G.R. No.

175587               September 21, 2007

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner,

vs.
JOSEPH ANTHONY M. ALEJANDRO, Respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review assails the May 31, 2006 Decision1 of the Court of Appeals in CA-G.R. CV
No. 78200 affirming the August 30, 2000 Decision2 of the Regional Trial Court of Makati, which
granted respondent Joseph Anthony M. Alejandro’s claim for damages arising from petitioner
Philippine Commercial International Bank’s (PCIB) invalid garnishment of respondent’s deposits.

On October 23, 1997, petitioner filed against respondent a complaint3 for sum of money with prayer
for the issuance of a writ of preliminary attachment. Said complaint alleged that on September 10,
1997, respondent, a resident of Hong Kong, executed in favor of petitioner a promissory note
obligating himself to pay ₱249,828,588.90 plus interest. In view of the fluctuations in the foreign
exchange rates which resulted in the insufficiency of the deposits assigned by respondent as
security for the loan, petitioner requested the latter to put up additional security for the loan.
Respondent, however, sought a reconsideration of said request pointing out petitioner’s alleged
mishandling of his account due to its failure to carry out his instruction to close his account as early
as April 1997, when the prevailing rate of exchange of the US Dollar to Japanese yen was
US$1.00:JPY127.50.4 It appears that the amount of ₱249,828,588.90 was the consolidated amount
of a series of yen loans granted by petitioner to respondent during the months of February and April
1997.5

In praying for the issuance of a writ of preliminary attachment under Section 1 paragraphs (e) and (f)
of Rule 57 of the Rules of Court, petitioner alleged that (1) respondent fraudulently withdrew his
unassigned deposits notwithstanding his verbal promise to PCIB Assistant Vice President Corazon
B. Nepomuceno not to withdraw the same prior to their assignment as security for the loan; and (2)
that respondent is not a resident of the Philippines. The application for the issuance of a writ was
supported with the affidavit of Nepomuceno.6

On October 24, 1997, the trial court granted the application and issued the writ ex parte7 after
petitioner posted a bond in the amount of ₱18,798,734.69, issued by Prudential Guarantee &
Assurance Inc., under Bond No. HO-46764-97. On the same date, the bank deposits of respondent
with Rizal Commercial Banking Corporation (RCBC) were garnished. On October 27, 1997,
respondent, through counsel, filed a manifestation informing the court that he is voluntarily
submitting to its jurisdiction.8

Subsequently, respondent filed a motion to quash9 the writ contending that the withdrawal of his
unassigned deposits was not fraudulent as it was approved by petitioner. He also alleged that
petitioner knew that he maintains a permanent residence at Calle Victoria, Ciudad Regina, Batasan
Hills, Quezon City, and an office address in Makati City at the Law Firm Romulo Mabanta
Buenaventura Sayoc & De los Angeles, 10 where he is a partner. In both addresses, petitioner
regularly communicated with him through its representatives. Respondent added that he is the
managing partner of the Hong Kong branch of said Law Firm; that his stay in Hong Kong is only
temporary; and that he frequently travels back to the Philippines.
On December 24, 1997, the trial court issued an order quashing the writ and holding that the
withdrawal of respondent’s unassigned deposits was not intended to defraud petitioner. It also found
that the representatives of petitioner personally transacted with respondent through his home
address in Quezon City and/or his office in Makati City. It thus concluded that petitioner
misrepresented and suppressed the facts regarding respondent’s residence considering that it has
personal and official knowledge that for purposes of service of summons, respondent’s residence
and office addresses are located in the Philippines. The dispositive portion of the court’s decision is
as follows:

WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby GRANTED, and
the ORDER of 24 October 1997 is hereby RECONSIDERED and SET ASIDE and the WRIT OF
attachment of the same is hereby DISCHARGED.

