1

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-252 March 30, 1946
TRANQUILINO CALO and DOROTEO SAN JOSE, petitioners,
vs.
ARSENIO C. ROLDAN, Judge of First Instance of Laguna, REGINO RELOVA and TEODULA
BARTOLOME,respondents.
Zosimo D. Tanalega for petitioners.
Estanislao A. Fernandez for respondents Relova and Bartolome.
No appearance for respondent Judge.
FERIA, J.:
This is a petition for writ of certiorari against the respondent Judge Arsenio C. Roldan of the Court First
Instance of Laguna, on the ground that the latter has exceeded his jurisdiction or acted with grave abuse
of discretion in appointing a receiver of certain lands and their fruits which, according to the complainant
filed by the other respondents, as plaintiffs, against petitioners, as defendants, in case No. 7951, were in
the actual possession of and belong to said plaintiffs.
The complaint filed by plaintiffs and respondents against defendants and petitioners in the Court of First
Instance of Laguna reads as follows:
1. That the plaintiffs and the defendants are all of legal age, Filipino citizens, and residents of
Pila, Laguna; the plaintiffs are husband and wife..
2. That the plaintiff spouses are the owners and the possessors of the following described
parcels of land, to wit:.
x x x x x x x x x
3. That parcel No. (a) described above is now an unplanted rice land and parcel No. (b)
described in the complaint is a coconut land, both under the possession of the plaintiffs..
4. That the defendants, without any legal right whatsoever and in connivance with each
other, through the use of force, stealth, threats and intimidation, intend or are intending to
enter and work or harvest whatever existing fruits may now be found in the lands above-
mentioned in violation of plaintiff's in this case ineffectual..
5. That unless defendants are barred, restrained, enjoined, and prohibited from entering or
harvesting the lands or working therein through ex-parte injunction, the plaintiffs will suffer
injustice, damages and irreparable injury to their great prejudice..
6. That the plaintiffs are offering a bond in their application for ex-parte injunction in the
amount of P2,000, subject to the approval of this Hon. Court, which bond is attached hereto
marked as Annex A and made an integral part of this complaint..
7. That on or about June 26, 1945, the defendants, through force, destroyed and took away
the madre-cacao fencer, and barbed wires built on the northwestern portion of the land
designated as parcel No. (b) of this complaint to the damage and prejudice of the plaintiffs in
the amount of at least P200..
Wherefore, it is respectfully prayed:.
(a) That the accompanying bond in the amount of P2,000 be approved;
(b) That a writ of preliminary injunction be issued ex-parte immediately restraining, enjoining
and prohibiting the defendants, their agents, servants, representatives, attorneys, and, (or)
other persons acting for and in their behalf, from entering in, interfering with and/or in any
wise taking any participation in the harvest of the lands belonging to the plaintiffs; or in any
wise working the lands above-described;
(c) That judgment be rendered, after due hearing, declaring the preliminary injunction final;.
(d) That the defendants be condemned jointly and severally to pay the plaintiffs the sum of
P200 as damages; and.
(e) That plaintiffs be given such other and further relief just and equitable with costs of suit to
the defendants.
The defendants filed an opposition dated August 8, 1945, to the issuance of the writ of preliminary
injunction prayed for in the above-quoted complaint, on the ground that they are owners of the lands
and have been in actual possession thereof since the year 1925; and their answer to the complaint filed
on August 14, 1945, they reiterate that they are the owners and were then in actual possession of said
property, and that the plaintiffs have never been in possession thereof.
The hearing of the petition for preliminary injunction was held on August 9, 1945, at which evidence was
introduced by both parties. After the hearing, Judge Rilloraza, then presiding over the Court of First
Instance of Laguna, denied the petition on the ground that the defendants were in actual possession of
said lands. A motion for reconsideration was filed by plaintiffs on August 20, 1945, but said motion had
not yet, up to the hearing of the present case, been decided either by Judge Rilloraza, who was assigned
to another court, or by the respondent judge.
The plaintiffs (respondents) filed on September 4, 1945, a reply to defendants' answer in which, among
others, they reiterate their allegation in the complaint that they are possessors in good faith of the
properties in question.
And on December 17, plaintiffs filed an urgent petition ex-parte praying that plaintiffs' motion for
reconsideration of the order denying their petition for preliminary injunction be granted and or for the
appointment of a receiver of the properties described in the complaint, on the ground that (a) the
plaintiffs have an interest in the properties in question, and the fruits thereof were in danger of being
lost unless a receiver was appointed; and that (b) the appointment of a receiver was the most
2

convenient and feasible means of preserving, administering and or disposing of the properties in
litigation which included their fruits. Respondents Judge Roldan, on the same date, December 17, 1945,
decided that the court would consider the motion for reconsideration in due time, and granted the
petition for appointment of and appointed a receiver in the case.
The question to be determined in the present special civil action of certiorari is, whether or not the
respondent judge acted in excess of his jurisdiction or with grave abuse of discretion in issuing the order
appointing a receiver in the case No. 7951 of the Court of First Instance of Laguna; for it is evident that
there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of the law
against the said order, which is an incidental or interlocutory one.
It is a truism in legal procedure that what determines the nature of an action filed in the courts are the
facts alleged in the complaint as constituting the cause of the action. The facts averred as a defense in
the defendant's answer do not and can not determine or change the nature of the plaintiff's action. The
theory adopted by the plaintiff in his complaint is one thing, and that of the defendant in his answer is
another. The plaintiff has to establish or prove his theory or cause of action in order to obtain the
remedy he prays for; and the defendant his theory, if necessary, in order to defeat the claim or action of
the plaintiff..
According to the complaint filed in the said case No. 7951, the plaintiff's action is one of ordinary
injunction, for the plaintiffs allege that they are the owners of the lands therein described, and were in
actual possession thereof, and that "the defendants without any legal right whatever and in connivance
with each other, through the use of force, stealth, threat and intimidation, intend or are intending to
enter and work or harvest whatever existing fruits may be found in the lands above mentioned in
violation of plaintiffs' proprietary rights thereto;" and prays "that the defendants, their agents, servants,
representatives, and other persons acting for or in their behalf, be restrained, enjoined and prohibited
from entering in, interfering with, or in any way taking any participation in the harvest of the lands above
describe belonging to the plaintiffs."
That this is the nature of plaintiffs' action corroborated by the fact that they petitioned in the same
complaint for a preliminary prohibitory injunction, which was denied by the court in its order dated
August 17, 1945, and that the plaintiffs, in their motion for reconsideration of said order filed on August
20 of the same year, and in their urgent petition dated December 17, moving the court to grant said
motion for reconsideration, reiterated that they were actual possessors of the land in question.
The fact that plaintiffs, in their reply dated September 4, after reiterating their allegation or claim that
they are the owners in fee simple and possessors in good faith of the properties in question, pray that
they be declared the owners in fee simple, has not changed the nature of the action alleged in the
complaint or added a new cause of action thereto; because the allegations in plaintiffs' reply were in
answer to defendants' defenses, and the nature of plaintiffs' cause of action, as set forth in their
complaint, was not and could not be amended or changed by the reply, which plaintiffs had the right to
present as a matter of course. A plaintiff can not, after defendant's answer, amend his complaint by
changing the cause of action or adding a new one without previously obtaining leave of court (section 2,
Rule 17)..
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 thestatus 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.
3

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.

















4

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 185734 July 3, 2013
ALFREDO C. LIM, JR., PETITIONER,
vs.
SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO, RESPONDENTS.
R E S O L U T I O N
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari
1
are the July 10, 2008 Decision
2
and December 18, 2008
Resolution
3
of the Court of Appeals (CA) in CA-G.R. SP No. 100270, affirming the March 29, 2007
Order
4
of the Regional Trial Court of Quezon City, Branch 223 (RTC), which lifted the writ of preliminary
attachment issued in favor of petitioner Alfredo C. Lim, Jr. (Lim, Jr.).
The Facts
On August 22, 2005, Lim, Jr. filed a complaint
5
for sum of money with prayer for the issuance of a writ of
preliminary attachment before the RTC, seeking to recover from respondents-spouses Tito S. Lazaro and
Carmen T. Lazaro (Sps. Lazaro) the sum of P2,160,000.00, which represented the amounts stated in
several dishonored checks issued by the latter to the former, as well as interests, attorneys fees, and
costs. The RTC granted the writ of preliminary attachment application
6
and upon the posting of the
required P2,160,000.00 bond,
7
issued the corresponding writ on October 14, 2005.
8
In this accord, three
(3) parcels of land situated in Bulacan, covered by Transfer Certificates of Title (TCT) Nos. T-64940, T-
64939, and T-86369 (subject TCTs), registered in the names of Sps. Lazaro, were levied upon.
9

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

Nonetheless, on September 22, 2006, the parties entered into a Compromise Agreement
13
whereby Sps.
Lazaro agreed to pay Lim, Jr. the amount of P2,351,064.80 on an installment basis, following a schedule
of payments covering the period from September 2006 until October 2013, under the following terms,
among others: (a) that should the financial condition of Sps. Lazaro improve, the monthly installments
shall be increased in order to hasten the full payment of the entire obligation;
14
and (b) that Sps. Lazaros
failure to pay any installment due or the dishonor of any of the postdated checks delivered in payment
thereof shall make the whole obligation immediately due and demandable.
The aforesaid compromise agreement was approved by the RTC in its October 31, 2006 Decision
15
and
January 5, 2007 Amended Decision.
16

Subsequently, Sps. Lazaro filed an Omnibus Motion,
17
seeking to lift the writ of preliminary attachment
annotated on the subject TCTs, which the RTC granted on March 29, 2007.
18
It ruled that a writ of
preliminary attachment is a mere provisional or ancillary remedy, resorted to by a litigant to protect and
preserve certain rights and interests pending final judgment. Considering that the case had already been
considered closed and terminated by the rendition of the January 5, 2007 Amended Decision on the
basis of the September 22, 2006 compromise agreement, the writ of preliminary attachment should be
lifted and quashed. Consequently, it ordered the Registry of Deeds of Bulacan to cancel the writs
annotation on the subject TCTs.
Lim, Jr. filed a motion for reconsideration
19
which was, however, denied on July 26, 2007,
20
prompting
him to file a petition for certiorari
21
before the CA.
The CA Ruling
On July 10, 2008, the CA rendered the assailed decision,
22
finding no grave abuse of discretion on the
RTCs part. It observed that a writ of preliminary attachment may only be issued at the commencement
of the action or at any time before entry of judgment. Thus, since the principal cause of action had
already been declared closed and terminated by the RTC, the provisional or ancillary remedy of
preliminary attachment would have no leg to stand on, necessitating its discharge.
23

Aggrieved, Lim, Jr. moved for reconsideration
24
which was likewise denied by the CA in its December 18,
2008 Resolution.
25

Hence, the instant petition.
The Issue Before the Court
The sole issue in this case is whether or not the writ of preliminary attachment was properly lifted.
The Courts Ruling
The petition is meritorious.
By its nature, preliminary attachment, under Rule 57 of the Rules of Court (Rule 57), is an ancillary
remedy applied for not for its own sake but to enable the attaching party to realize upon the relief
sought and expected to be granted in the main or principal action; it is a measure auxiliary or incidental
to the main action. As such, it is available during its pendency which may be resorted to by a litigant to
preserve and protect certain rights and interests during the interim, awaiting the ultimate effects of a
final judgment in the case.
26
In addition, attachment is also availed of in order to acquire jurisdiction over
the action by actual or constructive seizure of the property in those instances where personal or
substituted service of summons on the defendant cannot be effected.
27

In this relation, while the provisions of Rule 57 are silent on the length of time within which an
attachment lien shall continue to subsist after the rendition of a final judgment, jurisprudence dictates
that the said lien continues until the debt is paid, or the sale is had under execution issued on the
5

judgment or until the judgment is satisfied, or the attachment discharged or vacated in the same manner
provided by law.
28

Applying these principles, the Court finds that the discharge of the writ of preliminary attachment
against the properties of Sps. Lazaro was improper.
Records indicate that while the parties have entered into a compromise agreement which had already
been approved by the RTC in its January 5, 2007 Amended Decision, the obligations thereunder have yet
to be fully complied with particularly, the payment of the total compromise amount of P2,351,064.80.
Hence, given that the foregoing debt remains unpaid, the attachment of Sps. Lazaros properties should
have continued to subsist.
In Chemphil Export & Import Corporation v. CA,
29
the Court pronounced that a writ of attachment is not
extinguished by the execution of a compromise agreement between the parties, viz:
Did the compromise agreement between Antonio Garcia and the consortium discharge the latters
attachment lien over the disputed shares?
CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the dismissal of the case,
dies a natural death. Thus, when the consortium entered into a compromise agreement, which resulted
in the termination of their case, the disputed shares were released from garnishment.
We disagree. To subscribe to CEICs contentions would be to totally disregard the concept and purpose
of a preliminary attachment.
x x x x
The case at bench admits of peculiar character in the sense that it involves a compromise agreement.
Nonetheless, x x x. The parties to the compromise agreement should not be deprived of the protection
provided by an attachment lien especially in an instance where one reneges on his obligations under the
agreement, as in the case at bench, where Antonio Garcia failed to hold up his own end of the deal, so to
speak.
x x x x
If we were to rule otherwise, we would in effect create a back door by which a debtor can easily escape
his creditors. Consequently, we would be faced with an anomalous situation where a debtor, in order to
buy time to dispose of his properties, would enter into a compromise agreement he has no intention of
honoring in the first place. The purpose of the provisional remedy of attachment would thus be lost. It
would become, in analogy, a declawed and toothless tiger. (Emphasis and underscoring supplied;
citations omitted)
In fine, the Court holds that the writ of preliminary attachment subject of this case should be restored
and its annotation revived in the subject TCTs, re-vesting unto Lim, Jr. his preferential lien over the
properties covered by the same as it were before the cancellation of the said writ. Lest it be
misunderstood, the lien or security obtained by an attachment even before judgment, is in the nature of
a vested interest which affords specific security for the satisfaction of the debt put in suit.
30
Verily, the
lifting of the attachment lien would be tantamount to an abdication of Lim, Jr.s rights over Sps. Lazaros
properties which the Court, absent any justifiable ground therefor, cannot allow.
WHEREFORE, the petition is GRANTED. The July 10, 2008 Decision and the December 18, 2008 Resolution
of the Court of Appeals in CA-G.R. SP No. 100270 are REVERSED and SET ASIDE, and the March 29, 2007
Order of the Regional Trial Court of Quezon City, Branch 223 is NULLIFIED. Accordingly, the trial court is
directed to RESTORE the attachment lien over Transfer Certificates of Title Nos. T-64940, T-64939, and T-
86369, in favor of petitioner Alfredo C. Lim, Jr.
SO ORDERED.





















6

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-48080 August 31, 1942
JOSE DE BORJA, petitioner,
vs.
SERVILLANO PLATON and FRANCISCO DE BORJA, respondents.
Vicente J. Francisco for petitioner.
E. V. Filamor for respondents.
No appearance for respondent judge
BOCOBO, J.:
Petitioner seeks the setting aside of an order of preliminary attachment issued on November 6, 1940,
and reiterated on January 13, 1941, by the respondent Judge of the Court of First Instance against
petitioner's properties.
On August 12, 1936, petitioner brought a civil action in the Court of First Instance of Rizal against
Hermogena Romero, Francisco de Borja, Josefa Tangco and Crisanto de Borja to annul a second sale by
Francisco de Borja to Hermogena Romero, of a large estate known as the Hacienda Jalajala, and to
recover damages in the amount of P25,000. On August 29, 1936, Francisco de Borja and his wife Josefa
Tangco filed an answer with three counterclaims, and on September 29, 1936, they presented two more
counterclaims. Trial began September 30, 1936. Under date of August 4, 1937, defendants Francisco de
Borja, Josefa Tangco and Crisanto de Borja submitted their amended answer, consisting of a general
denial, special defenses, and five counterclaims and cross-complaints. In these causes for counter-claim
and cross-complaint, it was alleged that plaintiff, being a son of defendants Francisco de Borja and Josefa
Tangco, had been entrusted with the administration of the extensive interests of his parents, but had
been unfaithful to his trust. Said defendants, therefore, prayed, inter alia, that the spouses Borja and
Tangco be declared owners of the Hacienda Jalajala in question; that plaintiff be required to render an
accounting of the products of said hacienda that he had received and to pay said spouses at least
P100,000 illegally retained by him; that plaintiff be ordered to account for the proceed of rice and bran
and to pay at least P700,000 unlawfully retained by him; that plaintiff be made to deliver P20,000 which
he had collected from a debtor of said spouses; that plaintiff be likewise ordered to pay another sum of
P9,034 collected by him from the same debtor; and that plaintiff be required to turn over to defendants
Francisco de Borja and Josefa Tangco the amount of P40,000 collected by him as indemnity of an
insurance policy on property belonging to said spouses.
On July 27, 1940, Francisco de Borja and his wife filed their petition for preliminary attachment to cover
their third, fourth, and fifth, grounds for cross-complaint, involving a total of P69,035. In said motion, the
defendants Borja and wife stated that they did not include the first and second causes for cross-
complaint because the visible property of plaintiff that could then be attached was only worth about
P2,000. On August 21, 1940, plaintiff presented an amended answer setting up a counterclaim against
defendants Borja and wife in the sum of P99,175.46.
The order for preliminary attachment is questioned upon several grounds, among which are: (1) that no
writ of attachment can be issued in favor of a defendant who presents a counterclaim; (2) and the
defendants' affidavit was fatally defective.
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. In the
present case we see no reason why the order of the trial court should be disturbed, this question being a
matter within its discretion and we find no grave abuse of that discretion.
As to be the second objection of petitioner, his counsel strenuously advances the theory that the
affidavit attached to the petition for a writ of preliminary attachment was fatally defective because it
failed to allege that "the amount due to the plaintiff is as much as the sum for which the order is granted
above all legal counterclaims" as required in section 426, Code of Civil Procedure and section 3, Rule 59,
Rules of Court. Petitioner contends that his counterclaim against that of Francisco de Borja and wife
being P99,175.46 whereas the latter's counterclaim totalled only P69,035, the omission of the allegation
referred to is a serious defect. The trial court found, however, that the counterclaim of Francisco de
Borja and wife exceed those of the petitioner Jose de Borja. It should be borne in mind that the
aggregate counterclaims of Francisco de Borja and wife amounted to P869,000, which exceeds
petitioner's counterclaim by P769,000 in round figures. Moreover, as the trial court had before it the
evidence adduce by both sides, the petition for a writ of preliminary attachment having been filed four
years after the trial had begun, we presume that the lower court, having in mind such evidence, ordered
the attachment accordingly.
The order appealed from is hereby affirmed, with costs against the petitioner. So ordered.











