1
INTRODUCTION/PRELIMINARIES
THIRD DIVISION
G.R. No. 197802, November 11, 2015
ZUNECA PHARMACEUTICAL, AKRAM
ARAIN AND/OR VENUS ARAIN, M.D. DBA
ZUNECA
PHARMACEUTICAL, Petitioners, v. NATRAP
HARM, INC., Respondent.
RESOLUTION
VILLARAMA, JR., J.:
This is a petition for review1 under Rule 45 of
the 1997 Rules of Civil Procedure, as
amended, assailing the April 18, 2011
Decision2 and July 21, 2011 Resolution3 of the
Court of Appeals (CA) in the petition
for certiorari docketed as CA-G.R. SP No.
103333 granting a permanent injunction in
favor of respondent Natrapharm, Inc. and
against petitioner Zuneca Pharmaceutical.
The facts follow:
Respondent is an all-Filipino pharmaceutical
company which manufactures and sells a
medicine bearing the generic name
"CITICOLINE," which is indicated for heart
and stroke patients. The said medicine is
marketed by respondent under its registered
trademark "ZYNAPSE," which respondent
obtained from the Intellectual Property Office
(IPO) on September 24, 2007 under
Certificate of Trademark Registration No. 4-
2007-005596. With its registration, the
trademark "ZYNAPSE" enjoys protection for a
term of 10 years from September 24, 2007.4
In addition, respondent obtained from the
Bureau of Food and Drugs (BFAD) all
necessary permits and licenses to register, list
and sell its "ZYNAPSE" medicine in its various
forms and dosages.5
Allegedly unknown to respondent, since 2003
or even as early as 2001, petitioners have
been selling a medicine imported from
Lahore, Pakistan bearing the generic name
"CARBAMAZEPINE," an anti-convulsant
indicated for epilepsy, under the brand name
"ZYNAPS," which trademark is however not
registered with the IPO. "ZYNAPS" is
pronounced exactly like "ZYNAPSE."6
Respondent further alleged that petitioners
are selling their product "ZYNAPS"
CARBAMAZEPINE in numerous drugstores in
the country where its own product
"ZYNAPSE" CITICOLINE is also being sold.7
Moreover, respondent claimed that the drug
CARBAMAZEPINE has one documented
serious and disfiguring side-effect called
"Stevens-Johnson Syndrome," and that the
sale of the medicines "ZYNAPSE" and
"ZYNAPS" in the same drugstores will give
rise to medicine switching.8
On October 30, 2007, respondent sent
petitioners a cease-and-desist demand letter,
pointing out that:
a. "ZYNAPSE" is the registered
trademark of [respondent], and
that as such owner, it has
exclusive trademark right
under the law to the use
thereof and prevent others
from using identical or
confusingly similar marks, and
that [petitioners] must stop the
use of "ZYNAPS" for being
nearly identical to
"ZYNAPSE"; and
b. Because there is confusing
similarity between "ZYNAPSE"
and "ZYNAPS," there is a
danger of medicine switching,
with the patient on
"ZYNAPSE" medication
placed in a more injurious
situation given the Steven-
Johnson Syndrome side effect
of the "ZYNAPS"
CARBAMAZEPINE.9
Petitioners refused to heed the above

demand, claiming that they had prior use of
the name "ZYNAPS" since year 2003, having
been issued by the BFAD a Certificate of
Product Registration (CPR) on April 15, 2003,
which allowed them to sell CARBAMAZEPINE
under the brand name "ZYNAPS."10
On November 29, 2007, respondent filed a
complaint against petitioners for trademark
infringement for violation of Republic Act
(R.A.) No. 8293, or the Intellectual Property
Code of the Philippines (IPC), with prayer for
a temporary restraining order (TRO) and/or
writ of preliminary injunction. To justify the
TRO/writ of preliminary injunction, respondent
cited Section 12211 of R.A. No. 8293, under
which the registration of "ZYNAPSE" gives it
the exclusive right to use the said name as
well as to exclude others from using the
same.12 In addition, respondent argued that
under Sections 13813 and 147.114 of the IPC,
certificates of registration are prima facie
evidence of the registrant's ownership of the
mark and of the registrant's exclusive right to
use the same.15 Respondent also invoked the
case of Conrad and Company, Inc. v. Court of
Appeals16 where it was ruled that an invasion
of a registered mark entitles the holder of a
certificate of registration thereof to injunctive
relief.17
In their answer, petitioners argued that they
enjoyed prior use in good faith of the brand
name "ZYNAPS," having submitted their
application for CPR with the BFAD on October
2, 2001, with the name "ZYNAPS" expressly
indicated thereon. The CPR was issued to
them on April 15, 2003.18 Moreover,
petitioners averred that under Section 15919 of
the IPC their right to use the said mark is
protected.20
In its December 21, 2007 Order,21 the
Regional Trial Court (RTC) denied
respondent's application for a TRO, ruling that
even if respondent was able to first register its
mark "ZYNAPSE" with the IPO in 2007, it is
nevertheless defeated by the prior actual use
by petitioners of "ZYNAPS" in 2003.
In its March 12, 2008 Order,22 the RTC denied
the application for a writ of preliminary
2
injunction, reiterating the reasons stated in the
order denying the application for a TRO:
In this Court's objective evaluation, neither
party is, at this point, entitled to any injunctive
solace. Plaintiff, while admittedly the holder of
a registered trademark under the IPC, may
not invoke ascendancy or superiority of its
CTR [certificate of trademark registration] over
the CPR [certificate of product registration of
the BFAD] of the defendants, as the latter
certificate is, in the Court's opinion, evidence
of its "prior use". Parenthetically, the plaintiff
would have been entitled to an injunction as
against any or all third persons in respect of
its registered mark under normal conditions,
that is, in the event wherein Section 159.1
would not be invoked by such third person.
Such is the case however in this litigation.
Section 159 of the IPC explicitly curtails the
registrant's rights by providing for limitations
on those rights as against a "prior user" under
Section 159.1 xxx.23
Via a petition for certiorari with an application
for a TRO and/or a writ of preliminary
injunction, respondent questioned before the
CA the RTC's denial of the application for a
writ of preliminary injunction.
On June 17, 2008, the CA issued a
Resolution24 denying respondent's application
for TRO and/or preliminary injunction for lack
of merit. The CA found no compelling reason
to grant the application for TRO and/or
preliminary injunction because there was no
showing that respondent had a clear and
existing right that will be violated by
petitioners. Respondent moved for
reconsideration but was denied by the CA in
its July 31, 2008 Resolution.25cralawred
However, contrary to its earlier resolutions
denying the application for a TRO/preliminary
injunction, the CA, in its April 18, 2011
Decision, upheld the allegations of respondent
that it is entitled to injunctive relief on the
basis of its IPO registration and permanently
enjoined petitioners from the commercial use
of "ZYNAPS." The fallo of the CA Decision
reads:

WHEREFORE, premises considered, the
Petition for Certiorari is GRANTED. The
assailed Omnibus Order dated 12 March 2008
of the Regional Trial Court, Branch 93 of
Quezon City in Civil Case No. Q-07-61561
is REVERSED and SET ASIDE, and a new
one is
entered permanently ENJOINING defendant
s-respondents, their employees, agents,
representatives, dealers, retailers, and/or
assigns, and any and all persons acting in
their behalf, from manufacturing, importing,
distributing, selling and/or advertising for sale,
or otherwise using in commerce, the anti-
convulsant drug CARBAMAZEPINE under
the brand name and mark "ZYNAPS," or
using any other name which is similar or
confusingly similar to petitioner's registered
trademark "ZYNAPSE," including filing of
application for permits, license, or certificate of
product registration with the Food and Drug
Administration and other government
agencies.
SO ORDERED.26 (Underscoring and
additional emphasis supplied)
Petitioners' motion for reconsideration was
denied by the CA in its Resolution dated July
21, 2011.
Hence, this petition for review.
On December 2, 2011, the RTC rendered a
Decision27 on the merits of the case. It found
petitioners liable to respondent for damages.
Moreover, it enjoined the petitioners from
using "ZYNAPS" and ordered all materials
related to it be disposed outside the channel
of commerce or destroyed without
compensation.28
Respondent moved to dismiss the present
petition in view of the December 2, 2011 RTC
Decision which functions as a full adjudication
on the merits of the main issue of trademark
infringement. Respondent contended that the
present petition is moot and academic, it only
involving an ancillary writ.29
Petitioners, on the other hand, opposed the
motion to dismiss arguing that the December
2, 2011 RTC Decision had not yet attained
3
finality, thus, the present petition had not yet
been rendered moot.
The two issues which need to be addressed
are:
1) Whether the decision on the merits
rendered the issues in this case moot and
academic? and
2) Whether the CA may order a permanent
injunction in deciding a petition
for certiorari against the denial of an
application for a preliminary
injunction issued by the RTC?
We hold that the issues raised in the instant
petition have been rendered moot and
academic given the RTC's December 2, 2011
Decision on the merits of the case.
Rule 58 of the Rules of Court provides for
both preliminary and permanent injunction.
Section 1, Rule 58 provides for the definition
of preliminary injunction:
SECTION 1. Preliminary injunction defined;
classes. — 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. It may also require the performance
of a particular act or acts, in which case it
shall be known as a preliminary mandatory
injunction. (Emphasis supplied)
On the other hand, Section 9 of the same
Rule defines a permanent injunction in this
wise:
SEC. 9. When final injunction granted. —
If after the trial of the action it appears that
the applicant is entitled to have the act or acts
complained of permanently enjoined, the court
shall grant a final injunction perpetually
restraining the party or person enjoined from
the commission or continuance of the act or
acts or confirming the preliminary mandatory
injunction. (Emphasis supplied)
A writ of preliminary injunction is generally

based solely on initial and incomplete
evidence.30 The evidence submitted during the
hearing on an application for a writ of
preliminary injunction is not conclusive or
complete for only a sampling is needed to
give the trial court an idea of the justification
for the preliminary injunction pending the
decision of the case on the merits.31 As such,
the findings of fact and opinion of a court
when issuing the writ of preliminary injunction
are interlocutory in nature and made even
before the trial on the merits is commenced or
terminated.32
By contrast a permanent injunction, based on
Section 9, Rule 58 of the Rules of Court,
forms part of the judgment on the merits and it
can only be properly ordered only on final
judgment. A permanent injunction may thus
be granted after a trial or hearing on the
merits of the case and a decree granting or
refusing an injunction should not be entered
until after a hearing on the merits where a
verified answer containing denials is filed or
where no answer is required, or a rule to show
cause is equivalent to an answer.33
As such a preliminary injunction, like any
preliminary writ and any interlocutory order,
cannot survive the main case of which it is an
incident; because an ancillary writ of
preliminary injunction loses its force and effect
after the decision in the main petition.34
In Casilan v. Ybañez,35 this Court stated:
As things stand now, this Court can no longer
interfere with the preliminary injunctions
issued by the Leyte court in its cases Nos.
2985 and 2990, because such preliminary
writs have already been vacated, being
superseded and replaced by the permanent
injunction ordered in the decision on the
merits rendered on 21 March 1962. And as to
the permanent injunction, no action can be
taken thereon without reviewing the
judgment on the merits, such injunction
being but a consequence of the
pronouncement that the credits of Tiongson
and Montilla are entitled to priority over that of
Casilan. Since the court below had the
power and right to determine such
question of preference, its judgment is not
4
without, nor in excess of, jurisdiction; and
even assuming that its findings are not
correct, they would, at most, constitute
errors of law, and not abuses of discretion,
correctible by certiorari . The obvious
remedy for petitioner Casilan was a timely
appeal from the judgment on the merits to
the Court of Appeals, the amount involved
being less than P200,000. But the judgment
has become final and unappealable and can
not be set aside
through certiorari proceedings. (Emphasis
supplied)
Here, this Court is being asked to determine
whether the CA erred by issuing a permanent
injunction in a case which questioned the
propriety of the denial of an ancillary writ. But
with the RTC's December 2, 2011 Decision on
the case for "Injunction, Trademark
Infringement, Damages and Destruction," the
issues raised in the instant petition have been
rendered moot and academic. We note that
the case brought to the CA on a petition
for certiorari merely involved the RTC's denial
of respondent's application for a writ of
preliminary injunction, a mere ancillary writ.
Since a decision on the merits has already
been rendered and which includes in its
disposition a permanent injunction, the proper
remedy is an appeal36 from the decision in
the main case.
WHEREFORE, in light of all the foregoing, the
petition is hereby DENIED for being moot and
academic.
SO ORDERED.
Velasco, Jr., (Chairperson),
Bersamin,* Leonen,** and Jardeleza,
JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-252             March 30, 1946
TRANQUILINO CALO and DOROTEO SAN
JOSE, petitioners,
vs.
ARSENIO C. ROLDAN, Judge of First
Instance of Laguna, REGINO RELOVA and
TEODULA BARTOLOME, respondents.
Zosimo D. Tanalega for petitioners.
Estanislao A. Fernandez for respondents
Relova and Bartolome.
No appearance for respondent Judge.
FERIA, J.:
This is a petition for writ of certiorari against
the respondent Judge Arsenio C. Roldan of
the Court First Instance of Laguna, on the
ground that the latter has exceeded his
jurisdiction or acted with grave abuse of
discretion in appointing a receiver of certain
lands and their fruits which, according to the
complainant filed by the other respondents, as
plaintiffs, against petitioners, as defendants, in
case No. 7951, were in the actual possession
of and belong to said plaintiffs.
The complaint filed by plaintiffs and
respondents against defendants and
petitioners in the Court of First Instance of
Laguna reads as follows:
1. That the plaintiffs and the
defendants are all of legal age, Filipino
citizens, and residents of Pila, Laguna;
the plaintiffs are husband and wife..
2. That the plaintiff spouses are the
owners and the possessors of the
following described parcels of land, to
wit:.
xxx     xxx     xxx
5
3. That parcel No. (a) described above
is now an unplanted rice land and
parcel No. (b) described in the
complaint is a coconut land, both
under the possession of the plaintiffs..
4. That the defendants, without any
legal right whatsoever and in
connivance with each other, through
the use of force, stealth, threats and
intimidation, intend or are intending to
enter and work or harvest whatever
existing fruits may now be found in the
lands above-mentioned in violation of
plaintiff's in this case ineffectual..
5. That unless defendants are barred,
restrained, enjoined, and prohibited
from entering or harvesting the lands
or working therein through ex-parte
injunction, the plaintiffs will suffer
injustice, damages and irreparable
injury to their great prejudice..
6. That the plaintiffs are offering a
bond in their application for ex-parte
injunction in the amount of P2,000,
subject to the approval of this Hon.
Court, which bond is attached hereto
marked as Annex A and made an
integral part of this complaint..
7. That on or about June 26, 1945, the
defendants, through force, destroyed
and took away the madre-cacao
fencer, and barbed wires built on the
northwestern portion of the land
designated as parcel No. (b) of this
complaint to the damage and
prejudice of the plaintiffs in the amount
of at least P200..
Wherefore, it is respectfully prayed:.
(a) That the accompanying bond in the
amount of P2,000 be approved;
(b) That a writ of preliminary injunction
be issued ex-parte immediately
restraining, enjoining and prohibiting
the defendants, their agents, servants,
representatives, attorneys, and, (or)

other persons acting for and in their
behalf, from entering in, interfering
with and/or in any wise taking any
participation in the harvest of the lands
belonging to the plaintiffs; or in any
wise working the lands above-
described;
(c) That judgment be rendered, after
due hearing, declaring the preliminary
injunction final;.
(d) That the defendants be
condemned jointly and severally to
pay the plaintiffs the sum of P200 as
damages; and.
(e) That plaintiffs be given such other
and further relief just and equitable
with costs of suit to the defendants.
The defendants filed an opposition dated
August 8, 1945, to the issuance of the writ of
preliminary injunction prayed for in the above-
quoted complaint, on the ground that they are
owners of the lands and have been in actual
possession thereof since the year 1925; and
their answer to the complaint filed on August
14, 1945, they reiterate that they are the
owners and were then in actual possession of
said property, and that the plaintiffs have
never been in possession thereof.
The hearing of the petition for preliminary
injunction was held on August 9, 1945, at
which evidence was introduced by both
parties. After the hearing, Judge Rilloraza,
then presiding over the Court of First Instance
of Laguna, denied the petition on the ground
that the defendants were in actual possession
of said lands. A motion for reconsideration
was filed by plaintiffs on August 20, 1945, but
said motion had not yet, up to the hearing of
the present case, been decided either by
Judge Rilloraza, who was assigned to another
court, or by the respondent judge.
The plaintiffs (respondents) filed on
September 4, 1945, a reply to defendants'
answer in which, among others, they reiterate
their allegation in the complaint that they are
6
possessors in good faith of the properties in
question.
And on December 17, plaintiffs filed an urgent
petition ex-parte praying that plaintiffs' motion
for reconsideration of the order denying their
petition for preliminary injunction be granted
and or for the appointment of a receiver of the
properties described in the complaint, on the
ground that (a) the plaintiffs have an interest
in the properties in question, and the fruits
thereof were in danger of being lost unless a
receiver was appointed; and that (b) the
appointment of a receiver was the most
convenient and feasible means of preserving,
administering and or disposing of the
properties in litigation which included their
fruits. Respondents Judge Roldan, on the
same date, December 17, 1945, decided that
the court would consider the motion for
reconsideration in due time, and granted the
petition for appointment of and appointed a
receiver in the case.
The question to be determined in the present
special civil action of certiorari is, whether or
not the respondent judge acted in excess of
his jurisdiction or with grave abuse of
discretion in issuing the order appointing a
receiver in the case No. 7951 of the Court of
First Instance of Laguna; for it is evident that
there is no appeal or any other plain, speedy,
and adequate remedy in the ordinary course
of the law against the said order, which is an
incidental or interlocutory one.
It is a truism in legal procedure that what
determines the nature of an action filed in the
courts are the facts alleged in the complaint
as constituting the cause of the action. The
facts averred as a defense in the defendant's
answer do not and can not determine or
change the nature of the plaintiff's action. The
theory adopted by the plaintiff in his complaint
is one thing, and that of the defendant in his
answer is another. The plaintiff has to
establish or prove his theory or cause of
action in order to obtain the remedy he prays
for; and the defendant his theory, if
necessary, in order to defeat the claim or
action of the plaintiff..

According to the complaint filed in the said
case No. 7951, the plaintiff's action is one of
ordinary injunction, for the plaintiffs allege that
they are the owners of the lands therein
described, and were in actual possession
thereof, and that "the defendants without any
legal right whatever and in connivance with
each other, through the use of force, stealth,
threat and intimidation, intend or are intending
to enter and work or harvest whatever existing
fruits may be found in the lands above
mentioned in violation of plaintiffs' proprietary
rights thereto;" and prays "that the
defendants, their agents, servants,
representatives, and other persons acting for
or in their behalf, be restrained, enjoined and
prohibited from entering in, interfering with, or
in any way taking any participation in the
harvest of the lands above describe belonging
to the plaintiffs."
That this is the nature of plaintiffs' action
corroborated by the fact that they petitioned in
the same complaint for a preliminary
prohibitory injunction, which was denied by
the court in its order dated August 17, 1945,
and that the plaintiffs, in their motion for
reconsideration of said order filed on August
20 of the same year, and in their urgent
petition dated December 17, moving the court
to grant said motion for reconsideration,
reiterated that they were actual possessors of
the land in question.
The fact that plaintiffs, in their reply dated
September 4, after reiterating their allegation
or claim that they are the owners in fee simple
and possessors in good faith of the properties
in question, pray that they be declared the
owners in fee simple, has not changed the
nature of the action alleged in the complaint or
added a new cause of action thereto; because
the allegations in plaintiffs' reply were in
answer to defendants' defenses, and the
nature of plaintiffs' cause of action, as set
forth in their complaint, was not and could not
be amended or changed by the reply, which
plaintiffs had the right to present as a matter
of course. A plaintiff can not, after defendant's
answer, amend his complaint by changing the
cause of action or adding a new one without
previously obtaining leave of court (section 2,
Rule 17)..
7
Respondents' contention in paragraph I of
their answer that the action filed by them
against petitioners in the case No. 7951 of the
Court of First Instance of Laguna is not only
for injunction, but also to quiet title over the
two parcels of land described in the complaint,
is untenable for the reasons stated in the
previous paragraph. Besides, an equitable
action to quiet title, in order to prevent
harrassment by continued assertion of
adverse title, or to protect the plaintiff's legal
title and possession, may be filed in courts of
equity (and our courts are also of equity), only
where no other remedy at law exists or where
the legal remedy invokable would not afford
adequate remedy (32 Cyc., 1306, 1307). In
the present case wherein plaintiffs alleged
that they are the owners and were in actual
possession of the lands described in the
complaint and their fruits, the action of
injunction filed by them is the proper and
adequate remedy in law, for a judgment in
favor of plaintiffs would quiet their title to said
lands..
The provisional remedies denominated
attachment, preliminary injunction,
receivership, and delivery of personal
property, provided in Rules 59, 60, 61, and 62
of the Rules of Court, respectively, are
remedies to which parties litigant may resort
for the preservation or protection of their rights
or interest, and for no other purpose, during
the pendency of the principal action. If an
action, by its nature, does not require such
protection or preservation, said remedies can
not be applied for and granted. To each kind
of action or actions a proper provisional
remedy is provided for by law. The Rules of
Court clearly specify the case in which they
may be properly granted. .
Attachment may be issued only in the case or
actions specifically stated in section 1, Rule
59, in order that the defendant may not
dispose of his property attached, and thus
secure the satisfaction of any judgment that
may be recovered by plaintiff from defendant.
For that reason a property subject of litigation
between the parties, or claimed by plaintiff as
his, can not be attached upon motion of the
same plaintiff..

The special remedy of preliminary prohibitory
injunction lies when the plaintiff's principal
action is an ordinary action of injunction, that
is, when the relief demanded in the plaintiff's
complaint consists in restraining the
commission or continuance of the act
complained of, either perpetually or for a
limited period, and the other conditions
required by section 3 of Rule 60 are present.
The purpose of this provisional remedy is to
preserve the status quo of the things subject
of the action or the relation between the
parties, in order to protect the rights of the
plaintiff respecting the subject of the action
during the pendency of the suit. Because,
otherwise or if no preliminary prohibition
injunction were issued, the defendant may,
before final judgment, do or continue the
doing of the act which the plaintiff asks the
court to restrain, and thus make ineffectual the
final judgment rendered afterwards granting
the relief sought by the plaintiff. But, as this
court has repeatedly held, a writ of preliminary
injunction should not be granted to take the
property out of the possession of one party to
place it in the hands of another whose title
has not been clearly established..
A receiver may be appointed to take charge of
personal or real property which is the subject
of an ordinary civil action, when it appears that
the party applying for the appointment of a
receiver has an interest in the property or fund
which is the subject of the action or litigation,
and that such property or fund is in danger of
being lost, removed or materially injured
unless a receiver is appointed to guard and
preserve it (section 1 [b], Rule 61); or when it
appears that the appointment of a receiver is
the most convenient and feasible means of
preserving, administering or disposing of the
property in litigation (section 1 [e] of said
Rule). The property or fund must, therefore be
in litigation according to the allegations of the
complaint, and the object of appointing a
receiver is to secure and preserve the
property or thing in controversy pending the
litigation. Of course, if it is not in litigation and
is in actual possession of the plaintiff, the
latter can not apply for and obtain the
appointment of a receiver thereof, for there
would be no reason for such appointment.
8
Delivery of personal property as a provisional
remedy consists in the delivery, by order of
the court, of a personal property by the
defendant to the plaintiff, who shall give a
bond to assure the return thereof or the
payment of damages to the defendant in the
plaintiff's action to recover possession of the
same property fails, in order to protect the
plaintiff's right of possession of said property,
or prevent the defendant from damaging,
destroying or disposing of the same during the
pendency of the suit.
Undoubtedly, according to law, the provisional
remedy proper to plaintiffs' action of injunction
is a preliminary prohibitory injunction, if
plaintiff's theory, as set forth in the complaint,
that he is the owner and in actual possession
of the premises is correct. But as the lower
court found at the hearing of the said petition
for preliminary injunction that the defendants
were in possession of the lands, the lower
court acted in accordance with law in denying
the petition, although their motion for
reconsideration, which was still pending at the
time the petition in the present case was
heard in this court, plaintiffs insist that they are
in actual possession of the lands and,
therefore, of the fruits thereof.
From the foregoing it appears evident that the
respondent judge acted in excess of his
jurisdiction in appointing a receiver in case
No. 7951 of the Court of First Instance of
Laguna. Appointment of a receiver is not
proper or does not lie in an action of injunction
such as the one filed by the plaintiff. The
petition for appointment of a receiver filed by
the plaintiffs (Exhibit I of the petition) is based
on the ground that it is the most convenient
and feasible means of preserving,
administering and disposing of the properties
in litigation; and according to plaintiffs' theory
or allegations in their complaint, neither the
lands nor the palay harvested therein, are in
litigation. The litigation or issue raised by
plaintiffs in their complaint is not the
ownership or possession of the lands and
their fruits. It is whether or not defendants
intend or were intending to enter or work or
harvest whatever existing fruits could then be
found in the lands described in the complaint,
alleged to be the exclusive property and in the

actual possession of the plaintiffs. It is a
matter not only of law but of plain common
sense that a plaintiff will not and legally can
not ask for the appointment or receiver of
property which he alleges to belong to him
and to be actually in his possession. For the
owner and possessor of a property is more
interested than persons in preserving and
administering it.
Besides, even if the plaintiffs had amended
their complaint and alleged that the lands and
palay harvested therein are being claimed by
the defendants, and consequently the
ownership and possession thereof were in
litigation, it appearing that the defendants
(now petitioners) were in possession of the
lands and had planted the crop or palay
harvested therein, as alleged in paragraph 6
(a) and (b) of the petition filed in this court and
not denied by the respondent in paragraph 2
of his answer, the respondent judge would
have acted in excess of his jurisdiction or with
a grave abuse of discretion in appointing a
receiver thereof. Because relief by way of
receivership is equitable in nature, and a court
of equity will not ordinarily appoint a receiver
where the rights of the parties depend on the
determination of adverse claims of legal title to
real property and one party is in possession
(53 C. J., p. 26). The present case falls within
this rule..
In the case of Mendoza vs. Arellano and B. de
Arellano, this court said:
Appointments of receivers of real
estate in cases of this kind lie largely
in the sound discretion of the court,
and where the effect of such an
appointment is to take real estate out
of the possession of the defendant
before the final adjudication of the
rights of the parties, the appointment
should be made only in extreme cases
and on a clear showing of necessity
therefor in order to save the plaintiff
from grave and irremediable loss or
damage. (34 Cyc., 51, and cases
there cited.) No such showing has
been made in this case as would
justify us in interfering with the
exercise by trial judge of his discretion
9
in denying the application for receiver.
(36 Phil., 59, 63, 64.).
Although the petition is silent on the matter, as
the respondents in their answer allege that the
Court of First Instance of Laguna has
appointed a receiver in another case No. 7989
of said court, instituted by the respondents
Relova against Roberto Calo and his brothers
and sisters, children of Sofia de Oca and
Tranquilino Calo (petitioner in this case), and
submitted copy of the complaint filed by the
plaintiffs (now respondents) in case No. 7989
(Exhibit 9 of the respondents' answer), we
may properly express and do hereby express
here our opinion, in order to avoid multiplicity
of suits, that as the cause of action alleged in
the in the complaint filed by the respondents
Relova in the other case is substantially the
same as the cause of action averred in the
complaint filed in the present case, the order
of the Court of First Instance of Laguna
appointing a receiver in said case No. 7989
was issued in excess of its jurisdiction, and is
therefore null and void.
In view of all the foregoing, we hold that the
respondent Judge Arsenio C. Roldan of the
Court of First Instance of Laguna has
exceeded his jurisdiction in appointing a
receiver in the present case, and therefore the
order of said respondent judge appointing the
receiver, as well as all other orders and
proceedings of the court presided over by said
judge in connection with the receivership, are
null and void.
As to the petitioners' petition that respondents
Relova be punished for contempt of court for
having disobeyed the injunction issued by this
court against the respondents requiring them
to desist and refrain from enforcing the order
of receivership and entering the palay therein,
it appearing from the evidence in the record
that the palay was harvested by the receiver
and not by said respondents, the petition for
contempt of court is denied. So ordered, with
costs against the respondents.
Moran, C. J., Ozaeta, Jaranilla, De Joya,
Pablo, Perfecto, Hilado, and Bengzon,
JJ., concur

FIRST DIVISION
G. R. No. 134241 - August 11, 2003
DAVID REYES (Substituted by Victoria R.
Fabella), Petitioner, v. JOSE LIM, CHUY
CHENG KENG and HARRISON LUMBER,
INC., respondents.
CARPIO, J.:
The Case
This is a petition for review on certiorari of the
Decision1 dated 12 May 1998 of the Court of
Appeals in CA-G.R. SP No. 46224. The Court
of Appeals dismissed the petition for certiorari
assailing the Orders dated 6 March 1997, 3
July 1997 and 3 October 1997 of the Regional
Trial Court of Paranaque, Branch 2602 ("trial
court") in Civil Case No. 95-032.
The Facts
On 23 March 1995, petitioner David Reyes
("Reyes") filed before the trial court a
complaint for annulment of contract and
damages against respondents Jose Lim
("Lim"), Chuy Cheng Keng ("Keng") and
Harrison Lumber, Inc. ("Harrison Lumber").
The complaint3 alleged that on 7 November
1994, Reyes as seller and Lim as buyer
entered into a contract to sell ("Contract to
Sell") a parcel of land ("Property") located
along F.B. Harrison Street, Pasay City.
Harrison Lumber occupied the Property as
lessee with a monthly rental of P35,000. The
Contract to Sell provided for the following
terms and conditions:
1. The total consideration for the purchase of
the aforedescribed parcel of land together
with the perimeter walls found therein is
TWENTY EIGHT MILLION (P28,000,000.00)
PESOS payable as follows:
10
(a) TEN MILLION (P10,000,000.00) PESOS
upon signing of this Contract to Sell;
(b) The balance of EIGHTEEN MILLION
(P18,000,000.00) PESOS shall be paid on or
before March 8, 1995 at 9:30 A.M. at a bank
to be designated by the Buyer but upon the
complete vacation of all the tenants or
occupants of the property and execution of
the Deed of Absolute Sale. However, if the
tenants or occupants have vacated the
premises earlier than March 8, 1995, the
VENDOR shall give the VENDEE at least one
week advance notice for the payment of the
balance and execution of the Deed of
Absolute Sale.
2. That in the event, the tenants or occupants
of the premises subject of this sale shall not
vacate the premises on March 8, 1995 as
stated above, the VENDEE shall withhold the
payment of the balance of P18,000,000.00
and the VENDOR agrees to pay a penalty of
Four percent (4%) per month to the herein
VENDEE based on the amount of the
downpayment of TEN MILLION
(P10,000,000.00) PESOS until the complete
vacation of the premises by the tenants
therein.4
The complaint claimed that Reyes had
informed Harrison Lumber to vacate the
Property before the end of January 1995.
Reyes also informed Keng5 and Harrison
Lumber that if they failed to vacate by 8 March
1995, he would hold them liable for the
penalty of P400,000 a month as provided in
the Contract to Sell. The complaint further
alleged that Lim connived with Harrison
Lumber not to vacate the Property until the
P400,000 monthly penalty would have
accumulated and equaled the unpaid
purchase price of P18,000,000.
On 3 May 1995, Keng and Harrison Lumber
filed their Answer6 denying they connived with
Lim to defraud Reyes. Keng and Harrison
Lumber alleged that Reyes approved their
request for an extension of time to vacate the
Property due to their difficulty in finding a new
location for their business. Harrison Lumber
claimed that as of March 1995, it had already

started transferring some of its merchandise
to its new business location in Malabon.7
On 31 May 1995, Lim filed his Answer8 stating
that he was ready and willing to pay the
balance of the purchase price on or before 8
March 1995. Lim requested a meeting with
Reyes through the latters daughter on the
signing of the Deed of Absolute Sale and the
payment of the balance but Reyes kept
postponing their meeting. On 9 March 1995,
Reyes offered to return the P10 million down
payment to Lim because Reyes was having
problems in removing the lessee from the
Property. Lim rejected Reyes offer and
proceeded to verify the status of Reyes title to
the Property. Lim learned that Reyes had
already sold the Property to Line One Foods
Corporation ("Line One") on 1 March 1995 for
P16,782,840. After the registration of the
Deed of Absolute Sale, the Register of Deeds
issued to Line One TCT No. 134767 covering
the Property. Lim denied conniving with Keng
and Harrison Lumber to defraud Reyes.
On 2 November 1995, Reyes filed a Motion
for Leave to File Amended Complaint due to
supervening facts. These included the filing by
Lim of a complaint for estafa against Reyes as
well as an action for specific performance and
nullification of sale and title plus damages
before another trial court.9 The trial court
granted the motion in an Order dated 23
November 1995.
In his Amended Answer dated 18 January
1996,10 Lim prayed for the cancellation of the
Contract to Sell and for the issuance of a writ
of preliminary attachment against Reyes. The
trial court denied the prayer for a writ of
preliminary attachment in an Order dated 7
October 1996.
On 6 March 1997, Lim requested in open
court that Reyes be ordered to deposit the
P10 million down payment with the cashier of
the Regional Trial Court of Parañaque. The
trial court granted this motion.
On 25 March 1997, Reyes filed a Motion to
Set Aside the Order dated 6 March 1997 on
the ground the Order practically granted the
11
reliefs Lim prayed for in his Amended
Answer.11 The trial court denied Reyes motion
in an Order12 dated 3 July 1997. Citing Article
1385 of the Civil Code, the trial court ruled
that an action for rescission could prosper
only if the party demanding rescission can
return whatever he may be obliged to restore
should the court grant the rescission.
The trial court denied Reyes Motion for
Reconsideration in its Order13 dated 3 October
1997. In the same order, the trial court
directed Reyes to deposit the P10 million
down payment with the Clerk of Court on or
before 30 October 1997.
On 8 December 1997, Reyes14 filed a Petition
for Certiorari15 with the Court of Appeals.
Reyes prayed that the Orders of the trial court
dated 6 March 1997, 3 July 1997 and 3
October 1997 be set aside for having been
issued with grave abuse of discretion
amounting to lack of jurisdiction. On 12 May
1998, the Court of Appeals dismissed the
petition for lack of merit.
Hence, this petition for review.
The Ruling of the Court of Appeals
The Court of Appeals ruled the trial court
could validly issue the assailed orders in the
exercise of its equity jurisdiction. The court
may grant equitable reliefs to breathe life and
force to substantive law such as Article
138516 of the Civil Code since the provisional
remedies under the Rules of Court do not
apply to this case.
The Court of Appeals held the assailed orders
merely directed Reyes to deposit the P10
million to the custody of the trial court to
protect the interest of Lim who paid the
amount to Reyes as down payment. This did
not mean the money would be returned
automatically to Lim.
The Issues
Reyes raises the following issues:

1. Whether the Court of Appeals erred in
holding the trial court could issue the
questioned Orders dated March 6, 1997, July
3, 1997 and October 3, 1997, requiring
petitioner David Reyes to deposit the amount
of Ten Million Pesos (P10,000,000.00) during
the pendency of the action, when deposit is
not among the provisional remedies
enumerated in Rule 57 to 61 of the 1997
Rules on Civil Procedure.
2. Whether the Court of Appeals erred in
finding the trial court could issue the
questioned Orders on grounds of equity when
there is an applicable law on the matter, that
is, Rules 57 to 61 of the 1997 Rules on Civil
Procedure.17
The Courts Ruling
Reyes contentions are without merit.
Reyes points out that deposit is not among
the provisional remedies enumerated in the
1997 Rules of Civil Procedure. Reyes
stresses the enumeration in the Rules is
exclusive. Not one of the provisional remedies
in Rules 57 to 6118 applies to this case. Reyes
argues that a court cannot apply equity and
require deposit if the law already prescribes
the specific provisional remedies which do not
include deposit. Reyes invokes the principle
that equity is "applied only in the absence of,
and never against, statutory law or x x x
judicial rules of procedure."19 Reyes adds the
fact that the provisional remedies do not
include deposit is a matter of dura lex sed
lex.20
The instant case, however, is precisely one
where there is a hiatus in the law and in the
Rules of Court. If left alone, the hiatus will
result in unjust enrichment to Reyes at the
expense of Lim. The hiatus may also imperil
restitution, which is a precondition to the
rescission of the Contract to Sell that Reyes
himself seeks. This is not a case of equity
overruling a positive provision of law or judicial
rule for there is none that governs this
particular case. This is a case of silence or
insufficiency of the law and the Rules of Court.
In this case, Article 9 of the Civil Code
12
expressly mandates the courts to make a
ruling despite the "silence, obscurity or
insufficiency of the laws."21 This calls for the
application of equity,22 which "fills the open
spaces in the law."23
Thus, the trial court in the exercise of its
equity jurisdiction may validly order the
deposit of the P10 million down payment in
court. The purpose of the exercise of equity
jurisdiction in this case is to prevent unjust
enrichment and to ensure restitution. Equity
jurisdiction aims to do complete justice in
cases where a court of law is unable to adapt
its judgments to the special circumstances of
a case because of the inflexibility of its
statutory or legal jurisdiction.24 Equity is the
principle by which substantial justice may be
attained in cases where the prescribed or
customary forms of ordinary law are
inadequate.25
Reyes is seeking rescission of the Contract to
Sell. In his amended answer, Lim is also
seeking cancellation of the Contract to Sell.
The trial court then ordered Reyes to deposit
in court the P10 million down payment that
Lim made under the Contract to Sell. Reyes
admits receipt of the P10 million down
payment but opposes the order to deposit the
amount in court. Reyes contends that prior to
a judgment annulling the Contract to Sell, he
has the "right to use, possess and enjoy"26 the
P10 million as its "owner"27 unless the court
orders its preliminary attachment.28
To subscribe to Reyes contention will unjustly
enrich Reyes at the expense of Lim. Reyes
sold to Line One the Property even before the
balance of P18 million under the Contract to
Sell with Lim became due on 8 March 1995.
On 1 March 1995, Reyes signed a Deed of
Absolute Sale29 in favor of Line One. On 3
March 1995, the Register of Deeds issued
TCT No. 13476730 in the name of Line
One.31 Reyes cannot claim ownership of the
P10 million down payment because Reyes
had already sold to another buyer the
Property for which Lim made the down
payment. In fact, in his Comment32 dated 20
March 1996, Reyes reiterated his offer to
return to Lim the P10 million down payment.

On balance, it is unreasonable and unjust for
Reyes to object to the deposit of the P10
million down payment. The application of
equity always involves a balancing of the
equities in a particular case, a matter
addressed to the sound discretion of the
court. Here, we find the equities weigh heavily
in favor of Lim, who paid the P10 million down
payment in good faith only to discover later
that Reyes had subsequently sold the
Property to another buyer.
In Eternal Gardens Memorial Parks Corp. v.
IAC,33 this Court held the plaintiff could not
continue to benefit from the property or funds
in litigation during the pendency of the suit at
the expense of whomever the court might
ultimately adjudge as the lawful owner. The
Court declared:
In the case at bar, a careful analysis of the
records will show that petitioner admitted
among others in its complaint in Interpleader
that it is still obligated to pay certain amounts
to private respondent; that it claims no interest
in such amounts due and is willing to pay
whoever is declared entitled to said amounts.
xxx
Under the circumstances, there appears to be
no plausible reason for petitioners objections
to the deposit of the amounts in litigation after
having asked for the assistance of the lower
court by filing a complaint for interpleader
where the deposit of aforesaid amounts is not
only required by the nature of the action but is
a contractual obligation of the petitioner under
the Land Development Program (Rollo, p.
252).
There is also no plausible or justifiable reason
for Reyes to object to the deposit of the P10
million down payment in court. The Contract
to Sell can no longer be enforced because
Reyes himself subsequently sold the Property
to Line One. Both Reyes and Lim are now
seeking rescission of the Contract to Sell.
Under Article 1385 of the Civil Code,
rescission creates the obligation to return the
things that are the object of the contract.
Rescission is possible only when the person
demanding rescission can return whatever he
13
may be obliged to restore. A court of equity
will not rescind a contract unless there is
restitution, that is, the parties are restored to
the status quo ante.34
Thus, since Reyes is demanding to rescind
the Contract to Sell, he cannot refuse to
deposit the P10 million down payment in
court.35 Such deposit will ensure restitution of
the P10 million to its rightful owner. Lim, on
the other hand, has nothing to refund, as he
has not received anything under the Contract
to Sell.36
In Government of the Philippine Islands v.
Wagner and Cleland Wagner,37 the Court
ruled the refund of amounts received under a
contract is a precondition to the rescission of
the contract. The Court declared:
The Government, having asked for rescission,
must restore to the defendants whatever it has
received under the contract. It will only be just
if, as a condition to rescission, the
Government be required to refund to the
defendants an amount equal to the purchase
price, plus the sums expended by them in
improving the land. (Civil Code, art. 1295.)
The principle that no person may unjustly
enrich himself at the expense of another is
embodied in Article 2238 of the Civil Code.
This principle applies not only to substantive
rights but also to procedural remedies. One
condition for invoking this principle is that the
aggrieved party has no other action based on
contract, quasi-contract, crime, quasi-delict or
any other provision of law.39 Courts can
extend this condition to the hiatus in the Rules
of Court where the aggrieved party, during the
pendency of the case, has no other recourse
based on the provisional remedies of the
Rules of Court.
Thus, a court may not permit a seller to retain,
pendente lite, money paid by a buyer if the
seller himself seeks rescission of the sale
because he has subsequently sold the same
property to another buyer.40 By seeking
rescission, a seller necessarily offers to return
what he has received from the buyer. Such a
seller may not take back his offer if the court

deems it equitable, to prevent unjust
enrichment and ensure restitution, to put the
money in judicial deposit.
There is unjust enrichment when a person
unjustly retains a benefit to the loss of
another, or when a person retains money or
property of another against the fundamental
principles of justice, equity and good
conscience.41 In this case, it was just,
equitable and proper for the trial court to order
the deposit of the P10 million down payment
to prevent unjust enrichment by Reyes at the
expense of Lim.42
WHEREFORE, we AFFIRM the Decision of
the Court of Appeals.
SO ORDERED.
Davide, Jr., C.J., Vitug, Ynares-Santiago,
and Azcuna, JJ., concur.
RULE 57: PRELIMINARY ATTACHMENT
14
FIRST DIVISION
March 18, 2015
G.R. No. 203240
NORTHERN ISLANDS, CO., INC., Petitioner,
vs.
SPOUSES DENNIS and
CHERYLIN* GARCIA, doing business under
the name and style "Ecolamp Multi
Resources,", Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review
on certiorari1 are the Decision2 dated January
19, 2012 and the Resolution3 dated August
24, 2012 of the Court of Appeals (CA) in CA-
G.R. SP No. 97448, ordering the Regional
Trial Court of Quezon City, Branch 215 (RTC)
to appoint a commissioner to determine the
value of the attached properties of
respondents Spouses Dennis and Cherylin
Garcia (respondents), and to discharge any
excessive attachment found thereby.
The Facts
On September 23, 2005, petitioner Northern
Islands Co., Inc. (petitioner) filed a
Complaint4 with application for a writ of
preliminary attachment, before the RTC
against respondents, docketed as Civil Case
No. Q-05-53699 (Main Case), which was
subsequently amended5 on October 25,
2005.6 It alleged that: (a) from March to July
2004, petitioner caused the delivery to
respondents of various appliances in the
aggregate amount of P8,040,825.l 7;7 (b) the
goods were transported, shipped, and
delivered by Sulpicio Lines, Inc., and were
accepted in good order and condition by
respondents' representatives;8 (c) the parties
agreed that the goods delivered were payable
within 120 days, and that the unpaid amounts
would earn interest at a rate of eighteen
percent (18%) per annum;9 (d) however, the

value of the goods were not paid by
respondents despite repeated demands;10 and
(e) respondents fraudulently asserted that
petitioner had no proof that they had indeed
received the quantity of the subject goods.11
In connection with the application for a writ of
preliminary attachment, petitioner posted a
bond, through Visayan Surety and Insurance
Corporation, in the amount of P8,040,825.l 7.
On November 7, 2005, the RTC issued the
writ sought for.12
Instead of filing an answer, respondents filed
on November 11, 2001, an Urgent Motion for
Extension of Time to File Proper Pleading and
Motion for Discovery (Production and
Inspection)13 (November 11, 2001 Motion),
asking the RTC to allow them to photocopy
and personally examine the original invoices,
delivery cargo receipts, and bills of lading
attached to the Amended Complaint, claiming
that they could not "come up with an
intelligent answer" without being presented
with the originals of such documents.14
Thereafter, or on January 11, 2006,
respondents filed a Motion to Discharge
Excess Attachment,15 alleging that the
attachment previously ordered by the RTC
exceeded by P9,232,564.56 given that the
estimated value of the attached properties,
including the garnished bank accounts, as
assessed by their appraiser, Gaudioso W.
Lapaz (Lapaz), amounted to Pl 7,273,409.73,
while the attachment bond is only in the
amount of P8,040,825.17.16
In an Order17 dated February 28, 2006, the
RTC denied the November 11, 2001 Motion,
and, instead, directed respondents to file their
answer, which the latter complied with through
the filing of their Answer Ad Cautelam Ex
Abudante with Compulsory Counterclaim18 on
April 3, 2006. Despite this, respondents again
filed a Motion for Leave of Court to File Motion
for Discovery (Production and
Inspection)19 (Motion for Discovery) on April 7,
2006.20
The RTC Ruling
15
In an Order21 dated June 21, 2006, the RTC,
among others, denied the Motion to Discharge
Excess Attachment, finding that the appraisal
made by Lapaz was not reflective of the true
valuation of the properties, adding too that the
bond posted by petitioner stands as sufficient
security for whatever damages respondents
may sustain by reason of the attachment.22
On the other hand, the RTC granted the
Motion for Discovery in accordance with Rule
27 of the Rules of Court, despite petitioner's
claim that it did not have the originals of the
documents being sought.23
However, no production or inspection was
conducted on July 10, 2006 as the RTC
directed since respondents received the copy
of the above order only on July 11, 2006.24
On July 25, 2006, respondents filed a Motion
for Partial Reconsideration of the Order dated
June 21, 2006, specifically assailing the denial
of their Motion to Discharge Excess
Attachment. In this relation, they prayed that
the RTC refer to a commissioner, pursuant to
Rule 32 of the Rules of Court, the factual
determination of the total aggregate amount of
respondents' attached properties so as to
ascertain if the attachment was excessive.
Also, they prayed that the order for production
and inspection be modified and that petitioner
be ordered to produce the original documents
anew for their inspection and copying.25
The foregoing motion was, however, denied
by the RTC in an Order26 dated August 23,
2006 for lack of merit. Thus, respondents
elevated the matter to the CA via petition
for certiorari and mandamus,27 docketed as
CA-G.R. SP No. 97448 (Certiorari Case).
In the interim, the RTC rendered a
Decision28 dated September 21, 2011 in the
Main Case. Essentially, it dismissed
petitioner's Amended Complaint due to the
absence of any evidence to prove that
respondents had agreed to the pricing of the
subject goods.29
The RTC's September 21, 2011 Decision was
later appealed30 by petitioner before the CA on

October 27, 2011. Finding that the Notice of
Appeal was seasonably filed, with the
payment of the appropriate docket fees, the
RTC, in an Order31 dated January 25, 2012,
ordered the elevation of the entire records of
the Main Case to the CA. The appeal was
then raffled to the CA's Eighth Division, and
docketed as CA-GR. CV No. 98237. On the
other hand, records do not show that
respondents filed any appeal.32
The CA Ruling in the Certiorari Case
Meanwhile, the CA, in a Decision33 dated
January 19, 2012, partly granted the certiorari
petition of respondents, ordering the RTC to
appoint a commissioner as provided under
Rule 32 of the Rules of Court as well as the
subsequent discharge of any excess
attachment if so found therein, and, on the
other hand, denying respondents' Motion for
Discovery.34
It held that: (a) on the issue of attachment,
trial by commissioners under Rule 32 of the
Rules of Court was proper so that the parties
may finally settle their conflicting
valuations;35 and (b) on the matter of
discovery, petitioner could not be compelled
to produce the originals sought by
respondents for inspection since they were
not in the former's possession.36
Aggrieved, petitioner filed a Motion for Partial
Reconsideration37 on February 13, 2012 but
was, however, denied in a Resolution38 dated
August 24, 2012, hence, the present petition.
The Issues Before the Court
The issues presented for the Court's
resolution are: (a) whether the RTC had lost
jurisdiction over the matter of the preliminary
attachment after petitioner appealed the
decision in the Main Case, and thereafter
ordered the transmittal of the records to the
CA; and (b) whether the CA erred in ordering
the appointment of a commissioner and the
subsequent discharge of any excess
attachment found by said commissioner.
The Court's Ruling
16
The petition is meritorious.
Section 9, Rule 41 of the Rules of Court
provides that in appeals by notice of appeal,
the court loses jurisdiction over the case
upon the perfection of the appeals filed in
due time and the expiration of the time to
appeal of the other parties.
In this case, petitioner had duly perfected its
appeal of the RTC's September 21, 2011
Decision resolving the Main Case through the
timely filing of its Notice of Appeal dated
October 27, 2011, together with the payment
of the appropriate docket fees. The RTC, in an
Order39 dated January 25, 2012, had actually
confirmed this fact, and thereby ordered the
elevation of the entire records to the CA.
Meanwhile, records do not show
that.respondents filed any appeal, resulting in
the lapse of its own period to appeal
therefrom. Thus, based on Section 9, Rule 41,
it cannot be seriously doubted that the RTC
had already lost jurisdiction over the Main
Case.
With the RTC's loss of jurisdiction over the
Main Case necessarily comes its loss of
jurisdiction all over matters merely ancillary
thereto. Thus, the propriety of conducting a
trial by commissioners in order to determine
the excessiveness of the subject preliminary
attachment, being a mere ancillary matter to
the Main Case, is now mooted by its
supervening appeal in CA-G.R. CV No.
98237.
Note that in Sps. Olib v. Judge Pastoral,40 the
Court, in view of the nature of a preliminary
attachment, definitively ruled that the
attachment itself cannot be the subject of a
separate action independent of the principal
action because the attachment was only an
incident of such action, viz.:
Attachment is defined as a provisional remedy
by which the property of an adverse party is
taken into legal custody, either at the
commencement of an action or at any time
thereafter, as a security for the satisfaction of
any judgment that may be recovered by the
plaintiff or any proper party.
 17

It is an auxiliary remedy and cannot have an Republic of the Philippines

independent existence apart from the main SUPREME COURT
suit or claim instituted by the plaintiff against Manila
the defendant.isi Being merely ancillary to a
principal proceeding, the attachment must EN BANC
fail if the suit itself cannot be maintained
as the purpose of the writ can no longer be
justified.

