G.R. No.

L-252

March 30, 1946

(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 possessors in good faith of the properties in question. And on December 17, plaintiffs filed an urgent petition exparte 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

TRANQUILINO CALO and DOROTEO SAN JOSE vs. ARSENIO C. ROLDAN 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

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;

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).. 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. 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 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. Separate Opinions BRIONES, con quien esta conforme PARAS, M., conforme: Estoy conforme con la parte dispositiva por la unica razon, breve pero lucidamente expuesta en la ponencia, de que cuando hay controversia sobre el titulo de propiedad noo debe utilizarse el nombramiento de depositario para pertubar el status quo transladando la posesion del terreno litigioso de una parte a otra. Solamente cuando el dominio es indisputable verbigracia, hay de por medio un titulo Torrens cabe nombrar un depositario para los fines espicificos senalados por la ley, entre ellos principalmente la preservacion del objeto litigioso cuando corre el peligro de danarse o echarse a perder.

G.R. No. L-48756 September 11, 1982 K.O. GLASS CONSTRUCTION CO., INC., petitioner, vs. Court of First Instance of Rizal Petition for certiorari to annul and set aside the writ of preliminary attachment issued by the respondent Judge in Civil Case No. 5902-P of the Court of First Instance of Rizal, entitled: Antonio D. Pinzon plaintiff, versus K.O. Glass Construction Co., Inc., and Kenneth O. Glass, defendants, and for the release of the amount of P37,190.00, which had been deposited with the Clerk of Court, to the petitioner. On October 6, 1977, an action was instituted in the Court of First Instance of Rizal by Antonio D. Pinzon to recover from Kenneth O. Glass the sum of P37,190.00, alleged to be the agreed rentals of his truck, as well as the value of spare parts which have not been returned to him upon termination of the lease. In his verified complaint, the plaintiff asked for an attachment against the property of the defendant consisting of collectibles and payables with the Philippine Geothermal, Inc., on the grounds that the defendant is a foreigner; that he has sufficient cause of action against the said defendant; and that there is no sufficient security for his claim against the defendant in the event a judgment is rendered in his favor. 1 Finding the petition to be sufficient in form and substance, the respondent Judge ordered the issuance of a writ of attachment against the properties of the defendant upon the plaintiff's filing of a bond in the amount of P37,190.00. 2 Thereupon, on November 22, 1977, the defendant Kenneth O. Glass moved to quash the writ of attachment on the grounds that there is no cause of action against him since the transactions or claims of the plaintiff were entered into by and between the plaintiff and the K.O. Glass Construction Co., Inc., a corporation duly organized and existing under Philippine laws; that there is no ground for the issuance of the writ of preliminary attachment as defendant Kenneth O. Glass never intended to leave the Philippines, and even if he does, plaintiff can not be prejudiced thereby because his claims are against a corporation which has sufficient funds and property to satisfy his claim; and that the money being garnished belongs to the K.O. Glass Corporation Co., Inc. and not to defendant Kenneth O. Glass. 3 By reason thereof, Pinzon amended his complaint to include K.O. Glass Construction Co., Inc. as co-defendant of Kenneth O. Glass. 4 On January 26, 1978, the defendants therein filed a supplementary motion to discharge and/or dissolve the writ of preliminary attachment upon the ground that the affidavit filed in support of the motion for preliminary attachment was not sufficient or wanting in law for the reason that: (1) the affidavit did not state that the amount of plaintiff's claim was above all legal set-offs or counterclaims, as required by Sec. 3, Rule 57 of the Revised Rules of Court; (2) the affidavit did not state that there is no other sufficient security for the claim sought to be recovered by the action as also required by said Sec. 3; and (3) the affidavit did not specify any of the grounds enumerated in Sec. 1 of Rule 57, 5 but, the respondent Judge denied the motion and ordered the Philippine Geothermal, Inc. to deliver and deposit with the Clerk of Court the amount of P37,190.00 immediately upon receipt of the order which amount shall remain so deposited to await the judgment to be rendered in the case. 6 On June 19, 1978, the defendants therein filed a bond in the amount of P37,190.00 and asked the court for the release of the same amount deposited with the Clerk of Court, 7 but, the respondent Judge did not order the release of the money deposited. 8

Hence, the present recourse. As prayed for, the Court issued a temporary restraining order, restraining the respondent Judge from further proceeding with the trial of the case. 9 We find merit in the petition. The respondent Judge gravely abused his discretion in issuing the writ of preliminary attachment and in not ordering the release of the money which had been deposited with the Clerk of Court for the following reasons: First, there was no ground for the issuance of the writ of preliminary attachment. Section 1, Rule 57 of the Revised Rules of Court, which enumerates the grounds for the issuance of a writ of preliminary attachment, reads, as follows: Sec. 1. Grounds upon which attachment may issue. A plaintiff or any proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: (a) In an action for the recovery of money or damages on a cause of action arising from contract, express or implied, against a party who is about to depart from the Philippines with intent to defraud his creditor; (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 detained, 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 officer; (d) In an action against the party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought; (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. In ordering the issuance of the controversial writ of preliminary attachment, the respondent Judge said and We quote: The plaintiff filed a complaint for a sum of money with prayer for Writ of Preliminary Attachment dated September 14, 1977, alleging that the defendant who is a foreigner may, at any time, depart from the Philippines with intent to defraud his creditors including the plaintiff herein; that there is no sufficient security for the claim sought to be enforced by this action; that the amount due the plaintiff is as much as the sum for which an order of attachment

is sought to be granted; and that defendant has sufficient leviable assets in the Philippines consisting of collectibles and payables due from Philippine Geothermal, Inc., which may be disposed of at any time, by defendant if no Writ of Preliminary Attachment may be issued. Finding said motion and petition to be sufficient in form and substance. 10 Pinzon however, did not allege that the defendant Kenneth O. Glass "is a foreigner (who) may, at any time, depart from the Philippines with intent to defraud his creditors including the plaintiff." He merely stated that the defendant Kenneth O. Glass is a foreigner. The pertinent portion of the complaint reads, as follows: 15. Plaintiff hereby avers under oath that defendant is a foreigner and that said defendant has a valid and just obligation to plaintiff in the total sum of P32,290.00 arising out from his failure to pay (i) service charges for the hauling of construction materials; (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed spare parts of said leased unit; hence, a sufficient cause of action exists against saiddefendant. Plaintiff also avers under oath that there is no sufficient security for his claim against the defendantin the event a judgment be rendered in favor of the plaintiff. however, defendant has sufficient assets in the Philippines in the form of collectible and payables due from the Philippine Geothermal, Inc. with office address at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be disposed of by defendants and would render ineffectual the reliefs prayed for by plaintiff in this Complaint. 11 In his Amended Complaint, Pinzon alleged the following: 15. Plaintiff hereby avers under oath that defendant GLASS is an American citizen who controls most, if not all, the affairs of defendant CORPORATION. Defendants CORPORATION and GLASS have a valid and just obligation to plaintiff in the total sum of P32,290.00 arising out for their failure to pay (i) service charges for hauling of construction materials, (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed spare parts of said leased unit: hence, a sufficient cause of action exist against saiddefendants. Plaintiff also avers under oath that there is no sufficient security for his claim against thedefendants in the event a judgment be rendered in favor of the plaintiff. however, defendant CORPORATION has sufficient assets in the Philippines in the form of collectibles and payables due from the Philippine Geothermal., Inc. with office address at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be disposed of by defendants and would render ineffectual the reliefs prayed for by plaintiff in this Complaint. 12 There being no showing, much less an allegation, that the defendants are about to depart from the Philippines with intent to defraud their creditor, or that they are nonresident aliens, the attachment of their properties is not justified.

Second, the affidavit submitted by Pinzon does not comply with the Rules. Under the Rules, an affidavit for attachment must state that (a) sufficient cause of action exists, (b) the case is one of those mentioned in Section I (a) of Rule 57; (c) there is no other sufficient security 'or the claim sought to be enforced by the action, and (d) the amount due to the applicant for attachment 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. Section 3, Rule 57 of the Revised Rules of Court reads. as follows: Section 3. Affidavit and bond required. An order of attachment shall be granted only when it is made to appear by the affidavit of the applicant, or of some person who personally knows the facts, that a sufficient cause of action exists that the case is one of those mentioned in Section 1 hereof; that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the applicant, or the value of the property the possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The affidavit, and the bond required by the next succeeding section, must be duly filed with the clerk or judge of the court before the order issues. In his affidavit, Pinzon stated the following: I, ANTONIO D. PINZON Filipino, of legal age, married and with residence and postal address at 1422 A. Mabini Street, Ermita, Manila, subscribing under oath, depose and states that. 1. On October 6,1977,I filed with the Court of First Instance of Rizal, Pasay City Branch, a case against Kenneth O. Glass entitled 'ANTONIO D. PINZON vs. KENNETH O. GLASS', docketed as Civil Case No. 5902-P; 2. My Complaint against Kenneth O. Glass is based on several causes of action, namely: (i) On February 15, 1977, we mutually agreed that I undertake to haul his construction materials from Manila to his construction project in Bulalo, Bay, Laguna and vice-versa, for a consideration of P50.00 per hour; (ii) Also, on June 18, 1977, we entered into a separate agreement whereby my Isuzu cargo truck will be leased to him for a consideration of P4,000.00 a month payable on the 15th day of each month; (iii) On September 7, 1977, after making use of my Isuzu truck, he surrendered the same without paying the monthly rentals for the leased Isuzu truck and the peso equivalent of the spare parts that were either destroyed or misappropriated by him; 3. As of today, October 11, 1977, Mr. Kenneth 0. Glass still owes me the total sum of P32,290.00 representing his obligation arising from the hauling of his construction materials, monthly rentals for the lease Isuzu truck and the peso equivalent of the spare parts that were

either destroyed or misappropriated by him; 4. I am executing this Affidavit to attest to the truthfulness of the foregoing and in compliance with the provisions of Rule 57 of the Revised Rules of Court. 13 While Pinzon may have stated in his affidavit that a sufficient cause of action exists against the defendant Kenneth O. Glass, he did not state therein that "the case is one of those mentioned in Section 1 hereof; 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 is as much as the sum for which the order granted above all legal counter-claims." It has been held that the failure to allege in the affidavit the requisites prescribed for the issuance of a writ of preliminary attachment, renders the writ of preliminary attachment issued against the property of the defendant fatally defective, and the judge issuing it is deemed to have acted in excess of his jurisdiction. 14 Finally, it appears that the petitioner has filed a counterbond in the amount of P37,190.00 to answer for any judgment that may be rendered against the defendant. Upon receipt of the counter-bond the respondent Judge should have discharged the attachment pursuant to Section 12, Rule 57 of the Revised Rules of Court which reads, as follows: Section 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 on his behalf, may upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge of the attachment if a cash deposit is made or a counterbond executed to the attaching creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made, in an amount equal to the value of the property attached as determined by the judge, to secure the payment of any judgment that the attaching creditor may recover in the action. Upon the filing of such counterbond, copy thereof shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance with the provisions of this section the property attached, or the proceeds of any sale thereof, shall be delivered to the party making the deposit or giving the counterbond, or the person appearing on his behalf, the deposit or counter-bond aforesaid standing in the 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 creditor may apply for a new order of attachment. The filing of the counter-bond will serve the purpose of preserving the defendant's property and at the same time give the plaintiff security for any judgment that may be obtained against the defendant. 15 WHEREFORE, the petition is GRANTED and the writ prayed for is issued. The orders issued by the respondent Judge on October 11, 19719, January 26, 1978, and February 3, 1978 in Civil Case No. 5902-P of the Court of

First Instance of Rizal, insofar as they relate to the issuance of the writ of preliminary attachment, should be as they are hereby ANNULLED and SET ASIDE and the respondents are hereby ordered to forthwith release the garnished amount of P37,190.00 to the petitioner. The temporary restraining order, heretofore issued, is hereby lifted and set aside. Costs against the private respondent Antonio D. Pinzon. SO ORDERED.

G.R. No. L-894

July 30, 1947

LUIS F. GENERAL, petitioner, vs. JOSE R. DE VENECIA, Judge of First Instance of Camarines Sur Petition for certiorari to annul the order of the Court of First Instance of Camarines Sur denying the motion to dismiss the complaint, and to vacate the attachment issued, in civil case No. 364 therein entitled, "Ruedas vs. Luis F. General." That complaint was filed on June 4, 1946, to recover the value of a promissory note, worded as follows: For value received, I promise to pay Mr. Gregorio Ruedas the amount of four thousand pesos (P4,000), in Philippine currency within six (6) months after peace has been declared and government established in the Philippines. Naga, Camarines Sur, September 25, 1944. (Sgd.) LUIS F. GENERAL It prayed additionally for preliminary attachment of defendant's property, upon the allegation that the latter was about to dispose of his assets to defraud creditors. Two days later, the writ of attachment was issued upon the filing of a suitable bond. Having been served with summons, the defendant therein, Luis F. General, submitted, on June 11, 1946, a motion praying for dismissal of the complaint and dissolution of the attachment. He claimed it was premature, in view of the provisions of the debt moratorium orders of the President of the Philippines (Executive Orders Nos. 25 and 32 of 1945). Denial of this motion and of the subsequent plea for reconsideration, prompted the institution of this special civil action, which we find to be meritorious, for the reason that the attachment was improvidently permitted, the debt being within the terms of the decree of moratorium (Executive Order No. 32). It is our view that, upon objection by the debtor, no court may now proceed to hear a complaint that seeks to compel payment of a monetary obligation coming within the purview of the moratorium. And the issuance of a writ of attachment upon such complaint may not, of course, be allowed. Such levy is necessarily one step in the enforcement of the obligation, enforcement which, as stated in the order, is suspended temporarily, pending action by the Government. But the case for petitioner is stronger when we reflect that his promise is to pay P4,000 "within six months after peace has been declared." It being a matter of contemporary history that the peace treaty between the United States and Japan has not even been drafted, and that no competent official has formally declared the advent of peace (see Raquiza vs. Bardford, 75 Phil., 50), it is obvious that the six-month period has not begun; and Luis F. General has at present and in June, 1946, no demandable duty to make payment to plaintiffs, independently of the moratorium directive. On the question of validity of the attachment, "the general rule is that, unless the statute expressly so provides, the remedy by attachment is not available in respect to a demand which is not due and payable, and if an attachment is issued upon such a demand without statutory authority it is void." (7 C.J.S., p. 204.) It must be observed that under our rules governing the matter the person seeking a preliminary attachment must

show that "a sufficient cause of action exists" and that the amount due him is as much as the sum for which the order of attachment is granted" (sec. 3, Rule 59). Inasmuch as the commitment of Luis F. General has not as yet become demandable, there existed no cause of action against him, and the complaint should have been dismissed and the attachment lifted. (Orbeta vs. Sotto, 58 Phil., 505.) And although it is the general principle that certiorari is not available to correct judicial errors that could be straightened out in an appeal, we have adopted the course that where an attachment has been wrongly levied the writ may be applied for, because the remedy by appeal is either unavailable or inadequate. (Leung Ben vs. O'Brien, 38 Phil., 182; Director of Commerce and Industry vs. Concepcion, 43 Phil., 384; Orbeta vs. Sotto, supra.) Wherefore, the writ of attachment is quashed and the complaint is dismissed. Costs for petitioner. So ordered.

G.R. No. L-67715 July 11, 1986 WILLIAM ALAIN MIAILHE vs. ELAINE M. DE LENCQUESAING This petition is an appeal by certiorari from the Decision of the Intermediate Appellate Court in AC-G.R. SP. No. 01914 which declared null-and void, the Order of the Hon. Judge Felix V. Barbers, issued in Civil Case No. 83-16829, dated April 14, 1983, granting petitioner's application for the issuance of a writ of preliminary attachment and the Order dated September 13, 1983 denying respondent's motion to lift said attachment. The pertinent facts that gave rise to the instant petition are as follows: Petitioner William Alain Miailhe, his sisters Monique Miailhe Sichere, Elaine Miailhe de Lencquesaing and their mother, Madame Victoria D. Miailhe are coowners of several registered real properties located in Metro Manila. By common consent of the said co-owners, petitioner William Alain has been administering said properties since 1960. As Madame Victoria D. Miailhe, her daughter Monique and son William Alain (herein petitioner) failed to secure an out-of court partition thereof due to the unwillingness or opposition of respondent Elaine, they filed in the Court of First Instance of Manila (now Regional Trial Court) an action for Partition, which was docketed as Civil Case No. 105774 and assigned to Branch . . . thereof, presided over by Judge Pedro Ramirez. Among the issues presented in the partition case was the matter of petitioner's account as administrator of the properties sought to be partitioned. But while the said administrator's account was still being examined, respondent Elaine filed a motion praying that the sum of P203,167.36 which allegedly appeared as a cash balance in her favor as of December 31, 1982, be ordered delivered to her by petitioner William Alain. Against the opposition of petitioner and the other co-owners, Judge Pedro Ramirez granted the motion in his Order dated December 19, 1983 which order is now the subject of a certiorari proceeding in the Intermediate Appellate Court under AC-G.R. No. SP03070. Meanwhile however, and more specifically on February 28, 1983, respondent Elaine filed a criminal complaint for estafa against petitioner William Alain, with the office of the City Fiscal of Manila, alleging in her supporting affidavit that on the face of the very account submitted by him as Administrator, he had misappropriated considerable amounts, which should have been turned over to her as her share in the net rentals of the common properties. Two days after filing the complaint, respondent flew back to Paris, the City of her residence. Likewise, a few days after the filing of the criminal complaint, an extensive news item about it appeared prominently in the Bulletin Today, March 4, 1983 issue, stating substantially that Alain Miailhe, a consul of the Philippines in the Republic of France, had been charged with Estafa of several million pesos by his own sister with the office of the City Fiscal of Manila. On April 12, 1983, petitioner Alain filed a verified complaint against respondent Elaine, for Damages in the amount of P2,000,000.00 and attorney's fees of P250,000.00 allegedly sustained by him by reason of the filing by respondent (then defendant) of a criminal complaint for estafa, solely for the purpose of embarrassing petitioner (then plaintiff) and besmirching his honor and reputation as a private person and as an Honorary Consul of the Republic of the Philippine's in the City of Bordeaux, France. Petitioner further charged respondent with having caused the publication in the March 4, 1983 issue of the Bulletin Today, of a libelous news item. In his verified complaint, petitioner prayed for the issuance of a writ of preliminary attachment of the properties of respondent consisting of 1/6 undivided interests in certain real properties in the City of Manila on the ground that "respondent-defendant is a non-resident of the Philippines", pursuant to paragraph (f), Section 1, Rule 57,

in relation to Section 17, Rule 14 of the Revised Rules of Court. This case for Damages was docketed as Civil Case No. 83-16829 of the Regional Trial Court of Manila, Branch XXXIII presided over by the Honorable Felix V. Barbers. On April 14, 1983, Judge Barbers granted petitioner's application for preliminary attachment upon a bond to be filed by petitioner in the amount of P2,000,000.00. Petitioner filed said bond and upon its approval, the Writ of Preliminary Attachment was issued on April 18, 1983 which was served on the Deputy Clerk of Court of Branch XXX before whom the action for Partition was pending. On May 17, 1983, respondent thru counsel filed a motion to lift or dissolve the writ of attachment on the ground that the complaint did not comply with the provisions of Sec. 3 of Rule 57, Rules of Court and that petitioner's claim was for unliquidated damages. The motion to lift attachment having been denied, respondent filed with the Intermediate Appellate Court a special action for certiorari under ACG.R. SP No. 01914 alleging that Judge Barbers had acted with grave abuse of discretion in the premises. On April 4, 1984, the IAC issued its now assailed Decision declaring null and void the aforesaid Writ of preliminary attachment. Petitioner filed a motion for the reconsideration of the Decision but it was denied hence, this present petition which was given due course in the Resolution of this Court dated February 6, 1985. We find the petition meritless. The most important issue raised by petitioner is whether or not the Intermediate Appellate Court erred in construing Section 1 par. (f) Rule 57 of the Rules of Court to be applicable only in case the claim of the plaintiff is for liquidated damages (and therefore not where he seeks to recover unliquidated damages arising from a crime or tort). In its now assailed decision, the IAC stated We find, therefore, and so hold that respondent court had exceeded its jurisdiction in issuing the writ of attachment on a claim based on an action for damages arising from delict and quasi delict the amount of which is uncertain and had not been reduced to judgment just because the defendant is not a resident of the Philippines. Because of the uncertainty of the amount of plaintiff's claim it cannot be said that said claim is over and above all legal counterclaims that defendant may have against plaintiff, one of the indispensable requirements for the issuance of a writ of attachment which should be stated in the affidavit of applicant as required in Sec. 3 of Rule 57 or alleged in the verified complaint of plaintiff. The attachment issued in the case was therefore null and void. We agree. Section 1 of Rule 57 of the Rules of Court provides SEC. 1. Grounds upon which attachment may issue. A plaintiff or any proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: (a) In an action for the recovery of money or damages on a cause of action arising fromcontract, express or implied, 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 detained, 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 officer; (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 concealing or disposing of the property for the taking, detention or conversion of which the action is brought; (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. (emphasis supplied) While it is true that from the aforequoted provision attachment may issue "in an action against a party who resides out of the Philippines, " irrespective of the nature of the action or suit, and while it is also true that in the case of Cu Unjieng, et al vs. Albert, 58 Phil. 495, it was held that "each of the six grounds treated ante is independent of the others," still it is imperative that the amount sought be liquidated. In view of the foregoing, the Decision appealed from is hereby AFFIRMED. SO ORDERED.

G.R. NO. 123638

June 15, 2005

INSULAR SAVINGS BANK, Petitioner, vs. COURT OF APPEALS DECISION 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 petitioners 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 petitioners motion to discharge attachment by counter-bond in Civil Case No. 92-145, while the equally assailed resolution of January 24, 1996 denied petitioners motion for reconsideration. The undisputed facts are summarized in the appellate courts 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 petitioners 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 ofP12,600,000.00. 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, attorneys 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 RTCs 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 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 petitioners 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 [respondents] 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 ofP7,827,500.00; 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 attorneys fees and expenses of litigation in the amount ofP1,000,000.00 with a total amount of P27,237,700.00 (Adlawan vs. 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 respondents 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 ofP12,600,000.00 should, so petitioner argues, be the basis for computing the amount of the counterbond. 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 counterbond. 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 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 creditors principal claim. Else, excessive attachment, which ought to be avoided at all times, shall ensue. As we held in Asuncion vs. 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 applicants 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 applicants bond may be equal to the value of said property, and the amount of the adverse partys deposit or counter-bond may be equal to the applicants bond. The writ of preliminary attachment is issued upon approval of the requisite bond". (Emphasis supplied).1avvphi1.net 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, atP6,000,000.00. 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, respondents 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 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 ofP27,237,700.00, 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 respondents 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 petitioners 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 petitioners 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 petitioners 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.

G.R. No. L-43721

June 15, 1935

ISIDRO TAN (alias TAN LIT), petitioner, vs. FRANCISCO ZANDUETA, Judge, of First Instance of This case is intimately related to the habeas corpus case, G.R. No. 43772 (page 530, post), instituted by the same petitioner against the same respondents, and considered and decided on the same day. The respondent Tiu Chay (alias Tan Kia) sued the petitioner Isidro Tan (alias Tan Lit) in civil case No. 47826 of the Court of First Instance of Manila, to recover from him the amount of P22,500 which he alleged to be the half corresponding to him of the P45,000 which they won as a prize in the last drawing of the sweepstakes with ticket No. 228619 which they purchased with a part of the capital invested in a sari-sari store. Simultaneously with his complaint, said Tiu Chay (alias Tan Kia) asked and obtained from the respondent judge the attachment of the property of the petitioner Isidro Tan (alias Tan Lit) upon filing a bond in the amount of P5,000. Isidro Tan (alias Tan Lit) succeeded in dissolving the attachment by filing, in turn, a counter bond in the same amount as that filed by Tiu Chay (alias Tan Kia) to secure said attachment; and as soon as he obtained the order to that effect and filed the required counter bond on April 20, 1935, he withdrew from the Philippine National Bank his deposit in the amount of P23,500 the greater part of which was attached days before pursuant to the order of the respondent judge dated February 26, 1935. Three days after petitioner's withdrawal of the aforesaid amount from the Philippine National Bank, the respondent Tiu Chay (alias Tan Kia) asked and obtained an order from the respondent judge requiring the petitioner to file an additional counter bond at first P10,000, later P15,000 in lieu of P10,000, and still later P17,000, subsequently reduced to P12,000. When the time given the petitioner by the respondent judge to file said counter bond or to deposit in the Philippine National Bank the amount of P12,000 of the P23,500 which he withdrew therefrom, expired without having done either the one or the other, he was required to appear before the respondent judge and show cause, if any, why he should not be found in contempt of court for disobeying an order given him to that effect. And inasmuch as the explanations given by him were not deemed satisfactory by the respondent judge, the latter declared him guilty of contempt and immediately ordered his confinement, clearly advising him that he would continue so confined until he puts up the said counter bond of P12,000 or deposits the same amount in the bank. From its allegations, we gather that the petitioner of Isidro Tan (alias Tan Lit) is based upon the following grounds: (1) That the writ of preliminary attachment issued by the respondent judge at the instance of Tiu Chay ( alias Tan Kia) was irregular and illegal, and (2) that the order of the respondent judge directed the confinement of the petitioner until he complies with the order requiring him to file a counter bond in the amount of P12,000 or to deposit the identical amount in the bank, is likewise illegal because it is a sequel to another, also illegal, which directed the attachment of his property. As to the first ground, we find that the writ of preliminary attachment was issued in strict conformity to the law, because the complaint wherein the said attachment was issued alleged that the petitioner, after collecting the prize of a ticket in the last sweepstakes, consisting of the amount of P50,000, belonging to the two, that is the petitioner and the respondent Tiu Chay (alias Tan Kia), appropriated the entire prize exclusively for himself, in complete disregard of said Tiu Chay (alias Tan Kia), knowing that one-half thereof did not belong to him to said

respondent; that he was merely a depository or agent of the latter as to said half, and that the petitioner acted in the manner stated notwithstanding the fact that he was required to turn over to the respondent the part of the prize won corresponding to the latter. The allegations to this effect are found in paragraphs 6, 7, 8, and 9 of the complaint of said Tiu Chay (aliasTan Kia). Petitioner's contention that, in view of his motion to dissolve the writ of preliminary attachment, on the ground that the allegations of the complaint of the respondent Tiu Chay (alias Tan Kia) were not true, said attachment should have been dissolved without any condition, is without force, because the respondent judge had discretionary power, according to section 441 of Act No. 190, to dissolve or to leave in force the said attachment, and it was precisely in the exercise of this power, after hearing the parties, as may be deduced from the orders issued and now of record, that he decided to dissolve the attachment but conditioned on petitioner's filing a counter bond for P5,000; and this was voluntarily done by the petitioner, thereby enabling him to withdraw, as in fact he did withdraw, the amount he had on deposit in the Philippine National Bank which was a part of the money won in the last sweepstakes. On this sole ground, therefore, the writ of certiorari will not lie. As to the second ground we understand that the adequate remedy is not certiorari but habeas corpus, and the petitioner himself, learning of this afterwards, instituted motu proprio a habeas corpus proceeding herein mentioned in the beginning. In view of the facts and considerations above set forth, we are of the opinion, and so hold, that the proceeding instituted is without merit, especially after the habeas corpus commenced by the same petitioner has been favorably acted upon, without special finding as to the costs. So ordered.

G.R. No. L-23237

November 14, 1925

WALTER E. OLSEN & CO., plaintiff-appellee, vs. WALTER E. OLSEN, defendant-appellant. This is an appeal taken by the defendant from a judgment of the Court of First Instance of Manila, sentencing him to pay plaintiff corporation the sum of P66,207.62 with legal interest thereon at the rate of 6 per cent per annum from February 1, 1923, the date of the filing of the complaint, until full payment and the costs, and dismissing the crosscomplaint and counterclaim set up by him. As ground of his appeal, the defendant assigns four errors as committed by the trial court, to wit: (1) The holding that the defendant-appellant contracted fraudulently the debt which the plaintiff-appellee seeks to recover in its complaint; (2) its failure to set aside the writ of preliminary attachment issued by it ex parte; (3) the fact of it not having absolved the defendant from the complaint of the plaintiff corporation and of not having given judgment for the defendant and against the plaintiff for the amount of his counterclaim, after deducing the debt due from him to the plaintiff corporation in the sum of P66,207.62; and (4) its action in denying the motion for new trial of the defendant. As the first two supposed errors are intimately connected with each other, we will discuss them jointly. The first question that arises is whether or not an order denying a motion for the annulment of a preliminary attachment may be reviewed through an appeal. The preliminary attachment is an auxiliary remedy the granting of which lies within the sound discretion of the judge taking cognizance of the principal case upon whose existence it depends. The order of the judge denying a motion for the annulment of a writ of preliminary attachment, being of an incidental or interlocutory and auxiliary character, cannot be the subject of an appeal independently from the principal case, because our procedural law now in force authorizes an appeal only from a final judgement which gives an end to the litigation. (Section 143, Act No. 190: 3 C. J., 549 par. 389.) This lack of ordinary remedy through an appeal does not mean, however, that any excess a lower court may commit in the exercise of its jurisdiction is without remedy; because there are the especial remedies, such as certiorari, for the purpose. (Leung Ben vs. O'Brien, 38 Phil., 182.) While it is true that an order denying a motion for the annulment of a preliminary attachment is not subject to review through an appeal independently from the principal case, it not consisting a final order, yet when the writ of preliminary attachment becomes final by virtue of a final judgment rendered in the principal case, said writ is subject to review jointly with the judgment rendered in the principal case through an ordinary appeal. The appellate court has the power to revoke or confirm said order, in like manner as a judgment on the merits; because it is a ruling to which an exception may be taken, and therefore is subject to review in an appeal by bill of exceptions. (Secs. 141-143, Act No. 190.) The fact that section 441 of the Code of Civil Procedure does not provide any remedy against the granting or denial of a motion for the annulment of a writ of preliminary attachment, except in case of excess of jurisdiction, does not confer upon said order a final and irrevocable character, taking it out from the general provisions as to appeal and review, for a special provision is necessary for that purpose. Having arrived at the conclusion that an order denying a motion for the annulment of a preliminary attachment may be reviewed in an appeal taken from a final judgment rendered in the principal case, in which said order was entered as an auxiliary remedy, we will now turn

to consider the question whether or not the trial court committed error in denying the motion for the annulment of the preliminary attachment levied upon the property of the defendant-appellant. It is admitted by the defendant-appellant that he is indebted to the plaintiff-appellee corporation in the sum of P66,207.62, but denies that he has contracted said debt fraudulently. The evidence shows that the defendant-appellant was president-treasurer and general manager of the plaintiff-appellee corporation and exercised direct and almost exclusive supervision over its function, funds and books of account until about the month of August, 1921. During that time he has been taking money of the corporation without being duly authorized to do so either by the board of directors or by the by-laws, the money taken by him having amounted to the considerable sum of P66,207.62. Of this sum, P19,000 was invested in the purchase of the house and lot now under attachment in this case, and P50,000 in the purchase of 500 shares of stock of Prising at the price of P100 per share for himself and Marker. A few days afterwards he began to sell the ordinary shares of the corporation for P430 each. The defendant-appellant attempted to justify his conduct, alleging that the withdrawal of the funds of the corporation for his personal use was made in his current account with said corporation, in whose treasury he deposited his own money and the certificates of title of his shares, as well as of his estate, and that at the first meeting of the stockholders, which took place on February 1, 1919, a statement of his account with a debit balance was submitted and approved. Having, as he had, absolute and almost exclusive control over the function of the corporation and its funds by virtue of his triple capacity as president, treasurer and general manager, the defendant-appellant should have been more scrupulous in the application of the funds of said corporation to his own use. As a trustee of said corporation, it was his duty to see by all legal means possible that the interests of the stockholders were protected, and should not abuse the extraordinary opportunity which his triple position offered him to dispose of the funds of the corporation. Ordinary delicacy required that in the disposition of the funds of the corporation for his personal use, he should be very careful, so as to do it in such a way as would be compatible with the interest of the stockholders and his fiduciary character. And let it not also be said that he did every thing openly and with the security of his shares of stock, because as he could dispose of the funds of the corporation so he could dispose of his won shares and with greater freedom. And let it not also be said that other officers of the corporation, such as the vicepresident, the secretary and other chiefs and employees, were doing the same thing, because that does not show but that his bad example had spread among his subordinates and all believed themselves with the same right as their chief to dispose of the funds of the corporation for their personal use, although it were merely by way of loan, without any security of whatever kind of course. The approval of his account at the first meeting of the stockholders cannot be considered as a justification of his conduct, nor does it remove every suspicion of bad faith, because the corporation was constituted exclusively by the defendant-appellant himself and his cospeculator, Marker, and nothing else could be expected from it. As to the debt he owed to the corporation, Walter E. Olsen was in effect a lender and a borrower at the same time. The conduct of the defendant-appellant in connection with the funds of the corporation he represented was more than an irregularity; and while it is not sufficiently serious to constitute a criminal fraud, it is undoubtedly a fraud of a civil character, because it is an abuse of confidence to the damage of the corporation and its stockholders, and constitutes one of the grounds enumerated in section 424, in connection with section 412, of the Code of Civil Procedure for the issuance of a preliminary attachment, and the order of the Court of First Instance of Manila,

denying the motion for the annulment of the injunction in question, is in accordance with law. lawph!1.net As to the counterclaim set up by the defendantappellant, we have nothing to add to the considerations of the trial court which we make ours. For the foregoing, and no error having been found in the judgment appealed from, the same is hereby affirmed, with the costs against the defendant-appellant. So ordered.

G.R. No. L-31163

November 6, 1929

accordingly issued, and the defendant's property, including the 924 cavans and 31 kilos of palay found by the sheriff in his warehouse, were attached. It will be seen that the action brought by Pablo Tiongson against Jose C. Bernabe is that provided in section 262 of the Code of Civil Procedure for the delivery of personal property. Although it is true that the plaintiff and his attorney did not follow strictly the procedure provided in said section for claiming the delivery of said personal property nevertheless, the procedure followed by him may be construed as equivalent thereto, considering the provisions of section 2 of the Code of Civil Procedure of the effect that "the provisions of this Code, and the proceedings under it, shall be liberally construed, in order to promote its object and assist the parties in obtaining speedy justice." Liberally construing, therefore, the above cited provisions of section 262 of the Code of Civil Procedure, the writ of attachment applied for by Pablo Tiongson against the property of Jose C. Bernabe may be construed as a claim for the delivery of the sacks of palay deposited by the former with the latter. The 778 cavans and 38 kilos of palay belonging to the plaintiff Urbano Santos, having been mixed with the 1,026 cavans and 9 kilos of palay belonging to the defendant Pablo Tiongson in Jose C. Bernabe's warehouse; the sheriff having found only 924 cavans and 31 1/2 kilos of palay in said warehouse at the time of the attachment thereof; and there being no means of separating form said 924 cavans and 31 1/2 of palay belonging to Urbano Santos and those belonging to Pablo Tiongson, the following rule prescribed in article 381 of the Civil Code for cases of this nature, is applicable: Art. 381. If, by the will of their owners, two things of identical or dissimilar nature are mixed, or if the mixture occurs accidentally, if in the latter case the things cannot be separated without injury, each owner shall acquire a right in the mixture proportionate to the part belonging to him, according to the value of the things mixed or commingled. The number of kilos in a cavan not having been determined, we will take the proportion only of the 924 cavans of palay which were attached and sold, thereby giving Urbano Santos, who deposited 778 cavans, 398.49 thereof, and Pablo Tiongson, who deposited 1,026 cavans, 525.51, or the value thereof at the rate of P3 per cavan. Wherefore, the judgment appealed from is hereby modified, and Pablo Tiongson is hereby ordered to pay the plaintiff Urbano Santos the value of 398.49 cavans of palay at the rate of P3 a cavan, without special pronouncement as to costs. So ordered.

URBANO SANTOS, plaintiff-appellee, vs. JOSE C. BERNABE, ET AL.,. This appeal was taken by the defendants Pablo Tiongson and the Provincial Sheriff of Bulacan from the judgment of the Court of First of said province, wherein said defendant Pablo Tiongson was ordered to pay the plaintiff Urbano Santos the value of 778 cavans and 38 kilos of palay, at the rate of P3 per cavan, without special pronouncement as to costs. In support of their appeal, the appellants assign the following alleged errors committed by the lower court in its judgment, to wit: 1. The court erred in holding that it has been proved that in the cavans of palay attached by the herein defendant Pablo Tiongson from the defendant Jose C. Bernabe were included those claimed by the plaintiff in this cause. 2. The court erred in ordering the defendant Pablo Tiongson to pay the plaintiff the value of 778 cavans and 38 kilos of palay, the refund of which is claimed by said plaintiff. 3. The court erred in denying the defendants' motion for a new trial.1awphil.net The following facts were conclusively proved at the trial: On March 20, 1928, there were deposited in Jose C. Bernabe's warehouse by the plaintiff Urbano Santos 778 cavans and 38 kilos of palay and by Pablo Tiongson 1,026 cavans and 9 kilos of the same grain. On said date, March 20, 1928, Pablo Tiongson filed with the Court of First Instance of Bulacan a complaint against Jose C. Bernabe, to recover from the latter the 1,026 cavans and 9 kilos of palay deposited in the defendant's warehouse. At the same time, the application of Pablo Tiongson for a writ of attachment was granted, and the attachable property of Jose C. Bernabe, including 924 cavans and 31 1/2 kilos of palay found by the sheriff in his warehouse, were attached, sold at public auction, and the proceeds thereof delivered to said defendant Pablo Tiongson, who obtained judgment in said case. The herein plaintiff, Urbano Santos, intervened in the attachment of the palay, but upon Pablo Tiongson's filing the proper bond, the sheriff proceeded with the attachment, giving rise to the present complaint. It does not appear that the sacks of palay of Urbano Santos and those of Pablo Tiongson, deposited in Jose C. Bernabe's warehouse, bore any marks or signs, nor were they separated one from the other. The plaintiff-appellee Urbano Santos contends that Pablo Tiongson cannot claim the 924 cavans and 31 kilos of palay attached by the defendant sheriff as part of those deposited by him in Jose C. Bernabe's warehouse, because, in asking for the attachment thereof, he impliedly acknowledged that the same belonged to Jose C. Bernabe and not to him. In the complaint filed by Pablo Tiongson against Jose C. Bernabe, civil case No. 3665 of the Court of First Instance of Bulacan, it is alleged that said plaintiff deposited in the defendant's warehouse 1,026 cavans and 9 kilos of palay, the return of which, or the value thereof, at the rate of P3 per cavan was claimed therein. Upon filing said complaint, the plaintiff applied for a preliminary writ of attachment of the defendant's property, which was

G.R. No. 82446 July 29, 1988 STATE INVESTMENT HOUSE, INC., petitioner, vs. HON. COURT OF APPEALS The issue posed by the petition in this case is whether the trial court (whom the Court of Appeals sustained) gravely abused its discretion in lifting the preliminary attachment on the private respondents' properties. On September 30 and October 31,1977, Pedro 0. Valdez and Rudy H. Sales executed two Comprehensive Surety Agreements to secure any and all loans of P.O. Valdez, Inc. not exceeding the sums of P500,000 (Annex C) and P4,934,000 (Annex D) from the petitioner State Investment House, Inc., a domestic corporation engaged in quasi banking. Four years later, on July 30, 1981, petitioner and P.O. Valdez, Inc. entered into an agreement for discounting with the petitioner the receivables of P.O. Valdez, Inc. (Annex E). The other details of the transactions between the petitioner and P.O. Valdez, Inc. are recited in the decision of the Court of Appeals as follows: At the time the basic loan agreement (which is the Agreement dated July 30, 1981) was entered into, respondent P.O. Valdez, Inc. was required to provide collateral security for the loan. And pursuant thereto, private respondents turned over to the petitioner various certificates of stock of several corporations such as CDCP-Mining, Northern Lines, Inc., Oriental Petroleum and others. In addition, private respondents executed a Real Estate Mortgage in favor of the petitioner covering two (2) parcels of land located outside Baguio City. Later, private respondents were also made to execute a Deed of Sale dated December 29, 1982 covering the proceeds of a postdated check for P4,066,410.20, another Deed of Sale dated January 4, 1983, covering the proceeds as a postdated check for P197,010.31 and a Deed of Assignment dated January 4, 1983, covering P.O. Valdez, Inc.'s construction receivables from the Development Academy of the Philippines to the extent of P100,000.00. (p. 34, Rollo.) When Pedro Valdez' two checks were deposited by the petitioner upon maturity, they bounced for insufficient funds. Despite demands, respondent corporation failed to pay its obligations to petitioner amounting to P6,342,855.70 as of April 11, 1985. Petitioner foreclosed its real estate mortgage on the two lots in Benguet of Pedro and Remedios Valdez on April 11, 1985 and acquired them as the highest bidder in the foreclosure sale. Presumably because the proceeds of the foreclosure were insufficient to satisfy the debt, petitioner also filed a collection suit, with a prayer for preliminary attachment. It was docketed in the Regional Trial Court of Manila as Civil Case No. 8533050 entitled "STATE INVESTMENT HOUSE, INC. vs. P.O. VALDEZ, INC., PEDRO 0. VALDEZ and RUDY H. SALES." On November 5, 1985, the court, through Judge (now CA Justice) Antonio Martinez, issued a writ of preliminary attachment against the defendants' properties (Annex J). Pursuant thereto, certain real and personal properties of the defendants were attached. Tropical Homes, Inc. filed a third-party claim to certain properties titled in the name of Pedro Valdez. As the sheriff failed to act on the third-party claim, the claimant

filed on March 26, 1986, a motion to lift the attachment on those properties. It was opposed by the petitioner. On May 22, 1 986, respondent Judge Doroteo N. Caneba (who succeeded Justice Martinez) denied the motion. In the meantime, the defendants filed their answer to the complaint. They admitted that they obtained loans from the petitioner to finance their construction projects, namely, the DAP Building in Pasig, the National Engineering Building in the U.P. Campus, and the UP Hostel for Economics, also in U.P. Diliman, Quezon City. On June 24, 1986, P.O. Valdez, Inc. and Pedro Valdez filed a motion to discharge the attachment on the ground that there was no fraud in contracting the loans, and if any fraud existed, it was in the performance of the obligations. The motion was opposed by the petitioner. It was denied by the lower court on November 19, 1986. Valdez filed a motion for reconsideration. The petitioner opposed it. Nevertheless, Judge Caeba granted the motion for reconsideration and discharged the preliminary attachment on the properties of Pedro O. Valdez and Remedios Valdez on the ground that their conjugal properties may not be attached to answer for the debts of the corporation which has a juridical personality distinct from its incorporators. It held that "neither P.O. Valdez, Inc. and (sic) Pedro O. Valdez can be faulted nor could they be charged of incurring fraudulent acts in obtaining the loan agreement." (Annex K). It was the petitioner's turn to file a motion for reconsideration, but without success (Annex L). Petitioner went to the Court of Appeals on a petition for certiorari and prohibition alleging grave abuse of discretion on the part of the lower court in lifting the writ of preliminary attachment on the properties of the Valdez spouses (Annex K). The Court of Appeals dismissed the petition on January 28, 1988 (Annex A). It affirmed the lower court's finding that there was no fraud in contracting the debt. It observed that: 1. With respect to the shares of stock which the respondents pledged as additional security for the loan, the decline in their value did not mean that the private respondents entered into the loan transaction in bad faith or with fraudulent intent. For the private respondents could not have foreseen how the stocks would fare in the market. And if the petitioner thought they were worthless at the time, it should have rejected them as collateral. 2. With respect to the two parcels of land which were mortgaged to the petitioner, the latter should also have declined to accept them as collateral if it believed they were worth less than their supposed value. 3. With respect to the two postdated checks which bounced, the Court of Appeals observed that since they were "sold" to the petitioner after the loan had been granted to private respondents, their issuance did not fraudulently induce the petitioner to grant the loan applied for. They were "mere evidence of the private respondents" standing loan obligation to the petitioner" or "mere collaterals for the loan granted by the petitioner to the private respondents" (Annex A). These factual conclusions of the Court of Appeals are binding on US (Bernardo vs. Bernardo, 101 SCRA 351). Furthermore, We have examined the grounds enumerated in the petitioner's prayer for a writ of preliminary attachment, as reproduced in the decision of the Court of Appeals, the petitioner having failed to submit a copy of its complaint as an annex of its petition for certiorari. The main thrust of the prayer for preliminary attachment is the alleged misrepresentation of the debtor P.O. Valdez, Inc., in the Agreement for Discounting Receivables and in the deeds of sale of said receivables. (Annexes E, F, and G);

that the two checks or receivables" issued by Pedro Valdez were payment for "actual sales of its merchandise and/or personalities made to its customers or otherwise arising from its other legitimate business transactions" (par. a) and "that the receivables . . . were genuine, valid and subsisting and represent bona fide sales of merchandise and/or personalities made in the ordinary course of business" (par. c). It can hardly be doubted that those representations in petitioner's printed deeds of sale were false. But false though they were, the petitioners cannot claim to have been deceived or deluded by them because it knew, or should have known , that the issuer of the checks, Pedro O. Valdez, was not a "buyer" of the "merchandise and personalities made in the ordinary course of business" by P.O. Valdez, Inc. of which he was the president. Since the petitioner failed to prove during the hearing of private respondents' motion to lift the preliminary writ of attachment, that P.O. Valdez, Inc. received from it independent consideration for the "sale" of Pedro Valdez' checks to it, apart from the loans previously extended to the corporations, We are constrained to affirm the finding of the court of Appeals that Valdez's checks are "mere evidence of the outstanding obligation of P.O. Valdez, Inc. to the petitioner." The petition was not defrauded by their issuance for the loans had been contracted and released to P.O. Valdez, Inc. long before the checks were issued. WHEREFORE, the petition for certiorari is denied for lack of merit. SO ORDERED.