SO ORDERED.11

With the denial12 of petitioner’s motion for reconsideration, it elevated the case to the Court of
Appeals (CA-G.R. SP No. 50748) via a petition for certiorari. On May 10, 1999, the petition was
dismissed for failure to prove that the trial court abused its discretion in issuing the aforesaid
order.13 Petitioner filed a motion for reconsideration but was denied on October 28, 1999.14 On
petition with this Court, the case was dismissed for late filing in a minute resolution (G.R. No.
140605) dated January 19, 2000.15 Petitioner filed a motion for reconsideration but was
likewise denied with finality on March 6, 2000.16

Meanwhile, on May 20, 1998, respondent filed a claim for damages in the amount of P25 Million17 on
the attachment bond (posted by Prudential Guarantee & Assurance, Inc., under JCL(4) No. 01081,
Bond No. HO-46764-97) on account of the wrongful garnishment of his deposits. He presented
evidence showing that his ₱150,000.00 RCBC check payable to his counsel as attorney’s fees, was
dishonored by reason of the garnishment of his deposits. He also testified that he is a graduate of
the Ateneo de Manila University in 1982 with a double degree of Economics and Management
Engineering and of the University of the Philippines in 1987 with the degree of Bachelor of Laws.
Respondent likewise presented witnesses to prove that he is a well known lawyer in the business
community both in the Philippines and in Hong Kong.18 For its part, the lone witness presented by
petitioner was Nepomuceno who claimed that she acted in good faith in alleging that respondent is a
resident of Hong Kong.19

On August 30, 2000, the trial court awarded damages to respondent in the amount of P25 Million
without specifying the basis thereof, thus:

WHEREFORE, premises above considered, and defendant having duly established his claim in the
amount of ₱25,000,000.00, judgment is hereby rendered ordering Prudential Guarantee &
[Assurance] Co., which is solidarily liable with plaintiff to pay defendant the full amount of bond under
Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081, [Bond No. HO-46764-97], dated 24
October 1997 in the amount of ₱18,798,734.69. And, considering that the amount of the bond is
insufficient to fully satisfy the award for damages, plaintiff is hereby ordered to pay defendant the
amount of ₱6,201,265.31.

SO ORDERED.20

The trial court denied petitioner’s motion for reconsideration on October 24, 2000.21

Petitioner elevated the case to the Court of Appeals which affirmed the findings of the trial court. It
held that in claiming that respondent was not a resident of the Philippines, petitioner cannot be said
to have been in good faith considering that its knowledge of respondent’s Philippine residence and
office address goes into the very issue of the trial court’s jurisdiction which would have been
defective had respondent not voluntarily appeared before it.

The Court of Appeals, however, reduced the amount of damages awarded to petitioner and specified
their basis. The dispositive portion of the decision of the Court of Appeals states:

WHEREFORE, the appeal is PARTIALLY GRANTED and the decision appealed from is hereby
MODIFIED. The award of damages in the amount of ₱25,000,000.00 is deleted. In lieu thereof,
Prudential Guarantee & [Assurance, Inc.], which is solidarily liable with appellant [herein petitioner],
is ORDERED to pay appellee [herein respondent] ₱2,000,000.00 as nominal damages;
₱5,000,000.00 as moral damages; and ₱1,000,000.00 as attorney’s fees, to be satisfied against the
attachment bond under Prudential Guarantee & Assurance, Inc. JCL (4) No. 01081.

SO ORDERED.22

Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals denied
petitioner’s motion for reconsideration but granted that of respondent’s by ordering petitioner to pay
additional ₱5Million as exemplary damages.23

Hence, the instant petition.

At the outset, it must be noted that the ruling of the trial court that petitioner is not entitled to a writ of
attachment because respondent is a resident of the Philippines and that his act of withdrawing his
deposits with petitioner was without intent to defraud, can no longer be passed upon by this Court.
More importantly, the conclusions of the court that petitioner bank misrepresented that respondent
was residing out of the Philippines and suppressed the fact that respondent has a permanent
residence in Metro Manila where he may be served with summons, are now beyond the power of
this Court to review having been the subject of a final and executory order. Said findings were
sustained by the Court of Appeals in CA-G.R. SP No. 50784 and by this Court in G.R. No. 140605.
The rule on conclusiveness of judgment, which obtains under the premises, precludes the relitigation
of a particular fact or issue in another action between the same parties even if based on a different
claim or cause of action. The judgment in the prior action operates as estoppel as to those matters in
issue or points controverted, upon the determination of which the finding or judgment was rendered.
The previous judgment is conclusive in the second case, as to those matters actually and directly
controverted and determined.24 Hence, the issues of misrepresentation by petitioner and the
residence of respondent for purposes of service of summons can no longer be questioned by
petitioner in this case.