The consequence is that where the main G.R. No. 93262 December 29, 1991
action is appealed, the attachment which may
have been issued as an incident of that
DAVAO LIGHT & POWER CO.,
action, is also considered appealed and so
INC., petitioner,
also removed from the jurisdiction of the
vs.
court a quo. The attachment itself cannot be
THE COURT OF APPEALS, QUEENSLAND
the subject of a separate action
HOTEL or MOTEL or QUEENSLAND
independent of the principal action
TOURIST INN, and TEODORICO
because the attachment was only an
ADARNA, respondents.
incident of such action.41 (Emphases
supplied)
Breva & Breva Law Offices for petitioner.
That being said, it is now unnecessary to
discuss the other issues raised herein. In fine, Goc-Ong & Associates for private
the petition is granted and the assailed CA respondents.
rulings are set aside.

WHEREFORE, the petition is GRANTED. The

Decision dated January 19, 2012 and the NARVASA, J.:
Resolution dated August 24, 2012 of the
Court of Appeals in CA-G.R. SP No. 97448 Subject of the appellate proceedings at bar is
are hereby SET ASIDE. the decision of the Court of Appeals in CA-
G.R. Sp. No. 1967 entitled "Queensland
SO ORDERED. Hotel, Inc., etc. and Adarna v. Davao Light &
Power Co., Inc.," promulgated on May 4,
ESTELA M. PERLAS-BERNABE 1990. 1 That decision nullified and set aside
Associate Justice the writ of preliminary attachment issued by
the Regional Trial Court of Davao City 2 in
Civil Case No. 19513-89 on application of the
plaintiff (Davao Light & Power Co.), before the
service of summons on the defendants
(herein respondents Queensland Co., Inc. and
Adarna).

Following is the chronology of the undisputed

material facts culled from the Appellate
Tribunal's judgment of May 4, 1990.

1. On May 2, 1989 Davao Light & Power Co.,

Inc. (hereafter, simply Davao Light) filed a
verified complaint for recovery of a sum of
money and damages against Queensland
Hotel, etc. and Teodorico Adarna (docketed

as Civil Case No. 19513-89). The complaint
contained an ex parte application for a writ of
preliminary attachment.
2. On May 3, 1989 Judge Nartatez, to whose
branch the case was assigned by raffle,
issued an Order granting the ex
parte application and fixing the attachment
bond at P4,600,513.37.
3. On May 11, 1989 the attachment bond
having been submitted by Davao Light, the
writ of attachment issued.
4. On May 12, 1989, the summons and a copy
of the complaint, as well as the writ of
attachment and a copy of the attachment
bond, were served on defendants Queensland
and Adarna; and pursuant to the writ, the
sheriff seized properties belonging to the
latter.
5. On September 6, 1989, defendants
Queensland and Adarna filed a motion to
discharge the attachment for lack of
jurisdiction to issue the same because at the
time the order of attachment was promulgated
(May 3, 1989) and the attachment writ issued
(May 11, 1989), the Trial Court had not yet
acquired jurisdiction over the cause and over
the persons of the defendants.
6. On September 14, 1989, Davao Light filed
an opposition to the motion to discharge
attachment.
7. On September 19, 1989, the Trial Court
issued an Order denying the motion to
discharge.
This Order of September 19, 1989 was
successfully challenged by Queensland and
Adarna in a special civil action
of certiorari instituted by them in the Court of
Appeals. The Order was, as aforestated,
annulled by the Court of Appeals in its
Decision of May 4, 1990. The Appellate
Court's decision closed with the following
disposition:
. . . the Orders dated May 3, 1989
granting the issuance of a writ of
18
preliminary attachment, dated
September 19, 1989 denying the
motion to discharge attachment; dated
November 7, 1989 denying petitioner's
motion for reconsideration; as well as
all other orders emanating therefrom,
specially the Writ of Attachment dated
May 11, 1989 and Notice of Levy on
Preliminary Attachment dated May 11,
1989, are hereby declared null and
void and the attachment hereby
ordered DISCHARGED.
The Appellate Tribunal declared that —
. . . While it is true that a prayer for the
issuance of a writ of preliminary
attachment may be included m the
complaint, as is usually done, it is
likewise true that the Court does not
acquire jurisdiction over the person of
the defendant until he is duly
summoned or voluntarily appears, and
adding the phrase that it be issued "ex
parte" does not confer said jurisdiction
before actual summons had been
made, nor retroact jurisdiction upon
summons being made. . . .
It went on to say, citing Sievert v. Court of
Appeals, 3 that "in a proceedings in
attachment," the "critical time which must be
identified is . . . when the trial court acquires
authority under law to act coercively against
the defendant or his property . . .;" and that
"the critical time is the of the vesting of
jurisdiction in the court over the person of the
defendant in the main case."
Reversal of this Decision of the Court of
Appeals of May 4, 1990 is what Davao Light
seeks in the present appellate proceedings.
The question is whether or not a writ of
preliminary attachment may issue ex
parte against a defendant before acquisition
of jurisdiction of the latter's person by service
of summons or his voluntary submission to the
Court's authority.
The Court rules that the question must be
answered in the affirmative and that
 19

consequently, the petition for review will have without leave of court, 11 authorization by the
to be granted. Court of service of summons by
publication, 12 the dismissal of the action by
It is incorrect to theorize that after an action or the plaintiff on mere notice. 13
proceeding has been commenced and
This, too, is true with regard to the provisional remedies of preliminary
jurisdiction over the person of the plaintiff has
attachment, preliminary injunction, receivership or replevin. 14
been vested in the court, but before the  They may
acquisition of jurisdiction over the person of be validly and properly applied for and
the defendant (either by service of summons granted even before the defendant is
or his voluntary submission to the court's summoned or is heard from.
authority), nothing can be validly done by the
plaintiff or the court. It is wrong to assume that A preliminary attachment may be defined,
the validity of acts done during this period paraphrasing the Rules of Court, as the
should be defendant on, or held in suspension provisional remedy in virtue of which a plaintiff
until, the actual obtention of jurisdiction over or other party may, at the commencement of
the defendant's person. The obtention by the the action or at any time thereafter, have the
court of jurisdiction over the person of the property of the adverse party taken into the
defendant is one thing; quite another is the custody of the court as security for the
acquisition of jurisdiction over the person of satisfaction of any judgment that may be
the plaintiff or over the subject-matter or recovered. 15 It is a remedy which is purely
nature of the action, or the res or object statutory in respect of which the law requires a
hereof. strict construction of the provisions granting
it. 16 Withal no principle, statutory or
An action or proceeding is commenced by the jurisprudential, prohibits its issuance by any
filing of the complaint or other initiatory court before acquisition of jurisdiction over the
pleading. 4 By that act, the jurisdiction of the court over the subject person of the defendant.
matter or nature of the action or proceeding is invoked or called into
activity; 5
 and it is thus that the court acquires Rule 57 in fact speaks of the grant of the
jurisdiction over said subject matter or nature remedy "at the commencement of the action
of the action. 6 And it is by that self-same act or at any time thereafter." 17 The phase, "at
of the plaintiff (or petitioner) of filing the the commencement of the action," obviously
complaint (or other appropriate pleading) — refers to the date of the filing of the complaint
by which he signifies his submission to the — which, as above pointed out, is the date
court's power and authority — that jurisdiction that marks "the commencement of the
is acquired by the court over his person. 7 On action;" 18 and the reference plainly is to a time
the other hand, jurisdiction over the person of before summons is served on the defendant,
the defendant is obtained, as above stated, by or even before summons issues. What the
the service of summons or other coercive rule is saying quite clearly is that after an
process upon him or by his voluntary action is properly commenced — by the filing
submission to the authority of the court. 8 of the complaint and the payment of all
requisite docket and other fees — the plaintiff
The events that follow the filing of the complaint as a matter of routine are well
may apply for and obtain a writ of preliminary
known. After the complaint is filed, summons issues to the defendant, the
attachment upon fulfillment of the pertinent
summons is then transmitted to the sheriff, and finally, service of the summons
requisites laid down by law, and that he may
is effected on the defendant in any of the ways authorized by the Rules of Court.
do so at any time, either before or after
There is thus ordinarily some appreciable interval of time between the day of the
service of summons on the defendant. And
filing of the complaint and the day of service of summons of the defendant.
this indeed, has been the immemorial practice
During this period, different acts may be done by the plaintiff or by the Court,
sanctioned by the courts: for the plaintiff or
which are unquestionable validity and propriety. Among these, for example, are
other proper party to incorporate the
the appointment of a guardian ad litem, 9
 the grant of authority application for attachment in the complaint or
to the plaintiff to prosecute the suit as a other appropriate pleading (counter-claim,
pauper litigant, 10 the amendment of the cross-claim, third-party claim) and for the Trial
complaint by the plaintiff as a matter of right Court to issue the writ ex-parte at the

commencement of the action if it finds the
application otherwise sufficient in form and
substance.
In Toledo v. Burgos, 19 this Court ruled that a
hearing on a motion or application for
preliminary attachment is not generally
necessary unless otherwise directed by the
Trial Court in its discretion. 20 And in Filinvest
Credit Corporation v. Relova, 21 the Court
declared that "(n)othing in the Rules of Court
makes notice and hearing indispensable and
mandatory requisites for the issuance of a writ
of attachment." The only pre-requisite is that
the Court be satisfied, upon consideration of
"the affidavit of the applicant or of some other
person who personally knows the facts, that a
sufficient cause of action exists, that the case
is one of those mentioned in Section 1 . . .
(Rule 57), that there is no other sufficient
security for the claim sought to be enforced by
the action, and that the amount due to the
applicant, or the value of the property the
possession of which he is entitled to recover,
is as much as the sum for which the order (of
attachment) is granted above all legal
counterclaims." 22 If the court be so satisfied,
the "order of attachment shall be
granted," 23 and the writ shall issue upon the
applicant's posting of "a bond executed to the
adverse party in an amount to be fixed by the
judge, not exceeding the plaintiffs claim,
conditioned that the latter will pay all the costs
which may be adjudged to the adverse party
and all damages which he may sustain by
reason of the attachment, if the court shall
finally adjudge that the applicant was not
entitled thereto." 24
In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on
April 18, 1989, 25
 this Court had occasion to
emphasize the postulate that no hearing is
required on an application for preliminary
attachment, with notice to the defendant, for
the reason that this "would defeat the
objective of the remedy . . . (since the) time
which such a hearing would take, could be
enough to enable the defendant to abscond or
dispose of his property before a writ of
attachment issues." As observed by a former
member of this Court, 26 such a procedure
would warn absconding debtors-defendants of
the commencement of the suit against them
20
and the probable seizure of their properties,
and thus give them the advantage of time to
hide their assets, leaving the creditor-plaintiff
holding the proverbial empty bag; it would
place the creditor-applicant in danger of losing
any security for a favorable judgment and thus
give him only an illusory victory.
Withal, ample modes of recourse against a
preliminary attachment are secured by law to
the defendant. The relative ease with which a
preliminary attachment may be obtained is
matched and paralleled by the relative facility
with which the attachment may legitimately be
prevented or frustrated. These modes of
recourse against preliminary attachments
granted by Rule 57 were discussed at some
length by the separate opinion in Mindanao
Savings & Loans Asso. Inc. v. CA., supra.
That separate opinion stressed that there are
two (2) ways of discharging an
attachment: first, by the posting of a
counterbond; and second, by a showing of its
improper or irregular issuance.
1.0. The submission of a counterbond is an
efficacious mode of lifting an attachment
already enforced against property, or even
of preventing its enforcement altogether.
1.1. When property has already been seized
under attachment, the attachment may be
discharged upon counterbond in accordance
with Section 12 of Rule 57.
Sec. 12. Discharge of attachment
upon giving counterbond. — At any
time after an order of attachment has
been granted, the party whose
property has been attached or the
person appearing in his behalf, may,
upon reasonable notice to the
applicant, apply to the judge who
granted the order, or to the judge of
the court in which the action is
pending, for an order discharging the
attachment wholly or in part on the
security given . . . in an amount equal
to the value of the property attached
as determined by the judge to secure
the payment of any judgment that the

attaching creditor may recover in the
action. . . .
1.2. But even before actual levy on property,
seizure under attachment may be prevented
also upon counterbond. The defendant need
not wait until his property is seized before
seeking the discharge of the attachment by a
counterbond. This is made possible by
Section 5 of Rule 57.
Sec. 5. Manner of attaching property.
— The officer executing the order
shall without delay attach, to await
judgment and execution in the action,
all the properties of the party against
whom the order is issued in the
province, not exempt from execution,
or so much thereof as may be
sufficient to satisfy the applicant's
demand, unless the former makes a
deposit with the clerk or judge of the
court from which the order issued, or
gives a counter-bond executed to the
applicant, in an amount sufficient to
satisfy such demand besides costs, or
in an amount equal to the value of the
property which is about to be
attached, to secure payment to the
applicant of any judgment which he
may recover in the action. . . .
(Emphasis supplied)
2.0. Aside from the filing of a counterbond, a
preliminary attachment may also be lifted or
discharged on the ground that it has been
irregularly or improperly issued, in accordance
with Section 13 of Rule 57. Like the first, this
second mode of lifting an attachment may be
resorted to even before any property has
been levied on. Indeed, it may be availed
of after property has been released from a
levy on attachment, as is made clear by said
Section 13, viz.:
Sec. 13. Discharge of attachment for
improper or irregular issuance. — The
party whose property has been
attached may also, at any time
either BEFORE or AFTER the release
of the attached property, or before any
attachment shall have been actually
21
levied, upon reasonable notice to the
attaching creditor, apply to the judge
who granted the order, or to the judge
of the court in which the action is
pending, for an order to discharge the
attachment on the ground that the
same was improperly or irregularly
issued. If the motion be made on
affidavits on the part of the party
whose property has been attached,
but not otherwise, the attaching
creditor may oppose the same by
counter-affidavits or other evidence in
addition to that on which the
attachment was made. . . . (Emphasis
supplied)
This is so because "(a)s pointed out
in Calderon v. I.A.C., 155 SCRA 531 (1987),
The attachment debtor cannot be deemed to
have waived any defect in the issuance of the
attachment writ by simply availing himself of
one way of discharging the attachment writ,
instead of the other. Moreover, the filing of a
counterbond is a speedier way of discharging
the attachment writ maliciously sought out by
the attaching creditor instead of the other way,
which, in most instances . . . would require
presentation of evidence in a fullblown trial on
the merits, and cannot easily be settled in a
pending incident of the case." 27
It may not be amiss to here reiterate other related principles dealt with
in Mindanao Savings & Loans Asso. Inc. v. C.A., supra., 28
 to wit:
(a) When an attachment may not be
dissolved by a showing of its irregular
or improper issuance:
. . . (W)hen the preliminary attachment
is issued upon a ground which is at
the same time the applicant's cause of
action; e.g., "an action for money or
property embezzled or fraudulently
misapplied or converted to his own
use by a public officer, or an officer of
a corporation, or an attorney, factor,
broker, agent, or clerk, in the course of
his employment as such, or by any
other person in a fiduciary capacity, or
for a willful violation of duty." (Sec. 1
[b], Rule 57), or "an action against a

party who has been guilty of fraud m
contracting the debt or incurring the
obligation upon which the action is
brought" (Sec. 1 [d], Rule 57), the
defendant is not allowed to file a
motion to dissolve the attachment
under Section 13 of Rule 57 by
offering to show the falsity of the
factual averments in the plaintiff's
application and affidavits on which the
writ was based — and consequently
that the writ based thereon had been
improperly or irregularly issued (SEE
Benitez v. I.A.C., 154 SCRA 41) — the
reason being that the hearing on such
a motion for dissolution of the writ
would be tantamount to a trial of the
merits of the action. In other words,
the merits of the action would be
ventilated at a mere hearing of a
motion, instead of at the regular trial.
Therefore, when the writ of attachment
is of this nature, the only way it can be
dissolved is by a counterbond (G.B.
Inc. v. Sanchez, 98 Phil. 886).
(b) Effect of the dissolution of a preliminary
attachment on the plaintiffs attachment bond:
. . . The dissolution of the preliminary
attachment upon security given, or a
showing of its irregular or improper
issuance, does not of course operate
to discharge the sureties on plaintiff's
own attachment bond. The reason is
simple. That bond is "executed to the
adverse party, . . . conditioned that the
. . . (applicant) will pay all the costs
which may be adjudged to the adverse
party and all damages which he may
sustain by reason of the attachment, if
the court shall finally adjudge that the
applicant was not entitled thereto"
(SEC. 4, Rule 57). Hence, until that
determination is made, as to the
applicant's entitlement to the
attachment, his bond must stand and
cannot be with-drawn.
With respect to the other provisional
remedies, i.e., preliminary injunction (Rule
58), receivership (Rule 59), replevin or
delivery of personal property (Rule 60), the
22
rule is the same: they may also issue ex
parte. 29
It goes without saying that whatever be the acts done by the Court prior to the
acquisition of jurisdiction over the person of defendant, as above indicated —
issuance of summons, order of attachment and writ of attachment (and/or
appointments of guardian ad litem, or grant of authority to the plaintiff to
prosecute the suit as a pauper litigant, or amendment of the complaint by the
plaintiff as a matter of right without leave of court 30
 — and however
valid and proper they might otherwise be,
these do not and cannot bind and affect the
defendant until and unless jurisdiction over his
person is eventually obtained by the court,
either by service on him of summons or other
coercive process or his voluntary submission
to the court's authority. Hence, when the
sheriff or other proper officer commences
implementation of the writ of attachment, it is
essential that he serve on the defendant not
only a copy of the applicant's affidavit and
attachment bond, and of the order of
attachment, as explicity required by Section 5
of Rule 57, but also the summons addressed
to said defendant as well as a copy of the
complaint and order for appointment of
guardian ad litem, if any, as also explicity
directed by Section 3, Rule 14 of the Rules of
Court. Service of all such documents is
indispensable not only for the acquisition of
jurisdiction over the person of the defendant,
but also upon considerations of fairness, to
apprise the defendant of the complaint against
him, of the issuance of a writ of preliminary
attachment and the grounds therefor and thus
accord him the opportunity to prevent
attachment of his property by the posting of a
counterbond in an amount equal to the
plaintiff's claim in the complaint pursuant to
Section 5 (or Section 12), Rule 57, or
dissolving it by causing dismissal of the
complaint itself on any of the grounds set forth
in Rule 16, or demonstrating the insufficiency
of the applicant's affidavit or bond in
accordance with Section 13, Rule 57.
It was on account of the failure to comply with
this fundamental requirement of service of
summons and the other documents above
indicated that writs of attachment issued by
the Trial Court ex parte were struck down by
this Court's Third Division in two (2) cases,
namely: Sievert v. Court of
Appeals, 31 and BAC Manufacturing and Sales

Corporation v. Court of Appeals, et al. 32 In
contrast to the case at bar — where the
summons and a copy of the complaint, as well
as the order and writ of attachment and the
attachment bond were served on the
defendant — in Sievert, levy on attachment
was attempted notwithstanding that only the
petition for issuance of the writ of preliminary
attachment was served on the defendant,
without any prior or accompanying summons
and copy of the complaint; and in BAC
Manufacturing and Sales Corporation, neither
the summons nor the order granting the
preliminary attachment or the writ of
attachment itself was served on the defendant
"before or at the time the levy was made."
For the guidance of all concerned, the Court
reiterates and reaffirms the proposition that
writs of attachment may properly issue ex
parte provided that the Court is satisfied that
the relevant requisites therefor have been
fulfilled by the applicant, although it may, in its
discretion, require prior hearing on the
application with notice to the defendant; but
that levy on property pursuant to the writ thus
issued may not be validly effected unless
preceded, or contemporaneously
accompanied, by service on the defendant of
summons, a copy of the complaint (and of the
appointment of guardian ad litem, if any), the
application for attachment (if not incorporated
in but submitted separately from the
complaint), the order of attachment, and the
plaintiff's attachment bond.
WHEREFORE, the petition is GRANTED; the
challenged decision of the Court of Appeals is
hereby REVERSED, and the order and writ of
attachment issued by Hon. Milagros C.
Nartatez, Presiding Judge of Branch 8,
Regional Trial Court of Davao City in Civil
Case No. 19513-89 against Queensland Hotel
or Motel or Queensland Tourist Inn and
Teodorico Adarna are hereby REINSTATED.
Costs against private respondents.
SO ORDERED.
23
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIISION
G.R. No. 155868             February 6, 2007
SPOUSES GREGORIO and JOSEFA
YU, Petitioners,
vs.
NGO YET TE, doing business under the
name and style, ESSENTIAL
MANUFACTURING, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review
on Certiorari under Rule 45 of the Rules of
Court assailing the March 21, 2001
Decision1 of the Court of Appeals (CA) in CA-
G.R. CV No. 522462 and its October 14, 2002
Resolution.3
The antecedent facts are not disputed.
Spouses Gregorio and Josefa Yu (Spouses
Yu) purchased from Ngo Yet Te (Te) bars of
detergent soap worth ₱594,240.00, and
issued to the latter three postdated
checks 4 as payment of the purchase price.
When Te presented the checks at maturity for
encashment, said checks were returned
dishonored and stamped "ACCOUNT
CLOSED".5 Te demanded6 payment from
Spouses Yu but the latter did not heed her
demands. Acting through her son and
attorney-in-fact, Charry Sy (Sy), Te filed with
the Regional Trial Court (RTC), Branch 75,

Valenzuela, Metro Manila, a
Complaint,7 docketed as Civil Case No. 4061-
V-93, for Collection of Sum of Money and
Damages with Prayer for Preliminary
Attachment.
In support of her prayer for preliminary
attachment, Te attached to her Complaint an
Affidavit executed by Sy that Spouses Yu
were guilty of fraud in entering into the
purchase agreement for they never intended
to pay the contract price, and that, based on
reliable information, they were about to move
or dispose of their properties to defraud their
creditors.8
Upon Te’s posting of an attachment bond,9 the
RTC issued an Order of
Attachment/Levy10 dated March 29, 1993 on
the basis of which Sheriff Constancio
Alimurung (Sheriff Alimurung) of RTC, Branch
19, Cebu City levied and attached Spouses
Yu’s properties in Cebu City consisting of one
parcel of land (known as Lot No. 11)11 and
four units of motor vehicle, specifically, a
Toyota Ford Fierra, a jeep, a Canter delivery
van, and a passenger bus.12
On April 21, 1993, Spouses Yu filed an
Answer13 with counterclaim for damages
arising from the wrongful attachment of their
properties, specifically, actual damages
amounting to ₱1,500.00 per day; moral
damages, ₱1,000,000.00; and exemplary
damages, ₱50,000.00. They also sought
payment of ₱120,000.00 as attorney’s fees
and ₱80,000.00 as litigation expenses.14 On
the same date, Spouses Yu filed an Urgent
Motion to Dissolve Writ of Preliminary
Attachment.15 They also filed a Claim Against
Surety Bond16 in which they demanded
payment from Visayan Surety and Insurance
Corporation (Visayan Surety), the surety
which issued the attachment bond, of the sum
of ₱594,240.00, representing the damages
they allegedly sustained as a consequence of
the wrongful attachment of their properties.
While the RTC did not resolve the Claim
Against Surety Bond, it issued an
Order17 dated May 3, 1993, discharging from
attachment the Toyota Ford Fierra, jeep, and
24
Canter delivery van on humanitarian grounds,
but maintaining custody of Lot No. 11 and the
passenger bus. Spouses Yu filed a Motion for
Reconsideration18 which the RTC denied.19
Dissatisfied, they filed with the CA a Petition
for Certiorari,20 docketed as CA-G.R. SP No.
31230, in which a Decision21 was rendered on
September 14, 1993, lifting the RTC Order of
Attachment on their remaining properties. It
reads in part:
In the case before Us, the complaint and the
accompanying affidavit in support of the
application for the writ only contains general
averments. Neither pleading states in
particular how the fraud was committed or the
badges of fraud purportedly committed by the
petitioners to establish that the latter never
had an intention to pay the obligation; neither
is there a statement of the particular acts
committed to show that the petitioners are in
fact disposing of their properties to defraud
creditors. x x x.
xxxx
Moreover, at the hearing on the motion to
discharge the order of attachment x x x
petitioners presented evidence showing that
private respondent has been extending multi-
million peso credit facilities to the petitioners
for the past seven years and that the latter
have consistently settled their obligations.
This was not denied by private respondent.
Neither does the private respondent contest
the petitioners’ allegations that they have
been recently robbed of properties of
substantial value, hence their inability to pay
on time. By the respondent court’s own
pronouncements, it appears that the order of
attachment was upheld because of the
admitted financial reverses the petitioner is
undergoing.
This is reversible error. Insolvency is not a
ground for attachment especially when
defendant has not been shown to have
committed any act intended to defraud its
creditors x x x.

For lack of factual basis to justify its issuance,
the writ of preliminary attachment issued by
the respondent court was improvidently issued
and should be discharged.22
From said CA Decision, Te filed a Motion for
Reconsideration but to no avail.23
Te filed with us a Petition for Review
on Certiorari24 but we denied the same in a
Resolution dated June 8, 1994 for having
been filed late and for failure to show that a
reversible error was committed by the
CA.25 Entry of Judgment of our June 8, 1994
Resolution was made on July 22,
1994.26 Thus, the finding of the CA in its
September 14, 1993 Decision in CA-G.R. SP
No. 31230 on the wrongfulness of the
attachment/levy of the properties of Spouses
Yu became conclusive and binding.
However, on July 20, 1994, the RTC,
apparently not informed of the SC Decision,
rendered a Decision, the dispositive portion of
which reads:
WHEREFORE, premises considered, the
Court finds that the plaintiff has established a
valid civil cause of action against the
defendants, and therefore, renders this
judgment in favor of the plaintiff and against
the defendants, and hereby orders the
following:
1) Defendants are hereby ordered or
directed to pay the plaintiff the sum of
₱549,404.00, with interest from the
date of the filing of this case (March 3,
1993);
2) The Court, for reasons aforestated,
hereby denies the grant of damages to
the plaintiff;
3) The Court hereby adjudicates a
reasonable attorney’s fees and
litigation expenses of ₱10,000.00 in
favor of the plaintiff;
4) On the counterclaim, this Court
declines to rule on this, considering
that the question of the attachment
25
which allegedly gave rise to the
damages incurred by the defendants
is being determined by the Supreme
Court.
SO ORDERED.27 (Emphasis ours)
Spouses Yu filed with the RTC a Motion for
Reconsideration28 questioning the disposition
of their counterclaim. They also filed a
Manifestation29 informing the RTC of our June
8, 1994 Resolution in G.R. No. 114700.
The RTC issued an Order dated August 9,
1994, which read:
xxxx
(2) With regard the counter claim filed
by the defendants against the plaintiff
for the alleged improvident issuance of
this Court thru its former Presiding
Judge (Honorable Emilio Leachon,
Jr.), the same has been ruled with
definiteness by the Supreme Court
that, indeed, the issuance by the Court
of the writ of preliminary attachment
appears to have been improvidently
done, but nowhere in the decision
of the Supreme Court and for that
matter, the Court of Appeal’s
decision which was in effect
sustained by the High Court,
contains any ruling or directive or
imposition, of any damages to be
paid by the plaintiff to the
defendants, in other words, both the
High Court and the CA, merely
declared the previous issuance of the
writ of attachment by this Court thru its
former presiding judge to be
improvidently issued, but it did not
award any damages of any kind to the
defendants, hence, unless the High
Court or the CA rules on this, this
Court coud not grant any damages by
virtue of the improvident attachment
made by this Court thru its former
presiding judge, which was claimed by
the defendants in their counter claim.

(3) This Court hereby
reiterates in toto its Decision in this
case dated July 20,
1994. 30 (Emphasis ours)
The RTC also issued an Order dated
December 2, 1994,31 denying the Motion for
Reconsideration of Spouses Yu.32
In the same December 2, 1994 Order, the
RTC granted two motions filed by Te, a
Motion to Correct and to Include Specific
Amount for Interest and a Motion for
Execution Pending Appeal.33 The RTC also
denied Spouses Yu’s Notice of Appeal34 from
the July 20, 1994 Decision and August 9,
1994 Order of the RTC.
From said December 2, 1994 RTC Order,
Spouses Yu filed another Notice of
Appeal 35 which the RTC also denied in an
Order36 dated January 5, 1995.
Spouses Yu filed with the CA a
Petition37 for Certiorari, Prohibition
and Mandamus, docketed as CA-G.R. SP No.
36205, questioning the denial of their Notices
of Appeal; and seeking the modification of the
July 20, 1994 Decision and the issuance of a
Writ of Execution. The CA granted the Petition
in a Decision38 dated June 22, 1995.
Hence, Spouses Yu filed with the CA an
appeal39 docketed as CA-G.R. CV No. 52246,
questioning only that portion of the July 20,
1994 Decision where the RTC declined to rule
on their counterclaim for damages.40 However,
Spouses Yu did not dispute the specific
monetary awards granted to respondent Te;
and therefore, the same have become final
and executory.
Although in the herein assailed
Decision41 dated March 21, 2001, the CA
affirmed in toto the RTC Decision, it
nonetheless made a ruling on the
counterclaim of Spouses Yu by declaring that
the latter had failed to adduce sufficient
evidence of their entitlement to damages.
Spouses Yu filed a Motion for
Reconsideration42 but the CA denied it in the
26
herein assailed Resolution43 dated October
14, 2002.
Spouses Yu filed the present Petition raising
the following issues:
I. Whether or not the appellate court
erred in not holding that the writ of
attachment was procured in bad faith,
after it was established by final
judgment that there was no true
ground therefor.
II. Whether or not the appellate court
erred in refusing to award actual,
moral and exemplary damages after it
was established by final judgment that
the writ of attachment was procured
with no true ground for its issuance.44
There is one preliminary matter to set straight
before we resolve the foregoing issues.
According to respondent Te,45 regardless of
the evidence presented by Spouses Yu, their
counterclaim was correctly dismissed for
failure to comply with the procedure laid down
in Section 20 of Rule 57. Te contends that as
Visayan Surety was not notified of the
counterclaim, no judgment thereon could be
validly rendered.
Such argument is not only flawed, it is also
specious.
As stated earlier, Spouses Yu filed a Claim
Against Surety Bond on the same day they
filed their Answer and Urgent Motion to
Dissolve Writ of Preliminary
Attachment.46 Further, the records reveal that
on June 18, 1993, Spouses Yu filed with the
RTC a Motion to Give Notice to Surety.47 The
RTC granted the Motion in an Order48 dated
June 23, 1993. Accordingly, Visayan Surety
was notified of the pre-trial conference to
apprise it of a pending claim against its
attachment bond. Visayan Surety received the
notice on July 12, 1993 as shown by a registry
return receipt attached to the records.49
Moreover, even if it were true that Visayan
Surety was left in the proceedings a quo, such

omission is not fatal to the cause of Spouses
Yu. In Malayan Insurance Company, Inc. v.
Salas,50 we held that "x x x if the surety was
not given notice when the claim for damages
against the principal in the replevin bond was
heard, then as a matter of procedural due
process the surety is entitled to be heard
when the judgment for damages against the
principal is sought to be enforced against the
surety’s replevin bond."51 This remedy is
applicable for the procedures governing
claims for damages
on an attachment bond and on a replevin
bond are the same.52
We now proceed to resolve the issues jointly.
Spouses Yu contend that they are entitled to
their counterclaim for damages as a matter of
right in view of the finality of our June 8, 1994
Resolution in G.R. No. 114700 which affirmed
the finding of the CA in its September 14,
1993 Decision in CA-G.R. SP No. 31230 that
respondent Te had wrongfully caused the
attachment of their properties. Citing
Javellana v. D.O. Plaza Enterprises,
Inc.,53 they argue that they should be awarded
damages based solely on the CA finding that
the attachment was illegal for it already
suggests that Te acted with malice when she
applied for attachment. And even if we were to
assume that Te did not act with malice, still
she should be held liable for the aggravation
she inflicted when she applied for attachment
even when she was clearly not entitled to it.54
That is a rather limited understanding of
Javellana. The counterclaim disputed therein
was not for moral damages and therefore,
there was no need to prove malice. As early
as in Lazatin v. Twaño,55 we laid down the rule
that where there is wrongful attachment, the
attachment defendant may recover actual
damages even without proof that the
attachment plaintiff acted in bad faith in
obtaining the attachment. However, if it is
alleged and established that the attachment
was not merely wrongful but also malicious,
the attachment defendant may recover moral
damages and exemplary damages as
well. 56 Either way, the wrongfulness of the
27
attachment does not warrant the automatic
award of damages to the attachment
defendant; the latter must first discharge the
burden of proving the nature and extent of the
loss or injury incurred by reason of the
wrongful attachment.57
In fine, the CA finding that the attachment of
the properties of Spouses Yu was wrongful
did not relieve Spouses Yu of the burden of
proving the factual basis of their counterclaim
for damages.
To merit an award of actual damages arising
from a wrongful attachment, the attachment
defendant must prove, with the best evidence
obtainable, the fact of loss or injury suffered
and the amount thereof.58 Such loss or injury
must be of the kind which is not only capable
of proof but must actually be proved with a
reasonable degree of certainty. As to its
amount, the same must be measurable based
on specific facts, and not on guesswork or
speculation. 59 In particular, if the claim for
actual damages covers unrealized profits, the
amount of unrealized profits must be
estalished and supported by independent
evidence of the mean income of the business
undertaking interrupted by the illegal
seizure. 60
Spouses Yu insist that the evidence they
presented met the foregoing standards. They
point to the lists of their daily net income from
the operation of said passenger bus based on
used ticket stubs61 issued to their passengers.
They also cite unused ticket stubs as proof of
income foregone when the bus was wrongfully
seized.62 They further cite the unrebutted
testimony of Josefa Yu that, in the day-to-day
operation of their passenger bus, they use up
at least three ticket stubs and earn a minimum
daily income of ₱1,500.00.63
In ruling that Spouses Yu failed to adduce
sufficient evidence to support their
counterclaim for actual damages, the CA
stated, thus:
In this case, the actual damages cannot be
determined. Defendant-appellant Josefa Yu
testified on supposed lost profits without clear

and appreciable explanation. Despite her
submission of the used and unused ticket
stubs, there was no evidence on the daily net
income, the routes plied by the bus and the
average fares for each route. The submitted
basis is too speculative and conjectural. No
reports regarding the average actual profits
and other evidence of profitability necessary
to prove the amount of actual damages were
presented. Thus, the Court a quo did not err in
not awarding damages in favor of defendants-
appellants.64
We usually defer to the expertise of the CA,
especially when it concurs with the factual
findings of the RTC.65 Indeed, findings of fact
may be passed upon and reviewed by the
Supreme Court in the following instances: (1)
when the conclusion is a finding grounded
entirely on speculations, surmises, or
conjectures; (2) when the inference made is
manifestly mistaken, absurd, or impossible;
(3) where there is a grave abuse of discretion
in the appreciation of facts; (4) when judgment
is based on a misapprehension of facts; (5)
when the lower court, in making its findings,
went beyond the issues of the case and such
findings are contrary to the admissions of both
appellant and appellee; (6) when the factual
findings of the CA are contrary to those of the
trial court; (7) when the findings of fact are
themselves conflicting; (8) when the findings
of fact are conclusions made without a citation
of specific evidence on which they are based;
(9) when the facts set forth in the petition as
well as in the petitioner’s main and reply briefs
are not disputed by the respondents; (10)
when the findings of fact of the lower court are
premised on the supposed absence of
evidence and are contradicted by the
evidence on record.66 However, the present
case does not fall under any of the
exceptions. We are in full accord with the CA
that Spouses Yu failed to prove their
counterclaim.
Spouses Yu’s claim for unrealized income of
₱1,500.00 per day was based on their
computation of their average daily income for
the year 1992. Said computation in turn is
based on the value of three ticket stubs sold
over only five separate days in 1992.67 By no
stretch of the imagination can we consider
28
ticket sales for five days sufficient evidence of
the average daily income of the passenger
bus, much less its mean income. Not even the
unrebutted testimony of Josefa Yu can add
credence to such evidence for the testimony
itself lacks corroboration.68
Besides, based on the August 29, 1994
Manifestation69 filed by Sheriff Alimurung, it
would appear that long before the passenger
bus was placed under preliminary attachment
in Civil Case No. 4061-V-93, the same had
been previously attached by the Sheriff of
Mandaue City in connection with another case
and that it was placed in the Cebu Bonded
Warehousing Corporation, Cebu City. Thus,
Spouses Yu cannot complain that they were
unreasonably deprived of the use of the
passenger bus by reason of the subsequent
wrongful attachment issued in Civil Case No.
4061-V-93. Nor can they also attribute to the
wrongful attachment their failure to earn
income or profit from the operation of the
passenger bus.
Moreover, petitioners did not present
evidence as to the damages they suffered by
reason of the wrongful attachment of Lot No.
11.
Nonetheless, we recognize that Spouses Yu
suffered some form of pecuniary loss when
their properties were wrongfully seized,
although the amount thereof cannot be
definitively ascertained. Hence, an award of
temperate or moderate damages in the
amount of ₱50,000.00 is in order.70
As to moral and exemplary damages, to merit
an award thereof, it must be shown that the
wrongful attachment was obtained by the
attachment plaintiff with malice or bad faith,
such as by appending a false affidavit to his
application.71
Spouses Yu argue that malice attended the
issuance of the attachment bond as shown by
the fact that Te deliberately appended to her
application for preliminary attachment an
Affidavit where Sy perjured himself by stating
that they had no intention to pay their
obligations even when he knew this to be

untrue given that they had always paid their
obligations; and by accusing them of
disposing of their properties to defraud their
creditors even when he knew this to be false,
considering that the location of said properties
was known to him.72
The testimony of petitioner Josefa Yu herself
negates their claim for moral and exemplary
damages. On cross-examination she testified,
thus:
Q: Did you ever deposit any amount at that
time to fund the check?
A: We requested that it be replaced and
staggered into smaller amounts.
COURT: Did you fund it or not?
Atty. Ferrer: The three checks involved?
Atty. Florido: Already answered. She said that
they were not able to fund it.
Atty. Ferrer: And as a matter of fact, you went
to the bank to close your account?
A: We closed account with the bank because
we transferred the account to another bank.
Q: How much money did you transfer from
that bank to which the three checks were
drawn to this new bank?
A: I don’t know how much was there but we
transferred already to the Solid Bank.
Q: Who transferred?
A: My daughter, sir.73 (Emphasis ours)
Based on the foregoing testimony, it is not
difficult to understand why Te concluded that
Spouses Yu never intended to pay their
obligation for they had available funds in their
bank but chose to transfer said funds instead
of cover the checks they issued. Thus, we
cannot attribute malice nor bad faith to Te in
applying for the attachment writ. We cannot
29
hold her liable for moral and exemplary
damages.
As a rule, attorney’s fees cannot be awarded
when moral and exemplary damages are not
granted, the exception however is when a
party incurred expenses to lift a wrongfully
issued writ of
attachment.1awphi1.net74 Without a doubt,
Spouses Yu waged a protracted legal battle to
fight off the illegal attachment of their
properties and pursue their claims for
damages. It is only just and equitable that
they be awarded reasonable attorney’s fees in
the amount of ₱30,000.00.
In sum, we affirm the dismissal of the
counterclaim of petitioners Spouses Yu for
actual, moral, and exemplary damages.
However, we grant them temperate damages
and attorney’s fees.
WHEREFORE, the petition is
partly GRANTED. The March 21, 2001
Decision of the Court of Appeals
is AFFIRMED with the MODIFICATION that
petitioners’ counterclaim
is PARTLY GRANTED. Gregorio Yu and
Josefa Yu are awarded ₱50,000.00 temperate
damages and ₱30,000.00 attorney’s fees.
No costs.
SO ORDERED.
SECOND DIVISION
[G.R. NO. 144740 : August 31, 2005]
SECURITY PACIFIC ASSURANCE
CORPORATION, Petitioners, v. THE HON.
AMELIA TRIA-INFANTE, In her official
capacity as Presiding Judge, Regional
Trial Court, Branch 9, Manila; THE PEOPLE
OF THE PHILIPPINES, represented by
Spouses REYNALDO and ZENAIDA
ANZURES; and REYNALDO R. BUAZON, In
his official capacity as Sheriff IV, Regional
Trial Court, Branch 9, Manila, Respondents.

DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review
on Certiorari, assailing the Decision1 and
Resolution2 of the Court of Appeals in CA-
G.R. SP No. 58147, dated 16 June 2000 and
22 August 2000, respectively. The said
Decision and Resolution declared that there
was no grave abuse of discretion on the part
of respondent Judge in issuing the assailed
order dated 31 March 2000, which was the
subject in CA-G.R. SP No. 58147.
THE FACTS
The factual milieu of the instant case can be
traced from this Court's decision in G.R. No.
106214 promulgated on 05 September 1997.
On 26 August 1988, Reynaldo Anzures
instituted a complaint against Teresita Villaluz
(Villaluz) for violation of Batas Pambansa Blg.
22. The criminal information was brought
before the Regional Trial Court, City of Manila,
and raffled off to Branch 9, then presided over
by Judge Edilberto G. Sandoval, docketed as
Criminal Case No. 89-69257.
An Ex-Parte Motion for Preliminary
Attachment3 dated 06 March 1989 was filed
by Reynaldo Anzures praying that pending the
hearing on the merits of the case, a Writ of
Preliminary Attachment be issued ordering the
sheriff to attach the properties of Villaluz in
accordance with the Rules.
On 03 July 1989, the trial court issued an
Order4 for the issuance of a writ of preliminary
attachment "upon complainant's posting of a
bond which is hereby fixed at P2,123,400.00
and the Court's approval of the same under
the condition prescribed by Sec. 4 of Rule 57
of the Rules of Court'. "
An attachment bond5 was thereafter posted by
Reynaldo Anzures and approved by the court.
Thereafter, the sheriff attached certain
properties of Villaluz, which were duly
annotated on the corresponding certificates of
title.
30
On 25 May 1990, the trial court rendered a
Decision6 on the case acquitting Villaluz of the
crime charged, but held her civilly liable. The
dispositive portion of the said decision is
reproduced hereunder:
WHEREFORE, premises considered,
judgment is hereby rendered ACQUITTING
the accused TERESITA E. VILLALUZ
with cost de oficio. As to the civil aspect of the
case however, accused is ordered to pay
complainant Reynaldo Anzures the sum of
TWO MILLION ONE HUNDRED TWENTY
THREE THOUSAND FOUR HUNDRED
(P2,123,400.00) PESOS with legal rate of
interest from December 18, 1987 until fully
paid, the sum of P50,000.00 as attorney's
fees and the cost of suit.7
Villaluz interposed an appeal with the Court of
Appeals, and on 30 April 1992, the latter
rendered its Decision,8 the dispositive portion
of which partly reads:
WHEREFORE, in CA-G.R. CV No. 28780, the
Decision of the Regional Trial Court of Manila,
Branch 9, dated May 25, 1990, as to the civil
aspect of Criminal Case No. 89-69257, is
hereby AFFIRMED, in all respects'.
The case was elevated to the Supreme Court
(G.R. No. 106214), and during its pendency,
Villaluz posted a counter-bond in the amount
of P2,500,000.00 issued by petitioner Security
Pacific Assurance Corporation.9 Villaluz, on
the same date10 of the counter-bond, filed an
Urgent Motion to Discharge Attachment.11
On 05 September 1997, we promulgated our
decision in G.R. No. 106214, affirming in
toto the decision of the Court of Appeals.
In view of the finality of this Court's decision in
G.R. No. 106214, the private complainant
moved for execution of judgment before the
trial court.12
On 07 May 1999, the trial court, now presided
over by respondent Judge, issued a Writ of
Execution.13
Sheriff Reynaldo R. Buazon tried to serve the
writ of execution upon Villaluz, but the latter

no longer resided in her given address. This
being the case, the sheriff sent a Notice of
Garnishment upon petitioner at its office in
Makati City, by virtue of the counter-bond
posted by Villaluz with said insurance
corporation in the amount of P2,500,000.00.
As reported by the sheriff, petitioner refused to
assume its obligation on the counter-bond it
posted for the discharge of the attachment
made by Villaluz.14
Reynaldo Anzures, through the private
prosecutor, filed a Motion to Proceed with
Garnishment,15 which was opposed by
petitioner16 contending that it should not be
held liable on the counter-attachment bond.
The trial court, in its Order dated 31 March
2000,17 granted the Motion to Proceed with
Garnishment. The sheriff issued a Follow-Up
of Garnishment18 addressed to the
President/General Manager of petitioner
dated 03 April 2000.
On 07 April 2000, petitioner filed a Petition
for Certiorari with Preliminary Injunction and/or
Temporary Restraining Order19 with the Court
of Appeals, seeking the nullification of the trial
court's order dated 31 March 2000 granting
the motion to proceed with garnishment.
Villaluz was also named as petitioner. The
petitioners contended that the respondent
Judge, in issuing the order dated 31 March
2000, and the sheriff committed grave abuse
of discretion and grave errors of law in
proceeding against the petitioner corporation
on its counter-attachment bond, despite the
fact that said bond was not approved by the
Supreme Court, and that the condition by
which said bond was issued did not happen.20
On 16 June 2000, the Court of Appeals
rendered a Decision,21 the dispositive portion
of which reads:
WHEREFORE, premises considered, the
Court finds no grave abuse of discretion on
the part of respondent judge in issuing the
assailed order. Hence, the petition is
dismissed.
A Motion for Reconsideration22 was filed by
petitioner, but was denied for lack of merit by
31
the Court of Appeals in its Resolution23 dated
22 August 2000.
Undeterred, petitioner filed the instant petition
under Rule 45 of the 1997 Rules of Civil
Procedure, with Urgent Application for a Writ
of Preliminary Injunction and/or Temporary
Restraining Order.24
On 13 December 2000, this Court issued a
Resolution25 requiring the private respondents
to file their Comment to the Petition, which
they did. Petitioner was required to file its
Reply26 thereafter.
Meanwhile, on 17 January 2001, petitioner
and the spouses Reynaldo and Zenaida
Anzures executed a Memorandum of
Understanding (MOU).27 In it, it was stipulated
that as of said date, the total amount
garnished from petitioner had amounted
to P1,541,063.85, and so the remaining
amount still sought to be executed
was P958,936.15.28 Petitioner tendered and
paid the amount of P300,000.00 upon signing
of the MOU, and the balance of P658,936.15
was to be paid in installment at P100,000.00
at the end of each month from February 2001
up to July 2001. At the end of August 2001,
the amount of P58,936.00 would have to be
paid. This would make the aggregate amount
paid to the private
respondents P2,500,000.00.29 There was,
however, a proviso in the MOU which states
that "this contract shall not be construed as a
waiver or abandonment of the appellate
review pending before the Supreme Court and
that it will be subject to all such interim orders
and final outcome of said case."
On 13 August 2001, the instant petition was
given due course, and the parties were
obliged to submit their respective
Memoranda.30
ISSUES
The petitioner raises the following issues for
the resolution of this Court:
Main Issue - WHETHER OR NOT THE
COURT OF Appeals committed reversible
error in affirming the 31 march 2000 order of

public respondent judge which allowed
execution on the counter-bond issued by the
petitioner.
Corollary Issues - (1) WHETHER OR NOT
THE COURT OF APPEALS CORRECTLY
RULED THAT THE ATTACHMENT ON THE
PROPERTY OF VILLALUZ WAS
DISCHARGED WITHOUT NEED OF COURT
APPROVAL OF THE COUNTER-BOND
POSTED; and (2) WHETHER OR NOT THE
COURT OF APPEALS CORRECTLY RULED
THAT THE ATTACHMENT ON THE
PROPERTY OF VILLALUZ WAS
DISCHARGED BY THE MERE ACT OF
POSTING THE COUNTER-BOND.
THE COURT'S RULING
Petitioner seeks to escape liability by
contending, in the main, that the writ of
attachment which was earlier issued against
the real properties of Villaluz was not
discharged. Since the writ was not
discharged, then its liability did not accrue.
The alleged failure of this Court in G.R. No.
106214 to approve the counter-bond and to
cause the discharge of the attachment against
Villaluz prevented the happening of a
condition upon which the counter-bond's
issuance was premised, such that petitioner
should not be held liable thereon.31
Petitioner further asserts that the agreement
between it and Villaluz is not a suretyship
agreement in the sense that petitioner has
become an additional debtor in relation to
private respondents. It is merely waiving its
right of excussion32 that would ordinarily apply
to counter-bond guarantors as originally
contemplated in Section 12, Rule 57 of the
1997 Rules.
In their Comment,33 the private respondents
assert that the filing of the counter-bond by
Villaluz had already ipso facto discharged the
attachment on the properties and made the
petitioner liable on the bond. Upon
acceptance of the premium, there was already
an express contract for surety between
Villaluz and petitioner in the amount
of P2,500,000.00 to answer for any adverse
judgment/decision against Villaluz.
32
Petitioner filed a Reply34 dated 09 May 2001
to private respondents' Comment, admitting
the binding effect of the bond as between the
parties thereto. What it did not subscribe to
was the theory that the attachment was ipso
facto or automatically discharged by the mere
filing of the bond in court. Such theory,
according to petitioner, has no foundation.
Without an order of discharge of attachment
and approval of the bond, petitioner submits
that its stipulated liability on said bond,
premised on their occurrence, could not
possibly arise, for to hold otherwise would be
to trample upon the statutorily guaranteed
right of the parties to contractual autonomy.
Based on the circumstances present in this
case, we find no compelling reason to reverse
the ruling of the Court of Appeals.
Over the years, in a number of cases, we
have made certain pronouncements about
counter-bonds.
In Tijam v. Sibonghanoy,35 as reiterated
in Vanguard Assurance Corp. v. Court of
Appeals,36 we held:
. . . [A]fter the judgment for the plaintiff has
become executory and the execution is
'returned unsatisfied,' as in this case, the
liability of the bond automatically attaches
and, in failure of the surety to satisfy the
judgment against the defendant despite
demand therefore, writ of execution may issue
against the surety to enforce the obligation of
the bond.
In Luzon Steel Coporation v. Sia, et al.: 37
. . . [C]ounterbonds posted to obtain the lifting
of a writ of attachment is due to these bonds
being security for the payment of any
judgment that the attaching party may obtain;
they are thus mere replacements of the
property formerly attached, and just as the
latter may be levied upon after final judgment
in the case in order to realize the amount
adjudged, so is the liability of the
countersureties ascertainable after the
judgment has become final. . . .

