to mathematical computation.81
(Emphasis supplied)
Writs of preliminary injunction are granted only upon prior
notice to the party sought to be enjoined and upon their
due hearing. Rule 58, Section 5 of the Rules of Court
provides:
Section 5. Preliminary injunction not granted without
notice; exception. - No preliminary injunction shall be
granted without hearing and prior notice to the party or
person sought to be enjoined. If it shall appear from facts
shown by affidavits or by the verified application that great
or irreparable injury would result to the applicant before
the matter can be heard on notice, the court to which the
application for preliminary injunction was made, may
issue ex parte a temporary restraining order to be
effective only for a period of twenty (20) days from service
on the party or person sought to be enjoined, except as
herein provided. Within the said twenty-day period, the
court must order said party or person to show cause, at a
specified time and place, why the injunction should not be
granted, determine within the same period whether or not
the preliminary injunction shall be granted, and
accordingly issue the corresponding order.
However, and subject to the provisions of the preceding
sections, if the matter is of extreme urgency and the
applicant will suffer grave injustice and irreparable injury,
the executive judge of a multiple-sala court or the
presiding judge of a single sala court may issue ex parte
a temporary restraining order effective for only seventy-
two (72) hours from issuance but he shall immediately
comply with the provisions of the next preceding section
as to service of summons and the documents to be
served therewith. Thereafter, within the aforesaid
seventy-two (72) hours, the Judge before whom the case
is pending shall conduct a summary hearing to determine
whether the temporary restraining order shall be
extended until the application for preliminary injunction
can be heard. In no case shall the total period of effectivity
of the temporary restraining order exceed twenty (20)
days, including the original seventy-two hours (72) hours
provided herein.
In the event that the application for preliminary injunction
is denied or not resolved within the said period, the
temporary restraining order is deemed, automatically
vacated. The effectivity of a temporary restraining order
is not extendible without need of any judicial declaration
to that effect and no court shall have authority to extend
or renew the same on the same ground for which it was
issued.
However, if issued by the Court of Appeals or a member
thereof, the temporary restraining order shall be effective
for sixty (60) days from service on the party or person
sought to be enjoined. A restraining order issued by the
Supreme Court or a member thereof shall be effective
until further orders.
Thus, Rule 58 requires "a full and comprehensive hearing the trial court's denial of respondents' application for the
for the determination of the propriety of the issuance of a issuance of a writ of preliminary injunction. Respondents
writ of preliminary injunction,"82 giving the applicant an were unable to present prima facie evidence of their clear
opportunity to prove that great or irreparable injury will and unmistakable right to use Road Lot No. 3.
result if no writ is issued and allowing the opposing party
to comment on the application. WHEREFORE, this Court resolves to GRANT the
Petition. The assailed February 28, 2014 Decision and
On the other hand, a temporary restraining order that is August 26, 2014 Resolution of the Court of Appeals in
heard only with the evidence presented by its applicant is CA-G.R. SP No. 129806 are REVERSED and SET
ex parte, but it is issued to preserve the status quo until ASIDE.
the hearing for preliminary injunction can be conducted,
Miriam College Foundation, Inc v. Court of Appeals83 The temporary restraining order issued by this Court in its
explained the difference between preliminary injunction October 8, 2014 Resolution is made PERMANENT.
and a restraining order as follows:
SO ORDERED.
Preliminary injunction is an order granted at any stage of
an action or proceeding prior to the judgment or final Velasco, Jr., (Chairperson), Bersamin, Martires, and
order, requiring a party or a court, agency or a person to Gesmundo, JJ., concur.
perform to refrain from performing a particular act or acts.
As an extraordinary remedy, injunction is calculated to
preserve or maintain the status quo of things and is
generally availed of to prevent actual or threatened acts,
until the merits of the case can be heard. A preliminary
injunction persists until it is dissolved or until the
termination of the action without the court issuing a final
injunction.

The basic purpose of restraining order, on the other hand,

is to preserve the status quo until the hearing of the
application for preliminary injunction. Under the former
§5, Rule 58 of the Rules of Court, as amended by §5,
Batas Pambansa Blg. 224, a judge (or justice) may issue
a temporary restraining order with a limited life of twenty
days from date of issue. If before the expiration of the 20-
day period the application for preliminary injunction is
denied, the temporary order would thereby be deemed
automatically vacated. If no action is taken by the judge
on the application for preliminary injunction within the said
20 days, the temporary restraining order would
automatically expire on the 20th day by the sheer force of
law, no judicial declaration to that effect being necessary.
In the instant case, no such preliminary injunction was
issued; hence, the TRO earlier issued automatically
expired under the aforesaid provision of the Rules of
Court.84 (Citations omitted)

It is true that some issues are better threshed out before

the trial court, such as if the donation to the Department
of Health by the Camarines Sur Provincial Government
contained an encumbrance for the public to continue
using Road Lot No. 3, or the validity of this donation.85
The Court of Appeals, however, erred when it completely
disregarded the evidence presented by petitioners,
reasoning out that the question of whether or not Naga
City's evidence should prevail over BMC's title over the
property was supposedly a factual matter that should be
threshed out in the trial court.86

By focusing solely on Naga City and respondents'

evidence to determine if there was prima facie evidence
to issue the writ of preliminary injunction while the case
was being heard in the lower court, the Court of Appeals
misappreciated the nature of a writ of preliminary
injunction. To reiterate, a preliminary injunction is an
ancillary remedy issued after due hearing where both
parties are given the opportunity to present their
respective evidence. Thus, both their evidence should be
considered.

As it is, absent a finding of grave abuse of discretion,

there was no reason for the Court of Appeals to reverse