G.R. No. L-35990 June 17, 1981 ABOITIZ & COMPANY, vs. COTABATO BUS COMPANY, INC., respondent. The instant petition stemmed from Civil Case No. 7329 of the Court of First Instance of Davao (Branch 1) in which a writ of preliminary attachment was issued ex-parte by the Court on the strength of an affidavit of merit attached to the verified complaint filed by petitioner herein, Aboitiz & Co., Inc., on November 2, 1971, as plaintiff in said case, for the collection of money in the sum of P 155,739.41, which defendant therein, the respondent in the instant case, Cotabato Bus Co., owed the said petitioner. By virtue of the writ of preliminary attachment, the provincial sheriff attached personal properties of the defendant bus company consisting of some buses, machinery and equipment. The ground for the issuance of the writ is, as alleged in the complaint and the affidavit of merit executed by the Assistant Manager of petitioner, that the defendant "has removed or disposed of its properties or assets, or is about to do so, with intent to defraud its creditors." Respondent company filed in the lower court an "Urgent Motion to Dissolve or Quash Writ of Attachment" to which was attached an affidavit executed by its Assistant Manager, Baldovino Lagbao, alleging among other things that "the Cotabato Bus Company has not been selling or disposing of its properties, neither does it intend to do so, much less to defraud its creditors; that also the Cotabato Bus Company, Inc. has been acquiring and buying more assets". An opposition and a supplemental opposition were filed to the urgent motion. The lower court denied the motion stating in its Order that "the testimony of Baldovino Lagbao, witness for the defendant, corroborates the facts in the plaintiff's affidavit instead of disproving or showing them to be untrue." A motion for reconsideration was filed by the defendant bus company but the lower court denied it. Hence, the defendant went to the Court of Appeals on a petition for certiorari alleging grave abuse of discretion on the part of herein respondent Judge, Hon. Vicente R. Cusi Jr. On giving due course to the petition, the Court of Appeals issued a restraining order restraining the trial court from enforcing further the writ of attachment and from proceeding with the hearing of Civil Case No. 7329. In its decision promulgated on October 3, 1971, the Court of Appeals declared "null and void the order/writ of attachment dated November 3, 1971 and the orders of December 2, 1971, as well as that of December 11, 1971, ordered the release of the attached properties, and made the restraining order originally issued permanent. The present recourse is an appeal by certiorari from the decision of the Court of Appeals reversing the assailed orders of the Court of First Instance of Davao, (Branch I), petitioner assigning against the lower court the following errors: ERROR I THE COURT OF APPEALS ERRED IN HASTILY AND PERFUNCTORILY RENDERING, ON OCTOBER 3, 1971, A DECISION WITHOUT CONSIDERING MOST OF THE EVIDENCE SUCH THAT l) EVEN AN IMPORTANT FACT, ESTABLISHED BY DOCUMENTARY EVIDENCE AND NOT DENIED BY RESPONDENT, IS MENTIONED ONLY AS A "CLAIM" OF PETITIONER COMPANY; 2) THE DECISION CONTAINS NO DISCUSSION AND APPRECIATION OF THE FACTS AS PROVED, ASSEMBLED AND PRESENTED BY PETITIONER COMPANY SHOWING IN THEIR TOTALITY THAT

RESPONDENT HAS REMOVED, DIVERTED OR DISPOSED OF ITS BANK DEPOSITS, INCOME AND OTHER LIQUID ASSETS WITH INTENT TO DEFRAUD ITS CREDITORS, ESPECIALLY ITS UNSECURED SUPPLIERS; 3) THE DECISION IGNORES THE SIGNIFICANCE OF THE REFUSAL OF RESPONDENT TO PERMIT, UNDER REP. ACT NO. 1405, THE METROPOLITAN BANK & TRUST CO. TO BRING, IN COMPLIANCE WITH A subpoena DUCES TECUM TO THE TRIAL COURT ALL THE RECORDS OF RESPONDENT'S DEPOSITS AND WITHDRAWALS UNDER ITS CURRENT AND SAVINGS ACCOUNTS (NOW NIL) FOR EXAMINATION BY PETITIONER COMPANY FOR THE PURPOSE OF SHOWING DIRECTLY THE REMOVAL, DIVERSION OR DISPOSAL OF RESPONDENT'S DEPOSITS AND INCOME WITH INTENT TO DEFRAUD ITS CREDITORS. ERROR II THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE FACTS THAT RESPONDENT'S BANK DEPOSITS ARE NIL AS PROOF WHICH TOGETHER WITH RESPONDENT'S ADMISSION OF AN INCOME OF FROM P10,000.00 to P 14,000.00 A DAY AND THE EVIDENCE THAT IT CANNOT PRODUCE P 634.00 WITHOUT USING A PERSONAL CHECK OF ITS PRESIDENT AND MAJORITY STOCKHOLDER, AND OTHER EVIDENCE SHOWS THE REMOVAL OR CHANNELING OF ITS INCOME TO THE LATTER. ERROR III THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE RESCUE AND REMOVAL BY RESPONDENT OF FIVE ATTACHED BUSES, DURING THE DEPENDENCY OF ITS MOTION TO DISSOLVE THE ATTACHMENT IN THE, TRIAL COURT, AS A FURTHER ACT OF REMOVAL OF PROPERTIES BY RESPONDENT WITH INTENT TO DEFRAUD PETITIONER COMPANY, FOR WHOSE BENEFIT SAID BUSES HAD BEEN ATTACHED. The questions raised are mainly, if not solely, factual revolving on whether respondent bus company has in fact removed its properties, or is about to do so, in fraud of its creditors. This being so, the findings of the Court of Appeals on said issues of facts are generally considered conclusive and final, and should no longer be disturbed. However, We gave due course to the petition because it raises also a legal question of whether the writ of attachment was properly issued upon a showing that defendant is on the verge of insolvency and may no longer satisfy its just debts without issuing the writ. This may be inferred from the emphasis laid by petitioner on the fact that even for the measly amount of P 634.00 payment thereof was made with a personal check of the respondent company's president and majority stockholder, and its debts to several creditors, including secured ones like the DBP, have remained unpaid, despite its supposed daily income of an average of P 12,000.00, as declared by its assistant manager, Baldovino Lagbao. 1 Going forthwith to this question of whether insolvency, which petitioners in effect claims to have been proven by the evidence, particularly by company's bank account which has been reduced to nil, may be a ground for the issuance of a writ of attachment, the respondent Court of Appeals correctly took its position in the negative on the strength of the explicit ruling of this Court in Max Chamorro & Co. vs. Philippine Ready Mix Concrete Company, Inc. and Hon. Manuel P. Barcelona. 2 Petitioner, however, disclaims any intention of advancing the theory that insolvency is a ground for the issuance of a writ of attachment , 3 and insists that its evidence -is intended to prove his assertion that respondent company has disposed, or is about to dispose, of its properties, in

fraud of its creditors. Aside from the reference petitioner had made to respondent company's "nil" bank account, as if to show removal of company's funds, petitioner also cited the alleged non-payment of its other creditors, including secured creditors like the DBP to which all its buses have been mortgaged, despite its daily income averaging P12,000.00, and the rescue and removal of five attached buses. It is an undisputed fact that, as averred by petitioner itself, the several buses attached are nearly junks. However, upon permission by the sheriff, five of them were repaired, but they were substituted with five buses which were also in the same condition as the five repaired ones before the repair. This cannot be the removal intended as ground for the issuance of a writ of attachment under section 1 (e), Rule 57, of the Rules of Court. The repair of the five buses was evidently motivated by a desire to serve the interest of the riding public, clearly not to defraud its creditors, as there is no showing that they were not put on the run after their repairs, as was the obvious purpose of their substitution to be placed in running condition. Moreover, as the buses were mortgaged to the DBP, their removal or disposal as alleged by petitioner to provide the basis for its prayer for the issuance of a writ of attachment should be very remote, if not nil. If removal of the buses had in fact been committed, which seems to exist only in petitioner's apprehensive imagination, the DBP should not have failed to take proper court action, both civil and criminal, which apparently has not been done. The dwindling of respondent's bank account despite its daily income of from P10,000.00 to P14,000.00 is easily explained by its having to meet heavy operating expenses, which include salaries and wages of employees and workers. If, indeed the income of the company were sufficiently profitable, it should not allow its buses to fall into disuse by lack of repairs. It should also maintain a good credit standing with its suppliers of equipment, and other needs of the company to keep its business a going concern. Petitioner is only one of the suppliers. It is, indeed, extremely hard to remove the buses, machinery and other equipments which respondent company have to own and keep to be able to engage and continue in the operation of its transportation business. The sale or other form of disposition of any of this kind of property is not difficult of detection or discovery, and strangely, petitioner, has adduced no proof of any sale or transfer of any of them, which should have been easily obtainable. In the main, therefore, We find that the respondent Court of Appeals has not committed any reversible error, much less grave abuse of discretion, except that the restraining order issued by it should not have included restraining the trial court from hearing the case, altogether. Accordingly, the instant petition is hereby denied, but the trial court is hereby ordered to immediately proceed with the hearing of Civil Case No. 7329 and decide it in accordance with the law and the evidence. No special pronouncement as to costs. SO ORDERED.

G.R. No. L-29280 August 11, 1988 PEOPLE'S BANK AND TRUST COMPANY, plaintiffappellee, vs. SYVEL'S INCORPORATED, This is an appeal from the decision dated May 16, 1968 rendered by the Court of First Instance of Manila, Branch XII in Civil Case No. 68095, the decretal portion of which states: IN VIEW OF THE FOREGOING, judgment is rendered sentencing all the defendants to pay the plaintiff jointly and severally the sum of P601,633.01 with interest thereon at the rate of 11% per annum from June 17, 1967, until the whole amount is paid, plus 10% of the total amount due for attorney's fees and the costs of suit. Should the defendants fail to pay the same to the plaintiff, then it is ordered that all the effects, materials and stocks covered by the chattel mortgages be sold at public auction in conformity with the Provisions of Sec. 14 of the Chattel Mortgage Law, and the proceeds thereof applied to satisfy the judgment herein rendered. The counterclaim of the defendants, upon the evidence presented and in the light of the authorities above cited, is dismissed for lack of merit. SO ORDERED (pp. 89-90, Record on Appeal; p. 15, Rollo) The facts of the case based on the statement of facts, made by the trial court in its decision as cited in the briefs of both parties are as follows: This is an action for foreclosure of chattel mortgage executed in favor of the plaintiff by the defendant Syvel's Incorporated on its stocks of goods, personal properties and other materials owned by it and located at its stores or warehouses at No. 406, Escolta, Manila; Nos. 764-766 Rizal Avenue, Manila; Nos. 10-11 Cartimar Avenue, Pasay City; No. 886 Nicanor Reyes, Sr. (formerly Morayta), Manila; as evidenced by Annex"A."The chattel mortgage was duly registered in the corresponding registry of deeds of Manila and Pasay City. The chattel mortgage was in connection with a credit commercial line in the amount of P900,000.00 granted the said defendant corporation, the expiry date of which was May 20, 1966. On May 20, 1965, defendants Antonio V. Syyap and Angel Y. Syyap executed an undertaking in favor of the plaintiff whereby they both agreed to guarantee absolutely and unconditionally and without the benefit of excussion the full and prompt payment of any indebtedness to be incurred on account of the said credit line. Against the credit line granted the defendant Syvel's Incorporated the latter drew advances in the form of promissory notes which are attached to the complaint as Annexes "C" to "l." In view of the failure of the defendant corporation to make payment in accordance with the terms and

conditions agreed upon in the Commercial Credit Agreement the plaintiff started to foreclose extrajudicially the chattel mortgage. However, because of an attempt to have the matter settled, the extra-judicial foreclosure was not pushed thru. As no payment had been paid, this case was even tually filed in this Court. On petition of the plaintiff based on the affidavits executed by Mr. Leopoldo R. Rivera, Assistant Vice President of the plaintiff bank and Atty. Eduardo J. Berenguer on January 12, 1967, to the effect, among others, that the defendants are disposing of their properties with intent to defraud their creditors, particularly the plaintiff herein, a preliminary writ of attachment was issued. As a consequence of the issuance of the writ of attachment, the defendants, in their answer to the complaint set up a compulsory counterclaim for damages. After the filing of this case in this court and during its pendency defendant Antonio v. Syyap proposed to have the case settled amicably and to that end a conference was held in which Mr. Antonio de las Alas, Jr., Vice President of the Bank, plaintiff, defendant Antonio V. Syyap and Atty. Mendoza were present. Mr. Syyap requested that the plaintiff dismiss this case because he did not want to have the goodwill of Syvel's Incorporated impaired, and offered to execute a real estate mortgage on his real property located in Bacoor, Cavite. Mr. De las Alas consented, and so the Real Estate Mortgage, marked as Exhibit A, was executed by the defendant Antonio V. Syyap and his wife Margarita Bengco Syyap on June 22, 1967. In that deed of mortgage, defendant Syyap admitted that as of June 16, 1967, the indebtedness of Syvel's Incorporated was P601,633.01, the breakdown of which is as follows: P568,577.76 as principal and P33,055.25 as interest. Complying with the promise of the plaintiff thru its Vice President to ask for the dismissal of this case, a motion to dismiss this case without prejudice was prepared, Exhibit C, but the defendants did not want to agree if the dismissal would mean also the dismissal of their counterclaim Against the plaintiff. Hence, trial proceeded. As regards the liabilities of the defendants, there is no dispute that a credit line to the maximum amount of P900,000.00 was granted to the defendant corporation on the guaranty of the merchandise or stocks in goods of the said corporation which were covered by chattel mortgage duly registered as required by law. There is likewise no dispute that the defendants Syyap guaranteed absolutely and unconditionally and without the benefit of excussion the full and prompt payment of any indebtedness incurred by the defendant corporation under the credit line granted it by the plaintiff. As of June 16, 1967, its indebtedness was in the total amount of P601,633.01. This was admitted by defendant Antonio V. Syyap in the deed of real estate mortgage executed by him. No part of the amount has been paid by either of the defendants. Hence

their liabilities cannot be questioned. (pp. 3-6, Brief for Appellee; p. 26, Rollo)

Moreover, records show that in the real estate mortgage, appellants agreed that the chattel mortgage "shall remain in full force and shall not be impaired by this (real estate) mortgage."
The pertinent provision of the contract is quoted as follows: That the chattel mortgage executed by Syvel's Inc. (Doc. No. 439, Book No. I, Series of 1965, Notary Public Jose C. Merris, Manila); real estate mortgage executed by Angel V. Syyap and Rita V. Syyap (Doc. No. 441, Page No. 90, Book No. I, Series of 1965, Notary Public Jose C. Merris, Manila) shall remain in full force and shall not be impaired by this mortgage (par. 5, Exhibit"A," Emphasis ours).

In their brief, appellants assign the following errors: I. The lower court erred in not holding that the obligation secured by the Chattel Mortgage sought to be foreclosed in the above-entitled case was novated by the subsequent execution between appellee and appellant Antonio V, Syyap of a real estate mortgage as additional collateral to the obligation secured by said chattel mortgage. II. The lower court erred in not dismissing the above-entitled case and in finding appellants liable under the complaint. III. The lower court erred in not holding that the writ of preliminary attachment is devoid of any legal and factual basis whatsoever. IV. The lower court erred in dismissing appellants'counterclaim and in not holding appellee liable to appellants for the consequent damages arising out of a wrongful attachment. (pp. 1-2, Brief for the Appellants, p. 25, Rollo) Appellants admit that they are indebted to the appellee bank in the amount of P601,633.01, breakdown of which is as follows: P568,577.76 as principal and P33,055.25 as interest. After the filing of the case and during its pendency, defendant Antonio V. Syyap proposed to have the case amicably settled and for that purpose a conference was held in which Mr. Antonio de las Alas, Jr., Vice President of plaintiff People's Bank and Trust Company, defendant Antonio V. Syyap and Atty. Mendoza were present. Mr. Syyap requested that the plaintiff dismiss this case as he did not want to have the goodwill of Syvel's Incorporated impaired, and offered to execute a real estate mortgage on his real property located in Bacoor, Cavite. Mr. de las Alas consented, and so the Real Estate Mortgage (Exhibit "A") was executed by defendant Antonio Syyap and his wife Margarita Bengco Syyap on June 22, 1967. Defendants did not agree with plaintiffs motion to dismiss which included the dismissal of their counterclaim and filed instead their own motion to dismiss (Record on Appeal, pp. 68-72) on the ground that by the execution of said real estate mortgage, the obligation secured by the chattel mortgage subject of this case was novated, and therefore, appellee's cause of action thereon was extinguished. In an Order dated September 23, 1967, the motion was denied for not being well founded (record on Appeal, p. 78). Appellants contention is without merit. Novation takes place when the object or principal condition of an obligation is changed or altered. It is elementary that novation is never presumed; it must be explicitly stated or there must be manifest incompatibility between the old and the new obligations in every aspect (Goni v. CA, 144 SCRA 223 [1986]; National Power Corp. v. Dayrit, 125 SCRA 849 [1983]). In the case at bar, there is nothing in the Real Estate Mortgage which supports appellants'submission. The contract on its face does not show the existence of an explicit novation nor incompatibility on every point between the "old and the "new" agreements as the second contract evidently indicates that the same was executed as new additional security to the chattel mortgage previously entered into by the parties.

It is clear, therefore, that a novation was not intended. The real estate mortgage was evidently taken as additional security for the performance of the contract (Bank of P.I. v. Herrige, 47 Phil. 57). In the determination of the legality of the writ of attachment by the Court of First Instance of Manila, it is a well established rule that the grant or denial of a writ of attachment rests upon the sound discretion of the court. Records are bereft of any evidence that grave abuse of discretion was committed by respondent judge in the issuance of the writ of attachment. Appellants contend that the affidavits of Messrs. Rivera and Berenguer on which the lower court based the issuance of the writ of preliminary attachment relied on the reports of credit investigators sent to the field and not on the personal knowledge of the affiants. Such contention deserves scant consideration. Evidence adduced during the trial strongly shows that the witnesses have personal knowledge of the facts stated in their affidavits in support of the application for the writ. They testified that Syvel's Inc. had disposed of all the articles covered by the chattel mortgage but had not remitted the proceeds to appellee bank; that the Syvel's Stores at the Escolta, Rizal Avenue and Morayta Street were no longer operated by appellants and that the latter were disposing of their properties to defraud appellee bank. Such testimonies and circumstances were given full credit by the trial court in its decision (Brief for Appellee, p. 14). Hence, the attachment sought on the ground of actual removal of property is justified where there is physical removal thereof by the debtor, as shown by the records (McTaggert v. Putnam Corset Co., 8 N.Y. S 800 cited in Moran, Comments on the Rules of Court, 1970 Ed., Vol. 3, p. 7). Besides, the actuations of appellants were clearly seen by the witnesses who "saw a Fiat Bantam CarFiat Car, a small car and about three or four persons hurrying; they were carrying goods coming from the back portion of this store of Syvels at the Escolta, between 5:30 and 6:00 o'clock in the evening." (Record on Appeal, pp. 45-46). Therefore, "the act of debtor (appellant) in taking his stock of goods from the rear of his store at night, is sufficient to support an attachment upon the ground of the fraudulent concealment of property for the purpose of delaying and defrauding creditors." (4 Am. Jur., 841 cited in Francisco, Revised Rules of Court, Second Edition, 1985, p. 24).
In any case, intent to defraud may be and usually is inferred from the facts and circumstances of the case; it can rarely be proved by direct evidence. It may be gleaned also from the statements and conduct of the debtor, and in this connection, the principle may be applied that every person is presumed to intend the natural consequences of his acts (Francisco, Revised Rules of Court, supra, pp. 24-25), In fact the trial court is impressed "that not only has the plaintiff acted in perfect

good faith but also on facts sufficient in themselves to convince an ordinary man that the defendants were obviously trying to spirit away a port;.on of the stocks of Syvel's Incorporated in order to render ineffectual at least partially anyjudgment that may be rendered in favor of the plaintiff." (Decision; Civil Case No. 68095; Record on Appeal, pp. 88-89). Appellants having failed to adduce evidence of bad faith or malice on the part of appellee in the procurement of the writ of preliminary attachment, the claim of the former for damages is evidently negated. In fact, the allegations in the appellee's complaint more than justify the issuance of the writ of attachment. PREMISES CONSIDERED, this appeal is DISMISSED for lack of merit and the judgment appealed from is AFFIRMED. SO ORDERED.

G.R. Nos. 65957-58 July 5, 1994 ELEAZAR V. ADLAWAN and ELENA S. ADLAWAN, petitioners, vs. Hon. Judge RAMON AM. TORRES, as Presiding Judge of Branch 6, Regional Trial Court Cebu City, ABOITIZ & COMPANY, INC. This is a petitioner for certiorari and mandamus with preliminary injunction or restraining order to nullify: (1) the Order dated September 14, 1983 of respondent Judge Ramon Am. Torres of the Regional Trial Court, Branch 6, Cebu City, in Civil Case No. CEB-1185 and the Order dated September 26, 1983 of Judge Emilio A. Jacinto of Branch 23 of the same court in Civil Case No. CEB-1186, which granted the motion for the issuance of writs of preliminary attachment for the seizure of the property of petitioners by respondent Provincial Sheriffs; and (2) the Order dated December 12, 1983 of respondent Judge Ramon Am. Torres in the consolidated cases, Civil Case No. CEB-1185 and Civil Case No. CEB-1186. I In a complaint dated April 24, 1982 filed with the Court of First Instance of Cebu, now Regional Trial Court, (Civil Case No. R-21761), respondent Aboitiz and Company, Inc. (Aboitiz) sought to collect from petitioners a sum of money representing payments for: (1) the unpaid amortizations of a loan; (2) technical and managerial services rendered; and (3) the unpaid installments of the equipment provided by respondent Aboitiz to petitioners (Rollo, p. 37). Acting on the ex parte application for attachment, the Executive Judge of the Court of First Instance of Cebu, issued on May 14, 1982, an order directing the issuance of the writ of preliminary attachment against the property of petitioners upon the filing by respondent Aboitiz of an attachment bond. Subsequently, the case was raffled to Branch 11 of the Court of First Instance of Cebu, which issued a writ of attachment addressed to the Provincial Sheriffs of Cebu and the City Sheriff of Davao City. It was the Sheriff of Davao City who enforced the writ of attachment, resulting in the seizure of heavy construction equipment, motor vehicle spare parts, and other personal property with the aggregate value of P15,000,000.00. The said court also granted the motion of respondent Aboitiz to take possession and custody of the attached property of petitioners and ordered the Provincial Sheriff of Davao to deliver the property to respondent Aboitiz. Petitioners moved for a bill of particulars and to set aside the ex parte writ of attachment. Finding merit in the motion to set aside the writ, Branch 11 ordered on July 6, 1982 the lifting of the writ and, consequently, the discharge of the property levied upon. Respondent Aboitiz filed an urgent ex parte motion, praying for the stay of the July 6, 1982 Order for a period of 15 days for it to be able to appeal the order. The motion was favorably acted upon. However, on July 13, 1982, respondent Aboitiz filed a notice of dismissal of its complaint in accordance with Section 1, Rule 17 of the Revised Rules of Court. Consequently, Branch 11 issued an order confirming the notice of dismissal, emphasizing that all orders of the court issued prior to the filing of said notice of dismissal had been rendered functus oficio, and considering all pending incidents in the case as moot and academic. Petitioner Eleazar Adlawan filed a motion praying that the July 6, 1982 Order be implemented and enforced. On December 20, however, Branch 11 denied the motion on

account of the filing by respondent Aboitiz before Branch 16 of the Court of First Instance of Cebu in Lapu-lapu City of an action for delivery of personal property (Civil Case No. 619-L), and the filing by petitioner Eleazar Adlawan before Branch 10 of the same court of an action for damages in connection with the seizure of his property under the writ of attachment. In the replevin suit, Branch 16 ordered the seizure and delivery of the property described in the complaint. Said property were later delivered by the provincial sheriff to respondent Aboitiz. Alleging that while his office was situated in Cebu City, Adlawan was a resident of Minglanilla, and therefore, the Lapu-lapu City court should not entertain the action for replevin. Petitioner Eleazar Adlawan filed an omnibus motion praying for the reconsideration and dissolution of the writ of seizure, the retrieval of the property seized, and the dismissal of the complaint. He also averred that the property seized were in custodia legis by virtue of the writ of attachment issued by Branch 11. His omnibus motion was denied. Subsequently, he filed a motion for reconsideration which was not granted. The denial of his omnibus motion led petitioner Eleazar Adlawan to file a petition for certiorari and mandamus in the Supreme Court (G.R. No. 63225). The Third Division of this Court ruled on April 3, 1990 that since attachment is an ancillary remedy, the withdrawal of the complaint left it with no leg to stand on. Thus, the Court disposed of the case as follows:
WHEREFORE, in view of the foregoing, this Court rules that the attached properties left in the custody of private respondent Aboitiz and Company, Inc. be returned to petitioner Eleazar V. Adlawan without prejudice to the outcome of the cases filed by both parties (Rollo, p. 324).

Respondent Aboitiz filed a motion for reconsideration of the decision, contending that the replevin case was distinct and separate from the case where the writ of attachment was issued. It argued that the writ of replevin, therefore, remained in force as the Third Division of the Supreme Court had not found it illegal. The motion was, however, denied with finality in the Resolution of July 11, 1990. Undaunted, respondent Aboitiz filed a second motion for reconsideration with a prayer that the dispositive portion of the decision be clarified. It asserted that because the writ of preliminary attachment was different from the writ of replevin, we should rule that the property subject of the latter writ should remain in custodia legis of the court issuing the said writ. In the Resolution dated September 10, 1990, the Third Division stated that "the properties to be returned to petitioner are only those held by private respondent (Aboitiz) by virtue of the writ of attachment which has been declared non-existent." Accordingly, the dispositive portion of the April 3, 1990 decision of the Third Division of this Court was modified to read as follows:
WHEREFORE, in view of the foregoing, this Court rules that the properties in the custody of the private respondent Aboitiz & Company by virtue of the writ of attachment issued in Civil Case No. R21761 be returned to the petitioner, but properties in the custody of the private respondent by virtue of the writ of replevin issued in Civil Case No. 619-L be continued in custodia legis of said court pending litigation therein.

The Decision in G.R. No. 63225 having become final and executory, entry of judgment was made on November 15, 1990. This should have terminated the controversy between petitioners and respondent Aboitiz insofar as the Supreme Court was concerned, but that was not to be. On

September 9, 1983 respondent Aboitiz filed against petitioners two complaints for collection of sums of money with prayers for the issuance of writs of attachment in the Regional Trail Court, Branch 23, Cebu City, docketed as Civil Cases Nos. CEB-1185 and CEB-1186. The complaint in Civil Case No. CEB-1185 alleged that petitioner Eleazar Adlawan (defendant therein) was awarded a contract for the construction of the Tago Diversion Works for the Tago River Irrigation Project by the National Irrigation Administration and that respondent Aboitiz (plaintiff therein) loaned him money and equipment, which indebtedness as of June 30, 1983 totaled P13,430,259.14. Paragraph 16 of the complaint states:
16. That, in view of the enormous liabilities which the defendants have with the plaintiff, defendants executed a real estate mortgage covering eleven (11) parcels of land in favor of Philippine Commercial and Industrial Bank (PCIB) to secure a P1,000,000.00 loan with said bank and was able to remove, conceal and dispose of their properties, obviously to defraud the plaintiff, . . . (Rollo, pp. 6566).

of respondent Aboitiz, which had an exposure amounting to P13,430,259.14. Petitioners then filed a rejoinder to said comment, contending that since the property subject of the writ of attachment have earlier been attached or replevied, the same property were under custodia legis and therefore could not be the subject of other writs of attachment. On December 12, 1983, respondent Judge issued an order finding no merit in petitioners' motion for reconsideration and directing the sheriffs of Cebu, Davao and Metro Manila "to proceed with the enforcement and implementation of the writs of preliminary attachment." Respondent Judge ruled that the writs of attachment were issued on the basis of the supporting affidavits alleging that petitioner had removed or disposed of their property with intent to defraud respondent Aboitiz (Rollo, pp. 109113). On December 15, petitioners filed an ex parte motion praying: (1) that the December 12, 1983 Order be set for hearing; (2) that they be given 15 days within which to either file a motion for reconsideration or elevate the matter to this Court or the then Intermediate Appellate Court; and (3) that within the same 15-day period the implementation or enforcement of the writs of attachment be held in abeyance. On the same day, respondent Judge issued an order holding in abeyance the enforcement of the writs of preliminary attachment in order to afford petitioners an opportunity to seek their other remedies (Rollo, p. 116). On December 27, petitioners filed the instant petition for certiorari and mandamus. They alleged that respondent Judge gravely abused his discretion in ordering the issuance of the writs of preliminary attachment inasmuch as the real estate mortgage executed by them in favor of PCIB did not constitute fraudulent removal, concealment or disposition of property. They argued that granting the mortgage constituted removal or disposition of property, it was not per se a ground for attachment lacking proof of intent to defraud the creditors of the defendant. Petitioners contended that in Civil Case No. 21761, Branch 11 had ruled that the loan for which the mortgage was executed was contracted in good faith, as it was necessary for them to continue their business operations even after respondent Aboitiz had stopped giving them financial aid. Petitioners also contended that respondent Judge exceeded his jurisdiction when he issued the Order of December 12, 1983, without first hearing the parties on the motion for attachment and the motion to dissolve the attachment. Moreover, they argued that respondent Judge gravely abused his discretion in proceeding with the case, notwithstanding that his attention had been called with regard to the pendency of G.R. No. 63225 in this Court. As prayed for by petitioners, we issued a temporary restraining order on January 6, 1984 "enjoining the respondents from enforcing or implementing the writs of preliminary attachment against the property of petitioners, all dated September 26, 1983 and issued in Civil Cases Nos. CEB 1185 and 1186" (Rollo, p. 118). II The resolution of this case centers on the issue of the legality of the writ of attachment issued by respondent Judge in the consolidated cases for collection of sums of money. The affidavit submitted by respondent Aboitiz in support of its prayer for the writ of attachment does not meet the requirements of Rule 57 of the Revised Rules of Court regarding the allegations on impending fraudulent removal, concealment and disposition of defendant's property. As

The complaint in Civil Case No. CEB-1186 alleged that petitioner Eleazar Adlawan (defendant therein) was awarded a contract for the construction of the Lasang River Irrigation Project by the National Irrigation Administration and that respondent Aboitiz (plaintiff therein) loaned him money and equipment, which indebtedness as of June 30, 1983 totalled P5,370,672.08. Paragraph 15 of the complaint is similarly worded as paragraph 16 of the complaint in Civil Case No. CEB1185. Civil Case No. CEB-1185 was raffled to the Regional Trial Court, Branch 6, presided by respondent Judge Ramon Am. Torres. On September 14, 1983, respondent Judge ordered the issuance of a writ of attachment upon respondent Aboitiz' filing of a bond of P5,000,000.00. Similarly, in Civil Case No. CEB-1186, which was raffled to Branch 23, presiding Judge Emilio A. Jacinto ordered the issuance of a writ of attachment upon the filing of a bond of P2,500,000.00. Accordingly, in Civil Case No. CEB1185, the Acting Provincial Sheriff of Cebu issued separate writs dated September 26, 1983 addressed to the Sheriffs of Cebu, Davao and Metro Manila. No writ of preliminary attachment was, however, issued in Civil Case No. CEB-1186. Petitioners then filed in Civil Cases Nos. CEB-1185 and CEB-1186 urgent motions to hold in abeyance the enforcement of the writs of attachments. They alleged in the main that since their property had been previously attached and said attachment was being questioned before the Supreme Court in G.R. No. 63225, the filing of the two cases, as well as the issuance of the writs of attachment, constituted undue interference with the processes of this court in the then pending petition involving the same property. Upon motion of respondent Aboitiz, Branch 23 issued on October 13, 1983, an order directing the transfer to Branch 6 of Civil Case No. CEB-1186 for consolidation with Civil Case No. CEB-1185. Meanwhile, in its comment on petitioners' motion to withhold the enforcement of the writs of attachment, respondent Aboitiz alleged that the voluntary dismissal of Civil Case No. R-21761 under Section 1, Rule 17 of the Revised Rules of Court was without prejudice to the institution of another action based on the same subject matter. It averred that the issuance of the writ of attachment was justified because petitioners were intending to defraud respondent Aboitiz by mortgaging 11 parcels of land to the Philippine Commercial and Industrial Bank (PCIB) in consideration of the loan of P1,100,000.00, thereby making PCIB a preferred creditor to the prejudice

held in Carpio v. Macadaeg, 9 SCRA 552 (1963), to justify a preliminary attachment, the removal or disposal must have been made with intent to defraud defendant's creditors. Proof of fraud is mandated by paragraphs (d) and (e) of Section 1, Rule 57 of the Revised Rules of Court on the grounds upon which attachment may issue. Thus, the factual basis on defendant's intent to defraud must be clearly alleged in the affidavit in support of the prayer for the writ of attachment if not so specifically alleged in the verified complaint. The affidavit submitted by respondent Aboitiz states:
REPUBLIC OF THE PHILIPPINES CITY OF CEBU ...............) S.S. I, ROMAN S. RONQUILLO, of legal age, married and a resident of Cebu City, after being sworn in accordance with law, hereby depose and say: That I am the Vice-President of the plaintiff corporation in the above-entitled case; That a sufficient cause of action exists against the defendants named therein because the said defendants are indebted to the plaintiffs in the amount of P13,430,259.14 exclusive of interests thereon and damages claimed; That the defendants have removed or disposed of their properties with intent to defraud the plaintiff, their creditor, because on May 27, 1982 they executed a real estate mortgage in favor of Philippine Commercial and Industrial Bank (PCIB) covering eleven (11) of their fifteen (15) parcels of land in Cebu to secure a P1,000,000.00 loan with the same bank; That this action is one of those specifically mentioned in Section 1, Rule 57 of the Rules of Court, whereby a writ preliminary attachment may lawfully issue because the action therein is one against parties who have removed or disposed of their properties with intent to defraud their creditor, plaintiff herein; That there is no sufficient security for the claims sought to be enforced by the present action; That the total amount due to the plaintiff in the above-entitled case is P13,430,259.14, excluding interests and claim for damages and is as much the sum for which an order of attachment is herein sought to be granted; above all legal counter-claims on the part of the defendants. IN VIEW WHEREOF, I hereunto set my hand this 24th day of August 1983 at Cebu City, Philippines.

Bare allegation that an encumbrance of a property is in fraud of the creditor does not suffice. Factual bases for such conclusion must be clearly averred. The execution of a mortgage in favor of another creditor is not conceived by the Rules as one of the means of fraudulently disposing of one's property. By mortgaging a piece of property, a debtor merely subjects it to a lien but ownership thereof is not parted with. Furthermore, the inability to pay one's creditors is not necessarily synonymous with fraudulent intent not to honor an obligation (Insular Bank of Asia & America, Inc. v. Court of Appeals, 190 SCRA 629 [1990]). Consequently, when petitioners filed a motion for the reconsideration of the order directing the issuance of the writ of attachment, respondent Judge should have considered it as a motion for the discharge of the attachment and should have conducted a hearing or required submission of counter-affidavits from the petitioners, if only to gather facts in support of the allegation of fraud (Jopillo, Jr. v. Court of Appeals, 167 SCRA 247 [1988]). This is what Section 13 of Rule 57 mandates. This procedure should be followed because, as the Court has time and again said, attachment is a harsh, extraordinary and summary remedy and the rules governing its issuance must be construed strictly against the applicant. Verily, a writ of attachment can only be granted on concrete and specific grounds and not on general averments quoting perfunctorily the words of the Rules (D.P. Lub Oil Marketing Center, Inc. v. Nicolas, 191 SCRA 423 [1990]). The judge before whom the application is made exercises full discretion in considering the supporting evidence proffered by the applicant. One overriding consideration is that a writ of attachment is substantially a writ of execution except that it emanates at the beginning, instead of at the termination of the suit (Santos v. Aquino, Jr., 205 SCRA
127 [1992]; Tay Chun Suy v. Court of Appeals, 212 SCRA 713 [1992]). We need not discuss the issue of whether or not Civil Cases Nos. CEB-1185 and CEB-1186 constituted undue interference with the proceedings in G.R. No. 63225 in view of the entry of judgment in the latter case. WHEREFORE, the petition is GRANTED and the Temporary Restraining Order issued on January 6, 1984 is made PERMANENT. Respondent Judge or whoever is the presiding judge of the Regional Trial Court, Branch 6, Cebu City, is DIRECTED to PROCEED with the resolution of Civil Cases Nos. CEB-1185 and CEB-1186 with deliberate dispatch. SO ORDERED.

(Sgd.) RAMON S. RONQUILLO Affiant (Rollo, pp. 171-172) It is evident from said affidavit that the prayer for attachment rests on the mortgage by petitioners of 11 parcels of land in Cebu, which encumbrance respondent Aboitiz considered as fraudulent concealment of property to its prejudice. We find, however, that there is no factual allegation which may constitute as a valid basis for the contention that the mortgage was in fraud of respondent Aboitiz. As this Court said in Jardine-Manila Finance, Inc. v. Court of Appeals, 171 SCRA 636 (1989), "[T]he general rule is that the affidavit is the foundation of the writ, and if none be filed or one be filed which wholly fails to set out some facts required by law to be stated therein, there is no jurisdiction and the proceedings are null and void."

G.R. No. L-37682

November 26, 1932

Manuel C. Grey receiver of the property of the petitioner, be annulled. The sufficiency of the application for the writ of attachment assailed by the petitioner upon several grounds but we shall confine ourselves to the consideration of the question whether or not paragraph 2 of section 424 of the Code of Civil Procedure is applicable to this petitioner. The petitioner is a corporation duly organized under the laws of the District of Columbia; it had complied with all the requirements of the Philippine laws and the was duly licensed to do business in the Philippine Islands on the date said writ of attachment was issues. The petitioner was actively engaged in doing business in the Philippine Islands and had considerable property therein, which consisted to its manufacturing plant, machinery, merchandise and a large income under valuable contracts, all of which property was in the possession and under the control and management of the respondent Philippine Advertising Corporation, as the agent of the petitioner, on the date said attachment was levied. Considered from a practical and economic viewpoint, its position in the business community was indistinguishable from that of a domestic corporation. Section 242 of the Code of Civil Procedure under which the petitioner's property was attached, reads as follows:
Attachment. A plaintiff may, at the commencement of his action, or at any time afterwards, have the property of the defendant attached as security for the satisfaction of any judgment that may be recovered, unless the defendant gives security to pay such judgment, in the manner hereinafter provided, in the following cases. 1. In all the cases mentioned in section four hundred and twelve, providing for the arrest of a defendant. But the plaintiff must make an election as to whether he will ask for an order of arrest or an order of attachment; he shall not be entitled to both orders; 2. In an action against a defendant not residing in the Philippine Islands.

CLAUDE NEON LIGHTS, FEDERAL INC., U. S. A., petitioner, vs. PHILIPPINE ADVERTISING CORPORATION This case is to be determined upon the petition for writ of certiorari and the demurrer thereto filed by the respondents. The petition sets up two causes of action: one attacking the validity of a writ of attachment issued by the respondent judge on the petition and affidavit of the respondent Philippine Advertising Corporation, on April 6, 1932; the second, attacking the validity of the order of the respondent judge issued the same day on the petition of the respondent Philippine Advertising Corporation, appointing a receiver of the property which was seized by the sheriff under said writ of attachment. On April 5, 1932, the respondent Philippine Advertising Corporation filed suit against the petitioner in the Court of First Instance of Manila, claiming P300,000 as damages for alleged breach of the agency contract existing between the said respondent and the petitioner. At the same time, said respondent filed in said court an application for writ of attachment duly verified in which it is stated that the defendant (petitioner herein) is a foreign corporation having its principal place of business in the City of Washington, District of Columbia. It is not alleged in said application that the defendant, Claude Neon Lights, Inc. (the petitioner herein) was about to depart from the Philippine Islands with intent to defraud its creditors or that it was insolvent or had removed or disposed of its property or was about to do so with intent to defraud its creditors. The only statutory ground relied upon in the court below and in this court for the issuance of the writ of attachment against the petitioner is paragraph 2 of section 424 of the Code of Civil Procedure, which provides that plaintiff may have the property of the defendant attached "in an action against a defendant not residing in the Philippine Islands". On April 6, 1932, the respondent judge issued the writ of attachment as prayed for, and the sheriff has attached all the properties of the petitioner in the Philippine Islands. On the same date, on the ex parte petition and nomination of the respondent, the respondent judge appointed Manuel C. Grey receiver of said properties of the petitioner, fixing his bond at P3,000. Motions to dissolve said writ of attachment and receivership were fled in the court below, supported by affidavits of the attorney in fact for the petitioner in which it is recited, among other things, that the petitioner is not indebted to the respondent in any sum whatever nor has it in any way breached any contracts with the respondent or at any time interfered in the management of its business in the Philippine Islands as carried on by its agent, the respondent, and it has faithfully complied with every condition of said contract; that the attachment of the machinery and plants of the petitioner, as well as its other assets, is highly prejudicial to it as it is unable to proceed with its business in the Philippine Islands and irreparable loss will result to it unless such attachment be raised; that the filing of said suit was malicious, without foundation, and intended only to injure the petitioner and to depreciate the value of its holdings in the Philippine Islands. It does not appear that any answer was made to said motion in which said allegations were denied or that any refuting evidence was offered. On June 20 1932, the court denied said motions to vacate the attachment and receivership, declaring that the writ of attachment conforms to section 424 of the Code of Civil Procedure. The petitioner for certiorari prays that the writ of attachment issued by the respondent judge on April 6, 1932, as well as the order of the same date, appointing

It may be observed at the outset that the words of section 424, supra, taken in their literal sense seem to refer to a physical defendant who is capable of being "arrested" or who is "not residing in the Philippine Islands". It is only by a fiction that it can be held that a corporation is "not residing in the Philippine Islands". A corporation has no home or residence in the sense in which those terms are applied to natural persons. For practical purposes, a corporation is sometimes said, in a metaphorical sense, to be "a resident" of a certain state or a "citizen" of a certain country, which is usually the state or country by which or under the laws of which it was created. But that fiction or analogy between corporations and natural persons by no means extends so far that it can be said that every statute applicable to natural persons is applicable to corporations. Indeed, within the same jurisdiction a corporation has been held to be a "citizen" of the state of its creation for the purpose of determining the jurisdiction of the Federal courts (Wisconsin vs.Pelican Insurance Co., 127 U. S., 265) but not a "citizen" within the meaning of section 2 of article 4 of the Constitution of the United States which provides that the citizens of each state shall be entitled to all the privileges and immunities of citizens of the several states (Paul vs. Virginia, 8 Wall., 169). The question arises whether this petitioner, a foreign corporation, shall, in a metaphorical sense, be deemed as "not residing in the Philippine Islands" in the sense in which that expression would apply to a natural person. Having regard to the reason for the statute which is the protection of the creditors of a non-resident, we are of

the opinion that there is not the same reason for subjecting a duly licensed foreign corporation to the attachment of its property by a plaintiff under section 424, paragraph 2, as may exist in the case of a natural person not residing in the Philippine Islands. The law does not require the latter, as it does the former, to appoint a resident agent for service of process; nor to prove to the satisfaction of the Government before he does business here, as the foreign corporation must prove, that he "is solvent and in sound financial condition" (section 68, Act No. 1459, as amended, the Corporation Law), or to produce evidence of "fair dealing" (ibid.). He pays no license fee nor is his business subject at any time to investigation by the Secretary of Finance and the Governor-General; nor is his right to continue to do business revocable by the Government (Cf. section 71, Act No. 1459 of the Corporation Law). His books and papers are not liable to examination "at any time" by the Attorney-General, the Insular Auditor, the Insular Treasurer, "or any other officer of the Government" on the order of the Governor-General (section 54, ibid.). He is not, like a foreign corporation "bound by all laws, rules and regulations applicable to domestic corporations" . . . (section 73, ibid.), which are designed to protect creditors and the public. He can evade service of summons and other legal process, the foreign corporation never. (Section 72, ibid.) Corporations, as a rule, are less mobile than individuals. This is a specially true of foreign corporations that are carrying on business by proper authority in these Islands. They possess, as a rule, great capital which is seeking lucrative and more or less permanent investment in young and developing countries like our Philippines. Some of them came here as far back as the Spanish regime and are still important factors in our financial and industrial life. They are anything but "fly-by-night" concerns. The latter, we believe, are effectually excluded from our Islands both by our laws and by our geographical and economic situation. If, as we believe, section 424, paragraph 2, should not be held applicable to foreign corporations duly licensed to do business in the Philippine Islands both because the language and the reason of the statute limit it to natural persons, we sustain and reinforce the provisions of section 71 of the Corporation Law, Act No. 1459, which provides in substance that if the Secretary of Finance or the Secretary of Commerce and Communications and the GovernorGeneral find a duly licensed foreign corporation to be insolvent or that its continuance in business will involve probable loss to its creditors, they may revoke its license and "the Attorney-General shall take such proceedings as may be proper to protect creditors and the public". Section 71, supra, contemplates that the proceedings instituted by the Attorney-General shall effect the protection of all creditors and the public equally. Obviously, the benefit of that section will be minimized, if not entirely defeated, if a creditor or a few creditors can obtain privileged liens by writs of attachment based on the sole allegation, which is easily and safely made, that the corporation is "not residing in the Philippine Islands". (Cf. Kuenzle & Streiff vs. Villanueva, 41 Phil., 611.)lawphil.net Paragraph 2 of section 424, supra does not apply to a domestic corporation. Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business here, to the status of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil., 70, 76; Yu Cong Eng vs. Trinidad, 47 Phil., 385, 411.) We think it would be entirely out of line with this policy should we make a discrimination against a foreign corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment when it has complied not only with every requirement of law made especially of foreign corporations, but in addition with every requirement of law made of domestic corporations. (Section 73, supra.) It is true that the majority of the states in the American Union hold the contrary rule. But our situation is

obviously very dissimilar from that of a state in the American Union. There forty-eight states and the central government, all creating corporations which do a tremendous interstate business, are contiguous and separated by imaginary lines. A higher degree of protection against irresponsible corporations may be more necessary there than here. We have no interstate business. Only the central government grants charters to corporations. But even in the American Union there is a minority rule which we regard as the better reasoned and the better suited to our conditions, both geographical and economical, and more nearly in harmony with the policy of our law both under the Spanish regime and since the American occupation. This minority rule is supported by the following authorities: Brand vs. Auto Service Co. (New Jersey, 1907), 67 Atl., 19, 20; Mellor vs. Edward V. Hartford, Inc. (New Jersey, 1929), 146 Atl., 206; Charles Friend & Co. vs. Gold Smith & Co. (Illinois, 1923), 138 N. E., 185; Fullilove vs. Central State Bank (Louisiana, 1926), 107 So., 590. In the present instance, a particularly monstrous result has followed as s consequence of the granting of the writ attaching all of the property of the petitioner on the sole allegation that it "is not residing in the Philippine Islands". As the petitioner's business was a going concern, which the sheriff, who levied the writ, obviously could not manage, it became necessary on the same day for the court to appoint a receiver. This receiver, as the demurrer admits, "was and is an employee working under the president of the respondent Philippine Advertising Corporation, so that to all intents and purposes, all the property of the petitioner in the Philippine Islands was seized and delivered into the hands of the respondent Philippine Advertising Corporation." The prayer of the petitioner is granted. The order and writ of attachment complained of are annulled and set aside and the court below is directed to vacate the order appointing Manuel C. Grey receiver of the property of the petitioner and to require said Manuel C. Grey to submit his final report at the earliest practicable date. Costs in both instances to be borne by the respondent, Philippine Advertising Corporation. So ordered.

G.R. Nos. 79926-27 October 17, 1991 STATE INVESTMENT HOUSE, INC., vs. CITIBANK, N.A., BANK OF AMERICA, The chief question in the appeal at bar is whether or not foreign banks licensed to do business in the Philippines, may be considered "residents of the Philippine Islands" within the meaning of Section 20 of the Insolvency Law (Act No. 1956, as amended, eff. May 20, 1909) reading in part as follows: 1 An adjudication of insolvency may be made on the petition of three or more creditors, residents of the Philippine Islands, whose credits or demands accrued in the Philippine Islands, and the amount of which credits or demands are in the aggregate not less than one thousand pesos: Provided, that none of said creditors has become a creditor by assignment, however made, within thirty days prior to the filing of said petition. Such petition must be filed in the Court of First Instance of the province or city in which the debtor resides or has his principal place of business, and must be verified by at least three (3) of the petitioners. . . . The foreign banks involved in the controversy are Bank of America NT and SA, Citibank N.A. and Hongkong and Shanghai Banking Corporation. On December 11, 1981, they jointly filed with the Court of First Instance of Rizal a petition for involuntary insolvency of Consolidated Mines, Inc. (CMI), which they amended four days later. 2 The case was docketed as Sp. Proc. No. 9263 and assigned to Branch 28 of the Court. The petition for involuntary insolvency alleged:
1) that CMI had obtained loans from the three petitioning banks, and that as of November/December, 1981, its outstanding obligations were as follows: a) In favor of Bank of America (BA) P15,297,367.67 (as of December 10, 1981) US$ 4,175,831.88 (b) In favor of Citibank US$ 4,920,548.85 (as of December 10, 1981) c) In favor of Hongkong & Shanghai Bank US$ 5,389,434.12 (as of November 30, 1981); P6,233,969.24 2) that in November, 1981, State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI) had separately instituted actions for collection of sums of money and damages in the Court of First Instance of Rizal against CMI, docketed respectively as Civil Cases Numbered 43588 and 43677; and that on application of said plaintiffs, writs of preliminary attachment had been issued which were executed on "the royalty/profit sharing payments due CMI from Benguet Consolidated Mining, Inc;" and 3) that CMI had "committed specific acts of insolvency as provided in Section 20 of the Insolvency Law, to wit: xxx xxx xxx 5. that he (CMI) has suffered his (CMI's) property to remain under attachment or legal process for three days for the purpose of hindering or delaying or defrauding his (CMI's) creditors; xxx xxx xxx

11. that being a merchant or tradesman he (CMI) has generally defaulted in the payment of his (CMI's) current obligations for a period of thirty days; . . .