In Imperial Insurance, Inc. v. De Los
Angeles,38 we ruled:
. . . Section 17, Rule 57 of the Rules of Court
cannot be construed that an "execution
against the debtor be first returned unsatisfied
even if the bond were a solidary one, for a
procedural may not amend the substantive
law expressed in the Civil Code, and further
would nullify the express stipulation of the
parties that the surety's obligation should be
solidary with that of the defendant.
In Philippine British Assurance Co., Inc. v.
Intermediate Appellate Court,39 we further held
that "the counterbond is intended to secure
the payment of 'any judgment' that the
attaching creditor may recover in the action."
Petitioner does not deny that the contract
between it and Villaluz is one of surety.
However, it points out that the kind of surety
agreement between them is one that merely
waives its right of excussion. This cannot be
so. The counter-bond itself states that the
parties jointly and severally bind themselves
to secure the payment of any judgment that
the plaintiff may recover against the defendant
in the action. A surety is considered in law as
being the same party as the debtor in relation
to whatever is adjudged touching the
obligation of the latter, and their liabilities are
interwoven as to be inseparable.40
Suretyship is a contractual relation resulting
from an agreement whereby one person, the
surety, engages to be answerable for the
debt, default or miscarriage of another, known
as the principal. The surety's obligation is not
an original and direct one for the performance
of his own act, but merely accessory or
collateral to the obligation contracted by the
principal. Nevertheless, although the contract
of a surety is in essence secondary only to a
valid principal obligation, his liability to the
creditor or promise of the principal is said to
be direct, primary and absolute; in other
words, he is directly and equally bound with
the principal. The surety therefore becomes
liable for the debt or duty of another although
he possesses no direct or personal interest
over the obligations nor does he receive any
benefit therefrom.41
33
In view of the nature and purpose of a surety
agreement, petitioner, thus, is barred from
disclaiming liability.
Petitioner's argument that the mere filing of a
counter-bond in this case cannot
automatically discharge the attachment
without first an order of discharge and
approval of the bond, is lame.
Under the Rules, there are two (2) ways to
secure the discharge of an attachment. First,
the party whose property has been attached
or a person appearing on his behalf may post
a security. Second, said party may show that
the order of attachment was improperly or
irregularly issued.42 The first applies in the
instant case. Section 12, Rule 57,43 provides:
SEC. 12. Discharge of attachment upon giving
counter-bond. - After a writ of attachment has
been enforced, the party whose property has
been attached, or the person appearing on his
behalf, may move for the discharge of the
attachment wholly or in part on the security
given. The court shall, after due notice and
hearing, order the discharge of the attachment
if the movant makes a cash deposit, or files a
counter-bond executed to the attaching party
with the clerk of the court where the
application is made, in an amount equal to
that fixed by the court in the order of
attachment, exclusive of costs. But if the
attachment is sought to be discharged with
respect to a particular property, the counter-
bond shall be equal to the value of that
property as determined by the court. In either
case, the cash deposit or the counter-bond
shall secure the payment of any judgment that
the attaching party may recover in the action.
A notice of the deposit shall forthwith be
served on the attaching party. Upon the
discharge of an attachment in accordance
with the provisions of this section, the property
attached, or the proceeds of any sale thereof,
shall be delivered to the party making the
deposit or giving the counter-bond, or to the
person appearing on his behalf, the deposit or
counter-bond aforesaid standing in place of
the property so released. Should such
counter-bond for any reason be found to be or
become insufficient, and the party furnishing
the same fail to file an additional counter-

bond, the attaching party may apply for a new
order of attachment.
It should be noted that in G.R. No. 106214,
per our Resolution dated 15 January
1997,44 we permitted Villaluz to file a counter-
attachment bond. On 17 February 1997,45 we
required the private respondents to comment
on the sufficiency of the counter-bond posted
by Villaluz.
It is quite palpable that the necessary steps in
the discharge of an attachment upon giving
counter-bond have been taken. To require a
specific order for the discharge of the
attachment when this Court, in our decision in
G.R. No. 106214, had already declared that
the petitioner is solidarily bound with Villaluz
would be mere surplusage. Thus:
During the pendency of this petition, a
counter-attachment bond was filed by
petitioner Villaluz before this Court to
discharge the attachment earlier issued by the
trial court. Said bond amounting to P2.5
million was furnished by Security Pacific
Assurance, Corp. which agreed to bind itself
"jointly and severally" with petitioner for "any
judgment" that may be recovered by private
respondent against the former.46
We are not unmindful of our ruling in the case
of Belisle Investment and Finance Co., Inc. v.
State Investment House, Inc.,47 where we
held:
. . . [T]he Court of Appeals correctly ruled that
the mere posting of a counterbond does not
automatically discharge the writ of attachment.
It is only after hearing and after the judge has
ordered the discharge of the attachment if a
cash deposit is made or a counterbond is
executed to the attaching creditor is filed, that
the writ of attachment is properly discharged
under Section 12, Rule 57 of the Rules of
Court.
The ruling in Belisle, at first glance, would
suggest an error in the assailed ruling of the
Court of Appeals because there was no
specific resolution discharging the attachment
and approving the counter-bond. As above-
explained, however, consideration of our
34
decision in G.R. No. 106214 in its entirety will
readily show that this Court has virtually
discharged the attachment after all the parties
therein have been heard on the matter.
On this score, we hew to the pertinent
ratiocination of the Court of Appeals as
regards the heretofore cited provision of
Section 12, Rule 57 of the 1997 Rules of Civil
Procedure, on the discharge of attachment
upon giving counter-bond:
. . . The filing of the counter-attachment bond
by petitioner Villaluz has discharged the
attachment on the properties and made the
petitioner corporation liable on the counter-
attachment bond. This can be gleaned from
the "DEFENDANT'S BOND FOR THE
DISSOLUTION OF ATTACHMENT", which
states that Security Pacific Assurance
Corporation, as surety, in consideration of the
dissolution of the said attachment jointly and
severally, binds itself with petitioner Villaluz
for any judgment that may be recovered by
private respondent Anzures against petitioner
Villaluz.
The contract of surety is only between
petitioner Villaluz and petitioner corporation.
The petitioner corporation cannot escape
liability by stating that a court approval is
needed before it can be made liable. This
defense can only be availed by petitioner
corporation against petitioner Villaluz but not
against third persons who are not parties to
the contract of surety. The petitioners hold
themselves out as jointly and severally liable
without any conditions in the counter-
attachment bond. The petitioner corporation
cannot impose requisites before it can be
made liable when the law clearly does not
require such requisites to be
fulfilled.48 (Emphases supplied.)
Verily, a judgment must be read in its entirety,
and it must be construed as a whole so as to
bring all of its parts into harmony as far as this
can be done by fair and reasonable
interpretation and so as to give effect to every
word and part, if possible, and to effectuate
the intention and purpose of the Court,
consistent with the provisions of the organic
law.49

Insurance companies are prone to invent
excuses to avoid their just obligation.50 It
seems that this statement very well fits the
instant case.
WHEREFORE, in view of all the foregoing, the
Decision and Resolution of the Court of
Appeals dated 16 June 2000 and 22 August
2000, respectively, are both AFFIRMED.
Costs against petitioner.
SO ORDERED.
Puno, (Chairman), Austria-Martinez,
Callejo, Sr. and Tinga, JJ., concur.
G.R. No. 181721
WATERCRAFT VENTURE CORPORATION,
represented by its Vice-President,
ROSARIO E. RANOA, Petitioners,
vs.
ALFRED RAYMOND WOLFE, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under
Rule 45 of the Rules of Court, seeking to
reverse and set aside the Court of Appeals
(CA) Resolution1 dated January 24, 2008
denying the motion for reconsideration of its
Decision2 dated September 27, 2007 in CA-
G.R. SP No. 97804.
The facts are as follows:
Petitioner Watercraft Venture Corporation
(Watercraft) is engaged in the business of
building, repairing, storing and maintaining
yachts, boats and other pleasure crafts at the
Subic Bay Freeport Zone, Subic, Zambales. In
connection with its operations and
maintenance of boat storage facilities, it
charges a boat storage fee of Two Hundred
Seventy-Two US Dollars (US$272.00) per
35
month with interest of 4% per month for
unpaid charges.
Sometime in June 1997, Watercraft hired
respondent Alfred Raymond Wolfe (Wolfe), a
British national and resident of Subic Bay
Freeport Zone, Zambales, as its Shipyard
Manager.
During his empolyment, Wolfe stored the
sailboat, Knotty Gull, within Watercraft's boat
storage facilities, but never paid for the
storage fees.
On March 7, 2002, Watercraft terminated the
employment of Wolfe.
Sometime in June 2002, Wolfe pulled out his
sailboat from Watercraft's storage facilities
after signing a Boat Pull-Out Clearance dated
June 29, 2002 where he allegedly
acknowledged the outstanding obligation of
Sixteen Thousand Three Hundred and
Twenty-Four and 82/100 US Dollars
(US$16,324.82) representing unpaid boat
storage fees for the period of June 1997 to
June 2002. Despite repeated demands, he
failed to pay the said amount.
Thus, on July 7, 2005, Watercraft filed against
Wolfe a Complaint for Collection of Sum of
Money with Damages with an Application for
the Issuance of a Writ of Preliminary
Attachment. The case was docketed as Civil
Case No. 4534-MN, and raffled to Branch
1703 of the Regional Trial Court (RTC) of
Malabon City.
In his Answer, Wolfe claimed he was hired as
Service and Repair Manager, instead of
Shipyard Manager. He denied owing
Watercraft the amount of US$16,324.82
representing storage fees for the sailboat. He
explained that the sailboat was purchased in
February 1998 as part of an agreement
between him and Watercraft's then General
Manager, Barry Bailey, and its President,
Ricky Sandoval, for it to be repaired and used
as training or fill-in project for the staff, and to
be sold later on. He added that pursuant to a
central Listing Agreement for the sale of the
sailboat, he was appointed as agent, placed in

possession thereof and entitled to a ten
percent (10%) sales commission. He insisted
that nowhere in the agreement was there a
stipulation that berthing and storage fees will
be charged during the entire time that the
sailboat was in Watercraft's dockyard. Thus,
he claimed to have been surprised when he
received five (5) invoices billing him for the
said fees two (2) months after his services
were terminated. He pointed out that the
complaint was an offshoot of an illegal
dismissal case he filed against Watercraft
which had been decided in his favor by the
Labor Arbiter.
Meanwhile, finding Watercraft's ex-parte
application for writ of preliminary attachment
sufficient in form and in substance pursuant to
Section 1 of Rule 57 of the Rules of Court, the
RTC granted the same in the Order dated July
15, 2005, thus:
WHEREFORE, let a Writ of Preliminary
Attachment be issued accordingly in favor of
the plaintiff, Watercraft Ventures Corporation
conditioned upon the filing of attachment bond
in the amount of Three Million Two Hundred
Thirty-One Thousand Five Hundred and
Eighty-Nine and 25/100 Pesos
(Php3,231,589.25) and the said writ be served
simultaneously with the summons, copies of
the complaint, application for attachment,
applicant's affidavit and bond, and this Order
upon the defendant.
SO ORDERED.4
Pursuant to the Order dated July 15, 2005,
the Writ of Attachment dated August 3, 2005
and the Notice of Attachment dated August 5,
2005 were issued, and Wolfe's two vehicles, a
gray Mercedes Benz with plate number XGJ
819 and a maroon Toyota Corolla with plate
number TFW 110, were levied upon.
On August 12, 2005, Wolfe's accounts at the
Bank of the Philippine Islands were also
garnished.
By virtue of the Notice of Attachment and Levy
dated September 5, 2005, a white Dodge
pick-up truck with plate number XXL 111 was
36
also levied upon. However, a certain Jeremy
Simpson filed a Motion for Leave of Court to
Intervene, claiming that he is the owner of the
truck as shown by a duly-notarized Deed of
Sale executed on August 4, 2005, the
Certificate of Registration No. 3628665-1 and
the Official Receipt No. 271839105.
On November 8, 2005, Wolfe filed a Motion to
Discharge the Writ of Attachment, arguing that
Watercraft failed to show the existence of
fraud and that the mere failure to pay or
perform an obligation does not amount to
fraud. He also claimed that he is not a flight
risk for the following reasons: (1) contrary to
the claim that his Special Working Visa
expired in April 2005, his Special Subic
Working Visa and Alien Certificate of
Registration are valid until April 25, 2007 and
May 11, 2006, respectively; (2) he and his
family have been residing in the Philippines
since 1997; (3) he is an existing stockholder
and officer of Wolfe Marine Corporation which
is registered with the Securities and Exchange
Commission, and a consultant of
"Sudeco/Ayala" projects in Subic, a member
of the Multipartite Committee for the new port
development in Subic, and the Subic
Chamber of Commerce; and (4) he intends to
finish prosecuting his pending labor case
against Watercraft. On even date, Watercraft
also filed a Motion for Preliminary Hearing of
its affirmative defenses of forum shopping, litis
pendentia, and laches.
In an Order dated March 20, 2006, the RTC
denied Wolfe's Motion to Discharge Writ of
Attachment and Motion for Preliminary
Hearing for lack of merit.
Wolfe filed a motion for reconsideration, but
the RTC also denied it for lack of merit in an
Order dated November 10, 2006. Aggrieved,
Wolfe filed a petition for certiorari before the
CA.
The CA granted Wolfe's petition in a Decision
dated September 27, 2007, the dispositive
portion of which reads:
WHEREFORE, the Order dated March 20,
2006 and the Order dated November 10, 2006

of respondent Judge are hereby ANNULLED
and SET ASIDE. Accordingly, the Writ of
Attachment issued on August 3, 2005, the
Notice of Attachment dated August 5, 2005
and the Notice of Attachment and Levy dated
September 5, 2005 are hereby also declared
NULL and VOID, and private respondent is
DIRECTED to return to their owners the
vehicles that were attached pursuant to the
Writ.
SO ORDERED.5
The CA ruled that the act of issuing the writ of
preliminary attachment ex-parte constitutes
grave abuse of discretion on the part of the
RTC, thus:
x x x In Cosiquien [v. Court of Appeals], the
Supreme Court held that:
"Where a judge issues a fatally defective writ
of preliminary attachment based on an
affidavit which failed to allege the requisites
prescribed for the issuance of the writ of
preliminary attachment, renders the writ of
preliminary attachment issued against the
property of the defendant fatally defective.
The judge issuing it is deemed to have acted
in excess of jurisdiction. In fact, the defect
cannot even be cured by amendment. Since
the attachment is a harsh and rigorous
remedy which exposed the debtor to
humiliation and annoyance, the rule
authorizing its issuance must be strictly
construed in favor of defendant. It is the duty
of the court before issuing the writ to ensure
that all the requisites of the law have been
complied with. Otherwise, a judge acquires no
jurisdiction to issue the writ." (emphasis
supplied)
In the instant case, the Affidavit of Merit
executed by Rosario E. Rañoa, Watercraft's
Vice-President, failed to show fraudulent
intent on the part of Wolfe to defraud the
company. It merely enumerated the
circumstances tending to show the alleged
possibility of Wolfe's flight from the country.
And upon Wolfe's filing of the Motion to
Discharge the Writ, what the respondent
Judge should have done was to determine,
37
through a hearing, whether the allegations of
fraud were true. As further held in Cosiquien:
"When a judge issues a writ of preliminary
attachment ex-parte, it is incumbent on him,
upon proper challenge of his order to
determine whether or not the same was
improvidently issued. If the party against
whom the writ is prayed for squarely
controverts the allegation of fraud, it is
incumbent on the applicant to prove his
allegation. The burden of proving that there
indeed was fraud lies with the party making
such allegation. This finds support in Section
1, Rule 131 Rules of Court. In this jurisdiction,
fraud is never presumed." (Emphasis
supplied) As correctly noted by Wolfe,
although Sec. 1 of Rule 57 allows a party to
invoke fraud as a ground for the issuance of a
writ of attachment, the Rules require that in all
averments of fraud, the circumstances
constituting fraud must be stated with
particularity, pursuant to Rule 8, Section 5.
The Complaint merely stated, in paragraph 23
thereof that "For failing to pay the use [of]
facilities and services – in the form of boat
storage fees, the Defendant is clearly guilty of
fraud which entitles the Plaintiff to a Writ of
Preliminary Attachment upon the property of
the Defendant as security for the satisfaction
of any judgment herein." This allegation does
not constitute fraud as contemplated by law,
fraud being the "generic term embracing all
multifarious means which human ingenuity
can devise, and which are resorted to by one
individual to secure an advantage over
another by false suggestions or by
suppression of truth and includes all surprise,
trick, cunning, dissembling and any unfair way
by which another is cheated." In this instance,
Wolfe's mere failure to pay the boat storage
fees does not necessarily amount to fraud,
absent any showing that such failure was due
to [insidious] machinations and intent on his
part to defraud Watercraft of the amount due
it.
As to the allegation that Wolfe is a flight risk,
thereby warranting the issuance of the writ,
the same lacks merit. The mere fact that
Wolfe is a British national does not
automatically mean that he would leave the
country at will. As Wolfe avers, he and his

family had been staying in the Philippines
since 1997, with his daughters studying at a
local school. He also claims to be an existing
stockholder and officer of Wolfe Marine
Corporation, a SEC-registered corporation, as
well as a consultant of projects in the Subic
Area, a member of the Multipartite Committee
for the new port development in Subic, and a
member of the Subic Chamber of Commerce.
More importantly, Wolfe has a pending labor
case against Watercraft – a fact which the
company glaringly failed to mention in its
complaint – which Wolfe claims to want to
prosecute until its very end. The said
circumstances, as well as the existence of
said labor case where Wolfe stands not only
to be vindicated for his alleged illegal
dismissal, but also to receive recompense,
should have convinced the trial court that
Wolfe would not want to leave the country at
will just because a suit for the collection of the
alleged unpaid boat storage fees has been
filed against him by Watercraft.
Neither should the fact that Wolfe's Special
Working Visa expired in April 2005 lead
automatically to the conclusion that he would
leave the country. It is worth noting that all
visas issued by the government to foreigners
staying in the Philippines have expiration
periods. These visas, however, may be
renewed, subject to the requirements of the
law. In Wolfe's case, he indeed renewed his
visa, as shown by Special Working Visa No.
05-WV-0124P issued by the Subic Bay
Metropolitan Authority Visa Processing Office
on April 25, 2005, and with validity of two (2)
years therefrom. Moreover, his Alien
Certificate of Registration was valid up to May
11, 2006.
Based on the foregoing, it is therefore clear
that the writ was improvidently issued. It is
well to emphasize that "[T]he rules on the
issuance of a writ of attachment must be
construed strictly against the applicants. This
stringency is required because the remedy of
attachment is harsh, extraordinary and
summary in nature. If all the requisites for the
granting of the writ are not present, then the
court which issues it acts in excess of its
jurisdiction. Thus, in this case, Watercraft
failed to meet all the requisites for the
38
issuance of the writ. Thus, in granting the
same, respondent Judge acted with grave
abuse of discretion.6
In a Resolution dated January 24, 2008, the
CA denied Watercraft's motion for
reconsideration of its Decision, there being no
new or significant issues raised in the motion.
Dissatisfied with the CA Decision and
Resolution, Watercraft filed this petition for
review on certiorari, raising these two issues:
I.
WHETHER THE EX-PARTE ISSUANCE OF
THE PRELIMINARY ATTACHMENT BY THE
TRIAL COURT IN FAVOR OF THE
PETITIONER IS VALID.
II.
WHETHER THE ALLEGATIONS IN THE
AFFIDAVIT OF MERIT CONCERNING
FRAUD ARE SUFFICIENT TO WARRANT
THE ISSUANCE OF A PRELIMINARY WRIT
OF ATTACHMENT BY THE
TRIAL COURT IN FAVOR OF THE
PETITIONER.7
Watercraft argues that the CA erred in holding
that the RTC committed grave abuse of
discretion in issuing the writ of preliminary
attachment, and in finding that the affidavit of
merit only enumerated circumstances tending
to show the possibility of Wolfe's flight from
the country, but failed to show fraudulent
intent on his part mpany.
Stressing that its application for such writ was
anchored on two (2) grounds under Section
1,8 Rule 57, Watercraft insists that, contrary to
the CA ruling, its affidavit of merit sufficiently
averred with particularity the circumstances
constituting fraud as a common element of
said grounds.
Watercraft points out that its affidavit of merit
shows that from 1997, soon after Wolfe's
employment as Shipyard Manager, up to

2002, when his employment was terminated,
or for a period of five (5) years, not once did
he pay the cost for the use of the company's
boat storage facilities, despite knowledge of
obligation and obvious ability to pay by reason
of his position.
Watercraft adds that its affidavit clearly stated
that Wolfe, in an attempt to avoid settling of
his outstanding obligations to the company,
signed a Boat Pull-Out Clearance where he
merely acknowledged but did not pay Sixteen
Thousand Three Hundred and Twenty-Four
and 82/100 US Dollars (US$16,324.82)
representing unpaid boat storage fees for the
period commencing June 1997 to June 2002.
It avers that the execution of such clearance
enabled Wolfe to pull out his boat from the
company storage facilities without payment of
storage fees.
Watercraft also faults the CA in finding no
merit in its allegation that Wolfe is a flight risk.
It avers that he was supposed to stay and
work in the country for a limited period, and
will eventually leave; that despite the fact that
his wife and children reside in the country, he
can still leave with them anytime; and that his
work in the country will not prevent him from
leaving, thereby defeating the purpose of the
action, especially since he had denied
responsibility for his outstanding obligations. It
submits that the CA overlooked paragraph 28
of its Complaint which alleged that "[i]n
support of the foregoing allegations and the
prayer for the issuance of a Writ of Preliminary
Attachment in the instant case, the Plaintiff
has attached hereto the Affidavit of the Vice-
President of the Plaintiff, MS. ROSARIO E.
RAÑOA x x x."9
Watercraft asserts that it has sufficiently
complied with the only requisites for the
issuance of the writ of preliminary attachment
under Section 3, Rule 57 of the Rules of
Court, i.e., affidavit of merit and bond of the
applicant. It posits that contrary to the CA
ruling, there is no requirement that evidence
must first be offered before a court can grant
such writ on the basis of Section 1 (d) of Rule
57, and that the rules only require an affidavit
showing that the case is one of those
mentioned in Section 1, Rule 57. It notes that
39
although a party is entitled to oppose an
application for the issuance of the writ or to
move for the discharge thereof by
controverting the allegations of fraud, such
rule does not apply when the same
allegations constituting fraud are the very
facts disputed in the main action, as in this
case.
Watercraft also points out the inconsistent
stance of Wolfe with regard to the ownership
and possession of the sailboat. Contrary to
Wolfe's Answer that the purchase of the
sailboat was made pursuant to a three (3)-way
partnership agreement between him and its
General Manager and Executive Vice-
President, Barry Bailey, and its President,
Ricky Sandoval, Watercraft claims that he
made a complete turnaround and exhibited
acts of soleownership by signing the Boat
Pull-Out Clearance in order to retrieve the
sailboat. It argues that common sense and
logic would dictate that he should have
invoked the existence of the partnership to
answer the demand for payment of the
storage fees.
Watercraft contends that in order to pre-empt
whatever action it may decide to take with
respect to the sailboat in relation to his
liabilities, Wolfe accomplished in no time the
clearance that paved the way for its removal
from the company's premises without paying
his outstanding obligations. It claims that such
act reveals a fraudulent intent to use the
company storage facilities without payment of
storage fees, and constitutes unjust
enrichment.
The petition lacks merit.
A writ of preliminary attachment is defined as
a provisional remedy issued upon order of the
court where an action is pending to be levied
upon the property or properties of the
defendant therein, the same to be held
thereafter by the sheriff as security for the
satisfaction of whatever judgment that might
be secured in the said action by the attaching
creditor against the defendant.10 However, it
should be resorted to only when necessary
and as a last remedy because it exposes the

debtor to humiliation and annoyance.11 It must
be granted only on concrete and specific
grounds and not merely on general averments
quoting the words of the rules.12 Since
attachment is harsh, extraordinary, and
summary in nature,13 the rules on the
application of a writ of attachment must be
strictly construed in favor of the defendant. the
court14 in which the action is pending. Such
bond executed to the adverse party in the
amount fixed by the court is subject to the
conditions that the applicant will pay: (1) all
costs which may be adjudged to the adverse
party; and (2) all damages which such party
may sustain by reason of the attachment, if
the court shall finally adjudge that the
applicant was not entitled thereto.15 As to the
requisite affidavit of merit, Section 3,16 Rule
57of the Rules of Court states that an order of
attachment shall be granted only when it
appears in the affidavit of the applicant, or of
some other person who personally knows the
facts:
1. that a sufficient cause of action
exists;
2. that the case is one of those
mentioned in Section 117 hereof;
3. that there is no other sufficient
security for the claim sought to be
enforced by the action; and
4. that the amount due to the
applicant, or the value of the property
the possession of which he is entitled
to recover, is as much as the sum for
which the order is granted above all
legal counterclaims.
The mere filing of an affidavit reciting
the facts required by Section 3, Rule
57, however, is not enough to compel
the judge to grant the writ of
preliminary attachment. Whether or
not the affidavit sufficiently established
facts therein stated is a question to be
determined by the court in the
exercise of its discretion.18 "The
sufficiency or insufficiency of an
affidavit depends upon the amount of
40
credit given it by the judge, and its
acceptance or rejection, upon his
sound discretion."19 Thus, in reviewing
the conflicting findings of the CA and
the RTC on the pivotal issue of
whether or not Watercraft's affidavit of
merit sufficiently established facts
which constitute as grounds upon
which attachment may be issued
under Section 1 (a)20 and (d),21 Rule
57, the Court will examine the Affidavit
of Preliminary Attachment22 of Rosario
E. Rañoa, its Vice-President, which
reiterated the following allegations in
its complaint to substantiate the
application for a writ of preliminary
attachment:
xxxx
4. Sometime in June 1997, the
Defendant was hired as Watercraft's
Shipyard Manager.
5. Soon thereafter, the Defendant
placed his sailboat, the Knotty Gull,
within the boat storage facilities of
Watercraft for purposes of storage and
safekeeping.
6. Despite having been employed by
Watercraft, the Defendant was not
exempted from paying Watercraft boat
storage fees for the use of the said
storage facilities.
7. By virtue of his then position and
employment with Watercraft, the
Defendant was very much
knowledgeable of the foregoing fact.
8. All throughout his employment with
Watercraft, the Defendant used the
boat storage facilities of Watercraft for
his Knotty Gull.
9. However, all throughout the said
period of his employment, the
Defendant never paid the boat storage
fees in favor of the Plaintiff.

10. The Defendant's contract of
employment with Watercraft was
terminated on 07 March 2002.
11. [Sometime] thereafter, that is, in or
about June 2002, the Defendant
pulled out the Knotty Gull from the
boat storage facilities of Watercraft.
12. Instead of settling in full his
outstanding obligations concerning
unpaid storage fees before pulling our
the Knotty Gull, the Defendant signed
a Boat Pull-Out Clearance dated 29
June 2002 wherein he merely
acknowledged the then outstanding
balance of Sixteen Thousand Three
Hundred and Twenty-four and 82/100
US Dollars (US$16,324.82),
representing unpaid boat storage fees
for the period commencing June 1997
to June 2002, that he owed
Watercraft.
13. By reason of Defendant's mere
accomplishment of the said Boat Pull-
Out Clearance with acknowledgment
of his outstanding obligation to
Watercraft in unpaid boat storage
fees, Mr. Franz Urbanek, then the
Shipyard Manager who replaced the
Defendant, contrary to company
policy, rules and regulations, permitted
the latter to physically pull out his boat
from the storage facilities of the
Plaintiff without paying any portion of
his outstanding obligation in storage
fees.
14. Several demands were then made
upon the Defendant for him to settle
his outstanding obligations to the
Plaintiff in unpaid storage fees but the
same went unheeded.
15. As of 02 April 2005, the
outstanding obligation of the
Defendant to the Plaintiff in unpaid
boat storage fees stands at Three
Million Two Hundred Thirty-One
Thousand Five Hundred and Eighty-
Nine and 25/100 Pesos (Php
41
3,231,589.25) inclusive of interest
charges.
16. For failing to pay for the use [of]
facilities and services—in the form of
boat storage facilities—duly enjoyed
by him and for failing and refusing to
fulfill his promise to pay for the said
boat storage fees, the Defendant is
clearly guilty of fraud which entitles the
Plaintiff to a Writ of Preliminary
Attachment upon the property of the
Defendant as security for the
satisfaction of any judgment in its
favor in accordance with the
provisions of Paragraph (d), Section 1,
Rule 57 of the Rules of Court.
17. The instant case clearly falls under
the said provision of law.
18. Furthermore, lawful factual and
legal grounds exist which show that
the Defendant may have departed or
is about to depart the country to
defraud his creditors thus rendering it
imperative that a Writ of Preliminary
Attachment be issued in favor of the
Plaintiff in the instant case.
19. The possibility of flight on the part
of the Defendant is heightened by the
existence of the following
circumstances:
a. The Special Working Visa
issued in favor of the
Defendant expired in April
2005;
b. The Defendant is a British
national who may easily leave
the country at will;
c. The Defendant has no real
properties and visible,
permanent business or
employment in the Philippines;
and
e. The house last known to
have been occupied by the

Defendant is merely being
rented by him.
20. All told, the Defendant is a very
serious flight risk which fact will
certainly render for naught the
capacity of the Plaintiff to recover in
the instant case.23
After a careful perusal of the foregoing
allegations, the Court agrees with the CA that
Watercraft failed to state with particularity the
circumstances constituting fraud, as required
by Section 5,24 Rule 8 of the Rules of Court,
and that Wolfe's mere failure to pay the boat
storage fees does not necessarily amount to
fraud, absent any showing that such failure
was due to insidious machinations and intent
on his part to defraud Watercraft of the
amount due it.
In Liberty Insurance Corporation v. Court of
Appeals,25 the Court explained that to
constitute a ground for attachment in Section
1(d), Rule 57 of the Rules of Court, it must be
shown that the debtor in contracting the debt
or incurring the obligation intended to defraud
the creditor. A debt is fraudulently contracted
if at the time of contracting it, the debtor has a
preconceived plan or intention not to pay.
"The fraud must relate to the execution of the
agreement and must have been the reason
which induced the other party into giving
consent which he would not have otherwise
given."26
Fraudulent intent is not a physical entity, but a
condition of the mind beyond the reach of the
senses, usually kept secret, very unlikely to be
confessed, and therefore, can only be proved
by unguarded expressions, conduct and
circumstances.27 Thus, the applicant for a writ
of preliminary attachment must sufficiently
show the factual circumstances of the alleged
fraud because fraudulent intent cannot be
inferred from the debtor's mere non-payment
of the debt or failure to comply with his
obligation.28 The particulars of such
circumstances necessarily include the time,
persons, places and specific acts of fraud
committed.29 An affidavit which does not
contain concrete and specific grounds is
42
inadequate to sustain the issuance of such
writ. In fact, mere general averments render
the writ defective and the court that ordered its
issuance acted with grave abuse of discretion
amounting to excess of jurisdiction.30
In this case, Watercraft's Affidavit of
Preliminary Attachment does not contain
specific allegations of other factual
circumstances to show that Wolfe, at the time
of contracting the obligation, had a
preconceived plan or intention not to pay.
Neither can it be inferred from such affidavit
the particulars of why he was guilty of fraud in
the performance of such obligation. To be
specific, Watercraft's following allegation is
unsupported by any particular averment of
circumstances that will show why or how such
inference or conclusion was arrived at, to wit:
"16. For failing to pay for the use [of] facilities
and services - in the form of boat storage
facilities – duly enjoyed by him and for failing
and refusing to fulfill his promise to pay for the
said boat storage fees, the Defendant is
clearly guilty of fraud x x x."31 It is not an
allegation of essential facts constituting
Watercraft's causes of action, but a mere
conclusion of law.
With respect to Section 1 (a),32 Rule 57, the
other ground invoked by Watercraft for the
issuance of the writ of preliminary attachment,
the Court finds no compelling reason to depart
from the CA's exhaustive ruling to the effect
that such writ is unnecessary because Wolfe
is not a flight risk, thus:
As to the allegation that Wolfe is a flight risk,
thereby warranting the issuance of the writ,
the same lacks merit. The mere fact that
Wolfe is a British national does not
automatically mean that he would leave the
country at will. As Wolfe avers, he and his
family had been staying in the Philippines
since 1997, with his daughters studying at a
local school. He also claims to be an existing
stockholder and officer of Wolfe Marine
Corporation, a SEC-registered corporation, as
well as a consultant of projects in the Subic
Area, a member of the Multipartite Committee
for the new port development in Subic, and a
member of the Subic Chamber of Commerce.
More importantly, Wolfe has a pending labor

case against Watercraft – a fact which the
company glaringly failed to mention in its
complaint – which Wolfe claims to want to
prosecute until its very end. The said
circumstances, as well as the existence of
said labor case where Wolfe stands not only
to be vindicated for his alleged illegal
dismissal, but also to receive recompense,
should have convinced the trial court that
Wolfe would not want to leave the country at
will just because a suit for the collection of the
alleged unpaid boat storage fees has been
filed against him by Watercraft.
Neither should the fact that Wolfe's Special
Working Visa expired in April 2005 lead
automatically to the conclusion that he would
leave the country.1âwphi1 It is worth noting
that all visas issued by the government to
foreigner staying in the Philippines have
expiration periods. These visas, however, may
be renewed, subject to the requirements of
the law. In Wolfe's case, he indeed renewed
his visa, as shown by Special Working Visa
No. 05-WV-0124P issued by the Subic Bay
Metropolitan Authority Visa Processing Office
on April 25, 2005, and with validity of two (2)
years therefrom. Moreover, his Alien
Certificate of Registration was valid up to May
11, 2006.33
Meanwhile, Watercraft's reliance on Chuidian
v. Sandiganbayan34 is misplaced. It is well
settled that:
x x x when the preliminary attachment is
issued upon a ground which is at the same
time the applicant's cause of action; e.g., "an
action for money or property embezzled or
fraudulently misapplied or converted to his
own use by a public officer, or an officer of a
corporation, or an attorney, factor, broker,
agent, or clerk, in the course of his
employment as such, or by any other person
in a fiduciary capacity, or for a willful violation
of duty," or "an action against a party who has
been guilty of fraud in contracting the debt or
incurring the obligation upon which the action
is brought," the defendant is not allowed to file
a motion to dissolve the attachment under
Section 13 of Rule 57 by offering to show the
43
falsity of the factual averments in the plaintiff's
application and affidavits on which the writ
was based – and consequently that the writ
based thereon had been improperly or
irregularly issued – the reason being that the
hearing on such a motion for dissolution of the
writ would be tantamount to a trial of the
merits of the action. In other words, the merits
of the action would be ventilated at a mere
hearing of a motion, instead of at the regular
trial.35
Be that as it may, the foregoing rule is not
applicable in this case because when Wolfe
filed a motion to dissolve the writ of
preliminary attachment, he did not offer to
show the falsity of the factual averments in
Watercraft's application and affidavit on which
the writ was based. Instead, he sought the
discharge of the writ on the ground that
Watercraft failed to particularly allege any
circumstance amounting to fraud. No trial on
the merits of the action at a mere hearing of
such motion will be had since only the
sufficiency of the factual averments in the
application and affidavit of merit will be
examined in order to find out whether or not
Wolfe was guilty of fraud in contracting the
debt or incurring the obligation upon which the
action is brought, or in the performance
thereof.
Furthermore, the other ground upon which the
writ of preliminary attachment was issued by
the RTC is not at the same time the
applicant's cause of action. Assuming
arguendo that the RTC was correct in issuing
such writ on the ground that Watercraft's
complaint involves an action for the recovery
of a specified amount of money or damages
against a party, like Wolfe, who is about to
depart from the Philippines with intent to
defraud his creditors, the Court stresses that
the circumstances36 cited in support thereof
are merely allegations in support of its
application for such writ.37 Such
circumstances, however, are neither the core
of Watercraft's complaint for collection of sum
of money and damages, nor one of its three
(3) causes of action therein.38
All told, the CA correctly ruled that Watercraft
failed to meet one of the requisites for the

issuance of a writ of preliminary attachment,
i.e., that the case is one of those mentioned in
Section 1 of Rule 57, and that the RTC
gravely abused its discretion in improvidently
issuing such writ. Watercraft failed to
particularly state in its affidavit of merit the
circumstances constituting intent to defraud
creditors on the part of Wolfe in contracting or
in the performance of his purported obligation
to pay boat storage fees, as well as to
establish that he is a flight risk. Indeed, if all
the requisites for granting such writ are not
present, then the court which issues it acts in
excess of its jurisdiction.39
WHEREFORE, premises considered, the
petition is DENIED. The Court of Appeals
Decision dated September 27, 2007 and its
Resolution dated January 24, 2008 in CA-
G.R. SP No. 97804, are AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
WE CONCUR:
ECOND DIVISION
G.R. No. 154106             June 29, 2004
D.M. WENCESLAO and ASSOCIATES, INC.,
and/or DOMINADOR S. DAYRIT, petitioners,
vs.
READYCON TRADING AND
CONSTRUCTION CORP., respondent.
DECISION
QUISUMBING, J.:
This petition for review assails the decision1 of
the Court of Appeals, dated January 30, 2002,
as well as its resolution2 dated June 20, 2002
in CA-GR CV No. 49101, denying petitioners’
motion for reconsideration. The appellate
court affirmed the decision3 of the Regional
Trial Court of Pasig City, Branch 165, in Civil
44
Case No. 61159, ordering petitioners to pay
the sum of ₱1,014,110.45 with interest rate of
12% per annum (compounded annually) from
August 9, 1991, the date of filing of the
complaint, until fully paid to Readycon Trading
and Construction Corp., plus damages.
Petitioner D.M. Wenceslao and Associates,
Inc. (WENCESLAO, for brevity) is a domestic
corporation, organized under and existing
pursuant to Philippine laws, engaged in the
construction business, primarily infrastructure,
foundation works, and subdivision
development. Its co-petitioner, Dominador
Dayrit, is the vice-president of said
company.4 Respondent Readycon Trading
and Construction Corporation (READYCON,
for brevity) is likewise a corporate entity
organized in accordance with Philippine laws.
Its primary business is the manufacture and
sale of asphalt materials.5
The facts of this case are not in dispute.
WENCESLAO had a contract with the Public
Estates Authority (PEA) for the improvement
of the main expressway in the R-1 Toll Project
along the Coastal Road in Parañaque City. To
fulfill its obligations to the PEA, WENCESLAO
entered into a contract with READYCON on
April 16, 1991. READYCON agreed to sell to
WENCESLAO asphalt materials valued at
₱1,178,308.75. The contract bore the
signature of co-petitioner Dominador Dayrit,
as signatory officer for WENCESLAO in this
agreement. Under the contract, WENCESLAO
was bound to pay respondent a twenty
percent (20%) downpayment, or ₱235,661.75,
upon delivery of the materials contracted for.
The balance of the contract price, amounting
to ₱942,647, was to be paid within fifteen (15)
days thereof. It was further stipulated by the
parties that respondent was to furnish, deliver,
lay, roll the asphalt, and if necessary, make
the needed corrections on a prepared base at
the jobsite.6
On April 22, 1991, READYCON delivered the
assorted asphalt materials worth
₱1,150,531.75. Accordingly, WENCESLAO
paid the downpayment of ₱235,661.75 to
READYCON. Thereafter, READYCON

performed its obligation to lay and roll the
asphalt materials on the jobsite.7
Fifteen (15) days after performance of said
work, READYCON demanded that
WENCESLAO pay the balance of the contract
price. WENCESLAO, however, ignored said
demand.
On May 30, 1991, the counsel for
READYCON wrote a demand letter to
WENCESLAO asking that it make good on the
balance it owed. Again, WENCESLAO failed
to heed the demand. It did not even bother to
reply to the demand letter.8
In view of this development, on July 19, 1991,
READYCON filed a complaint with the
Regional Trial Court of Pasig City for
collection of a sum of money and damages,
with prayer for writ of preliminary attachment
against D.M. Wenceslao and/or Dominador
Dayrit, docketed as Civil Case No. 61159.
READYCON demanded payment of
₱1,014,110.45 from petitioners herein with
₱914,870.75 as the balance of contract price,
as well as payment of ₱99,239.70,
representing another unpaid account.9
As READYCON timely posted the required
bond of ₱1,150,000, its application for the writ
of preliminary attachment was granted.
On September 5, 1991, the RTC Sheriff
attached certain assets of WENCESLAO,
particularly, the following heavy equipments:
One (1) asphalt paver, one (1) bulldozer, one
(1) dozer and one (1) grader.10
On September 16, 1991, WENCESLAO
moved for the release of the attached
equipments and posted its counter-bond. The
trial court granted the motion and directed the
RTC Sheriff to return the attached
equipments.
On September 25, 1991, the Sheriff released
the attached heavy machineries to
WENCESLAO.11
In the proceedings below, WENCESLAO
admitted that it owed READYCON
45
₱1,014,110.45 indeed. However, it alleged
that their contract was not merely one of sale
but also of service, namely, that respondent
shall lay the asphalt in accordance with the
specifications and standards imposed by and
acceptable to the government. WENCESLAO
also alleged that since the contract did not
indicate this condition with respect to the
period within which the balance must be paid,
the contract failed to reflect the true intention
of the parties.12 It alleged READYCON agreed
that the balance in the payments would be
settled only after the government had
accepted READYCON’s work as to its quality
in laying the asphalt. By way of counterclaim,
WENCESLAO prayed for the payment of
damages caused by the filing of
READYCON’s complaint and the issuance of
the writ of attachment despite lack of cause.13
On December 26, 1994, the RTC rendered
judgment in this wise:
WHEREFORE, judgment is hereby
rendered ordering the defendant D.M.
Wenceslao & Associates, Inc. to pay
plaintiff as follows:
1. The amount of
P1,014,110.45 with interest at
the rate of 12% per annum
(compounded annually) from
August 9, 1991, date of filing
of the complaint, until fully
paid.
2. The amount of P35,000.00
as and for attorney’s fees and
expenses of litigation.
3. Costs of suit.
The counterclaim of the defendants is
dismissed for lack of merit.14
Dissatisfied with the decision, the petitioners
appealed to the Court of Appeals. The
appellate court, however, affirmed in toto the
decision of the lower court.15
In denying the appeal, the appellate court
found that contrary to WENCESLAO’s

assertion, malice and bad faith in obtaining a
writ of attachment must be proved before a
claim for damages on account of wrongful
attachment will prosper, citing Philippine
Commercial International Bank v. Intermediate
Appellate Court, 196 SCRA 29 (1991). The
CA stressed that the trial court found neither
malice nor bad faith relative to the filing of the
complaint and the obtaining of the writ of
attachment. Also, according to the CA,
petitioners did not adduce evidence to show
that the attachment caused damage to the
cited pieces of heavy equipment.16
The appellate court also found that the trial
court correctly interpreted the period for
payment of the balance. It held that the text of
the stipulation that the balance shall be paid
within fifteen days is clear and unmistakable.
Granting that the sales contract was not
merely for supply and delivery but also for
service, the balance was already due and
demandable when demand was made on May
30, 1991, which was a month after
READYCON performed its obligation.17
Hence, the instant petition, wherein petitioners
raise the following issues:
1. WHETHER OR NOT QUESTIONS
OF FACTS ARE RAISED IN THE
APPEAL BY CERTIORARI;
2. WHETHER OR NOT THE
HONORABLE COURT OF APPEALS
ERRED IN NOT HOLDING
RESPONDENT LIABLE FOR
COMPENSATORY DAMAGES FOR
THE WRONGFUL ISSUANCE OF
THE WRIT OF PRELIMINARY
ATTACHMENT;
3. WHETHER OR NOT THE
HONORABLE COURT OF APPEALS
ERRED IN NOT HOLDING THE
OBLIGATION [AS] NOT YET DUE
AND DEMANDABLE.18
We find proper for resolution two issues: (1) Is
respondent READYCON liable to petitioner
WENCESLAO for damages caused by the
issuance and enforcement of the writ of
46
preliminary attachment? (2) Was the
obligation of WENCESLAO to pay
READYCON already due and demandable as
of May 30, 1991?
On the first issue, petitioners rely mainly
on Lazatin v. Twano and Castro, 112 Phil. 733
(1961), reiterated in MC Engineering v. Court
of Appeals, 380 SCRA 116 (2002). In Lazatin,
we held that actual or compensatory damages
may be recovered for wrongful, though not
malicious, attachment. Lazatin also held that
attorney’s fees may be recovered under
Article 2208 of the Civil Code.19 Petitioners
contend that Lazatin applies in the instant
case because the wrongful attachment of
WENCESLAO’s equipment resulted in a
paralysis of its operations, causing it to
sustain a loss of ₱100,000 per day in terms of
accomplishment of work. Since the
attachment lasted 19 days it suffered a total
loss of ₱1.9 million. Aside from that, it had to
spend ₱50,000 on the pullout of the
equipment and another ₱100,000 to repair
and restore them to their former working
condition.20
Respondent counters that inasmuch as a
preliminary attachment is an available
ancillary remedy under the rules, a penalty
cannot be meted out for the enforcement of a
right, such as in this case when it sought such
relief. It stresses that the writ was legally
issued by the RTC, upon a finding that
READYCON sought the relief without malice
or bad faith. Furthermore, WENCESLAO
failed to show concrete and credible proof of
the damages it suffered. The issuance of a
writ and its enforcement entail a rigorous
process where the court found that it was not
attended by malice or bad faith. It
cites Mindanao Savings and Loan Association
v. Court of Appeals, 172 SCRA 480 (1989), to
the effect where a counter-bond is filed, the
right to question the irregularity and propriety
of the writ of attachment must be deemed
waived since the ground for the issuance of
the writ forms the core of the complaint.21
We find for the respondent on this issue.
However, its reliance upon Mindanao Savings
and Loan Association is misplaced.