7

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 155504 June 26, 2009
PROFESSIONAL VIDEO, INC., Petitioner,
vs.
TECHNICAL EDUCATION AND SKILLS DEVELOPMENT AUTHORITY, Respondent.
D E C I S I O N
BRION, J.:
We resolve the petition filed by Professional Video, Inc. (PROVI)
1
to annul and set aside the Decision
2
of
the Court of Appeals (CA) in CA-G.R. SP No. 67599, and its subsequent Order denying PROVIs motion for
reconsideration.
3
The assailed CA decision nullified:
a. the Order
4
dated July 16, 2001 of the Regional Trial Court (RTC), Pasig City, in Civil Case No. 68527,
directing the attachment/garnishment of the properties of respondent Technical Education and Skills
Development Authority (TESDA) amounting to Thirty Five Million Pesos (P35,000,000.00); and
b. the RTCs August 24, 2001 Order
5
denying respondent TESDAs motion to discharge/quash writ of
attachment.
THE FACTUAL BACKGROUND
PROVI is an entity engaged in the sale of high technology equipment, information technology products
and broadcast devices, including the supply of plastic card printing and security facilities.
TESDA is an instrumentality of the government established under Republic Act (R.A.) No. 7796 (the
TESDA Act of 1994) and attached to the Department of Labor and Employment (DOLE) to "develop and
establish a national system of skills standardization, testing, and certification in the country."
6
To fulfill
this mandate, it sought to issue security-printed certification and/or identification polyvinyl (PVC) cards
to trainees who have passed the certification process.
TESDAs Pre-Qualification Bids Award Committee (PBAC) conducted two (2) public biddings on June 25,
1999 and July 22, 1999 for the printing and encoding of PVC cards. A failure of bidding resulted in both
instances since only two (2) bidders PROVI and Sirex Phils. Corp. submitted proposals.
Due to the failed bidding, the PBAC recommended that TESDA enter into a negotiated contract with
PROVI. On December 29, 1999, TESDA and PROVI signed and executed their "Contract Agreement
Project: PVC ID Card Issuance" (the Contract Agreement) for the provision of goods and services in the
printing and encoding of PVC cards.
7
Under this Contract Agreement, PROVI was to provide TESDA with
the system and equipment compliant with the specifications defined in the Technical Proposal. In return,
TESDA would pay PROVI the amount of Thirty-Nine Million Four Hundred and Seventy-Five Thousand
Pesos (P39,475,000) within fifteen (15) days after TESDAs acceptance of the contracted goods and
services.
On August 24, 2000, TESDA and PROVI executed an "Addendum to the Contract Agreement Project: PVC
ID Card Issuance" (Addendum),
8
whose terms bound PROVI to deliver one hundred percent (100%) of
the enumerated supplies to TESDA consisting of five hundred thousand (500,000) pieces of security foil;
five (5) pieces of security die with TESDA seal; five hundred thousand (500,000) pieces of pre-printed and
customized identification cards; one hundred thousand (100,000) pieces of scannable answer sheets;
and five hundred thousand (500,000) customized TESDA holographic laminate. In addition, PROVI would
install and maintain the following equipment: one (1) unit of Micropoise, two (2) units of card printer,
three (3) units of flatbed scanner, one (1) unit of OMR scanner, one (1) unit of Server, and seven (7) units
of personal computer.
TESDA in turn undertook to pay PROVI thirty percent (30%) of the total cost of the supplies within thirty
(30) days after receipt and acceptance of the contracted supplies, with the balance payable within thirty
(30) days after the initial payment.
According to PROVI, it delivered the following items to TESDA on the dates indicated:
Date Particulars Amount
26 April 2000 48,500 pre-printed cards P 2,764,500.00
07 June 2000 330,000 pre-printed cards 18,810,000.00
07 August 2000 121,500 pre-printed cards 6,925,500.00
26 April 2000 100,000 scannable answer sheets 600,000.00
06 June 2000 5 Micro-Poise customized die 375,000.00
13 June 2000 35 boxes @ 15,000 imp/box
Custom hologram Foil
10,000,000.00
Total P 39,475,000.00
PROVI further alleged that out of TESDAs liability of P39,475,000.00, TESDA paid PROVI
only P3,739,500.00, leaving an outstanding balance of P35,735,500.00, as evidenced by PROVIs
Statement of Account.
9
Despite the two demand letters dated March 8 and April 27, 2001 that PROVI
sent TESDA,
10
the outstanding balance remained unpaid.
On July 11, 2001, PROVI filed with the RTC a complaint for sum of money with damages against TESDA.
PROVI additionally prayed for the issuance of a writ of preliminary attachment/garnishment against
TESDA. The case was docketed as Civil Case No. 68527. In an Order dated July 16, 2001, the RTC granted
PROVIs prayer and issued a writ of preliminary attachment against the properties of TESDA not exempt
from execution in the amount ofP35,000,000.00.
11

TESDA responded on July 24, 2001 by filing a Motion to Discharge/Quash the Writ of Attachment,
arguing mainly that public funds cannot be the subject of garnishment.
12
The RTC denied TESDAs
8

motion, and subsequently ordered the manager of the Land Bank of the Philippines to produce TESDAs
bank statement for the garnishment of the covered amount.
13

Faced with these rulings, TESDA filed a Petition for Certiorari with the CA to question the RTC orders,
imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the trial court for
issuing a writ of preliminary attachment against TESDAs public funds.
14

The CA set aside the RTCs orders after finding that: (a) TESDAs funds are public in nature and, therefore,
exempt from garnishment; and (b) TESDAs purchase of the PVC cards was a necessary incident of its
governmental function; consequently, it ruled that there was no legal basis for the issuance of a writ of
preliminary attachment/garnishment.
15
The CA subsequently denied PROVIs motion for
reconsideration;
16
hence, the present petition.
THE PETITION
The petition submits to this Court the single issue of whether or not the writ of attachment against
TESDA and its funds, to cover PROVIs claim against TESDA, is valid. The issue involves a pure question of
law and requires us to determine whether the CA was correct in ruling that the RTC gravely abused its
discretion in issuing a writ of attachment against TESDA.
PROVI argues that the CA should have dismissed TESDAs petition for certiorari as the RTC did not
commit any grave abuse of discretion when it issued the Orders dated July 16, 2001 and August 24,
2001. According to PROVI, the RTC correctly found that when TESDA entered into a purely commercial
contract with PROVI, TESDA went to the level of an ordinary private citizen and could no longer use the
defense of state immunity from suit. PROVI further contends that it has alleged sufficient ultimate facts
in the affidavit it submitted to support its application for a writ of preliminary attachment. Lastly, PROVI
maintains that sufficient basis existed for the RTCs grant of the writ of preliminary attachment, since
TESDA fraudulently misapplied or embezzled the money earmarked for the payment of the contracted
supplies and services, as evidenced by the Certification as to Availability of Funds.
TESDA claims that it entered the Contract Agreement and Addendum in the performance of its
governmental function to develop and establish a national system of skills standardization, testing, and
certification; in the performance of this governmental function, TESDA is immune from suit. Even
assuming that it had impliedly consented to be sued by entering into a contract with PROVI, TESDA posits
that the RTC still did not have the power to garnish or attach its funds since these are public funds.
Lastly, TESDA points out that PROVI failed to comply with the elements for the valid issuance of a writ of
preliminary attachment, as set forth in Section 1, Rule 57 of the 1997 Rules of Civil Procedure.
THE COURTS RULING
We find, as the CA did, that the RTCs questioned order involved a gross misreading of the law and
jurisprudence amounting to action in excess of its jurisdiction. Hence, we resolve to DENY PROVIs
petition for lack of merit.
TESDA is an instrumentality of the government undertaking governmental functions.
R.A. No. 7796 created the Technical Education and Skills Development Authority or TESDA under the
declared "policy of the State to provide relevant, accessible, high quality and efficient technical
education and skills development in support of the development of high quality Filipino middle-level
manpower responsive to and in accordance with Philippine development goals and priorities."
17
TESDA
replaced and absorbed the National Manpower and Youth Council, the Bureau of Technical and
Vocational Education and the personnel and functions pertaining to technical-vocational education in
the regional offices of the Department of Education, Culture and Sports and the apprenticeship program
of the Bureau of Local Employment of the DOLE.
18
Thus, TESDA is an unincorporated instrumentality of
the government operating under its own charter.
Among others, TESDA is empowered to: approve trade skills standards and trade tests as established and
conducted by private industries; establish and administer a system of accreditation of both public and
private institutions; establish, develop and support the institutions' trainors' training and/or programs;
exact reasonable fees and charges for such tests and trainings conducted, and retain such earnings for its
own use, subject to guidelines promulgated by the Authority; and perform such other duties and
functions necessary to carry out the provisions of the Act, consistent with the purposes of the creation of
TESDA.
19

Within TESDAs structure, as provided by R.A. No. 7769, is a Skills Standards and Certification Office
expressly tasked, among others, to develop and establish a national system of skills standardization,
testing and certification in the country; and to conduct research and development on various
occupational areas in order to recommend policies, rules and regulations for effective and efficient skills
standardization, testing and certification system in the country.
20
The law likewise mandates that
"[T]here shall be national occupational skills standards to be established by TESDA-accredited industry
committees. The TESDA shall develop and implement a certification and accreditation program in which
private groups and trade associations are accredited to conduct approved trade tests, and the local
government units to promote such trade testing activities in their respective areas in accordance with
the guidelines to be set by the TESDA. The Secretary of Labor and Employment shall determine the
occupational trades for mandatory certification. All certificates relating to the national trade skills testing
and certification system shall be issued by the TESDA through its Secretariat."
21

All these measures are undertaken pursuant to the constitutional command that "[T]he State affirms
labor as a primary social economic force," and shall "protect the rights of workers and promote their
welfare";
22
that "[T]he State shall protect and promote the right of all citizens to quality education at all
levels, and shall take appropriate steps to make such education accessible to all";
23
in order "to afford
protection to labor" and "promote full employment and equality of employment opportunities for all."
24

Under these terms, both constitutional and statutory, we do not believe that the role and status of
TESDA can seriously be contested: it is an unincorporated instrumentality of the government, directly
attached to the DOLE through the participation of the Secretary of Labor as its Chairman, for the
performance of governmental functions i.e., the handling of formal and non-formal education and
training, and skills development. As an unincorporated instrumentality operating under a specific
charter, it is equipped with both express and implied powers,
25
and all State immunities fully apply to it.
26

TESDA, as an agency of the State, cannot be sued without its consent.
The rule that a state may not be sued without its consent is embodied in Section 3, Article XVI of the
1987 Constitution and has been an established principle that antedates this Constitution.
27
It is as well a
universally recognized principle of international law that exempts a state and its organs from the
jurisdiction of another state.
28
The principle is based on the very essence of sovereignty, and on the
practical ground that there can be no legal right as against the authority that makes the law on which the
right depends.
29
It also rests on reasons of public policy that public service would be hindered, and the
public endangered, if the sovereign authority could be subjected to law suits at the instance of every
citizen and, consequently, controlled in the uses and dispositions of the means required for the proper
administration of the government.
30

9

The proscribed suit that the state immunity principle covers takes on various forms, namely: a suit
against the Republic by name; a suit against an unincorporated government agency; a suit against a
government agency covered by a charter with respect to the agencys performance of governmental
functions; and a suit that on its face is against a government officer, but where the ultimate liability will
fall on the government. In the present case, the writ of attachment was issued against a government
agency covered by its own charter. As discussed above, TESDA performs governmental functions, and
the issuance of certifications is a task within its function of developing and establishing a system of skills
standardization, testing, and certification in the country. From the perspective of this function, the core
reason for the existence of state immunity applies i.e., the public policy reason that the performance of
governmental function cannot be hindered or delayed by suits, nor can these suits control the use and
disposition of the means for the performance of governmental functions. In Providence Washington
Insurance Co. v. Republic of the Philippines,
31
we said:
[A] continued adherence to the doctrine of non-suability is not to be deplored for as against the
inconvenience that may be caused private parties, the loss of governmental efficiency and the obstacle
to the performance of its multifarious functions are far greater if such a fundamental principle were
abandoned and the availability of judicial remedy were not thus restricted. With the well known
propensity on the part of our people to go to court, at the least provocation, the loss of time and energy
required to defend against law suits, in the absence of such a basic principle that constitutes such an
effective obstacle, could very well be imagined.
PROVI argues that TESDA can be sued because it has effectively waived its immunity when it entered into
a contract with PROVI for a commercial purpose. According to PROVI, since the purpose of its contract
with TESDA is to provide identification PVC cards with security seal which TESDA will thereafter sell to
TESDA trainees, TESDA thereby engages in commercial transactions not incidental to its governmental
functions.
TESDAs response to this position is to point out that it is not engaged in business, and there is nothing in
the records to show that its purchase of the PVC cards from PROVI is for a business purpose. While
TESDA admits that it will charge the trainees with a fee for the PVC cards, it claims that this fee is only to
recover their costs and is not intended for profit.
We agree with TESDA. As the appellate court found, the PVC cards purchased by TESDA from PROVI are
meant to properly identify the trainees who passed TESDAs National Skills Certification Program the
program that immediately serves TESDAs mandated function of developing and establishing a national
system of skills standardization, testing, and certification in the country.
32
Aside from the express
mention of this function in R.A. No. 7796, the details of this function are provided under DOLE
Administrative Order No. 157, S. 1992, as supplemented by Department Order Nos. 3 thru 3-F, S. 1994
and Department Order No. 13, S. 1994.
33

Admittedly, the certification and classification of trainees may be undertaken in ways other than the
issuance of identification cards, as the RTC stated in its assailed Order.
34
How the mandated certification
is to be done, however, lies within the discretion of TESDA as an incident of its mandated function, and is
a properly delegated authority that this Court cannot inquire into, unless its exercise is attended by
grave abuse of discretion.
That TESDA sells the PVC cards to its trainees for a fee does not characterize the transaction as industrial
or business; the sale, expressly authorized by the TESDA Act,
35
cannot be considered separately from
TESDAs general governmental functions, as they are undertaken in the discharge of these functions.
Along this line of reasoning, we held in Mobil Philippines v. Customs Arrastre Services:
36