The petition was opposed by State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI). 3 It claimed that: 1) the three petitioner banks had come to court with unclean hands in that they filed the petition for insolvency alleging the CMI was defrauding its creditors, and they wished all creditors to share in its assets although a few days earlier, they had "received for the account of CMI substantial payments aggregating P10,800,000.00;" 2) the Court had no jurisdiction because the alleged acts of insolvency were false: the writs of attachment against CMI had remained in force because there were "just, valid and lawful grounds for the(ir) issuance," and CMI was not a "merchant or tradesman" nor had it "generally defaulted in the payment of (its) obligations for a period of thirty days . . . ;" 3) the Court had no jurisdiction to take cognizance of the petition for insolvency because petitioners are not resident creditors of CMI in contemplation of the Insolvency Law; and 4) the Court has no power to set aside the attachment issued in favor of intervenors-oppositors SIHI and SFCI. CMI filed its Answer to the petition for insolvency, asserting in the main that it was not insolvent, 4 and later filed a "Motion to Dismiss Based on Affirmative Defense of Petitioner's Lack of Capacity to Sue," echoing the theory of SIHI and SFCI that the petitioner banks are not "Philippine residents." 5 Resolution on the motion was "deferred until after hearing of the case on the merits" it appearing to the Court that the grounds therefor did not appear to be indubitable. 6 SIHI and SFCI filed their own Answer-inIntervention, 7 and served on the three petitioner banks requests for admission of certain facts in accordance with Rule 26 of the Rules of Court, 8 receiving a response only from Hongkong & Shanghai Bank. 9 SIHI and SFCI then filed a Motion for Summary Judgment dated May 23, 1983 "on the ground that, based on the pleadings and admissions on record, the trial court had no jurisdiction to adjudicate CMI insolvent since the petitioners (respondent foreign banks) are not "resident creditors" of CMI as required under the Insolvency Law." 10 Oppositions to the motion were filed, 11 to which a reply was submitted. 12 The Regional Trial Court 13 found merit in the motion for summary judgment. By Order dated October 10, 1983, it rendered "summary judgment dismissing the . . . petition for lack of jurisdiction over the subject matter, with costs against petitioners." 14 It ruled that on the basis of the "facts on record, as shown in the pleadings, motions and admissions of the parties, an insolvency court could "not acquire jurisdiction to adjudicate the debtor as insolvent if the creditors petitioning for adjudication of insolvency are not "residents" of the Philippines" citing a decision of the California Supreme Court which it declared "squarely applicable especially considering that one of the sources of our Insolvency Law is the Insolvency Act of California of 1895 . . . " And it declared that since petitioners had been merely licensed to do business in the Philippines, they could not be deemed residents thereof. The three foreign banks sought to take an appeal from the Order of October 10, 1983. They filed a notice of appeal and a record on appeal. 15 SIHI and SFCI moved to dismiss their appeal claiming it was attempted out of time. The Trial Court denied the motion.

SIHI and SFCI filed with this Court a petition for certiorari and prohibition (G.R. NO. 66449), impugning that denial. The Court dismissed the petition and instead required the three banks to file a petition for review in accordance with Rule 45 of the Rules of Court. 16 This the banks did (their petition was docketed as G.R. No. 66804). However, by Resolution dated May 16, 1984, the court referred the petition for review to the Intermediate Appellate Court, where it was docketed as AC SP03674. 17 In the meantime, the Trial Court approved on May 3, 1985 the banks' record on appeal and transmitted it to this Court, where it was recorded as UDK-6866. As might have been expected, this Court required the banks to file a petition for review under Rule 45, but they asked to be excused from doing so since they had already filed such a petition, which had been referred to the Intermediate Appellate Court and was there pending as AC-G.R. No. SP 03674, supra. This Court then also referred UDK-6866 to the Intermediate Appellate Court where it was docketed as AC-G.R. No. CV 07830. Both referred cases, AC-G.R. No. SP 03674 and AC-G.R. No. CV 07830, were consolidated by Resolution of the Court of Appeals dated April 9, 1986, and Decision thereon was promulgated on July 14, 1987 by the Fifteenth Division of said Court. 18 The Appellate Court reversed the Trial Court's Order of October 10, 1983 and remanded the case to it for further proceedings. It ruled: 1) that the purpose of the Insolvency Law was "to convert the assets of the bankrupt in cash for distribution among creditors, and then to relieve the honest debtor from the weight of oppressive indebtedness and permit him to start life anew, free from the obligations and responsibilities consequent upon business misfortunes;" 19 and that it was "crystal clear" that the law was "designed not only for the benefit of the creditors but more importantly for the benefit of the debtor himself," the object being "to provide not only for the suspension of payments and the protection of creditors but also the discharge of insolvent honest debtors to enable them to have a fresh start;" 2) that the Trial Court had placed "a very strained and restrictive interpretation of the term "resident," as to exclude foreign banks which have been operating in this country since the early part of the century," and "the better approach . . . would have been to harmonize the provisions . . . (of the Insolvency Law) with similar provisions of other succeeding laws, like the Corporation Code of the Philippines, the General Banking Act, the Offshore Banking Law and the National Internal Revenue Code in connection with or related to their doing business in the Philippines;" 3) that in light of said statutes, the three banks "are in truth and in fact considered as "residents" of the Philippines for purposes of doing business in the Philippines and even for taxation matters;" 4) that the banks had "complied with all the laws, rules and regulations (for doing business in the country) and have been doing business in the Philippines for many years now;" that the authority granted to them by the Securities and Exchange Commission upon orders of the Monetary Board "covers not only transacting banking business . . . but likewise maintaining suits "for recovery of any debt, claims or demand whatsoever," and that their petition for involuntary insolvency was "nothing more than a suit aimed at recovering a debt granted by them to Consolidated Mines, Inc., or at least a portion thereof;" 4) that to deprive the foreign banks of their right to proceed against their debtors through insolvency proceedings would "contravene the basic standards of equity and fair play, . . . would discourage their operations in economic

development projects that create not only jobs for our people but also opportunities for advancement as a nation;" and 5) that the terms "residence" and "domicile" do not mean the same thing, and that as regards a corporation, it is generally deemed an "inhabitant" of the state under whose law it is incorporated, and has a "residence" wherever it conducts its ordinary business, and may have its legal "domicile" in one place and "residence" in another. SIHI and SFCI moved for reconsideration and then, when rebuffed, took an appeal to this Court. Here, they argue that the Appellate Court's judgment should be reversed because it failed to declare that 1) the failure of the three foreign banks to allege under oath in their petition for involuntary insolvency that they are Philippine residents, wishing only to "be considered Philippine residents," is fatal to their cause; 2) also fatal to their cause is their failure to prove, much less allege, that under the domiciliary laws of the foreign banks, a Philippine corporation is allowed the reciprocal right to petition for a debtor's involuntary insolvency; 3) in fact and in law, the three banks are not Philippine residents because:
a) corporations have domicile and residence only in the state of their incorporation or in the place designated by law, although for limited and exclusive purposes, other states may consider them as residents; b) juridical persons may not have residence separate from their domicile;

4) actually, the non-resident status of the banks within the context of the Insolvency Law is confirmed by other laws; 5) the license granted to the banks to do business in the Philippines does not make them residents; 6) no substantive law explicitly grants foreign banks the power to petition for the adjudication of the Philippine corporation as a bankrupt; 7) the Monetary Board can not appoint a conservator or receiver for a foreign bank or orders its liquidation having only the power to revoke its license, subject to such proceedings as the Solicitor General may thereafter deem proper to protect its creditors; 8) the foreign banks are not denied the right to collect their credits against Philippine debtors, only the right to "petition for the harsh remedy of involuntary insolvency" not being conceded to them; 9) said banks have come to court with unclean hands, their filing of the petition for involuntary insolvency being an attempt to defeat validly acquired rights of domestic corporations. The concept of a foreign corporation under Section 123 of the Corporation Code is of "one formed, organized or existing under laws other than those of the Philippines and . . . (which) laws allow Filipino citizens and corporations to do business . . . ." There is no question that the three banks are foreign corporations in this sence, with principal offices situated outside of the Philippines. There is no question either that said banks have been licensed to do business in this country and have in fact been doing business here for many years, through branch offices or agencies, including "foreign currency deposit units;" in fact, one of them, Hongkong & Shanghai Bank has been doing business in the Philippines since as early as 1875.

The issue is whether these Philippine branches or units may be considered "residents of the Philippine Islands" as that term is used in Section 20 of the Insolvency Law, supra, 20 or residents of the state under the laws of which they were respectively incorporated. The answer cannot be found in the Insolvency Law itself, which contains no definition of the term, resident, or any clear indication of its meaning. There are however other statutes, albeit of subsequent enactment and effectivity, from which enlightening notions of the term may be derived. The National Internal Revenue Code declares that the term "'resident foreign corporation' applies to a foreign corporation engaged in trade or business within the Philippines," as distinguished from a " "non-resident foreign corporation" . . . (which is one) not engaged in trade or business within the Philippines." 21 The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries, affiliation, extension offices or any other units of corporation or juridical person organized under the laws of any foreign country operating in the Philippines shall be considered residents of the Philippines." 22 The General Banking Act, Republic Act No. 337, places "branches and agencies in the Philippines of foreign banks . . . (which are) called Philippine branches," in the same category as "commercial banks, savings associations, mortgage banks, development banks, rural banks, stock savings and loan associations" (which have been formed and organized under Philippine laws), making no distinction between the former and the later in so far, as the terms "banking institutions" and "bank" are used in the Act, 23 declaring on the contrary that in "all matters not specifically covered by special provisions applicable only to foreign banks, or their branches and agencies in the Philippines, said foreign banks or their branches and agencies lawfully doing business in the Philippines "shall be bound by all laws, rules, and regulations applicable to domestic banking corporations of the same class, except such laws, rules and regulations as provided for the creation, formation, organization, or dissolution of corporations or as fix the relation, liabilities, responsibilities, or duties of members, stockholders or officers or corporations." 24 This Court itself has already had occasion to hold 25 that a foreign corporation licitly doing business in the Philippines, which is a defendant in a civil suit, may not be considered a non-resident within the scope of the legal provision authorizing attachment against a defendant not residing in the Philippine Islands;" 26 in other words, a preliminary attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign corporation authorized to do business in the Philippines and is consequently and necessarily, "a party who resides out of the Philippines." Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who resides out of the country, then, logically, it must be considered a party who does reside in the Philippines, who is a resident of the country. Be this as it may, this Court pointed out that:
. . . Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business here, to the status of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu; Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be entirely out of line with this policy should we make a discrimination against a foreign corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment when it has complied not only with every requirement of law made specially of

foreign corporations, but in addition with every requirement of law made of domestic corporations. . . . .

Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the status ofdomestic corporations," subsumes their being found and operating as corporations, hence, residing, in the country. The same principle is recognized in American law: that the "residence of a corporation, if it can be said to have a residence, is necessarily where it exercises corporate functions . . . ;" that it is .considered as dwelling "in the place where its business is done . . . ," as being "located where its franchises are exercised . . . ," and as being "present where it is engaged in the prosecution of the corporate enterprise;" that a "foreign corporation licensed to do business in a state is a resident of any country where it maintains an office or agent for transaction of its usual and customary business for venue purposes;" and that the "necessary element in its signification is locality of existence." 27 Courts have held that "a domestic corporation is regarded as having a residence within the state at any place where it is engaged in the particulars of the corporate enterprise, and not only at its chief place or home office;" 28 that "a corporation may be domiciled in one state and resident in another; its legal domicil in the state of its creation presents no impediment to its residence in a real and practical sense in the state of its business activities." 29 The foregoing propositions are in accord with the dictionary concept of residence as applied to juridical persons, a term which appears to comprehend permanent as well as temporary residence. The Court cannot thus accept the petitioners' theory that corporations may not have a residence (i.e., the place where they operate and transact business) separate from their domicile (i.e., the state of their formation or organization), and that they may be considered by other states as residents only for limited and exclusive purposes. Of course, as petitioners correctly aver, it is not really the grant of a license to a foreign corporation to do business in this country that makes it a resident; the license merely gives legitimacy to its doing business here. What effectively makes such a foreign corporation a resident corporation in the Philippines is its actually being in the Philippines and licitly doing business here, "locality of existence" being, to repeat, the "necessary element in . . . (the) signification" of the term, resident corporation. Neither can the Court accept the theory that the omission by the banks in their petition for involuntary insolvency of an explicit and categorical statement that they are "residents of the Philippine Islands," is fatal to their cause. In truth, in light of the concept of resident foreign corporations just expounded, when they alleged in that petition that they are foreign banking corporations, licensed to do business in the Philippines, and actually doing business in this Country through branch offices or agencies, they were in effect stating that they are resident foreign corporations in the Philippines. There is, of course, as petitioners argue, no substantive law explicitly granting foreign banks the power to petition for the adjudication of a Philippine corporation as a bankrupt. This is inconsequential, for neither is there any legal provision expressly giving domestic banks the same power, although their capacity to petition for insolvency can scarcely be disputed and is not in truth disputed by petitioners. The law plainly grants to a juridical person, whether it be a bank or not or it be a foreign or domestic corporation, as to natural persons as well, such a power to petition for the adjudication of bankruptcy of any person, natural or juridical, provided that it is a resident corporation and joins at least two other residents in presenting the petition to the Bankruptcy Court.

The petitioners next argue that "Philippine law is emphatic that only foreign corporations whose own laws give Philippine nationals reciprocal rights may do business in the Philippines." As basis for the argument they invoke Section 123 of the Corporation Code which, however, does not formulate the proposition in the same way. Section 123 does not say, as petitioners assert, that it is required that the laws under which foreign corporations are formed "give Philippine nationals, reciprocal rights." What it does say is that the laws of the country or state under which a foreign corporation is "formed, organized or existing . . . allow Filipino citizens and corporations to do business in its own country or state," which is not quite the same thing. Now, it seems to the Court that there can be no serious debate about the fact that the laws of the countries under which the three (3) respondent banks were formed or organized (Hongkong and the United States) do "allow Filipino citizens and corporations to do business" in their own territory and jurisdiction. It also seems to the Court quite apparent that the Insolvency Law contains no requirement that the laws of the state under which a foreign corporation has been formed or organized should grant reciprocal rights to Philippine citizens to apply for involuntary insolvency of a resident or citizen thereof. The petitioners' point is thus not well taken and need not be belabored. That the Monetary Board can not appoint a conservator or receiver for a foreign bank or order its liquidation having only the power to revoke its license, subject to such proceedings as the Solicitor General may thereafter deem proper to protect its creditors, which is another point that petitioners seek to make, is of no moment. It has no logical connection to the matter of whether or not the foreign bank may properly ask for a judicial declaration of the involuntary insolvency of a domestic corporation, which is the issue at hand. The fact is, in any event, that the law is not lacking in sanctions against foreign banks or powerless to protect the latter's creditors. The petitioners contend, too, that the respondent banks have come to court with unclean hands, their filing of the petition for involuntary insolvency being an attempt to defeat validly acquired rights of domestic corporations. The Court wishes to simply point out that the effects of the institution of bankruptcy proceedings on all the creditors of the alleged bankrupt are clearly spelled out by the law, and will be observed by the Insolvency Court regardless of whatever motives apart from the desire to share in the assets of the insolvent in satisfying its credits that the party instituting the proceedings might have. Still another argument put forth by the petitioners is that the three banks' failure to incorporate their branches in the Philippines into new banks in accordance with said Section 68 of the General Banking Act connotes an intention on their part to continue as residents of their respective states of incorporation and not to be regarded as residents of the Philippines. The argument is based on an incomplete and inaccurate quotation of the cited Section. What Section 68 required of a "foreign bank presently having branches and agencies in the Philippines, . . . within one year from the effectivity" of the General Banking Act, was to comply with any of three (3) options, not merely with one sole requirement. These three (3) options are the following: 1) (that singled out and quoted by the petitioners, i.e.:) "incorporate its branch or branches into a new bank in accordance with Philippine laws . . . ; or 2) "assign capital permanently to the local branch with the concurrent maintenance of a 'net due to' head office account which shall include all net amounts due to other branches outside the Philippines in an amount which when added to the assigned capital shall at all times be not less than the minimum amount of capital accounts required for domestic

commercial banks under section twentytwo of this Act;" or 3) "maintain a "net due to" head office account which shall include all net amounts due to other branches outside the Philippines, in an amount which shall not be less than the minimum amount of capital accounts required for domestic commercial banks under section twentytwo of this Act." The less said about this argument then, the better. The petitioners allege that three days before respondent banks filed their petition for involuntary insolvency against CMI, they received from the latter substantial payments on account in the aggregate amount of P6,010,800.00, with the result that they were "preferred in the distribution of CMI's assets thereby defrauding other creditors of CMI." Non sequitur. It is in any case a circumstance that the Bankruptcy Court may well take into consideration in determining the manner and proportion by which the assets of the insolvent company shall be distributed among its creditors; but it should not be considered a ground for giving the petition for insolvency short shrift. Moreover, the payment adverted to does not appear to be all that large. The total liabilities of CMI to the three respondent banks as of December, 1981 was P21,531,336.91, and US$14,485,814.85. Converted into Philippine currency at the rate of P7.899 to the dollar, the average rate of exchange during December, 1981, 30 the dollar account would be P114,423,451.50. Thus, the aggregate liabilities of CMI to the banks, expressed in Philippine currency, was P135,954,788.41 as of December, 1981, and therefore the payment to them of P6,010,800.00 constituted only some 4.42% of the total indebtedness. WHEREFORE, the petition is DENIED and the challenged Decision of the Court of Appeals is AFFIRMED in toto, with costs against the petitioners. SO ORDERED.

G.R. No. L-825

July 20, 1948

ROMAN MABANAG, plaintiff-appellant, vs. JOSEPH M. GALLEMORE, defendant-appellee. This case, here on appeal from an order dismissal by the Court of First Instance of Occidental Misamis, raises the question of the court's jurisdiction. More specifically, the question is whether the action is in personam or one in rem. The trial court opined that it is the first and that it "has no authority nor jurisdiction to render judgment against the herein defendant, Joseph M. Gallemore for being a nonresident. The purpose of the action is to recover P735.18, an amount said to have been paid by the plaintiff to the defendant for two parcels of land whose sale was afterward annulled. The defendant is said to be residing in Los Angeles, California, U. S. A. He has no property in the Philippine except an alleged debt owing him by a resident of the municipality of Occidental Misamis. This debt, upon petition of the plaintiff, after the filing of the complaint and before the suit was dismissed, was attached to the extent of plaintiff's claim for the payment of which the action was brought. But the attachment was dissolved in the same order dismissing the case. It was Atty. Valeriano S. Kaamino who has amicus curi filed the motion to dismiss and to set aside the attachment. There is no appearance before this Court to oppose the appeal.
Section 2, Rule 5, of the Rules of Court provides: If any of the defendants does not reside and is not found in the Philippines, and the action effects the personal status of the plaintiff, or any property of the defendant located in the Philippines, the action may be commenced and tried in the province where the plaintiff resides or the property, or any portion thereof, is situated or found.

into the actual custody of the law, or it may result from the institution of legal proceedings wherein, under special provisions of law, the power of the court over the property is recognized and made effective. In the latter case the property, though at all times within the potential power of the court, may never be taken into actual custody at all. An illustration of the jurisdiction acquired by actual seizure is found in attachment proceedings, where the property is seized at the beginning of the action, or some subsequent stage of its progress, and held to abide the final event of the litigation. An illustration of what we term potential jurisdiction over the res, is found in the proceeding to register the title of land under our system for the registration of land. Here the court, without taking actual physical control over the property assumes, at the instance of some person claiming to be owner, to exercise a jurisdiction in rem over the property and to adjudicate the title in favor of the petitioner against all the world. (Banco EspaolFilipino vs. Palanca, supra, 927-928.). In an ordinary attachment proceeding, if the defendant is not personally served, the preliminary seizure is to be considered necessary in order to confer jurisdiction upon the court. In this case the lien on the property is acquired by the seizure; and the purpose of the proceeding is to subject the property to that lien. If a lien already exists, whether created by mortgage, contract, or statute, the preliminary seizure is not necessary; and the court proceeds to enforce such lien in the manner provided by law precisely as though the property had been seized upon attachment. (Roller vs. Holly, 176 U.S., 398, 405; 44 Law. ed., 520.) It results that the mere circumstance that in an attachment the property may be seized at the inception of the proceedings, while in the foreclosure suit it is not taken into legal custody until the time comes for the sale, does not materially affect the fundamental principle involved in both cases, which is that the court is here exercising a jurisdiction over the property in a proceeding directed essentially in rem. (Id., 929930.). When, however, the action relates to property located in the Philippines, the Philippine courts may validly try the case, upon the principles that a "State, through its tribunals, may subject property situated within its limit owned by non-residents to the payment of the demand of its own citizens against them; and the exercise of this jurisdiction in no respect infringes upon the sovereignty of the State were the owners are domiciled. Every State owes protection to its own citizens; and, when non-residents deal with them, it is a legitimate and just exercise of authority to hold any appropriate any property owned by such non-residents to satisfy the claims of its citizens. It is in virtue of the State's jurisdiction over the property of the nonresident situated within its limits that its tribunals can inquire into the non-resident's obligations to its own citizens, and the inquiry can then be carried only to the extent necessary to control disposition of the property. If the non-resident has no property in the State, there is nothing upon which the tribunals can adjudicate. (Slade Perkins vs. Dizon, 40 Off. Gaz. [3d Supplement], No. 7, p. 216.). A fuller statement of the principle whereunder attachment or garnishment of property of a non-resident defendant confers jurisdiction on the court in an otherwise personal action, appears in two well known and authoritative works: The main action in an attachment or garnishment suit is in rem until jurisdiction of the defendant is secured. Thereafter, it is in personam and also in rem, unless jurisdiction of the res is lost as by

The Philippine leading cases in which this Rule, or its counterpart in the former Code of Civil Procedure, section 377 and 395, were cited and applied, are Banco EspaolFilipino vs. Palanca, 37 Phil. 921, and Slade Perkins vs. Dizon, 40 Off. Gaz., [3d Suppl.], No. 7, p. 216. The gist of this Court's ruling in these cases, in so far as it is relevant to the present issues, is given in I Moran's Comments on the Rules of Court, 2d Ed., 105: As a general rule, when the defendant is not residing and is not found in the Philippines, the Philippine courts cannot try any case against him because of the impossibility of acquiring jurisdiction over his person, unless he voluntarily appears in court. But, when the action affects the personal status of the plaintiff residing in the Philippines, or is intended to seize or dispose of any property, real or personal, of the defendant, located in the Philippines, it may be validly tried by the Philippine courts, for then, they have jurisdiction over the res, i.e., the personal status of the plaintiff or the property of the defendant, and their jurisdiction over the person of the nonresident defendant is not essential. Venue in such cases may be laid in the province where the plaintiff whose personal status is in question resides, or where the property of the defendant or a part thereof involved in the litigation is located. Literally this Court said: Jurisdiction over the property which is the subject of litigation may result either from a seizure of the property under legal process, whereby it is brought

dissolution of the attachment. If jurisdiction of the defendant is acquired but jurisdiction of the res is lost, it is then purely in personam. . . a proceeding against property without jurisdiction of the person of the defendant is in substance a proceeding in rem; and where there is jurisdiction of the defendant, but the proceedings against the property continues, that proceedings is none the less necessarily in rem, although in form there is but a single proceeding. (4 Am. Jur., 556-557.) As the remedy is administered in some states, the theory of an attachment, whether it is by process against or to subject the property or effects of a resident or non-resident of the state, is that it partakes essentially of the nature and character of the proceeding in personam and not of a proceeding in rem. And if the defendant appears the action proceeds in accordance with the practice governing proceedings in personam. But were the defendant fails to appear in the action, the proceeding is to be considered as one in the nature of a proceedingin rem. And where the court acts directly on the property, the title thereof being charged by the court without the intervention of the party, the proceeding unquestionably is one in rem in the fullest meaning of the term. In attachment proceedings against a non-resident defendant where personal service on him is lacking, it is elementary that the court must obtain jurisdiction of the property of the defendant. If no steps have been taken to acquire jurisdiction of the defendant's person, and he has not appeared and answered or otherwise submitted himself to the jurisdiction of the court, the court is without jurisdiction to render judgment until there has been a lawful seizure of property owned by him within the jurisdiction of the court. (2 R. C. L., 800-804.). Tested by the foregoing decisions and authorities, the Court has acquired jurisdiction of the case at bar by virtue of the attachment of the defendant's credit. Those authorities and decisions, so plain and comprehensive as to make any discussion unnecessary, are in agreement that though no jurisdiction is obtained over the debtor's person, the case may proceed to judgment if there is property in the custody of the court that can be applied to its satisfaction. It is our judgment that the court below erred in dismissing the case and dissolving the attachment; and it is ordered that, upon petition of the plaintiff, it issue a new writ of attachment and then proceed to trial. The costs of this appeal will be charged to defendant and appellee.

PHILIPPINE COMMERCIAL G.R. No. 175587 INTERNATIONAL BANK, - versus JOSEPH ANTHONY M. ALEJANDRO September 21, 2007 DECISION This petition for review assails the May 31, 2006 Decision[1] of the Court of Appeals in CA-G.R. CV No. 78200 affirming the August 30, 2000 Decision[2] of the Regional Trial Court of Makati, which granted respondent Joseph Anthony M. Alejandros claim for damages arising from petitioner Philippine Commercial International Banks (PCIB) invalid garnishment of respondents deposits. On October 23, 1997, petitioner filed against respondent a complaint[3] 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 petitioners 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 parte[7] 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 quash[9] 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 respondents 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 respondents residence considering that it has personal and official knowledge that for purposes of service of summons, respondents residence and office addresses are located in the Philippines. The dispositive portion of the courts decision is as follows:
WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby GRANTED, and the ORDER of 24 October 1997 is hereby RECONSIDERED and SET ASIDE and the WRIT OF attachment of the same is hereby DISCHARGED. SO ORDERED.[11]

With the denial[12] of petitioners 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 Million [17] on the attachment bond (posted by Prudential Guarantee & Assurance, Inc., under JCL(4) No. 01081, Bond No. HO46764-97) 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 attorneys 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 petitioners 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 respondents

Philippine residence and office address goes into the very issue of the trial courts 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 attorneys fees, to be satisfied against the attachment bond under Prudential Guarantee & Assurance, Inc. JCL (4) No. 01081. SO ORDERED.[22]

Petitioners 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 defendants permanent residence in METRO-MANILA, either in defendants 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 defendants temporary home and business addresses in Hongkong. It is therefore clear that plaintiff could not deny their personal and official knowledge that defendants 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 defendants peso deposits assigned with the bank to secure the loan and as proof that the withdrawal was not intended to defraud plaintiff as creditor is that plaintiff approved and allowed said withdrawals. It is even noted that when the Court granted the prayer for attachment it was mainly on the first ground under Section 1(f) of Rule 57 of the 1997 Rules of Civil Procedure, that defendant resides out of the Philippines. On the above findings, it is obvious that plaintiff already knew from the beginning the deficiency of its second ground for attachment [i.e.,] disposing properties with intent to defraud his creditors, and therefore plaintiff had to resort to this misrepresentation that defendant was residing out of the Philippines and suppressed the fact that defendants 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

Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals denied petitioners motion for reconsideration but granted that of respondents by ordering petitioner to pay additionalP5Million 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.

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 attorneys 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. Escobars protestation is now too late in the day. The question of the illegality of the attachment and Escobars 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. Escobars 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 (Hanils) 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 petitioners 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 petitioners contention that respondent can be considered a resident who is temporarily out of the Philippines upon whom service of summons may be effected by publication, and therefore qualifies as among those against whom a writ of attachment may be issued under Section 1, paragraph (f), Rule 57 of the Rules of Court which provides: (f) In an action against a party x x x on whom summons may be served by publication. In so arguing, petitioner attempts to give the impression that although it erroneously invoked the ground that respondent does not reside in the Philippines, it should not be made to pay damages because it is in fact entitled to a writ of attachment had it invoked the proper ground under Rule 57. However, even on this alternative ground, petitioner is still not entitled to the issuance of a writ of attachment. The circumstances under which a writ of preliminary attachment may be issued are set forth in Section 1, Rule 57 of the Rules of Court, to wit: SEC. 1. Grounds upon which attachment may issue. At the commencement of the action or at any time before entry of judgment, a plaintiff or

any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: (a) In an action for the recovery of a specified amount of money or damages, other than moral and exemplary, on a cause of action arising from law, contract, quasi-contract, delict or quasi-delict against a party who is about to depart from the Philippines with intent to defraud his creditors; (b) In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty; (c) In an action to recover the possession of personal property unjustly or fraudulently taken, detained, or converted, when the property, or any part thereof, has been concealed, removed, or disposed of to prevent its being found or taken by the applicant or an authorized person; (d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof; (e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors; (f) In an action against a party who resides out of the Philippines, or on whom summons may be served by publication. The purposes of preliminary attachment are: (1) to seize the property of the debtor in advance of final judgment and to hold it for purposes of satisfying said judgment, as in the grounds stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or (2) to acquire jurisdiction over the action by actual or constructive seizure of the property in those instances where personal or substituted service of summons on the defendant cannot be effected, as in paragraph (f) of the same provision.[27] Corollarily, in actions in personam, such as the instant case for collection of sum of money, [28] summons must be served by personal or substituted service, otherwise the court will not acquire jurisdiction over the defendant. In case the defendant does not reside and is not found in the Philippines (and hence personal and substituted service cannot be effected), the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is to convert the action into a proceeding in rem or quasi in rem by attaching the property of the defendant.[29] Thus, in order to acquire jurisdiction in actions in personam where defendant resides out of and is not found in the Philippines, it becomes a matter of course for the court to convert the action into a proceeding in rem or quasi in rem by attaching the defendants property. The service of summons in this case (which may be by publication coupled with the sending by registered mail of the copy of the summons and the court order to the last known address of the defendant), is no longer for the purpose of acquiring jurisdiction but for compliance with the requirements of due process.[30]

However, where the defendant is a resident who is temporarily out of the Philippines, attachment of his/her property in an action in personam, is not always necessary in order for the court to acquire jurisdiction to hear the case. Section 16, Rule 14 of the Rules of Court reads: Sec. 16. Residents temporarily out of the Philippines. When an action is commenced against a defendant who ordinarily resides within the Philippines, but who is temporarily out of it, service may, by leave of court, be also effected out of the Philippines, as under the preceding section. The preceding section referred to in the above provision is Section 15 which provides for extraterritorial service (a) personal service out of the Philippines, (b) publication coupled with the sending by registered mail of the copy of the summons and the court order to the last known address of the defendant; or (c) in any other manner which the court may deem sufficient. In Montalban v. Maximo,[31] however, the Court held that substituted service of summons (under the present Section 7, Rule 14 of the Rules of Court) is the normal mode of service of summons that will confer jurisdiction on the court over the person of residents temporarily out of the Philippines. Meaning, service of summons may be effected by (a) leaving copies of the summons at the defendants residence with some person of suitable discretion residing therein, or (b) by leaving copies at the defendants 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 defendants property in order to have authority to try the case. Where the plaintiff seeks to attach the defendants 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 defendants 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 courts issuance of the writ was for the sole purpose of acquiring jurisdiction to hear and decide the case. Had the allegations in the complaint disclosed that respondent has a residence in Quezon City and an office in Makati City, the trial court, if only for the purpose of acquiring jurisdiction, could have served summons by substituted service on the said addresses, instead of attaching the property of the defendant. The rules on the application of a writ of attachment must be strictly construed in favor of the defendant. For attachment is harsh, extraordinary, and summary in nature; it is a rigorous remedy which exposes the debtor to humiliation and annoyance. [35] It should be resorted to only when necessary and as a last remedy. It is clear from the foregoing that even on the allegation that respondent is a resident temporarily out of the Philippines, petitioner is still not entitled to a writ of attachment because the trial court could acquire jurisdiction over the case by substituted service instead of attaching the property of the defendant. The misrepresentation of petitioner that respondent does not reside in the Philippines and its omission of his local addresses was thus a deliberate move to ensure that the application for the writ will be granted. In light of the foregoing, the Court of Appeals properly sustained the finding of the trial court that petitioner is liable for damages for the wrongful issuance of a writ of attachment against respondent. Anent the actual damages, the Court of Appeals is correct in not awarding the same inasmuch as the respondent failed to establish the amount garnished by petitioner. It is a well settled rule that one who has been injured by a wrongful attachment can recover damages for the actual loss resulting therefrom. But for such losses to be recoverable, they must constitute actual damages duly established by competent proofs, which are, however, wanting in the present case.[36] Nevertheless, nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right. Indeed, nominal damages are damages in name only and not in fact. [37] They are recoverable where some injury has been done but the pecuniary value of the damage is not shown by evidence and are thus subject to the discretion of the court according to the circumstances of the case.[38] In this case, the award of nominal damages is proper considering that the right of respondent to use his money has been violated by its garnishment. The amount of nominal damages must, however, be reduced fromP2 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. Likewise, the award of attorneys 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 attorneys fees should be fixed not at P1 Million, but only at P200,000.00. The courts below correctly awarded moral damages on account of petitioners 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 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 petitioners 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 petitioners 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 attorneys 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. HO46764-97. No pronouncement as to costs. SO ORDERED.

G.R. No. 84034 December 22, 1988 ALBERTO SIEVERT, petitioner, vs. COURT OF APPEALS, HON. JUDGE ARTEMON D. LUNA and AURELIO CAMPOSANO, respondents. King & Adorio Law Offices for petitioner. Moises C. Kallos for private respondent.

writ of preliminary attachment against petitioner before summons is served on the latter. We rule for respondent Judge. Under Sec. 1, Rule 57, it is clear that, at the commencement of the action, a party may have the property of the adverse party attached as security. The resolution of this issue depends, therefore, on what is meant by "Commencement of the action." Moran, citing American jurisprudence on this point, stated thus: "Commencement of action. Action is commenced by filing of the complaint, even though summons is not issued until a later date." (Comment on the Rules of Court, Vol. I, p. 150, 1979). Thus, a writ of preliminary attachment may issue upon filing of the complaint even before issuance of the summons. WHEREFORE, for lack of merit, the petition is hereby denied and, accordingly, dismissed. (Emphasis supplied) 2 The petitioner is now before this Court on a Petition for Review on Certiorari, assailing the above-quoted decision of the Court of Appeals. The petitioner assigns two (2) errors: 1. The proceedings taken and the order issued on plaintiffs petition for attachment prior to the service of summons on the defendant were contrary to law and jurisprudence and violated the defendant's right to due process. 2. The Court of Appeals committed a grave abuse of discretion amounting to lack of jurisdiction in ruling that a writ of preliminary attachment may issue upon filing of the complaint even prior to issuance of the summons. 3 The two (2) assignments of error relate to the single issue which we perceive to be at stake here, that is, whether a court which has not acquired jurisdiction over the person of the defendant in the main case, may bind such defendant or his property by issuing a writ of preliminary attachment. Both the trial court and the Court of Appeals held that the defendant may be bound by a writ of preliminary attachment even before summons together with a copy of the complaint in the main case has been validly served upon him. We are unable to agree with the respondent courts. There is no question that a writ of preliminary attachment may be applied for a plaintiff "at the commencement of the action or at any time thereafter" in the cases enumerated in Section 1 of Rule 57 of the Revised Rules of Court. The issue posed in this case, however, is not to be resolved by determining when an action may be regarded as having been commenced, a point in time which, in any case, is not necessarily fixed and Identical regardless of the specific purpose for which the deter. nation is to be made. The critical time which must be Identified is, rather, when the trial court acquires authority under law to act coercively against the defendant or his property in a proceeding in attachment. We believe and so hold that critical time is the time of the vesting of jurisdiction in the court over the person of the defendant in the main case.

FELICIANO, J.: On 18 May 1988 petitioner Alberto Sievert a citizen and resident of the Philippines received by mail a Petition for Issuance of a Preliminary Attachment filed with the Regional Trial Court of Manila Branch 32 in Civil Case No. 88-44346. Petitioner had not previously received any summons and any copy of a complaint against him in Civil Case No. 88-44346. On the day set for hearing of the Petition for a Preliminary Writ of Attachment, petitioner's counsel went before the trial court and entered a special appearance for the limited purpose of objecting to the jurisdiction of the court. He simultaneously filed a written objection to the jurisdiction of the trial court to hear or act upon the Petition for Issuance of a Preliminary Writ of Attachment. In this written objection, petitioner prayed for denial of that Petition for lack of jurisdiction over the person of the petitioner (defendant therein) upon the ground that since no summons had been served upon him in the main case, no jurisdiction over the person of the petitioner had been acquired by the trial court. The trial court denied the petitioner's objection and issued in open court an order which, in relevant part, read as follows: Under Section 1, Rule 57, Rules of Court, it is clear that a plaintiff or any proper party may "... at the commencement of the action or at any time thereafter, have the property of the adverse party attached as the security for the satisfaction of any judgment ..." This rule would overrule the contention that this Court has no jurisdiction to act on the application, although if counsel for defendant so desire, she is given five (5) days from today within which to submit her further position why the writ should not be issued, upon the receipt of which or expiration of the period, the pending incident shall be considered submitted for resolution. (Underscoring in the original) 1 Thereupon, on the same day, petitioner filed a Petition for certiorari with the Court of Appeals. On 13 July 1988, the respondent appellate court rendered a decision, notable principally for its brevity, dismissing the Petition. The relevant portion of the Court of Appeals' decision is quoted below: The grounds raised in this petition state that the court a quo had not acquired jurisdiction over defendant (now petitioner) since no summons had been served on him, and that respondent Judge had committed a grave abuse of discretion in issuing the questioned order without jurisdiction. In short, the issue presented to us is whether respondent Judge may issue a

Attachment is an ancillary remedy. It is not sought for its own sake b attaching party to realize upon relief sought and expected to be gran

action . 4 A court which has not acquired jurisdiction over the person of defendant, cannot bind that defendant whether in the main case or in any ancillary proceeding such as attachment proceedings. The service of a petition for preliminary attachment without the prior or simultaneous service of summons and a copy of the complaint in the main case and that is what happened in this case does not of course confer jurisdiction upon the issuing court over the person of the defendant. Ordinarily, the prayer in a petition for a writ of preliminary attachment is embodied or incorporated in the main complaint itself as one of the forms of relief sought in such complaint. Thus, valid service of summons and a copy of the complaint will in such case vest jurisdiction in the court over the defendant both for purposes of the main case and for purposes of the ancillary remedy of attachment. In such case, notice of the main case is at the same time notice of the auxiliary proceeding in attachment. Where, however, the petition for a writ of preliminary attachment is embodied in a discrete pleading, such petition must be served either simultaneously with service of summons and a copy of the main complaint, or after jurisdiction over the defendant has already been acquired by such service of summons. Notice of the separate attachment petition is not notice of the main action. Put a little differently, jurisdiction whetherratione personae or ratione materiae in an attachment proceeding is ancillary to jurisdiction ratione personae or ratione materiae in the main action against the defendant. If a court has no jurisdiction over the subject matter or over the person of the defendant in the principal action, it simply has no jurisdiction to issue a writ of preliminary attachment against the defendant or his property. It is basic that the requirements of the Rules of Court for issuance of preliminary attachment must be strictly and faithfully complied with in view of the nature of this provisional remedy. In Salas v. Adil, 5 this Court described preliminary attachment as a rigorous remedy which exposes the debtor to humiliation and annoyance, such [that] it should not be abused as to cause unnecessary prejudice. It is, therefore; the duty of the court, before issuing the writ, to ensure that all the requisites of the law have been complied with; otherwise the judge acts in excess of his jurisdiction and the writ so issued shall be null and void. (Emphasis supplied ) 6 The above words apply with greater force in respect of that most fundamental of requisites, the jurisdiction of the court issuing attachment over the person of the defendant. In the case at bar, the want of jurisdiction of the trial court to proceed in the main case against the defendant is quite clear. It is not disputed that neither service of summons with a copy of the complaint nor voluntary appearance of petitioner Sievert was had in this case. Yet, the trial court proceeded to hear the petition for issuance of the writ. This is reversible error and must be corrected on certiorari. WHEREFORE, the Petition for Review on certiorari is GRANTED due course and the Order of the trial court dated 20 May 1988 and the Decision of the Court of Appeals dated 13 July 1988 are hereby SET ASIDE and ANNULLED. No pronouncement as to costs. SO ORDERED.

G.R. No. 93262 December 29, 1991 DAVAO LIGHT & POWER CO., INC., petitioner, vs. THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLAND TOURIST INN, and TEODORICO ADARNA, respondents. Breva & Breva Law Offices for petitioner. Goc-Ong & Associates for private respondents.

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 consequently, the petition for review will have to be granted. It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of the plaintiff has been vested in the court, but before the acquisition of jurisdiction over the person of the defendant (either by service of summons or his voluntary submission to the court's authority), nothing can be validly done by the plaintiff or the court. It is wrong to assume that the validity of acts done during this period should be defendant on, or held in suspension until, the actual obtention of jurisdiction over the defendant's person. The obtention by the court of jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person of the plaintiff or over the subject-matter or nature of the action, or the res or object hereof. An action or proceeding is commenced by the filing of the complaint or other initiatory pleading. 4 By that act, the jurisdiction of the court over the subject matter or nature of the action or proceeding is invoked or called into activity; 5and it is thus that the court acquires jurisdiction over said subject matter or nature of the action. 6 And it is by that self-same act of the plaintiff (or petitioner) of filing the complaint (or other appropriate pleading) by which he signifies his submission to the court's power and authority that jurisdiction is acquired by the court over his person. 7 On the other hand, jurisdiction over the person of the defendant is obtained, as above stated, by the service of summons or other coercive process upon

NARVASA, J.:p Subject of the appellate proceedings at bar is the decision of the Court of Appeals in CA-G.R. Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna v. Davao Light & Power Co., Inc.," promulgated on May 4, 1990. 1 That decision nullified and set aside 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 ofcertiorari 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 preliminary

him or by his voluntary submission to the authority of the court. 8 The events that follow the filing of the complaint as a matter of routine are well known. After the complaint is filed, summons issues to the defendant, the summons is then transmitted to the sheriff, and finally, service of the summons is effected on the defendant in any of the ways authorized by the Rules of Court. There is thus ordinarily some appreciable interval of time between the day of the filing of the complaint and the day of service of summons of the defendant. During this period, different acts may be done by the plaintiff or by the Court, which are unquestionable validity and propriety. Among these, for example, are the appointment of a guardian ad litem, 9 the grant of authority to the plaintiff to prosecute the suit as a pauper litigant, 10 the amendment of the complaint by the plaintiff as a matter of right without leave of court, 11 authorization by the Court of service of summons by publication, 12 the dismissal of the action by the plaintiff on mere notice. 13 This, too, is true with regard to the provisional remedies of preliminary attachment, preliminary injunction, receivership or replevin. 14 They may be validly and properly applied for and granted even before the defendant is summoned or is heard from. A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of which a plaintiff or other party may, at the commencement of the action or at any time thereafter, have the property of the adverse party taken into the custody of the court as security for the satisfaction of any judgment that may be recovered. 15 It is a remedy which is purely statutory in respect of which the law requires a strict construction of the provisions granting it. 16 Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before acquisition of jurisdiction over the person of the defendant. Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time thereafter." 17The phase, "at the commencement of the action," obviously refers to the date of the filing of the complaint which, as above pointed out, is the date that marks "the commencement of the action;" 18 and the reference plainly is to a time before summons is served on the defendant, or even before summons issues. What the rule is saying quite clearly is that after an action is properly commenced by the filing of the complaint and the payment of all requisite docket and other fees the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counter-claim, cross-claim, third-party claim) and for the Trial 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 and the probable seizure of their properties, and thus give them the advantage of time to hide their assets, leaving the creditorplaintiff 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 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 withdrawn. 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 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 inSievert, 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.

G.R. No. 102448 August 5, 1992 RICARDO CUARTERO, petitioner, vs. COURT OF APPEALS, ROBERTO EVANGELISTA and FELICIA EVANGELISTA, respondents. Abesamis, Medialdea & Abesamis for petitioner. Eufemio Law Offices for private respondent.

On June 27, 1991, the Court of Appeals granted the petition for certiorari and rendered the questioned decision. The motion for reconsideration filed by herein petitioner Cuartero was denied for lack of merit in a resolution dated October 22, 1991. Hence, the present recourse to this Court. The petitioner raises the following assignment of errors: I THE COURT OF APPEALS ERRED AND COMMITTED A GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK OF JURISDICTION WHEN IT HELD THAT THE REGIONAL TRIAL COURT DID NOT ACQUIRE JURISDICTION OVER RESPONDENT SPOUSES. II THE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT HELD THAT THE REGIONAL TRIAL COURT COULD NOT VALIDLY ISSUE THE SUBJECT WRIT OF PRELIMINARY ATTACHMENT WHICH IS AN ANCILLARY REMEDY. (Rollo, p. 13) The Court of Appeals' decision is grounded on its finding that the trial court did not acquire any jurisdiction over the person of the defendants (private respondents herein). It declared that: . . . the want of jurisdiction of the trial court to proceed in the main case as well as the ancillary remedy of attachment is quite clear. It is not disputed that neither service of summons with a copy of the complaint nor voluntary appearance of petitioners was had in this case before the trial court issued the assailed order dated August 24, 1990, as well as the writ of preliminary attachment dated September 19, 1990. This is reversible error and must be corrected on certiorari. (Rollo, p. 24) The appellate tribunal relied on the case of Sievert v. Court of Appeals, 168 SCRA 692 (1988) in arriving at the foregoing conclusion. It stated that: Valid service of summons and a copy of the complaint vest jurisdiction in the court over the defendant both for the purpose of the main case and for purposes of the ancillary remedy of attachment and a court which has not acquired jurisdiction over the person of defendant, cannot bind the defendant whether in the main case or in any ancillary proceeding such as attachment proceedings (Sievert v. Court of Appeals, 168 SCRA 692). (Rollo, p. 24) The private respondents, in their comment, adopted and reiterated the aforementioned ruling of the Court of Appeals. They added that aside from the want of jurisdiction, no proper ground also existed for the issuance of the writ of preliminary attachment. They stress that the fraud in contracting the debt or incurring the obligation upon which the action is brought which comprises a ground for attachment must have already been intended at the inception of the contract. According to them, there was no intent to defraud the petitioner when the postdated checks were issued inasmuch as the latter was aware that the same were not yet funded and that they were issued only for purposes of creating an evidence to prove a preexisting obligation.

GUTIERREZ, JR., J.: This is a petition for review on certiorari seeking to annul the decision of the Court of Appeals promulgated on June 27, 1991 as well as the subsequent resolution dated October 22, 1991 denying the motion for reconsideration in CA-G.R. SP No. 23199 entitled "Spouses Roberto and Felicia Evangelista v. Honorable Cezar C. Peralejo, Presiding Judge Regional Trial Court of Quezon City, Branch 98, and Ricardo Cuartero," which nullified the orders of the trial court dated August 24, 1990 and October 4, 1990 and cancelled the writ of preliminary attachment issued on September 19, 1990. Following are the series of events giving rise to the present controversy. On August 20, 1990, petitioner Ricardo Cuartero filed a complaint before the Regional Trial Court of Quezon City against the private respondents, Evangelista spouses, for a sum of money plus damages with a prayer for the issuance of a writ of preliminary attachment. The complaint was docketed as Civil Case No. Q-90-6471. On August 24, 1990, the lower court issued an order granting ex-parte the petitioner's prayer for the issuance of a writ of preliminary attachment. On September 19, 1990, the writ of preliminary attachment was issued pursuant to the trial court's order dated August 24, 1990. On the same day, the summons for the spouses Evangelista was likewise prepared. The following day, that is, on September 20, 1990, a copy of the writ of preliminary attachment, the order dated August 24, 1990, the summons and the complaint were all simultaneously served upon the private respondents at their residence. Immediately thereafter, Deputy Sheriff Ernesto L. Sula levied, attached and pulled out the properties in compliance with the court's directive to attach all the properties of private respondents not exempt from execution, or so much thereof as may be sufficient to satisfy the petitioner's principal claim in the amount of P2,171,794.91. Subsequently, the spouses Evangelista filed motion to set aside the order dated August 24, 1990 and discharge the writ of preliminary attachment for having been irregularly and improperly issued. On October 4, 1990, the lower court denied the motion for lack of merit. Private respondents, then, filed a special civil action for certiorari with the Court of Appeals questioning the orders of the lower court dated August 24, 1990 and October 4, 1990 with a prayer for a restraining order or writ of preliminary injunction to enjoin the judge from taking further proceedings below. In a Resolution dated October 31, 1990, the Court of Appeals resolved not to grant the prayer for restraining order or writ of preliminary injunction, there being no clear showing that the spouses Evangelista were entitled thereto.