The core issue for resolution is whether petitioner bank is liable for damages for the improper
issuance of the writ of attachment against respondent.

We rule in the affirmative.

Notwithstanding the final judgment that petitioner is guilty of misrepresentation and suppression of a
material fact, the latter contends that it acted in good faith. Petitioner also contends that even if
respondent is considered a resident of the Philippines, attachment is still proper under Section 1,
paragraph (f), Rule 57 of the Rules of Court since he (respondent) is a resident who is temporarily
out of the Philippines upon whom service of summons may be effected by publication.

Petitioner’s contentions are without merit.

While the final order of the trial court which quashed the writ did not categorically use the word "bad
faith" in characterizing the representations of petitioner, the tenor of said order evidently considers
the latter to have acted in bad faith by resorting to a deliberate strategy to mislead the court. Thus –

In the hearings of the motion, and oral arguments of counsels before the Court, it appears that
plaintiff BANK through its contracting officers Vice President Corazon B. Nepomuceno and
Executive Vice President Jose Ramon F. Revilla, personally transacted with defendant mainly
through defendant’s permanent residence in METRO-MANILA, either in defendant’s home address
in Quezon City or his main business address at the Romulo Mabanta Buenaventura Sayoc & Delos
Angeles in MAKATI and while at times follow ups were made through defendant’s temporary home
and business addresses in Hongkong. It is therefore clear that plaintiff could not deny their personal
and official knowledge that defendant’s permanent and official residence for purposes of service of
summons is in the Philippines. In fact, this finding is further confirmed by the letter of Mr. JOHN
GOKONGWEI, JR. Chairman, Executive Committee of plaintiff BANK, in his letter dated 6 October
1997 on the subject loan to defendant of the same law firm was addressed to the ROMULO LAW
FIRM in MAKATI.

[Anent the] second ground of attachment x x x [t]he Court finds that the amount withdrawn was not
part of defendant’s peso deposits assigned with the bank to secure the loan and as proof that the
withdrawal was not intended to defraud plaintiff as creditor is that plaintiff approved and allowed said
withdrawals. It is even noted that when the Court granted the prayer for attachment it was mainly on
the first ground under Section 1(f) of Rule 57 of the 1997 Rules of Civil Procedure, that defendant
resides out of the Philippines.

On the above findings, it is obvious that plaintiff already knew from the beginning the deficiency of its
second ground for attachment [i.e.,] disposing properties with intent to defraud his creditors, and
therefore plaintiff had to resort to this misrepresentation that defendant was residing out of the
Philippines and suppressed the fact that defendant’s permanent residence is in METRO MANILA
where he could be served with summons.

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

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

Apropos the Application for Judgment on the Attachment Bond, Escobar claims in its petition that the
award of attorney’s fees and injunction bond premium in favor of Hanil is [contrary] to law and
jurisprudence. It contends that no malice or bad faith may be imputed to it in procuring the writ.

Escobar’s protestation is now too late in the day. The question of the illegality of the attachment and
Escobar’s bad faith in obtaining it has long been settled in one of the earlier incidents of this case.
The Court of Appeals, in its decision rendered on February 3, 1983 in C.A.-G.R. No. SP-14512,
voided the challenged writ, having been issued with grave abuse of discretion. Escobar’s bad faith in
procuring the writ cannot be doubted. Its Petition for the Issuance of Preliminary Attachment made
such damning allegations that: Hanil was already able to secure a complete release of its final
collection from the MPWH; it has moved out some of its heavy equipments for unknown destination,
and it may leave the country anytime. Worse, its Ex Parte Motion to Resolve Petition alleged that
"after personal verification by (Escobar) of (Hanil’s) equipment in Cagayan de Oro City, it appears
that the equipments were no longer existing from their compound." All these allegations of Escobar
were found to be totally baseless and untrue.