Now, the fact that a non-corporate government entity performs a function proprietary in nature does
not necessarily result in its being suable. If said non-governmental function is undertaken as an incident
to its governmental function, there is no waiver thereby of the sovereign immunity from suit extended to
such government entity.
TESDAs funds are public in character, hence exempt from attachment or garnishment.
Even assuming that TESDA entered into a proprietary contract with PROVI and thereby gave its implied
consent to be sued, TESDAs funds are still public in nature and, thus, cannot be the valid subject of a
writ of garnishment or attachment. Under Section 33 of the TESDA Act, the TESDA budget for the
implementation of the Act shall be included in the annual General Appropriation Act; hence, TESDA
funds, being sourced from the Treasury, are moneys belonging to the government, or any of its
departments, in the hands of public officials.
37
We specifically spoke of the limits in dealing with this fund
in Republic v. Villasor
38
when we said:
This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter.
It is therein expressly provided, The State may not be sued without its consent. A corollary, both
dictated by logic and sound sense, from such a basic concept, is that public funds cannot be the object of
garnishment proceedings even if the consent to be sued had been previously granted and the state
liability adjudged. Thus in the recent case of Commissioner of Public Highways vs. San Diego, such a well-
settled doctrine was restated in the opinion of Justice Teehankee:
The universal rule that where the State gives its consent to be sued by private parties either by general
or special law, it may limit claimant's action 'only up to the completion of proceedings anterior to the
stage of execution' and that the power of the Courts ends when the judgment is rendered, since
government funds and properties may not be seized under writs of execution or garnishment to satisfy
such judgments, is based on obvious considerations of public policy. Disbursements of public funds must
be covered by the corresponding appropriation as required by law. The functions and public services
rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds
from their legitimate and specific objects, as appropriated by law. [Emphasis supplied.]
We reiterated this doctrine in Traders Royal Bank v. Intermediate Appellate Court,
39
where we said:
The NMPCs implied consent to be sued notwithstanding, the trial court did not have the power to
garnish NMPC deposits to answer for any eventual judgment against it. Being public funds, the deposits
are not within the reach of any garnishment or attachment proceedings. [Emphasis supplied.]
As pointed out by TESDA in its Memorandum,
40
the garnished funds constitute TESDAs lifeblood in
government parlance, its MOOE
41
whose withholding via a writ of attachment, even on a temporary
basis, would paralyze TESDAs functions and services. As well, these funds also include TESDAs Personal
Services funds from which salaries of TESDA personnel are sourced. Again and for obvious reasons, the
release of these funds cannot be delayed.
PROVI has not shown that it is entitled to the writ of attachment.
Even without the benefit of any immunity from suit, the attachment of TESDA funds should not have
been granted, as PROVI failed to prove that TESDA "fraudulently misapplied or converted funds allocated
under the Certificate as to Availability of Funds." Section 1, Rule 57 of the Rules of Court sets forth the
grounds for issuance of a writ of preliminary attachment, as follows:
10

SECTION 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 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 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 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 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 does not reside and is not found in the Philippines, or on
whom summons may be served by publication. [Emphasis supplied.]
Jurisprudence teaches us that the rule on the issuance of a writ of attachment must be construed strictly
in favor of the defendant. Attachment, a harsh remedy, must be issued only on concrete and specific
grounds and not on general averments merely quoting the words of the pertinent rules.
42
Thus, the
applicants affidavit must contain statements clearly showing that the ground relied upon for the
attachment exists.
Section 1(b), Rule 57 of the Rules of Court, that PROVI relied upon, applies only where money or
property has been embezzled or converted by a public officer, an officer of a corporation, or some other
person who took advantage of his fiduciary position or who willfully violated his duty.
PROVI, in this case, never entrusted any money or property to TESDA. While the Contract Agreement is
supported by a Certificate as to Availability of Funds (Certificate) issued by the Chief of TESDAs
Accounting Division, this Certificate does not automatically confer ownership over the funds to PROVI.
Absent any actual disbursement, these funds form part of TESDAs public funds, and TESDAs failure to
pay PROVI the amount stated in the Certificate cannot be construed as an act of fraudulent
misapplication or embezzlement. In this regard, Section 86 of Presidential Decree No. 1445 (The
Accounting Code) provides:
Section 86. Certificate showing appropriation to meet contract. Except in a case of a contract for
personal service, for supplies for current consumption or to be carried in stock not exceeding the
estimated consumption for three months, or banking transactions of government-owned or controlled
banks, no contract involving the expenditure of public funds by any government agency shall be entered
into or authorized unless the proper accounting official or the agency concerned shall have certified to
the officer entering into the obligation that funds have been duly appropriated for the purpose and that
the amount necessary to cover the proposed contract for the current fiscal year is available for
expenditure on account thereof, subject to verification by the auditor concerned. The certification signed
by the proper accounting official and the auditor who verified it, shall be attached to and become an
integral part of the proposed contract, and the sum so certified shall not thereafter be available for
expenditure for any other purpose until the obligation of the government agency concerned under the
contract is fully extinguished. [Emphasis supplied.]
By law, therefore, the amount stated in the Certification should be intact and remains devoted to its
purpose since its original appropriation. PROVI can rebut the presumption that necessarily arises from
the cited provision only by evidence to the contrary. No such evidence has been adduced.
Section 1 (d), Rule 57 of the Rules of Court applies where a party is guilty of fraud in contracting a debt or
incurring an obligation, or in concealing or disposing of the property for the taking, detention or
conversion of which the action is brought. In Wee v. Tankiansee,
43
we held that for a writ of attachment
to issue under this Rule, the applicant must sufficiently show the factual circumstances of the alleged
fraud because fraudulent intent cannot be inferred from the debtors mere non-payment of the debt or
failure to comply with his obligation. The affidavit, being the foundation of the writ, must contain
particulars showing how the imputed fraud was committed for the court to decide whether or not to
issue the writ. To reiterate, a writ of attachment can only be granted on concrete and specific grounds
and not on general averments merely quoting the words of the rules.
44

The affidavit filed by PROVI through Elmer Ramiro, its President and Chief Executive Officer, only
contained a general allegation that TESDA had fraudulent misapplied or converted the amount
of P10,975,000.00 that was allotted to it. Clearly, we cannot infer any finding of fraud from PROVIs
vague assertion, and the CA correctly ruled that the lower court acted with grave abuse of discretion in
granting the writ of attachment despite want of any valid ground for its issuance.1avvphi1
For all these reasons, we support the appellate courts conclusion that no valid ground exists to support
the grant of the writ of attachment against TESDA. The CAs annulment and setting aside of the Orders of
the RTC were therefore fully in order.
WHEREFORE, premises considered, we hereby DENY the petition filed by petitioner Professional Video,
Inc., and AFFIRM the Court of Appeals Decision dated July 23, 2002, and Resolution of September 27,
2002, in CA-G.R. SP No. 67599. Costs against the petitioner.
SO ORDERED.






11

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 104405 May 13, 1993
LIBERTY INSURANCE CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, HON. NAPOLEON K. FLOJO, Presiding Judge of Branch II, RTC
Manila; ATILLA ARKIN, the CITY SHERIFF OF MANILA, the REGISTER OF DEEDS OF MANILA and the
REGISTER OF DEEDS OF MAKATI, METRO MANILA, respondents.
Cochico, Lopez, Delgado , Aquino & De la Merced for petitioner.
Edgar Dennis A. Padernal for private respondent.

BIDIN, J.:
This is a petition for review on certiorari seeking to set aside and to declare null and void the decision
dated September 17, 1991 of the respondent Court of Appeals dismissing petitioner's petition for review
and its resolution dated February 7, 1992 denying petitioner's Motion for Reconsideration.
On May 4, 1988 Jose H. Imperial Organizations, Pty., thru Atty. Jose H. Imperial entered into an
agreement with Coca-Cola Bottlers Philippines to promote two concerts featuring a group known as
"Earth, Wind and Fire" on June 12 and 13, 1988 with Coca-Cola sponsoring the concerts and the former
promoting the same.
To ensure compliance with the terms of the agreement, Coca-Cola required Imperial Organizations to
put up a performance bond. Petitioner Liberty Insurance, upon application of Imperial Organization put
up the performance bond in the amount of Three Million Pesos (P3,000,000.00), the principal condition
of which was to "fully and faithfully guarantee the terms and conditions" of the agreement dated May
24, 1988 entered into between Coca-Cola and Imperial Organizations. More particularly, the bond was to
guarantee the return to Coca-Cola of "whatever portion of the cash sponsorship and cash advances to be
made by Coca-Cola to finance the holding of the concerts on the dates aforesaid . . . ." (Rollo, pp. 37)
In turn, and as a condition for the issuance of said performance bond, petitioner required Imperial
Organizations, Jose H. Imperial, Atilla Arkin, and Carmen Madlangbayan to execute an indemnity
agreement in its favor to indemnify it for any and all damages including attorney's fees which the
petitioner may incur by reason of the issuance of the bond.
It appears that while the concerts took place, Imperial Organizations and private respondents failed to
comply with their obligations to Coca Cola, as a result of which petitioner became liable upon its
performance bond paying Coca-Cola Three Million Pesos. Petitioner, demanded reimbursement from
Imperial, Arkin And Madlangbayan based on their indemnity bond but to no avail.
On August 7, 1988 petitioner filed with the Regional Trial Court, National Capital Region, Branch 2,
Manila a complaint for damages with application for the issuance of a writ of preliminary attachment
against private respondents.
On September 20, 1988, the Trial Court thru the Hon. Rosario A. de Leon, issued an order allowing the
issuance of the writ, stating that.:
. . . There could have been fraud committed by the defendants Arkin and
Madlangbayan in promising to give as security or collateral to their Indemnity
Agreement, which caused the plaintiff to release the security bond, when as it
turned out, the Transfer Certificate of Title of a parcel of land supposedly issued by
the Register of Deeds of Rizal turned out to be fake, as the true land title number
was issued over a different parcel of land issued in the name of a person other
than defendant Madlangbayan, while defendant Atilla Arkin delivered an official
receipt in the name of a third party but which vehicle was allegedly sold to him
free from lien and encumbrance, when it turned out that the car was heavily
mortgaged to a third party, . . . .
The conclusion of fraud is inevitable in view of the above circumstances, for any
(sic) rate fraud is a state of mind that maybe inferred from the circumstances
extant in the case (Republic vs. Gonzales, 13 SCRA 633).
In addition to the fact that these representations/promises of Arkin and
Madlangbayan were made prior to the release of the bond (the bond by then had
already been executed), it can still be said that this fraud existed when the
obligation was contracted in line with Sec. 1, par (d), Rule 57, which reads: An
attachment may issue in an action against a party who has been guilty of fraud in
contracting or incurring the obligation upon which the action is brought.
A debt is fraudulently contracted if at the time of contracting it, the debtor
entertained an intention not to pay, or an intention not to keep a collateral
agreement regarding the disposition of a property purchased on credit. (Francisco,
Rules of Court, Second [1985] Edition, p. 21) . . . (Rollo, pp. 38-39)
On May 10, 1989 respondent Arkin filed a motion to Quash/ Recall Writ of Attachment. On October 19,
1989, the trial court, this time presided by respondent judge Napoleon K. Flojo, denied the motion,
reasoning out as follows:
Defendant Atilla Arkin posits that no ground existed for the issuance of the
preliminary attachment because he was not guilty of fraud in incurring the
obligation under the indemnity agreement.
The Court granted the prayer for a writ of preliminary attachment after a finding of
fraud from the evidence adduced by the parties. This conclusion was supported by
substantial evidence. There is no cogent reason from the arguments posed by the
movant to warrant and/or recall of the writ.
12

Furthermore, the complaint invokes another ground for the grant of the writ and
that is, "in an action against a party who has removed be (sic) disposed of his
property, or is about to do so, with the intent to defraud his creditors," . .
., evidenced by three conveyances or disposals of properties by defendant Atilla
Arkin though made before the institution of the action, is a circumstance tending to
show fraudulent conveyance with intent to defraud his creditors. Especially so,
when the payment of herein claim which the action is brought is not secured by any
mortgage or pledge of real (sic) personal property and plaintiff had no other
sufficient security for the enforcement of the claim. (Rollo, p. 58; emphasis
supplied).
After more than a year, or on December 14, 1990, Arkin filed a Motion for Reconsideration of the
aforementioned order of denial.
On March 6, 1991, respondent judge reversed his earlier ruling and instead issued two orders, (1)
granting Arkin's Motion for Reconsideration and directing the lifting of the writ of preliminary
attachment earlier issued, and (2) ordering the deputy sheriff assigned to said court to immediately
discharge or lift said writ. The first order, among other things, states:
xxx xxx xxx
The Court, presided at the time by Judge Rosalio De Leon, found that the
defendant has been guilty of fraud in inveigling the plaintiff to issue the surety
bond by offering false collaterals. The ground relied upon by the Court to issue the
attachment was based on Section 1 (d) of Rule 57 of the Rules of Court , which
states:
"Sec. 1. Grounds upon which attachment may issue. A
plaintiff or any party may, at the commencement of the
action or at anytime 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:
xxx xxx xxx
(d) In action (sic) against a party who has been guilty of
fraud in contracting the obligation upon which the action is
brought, . . . ."
To constitute a ground for attachment, fraud should be committed prior to or
simultaneous with the birth of the obligation sued upon, which in this case is the
May 30, 1988 surety bond.
xxx xxx xxx
A close examination of the evidence on record shows that the delivery of the fake
collaterals were made to Eduardo Cunanan on June 1, 1988, or two (2) days after
the issuance by the plaintiff of the surety bond. Thus, the offering of the fake
Transfer Certificate of Title and encumbered Mercedes Benz car was not prior to
or simultaneous with the execution of the Surety Bond. Such being the case, the
offer of the collaterals were not the cause which induced the plaintiff to issue the
surety bond. It is therefore clear that the issuance of the surety bond on May 30,
1988 was not based on the alleged fraud of the defendant Arkin offering the fake
collaterals.
xxx xxx xxx
With regards (sic) to the allegations that the defendant Arkin has removed or
disposed of his property, with intent to defraud his creditors, suffice it to say that
(when) the law authorizes the issuance of a writ preliminary attachment (it) should
be construed in favor of the defendant and before issuing an Order to that effect,
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.
xxx xxx xxx
Furthermore, allegations that debtors were removing or disposing some of the
properties with intent to defraud creditors must be specific.
xxx xxx xxx
In the present case the plaintiff did not prove the intent of defendant Arkin to
defraud creditors. Aside From the fact that the alleged dispositions were made
long prior to the filing of the case, the alleged dispositions were made of conjugal
partnership property which were then the subjects of partition between Arkin and
his estranged wife. . . . (Rollo, pp. 42-43).
Aggrieved, petitioner filed a special civil action for certiorari with respondent Court of Appeals to set
aside the above orders of respondent judge.
Respondent court dismissed the petition on the ground that the filing of the said petition was premature
considering that there was yet a remedy available in the ordinary course of law, i.e., filing a motion for
reconsideration of the challenged orders. Hence, this petition with the following assignment of errors:
I. A MOTION FOR RECONSIDERATION IS NOT ALWAYS A CONDITION PRECEDENT
TO THE FILING OF A SPECIAL CIVIL ACTION FOR CERTIORARI, AS THERE IS NO
APPEAL OR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY
COURSE OF LAW AVAILABLE TO HEREIN PETITIONER;
II. RESPONDENT HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
DISSOLUTION OF THE WRIT OF PRELIMINARY ATTACHMENT ON THE BASIS OF
SECTION 13, RULE 57, OF THE RULES OF THE COURT SUPPORTED (SIC) BY ANY
EVIDENCE;
III. RESPONDENT COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW IN
CONCLUDING THAT HEREIN PETITIONER FAILED TO RAISE AS AN ISSUE THE
DELAYED FILING OF PRIVATE RESPONDENT'S MOTION FOR RECONSIDERATION
DATED DECEMBER 14, 1990, IN PETITIONER'S OPPOSITION THERETO.
13