Another point which the private respondents raised in their comment is the alleged violation of their constitutionally guaranteed right to due process when the writ was issued without notice and hearing. In the later case of Davao Light and Power Co., Inc. v. Court of Appeals, G.R. No. 93262, November 29, 1991, we had occasion to deal with certain misconceptions which may have arisen from our Sievert ruling. The question which was resolved in the Davao Light case is whether or not a writ of preliminary attachment may issue exparte against a defendant before the court acquires jurisdiction over the latter's person by service of summons or his voluntary submission to the court's authority. The Court answered in the affirmative. This should have clarified the matter but apparently another ruling is necessary. 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 might be secured in said action by the attaching creditor against the defendant (Adlawan v. Tomol, 184 SCRA 31 [1990] citing Virata v. Aquino, 53 SCRA 30-31 [1973]). Under section 3, Rule 57 of the Rules of Court, the only requisites for the issuance of the writ are the affidavit and bond of the applicant. As has been expressly ruled in BF Homes, Inc. v. Court of Appeals, 190 SCRA 262 (1990), citing Mindanao Savings and Loan Association, Inc. v. Court of Appeals, 172 SCRA 480 (1989), no notice to the adverse party or hearing of the application is required inasmuch as the time which the hearing will take could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues. In such a case, a hearing would render nugatory the purpose of this provisional remedy. The ruling remains good law. There is, thus, no merit in the private respondents' claim of violation of their constitutionally guaranteed right to due process. The writ of preliminary attachment can be applied for and granted at the commencement of the action or at any time thereafter (Section 1, Rule 57, Rules of Court). In Davao Light and Power, Co., Inc. v. Court of Appeals, supra , the phrase "at the commencement of the action" is interpreted as referring to the date of the filing of the complaint which is a time before summons is served on the defendant or even before summons issues. The Court added that . . . after an action is properly commenced by filing of the complaint and the payment of all requisite docket and other fees the plaintiff may apply and obtain a writ of preliminary attachment upon the fulfillment of the pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the defendant. And this, indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counterclaim, cross-claim, third-party-claim) and for the Trial Court to issue the writ exparte at the commencement of the action if it finds the application otherwise sufficient in form and substance. The Court also pointed out that: . . . It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of the plaintiff has been vested in the Court, but before acquisition of jurisdiction over the person of the

defendant (either by service of summons or his voluntary submission to the Court's authority), nothing can be validly done by the plaintiff or the Court. It is wrong to assume that the validity of acts done during the period should be dependent on, or held in suspension until, the actual obtention of jurisdiction over the defendants person. The obtention by the court of jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person of the plaintiff or over the subject matter or nature of the action, or the res or object thereof. It is clear from our pronouncements that a writ of preliminary attachment may issue even before summons is served upon the defendant. However, we have likewise ruled that the writ cannot bind and affect the defendant. However, we have likewise ruled that the writ cannot bind and affect the defendant until jurisdiction over his person is eventually obtained. Therefore, it is required that when the proper officer commences implementation of the writ of attachment, service of summons should be simultaneously made. It must be emphasized that the grant of the provisional remedy of attachment practically involves three stages: first, the court issues the order granting the application; second, the writ of attachment issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the defendant should first be obtained. However, once the implementation commences, it is required that the court must have acquired jurisdiction over the defendant for without such jurisdiction, the court has no power and authority to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant. In Sievert v. Court of Appeals, supra, cited by the Court of Appeals in its questioned decision, the writ of attachment issued ex-parte was struck down because when the writ of attachment was being implemented, no jurisdiction over the person of the defendant had as yet been obtained. The court had failed to serve the summons to the defendant. The circumstances in Sievert are different from those in the case at bar. When the writ of attachment was served on the spouses Evangelista, the summons and copy of the complaint were also simultaneously served. It is appropriate to reiterate this Court's exposition in the Davao Light and Power case cited earlier, to wit: . . . writs of attachment may properly issue ex-parte provided that the Court is satisfied that the relevant requisites therefore 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. The question as to whether a proper ground existed for the issuance of the writ is a question of fact the determination of which can only be had in appropriate proceedings conducted for the purpose (Peroxide Philippines

Corporation V. Court of Appeals, 199 SCRA 882 [1991]). It must be noted that the spouses Evangelista's motion to discharge the writ of preliminary attachment was denied by the lower court for lack of merit. There is no showing that there was an abuse of discretion on the part of the lower court in denying the motion. Moreover, an attachment may not be dissolved by a showing of its irregular or improper issuance if it is upon a ground which is at the same time the applicant's cause of action in the main case since an anomalous situation would result if the issues of the main case would be ventilated and resolved in a mere hearing of a motion (Davao Light and Power Co., Inc. v. Court of Appeals, supra, The Consolidated Bank and Trust Corp. (Solidbank) v. Court of Appeals, 197 SCRA 663 [1991]). In the present case, one of the allegations in petitioner's complaint below is that the defendant spouses induced the plaintiff to grant the loan by issuing postdated checks to cover the installment payments and a separate set of postdated cheeks for payment of the stipulated interest (Annex "B"). The issue of fraud, then, is clearly within the competence of the lower court in the main action. WHEREFORE, premises considered, the Court hereby GRANTS the petition. The challenged decision of the Court of Appeals is REVERSED, and the order and writ of attachment issued by Hon. Cezar C. Peralejo, Presiding Judge of Branch 98, Regional Trial Court of Quezon City against spouses Evangelista are hereby REINSTATED. No pronouncement as to costs. SO ORDERED.

G.R. No. L-46009 May 14, 1979 RICARDO T. SALAS and MARIA SALAS, petitioners, vs. HON. MIDPANTAO L. ADIL, as Judge of Branch II, Court of First Instance of Iloilo, ROSITA BEDRO and BENITA YU, respondents. Castro Law Office for petitioners. Tirso Espelete and Fortunato A. Padilla for private respondents.

intent to defraud their creditors especially the plaintiffs in this case. On May 13, 1977, respondent Judge issued ex-parte a Writ of Attachment "against the properties of the defendants particularly Lots Nos. 1 and 4 of Psc-2157 less the building standing thereon upon the plaintiffs filing a bond in the amount of P200,000.00 subject to the approval of this Court." After a surety bond in the amount of P200,000.00, executed on May 11, 1977 by the Central Surety and Insurance Company as surety was filed, the writ itself was issued by respondent Judge on May 16, 1977, directing the Sheriff to attach the properties abovementioned. On May 17, 1977, the Deputy Sheriff of Iloilo levied upon the aforesaid properties of petitioners. Contending that respondent Judge gravely abused his discretion in issuing the said Writ of Attachment, petitioners filed the present petition. In certiorari proceedings, the cardinal rule is that the court must be given the opportunity to correct itself, Thus, for the special civil action of certiorari to prosper, there must be no appeal nor any plain, speedy and adequate remedy in the ordinary course of law. Petitioners, therefore, must exhaust all available remedies in the lower court before filing a petition for certiorari, otherwise the petition shall be held to be premature. In the instant case, it appears that petitioners have adequate remedy under the law. They could have filed an application with the court a quo for the discharge of the attachment for improper or irregular issuance under section 13, Rule 57, of the Revised Rules of Court, which provides the following SEC. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached may also, at any time either before or after the release of the attached property, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who Salas vs. Adil 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 counteraffidavits or other evidence in addition to that on which the attachment was made. After hearing, the judge shall order the discharge of the attachment if it appears that it was improperly or irregularly issued and the defect is not cured forthwith. Considering that petitioners have not availed of this remedy, the instant petition is premature. We deem it necessary, however, for the guidance of respondent Court and of the parties, to stress herein the nature of attachment as an extraordinary provisional remedy. A preliminary attachment is a rigorous remedy, which exposes the debtor to humiliation and annoyance, such it should not be abused as to cause unnecessary prejudice. It is, therefore, the duty of the court, before issuing the writ, to ensure that all the requisites of the law have been complied with; otherwise the judge acts in excess of his jurisdiction and the so issued shall be null and void . 1 In Carpio v. Macadaeg, 2 this Court said:

ANTONIO, J.: Certiorari to nullify the Order of Attachment of May 13, 1977, as well as the Writ of Attachment dated May 16, 1977, issued by respondent Judge in Civil Case No. 10770 of the Court of First Instance of Iloilo, entitled " Rosita Bedro and Benita Yu v. Spouses Ricardo T. Salas and Maria Salas, et al. On September 10, 1976, respondents Rosita Bedro and Benita Yu filed the afore-mentioned civil action with the Court of First Instance of Iloilo against herein petitioners Ricardo T. Salas and Maria Salas, the Philippine Commercial & Industrial Bank, in its capacity as Administrator of the Testate Estate of the deceased Charles Newton Hodges, and Avelina A. Magno, in her capacity as Administratrix of the Testate Estate of the deceased Linnie Jane Hodge to annul the deed of sale of Lot No. 5 executed by administrators of the Hodges Estate in favor of the Spouses Ricardo T. Salas and Maria Salas and for damages. The action for annulment was predicated upon the averment that Lot No. 5, being a subdivision road, is intend for public use and cannot be sold or disposed of by the Hodges Estate. The claim for damages was based on the assertion that after defendant spouses purchased Lots Nos. 2 and 3, they also purchased Lot No. 5 and thereafter "erected wooden posts, laid and plastered at the door of the house on Lot No. 3, with braces of hardwood, lumber and plywood nailed to the post", thereby preventing Rosita Bedro and Benita Yu from using the road on the afore-mentioned lot, Lot No. 5, and that as a result of such obstruction, private respondents Rosita Bedro and Benita Yu sustained actual damages in the amount of P114,000.00, plus the sum of Pl,000.00 as damages daily from June 30, 1976 due to the stoppage in the construction of their commercial buildings on Lot No. 3, and moral damages in the amount of P200,000.00. In their answer to the complaint, the Salas spouses, after specifically denying the material allegations in the complaint, stated that Lot No. 5 had been registered in the name of the C. N. Hodges as their exclusive private property and was never subjected to any servitude or easement of right of way in favor of any person; that any occupants of Lots Nos. 2 and 3 have direct access to Bonifacio Drive, a National Highway, hence, Lot No. 5 is neither needed nor required for the egress or ingress of the occupants thereof; and that private respondents, as a matter of fact, since 1964 had excluded and separated completely their property (Lots Nos. 2 and 3) from Lot No. 5 by building a concrete wall on the boundary thereon without providing any gate as entrance or exit towards Lot No. 5; and that private respondents have no personality to question the validity of the deed of sale over Lot No. 5 since they were not parties to the same and the sale was duly approved by the probate court. In a motion dated May 12, 1977, private respondents filed a Motion for Attachment, alleging, among others, that the case was "for annulment of a deed of sale and recovery of damages" and that the defendants have removed or disposed of their properties or are about to do so with

Respondent Judge should not have issued the two writs of preliminary attachment (Annexes C and C-1) on Abaya's simple allegation that the petitioner was about to dispose of his property, thereby leaving no security for the satisfaction of any judgment. Mere removal or disposal of property, by itself, is not ground for issuance of preliminary attachment, notwithstanding absence of any security for the satisfaction of any judgment against the defendant. The removal or disposal, to justify preliminary attachment, must have been made with intent to defraud defendant's creditors. Respondent Judge in fact corrected himself. Acting on petitioner's motion to discharge attachment and apparently believing the correctness of the grounds alleged therein, he set aside the orders of attachment (Order of March 11, 1960, Annex F) But reversing himself again, he set aside his order of March 11, 1960 (Annex K, dated March 29, 1960). This he did apparently on Abaya's contention that petitioner was about to remove or dispose of his property in order to defraud his creditors, as examples of which disposals he pointed to the alleged sale of the horses and of petitioner's office furniture. ... These averments of fraudulent disposals were controverted by petitioner who ... reiterated the defenses against preliminary attachment which he had previously enumerated in his petition to discharge the two orders of attachment. Thus the question of fraudulent disposal was put in issue; and respondent Judge, before issuing the pre attachment anew, should have given the parties opportunity to prove their respective claims or, at the very least should have provided petitioner with the chance to show that he had not been disposing of his property in fraud of creditors. (citing National Coconut Corporation v. Pecson L-4296, Feb. 25, 1952, Villongco v. Panlilio, 6214, Nov. 20, 1953). And in Garcia v. Reyes, 3 considering the allegation that the debtors were removing or disposing of some of their properties with intent to defraud their creditors, 'this Court said that "(a)ll in all due process would seem to require that both parties further ventilate their respective contentions in a hearing that could indeed reveal the truth. Fairness would be served thereby, the demand of reason satisfied." Considering the gravity of the allegation that herein petitioners have removed or disposed of their properties or are about to do so with intent to defraud their creditors, and further considering that the affidavit in support of the pre attachment merely states such ground in general terms, without specific allegations of lances to show the reason why plaintiffs believe that defendants are disposing of their properties in fraud of creditors, it was incumbent upon respondent Judge to give notice to petitioners and to allow wherein evidence is them to present their position at a to be received. Moreover, it appears from the records that private respondents are claiming unliquidated damages, including moral damages, from petitioners. The authorities agree that the writ of attachment is not available 'm a suit for damages where the amount claimed is contingent or unliquidated. We think, however, that a rule sufficient for the determination of this case has been Further.

suggested and acted upon, and that the remedy does not exist where unliquidated damages were demanded. ... In Warwick v. Chase, 23 Md 161, it is said: 'It is necessary that the standard for ascertaining the amount of damages claimed should not only appear, but that it should be fixed and certain, and in no degree dependent on facts either speculative or Uncertain ... The general rule is, that unliquidated damages, ... cannot be recovered by attachment, unless the contract affords a certain measure or standard for ascertaining the amount of the damages ... 4

The statute authorizing the issuance of the writ of garnishment and that relating to the issuance of the writ of attachment ... have not been construed as authorizing the writs to be issued when the plaintiff's suit is technically an action for debt. Neither of the writs may be issued when the suit is for damages for tort, but they may be issued when the plaintiff's claim arises out of contract either express or implied, and the demand is liquidated, that is, the amount of the claim is not contingent, is capable of being definitely ascertained by the usual means of evidence, and does not rest in the discretion of the jury. 5 WHEREFORE, the instant petition is hereby DENIED, in order to enable petitioners to move before respondent Court for the discharge of the attachment on the ground of its improper and irregular issuance, pursuant to section 13, Rule 57, of the Revised Rules of Court, and for the aforesaid Court to act thereon in accordance with the foregoing.

G.R. No. 40054

September 14, 1933

LA GRANJA, INC., petitioner, vs. FELIX SAMSON, Judge of First Instance of Cagayan, CHUA BIAN, CHUA YU LEE and CHUA KI, respondents. Miguel P. Pio for petitioner. The Respondent Judge in his own behalf. No appearance for other respondents. VILLA-REAL, J.: In this original petition for mandamus filed by the corporate entity, La Granja, Inc., against Felix Samson, as Judge of the Court of First Instance of Cagayan, Chua Bian, Chua Yu Lee and Chua Ki, the petitioner herein, for the reasons stated in its petition, prays that a writ of mandamus be issued against the respondent Judge compelling him to issue a writ of attachment against the properties of the other respondents herein, who are defendants in civil case No. 1888 of the Court of First Instance of Cagayan. The pertinent facts necessary for the solution of the questions raised in the present case are as follows: On July 5, 1932, the petitioner herein, La Granja, Inc., filed a complaint in the Court of First Instance of Cagayan, against Chua Bian, Chua Yu Lee and Chua Ki, for the recovery of the sum of P2,418.18 with interest thereon at the rate of 12 per cent per annum, which case was docketed as civil case No. 1888. The plaintiff at the same time, also prayed for the issuance of an order of attachment against the aforementioned defendants' property and accompanied said complaint with an affidavit of the manager of the aforesaid petitioner, La Granja, Inc., wherein it was alleged among other essential things, that the said defendants have disposed or are disposing of their properties in favor of the Asiatic Petroleum Co., with intent to defraud their creditors. The respondent judge, wishing to ascertain or convince himself of the truth of the alleged disposal, required the petitioner herein to present evidence to substantiate its allegation, before granting its petition. Inasmuch as the petitioner refused to comply with the court's requirement, alleging as its ground that was not obliged to do so, the respondent judge dismissed said petition for an order of attachment. The only question to decide in the present case is whether or not the mere filing of an affidavit executed in due form is sufficient to compel a judge to issue an order of attachment. Section 426 of the Code of Civil procedure provides the following: SEC. 426. Granting order of attachment. A judge or justice of the peace shall grant an order of attachment when it is made to appear to the judge or justice of the peace by the affidavit of the plaintiff, or of some other person who knows the facts, that a sufficient cause of action exists, and that the case is one of those mentioned in section four hundred and twenty-four, and that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for which the order is granted. It will be seen that the legal provision just cited orders the granting of a writ of attachment when it has been made to appear by affidavit that the facts mentioned by law as sufficient to warrant the issuance thereof, exist. Although the law requires nothing more than the affidavit as a means of establishing the existence of such facts, nevertheless, such affidavit must be sufficient to convince the court of their existence, the court being justified in rejecting the affidavit if it does not serve this purpose and

in denying the petition for an order of attachment. The affidavit filed by the petitioner, La Granja, Inc., must not have satisfied the respondent judge inasmuch as he desired to ascertain or convince himself of the truth of the facts alleged therein by requiring evidence to substantiate them. The sufficiency or insufficiency of an affidavit depends upon the amount of credit given it by the judge, and its acceptance or rejection, upon his sound discretion. Hence, the respondent judge, in requiring the presentation of evidence to establish the truth of the allegation of the affidavit that the defendants had disposed or were disposing of their property to defraud their creditors, has done nothing more than exercise his sound discretion in determining the sufficiency of the affidavit. In view of the foregoing considerations, we are of the opinion and so hold that the mere filing of an affidavit executed in due form is not sufficient to compel a judge to issue an order of attachment, but it is necessary that by such affidavit it be made to appear to the court that there exists sufficient cause for the issuance thereof, the determination of such sufficiency being discretionary on the part of the court. Wherefore, the petition for a writ of mandamus is hereby denied and the same is dismissed, with costs against the petitioner. So ordered.

G.R. No. L-48756 September 11, 1982 K.O. GLASS CONSTRUCTION CO., INC., petitioner, vs. THE HONORABLE MANUEL VALENZUELA, Judge of the Court of First Instance of Rizal, and ANTONIO D. PINZON, respondents. Guillermo E. Aragones for petitioner. Ruben V. Lopez for respondent Antonio D. Pinzon.

Judge denied the motion and ordered the Philippine Geothermal, Inc. to deliver and deposit with the Clerk of Court the amount of P37,190.00 immediately upon receipt of the order which amount shall remain so deposited to await the judgment to be rendered in the case. 6 On June 19, 1978, the defendants therein filed a bond in the amount of P37,190.00 and asked the court for the release of the same amount deposited with the Clerk of Court, 7 but, the respondent Judge did not order the release of the money deposited. 8 Hence, the present recourse. As prayed for, the Court issued a temporary restraining order, restraining the respondent Judge from further proceeding with the trial of the case. 9 We find merit in the petition. The respondent Judge gravely abused his discretion in issuing the writ of preliminary attachment and in not ordering the release of the money which had been deposited with the Clerk of Court for the following reasons: First, there was no ground for the issuance of the writ of preliminary attachment. Section 1, Rule 57 of the Revised Rules of Court, which enumerates the grounds for the issuance of a writ of preliminary attachment, reads, as follows: Sec. 1. Grounds upon which attachment may issue. A plaintiff or any proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: (a) In an action for the recovery of money or damages on a cause of action arising from contract, express or implied, against a party who is about to depart from the Philippines with intent to defraud his creditor; (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 detained, 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 officer; (d) In an action against the party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought; (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.

CONCEPCION, JR., J.: Petition for certiorari to annul and set aside the writ of preliminary attachment issued by the respondent Judge in Civil Case No. 5902-P of the Court of First Instance of Rizal, entitled: Antonio D. Pinzon plaintiff, versus K.O. Glass Construction Co., Inc., and Kenneth O. Glass, defendants, and for the release of the amount of P37,190.00, which had been deposited with the Clerk of Court, to the petitioner. On October 6, 1977, an action was instituted in the Court of First Instance of Rizal by Antonio D. Pinzon to recover from Kenneth O. Glass the sum of P37,190.00, alleged to be the agreed rentals of his truck, as well as the value of spare parts which have not been returned to him upon termination of the lease. In his verified complaint, the plaintiff asked for an attachment against the property of the defendant consisting of collectibles and payables with the Philippine Geothermal, Inc., on the grounds that the defendant is a foreigner; that he has sufficient cause of action against the said defendant; and that there is no sufficient security for his claim against the defendant in the event a judgment is rendered in his favor. 1 Finding the petition to be sufficient in form and substance, the respondent Judge ordered the issuance of a writ of attachment against the properties of the defendant upon the plaintiff's filing of a bond in the amount of P37,190.00. 2 Thereupon, on November 22, 1977, the defendant Kenneth O. Glass moved to quash the writ of attachment on the grounds that there is no cause of action against him since the transactions or claims of the plaintiff were entered into by and between the plaintiff and the K.O. Glass Construction Co., Inc., a corporation duly organized and existing under Philippine laws; that there is no ground for the issuance of the writ of preliminary attachment as defendant Kenneth O. Glass never intended to leave the Philippines, and even if he does, plaintiff can not be prejudiced thereby because his claims are against a corporation which has sufficient funds and property to satisfy his claim; and that the money being garnished belongs to the K.O. Glass Corporation Co., Inc. and not to defendant Kenneth O. Glass. 3 By reason thereof, Pinzon amended his complaint to include K.O. Glass Construction Co., Inc. as co-defendant of Kenneth O. Glass. 4 On January 26, 1978, the defendants therein filed a supplementary motion to discharge and/or dissolve the writ of preliminary attachment upon the ground that the affidavit filed in support of the motion for preliminary attachment was not sufficient or wanting in law for the reason that: (1) the affidavit did not state that the amount of plaintiff's claim was above all legal set-offs or counterclaims, as required by Sec. 3, Rule 57 of the Revised Rules of Court; (2) the affidavit did not state that there is no other sufficient security for the claim sought to be recovered by the action as also required by said Sec. 3; and (3) the affidavit did not specify any of the grounds enumerated in Sec. 1 of Rule 57, 5 but, the respondent

In ordering the issuance of the controversial writ of preliminary attachment, the respondent Judge said and We quote: The plaintiff filed a complaint for a sum of money with prayer for Writ of Preliminary Attachment dated September 14, 1977, alleging that the defendant who is a foreigner may, at any time, depart from the Philippines with intent to defraud his creditors including the plaintiff herein; that there is no sufficient security for the claim sought to be enforced by this action; that the amount due the plaintiff is as much as the sum for which an order of attachment is sought to be granted; and that defendant has sufficient leviable assets in the Philippines consisting of collectibles and payables due from Philippine Geothermal, Inc., which may be disposed of at any time, by defendant if no Writ of Preliminary Attachment may be issued. Finding said motion and petition to be sufficient in form and substance. 10 Pinzon however, did not allege that the defendant Kenneth O. Glass "is a foreigner (who) may, at any time, depart from the Philippines with intent to defraud his creditors including the plaintiff." He merely stated that the defendant Kenneth O. Glass is a foreigner. The pertinent portion of the complaint reads, as follows: 15. Plaintiff hereby avers under oath that defendant is a foreigner and that said defendant has a valid and just obligation to plaintiff in the total sum of P32,290.00 arising out from his failure to pay (i) service charges for the hauling of construction materials; (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed spare parts of said leased unit; hence, a sufficient cause of action exists against saiddefendant. Plaintiff also avers under oath that there is no sufficient security for his claim against the defendantin the event a judgment be rendered in favor of the plaintiff. however, defendant has sufficient assets in the Philippines in the form of collectible and payables due from the Philippine Geothermal, Inc. with office address at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be disposed of by defendants and would render ineffectual the reliefs prayed for by plaintiff in this Complaint. 11 In his Amended Complaint, Pinzon alleged the following: 15. Plaintiff hereby avers under oath that defendant GLASS is an American citizen who controls most, if not all, the affairs of defendant CORPORATION. Defendants CORPORATION and GLASS have a valid and just obligation to plaintiff in the total sum of P32,290.00 arising out for their failure to pay (i) service charges for hauling of construction materials, (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed spare parts of said leased unit: hence, a sufficient cause of action exist against saiddefendants. Plaintiff also avers under oath that there is no sufficient security for his claim against thedefendants in the event a judgment be rendered in favor of the plaintiff. however, defendant CORPORATION has sufficient assets in the Philippines in the form of

collectibles and payables due from the Philippine Geothermal., Inc. with office address at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be disposed of by defendants and would render ineffectual the reliefs prayed for by plaintiff in this Complaint. 12 There being no showing, much less an allegation, that the defendants are about to depart from the Philippines with intent to defraud their creditor, or that they are nonresident aliens, the attachment of their properties is not justified. Second, the affidavit submitted by Pinzon does not comply with the Rules. Under the Rules, an affidavit for attachment must state that (a) sufficient cause of action exists, (b) the case is one of those mentioned in Section I (a) of Rule 57; (c) there is no other sufficient security 'or the claim sought to be enforced by the action, and (d) the amount due to the applicant for attachment 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. Section 3, Rule 57 of the Revised Rules of Court reads. as follows: Section 3. Affidavit and bond required. An order of attachment shall be granted only when it is made to appear by the affidavit of the applicant, or of some person who personally knows the facts, that a sufficient cause of action exists that the case is one of those mentioned in Section 1 hereof; that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the applicant, or the value of the property the possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The affidavit, and the bond required by the next succeeding section, must be duly filed with the clerk or judge of the court before the order issues. In his affidavit, Pinzon stated the following: I, ANTONIO D. PINZON Filipino, of legal age, married and with residence and postal address at 1422 A. Mabini Street, Ermita, Manila, subscribing under oath, depose and states that. 1. On October 6,1977,I filed with the Court of First Instance of Rizal, Pasay City Branch, a case against Kenneth O. Glass entitled 'ANTONIO D. PINZON vs. KENNETH O. GLASS', docketed as Civil Case No. 5902-P; 2. My Complaint against Kenneth O. Glass is based on several causes of action, namely: (i) On February 15, 1977, we mutually agreed that I undertake to haul his construction materials from Manila to his construction project in Bulalo, Bay, Laguna and vice-versa, for a consideration of P50.00 per hour; (ii) Also, on June 18, 1977, we entered into a separate agreement whereby my Isuzu cargo truck will be leased to him for a consideration of P4,000.00 a month payable on the 15th day of each month;

(iii) On September 7, 1977, after making use of my Isuzu truck, he surrendered the same without paying the monthly rentals for the leased Isuzu truck and the peso equivalent of the spare parts that were either destroyed or misappropriated by him; 3. As of today, October 11, 1977, Mr. Kenneth 0. Glass still owes me the total sum of P32,290.00 representing his obligation arising from the hauling of his construction materials, monthly rentals for the lease Isuzu truck and the peso equivalent of the spare parts that were either destroyed or misappropriated by him; 4. I am executing this Affidavit to attest to the truthfulness of the foregoing and in compliance with the provisions of Rule 57 of the Revised Rules of Court. 13 While Pinzon may have stated in his affidavit that a sufficient cause of action exists against the defendant Kenneth O. Glass, he did not state therein that "the case is one of those mentioned in Section 1 hereof; 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 is as much as the sum for which the order granted above all legal counter-claims." It has been held that the failure to allege in the affidavit the requisites prescribed for the issuance of a writ of preliminary attachment, renders the writ of preliminary attachment issued against the property of the defendant fatally defective, and the judge issuing it is deemed to have acted in excess of his jurisdiction. 14 Finally, it appears that the petitioner has filed a counterbond in the amount of P37,190.00 to answer for any judgment that may be rendered against the defendant. Upon receipt of the counter-bond the respondent Judge should have discharged the attachment pursuant to Section 12, Rule 57 of the Revised Rules of Court which reads, as follows: Section 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 on his behalf, may upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge of the attachment if a cash deposit is made or a counterbond executed to the attaching creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made, in an amount equal to the value of the property attached as determined by the judge, to secure the payment of any judgment that the attaching creditor may recover in the action. Upon the filing of such counterbond, copy thereof shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance with the provisions of this section the property attached, or the proceeds of any sale thereof, shall be delivered to the party making the deposit or giving the counterbond, or the person appearing on his behalf, the deposit or counter-bond aforesaid standing in the 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 creditor may apply for a new order of attachment. The filing of the counter-bond will serve the purpose of preserving the defendant's property and at the same time give the plaintiff security for any judgment that may be obtained against the defendant. 15 WHEREFORE, the petition is GRANTED and the writ prayed for is issued. The orders issued by the respondent Judge on October 11, 19719, January 26, 1978, and February 3, 1978 in Civil Case No. 5902-P of the Court of First Instance of Rizal, insofar as they relate to the issuance of the writ of preliminary attachment, should be as they are hereby ANNULLED and SET ASIDE and the respondents are hereby ordered to forthwith release the garnished amount of P37,190.00 to the petitioner. The temporary restraining order, heretofore issued, is hereby lifted and set aside. Costs against the private respondent Antonio D. Pinzon. SO ORDERED.

G.R. No. L-45720 December 29, 1937 VENTURA GUZMAN, petitioner, vs. ALFREDO CATOLICO and SIMEON RAMOS, Judge of First Instance of Isabela, respondents. Arnaldo J. Guzman for the petitioner. Alfredo Catolico in his own behalf. No appearance for respondent Judge.

Section 426 of the Code of the Civil Procedure provides that "A judge or justice of the peace shall grant an order of attachment when it is made to appear to the judge or justice of the peace by the affidavit of the plaintiff, or of some other person who knows the facts, that a sufficient cause of action exists, and that the case is one of those mentioned in section four hundred and twenty-four, and that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for which the order is granted." The petitioner, in attacking the legality and validity of the writ of preliminary attachment, which is the subject matter of this petition, relies on the alleged lack of an allegation in the complaint or in the affidavit to the effect "that there is no sufficient security for the claim sought to be enforced by the action and that the amount alleged to be due to the plaintiff above all legal set-offs and counterclaims is as much as the sum for which the writ has been granted", and on the fact that the affidavit is based on mere information and belief of the plaintiff. With respect to the last requisites just stated above, the affidavit is not defective because in it the therein plaintiff and herein respondent Alfredo Catolico states "that all the allegations thereof are certain and true, to the best of my knowledge and belief", and not that they are so according to his information and belief. As to the other two requisites, there is no allegation, either in the complaint or in affidavit solemnizing it, to the effect that there is no other sufficient security for the claim which the plaintiff seeks to enforce by his action, and that the amount due him from the defendant, above all legal setoffs and counterclaims, is as much as the sum for which the writ of preliminary attachment has been granted. Now then, does the omission of these two requisites constitute a defect preventing a judge of the Court of First Instance from issuing a writ of preliminary attachment?lawphil.net Attachment is a juridical institution which has for its purpose to secure the outcome of the trial, that is, the satisfaction of the pecuniary obligation really contracted by a person or believed to have been contracted by him, either by virtue of a civil obligation emanating from contract or law, or by virtue of some crime or misdemeanor that he might have committed, and the writ issued, granting it, is executed by attaching and safely keeping all the movable property of the defendant, or so much thereof as may be sufficient to satisfy the plaintiff's demands (sec. 428, Act No. 190), or by filing a copy of said writ with the register of deeds for the province in which the real property is situated, whether standing upon the records in the name of the defendant or not appearing at all upon the record, which constitutes a limitation of ownership or the right to enjoy or dispose of a thing without further limitations than those established by law (art. 348, Civil Code), since the owner of the property attached cannot dispose of the same free of all liens and encumbrances. The law authorizing the issuance of a writ of preliminary attachment should, therefore, be construed strictly in favor of the judge should require that all the requisites prescribed by law be complied with, without which a judge acquires no jurisdiction to issue the writ. If he does so in spite of noncompliance with said requisites, he acts in excess of his jurisdiction and with the writ so issued by him will be null and void. The jurisdiction of attachment proceedings being a special one, it cannot be legitimately exercised unless the attaching creditor pursues substantially the essential requirements of the statute, and the court can act only under the special power limited by the statute and according to the forms of procedures it prescribes. . . . (6 C. J., 88, paragraph 121.) Where the statutes requires the affidavit to show that defendant is indebted to plaintiff in an amount

VILLA-REAL, J.: This is a petition filed by Ventura Guzman, praying this court, after proper proceedings, to render judgment declaring illegal and void and setting aside the writ of preliminary attachment issued by the respondent judge, Honorable Simeon Ramos, as judge of the Court of First Instance of Isabela, and ordering the dissolution thereof. The pertinent facts necessary for the resolution of the legal question raised in the present case are as follows: On March 8, 1937, the respondent Alfredo Catolico brought an action against the herein petitioner Ventura Guzman in the Court of First Instance of Isabela, for the recovery from the latter of the amount of his fees for services rendered by him as attorney, praying, at the same time, for the issuance of a writ of preliminary attachment against all of the properties adjudicated to said petitioner in special proceedings No. 179 of said court. As grounds for the issuance of said writ of preliminary attachment, he alleged: "That the herein defendant is trying to sell and dispose of the properties adjudicated to him, with intention to defraud his creditors, particularly the herein plaintiff, thereby rendering illusory the judgment that may be rendered against him, inasmuch as he has no other properties outside the same to answer for the fees the court may fix in favor of the plaintiff, this case being one of those mentioned by the Code of Civil Procedure warranting the issuance of a writ of preliminary attachment" (paragraph 8 of the complaint there appears the following affidavits: "I, Alfredo Catolico, of age, married and resident of Tuguegarao, Cagayan, after being duly sworn, declare: That I am the same plaintiff in this case; that I have prepared and read the same (complaint) and that all the allegations thereof are certain and true, to the best of knowledge and belief." In view of the said complaint and affidavit, the respondent judge, on March 10, 1937, issued an order granting the petition and ordering the issuance of a writ of preliminary attachment, after the filing of the corresponding bond by the plaintiff. On April 15, 1937, said defendant Ventura Guzman filed a motion for the cancellation of said writ of preliminary attachment on the ground that it had been improperly, irregularly and illegally issued, there being no allegation, either in the complaint or in the affidavit solemnizing it, that there is no other sufficient security for the claim sought to be enforced by the action; that the amount due to the plaintiff, above the legal set-off and counterclaim, is as much as the sum of which the preliminary attachment has been granted, and that the affidavit of the plaintiff is base in mere information and belief. Said motion was denied by the respondent judge in an order of July 10, 1937. The only question to be decided in this case is whether or not the requisites prescribed by law for the issuance of a writ of preliminary attachment have been complied with.

specified, or that the latter is entitled to recover such an amount, over and above all legal payments, set-offs, or counterclaims, compliance with this requirement is essential to confer jurisdiction to issue the writ. (6 C. J., 132, paragraph 201.) An affidavit is fatally defective where it fails to comply, at least substantially, with a statutory requirement that is shall state that the indebtedness for which the action is brought has not been secured by any mortgage or lien upon real or personal property, or any pledge of personal property, or, if so secured, that the security has become valueless. . . . (6 C. J., 146, paragraph 231.) For the foregoing consideration, this court is of the opinion and so holds that failure to allege in a complaint or in the affidavit solemnizing it, or in a separate one, the requisites prescribed by section 426 of the Code of Civil Procedure for the issuance of a writ of preliminary attachment that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for which the order is sought, renders a writ of preliminary attachments issued against the property of a defendant fatally defective, and the judge issuing it acts in excess of his jurisdiction. Wherefore, the writ of certiorari applied for is granted, and the writ of preliminary attachment issued by the respondent judge in civil case No. 1460 of the Court of First Instance of Isabela, wherein the herein respondent Alfredo Catolico is plaintiff and the herein petitioner Ventura Guzman is defendant, is declared null and void, with costs to respondent Alfredo Catolico. So ordered.

G.R. No. 55272 April 10, 1989 JARDINE-MANILA FINANCE, INC., petitioner, vs. COURT OF APPEALS, IMPACT CORPORATION, RICARDO DE LEON and EDUARDO DE LEON, respondents. Angara, Abello, Concepcion, Regala & Cruz for petitioner. Ramon Quisumbing, Jr. & Associates for private respondents.

reservation not to remit to plaintiff the proceeds of the receivables assigned to plaintiff as confirmed by their refusal to remit the same to plaintiff although the issuers of the receivables assigned to plaintiff had already paid to defendant corporation their obligations on said receivables to the latter. C. Defendants Ricardo de Leon and Eduardo de Leon who are likewise officers of defendant corporation in order to elicit plaintiffs approval to enter into said deeds of assignment with defendant corporation, executed the aforesaid surety agreement (Annex L), likewise, with reservation in their minds not to honor their obligations under the same as what they actually did when they refused to pay the obligations of defendant corporation to plaintiff pursuant to the provisions of said surety agreement. (Annex L) D. Defendant corporation, Ricardo de Leon and Eduardo de Leon have no visible other sufficient security for the claim sought to be enforced by this action of plaintiff other than their real and personal properties which are located in Metro Manila and in the province of Rizal, Province of Nueva Ecija or elsewhere. (Emphasis supplied) E. Plaintiffs action against defendant corporation is based upon documents and therefrom a sufficient cause of action exists. F. Plaintiff is willing to post a bond in an amount to be fixed by the Honorable Court, not exceeding plaintiffs claim which will be conditioned to the effect that plaintiff will pay all the costs which may be adjudged to the adverse party and all damages which they may sustain by reason of attachment, if the Honorable Court should finally adjudge that the applicant plaintiff is not entitled thereto.7 On the basis of the foregoing allegations, the lower court granted JARDINE's petition for the issuance of a writ of preliminary attachment on October 16, 1979. 8

FERNAN, C.J.: This is a petition for review on certiorari seeking to reverse and set aside: (a) the August 29, 1980 decision of the Court of Appeals 1 in Special Proceedings CA-G.R. No. SP-09972-R entitled "Impact Corporation, et al. v. Hon. Buenaventura Guerrero, etc., et al." annulling the order and the writ of attachment issued by the Court of First Instance of Rizal in Civil Case No. 34617 entitled "JardineManila Finance, Inc. v. Impact Corporation, et al. " 2 and (b) the Resolution dated October 7, 1980 denying herein petitioners motion for reconsideration. 3 On September 28, 1979, petitioner Jardine-Manila Finance, Inc. (JARDINE) filed a complaint in the then Court of First Instance (CFI) of Rizal, docketed as Civil Case No. 34617, against private respondents Impact Corporation (IMPACT), Ricardo de Leon and Eduardo de Leon, to collect various sums of money allegedly due from therein defendant IMPACT under a credit accomodation by way of a discounting line agreement. 4 Herein private respondents Ricardo de Leon and Eduardo de Leon were included as defendants by virtue of their undertaking covered by a Surety Agreement under which they bound themselves jointly and severally with defendant IMPACT to pay herein petitioner all of IMPACT's obligations under the aforesaid agreement. 5 It was alleged that in April and May 1979, IMPACT assigned its receivables to JARDINE on the condition that IMPACT was to collect them on their due dates from their issuers and remit the collected amounts to JARDINE and/or repurchase the assigned receivables; 6 but despite the fact that IMPACT had collected the amounts due on said receivables, it failed or refused to turn over the amounts so collected to JARDINE. JARDINE thus demanded payment of P 1,000,212.64, the total amount due under said various deeds of assignment, plus interest of P 16,614.64 as of September 6, 1979 and 25 % of the aforesaid amount as attorney's fees, exemplary damages and other expenses of litigation. Likewise contained in said complaint is petitioner's application for a writ of preliminary attachment against private respondents. The allegations in support of said petition for a writ of preliminary attachment are quoted in full: Special Allegations for Preliminary Attachment A. The foregoing allegations are hereby repleaded and made integral parts hereof. B. The defendant corporation at the time of the execution of the aforesaid deeds of assignment had

On October 19, 1979, therein defendants filed a motion to set aside the writ of preliminary attachment. They also submitted to the court a quo a memorandum in support of their motion to dissolve the attachment contending that the grounds alleged by the plaintiff in its application for a writ of attachment are not among the grounds specified under Section 1 of Rule 57; that the defendants have other sufficient security; that there was no affidavit of merit to support the application for attachment as required by Section 3 of Rule 57 and that the verification of the complaint was defective as it did not state that the amount due to the plaintiff above all legal set-ups or counterclaims is as much as the sum for which the order is sought. 9 JARDINE opposed the motion arguing that the mental reservation of defendants at the time of the execution of the deeds of assignment constituted fraud; that such fraud was further confirmed by the fact that defendants actually failed to remit the proceeds of the collection of receivables assigned by them; that defendants failed to disclose to the plaintiff the fact that they had already collected the receivables assigned by them; that the amounts collected by defendant corporation were received by defendants in trust for plaintiff and defendant corporation appropriated for itself said collection. 10 On November 7, 1979, the trial court denied defendant's motion to annul the writ of preliminary attachment. Thereupon, defendant Impact Corporation went to the appellate court on a petition for certiorari seeking to annul said writ. 11 The findings of the Court of Appeals are as follows: To our mind there is no question that the allegations of the complaint proper which were repleaded and made integral part of the application for preliminary attachment (paragraph A) made out a case of conversion or misappropriation of property held in trust which is the subject of the complaint for the allegations stated that IMPACT had assigned to JARDINE certain receivables with the understanding that it was to collect the same from the issuers of said receivables and deliver the amounts collected to JARDINE, but in spite of the fact that IMPACT had actually collected said amounts, it failed to turn over said receivables to JARDINE. There was, therefore, in the allegations of said complaint true conversion of the amounts received by defendant in trust for plaintiff. Defendants in their motion to discharge the attachment and the memorandum filed by them in support of said motion had in effect, admitted the conversion of the amounts collected by defendant IMPACT, but justified the use of said amounts to meet its operational expenses to prevent a complete shutdown of its operations. While we find that the grounds alleged by plaintiff, the herein private respondent, to support its application for preliminary attachment are among those enumerated in Section 1 of Rule 57 as grounds upon which an attachment may be issued, we are constrained nonetheless to rule against the regularity or legality of the attachment issued by respondent Court because there was no allegation made by plaintiff in its application for the issuance of a writ of attachment to the effect 'that there is no sufficient security for the claim sought to be enforced, by the action, and the amount due to the applicant or the value of the property on the basis of which is entitled to recover, is as much as the sum for which the order is granted above

all legal counterclaims, a requirement for the granting of an order of attachment under Section 3 of Rule 57. 12 Thus, on August 29, 1980, the Court of Appeals annulled the assailed writ of attachment for having been issued improperly and irregularly, the dispositive portion of which reads: IN VIEW OF THE FOREGOING, the petition to annul the order and the writ of attachment issued by respondent Court is hereby GRANTED and judgment is rendered declaring said order and writ of attachment null and void for having been issued improperly and regularly. The restraining order issued by this Court on November 9, 1979 restraining respondents from enforcing the writ of attachment issued by respondent Judge on October 16, 1979 is hereby made PERMANENT. With costs against private respondents. 13 Hence this recourse. Reduced to bare essentials, the records show that in the exercise of its discretion, the lower court found justification in the issuance of the attachment. On the other hand, the Court of Appeals while in accord with the lower court that a sufficient cause of action exists for petitioner and that the ground for its application for attachment is one of those mentioned in Section 1, Rule 57 of the Rules of Court, found the issuance of the attachment irregular or illegal in the absence of the following allegations in the application for attachment: (1) that "there is no sufficient security for the claim sought to be enforced by the action; and (2) that the amount due to the applicant or the value of the property on the basis of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims." Ultimately, the issue therefore, is whether or not noncompliance with the formal requirements invalidate the writ of attachment. On both counts, petitioner admits not having used the exact words of the Rules in making the requisite allegations, but nonetheless it alleged that it presented ultimate and specific facts, first-in showing that there is indeed no other sufficient security for the claim sought to be enforced as shown in paragraph D of the Complaint earlier quoted; and second-while it did not specifically state that the sum due is above all legal counterclaims, such conclusion of fact is no longer necessary in the face of actual proof in the answer which did not carry any counterclaim. In fine, petitioner stresses that mere forms must not be given more weight than substance. 14 In excusing the deficiencies of its application for a writ of preliminary attachment, petitioner relies heavily on the case of De Borja v. Platon, 15 where this Court sustained the writ of attachment issued by the lower court in favor of the defendants based on the counterclaim of the latter despite the lack of allegations in the affidavit attached to the petition for the issuance of the writ of attachment that the amount due the counterclaim was as much as the sum for which the order is granted above all legal counterclaims. It will be noted however, that the trial court found that the counterclaim of the defendants exceeded the claims of the plaintiff. Thus, this Court held that "as the trial court had before it the evidence adduced by both sides, the petition for a writ of preliminary attachment having been filed four years after the trial court had begun, we presume that the lower court having in mind such evidence, ordered the attachment accordingly." 16

In sharp contrast, in the case at bar, where the records undeniably reveal that: (1) the complaint was filed on September 28, 1979; 17 (2) the writ of preliminary attachment was issued on October 16, 1979; 18 (3) the motion to annul preliminary attachment dated October 19, 1979 was filed on the same day; 19 (4) the answer of defendant IMPACT dated October 30, 1979 20 was received by the RTC Pasig only on November 5, 1979, 21 it is evident that the questioned writ was issued ex parte; and at a time when the Court a quo had yet no basis for concluding that the amount due to petitioner is as much as the sum for which the order is granted above all legal counterclaims. It is therefore, readily apparent that the conclusions in the De Borja case cannot be applied to the case at bar. In fact even petitioner's plea for liberality as it vigorously invokes the doctrine on said case which refused "to sanction that formalism and that technicality which are discountenanced by the modern laws of procedure" is an obvious misreading of the ruling of this Court which states: On the first point, we believe a writ of preliminary attachment may be issued in favor of a defendant who sets up a counterclaim. For the purpose of the protection afforded by such attachment, it is immaterial whether the defendants Borja and wife simply presented a counterclaim or brought a separate civil action against Jose de Borja, plaintiff in the previous case and petitioner herein. To lay down a subtle distinction would be to sanction that formalism and that technicality which are discountenanced by the modern laws of procedure for the sake of speedy and substantial justice. . . . 22 as a liberal approach to the required allegations in the application for a writ of preliminary attachment when what this Court actually allowed was the presentation of a counterclaim by the defendant instead of a separate civil action in compliance with one of the basic requirements for the issuance of said writ. The authority to issue an attachment, like the jurisdiction of the court over such proceedings rests on express statutory provisions and unless there is authority in the statute, there is no power to issue the writ, and such authority as the statute confers must be strictly construed.23 In fact, "(E)ven where liberal construction is the rule, the statute or the right to attachment thereby granted may not be extended by judicial interpretation beyond the meaning conveyed by the words of the statute." 24 Petitioner's application for a writ of preliminary attachment must therefore be scrutinized and assessed by the requisites and conditions specifically prescribed by law for the issuance of such writ. Section 3, Rule 57 of the Revised Rules of Court governs the issuance of a writ of attachment, to wit: Sec. 3. Affidavit and bond required.-An order of attachment shall be granted only when it is made to appear by the affidavit of the applicant or some other person who personally knows of the facts, that a sufficient cause of action exists, that the case is one of those mentioned in section 1 hereof, that there is no sufficient security for the claim sought to be enforced by the action, and that the amount due to 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 stringent conditions for the issuance of the writ have been echoed in all subsequent cases, even as late as K.O. Glass Construction Co. Inc. vs. Valenzuela, 25 wherein the writ of preliminary attachment issued was annulled and set aside on the findings that while the plaintiff "may have stated in his affidavit that a sufficient cause of action exists against the defendant Kenneth O. Glass, he did not state therein that the case is one of those mentioned in Section 1 hereof; 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 is as much as the sum for which the order is granted above all legal counterclaims." More specifically, it has been held that the failure to allege in the affidavit 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, and the judge issuing it is deemed to have acted in excess of his jurisdiction. 26 In fact, in such cases, the defect cannot even be cured by amendment. 27 Since the attachment is a harsh and rigorous remedy which exposes 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. 28 Otherwise, a judge acquires no jurisdiction to issue the writ. The general rule is that the affidavit is the foundation of the writ, and if none be filed or one be filed which wholly fails to set out some facts required by law to be stated therein, there is no jurisdiction and the proceedings are null and void. Thus, while not unmindful of the fact that the property seized under the writ and brought into court is what the court finally exercises jurisdiction over, the court cannot subscribe to the proposition that the steps pointed out by statutes to obtain such writ are inconsequential, and in no sense jurisdictional. 29 Considering that petitioner's application for the subject writ of preliminary attachment did not fully comply with the requisites prescribed by law, said writ is, as it is hereby declared null and void and of no effect whatsoever. This conclusion renders a discussion of petitioner's other argument unnecessary. WHEREFORE, the decision of the Court of Appeals dated August 29, 1980 is hereby AFFIRMED. Costs against petitioner. SO ORDERED.