It is to be stressed that the posting of a
counter-bond is not tantamount to a waiver of
the right to damages arising from a wrongful
attachment. This we have made clear in
previous cases, e.g., Calderon v. Intermediate
Appellate Court,22 where we ruled that:
Whether the attachment was
discharged by either of the two (2)
ways indicated in the law, i.e., by filing
a counterbond or by showing that the
order of attachment was improperly or
irregularly issued, the liability of the
surety on the attachment bond
subsists because the final reckoning is
when "the Court shall finally adjudge
that the attaching creditor was not
entitled" to the issuance of the
attachment writ in the first place. The
attachment debtor cannot be deemed
to have waived any defect in the
issuance of the attachment writ by
simply availing himself of one way of
discharging the attachment writ,
instead of the other. Moreover, the
filing of a counterbond is a speedier
way of discharging the attachment writ
maliciously sought out by the
attaching party creditor instead of the
other way, which in most instances
like in the present case, would require
presentation of evidence in a fullblown
trial on the merits and cannot easily be
settled in a pending incident of the
case.23
The point in Mindanao Savings, alluded to by
respondent, pertained to the propriety of
questioning the writ of attachment by filing a
motion to quash said writ, after a counter-
bond had been posted by the movant. But
nowhere in Mindanao Savings did we rule that
filing a counter-bond is tantamount to a waiver
of the right to seek damages on account of
the impropriety or illegality of the writ.
We note that the appellate court,
citing Philippine Commercial & Industrial
Bank, 196 SCRA 29 (1991), stressed that bad
faith or malice must first be proven as a
condition sine qua non to the award of
damages. The appellate court appears to
47
have misread our ruling, for pertinently what
this Court stated was as follows:
The silence of the decision in GR No.
55381 on whether there was bad faith
or malice on the part of the petitioner
in securing the writ of attachment does
not mean the absence thereof. Only
the legality of the issuance of the writ
of attachment was brought in issue in
that case. Hence, this Court ruled on
that issue without a pronouncement
that procurement of the writ was
attended by bad faith. Proof of bad
faith or malice in obtaining a writ of
attachment need be proved only in the
claim for damages on account of the
issuance of the writ. We affirm the
finding of the respondent appellate
court that malice and bad faith
attended the application by PCIB of a
writ of attachment.24
Plainly, we laid no hard and fast rule that bad
faith or malice must be proved to recover any
form of damages. In Philippine Commercial &
Industrial Bank, we found bad faith and malice
to be present, thereby warranting the award of
moral and exemplary damages. But we
denied the award of actual damages for want
of evidence to show said damages. For the
mere existence of malice and bad faith would
not per se warrant the award of actual or
compensatory damages. To grant such
damages, sufficient proof thereon is required.
Petitioners cite Lazatin and MC
Engineering insofar as proof of bad faith and
malice as prerequisite to the claim of actual
damages is dispensed with. Otherwise stated,
in the present case, proof of malice and bad
faith are unnecessary because, just like
in Lazatin and MC Engineering, what is
involved here is the issue of actual and
compensatory damages. Nonetheless, we find
that petitioner is not entitled to an award of
actual or compensatory damages.
Unlike Lazatin and MC Engineering, wherein
the respective complaints were dismissed for
being unmeritorious, the writs of attachment
were found to be wrongfully issued, in the
present case, both the trial and the appellate
courts held that the complaint had merit.

Stated differently, the two courts found
READYCON entitled to a writ of preliminary
attachment as a provisional remedy by which
the property of the defendant is taken into
custody of the law as a security for the
satisfaction of any judgment which the plaintiff
may recover.25
Rule 57, Section 4 of the 1997 Rules of Civil
Procedure states that:
SEC. 4. Condition of applicant’s bond.
- The party applying for the order must
thereafter give a bond executed to the
adverse party in the amount fixed by
the court in its order granting the
issuance of the writ, conditioned that
the latter will pay all the costs which
may be adjudged to the adverse party
and all damages which he may
sustain by reason of the attachment, if
the court shall finally adjudge that the
applicant was not entitled
thereto (italics for emphasis).
In this case, both the RTC and the Court of
Appeals found no reason to rule that
READYCON was not entitled to issuance of
the writ. Neither do we find now that the writ is
improper or illegal. If WENCESLAO suffered
damages as a result, it is merely because it
did not heed the demand letter of the
respondent in the first place. WENCESLAO
could have averted such damage if it
immediately filed a counter-bond or a deposit
in order to lift the writ at once. It did not, and
must bear its own loss, if any, on that account.
On the second issue, WENCESLAO admits
that it indeed owed READYCON the amount
being claimed by the latter. However, it
contends that while the contract provided that
the balance was payable within fifteen (15)
days, said agreement did not specify when
the period begins to run. Therefore, according
to petitioner, the appellate court erred when it
held the contract clear enough to be
understood on its face. WENCESLAO insists
that the balance of the purchase price was
payable only "upon acceptance of the work by
the government." In other words, the real
intent of the parties was that it shall be due
48
and demandable only fifteen days after
acceptance by the government of the work.
This is common practice, according to
petitioner.
Respondent argues that the stipulation in the
sales contract is very clear that it should be
paid within fifteen (15) days without any
qualifications and conditions. When the terms
of a contract are clear and readily
understandable, there is no room for
construction. Even so, the contention was
mooted and rendered academic when, a few
days after institution of the complaint, the
government accepted the work but
WENCESLAO still failed to pay respondent.
Under Article 1582 of the Civil Code, the
buyer is obliged to pay the price of the thing
sold at the time stipulated in the contract. Both
the RTC and the appellate court found that
the parties’ contract stated that the buyer shall
pay the manufacturer the amount of
₱1,178,308.75 in the following manner:
20% downpayment - ₱235,661.75
Balance – payable within fifteen (15)
days – ₱942,647.00
Following the rule on interpretation of
contracts, no other evidence shall be
admissible other than the original document
itself,26 except when a party puts in issue in
his pleading the failure of the written
agreement to express the true intent of the
parties.27 This was what the petitioners
wanted done.
However, to rule on whether the written
agreement failed to express the true intent of
the parties would entail having this Court
reexamine the facts. The findings of the trial
court as affirmed by the appellate court on this
issue, however, bind us now. For in a petition
for certiorari under Rule 45 of the 1997 Rules
of Civil Procedure, this Court may not review
the findings of fact all over again. Suffice it to
say, however, that the findings by the RTC,
then affirmed by the CA, that the extra
condition being insisted upon by the
petitioners is not found in the sales contract

between the parties. Hence it cannot be used
to qualify the reckoning of the period for
payment. Besides, telling against petitioner
WENCESLAO is its failure still to pay the
unpaid account, despite the fact of the work’s
acceptance by the government already.
With submissions of the parties carefully
considered, we find no reason to warrant a
reversal of the decisions of the lower courts.
But since Dominador Dayrit merely acted as
representative of D.M. Wenceslao and
Associates, Inc., in signing the contract, he
could not be made personally liable for the
corporation’s failure to comply with its
obligation thereunder. Petitioner
WENCESLAO is properly held liable to pay
respondent the sum of ₱1,014,110.45 with
interest rate of 12% per annum (compounded
annually) from August 9, 1991, the date of
filing of the complaint, until fully paid, plus
damages.
WHEREFORE, the petition is DENIED. The
assailed decision and resolution of the Court
of Appeals in CA-G.R. CV No. 49101,
affirming the judgment of the Regional Trial
Court of Pasig City, Branch 165, in Civil Case
No. 61159, are AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Puno, Austria-Martinez*, Callejo,
Sr., and Tinga, JJ., concur.
THIRD DIVISION
[G.R. NO. 123638 : June 15, 2005]
INSULAR SAVINGS
BANK, Petitioner, v. COURT OF APPEALS,
JUDGE OMAR U. AMIN, in his capacity as
Presiding Judge of Branch 135 of the
Regional Trial Court of Makati, and FAR
EAST BANK AND TRUST
COMPANY, Respondents.
DECISION
GARCIA, J.:
49
Thru this appeal via a Petition for Review
on Certiorari under Rule 45 of the Rules of
Court, petitioner Insular Savings Bank seeks
to set aside the D E C I S I O N1 dated
October 9, 1995 of the Court of Appeals
in CA-G.R. SP No. 34876 and its resolution
dated January 24, 1996,2 denying petitioner's
motion for reconsideration.
The assailed decision of October 9, 1995
cleared the Regional Trial Court (RTC) at
Makati, Branch 135, of committing, as
petitioner alleged, grave abuse of discretion in
denying petitioner's motion to discharge
attachment by counter-bond in Civil Case No.
92-145, while the equally assailed resolution
of January 24, 1996 denied petitioner's motion
for reconsideration.
The undisputed facts are summarized in the
appellate court's decision3 under review, as
follows:
"On December 11, 1991, respondent Bank
[Far East Bank and Trust Company] instituted
Arbitration Case No. 91-069 against petitioner
[Insular Savings Bank] before the Arbitration
Committee of the Philippine Clearing House
Corporation [PCHC]. The dispute between the
parties involved three [unfunded] checks with
a total value of P25,200,000.00. The checks
were drawn against respondent Bank and
were presented by petitioner for clearing. As
respondent Bank returned the checks beyond
the reglementary period, [but after petitioner's
account with PCHC was credited with the
amount of P25,200,000.00] petitioner refused
to refund the money to respondent Bank.
While the dispute was pending arbitration, on
January 17, 1992, respondent Bank
instituted Civil Case No. 92-145 in the
Regional Trial Court of Makati and prayed for
the issuance of a writ of preliminary
attachment. On January 22, 1992, Branch 133
of the Regional Trial Court of Makati issued an
Order granting the application for preliminary
attachment upon posting by respondent Bank
of an attachment bond in the amount
of P6,000,000.00. On January 27, 1992,
Branch 133 of the Regional Trial Court of
Makati issued a writ of preliminary attachment
for the amount of P25,200,000.00. During the
hearing on February 11, 1992 before the

Arbitration Committee of the Philippine
Clearing House Corporation, petitioner and
respondent Bank agreed to temporarily divide
between them the disputed amount
of P25,200,000.00 while the dispute has not
yet been resolved. As a result, the sum
of P12,600,000.00 is in the possession of
respondent Bank. On March 9, 1994,
petitioner filed a motion to discharge
attachment by counter-bond in the amount
of P12,600,000.00. On June 13, 1994,
respondent Judge issued the first assailed
order denying the motion. On June 27,
1994, petitioner filed a motion for
reconsideration which was denied in the
second assailed order dated July 20, 1994"
(Emphasis and words in bracket added).
From the order denying its motion to
discharge attachment by counter-bond,
petitioner went to the Court of Appeals on a
petition for certiorari thereat docketed as CA-
G.R. SP No. 34876, ascribing on the trial court
the commission of grave abuse of discretion
amounting to lack of jurisdiction.
While acknowledging that "[R]espondent
Judge may have erred in his Order of June
13, 1994 that the counter-bond should be in
the amount of P27,237,700.00", in that he
erroneously factored in, in arriving at such
amount, unliquidated claim items, such as
actual and exemplary damages, legal interest,
attorney's fees and expenses of litigation, the
CA, in the herein assailed decision dated
October 9, 1995, nonetheless denied due
course to and dismissed the petition. For,
according to the appellate court, the RTC's
order may be defended by, among others, the
provision of Section 12 of Rule 57 of the Rules
of Court, infra. The CA added that, assuming
that the RTC erred on the matter of computing
the amount of the discharging counter-bond,
its error does not amount to grave abuse of
discretion.
With its motion for reconsideration having
been similarly denied, petitioner is now with
us, faulting the appellate court, as follows:
"I. THE COURT OF APPEALS ERRED IN
NOT RULING THAT THE PRINCIPAL
50
AMOUNT CLAIMED BY RESPONDENT
BANK SHOULD BE THE BASIS FOR
COMPUTING THE AMOUNT OF THE
COUNTER-BOND, FOR THE PRELIMINARY
ATTACHMENT WAS ISSUED FOR THE
SAID AMOUNT ONLY.
"II. THE COURT OF APPEALS ERRED IN
NOT RULING THAT THE ARGUMENT THAT
THE AMOUNT OF THE COUNTER-BOND
SHOULD BE BASED ON THE VALUE OF
THE PROPERTY ATTACHED CANNOT BE
RAISED FOR THE FIRST TIME IN THE
COURT OF APPEALS.
"III. THE COURT OF APPEALS ERRED IN
RULING THAT THE AMOUNT OF THE
COUNTER-BOND SHOULD BE BASED ON
THE VALUE OF THE PROPERTY
ATTACHED EVEN IF IT WILL RESULT IN
MAKING THE AMOUNT OF THE COUNTER-
BOND EXCEED THE AMOUNT FOR WHICH
PRELIMINARY ATTACHMENT WAS
ISSUED."
Simply put, the issue is whether or not the CA
erred in not ruling that the trial court
committed grave abuse of discretion in
denying petitioner's motion to discharge
attachment by counter-bond in the amount
of P12,600,000.00.
Says the trial court in its Order of June 13,
1994:
"xxx (T)he counter-bond posted by [petitioner]
Insular Savings Bank should include the
unsecured portion of [respondent's] claim
of P12,600,000.00 as agreed by means of
arbitration between [respondent] and
[petitioner]; Actual damages at 25% percent
per annum of unsecured amount of claim from
October 21, 1991 in the amount
of P7,827,500.00; Legal interest of 12%
percent per annum from October 21, 1991 in
the amount of P3,805,200.00; Exemplary
damages in the amount of P2,000,000.00;
and attorney's fees and expenses of litigation
in the amount of P1,000,000.00 with a total
amount of P27,237,700.00 (Adlawan v.
Tomol, 184 SCRA 31 (1990)".

Petitioner, on the other hand, argues that the
starting point in computing the amount of
counter-bond is the amount of the
respondent's demand or claim only, in this
case P25,200,000.00, excluding contingent
expenses and unliquidated amount of
damages. And since there was a mutual
agreement between the parties to temporarily,
but equally, divide between themselves the
said amount pending and subject to the final
outcome of the arbitration, the amount
of P12,600,000.00 should, so petitioner
argues, be the basis for computing the
amount of the counter-bond.
The Court rules for the petitioner.
The then pertinent provision of Rule 57
(Preliminary Attachment) of the Rules of Court
under which the appellate court issued its
assailed decision and resolution, provides as
follows:
"SEC. 12. Discharge of attachment upon
giving counter-bond. - At any time after an
order of attachment has been granted, the
party whose property has been attached, . . .
may upon reasonable notice to the applicant,
apply to the judge who granted the order or to
the judge of the court which the action is
pending, for an order discharging the
attachment wholly or in part on the security
given. The judge shall, after hearing, order the
discharge of the attachment if a cash deposit
is made, or a counter-bond executed to the
attaching creditor is filed, on behalf of the
adverse party, with the clerk or judge of the
court where the application is made in an
amount equal to the value of the property
attached as determined by the judge, to
secure the payment of any judgment that
the attaching creditor may recover in the
action. x x x . Should such counter-bond for
any reason be found to be, or become
insufficient, and the party furnishing the same
fail to file an additional counter-bond, the
attaching party may apply for a new order of
attachment"4 (Emphasis supplied).4
As may be noted, the amount of the counter-
attachment bond is, under the terms of the
aforequoted Section 12, to be measured
51
against the value of the attached property, as
determined by the judge to secure the
payment of any judgment that the attaching
creditor may recover in the action. Albeit not
explicitly stated in the same section and
without necessarily diminishing the sound
discretion of the issuing judge on matters of
bond approval, there can be no serious
objection, in turn, to the proposition that the
attached property - and logically the counter-
bond necessary to discharge the lien on such
property - should as much as possible
correspond in value to, or approximately
match the attaching creditor's principal claim.
Else, excessive attachment, which ought to be
avoided at all times, shall ensue. As we held
in Asuncion v. Court of Appeals:5
"We, however, find the counter-attachment
bond in the amount of P301,935.41 required
of the private respondent by the trial court as
rather excessive under the circumstances.
Considering that the principal amounts
claimed by the petitioner . . . total only
P185,685.00, and that he had posted a bond
of only P80,000.00 for the issuance of the writ
of preliminary attachment, we deem it
reasonable to lower the amount of the
counter-attachment bond to be posted by the
private respondent . . . to the sum of
P185,685.00."
The following excerpts from
Herrera, REMEDIAL LAW, Vol. VII, 1997 ed.,
p. 61, citing retired Justice Jose Y. Feria, drive
home the same point articulated in Asuncion:
"The sheriff is required to attach only so much
of the property of the party against whom the
order is issued as may be sufficient to satisfy
the applicant's demand, the amount of which
is stated in the order, unless a deposit is
made or a counter-bond is given equal to
said amount. However, if the value of the
property to be attached is less than the
amount of the demand, the amount of the
applicant's bond may be equal to the value of
said property, and the amount of the
adverse party's deposit or counter-bond
may be equal to the applicant's bond. The
writ of preliminary attachment is issued upon
approval of the requisite bond". (Emphasis

supplied).ςηαñrοblεš  Î½Î¹r†υαl  lαω
lιbrαrÿ
Turning to the case at bar, the records show
that the principal claim of respondent, as
plaintiff a quo, is in the amount
of P25,200,000.00,6 representing the three (3)
unfunded checks drawn against, and
presented for clearing to, respondent bank.
Jurisprudence teaches that a writ of
attachment cannot be issued for moral and
exemplary damages, and other unliquidated
or contingent claim.7
The order of attachment dated January 22,
1992 fixed the bond to be posted by
respondent, as applicant, at P6,000,000.00.
The writ of attachment issued on January 27,
1992, in turn, expressly indicated that
petitioner is justly indebted to respondent in
the amount of P25,200,000.00.8 On February
11, 1992, before the Arbitration Committee of
the Philippine Clearing House Corporation,
petitioner and respondent, however, agreed to
equally divide between themselves, albeit on
a temporary basis, the disputed amount
of P25,200,000.00, subject to the outcome of
the arbitration proceedings. Thus, the release
by petitioner of the amount of P12,600,000.00
to respondent. On March 7, 1994, petitioner
filed a motion to discharge attachment by
counter-bond in the amount
of P12,600,000.009 which, to petitioner, is the
extent that respondent may actually be
prejudiced in the event its basic complaint for
recovery of money against petitioner prospers.
As things stood, therefore, respondent's
principal claim against petitioner immediately
prior to the filing of the motion to discharge
attachment has effectively been pruned down
to P12,600,000.00. The trial court was fully
aware of this reality. Accordingly, it should
have allowed a total discharge of the
attachment on a counter-bond based on the
reduced claim of respondent. If a portion of
the claim is already secured, we see no
justifiable reason why such portion should still
be subject of counter-bond. It may be that a
counter-bond is intended to secure the
payment of any judgment that the attaching
party may recover in the main action. Simple
common sense, if not consideration of fair
52
play, however, dictates that a part of a
possible judgment that has veritably been
preemptively satisfied or secured need not be
covered by the counter-bond.
With the view we take of this case, the trial
court, in requiring petitioner to post a counter-
bond in the amount of P27,237,700.00,
obviously glossed over one certain
fundamental. We refer to the fact that the
attachment respondent applied for and the
corresponding writ issued was only for the
amount of P25.2 Million. Respondent, it bears
to stress, did not pray for attachment on its
other claims, contingent and unliquidated as
they were. Then, too, the attaching writ rightly
excluded such claims. While the records do
not indicate, let alone provide a clear answer
as to the actual value of the property levied
upon, it may reasonably be assumed that it is
equal to respondent's principal claim. Be that
as it may, it was simply unjust for the trial
court to base the amount of the counter-bond
on a figure beyond the P25,200,000.00
threshold, as later reduced
to P12,600,200.00.
The trial court, therefore, committed grave
abuse of discretion when it denied petitioner's
motion to discharge attachment by counter-
bond in the amount of P12,600,000.00, an
amount more than double the attachment
bond required of, and given by, respondent.
As a necessary consequence, the Court of
Appeals committed reversible error when it
dismissed petitioner's recourse thereto in CA-
G.R. SP No. 34876.
It bears to stress, as a final consideration, that
the certiorari proceedings before the appellate
court and the denial of the motion to
discharge attachment subject of such
proceedings, transpired under the old rules on
preliminary attachment which has since been
revised.10 And unlike the former Section 12 of
Rule 57 of the Rules of Court where the value
of the property attached shall be the defining
measure in the computation of the discharging
counter-attachment bond, the present less
stringent Section 12 of Rule 57 provides that
the court shall order the discharge of

attachment if the movant "makes a cash
deposit, or files a counter-bond . . . in an
amount equal to that fixed by the court in the
order of attachment, exclusive of costs." Not
being in the nature of a penal statute, the
Rules of Court cannot be given retroactive
effect.11
This disposition should be taken in the light of
then Section 12, Rule 57 of the Rules of
Court.
WHEREFORE, the instant petition
is GRANTED. Accordingly, the assailed
decision and resolution of the Courts of
Appeals are hereby REVERSED and SET
ASIDE, along with the orders dated June 13,
1994 and July 20, 1994 of the Regional Trial
Court at Makati, Branch 135, in Civil Case
No. 92-145 insofar they denied petitioner's
motion to discharge attachment by counter-
bond in the amount of P12,600,000.00, and a
new one entered GRANTING such motion
upon the reposting of the same counter-bond.
SO ORDERED.
Panganiban, (Chairman), Sandoval-
Gutierrez, Corona, and Carpio-Morales, JJ.,
concur.
(*Engracio U. Ang, Jr. vs. Spouses Benjamin
M. Bitanga and Marilyn Andal Bitanga, G.R.
No. 223046, November 28, 2019---fairly new
case---naka PDF)
FIRST DIVISION
June 27, 2016
G.R. No. 184666
REPUBLIC OF THE
PHILIPPINES, Petitioner,
vs.
MEGA PACIFIC Esolutions, INC., WILLY U.
YU, BONNIE S. YU, ENRIQUE T.
53
TANSIPEK, ROSITA Y. TANSIPEK, PEDRO
O. TAN, JOHNSON W. FONG, BERNARD I.
FONG, and *LAURIANO A. BARRIOS,
Respondents.
DECISION
SERENO, CJ.:
The instant case is an offshoot of this Court's
Decision dated 13 January 2004 (2004
Decision) in a related case entitled Information
Technology Foundation of the
Philippines v. Commission on Elections .1
In the 2004 case, We declared void the
automation contract executed by respondent
Mega Pacific eSolutions, Inc. (MPEI) and the
Commission on Elections (COMELEC) for the
supply of automated counting machines
(ACMs) for the 2004 national elections.
The present case involves the attempt of
petitioner Republic of the Philippines to cause
the attachment of the properties owned by
respondent MPEI, as well as by its
incorporators and stockholders (individual
respondents in this case), in order to secure
petitioner's interest and to ensure recovery of
the payments it made to respondents for the
invalidated automation contract.
At bench is a Rule 45 Petition assailing the
Amended Decision dated 22 September 2008
(Amended Decision) issued by the Court of
Appeals (CA) in CA-G.R. SP No. 95988.2 In
said Amended Decision, the CA directed the
remand of the case to the Regional Trial Court
of Makati City, Branch 59 (RTC Makati) for the
reception of evidence in relation to petitioner's
application for the issuance of a writ of
preliminary attachment. The CA had
reconsidered and set aside its previous
Decision dated 31 January 2008 (First
Decision)3 entitling petitioner to the issuance
of said writ.
Summarized below are the relevant facts of
the case, some of which have already been
discussed in this Court's 2004 Decision:
THE FACTS

Republic Act No. 8436 authorized the
COMELEC to use an automated election
system for the May 1998 elections. However,
the automated system failed to materialize
and votes were canvassed manually during
the 1998 and the 2001 elections.
For the 2004 elections, the COMELEC again
attempted to implement the automated
election system. For this purpose, it invited
bidders to apply for the procurement of
supplies, equipment, and services.
Respondent MPEI, as lead company,
purportedly formed a joint venture - known as
the Mega Pacific Consortium (MPC) - together
with We Solv, SK C & C, ePLDT, Election.com
and Oracle. Subsequently, MPEI, on behalf of
MPC, submitted its bid proposal to
COMELEC.
The COMELEC evaluated various bid offers
and subsequently found MPC and another
company eligible to participate in the next
phase of the bidding process.4 The two
companies were referred to the Department of
Science and Technology (DOST) for technical
evaluation. After due assessment, the Bids
and Awards Committee (BAC) recommended
that the project be awarded to MPC. The
COMELEC favorably acted on the
recommendation and issued Resolution No.
6074, which awarded the automation project
to MPC.
Despite the award to MPC, the COMELEC
and MPEI executed on 2 June 2003 the
Automated Counting and Canvassing Project
Contract (automation contract)5 for the
aggregate amount of ₱l,248,949,088. MPEI
agreed to supply and deliver 1,991 units of
ACMs and such other equipment and
materials necessary for the computerized
electoral system in the 2004 elections.
Pursuant to the automation contract, MPEI
delivered 1,991 ACMs to the COMELEC. The
latter, for its part, made partial payments to
MPEI in the aggregate amount of ₱l.05 billion.
The full implementation of the automation
contract was rendered impossible by the fact
that, after a painstaking legal battle, this Court
in its 2004 Decision declared the contract null
54
and void.6 We held that the COMELEC
committed a clear violation of law and
jurisprudence, as well as a reckless disregard
of its own bidding rules and procedure. In
addition, the COMELEC entered into the
contract with inexplicable haste, and without
adequately checking and observing
mandatory financial, technical, and legal
requirements. In a subsequent Resolution, We
summarized the COMELEC's grave abuse of
discretion as having consisted of the
following: 7
1. By a formal Resolution, it awarded the
project to "Mega Pacific Consortium," an entity
that had not participated in the bidding.
Despite this grant, Comelec entered into
the actual Contract with "Mega Pacific
eSolutions, Inc." (MPEI), a company that
joined the bidding process but did not meet
the eligibility requirements.
2. Comelec accepted and irregularly paid for
MPEI's ACMs that had failed the accuracy
requirement of 99.9995 percent set up by the
Comelec bidding rules. Acknowledging that
this rating could have been too steep, the
Court nonetheless noted that "the essence of
public bidding is violated by the practice of
requiring very high standards or unrealistic
specifications that cannot be met, x x x only to
water them down after the award is
made. Such scheme, which discourages
the entry of bona fide bidders, is in fact a
sure indication of fraud in the bidding,
designed to eliminate fair competition."
3. The software program of the counting
machines likewise failed to detect previously
downloaded precinct results and to prevent
them from being reentered. This failure, which
has not been corrected x x x, would have
allowed unscrupulous persons to repeatedly
feed into the computers the results favorable
to a particular candidate, an act that would
have translated into massive election fraud by
just a few key strokes.
4. Neither were the ACMs able to print audit
trails without loss of data - a

mandatory requirement under Section 7 of
Republic Act No. 8436. Audit trails would
enable the Comelec to document the
identities of the ACM operators responsible for
data entry and downloading, as well as the
times when the various data were processed,
in order to forestall fraud and to identify the
perpetrators. The absence of audit trails
would have posed a serious threat to free and
credible elections.
5. Comelec failed to explain satisfactorily why
it had ignored its own bidding rules and
requirements. It admitted that the software
program used to test the ACMs was merely a
"demo" version, and that the final one to be
actually used in the elections was still being
developed. By awarding the Contract and
irregularly paying for the supply of the ACMs
without having seen -- much less, evaluated --
the final product being purchased, Comelec
desecrated the law on public bidding. It would
have allowed the winner to alter its bid
substantially, without any public bidding.
All in all, Comelec subverted the essence of
public bidding: to give the public an
opportunity for fair competition and a clear
basis for a precise comparison of
bids.8 (Emphasis supplied)
As a consequence of the nullification of the
automation contract, We directed the Office of
the Ombudsman to determine the possible
criminal liability of persons responsible for the
contract.9 This Court likewise directed the
Office of the Solicitor General to protect the
government from the ill effects of the illegal
disbursement of public funds in relation to the
automation contract. 10
After the declaration of nullity of the
automation contract, the following incidents
transpired:
1. Private respondents in the 2004 case
moved for reconsideration of the 2004
Decision, but the motion was denied by this
Court in a Resolution dated 17 February 2004
(2004 Resolution). 11
55
2. The COMELEC filed a "Most Respectful
Motion for Leave to Use the Automated
Counting Machines in the Custody of the
Commission on Elections for use in the 8
August 2005 Elections in the Autonomous
Region for Muslim Mindanao" dated 9
December 2004 (Motion for Leave to Use
ACMs), which was denied by this Court in its
Resolution dated 15 June 2005 (2005
Resolution).
3. Atty. Romulo B. Macalintal (Macalintal) filed
an "Omnibus Motion for Leave of Court (1) to
Reopen the Case; and (2) to Intervene and
Admit the Attached Petition in Intervention,"
which was denied by this Court in its
Resolution dated 22 August 2006 (2006
Resolution); and
4. Respondent MPEI filed a Complaint for
Damages12 (Complaint) with the RTC Makati,
from which the instant case arose.
The above-mentioned incidents are discussed
in more detail below.
BACKGROUND PROCEEDINGS
Private respondents' Motion for
Reconsideration
Private respondents in the 2004 case moved
for reconsideration of the 2004 Decision.
Aside from reiterating the procedural and
substantive arguments they had raised, they
also argued that the 2004 Decision had
exposed them to possible criminal
prosecution. 13
This Court denied the motion in its 2004
Resolution and ruled that no prejudgment had
been made on private respondents' criminal
liability. We further ruled that although the
2004 Decision stated that the Ombudsman
shall "determine the criminal liability, if any, of
the public officials (and conspiring private
individuals, if any) involved in the subject
Resolution and Contract," We did not make
any premature conclusion on any wrongdoing,
but precisely directed the Ombudsman to
make that determination after conducting

appropriate proceedings and observing due
process.
Similarly, it appears from the record that
several criminal and administrative
Complaints had indeed been filed with the
Ombudsman in relation to the declaration of
nullity of the automation contract. 14 The
Complaints were filed against several public
officials and the individual respondents in this
case. 15
In a Resolution issued on 28 June 2006, 16 the
Ombudsman recommended the filing of
informations before the Sandiganbayan
against some of the public officials and the
individual respondents17 for violation of
Section 3(e) of Republic Act No. 3019 (the
Anti-Graft and Corrupt Practices Act).
However, on 27 September 2006, 18 upon
reconsideration, the Ombudsman reversed its
earlier ruling in a Supplemental Resolution
(September Resolution), directing the
dismissal of the criminal cases against the
public officials, as well as the individual
respondents, for lack of probable cause. 19
With this development, a Petition
for Certiorari was filed with this Court on 13
October 2006 and docketed as G.R. No.
174777.20 In the Petition, several
individuals21 assailed the September
Resolution of the Ombudsman finding no
probable cause to hold respondents criminally
liable. The case remains pending with this
Court as of this date.
COMELEC's Motion for Leave to
Use ACMs in the ARMM Elections
The COMELEC filed a motion with this Court
requesting permission to use the 1,991 ACMs
previously delivered by respondent MPEI, for
the ARMM elections, then slated to be held on
8 August 2005. In its motion, the COMELEC
claimed that automation of the ARMM
elections was mandated by Republic Act No.
9333, and since the government had no
available funds to finance the automation of
those elections, the ACMs could be utilized for
the 2005 elections.
56
This Court denied the Motion in Our 2005
Resolution. We ruled that allowing the use of
the ACMs would have the effect of illegally
reversing and subverting a final decision We
had promulgated. We further ruled that the
COMELEC was asking for permission to do
what it had precisely been prohibited from
doing under the 2004 Decision. This Court
also ruled that the grant of the motion would
bar or jeopardize the recovery of government
funds paid to respondents. Considering that
the COMELEC did not present any evidence
to prove that the defects had been addressed,
We held that the use of the ACMs and the
software would expose the ARMM elections to
the same electoral ills pointed out in the 2004
Decision.
Atty. Macalintal's Omnibus Motion
Atty. Romulo Macalintal sought to reopen the
2004 case in order that he may be allowed to
intervene as a taxpayer and citizen. His
purpose for intervening was to seek another
testing of the ACMs with the ultimate objective
of allowing the COMELEC to use them, this
time for the 2007 national elections.
This Court denied his motion in Our 2006
Resolution, ruling that Atty. Macalintal failed to
demonstrate that certain supervening events
and legal circumstances had transpired to
justify the reliefs sought. We in fact found that,
after Our determination that the ACMs had
failed to pass legally mandated technical
requirements in 2004, they were simply put in
storage. The ACMs had remained idle and
unused since the last evaluation, at which
they failed to hurdle crucial tests.
Consequently, We ruled that if the ACMs were
not good enough for the 2004 national
elections or the 2005 ARMM elections, then
neither would they be good enough for the
2007 national elections, considering that
nothing was done to correct the flaws that had
been previously underscored in the 2004
Decision. We held that granting the motion
would be tantamount to rendering the 2004
Decision totally ineffective and nugatory.
Moreover, because of our categorical ruling
that the whole bidding process was void

and fraudulent, the proposal to use the
illegally procured, demonstratively defective,
and fraud-prone ACMs was rendered
nonsensical. Thus:
We stress once again that the Contract
entered into by the Comelec for the supply of
the ACMs was declared VOID by the Court in
its Decision, because of clear violations of law
and jurisprudence, as well as the reckless
disregard by the Commission of its own
bidding rules and procedure. In addition, the
poll body entered into the Contract with
inexplicable haste, without adequately
checking and observing mandatory financial,
technical and legal requirements. As
explained in our Decision, Comclec's gravely
abusive acts consisted of the following:
xxxx
To muddle the issue, Comelec keeps on
saying that the "winning" bidder presented
a lower price than the only other bidder. It
ignored the fact that the whole bidding
process was VOID and FRAUDULENT. How
then could there have been a "winning"
bid?22 (Emphasis supplied)
THE INSTANT CASE
Complaint for Damages filed by
respondents with the RTC Makati
and petitioner's Answer with
Counterclaim, with an application
for a writ of preliminary attachment,
from which the instant case arose
Upon the finality of the declaration of nullity of
the automation contract, respondent MPEI
filed a Complaint for Damages before the RTC
Makati, arguing that, notwithstanding the
nullification of the automation contract, the
COMELEC was still bound to pay the amount
of ₱200,165,681.89. This amount represented
the difference between the value of the ACMs
and the support services delivered on one
hand, and on the other, the payment
previously made by the COMELEC.23
Petitioner filed its Answer with
Counterclaim24 and argued that respondent
57
MPEI could no longer recover the unpaid
balance from the void automation contract,
since the payments made were illegal
disbursements of public funds. It contended
that a null and void contract vests no rights
and creates no obligations, and thus produces
no legal effect at all. Petitioner further posited
that respondent MPEI could not hinge its
claim upon the principles of unjust enrichment
and quasi-contract, because such presume
that the acts by which the authors thereof
become obligated to each other are lawful,
which was not the case herein.25
By way of a counterclaim, petitioner
demanded from respondents the return of the
payments made pursuant to the automation
contract.26 It argued that individual
respondents, being the incorporators of MPEI,
likewise ought to be impleaded and held
accountable for MPEI's liabilities. The creation
of MPC was, after all, merely an ingenious
scheme to feign eligibility to bid.27
Pursuant to Section l(d) of Rule 57 of the
Rules of Court, petitioner prayed for the
issuance of a writ of preliminary attachment
against the properties of MPEI and individual
respondents. The application was grounded
upon the fraudulent misrepresentation of
respondents as to their eligibility to participate
in the bidding for the COMELEC automation
project and the failure of the ACMs to comply
with mandatory technical requirements.28
Subsequently, the trial court denied the prayer
for the issuance of a writ of preliminary
attachment, 29 ruling that there was an
absence of factual allegations as to how the
fraud was actually committed.
The allegations of petitioner were found to be
unreliable, as the latter merely copied from the
declarations of the Supreme Court
in Information Technology Foundation of the
Phils. v. COMELEC the factual allegations of
MPEI's lack of qualification and
noncompliance with bidding requirements.
The trial court further ruled that the allegations
of fraud on the part of MPEI were not
supported by the COMELEC, the office in
charge of conducting the bidding for the

election automation contract. It was likewise
held that there was no evidence that
respondents harbored a preconceived plan
not to comply with the obligation; neither was
there any evidence that MPEI's corporate
fiction was used to perpetrate fraud. Thus, it
found no sufficient basis to pierce the veil of
corporate fiction or to cause the attachment of
the properties owned by individual
respondents.
Petitioner moved to set aside the trial court's
Order denying the writ of attachment,30 but its
motion was denied.31
Appeal before the CA and the First
Decision
Aggrieved, petitioner filed an appeal with the
CA, arguing that the trial court had acted with
grave abuse of discretion in denying the
application for a writ of attachment.
As mentioned earlier, the CA in its First
Decision32 reversed and set aside the trial
court's Orders and ruled that there was
sufficient basis for the issuance of a writ of
attachment in favor of petitioner.
The appellate court explained that the
averments of petitioner in support of the
latter's application actually reflected pertinent
conclusions reached by this Court in its 2004
Decision. It held that the trial court erred in
disregarding the following findings of fact,
which remained unaltered and unreversed: (1)
COMELEC bidding rules provided that the
eligibility and capacity of a bidder may be
proved through financial documents including,
among others, audited financial statements for
the last three years; (2) MPEI was
incorporated only on 27 February 2003, or 11
days prior to the bidding itself; (3) in an
attempt to disguise its ineligibility, MPEI
participated in the bidding as lead company of
MPC, a putative consortium, and submitted
the incorporation papers and financial
statements of the members of the consortium;
and (4) no proof of the joint venture
agreement, consortium agreement,
memorandum of agreement, or business plan
executed among the members of the
58
purported consortium was ever submitted to
the COMELEC.33
According to the CA, the foregoing were
glaring indicia or badges of fraud, which
entitled petitioner to the issuance of the writ. It
further ruled that there was sufficient reason
to pierce the corporate veil of MPEI. Thus, the
CA allowed the attachment of the properties
belonging to both MPEI and individual
respondents.34 The CA likewise ruled that
even if the COMELEC committed grave abuse
of discretion in capriciously disregarding the
rules on public bidding, this should not
preclude or deter petitioner from pursuing its
claim against respondents. After all, the State
is not estopped by the mistake of its officers
and employees.35
Respondents moved for reconsideration36 of
the First Decision of the CA.
Motion for Reconsideration before
the CA and the Amended Decision
Upon review, the CA reconsidered its First
Decision37 and directed the remand of the
case to the RTC Makati for the reception of
evidence of allegations of fraud and to
determine whether attachment should
necessarily issue.38
The CA explained in its Amended Decision
that respondents could not be considered to
have fostered a fraudulent intent to dishonor
their obligation, since they had delivered
1,991 units of ACMs.39 It directed petitioner to
present proof of respondents' intent to defraud
COMELEC during the execution of the
automation contract.40 The CA likewise
emphasized that the Joint Affidavit submitted
in support of petitioner's application for the
writ contained allegations that needed to be
substantiated.41 It added that proof must
likewise be adduced to verify the requisite
fraud that would justify the piercing of the
corporate veil of respondent MPEI.42
The CA further clarified that the 2004 Decision
did not make a definite finding as to the
identities of the persons responsible for the
illegal disbursement or of those who

participated in the fraudulent dealings.43 It
instructed the trial court to consider, in its
determination of whether the writ of
attachment should issue, the illegal,
imprudent and hasty acts in awarding the
automation contract by the COMELEC. In
particular, these acts consisted of: (1)
awarding the automation contract to MPC, an
entity that did not participate in the bidding;
and (2) signing the actual automation contract
with respondent MPEI, the company that
joined the bidding without meeting the
eligibility requirement.44
Rule 45 Petition before Us
Consequently, petitioner filed the instant Rule
45 Petition,45 arguing that the CA erred in
ordering the remand of the case to the trial
court for the reception of evidence to
determine the presence of fraud. Petitioner
contends that this Court's 2004 Decision was
sufficient proof of the fraud committed by
respondents in the execution of the voided
automation contract.46 Respondents allegedly
committed fraud by securing the automation
contract, although MPEI was not qualified to
bid in the first place.47 Their claim that the
members of MPC bound themselves to the
automation contract was an indication of bad
faith as the contract was executed by MPEI
alone.48 Neither could they deny that the
software submitted during the bidding process
was not the same one that would be used on
election day.49 They could not dissociate
themselves from telltale signs such as
purportedly supplying software that later
turned out to be non-existent. 50
In their respective Comments, respondents
Willy Yu, Bonnie Yu, Enrique Tansipek, and
Rosita Tansipek counter51 that this Court
never ruled that individual respondents were
guilty of any fraud or bad faith in connection
with the automation contract, and that it was
incumbent upon petitioner to present evidence
on the allegations of fraud to justify the
issuance of the writ. 52 They likewise argue
that the 2004 Decision cannot be invoked
against them, since petitioner and MPEI were
co-respondents in the 2004 case and not
adverse parties therein. 53Respondents further
contend that the allegations of fraud are
59
belied by their actual delivery of 1,991 units of
ACMs to the COMELEC, which they claim is
proof that they never had any intention to
evade performance. 54
They further allege that this Court, in its 2004
Decision, even recognized that it had not
found any wrongdoing on their part, and that
the Ombudsman had already made a
determination that no probable cause existed
with respect to charges of violation of Anti-
Graft and Corrupt Practices Act.55
Echoing the other respondents' arguments on
the lack of particularity in the allegations of
fraud, 56 respondents MPEI, Johnson Wong,
Bernard Fong, Pedro Tan, and Lauriano
Barrios likewise argue that they were not
parties to the 2004 case; thus, the 2004
Decision thereon is not binding on
them.57 Individual respondents likewise argue
that the findings of fact in the 2004 Decision
were not conclusive,58 considering that eight
(8) of the fifteen (15) justices allegedly refused
to go along with the factual findings as stated
in the majority opinion.59 Thereafter, petitioner
filed its Reply to the Comments.60
Based on the submissions of both parties, the
following issues are presented to this Court for
resolution:
1. Whether petitioner has sufficiently
established fraud on the part of
respondents to justify the issuance of
a writ of preliminary attachment in its
favor; and
2. Whether a writ of preliminary
attachment may be issued against the
properties of individual respondents,
considering that they were not parties
to the 2004 case.
THE COURT'S RULING
The Petition is meritorious. A writ of
preliminary attachment should issue in favor
of petitioner over the properties of
respondents MPEI, Willy Yu (Willy) and the
remaining individual respondents, namely:
Bonnie S. Yu (Bonnie), Enrique T. Tansipek

(Enrique), Rosita Y. Tansipek (Rosita), Pedro
O. Tan (Pedro), Johnson W. Fong (Johnson),
Bernard I. Fong (Bernard), and Lauriano
Barrios (Lauriano). The bases for the writ are
the following:
1. Fraud on the part of respondent
MPEI was sufficiently established by
the factual findings of this Court in its
2004 Decision and subsequent
pronouncements.
2. A writ of preliminary attachment
may issue over the properties of the
individual respondents using the
doctrine of piercing the corporate veil.
3. The factual findings of this Court
that have become final cannot be
modified or altered, much less
reversed, and are controlling in the
instant case.
4. The delivery of 1,991 units of ACMs
does not negate fraud on the part of
respondents MPEI and Willy.
5. Estoppel does not lie against the
state when it acts to rectify mistakes,
errors or illegal acts of its officials and
agents.
6. The findings of the Ombudsman are
not controlling in the instant case.
DISCUSSION
I.
Fraud on the part of respondent
MPEI was sufficiently established by the
factual findings of this Court in the latter's
2004 Decision and subsequent
pronouncements.
Petitioner argues that the findings of this Court
in the 2004 Decision serve as sufficient basis
to prove that, at the time of the execution of
the automation contract, there was fraud on
the part of respondents that justified the
issuance of a writ of attachment.
60
Respondents, however, argue the contrary.
They claim that fraud had not been sufficiently
established by petitioner.
We rule in favor of petitioner. Fraud on the
part of respondents MPEI and Willy, as well
as of the other individual respondents -
Bonnie, Enrique, Rosita, Pedro, Johnson,
Bernard, and Lauriano -has been established.
A writ of preliminary attachment is a
provisional remedy issued upon the order of
the court where an action is
pending.1âwphi1 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.61 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. 62
The purpose and function of an attachment or
garnishment 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.63 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 are
liable to be removed beyond the jurisdiction,
or improperly disposed of or concealed, or
otherwise placed beyond the reach of
creditors.64
Petitioner relied upon Section l (d), Rule 57 of
the Rules of Court as basis for its application
for a writ of preliminary attachment. This
provision states:

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:
xxxx
(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.
(Emphasis supplied)
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. 65 In Metro, Inc. v. Lara's Gift and
Decors, Inc., 66We explained:
To sustain an attachment on this ground, it
must be shown that the debtor in contracting
the debt or incurring the obligation intended to
defraud the creditor. The fraud must relate
to the execution of the agreement and
must have been the reason which induced
the other party into giving consent which
he would not have otherwise given. To
constitute a ground for attachment in Section
1 (d), Rule 57 of the Rules of Court, fraud
should be committed upon contracting the
obligation sued upon. A debt is fraudulently
contracted if at the time of contracting it the
debtor has a preconceived plan or intention
not to pay, as it is in this case. x x x.
The applicant for a writ of preliminary
attachment must sufficiently show the factual
circumstances of the alleged fraud because
fraudulent intent cannot be inferred from the
debtor's mere non-payment of the debt or
failure to comply with his obligation.
(Emphasis supplied)
An 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
61
those instances relating to fraud in the
performance of the obligation.67
Fraud is a generic term that is used in various
senses and assumes so many different
degrees and forms that courts are compelled
to content themselves with comparatively few
general rules for its discovery and defeat. For
the same reason, the facts and circumstances
peculiar to each case are allowed to bear
heavily on the conscience and judgment of
the court or jury in determining the presence
or absence of fraud. In fact, the fertility of
man's invention in devising new schemes of
fraud is so great that courts have always
declined to define it, thus, reserving for
themselves the liberty to deal with it in
whatever form it may present itself.68
Fraud may be characterized as 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.69 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.70 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.71
While fraud cannot be presumed, it need not
be proved by direct evidence and can well be
inferred from attendant
circumstances.72 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.73
In the case at bar, petitioner has sufficiently
discharged the burden of demonstrating the
commission of fraud by respondent MPEI in

the execution of the automation contract in the
two ways that were enumerated earlier and
discussed below:
A. Respondent MPEI had perpetrated a
scheme against petitioner to secure the
automation contract by using MPC as
supposed bidder and eventually
succeeding
in signing the automation contract as
MPEI alone, an entity which was ineligible
to hid in the first place.
To avoid any confusion relevant to the basis
of fraud, We quote herein the pertinent
portions of this Court's 2004 Decision with
regard to the identity, existence, and eligibility
of MPC as bidder:74
On the question of the identity and the
existence of the real bidder, respondents
insist that, contrary to petitioners' allegations,
the bidder was not Mega Pacific eSolutions.
Inc. (MPEI), which was incorporated only
on February 27, 2003, or 11 days prior to
the bidding itself. Rather, the bidder was
Mega Pacific Consortium (MPC), of which
MPEI was but a part. As proof thereof, they
point to the March 7, 2003 letter of intent to
bid, signed by the president of MPEI allegedly
for and on behalf of MPC. They also call
attention to the official receipt issued to MPC,
acknowledging payment for the bidding
documents, as proof that it was the
"consortium" that participated in the bidding
process.
We do not agree. The March 7, 2003 letter,
signed by only one signatory - "Willy U. Yu,
President, Mega Pacific eSolutions, Inc.,
(Lead Company/Proponent) For: Mega Pacific
Consortium" - and without any further proof,
does not by itself prove the existence of the
consortium. It does not show that MPEI or its
president have been duly pre-authorized by
the other members of the putative consortium
to represent them, to bid on their collective
behalf and, more important, to commit them
jointly and severally to the bid undertakings.
The letter is purely self-serving and
uncorroborated.
62
Neither does an official receipt issued to MPC,
acknowledging payment for the bidding
documents, constitute proof that it was the
purported consortium that participated in the
bidding. Such receipts are issued by cashiers
without any legally sufficient inquiry as to the
real identity or existence of the supposed
payor.
To assure itself properly of the due existence
(as well as eligibility and qualification) of the
putative consortium, Comelec's BAC should
have examined the bidding documents
submitted on behalf of MPC. They would have
easily discovered the following fatal flaws.
xxxx
The Eligibility Envelope was to contain legal
documents such as articles of incorporation, x
x x to establish the bidder's financial capacity.
In the case of a consortium or joint venture
desirous of participating in the bidding, it goes
without saying that the Eligibility Envelope
would necessarily have to include a copy of
the joint venture agreement, the consortium
agreement or memorandum of agreement --
or a business plan or some other instrument
of similar import -- establishing the due
existence, composition and scope of such
aggrupation. Otherwise, how would Comelec
know who it was dealing with, and whether
these parties are qualified and capable of
delivering the products and services being
offered for bidding?
In the instant case, no such instrument
was submitted to Comelec during the
bidding process. x x x
xxxx
However, there is no sign whatsoever of
any joint venture agreement, consortium
agreement, memorandum of agreement, or
business plan executed among the
members of the purported consortium.
The only logical conclusion is that no such
agreement was ever submitted to the