IV. THE APPREHENSION OF THE HEREIN PETITIONER REGARDING THE PROPENSITY
OF PRIVATE RESPONDENT TO DISPOSE OF HIS PROPERTIES IN FRAUD OF HIS
CREDITORS TURNED OUT TO BE TRUE AND CORRECT. (Rollo, pp. 24-26, 30).
In brief, the questions posited by the instant petition may be consolidated into two issues, namely:
1) Whether or not the writ of preliminary attachment in question was properly or regularly issued and 2)
Whether or not petitioner's failure to file a motion for reconsideration of the questioned orders of the
court a quo bars the filing of a special civil action for certiorari before the respondent court.
In an action against a party who has been guilty of fraud in contracting the debt or incurring the
obligation upon which the action is brought, Section 1 (d) of Rule 57 authorizes the plaintiff or any
proper party to have the property of the adverse party attached as security for the satisfaction of any
judgment that may be recovered therein. Thus:
Rule 57, Sec. 1. Grounds upon which attachment may
issue.
(d): In an action against a party who has been guilty of a fraud of 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;
To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or
incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the
agreement and must have been the reason which induced the other party into giving consent which he
would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the
Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is
fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention
not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but
may be inferred from the circumstances attendant in each case (Republic v. Gonzales, 13 SCRA 633
[1965]).
Here, it has been established that all the collaterals given by the respondent Arkin as security for the
bond were either fraudulent or heavily encumbered. Records show that Transfer Certificate of Title No.
300011 supposedly issued by the Register of Deeds of Rizal covering a parcel of land with an area of
25,750 square meters located at Muntinlupa, Las Pias, M.M. and registered in the name of Carmen
Madlangbayan, used as one of the collaterals, turned out to be fake and spurious as the genuine TCT No.
300011 of the Office of the Register of Deeds of Rizal covers a parcel of land located in
Angono, Rizal with an area of 514 square meters registered in the name of persons other than
respondents Imperial, Arkin, and Madlangbayan. Likewise, the supposed lien-free motor vehicle offered
as collateral turned out to be heavily mortgaged and was even disposed of without informing petitioner.
Furthermore, it has also been proven that subsequent to the issuance of the May 30, 1988 surety bond,
respondent Arkin started disposing of his other properties. Prior to the filing of the complaint,
respondent not only had sold the motor vehicle given as collateral but that his two other condominium
units were also alienated in favor of a company of which respondent Arkin is the president. All these
circumstances unerringly point to the devious scheme of respondent Arkin to defraud petitioner.
It is therefore clear that fraud was present when private respondent, among others, entered into an
indemnity agreement with petitioner. The actuations of respondent Arkin indubitably lead to the
conclusion that he never entertained the idea of fulfilling his obligations under the agreement and was
bent on defrauding petitioner from the very beginning.
Under the circumstances, we perceive no impropriety or irregularity in the issuance of the writ of
attachment especially so where petitioner has fully complied with the requirements for the issuance
thereof.
On the contrary, what we see as having been attended by irregularity is the assailed order of respondent
judge lifting the writ of attachment based on grounds which are contradicted by the evidence on record.
It is a fact that respondent Arkin gave fake land titles as collaterals and even disposed of real properties
in his obvious attempt to defraud petitioner. And yet, respondent judge concluded that petitioner's
allegation that respondent Arkin's fraudulent alienation of his properties has no foundation in fact. This
is plain absurdity. As respondent judge himself noted in his earlier order denying respondent Arkin's
motion to quash writ of attachment, the latter's three (3) conveyances, "though made before the
institution of the action, is a circumstance tending to show fraudulent conveyance with intent to defraud
his creditors. Especially so, when the payment of herein claim upon which the action is brought is not
secured by any mortgage or pledge of real (or) personal property and plaintiff had no other sufficient
security for the enforcement of the claim" (Rollo, p. 58). Such being the case, respondent Arkin's claim
that the writ of attachment has been irregularly issued should not have merited serious consideration by
respondent judge.
Be that as it may, the instant case being "an action against a party who has been guilty of fraud in
contracting the obligation upon which the action is brought", respondent Arkin is not allowed to file a
motion to dissolve the attachment on the ground that the writ has been improperly or irregularly issued.
As we held in Mindanao Savings and Loan Assoc. vs. Court of Appeals (172 SCRA 480 [1989]):
. . ., when the preliminary attachment is issued upon a ground which is at the same
time the applicant's cause of action: e.g., . . . an action against a party who has
been guilty of fraud in contracting the debt or incurring the obligation upon which
the action is brought, the defendant is not allowed to file a motion to dissolve the
attachment under Section 13 of Rule 57 by offering to show the falsity of the
factual averments in the plaintiff's application and affidavits on which the writ was
based and consequently that the writ based therein had been improperly, or
irregularly, issued the reason being that the hearing on such motion for
dissolution of the writ would be tantamount to a trial on the merits. In other
words, the merits of the action would be ventilated at a mere hearing of a motion,
instead of the regular trial. Therefore, when the writ of attachment is of this
nature, the only way it can be dissolved is by a counterbond.
Petitioner next contends that motion for reconsideration need not at all times be resorted to before a
special civil action for certiorari may be instituted before respondent court.
Ordinarily, certiorari will not lie unless an inferior court, through a motion for reconsideration, had been
given an opportunity to correct the imputed errors. However, this rule admits of exceptions such as 1)
when the issue raised is one purely, of law; 2) where public interest is involved; 3) in cases of urgency
(Quirino vs. Grospe, 169 SCRA 702 [1989]); or 4) where special circumstances warrant immediate or
more direct action (People vs. Dacudao, 170 SCRA 489 [1989]).
In the case at bar, petitioner's failure to file a motion for reconsideration in the trial court before
commencingcertiorari proceedings in the Court of Appeals is not fatal considering the existence of
14

special circumstances that warrant immediate and more direct action (Saldaa vs. CA, 190 SCRA 396
[1990]).
The indecent haste with which respondent Arkin had been disposing of his properties demonstrates the
imperative need for a more adequate relief requiring an immediate and more direct action. There was an
urgency which caused the present case to fall under one of the exceptions thereby allowing petitioner to
file a petition forcertiorari without the need of first filing a motion for reconsideration.
Filing a motion for reconsideration would have served no useful purpose nor can it be considered a plain,
speedy and adequate remedy since the order directing the sheriff to discharge or lift the writ of
attachment was issued on the same day the order granting the quashal was made. It would not have
automatically forestalled Arkin from further disposing of his properties. It is rather disturbing how
respondent judge, after ruling in his order of October 19, 1989, denying respondent's motion to quash,
that the trial court's finding of fraud in incurring the obligation under the indemnity agreement was
supported by substantial evidence, would, in his order of March 6, 1991 granting the motion for
reconsideration, based on the same substantial evidence supporting a finding of fraud, later reverse
himself and declare that "the plaintiff (petitioner herein) did not prove the intent of defendant Arkin to
defraud creditors."
Through the order for the "immediate" lifting of the writ, respondent Judge, in one swift stroke,
completely subverted the valid order of attachment issued after a finding of fraud, which finding he
himself has declared as supported by substantial evidence. We hold that respondent judge in issuing the
contested orders has acted capriciously, whimsically and arbitrarily and with grave abuse of discretion
amounting to lack or in excess of jurisdiction correctible by the special writ of certiorari.
WHEREFORE, the petition is GRANTED. The assailed order of respondent judge dated March 6, 1991 is
SET ASIDE and the order dated October 19, 1989 is hereby REINSTATED. Costs against private
respondent.
SO ORDERED.










Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-23237 November 14, 1925
WALTER E. OLSEN & CO., plaintiff-appellee,
vs.
WALTER E. OLSEN, defendant-appellant.
Ross, Lawrence and Selph and Antonio T. Carrascoso, Jr., for appellant.
Gibbs and McDonough for appellee.

VILLA-REAL, J.:
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 cross-complaint 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,
15

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
vice-president, 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 defendant-appellant, 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.


















16

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 123358 February 1, 2000
FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU, petitioners,
vs.
THE COURT OF APPEALS, THE HON. JOSE C. DE LA RAMA, Presiding Judge, Branch 139, Regional Trial
Court, NCJR, Makati City, Metro-Manila, and LEY CONSTRUCTION AND DEVELOPMENT
CORPORATION,respondents.
YNARES-SANTIAGO, J.:
On June 29, 1993, private respondent Ley Construction and Development Corporation filed a Complaint
for collection of a sum of money with application for preliminary attachment against petitioner FCY
Construction Group, Inc. and Francis C. Yu with the Makati Regional Trial Court which was docketed as
Civil Case No. 93-2112. Private respondent alleged that it had a joint venture agreement with petitioner
FCY Construction Group, Inc. (wherein petitioner Francis C. Yu served as President) over the Tandang
Sora Commonwealth Flyover government project, for which it had provided funds and construction
materials. The Complaint was filed in order to compel petitioners to pay its half share in the collections
received in the project as well as those yet to be received therein. In support of its application for a writ
of attachment, private respondent alleged that petitioners were guilty of fraud in incurring the obligation
and had fraudulently misapplied or converted the money paid them, to which it had an equal share.
On July 6, 1993, following an ex-parte hearing, the lower court issued an Order for the issuance of a writ
of preliminary attachment, conditioned upon the filing of a P7,000,000.00 attachment bond.
Petitioners moved for the lifting of the writ of preliminary attachment on the following grounds: (1) the
attachment was heard, issued and implemented even before service of summons upon them; (2) failure
of the attaching officer to serve a copy of the affidavit of merit upon them; and (3) that there was no
fraud in incurring the obligation. As an alternative prayer in their Motion, petitioners prayed that the
attachment be limited to their receivables with the Department of Public Works and Highways. This
alternative prayer was later withdrawn by petitioners in a Manifestation and Motion.
On May 25, 1994, the lower court issued another Order denying petitioners' Motion to Lift
Attachment.
1
It, however, reduced and confined the attachment to receivables due petitioners from the
Tandang Sora Commonwealth Flyover project.
Subsequently, petitioners filed a Motion for Reconsideration
2
as well as an Omnibus Motion for Leave to
file Amended Answer and/or to delete Francis C. Yu as party-defendant.
3

With the denial of both Motions by the lower court on September 4, 1994,
4
petitioners filed a Petition
for Certioraribefore the Court of Appeals on September 16, 1994.
5
The Petition was, however, denied on
July 31, 1995;
6
so was petitioners' Motion for Reconsideration.
7

Hence, the instant Petition.
It is evident that the questioned writ of attachment was anchored upon Section 1(d), Rule 57 of the
Revised Rules of Court, to wit
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:
x x x x x x x x x
(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;
x x x x x x x x x
Petitioners, however, insist that the writ of preliminary attachment was irregularly issued inasmuch as
there was no evidence of fraud in incurring the obligations sued upon.
In support of their stand, petitioners alleged that private respondent's principal witness admitted that it
was the Department of Public Works and Highways (DPWH) that induced it to deliver materials and cash
for the Tandang Sora Commonwealth Flyover project, to wit
COURT:Now . . . as of January 5, 1993 you delivered to him (referring to defendant FCY
corporation) in cash and in kind amounting to Fifteen Million Pesos (P15,000,000,00), now
why did you keep on delivering cash and materials to him if you were not paid a single
centavo?
A &nsbp Because of every need for the project, and the Public Works official assured me that I will be
given a new project after the Tandang Sora will be finished.
Q &nsbp Who is this public official that promised you?
A &nsbp Director Pendosa, Teodoro Encarnacion and Secretary de Jesus your Honor. (TSN, 6 July 1993,
pp. 47-48).
x x x x x x x x x
Q &nsbp What about these officials of the Department of Public Highways, what would they do to
project their sub alleged project?
A &nsbp Secretary de Jesus is no longer connected there, your Honor.
Q &nsbp At the time?
A &nsbp At that time, he resigned.
17

Q &nsbp Before he resigned.
A &nsbp He gave me assurance that they will soon give assurance, they will soon give me another
project . . . (TSN, 6 July 1993, p. 55)
8

A cursory reading of the above-cited testimony, however, readily shows that said reassurance from the
DPWH officials came, not at the inception of the obligation or contract, but during its performance. On
the other hand, the fraud of which petitioners are accused of and which was the basis for the issuance of
the questioned attachment, is fraud alleged to have been committed upon contracting the obligation
sued upon. Thus, petitioners' argument that "the inducement was the mouth-watering temptation of a
DPWH promise of a "new project after the Tandang Sora Flyover project will be finished" is clearly off-
tangent as such inducement, if any, came not at the inception of the obligation.
Similarly, petitioners' arguments that it was private respondent who admittedly prepared the letter
embodying the alleged joint venture agreement
9
and had petitioner Francis Yu sign it must fail. The
written agreement referred to was signed by petitioner Francis Yu only on January 5, 1993, long after the
project had commenced. Thus, it was only a written confirmation of an arrangement that had already
been existing and operational. Similarly then, such written confirmation did not occur at the inception of
the obligation sued upon.
In Liberty Insurance Corporation vs. Court Appeals,
10
this Court, discussing Section 1(d), Rule 57,
cautioned as follows
To sustain an attachment on this ground, it must be shown that the debtor in contracting the
debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the
execution of the agreement and must have been the reason which induced the other party
into giving consent which he would not have otherwise given. To constitute a ground for
attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon
contracting the obligation sued upon. A debt is fraudulently contracted if at the time of
contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case.
Fraud is a state of mind and need not be proved by direct evidence but may be inferred from
the circumstances attendant in each case. (Republic v. Gonzales, 13 SCRA 633).
From the foregoing, therefore, the alleged inducement by the DPWH officials upon private respondent as
well as the circumstances surrounding the execution of the joint venture agreement, both appear
immaterial as they were not committed upon contracting the obligation sued upon but occurred long
after the obligation has been established.
The fact that petitioners have paid a substantial amount of money to private respondent cannot save the
day for them either. As per their own accounting, such payments were for accounts payable for labor
supplied, construction materials and cash advances.
11
It is not denied that no payment of profits has
been given to private respondent, which is precisely what it issuing for.
Finally, considering that the writ of preliminary attachment has been issued on account of allegations of
fraud in contracting the obligation upon which the action is brought petitioners' efforts to have the writ
of preliminary attachment dissolved on the ground that it was improperly or irregularly issued is in vain.
Indeed, in Liberty Insurance Corporation, supra, which cited Mindanao Savings and Loan Assoc. vs. Court
of Appeals (172 SCRA 480), we ruled
. . ., when the preliminary attachment is issued upon a ground which is at the same time the
applicant's cause of action: e.g., . . . an action against a party who has been guilty of fraud in
contracting the debtor incurring the obligation upon which the action is brought, the
defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule
57 by offering to show the falsity of the factual averments in the plaintiffs application and
affidavits on which the writ was based and consequently that the writ based therein had been
improperly or irregularly issued the reason being that the hearing on such motion for
dissolution of the writ would be tantamount to a trial on the merits. In other words, the
merits of the action would be ventilated at a mere hearing of a motion; instead of the regular
trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved
is by a counterbond.
We now come to the issue of whether or not petitioner Francis Yu should remain as party-defendant.
Petitioners argue that since the transactions were corporation to corporation only, petitioner Francis Yu
should be dropped as party-defendant considering the hornbook law that corporate personality is a
shield against personal liability of its officers. We agree that petitioner Francis Yu cannot be made liable
in his individual capacity if he indeed entered into and signed the contract in his official capacity as
President, in the absence of stipulation to that effect, due to the personality of the corporation being
separate and distinct from the persons composing it.
12
However, while we agree that petitioner Francis
Yu cannot be held solidarily liable with petitioner corporation merely because he is the President thereof
and was involved in the transactions with private corporation, we also note that there exists instances
when corporate officers may be held personally liable for corporate acts. Such exceptions were outlined
in Tramat Mercantile, Inc. vs. Court of Appeals,
13
as follows
Personal liability of a corporate director, trustee or officer along (although not necessarily)
with the corporation may so validly attach, as a rule, only when
1.He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross
negligence in directing its affairs, or (c) for conflict of interest, resulting in damages to the
corporation, its stockholders or other persons;
2.He consents to the issuance of watered down stocks or who, having knowledge thereof,
does not forthwith file with the corporate secretary his written objection thereto;
3.He agrees to hold himself personally and solidarily liable with the corporation; or
4.He is made, by a specific provision of law, to personally answer for his corporate action.
The attendance of these circumstances, however, cannot be determined at this stage and should
properly be threshed out during the trial on the merits. Stated differently, whether or not petitioner
Francis Yu should be held personally and solidarily liable with petitioner corporation is a matter that
should be left to the trial court's discretion, dependent as it is on evidence during trial.
WHEREFORE, in view of the foregoing, the instant Petition is hereby DISMISSED. No pronouncement as
to costs.
SO ORDERED.