G.R. No. L-61754 August 17, 1989 ROBERTO TING, and DOLORES TING, petitioners, vs. HON. AUGUSTO E. VILLARIN, FELICIANO GERVACIO, FERDINAND J. GUERRERO, and CONSOLIDATED BANK & TRUST COMPANY, respondents. Santos, Valmonte & Associates for petitioners.

defendant gives security to pay such judgment as may be recovered in this action in the manner provided for by the Rules of Court; and that you return immediately this order after executing the same with a full statement of your proceedings and a complete inventory of the properties attached. 3 On March 3, 1982, acting on the petitioners' Motion to Quash Attachment, the respondent judge issued a second order, to wit: xxx xxx xxx Acting on defendants Roberto and Dolores Ting's motion to quasi attachment and plaintiffs' opposition thereto, it appearing from plaintiffs' allegations that the alleged fraud was effected through the collective action of the defendants, the court finds the motion to be without sufficient merit. 4 xxx xxx xxx On July 19, 1982, acting on the petitioners' motion for reconsideration, the respondent judge issued the last disputed order the dispositive portion of which states: xxx xxx xxx WHEREFORE, under the circumstances, and finding no sufficient justification for the reconsideration of the order of March 3, 1982, the motion for reconsideration is hereby DENIED. 5 xxx xxx xxx The petitioners came to this Court via a petition for certiorari. They are questioning the writ of preliminary attachment principally on the ground that the application therefor hinges on "fraud in contracting" the trust receipt agreements under the second cause of action. On the other hand, the petitioners are impleaded in the complaint merely under the first cause of action. Moreover, the petitioners challenge the writ of preliminary attachment issued because, in effect, it pierced the veil of corporate fiction. The petitioners explain that the corporation alone should be held liable for the violation of the trust receipt agreements. Finally, the petitioners ask that the writ of preliminary attachment be struck down by this Court because it authorized an attachment over the petitioners' conjugal partnership property. We agree with the petitioners.

SARMIENTO, J.: On September 17, 1981, private respondent Consolidated Bank and Trust Company (hereinafter "Consolidated Bank") filed a complaint 1 for a sum of money with prayer for a writ of preliminary attachment against Perlon Textile Mills and its directors. Roberto Ting, a director, was impleaded with his wife Dolores Lim Ting. The complaint recites that the wife was impleaded as a party defendant in order to bind their conjugal partnership of gains which allegedly benefitted from the transactions subject of the complaint. The, spouses Ting are the present petitioners. Consolidated Bank actually sued on two (2) causes of action. The first was targeted at recovering on several promissory notes the amount of P2,972,955.51, allegedly obtained for the defendant corporation by its duly authorized officers Lu Cheng Peng, Teng See, and Roberto Ting. These officers allegedly signed the promissory notes in their personal and official capacities thereby binding themselves jointly and severally to Consolidated Bank for the payment of the promissory notes. The second cause of action dwells on several violations of trust receipt agreements which the defendant corporation executed in favor of Consolidated Bank. The defendant corporation's faithful compliance with the trust receipt agreements appears to have been secured by the continuing guaranty of defendants Liu Suy Lin Angelo Leonar, and Lu Cheng Peng. In support of the application for preliminary attachment, Consolidated Bank averred the ground of "fraud in contracting an obligation" thus 16. Defendants are guilty of fraud in contracting their obligations more specifically illustrated by their violation of the trust receipt agreement which is a ground defined under Sec. 1, Rule 57 of the Rules of Court for the issuance of a writ of preliminary attachment. 2 On September 23, 1981, acting on the application for a writ of attachment by Consolidated Bank, the respondent judge issued the orders under question, to wit: xxx xxx xxx We, therefore, command you [Deputy Sheriffs Feliciano Gervacio and Ferdinand J. Guerrero] that you attach the estate, real and personal, of the said defendants Perlon Textile Mills, Inc., Lu Cheng Peng and Spouse; Teng See @ Teng Tik Hua and Spouse; Spouses Roberto Ting and Dolores Lim Ting; Angelo Leonor and Spouse, Liu Suy Lin and Spouse, and Yap Chi and Spouse, within your province to the value of said demands, and costs of suit, and that you keep safely the same according to the Rules of Court, unless the

The complaint did not provide for a sufficient basis for the issuance of a writ of preliminary attachment. It is not enough for the complaint to ritualistic ally cite, as here, that the defendants are "guilty of fraud in contracting an obligation." An order of attachment cannot be issued on a general averment, such as one ceremoniously quoting from a pertinent rule.6 The need for a recitation of factual circumstances that support the application becomes more compelling here considering that the ground relied upon is "fraud in contracting an obligation." The complaint utterly failed to even give a hint about what constituted the fraud and how it was perpetrated. Fraud cannot be presumed. 7 The respondent judge thus failed in this duty to ensure that, before issuing the writ of preliminary attachment, all the requisites of the law have been complied with. He acted in excess of his jurisdiction and the writ he so issued is thus null and void. 8

What is more, the respondent judge plainly ignored that, as correctly pointed out by the petitioners, the application for preliminary attachment rests on "fraud in contracting" the trust receipt agreements. The complaint itself, save for the unwarranted sweeping reference to "defendants," alleged that only Consolidated Bank, as principals, and Liu Suy Lin Angelo Leonar, and Lu Cheng Peng, as guarantors, were privy to the trust receipt agreements under the second cause of action. Petitioner Roberto Ting's involvement is limited only to the promissory notes under the first cause of action. The complaint thus relevantly alleges FIRST CAUSE OF ACTION 7. On March 15, 1979, defendant corporation, through its duly authorized officers Lu Cheng Peng, Tang See and Roberto Ting obtained from plaintiff loan accommodations in the amount of P2,972,955.51 and as evidence thereof, the aforementioned defendants in their personal and official capacities executed promissory notes undertaking therein jointly and severally with the corporation to pay plaintiff the above-mentioned amount with interest .... SECOND CAUSE OF ACTION 8. On different occasions in 1978-1979, defendants applied to plaintiff for the opening of numerous letters of credit to finance its purchase of goods from various suppliers. xxx xxx xxx ALLEGATIONS COMMON TO ALL CAUSES OF ACTION 12. In order to secure the credit accommodations obtained and all those that the defendant Perlon Textile Mills, Inc. may thereafter obtain from plaintiff, defendants Liu Suy Lin Angelo Leonar and Lu Cheng Peng executed a continuing guaranty ... . 9 The sweeping nature of the attachment order probably stemmed from the respondent judge's failure to detect that the two (2) causes of action had been misproperly joined. Joinder of causes of action is, among others, subject to the rules on joinder of parties. 10 And the rule on joinder of parties is enunciated in Sec. 6, Rule 3, Revised Rules of Court, thus Sec. 6. Permissive joinder of parties. All persons ... against whom any right to relief in respect to or arising out of the same transaction or series transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these rules ... be joined as defendants in one complaint, where any question of law or fact common to all such ... defendants may arise in the action ... . Here, the two causes of action arose from different transactions. There was no "series of transactions" to speak of. But above all, the complaint can conceivably affect adversely petitioner Roberto Ting under the first cause of action only but not in the second cause of action. 11 That the attachment ordered by the respondent judge called for the sheriffs to "attach the estate, real and personal of ... Spouses Roberto Ting and Dolores Lim

Ting" (Order of September 23, 1981) likewise gives cause for this Court to strike it down for being null and void. The attached property of the spouses Ting are conjugal, the same cannot be validly brought under the painful process of attachment because: (a) First, the wife Dolores was impleaded merely because of the fact that she is the spouse of Roberto; (b) Second, the conjugal partnership cannot possibly be benefitted (again, here, Consolidated Bank's allegation that the act of the husband redounded to the benefit of the conjugal partnership is mere "book form" when the husband binds himself, as guarantor, because this act does not conserve or augment conjugal funds but instead threatens to dissipate them 12 by unnecessary and unwarranted risks to the partnership's financial stability. When the husband assumes the obligation of a guarantor, the presumption that he acts, as administrator, for the benefit of the conjugal partnership, is lost. WHEREFORE, the petition is hereby GRANTED. The questioned Orders, dated September 23, 1981, March 3, 1982, and July 19,1982, of the respondent judge, and the levy on attachment made by the deputy sheriffs against the parcel of land covered by TCT No. T-7232 and registered in the names of the petitioners, are declared NULL AND VOID. Costs against the private respondent. SO ORDERED.

G.R. No. 38284

September 17, 1933

Shortly after the hearing to discharge the attachment had begun, plaintiff asked leave to file an amended affidavit in support of its petition for a writ of attachment. After oral and written arguments, the respondent judge on November 25, 1931, entered an order admitting the amended affidavit of attachment. The amended affidavit consists of three pages and is admitted to be in full compliance with the provisions of section 426 of the Code of Civil Procedure, which sets out what must be shown to the court before a writ of attachment shall issue. Further proceedings were had in the trial court, and on March 4 and April 11, 1932, it entered an order refusing on the showing so far made to dissolve the attachment. On October 4, 1932, these proceedings were instituted, based on the two propositions (1) that an affidavit of attachment cannot be amended and (2) that if a cause of action arises ex delicto, it is not within the terms of our attachment statutes. Respondents claim that petitioners had not exhausted their rights in the trial court and that if the petitioner regarded the order of April 11 as a final order, petitioners are guilty of laches by waiting until October before filing a complaint. Without considering the minor questions raised by respondents, we believe it is for the best interests of all concerned to dispose of the case on the points raised by petitioners. As to whether amendments should be admitted, respondents rely upon section 110 of the Code of Civil Procedure, which reads: SEC. 110. Amendments in General. The court shall, in furtherance of justice, and on such terms, if any, as may be proper, allow a party to amend any pleading or proceeding and at any stage of the action, in either the Court of first Instance or the Supreme Court, by adding or striking out the name of any party, either plaintiff or defendant, or by correcting a mistake in the name of a party, or a mistaken or inadequate allegation or description in any other respect, so that the actual merits of the controversy may speedily be determined, without regard to technicalities, and in the most expeditious and inexpensive manner. The court may also, upon like terms, allow an answer or other pleading to be made after the time limited by the rules of the court for filing the same. Orders of the court upon the matters provided in this section shall be made upon motion filed in this court, and after notice to the adverse party, and an opportunity to be heard." and claim it should read in connection with section 2 of the same Code: SEC. 2. Construction of Code. The provisions of this Code and the proceedings under it, shall be liberally construed, in order to promote its object and assist the parties in obtaining speedy justice. This court has held in the case of Central Capiz vs. Salas (43 Phil., 930), that section 2 applies to applications for writs of attachment and that the affidavit may be read in connection with the complaint. In the original affidavit, affiant did not swear on information and relief but expressly on knowledge. It is also clear from the affidavit that the ground on which the attachment was sought to be secured, is paragraph 4 of section 412 of the Code of Civil Procedure. It is defective in ( a) that there is no allegation, either in the affidavit or the complaint, that there was no other sufficient security for the claim sought to be enforced by the action and (b) that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for which the order is granted. The claim of petitioners that the original affidavit is defective is virtually admitted by respondents by their having filed a

GUILLERMO A. CU UNJIENG and MARIANO CU UNJIENG, petitioners, vs. LEONARD S. GODDARD, acting as Judge of First Instance of Manila, and HONGKONG & SHANGHAI BANKING CORPORATION, respondents. Gibbs and McDonough and Duran, Lim and Tuason for petitioners. DeWitt, Perkins and Brady for respondents. HULL, J.: Original action for certiorari praying that a writ of attachment levied against the properties of the petitioners and defendants in a civil action in the Court of First Instance of Manila, brought by respondent Hongkong & Shanghai Banking Corporation, be declared null and void. In that civil action it was alleged in substance that the defendants, the petitioners in this proceeding, entered into a fraudulent conspiracy or combination with one Fernandez, by which the conspirators would hypothecate and pledge forged securities of various kinds with the various banking institutions and other commercial firms of the City of Manila, and pursuant to said fraudulent conspiracy, secured credit with the bank, and the plaintiff was defrauded by the defendants and Fernandez in the sum of P1,411,312.80. Simultaneously with the filing of the complaint, plaintiffs asked for a writ of attachment, which was granted. The affidavit filed at the time reads: AFFIDAVIT B.C.M. Johnston, of legal age and resident of the City of Manila, being duly sworn, states: That he is the Manager of the Hongkong and Shanghai Banking Corporation, the plaintiff in the above-entitled cause, and that he knows that there exists a cause of action in favor of said plaintiff and against the defendants, as appears in the complaint on file in this case, reference to which is hereby made as an integral part of this affidavit; That the complaint is one for the recovery of money on a cause of action arising from a fraud; and That, as set out in the complaint, the defendants in said cause have been guilty of fraud in contracting the debt in incurring the obligation upon which this action is brought. (Sgd.) B.C.M. JOHNSTON About one week thereafter, on October 20, 1931, petitioners herein filed a motion to discharge the attachment on the ground that it had been improperly and irregularly issued, which motion contains eight paragraphs. Paragraph (4) alleges that the affidavit was defective in that it fails to state that there is no other sufficient security for the claim sought to be enforced by the action and that the amount due the plaintiff involves as much as the sum for which the order of attachment was granted, while paragraph (5) alleges that the affidavit for attachment fails to estate that the allegations contained in the unverified complaint to which it refers are true and that likewise the affidavit fails to estate that affiant knows the facts.

amended affidavit and by their insistence upon their right to amend. Our section 110 of the Code of Civil Procedure is based on section 473 of the California Code of Civil Procedure and is a general statute authorizing, in the discretion of the court, any amendment, in the further interest of justice, of pleadings or procedure at any stage of the action. Proceedings in the Court of First Instance to discharge the attachment were taken under section 441 of the Code of Civil Procedure, which reads: SEC. 441. Discharge of Attachment on Motion. The defendant may also at any time either before or after the release of the attachment property, or before any attachment shall have been actually levied, upon reasonable notice to the plaintiff, apply to the judge or justice of the peace who granted the order of attachment, 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 defendant, but not otherwise, the plaintiff may oppose the same by affidavits or other evidence in addition to those on which the attachment was made. If upon such application it satisfactorily appears that the writ of attachment was improperly or irregularly issued, it must be discharged. The corresponding sections of the California Code, namely section 556, 557, and 558, read: SEC. 556. When a motion to discharge attachment may be made, and upon what grounds. The defendant may also at any time, either before or after the release of the attached property, or before any attachment shall have been actually levied, apply, on motion, upon reasonable notice to the plaintiff, to the court in which the action is brought, or to a judge thereof, that the writ of attachment be discharged on the ground that the same was improperly or irregularly issued. SEC. 557. When motion made on affidavit, it may be opposed by affidavit. If the motion be made upon affidavits on the part of the defendant, but not otherwise, the plaintiff may oppose the same by affidavits or other evidence, in addition to those on which the attachment was made. SEC. 558. When writ must be discharged. If upon such application it satisfactorily appears that the writ of attachment was improperly or irregularly issued it must be discharged; provided that such attachment shall not be discharged if at or before the hearing of such application, the writ of attachment, or the affidavit, or undertaking upon which such attachment was based shall be amended and made to conform to the provisions of this chapter. In a long line of decisions from Castle Bros., Wolf & Sons vs. Go-Juno (7 Phil., 144), where it was said: Inasmuch as this section 95 is taken bodily from the California Code of Procedure, we feel justified in following the decisions of the Supreme Court of California in the interpretation of the same. to Pando vs. Kette and Sellner (54 Phil., 683), where this court uses the following language: The provision of our Code of Civil Procedure having been adopted from section 692 of the California Code, it must be understood that our

law was promulgated with the construction placed upon it by the State of California." Where a provision of the Code of Civil Procedure has been adopted bodily from one of the States of the Union, we have followed the rule that it was undoubtedly the intention of the Legislature to promulgate the law with the construction that had already been placed upon it. At the time sections 110 and 114 were adopted, the similar provisions of the California Code had already been construed by the Supreme Court of California. In Winters vs. Pearson (72 Cal., 553), that court used the following language: On a motion to discharge a writ of attachment, on the ground that it was improperly or irregularly issued, the affidavit on which the writ was issued is not amendable. This, in our opinion, is in accordance with section 558 of the Code of Civil Procedure, which provides that the writ was improperly or irregularly issued, it must be discharged. To allow the affidavit to be made good by amendment, and upon such action refused to discharge the writ, would, in our judgment, violate the requirements of the section just above cited. In Tibbet vs. Tom Sue (122 Cal., 206), the court followed Winters vs. Pearson, saying: Respondent asks the privilege of amending the undertaking, if it be held defective by this court. From such relief he invokes section 473 of the Code of Civil Procedure, wherein amendments are allowed to pleadings or proceedings in furtherance of justice. In speaking as to an application to discharge a writ of attachment, the Code says: "If upon such application it satisfactorily appears that the writ of attachment was improperly or irregularly issued, it must be discharged." (Code Civ. Proc., sec. 558.) This section is specific and expressly directed to the subject of attachments. It must be held to control and limit the general provisions of the aforesaid section 473. The lawmaking body has declared what shall be the action of the court under the circumstances here presented, and such action demands that the writ should be discharged. It is said in Winters vs. Pearson(72 Cal., 553), that the affidavit on attachment is not amendable. The undertaking upon attachment stands upon the same ground. The facts that California in 1909 changed the law by permitting amendments of a defective affidavit for attachment under certain specified circumstances, does not affect this case, as our Legislature has allowed the law to stand unchanged. It therefore allows that where the affidavit for attachment is fatally defective, the attachment must be held to have been improperly or irregularly issued and must be discharged, and such fatal defect cannot be cured by amendment. The writ of attachment in this case should therefore have been discharged. In view of the above views, the second ground for the discharge of the writ of attachment presented by petitioners herein, is reserved for discussion in another case. The writ of certiorari herein prayed for must be granted. So ordered. Avancea, C.J., Street, Malcolm, Villa-Real, Abad Santos, and Butte, JJ., concur.

IMPERIAL, J.: Petitioners brought this certiorari proceeding to annul the writ of attachment issued by the Court of First Instance of Manila on October 14, 1931, as well as the orders of November 25, 1931, March 4 and April 11, 1932, granting the admission of an amended affidavit and denying the motion to dissolve the attachment, respectively. It is the purpose of this opinion to show: (a) That the averments of the complaint, which were made integral part of the affidavit supporting the petition for the issuance of the writ of attachment, meet substantially the requirements of the statute on attachment; (b) that the affidavit on which the petition for attachment was based is sufficient and has substantially complied with the grounds required by section 426 of the Code of Civil Procedure, and (c) that the respondent judge did not act in excess of his jurisdiction when issued the writ of attachment and denied the motion for dissolution. The complaint filed in the civil action in which the writ of attachment was issued contains, among others, the following allegations: III That during the years 1930 and 1931, the said defendants entered into a fraudulent conspiracy or combination with one Rafael Fernandez, who has been adjudicated an involuntary insolvent by the Court of First Instance of Manila, and for that reason is not made a defendant in this action, pursuant to which fraudulent conspiracy and combination, it was agreed that the said Fernandez, or the said Fernandez, or the said defendant Guillermo A. Cu Unjieng, or the said Mariano Cu Unjieng should hypothecate and pledge forged share certificates, forged warehouse receipts, and forged securities of other kinds, in large amounts, with various banking institutions and other commercial firms of the City of Manila, with a view to a division of the proceeds among the said fraudulent conspirators. IV That pursuant to said fraudulent combination and conspiracy the said Guillermo A. Cu Unjieng employed a forger to forge the signatures of the proper officers on a large number of warehouse receipts and share certificates of the Pampanga Sugar Development Company, Inc., a corporation organized under the laws of the Philippine Islands, and operating a large sugar central in the Province of Pampanga, Philippine Islands, after the said Rafael Fernandez, pursuant to said fraudulent combination and conspiracy, had caused a large number of said share certificates and warehouse receipts to be printed in blank, for the purpose of having them so forged. V That pursuant to said fraudulent combination and conspiracy, the said defendants, Guillermo and Mariano Cu Unjieng and the said Rafael Fernandez pledged and hypothecated said forged share certificates and said forged warehouse receipts in large amounts with various banking institutions and commercial firms of the City of Manila, using the proceeds in some cases for the purpose of taking up the forged certificates and warehouse receipts so pledged and hypothecated in other cases, so as to continue the scheme for the longest in other time, and in other cases, dividing among themselves the proceeds of the loans obtained on the security of said forged share

certificates and forged warehouse receipts so fraudulently pledged and hypothecated. VI That pursuant to said fraudulent conspiracy and combination, the said Rafael Fernandez, at various dates, on and after June 16th, 1931, pledged and hypothecated various forged warehouse receipts and promissory notes to the plaintiff herein, as security for loans in account current granted said Fernandez by the plaintiff in reliance therein, on which there was a total debit balance due of P1,411,312.80, on the date of the adjudication of Fernandez as an insolvent, that is, on the 1st day of August, 1931, together with interest at 9 per cent per annum on P1,010,886.96 thereof from the 1st day of July, 1931, and interest on the balance at the rate of 9 per cent per annum from July 8, 1931. VII That of the amounts so obtained by the said Fernandez from this plaintiff by the fraudulent pledging and hypothecation of said forged warehouse receipts and promissory notes, pursuant to said fraudulent combination and conspiracy, as hereinbefore alleged, said Fernandez, pursuant to said combination and conspiracy, paid directly to the defendant herein, Guilermo A. Cu Unjieng, sums aggregating P325,000; to the defendant herein, Mariano Cu Unjieng, the sum of P10,000; caused other large amounts to be paid said defendants indirectly through other banking institutions in the City of Manila; and utilized the balance in covering overdrafts and loans obtained in his name with other banking institutions in the City of Manila, on the security of forged share certificates, warehouse receipts and other forged securities the proceeds of which were divided between him and the defendants herein pursuant to said fraudulent combination and conspiracy. VIII That as a result of said fraudulent conspiracy and combination, between the defendants herein and the said insolvent, Rafael Fernandez, and the pledging and hypothecation by said Fernandez of said forged warehouse receipts and promissory notes with the plaintiff herein, the said plaintiff has been defrauded by the defendants herein and by the said Fernandez in the sum of P1,411,312.80, with interest on P1,010,886.96 thereof at the rate of 9 per cent per annum from July 1, 1931, and with interest on the balance thereof at the rate of 9 per cent per annum from July 8, 1931. The affidavit above referred to read as follows: AFFIDAVIT B.C.M. Johnston, of legal age and a resident of the City of Manila, being duly sworn states: That he is the Manager of the Hongkong & Shanghai Banking Corporation, the plaintiff in the above entitled cause, and that he knows that there exists a cause of action in favor of the said plaintiff and against the defendant, as appears in the complaint on file in this case, reference to which is hereby made as an integral part of this affidavit. That the complaint is one for the recovery of money on a cause of action arising from a fraud: and

That as set out in the complaint, the defendant in said cause has been guilty of fraud in contracting the debt and in incurring the obligation upon this action is brought. (Sgd.) B.C.M. JOHNSTON Subscribed and sworn to before me this 11th day of July, 1931, affiant exhibiting to me his cedula certificate No. F-14401, issued at Manila, P.I., January 19, 1931. Doc. No. 420 GUEVARA Page 71 Book III 1932 (Sgd.) "DOMINGO A. Notary Public Until December 31,

exercise of the jurisdiction conferred upon him by the law. As to the other ground, the same thing could be said. In deciding this case I believe technicalities of law should be overlooked in order to attain the ends of justice. If the main action fails the petitioners, as defendants, will get compensation for any damages or injury they may have suffered upon the bond given by plaintiff-respondent, while should the action prosper and the attachment is already quashed plaintiff would not get anything so much so as there are other creditors who are claiming big amounts from the same defendants. Based on the foregoing reasons I dissent from the majority's decision and I am of the opinion that the liberal construction of the statute on attachment should have been applied in this particular instance and the petition denied.

Section 426 of Act No. 190 provides: SEC. 426. Granting order of attachment. A judge or justice of the peace shall grant an order of attachment when it is made to appear to the judge or justice of the peace by the affidavit of the plaintiff, or of some other person who knows the facts, that a sufficient cause of action exists, and that the case is one of those mentioned in section four hundred and twenty-four, and that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for which the order is granted. From a perusal of said section it is obvious that the law does not require conclusive evidence to establish the requisites necessary in order a justice or judge may issue a writ of attachment; all what the law requires is the presentation ofprima facie evidence which shows the existence of said grounds. This is the reason why it calls for affidavit in lieu of other material and competent evidence. As alleged in the affidavit affiant made a part of his statement all material and necessary averments contained in the complaint undoubtedly for the purpose of making a complete narration of the facts and at the same time to avoid superfluous repetition. In substance, it was alleged in the complaint that the defendants in the civil action were guilty of fraud at the time they incurred in the obligations set forth and that Rafael Fernandez secured from the plaintiff the amount of over P1,000,000, which is the subject matter of the action, thru conspiracy and collusion with the defendants-petitioners, having delivered said Fernandez warehouse receipts and shares certificates which were forged and valueless. It is argued that the original affidavit was fatally defective because it failed to recite: (1) That the plaintiff in the action has no other sufficient security for the claims sought to be enforced, and (2) that the amount due it above all legal set-offs or counterclaims is as much as the sum for which the order is prayed for. While it may be conceded that the original affidavit as well as the complaint are lacking of such specific averments, still from the above quoted allegations the facts can be reasonably inferred, If the action was brought by plaintiff to recover the amount of over P1,000,000 which it lost in the manner above described and if it is especially alleged that the security given by the defendants became valueless because they were all forged it is hard to conceived how one could not deduce the inference that no other security has been given the plaintiff with the exception of those especifically alleged in the complaint. The same inference was undoubtedly gathered by the respondent judge when he granted the attachment upon said original affidavit and as far as I am concerned I believed he did not exceed in the

JUAN DE DIOS CARLOS, Petitioner,

G.R. No. 135830

HON. COURT OF APPEALS (FORMER SPECIAL FOURTH DIVISION), HON.

Present:

ALBERTO L. LERMA and/or the REGIONAL TRIAL COURT OF THE

PUNO, J., - versus Chairman, AUSTRIA-MARTINEZ, CALLEJO, SR., TINGA, and FELICIDAD SANDOVAL, also known as FELICIDAD S. VDA. DE CARLOS or FELICIDAD S. CARLOS or FELICIDAD SANDOVAL DE CARLOS, and TEOFILO CARLOS II, Respondents. September 30, 2005 Promulgated:

CITY OF MUNTINLUPA, BRANCH 256, FELICIDAD SANDOVAL, also known as FELICIDAD S. VDA. DE CARLOS OR FELICIDAD S. CARLOS OR FELICIDAD SANDOVAL CARLOS OR FELICIDAD

CHICO-NAZARIO, JJ. SANDOVAL VDA. DE CARLOS and TEOFILO CARLOS II, Respondents.

x-------------------------------------------------------------------x

DECISION x-------------------------------------------------------------------x TINGA, J.: SIDDCOR (now MEGA PACIFIC) INSURANCE CORPORATION, Petitioner, G.R. No. 136035 These consolidated petitions emanated from a civil case filed by Juan de Dios Carlos (Carlos) against respondents Felicidad Sandoval (Sandoval) and Teofilo Carlos II (Teofilo II) docketed with the Regional Trial Court (RTC) of Muntinlupa City as Civil Case No. 95-135.

versus In his Complaint before the RTC, Carlos asserted that he was the sole surviving compulsory heir of his parents, Felix B. Carlos and Felipa Elemia, [1] who had acquired during their marriage, six parcels of land (subject properties). His brother, Teofilo (Teofilo), died intestate in 1992. At the time of his death, Teofilo was apparently married to Sandoval, and cohabiting with her and their child, respondent Teofilo II. Nonetheless, Carlos alleged in his Complaint that Teofilo and Sandoval were not validly married as they had not obtained any marriage license. [2] Furthermore, Carlos also asserted that Teofilo II could not be considered as Teofilos child. As a result, Carlos concluded that he was also the sole heir of his brother Teofilo, since the latter had died without leaving any heirs.

FELICIAD SANDOVAL VDA. DE CARLOS and TEOFILO CARLOS II, Respondents.

x------------------------------------------------------------------x

SIDDCOR (now MEGA PACIFIC) INSURANCE CORPORATION, Petitioner,

G.R. No. 137743

versus -

Carlos also claimed that Teofilo, prior to their father Felixs death in 1963, developed a scheme to save the elder Carloss estate from inheritance taxes. Under the scheme, the properties of the father would be transferred to Teofilo who would, in turn, see to it that the shares of the legal heirs are protected and delivered to them. Felix assented to the plan, and the subject properties were transferred in the name of Teofilo. After Teofilos death, Carlos entered into certain agreements with Sandoval in connection with the subject properties. Carlos did so, believing that the latter was the lawful wife of his brother Teofilo. Subsequently though, Carlos discovered that Sandoval and his brother were never validly married, as their marriage was contracted without a marriage license. [3]

Carlos now sought to nullify these agreements with Sandoval for want of consideration, the premise for these contracts being non-existent. Thus, Carlos prayed of the RTC to declare the alleged marriage between Teofilo and Sandoval void ab initio, provided that Teofilo died without issue, order that new titles covering the subject properties be issued in the name of Carlos, and require Sandoval to restitute Carlos in the amount of P18,924,800.00.[4]

4. Declaring plaintiff as the sole and exclusive owner of the parcel of land, less the portion adjudicated to the plaintiffs in Civil Case No. 11975, covered by TCT No. 139061 of the Register of Deeds of Makati City, and ordering said Register of Deeds to cancel said title and to issue another title in the sole name of plaintiff herein;

Carlos likewise prayed for the issuance of the provisional relief of preliminary attachment. The RTC issued an Order dated 7 September 1995 granting the prayer for preliminary attachment, and on 15 September 1995, a writ of preliminary attachment. Carlos posted a bond for P20,000,000.00 issued by herein petitioner SIDDCOR Insurance Corporation (SIDDCOR). [5] Shortly thereafter, a Notice of Garnishment was served upon the Philippine National Bank (PNB) over the deposit accounts maintained by respondents. Respondents filed an Urgent Motion to Discharge the Writ of Attachment, which was opposed by Carlos. On 4 December 1995, the RTC rendered an order denying the motion. This caused respondents to file a Petition for Certiorari with the Court of Appeals, seeking to set aside the RTC order granting the writ of preliminary attachment denying the motion for the discharge of the writ. This case was docketed as CA-G.R. SP No. 39267.[6] On 27 February 1996, the Court of Appeals Second Division promulgated its Decision in CA-G.R. SP No. 39267, wherein it granted the Petition for Certiorari and ordered the discharge and dissolution of the Writ of Attachment and Notice of Garnishment. [7] The Court of Appeals found that there was no sufficient cause of action to warrant the preliminary attachment, since Carlos had merely alleged general averments in order to support his prayer.[8] Carlos elevated the said Decision to this Court by way of Petition for Review on Certiorari, which was docketed as G.R. No. L-125717. In a Resolution dated 21 October 1996, the Court denied Carloss Petition, and thus the Court of Appeals Decision ordering the dissolution of the Writ of Attachment and Notice of Garnishment became final. In the meantime, the hearing on Carloss Complaint ensued before the RTC. Respondents duly filed their Answer and thereafter filed a Motion for Summary Judgment. Carlos opposed the motion and countered with his own Motion for Summary Judgment. On 8 April 1996, the RTC rendered a summary judgment in favor of Carlos. Carloss victory was wholesale, with the RTC making the following pronouncements: 1. Declaring the marriage between defendant Felicidad Sandoval and Teofilo Carlos solemnized at Silang, Cavite, on May 14, 1962, evidenced by the Marriage Contract submitted in this case, null and void ab initio for lack of the requisite marriage license; 2. Declaring that the defendant minor, Teofilo S. Carlos II, is not the natural, illegitimate, or legally adopted child of the late Teofilo E. Carlos;

5. Declaring the Contract, Annex K of the Complaint, between plaintiff and defendant Sandoval null and void, and ordering the Register of Deeds of Makati City to cancel TCT No. 139058 in the name of Teofilo Carlos, and to issue another title in the sole name of the plaintiff herein; 6. Declaring the Contract, Annex M of the Complaint, between plaintiff and defendant Sandoval null and void; 7. Ordering the cancellation of TCT No. 210877 in the names of defendant Sandoval and defendant minor Teofilo S. Carlos II and ordering the Register of Deeds of Manila to issue another title in the exclusive name of plaintiff herein. 8. Ordering the cancellation of TCT No. 210878 in the names of defendant Sandoval and defendant minor Teofilo S. Carlos II and ordering the Register of Deeds of Manila to issue another title in the sole name of plaintiff herein.[9] Upon promulgation of the Summary Judgment, Carlos moved before the RTC for execution pending appeal. The RTC granted the motion for execution pending appeal upon the filing of a bond. [10] On 27 May 1996, the RTC issued a Writ of Execution. Meanwhile, respondents filed a Motion for Reconsideration of the Summary Judgment, which was denied in an Order dated 20 May 1996. Respondents then appealed the RTC Decision to the Court of Appeals, wherein such appeal was docketed as CA-G.R. CV No. 53229. The case was raffled to the appellate courts Fourteenth Division for completion of records. Sandoval and Carlos also filed a Petition for Certiorari with Temporary Restraining Order dated 2 June 1996. This special civil action primarily attacked the allowance of execution pending appeal, and prayed for the annulment of the Order granting execution pending appeal, and of the Writ of Execution On 10 December 1996, in CA-G.R. CV No. 53229, respondents filed a Motion for Judgment On the Attachment Bond. They noted that the Court of Appeals had already ruled that the Writ of Preliminary Attachment issued by the RTC was improperly granted and that its Decision, as affirmed by the Supreme Court, had attained finality. Accordingly, they were entitled to damages under Section 20, Rule 57 of the then Rules of Civil Procedure, which governed claims for damages on account of unlawful attachment. In support of their allegation of damages, they cite the Notice of Garnishment served on PNB Malolos Branch, where Felicidad Carlos maintained deposits amounting to P15,546,121.98.[11] Also presented in support of the motion was a Notice of Delivery/Payment by the RTC Sheriff, directing the PNB Malolos Branch to deliver the amounts previously garnished by virtue of the Writ of Execution dated 27 May 1996;[12] a Manifestation filed by PNB dated 19 July 1996 in CA-G.R. SP No. 40819, stating that PNB had already delivered to the RTC Sheriff on 27 June 1996 the amount of P15,384,509.98 drawn against the accounts of Carlos;

3. Ordering defendant Sandoval to pay and restitute to plaintiff the sum of P18,924,800.00, together with the interest thereon at the legal rate from date of filing of the instant complaint until fully paid;

and a Certification to the same effect issued by the PNB Malolos Branch. In an Addendum to Motion for Judgment on the Attachment Bond, respondents additionally prayed for moral and exemplary damages.[13] After various pleadings were duly filed by the parties, the Court of Appeals Special Fourth Division issued a Resolution dated 23 March 1998, certifying that all the necessary pleadings have been filed, and that the case may already be referred to the Raffle Committee for assignment to a ponente for study and report. The sameResolution likewise denied without elaboration a Motion to Dismiss on the ground of forum-shopping filed earlier by Carlos.[14] On such denial, Carlos filed a Motion for Reconsideration. Respondents likewise filed a Motion for Partial Reconsideration dated 17 April 1998, arguing that under the Revised Internal Rules of the Court of Appeals (RIRCA), the case may be re-raffled for assignment for study and report only after there is a resolution that the case is deemed submitted for decision. [15] They pointed out that re-raffle could not yet be effected, as there were still pending incidents, particularly the motions for reconsideration of Carlos and themselves, as well as the Motion for Judgment on Attachment Bond.

... . The contention of [Carlos] that the writ of attachment was not implemented falls flat on the face of the manifestation of PNB that the delivery of the garnished P15,384,509.98 to him was effected through the sheriff.[19] The Court of Appeals found that moral and exemplary damages were not warranted, there being no malice in pursuing the attachment. The appellate court also found the claim of P2,000,000.00 for attorneys fees as excessive, and reduced the sum by half. Correspondingly, the dispositive portion of the assailed Resolution reads: WHEREFORE, premises considered, judgment is hereby rendered against the attachment bond, ordering SIDDCOR INSURANCE CORPORATION and plaintiff-appellee to pay defendantsappellants, jointly and severally, the sum of P15,384,509.98 and 12% interest per annum from June 27, 1996 when the unlawful garnishment was effected until fully paid and P1,000,000.00 as attorneys fees with 6% interest thereon from the trial courts decision on April 8, 1986 until fully paid. SO ORDERED.[20] Both Carlos and SIDDCOR filed their respective motions for reconsideration of the Resolution. For their part, respondents filed a Motion for Immediate Execution dated7 August 1998 in regard to the Resolution of 26 June 1998 awarding them damages. In the Resolution dated 10 October 1998,[21] the Court of Appeals denied the motions for reconsideration and granted the Motion for Immediate Execution. In granting the Motion for Immediate Execution, the Court of Appeals cited the reasons that the appeal to be undertaken from the 26 June 1998 Resolution was patently dilatory; that there were no material and substantial defenses against the motion for judgment on the attachment bond, rendering the appeal pro-forma and dilatory; that Sandoval was of advanced age and might not enjoy the fruits of the judgment on the attachment bond; and that immediate execution would end her suffering due to the arbitrary garnishment of her account pursuant to an improper attachment.[22] In its Motion for Reconsideration, SIDDCOR explicitly assailed the allowance of the Motion for Immediate Execution.[23] This was denied by the Court of Appeals in aResolution dated 22 December 1998.[24] From these antecedents, the following petitions were filed before this Court: G.R. No. 135830 This Appeal by Certiorari with Prayer for Temporary Restraining Order/Preliminary Injunction dated 26 October 1998 filed by Carlos assailed the two resolutions of the Court of Appeals both dated 26 June 1998, as well as the Resolution of 10 October 1998, which denied Carloss motion for reconsideration. Carlos argues that the Court of Appeals, through the Former Special Fourth Division, could not have resolved the Motion for Judgment on the Attachment Bond since the case had not yet been reraffled under the two-raffle system for study and report; that the Court of Appeals erred in resolving the motion without conducting any hearing; that the Court of Appeals had no jurisdiction over the motion as the docketing fees had not yet been filed; that the motion for judgment, which did not contain any certification against forum-shopping, was an application subject to the requirements of certification against forum-shopping; that there was no supporting evidence to support the award of damages; and

On 26 June 1998, the Court of Appeals Former Special Fourth Division promulgated two resolutions. [16] The first, in response to Carloss Motion for Reconsideration, again denied Carloss Motion to Dismiss the Appeal and Motion for Suspension, but explained the reasons for such denial.

The second resolution is at the center of the present petitions. The assailed Resolution agreed with respondents that it was first necessary to resolve the pending incidents before the case could be re-raffled for study and report. Accordingly, the Court of Appeals proceeded to rule on these pending incidents. While the first resolution dwelt on the pending motions filed by Carlos, this Resolution tackled the other matter left unresolved, the Motion for Judgment on Attachment Bond. The Court of Appeals found the claim for damages meritorious, citing the earlier decisions ruling that Carlos was not entitled to the preliminary attachment. Invoking Section 20, Rule 57 of the Rules of Court, as well as jurisprudence,[17] the Court of Appeals ruled that it was not necessary for the determination of damages on the injunction bond to await the decision on appeal. The Court of Appeals then proceeded to determine to what damages respondents were entitled to. In ruling that the award of actual damages was warranted, the court noted: It is also not disputed that the PNB, on June 27, 1996, issued two managers checks: MC No. 938541 for P4,932,621.09 and MC 938542 for P10,451,888.89 payable to the order of Luis C. Bucayon II, Sheriff IV, RTC, Branch 256, Muntinlupa, duly received by the latter in the total amount of PESOS FIFTEEN MILLION THREE HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED NINE & 98/100 (P15,384,509.98), drawn against the accounts of Ms. Felicidad Sandoval Vda. de Carlos which were earlier garnished for the satisfaction of the above-mentioned writ of attachment (Annex E, Motion for Judgment on the Attachment Bond, pp. 7-8)[18]

that the Court of Appeals committed grave abuse of discretion in denying the Motion for Reconsideration without adverting to specific reasons mentioned for the denial of each issue.[25]

Finally, SIDDCOR contests the special reasons cited by the Court of Appeals in granting the Motion for Immediate Execution. Facts Arising Subsequent to the Filing of Instant Petitions On 7 May 1999, the Court of Appeals issued a Writ of Execution directing the enforcement of the judgment on the attachment bond. [28] However, in a Resolutiondated 9 June 1999, this Court through the First Division issued a Temporary Restraining Order, enjoining the enforcement of the said Writ of Execution. On 15 October 2002, the Court of Appeals First Division rendered a Decision[29] on the merits of CA-G.R. CV No. 53229, setting aside the Summary Judgment and ordering the remand of the case for further proceedings. [30] Both parties filed their respective motions for reconsideration.[31] In addition, Carlos filed a motion to inhibit the author of the assailed decision, Justice Rebecca de Guia-Salvador,[32] who thereafter agreed to inhibit herself.[33] Then on 7 August 2003, the Court of Appeals Former First Division issued a Resolution deferring action on the motions for reconsideration in light of the temporary restraining order issued by this Court until the resolution of the present petitions. The factual background may be complicated, but the court need only concern itself with the propriety of the judgment on the attachment bond and the subsequent moves to secure immediate execution of such judgment. Should this Court be called upon to tackle the merits of the original action, Carloss complaint, it shall be in the review of the final resolution of the Court of Appeals in CA-G.R. CV No. 53229.

Carlos likewise ascribes grave abuse of discretion to the Court of Appeals in its other Resolution dated 26 June 1998 for its refusal to dismiss CA-G.R. CV No. 53229 on the ground of forum-shopping, adding that the appellate court should have deferred resolution of the Motion for Judgment on the Attachment Bond considering the prejudicial question raised in Carloss motion to dismiss the main case on the ground of forum-shopping. G.R. No. 136035 This concerns a Petition for Review filed by SIDDCOR, likewise challenging the Resolution of 26 June 1998 of the Court of Appeals and the 10 October 1998Resolution wherein Siddcors Motion for Reconsideration, among others, was denied. Siddcor argues therein that the Court of Appeals erred in ruling on the motion for damages without awaiting judgment in the main case; granting that damages may be awarded, these should encompass only such damages incurred during the pendency of the appeal; and that a hearing was necessary to prove the claim for damages and the appellate court erred in granting the award for damages despite lack of hearing.

G.R. No. 137743 The third petition for adjudication, a Petition for Certiorari under Rule 65 with Prayer for Temporary Restraining Order or Preliminary Injunction , was also filed by SIDDCOR. This petition, dated 8 March 1999, specifically assails the allowance by the Court of Appeals of the immediate execution of the award of damages, made through the resolutions dated 10 October 1998 and 22 December 1998. SIDDCOR hereunder argues that Section 2, Rule 39 of the Rules of Civil Procedure requires that execution of a judgment or final order pending appeal may be made only on motion of the prevailing party and may be made even before the expiration of the period to appeal. [26] Respondents had argued in their Motion for Immediate Execution that the judgment sought to be executed (that on the attachment bond) was interlocutory and not appealable, yet cited rulings on execution pending appeal under Section 2, Rule 39 in support of their position. SIDDCOR cites this inconsistency as proof of a change of theory on the part of respondents which could not be done for the theories are incompatible. Such being the case, SIDDCOR argues, the Court of Appeals gravely abused its discretion in granting immediate execution since respondents had filed its motion on the premise that the award on the judgment bond was interlocutory and not appealable. SIDDCOR also claims that the judgment on the attachment bond is not interlocutory, citing Stronghold Insurance Co., Inc. v. Court of Appeals [27] wherein it was ruled that such indeed constitutes a final and appealable order. SIDDCOR points out that no hearing was conducted on the Motion for Immediate Execution despite the requirement in Section 2, Rule 39 that discretionary execution may only issue upon good reasons to be stated in a special order after due hearing. SIDDCOR likewise notes that the motion granting immediate execution was granted in the very same resolution which had denied the motion for reconsideration of the resolution sought to be immediately executed. For SIDDCOR, such constituted a denial of procedural due process insofar as its statutory right to appeal was concerned, as the resolution that it intended to appeal from was already the subject of immediate execution.

Consolidation of Issues in G.R. Nos. 135830 and 136035 The petitions in G.R. Nos. 135830 and 136035 are concerned with the award of damages on the attachment bond. They may be treated separately from the petition in G.R. No. 137743, which relates to the immediate execution of the said award. We consolidate the main issues in G.R. Nos. 135830 and 136035, as follows: (1) whether the assailed judgment on the attachment bond could have been rendered, as it was, prior to the adjudication of the main case; (2) whether the Court of Appeals properly complied with the hearing requirement under Section 20, Rule 57 prior to its judgment on the attachment bond; and (3) whether the Court of Appeals properly ascertained the amount of damages it awarded in the judgment on the attachment bond. Resolving these issues requires the determination of the proper scope and import of Section 20, Rule 57 of the 1997 Rules of Civil Procedure. The provision governs the disposal of claims for damages on account of improper, irregular or excessive attachment SECTION 20. Claim for damages on account of improper, irregular or excessive attachment.An application for damages on account of improper, irregular or excessive attachment must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching obligee or his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. Such damages may be awarded only after proper hearing and shall be included in the judgment on the main case.

If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages sustained during the pendency of the appeal by filing an application in the appellate court with notice to the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court. Nothing herein contained shall prevent the party against whom the attachment was issued from recovering in the same action the damages awarded to him from any property of the attaching obligee not exempt from execution should the bond or deposit given by the latter be insufficient or fail to fully satisfy the award. (Emphasis supplied.) Section 20 essentially allows the application to be filed at any time before the judgment becomes executory. It should be filed in the same case that is the main action, and cannot be instituted separately. [34] It should be filed with the court having jurisdiction over the case at the time of the application.[35] The remedy provided by law is exclusive and by failing to file a motion for the determination of the damages on time and while the judgment is still under the control of the court, the claimant loses his right to damages.[36] There is no question in this case that the Motion for Judgment on the Attachment Bond filed by respondents on 10 December 1996 was properly filed since it was filed with the Court of Appeals during the pendency of the appeal in the main case and also as an incident thereto. The core questions though lie in the proper interpretation of the condition under Section 20, Rule 57 that reads: Such damages may be awarded only after proper hearing and shall be included in the judgment on the main case. Petitioners assert that there was no proper hearing on the application for damages and that the Court of Appeals had wrongfully acted on the application in that it resolved it prior to the rendition of the main judgment. Such Damages May Be Awarded Only After Proper Hearing.