Even assuming that the trial court did not make a categorical pronouncement of misrepresentation
and suppression of material facts on the part of petitioner, the factual backdrop of this case does not
support petitioner’s claim of good faith. The facts and circumstances omitted are highly material and
relevant to the grant or denial of writ of attachment applied for.

Finally, there is no merit in petitioner’s contention that respondent can be considered a resident who
is temporarily out of the Philippines upon whom service of summons may be effected by publication,
and therefore qualifies as among those against whom a writ of attachment may be issued under
Section 1, paragraph (f), Rule 57 of the Rules of Court which provides:

(f) In an action against a party x x x on whom summons may be served by publication.

In so arguing, petitioner attempts to give the impression that although it erroneously invoked the
ground that respondent does not reside in the Philippines, it should not be made to pay damages
because it is in fact entitled to a writ of attachment had it invoked the proper ground under Rule 57.
However, even on this alternative ground, petitioner is still not entitled to the issuance of a writ of
attachment.

The circumstances under which a writ of preliminary attachment may be issued are set forth in
Section 1, Rule 57 of the Rules of Court, to wit:

SEC. 1. Grounds upon which attachment may issue. — At the commencement of the action or at
any time before entry of judgment, a plaintiff or any proper party may have the property of the
adverse party attached as security for the satisfaction of any judgment that may be recovered in the
following cases:

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

(b) In an action for money or property embezzled or fraudulently misapplied or converted to

his own use by a public officer, or an officer of a corporation or an attorney, factor, broker,
agent, or clerk, in the course of his employment as such, or by any other person in a
fiduciary capacity, or for a willful violation of duty;

(c) In an action to recover the possession of personal property unjustly or fraudulently taken,
detained, or converted, when the property, or any part thereof, has been concealed,
removed, or disposed of to prevent its being found or taken by the applicant or an authorized
person;

(d) In an action against a party who has been guilty of a fraud in contracting the debt or
incurring the obligation upon which the action is brought, or in the performance thereof;

(e) In an action against a party who has removed or disposed of his property, or is about to
do so, with intent to defraud his creditors;
 (f) In an action against a party who resides out of the Philippines, or on whom summons may
be served by publication.

The purposes of preliminary attachment are: (1) to seize the property of the debtor in advance of
final judgment and to hold it for purposes of satisfying said judgment, as in the grounds stated in
paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or (2) to acquire jurisdiction over
the action by actual or constructive seizure of the property in those instances where personal or
substituted service of summons on the defendant cannot be effected, as in paragraph (f) of the same
provision.27

Corollarily, in actions in personam, such as the instant case for collection of sum of
money,28 summons must be served by personal or substituted service, otherwise the court will not
acquire jurisdiction over the defendant. In case the defendant does not reside and is not found in the
Philippines (and hence personal and substituted service cannot be effected), the remedy of the
plaintiff in order for the court to acquire jurisdiction to try the case is to convert the action into a
proceeding in rem or quasi in rem by attaching the property of the defendant.29 Thus, in order to
acquire jurisdiction in actions in personam where defendant resides out of and is not found in the
Philippines, it becomes a matter of course for the court to convert the action into a proceeding in
rem or quasi in rem by attaching the defendant’s property. The service of summons in this case
(which may be by publication coupled with the sending by registered mail of the copy of the
summons and the court order to the last known address of the defendant), is no longer for the
purpose of acquiring jurisdiction but for compliance with the requirements of due process.30

However, where the defendant is a resident who is temporarily out of the Philippines, attachment of
his/her property in an action in personam, is not always necessary in order for the court to acquire
jurisdiction to hear the case.