18

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 171741 November 27, 2009
METRO, INC. and SPOUSES FREDERICK JUAN and LIZA JUAN, Petitioners,
vs.
LARA'S GIFTS AND DECORS, INC., LUIS VILLAFUERTE, JR. and LARA MARIA R.
VILLAFUERTE,Respondents.
D E C I S I O N
CARPIO, J.:
The Case
This is a petition for review
1
of the 29 September 2004 Decision
2
and 2 March 2006 Resolution
3
of the
Court of Appeals in CA-G.R. SP No. 79475. In its 29 September 2004 Decision, the Court of Appeals
granted the petition for certiorari of respondents Laras Gifts and Decors, Inc., Luis Villafuerte, Jr., and
Lara Maria R. Villafuerte (respondents). In its 2 March 2006 Resolution, the Court of Appeals denied the
motion for reconsideration of petitioners Metro, Inc., Frederick Juan and Liza Juan (petitioners).
The Facts
Laras Gifts and Decors Inc. (LGD) and Metro, Inc. are corporations engaged in the business of
manufacturing, producing, selling and exporting handicrafts. Luis Villafuerte, Jr. and Lara Maria R.
Villafuerte are the president and vice-president of LGD respectively. Frederick Juan and Liza Juan are the
principal officers of Metro, Inc.
Sometime in 2001, petitioners and respondents agreed that respondents would endorse to petitioners
purchase orders received by respondents from their buyers in the United States of America in exchange
for a 15% commission, to be shared equally by respondents and James R. Paddon (JRP), LGDs agent. The
terms of the agreement were later embodied in an e-mail labeled as the "2001 Agreement."
4

In May 2003, respondents filed with the Regional Trial Court, Branch 197, Las Pias City (trial court) a
complaint against petitioners for sum of money and damages with a prayer for the issuance of a writ of
preliminary attachment. Subsequently, respondents filed an amended complaint
5
and alleged that, as of
July 2002, petitioners defrauded them in the amount of $521,841.62. Respondents also prayed
for P1,000,000 as moral damages,P1,000,000 as exemplary damages and 10% of the judgment award as
attorneys fees. Respondents also prayed for the issuance of a writ of preliminary attachment.
In its 23 June 2003 Order,
6
the trial court granted respondents prayer and issued the writ of attachment
against the properties and assets of petitioners. The 23 June 2003 Order provides:
WHEREFORE, let a Writ of Preliminary Attachment issue against the properties and assets of Defendant
METRO, INC. and against the properties and assets of Defendant SPOUSES FREDERICK AND LIZA JUAN
not exempt from execution, as may be sufficient to satisfy the applicants demand of US$521,841.62 US
Dollars or its equivalent in Pesos upon actual attachment, which is about P27 Million, unless such
Defendants make a deposit or give a bond in an amount equal to P27 Million to satisfy the applicants
demand exclusive of costs, upon posting by the Plaintiffs of a Bond for Preliminary Attachment in the
amount of twenty five million pesos (P25,000,000.00), subject to the approval of this Court.
SO ORDERED.
7

On 26 June 2003, petitioners filed a motion to discharge the writ of attachment. Petitioners argued that
the writ of attachment should be discharged on the following grounds: (1) that the 2001 agreement was
not a valid contract because it did not show that there was a meeting of the minds between the parties;
(2) assuming that the 2001 agreement was a valid contract, the same was inadmissible because
respondents failed to authenticate it in accordance with the Rules on Electronic Evidence; (3) that
respondents failed to substantiate their allegations of fraud with specific acts or deeds showing how
petitioners defrauded them; and (4) that respondents failed to establish that the unpaid commissions
were already due and demandable.
After considering the arguments of the parties, the trial court granted petitioners motion and lifted the
writ of attachment. The 12 August 2003 Order
8
of the trial court provides:
Premises considered, after having taken a second hard look at the Order dated June 23, 2003 granting
plaintiffs application for the issuance of a writ of preliminary attachment, the Court holds that the
issuance of a writ of preliminary attachment in this case is not justified.
WHEREFORE, the writ of preliminary attachment issued in the instant case is hereby ordered
immediately discharged and/or lifted.
SO ORDERED.
9

Respondents filed a motion for reconsideration. In its 10 September 2003 Order, the trial court denied
the motion.
Respondents filed a petition for certiorari before the Court of Appeals. Respondents alleged that the trial
court gravely abused its discretion when it ordered the discharge of the writ of attachment without
requiring petitioners to post a counter-bond.
In its 29 September 2004 Decision, the Court of Appeals granted respondents petition. The 29
September 2004 Decision provides:
WHEREFORE, finding merit in the petition, We GRANT the same. The assailed Orders are hereby
ANNULLED and SET ASIDE. However, the issued Writ of Preliminary Attachment may be ordered
discharged upon the filing by the private respondents of the proper counter-bond pursuant to Section
12, Rule 57 of the Rules of Civil Procedure.
SO ORDERED.
10

19

Petitioners filed a motion for reconsideration. In its 2 March 2006 Resolution, the Court of Appeals
denied the motion.
Hence, this petition.
The 12 August 2003 Order of the Trial Court
According to the trial court, respondents failed to sufficiently show that petitioners were guilty of fraud
either in incurring the obligation upon which the action was brought, or in the performance thereof. The
trial court found no proof that petitioners were motivated by malice in entering into the 2001
agreement. The trial court also declared that petitioners failure to fully comply with their obligation,
absent other facts or circumstances to indicate evil intent, does not automatically amount to fraud.
Consequently, the trial court ordered the discharge of the writ of attachment for lack of evidence of
fraud.
The 29 September 2004 Decision of the Court of Appeals
According to the Court Appeals, the trial court gravely abused its discretion when it ordered the
discharge of the writ of attachment without requiring petitioners to post a counter-bond. The Court of
Appeals said that when the writ of attachment is issued upon a ground which is at the same time also
the applicants cause of action, courts are precluded from hearing the motion for dissolution of the writ
when such hearing would necessarily force a trial on the merits of a case on a mere motion.
11
The Court
of Appeals pointed out that, in this case, fraud was not only alleged as the ground for the issuance of the
writ of attachment, but was actually the core of respondents complaint. The Court of Appeals declared
that the only way that the writ of attachment can be discharged is by posting a counter-bond in
accordance with Section 12,
12
Rule 57 of the Rules of Court.
The Issue
Petitioners raise the question of whether the writ of attachment issued by the trial court was improperly
issued such that it may be discharged without the filing of a counter-bond.
The Ruling of the Court
The petition has no merit.
Petitioners contend that the writ of attachment was improperly issued because respondents amended
complaint failed to allege specific acts or circumstances constitutive of fraud. Petitioners insist that the
improperly issued writ of attachment may be discharged without the necessity of filing a counter-bond.
Petitioners also argue that respondents failed to show that the writ of attachment was issued upon a
ground which is at the same time also respondents cause of action. Petitioners maintain that
respondents amended complaint was not an action based on fraud but was a simple case for collection
of sum of money plus damages.
On the other hand, respondents argue that the Court of Appeals did not err in ruling that the writ of
attachment can only be discharged by filing a counter-bond. According to respondents, petitioners
cannot avail of Section 13,
13
Rule 57 of the Rules of Court to have the attachment set aside because the
ground for the issuance of the writ of attachment is also the basis of respondents amended complaint.
Respondents assert that the amended complaint is a complaint for damages for the breach of obligation
and acts of fraud committed by petitioners.1 a vv p h i 1
In this case, the basis of respondents application for the issuance of a writ of preliminary attachment is
Section 1(d), Rule 57 of the Rules of Court which provides:
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 maybe recovered in the following
cases: x x x
(d) In an action against a party who has been guilty of fraud in contracting the debt or incurring the
obligation upon which the action is brought, or in the performance thereof; x x x
In Liberty Insurance Corporation v. Court of Appeals,
14
we explained:
To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or
incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the
agreement and must have been the reason which induced the other party into giving consent which he
would not have otherwise given. To constitute a ground for attachment in Section 1(d), Rule 57 of the
Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is
fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention
not to pay, as it is in this case.
15

The applicant for a writ of preliminary attachment must sufficiently show the factual circumstances of
the alleged fraud because fraudulent intent cannot be inferred from the debtors mere non-payment of
the debt or failure to comply with his obligation.
16

In their amended complaint, respondents alleged the following in support of their prayer for a writ of
preliminary attachment:
5. Sometime in early 2001, defendant Frederick Juan approached plaintiff spouses and asked them to
help defendants export business. Defendants enticed plaintiffs to enter into a business deal. He
proposed to plaintiff spouses the following:
a. That plaintiffs transfer and endorse to defendant Metro some of the Purchase Orders
(POs) they will receive from their US buyers;
b. That defendants will sell exclusively and "only thru" plaintiffs for their US buyer;
x x x
6. After several discussions on the matter and further inducement on the part of defendant spouses,
plaintiff spouses agreed. Thus, on April 21, 2001, defendant spouses confirmed and finalized the
agreement in a letter-document entitled "2001 Agreement" they emailed to plaintiff spouses, a copy of
which is hereto attached asAnnex "A".
x x x
20

20. Defendants are guilty of fraud committed both at the inception of the agreement and in the
performance of the obligation. Through machinations and schemes, defendants successfully enticed
plaintiffs to enter into the 2001 Agreement. In order to secure plaintiffs full trust in them and lure
plaintiffs to endorse more POs and increase the volume of the orders, defendants during the early part,
remitted to plaintiffs shares under the Agreement.
21. However, soon thereafter, just when the orders increased and the amount involved likewise
increased, defendants suddenly, without any justifiable reasons and in pure bad faith and fraud,
abandoned their contractual obligations to remit to plaintiffs their shares. And worse, defendants
transacted directly with plaintiffs foreign buyer to the latters exclusion and damage. Clearly, defendants
planned everything from the beginning, employed ploy and machinations to defraud plaintiffs, and
consequently take from them a valuable client.
22. Defendants are likewise guilty of fraud by violating the trust and confidence reposed upon them by
plaintiffs. Defendants received the proceeds of plaintiffs LCs with the clear obligation of remitting 15%
thereof to the plaintiffs. Their refusal and failure to remit the said amount despite demand constitutes a
breach of trust amounting to malice and fraud.
17
(Emphasis and underscoring in the original) (Boldfacing
and italicization supplied)
We rule that respondents allegation that petitioners undertook to sell exclusively and only through
JRP/LGD for Target Stores Corporation but that petitioners transacted directly with respondents foreign
buyer is sufficient allegation of fraud to support their application for a writ of preliminary attachment.
Since the writ of preliminary attachment was properly issued, the only way it can be dissolved is by filing
a counter-bond in accordance with Section 12, Rule 57 of the Rules of Court.
Moreover, the reliance of the Court of Appeals in the cases of Chuidian v. Sandiganbayan,
18
FCY
Construction Group, Inc. v. Court of Appeals,
19
and Liberty Insurance Corporation v. Court of Appeals
20
is
proper. The rule that "when the writ of attachment is issued upon a ground which is at the same time
the applicants cause of action, the only other way the writ can be lifted or dissolved is by a counter-
bond"
21
is applicable in this case. It is clear that in respondents amended complaint of fraud is not only
alleged as a ground for the issuance of the writ of preliminary attachment, but it is also the core of
respondents complaint. The fear of the Court of Appeals that petitioners could force a trial on the merits
of the case on the strength of a mere motion to dissolve the attachment has a basis.
WHEREFORE, we DENY the petition. We AFFIRM the 29 September 2004 Decision and 2 March 2006
Resolution of the Court of Appeals in CA-G.R. SP No. 79475.
SO ORDERED.






Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 164800 July 22, 2009
REPUBLIC OF THE PHILIPPINES, Petitioner,
vs.
ESTATE OF ALFONSO LIM, SR., ALFONSO LIM, JR., TEODORO Q. PENA, FERDINAND E. MARCOS (now
deceased and Represented by his Estate/Heirs), IMELDA R. MARCOS, TAGGAT INDUSTRIES, INC.,
PAMPLONA REDWOOD VENEER, INC., SOUTHERN PLYWOOD, WESTERN CAGAYAN LUMBER, ACME
PLYWOOD, VETERAN WOODWORK, INC., SIERRA MADRE WOOD INDUSTRIES, INC., and TROPICAL
PHILIPPINES WOOD INDUSTRIES, INC., Respondent.
D E C I S I O N
VELASCO, JR., J.:
In this Petition for Certiorari under Rule 65, the Republic of the Philippines assails and seeks to nullify the
Resolution
1
dated March 28, 2003 of the Sandiganbayan, as effectively reiterated in another resolution
of June 18, 2004, which denied petitioners motion for the issuance of a writ of preliminary attachment
in Civil Case No. 0030, entitled Republic v. Alfonso Lim, et al.,
2
a suit to recover ill-gotten or unexplained
wealth.
The Facts
On October 2, 1991, in Civil Case No. 0030, the Republic, represented by the Presidential Commission on
Good Government (PCGG), filed before the Sandiganbayan, Second Division, an Amended Complaint for
reconveyance, reversion, accounting, restitution, and damages. In it, the Republic averred that Alfonso
Lim, Sr. (now deceased) and Alfonso Lim, Jr., acting by themselves and/or in unlawful collusion with
Ferdinand E. Marcos and Imelda R. Marcos, and taking undue advantage of their relationship, influence,
and connection with the latter, embarked upon devices and stratagems to unjustly enrich themselves at
the expense of the Republic and the Filipino people. Among other acts, the Lims were alleged to have:
(a) actively solicited and obtained, upon the personal behest of [the Marcoses], with the
active collaboration of Teodoro Q. Pea, who was then Minister of Natural Resources,
additional timber concession in favor of Taggat Industries, Inc. (TAGGAT) and Pamplona
Redwood Veneer, Inc. (PAMPLONA), corporations beneficially held and controlled by Alfonso
Lim and Alfonso Lim, Jr., which, in addition to other areas already awarded to TAGGAT and
PAMPLONA, resulted in their concession holdings in excess of the allowable limits prescribed
under Section 11, Article XIV of the 1973 Constitution;
(b) actively solicited and obtained, upon the personal behest of [the Marcoses], a
management contract in favor of TAGGAT to operate and manage the logging concessions of
Veterans Woodwork, Inc. (VETERANS), Sierra Madre Wood Industries, Inc. (SIERRA MADRE),
and Tropical Philippines Wood Industries, Inc. (TROPICAL) over and above the objections of
VETERANS;
21

(c) obtained a permit to cut down a certain number of Narra and Amaciga trees, and, on the
very same day, was likewise given an authorization by Ferdinand E. Marcos to export the
same, in violation of existing ban against cutting and export of the aforesaid trees;
(d) obtained, in favor of PAMPLONA, a syndicated loan in the amount of millions of US dollars
from a consortium of international banks, secured by the guarantee of the National
Investment and Development Corporation (NIDC), a subsidiary of the Philippine National
Bank; and in view of the default by PAMPLONA in the payment of its principal and/or interest
amortizations, the loan was converted, under the debt rescheduling arrangement between
Republic and its foreign creditor banks, into a public sector obligation of Republic, to the
grave and irreparable damage of the Republic and the Filipino people.
The Republic also alleged that the foregoing acts, singly or collectively, constituted grave and gross abuse
of official position and authority, flagrant breach of public trust and fiduciary obligations, brazen abuse
of right and power, unjust enrichment, and violation of the Constitution and laws of the Republic to the
grave and irreparable damage to it and its citizens.
As its main prayer, the Republic asked for the reconveyance of all funds and property impressed with
constructive trust in favor of the Republic and the Filipino people, "as well as funds and other property
acquired with *respondents+ abuse of right and power and through unjust enrichment, including but not
limited to the properties listed in Annex "A" of the Complaint together with the accruing income or
increment from date of acquisition until final judgment."
The properties listed in the said Annex "A"
3
consistbesides the Lims assets sequestered in accordance
wth Executive Order Nos. 1 and 2, Series of 1986of the assets and other properties of Lim, Sr., as
follows:
1. a parcel of land with TCT No. 2981 (Lot A), located at Barrio Birinayan, Talisay, Batangas;
2. a parcel of raw land with TCT No. 11750 (Lot 8-C-53) located at Muzon, San Isidro, Angono,
Rizal;
3. a parcel of raw land with TCT No. 11749 (Lot 8-C-51) located at Muzon, San Isidro, Angono.
Rizal;
4. a parcel of land with TCT No. 11728 (Lot 8-C-9) located at Muzon, San Isidro, Angono, Rizal;
5. a parcel of land with TCT No. 11732 (Lot 8-C-17) located at Muzon, San Isidro, Angono,
Rizal;
6. a parcel of agricultural land with TCT No. 11728 (Lot 8-C-9) located at Muzon, San Isidro,
Angono, Rizal;
7. a parcel of agricultural land with TCT No. 11727 (Lot 8-C-7) located at Muzon, San Isidro,
Angono, Rizal;
8. a parcel of residential land with TCT No. 315 located at Maharlika, Tagaytay City;
9. a parcel of agricultural/residential land with TCT No. 157570 located at Berinayan, Laurel,
Batangas;
10. a parcel of land and building in the name of SIERRA MADRE as reported by Task Force
SEAFRONT, Nov. 20, 1986;
11. a parcel of land and building in the name of PAMPLONA as reported by Task Force
SEAFRONT, November 20, 1986;
12. Contigous [13] parcels of land located at Claveria, Cagayan in the name of TAGGAT
Industries, Inc. as reported by Task Force SEAFRONT, November 7, 1987:
x x x x
13. a parcel of agricultural land in the name of TAGGAT with OCT No. O-1108 (S) Lot No. 1195;
14. a parcel of commercial land in the name of TAGGAT with TCT No. 78732 located at
Romualdez Street, Paco, Manila;
15. buildings and improvements in the name of TAGGAT erected on OCT No. 0-1104, 0-11017,
0-1109;
16. buildings in the name of TAGGAT erected on TCT No. 78732; Paco, Manila.
[OTHER PROPERTIES]
A. Shares of Stocks in:
1. Taggat Industries, Inc. (TAGGAT) 1350, Romualdez Street, Paco, Manila
2. Pamplona Redwood Veneer, Inc.
(PAMPLONA)
1350, Romualdez Street, Paco, Manila
3. Sierra Madre Wood Industries, Inc.
(SIERRA MADRE)
79 Doa Hemady corner 13th St., New Manila, Quezon City
4. Veterans Woodworks, Inc. (VETERANS) 79 Doa Hemady corner 13th St., New Manila, Quezon City
5. Southern Plywood Corporation (SPC)
5th Floor Jardine Davies Bldg., 222 Sen. J. Puyat Avenue,
Makati, Metro Manila
6. Western Cagayan Lumber (WCL)
Jardine Davies Building, 222 Sen. J. Puyat Avenue, Makati,
Metro Manila
B. Property, Plant and Equipment
x x x x
22