In this case, both Carlos and SIDDCOR were duly notified by the appellate court of the Motion for Judgment on the Attachment Bond and were required to file their respective comments thereto.[41] Carlos and SIDDCOR filed their respective comments in opposition to private respondents motion.[42] Clearly, all the relevant parties had been afforded the bare right to be heard on the matter. Concededly, the facts of this case differ from that in Paramount, wherein the award of damages was predicated under Section 8, Rule 58, and the trial on the merits included the claim for damages on the attachment bond. The Court did note therein that the counsel of the surety was present during the hearings. [43] In this case, unlike in Paramount, there were no open court hearings conducted by the Court of Appeals, and it is precisely this absence that the petitioners assert as fatal. Plainly, there is no express requirement under the rule that the hearing be done in open court, or that the parties be allowed to confront adverse witnesses to the claim of damages on the bond. The proper scope of the hearing requirement was explained before Paramount in Peroxide Philippines Corp. v. Court of Appeals,[44] thus: . . . [It] is undeniable that when the attachment is challenged for having been illegally or improperly issued, there must be a hearing with the burden of proof to sustain the writ being on the attaching creditor. That hearing embraces not only the right to present evidence but also a reasonable opportunity to know the claims of the opposing parties and meet them. The right to submit arguments implies that opportunity, otherwise the right would be a barren one. It means a fair and open hearing. From this pronouncement, we can discern that the proper hearing contemplated would not merely encompass the right of the parties to submit their respective positions, but also to present evidence in support of their claims, and to rebut the submissions and evidence of the adverse party. This is especially crucial considering that the necessary elements to be established in an application for damages are essentially factual: namely, the fact of damage or injury, and the quantifiable amount of damages sustained. Such matters cannot be established on the mere say-so of the applicant, but require evidentiary support. At the same time, there was no equivocal statement from the Court in Peroxide that the hearing required under the rule should be a full-blown hearing on the merits

We first discuss whether the proper hearing requirement under Section 20, Rule 57 had been satisfied prior to the award by the Court of Appeals of damages on the attachment bond.

Section 20 of Rule 57 requires that there be a proper hearing before the application for damages on the attachment bond may be granted. The hearing requirement ties with the indispensable demand of procedural due process. Due notice to the adverse party and its surety setting forth the facts supporting the applicant's right to damages and the amount thereof under the bond is essential. No judgment for damages may be entered and executed against the surety without giving it an opportunity to be heard as to the reality or reasonableness of the damages resulting from the wrongful issuance of the writ.[37] In Paramount Insurance v. Court of Appeals , the Court held that under the rule, it was neither mandatory nor fatal that there should be a separate hearing in order that damages upon the bond can be claimed, ascertained and awarded. [39] What is necessary only is for the attaching party and his surety or sureties to be duly notified and given the opportunity to be heard. [40]
[38]

In this case, we rule that the demands of a proper hearing were satisfied as of the time the Court of Appeals rendered its assailed judgment on the attachment bond. The circumstances in this case that we consider particularly telling are the settled premises that the judicial finding on the wrongfulness of the attachment was then already conclusive and beyond review, and that the amount of actual damages sustained was likewise indubitable as it indeed could be found in the official case record in CA-G.R. CV No. 53229. As a result, petitioners would have been precluded from either raising the defenses that the preliminary attachment was valid or disputing the amount of actual damages sustained by reason of the garnishment. The only matter of controversy that could be litigable through the traditional hearing would be the matter of moral and exemplary damages, but the Court of Appeals appropriately chose not to award such damages. Moreover, petitioners were afforded the opportunity to counter the arguments extended by the respondents. They fully availed of that right by submitting their respective comments/oppositions. In fine, the due process guarantee has been satisfied in this case.

It should be noted that this case poses a situation different from what is normally contemplated under Section 20, Rule 57wherein the very wrongfulness of the attachment remains one of the issues in contention in the main case. In such a case, there would be a greater demand for a more extensive hearing on the application of damages. The modality of hearing should remain within the discretion of the court having jurisdiction to hear the application for damages. The only demand, concordant to due process, would be the satisfaction of the right to be heard, to present evidence, and to rebut the evidence and arguments of the opposing party.

Indeed, there is no existing statute, procedural rule, or jurisprudential fiat that makes it mandatory on the Court of Appeals or the Supreme Court to conduct an open-court hearing on any matter for resolution. There is nothing demonstrably urgent with an application for damages under Section 20, Rule 57 that would necessitate this Court to adopt an unprecedented rule mandating itself or the Court of Appeals to conduct full-blown open court hearings on a particular type of action.

Some disquisition is necessary on whether or not, as petitioners submit, a full-blown hearing in open court is compulsory under Section 20, Rule 57. To impose this as a mandatory requirement would ultimately prove too onerous to our judicial system. Perhaps such a demand would be less burdensome on the regional trial courts, which, as a matter of routine, receive testimonial or documentary evidence offered de novo, and to formulate conclusions on the admissibility and credibility of the same.

This pronouncement does not contradict our ruling in Hanil Development v. IAC,[46] which Carlos interprets as requiring the Court of Appeals to conduct a proper hearing on an application for damages on the attachment bond. Hanil concerned the refusal by the Intermediate Appellate Court (now Court of Appeals) to take cognizance of the application for damages on the attachment bond, such refusal being reversed by the Court, which ruled that the Intermediate Appellate Court (IAC) had jurisdiction to accept and rule on such application. While the Court therein recognized that the IAC was empowered to try cases and conduct hearings, or otherwise perform acts necessary to resolve factual issues in cases, [47] it did not require the appellate court to conduct a hearing in open court, but merely to reinstate the application for damages.

However, a different situation applies if it is the Court of Appeals or the Supreme Court before which the application for damages is filed. Both these courts, which are capacitated to receive and act on such actions, are generally not triers of facts, and do not, in the course of daily routine, conduct hearings. It is partly for such reason that Section 20, Rule 57 authorizes these appellate courts to refer the application for damages to the trial court for hearing and decision. The trial courts are functionally attuned to ascertain and evaluate at the first instance the necessary factual premises that would establish the right to damages. Still, reference of the application for damages to the trial court is discretionary on the part of the appellate courts. The latter, despite their traditional appellate jurisdiction and review function, are still empowered under Section 20 to rule on the application for damages, notwithstanding the factual dimension such question presents.

Admittedly, the dispositive portion of Hanil required the Court of Appeals to conduct hearings on the application for damages, [48] but nowhere in the decision was a general rule laid down mandating the appellate court to conduct such hearings in open court. The ascertainment of the need to conduct full-blown hearings is best left to the discretion of the appellate court which chooses to hear the application. At the same time, the Court cautions the appellate courts to carefully exercise their discretion in determining the need for opencourt hearings on the application for damages on the attachment bond. The Court does not sanction the indolent award of damages on the attachment bond by the appellate court without affording the adverse party and the bonding company concerned the opportunity to present their sides and adduce evidence in their behalf, or on the basis of unsubstantiated evidence. And Shall be Included in the Judgment on the Main Case Section 20, Rule 57 does state that the award of damages shall be included in the judgment on the main case, and seemingly indicates that it should not be rendered prior to the adjudication of the main case. The rule, which guarantees a right to damages incurred by reason of wrongful attachment, has long been recognized in this jurisdiction.[49] Under Section 20, Rule 57 of the 1964 Rules of Court, it was provided that there must be first a judgment on the action in favor of the party against whom attachment was issued before damages can be claimed by such party.[50] The Court however subsequently clarified that under the rule, recovery for damages may be had by the party thus prejudiced by the wrongful attachment, even if the judgment be adverse to him.[51]

To impose as mandatory on the Court of Appeals or the Supreme Court to hear the application for damages through full-blown hearings in open court is supremely unwise and beyond the demands of Section 20, Rule 57. The effect would be unduly disruptive on the daily workflow of appellate courts such as the Court of Appeals and the Supreme Court, which rarely conduct open court hearings. Neither could the Court see what is so markedly special about an application for damages, fact-oriented as it may be, that would require it to be heard by the appellate courts in open court when no such mandatory rule applies to other judicial matters for resolution that are also factual in nature.

For example, the review of death penalty convictions by the Court of Appeals and the Supreme Court necessitates a thorough evaluation of the evidence presented, notwithstanding the prior factual appreciation made by the trial court.[45] Notwithstanding the factual nature of the questions involved, there is no rule requiring the Court of Appeals or the Supreme Court to call death penalty cases for hearing or oral argument. If no such mandatory rule for hearing is imposed on the appellate courts when the supreme penalty of death is involved, why then should an exceptional rule be imposed in the case for the relatively insignificant application for damages on the attachment bond? If open court hearings are ever resorted to by appellate courts, such result from the exercise of discretion rather than by imposition by statute or procedural rule.

The language used in the 1997 revision of the Rules of Civil Procedure leaves no doubt that there is no longer need for a favorable judgment in favor of the party against whom attachment was issued in order that damages may be awarded. It is indubitable that even a party who loses the action in main but is able to establish a right to damages by reason of improper, irregular, or excessive attachment may be entitled to damages. This bolsters the notion that the claim for damages arising from such wrongful attachment may arise and be decided separately from the merits of the main action. As noted by

the Court in Philippine Charter Insurance Corp. v. Court of Appeals:[52] The surety does not, to be sure, become liable on its bond simply because judgment is subsequently rendered against the party who obtained the preliminary attachment. The surety becomes liable only when and if "the court shall finally adjudge that the applicant was not entitled to the attachment." This is so regardless of the nature and character of the judgment on the merits of the principal claims, counterclaims or cross-claims, etc. asserted by the parties against each other. Indeed, since an applicant's cause of action may be entirely different from the ground relied upon by him for a preliminary attachment, it may well be that although the evidence warrants judgment in favor of said applicant, the proofs may nevertheless also establish that said applicant's proferred ground for attachment was inexistent or specious and hence, the writ should not have issued at all; i.e., he was not entitled thereto in the first place. In that event, the final verdict should logically award to the applicant the relief sought in his basic pleading, but at the same time sentence himusually on the basis of a counterclaimto pay damages caused to his adversary by the wrongful attachment. [Emphasis supplied.]

However, this reasoning was assailed by respondents, who argued that the motion for judgment on the attachment bond was a pending incident that should be decided before the case can be re-raffled to a ponente for decision. Respondents may be generally correct on the point that a case can only be deemed submitted for decision only after all pending incidents are resolved. Yet since Section 20, Rule 57 provides that their application for damages on the attachment bond shall be included in the judgment on the main case, it is clear that the award for damages need not be resolved before the case is submitted for decision, but should instead be resolved and included in the judgment on the main case, or the decision on the Appeal by Certiorari filed by the respondents.

Thus, the action of the Court of Appeals in resolving the application for damages even before the main judgment was issued does not conform to Section 20, Rule 57. However, the special particular circumstances of this case lead us to rule that such error is not mortal to the award of damages. As noted earlier, the award of damages was made after a proper hearing had occurred wherein all the concerned parties had been given the opportunity to present their arguments and evidence in support and in rebuttal of the application for damages. The premature award of damages does not negate the fact that the parties were accorded due process, and indeed availed of their right to be heard. Moreover, we are compelled to appreciate the particular circumstance in this case that the right of private respondents to acquire relief through the award of damages on account of the wrongful preliminary attachment has been conclusively affirmed by the highest court of the land. This differs from the normal situation under Section 20, Rule 57 wherein the court having jurisdiction over the main action is still required to ascertain whether the applicant actually has a right to damages. To mandatorily require that the award of damages be included in the judgment in the main case makes all the sense if the right to damages would be ascertained at the same time the main judgment is made. However, when the said right is already made viable by reason of a final judgment which is no longer subject to review, there should be no unnecessary impediments to its immediate implementation.

Moreover, a separate ruleSection 8, Rule 58 covers instances when it is the trial court that awards damages upon the bond for preliminary injunction of the adverse party. Tellingly, it requires that the amount of damages to be awarded be claimed, ascertained, and awarded under the same procedure prescribed in Section 20 of Rule 57.

In this case, we are confronted with a situation wherein the determination that the attachment was wrongful did not come from the trial court, or any court having jurisdiction over the main action. It was rendered by the Court of Appeals in the exercise of its certiorari jurisdiction in the original action reviewing the propriety of the issuance of the Writ of Preliminary Attachment against the private respondents. Said ruling attained finality when it was affirmed by this Court.

The courts are thus bound to respect the conclusiveness of this final judgment, deeming as it does the allowance by the RTC of preliminary attachment as improper. This conclusion is no longer subject to review, even by the court called upon to resolve the application for damages on the attachment bond. The only matter left for adjudication is the proper amount of damages.

Nevertheless, Section 20, Rule 57 explicitly provides that the award for damages be included in the judgment on the main case. This point was apparently not lost on the Court of Appeals when it rendered its Resolution dated 23 March 1998, certifying that the case may now be referred to the Raffle Committee for assignment to aponente. The appellate court stated therein: The Resolution of defendants-appellants motion for judgment on the attachment may be incorporated in the decision by theponente for study and report,[53] and such observation is in conformity with Section 20.

And finally, any ruling on our part voiding the award of damages solely for the reason that it was not included in the judgment on the main case, and remanding the motion to the Court of Appeals for proper adjudication together with the main case may exhibit fealty to the letter of the procedural rule, but not its avowed aims of promoting a just and speedy disposition of every action and proceeding. After all, if we were to compel the Court of Appeals to decide again on the application for damages and incorporate its ruling in the judgment on the main action, the appellate court will be examining exactly the same evidence and applying exactly the same rules as it already did when it issued the assailed resolution awarding damages on the bond. This would be unnecessarily redundant especially considering that the Supreme Court had already affirmed that there was wrongful attachment in this case.

There is also the fact that remanding the question of damages, singly for the purpose of adhering to the letter of the procedural rule, would further prolong the resolution of the main case, which has been with the Court of Appeals for more than nine years now. [54] Our Rules of Court precisely requires liberal construction of the procedural rules to promote the objective of securing a just, speedy and inexpensive disposition of every action

and proceeding.[55] With this precept, all the more justification is supplied for allowing the award for damages despite its apparent prematurity, if it is in all other respects proper. The same reasons apply in resolving the question of whether the Court of Appeals could have decided the Motion for Judgment on the Attachment Bond considering that the case had not yet been re-raffled under the two-raffle system for study and report. Under Section 5, Rule 3 of the RIRCA, a case filed with the Court of Appeals undergoes two raffles for assignment to a particular Justice. The first raffle is made for completion of records.[56] Afterwards, all raffled appealed cases, the records of which have been completed and submitted for decision, shall be re-raffled for assignment to a Justice for study and report.[57]

proved was the amount of damage actually sustained by respondents by reason of the wrongful attachment. It is unquestioned that by virtue of the writ of preliminary attachment, a Notice of Garnishment was served upon the PNB over deposit accounts maintained by respondents. Said Notice of Garnishment placed under the control of the RTC all the accounts maintained by respondents, and prevented the transfer or disposition of these accounts. [60] Then the subsequent Writ of Execution dated 27 May 1996 ordered the delivery to Carlos of these accounts earlier subjected to garnishment.[61]

The fact that Section 20, Rule 57 provides that the award of damages on the attachment bond shall be included in the judgment on the main case necessarily implies that it is to be made only after the case has been re-raffled for study and report, and concurrently decided with the judgment of the ponente in the main case. Again, the Court of Appeals failed to consider Section 20, Rule 57 when it acted upon the application even before the second raffle was made.

Clearly, the amount of actual pecuniary loss sustained by respondents has been well established. The Manifestation submitted by the PNB further affirmed the actual amount seized by Carlos, an amount which could not have been acquired had it not been for the writ of preliminary attachment which was wrongfully issued.

Had Section 20, Rule 57 been faithfully complied with, a different Justice of the Court of Appeals would have penned the ruling on the application for damages, in accordance with the RIRCA. Yet this circumstance does not outweigh the other considerations earlier mentioned that would warrant a liberal interpretation of the procedural rules in favor of respondents. The parties had adduced all their arguments and evidence before the Court of Appeals, and indeed, these were appreciated on first instance by Justice Demetria, who eventually penned the assailed resolutions. There was already a final determination that the attachment was wrongful. And any delay brought about by requiring that it be the ponencia, determined after the second raffle, who decides the application for damages may bear pro forma adherence to the letter of the rule, but would only cause the delay of the resolution of this longpending case. Procedural rules are designed, and must therefore be so interpreted as, to give effect to lawful and valid claims and not to frustrate them.[58]

Carlos lamely argues in his petition that there was no concrete or supporting evidence to justify the amount of actual damages, a claim that is belied by the official case records. The more substantive argument is presented by SIDDCOR, which submits that any damages that may be awarded to respondents can include only those that were incurred, if any, during the pendency of the appeal. But this contention is belied by Section 4, Rule 57 of the 1997 Rules of Civil Procedure, which provides that the bond issued for preliminary attachment is 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.[62] The case Paramount Insurance Corp. v. Court of Appeals[63] is instructive. It discusses the scope of the bond executed by upon an application for preliminary injunction, [64] which similarly covers all damages which [may be] sustain[ed] by reason of the injunction or temporary restraining order if the court should finally decide that the applicant was not entitled thereto. [65] The surety in that case claimed that it could be liable only to the amount of damages accruing from the time the injunction bond was issued until the termination of the case, and not from the time the suit was commenced.[66] In rebutting this claim, the Court ruled: . . . . Rule 58, Section 4(b), provides that a bond is executed in favor of the party enjoined to answer for all damages which he may sustain by reason of the injunction. This Court already had occasion to rule on this matter in Mendoza v. Cruz, where it held that "(t)he injunction bond is intended as a security for damages in case it is finally decided that the injunction ought not to have been granted . It is designed to cover all damages which the party enjoined can possibly suffer. Its principal purpose is to protect the enjoined party against loss or damage by reason of an injunction." No distinction was made as to when the damages should have been incurred.[67] Our ruling in Philippine Charter Insurance Corp. v. Court of Appeals, relied upon by the Court of Appeals, squarely applies to this case: Under the circumstances, too, there can be no gainsaying the suretys full awareness of its undertakings under its bond: that, as the law puts it: "the plaintiff will pay all costs which may be adjudged to the defendant(s), and all damages which may be sustained by reason of the attachment, if the same shall finally be adjudged to have been wrongful and without cause," and that those

Even SIDDCOR acknowledges that there are recognized instances where the award of damages or judgment on the attachment bond may not be included in the decision on the main case, such as if the main case was dismissed for lack of jurisdiction and no claim for damages could have been presented in the main case. [59]

Scope of Damages Properly Awardable Next, we examine the particular award of damages made in this case, consisting of P15,384,509.98, plus interest, as well as P1,000,000.00 as attorneys fees. There seems to be no dispute that the former amount constituted the amount drawn against the account of Sandoval by reason of the writ of execution issued by the trial court on 27 May 1996. This fact was confirmed by the PNB, in its Manifestation dated 19 July 1996, confirming the garnishment. Respondents burden in proving damages in this case was considerably lessened by the fact that there was already a final judgment, no longer subject to review, that the preliminary attachment allowed by the trial court was indeed wrongful. Hence, all that was necessary to be

damages plainly comprehended not only those sustained during the trial of the action but also those during the pendency of the appeal. This is the law, and this is how the surety's liability should be understood. The surety's liability may be enforced whether the application for damages for wrongful attachment be submitted in the original proceedings before the Trial Court, or on appeal, so long as the judgment has not become executory. The surety's liability is not and cannot be limited to the damages caused by the improper attachment only during the pendency of the appeal. That would be absurd. The plain and patent intendment of the law is that the surety shall answer for all damages that the party may suffer as a result of the illicit attachment, for all the time that the attachment was in force; from levy to dissolution. . . .

attorneys fees and expenses of litigation should be recovered,[70] even if moral and exemplary damages are unavailing.[71]

Particularly, the Court has recognized as just and equitable that attorney's fees be awarded when a party is compelled to incur expenses to lift a wrongfully issued writ of attachment.[72] The amount of money garnished, and the length of time respondents have been deprived from use of their money by reason of the wrongful attachment, all militate towards a finding that attorneys fees are just and equitable under the circumstances. However, we deem the amount of P1,000,000.00 as excessive, and modify the award of attorneys fees to P500,000.00 which represents merely approximately three percent of the actual damages suffered by and awarded to respondents. We also delete the imposition of legal interest made by the Court of Appeals on the awarded attorneys fees.

The fact that the second paragraph of the rule speaks only of "damages sustained during the pendency of the appeal" is of no moment; it obviously proceeds from the assumption in the first paragraph that the award for the damages suffered during the pendency of the case in the trial court was in fact "included in the final judgment" (or applied for therein before the appeal was perfected or the judgment became executory); hence, it states that the damages additionally suffered thereafter, i.e., during the pendency of the appeal, should be claimed before the judgment of the appellate tribunal becomes executory. It however bears repeating that where. as in the case at bar, the judgment of the Trial Court has expressly or impliedly sustained the attachment and thus has given rise to no occasion to speak of, much less, file an application for damages for wrongful attachment, and it is only in the decision of the Court of Appeals that the attachment is declared wrongful and that the applicant "was not entitled thereto," the rule is, as it should be, that it is entirely proper at this time for the application for damages for such wrongful attachment to be filed i.e., for all the damages sustained thereby, during all the time that it was in force, not only during the pendency of the appeal. . . .[68] The rule is thus well-settled that the bond issued upon an application for preliminary attachment answers for all damages, incurred at whatever stage, which are sustained by reason of the attachment. The award of actual damages by the Court of Appeals is thus proper in amount. However, we disagree that the rate of legal interest be counted from the date of the unlawful garnishment, or on 27 June 1996. Properly, interest should start to accrue only from the moment it had been finally determined that the attachment was unlawful, since it is on that basis that the right to damages comes to existence. In this case, legal interest commences from the date the Court of Appeals decision in CA-G.R. SP No. 39267 became final, by reason of its affirmation by this Court.

Other Issues Raised in G.R. No. 135830

The issues raised in G.R. No. 136035 have been dispensed with, and the remaining issues in G.R. No. 135830 are relatively minor. There is no need to dwell at length on them.

Carlos insists that respondents were liable to have paid docket fees upon filing of their Motion for Judgment on Attachment Bond, on the theory that they claimed therein for the first time the alleged damages resulting from the dissolved attachment. The said motion is characterized as an initiatory proceeding because it is claimed therein for the first time, the damages arising from the attachment. In the same vein, Carlos argues that the absence of a certification against forum-shopping attached to the motion renders the said motion as fatal. Again, it is pointed out that initiatory pleadings must contain the said certification against forum-shopping.

Our ruling in Santo Tomas University Hospital v. Surla[73] is instructive. It was argued therein that the requirement of the certification against forum-shopping, as contained in Administrative Circular No. 04-94, [74] covered compulsory counterclaims. The Court ruled otherwise:

It bears stressing, once again, that the real office of Administrative Circular No. 04-94, made effective on 01 April 1994, is to curb the malpractice commonly referred to also as forum-shopping. . . . The language of the circular distinctly suggests that it is primarily intended to cover an initiatory pleading or an incipient application of a party asserting a claim for relief.

The award of attorneys fees in the amount of P1,000,000.00 is also questioned before this Court, considering that the Court of Appeals did not award moral or exemplary damages. The general rule may be that an award of attorneys fees should be deleted where the award of moral and exemplary damages are eliminated. [69] Nonetheless, attorneys fees may be awarded under the Civil Code where the court deems it just and equitable that

It should not be too difficult, the foregoing rationale of the circular aptly taken, to sustain the view that the circular in question has not, in fact, been contemplated to include a kind of claim which, by its very nature as being auxiliary to the proceeding in the suit and as deriving its substantive and jurisdictional support therefrom, can only be appropriately pleaded in the answer and not remain outstanding for independent resolution except by the court where the main case pends. Prescinding from the foregoing, the

proviso in the second paragraph of Section 5, Rule 8, of the 1997 Rules of Civil Procedure, i.e., that the violation of the antiforum shopping rule "shall not be curable by mere amendment . . . but shall be cause for the dismissal of the case without prejudice," being predicated on the applicability of the need for a certification against forum shopping, obviously does not include a claim which cannot be independently set up.[75] (Emphasis supplied.)

immediate execution would end her suffering caused by the arbitrary garnishment of her PNB account.

There is no doubt that a judgment on the attachment bond is a final and appealable order. As stated earlier, it is, under normal course, included in the main judgment, which in turn is final and appealable. Respondents admit that they had erred in earlier characterizing the said judgment as an interlocutory order. Still, SIDDCOR argues that such earlier error is fatal, and that the Court of Appeals abused its discretion in ruling on the motion on a theory different from that urged on by respondents.

It is clear that under Section 20, Rule 57, the application for damages on the attachment bond cannot be independently set up, but must be filed in the main case, before the judgment therein becomes final and executory. Santo Tomas squarely applies in determining that no certification against forum-shopping was required in theMotion for Judgment on the Attachment Bond . The same reasoning also sustains a ruling that neither legal fees were required for the filing of the said motion. Section 1, Rule 141 of the Rules of Court provides that legal fees are prescribed upon the filing of the pleading or other application which initiates an action or proceeding. [76] Since the said application for judgment on the attachment bond cannot be considered as an initiatory pleading, as it cannot be independently set up from the main action, it is not likewise chargeable with legal fees.

By no means could respondents be deemed as estopped from changing their legal theory, since the rule on estoppel applies to questions of fact and not questions of law.[78] Moreover, courts are empowered to decide cases even if the parties raise legal rationales other than that which would actually apply in the case. The basis of whether respondents are entitled to immediate execution arises from law, particularly Section 2(a), Rule 39 of the Rules of Court, and not solely on whatever allegations may be raised by the movant.

As to the issue relating to the other Resolution dated 26 June 1998 denying the motion to dismiss appeal on the ground of forum-shopping, we find Carloss arguments as unmeritorious. Forum-shopping allegedly existed because petitioners had filed two cases before the Court of Appeals, CA-G.R. CV No. 53229, and thePetition for Certiorari with Temporary Restraining Order dated 2 June 1996 attacking the allowance of execution pending appeal. Evidently, the two causes of action in these two petitions are different, CA-G.R. CV No. 53229 being an appeal from the Summary Judgment rendered by the RTC, and the second petition assailing the subsequent allowance by the RTC of execution pending appeal. There is no identity between these two causes of action that would warrant a finding of forum-shopping.

Thus, we find no grave abuse of discretion on the part of the Court of Appeals, even though it allowed execution pending appeal on a legal basis different from that originally adduced by respondents. After all, the reasoning ultimately employed by the appellate court is correct, and it hardly would be judicious to require the lower court to adhere to the movants erroneous ratiocination and preclude the proper application of the law.

Issues Raised in G.R. No. 137743

To recount, respondents, having obtained a favorable decision on their Motion for Judgment on the Attachment Bond, filed a Motion for Immediate Execution of the award of damages. This was granted by the Court of Appeals in its Resolution dated 16 October 1998, said resolution now specifically assailed by SIDDCOR in G.R. No. 137743.

We need not review in length the justification of the Court of Appeals in allowing execution pending appeal. The standard set under Section 2(a), Rule 39 merely requires good reasons, a special order, and due hearing. Due hearing would not require a hearing in open court, but simply the right to be heard, which SIDDCOR availed of when it filed its opposition to the motion for immediate execution. The Resolution dated 16 October 1998 satisfies the special order requirement, and it does enumerate at length the good reasons for allowing execution pending appeal. As to the appreciation of good reasons, we simply note that the advanced age alone of Sandoval would have sufficiently justified execution pending appeal, pursuant to the well-settled jurisprudential rule.[79] The wrongfulness of the attachment, and the length of time respondents have been deprived of their money by reason of the wrongful attachment further justifies execution pending appeal under these circumstances.

In their Motion for Immediate Execution, respondents theory in seeking the immediate execution of the award of damages was that said award was not subject to appeal, the ruling thereupon being an interlocutory order. [77] This position was not adopted by the Court of Appeals in its 16 October 1998 Resolution, which was otherwise favorably disposed to respondents. Instead, the Court of Appeals predicated the immediate execution on the following grounds: (1) that the judicial finding that the writ of preliminary attachment was wrongful was already final and beyond review; (2) there were no material and substantial defenses against the motion for the issuance of the judgment bond; (3) Sandoval was elderly and sickly, without means of livelihood and may not be able to enjoy the fruits of the judgment on the attachment bond; (4) that

WHEREFORE, the petitions are DISMISSED. The Temporary Restraining Order issued in the Resolution dated 9 June 1999 is hereby LIFTED. The assailedResolution of the Court of Appeals Special Fourth Division dated 26 June 1998 is AFFIRMED with the MODIFICATIONS that the legal interest on the award of actual damages should commence from the date of the finality of the Decision of the Court of Appeals in CA G.R. SP No. 39267 and that the award of attorneys fees is in the amount of P500,000. Costs against petitioners.

SO ORDERED.

G.R. No. 73610 April 19, 1991 PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly Philippine Commercial & Industrial Bank),petitioner, vs. INTERMEDIATE APPELLATE COURT and SPOUSES JOSE SALGADO and JULIETA SALGADO, respondents. San Juan, Africa, Gonzalez & San Agustin Law Offices for petitioner. Manalo, Puno & Gosos for private respondents.

court. The petition was dismissed for lack of merit in a resolution dated November 29, 1979. However, on motion for reconsideration, the appellate court reversed its previous order and reinstated the writ of attachment. The spouses Salgado went to this Court in a petition for certiorari which was docketed as G.R. No. 55381. Meanwhile, in the main case for recovery of a sum of money, a decision was rendered by the trial court on July 15, 1981, through Judge Nelly L. Romero Valdellon. The trial court found that the note sued upon in the main case was sufficiently secured by a real estate mortgage and that the note was not yet due and demandable in view of the agreement of the parties to restructure the obligation (pp. 87-90, Rollo). The dispositive portion of the decision states: WHEREFORE, judgment is hereby rendered in favor of defendants and against plaintiff a) Dismissing the complaint; b) Ordering plaintiff to pay defendants: 1. P1,000,000.00 as moral damages 2. P100,000.00 as exemplary damages; and 3. P150,000.00 as and for attorney's fees. As a consequence hereof, the writ of preliminary attachment previously issued becomes vacated motu proprio. Costs against plaintiff. SO ORDERED. (p. 95, Rollo) On reconsideration by PCIB, the trial court, through Judge Gregorio Pineda, pairing judge of Judge Valdellon who was then on leave, reversed the decision and ruled that there was indeed a debt which was due and demandable. The dispositive portion of the decision states: WHEREFORE, the Decision of this Court of July 15, 1981 is hereby reconsidered. The defendants are hereby ordered to pay to the plaintiff the amount of P1,300,000.00 with the corresponding interests, penalties, bank charges and attorney's fees in accordance with the terms of the Promissory Note, Exhibit "A". The counter-claims are dismissed. The writ of preliminary attachment previously issued by this Court is hereby maintained. Costs against the defendants. (p. 103, Rollo) Upon the denial of their motion for reconsideration, the spouses Salgado appealed to the Intermediate Appellate Court. Meanwhile, this Court in G.R. No. 55381, declared that the allegations in the affidavit of Helen Osias, which was made the basis for the issuance of the writ of attachment in the trial court, was false; and the issuance of the writ, irregular. The note sued upon in the main case was in fact secured by a real estate mortgage duly registered and annotated in the titles of the affected property. Accordingly, the resolution of the then appellate court reinstating the writ of attachment was set aside. (p.113, Rollo). On the basis of the decision of the Supreme Court in G.R. 55381 declaring that the issuance of the writ of attachment

MEDIALDEA, J.:p This is a petition for review on certiorari of the decision of the Intermediate Appellate Court dated October 30, 1985 in AC-G.R. CV No. 00119 entitled, "Philippine Commercial and Industrial Bank, v. Spouses Jose Salgado and Julieta Salgado," which reversed the decision of the trial court and its resolution denying the motion for reconsideration. The facts are as follows: A complaint (pp. 43-48, Rollo) for recovery of a sum of money with an application for a writ of preliminary attachment was filed on May 8, 1978 by Philippine Commercial and Industrial Corporation (PCIB) against Spouses Salgado with the Court of First Instance of Rizal and docketed as Civil Case No. 29392. The complaint sought to enforce payment of the P1.3 million promissory note executed by the spouses in favor of PCIB. To secure a writ of attachment, PCIB alleged in the complaint that the note has no sufficient security and that the spouses were disposing, concealing or removing their properties with intent to defraud creditors. An affidavit to this effect was executed by Helen Osias, PCIB's Credit Division Manager (p. 52, Rollo). The application for a writ of preliminary injunction was granted on May 9, 1978 upon the filing by PCIB of a bond of P1,500,905.00 (p. 53, Rollo). The deputy sheriff of the court levied upon fifteen (15) parcels of land registered in the names of the spouses (p. 83, Rollo). PCIB also filed a petition for extra-judicial foreclosure of four (4) real estate mortgages executed in its favor by spouses Salgado with the provincial sheriff of Negros Occidental on May 11, 1978. The petition alleged that the outstanding debt of the spouses to PCIB under the above mortgages amounted to P3,161,393.44 inclusive of interests, penalty/bank charges as of April 30, 1978. An auction sale was conducted where PCIB was the highest bidder for P2,325,819.60 (CA decision, p. 11, Rollo). Spouses Salgado filed their answer in the civil case alleging that the note sued upon was secured by several real estate mortgages and that PCIB allowed the reconstruction of the loan by agreeing to service their accounts with future sugar proceeds starting from crop year 1978-79 and onwards. On September 15, 1978, the spouses Salgado moved to quash the writ of preliminary attachment alleging that PCIB made fraudulent misrepresentation in securing the writ by deleting the words "REM" (Real Estate Mortgage) from the xerox copy of the promissory note attached to the complainant thereby making it appear that the note was unsecured. The motion was granted and the writ lifted on January 31, 1979; PCIB's motion for reconsideration was denied. PCIB filed a petition for certiorari questioning the trial court's lifting of the writ of attachment with the appellate

was irregular, the Salgado spouses filed on November 28, 1984 a claim for damages on account of the illegal attachment with the Intermediate Appellate Court. The claim was referred to the Regional Trial Court that took the place of Branch XXII of the Court of First Instance of Rizal, for trial and reception of evidence (p. 4, CA Decision, p. 9,Rollo). During the trial, only Julieta Salgado testified. The trial court concluded that Julieta Salgado had not satisfactorily proved her claims for actual damages but granted moral damages, exemplary damages and attorney's fees. On June 18, 1985, the Salgado spouses filed a motion for reconsideration of the above decision of the lower court in the claim for damages on account of illegal attachment, praying that the damages awarded be increased even just to the extent of the full amount of the attachment bond of P1,500,000.00. When this motion for reconsideration was filed, the records were already with the Intermediate Appellate Court. On July 8, 1985, the Salgado spouses filed a Notice of Appeal from the trial court's decision on June 11, 1985. Invoking Section 20 of Rule 57 of the Rules of Court, the Intermediate Appellate Court included the appeal of the Salgado spouses from the decision of the trial court in their claim for damages on account of illegal attachment in the resolution of the main case (p. 4, CA Decision; p. 9, Rollo). In a decision (pp. 6-17, Rollo) rendered on October 30, 1985, the Intermediate Appellate Court reversed the decision of Judge Pineda in the main case and modified the decision of the trial court in the claim of the Salgado's for damages on the account of the illegal attachment by increasing the award of damages, the pertinent portion of which reads: In the main case the lower court in its decision dated July 15, 1981 through Judge Valdellon dismissed the complaint and awarded damages in favor of appellants. Since, We are awarding damages due to the illegal attachment, in the exercise of Our discretion, the damages awarded by Judge Valdellon should be reduced. Hence, in addition to the damages as a result of the illegal attachment, an award of P150,000.00 as moral damages; P75,000.00 as exemplary damages; and P50,000.00 as and for attorney's fees, are adequate and reasonable. WHEREFORE, the decision appealed from is hereby REVERSED and set aside and a new one entered awarding damages in favor of Appellants (Salgado spouses) in the following aggregate sum of P650,000.00 as actual damages; P450,000.00 as moral damages; P175,000.00 as exemplary damages and P149,000.00 as and for attorney's fees. SO ORDERED. (pp. 14-15, Rollo) Upon the denial of its motion for reconsideration, PCIB filed the instant petition for review on February 26, 1 986 raising the following questions of law: I. When a bank-creditor extrajudicially forecloses a Real Estate Mortgage (REM) to satisfy a past due obligation of its debtor and realizes certain monetary proceeds in the foreclosure sale thereof, can said debtor legally demand pursuant to the provisions of Article 1252 of the New Civil Code of the Philippines on "Application of Payments" that said proceeds be applied as payment to his other outstanding obligation with the same

bank-creditor which is a subject matter of an ordinary action for collection and not to the indebtedness secured by the mortgage? II. When a bank-creditor applied and obtained a writ of attachment which was later on dissolved without any pronouncement or finding of bad faith on the part of said bank-creditor in obtaining said writ of attachment, can said bankcreditor be held liable for damages in consequence thereof (p.19, Rollo) Petitioner PCIB admitted in its petition that the P1.3 Million account subject of Civil Case No. 29392 was also secured by the same mortgage foreclosed on August 14, 1978 but it contended that when it brought the civil action for collection (Civil Case No. 29392), their mortgage was deemed waived (p.13, Rollo). No valid waiver of mortgage can be concluded from PCIB's act of filing a collection suit to enforce payment of the P1.3M account and subsequently filing foreclosure proceedings for the security given for the account. Although it appears that the mortgages foreclosed on August 14, 1978 also secured private respondents' other outstanding obligations for crop years 1976-77 and 197778, the fact remains that the foreclosure proceedings also included the security for the P1.3M account. While the law allows a mortgage creditor to either institute a personal action for the debt or a real action to foreclosure the mortgage, he cannot pursue both remedies simultaneously or successively as was done by PCIB in this case. This rule was laid down in the case of Danao v. Court of Appeals, G.R. No. L-48276, September 30, 1987, 154 SCRA 446, 457; pp. 457-458, citing Manila Trading and Supply Co. v. Co Kim, et al., 71 Phil. 448 [1941]; Movido v. RFC, et al., 105 Phil. 886, where We held: Anent real properties in particular, the court has laid down the rule that a mortgage creditor may institute against the mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In other words, he may pursue either of the two remedies, but not both. The rule was explained in the above-cited cases, as follows: For non-payment of a note secured by mortgage, the creditor has a single cause of action against the debtor. This single cause of action consists in the recovery of the credit with execution of the security. In other words, the creditor in his action may make two demands, the payment of the debt and the foreclosure of the mortgage. But both demands arise from the same cause, the non-payment of the debt, and, for that reason, they constitute a single cause of action. Though the debt and the mortgage constitute separate agreements, the latter is subsidiary to the former, and both refer to one and the same obligation. Consequently there exists only one cause of action for a single breach of that obligation. Plaintiff, then, by applying the rule above stated cannot split up his single cause of action by filing a complaint for payment of the debt, and thereafter another complaint for foreclosure of the mortgage. If he does so, the filing of the first complaint will bar the subsequent complaint. By allowing the creditor to file two separate complaints simultaneously or successively, one to recover his credit and

the other to foreclose his mortgage, We will, in effect, be authorizing him plural redress for a single breach of contract at much cost to the courts and with so much vexation and oppression to the debtor. . . . a rule that would authorize the plaintiff to bring a personal action against the debtor and simultaneously or successively another action against the mortgaged property, would result not only in multiplicity of suits so offensive to justice (Soriano v. Enriquez, 24 Phil. 584) and obnoxious to law and equity (Osorio v. San Agustin, 25 Phil, 404), but also in subjecting the defendant to the vexation of being sued in the place of his residence or of the residence of the plaintiff, and then again in the place where the property lies. (Bachrach Motor Co., Inc. v. Esteban Icarangal, et al., 38 Off. Gaz.-389 [1939]) Evidently, the prior recourse of the creditor bank in filing a civil action against the Danao spouses and subsequently resorting to the complaint of foreclosure proceedings, are not only a demonstration of the prohibited splitting up of a cause of action but also of the resulting vexation and oppression to the debtor. Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the P1.3 Million promissory note secured by real estate mortgages and subsequently filed a petition for extrajudicial foreclosure, it violated the rule against splitting a cause of action. It is also the contention of PCIB that the rule on application of payments does not apply in this case. We have held that the application of the proceeds from the sale of the mortgaged property to the mortgagor's obligation is an act of payment, (Gorospe v. Gochangco, 106 Phil. 426), hence, respondent appellate court correctly held that the proceeds of P2,325,819.60 realized in the public auction sale of August 14, 1978 may be applied first to liquidate private respondent's indebtedness of P1,300,000.00 subject of the main case because, in addition to the fact that the said debt was one of those secured by the real estate mortgages foreclosed by the Provincial Sheriff, it is the most onerous (14% interest per year) and the oldest. There is no question that the suing out of the writ of attachment by petitioner was wrongful. This question is settled in G.R. No. 55381 entitled, "Spouses Jose Salgado and Julieta Salgado v. Hon. Court of Appeals," promulgated on March 26, 1984. Petitioner contends that since there was no pronouncement in G.R. No. 55381 that there was bad faith or malice in securing the writ of attachment, PCIB cannot be held liable for damages. The contention is not meritorious. The silence of the decision in G.R. No. 55381 on whether there was bad faith or malice on the part of 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 respondent appellate court that malice and bad faith attended the application by PCIB of a writ of attachment. To have a basis for the issuance of a writ of preliminary attachment, in the xerox copy of the promissory note attached to the complaint in the instant case, the existence of the REM was blotched out

making it appear that the note was unsecured when in truth and in fact it was fully secured by a series of valid and existing real estate mortgages duly registered and annotated in the titles of the affected real properties in favor of the bank. Certainly blotching out the existence of a fact is an act of bad faith. This act of bad faith was made more apparent when Appellee bank in its complaint did not mention of such REM. (p.14, Rollo) However, the award of actual damages is not supported by evidence. While the testimony of Julieta Salgado was not rebutted by the petitioner, the trial court which received the evidence held that the claims for damages were not satisfactorily proved. The stopping of her children from going to school is too remote a result of the wrongful attachment. It has not been clearly shown that whatever losses she might have suffered from the sale of her 80 carabaos at a lower price and from the pledge of her jewelry were the direct and proximate result of the wrongful suing out of the writ and the seizure and detention of her property thereunder. In accordance with the rule that the recovery of actual damages is limited to compensation for injuries which are the direct and proximate result of the wrongful attachment, the items recoverable are limited to those which flow naturally and reasonably therefrom. (Francisco,supra, p.165) The loss from P600,000.00 to P1,000,000.00 as a result of the abandonment of the sugar cane plantation is not certain and is speculative and has not been duly established by competent proofs; It is 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 (Diaz & Delena vs. Enriquez & Teodoro, (CA) 49 O.G. 29320). The cancellation of the loan with Traders Royal bank, has not been sufficiently established by evidence independent of the testimony of Julieta Salgado. The P100,000-loss in the fishing boat business and the P240,000-loss in the fishpond business have not been shown, by clear and convincing evidence, to have been the natural, direct and proximate result of the wrongful attachment. Neither can the failure to pay the laborers, for

want of complete evidence, be considered as the immediate result of the suing out of the writ. The P50,000.00 allegedly spent by Julieta Salgado for her board and lodging and transportation from Bacolod to Manila and from Manila to Bacolod in connection with the attachment case has not been adequately established. No receipts covering such as expenditure have been produced. Her testimony on this point has not been corroborated. The P99,000.00 representing the attorney's fees of previous counsel has not been completely and competently proved. Exhibit M has not been duly authenticated. It has no usefulness as evidence. Whatever the character of a private writing its authentication is a condition precedent to its usefulness as evidence (Salonga, Philippine Law of Evidence, 3rd Edition, p. 710). The impairment of Julieta Salgado's credit is a remote consequence of the wrongful attachment. The impairment of the plaintiffs credit, his inability to sell the land levied upon, or to contract a loan upon the security of the land, are not the proximate, but remote consequence of the attachment. (Health v. Lent, 1 Cal. 410; Elder v. Kutner, 47 Cal. 490, 32 Pac 563, cited in Francisco, supra, p. 168) The illness of Julieta Salgado's husband his ulcer and the 3 operations he had undergone may be ascribable to causes remotely related to the wrongful attachment. (pp. 123-125, Rollo) We quote with approval the findings of the trial court that spouses Salgado are entitled to moral damages, exemplary damages and attorney's fees. Defendants-Appellants however are entitled to recover moral damages, exemplary damages and attorney's fees but in reduced amounts. Julieta Salgado declared: "Basing on our social standing in our community, basing on our business transaction I think 10 million moral damages is not enough to compensate for what the bank has done to us (TSN, March 27, 1985, p. 30). No evidence has been submitted on her social standing or reputation in her community. "Reputation . . . is the consideration or estimation in which a person is held especially by the community or the public generally" (Hopkins v. Tate, 255 Pa. 56, 90 A-210). It is "what people think an individual is and what they say about him" (Black's Law Dictionary, De Luxe Fourth Edition, p. 1468). Put otherwise, reputation is not what a person thinks of, and says about himself.

The reputation must be among people who have had an opportunity of observing the person's conduct; in particular, in the neighborhood of his home, or in a group of persons with whom he follows his occupation or otherwise associates intimately . . . . The common reputation must be among people who have had an adequate opportunity of observing the person's conduct' (Wigmore's Pocket Code of Evidence, Sec. 1074, p. 250). No such persons have been produced to testify on the reputation and the social or credit standing of the Salgado's in the community in which they live. It has been established that the writ of attachment based on a false affidavit (Exh. C) was improperly or irregularly issued (Exh. F). "An action to recover damages from the attachment plaintiff, for the wrongful issuance and levy of attachment is identical with or analogous to the ordinary action for malicious prosecution" (Lazatin vs. Twano, L-12736, July 31, 1961, 2 SCRA 842). In view thereof, moral damages may be recovered by defendants-appellants (Art. 2219 (8), Civil Code). Moral damages are to be fixed in the discretion of the court taking into consideration the educational, social and financial standing of the parties (Dominding vs. Ng, 103 Phil. 11). No evidence has been introduced showing that defendants-appellants appear to be of much social and financial consequence. As a consequence, it is believed that the amount of P10,000,000.00 moral damages is out of reason and should accordingly be reduced to P10,000.00. It has been shown that defendantsappellants are entitled to moral damages. They may, for that reason, recover exemplary damages. For one to recover exemplary damages, he must first show that he is entitled to moral, temperate, liquidated or compensatory damages (Marchan vs. Mendoza, 26 SCRA 731). The amount, however, of P5,000,000.00 is excessive. It should be reduced to P5,000.00. Reasonable attorney's fees constitute a proper element of damages in an action based upon wrongful attachment. . . . the more generally prevailing view is that one against whom an attachment has been wrongfully sued out is entitled to recover reasonable counsel fees incurred or expended in defending against such attachment (7 C.J.S., 372, cited in Francisco, supra, p. 170).

And "in cases mentioned in Article 2208 (Civil Code) attorney's fees constitute a part of actual damages" (Fores vs. Miranda, L-12103, March 4, 1959). Recoverable attorney's fees are limited to those actually paid or contracted to be paid. It cannot be successfully disputed that defendants-appellants are represented actively by counsel. But the amount of P50,000.00 as attorney's fees is unreasonable, considering the amount and character of the services rendered, the nature of the litigation, and the time spent during the hearing thereof. It should accordingly be reduced to P3,000.00. The principle that courts should reduce stipulated attorney's fees whenever it is found under the circumstances of the case that the same is unreasonable, is now deeply rooted in this jurisdiction to entertain any serious objection to it. (Mambulao Lumber Co. vs. Philippine National Bank, 22 SCRA 370). xxx xxx xxx For the foregoing considerations, judgment is hereby rendered ordering plaintiff-appellee Philippine Commercial and Industrial Bank to pay the defendantsappellants, the spouses Jose and Julieta Salgado, the following amounts: 1. P10,000.00 as moral damages; 2. P5,000.00 as exemplary damages; and 3. P3,000.00 as attorney's fees. SO ORDERED. (pp. 125-129, Rollo) However, We are increasing the attorney's fees from P3,000.00 to P10,000.00 considering that the issue on the legality of the issuance of the writ of preliminary attachment reached this Court. In the main case, recovery of damages is in order. However, the award granted by the appellate court is very excessive. An award of P30,000.00 moral damages, P10,000.00 exemplary damages and P10,000.00 attorney's fees is sufficient. ACCORDINGLY, the decision of the Court of Appeals is AFFIRMED with modification on the amount awarded as damages: the aggregate sum of P40,000.00 as moral damages, P15,000.00 as exemplary damages and P20,000.00 as attorney's fees. SO ORDERED.