Comelec for its consideration, as part of
the bidding process.
It thus follows that, prior the award of the
Contract, there was no documentary or
other basis for Comelec to conclude that a
consortium had actually been formed
amongst MPEI, SK C&C and WeSolv, along
with Election.com and ePLDT. Neither was
there anything to indicate the exact
relationships between and among these firms;
their diverse roles, undertakings and
prestations, if any, relative to the prosecution
of the project, the extent of their respective
investments (if any) in the supposed
consortium or in the project; and the precise
nature and extent of their respective liabilities
with respect to the contract being offered for
bidding. And apart from the self-serving letter
of March 7, 2003, there was not even any
indication that MPEI was the lead company
duly authorized to act on behalf of the others.
xxxx
Hence, had the proponent MPEI been
evaluated based solely on its own
experience, financial and operational track
record or lack thereof, it would surely not
have qualified and would have been
immediately considered ineligible to bid,
as respondents readily admit.
xxxx
At this juncture, one might ask: What, then, if
there are four MOAs instead of one or none at
all? Isn't it enough that there are these
corporations coming together to carry out the
automation project? Isn't it
true, as respondent aver, that nowhere in the
RFP issued by Comelec is it required that the
members of the joint venture execute a single
written agreement to prove the existence of a
joint venture. x x x
xxxx
The problem is not that there are four
agreements instead of only one.1âwphi1 The
problem is that Comelec never bothered to
63
check. It never based its decision on
documents or other proof that would
concretely establish the existence of the
claimed consortium or joint venture or
agglomeration.
xxxx
True, copies of financial statements and
incorporation papers of the alleged
"consortium" members were submitted. But
these papers did not establish the existence
of a consortium, as they could have been
provided by the companies concerned for
purposes other than to prove that they were
part of a consortium or joint venture.
xxxx
In brief, despite the absence of competent
proof as to the existence and eligibility of
the alleged consortium (MPC), its capacity
to deliver on the Contract, and the
members' joint and several liability
therefor, Comelec nevertheless assumed
that such consortium existed and was
eligible. It then went ahead and considered
the bid of MPC, to which the Contract was
eventually awarded, in gross violation of
the former's own bidding rules and
procedures contained in its RFP. Therein
lies Comelec's grave abuse of discretion.
Sufficiency of the Four Agreements
Instead of one multilateral agreement
executed by, and effective and binding on, all
the five "consortium members" -- as earlier
claimed by Commissioner Tuason in open
court -- it turns out that what was actually
executed were four (4) separate and distinct
bilateral Agreements. Obviously, Comelec
was furnished copies of these Agreements
only after the bidding process had been
terminated, as these were not included in
the Eligibility Documents. x x x
xxxx
At this point, it must be stressed most
vigorously that the submission of the four
bilateral Agreements to Comelec after the

end of the bidding process did nothing to
eliminate the grave abuse of discretion it
had already committed on April 15, 2003.
Deficiencies Have Not Been "Cured"
In any event, it is also claimed that the
automation Contract awarded by Comelec
incorporates all documents executed by the
"consortium" members, even if these
documents are not referred to therein. x x x
xxxx
Thus, it is argued that whatever perceived
deficiencies there were in the supplementary
contracts -- those entered into by MPEI and
the other members of the "consortium" as
regards their joint and several undertakings --
have been cured. Better still, such deficiencies
have supposedly been prevented from arising
as a result of the above-quoted provisions,
from which it can be immediately established
that each of the members of MPC assumes
the same joint and several liability as the other
members.
The foregoing argument is
unpersuasive. First, the contract being
referred to, entitled "The Automated
Counting and Canvassing Project
Contract," is between Comelec and MPEI,
not the alleged consortium, MPC. To
repeat, it is MPEI -- not MPC -that is a party
to the Contract. Nowhere in that Contract
is there any mention of a consortium or
joint venture, of members thereof, much
less of joint and several
liability. Supposedly executed sometime in
May 2003, the Contract bears a
notarization date of June 30, 2003, and
contains the signature of Willy U. Yu
signing as president of MPEI (not for and
on behalf of MPC), along with that of the
Comelec chair. It provides in Section 3.2
that MPEI (not MPC) is to supply the
Equipment and perform the Services under
the Contract, in accordance with the
appendices thereof; nothing whatsoever is
said about any consortium or joint venture
or partnership.
64
xxxx
Eligibility of a Consortium Based on the
Collective
Qualifications of Its Members
Respondents declare that, for purposes of
assessing the eligibility of the bidder, the
members of MPC should be evaluated on a
collective basis. Therefore, they contend,
the failure of MPEI to submit financial
statements (on account of its recent
incorporation) should not by itself
disqualify MPC, since the other members
of the "consortium" could meet the criteria
set out in the RFP.
xxxx
Unfortunately, this argument seems to
assume that the "collective" nature of the
undertaking of the members of MPC, their
contribution of assets and sharing of risks,
and the "community" of their interest in the
performance of the Contract entitle MPC to be
treated as a joint venture or consortium; and
to be evaluated accordingly on the basis of
the members' collective qualifications when, in
fact, the evidence before the Court suggest
otherwise.
xxxx
Going back to the instant case, it should
be recalled that the automation Contract
with Comelec was not executed by the
"consortium" MPC -- or by MPEI for and on
behalf of MPC -- but by MPEI, period. The
said Contract contains no mention
whatsoever of any consortium or members
thereof. This fact alone seems to
contradict all the suppositions about a
joint undertaking that would normally
apply to a joint venture or consortium: that
it is a commercial enterprise involving a
community of interest, a sharing of risks,
profits and losses, and so on.
xxxx
To the Court, this strange and beguiling
arrangement of MPEI with the other

companies does not qualify them to be treated
as a consortium or joint venture, at least of the
type that government agencies like the
Comelec should be dealing with. With more
reason is it unable to agree to the proposal to
evaluate the members of MPC on a collective
basis. (Emphases supplied)
These findings found their way into petitioner's
application for a writ of preliminary
attachment,75 in which it claimed the following
as bases for fraud: (1) respondents committed
fraud by securing the election automation
contract and, in order to perpetrate the fraud,
by misrepresenting the actual bidder as MPC
and MPEI as merely acting on MPC's behalf;
(2) while knowing that MPEI was not qualified
to bid for the automation contract,
respondents still signed and executed the
contract; and (3) respondents acted in bad
faith when they claimed that they had bound
themselves to the automation contract,
because it was not executed by MPC-or by
MPEI on MPC's behalf- but by MPEI alone. 76
We agree with petitioner that respondent
MPEI committed fraud by securing the
election automation contract; and, in order to
perpetrate the fraud, by misrepresenting that
the actual bidder was MPC and not MPEI,
which was only acting on behalf of MPC. We
likewise rule that respondent MPEI has
defrauded petitioner, since the former still
executed the automation contract despite
knowing that it was not qualified to bid for the
same.
The established facts surrounding the
eligibility, qualification and existence of MPC -
and of MPEI for that matter - and the
subsequent execution of the automation
contract with the latter, when all taken
together, constitute badges of fraud that We
simply cannot ignore. MPC was considered an
illegitimate entity, because its existence as a
joint venture had not been established.
Notably, the essential document/s that would
have shown its eligibility as a joint
venture/consortium were not presented to the
COMELEC at the most opportune time, that
is, during the qualification stage of the bidding
process. The concealment by respondent
MPEI of the essential documents showing its
65
eligibility to bid as part a joint venture is too
obvious to be missed. How could it not have
known that the very document showing MPC
as a joint venture should have been included
in their eligibility envelope?
Likewise notable is the fact that these
supposed agreements, allegedly among the
supposed consortium members,
were belatedly provided to the
COMELEC after the bidding process had
been terminated; these were not included in
the Eligibility Documents earlier submitted by
MPC. Similarly, as found by this Court, these
documents did not prove any joint venture
agreement among the parties in the first
place, but were actually individual agreements
executed by each member of the supposed
consortium with respondent MPEI.
More startling to the dispassionate mind is the
incongruence between the supposed actual
bidder MPC, on one hand, and, on the other,
respondent MPEI, which executed the
automation contract. Significantly, respondent
MPEI was not even eligible and qualified to
bid in the first place; and yet, the automation
contract itself was executed and
signed singly by respondent MPEI, not on
behalf of the purported bidder MPC, without
any mention whatsoever of the members of
the supposed consortium.
From these established facts, We can surmise
that in order to secure the automation
contract, respondent MPEI perpetrated a
scheme against petitioner by using MPC as
supposed bidder and eventually succeeding in
signing the automation contract as MPEI
alone. Worse, it was respondent MPEI alone,
an entity that was ineligible to bid in the first
place, that eventually executed the
automation contract.
To a reasonable mind, the entire situation
reeks of fraud, what with the
misrepresentation of identity and
misrepresentation as to creditworthiness. It is
in these kinds of fraudulent instances, when
the ability to abscond is greatest, to which a
writ of attachment is precisely responsive.

Further, the failure to attach the eligibility
documents is tantamount to failure on the part
of respondent MPEI to disclose material facts.
That omission constitutes fraud.
Pursuant to Article 1339 of the Civil
Code,77 silence or concealment does not, by
itself, constitute fraud, unless there is a
special duty to disclose certain facts, or unless
the communication should be made according
to good faith and the usages of commerce. 78
Fraud has been defined to include an
inducement through insidious machination.
Insidious machination refers to a deceitful
scheme or plot with an evil or devious
purpose. Deceit exists where the party, with
intent to deceive, conceals or omits to state
material facts and, by reason of such
omission or concealment, the other party was
induced to give consent that would not
otherwise have been given.79
One form of inducement is covered within the
scope of the crime of estafa under Article 315,
paragraph 2, of the Revised Penal Code, in
which, any person who defrauds another by
using fictitious name, or falsely pretends to
possess power, influence, qualifications,
property, credit, agency, business or
imaginary transactions, or by means of similar
deceits executed prior to or simultaneously
with the commission of fraud is held criminally
liable. In Jason v. People,80this Court
explained the element of defraudation by
means of deceit, by giving a definition of fraud
and deceit, in this wise:
What needs to be determined therefore is
whether or not the element of defraudation by
means of deceit has been established beyond
reasonable doubt.
In the case of People v. Menil, Jr., the Court
has defined fraud and deceit in this wise:
Fraud, in its general sense, is deemed to
comprise anything calculated to deceive,
including all acts, omissions, and concealment
involving a breach of legal or equitable duty,
trust, or confidence justly reposed, resulting in
damage to another, or by which an undue and
66
unconscientious advantage is taken of
another. It is a generic term embracing all
multifarious means which human ingenuity
can devise, and which are resorted to by one
individual to secure an advantage over
another by false suggestions or by
suppression of truth and includes all surprise,
trick, cunning, dissembling and any unfair way
by which another is cheated. On the other
hand, deceit is the false representation of a
matter of fact, whether by words or
conduct, by false or misleading
allegations, or by concealment of that
which should have been disclosed which
deceives or is intended to deceive another
so that he shall act upon it to his legal
injury. (Emphases supplied)
For example, in People v. Comila,81both
accused-appellants therein represented
themselves to the complaining witnesses to
have the capacity to send them to Italy for
employment, even as they did not have the
authority or license for the purpose. It was
such misrepresentation that induced the
complainants to part with their hard-earned
money for placement and medical fees. Both
accused-appellants were criminally held liable
for estafa.
In American jurisprudence, fraud may be
predicated on a false introduction or
identification. 82 In Union Co. v. Cobb, 83the
defendant therein procured the merchandise
by misrepresenting that she was Mrs. Taylor
Ray and at another time she was Mrs. Ben W.
Chiles, and she forged their name on charge
slips as revealed by the exhibits of the
plaintiff. The sale of the merchandise was
induced by these representations, resulting in
injury to the plaintiff.
In Raser v. Moomaw,84it was ruled that the
essential elements necessary to constitute
actionable fraud and deceit were present in
the complaint. It was alleged that, to induce
plaintiff to procure a loan, defendant
introduced him to a woman who was falsely
represented to be Annie L. Knowles of
Seattle, Washington, the owner of the
property, and that plaintiff had no means of
ascertaining her true identity. On the other
hand, defendant knew, or in the exercise of

reasonable caution should have known, that
she was an impostor, and that plaintiff relied
on the representations, induced his client to
make the loan, and had since been compelled
to repay it. In the same case, the Court ruled
that false representations as to the identity of
a person are actionable, if made to induce
another to act thereon, and such other does
so act thereon to his prejudice.85
In this case, analogous to the fraud and deceit
exhibited in the abovementioned
circumstances, respondent MPEI had no
excuse not to be forthright with the documents
showing MPC's eligibility to bid as a joint
venture. The Invitation to Bid, as quoted in our
2004 Decision, could not have been any
clearer when it stated that only bids from
qualified entities, such as a joint venture,
would be entertained:
INVITATION TO APPLY FOR ELIGIBILITY
AND TO BID
The Commission on Elections (COMELEC),
pursuant to the mandate of Republic Act Nos.
8189 and 8436, invites interested offerors,
vendors, suppliers or lessors to apply for
eligibility and to bid for the procurement by
purchase, lease, lease with option to
purchase, or otherwise, supplies, equipment,
materials and services needed for a
comprehensive Automated Election System,
consisting of three (3) phases: (a)
registration/verification of voters, (b)
automated counting and consolidation of
votes, and (c) electronic transmission of
election results, with an approved budget of
TWO BILLION FIVE HUNDRED MILLION
(Php2,500,000,000) Pesos.
Only bids from the following entities shall
be entertained:
xxxx
d. Manufacturers, suppliers and/or
distributors forming themselves into a
joint venture, i.e., a group of two (2) or
more manufacturers, suppliers and/or
distributors that intend to be jointly and
severally responsible or liable for a
67
particular contract, provided that Filipino
ownership thereof shall be at least sixty
percent (60%); and
e. Cooperatives duly registered with the
Cooperatives Development
Authority. 86 (Emphases supplied)
No reasonable mind would argue that
documents showing the very existence of a
joint venture need not be included in the
bidding envelope showing its existence,
qualification, and eligibility to undertake the
project, considering that the purpose of
prequalification in any public bidding is to
determine, at the earliest opportunity, the
ability of the bidder to undertake the project.87
As found by this Court in its 2004 Decision, it
appears that the documents that were
submitted after the bidding, which
respondents claimed would prove the
existence of the relationship among the
members of the consortium, were actually
separate agreements individually executed by
the supposed members with MPEI. We had
ruled that these documents were highly
irregular, considering that each of the four
different and separate bilateral Agreements
was valid and binding only between MPEI and
the other contracting party, leaving the other
"consortium" members total strangers thereto.
Consequently, the other consortium members
had nothing to do with one another, as each
one dealt only with MPEI.88
Considering that they merely showed MPEI's
individual agreements with the other
supposed members, these agreements
confirm to our mind the fraudulent intent on
the part of respondent MPEI to deceive the
relevant officials about MPC. The intent was
to cure the deficiency of the winning bid,
which intent miserably failed. Said this Court:89
We are unconvinced, PBAC was guided by
the rules, regulations or guidelines existing
before the bid proposals were opened on
November 10, 1989. The basic rule in public
bidding is that bids should be evaluated
based on the required documents
submitted before and not after the opening

of bids. Otherwise, the foundation of a fair
and competitive public bidding would be
defeated. Strict observance of the rules,
regulations, and guidelines of the bidding
process is the only safeguard to a fair,
honest and competitive public bidding.
In underscoring the Court's strict application of
the pertinent rules, regulations and guidelines
of the public bidding process, We have ruled
in C & C Commercial vs. Menor (L-28360,
January 27, 1983, 120 SCRA 112), that
Nawasa properly rejected a bid of C & C
Commercial to supply asbestos cement
pressure which bid did not include a tax
clearance certificate as required by
Administrative Order No. 66 dated June 26,
1967. In Caltex (Phil.) Inc., et. al. vs. Delgado
Brothers, Inc. et. al., (96 Phil. 368, 375), We
stressed that public biddings are held for the
protection of the public and the public should
be given the best possible advantages by
means of open competition among the
bidders.
xxxx
INTER TECHNICAL's failure to comply with
what is perceived to be an elementary and
customary practice in a public bidding
process, that is, to enclose the Form of Bid
in the original and eight separate copies of
the bidding documents submitted to the
bidding committee is fatal to its cause. All
the four pre-qualified bidders which include
INTER TECHNICAL were subject to Rule IB
2.1 of the
Implementing Rules and Regulations of P.D.
1594 in the preparation of bids, bid bonds,
and pre-qualification statement and Rule IB
2.8 which states that the Form of Bid, among
others, shall form part of the contract. INTER
TECHNICAL's explanation that its bid form
was inadvertently left in the office (p. 6,
Memorandum for Private Respondent, p.
355, Rollo) will not excuse compliance with
such a simple and basic requirement in the
public bidding process involving a multi-million
project of the Government. There should be
strict application of the pertinent public
bidding rules, otherwise the essential
68
requisites of fairness, good faith, and
competitiveness in the public bidding
process would be rendered
meaningless. (Emphases supplied)
All these circumstances, taken together,
reveal a scheme on the part of respondent
MPEI to perpetrate fraud against the
government. The purpose of the scheme was
to ensure that MPEI, an entity that was
ineligible to bid in the first place, would
eventually be awarded the contract. While
respondent argues that it was merely a
passive participant in the bidding process, We
cannot ignore its cavalier disregard of its
participation in the now voided automation
contract.
B. Fraud on the part of respondent MPEI
was further shown by the fact that despite
the failure of its ACMs to pass the tests
conducted by the DOST, respondent still
acceded to being awarded the automation
contract.
Another token of fraud is established by Our
findings in relation to the failure of the ACMs
to pass the tests of the DOST. We quote
herein the pertinent portions of this Court's
2004 Decision in relation thereto:
After respondent "consortium" and the other
bidder, TIM, had submitted their respective
bids on March 10, 2003, the Comelec's BAC -
- through its Technical Working Group (TWG)
and the DOST - evaluated their technical
proposals.
xxxx
According to respondents, it was only after the
TWG and the DOST had conducted their
separate tests and submitted their respective
reports that the BAC, on the basis of these
reports formulated its
comments/recommendations on the bids of
the consortium and TIM.
The BAC, in its Report dated April 21, 2003,
recommended that the Phase II project
involving the acquisition of automated
counting machines be awarded to MPEI. x x x

xxxx
The BAC, however, also stated on page 4
of its Report: "Based on the 14 April 2003
report (Table 6) of the DOST, it appears
that both Mega-Pacific and TIM (Total
Information Management Corporation)
failed to meet some of the requirements. x
xx
xxxx
Failure to Meet the Required Accuracy Rating
The first of the key requirements was that the
counting machines were to have an accuracy
rating of at least 99.9995 percent. The BAC
Report indicates that both Mega Pacific
and TIM failed to meet this standard.
The key requirement of accuracy rating
happens to be part and parcel of the
Comelec's Request for Proposal (RFP). x x
x this crucial deficiency, which should have
xxxx
x x x Whichever accuracy rating is the right
standard - whether 99.995 or 99.9995
percent – the fact remains that the machines
of the so-called "consortium" failed to even
reach the lesser of the two. On this basis
alone, it ought to have been disqualified and
its bid rejected outright.
At this point, the Court stresses that the
essence of public bidding is violated by
the practice of requiring very high
standards or unrealistic specifications that
cannot be met - like the 99.9995 percent
accuracy rating in this case - only to water
them down after the bid has been award.
[sic] Such scheme, which discourages the
entry of prospective bona fide bidders, is
in fact a sure indication of fraud in the
bidding, designed to eliminate fair
competition. Certainly, if no bidder meets
the mandatory requirements, standards or
specifications, then no award should be
made and a failed bidding declared.
xxxx
69
Failure of Software to Detect Previously
Downloaded Data
Furthermore, on page 6 of the BAC Report,
it appears that the "consortium" as well as
TIM failed to meet another key requirement
- for the counting machine's software
program to be able to detect previously
downloaded precinct results and to
prevent these from being entered again
into the counting machine. This same
deficiency on the part of both bidders
reappears on page 7 of the BAC Report, as a
result of the recurrence of their failure to meet
the said key requirement.
That the ability to detect previously
downloaded data at different canvassing or
consolidation levels is deemed of utmost
importance can be seen from the fact that it is
repeated three times in the RFP. x x x.
Once again, though, Comelec chose to ignore
been a cause for the gravest concern. x x x.
xxxx
Inability to Print the Audit Trail
But that grim prospect is not all. The BAC
Report, on pages 6 and 7, indicate that the
ACMs of both bidders were unable to print the
audit trail without any loss of data. In the case
of MPC, the audit trail system was "not yet
incorporated" into its ACMs.
xxxx
Thus, the RFP on page 27 states that
the ballot counting machines and ballot
counting software must print an audit trail of
all machine operations for documentation
and verification purposes. Furthermore, the
audit trail must be stored on the internal
storage device and be available on demand
for future printing and verifying. On pages 30-
31, the RFP also requires that
the city/municipal canvassing system
software be able to print an audit trail of the
canvassing operations, including therein
such data as the date and time the

canvassing program was started, the log-in of
the authorized users (the identity of the
machine operators), the date and time the
canvass data were downloaded into the
canvassing system, and so on and so forth.
On page 33 of the RFP, we find the
same audit trail requirement with respect to
the provincial/district canvassing system
software; and again on pages 35-36 thereof,
the same audit trail requirement with respect
to the national canvassing system software.
xxxx
The said provision which respondents have
quoted several times, provides that ACMs are
to possess certain features divided into two
classes: those that the statute itself
considers mandatory and other features or
capabilities that the law deems
optional. Among those considered
mandatory are "provisions for audit
trails"! x x x.
In brief, respondents cannot deny that the
provision requiring audit trails is indeed
mandatory, considering the wording of
Section 7 of RA 8436. Neither can
Respondent Comelec deny that it has relied
on the BAC Report, which indicates that the
machines or the software was deficient in that
respect. And yet, the Commission simply
disregarded this shortcoming and awarded
the Contract to private respondent, thereby
violating the very law it was supposed to
implement.90 (Emphases supplied)
The above-mentioned findings were further
echoed by this Court in its 2006 Resolution
with a categorical conclusion that the bidding
process was void and fraudulent.91 Again,
these factual findings found their way into the
application of petitioner for a writ of
preliminary attachment,92 as it claimed that
respondents could not dissociate themselves
from their telltale acts of supplying defective
machines and nonexistent software.93 The
latter offered no defense in relation to these
claims.
We see no reason to deviate from our finding
of fraud on the part of respondent MPEI in the
70
2004 Decision and 2006 Resolution. Despite
its failure to meet the mandatory requirements
set forth in the bidding procedure, respondent
still acceded to being awarded the contract.
These circumstances reveal its ploy to gain
undue advantage over the other bidders in
general, even to the extent of cheating the
government.
The word "bidding" in its comprehensive
sense means making an offer or an invitation
to prospective contractors, whereby the
government manifests its intention to make
proposals for the purpose of securing
supplies, materials, and equipment for official
business or public use, or for public works or
repair.94 Three principles involved in public
bidding are as follows: (1) the offer to the
public; (2) an opportunity for competition, and
(3) a basis for an exact comparison of bids. A
regulation of the matter, which excludes any
of these factors, destroys the distinctive
character of the system and thwarts the
purpose of its adoption.95
In the instant case, We infer from the
circumstances that respondent MPEI
welcomed and allowed the award of the
automation contract, as it executed the
contract despite the full knowledge that it had
not met the mandatory requirements set forth
in the RFP. Respondent acceded to and
benefitted from the watering down of these
mandatory requirements, resulting in undue
advantage in its favor. The fact that there
were numerous mandatory requirements that
were simply set aside to pave the way for the
award of the automation contract does not
escape the attention of this Court.
Respondent MPEI, through respondent Willy,
signed and executed the automation contract
with COMELEC. It is therefore preposterous
for respondent argue that it was a "passive
participant" in the whole bidding process.
We reject the CA's denial of petitioner's plea
for the ancillary remedy of preliminary
attachment, considering that the cumulative
effect of the factual findings of this Court
establishes a sufficient basis to conclude that
fraud had attended the execution of the
automation contract. Such fraud is deducible
from the 2004 Decision and further upheld in

the 2006 Resolution. It was incongruous,
therefore, for the CA to have denied the
application for a writ of preliminary
attachment, when the evidence on record was
the same that was used to demonstrate the
propriety of the issuance of the writ of
preliminary attachment. This was the same
evidence that We had already considered and
passed upon, and on which We based Our
2004 Decision to nullify the automation
contract. It would not be right for this Court to
ignore these illegal transactions, as to do so
would be tantamount to abandoning its
constitutional duty of safeguarding public
interest.
II.
Application of the piercing doctrine
justifies the issuance of a writ of
preliminary attachment over the properties
of the individual respondents.
Individual respondents argue that since they
were not parties to the 2004 case, any factual
findings or conclusions therein should not be
binding upon them.96 Since they were
strangers to that case, they are not bound by
the judgment rendered by this Court.97 They
claim that their fundamental right to due
process would be violated if their properties
were to be attached for a purported corporate
debt on the basis of a court ruling in a case in
which they were not given the right or
opportunity to be heard.98
We cannot subscribe to this argument. In the
first place, it could not be reasonably
expected that individual respondents would be
impleaded in the 2004 case. As admitted by
respondents, the issues resolved in the 2004
Decision were limited to the following: (1)
whether to declare Resolution No. 6074 of the
COMELEC null and void; (2) whether to enjoin
the implementation of any further contract that
may have been entered into by COMELEC
with MPC or MPEI; and (3) whether to compel
COMELEC to conduct a rebidding of the
project. To implead individual respondents
then was improper, considering that the
automation contract was entered into by
respondent MPEI. This Court even
71
acknowledged this fact by directing that the
liabilities of persons responsible for the nullity
of the contract be determined in another
appropriate proceeding and by directing the
OSG to undertake measures to protect the
interests of the government.
At any rate, individual respondents have been
fully afforded the right to due process by being
impleaded and heard in the subsequent
proceedings before the courts a quo. Finally,
they cannot argue violation of due process, as
respondent MPEI, of which they are
incorporators/stockholders, remains
vulnerable to the piercing of its corporate veil.
A. There are red flags indicating that
MPEI was used to perpetrate the fraud
against petitioner, thus allowing the
piercing of its corporate veil.
Petitioner seeks the issuance of a writ of
preliminary attachment over the personal
assets of the individual respondents,
notwithstanding the doctrine of separate
juridical personality.99 It invokes the use of the
doctrine of piercing the corporate veil, to
which the canon of separate juridical
personality is vulnerable, as a way to reach
the personal properties of the individual
respondents. Petitioner paints a picture of a
sham corporation set up by all the individual
respondents for the purpose of securing the
automation contract.
We agree with petitioner.
Veil-piercing in fraud cases requires that the
legal fiction of separate juridical personality is
used for fraudulent or wrongful ends. 100 For
reasons discussed below, We see red flags of
fraudulent schemes in public procurement, all
of which were established in the 2004
Decision, the totality of which strongly indicate
that MPEI was a sham corporation
formed merely for the purpose of perpetrating
a fraudulent scheme.
The red flags are as follows: (1) overly narrow
specifications; (2) unjustified
recommendations and unjustified winning
bidders; (3) failure to meet the terms of the

contract; and (4) shell or fictitious company.
We shall discuss each in detail.
Overly Narrow Specifications
The World Bank's Fraud and Corruption
Awareness Handbook: A Handbook for Civil
Servants Involved in Public
Procurement, (Handbook) identifies an
assortment of fraud and corruption indicators
and relevant schemes in public
procurement. 101 One of the schemes
recognized by the Handbook is rigged
specifications:
Scheme: Rigged specifications. In a
competitive market for goods and services,
any specifications that seem to be drafted in a
way that favors aparticular company
deserve closer scrutiny. For example,
specifications that are too narrow can be used
to exclude other qualified bidders or justify
improper sole source awards. Unduly vague
or broad specifications can allow an
unqualified bidder to compete or justify
fraudulent change orders after the contract is
awarded. Sometimes, project officials will go
so far as to allow the favored bidder to draft
the specifications. 102
In Our 2004 Decision, We identified a red flag
of rigged bidding in the form of overly narrow
specifications. As already discussed, the
accuracy requirement of 99.9995 percent was
set up by COMELEC bidding rules. This Court
recognized that this rating was "too high and
was a sure indication of fraud in the
bidding, designed to eliminate fair
competition." 103 Indeed, "the essence of
public bidding is violated by the practice of
requiring very high standards or unrealistic
specifications that cannot be met. . . only to
water them down after the bid has been
award(ed)." 104
Unjustified Recommendations and
Unjustified Winning Bidders
Questionable evaluation in a Bid Evaluation
Report (BER) is an
indicator of bid rigging. The Handbook
expounds:
72
Questionable evaluation and unusual bid
patterns may emerge in the BER. After the
completion of the evaluation process, the
Bid Evaluation Committee should present
to the implementing agency its BER, which
describes the results and the process by
which the BEC has evaluated the bids
received. The BER may include a number
of indicators of bid rigging, e.g.,
questionable disqualifications, and
unusual bid patterns.105
The Handbook lists unjustified
recommendations and unjustified winning
bidders as red flags of a rigged bidding. 106
The red flags of questionable
recommendation and unjustified awards are
raised in this case. As earlier discussed, the
project was awarded to MPC, which proved to
be a nonentity. It was MPEI that actually
participated in the bidding process, but it was
not qualified to be a bidder in the first place.
Moreover, its ACMs failed the accuracy
requirement set by COMELEC. Yet, MPC -
the nonentity - obtained a favorable
recommendation from the BAC, and the
automation contract was awarded to the
former.
Failure to Meet Contract Terms
Failure to meet the terms of a contract is
regarded as a fraud by the Handbook:
Scheme: Failure to meet contract terms.
Firms may deliberately fail to comply with
contract requirements. The contractor will
attempt to conceal such actions often by
falsifying or forging supporting documentation
and bill for the work as if it were done in
accordance with specifications. In many
cases, the contractors must bribe inspection
or project personnel to accept the
substandard goods or works, or supervision
agents are coerced to approve substandard
work. x x x 107
As mentioned earlier, this Court already found
the ACMs to be below the standards set by
the COMELEC. We reiterated their
noncompliant status in Our 2005 and 2006

Resolutions. As early as 2005, when the
COMELEC sought permission from this Court
to utilize the ACMs in the then scheduled
ARMM elections, We declared that the
proposed use of the machines would expose
the ARMM elections to the same dangers of
massive electoral fraud that would have been
inflicted by the projected automation of the
2004 national elections. We based this
pronouncement on the fact that
the COMELEC failed to show that the
deficiencies had been cured. 108 Yet again,
this Court in 2006 blocked another attempt to
use the ACMs, this time for the 2007
elections. We reiterated that because the
ACMs had merely remained idle and unused
since their last evaluation, in which they failed
to hurdle the crucial tests, then their defects
and deficiencies could not have been cured
by then. 109
Based on the foregoing, the ACMs delivered
were plagued with defects that made them fail
the requirements set for the automation
project.
Shell or fictitious company
The Handbook regards a shell or fictitious
company as a "serious red flag," a concept
that it elaborates upon:
Fictitious companies are by
definition fraudulent and may also serve as
fronts for government officials. The typical
scheme involves corrupt government officials
creating a fictitious company that will serve as
a "vehicle" to secure contract awards. Often,
the fictitious-or ghost-company will
subcontract work to lower cost and sometimes
unqualified firms. The fictitious company may
also utilize designated losers as
subcontractors to deliver the work, thus
indicating collusion.
Shell companies have no significant assets,
staff or operational capacity. They pose
a serious red flag as a bidder on public
contracts, because they often hide the
interests of project or government officials,
concealing a conflict of interest and
73
opportunities for money laundering. Also, by
definition, they have no experience. 110
MPEI qualifies as a shell or fictitious company.
It was nonexistent at the time of the invitation
to bid; to be precise, it was incorporated only
11 days before the bidding. It was a newly
formed corporation and, as such, had no track
record to speak of.
Further, MPEI misrepresented itself in the
bidding process as "lead company" of the
supposed joint venture. The
misrepresentation appears to have been an
attempt to justify its lack of experience. As a
new company, it was not eligible to participate
as a bidder. It could do so only by pretending
that it was acting as an agent of the putative
consortium.
The timing of the incorporation of MPEI is
particularly noteworthy. Its close nexus to the
date of the invitation to bid and the date of the
bidding (11 days) provides a strong indicium
of the intent to use the corporate vehicle for
fraudulent purposes. This proximity
unmistakably indicates that the automation
contract served as motivation for the formation
of MPEI: a corporation had to be organized so
it could participate in the bidding by claiming
to be an agent of a pretended joint venture.
The timing of the formation of MPEI did not
escape the scrutiny of Justice Angelina
Sandoval-Gutierrez, who made this
observation in her Concurring Opinion in the
2004 Decision:
At this juncture, it bears stressing that MPEI
was incorporated only on February 27,
2003 as evidenced by its Certificate of
Incorporation. This goes to show that from the
time the COMELEC issued its Invitation to
Bid (January 28, 2003) and Request for
Proposal (February 17, 2003) up to the time it
convened the Pre-bid Conference (February
18, 2003), MPEI was literally a non-existent
entity. It came into being only on February 27,
2003 or eleven (11) days prior to the
submission of its bid, i.e. March 10,
2003. This poses a legal obstacle to its
eligibility as a bidder. The Request for

Proposal requires the bidder to submit
financial documents that will establish to the
BAC's satisfaction its financial capability which
include:
(1) audited financial statements ofthe Bidder's
firm for the last three (3) calendar years,
stamped "RECEIVED" by the appropriate
government agency, to show its capacity to
finance the manufacture and supply of Goods
called for and a statement or record of
volumes of sales;
(2) Balance Sheet;
(3) Income Statement; and
(4) Statement of Cash Flow.
As correctly pointed out by petitioners, how
could MPEI comply with the above
requirement of audited financial statements
for the last three (3) calendar years if it came
into existence only eleven (11) days prior to
the bidding?
To do away with such complication, MPEI
asserts that it was MP CONSORTIUM who
submitted the bid on March 10, 2003. It
pretends compliance with the requirements by
invoking the financial capabilities and long
time existence of the alleged members of the
MP CONSORTIUM, namely, Election.Com,
WeSolv, SK CeC, ePLDT and Oracle. It wants
this Court to believe that it is MP
CONSORTIUM who was actually dealing with
the COMELEC and that its (MPEI)
participation is merely that of a "lead company
and proponent" of the joint venture. This is
hardly convincing. For one, the contract for
the supply and delivery of ACM was between
COMELEC and MPEI, not MP
CONSORTIUM. As a matter of fact, there
cannot he found in the contract any reference
to the MP CONSORTIUM or any member
thereof for that matter. For another, the
agreements among the alleged members of
MP CONSORTIUM do not show the existence
of a joint-venture agreement. Worse, MPEI
cannot produce the agreement as to the "joint
and several liability" of the alleged members
of the MP CONSORTIUM as required by this
74
Court in its Resolution dated October 7,
2003. 111
Respondent MPEI was formed to
perpetrate the fraud against petitioner.
The totality of the red flags found in this case
leads Us to the inevitable conclusion that
MPEI was nothing but a sham corporation
formed for the purpose of defrauding
petitioner. Its ultimate objective was to secure
the ₱1,248,949,088 automation contract. The
scheme was to put up a corporation that
would participate in the bid and enter into a
contract with the COMELEC, even if the
former was not qualified or authorized to do
so.
Without the incorporation of MPEI, the
defraudation of the government would not
have been possible. The formation of MPEI
paved the way for its participation in the bid,
through its claim that it was an agent of a
supposed joint venture, its misrepresentations
to secure the automation contract, its
misrepresentation at the time of the execution
of the contract, its delivery of the defective
ACMs, and ultimately its acceptance of the
benefits under the automation contract.
The foregoing considered, veil-piercing is
justified in this case.
We shall next consider the question of whose
assets shall be reached by the application of
the piercing doctrine.
B. Because all the individual
respondents actively participated in the
perpetration of the fraud against petitioner,
their personal assets may be subject to a
writ of preliminary attachment by piercing
the corporate veil.
A corporation's privilege of being treated as
an entity distinct and separate from the
stockholders is confined to legitimate uses,
and is subject to equitable limitations to
prevent its being exercised for fraudulent,
unfair, or illegal purposes. 112 As early as the
19th century, it has been held that:

The general proposition that a corporation is
to be regarded as a legal entity, existing
separate and apart from the natural persons
composing it, is not disputed; but that the
statement is a mere fiction, existing only in
idea, is well understood, and not controverted
by any one who pretends to accurate
knowledge on the subject. It has been
introduced for the convenience of the
company in making contracts, in acquiring
property for corporate purposes, in suing and
being sued, and to preserve the limited liability
of the stockholder by distinguishing between
the corporate debts and property of the
company and of the stockholders in their
capacity as individuals. All fictions of law
have been introduced for the purpose of
convenience, and to subserve the ends of
justice. It is in this sense that the maxim in
fictione juris subsistit aequitas is used, and the
doctrine of fictions applied. But when they
are urged to an intent and purpose not
within the reason and policy of the fiction,
they have always been disregarded by the
courts. Broom's, Legal Maxims 130. "It is a
certain rule," says Lord Mansfield, C.J., "that a
fiction of law never be contradicted so as to
defeat the end for which it was invented, but
for every other purpose it may be
contradicted.'' Johnson v. Smith, 2 Burr.,
962.113
The main effect of disregarding the corporate
fiction is that stockholders will be held
personally liable for the acts and contracts of
the corporation, whose existence, at least for
the purpose of the particular situation
involved, is ignored. 114
We have consistently held that when the
notion of legal entity is used to defeat public
convenience, justify wrong, protect fraud, or
defend crime, the law will regard the
corporation as an association of
persons. 115 Thus, considering that We find it
justified to pierce the corporate veil in the case
before Us, MPEI must, perforce, be treated as
a mere association of persons whose assets
are unshielded by corporate fiction. Such
persons' individual liability shall now be
determined with respect to the matter at hand.
75
Contrary to respondent Willy's claims, his
participation in the fraud is clearly established
by his unequivocal agreement to the
execution of the automation contract with the
COMELEC, and his signature that appears on
the voided contract. As far back as in the 2004
Decision, his participation as a signatory to
the automation contract was already
established:
The foregoing argument is
unpersuasive. First, the contract being
referred to, entitled "The Automated Counting
and Canvassing Project Contract,'' is between
Comelec and MPEI, not the alleged
consortium, MPC. To repeat, it is MPEI -- not
MPC -- that is a party to the
Contract. Nowhere in that Contract is there
any mention of a consortium or joint venture,
of members thereof,much less of joint and
several liability. Supposedly executed
sometime in May 2003, the Contract bears a
notarization date of June 30, 2003, and
contains the signature of Willy U. Yu
signing as president of MPEI (not for and
on behalf of MPC), along with that of the
Comclec chair. It provides in Section 3.2 that
MPEI (not MPC) is to supply the Equipment
and perform the Services under the Contract,
in accordance with the appendices thereof;
nothing whatsoever is said about any
consortium or joint venture or partnership. x x
x (Emphasis supplied)
That his signature appears on the automation
contract means that he agreed and acceded
to its terms. 116 His participation in the fraud
involves his signing and executing the voided
contract.
The execution of the automation contract with
a non-eligible entity and the subsequent
award of the contract despite the failure to
meet the mandatory requirements were
"badges of fraud" in the procurement process
that should have been recognized by the CA
to justify the issuance of the writ of preliminary
attachment against the properties of
respondent Willy.

With respect to the other individual
respondents, petitioner, in its Answer with
Counterclaim, alleged:
30. Also, inasmuch as MPEI is in truth a mere
shell corporation with no real assets in its
name, incorporated merely to feign eligibility
for the bidding of the automated contract
when it in fact had none, to the great prejudice
of the Republic, plaintiff's individual
incorporators should likewise be made
liable together with MPEI for the automated
contract amount paid to and received by the
latter. The following circumstances altogether
manifest that the individual incorporators
merely cloaked themselves with the veil of
corporate fiction to perpetrate a fraud and to
eschew liability therefor, thus:
xxxx
f. From the time it was incorporated until
today, MPEI has not complied with the
reportorial requirements of the Securities and
Exchange Commission;
g. Individual incorporators, acting
fraudulently through MPEI, and in violation
of the bidding rules,
then subcontracted the automation
contract to four (4) other
corporations, namely: WeSolve Corporation,
SK C&C, ePLDT and election.com, to comply
with the capital requirements, requisite five
(5)-year corporate standing and the technical
qualifications of the Request for Proposal;
x x x x117
In response to petitioner's allegations,
respondents Willy and Bonnie stated in their
Reply and Answer (Re: Answer with
Counterclaim dated 28 June 2004): 118
3.3 As far as plaintiff MPEI and defendants-
in-counterclaim are concerned, they dealt
with the COMELEC with full transparency
and in utmost good faith. All documents
support its eligibility to bid for the supply of the
ACMs and their peripheral services, were
submitted to the COMELEC for its evaluation
in full transparency. Pertinently, neither
76
plaintiff MPEI nor any of its directors,
stockholders, officers or employees had any
participation in the evaluation of the bids and
eventual choice of the winning bidder. 119
Respondents Johnson's and Bernard’s
denials were made in paragraphs 2.17 and
3.3 of their Answer with Counterclaim to the
Republic’s Counterclaim, to wit:120
2.17 The erroneous conclusion of fact and law
in paragraph 30 (f) and (g) of the Republic's
answer is denied, having been pleaded in
violation of the requirement, that only ultimate
facts are to be stated in the pleadings and
they are falsehoods. The truth of the matter is
that there could not have been fraud, as these
agreements were submitted to the COMELEC
for its evaluation and assessment, as to the
qualification of the Consortium as a bidder, a
showing of transparency in plaintiff's dealings
with the Republic. 121
3.3 As far as plaintiff MPEI and defendants-
in-counterclaim are concerned, they dealt
with the COMELEC with full transparency
and in utmost good faith. All documents
support its eligibility to bid for the supply of the
automated counting machines and its
peripheral services, were submitted to the
COMELEC for its evaluation in full
transparency. Pertinently, the plaintiff or any
of its directors, stockholders, officers or
employees had no participation in the
evaluation of the bids and eventual choice of
the winning bidder.122
As regards Enrique and Rosita, the relevant
paragraphs in the Answer with Counterclaim
to the Republic's Counterclaim 123 are quoted
below:
2.17. The erroneous conclusion of fact and
law in paragraph 30 (F) and (G) of the
Republic's answer is denied, having been
pleaded in violation of the requirement, that
only ultimate facts are to be stated in the
pleadings and they are falsehoods. The truth
of the matter is that there could not have been
fraud, as these agreements were submitted to
the COMELEC for its evaluation and
assessment, as to the qualification of the

Consortium as a bidder, a showing of
transparency in plaintiffs dealings with the
Republic. 124
3.3. As far as the plaintiff and herein
answering defendants-in-counterclaim are
concerned, they dealt with the
Commission on Elections with full
transparency and in utmost good faith. All
documents in support of its eligibility to bid for
the supply of the automated counting
machines and its peripheral services were
submitted to the Commission on Elections for
its evaluation in full transparency. Pertinently,
the plaintiff or any of its directors,
stockholders, officers or employees had no
participation in the evaluation of the bids and
eventual choice of the winning bidder.125
Pedro and Laureano offer a similar defense in
paragraph 3.3 of their Reply and Answer with
Counterclaim to the Republic's
Counterclaim 126 dated 28 June 2004, which
reads:
3.3. As far as plaintiff MPEI and defendants-
in-counterclaim are concerned, they dealt
with the COMELEC with full transparency
and in utmost good faith. All documents
support its eligibility to bid for the supply of the
ACMs and their peripheral services, were
submitted to the COMELEC for its evaluation
in full transparency. Pertinently, neither
plaintiff MPEI nor any of its directors,
stockholders, officers or employees had any
participation in the evaluation of the bids and
eventual choice of the winning bidder. 127
It can be seen from the above-quoted
paragraphs that the individual respondents
never denied their participation in the
questioned transactions of MPEI, merely
raising the defense of good faith and shifting
the blame to the COMELEC. The individual
respondents have, in effect, admitted that they
had knowledge of and participation in the
fraudulent subcontracting of the automation
contract to the four corporations.
It bears stressing that the remaining individual
respondents, together with respondent Willy,
incorporated MPEI. As incorporators, they are
77
expected to be involved in the management of
the corporation and they are charged with the
duty of care. This is one of the reasons for the
requirement of ownership of at least one
share of stock by an incorporator:
The reason for this, as explained by the
lawmakers, is to avoid the confusion and/or
ambiguities arising in a situation under the old
corporation law where there exists one set of
incorporators who are not even
shareholders and another set of
directors/incorporators who must all be
shareholders of the corporation. The
people who deal with said corporation at such
an early stage are confused as to who are the
persons or group really authorized to act in
behalf of the corporation. (Proceedings of the
Batasan Pambansa on the Proposed
Corporation Code). Another reason may be
anchored on the presumption that when an
incorporator has pecuniary interest in the
corporation, no matter how minimal, he
will be more involved in the management
of corporate affairs and to a greater
degree, be concerned with the welfare of
the corporation. 128
As incorporators and businessmen about to
embark on a new business venture involving a
sizeable capital (₱300 million), the remaining
individual respondents should have known of
Willy's scheme to perpetrate the fraud against
petitioner, especially because the objective
was a billion peso automation contract. Still,
they proceeded with the illicit business
venture.
It is clear to this Court that inequity would
result if We do not attach personal liability to
all the individual respondents. With a definite
finding that MPEI was used to perpetrate the
fraud against the government, it would be a
great injustice if the remaining individual
respondents would enjoy the benefits of
incorporation despite a clear finding of abuse
of the corporate vehicle. Indeed, to allow the
corporate fiction to remain intact would not
subserve, but instead subvert, the ends of
justice.
III.