C. Aircraft [2 units]
x x x x
D. Current Assets [as reported]
x x x x
E. Investments and Other Assets
1. Due from affiliated companies, TAGGAT, as reported
2. Investment in Stocks, TAGGAT, as reported
3. Deferred Charges and Other Assets, TAGGAT, as reported
F. Bank Accounts
1. PAMPLONA Accounts
a. The Consolidated Bank and Trust Co.
b. Equitable Banking Corporation
2. TAGGAT Acccounts
a. The Consolidated Bank and Trust Co,
b. Philippine National Bank
c. Equitable Banking Corporation
d. Philippine Banking Corporation
e. Allied Banking Corporation
G. Other
1. Frozen Bank Accounts and Other Assets of Alfonso Lim, Sr., Alfonso Lim, Jr. and Lawrence
Lim
Meanwhile, Lim, Sr. passed away. On June 22, 1998, his estate filed a motion to lift the
sequestration
4
over certain real properties
5
contending that the PCGG impleaded him owing to his
alleged association with former Pres. Marcos. The estate would add, however, that Lim, Sr. secured title
over almost all of his real properties thus sequestered way back in 1948, long before the Marcoses came
to power.
To the motion to lift, the Republic interposed an opposition, alleging that the sequestered lots and titles
stand as security for the satisfaction of any judgment the Republic may obtain against the estate of Lim,
Sr., his family, or his group of companies.
By Resolution
6
dated March 17, 2001, the Sandiganbayan lifted the sequestration order in question on
the strength of the following pertinent premises, to wit:
The sequestration of some of the real properties of movant-defendant [estate of Lim, Sr.] is a remedial
measure resorted to in order to preserve these properties along with others alleged to have taken
illegally x x x, and "in order to prevent the same from disappearance, destruction, loss or dissipation and
/or to foil acts that may render moot and academic the efforts to recover the aforesaid alleged "ill-
gotten wealth". However, the pertinent provisions of Executive Order Nos. 1, 2 and 14 are explicit in
saying that the properties that are supposed to be "sequestered" are those x x x amassed during the
regime of the deposed President Ferdinand E. Marcos and not before or later thereto. x x x
In time, the Republic sought but was later denied reconsideration of the sequestration-lifting resolution
of the Sandiganbayan.
7

Meanwhile, after presenting its evidence in the main case, the Republic filed its Formal Offer of Evidence
dated October 8, 2001.
8
On December 5, 2001, the Sandiganbayan issued a terse order admitting all the
documentary exhibits of the Republic consisting of Exhibits "A" to "G," inclusive of their submarkings.
9

The following incidents/events then transpired:
(1) Sometime in January 2002, the estate of Lim, Sr., Ruthie Lim, and two others, as
defendants a quo, filed a Demurrer to Evidence
10
dated January 14, 2002, on the ground of
either irrelevancy or immateriality of the Republics evidence. As argued, the same evidence
did not prove or disprove that the demurring defendants, on their own or in concert with the
Marcoses, amassed ill-gotten wealth. Lim, Jr. later filed a Manifestation
11
adopting the
demurrer to evidence of the estate of Lim, Sr., et al.
(2) On July 4, 2002, the Sandiganbayan denied the Republics motion for reconsideration of
the graft courts resolution lifting the sequestration order.
12

(3) In an obvious bid to counter the effects of the lifting of the sequestration, the Republic, on
September 9, 2002, filed a Motion for the Issuance of a Writ of Preliminary
Attachment
13
against respondents in the amount of its claim. The Republic alleged that
respondent Lims "were guilty of fraud in incurring various legal obligations which the present
action has been brought," by "taking undue advantage of their relationship, influence and
connection with the [Marcoses]" to unjustly enriched themselves to the prejudice of the
Republic.
Except for one, all the other respondents belonging to the Lim group filed their respective
comment or opposition to the Republics motion for a writ of attachment.
23

(4) On March 28, 2003, the Sandiganbayan, stating that bare allegations of the commission of
fraud by respondents in incurring the aforesaid obligations are not sufficient for the granting
of the writ of preliminary attachment, denied, via a Resolution,
14
the corresponding motion.
In due time, the Republic interposed a motion seeking reconsideration of the
Sandiganbayans March 28, 2003 denial action.
15

(5) By Resolution dated July 17, 2003, the Sandiganbayan denied respondents demurrer to
evidence.
16

Forthwith, the estate of Lim, Sr., Taggat Industries, Inc. (TAGGAT), and Pamplona Redwood
Veneer, Inc. (PAMPLONA), followed later by Lim, Jr., respectfully moved for reconsideration
of the July 17, 2003 Resolution.
(6) On June 18, 2004, the Sandiganbayan resolved to affirm the denial of the respondents
demurrer to evidence. It also denied in its March 28, 2003 resolution the Republics motion
for the issuance of a writ of preliminary attachment.
17

Hence, this recourse is before us.
The Issues
The two interrelated issues petitioner Republic tenders boils down to: whether the Sandiganbayan, in
the light of the denial of respondents demurrer to evidence, acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in not considering that the evidence already on record
support the issuance of a writ or preliminary attachment.
The Republic contends that the pieces of evidence offered before and admitted by the Sandiganbayan
provide sufficient basis for the issuance of a writ of preliminary attachment. Thus, the graft court, as the
Republic argues, committed grave abuse of discretion amounting to excess of jurisdiction in denying the
writ of preliminary injunction by not considering the evidence already on record and in ruling contrary to
its findings and conclusions when it denied respondents demurrer to evidence.
Respondents, on the other hand, reiterate their position on the absence of evidence of fraud, as
required under Section 1(d), Rule 57 of the Rules of Court, which would justify the issuance of the
desired writ. In this regard, they reproduced what the Sandiganbayan said in its March 28, 2003
resolution on the matter of fraud, thus: "These are general averments devoid of the particulars of time,
persons, etc., in support of the serious allegation that [respondents] are guilty of fraud in incurring these
alleged legal obligation. Bare allegations that [respondents] have been guilty of fraud in incurring the
aforesaid obligations are not sufficient for the granting of the writ of attachment."
18

The Courts Ruling
An assiduous review of the antecedent facts and factual findings and conclusions of the Sandiganbayan
relative to the denial of demurrer to evidence and the writ of preliminary injunction compels this Court
to grant the instant petition.
Nature of Preliminary Attachment
Attachment is an ancillary remedy applied for not for its own sake but to enable the attaching party to
realize upon relief sought and expected to be granted in the main or principal action;
19
it is a measure
auxiliary or incidental to the main action. As such, it is available during the pendency of the action which
may be resorted to by a litigant to preserve and protect certain rights and interests therein pending
rendition, and for purposes of the ultimate effects, of a final judgment in the case. As a corollary
proposition, an order granting an application for a writ of preliminary attachment cannot, owing to the
incidental or auxiliary nature of such order, be the subject of an appeal independently of the main
action.
20

The instant case is one of those mentioned in Sec. 1, Rule 57 of the Rules, specifically the sections
paragraph "d," wherein a writ of preliminary attachment may be issued. It provides:
SECTION 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:
x x x x
(d) In an action against a party who has been guilty of fraud in contracting the debt or incurring the
obligation upon which the action is brought, or in concealing or disposing of the property for the taking,
detention or conversion of which the action is brought;
For a writ of attachment to issue under the above-quoted rule, the applicant must sufficiently show the
factual circumstances of the alleged fraud.
Fraud may be defined as the voluntary execution of a wrongful act, or a willful omission, knowing and
intending the effects which naturally and necessarily arise from such act or omission.
21
In its general
sense, fraud is deemed to comprise anything calculated to deceive, including all acts and omissions and
concealment involving a breach of legal or equitable duty, trust, or confidence justly reposed, resulting in
damage to another, or by which an undue and unconscientious advantage is taken of another.
22
Fraud is
also described as embracing all multifarious means which human ingenuity can device, and which are
resorted to by one individual to secure an advantage over another by false suggestions or by suppression
of truth and includes all surprise, trick, cunning, dissembling, and any unfair way by which another is
cheated.
23
Fraudulent, on the other hand, connotes intentionally wrongful, dishonest, or unfair.
24

In the case at bar, the Republic has, to us, sufficiently discharged the burden of demonstrating the
commission of fraud committed by respondents Lims as a condition sine qua non for the issuance of a
writ of preliminary attachment. The main supporting proving document is the Republics Exhibit
"B" which the Sandiganbayan unqualifiedly admitted in evidence. And the fraud or fraudulent scheme
principally came in the form of Lim, Sr. holding and/or operating logging concessions which far exceeded
the allowable area prescribed under the 1973 Constitution.
A cursory evaluation of the Republics Exhibit "B"the Decision dated November 20, 1986 of then
Minister Ernesto M. Maceda of the Ministry Natural Resources (MNR)
25
in an unnumbered MNR case
entitled IN RE: VIOLATIONS OF VETERANS WOODWORKS, INC. AND ALFONSO LIM, SR. AND TAGGAT
INDUSTRIES, INC., canceling the logging concessions
26
enjoyed by the Lim Groupyields the following
undisputed relevant data:
(1) Lim, Sr., through the seven (7) respondent corporations, had been
holding/operating/managing several timber concessions with a total area of 533,880
24

hectares, more or less, which was far in excess of the 100,000 hectares allowed in the 1973
Constitution;
27

(2) Since a wide expanse of forest lands were in between the different Lim concessions, the
Lims had effectively access to a total of 633,880 hectares of forests; and
(3) Other violation of the constitutional prohibition applies also to three (3) corporations
(Acme Plywood Co., Inc., Western Cagayan Lumber Co., Inc., and Southern Plywood
Corporation).
As is made abundantly clear in the aforesaid Maceda decision, the MNR revoked or canceled the
concessions or timber license agreements (TLAs) of Lim, Sr. on the principal ground that the timber
award was made in utter violation of the Constitutional limitations on the granting of logging
concessions.
28
The same decision also indicated that Lim, Sr.s "influence, power and strong connection
with the past [i.e., Marcos] dispensation"
29
explained his receipt of special privileges and concessions
unfettered by constitutional constraints. So influential was Lim, Sr. that he and TAGGAT and sister
companies received certain timber-related benefits without the knowledge, let alone approval, of
MNR.
30
Lim, Sr. doubtless utilized to the hilt his closeness to the Marcoses to amass what may prima
facie be considered as illegal wealth.
Scheme to Circumvent Constitutional Prohibition
Sec. 11 of Article XIV of the governing 1973 Constitution states that "no private corporation or
association may hold by lease, concession, license, or permit, timber or forest lands and other timber
or forest resources in excess of one hundred thousand hectares." Complementing this provision was
Chapter I, No. 3(e) of Forestry Administrative Order (FAO) No. 11 prohibiting any individual, corporation,
partnership, or association from acquiring a timber license or license agreement covering an area in
excess of 100,000 hectares. Likewise, Chapter I, No. 3(d) of FAO No. 11 states that no individual
corporation, partnership, or association who is already a holder of an ordinary timber license or license
agreement nor any member of the family, incorporator, director, stockholder, or member of such
individual, corporation, partnership, or association shall be allowed to acquire a new timber license or
license agreement or any interest or participation in it.
The constitutional and statutory limitations on allowable area leases and concessions were obviously
meant to prevent the concentration of large tracts of public land in the hands of a single individual. But
as the Office of the Solicitor General aptly observed, citing the Maceda decision: "For one Filipino out of
55 million to own, operate or in one form [or] another be financially interested in more than 600,000
hectares out of a total forest land of 14 million hectares is certainly unfair, unacceptable and
unconstitutional by any standard."
31

Lim, Sr., as earlier stated, had been holding/operating/managing several timber concessions through the
seven (7) logging companies for an aggregate area of 533,880 hectares, as follows:
Name of Corporation TLA No. Concession Area
(1) Taggat Industries, Inc. 071 107,845 has.
(2) Pamplona Redwood Veneer Co., Inc. 074 118,315 has
(3) Southern Plywood Corp. (one share) 321 71,300 has.
(4) Western Cagayan Lumber Co., Inc. (one share) 073 69,675 has.
(5) Acme Plywood & Veneer Co,, Inc. (one share) 075 84,525 has.
(6) Veterans Woodworks, Inc. 63,179 has.
(7) Sierra Madre Wood Ind., Inc. 345 19,050 has.
TOTAL 533,880 has.
The Maceda decision stressed that Lim, Sr. had one share each in the three corporations, namely: (1)
Acme Plywood and Veneer Co., Inc. (ACME); (2) Western Cagayan Lumber Co., Inc. (WESTERN); and (3)
Southern Plywood Corporation (SPC). These corporations, the decision added, likewise violated the
Constitution considering that Lim, Sr. had control over them as owner-founder. To cover the
constitutional violation, Lim, Jr. was used as a front and made to appear as President of the mentioned
three corporations.
32

There can be no quibbling that MNR correctly revoked/canceled all the timber concessions of Lim, Sr.,
namely: TLA No. 071 (TAGGAT), TLA No. 074 (PAMPLONA), TLA No. 321 (SPC), TLA No. 073 (WESTERN),
and TLA No. 075 (ACME). As it were, the TLAs of TAGGAT and PAMPLONA each exceeded the 100,000-
hectare threshold prescribed by the 1973 Constitution. Initially, the execution and granting of those
timber license agreements were already tainted with fraud. The Lims resorted to their close connection
with the Marcoses for the approval of the timber license agreements and the Lims were given access
effectively to a total 633,880 hectares in violation of the 1973 Constitution and FAO No. 11.
Indeed, the Lims availment and enjoyment of logging concessions grossly in excess of constitutional
limits amount to a voluntary execution of a wrongful act, if not a serious breach of legal duty. By their
acts, the Lims veritably defrauded and cheated the Filipino peoplethe ultimate beneficiaries of the
countrys natural resources.
Denial of Demurrer to Evidence Indicative
of the Commission of Fraudulent Acts
The evidence that clearly supports the issuance of a writ of preliminary attachment sought by Republic is
already on record before the Sandiganbayan. As a matter of fact, the anti-graft court already ruled and
considered that the evidence so far presented by the Republic had been sufficient to support a finding
that respondents had committed illegal and fraudulent acts against the Republic and the Filipino people.
This was the tenor of the Sandiganbayans resolution denying the respondents demurrer to evidence.
A demurrer to evidence is defined as "an objection by one of the parties in an action, to the effect that
the evidence which his adversary produced is insufficient in point of law, whether true or not, to make
out a case or sustain the issue."
33
The party demurring challenges the sufficiency of the whole evidence
to sustain a verdict.
34
In passing upon the sufficiency of the evidence raised in a demurrer, the court is
merely required to ascertain whether there is competent or sufficient proof to sustain the indictment or
to support a verdict of guilt.
35
And when the court denies the demurrer, the defendant has to present
countervailing evidence against the evidence adduced by the plaintiff.
36

In the case at bar, when the Sandiganbayan denied respondents demurrer to evidence, it in effect ruled
that the evidence presented by the prosecution is, absent a countervailing evidence, prima
facie sufficient to support an adverse verdict against them for amassing illegal wealth. The
Sandiganbayan, in its underlying resolution of July 17, 2003 denying the demurrer, wrote:
25

The Demurrer is denied.
To support the charges, plaintiff introduced, among others, Exhibit "B", a decision dated November 20,
1986 by then DENR Secretary Ernesto Maceda which, after hearing, revoked or cancelled the respective
Timber License Agreements (TLAs) of defendants Alfonso Lim, Sr., Taggat Industries, Inc., Pamplona
Redwood Veneer, [etc.] after an investigation found that the same entities held timber concessions in
excess of what was allowed by the Constitution. The same decision likewise made certain findings of
facts that x x x Lim, Sr. enjoyed close association with former President Ferdinand E. Marcos as a
consequence of which the latter granted x x x Lim, Sr. special privileges and concessions in gross violation
of the Constitution. In addition, Exhibit "E" indicates that x x x Taggat Industries, chiefly owned by
defendant Lim Sr., using his close association with then President Marcos, acquired and controlled three
(3) other logging firms, namely Veteran Woodworks, Inc., Tropical Philippine Wood Industries, Inc., and
Sierra Madre Wood Industries, Inc. x x x. This resulted to the acquisition of defendant Lim Sr. of excessive
number of timber concessions.
Given the circumstances, this Court cannot simply brush aside the foregoing considering that what the
defendants-movants proffer are mere blanket denial of the charges. In demurrer to evidence, the party
demurring challenges the sufficiency of the whole evidence to sustain a verdict. The court, in passing
upon the sufficiency of the evidence raised in a demurrer, is merely required to ascertain whether there
is competent or sufficient evidence to sustain the indictment. Applying the said ruling in the instant case,
there exists prima facie evidence on record x x x to support or sustain the charges against the
defendants-movants. There is therefore a further need on the part of the defendants-movants to submit
the proof to the contrary other than their mere simple disclaimer.
37