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner, Santiago, J. (Chairperson), - versus Martinez,

G.R. No. 175587 Present: YnaresAustriaChicoNazario, Nachura, and Reyes, JJ .

informing the court that he is voluntarily submitting to its jurisdiction.[8] Subsequently, respondent filed a motion to quash[9] 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 respondents 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 respondents residence considering that it has personal and official knowledge that for purposes of service of summons, respondents residence and office addresses are located in the Philippines. The dispositive portion of the courts decision is as follows: WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby GRANTED, and the ORDER of 24 October 1997 is hereby RECONSIDERED and SET ASIDE and the WRIT OF attachment of the same is hereby DISCHARGED. SO ORDERED.[11] With the denial[12] of petitioners 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 Million [17] on the attachment bond (posted by Prudential Guarantee & Assurance, Inc., under JCL(4) No. 01081, Bond No. HO46764-97) 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 attorneys 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

JOSEPH ANTHONY M. ALEJANDRO, Respondent. ated:

Promulg

September 21, 2007 x --------------------------------------------------------------------------------------- x DECISION YNARES-SANTIAGO, J.: This petition for review assails the May 31, 2006 Decision[1] of the Court of Appeals in CA-G.R. CV No. 78200 affirming the August 30, 2000 Decision[2] of the Regional Trial Court of Makati, which granted respondent Joseph Anthony M. Alejandros claim for damages arising from petitioner Philippine Commercial International Banks (PCIB) invalid garnishment of respondents deposits. On October 23, 1997, petitioner filed against respondent a complaint[3] 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 petitioners 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 parte[7] 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

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 petitioners 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 respondents Philippine residence and office address goes into the very issue of the trial courts 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 attorneys fees, to be satisfied against the attachment bond under Prudential Guarantee & Assurance, Inc. JCL (4) No. 01081. SO ORDERED.[22] Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals denied petitioners motion for reconsideration but granted that of respondents by ordering petitioner to pay additionalP5Million 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. Petitioners 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 defendants permanent residence in METRO-MANILA, either in defendants 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 defendants temporary home and business addresses in Hongkong. It is therefore clear that plaintiff could not deny their personal and official knowledge that defendants 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 defendants peso deposits assigned with the bank to secure the loan and as proof that the withdrawal was not intended to defraud plaintiff as creditor is that plaintiff approved and allowed said withdrawals. It is even noted that when the Court granted the prayer for attachment it was mainly on the first ground under Section 1(f) of Rule 57 of the 1997 Rules of Civil Procedure, that defendant resides out of the Philippines.

On the above findings, it is obvious that plaintiff already knew from the beginning the deficiency of its second ground for attachment [i.e.,] disposing properties with intent to defraud his creditors, and therefore plaintiff had to resort to this misrepresentation that defendant was residing out of the Philippines and suppressed the fact that defendants 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 attorneys 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. Escobars protestation is now too late in the day. The question of the illegality of the attachment and Escobars 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. Escobars 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 (Hanils) 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 petitioners 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 petitioners contention that respondent can be considered a resident who is temporarily out of the Philippines upon whom service of

summons may be effected by publication, and therefore qualifies as among those against whom a writ of attachment may be issued under Section 1, paragraph (f), Rule 57 of the Rules of Court which provides: (f) In an action against a party x x x on whom summons may be served by publication. In so arguing, petitioner attempts to give the impression that although it erroneously invoked the ground that respondent does not reside in the Philippines, it should not be made to pay damages because it is in fact entitled to a writ of attachment had it invoked the proper ground under Rule 57. However, even on this alternative ground, petitioner is still not entitled to the issuance of a writ of attachment. The circumstances under which a writ of preliminary attachment may be issued are set forth in Section 1, Rule 57 of the Rules of Court, to wit: SEC. 1. Grounds upon which attachment may issue. At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: (a) In an action for the recovery of a specified amount of money or damages, other than moral and exemplary, on a cause of action arising from law, contract, quasi-contract, delict or quasi-delict against a party who is about to depart from the Philippines with intent to defraud his creditors; (b) In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty; (c) In an action to recover the possession of personal property unjustly or fraudulently taken, detained, or converted, when the property, or any part thereof, has been concealed, removed, or disposed of to prevent its being found or taken by the applicant or an authorized person; (d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof; (e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors; (f) In an action against a party who resides out of the Philippines, or on whom summons may be served by publication. The purposes of preliminary attachment are: (1) to seize the property of the debtor in advance of final judgment and to hold it for purposes of satisfying said judgment, as in the grounds stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or (2) to acquire jurisdiction over the action by actual or

constructive seizure of the property in those instances where personal or substituted service of summons on the defendant cannot be effected, as in paragraph (f) of the same provision.[27] Corollarily, in actions in personam, such as the instant case for collection of sum of money, [28] summons must be served by personal or substituted service, otherwise the court will not acquire jurisdiction over the defendant. In case the defendant does not reside and is not found in the Philippines (and hence personal and substituted service cannot be effected), the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is to convert the action into a proceeding in rem or quasi in rem by attaching the property of the defendant.[29] Thus, in order to acquire jurisdiction in actions in personam where defendant resides out of and is not found in the Philippines, it becomes a matter of course for the court to convert the action into a proceeding in rem or quasi in rem by attaching the defendants property. The service of summons in this case (which may be by publication coupled with the sending by registered mail of the copy of the summons and the court order to the last known address of the defendant), is no longer for the purpose of acquiring jurisdiction but for compliance with the requirements of due process.[30] However, where the defendant is a resident who is temporarily out of the Philippines, attachment of his/her property in an action in personam, is not always necessary in order for the court to acquire jurisdiction to hear the case. Section 16, Rule 14 of the Rules of Court reads: Sec. 16. Residents temporarily out of the Philippines. When an action is commenced against a defendant who ordinarily resides within the Philippines, but who is temporarily out of it, service may, by leave of court, be also effected out of the Philippines, as under the preceding section. The preceding section referred to in the above provision is Section 15 which provides for extraterritorial service (a) personal service out of the Philippines, (b) publication coupled with the sending by registered mail of the copy of the summons and the court order to the last known address of the defendant; or (c) in any other manner which the court may deem sufficient. In Montalban v. Maximo,[31] however, the Court held that substituted service of summons (under the present Section 7, Rule 14 of the Rules of Court) is the normal mode of service of summons that will confer jurisdiction on the court over the person of residents temporarily out of the Philippines. Meaning, service of summons may be effected by (a) leaving copies of the summons at the defendants residence with some person of suitable discretion residing therein, or (b) by leaving copies at the defendants 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 defendants property in order to have authority to try the case. Where the plaintiff seeks to attach the defendants 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 defendants 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 courts issuance of the writ was for the sole purpose of acquiring jurisdiction to hear and decide the case. Had the allegations in the complaint disclosed that respondent has a residence in Quezon City and an office in Makati City, the trial court, if only for the purpose of acquiring jurisdiction, could have served summons by substituted service on the said addresses, instead of attaching the property of the defendant. The rules on the application of a writ of attachment must be strictly construed in favor of the defendant. For attachment is harsh, extraordinary, and summary in nature; it is a rigorous remedy which exposes the debtor to humiliation and annoyance. [35] It should be resorted to only when necessary and as a last remedy. It is clear from the foregoing that even on the allegation that respondent is a resident temporarily out of the Philippines, petitioner is still not entitled to a writ of attachment because the trial court could acquire jurisdiction over the case by substituted service instead of attaching the property of the defendant. The misrepresentation of petitioner that respondent does not reside in the Philippines and its omission of his local addresses was thus a deliberate move to ensure that the application for the writ will be granted. In light of the foregoing, the Court of Appeals properly sustained the finding of the trial court that petitioner is liable for damages for the wrongful issuance of a writ of attachment against respondent. Anent the actual damages, the Court of Appeals is correct in not awarding the same inasmuch as the respondent failed to establish the amount garnished by petitioner. It is a well settled rule that one who has been injured by a wrongful attachment can recover damages for the actual loss resulting therefrom. But for such losses to be recoverable, they must constitute actual damages duly established by competent proofs, which are, however, wanting in the present case.[36] Nevertheless, nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right. Indeed, nominal damages are

damages in name only and not in fact. [37] They are recoverable where some injury has been done but the pecuniary value of the damage is not shown by evidence and are thus subject to the discretion of the court according to the circumstances of the case.[38] In this case, the award of nominal damages is proper considering that the right of respondent to use his money has been violated by its garnishment. The amount of nominal damages must, however, be reduced fromP2 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. Likewise, the award of attorneys 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]

ordered to pay respondent Joseph Anthony M. Alejandro the following amounts: P50,000.00 as nominal damages, P200,000.00 as attorneys 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. HO46764-97. No pronouncement as to costs. SO ORDERED.

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 attorneys fees should be fixed not at P1 Million, but only at P200,000.00. The courts below correctly awarded moral damages on account of petitioners 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 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 petitioners 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 petitioners 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

A.M. No. RTJ-93-1008 November 14, 1994 TERESITA P. ARELLANO, petitioner, vs. JUDGE NAPOLEON R. FLOJO, FELINO BANGALAN, Clerk of Court III, HERMINIO DEL CASTILLO, RTCOCC.; LUCINO JOVE, Deputy Sheriff, respondents. Wilfredo O. Paraiso for petitioner. Tumaru, Guerrero & Tumaru Law Offices for respondents Judge Bangalan and Sheriff Jove. RESOLUTION MELO, J.: Teresita P. Arellano, defendant in Civil Case No. 11-1041 then pending before Branch 6 of the Regional Trial Court of the Second Judicial Region and stationed in Aparri, Cagayan, filed a verified complaint for neglect of duty, misconduct, bias, and partiality against (a) Judge Napoleon R. Flojo, then Presiding Judge of the aforementioned Branch 6, now assigned as Presiding Judge of Branch 2 of the Regional Trial Court of Manila, for having irregularly issued an order dated January 21, 1986 for the issuance of a writ of attachment in the said case on the same date despite the lack of legal basis therefor. (b) Felino Bangalan, then Acting Clerk of Court III, of the Aparri RTC (now Presiding Judge, MTC, Branch 1, Aparri, Cagayan) for issuing the writ of attachment in the said case despite the failure of the plaintiffs to post the required attachment bond of P100,000.00 and for deliberately delaying the issuance of service of summons to the defendant in that although the case was filed on January 21, 1986, the defendant (complainant herein) was served summons only on May 13, 1986 or four (4) months thereafter, and that she was not even furnished a copy of the Order authorizing the issuance of a writ of attachment, the so-called attachment bond, as well as the writ of attachment itself. (c) Herminio del Castillo, Branch Clerk of Court of the Aparri RTC for deliberately delaying the issuance of service of summons on the defendant. (d) Luciano Jove, Deputy Sheriff, Aparri, Cagayan for seizing a vehicle not owned by the defendant and entrusting the custody thereof to Sheriff Guards Rodolfo Auringan and Dioniso Co., Jr., instead of personally keeping it under his custody, resulting in the said vehicle being cannibalized to the damage and prejudice of the complainant and the heirs of the late Ruperto Arellano. The complaint against Clerk of Court Herminio del Castillo was dismissed for lack of merit by the Court in its Resolution dated June 28, 1993, as he did not appear to have had any participation in the issuance and service of summons on the defendant in the aforementioned civil case (pp. 42-43, Rollo.) With respect to Judge Napoleon R. Flojo, inasmuch as the charges against him were mere reiterations of the charges filed by the same complainant in A.M. Case No. RTJ-8652 which had been earlier dismissed for lack of merit by the Court en banc on March 24, 1987, the instant complaint against him was likewise dismissed in the resolution of the Court dated November 8, 1993 (p. 83, Rollo). Thereafter, the case was referred to Justice Ramon A. Barcelona of the Court of Appeals, for investigation, report, and recommendation in regard to the remaining respondents.

Justice Barcelona finds Judge Bangalan (then Clerk of Court III) guilty of negligence for (1) having issued the writ of attachment on January 21, 1986 in spite of the applicants' failure to post an acceptable bond as required under Section 4, Rule 57 of the Rules of Court for what appears in the record is only a promissory note in the form of an affidavit executed by Victor Suguitan, Andres Langaman, and Mariano Retreta; having caused the implementation through Sheriff Jove, of the said writ of attachment on January 23, 1986, knowingly fully well that no summons had as yet been issued and served as of said date upon defendant therein in violation of Section 5, Rule 57 of the Rules of Court and Section 3, Rule 14 of the same rules. As for Sheriff Jove, Justice Barcelona found that in serving the writ of attachment, the sheriff did not serve the same on the defendant but on somebody whom he suspected only as holding the property of the complainant. He failed to verify the ownership of the cargo truck he attached. To compound the sheriff's failure to exercise diligence in the execution of the writ of attachment, he surrendered the custody of the property to the two alleged guards instead of depositing the same in a bonded warehouse. Finding both Judge Bangalan and Sheriff Jove remiss in the performance of their duties, Justice Barcelona recommends that they each be suspended for one (1) month (not chargeable to their accumulated leave) without pay. However, this Court is of the opinion and thus hereby holds that a fine of P5,000.00 each for Judge Bangalan and Sheriff Jove is the commensurate penalty for the irregularity that attended the civil case below. In this respect, we agree with the factual findings and analysis of the Office of the Court Administrator, thus: Indeed, he issued the Writ of Attachment although the plaintiffs have not yet posted the required attachment bond. It is explicitly stated in his Comment that what was filed was merely an undertaking. The fact that the "Undertaking" was subscribed by the branch clerk of court does not necessarily follow that it carried the imprimatur of the presiding judge thereof. As a lawyer, respondent Bangalan, who is now a Judge should have known the glaring distinctions between a plain undertaking and a real attachment bond. The difference between the two is not that hard to discern. As ruled by Judge Ernesto A. Talamayan in his order of April 23, 1993 (Rollo, pp. 18-19), no bond can be confiscated to answer for the damages sustained by defendants. He discovered that only a promissory note in the form of an affidavit executed by the bondsmen denominated as an attachment bond appears on the record. Had respondent Bangalan carefully examined the undertaking filed before he issued the writ of attachment, such a situation could have been obviated. Where a statute authorizing attachment requires, as a condition to the issuance of the writ, that a bond shall be given by plaintiff to indemnify defendant for any loss or injury resulting from the attachment in case it proves to be wrongful, a failure to give such bond is fatal, and an attachment issued without the necessary bond is invalid (7 C.J.S. 326). However, we do not find that the delay in the issuance and service of summons was deliberately done to prejudice the defendant. Bad faith cannot be inferred by the mere fact of delay considering that it was issued by the Office of the Clerk of Court and not by the branch clerk to whom the case was already assigned.

For seizing a vehicle which is not owned by the defendant, respondent Sheriff Jove may be held administratively liable. Although his actuation may not have been tainted with bad faith or malice, he failed to exercise due prudence in attaching the truck. He should have verified first if the truck he seized was owned by the judgment debtor, especially in this case where it was found in the possession of a person other than its real owner. Consequently, the writ of attachment was ordered dissolved in the Decision of Judge Tumacder dated August 9, 1989 (Rollo, pp. 25 to 41) as the property attached does not belong to the judgment debtor but to her father, Ruperto Arellano. A sheriff incurs liability if he wrongfully levies upon the property of a third person (47 Am Jr 857). A sheriff has no authority to attach the property of any person under execution except that of the judgment debtor. If he does so, the writ of execution affords him no justification, for the action is not in obedience to the mandate of the writ (Codesal and Ocampo vs. Ascue, 38 Phil. 902). The sheriff maybe liable for enforcing execution on property belonging to a third party (Sec. 17, Rule 39, Rules of Court). However, he cannot be faulted for entrusting the custody thereof to the sheriff guards considering that he can not physically keep the cargo truck under his custody. His stand is sustained by the Court in its Order of October 10, 1989 (Rollo, pp. 110 to 111), holding the two (2) sheriff guards liable for the cannibalism of the truck. (pp. 132-133. Rollo) WHEREFORE, premises considered, Judge Felino Bangalan and Sheriff Lucinio Jove are hereby each fined the amount of FIVE THOUSAND PESOS (P5,000.00), with the severe warning that a repetition of the same or similar acts in the future will be dealt with more severely. SO ORDERED.

G.R. No. 74696 November 11, 1987 JOSE D. CALDERON, petitioner, vs. THE INTERMEDIATE APPELLATE COURT, GEORGE SCHULZE, GEORGE SCHULZE, JR., ANTONIO C. AMOR, MANUEL A. MOZO, and VICTOR M. NALUZ, respondents. G. R. No. 73916 November 11, 1987 FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC., petitioner, vs. THE INTERMEDIATE APPELLATE COURT, GEORGE SCHULZE, ANTONIO C. AMOR, MANUEL A. MOZO and VICTOR M. NALUZ, respondents.

PARAS, J.: For review on certiorari is respondent appellate Court's decision 1 in AC-G.R. No. 01420, which affirmed the Regional Trial Court's decision 2 appealed from holding the plaintiff Jose D. Calderon (petitioner herein) and his bondsman the Integrated Bonding and Insurance Company, Inc., jointly and severally liable to pay defendants (private respondents herein), damages caused by the filing by Calderon of the allegedly unwarranted suit and the wrongful and malicious attachment of private respondents' properties. The facts of the case are briefly as follows: On November 2, 1976, petitioner Calderon purchased from the private respondents the following: the Luzon Brokerage Corporation (LBC for brevity) and its five (5) affiliate companies, namely, Luzon Air Freight, Inc., Luzon Port Terminals Services, Inc., Luzon (GS) Warehousing Corporation, GS Industrial Management Corporation, and GS Luzon Trucking Corporation. Twenty one (21) days thereafter or on November 23, 1976, the Bureau of Customs suspended the operations of LBC for failure to pay the amount of P1,475,840.00 representing customs taxes and duties incurred prior to the execution of the sale. In order to lift the suspension Calderon paid the sum of P606,430.00 to the Bureau of Customs. On October 27, 1977, Calderon filed a complaint against private respondents to recover said amount of P1,475,840.00, with damages by reason of breach of warranty. In the same complaint, the petitioner prayed for a preliminary attachment, alleging: that private respondents had deliberately and willfully concealed from his knowledge such staggering liability of the LBC for the purpose of misleading him into buying the six aforesaid companies; and that private respondent Schulze is about to depart from the Philippines in order to defraud his creditors. To support the petition for preliminary attachment, the petitioner posted a surety bond of P1,475,840.00. On October 28, 1977, the trial court issued a writ of preliminary attachment, whereupon properties of the private respondents were attached and their bank deposits were garnished. On November 10, 1977, petitioner Calderon filed an amended complaint, alleging that while the liabilities of LBC are reflected in its books, the aforesaid amount was fraudulently withdrawn and misappropriated by private respondent Schulze. (pp. 7-18, Rollo) On the other hand, private respondents claimed: that the amount of P1,475,840.00 due to the Bureau of Customs represents the duties and taxes payable out of the

advanced payments made by LBC's client, Philippine Refining Company (PRC, for brevity) in August, September and October, 1976, and in the first and second weeks of November 1976, after Calderon himself had taken control of the management of LBC (Exhibit A); that these deposit payments were properly recorded in the books of the corporation and existing as part of the corporate funds; that from the first week of June, 1976 up to October 30, 1976, private respondent Schulze fully disclose and explained to Calderon that these customer's advanced deposit payments (including those of the PRC) are to be paid to the Bureau of Customs when their corresponding customs taxes and duties become due; that during this phase of the negotiation, Calderon and his representatives inspected and studied the corporate books and records at will and learned the daily operations and management of LBC; that the petitioner did not pay out of his own pocket but out of the LBC funds the said amount of P606,430,30 demanded by the Bureau of Customs, as evidenced by a manager's check No. FEBTC 25092 (Exhibits 9, 10, 11 & 38) and another facility negotiated with the Insular Bank of Asia and America (Exhibit K-2); and that private respondents are setting up a counterclaim for actual, moral and exemplary damages as well as attorney's fees, as a consequence of the filing of the baseless suit and the wrongful and malicious attachment of their properties, (pp. 217-221, Rollo) On November 17, 1977, private respondents filed a counterbond, whereupon the trial court issued an order directing the sheriff to return all real and personal properties already levied upon and to lift the notices of garnishment issued in connection with the said attachment (Annex B, p. 42, Rollo). After trial, the trial court dismissed the complaint, holding Calderon and his surety First integrated Bonding and Insurance Co., Inc., jointly and severally liable to pay the damages prayed for by the private respondents. Said decision was affirmed on appeal, although slightly modified in the sense that the award of moral and exemplary damages in favor of private respondents Schulze and Amor was reduced. The dispositive portion of the judgment of affirmance and modification reads: WHEREFORE, the judgment of the lower court is modified as follows: To defendant-appellee George Schulze: P650,000.00 as moral damages and P200,000.00 as exemplary damages. To defendant-appellee Antonio C. Amor: P150,000.00 as moral damages and P30,000.00 as exemplary damages, An other dispositions in the judgment appealed from, including the dismissal of the amended complainant are hereby affirmed in toto. SO ORDERED. In his petition, petitioner Calderon asserts, among other things, that the court below erred: I IN HOLDING THAT THE PETITIONER FAILED TO ESTABLISH HIS CLAIMS. II IN HOLDING THAT THE PRELIMINARY ATTACHMENT HAD BEEN WRONGFULLY AND MALICIOUSLY SUED OUT.

III IN HOLDING THAT THE PETITIONER IS LIABLE NOT ONLY FOR ACTUAL DAMAGES BUT MORAL AND EXEXEMPLARY DAMAGES AS WELL. On the other hand, petitioner Insurance Company raises the following issues: I WHETHER OR NOT THE PETITIONER SURETY IS LIABLE FOR DAMAGES ON ITS CONTRACTED SURETYSHIP NOTWITHSTANDING THE DISSOLUTION OF THE WRIT OF PRELIMINARY ATTACHMENT, AS A CON. SEQUENCE OF THE FILING OF THE DEFENDANT'S COUNTER- BOND, WHEREBY LEVIED PROPERTIES WERE ORDERED BY THE COURT RETURNED TO PRIVATE RESPONDENTS AND THE NOTICES OF GARNISHMENT ISSUED IN CONNECTION THEREWITH ORDERED LIFTED. II WHETHER OR NOT THE SUBSEQUENT FILING BY PRIVATE RESPONDENTS OF A COUNTER-BOND TO DISCHARGE THE WRIT OF PRELIMINARY ATTACHMENT CONSTITUTE A WAIVER ON ANY DEFECT IN THE ISSUANCE OF THE ATTACHMENT WRIT. III WHETHER OR NOT A SURETY IS A GUARANTOR OF THE EXISTENCE OF A GOOD CAUSE OF ACTION IN THE COMPLAINT. The petition is devoid of merit. Whether or not the amount of P1,475,840.00 was duly disclosed as an outstanding liability of LBC or was misappropriated by private respondent Schulze is purely a factual issue. That Calderon was clearly in bad faith when he asked for the attachment is indicated by the fact that he failed to appear in court to support his charge of misappropriation by Schulze, and in effect, preventing his being cross-examined, no document on the charges was presented by him. What the Appellate Court found in this regard need not be further elaborated upon. The Appellate Court ruled: ... The record shows that appellant Calderon failed to produce any evidence in support of his sworn charge that appellee Schulze had deliberately and willfully concealed the liabilities of Luzon Brokerage Corporation. Neither did appellant Calderon prove his sworn charges that appellee Schulze had maliciously and fraudulently withdrawn and misappropriated the amount of Pl,475,840.00 and that an the defendants had maliciously and fraudulently concealed and withheld from him this alleged liability of Luzon Brokerage Corporation in breach of the contractwarranty that said corporation had no obligations or liabilities except those appearing in the books and records of the said corporation. Indeed, appellant

Calderon never appeared in the trial court to substantiate the charges in his verified complaints and in his affidavit to support his petition for the issuance of a writ of attachment. He distanced himself from the appellees and avoided cross-examination regarding his sworn allegations. ... ... But even though appellant Calderon failed to prove his serious charges of fraud, malice and bad faith, the appellees took it upon themselves to show that they did not conceal or withhold from appellant's knowledge the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation and that they did not withdraw and misappropriate the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation. The books and records of Luzon Brokerage Corporation on which the Financial Statement of Luzon Brokerage Corporation, as of October 31, 1976 was prepared by the auditing firm retained by appellant Calderon himself (Exhibit 1), disclose that the liabilities of Luzon Brokerage Corporation in the total amount of P4,574,498.32 appear under the heading 'Customers Deposit' (Exhibit 1-A) this amount includes the deposit of Philippine Refining Co., Inc. in the sum of Pl,475,840.00. But appellant Calderon contends that this financial statement was dated February 4, 1977 (see Exhibit 1-C). There is nothing commendable in this argument because the bases of the financial statement were the books, records and documents of Luzon Brokerage Corporation for the period ending October 31, 1976, which were all turned over to and examined by appellant Calderon and his executive, legal and financial staffs. There is also no merit in the contention of appellant Calderon that the appellees have tampered the books of Luzon Brokerage Corporation because there is no proof to back this charge, let alone the fact that appellant Calderon did not even present the said books to support his charge. As stated above, the amount of customers' deposits in the sum of P4,574,498.32 includes the deposits of Philippine Refining Co., Inc. (Exhibits 46A, 46-B, 46-C, 46-D, 46-E, 46-F, 46-G, 46H, 46-1, 46-J, t.s.n. July 23, 1980, pp. 1213, 14-15). The amounts deposited by Philippine Refining Co., Inc. on various dates with Luzon Brokerage Corporation made before the execution of the sale were all entered in three other corporate books of Luzon Brokerage Corporation namely, the Cash Receipts Register (Exhibits 39-A-1 to 39-K-1 and 39-A-1-B to 39-K-1-B), the Journal Vouchers (Exhibits 42 to 46 and 42-A to 43- A), and the Customer's Deposit Ledger (Exhibit 46-A to 46-J) ... . Thus, the claim of appellant Calderon that the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation of P406,430.00 on August 24, 1976 (Exhibit N P53,640.00 on October 13, 1976 (Exhibit 0), P406,430.00 on September 8, 1976 (Exhibit P P199,508.00 on September 24, 1976

(Exhibit Q P52,738.00 on October 22, 1976 (Exhibit R and P264,436.00 on October 7, 1976 (Exhibit S) were not entered in the books of Luzon Brokerage Corporation, is completely without merit. ... (pp. 85-87, Rollo) It is evident from the foregoing that the attachment was maliciously sued out and that as already pointed out Schulze was not in bad faith. While as a general rule, the liability on the attachment bond is limited to actual damages, moral and exemplary damages may be recovered where the attachment was alleged to be maliciously sued out and established to be so.(Lazatin vs. Twano et al, L-12736, July 31, 1961). In the instant case, the issues of wrongful and malicious suing out of the writ of preliminary attachment were joined not only in private respondents' motion to discharge the attachment but also in their answer to the amended complaint (p. 38, Rollo). The trial court observed that the books and records of Luzon Brokerage Corporation disclose that the liabilities of the said corporation in the total amount of P4,574,498.32 appear under the heading "Customs Deposit" (Exhibit 1-A) and this amount includes the deposit of Philippine Refining Co., Inc. in the sum of P1,475,840.00 (p. 26, Rollo). On the other hand, plaintiff never appeared in court, and failed to produce any evidence to substantiate his charges (p. 26, Rollo). Well settled is the rule that the factual findings of the trial court are entitled to great weight and respect on appeal, especially when established by unrebutted testimonial and documentary evidence, as in this case. Anent the petition of the surety, We say the following: Specifically, petitioner surety contends that the dissolution of the attachment extinguishes its obligation under the bond, for the basis of its liability, which is wrongful attachment, no longer exists, the attachment bond having been rendered void and ineffective, by virtue of Section 12, Rule 57 of the Rules of Court. (p. 5, Petition) While Section 12, Rule 57 of the Rules of Court provides that upon the filing of a counterbond, the attachment is discharged or dissolved, nowhere is it provided that the attachment bond is rendered void and ineffective upon the filing of counterbond. The liability of the attachment bond is defined in Section 4, Rule 57 of the Rules of Court, as follows: Sec. 4. Condition of applicant's bond. The party applying for the order must give a bond executed to the adverse party in an amount to be fixed by the judge, not exceeding the applicant's claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto. It is clear from the above provision that the responsibility of the surety arises "if the court shall finally adjudge that the plaintiff was not entitled thereto." In Rocco vs. Meads, 96 Phil. Reports 884, we held that 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. It is, therefore, evident that upon the dismissal of an attachment wrongfully issued, the surety is liable for damages as a direct result of said attachment.

Equally untenable is the Surety's contention that by filing a counterbond, private respondents waived any defect or flaw in the issuance of the attachment writ, for they could have sought, without need of filing any counterbond, the discharge of the attachment if the same was improperly or irregularly issued, as provided in Section 13, Rule 57 of the Rules of Court. 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 creditor instead of the other way, which, in most instances like in the present case, would require presentation of evidence in a full-blown trial on the merits and cannot easily be settled in a pending incident of the case. We believe, however, that in the light of the factual situation in this case, the damages awarded by the Intermediate Appellate Court are rather excessive. They must be reduced. WHEREFORE, the judgment of said Appellate Court is hereby modified as follows: Both petitioner Calderon and petitioner First Integrated Bonding and Insurance Company, Inc. are hereby ordered to give jointly and severally: 1. Respondent George Schulze, P250,000.00 as moral damages and P50,000.00 as exemplary damages; and 2. Respondent Antonio C. Amor, P50,000.00 as moral damages and P10,000.00 as exemplary damages. The rest of the judgment of the Intermediate Appellate Court is hereby AFFIRMED. SO ORDERED.

G.R. No. L-39596

March 23, 1934

"CONSULTA" No. 1013 OF THE REGISTER OF DEEDS OF TAYABAS. GOTAUCO & CO., applicant-appellant, vs. THE REGISTER OF DEEDS OF TAYABAS, oppositorappellee. Godofredo Reyes for appellant. Office of the Solicitor-General Hilado for appellee. BUTTE, J.: This is an appeal from a judgment of the Fourth Branch of the Court of First Instance of Manila in a consulta submitted by the register of deeds of Tayabas. Our decision upon this appeal has been facilitated because both the appellant and the appellee, the latter being represented by the Solicitor-General, agreed that the judgment should be reversed. On August 12, 1932, when Exhibits A and B were presented to the register, by which a levy of execution against the judgment debtor, Rafael Vilar was made on fifteen contracts of land described in Exhibit B and registered in the name of Florentino Vilar, the register properly denied the inscription of said levy of execution because the title to the lands was in the name of Florentino Vilar and no evidence was submitted that Rafael Vilar had any present or possible future interest in the land. On September 17, 1932, there was presented to him a copy of a petition filed in the Court of First Instance of the province, entitled, "Intestado del Finado Florentino Vilar", from which he could properly infer that Florentino Vilar was dead and that the judgment debtor Rafael Vilar is one of the heirs of the deceased Florentino Vilar. Although the value of the participation of Rafael Vilar in the estate of Florentino Vilar was indeterminable before the final liquidation of the estate, nevertheless, the right of participation in the estate and the lands thereof may be attached and sold. The real test was laid down by this court in the case of Reyes vs. Grey (21 Phil., 73, 76), namely: Does the judgment debtor hold such a beneficial interest in the property that he can sell or otherwise dispose of it for value? Nothing appears in this record to indicate that Rafael Vilar being sui juris could not dispose of his interest or share as heir in the estate of Florentina Vilar. Having this right, he could by a conveyance defeat pro tanto the provisions of section 450 of the Code of Civil Procedure and thus deprive the judgment creditor of the benefit of a lawful execution. (See also Consulta No. 441 de los Abogados de Smith, Bell & Co., 48 Phil., 656, 664, 665.) On October 12, 1932, with the knowledge which he them had, the register should have accepted and inscribed Exhibit A, B and D. The judgment in this consulta is reversed without special pronouncement as to costs.

G.R. No. 107303 February 21, 1994 EMMANUEL C. OATE and ECON HOLDINGS CORPORATION, petitioners, vs. HON. ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents. G.R. No. 107491 February 21, 1994 BRUNNER DEVELOPMENT CORPORATION, petitioner, vs. HON. ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents. Florante A. Bautista for petitioner in G.R. No. 107303. Andin & Andin Law Offices for Brunner Development Corporation. Quasha, Asperilla, Ancheta, Pena & Nolasco for Sun Life Assurance Company of Canada.

1992. Petitioners filed a motion to nullify the proceedings taken thereat since they were not present. On January 30, 1992, petitioners and their co-defendants filed a memorandum in support of the motion to discharge attachment. Also on that same day, Sun Life filed another motion for examination of bank accounts, this time seeking the examination of Account No. 0041-0277-03 with the Bank of Philippine Islands (BPI) which, incidentally, petitioners claim not to be owned by them and the records of Philippine National Bank (PNB) with regard to checks payable to Brunner. Sun Life asked the court to order both banks to comply with the notice of garnishment. On February 6, 1992, respondent Judge issued an order (1) denying petitioners' and the co-defendants' motion to discharge the amended writ of attachment, (2) approving Sun Life's additional attachment, (3) granting Sun Life's motion to examine the BPI account, and (4) denying petitioners' motion to nullify the proceedings of January 23, 1992. On March 12, 1992, petitioners filed a motion for reconsideration of the February 6, 1992 order. On September 6, 1992, respondent Judge denied the motion for reconsideration. Hence, the instant petitions. Petitioners' basic argument is that respondent Judge had acted with grave abuse of discretion amounting to lack or in excess of jurisdiction in (1) issuing ex parte the original and amended writs of preliminary attachment and the corresponding notices of garnishment and levy on attachment since the trial court had not yet acquired jurisdiction over them; and (2) allowing the examination of the bank records though no notice was given to them. We find both petitions unmeritorious. Petitioners initially argue that respondent Judge erred in granting Sun Life's prayer for a writ of preliminary attachment on the ground that the trial court had not acquired jurisdiction over them. This argument is clearly unavailing since it is well-settled that a writ of preliminary attachment may be validly applied for and granted even before the defendant is summoned or is heard from. 2 The rationale behind this rule was stated by the Court in this wise: A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of which a plaintiff or other proper party may, at the commencement of the action or any time thereafter, have the property of the adverse party taken into the custody of the court as security for the satisfaction of any judgment that may be recovered. It is a remedy which is purely statutory in respect of which the law requires a strict construction of the provisions granting it. Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before acquisition of jurisdiction over the person of the defendant. Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time thereafter." The phrase "at the commencement of the action," obviously refers to the date of the filing of the complaint which, as abovepointed out, its the date that marks "the commencement of the action;" and the reference plainly is to a time before summons is served on the defendant or even before summons issues. What the rule is saying quite clearly is that after an action is properly

NOCON, J.: These are separate petitions for certiorari with a prayer for temporary restraining order filed by Emmanuel C. Oate and Econ Holdings Corporation (in G.R. No. 107303), and Brunner Development Corporation (in G.R. No. 107491), both of which assail several orders issued by respondent Judge Zues C. Abrogar in Civil Case No. 91-3506. The pertinent facts are as follows: On December 23, 1991, respondent Sun Life Assurance Company of Canada (Sun Life, for brevity) filed a complaint for a sum of money with a prayer for the immediate issuance of a writ of attachment against petitioners, and Noel L. Dio, which was docketed as Civil Case No. 91-3506 and raffled to Branch 150 of the RTC Makati, presided over by respondent Judge. The following day, December 24, 1991, respondent Judge issued an order granting the issuance of a writ of attachment, and the writ was actually issued on December 27, 1991. On January 3, 1992, upon Sun Life's ex-parte motion, the trial court amended the writ of attachment to reflect the alleged amount of the indebtedness. That same day, Deputy Sheriff Arturo C. Flores, accompanied by a representative of Sun Life, attempted to serve summons and a copy of the amended writ of attachment upon petitioners at their known office address at 108 Aguirre St., Makati but was not able to do so since there was no responsible officer to receive the same. 1 Nonetheless, Sheriff Flores proceeded, over a period of several days, to serve notices of garnishment upon several commercial banks and financial institutions, and levied on attachment a condominium unit and a real property belonging to petitioner Oate. Summons was eventually served upon petitioners on January 9, 1992, while defendant Dio was served with summons on January 16, 1992. On January 21, 1992, petitioners filed an "Urgent Motion to Discharge/Dissolve Writ of Attachment." That same day, Sun Life filed an ex-parte motion to examine the books of accounts and ledgers of petitioner Brunner Development Corporation (Brunner, for brevity) at the Urban Bank, Legaspi Village Branch, and to obtain copies thereof, which motion was granted by respondent Judge. The examination of said account took place on January 23,

commenced by the filing of the complaint and the payment of all requisite docket and other fees the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counterclaim, crossclaim, third-party claim) and for the Trial Court to issue the writ ex-parte at the commencement of the action if it finds the application otherwise sufficient in form and substance. 3 Petitioners then contended that the writ should have been discharged since the ground on which it was issued fraud in contracting the obligation was not present. This cannot be considered a ground for lifting the writ since this delves into the very complaint of the Sun Life. As this Court stated in Cuatro v. Court of Appeals: 4 Moreover, an attachment may not be dissolved by a showing of its irregular or improper issuance if it is upon a ground which is at the same time the applicant's cause of action in the main case since an anomalous situation would result if the issues of the main case would be ventilated and resolved in a mere hearing of the motion (Davao Light and Power Co., Inc. vs. Court of Appeals, supra, The Consolidated Bank and Trust Corp. (Solidbank) vs. Court of Appeals, 197 SCRA 663 [1991]). In the present case, one of the allegation in petitioner's complaint below is that the defendant spouses induced the plaintiff to grant the loan by issuing postdated checks to cover the installment payments and a separate set of postdated checks for payment of the stipulated interest (Annex "B"). The issue of fraud, then, is clearly within the competence of the lower court in the main action. 5 The fact that a criminal complaint for estafa filed by Sun Life against the petitioners was dismissed by the Provincial Prosecutor of Rizal for Makati on April 21, 1992 and was upheld by the Provincial Prosecutor on July 13, 1992 is of no moment since the same can be indicative only of the absence of criminal liability, but not of civil liability. Besides, Sun Life had elevated the case for review to the Department of Justice, where the case is presently pending. Finally, petitioners argue that the enforcement of the writ was invalid since it undisputedly preceded the actual service of summons by six days at most. Petitioners cite the decisions in Sievert vs. Court of Appeals, et al. 6 and BAC Manufacturing and Sales Corp. vs. Court of Appeals, et al., 7 wherein this Court held that enforcement of the writ of attachment can not bind the defendant in view of the failure of the trial court to acquire jurisdiction over the defendant through either summons or his voluntary appearance. We do not agree entirely with petitioners. True, this Court had held in a recent decision that the enforcement of writ of attachment may not validly be effected until and unless proceeded or contemporaneously accompanied by service of summons. 8

But we must distinguish the case at bar from the Sievert and BAC Manufacturing cases. In those two cases,summons was never served upon the defendants. The plaintiffs therein did not even attempt to cause service of summons upon the defendants, right up to the time the cases went up to this Court. This is not true in the case at bar. The records reveal that Sheriff Flores and Sun Life did attempt a contemporaneous service of both summons and the writ of attachment on January 3, 1992, but we stymied by the absence of a responsible officer in petitioners' offices. Note is taken of the fact that petitioners Oate and Econ Holdings admitted in their answer 9 that the offices of both Brunner Development Corporation and Econ Holdings were located at the same address and that petitioner Oate is the President of Econ Holdings while petitioner Dio is the President of Brunner Development Corporation as well as a stockholder and director of Econ Holdings. Thus, an exception to the established rule on the enforcement of the writ of attachment can be made where a previous attempt to serve the summons and the writ of attachment failed due to factors beyond the control of either the plaintiff or the process server, provided that such service is effected within a reasonable period thereafter. Several reasons can be given for the exception. First, there is a possibility that a defendant, having been alerted of plaintiffs action by the attempted service of summons and the writ of attachment, would put his properties beyond the reach of the plaintiff while the latter is trying to serve the summons and the writ anew. By the time the plaintiff may have caused the service of summons and the writ, there might not be any property of the defendant left to attach. Second, the court eventually acquired jurisdiction over the petitioners six days later. To nullify the notices of garnishment issued prior thereto would again open the possibility that petitioners would transfer the garnished monies while Sun Life applied for new notices of garnishment. Third, the ease by which a writ of attachment can be obtained is counter-balanced by the ease by which the same can be discharged: the defendant can either make a cash deposit or post a counter-bond equivalent to the value of the property attached. 10 The petitioners herein tried to have the writ of attachment discharged by posting a counter-bond, the same was denied by respondent Judge on the ground that the amount of the counter-bond was less than that of Sun Life's bond. II. Petitioners' second ground assail the acts of respondent Judge in allowing the examination of Urban Banks' records and in ordering that the examination of the bank records of BPI and PNB as invalid since no notice of said examinations were ever given them. Sun Life grounded its requests for the examination of the bank accounts on Section 10, Rule 57 of the Rules of Court, which provided, to wit: Sec. 10. Examination of party whose property is attached and persons indebted to him or controlling his property; delivery of property to officer. Any person owing debts to the party whose property is attached or having in his possession or under his control any credit or other personal property belonging to such party, may be required to attend before the court in which the action is pending, or before a commissioner appointed by the court and be examined on oath respecting the same. The party whose property is attached may also be required to attend for the purpose of giving information respecting his

property, and may be examined on oath. The court may, after such examination, order personal property capable of manual delivery belonging to him, in the possession of the person so required to attend before the court, to be delivered to the clerk or court, sheriff, or other proper officer on such terms as may be just, having reference to any lien thereon or claim against the same, to await the judgment in the action. It is clear from the foregoing provision that notice need only be given to the garnishee, but the person who is holding property or credits belonging to the defendant. The provision does not require that notice be furnished the defendant himself, except when there is a need to examine said defendant "for the purpose of giving information respecting his property. Furthermore, Section 10 Rule 57 is not incompatible with Republic Act No. 1405, as amended, "An Act Prohibiting Disclosure or Inquiry Into, Deposits With Any Banking Institution and Providing Penalty Therefore," for Section 2 therefore provides an exception "in cases where the money deposited or invested is the subject matter of the litigation." The examination of the bank records is not a fishing expedition, but rather a method by which Sun Life could trace the proceeds of the check it paid to petitioners. WHEREFORE, the instant petitions are hereby DISMISSED. The temporary restraining order issued on June 28, 1993 is hereby lifted. SO ORDERED.