The factual findings of this Court that have
become final
cannot be modified or altered, much less
reversed,
and are controlling in the instant case.
Respondents argue that the 2004 Decision
did not resolve and could not have resolved
the factual issue of whether they had
committed any fraud, as the Supreme Court is
not a trier of facts; and the 2004 case, being
a certiorari case, did not deal with questions of
fact. 129
Further, respondents argue that the findings
of this Court ought to be confined only to
those issues actually raised and resolved in
the 2004 case, in accordance with the
principle of conclusiveness of judgment. 130
They explain that the issues resolved in the
2004 Decision were only limited to the
following: (l)whether to declare COMELEC
Resolution No. 6074 null and void; (2)
whether to enjoin the implementation of any
further contract that may have been entered
into by COMELEC with MPC or MPEI; and (3)
whether to compel COMELEC to conduct a
rebidding of the project. 131
It is obvious that respondents are merely
trying to escape the implications or effects of
the nullity of the automation contract that they
had executed. Section 1,Rule 65 of the Rules
of Court, clearly sets forth the instances when
a petition for certiorari can be used as a
proper remedy:
Section 1. Petition for certiorari. - When any
tribunal, board or officer exercising judicial or
quasi-judicial functions has acted without or in
excess of its jurisdiction, or with grave abuse
of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any
plain, speedy, and adequate remedy in the
ordinary course of law, a person aggrieved
thereby may file a verified petition in the
proper court, alleging the facts with certainty
and praying that judgment be rendered
annulling or modifying the proceedings of
such tribunal, board or officer, and granting
such incidental reliefs as law and justice may
require.
78
The term "grave abuse of discretion" has a
specific meaning. An act of a court or tribunal
can only be considered to have been
committed with grave abuse of discretion
when the act is done in a "capricious or
whimsical exercise of judgment as is
equivalent to lack of jurisdiction." 132 The
abuse of discretion must be so patent and
gross as to amount to an "evasion of a
positive duty or to a virtual refusal to perform a
duty enjoined by law, or to act at all in
contemplation of law, as where the power is
exercised in an arbitrary and despotic manner
by reason of passion and
hostility." 133 Furthermore, the use of a petition
for certiorari is restricted only to "truly
extraordinary cases wherein the act of the
lower court or quasi-judicial body is wholly
void." 134 From the foregoing definition, it is
clear that the special civil action
of certiorari under Rule 65 can only strike
down an act for having been done with grave
abuse of discretion if the petitioner could
manifestly show that such act was patent and
gross. 135
We had to ascertain from the evidence
whether the COMELEC committed grave
abuse of discretion, and in the process, were
justified in making some factual findings. The
conclusions derived from the factual findings
are inextricably intertwined with this Court's
determination of grave abuse of discretion.
They have a direct bearing and are in fact
necessary to illustrate that the award of the
automation contract was done hastily and in
direct violation of law. This Court has indeed
made factual findings based on the evidence
presented before it; in turn, these factual
findings constitute the controlling legal rule
between the parties that cannot be modified
or amended by any of them. This Court is
bound to consider the factual findings made in
the 2004 Decision in order to declare that
there is fraud for the purpose of issuing the
writ of preliminary attachment.
Respondents appear to have misunderstood
the implications of the principle of
conclusiveness of judgment on their cause.
Contrary to their claims, the factual findings
are conclusive and have been established as
the controlling legal rule in the instant case,

on the basis of the principle of res judicata-
moreparticularly, the principle of
conclusiveness of judgment.
This doctrine of res judicata which is set forth
in Section 47 of Rule 39 of the Rules of
Court136 lays down two main rules, namely: (1)
the judgment or decree of a court of
competent jurisdiction on the merits concludes
the litigation between the parties and their
privies and constitutes a bar to a new action
or suit involving the same cause of action
either before the same or any other tribunal;
and (2) any right, fact, or matter in issue
directly adjudicated or necessarily involved in
the determination of an action before a
competent court in which a judgment or
decree is rendered on the merits is
conclusively settled by the judgment therein
and cannot again be litigated between the
parties and their privies whether or not the
claims or demands, purposes, or subject
matters of the two suits are the same. 137
These two main rules mark the distinction
between the principles governing the two
typical cases in which a judgment may
operate as evidence. 138 The first general rule
stated above and corresponding to the
afore-quoted paragraph (b) of Section 47,
Rule 39 of the Rules of Court, is referred to as
"bar by former judgment"; while the second
general rule, which is embodied in paragraph
(c) of the same section and rule, is known as
"conclusiveness of judgment." 139
In Calalang v. Register of Deeds of
Quezon City, 140 We discussed the concept of
conclusiveness of judgment as pertaining
even to those matters essentially
connected with the subject of litigation in the
first action. This Court explained therein that
the bar on re-litigation extends to those
questions necessarily implied in the final
judgment, although no specific finding may
have been made in reference thereto, and
although those matters were directly referred
to in the pleadings and were not actually or
formally presented. If the record of the former
trial shows that the judgment could not have
been rendered without deciding a particular
79
matter, it will be considered as having settled
that matter as to all future actions between the
parties; and if a judgment necessarily
presupposes certain premises, they are as
conclusive as the judgment itself:
The second concept - conclusiveness of
judgment - states that a fact or question
which was in issue in a former suit and
was there judicially passed upon and
determined by a court of competent
jurisdiction, is conclusively settled by the
judgment therein as far as the parties to
that action and persons in privity with
them are concerned and cannot be again
litigated in any future action between such
parties or their privies, in the same court
or any other court of concurrent
jurisdiction on either the same or different
cause of action, while the judgment
remains unreversed by proper authority. It
has been held that in order that a judgment in
one action can be conclusive as to a particular
matter in another action between the same
parties or their privies, it is essential that the
issue be identical. If a particular point or
question is in issue in the second action,
and the judgment will depend on the
determination of that particular point or
question, a former judgment between the
same parties or their privies will be final
and conclusive in the second if that same
point or question was in issue and
adjudicated in the first suit (Nabus v. Court
of Appeals, 193 SCRA 732 [1991]). Identity of
cause of action is not required but merely
identity of issue.
Justice Feliciano, in Smith Bell & Company
(Phils), Inc. v. Court of Appeals (197 SCRA
201, 210 [1991]), reiterated Lopez v.
Reyes (76 SCRA 179 [1977]) in regard to the
distinction between bar by former judgment
which bars the prosecution of a second action
upon the same claim, demand, or cause of
action, and conclusiveness of judgment which
bars the relitigation of particular facts or
issues in another litigation between the same
parties on a different claim or cause of action.
The general rule precluding the re-
litigation of material facts or questions
which were in issue and adjudicated in

former action are commonly applied to all
matters essentially connected with the
subject matter of the litigation. Thus, it
extends to questions necessarily implied
in the final judgment, although no specific
finding may have been made in reference
thereto and although such matters were
directly ref erred to in the pleadings and
were not actually or formally presented.
Under this rule, if the record of the former
trial shows that the judgment could not
have been rendered without deciding the
particular matter, it will be considered as
having settled that matter as to all future
actions between the parties and if a
judgment necessarily presupposes certain
premises, they are as conclusive as the
judgment itself. 141 (Emphases supplied)
The foregoing disquisition finds application to
the case at bar. Undeniably, the present case
is merely an adjunct of the 2004 case, in
which the automation contract was declared to
be a nullity. Needless to say, the 2004
Decision has since become final. As earlier
explained, this Court arrived at several factual
findings showing the illegality of the
automation contract; in turn, these findings
were used as basis to justify the declaration of
nullity.
A closer scrutiny of the 2004 Decision would
reveal that the judgment could not have been
rendered without deciding particular factual
matters in relation to the following: (1) identity,
existence and eligibility of MPC as a bidder;
(2) failure of the ACMs to pass DOST
technical tests; and (3) remedial measures
undertaken by the COMELEC after the award
of the automation contract. Under the principle
of conclusiveness of judgment, We are
precluded from re-litigating these facts, as
these were essential to the question of nullity.
Otherwise stated, the judgment could not
have been rendered without necessarily
deciding on the above-enumerated factual
matters.
Thus, under the principle of conclusiveness of
judgment, those material facts became
binding and conclusive on the parties, in this
case MPEI and, ultimately, the persons that
comprised it. When a right or fact has been
80
judicially tried and determined by a court of
competent jurisdiction, or when an opportunity
for that trial has been given, the judgment of
the court-as long as it remains unreversed-
should be conclusive upon the parties and
those in privity with them. 142 Thus, the CA
should not have required petitioner to present
further evidence of fraud on the part of
respondent Willy and MPEI, as it was already
necessarily adjudged in the 2004 case.
To allow respondents to argue otherwise
would be violative of the principle of
immutability of judgment. When a final
judgment becomes executory, it becomes
immutable and unalterable and may no longer
undergo any modification, much less any
reversal. 143 In Navarro v. Metropolitan Bank &
Trust Company144this Court explained that the
underlying reason behind this principle is to
avoid delay in the administration of justice and
to avoid allowing judicial controversies to drag
on indefinitely, viz.:
No other procedural law principle is indeed
more settled than that once a judgment
becomes final, it is no longer subject to
change, revision, amendment or reversal,
except only for correction of clerical
errors, or the making of nunc pro
tunc entries which cause no prejudice to
any party, or where the judgment itself is
void. The underlying reason for the rule is
two-fold: (1) to avoid delay in the
administration of justice and thus make
orderly the discharge of judicial business, and
(2) to put judicial controversies to an end, at
the risk of occasional errors, inasmuch as
controversies cannot be allowed to drag on
indefinitely and the rights and obligations of
every litigant must not hang in suspense for
an indefinite period of time. As the Court
declared in Yau v. Silverio,
Litigation must end and terminate sometime
and somewhere, and it is essential to an
effective and efficient administration of justice
that, once a judgment has become final, the
winning party be, not through a mere
subterfuge, deprived of the fruits of the
verdict. Courts must therefore guard against
any scheme calculated to bring about that
result. Constituted as they are to put an end to

controversies, courts should frown upon any
attempt to prolong them.
Indeed, just as a losing party has the right to
file an appeal within the prescribed period, the
winning party also has the correlative right to
enjoy the finality of the resolution of his case
by the execution and satisfaction of the
judgment. Any attempt to thwart this rigid rule
and deny the prevailing litigant his right to
savor the fruit of his victory must immediately
be struck down. x x x. (Emphasis supplied) 145
In the instant case, adherence to respondents'
position would mean a complete disregard of
the factual findings We made in the 2004
Decision, and would certainly be tantamount
to reversing the same. This would invariably
cause further delay in the efforts to recover
the amounts of government money illegally
disbursed to respondents back in 2004.
Next, respondents argue that the findings of
fact in the 2004 Decision are not
conclusive146 considering that eight (8) of the
fifteen (15) justices of this Court refused to go
along with the factual findings as stated in the
majority opinion. 147 This argument fails to
convince.
Fourteen (14) Justices participated in the
promulgation of the 2004
Decision.1âwphi1 Out of the fourteen (14)
Justices, three (3) Justices registered their
dissent, 148 and two (2) Justices wrote their
Separate Opinions, each recommending the
dismissal of the Petition. 149 Of the nine (9)
Justices who voted to grant the Petition, four
(4) joined the ponente in his disposition of the
case, 150 and two (2) Justices wrote Separate
Concurring Opinions. 151 As to the remaining
two (2) Justices, one (1) Justice 152 merely
concurred in the result, while the other joined
another Justice in her Separate Opinion. 153
Contrary to the allegations of respondents, an
examination of the voting shows that nine (9)
Justices voted in favor of the majority opinion,
without any qualification regarding the factual
findings made therein. In fact, the two (2)
Justices who wrote their own Concurring
Opinions echoed the lack of eligibility of MPC
81
and the failure of the ACMs to pass the
mandatory requirements.
Finally, respondents cannot argue that, from
the line of questioning of then Justice
Leonardo A. Quisumbing during the oral
arguments in the 2004 case, he did not agree
with the factual findings of this Court. Oral
arguments before this Court are held precisely
to test the soundness of each proponent's
contentions. The questions and statements
propounded by Justices during such an
exercise are not to be construed as their
definitive opinions. Neither are they indicative
of how a Justice shall vote on a particular
issue; indeed, Justice Quisumbing clearly
states in the 2004 Decision that he concurs in
the results. At any rate, statements made by
Our Members during oral arguments are
not stare decisis; what is conclusive are the
decisions reached by the majority of the
Court.
IV.
The delivery of 1,991 units of ACMs does
not negate fraud on
the part of respondents Willy and MPEI.
The CA in its Amended Decision explained
that respondents could not be considered to
have fostered a fraudulent intent to not honor
their obligation, since they delivered 1,991
units of ACMs. 154 In turn, respondents argue
that respondent MPEI had every intention of
fulfilling its obligation, because it in fact
delivered the ACMs as required by the
automation contract. 155
We disagree with the CA and
respondents.1âwphi1 The fact that the ACMs
were delivered cannot induce this Court to
disregard the fraud respondent MPEI had
employed in securing the award of the
automation contract, as established above.
Furthermore, they cannot cite the fact of
delivery in their favor, considering that the
ACMs delivered were substandard and
noncompliant with the requirements initially
set for the automation project.

In Our 2004 Decision, We already found the
ACMs to be below the standards set by the
COMELEC. The noncompliant status of these
ACMs was reiterated by this Court in its 2005
and 2006 Resolutions. The CA therefore
gravely erred in considering the delivery of
1,991 ACMs as evidence of respondents'
willingness to perform the obligation (and
thus, their lack of fraud) considering that, as
exhaustively discussed earlier, the ACMs
delivered were plagued with defects and failed
to meet the requirements set for the
automation project.
Under Article 1233 of the New Civil Code, a
debt shall not be understood to have been
paid, unless the thing or service in which the
obligation consists has been completely
delivered or rendered. In this case,
respondents cannot be considered to
have performed their obligation, because the
ACMs were defective.
v.
Estoppel does not lie against the State
when it acts to rectify
the mistakes, errors or illegal acts of its
officials and agents.
Respondents claim that the 2004 Decision
may not be invoked against them, since the
petitioner and the respondents were co-
respondents and not adverse parties in the
2004 case. Respondents further explain that
since petitioner and respondents were on the
same side at the time, had the same interest,
and took the same position on the validity and
regularity of the automation contract,
petitioner cannot now invoke the 2004
Decision against them. 156
Contrary to respondents' contention, estoppel
generally finds no application against the
State when it acts to rectify mistakes, errors,
irregularities, or illegal acts of its officials and
agents, irrespective of rank. This principle
ensures the efficient conduct of the affairs of
the State without any hindrance to the
implementation of laws and regulations by the
government. This holds true even if its agents'
prior mistakes or illegal acts shackle
82
government operations and allow others-
some by malice-to profit from official error or
misbehavior, and even if the rectification
prejudices parties who have meanwhile
received benefit. 157 Indeed, in the 2004
Decision, this Court even directed the
Ombudsman to determine the possible
criminal liability of public officials and private
persons responsible for the contract, and the
OSG to undertake measures to protect the
government from the ill effects of the illegal
disbursement of public funds. 158
The equitable doctrine of estoppel for
the prevention of injustice and is for the
protection of those who have been misled by
that which on its face was fair and whose
character, as represented, parties to the
deception will not, in the interest of justice, be
heard to deny. 159 It cannot therefore be
utilized to insulate from liability the very
perpetrators of the injustice complained of.
VI.
The findings of the Office of the
Ombudsman
are not controlling in the instant case.
Respondents further claim that this Court has
recognized the fact that it did not determine or
adjudge any fraud that may have been
committed by individual respondents. Rather,
it referred the matter to the Ombudsman for
the determination of criminal liability. 160 The
Ombudsman in fact made its own
determination that there was no probable
cause to hold individual respondents
criminally liable. 161
Respondents miss the point. The main issue
in the instant case is whether respondents are
guilty of fraud in obtaining and executing the
automation contract, to justify the issuance of
a writ of preliminary attachment in petitioner's
favor. Meanwhile, the issue relating to the
proceedings before the Ombudsman (and this
Court in G.R. No. 174777) pertains to the
finding of lack of probable cause for the
possible criminal liability of respondents under
the Anti-Graft and Corrupt Practices Act.

The matter before Us involves petitioner's
application for a writ of preliminary attachment
in relation to its recovery of the expended
amount under the voided contract, and not the
determination of whether there is probable
cause to hold respondents liable for possible
criminal liability due to the nullification of the
automation contract. Whether or not the
Ombudsman has found probable cause for
possible criminal liability on the part of
respondents is not controlling in the instant
case.
CONCLUSION
If the State is to be serious in its obligation to
develop and implement coordinated anti-
corruption policies that promote proper
management of public affairs and public
property, integrity, transparency and
accountability, 162 it needs to establish and
promote effective practices aimed at the
prevention of corruption, 163 as well as
strengthen our efforts at asset recovery. 164
As a signatory to the United Nations
Convention Against Corruption
(UNCAC), 165 the Philippines acknowledges its
obligation to establish appropriate systems of
procurement based on transparency,
competition and objective criteria in decision-
making that are effective in preventing
corruption. 166 To promote transparency, and
in line with the country's efforts to curb
corruption, it is useful to identify certain fraud
indicators or "red flags" that can point to
corrupt activity. 167 This case - arguably the
first to provide palpable examples of what
could be reasonably considered as "red flags"
of fraud and malfeasance in public
procurement - is the Court's contribution to the
nation's continuing battle against corruption, in
accordance with its mandate to dispense
justice and safeguard the public interest.
WHEREFORE, premises considered, the
Petition is GRANTED. The Amended Decision
dated 22 September 2008 of the Court of
Appeals in CA-G.R. SP. No. 95988
is ANNULLED AND SET ASIDE. A new one
is entered DIRECTING the Regional Trial
Court of Makati City, Branch 59, to ISSUE in
83
Civil Case No. 04-346, entitled Mega Pacific
eSolutions, Inc., vs. Republic of the
Philippines, the Writ of Preliminary Attachment
prayed for by petitioner Republic of the
Philippines against the properties of
respondent Mega Pacific eSolutions, Inc., and
Willy U. Yu, Bonnie S. Yu, Enrique T.
Tansipek, Rosita Y. Tansipek, Pedro O. Tan,
Johnson W. Fong, Bernard I. Fong and
Lauriano Barrios.
No costs.
SO ORDERED.
MARIA LOURDES P.A. SERENO
Chief Justice, Chairperson
SECOND DIVISION
January 30, 2017
G.R. No. 219345
SECURITY BANK
CORPORATION, Petitioner
vs.
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 ₱10,000,000.00.
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
₱10,000,000.00.
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
84
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 denied by the RTC
in its Order, 10 dated August 12, 2013.
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. 12
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 tum 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
85
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
86
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
xx:xe) 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
87
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 (Pu/gar), 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 tum 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 tum 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 es ta fa 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 noncompliance 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 tum
over the proceeds of the sale to the bank, and
to return the goods to the bank in the event of
88
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
nonsale. 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 noncompliance 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.1âwphi1 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 R TC to substantiate
the specific violation of trust receipts by
respondents. Security Bank took great lengths
to explain the contents of the trust receipt and
89
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 l(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.
90
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.
JOSE CATRAL MENDOZA
Associate Justice
THIRD DIVISION
G.R. No. 175727, March 06, 2019
LORENZO SHIPPING CORPORATION,
PETITIONER, v. FLORENCIO O. VILLARIN
AND FIRST CARGOMASTERS
CORPORATION, CEBU ARRASTRE &
STEVEDORING SERVICES CORPORATION
AND GUERRERO G. DAJAO,
RESPONDENTS.
G.R. No. 178713, March 06, 2019
LORENZO SHIPPING CORPORATLON,
PETITIONER, v. FLORENCIO O. VILLARIN,
RESPONDENTS.
DECISION
REYES, A., JR., J.:
These are consolidated petitions for review
on certiorari under Rule 45 of the Revised
Rules of Court assailing the rulings of the
Court of Appeals (CA) in CA-G.R. SP No.
86333, which sustained the Orders dated .
May 11, 20041 and June 16, 20042 issued by
the Regional Trial Court (RTC) of Cebu City,
Branch 6, in Civil Case No. CEB-25283; and
in CA-G.R. CEB SP No. 01855, which
reversed the Orders dated March 9,
20063 and May 30, 20064 issued by the RTC
of Cebu City, Branch 20 in the same case.
Civil Case No. CEB-25283 is a suit for specific
performance, accounting, and damages, with
prayer for writs of preliminary mandatory
injunction and preliminary attachment, filed
before the RTC of Cebu City.

The Facts
Lorenzo Shipping Corporation (LSC) is a
domestic corporation which operates
interisland shipping vessels in the Philippines.
On the other hand, Cebu Arrastre and
Stevedoring Services Corporation
(CASSCOR) provides arrastre and
stevedoring services for LSC's ships calling at
the Port of Cebu under a Cargo Handling
Contract dated March 8, 1997.5
On February 20, 1997, Guerrero G. Dajao
(Dajao), as President and General Manager of
CASSCOR, entered into a Memorandum of
Agreement (MOA) with Serafin Cabanlit
(Cabanlit) and Florencio Villarin (Villarin).6
Under the MOA, Villarin and Cabanlit
undertook to operate and manage the arrastre
and stevedoring operations of CASSCOR with
respect to LSC's vessels. CASSCOR was
entitled to 5% of the proceeds of the
operation, while Dajao was entitled to a 2%
royalty. 10% was allocated for taxes, wages
and other necessary expenses; and another
10% was earmarked for the share of the
Philippine Ports Authority.7 Villarin and
Cabanlit alleged that the rest of the proceeds,
amounting to 73%, were due to them.8
The Attachment Case
Alleging failure on the part of CASSCOR and
Dajao to remit their shares from July 1999
onwards, Villarin, Cabanlit, and FCC
(Villarin, et al.) filed a Complaint for specific
performance and accounting against
CASSCOR and Dajao.9 The Complaint was
subsequently amended on June 20, 2000 to
implead LSC as a nominal defendant; to
include a prayer for a writ of preliminary
attachment against CASSCOR and Dajao;
and to include a prayer for mandatory
injunction against LSC. The case was
docketed as Civil Case No. CEB-25283 and
raffled to Branch 5 of the RTC of Cebu City. A
writ of preliminary attachment was thereafter
issued by the RTC against CASSCOR and
Dajao on June 21, 2000.10
CASSCOR and Dajao filed their Answer on
91
June 27, 2000, while LSC filed its Answer on
August 27, 2001. However, on September 22,
2003, Villarin, et al. filed a Second Amended
Complaint. The case was then re-raffled to
Branch 6 of the RTC of Cebu City.11
On January 26, 2004, Villarin, et al. filed a
motion for issuance of a writ of preliminary
attachment. On May 11, 2004, Judge
Anacleto Caminade (Judge Caminade) of
RTC Branch 6 granted the motion and
ordered the issuance of a writ of preliminary
attachment upon the posting by Villarin, et
al. of a Php 150,000.00 bond. On May 17,
2004, LSC filed a Motion for
Clarification/Reconsideration, arguing that it
cannot be subjected to the attachment writ.
However, before the court can act on LSC's
Motion for Clarification/Reconsideration, a
Notice of Garnishment was served on LSC on
May 20, 2004, prompting it to file a motion to
post a counter-bond. On June 1, 2004, Judge
Caminade issued an order granting LSC's
motion to post a counter-bond. Hence, LSC
and CASSCOR both posted counter-bonds
worth Php 150,000.00 each, resulting in the
discharge of the writ of attachment.12
On June 16, 2004, Judge Caminade, ruling on
LSC's Motion for
Clarification/Reconsideration, issued an
Order13 clarifying that the writ of attachment
issued under the Order dated May 11, 2004 is
directed at all the defendants, including LSC.
The pertinent portion of the order states that:
It is the opinion of the Court as already stated
that all the defendants including the
defendant-movant appear to be guilty of fraud
in the performance of the obligation. It is not
true that the plaintiffs and defendant-movant
have no contract. Plaintiff has contract with
the shipping corporation in view of the fact
that the defendant shipping corporation is a
beneficiary of the services of plaintiffs as
alleged in the contract between plaintiffs and
other defendants. The rule on privity of
contract applies.14
Aggrieved, LSC filed a petition
for certiorari with the CA claiming that Judge
Caminade committed grave abuse of
discretion in subjecting LSC to the attachment
writ since it had no contract or juridical relation
with Villarin and the other plaintiffs. LSC

further argued that it cannot be subjected to
the attachment writ because it was only
impleaded as a nominal party.
Judge Caminade subsequently inhibited
himself from the case, which was then re-
raffled to RTC Branch 20.
The Deposit Case
On November 23, 2004, Villarin, et al. filed
a Verified Motion to Require Defendant LSC
to Deposit in Court Money Held in Trust.15 To
support the motion, Villarin, et al. presented
an audit report16 and a letter17 dated January
5, 2004 from LSC Vice-President for Finance
Julita' Valeros (Valeros) which contains a
statement from LSC's external auditor stating
that the unpaid account of LSC to CASSCOR
amounts to Php 10,297,499.59.
On August 12, 2005, Judge Bienvenido R.
Saniel, Jr. (Judge Saniel) of RTC Branch 20
issued an Order18 (Order to Deposit) granting
the November 23, 2004 motion, which reads
as follows:
When this case was called today, Atty.
Bernardito Florido and Atty. Florencio Villarin
agreed and jointly manifested that the money
requested to be deposited in the plaintiffs'
motion shall be deposited in court under the
joint account/name of the plaintiffs and
defendant Cebu Arrastre and Stevedoring
Services Corporation. No one shall withdraw
the money without the knowledge and
conformity of the other, and the approval of
the court.
Accordingly, the verified motion to require
defendant Lorenzo Shipping Corporation to
deposit in court the money held in trust is
hereby granted. Defendant [LSC] is directed
to deposit the amount of Php10,297,499.59
with the Clerk of Court of this Court in the joint
account/name of the plaintiffs and Cebu
Arrastre and Stevedoring Services
Corporation, the same to be withdrawn only
with the knowledge and conformity of the said
parties and the approval of the court.
SO ORDERED.19
The Order noted that the counsels for
Villarin, et al. and CASSCOR and Dajao have
92
subsequently agreed and jointly manifested
that the money requested to be deposited will
be so deposited in court.
On September 6, 2005, Villarin, et al. moved
for the issuance of a writ of execution to
enforce Judge Saniel's Order to Deposit. On
the other hand, LSC moved for
reconsideration of the Order to Deposit on
October 4, 2005.20
On March 9, 2006, Judge Saniel issued an
Order21 granting LSC's motion for
reconsideration and denying Villarin's motion
for execution. The pertinent portions of the
order are as follows:
The motion to require the deposit was
concurred in, with condition, by defendant
Cebu Arrastre and Stevedoring Services
Corporation (CASSCOR). The apparent
purpose of the plaintiffs in securing the
deposit of the above-mentioned amount is to
have an assurance that the money - which the
plaintiff claims to be owing from defendant
Lorenzo Shipping and payable to CASSCOR-
will be available for payment to the prevailing
party when this case shall be finally
terminated or disposed of. The court has
noted however that earlier the court had
issued a writ of preliminary attachment but the
same was discharged when the defendants
put up a counterbond of P300,000.00. In
approving the counterbond, the court had
thereby determined that the counterbond was
sufficient to protect the interests of the
plaintiff. To still require the deposit of the
amount in court would be unnecessary and
oppressive. Besides, whether or not there is
privity of contract between the plaintiffs and
Lorenzo Shipping is an issue that is yet to be
determined and resolved in this case.
WHEREFORE, without needing to discuss the
other matters and arguments raised in the
motion for reconsideration and other
pleadings of the parties, the court resolves to
reconsider, as it does hereby reconsider and
set aside, the order of August 12, 2005.
The plaintiffs motion for issuance of a writ of
execution to enforce the 12 August 2005
order is hereby denied.22

Villarin, et al. moved for reconsideration but
was denied. In denying the motion, the trial
court noted that the grant of LSC and
CASSCOR's motions to post counterbond
was not questioned by the plaintiffs and that
the issue of LSC's liability to Villarin, et al. is
still in dispute. It also held that the Order to
Deposit has no basis in the Rules of Court.23
Aggrieved, Villarin, et al. filed a petition
for certiorari with the CA (the Deposit Case),
asserting that Judge Saniel committed grave
abuse of discretion in granting LSC's motion
for reconsideration. They raised the following
contentions in their petition: (1) the Order to
Deposit is sanctioned by Rule 135, Section 6,
which authorizes courts to issue writs and
processes to carry their jurisdiction into effect;
(2) the Php 300,000.00 counterbond is
insufficient to protect their interest; and (3) the
letter dated January 5, 2004 amounts to an
admission of liability on the part of LSC.24
Rulings of the CA
CA Ruling in the Deposit Case
On September 7, 2006, the CA rendered its
Decision25 in favor of Villarin, et al., thusly:
WHEREFORE. in view of the foregoing
premises, judgment is hereby rendered by
us GRANTING the petition filed in this
case, ANNULLING and SETTING ASIDE, as
they are hereby annulled and set aside, the
Orders elated March 9, 2006 and May 30,
2006 of the respondent judge
and REINSTATING his Order elated August
12, 2005. Further, the respondent judge is
hereby ordered to ENFORCE his Order dated
August 12, 2005 which requires the deposit in
court the amount of P10, 297, 499.59.
SO ORDERED.26
The CA ruled that Judge Saniel committed
grave abuse of discretion in granting LSC's
motion on the ground that the counterbond
was sufficient to protect the interests of the
plaintiffs. Taking the Valeros letter as a judicial
admission on the part of CASSCOR and
Dajao, the appellate court concluded that the
Php 300,000.00 counterbond would not
suffice to secure a liability of more than Php
10,000,000.00. The appellate court also
93
upheld Villarin, et al.'s contention regarding
the grounding of the Order to Deposit in Rule
135, Section 6. Finally, it ruled that the Order
to Deposit does not amount to a prejudgment
of the case because the deposited amount
remains in the control of the court as a
measure to ensure that LSC will not unjustly
benefit from the funds to the prejudice of
whoever may be ultimately declared entitled
thereto.
LSC filed a motion for reconsideration which
was denied by the appellate court in a
Resolution27 dated May 30, 2006. Aggrieved,
LSC filed a petition for review
on certiorari28 with this Court which was
docketed as G.R. No. 175727.
CA Ruling in the Attachment Case
On April 24, 2007, the CA rendered its
Decision29 in favor of Villarin, et al., disposing
thus:
WHEREFORE, the present petition is hereby
DISMISSED for want of merit.
SO ORDERED.30
The CA, in upholding the trial court, ruled that
the complaint contained averments which
allege fraud on the part of all the defendants,
including LSC. As regards LSC's assertion of
the absence of privity of contract, the CA ruled
that LSC is a beneficiary of the contract
between Villarin and CASSCOR; and that
Section 1(d) of Rule 57 does not require the
existence of a contractual obligation.
Citing Sta. Ines Melale Forest Products
Corporation v. Macaraig,31 the CA noted that
Section 1(d) also contemplates other sources
of obligation, such as law, crime, or quasi-
delict, without stating the precise nature of the
obligation involved in the case at bar. The CA
further held that the admission cited by LSC in
its petition was not an admission of the
absence of privity of contract between LSC
and Villarin but is instead an admission by
Villarin that LSC has payables to FCC.
LSC sought reconsideration of the decision
but was denied by the CA in its
Resolution32 dated July 6, 2007. LSC thus
filed a petition for review on certiorari33 with
this Court, docketed as G.R. No. 178713. In a
 94

Resolution34 dated September 16, 2009, the THE CA SERIOUSLY ERRED IN

Com1ordered the consolidation of G.R. No. REVERSING THE ORDERS OF THE
178713 with G.R. No. 175727. Thereafter, the COURT A QUO AND ORDERING THE
parties were directed to file their respective IMPLEMENTATION OF THE ORDER DATED
memoranda. AUGUST 12, 2005 REQUIRING LSC, A
NOMINAL DEFENDANT AT THAT, TO
The Issues DEPOSIT TO COURT THE AMOUNT OF
PHP 10,297,499.59 UNDER THE JOINT
G.R. No. 178713 ACCOUNT OF CASSCOR AND
VILLARIN, ET AL. FOR THE FOLLOWING
LSC ascribes the following error to the REASONS, NAMELY:
appellate court in G.R. No. 178713:
THE CA SERIOUSLY ERRED IN AFFIRMING 1. THE ORDER DATED
THE ORDER OF THE COURT A QUO IN AUGUST 12, 2005, IF
EXTENDING THE WRIT OF PRELIMINARY ENFORCED, IS
ATTACHMENT AS TO INCLUDE LSC, TANTAMOUNT TO A
WHICH WAS MERELY DESCRIBED AS A PREJUDGMENT OF THE
NOMINAL DEFENDANT, BY CHARGING IT MAIN CASE AS AGAINST
AS GUILTY OF FRAUD IN CONTRACTING LSC.
THE OBLIGATION, WHEN THE
APPLICATION FOR THE WRIT OF 2. AFTER TWO (2) WRITS OF
PRELIMINARY ATTACHMENT WAS ONLY ATTACHMENT ISSUED AND
DIRECTED TO CO-DEFENDANTS COUNTERBONDS POSTED,
CASSCOR AND DAJAO.35 REQUIIUNG LSC TO
According to LSC, the Order dated May 11, DEPOSIT ITS MONEY IN
2004 subjecting it to the attachment writ COURT IS AN OVERKILL AS
contravenes jurisprudence which requires the IT IS TANTAMOUNT TO A
writ to contain concrete and specific grounds THIRD WRIT OF
to justify the attachment. LSC also points out ATTACHMENT.
that the CA did not uphold the trial court's 3. THE ORDER TO DEPOSIT IS
finding with regard to privity of contract; NOT SANCTIONED BY THE
instead it held that an existing contractual RULES ON THE
relation is not a requirement for the issuance PROVISIONAL REMEDIES.
of an attachment writ, without specifying the
nature of the obligation of LSC to Villarin. LSC 4. THE THEORY OF
further asserts that the allegations in VILLARIN, ET AL. THAT THE
Villarin, et al.'s complaint cited by the CA are MONEY IS HELD IN TRUST
not badges of fraud but legal justifications for IS A LEGAL CONCLUSION
LSC's refusal to pay Villarin directly. LSC WHICH NEEDS TO BE
faults the CA for subjecting it to the THRESHED OUT IN THE
attachment writ on the basis of the general DECISION OF THE MAIN
prayer for relief despite its impleader in the CASE AND CANNOT BE
case as a mere nominal party. Lastly, LSC PASSED UPON AS A MERE
points out that the trial court had already INCIDENCE OF THE CASE.
issued a writ of attachment on June 21, 2000, THERE IS NO TRUST,
making the writ of attachment issued under EXPRESS OR IMPLIED,
the Order dated May 11, 2004 a superfluity. CREATED UNDER THE
FACTS OF THE CASE.
G.R. No. 175727
5. THE ORDER TO DEPOSIT IS
LSC ascribes the following errors to the OVER AND ABOVE THE
appellate court in G.R. No. 175727: RELIEFS IN THE
COMPLAINT AND IS

OUTSIDE THE
JURISDICTION OF THE
COURT A QUO DUE TO
NON-PAYMENT OF DOCKET
FEES THEREFOR.
6. LSC, BEING A NOMINAL
DEFENDANT AS
DESCRIBED BY
VILLARIN, ET AL., CANNOT
BE BURDENED MORE THAN
THE PRINCIPAL
DEFENDANTS WHICH IS
THE DAJAO GROUP.
7. THE ORDER SOUGHT TO
BE ENFORCED AGAINST
LSC IS IN THE NATURE OF
A MANDATORY INJUNCTION
AND THE VILLARIN AND
DAJAO GROUPS
MISERABLY FAILED TO
PROVE THEIR
ENTITLEMENT THERETO.
8. IN LEGAL CONTEMPLATION,
NO ADMISSION WAS MADE
BY LSC THAT IT OWES
DAJAO OR CASSCOR THE
AMOUNT OF PHP
10,297,499.59. DEFINITELY,
LSC DID NOT ADMIT ANY
LIABILITY TO VILLARIN, ET
AL.36
LSC insists that the Order to Deposit amounts
to a prejudgment of the case, a third
attachment writ, and a mandatory injunction,
since it would be compelled to turn over
control of the amount deposited. It also claims
that the fixing of the amount of the deposit at
Php 10,297,499.59 is misleading because it
fails to take possible counterclaims and cross-
claims into account. LSC likewise assails the
CA's application of Rule 135, Section 6 to the
case, asserting that there is neither basis nor
need for the Order to Deposit because the
rules on preliminary attachment adequately
govern the case at bar. In the same vein, it
submits that the listing of provisional remedies
in Rules 57 to 61 of the Revised Rules of
Court is exclusive. It also contends that the
trial court had no jurisdiction to issue the
Order to Deposit in the amount of more than
95
Php 10,000,000.00 considering that Villarin, et
al. only paid Php 300,000.00 in docket fees. It
also maintains that it could not be subjected to
the Order to Deposit since it was originally
impleaded as a mere nominal party. Finally,
LSC challenges the appellate court's
acceptance of the Valeros letter as a judicial
admission of its liability to CASSCOR.
Ruling of the Court
Both petitions are meritorious.
G.R. No. 178713
The CA, in upholding the trial court's order in
favor of Villarin, et al., ruled that all the
defendants, including LSC, are guilty of fraud
in the performance of their obligation. The
courts a quo anchored the issuance the writ of
preliminary attachment prayed for on Sections
1(b) and 1(d) of Rule 57 of the Rules of Court,
which state:
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: x x x
(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;
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;
The Court does not agree.
A writ of preliminary attachment is a
provisional remedy issued upon order of the
court where an action is pending to be levied
upon the property or properties of the

defendant therein, the same to be held
thereafter by the Sheriff as security for the
satisfaction of whatever judgment might be
secured in said action by the attaching
creditor against the defendant.37 It is governed
by Rule 57 of the Revised Rules of Court.
The provisional remedy of attachment is
available in order that the defendant may not
dispose of his property attached, and thus
secure the satisfaction of any judgment that
may be secured by plaintiff from defendant.
The purpose and function of an attachment or
garnishment is two-fold. First, it seizes upon
property of an alleged debtor in advance of
final judgment and holds it subject to
appropriation thus preventing the loss or
dissipation of the property by fraud or
otherwise, Second, it subjects .to the payment
of a creditor's claim property of the debtor in
those cases where personal service cannot
be obtained upon the debtor.38
In Ng Wee v. Tankiansee,39 the Court,
interpreting Section 1(d), ruled that:
To sustain an attachment [under this section],
it must be shown that the debtor in contracting
the debt or incurring the obligation intended to
defraud the creditor. The fraud must relate to
the execution of the agreement and must
have been the reason which induced the other
party into giving consent which he would not
have otherwise given. To constitute a ground
for attachment in Section 1 (d), Rule 57 of the
Rules of Court, fraud should be committed
upon contracting the obligation sued upon. A
debt is fraudulently contracted if at the time of
contracting it the debtor has a preconceived
plan or intention not to pay, as it is in this
case. Fraud is a state of mind and need not
be proved by direct evidence but may be
inferred from the circumstances attendant in
each case.40 (Underscoring Ours)
The Court, speaking through Associate
Justice Antonio Eduardo B. Nachura,
reiterated the long-standing doctrine that "[t]he
provisional remedy of preliminary attachment
is harsh and rigorous for it exposes the debtor
to humiliation and annoyance. The rules
governing its issuance are, therefore, strictly
construed against the applicant, such that if
the requisites for its grant are not shown to be
all present, the court shall refrain from issuing
96
it, for, otherwise, the court which issues it acts
in excess of its jurisdiction."41 This standard of
construction of the rules on preliminary
attachment is reiterated in the. 2015 case
of Watercraft Venture Corporation v. Wolfe.42
Tested against these jurisprudential
standards, the CA's decision upholding Judge
Caminade's Order dated June 16, 2004
against LSC must be reversed.
It must be borne in mind that Villarin's action
is for specific performance. The main thrust of
his complaint is to compel Dajao and
CASSCOR to observe the provisions of the
MOA. All the other remedies sought by the
complaint are merely ancillary to this primary
relief. The MOA, therefore, is the obligation
upon which Villarin's action is brought; hence
the obligation sought to be upheld in this case
is ex contractu.
Pertinently, Article 1311 of the New Civil Code
provides that "[c]ontracts take effect only
between the parties, their assigns and heirs,
except in case where the rights and
obligations arising from the contract are not
transmissible by their nature, or by stipulation
or by provision of law." In the case at bar, the
MOA was entered into by Dajao (as
CASSCOR President) on one hand, and
Villarin, et al. on the other. LSC cannot be
guilty of fraud within the contemplation of
Section 1(d), Rule 57 of the Rules of Court
because it did not enter into any agreement or
contract with Villarin. In the absence of any
assignment of rights to LSC, the MOA can
only bind the parties thereto. Not being a party
to the MOA, LSC cannot be subjected to an
attachment writ on the basis of Section 1(d).
Villarin admits that he has no express or
written contract with LSC. He nevertheless
asserts in his Memorandum the existence of
an implied trust relation among himself, LSC,
and CASSCOR. He alleges in the Second
Amended Complaint that LSC was aware of
the arrangement under the MOA for
CASSCOR to subcontract its LSC arrastre
operations to Villarin.43 He asserts that the
relation between them was "a business
relation that requires them to repose trust and
confidence in each other and exercise a

corresponding degree of fairness and good
faith pursuant to an existing quasi-contract or
implied contract created by law."44 He then
denominates this relation as an implied
constructive trust, where LSC holds 73% of
the amount payable to CASSCOR in trust for
payment to him.
At this point, the Court emphasizes that it
cannot make an authoritative characterization
of the juridical relation between LSC and
Villarin, so as to not preempt any ruling of the
RTC Branch 20 in Cebu City in the main
controversy. Be that as it may, the Court shall
make an initial determination herein if only to
resolve the issue on the propriety of the
issuance of provisional remedies by the trial
court.
In this regard, the Court cannot sustain the
finding a quo that constructive trust relation
obtains in this case.
A constructive trust is "a trust not created by
any words, either expressly or impliedly,
evincing a direct intention to create a trust but
by the construction of equity in order to satisfy
the demands of justice and prevent unjust
enrichment. It does not arise by agreement or
intention but by operation of law against one
who, by fraud, duress, or abuse of confidence
obtains or holds the legal right to property
which he ought not, in equity and good
conscience, to hold."45
In the case at bar, it appears that LSC has a
legal justification for refusing to yield to
Villarin's demands, based on the law on privity
of contract. Thus, it cannot be said that LSC is
withholding payment for fraudulent reasons.
Nevertheless, assuming without conceding
that a constructive trust relation does exist in
this case, it has already been held
in Philippine National Bank v. CA46 that, "in a
constructive trust, there is neither a promise
nor any fiduciary relation to speak of and the
so-called trustee neither accepts any trust nor
intends holding the property for the
beneficiary."47 This takes the case out of the
purview of Section l(b), since there would be
no fiduciary relation between LSC and Villarin.
The appellate court's reliance on the ruling
97
in Sta. Ines48 is misplaced. In that case, the
Court found that a juridical relation between
the attachment plaintiff and the attachment
defendant was created by virtue of the
attachment defendant's cutting of logs within
the attachment plaintiffs timber license area,
which amounted to a wrongful act committed
by the former causing damage to the latter.
The Court then held that the term "creditors"
as used in Rule 57 should be construed
broadly to contemplate all classes of creditors
regardless of the source of obligation. In other
words, a juridical tie is still required, which is
not present in the case at bar between Villarin
and LSC. LSC's refusal to directly remit its
payables to Villarin cannot be considered
wrongful, because LSC contracted only with
CASSCOR and not with Villarin; and such
refusal is justified by the legal principle of
privity of contract.
G.R. No. 175727
The pivotal issue in this petition is the
propriety of the issuance of the Order to
Deposit.
Deposit as a provisional remedy
While deposit may not be included in the
provisional remedies stated in Rules 57 to 61
of the Rules of Court, this does not mean,
however, that its concept as a provisional
remedy is nonexistent. As correctly pointed
out by the appellate court, Rule 135 gives
courts wide latitude in employing means to
carry their jurisdiction into effect. Thus, this
Court has upheld deposit orders issued by
trial courts in cases involving actions for
partition,49 recovery of possession,50 and even
annulment of contract. In The Province of
Bataan v. Hon. Villafuerte, Jr.,51 the Court
sustained an escrow order over the lease
rentals of the subject properties therein
pending the resolution of the main action for
annulment of sale and reconveyance; while
in Reyes v. Lim,52 the Court upheld an order to
deposit the down payment for the purchase
price of a parcel of land after the buyer sought
the rescission of the contract to sell.
Based on jurisprudence, a deposit order is an
extraordinary provisional remedy whereby

money or other property is placed in custodia
legis to ensure restitution to whichever party is
declared entitled thereto after court
proceedings. It is extraordinary because its
basis is not found in Rules 57 to 61 of the
Rules of Court on Provisional Remedies but
rather, under Sections 5(g) and 6 of Rule 135
of the same Rules53 pertaining to the inherent
power of every court "[t]o amend and control
its process and orders so as to make them
conformable to law and justice;" as well as to
issue "all auxiliary writs, processes and other
means necessary" to carry its jurisdiction into
effect.
To elucidate further, provisional deposit
orders can be seen as falling under two
general categories. In the first category, the
demandability of the money or other property
to be deposited is not, or cannot - because of
the nature of the relief sought - be contested
by the party-depositor. In the second
category, the party-depositor regularly
receives money or other property from a non-
party during the pendency of the case, and
the court deems it proper to place such money
or other property in custodia legis pending
final determination of the party truly entitled to
the same.
The cases of Eternal Gardens Memorial Parks
Corp. v. First Special Cases Division,
Intermediate Appellate Court54 and Reyes v.
Lim55 fall under the first category. Eternal
Gardens involved an interpleader case where
the plaintiff-buyer (Eternal), who was seeking
to compel the litigation of the two conflicting
claims to the property in question, refused to
comply with an order to deposit in custodia
legis the installment payments for the disputed
property. In upholding the provisional deposit
order, the Court ruled that Eternal's disavowal
of interest in the disputed property, and the
deposit of such disputed money or property
with the court, are essential elements of an
interpleader suit.56 Thus, Eternal was ordered
to deposit the installment payments with the
trial court. In Reyes, the Court upheld a
provisional deposit order covering the down
payment for a parcel of land pending the
resolution of the case for annulment of
contract, viz.:
98
[S]ince Reyes is demanding to rescind the
Contract to Sell, he cannot refuse to deposit
the P10 million down payment in court. Such
deposit will ensure restitution of the P10
million to its rightful owner. Lim, on the other
hand, has nothing to refund, as he has not
received anything under the Contract to Sell.57
In both Eternal Gardens and Reyes, the
nature of the relief sought precluded the
depositor-party from contesting the
demandability of the amounts sought to be
deposited. Stated differently, the depositor-
parties effectively resigned their respective
interests over the amounts deposited. The
most equitable solution to prevent unjust
enrichment in such cases, therefore, is a
provisional deposit order, so that the amount
deposited may easily be turned over to
whoever would be adjudged properly entitled
thereto.
The second category of cases involve
provisional deposit orders covering sums
regularly received from non-parties to the
case by the depositor-party during the
pendency of the proceedings. These are
turned over to the custody of the court since
the entitlement of the depositor-party thereto
remains disputed, and to ensure the timely
transfer of such sums to whoever would be
adjudged properly entitled thereto. In Go v.
Go,58Bustamante v. CA,59 and Province of
Bataan,60 the Court upheld the trial court's
order directing the depositor-parties therein,
who regularly received rental payments from
the lessees of the disputed properties, to
deposit such rental payments with the court
pending the resolution of the issue of
ownership of the disputed properties.
A common thread running through these
cases is the existence of an agreement or a
juridical tie, which either binds the depositor-
party and the party to be benefited by the
deposit; or forms the basis for the regular
receipt of payments by the depositor-party.
In Eternal Gardens, Eternal had a contract of
sale with one of the interpleading parties;
while in Reyes, Reyes had a contact to sell
with Lim; and in Go, Bustamante,
and Province of Bataan, the regular payments
received by the depositor-parties are based
on lease agreements.