Sandiganbayan Did Not Consider
Evidence in Denying Attachment
Given the foregoing pronouncement from the Sandiganbayan, the Court is completely at a loss to
understand the graft courts denial of the Republics plea for the ancillary remedy of preliminary
attachment. The wrongful actthe fraud perpetuated by Lim Sr. and/or his corporations on the
Republicis written over or easily deducible from the adverted Maceda decision and Exhibit "E." While
fraud cannot be presumed, it need not be proved by direct evidence and it can well be inferred from
attendant circumstances.
38
Withal, we cannot but agree with the Republics contention that the
Sandiganbayans denial of its motion for a writ of preliminary attachment constitutes grave and patent
abuse of discretion amounting to lack or excess of jurisdiction.
A scrutiny of the above-quoted July 17, 2003 Resolution readily shows that the Sandiganbayan indeed
considered the evidence presented and offered by the Republic, specifically Exhibits "B" and "E" which
convincingly show the finding that respondents acts were tainted with fraud in the acquisition of the
logging concessions due to their close association with the Marcoses.
It is incongruous, therefore, for the Sandiganbayan to deny the writ of preliminary attachment when the
pieces of evidence on record which it used and based its findings and conclusions in denying the
demurrer to evidence were the same ones which demonstrate the propriety of the writ of preliminary
attachment. Clearly, the Republic has complied with and satisfied the legal obligation to show the
specific acts constitutive of the alleged fraud committed by respondents. The denial of the prayed writ,
thus, evidently constitutes grave abuse of discretion on the part of Sandiganbayan. After all, "attachment
is a mere provisional remedy to ensure the safety and preservation of the thing attached until the
plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its
satisfaction."
39
Indeed, the properties of respondents sought to be subjected to the ancillary writ of
preliminary attachment are not only in danger of being lost but should be placed under custodia legis to
answer for any liabilities that may be adjudged against them in the instant case.
WHEREFORE, the Sandiganbayan Resolutions dated March 28, 2003 and June 18, 2004 are
hereby REVERSEDand SET ASIDE. Accordingly, the 2nd Division of Sandiganbayan is
hereby DIRECTED to ISSUE the Writ of Preliminary Attachment prayed for by the Republic. No costs.
SO ORDERED.



















26

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 170674 August 24, 2009
FOUNDATION SPECIALISTS, INC., Petitioner,
vs.
BETONVAL READY CONCRETE, INC. and STRONGHOLD INSURANCE CO., INC., Respondents.
D E C I S I O N
CORONA, J.:
On separate dates, petitioner Foundation Specialists, Inc. (FSI) and respondent Betonval Ready Concrete,
Inc. (Betonval) executed three contracts
1
for the delivery of ready mixed concrete by Betonval to FSI. The
basic stipulations were: (a) for FSI to supply the cement to be made into ready mixed concrete; (b) for FSI
to pay Betonval within seven days after presentation of the invoices plus 30% interest p.a. in case of
overdue payments and (c) a credit limit of P600,000 for FSI.
Betonval delivered the ready mixed concrete pursuant to the contracts but FSI failed to pay its
outstanding balances starting January 1992. As an accommodation to FSI, Betonval extended the seven
day credit period to 45 days.
2

On September 1, 1992, Betonval demanded from FSI its balance of P2,349,460.
3
Betonval informed FSI
that further defaults would leave it no other choice but to impose the stipulated interest for late
payments and take appropriate legal action to protect its interest.
4
While maintaining that it was still
verifying the correctness of Betonvals claims, FSI sent Betonval a proposed schedule of payments
devised with a liability for late payments fixed at 24% p.a.
5

Thereafter, FSI paid Betonval according to the terms of its proposed schedule of payments. It was able to
reduce its debt to P1,114,203.34 as of July 1993, inclusive of the 24% annual interest computed from the
due date of the invoices.
6
Nevertheless, it failed to fully settle its obligation.
Betonval thereafter filed an action for sum of money and damages in the Regional Trial Court (RTC).
7
It
also applied for the issuance of a writ of preliminary attachment alleging that FSI employed fraud when it
contracted with Betonval and that it was disposing of its assets in fraud of its creditors.
FSI denied Betonvals allegations and moved for the dismissal of the complaint. The amount claimed was
allegedly not due and demandable because they were still reconciling their respective records. FSI also
filed a counterclaim and prayed for actual damages, alleging that its other projects were delayed when
Betonval attached its properties and garnished its bank accounts. It likewise prayed for moral and
exemplary damages and attorneys fees.
The RTC issued a writ of preliminary attachment and approved the P500,000 bond of respondent
Stronghold Insurance Co., Inc. (Stronghold). FSI filed a counterbond of P500,000 thereby discharging the
writ of preliminary attachment, except with respect to FSIs excavator, crawler crane and Isuzu pick-up
truck, which remained incustodia legis.
8
An additional counterbond of P350,000 lifted the garnishment of
FSIs receivables from the Department of Public Works and Highways.
On January 29, 1999, the RTC ruled for Betonval.
9
However, it awarded P200,000 compensatory damages
to FSI on the ground that the attachment of its properties was improper.
10

FSI and Stronghold separately filed motions for reconsideration while Betonval filed a motion for
clarification and reconsideration. In an order dated May 19, 1999, the RTC denied the motions for
reconsideration of Betonval and Stronghold. However, the January 29, 1999 decision was modified in
that the award of actual or compensatory damages to FSI was increased to P1.5 million.
11

All parties appealed to the Court of Appeals (CA). However, only the respective appeals of Betonval and
Stronghold were given due course because FSIs appeal was dismissed for nonpayment of the appellate
docket fees.
12

In its appeal, Betonval assailed the award of actual damages as well as the imposition of legal interest at
only 12%, instead of 24% as agreed on. Stronghold, on the other hand, averred that the attachment was
proper.
In its decision
13
dated January 20, 2005, the CA upheld the May 19, 1999 RTC order with modification.
The CA held that FSI should pay Betonval the value of unpaid ready mixed concrete at 24% p.a. interest
plus legal interest at 12%. The CA, however, reduced the award to FSI of actual and compensatory
damages, thus:
WHEREFORE, premises considered, the appealed Order dated May 19, 1999 is MODIFIED as follows: (a)
to increase the rate of interest imposable on the P1,114,203.34 awarded to appellant Betonval from 12%
to 24% per annum, with the aggregate sum to further earn an annual interest rate of 12% from the
finality of this decision, until full payment; (b) to reduce the award of actual damages in favor of appellee
from P1,500,000.00 to P200,000.00; (c) to hold both appellants jointly and severally liable to pay said
amount; and (d) to hold appellant Betonval liable for whatever appellant surety may be held liable under
the attachment bond. The rest is AFFIRMED in toto.
FSIs motion for reconsideration was denied.
14

In this petition for review on certiorari,
15
FSI prays for the following:
(a) decrease the rate of imposable interest on the P1,114,203.34 award to Betonval, from
12% to 6% p.a.from date of judicial demand or filing of the complaint until the full amount is
paid;
(b) deduct [from the award to Betonval] the cost or value of unused cement based on [its]
invoice stating 1,307.45 bags computed at the prevailing price;
(c) award actual and compensatory damages at P3,242,771.29;
(d) hold Betonval and Stronghold jointly and severally liable to pay such actual and
compensatory damages;
27

(e) hold Betonval liable for whatever Stronghold may be held liable under the attachment
bond and
(f) affirm in toto the rest of the order.
16

The petition has no merit.
Betonvals Complaint was not Premature
FSI argues that Betonvals complaint was prematurely filed. There was allegedly a need to reconcile
accounts, particularly with respect to the value of the unused cement supplied by FSI, totaling 2,801.2
bags
17
which supposedly should have been deducted from FSIs outstanding obligation. FSIs repeated
requests for reconciliation of accounts were allegedly not heeded by Betonvals representatives.
FSIs contention is untenable. It neither alleged any discrepancies in nor objected to the accounts within
a reasonable time.
18
As held by the RTC, FSI was deemed to have admitted the truth and correctness of
the entries in the invoices since:
[N]o attempts were made to reconcile [FSIs] own record with [Betonval] until after the filing of the
complaint, inspite of claims in *FSIs+ Answer about its significance, and despite having had plenty of
opportunity to do so from the time of receipt of the invoices or demand letters from [Betonval]. [FSIs]
excuse that it was impractical to reconcile accounts during the middle of transactions is defeated by
the absence of any showing on record that a formal request to reconcile was issued to [Betonval]
despite the completion of deliveries or [FSIs] discovery of the alleged discrepancies, as well as its
failure to initiate any meeting with [Betonval], including one which the parties were directed to hold
for that purpose by the Court. Since [FSI] failed to prove the correctness of its entries against those in
*Betonvals+ invoices, its record is self-serving. xxx (emphasis supplied)
In view of FSIs failure to dispute this finding of the RTC because of its failure to perfect its appeal, FSI is
now estopped from raising this issue. There is no cogent reason to depart from the RTCs
finding.1avvphi1
Undaunted, FSI retracts. Instead of claiming the balance of the unused cement as reflected in its
records, it now bases its claim on the invoices of Betonval. FSI relies on the RTCs statement in the May
19, 1999 order:
Still it can claim the cost of the balance of unused cement based on *Betonvals+ invoices,
notwithstanding its admission of the obligation in the letter, as it neither expressed nor implied any
intent to waive that claim by said admission.
FSI contends that this declaration has become final and executory and must be implemented in the
name of substantial justice. Betonval, however, avers that that the issue on the alleged unused cement
was never raised as an affirmative defense in its answer or in its motion for reconsideration to the
January 29, 1999 decision. Neither was this issue raised in the CA. Hence, FSI must not be allowed to
broach it for the first time in this Court. Betonval is correct.
It is well-settled that issues not raised in the trial court may not be raised for the first time on appeal.
Furthermore, defenses and objections not pleaded either in a motion to dismiss or in the answer are
deemed waived.
19

More importantly, the portion of a decision that becomes the subject of an execution is that ordained or
decreed in the dispositive portion.
20
In this case, there was no award in favor of FSI of the value of the
balance of the unused cement as reflected in the invoices.
The Applicable Interest
Rate is 24% p.a.
There is no dispute that FSI and Betonval stipulated the payment of a 30% p.a. interest in case of
overdue payments. There is likewise no doubt that FSI failed to pay Betonval on time.
FSI acknowledged its indebtedness to Betonval in the principal amount of P1,114,203.34. However, FSI
opposed the CAs imposition of a 24% p.a. interest on the award to Betonval allegedly because: (a) the
grant to FSI of a 45-day credit extension novated the contracts insofar as FSIs obligation to pay any
interest was concerned; (b) Betonval waived its right to enforce the payment of the 30% p.a. interest
when it granted FSI a new credit term and (c) Betonvals prayer for a 24% p.a. interest instead of 30%,
resulted in a situation where, in effect, no interest rate was supposedly stipulated, thus necessitating the
imposition only of the legal interest rate of 6% p.a. from judicial demand.
FSIs contentions have no merit.
Novation is one of the modes of extinguishing an obligation.
21
It is done by the substitution or change of
the obligation by a subsequent one which extinguishes the first, either by changing the object or
principal conditions, or by substituting the person of the debtor, or by subrogating a third person in the
rights of the creditor.
22
Novation may:
[E]ither be extinctive or modificatory, much being dependent on the nature of the change and the
intention of the parties. Extinctive novation is never presumed; there must be an express intention to
novate; in cases where it is implied, the acts of the parties must clearly demonstrate their intent to
dissolve the old obligation as the moving consideration for the emergence of the new one. Implied
novation necessitates that the incompatibility between the old and new obligation be total on every
point such that the old obligation is completely superceded by the new one. The test of incompatibility is
whether they can stand together, each one having an independent existence; if they cannot and are
irreconcilable, the subsequent obligation would also extinguish the first.
An extinctive novation would thus have the twin effects of, first, extinguishing an existing obligation
and, second, creating a new one in its stead. This kind of novation presupposes a confluence of four
essential requisites: (1) a previous valid obligation, (2) an agreement of all parties concerned to a new
contract, (3) the extinguishment of the old obligation, and (4) the birth of a valid new obligation.
Novation is merely modificatory where the change brought about by any subsequent agreement is
merely incidental to the main obligation (e.g., a change in interest rates or an extension of time to pay; in
this instance, the new agreement will not have the effect of extinguishing the first but would merely
supplement it or supplant some but not all of its provisions.)
23

The obligation to pay a sum of money is not novated by an instrument that expressly recognizes the old,
changes only the terms of payment, adds other obligations not incompatible with the old ones or the
new contract merely supplements the old one.
24

The grant by Betonval to FSI of a 45-day credit extension did not novate the contracts so as to extinguish
the latter. There was no incompatibility between them. There was no intention by the parties to
supersede the obligations under the contracts. In fact, the intention of the 45-day credit extension was
28

precisely to revive the old obligation after the original period expired with the obligation unfulfilled. The
grant of a 45-day credit period merely modified the contracts by extending the period within which FSI
was allowed to settle its obligation. Since the contracts remained the source of FSIs obligation to
Betonval, the stipulation to pay 30% p.a. interest likewise remained.
Obviously, the extension given to FSI was triggered by its own request, to help it through its financial
difficulties. FSI would now want to take advantage of that generous accommodation by claiming that its
liability for interest was extinguished by its creditors benevolence.
Neither did Betonval waive the stipulated interest rate of 30% p.a., as FSI erroneously claims. A waiver is
a voluntary and intentional relinquishment or abandonment of a known legal right or privilege.
25
A
waiver must be couched in clear and unequivocal terms which leave no doubt as to the intention of a
party to give up a right or benefit which legally pertains to him.
26
FSI did not adduce proof that a valid
waiver was made by Betonval. FSIs claim is therefore baseless.
Parties are bound by the express stipulations of their contract as well as by what is required by the
nature of the obligation in keeping with good faith, usage and law.
27
Corollarily, if parties to a contract
expressly provide for a particular rate of interest, then that interest shall be applied.
28

It is clear that Betonval and FSI agreed on the payment of interest. It is beyond comprehension how
Betonvals prayer for a 24% interest on FSIs balance could have resulted in a situation as if no interest
rate had been agreed upon. Besides, FSIs proposed schedule of payments (September 3,
1992),
29
referring to Betonvals statement of account,
30
contained computations of FSIs arrears and
billings with 24% p.a. interest.
There can be no other conclusion but that Betonval had reduced the imposable interest rate from 30% to
24% p.a. and this reduced interest rate was accepted, albeit impliedly, by FSI when it proposed a new
schedule of payments and, in fact, actually made payments to Betonval with 24% p.a. interest. By its own
actions, therefore, FSI is estopped from questioning the imposable rate of interest.
We likewise hold that the imposition of a 12% p.a. interest on the award to Betonval (in addition to the
24% p.a. interest) in the assailed judgment is proper. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal interest shall be 12% p.a. from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
31

There was Improper
Attachment of FSIs
Properties
Betonvals application for the issuance of the writ of preliminary attachment was based on Section 1(d)
and (e), Rule 57 of the Rules of Court.
32
However, the CA affirmed the RTCs factual findings that there
was improper attachment of FSIs properties. In debunking FSIs claim for actual damages, respondents
insist that the attachment was proper and that Betonval was able to sufficiently prove the existence of
the grounds for attachment. However, these are factual matters that have been duly passed upon by the
RTC and the CA and which are inappropriate in a petition for review.
Moreover, we agree with the RTC and the CA that FSIs properties were improperly attached. Betonval
was not able to sufficiently show the factual circumstances of the alleged fraud because fraudulent
intent cannot be inferred from FSIs mere nonpayment of the debt or failure to comply with its
obligation. In Ng Wee v. Tankiansee,
33
we held that the applicant must be able to demonstrate that the
debtor intended to defraud the creditor. Furthermore:
The fraud must relate to the execution of the agreement and must have been the reason which induced
the other party into giving consent which he would not have otherwise given. To constitute a ground for
attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting
the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has
a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not be
proved by direct evidence but may be inferred from the circumstances attendant in each case.
34

In other words, mere failure to pay its debt is, of and by itself, not enough to justify an attachment of the
debtors properties. A fraudulent intention not to pay (or not to comply with the obligation) must be
present.
Petitioner is not Entitled
to the Amount of Actual
Damages Prayed For
In its bid for a bigger award for actual damages it allegedly suffered from the wrongful attachment of its
properties, FSI enumerates the standby costs of equipment
35
and manpower standby costs
36
it allegedly
lost. We cannot grant FSIs prayer. FSI did not pursue its appeal to the CA as shown by its failure to pay
the appellate docket fees. It is well-settled that a party who does not appeal from the decision may not
obtain any affirmative relief from the appellate court other than what he has obtained from the lower
court whose decision is brought up on appeal.
37

WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.