G.R. No. 107303 February 23, 1995 EMMANUEL C. OATE and ECON HOLDINGS CORPORATION, petitioners, vs. HON. ZEUS C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents. BRUNNER DEVELOPMENT CORPORATION, petitioner, vs. HON. ZEUS C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents. RESOLUTION

obligation, resolution of the question must await the trial of the main case. However, we find petitioners' contention respecting the validity of the attachment of their properties to be well taken. We hold that the attachment of petitioners' properties prior to the acquisition of jurisdiction by the respondent court is void and that the subsequent service of summons on petitioners did not cure the invalidity of such attachment. The records show that before the summons and the complaint were served on petitioners Oate and Econ Holdings Corporation (Econ) on January 9, 1992, Deputy Sheriff Arturo C. Flores had already served on January 3, 1992 notices of garnishment on the PNB Head office 2 and on all its Metro Manila branches and an A.B capital. 3 In addition he made other levies before the service of summons on petitioners, to wit: On January 6, 1992, he served notices of garnishment on the Urban Bank Head Office and all its Metro Manila branches, 4 and on the BPI. 5 On the same day, he levied on attachment Oate's condominium unit at the Amorsolo Apartments Condominium Project, covered by Condominium Certificate of Title No. S-1758. 6 On January 7, 1992, he served notice of garnishment on the Union Bank of the Philippines. 7 On January 8, 1992, he attached Oate's lot, consisting of 1,256 square meters, at the Ayala-Alabang Subdivision, Alabang, Muntinlupa, covered by TCT No. 112673. 8 First. The Deputy Sheriff claims that he had tried to serve the summons with a copy of the complaint on petitioners on January 3, 1992 but that there was no one in the offices of petitioners on whom he could make a service. This is denied by petitioners who claim that their office was always open and that Adeliza M. Jaranilla, Econ's Chief Accountant who eventually received summons on behalf of Oate and Econ, was present that day. Whatever the truth is, the fact is that no other attempt was made by the sheriff to serve the summons except on January 9, 1992, in the case of Oate and Econ, and on January 16, 1992, in the case of Dio. Meantime, he made several levies, which indicates a predisposition to serve the writ of attachment in anticipation of the eventual acquisition by the court of jurisdiction over petitioners. Second. Private respondent invokes the ruling in Davao Light & Power Co. v. Court of Appeals 9 in support of its contention that the subsequent acquisition of jurisdiction by the court cured the defect in the proceedings for attachment. It cites the following portion of the decision in Davao Light and Power, written by Justice, now Chief Justice, Narvasa: It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of the defendant, as above indicated issuance of summons, order of attachment and writ of attachment (and/or appointment 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 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

MENDOZA, J.: These are motions separately filed by petitioners, seeking reconsideration of the decision of the Second Division holding that although the levy on attachment of petitioners' properties had been made before the trial court acquired jurisdiction over them, the subsequent service of summons on them cured the invalidity of the attachment. The motions were referred to the Court en banc in view of the fact that in another decision rendered by the Third Division on the same question, it was held that the subsequent acquisition of jurisdiction over the person of a defendant does not render valid the previous attachment of his property. 1 The Court en bancaccepted the referral and now issues this resolution. Petitioners maintain that, in accordance with prior decisions of this Court, the attachment of their properties was void because the trial court had not at that time acquired jurisdiction over them and that the subsequent service of summons on them did not cure the invalidity of the levy. They further contend that the examination of the books and ledgers of the Bank of the Philippine Islands (BPI), the Philippine National Bank (PNB) and the Urban Bank was a "fishing expedition" which the trial court should not have authorized because petitioner Emmanuel C. Oate, whose accounts were examined, was not a signatory to any of the documents evidencing the transaction between Sun Life Assurance of Canada (Sun Life) and Brunner Development Corporation (Brunner). On the other hand private respondent Sun Life stresses the fact that the trial court eventually acquired jurisdiction over petitioners and contends that this cured the invalidity of the attachment of petitioners' properties. With respect to the second contention of petitioners, private respondent argues that the examination of petitioner Oate's bank account was justified because it was he who signed checks transferring huge amounts from Brunner's account in the Urban Bank to the PNB and the BPI. I At the outset, it should be stated that the Court does not in the least doubt the validity of the writ of attachment issued in these cases. The fact that a criminal complaint for estafa which Sun Life had filed against petitioner Oate and Noel L. Dio, president of Brunner, was dismissed by the Office of the Provincial Prosecutor is immaterial to the resolution of the motions for reconsideration. In the first place, the dismissal, although later affirmed by the Department of Justice, is pending reconsideration. In the second place, since the issue in the case below is precisely whether petitioners were guilty of fraud in contracting their

writ of attachment, it is essential that he serve on the defendant not only a copy of the applicant's affidavit and attachment bond, and of the order of attachment, as explicitly required by Section 5 of Rule 57, but also the summons addressed to said defendant as well as a copy of the complaint and order for appointment of guardian ad litem, if any, as also explicitly directed by Section 3, Rule 14 of the Rules of Court. 10 It is clear from the above excerpt, however, that while the petition for a writ of preliminary attachment may begranted and the writ itself issued before the defendant is summoned, the writ of attachment cannot beimplemented until jurisdiction over the person of the defendant is obtained. As this Court explained, "levy on property pursuant to the writ thus issued may not be validly effected unless preceded, or contemporaneouslyaccompanied, 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." 11 Further clarification on this point was made in Cuartero v. Court of Appeals, 12 in which it was held: It must be emphasized that the grant of the provisional remedy of attachment practically involves three stages; first, the court issues the order granting the application; second, the writ of attachment issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the defendant should first be obtained. However, once the implementation commences, it is required that the court must have acquired jurisdiction over the defendant for without such jurisdiction, the court has no power and authority to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant. Private respondent argues that the case of Cuartero itself provides for an exception as shown in the statement that "the court [in issuing the writ of preliminary attachment] cannot bind and affect the defendant until jurisdiction is eventually obtained" and that since petitioners were subsequently served with summons, no question can be raised against the validity of the attachment of petitioners' properties before such service. The statement in question has been taken out of context. The full statement reads: It is clear from our pronouncements that a writ of preliminary attachment may issue even before summons is served upon the defendant. However, we have likewise ruled that the writ cannot bind and affect the defendant until jurisdiction over his person is eventually obtained. Therefore, it is required that when proper officer commences implementation of the writ of attachment service of summons should be simultaneously made. 13 Indeed, as this Court through its First Division has ruled on facts similar to those in these cases, the attachment of properties before the service of summons on the defendant is invalid, even though the court later acquires jurisdiction over the defendant. 14 At the very least, then,

the writ of attachment must be served simultaneously with the service of summons before the writ may be enforced. As the properties of the petitioners were attached by the sheriff before he had served the summons on them, the levies made must be considered void. Third. Nor can the attachment of petitioners' properties before the service of summons on them was made be justified an the ground that unless the writ was then enforced, petitioners would be alerted and might dispose of their properties before summons could be served on them. The Rules of Court do not require that issuance of the writ be kept a secret until it can be enforced. Otherwise in no case may the service of summons on the defendant precede the levy on attachment. To the contrary, Rule 57, 13 allows the defendant to move to discharge the attachment even before any attachment is actually levied upon, thus negating any inference that before its enforcement, the issuance of the writ must be kept secret. Rule 57, 13 provides: Sec. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached may also, at any time either before or after the release of the attached property, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. . . . (Emphasis added). As this Court pointed out in Davao Light and Power, 15 the lifting of an attachment "may be resorted to even before any property has been levied on." It is indeed true that proceedings for the issuance of a writ of attachment are generally ex parte. In Mindanao Savings and Loans Ass'n v. Court of Appeals 16 it was held that no hearing is required for the issuance of a writ of attachment because this "would defeat the objective of the remedy [because] the time which such hearing would take could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues." It is not, however, notice to defendant that is sought to be avoided but the "time which such hearing would take" because of the possibility that defendant may delay the hearing to be able to dispose of his properties. On the contrary there may in fact be a need for a hearing before the writ is issued as where the issue of fraudulent disposal of property is raised. 17 It is not true that there should be no hearing lest a defendant learns of the application for attachment and he remove's his properties before the writ can be enforced. On the other hand, to authorize the attachment of property even before jurisdiction over the person of the defendant is acquired through the service of summons or his voluntary appearance could lead to abuse. It is entirely possible that the defendant may not know of the filing of a case against him and consequently may not be able to take steps to protect his interests. Nor may sheriff's failure to abide by the law be excused on the pretext that after all the court later acquired jurisdiction over petitioners. More important than the need for insuring success in the enforcement of the writ is the need for affirming a principle by insisting on that "most fundamental of all requisites the jurisdiction of the court issuing attachment over the person of the defendant." 18 It may be that the same result would follow from requiring that a new writ be served all over again. The symbolic significance of

such an act, however, is that it would affirm our commitment to the rule of law. 19 II We likewise find petitioners' second contention to be meritorious. The records show that, on January 21, 1992, respondent judge ordered the examination of the books of accounts and ledgers of Brunner at the Urban Bank, Legaspi Village branch, and on January 30, 199 the records of account of petitioner Oate at the BPI, even as he ordered the PNB to produce the records regarding certain checks deposited in it. First. Sun Life defends these court orders on the ground that the money paid by it to Brunner was subsequently withdrawn from the Urban Bank after it had been deposited by Brunner and then transferred to BPI and to the unnamed account in the petitioner Oate's account in the BPI and to the unnamed account in the PNB. The issue before the trial court, however, concerns the nature of the transaction between petitioner Brunner and Sun Life. In its complaint, Sun Life alleges that Oate, in his personal capacity and as president of Econ, offered to sell to Sun Life P46,990,000.00 worth of treasury bills owned by Econ and Brunner at the discounted price of P39,526,500.82; that on November 27, 1991, Sun Life paid the price by means of a check payable to Brunner; that Brunner, through its president Noel L. Dio, issued to it a receipt with undertaking to deliver the treasury bills to Sun Life; and that on December 4, 1991, Brunner and Dio delivered instead a promissory note, dated November 27, 1991, in which it was made to appear that the transaction was a money placement instead of sale of treasury bills. Thus the issue is whether the money paid to Brunner was the consideration for the sale of treasury bills, as Sun Life claims, or whether it was money intended for placement, as petitioners allege. Petitioners do not deny receipt of P39,526,500.82 from Sun Life. Hence, whether the transaction is considered a sale or money placement does not make the money the "subject matter of litigation" within the meaning of 2 of Republic Act No. 1405 which prohibits the disclosure or inquiry into bank deposits except "in cases where the money deposited or invested is the subject matter of litigation." Nor will it matter whether the money was "swindled" as Sun Life contends. Second. The examination of bank books and records cannot be justified under Rule 57, 10. This provision states: Sec. 10. Examination of party whose property is attached and persons indebted to him or controlling his property; delivery of property to officer. Any person owing debts to the party whose property is attached or having in his possession or under his control any credit or other personal property belonging to such party, may be required to attend before the court in which the action is pending, or before a commissioner appointed by the court, and be examined on oath respecting the same. The party whose property is attached may also be required to attend for the purpose of giving information respecting his property, and may be examined on oath. The court may, after such examination, order personal property capable of manual delivery belonging to him, in the possession of the person so required to attend before the court, to be delivered to the clerk of the court, sheriff, or other proper officer on such terms as may be just, having reference to any lien thereon

or claims against the same, to await the judgment in the action. Since, as already stated, the attachment of petitioners' properties was invalid, the examination ordered in connection with such attachment must likewise be considered invalid. Under Rule 57, 10, as quoted above, such examination is only proper where the property of the person examined has been validly attached. WHEREFORE, the decision dated February 21, 1994 is RECONSIDERED and SET ASIDE and another one is rendered GRANTING the petitions for certiorari and SETTING ASIDE the orders dated February 26, 1992 and September 9, 1992, insofar as they authorize the attachment of petitioners' properties and the examination of bank books and records pertaining to their accounts, and ORDERING respondent Judge Zeus C. Abrogar (1) forthwith to issue an alias writ of attachment upon the same bond furnished by respondent Sun Life Assurance Company of Canada; (2) direct the sheriff to lift the levy under the original writ of attachment and simultaneously levy on the same properties pursuant to the alias writ so issued; and (3) take such steps as may be necessary to insure that there will be no intervening period between the lifting of the original attachment and the subsequent levy under the alias writ. Petitioners may file the necessary counterbond to prevent subsequent levy or to dissolve the attachment after such levy. SO ORDERED.

G.R. No. 106989 May 10, 1994 H.B. ZACHRY COMPANY INTERNATIONAL, petitioner, vs. HON. COURT OF and VINNEL-BELVOIR CORPORATION, respondents. G.R. No. 107124 May 10, 1994 VINNEL-BELVOIR CORPORATION, petitioner, vs. THE COURT OF APPEALS and H.B. ZACHRY COMPANY INTERNATIONAL, respondents. Quisumbing, Torres & Evangelista for H.B. Zachry Co. Feria, Feria, Lustu & La O' for Vinnel Belvoir Corp.

provided "that substantial differences between the proposal and the final drawings and Specification approved by the OWNER may be grounds for an equitable adjustment in price and/or time of performance if requested by either party in accordance with Section 6 [on] Changes." 6 Section 27 of the agreement reads: Section 27. DISPUTES PROCEDURE A. In case of any dispute, except those that are specifically provided for in this SUBCONTRACT, between the SUBCONTRACTOR and the CONTRACTOR, the SUBCONTRACTOR agrees to be bound to the CONTRACTOR to the same extent that the CONTRACTOR is bound to the OWNER by the terms of the GENERAL CONTRACT and by any and all decisions or determinations made thereunder by the party or boards so authorized in the GENERAL CONTRACT. The SUBCONTRACTOR, on items or issues relating or attributable to the SUBCONTRACTOR, also agrees to be bound to the CONTRACTOR to the same extent that the CONTRACTOR is bound to the OWNER by the final decision of a court of competent jurisdiction, whether or not the SUBCONTRACTOR is a party to such proceeding. If such a dispute is prosecuted or defended by the CONTRACTOR against the OWNER under the terms of the GENERAL CONTRACT or in court action, the SUBCONTRACTOR agrees to furnish all documents, statements, witnesses and other information required by the CONTRACTOR for such purpose. It is expressly understood that as to any and all work done and agreed to be done by the CONTRACTOR and as to any and all materials, equipment or services furnished or agreed to be furnished by the SUBCONTRACTOR, and as to any and all damages incurred by the SUBCONTRACTOR in connection with this SUBCONTRACT, the CONTRACTOR shall not be liable to the SUBCONTRACTOR to any greater extent than the OWNER is liable to and pays the CONTRACTOR for the use and benefit of the SUBCONTRACTOR for such claims, except those claims arising from acts of the CONTRACTOR. No dispute shall interfere with the progress of the WORK and the SUBCONTRACTOR agrees to proceed with his WORK as directed, despite any disputes it may have with the CONTRACTOR, the OWNER, or other parties. B. If at any time any controversy should arise between the CONTRACTOR and the SUBCONTRACTOR, with respect to any matter or thing involved in, related to or arising out of this SUBCONTRACT, which controversy is not controlled or determined by subparagraph 27.A. above or other provisions in this SUBCONTRACT, then said controversy shall be decided as follows: 1. The SUBCONTRACTOR shall be conclusively bound and abide by the CONTRACTOR'S written decision respecting said controversy, unless the SUBCONTRACTOR shall commence arbitration proceedings as hereinafter

DAVIDE, JR., J.: Challenged in these petitions for review, which were ordered consolidated on 9 December 1992, 1 is the decision of the Court of Appeals in CA-G.R. SP No. 24174, 2 promulgated on 1 July 1992, the dispositive portion of which reads: WHEREFORE, premises considered, this Petition for Certiorari and Prohibition is hereby granted in so far as it prayed for the dissolution of the writ of preliminary attachment inasmuch as it was issued prior to the service of summons and a copy of the complaint on petitioner. The writ of preliminary attachment issued by respondent Court on March 21, 1990 is hereby ordered lifted and dissolved as having been issued in grave abuse of discretion by respondent Court. With respect to the issue of whether or not parties should submit the instant dispute [to] arbitration, We hereby order public respondent to conduct a hearing for the determination of the proper interpretation of the provisions of the Subcontract Agreement. No pronouncement as to costs. 3 and its 2 September 1992 Resolution 4 which denied the motion for partial reconsideration of H.B. Zachry Company International (hereinafter Zachry) and the motion for reconsideration of Vinnel-Belvoir Corporation (hereinafter VBC). The pleadings of the parties and the challenged decision disclose the following material facts: On 17 July 1987, VBC entered into a written Subcontract Agreement 5 with Zachry, a foreign corporation. The latter had been engaged by the United States Navy to design and construct 264 Family Housing Units at the US Naval Base at Subic, Zambales. Under the agreement, specifically under Section 3 on Payment, VBC was to perform all the construction work on the housing project and would be paid "for the performance of the work the sum of Six Million Four Hundred Sixty-eight Thousand U.S. Dollars (U.S. $6,468,000.00), subject to additions and deductions for changes as hereinafter provided." This "lump sum price is based on CONTRACTOR'S proposal, dated 21 May 1987 (including drawings), submitted to OWNER for Alternate Design-Apartments." It was also

provided within thirty (30) days following receipt of such written decision. 2. If the SUBCONTRACTOR decides to appeal from the written decision of the CONTRACTOR, then the controversy shall be decided by arbitration in accordance with the then current rules of the Construction Industry Arbitration Rules of the American Arbitration Association, and the arbitration decision shall be final and binding on both parties; provided, however, that proceedings before the American Arbitration Association shall be commenced by the SUBCONTRACTOR not later than thirty (30) days following the CONTRACTOR'S written decision pursuant to subparagraph 27.B.1 above. If the SUBCONTRACTOR does not file a demand for arbitration with the American Arbitration Association and CONTRACTOR within this thirty (30) day period, then the CONTRACTOR'S written decision is final and binding. 3. This agreement to arbitrate shall be specifically enforceable. 7 When VBC had almost completed the project, Zachry complained of the quality of work, making it a reason for its decision to take over the management of the project, which paragraph c, Section 7 of the Subcontract Agreement authorized. However, prior to such take-over, the parties executed on 18 December 1989 a Supplemental Agreement, 8 pertinent portions of which read as follows: 2. All funds for progress as computed by the schedule of prices under the subcontract will be retained by ZACHRY to insure sufficiency of funds to finish the lump sum project as scoped by the subcontract. However, one month after the date of this agreement, when ZACHRY shall have determined the cost to complete the subcontract, ZACHRY shall as appropriate, release to VBC the corresponding portion of the amounts retained. xxx xxx xxx 7. All costs incurred by ZACHRY chargeable to VBC under the subcontract from the date of the takeover to complete the scope of the subcontract will be to the account of VBC and/or its sureties. Zachry will advise both VBC and its sureties on a periodic basis as to progress and accumulated costs. xxx xxx xxx 9. VBC will be invited to participate in negotiations with the Navy in Change Orders concerning its scope of work. VBC will accept as final, without recourse against ZACHRY the Navy's decision regarding its interest in these Change Orders or modifications. In accordance with the above conditions, VBC submitted to Zachry on 10 January 1990 a detailed computation of the cost to complete the subcontract on the housing project. According to VBC's computation, there remains a balance of $1,103,000.00 due in its favor as of 18 January 1990. This amount includes the sum of $200,000.00 allegedly withheld by Zachry and the labor escalation adjustment granted earlier by the US Navy in the amount

of $282,000.00 due VBC. Zachry, however, not only refused to acknowledge the indebtedness but continually failed to submit to VBC a statement of accumulated costs, as a result of which VBC was prevented from checking the accuracy of the said costs. On 2 March 1990, VBC wrote Zachry a letter demanding compliance with its obligations. 9 Zachry still failed to do so. VBC made representations to pursue its claim, including a formal claim with the Officer-in-Charge of Construction, NAVFAC Contracts, Southwest Pacific, 10 which also failed. Hence, on 20 March 1990, VBC filed a Complaint 11 with the Regional Trial Court (RTC) of Makati against Zachry for the collection of the payments due it with a prayer for a writ of preliminary attachment over Zachry's bank account in Subic Base and over the remaining thirty-one undelivered housing units which were to be turned over to the US Navy by Zachry on 30 March 1990. The case was docketed as Civil Case No. 90-772 and was raffled to Branch 142 of the said court presided over by Judge Salvador P. de Guzman, Jr. Paragraph 2 of the Complaint alleges that defendant Zachry "is a foreign corporation with address at 527 Longwood Street, San Antonio, Texas, U.S.A. and has some of its officers working at U.S. Naval Base, Subic Bay, Zambales where it may be served with summons." On 21 March 1990, the trial court issued an order granting the application for the issuance of the writ of preliminary attachment and fixing the attachment bond at P24,266,000.00. 12 VBC put up the required bond and on 26 March 1990, the trial court issued the writ of attachment, 13 which was served, together with the summons, a copy of the complaint with annexes, the bond, and a copy of the order of attachment, on 27 March 1990 in the manner described in the Sheriff's Partial Return 14 of 29 March 1990: upon defendant H.B. Zachry Company (International) at its field office in U.S. Naval Base, Subic Bay, Zambales thru Ruby Apostol who acknowledged receipt thereof. Mr. James M. Cupit, defendant's authorized officer was in their Manila office at the time of service. The return further states: That on March 28, 1990, the undersigned sheriff went to the office of defendant H. B. Zachry Company (International) at c/o A.M. Oreta & Co. at 5th Floor, Ermita Building, Arquiza corner Alhambra streets, Ermita, Manila to serve the Court's processes but was informed by Atty. Felix Lobiro of A.M. Oreta & Co., that defendant H.B. Zachry Company has its own office at Room 600, 6th Floor of the same building (Ermita Building). However, said defendant's office was closed and defendant company (ZACHRY) only holds office during Mondays and Tuesdays of the week as per information gathered from the adjacent office. On 27 March 1990, VBC filed an Amended Complaint 15 in Civil Case No. 90-772 to implead as additional defendants the US Navy Treasury Office-Subic Naval Base and Captain A.L. Wynn, an officer of the US Navy, against whom VBC prayed for a restraining order or preliminary injunction to restrain the latter from preparing the treasury warrant checks to be paid to Zachry and the former from signing the said checks and to restrain both from making any further payments to Zachry. It also amended paragraph 2 on the status and circumstances of Zachry as follows: 2. Defendant, H.B. Zachry Co. (International) . . . is a foreign corporation

with address at 527 Longwood Street, San Antonio, Texas, U.S.A. and may be served with summons and all other legal processes at the following addresses: a) H.B. Zachry Company (International), U.S. Naval Base, Subic Bay, Zambales; and b) H.B. Zachry Company (International) c/o A.M. Oreta & Co., 5th Floor Ermita Building, Arquiza corner Alhambra Streets, Ermita, Manila, through its authorized officer James C. Cupit. 16 On 6 April 1990, Zachry filed a motion to dismiss the complaint 17 on the ground of lack of jurisdiction over its person because the summons was not validly served on it. It alleges that it is a foreign corporation duly licensed on 13 November 1989 by the Securities and Exchange Commission to do business in the Philippines18 and, pursuant to Section 128 of the Corporation Code of the Philippines, had appointed Atty. Lucas Nunag19 as its resident agent on whom any summons and legal processes against it may be served. Atty. Nunag's address is at the 10th Floor, Shell House, 156 Valero St., Makati, Metro Manila. Summons and a copy of the Amended Complaint were served on 24 April 1990 on Zachry through Atty. Nunag as shown in the sheriff's return dated 24 April 1990. 20 On 26 April 1990, VBC filed a Manifestation 21 to inform the court of the above service of summons on Zachry which it claimed rendered moot and academic the motion to dismiss. On 24 May 1990, Zachry filed an Omnibus Motion 22 (a) to dismiss the complaint for lack of jurisdiction over its person since the subsequent service of summons did not cure the jurisdictional defect it earlier pointed out and, in the alternative, to dismiss the case or suspend the proceedings therein for failure of the plaintiff to submit the controversy in question to arbitration as provided for in its contract with Zachry; and (b) to dissolve the writ of attachment of 26 March 1990 "for having been issued without jurisdiction, having been issued prior to the service of summons." The arbitration provision referred to is Section 27.B of the Subcontract Agreement quoted earlier. In support of its alternative prayer for the suspension of proceedings, it cited Section 7 of R.A. No. 876, otherwise known as the Arbitration Act which provides: Sec. 7. Stay of Civil Action If any suit or proceeding be brought upon an issue, arising out of an agreement providing for the arbitration thereof, the Court in which such suit or proceeding is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration, shall stay the action or proceeding until an arbitration has been had in accordance with the terms of the agreement. . . . This provision is almost identical with Section 3 of the United States Arbitration Act. As to the invalidity of the writ of attachment, Zachry avails of the decision in Sievert vs. Court of Appeals 23wherein this Court said: Attachment is an ancillary remedy. It is not sought for its own sake but rather to enable the attaching party to realize upon relief sought and expected to be granted in the main or principal action. A court which has not acquired jurisdiction over the person of the defendant, cannot bind that defendant whether in the main case or in any ancillary proceeding such as attachment proceedings. The service of a

petition for preliminary attachment without the prior or simultaneous service of summons and a copy of the complaint in the main case and that is what happened in this casedoes not of course confer jurisdiction upon the issuing court over the person of the defendant. 24 VBC opposed the Omnibus Motion. Pleadings related to the Omnibus Motion were subsequently filed. 25 In its Order of 19 September 1990, 26 the trial court resolved the Omnibus Motion and the related incidents by declaring that "the merits of the case can only [be] reached after due presentation of evidence." Hence, it denied the motion and directed the defendants to file their answer within the period provided by law. On 8 October 1990, Zachry filed a motion for the reconsideration 27 of the above order assailing the court's inaction on the second and third issues raised in its Omnibus Motion, viz., the necessity of arbitration and the invalidity of the writ of attachment. VBC opposed the motion. 28 On 9 January 1991, the court issued an order denying the motion for reconsideration by ruling that the writ of preliminary attachment was regularly issued and that the violations of the Subcontract Agreement can be "tranced [sic] only after the case is heard on the merits." Dissatisfied with the denial, Zachry filed with the Court of Appeals on 14 February 1991 a petition forcertiorari and prohibition, 29 which was docketed as CA-G.R. SP No. 24174. Zachry contends therein that: 1. The proceedings before respondent trial court should be suspended, pending submission of the dispute to arbitration pursuant to Section 27-B of the Subcontract Agreement; 2. Alternatively, the complaint should be dismissed, pending arbitration pursuant to Section 27-B of the Subcontract Agreement; 3. As a third alternative, the complaint should be dismissed, because the dispute has been resolved with finality under Section 27-B of the Subcontract Agreement; and 4. The writ of preliminary attachment should be dissolved, as having been outside, or in excess of respondent court's jurisdiction, having been issued prior to the service of summons on petitioner. It then prays that (a) the orders of the trial court of 19 September 1990 and 9 January 1991 be annulled for having been issued without or in excess of jurisdiction or with grave abuse of discretion; and (b) the trial court be directed to immediately suspend the proceedings in Civil Case No. 90-772 pending arbitration proceedings in accordance with the terms of Section 27.B of the Subcontract Agreement or, alternatively, to dismiss the amended complaint and dissolve the writ of attachment. It also prays for the issuance of a temporary restraining order and a writ of preliminary injunction to restrain the trial court from proceeding further in Civil Case No. 90-772. On 18 February 1991, the Court of Appeals issued a temporary restraining order. 30 On 1 July 1991, the Court of Appeals promulgated the challenged decision 31 dissolving the writ of preliminary attachment issued by the trial court and ordering it to conduct a hearing to determine the proper interpretation of the provisions of the Subcontract Agreement. As to the writ of attachment, the Court of Appeals held that summons

was served on Zachry only on 24 April 1990; hence, applying Sievert vs. Court of Appeals, 32 the trial court "had no authority yet to act coercively against the defendant" when it issued the writ of attachment on 21 March 1990. As to arbitration, it ruled: We are of the reasoned opinion that unlike in the factual situation in the cases cited by petitioner, the contract involved in the case at bar is, with respect to its arbitration clause, vogue [sic] and uncertain. Section 27.B which is the provision upon which petitioner anchors its claims is ambiguous in its terminology when it states that "if at anytime any controversy should arise between the contractor and the subcontractor . . . which controversy is not controlled or determined by Section 27.A above or other provision of this subcontract . . . ." This provision states that only when a controversy arises between the contractor and the subcontractor which is not covered by Section 27.A or any provision of the Subcontract Agreement will the parties submit to arbitration. As to what controversies fall under Section 27.B, it is not clear from a mere perusal of the provisions. It is therefore not correct for petitioner to say that any and all dispute arising between the contracting parties should be resolved by arbitration prior to a filing of a suit in court. 33 VBC and Zachry filed a motion for reconsideration and a partial motion for reconsideration, respectively. 34The former urged the Court of Appeals to consider the decision of this Court of 29 November 1991 in Davao Light & Power Co. vs. Court of Appeals 35 wherein this Court ruled that a writ of preliminary attachment may be issued exparte prior to the service of summons and a copy of the complaint on the defendants. On the other hand, Zachry insists that "[t]here is nothing 'vague' or 'ambiguous about' " the provision on dispute procedures set forth in Subsections 27.B.1 to 27.B.3 of the Subcontract Agreement. In its Resolution of 2 September 1992, 36 the Court of Appeals denied the above motions of the parties. Hence, these petitions which were given due course in this Court's Resolution of 8 March 1993. 37 In G.R. No. 106989, petitioner Zachry reiterates all the issues it raised before the Court of Appeals, except that regarding the validity of the writ of attachment which was decided in its favor. In G.R. No. 107124, petitioner VBC raises the following issues: A. WHETHER THE ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT PRIOR TO THE SERVICE OF THE SUMMONS AND A COPY OF THE AMENDED COMPLAINT ON THE RESPONDENT IS VALID. B. WHETHER RESORT TO ARBITRATION PRIOR TO FILING A SUIT IN COURT IS REQUIRED BY THE SUBCONTRACT AGREEMENT UNDER THE FACTS OBTAINING IN THE PRESENT CASES. As to the first issue, VBC takes refuge in the ruling in Davao Light & Power Co. vs. Court of Appeals 38 and argues that the issuance of the writ of attachment on 21 March 1990, although before the service of the summons,

was valid. Its issuance and implementation are two different and separate things; the first is not affected by any defect in the implementation which may be corrected. Moreover, assuming arguendo that the initial service of summons was defective, it was cured by the numerous pleadings thereafter filed. Finally, whatever doubts existed on the effectiveness of the implementation of the writ was erased by its re-service on the resident agent of Zachry. As to the issue on arbitration, VBC maintains that arbitration is not required under the facts obtaining in the present case because the applicable provision of the Subcontract Agreement is Section 3 on Payment and not Section 27.B on Arbitration. Zachry's fraudulent actuations and gross violation of the Subcontract Agreement render prior resort to arbitration futile and useless. The preliminary attachment, which was essential to secure the interest of the petitioner, could not have been obtained through arbitration proceedings. Zachry, in its Comment, 39 contends that pursuant to the Sievert and Davao Light rulings, the issuance of the writ of attachment before the service of summons on Zachry's resident agent was invalid and that the various pleadings filed by the parties did not cure its invalidity. It argues that the arbitration procedure is set forth in Section 27.B of the Subcontract Agreement. It further maintains that pursuant to General Insurance vs. Union Insurance, 40 the alleged fraudulent actuations which relate to the merits of the case may be properly addressed to the arbitrators and that there is no merit to the claim that arbitration would be useless since the arbitration proceeding would be presided over by an independent and competent arbitral tribunal. The issues in these petitions are properly defined by VBC in G.R. No. 107124. We find for petitioner VBC. It was error for the Court of Appeals to declare, on the ground of grave abuse of discretion, the nullity of the writ of attachment issued by the trial court on 21 March 1990. In the first place, the writ was in fact issued only on 26 March 1990 and served, together with the summons, copy of the complaint, the Order of 21 March 1990, and the bond, on 27 March 1990 on Zachry at its field office in Subic Bay, Zambales, through one Ruby Apostol. What the Court of Appeals referred to as having been issued on 21 March 1990 is the order granting the application for the issuance of a writ of preliminary attachment upon the posting of a bond of P24,266,000.00. 41 In the second place, even granting arguendo that the Court of Appeals had indeed in mind the 26 March 1990 writ of attachment, its issuance, as well as the issuance of the 21 March 1990 Order, did not suffer from any procedural or jurisdictional defect; the trial court could validly issue both. However, the writ of attachment cannot be validly enforced through the levy of Zachry's property before the court had acquired jurisdiction over Zachry's person either through its voluntary appearance or the valid service of summons upon it. 42 To put it in another way, a distinction should be made between the issuanceand the enforcement of the writ. The trial court has unlimited power to issue the writ upon the commencement of the action even before it acquires jurisdiction over the person of the defendant, but enforcement thereof can only be validly done after it shall have acquired such jurisdiction. This is the rule enunciated in Davao Light & Power Co. vs. Court of Appeals. 43 In that case, this Court stated: 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 consequently, the petition for review will have to be granted. It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of the plaintiff has been vested in the court, but before the acquisition of jurisdiction over the person of the defendant (either by service of summons or his voluntary submission to the court's authority), nothing can be validly done by the plaintiff or the court. It is wrong to assume that the validity of acts done during this period should be dependent on, or held in suspension until, the actual obtention of jurisdiction over the defendant's person. The obtention by the court of jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person of the plaintiff or over the subject-matter or nature of the action, or the res or object thereof. 44 xxx xxx xxx A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of which a plaintiff or other proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party taken into the custody of the court as security for the satisfaction of any judgment that may be recovered. It is a remedy which is purely statutory in respect of which the law requires a strict construction of the provisions granting it. Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before acquisition of jurisdiction over the person of the defendant. Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time thereafter." The phrase "at the commencement of the action," obviously refers to the date of the filing of the complaint which, as above pointed out, is the date that marks "the commencement of the action;" and the reference plainly is to a time before summons is served on the defendant, or even before summons issues. What the rule is saying quite clearly is that after an action is properly commenced by the filing of the complaint and the payment of all requisite docket and other fees the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counterclaim, crossclaim, third-party claim) and for the Trial Court to issue the writ ex-parte at the commencement of the action if it finds the application otherwise sufficient in form and substance. 45 xxx xxx xxx

It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of the defendant, as above indicated issuance of summons, order of attachment and writ of attachment (and/or appointment 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) 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 explicitly 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 explicitly 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. 46 xxx xxx xxx 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. 47 We reiterated the rule laid down in Davao Light in the subsequent case of Cuartero vs. Court of Appeals 48wherein we stated:

It must be emphasized that the grant of the provisional remedy of attachment practically involves three stages: first, the court issues the order granting the application; second, the writ of attachment issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the defendant should first be obtained. However, once the implementation commences, it is required that the court must have acquired jurisdiction over the person of the defendant for without such jurisdiction, the court has no power and authority to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant. The validity then of the order granting the application for a writ of preliminary attachment on 21 March 1990 and of the issuance of the writ of preliminary attachment on 26 March 1990 is beyond dispute. However, the enforcement of the preliminary attachment on 27 March 1990, although simultaneous with the service of the summons and a copy of the complaint, did not bind Zachry because the service of the summons was not validly made. When a foreign corporation has designated a person to receive service of summons pursuant to the Corporation Code, that designation is exclusive and service of summons on any other person is inefficacious. 49 The valid service of summons and a copy of the amended complaint was only made upon it on 24 April 1990, and it was only then that the trial court acquired jurisdiction over Zachry's person. Accordingly, the levy on attachment made by the sheriff on 27 April 1990 was invalid. However, the writ of preliminary attachment may be validly served anew. As to the second issue of arbitration, we find that although the order of the trial court denying the motion to dismiss did not clearly state so, it is evident that the trial court perceived the ground of the motion to be not indubitable; hence, it could defer its resolution thereon until the trial of the case. In deciding a motion to dismiss, Section 3, Rule 16 of the Rules of Court grants the court four options: (1) to deny the motion, (2) to grant the motion, (3) to allow amendment of pleadings, or (4) to defer the hearing and determination of the motion until the trial, if the ground alleged therein does not appear to be indubitable. Under the fourth option, the court is under no obligation to immediately hold a hearing on the motion; it is vested with discretion to defer such hearing and the determination of the motion until the trial of the case. 50 The lack of indubitability of the ground involved in Zachry's motion to dismiss is confirmed by the Court of Appeals when it declared: Section 27. B which is the provision upon which petitioner [Zachry] anchors its claim is ambiguous in its terminology when it states that "if at any time any controversy should arise between the contractor and the subcontractor . . . which controversy is not controlled or determined by Section 27.A above or other provisions of this subcontract' . . . . This provision states that only when a controversy arises between the contractor and subcontractor which is not covered by Section 27.A or any provision of the Subcontract will the parties submit to arbitration. As to what controversies fall under Section 27.B, it is not clear from a mere perusal of the provisions. Indeed, the parties could not even agree on what controversies fall within Section 27.B, and, perhaps, rightly so because the said Section 27.B excludes controversies controlled or determined by Section 27.A and other provisions of the Subcontract Agreement, which are

themselves unclear. For that reason, VBC insists that its cause of action in Civil Case No. 90-772 is based on Section 3 of the Subcontract Agreement. It may further be emphasized that VBC's complaint was precipitated by Zachry's refusal to comply with the Supplemental Agreement. Evidently, Section 3 of the Subcontract Agreement and the Supplemental Agreement are excluded by Section 27.B. The trial court was, therefore, correct in denying Zachry's motion to dismiss. However, we cannot give our assent to the Court of Appeals' order directing the trial court to conduct a hearing for the determination of the proper interpretation of the provisions of the Subcontract Agreement. It would re-open the motion to dismiss which, upon the trial court's exercise of its discretion, was properly denied for lack of indubitability of the ground invoked and thereby unduly interfere with the trial court's discretion. The proper interpretation could only be done by the trial court after presentation of evidence during trial on the merits pursuant to the tenor of its order denying the motion to dismiss. If the trial court should find that, indeed, arbitration is in order, then it could apply Section 7 of R.A. No. 876 which reads as follows: Sec. 7. Stay of civil action. If any suit or proceeding be brought upon an issue arising out of an agreement providing for the arbitration thereof, the court in which such suit or proceeding is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration, shall stay the action or proceeding until an arbitration has been had in accordance with the terms of the agreement: Provided, That the applicant for the stay is not in default in proceeding with such arbitration. WHEREFORE, the petition in G.R. No. 107124 is GRANTED while that in G.R. No. 106989 is DENIED for lack of merit. The challenged Decision of 1 July 1992 and Resolution of 2 September 1992 are hereby SET ASIDE. The orders of Branch 142 of the Regional Trial Court of Makati in Civil Case No. 90-772 of 19 September 1990 denying the motion to dismiss and of 8 October 1990 denying the motion to reconsider the former are REINSTATED. However, the service of the writ of preliminary attachment on 26 March 1990 is hereby declared invalid. The writ may, nevertheless, be served anew. No pronouncement as to costs. SO ORDERED.

G.R. No. L-42594 October 18, 1979 ELIGIO ROQUE and RODRIGO G. MALONJAO, petitioners, vs. HON. COURT OF APPEALS, HON. JUDGE CARLOS L. SUNDIAM, (CFI-Manila, Branch XXVIII) ASSOCIATED BANKING CORPORATION FIL-EASTERN WOOD INDUSTRIES, INC., CITY SHERIFF OF MANILA, DEPUTY SHERIFFS ADRIEL GARCIA and BENJAMIN GARVIDA, respondents. Laurel Law Office for petitioner. Paterno C. Pajares for respondents.

well as a Coastwise License, were issued to Roque by the Philippine Coast Guard. 6 These muniments of title were issued only after counsel for Eligio Roque had assured the Philippine Coast Guard, in a letter dated November 13, 1974, that "without touching on the merit of the preference of our client's claim in relation to the levy registered by other claimants, such levy is not in any manner a legal obstacle to the registration of the vessels in our client's name." 7 Acting thereon, the Acting Commandant of the Philippine Coast Guard in a letter dated November 23, 1974, authorized the issuance of a new certificate of registration annotating thereon any levy validly registered against said vessel(s)." 8 However, neither the Certificate of Ownership nor the Certificate of Philippine Register appended as Annexes "C" and "D", respectively, to petitioners' Urgent Manifestation and Motion filed before the lower Court 9 carry that annotation. On August 29, 1974, the Bank filed a "Motion for the Issuance of Another Writ of Attachment" stating that at the time of the issuance of the Writ on February 4, 1974, the barge in question could not be located within the jurisdiction of the trial Court. having been anchored somewhere in the Visayas, and that actual levy on the barge could not be made as "the original Order of attachment is allegedly in the possession of the Branch Deputy Sheriff appointed by the Honorable Court, who has not reported to the office since August 26, 1974, and, therefore, could not implement the writ." 10 On the same date, August 29, 1974, the trial Court (Judge Rafael S. Sison, presiding) denied the issuance of another Writ (apparently ' v because it was deemed unnecessary), but instead ordered the Deputy Sheriff of Branch XXVIII to coordinate with the City Sheriff of Manila in the implementation of the Writ previously issued. 11 On August 30, 1974, Deputy Sheriff Garvida actually seized and levied upon the vessel. On October 7, 1974, respondent Bank and respondent FilEastern submitted a Compromise Agreement whereby FilEastern bound itself to pay to the Bank the principal amount of P200,000.00, with 1417,9 interest, plus other amounts stated therein. On October 9, 1974, respondent Judge approved the Agreement and rendered judgment accordingly. On November 6, 1974, the Bank moved for the issuance of a Writ of Execution for failure of Fil-Eastern to make payments within the period stipulated in the Compromise Agreement. Meanwhile, without prior authority from Deputy Sheriff Garvida the barge in question was "spirited away" to Bacolod City by a certain Captain Marcelino Agito, who claimed to have been given the right to use the same by Fil-Eastern. 12 On January 6, 1975, respondent Judge issued an Order requiring Capt. Marcelino Agito, in coordination with Deputy Sheriff Benjamin E. Garvida to bring back to Manila the barge in question. 13 On March 7, 1975, respondent Judge issued a Writ of Execution and ordered the sale of the barge at public auction, as follows: ORDER The Decision rendered by this Court under date of October 9, 1974 having already become final and executory, let a Writ of Execution be issued to be enforced by Sheriff Adriel V. Garcia by conducting an auction sale on the vessel placed under attachment. The satisfaction of the judgment in this case shall be given preference and the payment of the third party claim of Alfredo H. Maligaya for and in behalf of Leonardo M. Canoso shall be satisfied from whatever remaining

MELENCIO-HERRERA, J.: Treating this Petition as a special civil action for Certiorari, we affirm the Decision of the Court of Appeals denying petitioners' prayer to set aside the trial Court Order, dated April 14, 1975, to surrender the barge in question under pain of contempt, and its subsequent Orders denying their Motion for Reconsideration. There is no dispute as to the following background facts: On January 31, 1973, respondent Associated Banking Corporation (the Bank, for short) instituted an action, Civil Case No. 89692, in the Court of First Instance of Manila, Branch XXVIII, respondent Judge, presiding, against private respondent Fil-Eastern Wood Industries, Inc. (FilEastern, for brevity), a domestic corporation, for recovery of a sum of money. Upon ex-parte application by the Bank for a Writ of Preliminary Attachment, respondent Judge, after the filing and approval of the required bond of P220,000.00, issued, on February 4, 1974, an Order of Attachment commanding the Sheriff to attach the estate, real and personal, of FilEastern. 1 On February 7, 1974, the Sheriff's "Notice of Levy Pursuant to the Writ of Attachment" was registered in the Office of the Commander of the First Coast Guard, District of Manila, 2 pursuant to Sec. 805 of the Tariff and Customs Code, as amended by Presidential Decree No. 34, requiring the registration of documents affecting titles of vessels with that entity. The said notice read, "levy is hereby made upon all the rights, titles, interest, shares and participation which the defendant Fil-Eastern Wood Industries, Inc. has or might have over a sea vessel or barge named Fil-Eastern V. It appears that prior to the issuance of said Writ of Attachment, Fil-Eastern had delivered the barge to the Cotabato Visayan Development Corporation sometime in April, 1973, for repair. The job was completed in June 1973, but Fil-Eastern failed to pay the cost of repairs of P261,190.59. Pursuant to the provisions of Article 2112 3 in relation to Article 1731 4 of the Civil Code, the Cotabato Visayan Development Corporation proceeded before Notary Public Clemente R. Gonzales of Manila to the sale of said barge. In the public auction sale conducted by said Notary Public on April 24, 1974, petitioner Eligio Roque acquired the barge as the highest bidder, and was accordingly issued a Certificate of Sale by the Notary Public. On the same date, the Cotabato Visayan Development Corporation issued an Affidavit of Release of mechanic's lien against Fil-Eastern. The Certificate of Sale was received in the office of the Philippine Coast Guard on May 3, 1974. 5 It wag not until December 24, 1974, however, that Certificate of Ownership No. 8647, a Certificate. of Philippine Register, a Certificate of Change of Name of Vessel from Fil-Eastern V" to "Satellite I I, " as

proceeds of the auction sale on the aforedsaid vessel, if there be any. SO ORDERED. 14 On April 7, 1975, Capt. Marcelino Aguito and Deputy Sheriff Benjamin Garvida filed a Manifestation stating that petitioner Rodrigo Malonjao, acting for and in behalf of his co-petitioner Eligio Roque, refused to-surrender the barge on the ground I d that Eligio Roque is now the new owner, having acquired the same by purchase at public auction, and praying that petitioners, and all persons claiming under them, be directed to surrender the barge to the custody of the Court through its duly authorized representative. On April 14, 1975, respondent Judge issued the following Order: Upon motion filed by Capt. Marcelino Agito and Deputy Sheriff Benjamin Garvida and considering the absence of a formal claim with this Court filed by Eulogio Roque, personally or through counsel, relative to the barge SATELLITE II, EX-FIL-EASTERN V', subject of the writ of Attachment issued by this Court on February 7, 1974, and in order to prevent further delay in the implementation of the Order of this Court dated March 7, 1975, Rodrigo Malonjao and Eulogio Roque and an persons claiming right under them over the aforesaid vessel, including those acting under their direction or supervision, are hereby ordered under pain of being cited in contempt of Court to forthwith surrender possession of the above said vessel to Sheriff Adriel V. Garcia so that the latter may be able to implement fully and expeditiously the aforesaid Order of this Court dated March 7, 1975. ... 15 On April 24, 1975, petitioners filed before the trial Court an Urgent Manifestation and Motion seeking to set aside the Order of April 14, 1975, claiming that Roque is now the new owner of the barge having acquired the same at a public auction sale arising from a mechanic's lien. The Motion was denied by respondent Judge on the ground that the records belied petitioners' claim that the auction sale occurred very much ahead of the notice of levy. Petitioners' first and second Motion for Reconsideration were similarly denied. On July 16, 1975, respondent Deputy Sheriff Adriel V. Garcia submitted a report informing the Court that the barge in question had been turned over to him and was anchored along Pasig River, under guard. On August 28, 1975, petitioners sought relief from the Court of Appeals by filing a "Petition for certiorari and Prohibition with Preliminary Injunction and Preliminary Mandatory Injunction" assailing and asking to vacate the Orders issued in Civil Case No. 89692 by respondent Judge as well as the Writs, notices and other processes emanating therefrom. The Court of Appeals, * in denying the Petition in its Decision promulgated on November 24, 1975, ruled that certiorari did not lie as petitioner was not without sufficient and adequate remedy to obtain relief from the damaging effects of the Orders complained of. Petitioner filed the present Petition on March 1, 1976 before this Court, claiming that they are purchasers in good faith and for valuable consideration, having actually paid the total amount of P354,689.00 to the Cotabato Visayan Development Corporation for three barges, one of which is the barge in question. They have also raised the following legal issues: 1. The decision of the respondent Court of Appeals sustaining the challenged orders,

writs and other processes issued by the respondent Judge is contrary to the provisions of Art. 1731 in relation to Art. 2112 of the New Civil Code and to the ruling laid down in Bank of P.I. vs. Walter A. Smith' & Co., 55 Phil. 533 and Bachrach Motor Co. vs. Mendoza, 43 Phil. 410. 2. If the levy and/or attachment by the sheriff of the barge in question are illegal, will herein petitioner be required to avail of Section 14, Rule 57 and/or Section 17, Rule 39 of the Revised Rules of Court? On July 19, 1976, we issued a Restraining Order enjoining respondents from proceeding with the projected sale at public auction of the barge, subject of this litigation. We also declared the case submitted for decision. On January 18, 1977, the Bank filed a Motion for Authority to Sell the barge under attachment. This was opposed, however, by petitioners and we resolved to defer resolution until decision on the merits is rendered. On May 31, 1979, the Bank filed a Motion for Early Resolution, but the same was agendaed only on September 24, 1979. We take note of the BANK's contention that ever since the Sheriff took custody of the vessel on July 16, 1975, the same has been lying Idle, moored at the Muelle de la Industrial, Pasig River, exposed to the elements, and has deteriorated rapidly, hence the need for early resolution. It should be reiterated that this is a special civil action for Certiorari, the main requisites for the issuance of which Writ are: 1) that the Writ be directed against a tribunal, board or officer exercising judicial functions; 2) that such tribunal, board or officer has acted without or in excess of jurisdiction or with grave abuse of discretion; and 3) that there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law. 16 While the first requisite has been met, the second-hand the third have not. We agree with the findings of the Court of Appeals that petitioners were not without any plain, speedy and adequate remedy in the ordinary course of law. For one, upon the issuance of the Order, dated August 29, 1974, commanding the implementation of the Writ of Attachment, petitioners could have availed themselves of the remedy provided for in Section 14, Rule 57 of the Rules of Court, which reads: If the property taken be claimed by any person other than the party against whom attachment had been issued or his agent, and such person makes an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serves such affidavit upon the officer while the latter has possession of the property, and a copy thereof upon the attaching creditor, the officer shall not be bound to keep the property under attachment, unless the attaching creditor or his agent, on demand of the said officer, secures him against such claim by a bond in a sum not greater than the value of the property attached. ... For another, when respondent Sheriff seized the vessel in question to be sold at public auction in accordance with the Order of execution of March 7, 1975, petitioner could have availed of the remedy under Section 17, Rule 39 of the Rules of Court which provides: If the property levied on be claimed by any other person than the Judgment debtor or his agent, and such person make an affidavit of his title thereto or right to the possession thereof, stating the grounds of

such right or title, and serve the same upon the officer making the levy, and a copy thereof upon the judgment creditor, the officer shall not be bound to keep the property, unless such judgment creditor or his agent, on demand of the officer, indemnify the officer against such claim by a bond in a sum not greater than the value of the property levied on. ... Petitioner Eligio Roque argues, however, that he could not avail of the foregoing Rules inasmuch as the vessel was not in the actual custody of the Sheriff nor of the Court, since the supposed levy by the Sheriff on February 7, 1974 was a mere paper levy which, in legal contemplation, is no levy at an. It is a fact that respondent Sheriff could not effect seizure immediately, first, because the barge could nowhere be found in this vicinity, and subsequently when found, because petitioners would not deliver possession to the Sheriff. It was not until the trial Court granted the Sheriff's Motion praying for an Order directing petitioners or their agents to surrender the barge to the custody of the Court, that the Sheriff was able to take physical custody. As a general rule, however, a levy of an attachment upon personal property may be either actual or constructive. 17 In this case, levy had been constructively made by the registration of the same with the Philippine Coast Guard on February 7, 1974. Constructive possession should be held sufficient where actual possession is not feasible, 18 particularly when it was followed up by the actual seizure of the property as soon as that could possibly be effected. Petitioners further argue that the levy was illegal because the Writ was implemented more than sixty days after its issuance so that they need not have complied with Section 14, Rule 57, supra. The Rules do not provide any lifetime for a Writ of Attachment unlike a Writ of Execution. But even granting that a Writ of Attachment is valid for only sixty days, yet, since there was constructive levy within that period the fact that actual seizure was effected only thereafter cannot affect the validity of that levy. Neither can it be said that respondent Judge committed grave abuse of discretion in issuing the challenged Order of April 14, 1975, supra, whereby it commanded the immediate implementation of the Order of execution of March 7, 1975 and ordered petitioners to surrender possession of the barge to the Sheriff under pain of contempt. A trial Court is enjoined by law to bring about a prompt dispatch of the controversy pending before it. As it was, it took the trial Court more than a year to cause the enforcement of its Writs and processes. Moreover, its Decision of October 9, 1974 had become final and executory, and execution then became purely a ministerial phase of adjudication. It had no jurisdiction to pass upon petitioners' claim of ownership not only because trial in that, case had already been terminated but also considering that petitioners were not parties in the case below nor had they filed any third-party claim for the enforcement of their rights. Verily, petitioners' remedy was to ventilate their claims of ownership in a separate and independent reivindicatory action, as even then suggested by the Court of Appeals. That was the arena where the question of preferential rights, if any, impliedly raised in the first assigned error, could have been fully threshed out. ...a third person claiming to be the owner of the property attached or levied upon is required to file a separate or independent action to determine whether the property should answer for the claim of the attaching or judgment creditor instead of being allowed to raise that issue in the case where the writ of attachment or execution was issued (Sec. 17, Rule 39 and sec. 14, Rule 57, Rules of Court;

Bayer Philippines, Inc. vs. Agana, L38701, April 8, 1975, 63 SCRA 355).

19

In the interest of justice, petitioners can still file an independent civil action to establish their ownership over the barge, if they have not yet done so. WHEREFORE, in the absence of jurisdictional errors, this Petition is dismissed, and the Restraining Order, heretofore issued, hereby lifted effective immediately. No costs. SO ORDERED.