Jurisprudence on provisional deposit orders
as applied to the case at bar
Shorn of the minor details, the case at bar
involves a situation where the creditor seeks
to attach properties of his debtor's debtor,
without establishing a juridical link between
the two debts. The question arises: can the
provisional remedy of deposit, as established
under the Rules of Court and jurisprudence,
be availed of in such a situation? To answer
this query, the Court now determines if the
case at bar falls under any of the two
categories established by the jurisprudence
on provisional deposit orders.
The principal relief sought in respondent's
complaint is for specific performance to
compel CASSCOR and Dajao to observe the
provisions of the MOA. The deposit order was
applied for by Villarin, et al. and directed at
LSC as the depositor-party, with Villarin, et
al. as the beneficiary of the deposit order.
Essentially, the situation involves two
contracts: the cargo handling contract
between LSC and CASSCOR, and the MOA
between Dajao (as CASSCOR President) and
Villarin, et al. - which is the contract sought to
be enforced by Villarin, et al. It must be
pointed out however, that LSC is not a party to
the MOA entered into by Dajao and Villarin, et
al. As such, the deposit order cannot be
directed at LSC since it is not privy to the
contract sought to be enforced. To do so
would violate the civil law principle that a
contract can only bind the parties who entered
into it, and it cannot favor or prejudice a third
person, even if he is aware of such contract
and has acted with knowledge thereof.61
Furthermore, the nature of the relief sought in
the case at bar does not preclude the
depositor-party, i.e., LSC, from contesting the
demandability of the amount deposited. In a
specific performance case, the defendant can
put in issue the existence of any liability on
her part to the plaintiff. In contrast, in
provisional deposit orders of the first category,
the depositor-party does not, or is precluded,
from contesting the demandability of the
money or property sought to be deposited - a
situation which presumes some resignation of
99
interest in the money or property deposited on
the part of the depositor-party. Here, LSC
does not resign any interest in favor
ofVillarin, et al.; but instead asserts that it has
no liability whatsoever, there being no juridical
tie between them. Moreover, even
assuming arguendo that LSC did concede
the existence of any liability on its part in favor
of CASSCOR or Villarin, et al., the
demandability of the amount covered by the
deposit order against LSC is still in dispute
since LSC has its own claims against
CASSCOR.62 Such claims can possibly
compensate for whatever amounts CASSCOR
may be entitled to receive from LSC under
their contract, which in turn, may be sought
from CASSCOR by Villarin, et al. Clearly, the
case at bar cannot be subsumed under the
first category of provisional deposit orders.
The second category of provisional deposit
cases is likewise inapplicable. The amount
covered by the deposit order against LSC
comes from its own account and is not
regularly received from non-parties to the
case. There is no regular flow of incoming
amounts from non-parties which must be
properly received and kept in custodia legis in
favor of the party who will ultimately be
adjudged entitled thereto. Furthermore, it has
already been established that the actual
liability of LSC to CASSCOR is still in dispute.
At this juncture, it would not be amiss to
reiterate that LSC has no juridical tie or
agreement with Villarin, et al. which would
suffice as basis for the issuance· of a deposit
order against the former in favor of the latter.
It is therefore clear from the foregoing
disquisition that a provisional deposit order,
while available under our procedural law,
cannot be granted in this case; the factual and
legal circumstances herein being inconsistent
with the parameters established by
jurisprudence.
The Court concludes by enjoining courts from
indiscriminately resorting to deposit orders
when the remedy of preliminary attachment is
not available. The Court reiterates our
pronouncement in Province of Bataan,63 that
the provisional remedy of deposit is a "fair

response to the exigencies and equities of the
situation", when the factual circumstances of
the case call for its application. Thus, when
there is no juridical tie between the obligee-
plaintiff and the beneficiary of the services he
has rendered; and the obligor-defendant failed
to set up a cross-claim to connect the two
parties with whom it had separate contracts, a
deposit order would only amount to a
circumvention of the rules on preliminary
attachment and an unjust imposition on the
alleged beneficiary who is not a party to the
contract sought to be enforced.
WHEREFORE, premises considered, the
Court hereby rules as follows:
1. In G.R. No. 175727:
a. The petition is GRANTED.
b. The Decision dated September 7,
2006 and the Resolution dated
November 28, 2006 of the Court of
Appeals in CA-G.R. CEB-SP No.
01855 are hereby REVERSED and
SET ASIDE.
c. The Orders dated March 9, 2006 and
May 30, 2006 issued by Judge
Bienvenido R. Saniel, Jr. in Civil Case
No. CEB-25283 are
hereby REINSTATED.
d. The Regional Trial Court of Cebu City
is ordered to return any and all
amounts deposited to it by petitioner
Lorenzo Shipping Corporation
pursuant to the aforesaid Decision and
Resolution in CA-G.R. CEB-SP No.
01855.
2. In G.R. No. 178713:
a. The petition is GRANTED.
b. The Decision dated April 24, 2007 and
the Resolution dated July 6, 2007 of
the Court of Appeals in CA-G.R. SP
No. 86333 are hereby REVERSED
and SET ASIDE.
c. The Order dated June 16, 2004 issued
by Judge Anacleto Caminade in Civil
100
Case No. CEB-25283; and the writ of
attachment issued thereunder, are
hereby ANNULLED and SET
ASIDE insofar as it pertains to
petitioner Lorenzo Shipping
Corporation.
d. The counter-bond posted by Lorenzo
Shipping Corporation in connection
with the aforesaid writ of attachment is
ordered returned.
3. The Regional Trial Court of Cebu City is
hereby ordered to try the merits of Civil Case
No. CEB-25283 with utmost dispatch.
SO ORDERED.
Peralta, (Chairperson), Leonen, Hernando,
and Carandang,*JJ., concur.
FIRST DIVISION
APRIL 4, 2018
G.R. No. 193572
TSUNEISHI HEAVY INDUSTRIES (CEBU),
INC., Petitioner
vs
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 CAG.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
101
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
Tsuneishi also filed the Affidavit17 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 dry docking 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
102
to dirty lube oil or defective main engine
lubricating oil which was the lookout and
responsibility of the vessel's engineers.
xxxx
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 ₱26.6 Million and MT MIS-
1 were attached.20
MIS filed a motion to discharge the
attachment.21 The RTC denied this motion in
an Order22 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,
103
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
104
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.1âwphi1 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.
I she can demand that the property subject to
We begin by classifying the legal concepts of
lien, maritime lien and the provisional remedy
of preliminary attachment.
Alien 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
105
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
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 are 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.
106
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 for 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.1âwphi1 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:
107
[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
108
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.
THIRD DIVISION
[G.R. NO. 175587 : September 21, 2007]
PHILIPPINE COMMERCIAL
INTERNATIONAL
BANK, Petitioner, v. JOSEPH ANTHONY M.
ALEJANDRO, Respondent.
DECISION
YNARES-SANTIAGO, J.:
109
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 P249,828,588.90 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 P249,828,588.90 was the
consolidated amount of a series of yen loans
granted by petitioner to respondent during the
months of February and April 1997.5
In praying for the issuance of a writ of
preliminary attachment under Section 1
paragraphs (e) and (f) of Rule 57 of the Rules
of Court, petitioner alleged that (1) respondent
fraudulently withdrew his unassigned deposits
notwithstanding his verbal promise to PCIB
Assistant Vice President Corazon B.
Nepomuceno not to withdraw the same prior
to their assignment as security for the loan;
and (2) that respondent is not a resident of the
Philippines. The application for the issuance
of a writ was supported with the affidavit of
Nepomuceno.6
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 P18,798,734.69, issued by
Prudential Guarantee & Assurance Inc., under
Bond No. HO-46764-97. On the same date,
the bank deposits of respondent with Rizal
Commercial Banking Corporation (RCBC)
were garnished. On October 27, 1997,
respondent, through counsel, filed a
manifestation informing the court that he is
voluntarily submitting to its jurisdiction.8
Subsequently, respondent filed a motion to
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.
110
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 P150,000.00 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 P25,000,000.00,
judgment is hereby rendered ordering
Prudential Guarantee & [Assurance] Co.,

which is solidarily liable with plaintiff to pay
defendant the full amount of bond under
Prudential Guarantee & Assurance, Inc.
JCL(4) No. 01081, [Bond No. HO-46764-97],
dated 24 October 1997 in the amount
of P18,798,734.69. And, considering that the
amount of the bond is insufficient to fully
satisfy the award for damages, plaintiff is
hereby ordered to pay defendant the amount
of P6,201,265.31.
SO ORDERED.20
The trial court denied 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 P25,000,000.00 is deleted. In
lieu thereof, Prudential Guarantee &
[Assurance, Inc.], which is solidarily liable with
appellant [herein petitioner], is ORDERED to
pay appellee [herein
respondent] P2,000,000.00 as nominal
damages; P5,000,000.00 as moral damages;
and P1,000,000.00 as attorney's fees, to be
satisfied against the attachment bond under
Prudential Guarantee & Assurance, Inc. JCL
(4) No. 01081.
22
SO ORDERED.
Both parties moved for reconsideration. On
November 21, 2006, the Court of Appeals
111
denied petitioner's motion for reconsideration
but granted that of respondent's by ordering
petitioner to pay additional P5Million as
exemplary damages.23
Hence, the instant petition.
At the outset, it must be noted that the ruling
of the trial court that petitioner is not entitled to
a writ of attachment because respondent is a
resident of the Philippines and that his act of
withdrawing his deposits with petitioner was
without intent to defraud, can no longer be
passed upon by this Court. More importantly,
the conclusions of the court that petitioner
bank misrepresented that respondent was
residing out of the Philippines and suppressed
the fact that respondent has a permanent
residence in Metro Manila where he may be
served with summons, are now beyond the
power of this Court to review having been the
subject of a final and executory order. Said
findings were sustained by the Court of
Appeals in CA-G.R. SP No. 50784 and by this
Court in G.R. No. 140605. The rule on
conclusiveness of judgment, which obtains
under the premises, precludes the 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
112
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
113
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.
114
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
115
debtor to humiliation and annoyance.35 It
should be resorted to only when necessary
and as a last remedy.
It is clear from the foregoing that even on the
allegation that respondent is a resident
temporarily out of the Philippines, petitioner is
still not entitled to a writ of attachment
because the trial court could acquire
jurisdiction over the case by substituted
service instead of attaching the property of the
defendant. The misrepresentation of petitioner
that respondent does not reside in the
Philippines and its omission of his local
addresses was thus a deliberate move to
ensure that the application for the writ will be
granted.
In light of the foregoing, the Court of Appeals
properly sustained the finding of the trial court
that petitioner is liable for damages for the
wrongful issuance of a writ of attachment
against respondent.
Anent the actual damages, the Court of
Appeals is correct in not awarding the same
inasmuch as the respondent failed to
establish the amount garnished by petitioner.
It is a well settled rule that one who has been
injured by a wrongful attachment can recover
damages for the actual loss resulting
therefrom. But for such losses to be
recoverable, they must constitute actual
damages duly established by competent
proofs, which are, however, wanting in the
present case.36
Nevertheless, nominal damages may be
awarded to a plaintiff whose right has been
violated or invaded by the defendant, for the
purpose of vindicating or recognizing that
right, and not for indemnifying the plaintiff for
any loss suffered by him. Its award is thus not
for the purpose of indemnification for a loss
but for the recognition and vindication of a
right. Indeed, nominal damages are damages
in name only and not in fact.37 They are
recoverable where some injury has been done
but the pecuniary value of the damage is not
shown by evidence and are thus subject to
the discretion of the court according to the
circumstances of the case.38

In this case, the award of nominal damages is
proper considering that the right of respondent
to use his money has been violated by its
garnishment. The amount of nominal
damages must, however, be reduced from P2
million to P50,000.00 considering the short
period of 2 months during which the writ was
in effect as well as the lack of evidence as to
the amount garnished.ςηαñrοblεš
νιr†υαl  lαω  lιbrαrÿ
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 P1 Million, but only
at P200,000.00.
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 P5 Million
excessive. Moral damages are to be fixed
upon the discretion of the court taking into
consideration the educational, social and
financial standing of the parties.41 Moral
116
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 P500,000.00.
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 P5M to P500,000.00.
Finally, contrary to the claim of petitioner, the
instant case for damages by reason of the
invalid issuance of the writ, survives the
dismissal of the main case for sum of money.
Suffice it to state that the claim for damages
arising from such wrongful attachment may
arise and be decided separately from the
merits of the main action.44
WHEREFORE, the petition is PARTIALLY
GRANTED. The May 31, 2006 Decision of the
Court of Appeals in CA-G.R. CV No. 78200 is
AFFIRMED with MODIFICATIONS. As
modified, petitioner Philippine Commercial
International Bank is ordered to pay
respondent Joseph Anthony M. Alejandro the
following amounts: P50,000.00 as nominal
damages, P200,000.00 as attorney's fees;
and P500,000.00 as moral damages,
and P500,000.00 as exemplary damages, to
be satisfied against the attachment bond
issued by Prudential Guarantee & Assurance
Inc.,45 under JCL (4) No. 01081, Bond No.
HO-46764-97.

No pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 158271             April 8, 2008
CHINA BANKING
CORPORATION, petitioner,
vs.
ASIAN CONSTRUCTION and
DEVELOPMENT
CORPORATION, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review
on Certiorari under Rule 45 of the Rules of
Court filed by petitioner China Banking
Corporation (China Bank) seeking to annul
the Resolution1 dated October 14, 2002 and
the Resolution2 dated May 16, 2003 of the
Court of Appeals (CA) in CA-G.R. CV No.
72175.
The facts of the case:
On July 24, 1996, China Bank granted
respondent Asian Construction and
Development Corporation (ACDC) an
Omnibus Credit Line in the amount
of P90,000,000.00.3
On April 12, 1999, alleging that ACDC failed
to comply with its obligations under the
Omnibus Credit Line, China Bank filed a
Complaint4 for recovery of sum of money and
damages with prayer for the issuance of writ
of preliminary attachment before the Regional
Trial Court (RTC) of Makati, Branch 138,
docketed as Civil Case No. 99-796. In the
Complaint, China Bank claimed that ACDC,
117
after collecting and receiving the proceeds or
receivables from the various construction
contracts and purportedly holding them in
trust for China Bank under several Deeds of
Assignment, misappropriated, converted, and
used the funds for its own purpose and
benefit, instead of remitting or delivering them
to China Bank.5
On April 22, 1999, the RTC issued an
Order6 granting China Bank’s prayer for writ of
preliminary attachment. Consequently, as
shown in the Sheriff’s Report7 dated June 14,
1999, the writ of preliminary attachment was
implemented levying personal properties of
ACDC, i.e., vans, dump trucks, cement
mixers, cargo trucks, utility vehicles,
machinery, equipment and office machines
and fixtures.
On March 27, 2000, upon motion of China
Bank, the RTC issued a Summary
Judgment8 in favor of China Bank. ACDC filed
its Notice of Appeal9 dated April 24, 2000.
On June 15, 2000, China Bank filed a Motion
to Take Custody of Attached Properties with
Motion for Grant of Authority to Sell to the
Branch Sheriff10 with the RTC, praying that it
be allowed to take custody of ACDC’s
properties for the purpose of selling them in
an auction.11 On June 20, 2000, ACDC filed its
Opposition12 to the June 15, 2000 Motion
arguing that there can be no sale of the
latter’s attached properties in the absence of a
final and executory judgment against ACDC.
On August 25, 2000, China Bank partially
appealed the Summary Judgment for not
awarding interest on one of its promissory
notes.13 Records of the case were elevated to
the CA.14
On April 18, 2002, China Bank filed a Motion
for Leave for Grant of Authority to Sell
Attached Properties15 which the CA denied in
the herein assailed Resolution dated October
14, 2002.
According to the CA, selling the attached
properties prior to final judgment of the
appealed case is premature and contrary to

the intent and purpose of preliminary
attachment for the following reasons: first, the
records reveal that the attached properties
subject of the motion are not perishable in
nature; and second, while the sale of the
attached properties may serve the interest of
China Bank, it will not be so for ACDC. The
CA recognized China Bank’s apprehension
that by the time a final judgment is rendered,
the attached properties would be worthless.
However, the CA also acknowledged that
since ACDC is a corporation engaged in a
construction business, the preservation of the
properties is of paramount importance; and
that in the event that the decision of the lower
court is reversed and a final judgment
rendered in favor ACDC, great prejudice will
result if the attached properties were already
sold.
China Bank filed a Motion for
Reconsideration16 which was denied in the
herein assailed CA Resolution17 dated May
16, 2003.
Hence, the present petition for review
on certiorari, on the following ground:
THE HONORABLE COURT OF
APPEALS RENDERED THE
QUESTIONED RESOLUTIONS
(ANNEXES "A" and "B") IN A
MANNER NOT IN ACCORD WITH
THE PROVISIONS OF SECTION 11,
RULE 57 OF THE RULES OF CIVIL
PROCEDURE, AS IT SHELVED THE
DEMANDS OF EQUITY BY
ARBITRARILY DISALLOWING THE
SALE OF THE ATTACHED
PROPERTIES, UPHOLDING ONLY
THE INTEREST OF RESPONDENT,
IN UTTER PARTIALITY.18
Considering that the herein assailed CA
Resolutions are interlocutory in nature as they
do not dispose of the case completely but
leave something to be done upon the
merits,19 the proper remedy should have been
by way of petition for certiorari under Rule 65,
as provided for in Section 1 (b), Rule 41 of the
Rules of Court, as amended by A.M. No. 07-7-
12-SC,20 which provides:
118
Section 1. Subject of appeal. - An
appeal may be taken from a judgment
or final order that completely disposes
of the case, or of a particular matter
therein when declared by these Rules
to be appealable.
No appeal may be taken from:
xxxx
(b) An interlocutory order;
xxxx
In any of the foregoing instances, the
aggrieved party may file
an appropriate special civil action
as provided in Rule 65. (Emphasis
supplied).
The present petition for review
on certiorari should have been dismissed
outright. However, in many instances, the
Court has treated a petition for review
on certiorari under Rule 45 as a petition
for certiorari under Rule 65 of the Rules of
Court, such as in cases where the subject of
the recourse was one of jurisdiction, or the act
complained of was perpetrated by a court with
grave abuse of discretion amounting to lack or
excess of jurisdiction.21 The present petition
does not involve any issue on jurisdiction,
neither does it show that the CA committed
grave abuse of discretion in denying the
motion to sell the attached property.
Section 11, Rule 57 of the Rules of Court
provides:
Sec. 11. When attached property may
be sold after levy on attachment and
before entry of judgment.- Whenever it
shall be made to appear to the court in
which the action is pending, upon
hearing with notice to both parties,
that the property attached is
perishable, or that the interests of all
the parties to the action will be
subserved by the sale thereof, the
court may order such property to be
sold at public auction in such manner

as it may direct, and the proceeds of
such sale to be deposited in court to
abide the judgment in the action.
(Emphasis supplied)
Thus, an attached property may be sold after
levy on attachment and before entry of
judgment whenever it shall be made to appear
to the court in which the action is pending,
upon hearing with notice to both parties,
that the attached property is
perishable or that the interests of all the
parties to the action will be subserved by
the sale of the attached property.
In its Memorandum,22 China Bank argues that
the CA’s notion of perishable property, which
pertains only to those goods which rot and
decay and lose their value if not speedily put
to their intended use,23 is a strict and stringent
interpretation that would betray the purpose
for which the preliminary attachment was
engrafted.24 Citing Witherspoon v.
Cross,25 China Bank invokes the definition of
"perishable property" laid down by the
Supreme Court of California as goods which
decay and lose their value if not speedily put
to their intended use; but where the time
contemplated is necessarily long, the term
may embrace property liable merely to
material depreciation in value from other
causes than such decay.
As stated in the Sheriff’s Report26 and Notices
of Levy on Properties,27 all of
ACDC’s properties which were levied are
personal properties consisting of used
vehicles, i.e., vans, dump trucks, cement
mixers, cargo trucks, utility vehicles,
machinery, equipment and office machines
and fixtures. China Bank insists that the
attached properties, all placed inside ACDC’s
stockyard located at Silang, Cavite and the
branch office in Mayamot, Antipolo City, are
totally exposed to natural elements and
adverse weather conditions.28 Thus, China
Bank argues, that should the attached
properties be allowed to depreciate, perish or
rot while the main case is pending, the
attached properties will continue losing their
119
worth thereby rendering the rules on
preliminary attachment nugatory.
The issue hinges on the determination
whether the vehicles, office machines and
fixtures are "perishable property" under
Section 11, Rules 57 of the Rules of Court,
which is actually one of first impression. No
local jurisprudence or authoritative work has
touched upon this matter. This being so, an
examination of foreign laws and
jurisprudence, particularly those of the United
States where some of our laws and rules were
patterned after, is in order.29
In Mossler Acceptance Co. v. Denmark,30 an
order of the lower court in directing the sale of
attached properties, consisting of 20
automobiles and 2 airplanes, was reversed by
the Supreme Court of Louisiana. In support of
its contention that automobiles are
perishable, Mossler offered testimony to the
effect that automobile tires tend to dry-rot in
storage, batteries to deteriorate, crankcases
to become damaged, paint and upholstery to
fade, that generally automobiles tend to
depreciate while in storage.31 Rejecting these
arguments, the Supreme Court of Louisiana
held that while there might be a depreciation
in the value of a car during storage,
depending largely on existing economic
conditions, there would be no material
deterioration of the car itself or any of its
appurtenances if the car was properly cared
for, and therefore it could not be said that
automobiles were of a perishable nature
within the intendment of the statute, which
could only be invoked when the property
attached and seized was of a perishable
nature.32
With respect to the determination of the
question on whether the attached office
furniture, office equipment, accessories and
supplies are perishable properties, the
Supreme Court of Alabama in McCreery v.
Berney National Bank33 discussed the
"perishable" nature of the attached properties,
consisting of shelving, stock of drygoods and
a complete set of store fixtures, consisting of
counters iron safe, desk and showcases, to be
within the meaning of "perishable" property
under the Alabama Code which authorizes a

court, on motion of either party, to order the
sale, in advance of judgment, of perishable
property which had been levied on by a writ of
attachment.34
In McCreery, the Supreme Court of Alabama
rejected the argument that the sale of the
attached property was void because the term
"perishable" property, as used in the statute,
meant only such property as contained in itself
the elements of speedy decay, such as fruits,
fish, fresh meats, etc.35 The Supreme Court of
Alabama held that whatever may be the
character of the property, if the court is
satisfied that, either by reason of its
perishable nature, or because of the expense
of keeping it until the termination of the
litigation, it will prove, or be likely to prove,
fruitless to the creditor, and that the purpose
of its original seizure will probably be
frustrated, the sale of the attached property is
justified.
McCreery applied the doctrine in Millard’s
Admrs. v. Hall36 where the Supreme Court of
Alabama held that an attached property is
perishable "if it is shown that, by keeping the
article, it will necessarily become, or is likely to
become, worthless to the creditor, and by
consequence to the debtor, then it is
embraced by the statute. It matters not, in our
opinion, what the subject matter is. It may be
cotton bales, live stock, hardware provisions
or dry goods." Although the statute under
which Millard’s was decided used the words
"likely to waste or be destroyed by keeping,"
instead of the word "perishable," the reasons
given for the construction placed on the
statute apply equally to the Alabama Code
which uses the term "perishable."37
In the Motion for Leave for Grant of Authority
to Sell Attached Properties38 filed before the
CA, China Bank alleged that the attached
properties are placed in locations where they
are totally exposed to the natural elements
and adverse weather conditions since their
attachment in 1999;39 that as a result, the
attached properties have gravely deteriorated
with corrosions eating them up, with weeds
germinating and growing thereon and their
engines and motors stock up;40 and that the
same holds true to the office furniture, office
120
equipment, accessories and supplies.41 No
evidence, however, were submitted by China
Bank to support and substantiate these claims
before the CA.
Notably, in the Petition filed before the Court,
China Bank, for the first time, included as
annexes,42 photographs of the attached
properties which were alleged to be recently
taken, in an attempt to convince the Court of
the deteriorated condition of the attached
properties.
The determination on whether the attached
vehicles are properly cared for, and the
burden to show that, by keeping the attached
office furniture, office equipment and supplies,
it will necessarily become, or is likely to
become, worthless to China Bank, and by
consequence to ACDC, are factual issues
requiring reception of evidence which the
Court cannot do in a petition
for certiorari. Factual issues are beyond the
scope of certiorari because they do not
involve any jurisdictional issue.43
As a rule, only jurisdictional questions may be
raised in a petition for certiorari, including
matters of grave abuse of discretion which are
equivalent to lack of jurisdiction.44 The office of
the writ of certiorari has been reduced to the
correction of defects of jurisdiction solely and
cannot legally be used for any other
purpose.45
Certiorari is truly an extraordinary remedy
and, in this jurisdiction, its use is restricted to
truly extraordinary cases - cases in which the
action of the inferior court is wholly void;
where any further steps in the case would
result in a waste of time and money and would
produce no result whatever; where the
parties, or their privies, would be utterly
deceived; where a final judgment or decree
would be nought but a snare and delusion,
deciding nothing, protecting nobody, a judicial
pretension, a recorded falsehood, a standing
menace. It is only to avoid such results as
these that a writ of certiorari is issuable; and
even here an appeal will lie if the aggrieved
party prefers to prosecute it.46

Moreover, the Court held in JAM
Transportation Co., Inc. v. Flores47 that it is
well-settled, too well-settled to require a
citation of jurisprudence, that this Court does
not make findings of facts specially on
evidence raised for the first time on
appeal.48 The Court will not make an
exception in the case at bar. Hence, the
photographs of the attached properties
presented before the Court, for the first time
on appeal, cannot be considered by the Court.
China Bank argues that if the CA allowed the
attached properties to be sold, whatever
monetary value which the attached properties
still have will be realized and saved for both
parties.49 China Bank further claims that
should ACDC prevail in the final judgment50 of
the collection suit, ACDC can proceed with the
bond posted by China Bank.51 The Court finds
said arguments to be specious and
misplaced.
Section 4, Rule 57 of the Rules of Court
provides:
Section 4. Condition of applicant’s
bond. - The party applying for the
order must thereafter give a bond
executed to the adverse party in the
amount fixed by the court in its order
granting the issuance of the writ,
conditioned that the latter will pay all
the costs which may be adjudged to
the adverse party and all the damages
which he may sustain by reason of the
attachment, if the court shall finally
adjudge that the applicant was not
entitled thereto.
It is clear from the foregoing provision that the
bond posted by China Bank answers only for
the payment of all damages which ACDC may
sustain if the court shall finally adjudge that
China Bank was not entitled to attachment.
The liability attaches if "the plaintiff is not
entitled to the attachment because the
requirements entitling him to the writ are
wanting," or "if the plaintiff has no right to the
attachment because the facts stated in his
affidavit, or some of them are
untrue."52 Clearly, ACDC can only claim from
121
the bond for all the damages which it may
sustain by reason of the attachment and not
because of the sale of the attached properties
prior to final judgment.
Sale of attached property before final
judgment is an equitable remedy provided for
the convenience of the parties and
preservation of the property.53 To repeat, the
Court finds that the issue of whether the sale
of attached properties is for the convenience
of the parties and that the interests of all the
parties will be subserved by the said sale is a
question of fact. Again, the foregoing issue
can only be resolved upon examination of the
evidence presented by both parties which the
Court cannot do in a petition
for certiorari under Rule 65 of the Rules of
Court.
WHEREFORE, the petition is DENIED. The
assailed Resolutions of the Court of Appeals
dated October 14, 2002 and May 16, 2003 in
CA-G.R. CV No. 72175 are
hereby AFFIRMED.
SO ORDERED.
Tinga*, Austria-Martinez, Chico-Nazario,
Nachura, Reyes, JJ., concur.
THIRD DIVISION
G.R. No. 203530, April 13, 2015
LUZON DEVELOPMENT BANK, TOMAS
CLEMENTE, JR., AND OSCAR
RAMIREZ, Petitioners, v. ERLINDA
KRISHNAN, Respondent.
DECISION
PERALTA, J.:
This is a Petition for Review
on Certiorari under Rule 45 of the 1997 Rules
of Civil Procedure praying for the annulment
of the Decision1 dated March 27, 2012 and
Resolution2 dated September 11, 2012 of the

Court of Appeals (CA) in CA-G.R. SP No.
120664, which affirmed the Orders dated
September 24, 2010 and May 26, 2011,
respectively, of Branch 30, Regional Trial
Court (RTC) - Manila.
The factual antecedents, as found by the CA,
are as follows:chanroblesvirtuallawlibrary
Petitioners Luzon Development Bank, Tomas
Clemente, and Oscar Ramirez (hereafter
petitioners) are the respondents in the
complaint for Collection of Sum of Money and
Damages filed by respondent Erlinda
Khrishnan (hereafter respondent Erlinda) on
February 7, 2001. Respondent Erlinda
claimed that she is a client of respondent
bank wherein she maintained several
accounts including time deposits. On several
occasions, when respondent Erlinda
presented her Time Deposits Certificates
amounting to P28,597,472.70 for payment
because they have become due, petitioners
refused to honor them for the reason that they
were fraudulent. Respondent Erlinda likewise
applied for a Preliminary Writ of Attachment
which the RTC granted on February 27, 2001.
By virtue of the writ, petitioner bank's
accounts in BPI Family Bank, Calamba,
Laguna in the amount of P28,597,472.70 and
its account amounting to P49,000,000.00 in
the Central Bank were garnished.
On March 9, 2001, petitioners filed an urgent
ex-parte Motion to Recall Quash and/or Lift
Attachment or Garnishment (in excess of
amounts in the writ). Respondent Erlinda
opposed the motion.
On August 15, 2001, petitioners filed an
Omnibus Motion seeking the substitution of
their garnished account with government
securities and the immediate resolution of
their motion to discharge attachment and
setting the motion for hearing, which
respondent Erlinda opposed.
On May 22, 2002, the RTC resolved the
pending incidents and required the petitioners
to justify their motion to discharge the
attachment. During pre-trial on May 23, 2002,
respondents requested additional time to file a
122
supplemental motion to justify their earlier
motions which was granted and gave
petitioners ten (10) days from receipt within
which to comment or opposed (sic) it.
On September 8, 2003, the RTC issued an
order lifting the attachment to which
respondent Erlinda filed a motion for
reconsideration. Respondent Erlinda also filed
a Motion for Inhibition. On December 18,
2003, the RTC denied the motion for
reconsideration but granted the motion for
inhibition. The said Order was questioned by
respondent Erlinda by way of Petition
for Certiorari before the 7th Division which
rendered a decision on November 15, 2006,
the dispositive portion of which reads as
follows:chanroblesvirtuallawlibrary
"WHEREFORE, the PETITION FOR
CERTIORARI is GRANTED.
THE ORDERS dated September 8, 2003, and
December 18, 2003 are NULLIFIED and SET
ASIDE.
The private respondents, as defendants in
Civil Case No. 01-100046 entitled Erlinda C.
Krishnan v. Luzon Development Bank, et al.,
are ORDERED to file a counterbond in
accordance with Sec. 12, Rule 57, 1997 Rules
of Civil Procedure, within 10 days from the
finality of this decision; otherwise, the
REGIONAL TRIAL COURT, BRANCH 36, in
Manila shall immediately reinstate the writ of
attachment issued and implemented in Civil
Case No. 01-100046.
Costs of suit to be paid by the respondents.
SO ORDERED.
Petitioners' subsequent motion for
reconsideration was denied. Thereafter, their
petition and motion for reconsideration before
the Supreme Court were likewise denied.
On May 09, 2008, respondent judge issued an
Order directing respondent Erlinda to file a
new attachment bond in the amount of
P35,000,000.00 and petitioners to file a
counterbond within ten days from notice of the
filing and approval of the bond of respondent
Erlinda. Petitioners moved for the
reconsideration of the said Order which
respondent judge denied and granted a period

of fifteen days for respondent Erlinda to file an
attachment bond.
Respondent Erlinda filed her attachment bond
on June 25, 2009 in the amount of
P35,000,000.00 through Visayan Surety and
Insurance Corporation which was approved
by respondent on July 7, 2009.
Meanwhile, on July 3, 2009, petitioners filed
an Omnibus Motion praying that a hearing be
held to determine the sufficiency of the
attachment bond and they be allowed to
deposit Certificates of Title of real property,
and the issuance of the writ of attachment be
held in abeyance.
On July 20, 2009, petitioners filed a motion for
extension of time to comply and/or file the
appropriate pleading and to hold in abeyance
the reinstatement of the writ of attachment.
On January 28, 2010, petitioners filed a
motion to admit bank property in lieu of
counterbond which was opposed by
respondent Erlinda.
On September 24, 2010, respondent judge
denied petitioners' motion in the assailed
Order. Their subsequent motion for
reconsideration was denied on May 26, 2011.
On June 27, 2011, respondent judge issued
an Order reinstating the Writ of Attachment
dated March 1, 2001 for failure of petitioners
to file the required counterbond. Respondent
judge also issued an amended Reinstated
Writ of Attachment directing respondent
Sheriff Oscar L. Rojas (hereafter respondent
Sheriff) to attach the real estate or personal
properties of petitioners in the amount of
P28,597,472.70. On June 30, 2011, the sheriff
served the Notice of Garnishment and the
Amended Reinstated Writ of Attachment.
On July 4, 2011, petitioners filed an urgent
motion to recall, suspend or hold in abeyance
and re-examination of the amended reinstated
writ of preliminary attachment of June 27,
2011 which was opposed by respondent
Erlinda.
On July 19, 2011, respondent Sheriff issued a
123
Sheriffs Partial Report. Thereafter, petitioners
filed this petition for certiorari x x x.
In a Decision dated March 27, 2012, the CA
dismissed petitioners' certiorari petition and
affirmed the Orders of the RTC reinstating the
Writ of Attachment for failure of petitioners to
file the required counter-bond. The CA ruled
that the RTC judge committed no grave abuse
of discretion in denying petitioners' motion to
admit bank property in lieu of counter-bond,
thus, it held:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the
petition is DISMISSED and accordingly,
DENIED DUE COURSE. The Orders dated
September 24, 2010 and May 26, 2011 are
hereby AFFIRMED.
SO ORDERED.3cralawlawlibrary
Petitioners filed a motion for reconsideration
against said decision, but the same was
denied in a Resolution dated September 11,
2012.
Hence, petitioners filed this present petition
raising the following
grounds:chanroblesvirtuallawlibrary
IN THE FIRST ASSAILED ORDER THE
HONORABLE COURT OF APPEALS ACTED
WITH GRAVE ABUSE OF DISCRETION
WHEN IT MISCONSTRUED AND FAILED TO
RULE ON THE CORRECT LEGAL ISSUE
PRESENTED IN THE PETITION FOR
CERTIORARI.4
IN THE SECOND ASSAILED ORDER THE
FIONORABLE COURT OF APPEALS AGAIN
ACTED WITH GRAVE ABUSE OF
DISCRETION WHEN IT FAILED TO
PRESENT ANY LEGAL BASIS FOR
STATING THAT RULE 39 OF THE REVISED
RULES OF COURT DOES NOT
APPLY.5cralawlawlibrary
Simply stated, the issue for our resolution is
whether the CA erred in affirming the RTC's
decision which denied petitioners' motion
praying that bank property be deposited in lieu
of cash or a counter-bond.
In their petition, petitioners contend that it has
the option to deposit real property, in lieu of
cash or a counter-bond, to secure any

contingent lien on its property in the event
respondent wins the case. They argue that
Section 2 of Rule 57 only mentions the term
"deposit," thus, it cannot only be confined or
construed to refer to cash.
We rule in the negative.
Section 2, Rule 57 of the Rules of Court
explicitly states that "[a]n order of attachment
may be issued either ex parte or upon motion
with notice and hearing by the court in which
the action is pending, or by the Court of
Appeals or the Supreme Court, and must
require the sheriff of the court to attach so
much of the property in the Philippines of the
party against whom it is issued, not exempt
from execution, as may be sufficient to satisfy
the applicant's demand, unless such party
makes deposit or gives a bond as
hereinafter provided in an amount equal to
that fixed in the order, which may be the
amount sufficient to satisfy the applicant's
demand or the value of the property to be
attached as stated by the applicant, exclusive
of costs."
Section 5 of the same Rule likewise states
that "[t]he sheriff enforcing the writ shall
without delay and with all reasonable
diligence attach, to await judgment and
execution in the action, only so much of the
property in the Philippines of the party against
whom the writ is issued, not exempt from
execution, as may be sufficient to satisfy the
applicant's demand, unless the former
makes a deposit with the court from which
the writ is issued, or gives a counter-bond
executed to the applicant, in an amount
equal to the bond fixed by the court in the
order of attachment or to the value of the
property to be attached, exclusive of
costs."
From the foregoing, it is evidently clear that
once the writ of attachment has been issued,
the only remedy of the petitioners in lifting the
same is through a cash deposit or the filing of
the counter-bond. Thus, the Court holds that
petitioner's argument that it has the option to
deposit real property instead of depositing
cash or filing a counter-bond to discharge the
attachment or stay the implementation thereof
124
is unmeritorious.
In fact, in Security Pacific Assurance
Corporation v. Tria-Infante,6 we held that one
of the ways to secure the discharge of an
attachment is for the party whose property has
been attached or a person appearing on his
behalf, to post a counterbond or make the
requisite cash deposit in an amount equal to
that fixed by the court in the order of
attachment.7
Apropos, the trial court aptly ruled that while it
is true that the word deposit cannot only be
confined or construed to refer to cash, a
broader interpretation thereof is not justified in
the present case for the reason that a party
seeking a stay of the attachment under
Section 5 is required to make a deposit in an
amount equal to the bond fixed by the court in
the order of attachment or to the value of the
property to be attached. The proximate
relation of the word "deposit" and "amount" is
unmistakable in Section 5 of Rule 57. Plainly,
in construing said words, it can be safely
concluded that Section 5 requires the deposit
of money as the word "amount" commonly
refers to or is regularly associated with a sum
of money.
In Alcazar v. Arante,8 we held that in
construing words and phrases used in a
statute, the general rule is that, in the absence
of legislative intent to the contrary, they should
be given their plain, ordinary and common
usage meaning. The words should be read
and considered in their natural, ordinary,
commonly-accepted and most obvious
signification, according to good and approved
usage and without resorting to forced or
subtle construction. Words are presumed to
have been employed by the lawmaker in their
ordinary and common use and
acceptation.9 Thus, petitioners should not give
a special or technical interpretation to a word
which is otherwise construed in its ordinary
sense by the law and broaden the signification
of the term "deposit" to include that of real
properties.cralawred
WHEREFORE, premises considered, the
instant petition is DENIED. The Decision
dated March 27, 2012 and Resolution dated

September 11, 2012 of the Court of Appeals
are hereby AFFIRMED.
SO ORDERED.chanroblesvirtuallawlibrary
FIRST DIVISION
[G.R. NO. 158997 : October 6, 2008]
FORT BONIFACIO DEVELOPMENT
CORPORATION Petitioner, v. YLLAS
LENDING CORPORATION and JOSE S.
LAURAYA, in his official capacity as
President, Respondents.
DECISION
CARPIO, J.:
The Case
1
This is a Petition for Review on Certiorari   of
the Orders issued on 7 March 20032 and 3
July 20033 by Branch 59 of the Regional Trial
Court of Makati City (trial court) in Civil Case
No. 01-1452. The trial court's orders
dismissed Fort Bonifacio Development
Corporation's (FBDC) third party claim and
denied FBDC's Motion to Intervene and Admit
Complaint in Intervention.
The Facts
On 24 April 1998, FBDC executed a lease
contract in favor of Tirreno, Inc. (Tirreno) over
a unit at the Entertainment Center - Phase 1
of the Bonifacio Global City in Taguig, Metro
Manila. The parties had the lease contract
notarized on the day of its execution. Tirreno
used the leased premises for Savoia
Ristorante and La Strega Bar.
Two provisions in the lease contract are
pertinent to the present case: Section 20,
which is about the consequences in case of
default of the lessee, and Section 22, which is
about the lien on the properties of the lease.
The pertinent portion of Section 20 reads:
125
Section 20. Default of the Lessee
20.1 The LESSEE shall be deemed to be in
default within the meaning of this Contract in
case:
(i) The LESSEE fails to fully pay on time any
rental, utility and service charge or other
financial obligation of the LESSEE under this
Contract;
xxx
20.2 Without prejudice to any of the rights of
the LESSOR under this Contract, in case of
default of the LESSEE, the lessor shall have
the right to:
(i) Terminate this Contract immediately upon
written notice to the LESSEE, without need of
any judicial action or declaration;
xxx
Section 22, on the other hand, reads:
Section 22. Lien on the Properties of the
Lessee
Upon the termination of this Contract or the
expiration of the Lease Period without the
rentals, charges and/or damages, if any,
being fully paid or settled, the LESSOR shall
have the right to retain possession of the
properties of the LESSEE used or situated in
the Leased Premises and the LESSEE hereby
authorizes the LESSOR to offset the
prevailing value thereof as appraised by the
LESSOR against any unpaid rentals, charges
and/or damages. If the LESSOR does not
want to use said properties, it may instead sell
the same to third parties and apply the
proceeds thereof against any unpaid rentals,
charges and/or damages.
Tirreno began to default in its lease payments
in 1999. By July 2000, Tirreno was already in
arrears by P5,027,337.91. FBDC and Tirreno
entered into a settlement agreement on 8
August 2000. Despite the execution of the
settlement agreement, FBDC found need to

send Tirreno a written notice of termination
dated 19 September 2000 due to Tirreno's
alleged failure to settle its outstanding
obligations. On 29 September 2000, FBDC
entered and occupied the leased premises.
FBDC also appropriated the equipment and
properties left by Tirreno pursuant to Section
22 of their Contract of Lease as partial
payment for Tirreno's outstanding obligations.
Tirreno filed an action for forcible entry against
FBDC before the Municipal Trial Court of
Taguig. Tirreno also filed a complaint for
specific performance with a prayer for the
issuance of a temporary restraining order
and/or a writ of preliminary injunction against
FBDC before the Regional Trial Court (RTC)
of Pasig City. The RTC of Pasig City
dismissed Tirreno's complaint for forum-
shopping.
On 4 March 2002, Yllas Lending Corporation
and Jose S. Lauraya, in his official capacity as
President, (respondents) caused the sheriff of
Branch 59 of the trial court to serve an alias
writ of seizure against FBDC. On the same
day, FBDC served on the sheriff an affidavit of
title and third party claim. FBDC found out that
on 27 September 2001, respondents filed a
complaint for Foreclosure of Chattel Mortgage
with Replevin, docketed as Civil Case No. 01-
1452, against Tirreno, Eloisa Poblete Todaro
(Eloisa), and Antonio D. Todaro (Antonio), in
their personal and individual capacities, and in
Eloisa's official capacity as President. In their
complaint, respondents alleged that they lent
a total of P1.5 million to Tirreno, Eloisa, and
Antonio. On 9 November 2000, Tirreno, Eloisa
and Antonio executed a Deed of Chattel
Mortgage in favor of respondents as security
for the loan. The following properties are
covered by the Chattel Mortgage:
A. Furniture, Fixtures and Equipment of
Savoia Ristorante and La Strega Bar, a
restaurant owned and managed by [Tirreno],
inclusive of the leasehold right of [Tirreno]
over its rented building where [the] same is
presently located.
b. Goodwill over the aforesaid restaurant,
including its business name, business sign,
logo, and any and all interest therein.
126
c. Eighteen (18) items of paintings made by
Florentine Master, Gino Tili, which are fixtures
in the above-named restaurant.
The details and descriptions of the above
items are specified in Annex "A" which is
hereto attached and forms as an integral part
of this Chattel Mortgage instrument.4
In the Deed of Chattel Mortgage, Tirreno,
Eloisa, and Antonio made the following
warranties to respondents:
1. WARRANTIES: The MORTGAGOR hereby
declares and warrants that:
A. The MORTGAGOR is the absolute owner
of the above named properties subject of this
mortgage, free from all liens and
encumbrances.
b. There exist no transaction or documents
affecting the same previously presented for,
and/or pending transaction.5
Despite FBDC's service upon him of an
affidavit of title and third party claim, the
sheriff proceeded with the seizure of certain
items from FBDC's premises. The sheriff's
partial return indicated the seizure of the
following items from FBDC:
A. FIXTURES
(2) - Smaller Murano Chandeliers
(1) - Main Murano Chandelier
B. EQUIPMENT
(13) - Uni-Air Split Type 2HP Air Cond.
(2) - Uni-Air Split Type 1HP Air Cond.
(3) - Uni-Air Window Type 2HP Air Cond.
(56) - Chairs
(1) - Table
(2) - boxes - Kitchen equipments [sic]6