Section 16, Rule 14 of the Rules of Court reads:

Sec. 16. Residents temporarily out of the Philippines. – When an action is commenced against a
defendant who ordinarily resides within the Philippines, but who is temporarily out of it, service may,
by leave of court, be also effected out of the Philippines, as under the preceding section.

The preceding section referred to in the above provision is Section 15 which provides for
extraterritorial service – (a) personal service out of the Philippines, (b) publication coupled with the
sending by registered mail of the copy of the summons and the court order to the last known
address of the defendant; or (c) in any other manner which the court may deem sufficient.

In Montalban v. Maximo,31 however, the Court held that substituted service of summons (under the
present Section 7, Rule 14 of the Rules of Court) is the normal mode of service of summons that will
confer jurisdiction on the court over the person of residents temporarily out of the Philippines.
Meaning, service of summons may be effected by (a) leaving copies of the summons at the
defendant’s residence with some person of suitable discretion residing therein, or (b) by leaving
copies at the defendant’s office or regular place of business with some competent person in charge
thereof.32 Hence, the court may acquire jurisdiction over an action in personam by mere substituted
service without need of attaching the property of the defendant.

The rationale in providing for substituted service as the normal mode of service for residents
temporarily out of the Philippines, was expounded in Montalban v. Maximo,33 in this wise:

A man temporarily absent from this country leaves a definite place of residence, a dwelling where he
lives, a local base, so to speak, to which any inquiry about him may be directed and where he is
bound to return. Where one temporarily absents himself, he leaves his affairs in the hands of one
who may be reasonably expected to act in his place and stead; to do all that is necessary to protect
his interests; and to communicate with him from time to time any incident of importance that may
affect him or his business or his affairs. It is usual for such a man to leave at his home or with his
business associates information as to where he may be contacted in the event a question that
affects him crops up.

Thus, in actions in personam against residents temporarily out of the Philippines, the court need not
always attach the defendant’s property in order to have authority to try the case. Where the plaintiff
seeks to attach the defendant’s property and to resort to the concomitant service of summons by
publication, the same must be with prior leave, precisely because, if the sole purpose of the
attachment is for the court to acquire jurisdiction, the latter must determine whether from the
allegations in the complaint, substituted service (to persons of suitable discretion at the defendant’s
residence or to a competent person in charge of his office or regular place of business) will suffice,
or whether there is a need to attach the property of the defendant and resort to service of summons
by publication in order for the court to acquire jurisdiction over the case and to comply with the
requirements of due process.

In the instant case, it must be stressed that the writ was issued by the trial court mainly on the
representation of petitioner that respondent is not a resident of the Philippines.34 Obviously, the trial
court’s issuance of the writ was for the sole purpose of acquiring jurisdiction to hear and decide the
case. Had the allegations in the complaint disclosed that respondent has a residence in Quezon City
and an office in Makati City, the trial court, if only for the purpose of acquiring jurisdiction, could have
served summons by substituted service on the said addresses, instead of attaching the property of
the defendant. The rules on the application of a writ of attachment must be strictly construed in favor
of the defendant. For attachment is harsh, extraordinary, and summary in nature; it is a rigorous
remedy which exposes the debtor to humiliation and annoyance.35 It should be resorted to only when
necessary and as a last remedy.

It is clear from the foregoing that even on the allegation that respondent is a resident temporarily out
of the Philippines, petitioner is still not entitled to a writ of attachment because the trial court could
acquire jurisdiction over the case by substituted service instead of attaching the property of the
defendant. The misrepresentation of petitioner that respondent does not reside in the Philippines
and its omission of his local addresses was thus a deliberate move to ensure that the application for
the writ will be granted.

In light of the foregoing, the Court of Appeals properly sustained the finding of the trial court that
petitioner is liable for damages for the wrongful issuance of a writ of attachment against respondent.

Anent the actual damages, the Court of Appeals is correct in not awarding the same inasmuch as
the respondent failed to establish the amount garnished by petitioner. It is a well settled rule that one
who has been injured by a wrongful attachment can recover damages for the actual loss resulting
therefrom. But for such losses to be recoverable, they must constitute actual damages duly
established by competent proofs, which are, however, wanting in the present case.36

Nevertheless, nominal damages may be awarded to a plaintiff whose right has been violated or
invaded by the defendant, for the purpose of vindicating or recognizing that right, and not for
indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose of
indemnification for a loss but for the recognition and vindication of a right. Indeed, nominal damages
are damages in name only and not in fact.37 They are recoverable where some injury has been done
but the pecuniary value of the damage is not shown by evidence and are thus subject to the
discretion of the court according to the circumstances of the case.38
In this case, the award of nominal damages is proper considering that the right of respondent to use
his money has been violated by its garnishment. The amount of nominal damages must, however,
be reduced from ₱2 million to ₱50,000.00 considering the short period of 2 months during which the
writ was in effect as well as the lack of evidence as to the amount garnished. 1âwphi1

Likewise, the award of attorney’s fees is proper when a party is compelled to incur expenses to lift a
wrongfully issued writ of attachment. The basis of the award thereof is also the amount of money
garnished, and the length of time respondents have been deprived of the use of their money by
reason of the wrongful attachment.39 It may also be based upon (1) the amount and the character of
the services rendered; (2) the labor, time and trouble involved; (3) the nature and importance of the
litigation and business in which the services were rendered; (4) the responsibility imposed; (5) the
amount of money and the value of the property affected by the controversy or involved in the
employment; (6) the skill and the experience called for in the performance of the services; (7) the
professional character and the social standing of the attorney; (8) the results secured, it being a
recognized rule that an attorney may properly charge a much larger fee when it is contingent than
when it is not.40

All the aforementioned weighed, and considering the short period of time it took to have the writ
lifted, the favorable decisions of the courts below, the absence of evidence as to the professional
character and the social standing of the attorney handling the case and the amount garnished, the
award of attorney’s fees should be fixed not at ₱1 Million, but only at ₱200,000.00.

The courts below correctly awarded moral damages on account of petitioner’s misrepresentation and
bad faith; however, we find the award in the amount of ₱5 Million excessive. Moral damages are to
be fixed upon the discretion of the court taking into consideration the educational, social and
financial standing of the parties.41 Moral damages are not intended to enrich a complainant at the
expense of a defendant.42 They are awarded only to enable the injured party to obtain means,
diversion or amusements that will serve to obviate the moral suffering he has undergone, by reason
of petitioner’s culpable action. Moral damages must be commensurate with the loss or injury
suffered. Hence, the award of moral damages is reduced to ₱500,000.00.

Considering petitioner’s bad faith in securing the writ of attachment, we sustain the award of
exemplary damages by way of example or correction for public good. This should deter parties in
litigations from resorting to baseless and preposterous allegations to obtain writs of attachments.
While as a general rule, the liability on the attachment bond is limited to actual (or in some cases,
temperate or nominal) damages, exemplary damages may be recovered where the attachment was
established to be maliciously sued out.43 Nevertheless, the award of exemplary damages in this case
should be reduced from ₱5M to ₱500,000.00.

Finally, contrary to the claim of petitioner, the instant case for damages by reason of the invalid
issuance of the writ, survives the dismissal of the main case for sum of money. Suffice it to state that
the claim for damages arising from such wrongful attachment may arise and be decided separately
from the merits of the main action.44

WHEREFORE, the petition is PARTIALLY GRANTED. The May 31, 2006 Decision of the Court of
Appeals in CA-G.R. CV No. 78200 is AFFIRMED with MODIFICATIONS. As modified, petitioner
Philippine Commercial International Bank is ordered to pay respondent Joseph Anthony M.
Alejandro the following amounts: ₱50,000.00 as nominal damages, ₱200,000.00 as attorney’s fees;
and ₱500,000.00 as moral damages, and ₱500,000.00 as exemplary damages, to be satisfied
against the attachment bond issued by Prudential Guarantee & Assurance Inc.,45 under JCL (4) No.
01081, Bond No. HO-46764-97.
No pronouncement as to costs.

SO ORDERED.

Case Digest