The sheriff delivered the seized properties to
respondents. FBDC questioned the propriety
of the seizure and delivery of the properties to
respondents without an indemnity bond before
the trial court. FBDC argued that when
respondents and Tirreno entered into the
chattel mortgage agreement on 9 November
2000, Tirreno no longer owned the mortgaged
properties as FBDC already enforced its lien
on 29 September 2000.
In ruling on FBDC's motion for leave to
intervene and to admit complaint in
intervention, the trial court stated the facts as
follows:
Before this Court are two pending incidents, to
wit: 1) [FBDC's] Third-Party Claim over the
properties of [Tirreno] which were seized and
delivered by the sheriff of this Court to
[respondents]; and 2) FBDC's Motion to
Intervene and to Admit Complaint in
Intervention.
Third party claimant, FBDC, anchors its claim
over the subject properties on Sections 20.2(i)
and 22 of the Contract of Lease executed by
[FBDC] with Tirreno. Pursuant to said
Contract of Lease, FBDC took possession of
the leased premises and proceeded to sell to
third parties the properties found therein and
appropriated the proceeds thereof to pay the
unpaid lease rentals of [Tirreno].
FBDC, likewise filed a Motion to Admit its
Complaint-in-Intervention.
In Opposition to the third-party claim and the
motion to intervene, [respondents] posit that
the basis of [FBDC's] third party claim being
anchored on the aforesaid Contract [of] Lease
is baseless. [Respondents] contend that the
stipulation of the contract of lease partakes of
a pledge which is void under Article 2088 of
the Civil Code for being pactum
commissorium.
xxx
By reason of the failure of [Tirreno] to pay its
lease rental and fees due in the amount
of P5,027,337.91, after having notified
127
[Tirreno] of the termination of the lease, x x x
FBDC took possession of [Tirreno.'s]
properties found in the premises and sold
those which were not of use to it. Meanwhile,
[respondents], as mortgagee of said
properties, filed an action for foreclosure of
the chattel mortgage with replevin and caused
the seizure of the same properties which
[FBDC] took and appropriated in payment of
[Tirreno's] unpaid lease rentals.7
The Ruling of the Trial Court
In its order dated 7 March 2003, the trial court
stated that the present case raises the
questions of who has a better right over the
properties of Tirreno and whether FBDC has a
right to intervene in respondents' complaint for
foreclosure of chattel mortgage.
In deciding against FBDC, the trial court
declared that Section 22 of the lease contract
between FBDC and Tirreno is void under
Article 2088 of the Civil Code.8 The trial court
stated that Section 22 of the lease contract
pledges the properties found in the leased
premises as security for the payment of the
unpaid rentals. Moreover, Section 22 provides
for the automatic appropriation of the
properties owned by Tirreno in the event of its
default in the payment of monthly rentals to
FBDC. Since Section 22 is void, it cannot vest
title of ownership over the seized properties.
Therefore, FBDC cannot assert that its right is
superior to respondents, who are the
mortgagees of the disputed properties.
The trial court quoted from Bayer Phils. v.
Agana9 to justify its ruling that FBDC should
have filed a separate complaint against
respondents instead of filing a motion to
intervene. The trial court quoted
from Bayer as follows:
In other words, construing Section 17 of Rule
39 of the Revised Rules of Court (now Section
16 of the 1997 Rules on Civil Procedure), the
rights of third-party claimants over certain
properties levied upon by the sheriff to satisfy
the judgment may not be taken up in the case
where such claims are presented but in a

separate and independent action instituted by
the claimants.10
The dispositive portion of the trial court's
decision reads:
WHEREFORE, premises considered,
[FBDC's] Third Party Claim is hereby
DISMISSED. Likewise, the Motion to
Intervene and Admit Complaint in Intervention
is DENIED.11
FBDC filed a motion for reconsideration on 9
May 2003. The trial court denied FBDC's
motion for reconsideration in an order dated 3
July 2003. FBDC filed the present petition
before this Court to review pure questions of
law.
The Issues
FBDC alleges that the trial court erred in the
following:
1. Dismissing FBDC's third party claim upon
the trial court's erroneous interpretation that
FBDC has no right of ownership over the
subject properties because Section 22 of the
contract of lease is void for being a pledge
and a pactum commissorium;
2. Denying FBDC intervention on the ground
that its proper remedy as third party claimant
over the subject properties is to file a separate
action; andcralawlibrary
3. Depriving FBDC of its properties without
due process of law when the trial court
erroneously dismissed FBDC's third party
claim, denied FBDC's intervention, and did not
require the posting of an indemnity bond for
FBDC's protection.12
The Ruling of the Court
The petition has merit.
Taking of Lessee's Properties
without Judicial Intervention
128
We reproduce Section 22 of the Lease
Contract below for easy reference:
Section 22. Lien on the Properties of the
Lessee
Upon the termination of this Contract or the
expiration of the Lease Period without the
rentals, charges and/or damages, if any,
being fully paid or settled, the LESSOR shall
have the right to retain possession of the
properties of the LESSEE used or situated in
the Leased Premises and the LESSEE hereby
authorizes the LESSOR to offset the
prevailing value thereof as appraised by the
LESSOR against any unpaid rentals, charges
and/or damages. If the LESSOR does not
want to use said properties, it may instead sell
the same to third parties and apply the
proceeds thereof against any unpaid rentals,
charges and/or damages.
Respondents, as well as the trial court,
contend that Section 22 constitutes a pactum
commissorium, a void stipulation in a pledge
contract. FBDC, on the other hand, states that
Section 22 is merely a dacion en pago.
Articles 2085 and 2093 of the Civil Code
enumerate the requisites essential to a
contract of pledge: (1) the pledge is
constituted to secure the fulfillment of a
principal obligation; (2) the pledgor is the
absolute owner of the thing pledged; (3) the
persons constituting the pledge have the free
disposal of their property or have legal
authorization for the purpose; and (4) the
thing pledged is placed in the possession of
the creditor, or of a third person by common
agreement. Article 2088 of the Civil Code
prohibits the creditor from appropriating or
disposing the things pledged, and any
contrary stipulation is void.
On the other hand, Article 1245 of the Civil
Code defines dacion en pago, or dation in
payment, as the alienation of property to the
creditor in satisfaction of a debt in
money. Dacion en pago is governed by the
law on sales. Philippine National Bank v.
Pineda13 held that dation in payment requires
delivery and transmission of ownership of a

thing owned by the debtor to the creditor as
an accepted equivalent of the performance of
the obligation. There is no dation in payment
when there is no transfer of ownership in the
creditor's favor, as when the possession of the
thing is merely given to the creditor by way of
security.
Section 22, as worded, gives FBDC a means
to collect payment from Tirreno in case of
termination of the lease contract or the
expiration of the lease period and there are
unpaid rentals, charges, or damages. The
existence of a contract of pledge, however,
does not arise just because FBDC has means
of collecting past due rent from Tirreno other
than direct payment. The trial court concluded
that Section 22 constitutes a pledge because
of the presence of the first three requisites of
a pledge: Tirreno's properties in the leased
premises secure Tirreno's lease payments;
Tirreno is the absolute owner of the said
properties; and the persons representing
Tirreno have legal authority to constitute the
pledge. However, the fourth requisite, that
the thing pledged is placed in the
possession of the creditor, is absent. There
is non-compliance with the fourth requisite
even if Tirreno's personal properties are found
in FBDC's real property. Tirreno's personal
properties are in FBDC's real property
because of the Contract of Lease, which gives
Tirreno possession of the personal properties.
Since Section 22 is not a contract of pledge,
there is no pactum commissorium.
FBDC admits that it took Tirreno's properties
from the leased premises without judicial
intervention after terminating the Contract of
Lease in accordance with Section 20.2. FBDC
further justifies its action by stating that
Section 22 is a forfeiture clause in the
Contract of Lease and that Section 22 gives
FBDC a remedy against Tirreno's failure to
comply with its obligations. FBDC claims that
Section 22 authorizes FBDC to take whatever
properties that Tirreno left to pay off Tirreno's
obligations.
We agree with FBDC.
129
A lease contract may be terminated without
judicial intervention. Consing v.
Jamandre upheld the validity of a
contractually-stipulated termination clause:
This stipulation is in the nature of a resolutory
condition, for upon the exercise by the [lessor]
of his right to take possession of the leased
property, the contract is deemed terminated.
This kind of contractual stipulation is not
illegal, there being nothing in the law
proscribing such kind of agreement.
xxx
Judicial permission to cancel the agreement
was not, therefore necessary because of the
express stipulation in the contract of [lease]
that the [lessor], in case of failure of the
[lessee] to comply with the terms and
conditions thereof, can take-over the
possession of the leased premises, thereby
cancelling the contract of sub-lease. Resort to
judicial action is necessary only in the
absence of a special provision granting the
power of cancellation.14
A lease contract may contain a forfeiture
clause. Country Bankers Insurance Corp. v.
Court of Appeals upheld the validity of a
forfeiture clause as follows:
A provision which calls for the forfeiture of the
remaining deposit still in the possession of the
lessor, without prejudice to any other
obligation still owing, in the event of the
termination or cancellation of the agreement
by reason of the lessee's violation of any of
the terms and conditions of the agreement is
a penal clause that may be validly entered
into. A penal clause is an accessory obligation
which the parties attach to a principal
obligation for the purpose of insuring the
performance thereof by imposing on the
debtor a special prestation (generally
consisting in the payment of a sum of money)
in case the obligation is not fulfilled or is
irregularly or inadequately fulfilled.15
In Country Bankers, we allowed the forfeiture
of the lessee's advance deposit of lease
payment. Such a deposit may also be

construed as a guarantee of payment, and
thus answerable for any unpaid rent or
charges still outstanding at any termination of
the lease.
In the same manner, we allow FBDC's
forfeiture of Tirreno's properties in the leased
premises. By agreement between FBDC and
Tirreno, the properties are answerable for any
unpaid rent or charges at any termination of
the lease. Such agreement is not contrary to
law, morals, good customs, or public policy.
Forfeiture of the properties is the only security
that FBDC may apply in case of Tirreno's
default in its obligations.
Intervention v. Separate Action
Respondents posit that the right to intervene,
although permissible, is not an absolute right.
Respondents agree with the trial court's ruling
that FBDC's proper remedy is not intervention
but the filing of a separate action. Moreover,
respondents allege that FBDC was accorded
by the trial court of the opportunity to defend
its claim of ownership in court through
pleadings and hearings set for the purpose.
FBDC, on the other hand, insists that a third
party claimant may vindicate his rights over
properties taken in an action for replevin by
intervening in the replevin action itself.
We agree with FBDC.
Both the trial court and respondents relied on
our ruling in Bayer Phils. v. Agana16 to justify
their opposition to FBDC's intervention and to
insist on FBDC's filing of a separate action.
In Bayer, we declared that the rights of third
party claimants over certain properties levied
upon by the sheriff to satisfy the judgment
may not be taken up in the case where such
claims are presented, but in a separate and
independent action instituted by the claimants.
However, both respondents and the trial court
overlooked the circumstances behind the
ruling in Bayer, which makes the Bayer ruling
inapplicable to the present case. The third
party in Bayer filed his claim during execution;
in the present case, FBDC filed for
intervention during the trial.
130
The timing of the filing of the third party claim
is important because the timing determines
the remedies that a third party is allowed to
file. A third party claimant under Section 16 of
Rule 39 (Execution, Satisfaction and Effect of
Judgments)17 of the 1997 Rules of Civil
Procedure may vindicate his claim to the
property in a separate action, because
intervention is no longer allowed as judgment
has already been rendered. A third party
claimant under Section 14 of Rule 57
(Preliminary Attachment)18 of the 1997 Rules
of Civil Procedure, on the other hand, may
vindicate his claim to the property by
intervention because he has a legal interest in
the matter in litigation.19
We allow FBDC's intervention in the present
case because FBDC satisfied the
requirements of Section 1, Rule 19
(Intervention) of the 1997 Rules of Civil
Procedure, which reads as follows:
Section 1. Who may intervene. - A person
who has a legal interest in the matter in
litigation, or in the success of either of the
parties, or an interest against both, or is so
situated as to be adversely affected by a
distribution or other disposition of property in
the custody of the court or of an officer thereof
may, with leave of court, be allowed to
intervene in the action. The court shall
consider whether or not the intervention will
unduly delay or prejudice the adjudication of
the rights of the original parties, and whether
or not the intervenor's rights may be fully
protected in a separate proceeding.
Although intervention is not mandatory,
nothing in the Rules proscribes intervention.
The trial court's objection against FBDC's
intervention has been set aside by our ruling
that Section 22 of the lease contract is
not pactum commissorium.
Indeed, contrary to respondents' contentions,
we ruled in BA Finance Corporation v. Court
of Appeals that where the mortgagee's right to
the possession of the specific property is
evident, the action need only be maintained
against the possessor of the property.
However, where the mortgagee's right to

possession is put to great doubt, as when a
contending party might contest the legal
bases for mortgagee's cause of action or an
adverse and independent claim of ownership
or right of possession is raised by the
contending party, it could become essential to
have other persons involved and accordingly
impleaded for a complete determination and
resolution of the controversy. Thus:
A chattel mortgagee, unlike a pledgee, need
not be in, nor entitled to, the possession of the
property, unless and until the mortgagor
defaults and the mortgagee thereupon seeks
to foreclose thereon. Since the mortgagee's
right of possession is conditioned upon the
actual default which itself may be
controverted, the inclusion of other parties,
like the debtor or the mortgagor himself, may
be required in order to allow a full and
conclusive determination of the case. When
the mortgagee seeks a replevin in order to
effect the eventual foreclosure of the
mortgage, it is not only the existence of, but
also the mortgagor's default on, the chattel
mortgage that, among other things, can
properly uphold the right to replevy the
property. The burden to establish a valid
justification for that action lies with the plaintiff
[-mortgagee]. An adverse possessor, who is
not the mortgagor, cannot just be deprived
of his possession, let alone be bound by
the terms of the chattel mortgage contract,
simply because the mortgagee brings up
an action for replevin.20 (Emphasis added)
FBDC exercised its lien to Tirreno's properties
even before respondents and Tirreno
executed their Deed of Chattel Mortgage.
FBDC is adversely affected by the disposition
of the properties seized by the sheriff.
Moreover, FBDC's intervention in the present
case will result in a complete adjudication of
the issues brought about by Tirreno's creation
of multiple liens on the same properties and
subsequent default in its obligations.
Sheriff's Indemnity Bond
FBDC laments the failure of the trial court to
require respondents to file an indemnity bond
for FBDC's protection. The trial court, on the
131
other hand, did not mention the indemnity
bond in its Orders dated 7 March 2003 and 3
July 2003.
Pursuant to Section 14 of Rule 57, the sheriff
is not obligated to turn over to respondents
the properties subject of this case in view of
respondents' failure to file a bond. The bond in
Section 14 of Rule 57 (proceedings where
property is claimed by third person) is different
from the bond in Section 3 of the same rule
(affidavit and bond). Under Section 14 of Rule
57, the purpose of the bond is to indemnify
the sheriff against any claim by the intervenor
to the property seized or for damages arising
from such seizure, which the sheriff was
making and for which the sheriff was directly
responsible to the third party. Section 3, Rule
57, on the other hand, refers to the
attachment bond to assure the return of
defendant's personal property or the payment
of damages to the defendant if the plaintiff's
action to recover possession of the same
property fails, in order to protect the plaintiff's
right of possession of said property, or prevent
the defendant from destroying the same
during the pendency of the suit.
Because of the absence of the indemnity
bond in the present case, FBDC may also
hold the sheriff for damages for the taking or
keeping of the properties seized from FBDC.
WHEREFORE,we GRANT the petition.
We SET ASIDE the Orders dated 7 March
2003 and 3 July 2003 of Branch 59 of the
Regional Trial Court of Makati City in Civil
Case No. 01-1452 dismissing Fort Bonifacio
Development Corporation's Third Party Claim
and denying Fort Bonifacio Development
Corporation's Motion to Intervene and Admit
Complaint in Intervention.
We REINSTATE Fort Bonifacio Development
Corporation's Third Party Claim
and GRANT its Motion to Intervene and Admit
Complaint in Intervention. Fort Bonifacio
Development Corporation may hold the Sheriff
liable for the seizure and delivery of the
properties subject of this case because of the
lack of an indemnity bond.
SO ORDERED.

THIRD DIVISION
February 10, 2016
G.R. No. 174462
PHILIPPINE OVERSEAS
TELECOMMUNICATIONS CORPORATION
(POTC), PHILIPPINE COMMUNICATIONS
SATELLITE CORPORATION
(PHILCOMSAT), Petitioners,
vs.
SANDIGANBAYAN (3rd Division),
REPUBLIC OF THE PHILIPPINES
represented by PRESIDENTIAL
COMMISSION ON GOOD GOVERNMENT
(PCGG), Respondents.
DECISION
PEREZ, J.:
Before this Court is a Petition
for Certiorari filed under Rule 65 of the Rules
of Court, seeking to nullify the Resolution1 of
public respondent Sandiganbayan dated 20
October 2005 in Civil Case No. 0009,
entitled "Republic of the Philippines v. Jose L.
Africa, Manuel H Nieto, Jr., Ferdinand E.
Marcos, Imelda R. Marcos, Ferdinand R.
Marcos, Jr., Roberto S. Benedicto, Juan
Ponce Enrile, Potenciano Ilusorio." The
assailed Resolution denied petitioners'
Omnibus Motion, which sought the lifting of
the sequestration order issued by the
Presidential Commission on Good
Government (PCGG) on Philippine Overseas
Telecommunications Corporation (POTC) and
Philippine Communications Satellite
Corporation (PHILCOMSAT).
132
The antecedent facts are as follows:
However whoever reads recent Philippine
history, the EDSA People Power Revolution in
February 1986 is a singular political
phenomenon. Unprecedented, unique,
unnatural even, the revolution was unarmed.
But it succeeded. The unnatural means
yielded results natural to a revolution. The
vanquished and its acts had to yield to the
victors and its reactions. The new President
Corazon Cojuangco Aquino, exercising
revolutionary government powers issued
Executive Order Nos. 1 and 2, creating the
PCGG to recover properties amassed by the
unseated President Ferdinand Edralin
Marcos, Sr., his immediate family, relatives,
and cronies, "by taking undue advantage of
their public office and/or using their powers,
authority, influence, connections or
relationship,"2 and to sequester and take over
such properties. The present litigation is one
of the many offsprings of the revolutionary
orders.
Pursuant to Executive Order Nos. 1 and 2, on
14 March 1986, then PCGG Commissioner
Ramon A. Diaz issued a letter3 directing
Officer-In-Charge Carlos M. Ferrales to:
a. Sequester and immediately take over
POTC and PHILCO MS AT among others,
and
b. To freeze all 'withdrawals, transfers and/or
remittances under any type of deposit
accounts, trust accounts or placements.
POTC is a private corporation, which is a main
stockholder of PHILCOMSAT, a government-
owned and controlled corporation, which was
established in 1966 and was granted a
legislative telecommunications franchise by
virtue of Republic Act No. 5514, as amended
by Republic Act No. 7949, to establish and
operate international satellite communication
in the Philippines.
On 22 July 1987, the Office of the Solicitor
General (OSG), on behalf of the Republic of
the Philippines, filed a Complaint for
Reconveyance, Reversion, Accounting and

Restitution, and Damages, docketed as Civil
Case No. 0009, against Jose L. Africa,
Manuel H. Nieto, Jr., Ferdinand E. Marcos,
Imelda R. Marcos, Ferdinand R. Marcos, Jr.,
Roberto S. Benedicto, Juan Ponce Enrile, and
Potenciano Ilusorio (collectively hereinafter
referred to as "defendants"). The Complaint
averred the following:
(a) xxx through manipulations and dubious
arrangements with officers and members of
the Board of the National Development
Corporation (NDC), xxx purchased NDC's
shareholdings in the Philippine
Communications Satellite Corporation
(PHILCOMSA T), xxx under highly
unconscionable terms and conditions
manifestly disadvantageous to Plaintiff and
the Filipino people[;]
(b) xxx
(c) illegally manipulated, under the guise of
expanding the operations of PHILCOMSAT,
the purchase of major shareholdings of Cable
and Wireless Limited, a London-based
telecommunication company, in Eastern
Telecommunications Philippines, Incorporated
(ETPI), which shareholdings Defendants
Roberto S. Benedicto, Jose L. Africa and
Manuel H. Nieto, Jr., by themselves and
through corporations namely Polygon
Investors and Managers, Inc., Aeroco[m]
Investors and Managers Inc. and Universal
Molasses Corporation organized by them,
were beneficially held for themselves and for
Defendants Ferdinand E. Marcos and Imelda
R. Marcos;
(d) illegally effected, xxx contracts involving
corporations which they owned and/or
controlled, such as: The contract between
ETPI and Polygon Investors and Managers,
Inc., thereby ensuring effective control of ETPI
and advancing Defendants' scheme to
monopolize the telecommunications industry;
(e) acted in collaboration with each other as
dummies, nominees and/or agents of
Defendants Ferdinand E. Marcos, Imelda R.
Marcos and Ferdinand R. Marcos, Jr. in
several corporations, such as, the Mid-Pasig
133
Land Development Corporation and
Independent Realty Corporation which,
through manipulations by said Defendants,
appropriated a substantial portion of the
shareholdings in POTC-PHILCOMSA T held
by the late Honorio Poblador, Jr., Jose Valdez
and Francisco Reyes, thereby further
advancing Defendants' scheme to monopolize
the telecommunications industry;
(f) received improper payments such as
bribes, kickbacks or commissions from an
overprice in the purchase of equipment for
DOMSAT[:]4
As alleged in the Complaint, through clever
schemes, the wealth that should go to the
coffers of the government, which should be
deemed acquired for the benefit of the
Republic, went to the defendants in their own
individual accounts-some, however, through
conduits or corporations. The property
supposedly acquired illegally was specifically
set out in a list appended to the Complaint as
Annex A. For instance, Jose L. Africa, one of
the defendants, allegedly channelled the ill-
gotten wealth in shares of stock in twenty (20)
corporations, to wit:
1. Security Bank and Trust Company
2. SBTC Trust, Class A, Account No. 2016
3. SBTC Trust, Class A, Account No. 2017
4. SBTC Trust, Class A, Account No. 2018
5. Oceanic Wireless Network, Inc.
6. Bukidnon Sugar [Milling] Co., Inc.
7. Domestic Satellite Phils., Inc.
8. Northern Lines, Inc.
9. Philippine Communications Satellite
Corp.
10. Far East Managers and Investors, Inc.
11. Traders Royal Bank

12. Philippine Overseas
Telecommunications Corp.
13. Eastern Telecommunications Philippines,
Inc.
14. Polygon Investors & Managers, Inc.
15. Universal Molasses Corp.
16. Silangan Investors and Managers, Inc.
17. Masters Assets Corp., Class B
18. Gainful Assets Corp., Class B
19. Aerocom Investors and Managers, Inc.
20. Luzon Stevedoring Corp.
21. Amalgamated Motors (Philippines), Inc.
22. Philippine National Construction Corp.
23. Consolidated Tobacco Industries of the
Philippines.5
Another defendant, Manuel H. Nieto, Jr.,
allegedly channelled ill-gotten wealth into
shares of stock in fifteen (15) corporations,
namely:
1. Ozamis Agricultural Development, Inc.
2. Eastern Telecommunications Philippines,
Inc.
3. Rang'ay Farms
4. Hacienda San Martin, Inc.
5. Domestic Satellite
6. Bukidnon Sugar Milling Co., Inc.
7. Sum1yday Farms Company Inc.
8. Silangan Investors & Managers, Inc.
9. Phil. Communications Satellite Corp.
134
10. Oceanic Wireless Network, Inc.
11. Integral Factors Corp.
12. Phil. Overseas Telecommunication[s]
Corp.
13. Aerocom Investors and Managers, Inc.
14. Del Carmen Investments, Inc.
15. Polygon Ventures & Land Development
Corp.6
As borne by the records,7 the following are the
stockholdings in POTC of the defendants in
Civil Case No. 0009:
Pursuant to its power to sequester and to
avoid further dissipation of the sequestered
properties, the PCGG appointed a
comptroller, who controlled the disbursement
of funds of POTC and PHILCOMSAT. At the
same time, in a Memorandum11 by the PCGG
dated 24 October 2000 to the Bangko Sentral
ng Pilipinas (BSP), the PCGG informed the
BSP that in all cash withdrawals, transfer of
funds, money market placements and
disbursements of POTC and PHILCOMSAT,
the approval of the PCGG appointed
comptroller is required. The Memorandum
was to be disseminated to all commercial
banks and other non-bank financial
institutions performing quasi-banking
functions.
From Civil Case No. 0009 sprung other cases:
(1) Injunction; (2) Mandamus; and (3)
Approval of the Compromise Agreement.
On 1 March 1991, POTC and PHILCOMSAT
filed separate complaints for Injunction with
the Sandiganbayan against the Republic to
nullify and lift the sequestration order issued
against them for failure to file the necessary
judicial action against them within the period
prescribed by the Constitution and to enjoin
the PCGG from interfering with their
management and operation, which the
Sandiganbayan granted on 4 December 1991
through a Resolution.12

On 23 January 1995, however, this Court,
in Republic v. Sandiganbayan (First
Division), G.R. No. 96073, 240 SCRA 376,
January 23, 1995, reversed the
Sandiganbayan Resolution and ruled that the
filing of Complaint for Reconveyance,
Reversion, Accounting and Restitution, and
Damages, docketed as Civil Case No. 0009,
was filed within the required 6-month period.
Besides the complaint for Injunction, POTC
also filed a complaint for Mandamus against
the Republic before the Sandiganbayan to
compel the PCGG to return POTC's Stock
and Transfer Book and Stock Certificate
Booklets. The case was docketed as Civil
Case No. 0148.
On 13 May 1993, the Sandiganbayan granted
the Mandamus, and the Decision became
final and executory.
On 28 June 1996, Atty. Potenciano Ilusorio
(Ilusorio), one of the defendants in the Civil
Case No. 0009, entered into a Compromise
Agreement with the Republic. Out of 5,400 or
40o/o of the shares of stock of POTC in the
names of Mid-Pasig Land Development
Corporation (MLDC) and Independent Realty
Corporation (IRC), the government recovered
4, 727 shares or 34.9% of the shares of stock.
Ilusorio, on the other hand, retained 673
shares or 5% of the shares of stock.
The Compromise Agreement was approved
by the Sandiganbayan in an Order13 dated 8
June 1998.
In opposition to the Compromise Agreement,
MLDC and IRC filed a Motion to Vacate the
Compromise Agreement on 16 August and 2
October 1998, respectively, which was denied
by the Sandiganbayan in a Resolution14 dated
20 December 1999. In the same Resolution,
the Sandiganbayan directed the Corporate
Secretary of POTC to issue within ten (10)
days from receipt thereof, the corresponding
Stock Certificate of the government. Pursuant
to the Order, 4,727 or 34.9% shares of stock
of POTC were transferred in the name of the
Republic of the Philippines.
135
Aggrieved, the PCGG, MLDC, and IRC filed
separate petitions before this Court to nullify
the Order of the Sandiganbayan approving
the Compromise Agreement, which this Court,
on 15 June 2005, declared valid in Republic of
the Phils. v. Sandiganbayan, G.R. No. 141796
and 141804.
The Decision of the Court has long become
final and executory. The dispositive portion of
the Decision reads:
Having been sealed with court approval, the
Compromise Agreement has the force of res
judicata between the parties and should be
complied with in accordance with its terms.
Pursuant thereto, Victoria C. de los Reyes,
Corporate Secretary of the POTC, transmitted
to Mr. Magdangal B. Elma, then Chief
Presidential Legal Counsel and Chairman of
PCGG, Stock Certificate No. 131 dated
January 10, 2000, issued in the name of the
Republic of the Philippines, for 4, 727 POTC
shares. Thus, the Compromise Agreement
was partly implemented.
WHEREFORE, the instant petitions are
hereby DISMISSED.
SO ORDERED.15(Citations omitted)
By virtue of the aforesaid Decision in Republic
of the Phils. v. Sandiganbayan, POTC and
PHILCOMSAT filed an Omnibus
Motion16 dated 28 February 2005, which
sought to nullify and/or discharge the
continued sequestration of POTC and
PHILCOMSAT and to declare null and void
the PCGG Memorandum to the BSP dated 24
October 2000.
On 20 October 2005, the Sandiganbayan
denied POTC and PHILCOMSAT' s Omnibus
Motion in the assailed Resolution.17 The
Motion for Reconsideration was likewise
denied in a Resolution18 dated 2 August 2006.
Hence, the present Petition, which raises the
following assignment of errors.
ASSIGNMENT OF ERRORS

(A)
The public respondent Sandiganbayan erred,
and in fact, gravely abused its discretion
amounting to lack or excess of jurisdiction,
when it ruled that the sequestration of POTC
and PHILCOMSAT is still necessary under the
present circumstances.
(B)
The public respondent Sandiganbayan erred,
and in fact, gravely abused its discretion
amounting to lack or excess of jurisdiction,
when it ruled that the appointment of a PCGG
fiscal agent in POTC and PHILCOMSAT is
justified under the present circumstances.
(C)
The public respondent Sandiganbayan erred,
and in fact, [gravely] abused its discretion
amounting to lack or excess of jurisdiction,
when it ruled that the sequestration order
against the petitioners is valid despite clear
fatal legal infirmities thereto.19
Arguments of POTC and PHILCOMSAT
POTC and PHILCOMSAT aver that the
Sandiganbayan committed grave abuse of
discretion amounting to lack or in excess of
jurisdiction by affirming the continued
sequestration of the shares, disregarding the
final and executory Decision and Resolution
of the Sandiganbayan dated 15 June 2005
and 7 September 2005 in Republic of the
Phils. v. Sandiganbayan, which already ruled
on the ownership of the subject shares. In the
aforesaid case, the Court upheld the
Compromise Agreement between the
government and Ilusorio. As a consequence,
the government is now the undisputed owner
of 34.9% of the shares of stock of the
sequestered corporations. Pursuant to the
final and executory Decision of the Court,
there is no longer need for the continued
sequestration of POTC and PHILCOMSAT.
POTC and PHILCO MS AT cited the
pronouncement of this Court in Bataan
Shipyard and Engineering Co.,
Inc. (BASECO) v. PCGG, which held that, as
136
the writ of sequestration is merely a
conservatory measure, thus, provisional and
temporary in character, the final adjudication
of the Court, which finally disposed the
sequestered shares, rendered the writ
unnecessary.
The POTC and PHILCOMSAT aver that while
the PCGG has the power to sequester, such
power is merely provisional. The POTC and
PHILCOMSAT cite Executive Order No. 1,
Section 3, which grants the PCGG the power
to take over sequestered properties
provisionally, such that, after the sequestered
properties have been finally disposed of by
the proper authorities, the writ shall be lifted.
Ruling of the Sandiganbayan
On the other hand, as it held, the
Sandiganbayan posits that the sequestration
of POTC and PHILCOMSAT should not be
lifted. The Sandiganbayan ruled in this wise:
Executive Order No. 1 declares that the
sequestration of property the acquisition if
which is suspect shall last until the
transactions leading to such acquisition
can be disposed of by the appropriate
authorities.
xxx.
Also, this Court had already ruled in the
Resolution dated April 1 2003 that there
was prima facie evidence that the herein
defendants have ill-gotten wealth consisting of
funds and properties and that POTC and
PHILCOMSAT, among others, were used in
acquiring and concealing their ill-gotten
wealth.20 (Emphasis supplied)
Hence, the main issue of whether or not the
continued sequestration is necessary.
Our Ruling
We rule in favor of POTC and PHILCOMSAT.
I

First, the threshold issue of whether or not the
failure to properly implead POTC and
PHILCOMSAT as defendants in Civil Case
No. 0009 is a fatal jurisdictional error.
Section 26, Article XVIII of the Constitution
mandates that if no judicial action has been
filed within six (6) months after the ratification
of the 1987 Constitution,21 the writ of
sequestration shall automatically be lifted. In
the case at bar, there was no judicial action
filed against POTC and PHILCOMSAT. There
has never been any appropriate judicial action
for reconveyance or recovery ever instituted
by the Republic against POTC and
PHILCOMSAT.
A perusal of the instant Complaint, docketed
as Civil Case No. 0009 dated 22 July 1987,
reveals that it was filed against private
individuals, namely, Jose L. Africa, Manuel H.
Nieto, Jr., Ferdinand E. Marcos, Imelda R.
Marcos, Ferdinand R. Marcos, Jr., Roberto S.
Benedicto, Juan Ponce Enrile, Potenciano
Ilusorio.22 Nowhere was POTC and
PHILCOMSAT impleaded in the Complaint.
The facts surrounding the present case
square with those in PCGG v. Sandiganbayan
(PCGG).23In PCGG, the complaint was filed
against private individuals, Nieto and Africa,
who are shareholders in Aerocom. The Court
ruled that the failure to implead Aerocom, the
corporation, violated the fundamental principle
that a corporation's legal personality is distinct
and separate from its stockholders, and that
mere annexation to the list of corporations
does not suffice. In the same manner
as PCGG, in the case at bar, the Complaint
was filed only against POTC and
PHILCOMSAT' s stockholders, who are
private individuals. Similarly, POTC and
PHILCOMSAT were also merely annexed to
the list of corporations and were not properly
impleaded in the case. The suit was against
its individual shareholders, herein
respondents, Jose L. Africa, Manuel H. Nieto,
Jr., Ferdinand E. Marcos, Imelda R. Marcos,
Ferdinand R. Marcos, Jr., Roberto S.
Benedicto, Juan Ponce Enrile, and
Potenciano Ilusorio.
137
Failure to implead POTC and PHILCOMSAT
is a violation of the fundamental principle that
a corporation has a legal personality distinct
and separate from its stockholders;24 that, the
filing of a complaint against a stockholder is
not ipso facto a complaint against the
corporation. Our pronouncement
in Aerocom is apt:
There is no existing sequestration to talk
about in this case, as the writ issued against
Aerocom, to repeat, is invalid for reasons
hereinbefore stated. Ergo, the suit in Civil
Case No. 0009 against Mr. Nieto and Mr.
Africa as shareholders in Aerocom is not and
cannot ipso facto be a suit against the
unimpleaded Aerocom itself without violating
the fundamental principle that a corporation
has a legal personality distinct and separate
from its stockholders. Such is the ruling laid
down in PCGG v. Jnterco reiterated anew in a
case of more recent vintage - Republic v.
Sandiganbayan, Sipalay Trading Corp. and
Allied Banking Corp. where this. Court,
speaking through Mr. Justice Ricardo J.
Francisco, hewed to the lone dissent of Mr.
Justice Teodoro R. Padilla in the very same
Republic v. Sandiganbayan case herein
invoked by the PCGG, to wit:
xxxx. (Emphasis supplied, citations omitted)
The basic tenets of fair play and principles of
justice dictate that a corporation, as a legal
entity distinct and separate from its
stockholders, must be impleaded as
defendants, giving it the opportunity to be
heard. The failure to properly implead POTC
and PHILCOMSAT not only violates the
latters' legal personality, but is repugnant on
POTC's and PHILCOMSAT's right to due
process. "[F]ailure to implead these
corporations as defendants and merely
annexing a list of such corporations to the
complaints is a violation of their right to due
process for it would in effect be disregarding
their distinct and separate personality without
a hearing."25 As already settled, a suit against
individual stockholders is not a suit against the
corporation.

Proceeding from the foregoing, as POTC and
PHILCOMSAT were not impleaded, there is
no longer any existing sequestration on POTC
and PHILCOMSAT.26 The sequestration order
over POTC and PHILCOMSAT was
automatically lifted six (6) months after the
ratification of the 1987 Constitution on 2
February 1987 for failure to implead POTC
and PHILCOMSAT in Civil Case No. 0009
before the Sandiganbayan or before any court
for that matter.27 To recite Section 26, Article
XVIII of the Constitution, if no judicial action
has been filed within six (6) months after the
ratification of the 1987 Constitution, the writ of
sequestration shall automatically be lifted.
Note must be made of the fact that we do not
here touch our previous holding that Civil
Case No. 0009 was filed within the 6-month
period. We now say that such
notwithstanding, and as shown by the facts on
record, the POTC and PHILCOMSA T were
not impleaded in the Civil Case.
II
For one more reason should this Petition be
granted. This concerns the shares in
petitioner corporations of Potenciano Ilusorio
covered by the Compromise Agreement
entered into between Ilusorio and PCGG,
which was upheld by the Court in Republic of
the Phils. v. Sandiganbayan, the decision in
which is now final and executory.
a. Sequestration is merely provisional
To effectively recover all ill-gotten wealth
amassed by former President Marcos and his
cronies, the President granted the PCGG,
among others, power and authority to
sequester, provisionally take over or freeze
suspected ill-gotten wealth. The subject of the
present case is the extent of PCGG's power to
sequester.
Sequestration is the means to place or cause
to be placed under the PCGG's possession or
control properties, building or office, including
business enterprises and entities, for the
purpose of preventing the destruction,
concealment or dissipation of, and otherwise
conserving and preserving the same until it
138
can be determined through appropriate
judicial proceedings, whether the property
was in truth "ill-gotten. "28
However, the power of the PCGG to
sequester is merely provisional.29 None other
than Executive Order No. 1, Section 3(c)
expressly provides for the provisional nature
of sequestration, to wit:
c) To provisionally take over in the public
interest or to prevent its disposal or
dissipation, business enterprises and
properties taken over by the government of
the Marcos Administration or by entities or
persons close to former President Marcos,
until the transactions leading to such
acquisition by the latter can be disposed of by
the appropriate authorities.30 (Emphasis
supplied).
In the notable case of Bataan Shipyard &
Engineering Co., Inc. (BASECO)
v. PCGG,31 the Court clearly pronounced that
sequestration is provisional, that such
sequestration shall last "until the transactions
leading to such acquisition xxx can be
disposed of by the appropriate authorities."32
Sequestration is akin to the provisional
remedy of preliminary attachment, or
receivership.33 Similarly, in attachment, the
property of the defendant is seized as a
security for the satisfaction of any judgment
that may be obtained, and not disposed of, or
dissipated, or lost intentionally or otherwise,
pending litigation.34 In a receivership, the
property is placed in the possession and
control of a receiver appointed by the court,
who shall conserve the property pending final
determination of ownership or right of
possession of the parties.35 In sequestration,
the same principle holds true. The
sequestered properties are placed under the
control of the PCGG, subject to the final
determination of whether the property was in
truth ill-gotten. We reiterate the disquisition of
this Court in BASECO:
By the clear terms of the law, the power of the
PCGG to sequester property claimed to be "ill-
gotten" means to place or cause to be placed

under its possession or control said property,
or any building or office wherein any such
property and any records pertaining thereto
may be found, including "business enterprises
and entities," - for the purpose of preventing
the destruction, concealment or dissipation of,
and otherwise conserving and preserving, the
same - until it can be determined, through
appropriate judicial proceedings, whether
the property was in truth "ill-
gotten," i.e., acquired through or as a result
of improper or illegal use of or the conversion
of funds belonging to the Government or any
of its branches, instrumentalities, enterprises,
banks or financial institutions, or by taking
undue advantage of official position, authority
relationship, connection or influence, resulting
in unjust enrichment of the ostensible owner
and grave damage and prejudice to the State.
xxx.36 (Emphasis supplied, citations omitted)
Sequestration is. a conservatory writ,37 which
purpose is to preserve properties in custodia
legis, lest the dissipation and concealment of
the "ill-gotten" wealth the former President
Marcos and his allies may resort to, pending
the final disposition of the properties.38 It is to
prevent the disappearance or dissipation
pending adjudgment of whether the
acquisition thereof by the apparent owner was
attended by some vitiating anomaly or
attended by some illegal means.39 Thus by no
means is it permanent in character. Upon the
final disposition of the sequestered properties,
the sequestration is renderedfunctus officio.
b. Ownership of the sequestered properties
have already been finally adjudged
As sequestration is a provisional remedy, a
transitional state of affairs, in order to prevent
the disappearance or dissipation of the
property pending the final disposition of the
property, the ultimate purpose of
sequestration is to bring an intended
permanent effect while the PCGG investigates
in pursuit of a judicial proceeding - to dispose
of the sequestered properties. Tersely put, the
ultimate purpose of sequestration is to recover
the sequestered properties in favor of the
government in case they tum out to be ill-
gotten. This function to dispose of the
property is reserved to the Sandiganbayan.
139
Until the Sandiganbayan determines whether
the property was in truth and in fact "ill-
gotten", the sequestration shall subsist. In
case of a finding that the sequestered
properties are ill-gotten, the property shall be
returned to the lawful owner, to the people,
through the government; otherwise, the
sequestered property shall be returned to the
previous owner.
Clearly, the purpose of sequestration is to
take control until the property is finally
disposed of by the proper
authorities.1âwphi1 However, when such
property has already been disposed of, such
that the owner has already been adjudged by
the Court, must the sequestration still subsist?
In the case at bar, the 34.9% ownership of the
sequestered property has been finally
adjudged; the ultimate purpose of
sequestration was already accomplished
when the ownership thereof was adjudged to
the government by this Court in Republic of
the Phils. v. Sandiganbayan. Moreover, the
said shares in the ownership of the
sequestered properties have reverted to the
Government. The government now owns
4,727 shares or 34.9% of the sequestered
corporations.
As the sequestered property has already been
disposed, the ultimate purpose of
sequestration has already been attained; the
evil sought to be prevented is no longer
present. Evidently, the sequestered property
which was already returned to the government
cannot anymore be dissipated or concealed.
Otherwise stated, the sequestered properties
need no longer be subject of reversion
proceedings because they have already
reverted back to the government. Thus, as the
sequestration is rendered functus officio, it is
merely ministerial upon the Sandiganbayan to
lift the same.
In fact, on 4 November 2010, the Department
of Justice (DOJ), which has supervision over
the PCGG, acknowledged the need to lift the
writ of sequestration in the DOJ Memorandum
LML-M-4K10-368.40 The pertinent portion of
the DOJ Memorandum reads:

It bears stressing that the PCGG, which is
now under the administrative supervision of
this Department pursuant to Executive Order
No. 643 s. 2007, has lost "authority" over the
shares of the Republic in POTC. This is due to
the fact that in PCGG Resolution No. 2007-
024 dated 4 September 2007, it was resolved
that the 4,727 shares of stock of POTC, which
is under the name of the Republic of the
Philippines, be now transferred to the
Department of Finance (DOF) for disposition.
xxx. (Boldface omitted)
xxxx
In view of the foregoing, you are hereby
directed to immediately implement PCGG
Resolution No. 2007-024 by immediately
transferring to the DOF, for its proper
disposition, POTC Stock Certificate No.
131. Corollary to this is the lifting of the
sequestration orders, if any, that covers
the 4,727 shares of stock of the Republic in
POTC. xxx.41 (Emphasis supplied)
Quite telling is this Court's unequivocal
pronouncement in a rather recent case
of Palm Avenue Holding Co., Inc. v.
Sandiganbayan,42which involved very similar
factual antecedents to those pertaining to
petitioners POTC and PHILCOMSAT.
"Section 26, Article XVIII of the 1987
Constitution provides:
xxxx
A sequestration or freeze order shall be
issued only upon showing of a prima
facie case. The order and the list of the
sequestered of frozen properties shall
forthwith be registered with the proper court.
For orders issued before the ratification of this
Constitution, the corresponding judicial action
or proceeding shall be filed within six months
from its ratification. For those issued after
such ratification, the judicial action or
proceeding shall be commenced within six
months from the issuance thereof.
The sequestration or freeze order is deemed
automatically lifted if no judicial action or
140
proceeding is commenced as herein
provided.1âwphi1
The aforesaid provision mandates the
Republic to file the corresponding judicial
action or proceedings within a six-month
period (from its ratification on February 2,
1987) in order to maintain sequestration, non-
compliance with which would result in the
automatic lifting of the sequestration order.
The Court's ruling in Presidential Commission
on Good Government v.
Sandiganbayan, which remains good law,
reiterates the necessity of the Republic to
actually implead corporations as defendants
in the complaint, out of recognition for their
distinct and separate personalities, failure to
do so would necessarily be denying such
entities their right to due process. Here, the
writ of sequestration issued against the assets
of the Palm Companies is not valid because
the suit in Civil Case No. 0035 against
Benjamin Romualdez as shareholder in the
Palm Companies is not a suit against the
latter. The Court has held, contrary to the
assailed Sandiganbayan Resolution in G .R.
No. 173082, that failure to implead these
corporations as defendants and merely
annexing a list of such corporations to the
complaints is a violation of their right to due
process for it would be, in effect, disregarding
their distinct and separate personality without
a hearing. Here, the Palm Companies were
merely mentioned as Item Nos. 47 and 48,
Annex A of the Complaint, as among the
corporations where defendant Romualdez
owns shares of stocks. Furthermore, while the
writ of sequestration was issued on October
27, 1986, the Palm Companies were
impleaded in the case only in 1997, or already
a decade from the ratification of the
Constitution in 1987, way beyond the
prescribed period.
The argument that the beneficial owner of
these corporations was, anyway, impleaded
as party-defendant can only be interpreted as
a tacit admission of the failure to file the
corresponding judicial action against said
corporations pursuant to the constitutional
mandate. Whether or not the impleaded
defendant in Civil Case No. 0035 is indeed
the beneficial owner of the Palm Companies is

a matter which the PCGG merely assumes
and still has to prove in said case.
The sequestration order issued against the
Palm Companies is therefore deemed
automatically lifted due to the failure of the
Republic to commence the proper judicial
action or to implead them therein within
the period under the
Constitution. However, the lifting of the writ
of sequestration will not necessarily be fatal to
the main case since the same does not ipso
facto mean that the sequestered properties
are, in fact, not illgotten. The effect of the
lifting of the sequestration will merely be the
termination of the government's role as
conservator. In other words, the PCGG may
no longer exercise administrative or
housekeeping powers, and its nominees may
no longer vote the sequestered shares to
enable them to sit in the corporate board of
the subject company.43 (Emphasis supplied,
citations omitted)
The glaring similarity in the circumstances
attendant in the case involving Palm
Companies with the situation of petitioners
POTC and PHILCOMSAT compels us to rule
in this case as we did in Palm case.
On a final note, while sequestration is the
means to revert the amassed ill-gotten wealth
back to the coffers of our government, we
must still safeguard the protection of property
rights from overzealousness. Sequestration as
statutorily and constitutionally recognized is
not permanent. It must be lifted when the law
and proven facts warrant, or when the
purpose has been accomplished.
WHEREFORE, the Petition is GRANTED. The
assailed Resolution issued by the
Sandiganbayan dated 20 October 2005 and 2
August 2006 are REVERSED. The writ of
sequestration issued against petitioner POTC
and PHILCOMSA T is hereby
declared LIFTED six (6) months after the
ratification of the 1987 Constitution on 2
February 1987.
SO ORDERED.
141
JOSE PORTUGAL PEREZ
Associate Justice
G.R. No. 185734               July 3, 2013
ALFREDO C. LIM, JR., PETITIONER,
vs.
SPOUSES TITO S. LAZARO AND CARMEN
T. LAZARO, RESPONDENTS.
RESOLUTION
PERLAS-BERNABE, J.:
Assailed in this petition for review on
certiorari1 are the July 10, 2008 Decision2 and
December 18, 2008 Resolution3 of the Court
of Appeals (CA) in CA-G.R. SP No. 100270,
affirming the March 29, 2007 Order4 of the
Regional Trial Court of Quezon City, Branch
223 (RTC), which lifted the writ of preliminary
attachment issued in favor of petitioner
Alfredo C. Lim, Jr. (Lim, Jr.).
The Facts
On August 22, 2005, Lim, Jr. filed a
complaint5 for sum of money with prayer for
the issuance of a writ of preliminary
attachment before the RTC, seeking to
recover from respondents-spouses Tito S.
Lazaro and Carmen T. Lazaro (Sps. Lazaro)
the sum of ₱2,160,000.00, which represented
the amounts stated in several dishonored
checks issued by the latter to the former, as
well as interests, attorney’s fees, and costs.
The RTC granted the writ of preliminary
attachment application6 and upon the posting
of the required ₱2,160,000.00 bond,7 issued
the corresponding writ on October 14,
2005.8 In this accord, three (3) parcels of land
situated in Bulacan, covered by Transfer
Certificates of Title (TCT) Nos. T-64940, T-
64939, and T-86369 (subject TCTs),

registered in the names of Sps. Lazaro, were
levied upon.9
In their Answer with Counterclaim,10 Sps.
Lazaro averred, among others, that Lim, Jr.
had no cause of action against them since: (a)
Colim Merchandise (Colim), and not Lim, Jr.,
was the payee of the fifteen (15) Metrobank
checks; and (b) the PNB and Real Bank
checks were not drawn by them, but by
Virgilio Arcinas and Elizabeth Ramos,
respectively. While they admit their
indebtedness to Colim, Sps. Lazaro alleged
that the same had already been substantially
reduced on account of previous payments
which were apparently misapplied. In this
regard, they sought for an accounting and
reconciliation of records to determine the
actual amount due. They likewise argued that
no fraud should be imputed against them as
the aforesaid checks issued to Colim were
merely intended as a form of
collateral.11 Hinged on the same grounds,
Sps. Lazaro equally opposed the issuance of
a writ of preliminary attachment.12
Nonetheless, on September 22, 2006, the
parties entered into a Compromise
Agreement13 whereby Sps. Lazaro agreed to
pay Lim, Jr. the amount of ₱2,351,064.80 on
an installment basis, following a schedule of
payments covering the period from September
2006 until October 2013, under the following
terms, among others: (a) that should the
financial condition of Sps. Lazaro improve, the
monthly installments shall be increased in
order to hasten the full payment of the entire
obligation;14 and (b) that Sps. Lazaro’s failure
to pay any installment due or the dishonor of
any of the postdated checks delivered in
payment thereof shall make the whole
obligation immediately due and demandable.
The aforesaid compromise agreement was
approved by the RTC in its October 31, 2006
Decision15 and January 5, 2007 Amended
Decision.16
Subsequently, Sps. Lazaro filed an Omnibus
Motion,17 seeking to lift the writ of preliminary
attachment annotated on the subject TCTs,
which the RTC granted on March 29,
142
2007.18 It ruled that a writ of preliminary
attachment is a mere provisional or ancillary
remedy, resorted to by a litigant to protect and
preserve certain rights and interests pending
final judgment. Considering that the case had
already been considered closed and
terminated by the rendition of the January 5,
2007 Amended Decision on the basis of the
September 22, 2006 compromise agreement,
the writ of preliminary attachment should be
lifted and quashed. Consequently, it ordered
the Registry of Deeds of Bulacan to cancel the
writ’s annotation on the subject TCTs.
Lim, Jr. filed a motion for
reconsideration19 which was, however, denied
on July 26, 2007,20 prompting him to file a
petition for certiorari21 before the CA.
The CA Ruling
On July 10, 2008, the CA rendered the
assailed decision,22 finding no grave abuse of
discretion on the RTC’s part. It observed that
a writ of preliminary attachment may only be
issued at the commencement of the action or
at any time before entry of judgment. Thus,
since the principal cause of action had already
been declared closed and terminated by the
RTC, the provisional or ancillary remedy of
preliminary attachment would have no leg to
stand on, necessitating its discharge.23
Aggrieved, Lim, Jr. moved for
reconsideration24 which was likewise denied
by the CA in its December 18, 2008
Resolution.25
Hence, the instant petition.
The Issue Before the Court
The sole issue in this case is whether or not
the writ of preliminary attachment was
properly lifted.
The Court’s Ruling
The petition is meritorious.
 143

By its nature, preliminary attachment, under Did the compromise agreement between
Rule 57 of the Rules of Court (Rule 57), is an Antonio Garcia and the consortium discharge
ancillary remedy applied for not for its own the latter’s attachment lien over the disputed
sake but to enable the attaching party to shares?
realize upon the relief sought and expected to
be granted in the main or principal action; it is CEIC argues that a writ of attachment is a
a measure auxiliary or incidental to the main mere auxiliary remedy which, upon the
action. As such, it is available during its dismissal of the case, dies a natural death.
pendency which may be resorted to by a Thus, when the consortium entered into a
litigant to preserve and protect certain rights compromise agreement, which resulted in the
and interests during the interim, awaiting the termination of their case, the disputed shares
ultimate effects of a final judgment in the were released from garnishment.
case.26 In addition, attachment is also availed
of in order to acquire jurisdiction over the We disagree. To subscribe to CEIC’s
action by actual or constructive seizure of the contentions would be to totally disregard the
property in those instances where personal or concept and purpose of a preliminary
substituted service of summons on the attachment.
defendant cannot be effected.27
xxxx
In this relation, while the provisions of Rule 57
are silent on the length of time within which an
The case at bench admits of peculiar
attachment lien shall continue to subsist after
character in the sense that it involves a
the rendition of a final judgment, jurisprudence
compromise agreement. Nonetheless, x x x.
dictates that the said lien continues until the
The parties to the compromise agreement
debt is paid, or the sale is had under
should not be deprived of the protection
execution issued on the judgment or until the
provided by an attachment lien especially in
judgment is satisfied, or the attachment
an instance where one reneges on his
discharged or vacated in the same manner
obligations under the agreement, as in the
provided by law.28
case at bench, where Antonio Garcia failed to
hold up his own end of the deal, so to speak.
Applying these principles, the Court finds that
the discharge of the writ of preliminary
xxxx
attachment against the properties of Sps.
Lazaro was improper.
If we were to rule otherwise, we would in
effect create a back door by which a debtor
Records indicate that while the parties have
can easily escape his creditors. Consequently,
entered into a compromise agreement which
we would be faced with an anomalous
had already been approved by the RTC in its
situation where a debtor, in order to buy time
January 5, 2007 Amended Decision, the
to dispose of his properties, would enter into a
obligations thereunder have yet to be fully
compromise agreement he has no intention of
complied with – particularly, the payment of
honoring in the first place. The purpose of the
the total compromise amount of
provisional remedy of attachment would thus
₱2,351,064.80. Hence, given that the
be lost. It would become, in analogy, a
foregoing debt remains unpaid, the
declawed and toothless tiger. (Emphasis and
attachment of Sps. Lazaro’s properties should
underscoring supplied; citations omitted)
have continued to subsist.
In fine, the Court holds that the writ of
In Chemphil Export & Import Corporation v.
preliminary attachment subject of this case
CA,29 the Court pronounced that a writ of
should be restored and its annotation revived
attachment is not extinguished by the
in the subject TCTs, re-vesting unto Lim, Jr.
execution of a compromise agreement
his preferential lien over the properties
between the parties, viz:
covered by the same as it were before the
 144

cancellation of the said writ. Lest it be

misunderstood, the lien or security obtained
by an attachment even before judgment, is in
the nature of a vested interest which affords
specific security for the satisfaction of the debt
put in suit.30 Verily, the lifting of the attachment
lien would be tantamount to an abdication of
Lim, Jr.’s rights over Sps. Lazaro’s properties
which the Court, absent any justifiable ground
therefor, cannot allow.

WHEREFORE, the petition is GRANTED. The

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

SO ORDERED.

Carpio, (Chairperson), Brion, Del Castillo,

Perez, and Perlas-Bernabe, JJ., concur.