29

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-35990 June 17, 1981
ABOITIZ & COMPANY, INC., HONORABLE VICENTE N. CUSI JR., Judge of the Court of First Instance of
Davao, and the PROVINCIAL SHERIFF OF DAVAO DEL SUR, petitioners,
vs.
COTABATO BUS COMPANY, INC., respondent.

DE CASTRO, J.:
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
30

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.





















31

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-67715 July 11, 1986
WILLIAM ALAIN MIAILHE and THE HON. FELIX V. BARBERS, in his capacity as Presiding Judge, RTC of
Manila, Branch XXXIII, petitioners-appellants,
vs.
ELAINE M. DE LENCQUESAING and HERVE DE LENCQUESAING, respondents-appellees.
PARAS, J.:
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 co-owners 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. SP-03070.
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 AC-G.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
32

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 ofCu 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.








Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 75466 December 19, 1988
ANTONIO TOLEDO, petitioner,
vs.
HON. JOSE P. BURGOS, Presiding Judge of Branch XXV of the Regional Trial Court of Cebu, Region VII,
and PERCY CASTRO, respondents.

PARAS, J.:
This is a petition for certiorari and mandamus with a prayer for the issuance of a writ of preliminary
prohibitory injunction, questioning the respondent judge's denial of petitioner's "Application for
Issuance of a Writ of Preliminary Attachment" and the latter's subsequent "Motion for Reconsideration",
in his orders dated 6 June 1986 and 23 June 1986, respectively.
As can be gleaned from the parties' memoranda, the following material facts have been established:
A complaint for Delivery of Personal Property was commenced by petitioner on 14 June 1985 against
respondent Castro but was subsequently denied. In connection therewith, a writ of Replevin was applied
for. Petitioner's subsequent reconsideration having been likewise denied, he went to the then
Intermediate Appellate Court on certiorari. The latter Court denied the same on 30 April 1986. *
Subsequently, on 14 May 1986, petitioner applied for the issuance of a writ of preliminary attachment
with the Court below, and which was requested by the former's counsel for it to be considered in the
morning of 6 June 1986 "With or without the attendance of counsel and without oral arguments" (p. 28,
Rollo). In said application, it was alleged that respondent Castro, among others, "has removed and has
deposed (sic) or is about to depose (sic) of her property with intent to defraud the herein plaintiff" (p.
24, Rollo). To support such allegation, an affidavit of one Rudolfo Inot (p. 29, Rollo) was attached to the
application to prove that respondent Castro and her spouse insistently offered to sell to him two (2)
motor vehicles. Castro submitted her written opposition thereto on 4 June 1986 (p. 57, Rollo). On the
hearing of 6 June 1986, neither petitioner nor his counsel appeared. Being present then, Castro assailed
the allegations in the affidavit of Mr. Inot. She likewise argued that petitioner had to prove by
overwhelming evidence his allegation that she was about to dispose of her properties in fraud of
creditors, and that mere affidavits would not suffice. On the same date, respondent judge denied the
application.
On 17 June 1986, petitioner moved to reconsider the above denial. Once more, counsel for petitioner
requested that the consideration of said motion be scheduled in the morning session of 23 June 1986
"without need of argument or appearance of counsel" (p. 35, Rollo). But like before, petitioner and his
counsel failed to appear. On said date, respondent Castro manifested that the two (2) vehicles, alleged
to have been offered for sale by her, were needed in her retail merchandising business, thus, had no
intention of disposing of them. The respondent judge then issued another order dated 23 June 1986
denying petitioner's motion. Hence, this present petition was filed on 12 August 1986.
33

In a minute resolution dated 25 August 1986 (p. 90, Rollo), this Court denied the instant petition for
being without merit. And after respondent Castro had filed her answer and petitioner his motion for
reconsideration, this Court reconsidered the aforesaid resolution in a subsequent one dated 5 January
1987 (p. 94, Rollo) and ordered the parties to submit their respective memoranda.
The sole issue in this case concerns the propriety of the respondent judge's denial of petitioner's
application for a writ of attachment. In branding the denial as improper, petitioner accuses respondent
judge of having made it "with undue haste and without proper notice of hearing" and with disregard of
the "(strong) evidence in support of the application". (Petition, p. 8, Rollo)
We disagree With the petitioner's accusations. Contrary to his claims, the respondent judge acted well
within his powers and in the highest regard for justice. Respondent judge acted correctly in denying
petitioner's "Application for Issuance of a Writ of Preliminary attachment". There was no need for him
to, as against petitioner's claim, set a hearing on the said application. This is because the issuance of a
writ of preliminary attachment may be made by the Court ex parte. As We held in the case of Filinvest
Credit Corporation vs. Relova, 117 SCRA 420, and reiterated in Belisle Investment and Finance Co., Inc. vs.
State Investment House, Inc., 151 SCRA 630:
Nothing in the Rules of Court makes notice and hearing indispensable and
mandatory requisites for the issuance of a writ of attachment. The statement in
the case Blue Green Waters, Inc. vs. Hon. Sundiam and Tan cited by private
respondent, to the effect that the order of attachment issued without notice to
therein petitioner Blue Green Waters, Inc. and without giving it a chance to prove
that it was not fraudulently disposing of its properties is irregular, gives the wrong
implication. As clarified in the separate opinion of Mr. Justice Claudio Teehankee
in the same cited case, a writ of attachment may be issued ex parte.
And even if said notice is indeed necessary, petitioner can only blame himself for failing to attend the
scheduled hearing of 6 June 1986. This is because it was he, through his counsel, who requested that the
application be set for consideration and approval by the Court on the said date. It was, therefore, his
duty to be present in Court on that date.
Inasmuch as a writ of preliminary attachment may be issued without hearing, the judge before whom
the application is made has full discretion in considering the supporting evidence proffered by the
applicant. And in dealing with the affidavit of Mr. Inot, the respondent judge was empowered to decide
whether or not such should be given credit. As We enunciated in the early case of La Grande vs. Samson
(58 Phil. 578); "the sufficiency or insufficiency of an affidavit depends upon the amount of credit given to
it by the judge, and its acceptance of rejection upon his sound discretion."
It is unfortunate that counsel for petitioner, in his motion for reconsideration dated 13 October 1986,
has made a hasty accusation against the Honorable Judge Jose Burgos, the public respondent, as having
"shown manifest partiality towards private respondents, making statements and actions which clearly
intimate that the private respondents would win the case handsdown This is indeed unfortunate,
improper and an affront to the dignity of the judiciary." (p. 79, Rollo). We do not find any cogent and
valid ground in the records of this case which justify such a grave imputation upon a member of the
Bench. Counsel for petitioner is hereby reminded of his duties to the Court. And the attorney's duty of
prime importance is to observe and maintain the respect due the courts of justice and judicial officers
(Rule 138, Sec. 20(b); Rheem of the Phil. vs. Ferrer, 60 SCRA 234). His arguments, written or oral, should
be gracious to both the court and opposing counsel and be of such words as may be properly addressed
by one gentleman to another (National Surety Co. v. Jarvis, 278 US 610 (1928).
WHEREFORE, premises considered, this petition is hereby DENIED with costs against petitioner.
























34

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 166759 November 25, 2009
SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR RESOURCES, INC.,Petitioners,
vs.
NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and NIKKI NORLIN
SATSATIN, Respondents.
D E C I S I O N
PERALTA, J.:
This is a petition for review on certiorari assailing the Decision
1
dated November 23, 2004 of the Court of
Appeals (CA) in CA-G.R. SP No. 83595, and its Resolution
2
dated January 18, 2005, denying petitioners
motion for reconsideration.
The factual and procedural antecedents are as follows:
The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario Torres (Mario) each own adjacent
20,000 square meters track of land situated at Barrio Lankaan, Dasmarias, Cavite, covered by Transfer
Certificate of Title (TCT) Nos. 251267,
3
251266,
4
and 251265,
5
respectively.
Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners mother, Agripina Aledia, if she wanted
to sell their lands. After consultation with her daughters, daughter-in-law, and grandchildren, Agripina
agreed to sell the properties. Petitioners, thus, authorized Nicanor, through a Special Power of Attorney,
to negotiate for the sale of the properties.
6

Sometime in 1999, Nicanor offered to sell the properties to Solar Resources, Inc. (Solar). Solar allegedly
agreed to purchase the three parcels of land, together with the 10,000-square-meter property owned by
a certain Rustica Aledia, for P35,000,000.00. Petitioners alleged that Nicanor was supposed to remit to
them the total amount ofP28,000,000.00 or P9,333,333.00 each to Sofia, Fructosa, and the heirs of
Mario.
Petitioners claimed that Solar has already paid the entire purchase price of P35,000,000.00 to Nicanor in
Thirty-Two (32) post-dated checks which the latter encashed/deposited on their respective due dates.
Petitioners added that they also learned that during the period from January 2000 to April 2002, Nicanor
allegedly acquired a house and lot at Vista Grande BF Resort Village, Las Pias City and a car, which he
registered in the names of his unemployed children, Nikki Normel Satsatin and Nikki Norlin Satsatin.
However, notwithstanding the receipt of the entire payment for the subject property, Nicanor only
remitted the total amount of P9,000,000.00, leaving an unremitted balance of P19,000,000.00. Despite
repeated verbal and written demands, Nicanor failed to remit to them the balance of P19,000,000.00.
Consequently, on October 25, 2002, petitioners filed before the regional trial court (RTC) a
Complaint
7
for sum of money and damages, against Nicanor, Ermilinda Satsatin, Nikki Normel Satsatin,
and Nikki Norlin Satsatin. The case was docketed as Civil Case No. 2694-02, and raffled to RTC, Branch 90,
Dasmarias, Cavite.
On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ of
Attachment,
8
alleging among other things: that respondents are about to depart the Philippines; that
they have properties, real and personal in Metro Manila and in the nearby provinces; that the amount
due them is P19,000,000.00 above all other claims; that there is no other sufficient security for the claim
sought to be enforced; and that they are willing to post a bond fixed by the court to answer for all costs
which may be adjudged to the respondents and all damages which respondents may sustain by reason of
the attachment prayed for, if it shall be finally adjudged that petitioners are not entitled thereto.
On October 30, 2002, the trial court issued an Order
9
directing the petitioners to post a bond in the
amount ofP7,000,000.00 before the court issues the writ of attachment, the dispositive portion of which
reads as follows:
WHEREFORE, premises considered, and finding the present complaint and motion sufficient in form and
substance, this Court hereby directs the herein plaintiffs to post a bond, pursuant to Section 3, Rule 57 of
the 1997 Rules of Civil Procedure, in the amount of Seven Million Pesos (P7,000,000.00), before the Writ
of Attachment issues.
10

On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff,
11
informing the court that
they have already filed an attachment bond. They also prayed that a sheriff be deputized to serve the
writ of attachment that would be issued by the court.
In the Order
12
dated November 15, 2002, the RTC granted the above motion and deputized the sheriff,
together with police security assistance, to serve the writ of attachment.
Thereafter, the RTC issued a Writ of Attachment
13
dated November 15, 2002, directing the sheriff to
attach the estate, real or personal, of the respondents, the decretal portion of which reads:
WE, THEREFORE, command you to attach the estate, real or personal, not exempt from execution, of the
said defendants, in your province, to the value of said demands, and that you safely keep the same
according to the said Rule, unless the defendants give security to pay such judgment as may be
recovered on the said action, in the manner provided by the said Rule, provided that your legal fees and
all necessary expenses are fully paid.
You shall return this writ with your proceedings indorsed hereon within twenty (20) days from the date
of receipt hereof.
GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day of November, 2002, at Imus for
Dasmarias, Cavite, Philippines.
14

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

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

35

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

On the same day respondents filed their answer, they also filed a Motion to Discharge Writ of
Attachment
18
anchored on the following grounds: the bond was issued before the issuance of the writ of
attachment; the writ of attachment was issued before the summons was received by the respondents;
the sheriff did not serve copies of the application for attachment, order of attachment, plaintiffs
affidavit, and attachment bond, to the respondents; the sheriff did not submit a sheriffs return in
violation of the Rules; and the grounds cited for the issuance of the writ are baseless and devoid of
merit. In the alternative, respondents offered to post a counter-bond for the lifting of the writ of
attachment.
19

On March 11, 2003, after the parties filed their respective pleadings, the RTC issued an Order
20
denying
the motion, but at the same time, directing the respondents to file a counter-bond, to wit:
WHEREFORE, premises considered, after the pertinent pleadings of the parties have been taken into
account, the herein defendants are hereby directed to file a counter-bond executed to the attaching
party, in the amount of Seven Million Pesos (P7,000,000.00), to secure the payment of any judgment
that the attaching party may recover in the action, with notice on the attaching party, whereas, the
Motion to Discharge Writ of Attachment is DENIED.
SO ORDERED.
21

Thereafter, respondents filed a motion for reconsideration and/or motion for clarification of the above
order. On April 3, 2003, the RTC issued another Order
22
which reads:
In view of the Urgent Motion For Reconsideration And/Or Motion For Clarification of the Order of this
Court dated March 11, 2003, denying their Motion to Discharge Writ of Attachment filed by the
defendants through counsel Atty. Franco L. Loyola, the Motion to Discharge Writ of Attachment is denied
until after the defendants have posted the counter-bond in the amount of Seven Million Pesos
(P7,000,000.00).
The defendants, once again, is directed to file their counter-bond of Seven Million Pesos (P7,000,000.00),
if it so desires, in order to discharge the Writ of Attachment.
SO ORDERED.
On December 15, 2003, respondents filed an Urgent Motion to Lift/Set Aside Order Dated March [11],
2003,
23
which the RTC denied in an Order
24
of even date, the dispositive portion of which reads:
WHEREFORE, premises considered, defendants Urgent Motion to Lift/Set Aside Order Dated March 23,
2003 (With Manifestation to Dissolve Writ of Attachment) is hereby DENIED for lack of Merit.
SO ORDERED.
Respondents filed an Urgent Motion for Reconsideration,
25
but it was denied in the Order
26
dated March
3, 2004.
Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and Prohibition with
Preliminary Injunction and Temporary Restraining Order
27
under Rule 65 of the Rules of Court, docketed
as CA-G.R. SP No. 83595, anchored on the following grounds:
(1) public respondents committed grave abuse of discretion amounting to lack of or in excess
of jurisdiction in failing to notice that the lower court has no jurisdiction over the person and
subject matter of the complaint when the subject Writ of Attachment was issued;
(2) public respondents committed grave abuse of discretion amounting to lack of or in excess
of jurisdiction in granting the issuance of the Writ of Attachment despite non-compliance
with the formal requisites for the issuance of the bond and the Writ of Attachment.
28

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

On November 23, 2003, the CA rendered the assailed Decision in favor of the respondents, finding grave
abuse of discretion amounting to lack of or in excess of jurisdiction on the part of the RTC in issuing the
Orders dated December 15, 2003 and March 3, 2004. The decretal portion of the Decision reads:
WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed Orders are hereby
nullified and set aside. The levy on the properties of the petitioners pursuant to the Writ of Attachment
issued by the lower court is hereby LIFTED.
SO ORDERED.
30

Petitioners filed a Motion for Reconsideration,
31
but it was denied in the Resolution
32
dated January 18,
2005.
Hence, this petition assigning the following errors:
I.
THE HONORABLE COURT OF APPEALS ERRED IN ORDERING THE LIFTING OF THE WRIT OF ATTACHMENT
PURSUANT TO SECTION 13, RULE 57 OF THE REVISED RULES OF CIVIL PROCEDURE.
II.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PUBLIC RESPONDENT COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN GRANTING
THE WRIT OF ATTACHMENT DESPITE THE BOND BEING INSUFFICIENT AND HAVING BEEN IMPROPERLY
ISSUED.
36

III.
THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING THE PETITION BY REASON OF
ESTOPPEL, LACHES AND PRESCRIPTION AND IN HOLDING THAT THE WRIT OF ATTACHMENT WAS
IMPROPERLY AND IRREGULARLY ENFORCED IN VIOLATION OF SECTION 5, RULE 57 OF THE REVISED
RULES OF COURT.
IV.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRINCIPLE OF ESTOPPEL WILL NOT
LIE AGAINST RESPONDENTS.
Petitioners maintain that in the case at bar, as in the case of FCY Construction Group, Inc. v. Court of
Appeals,
33
the only way the subject writ of attachment can be dissolved is by a counter-bond. They claim
that the respondents are not allowed to file a motion to dissolve the attachment under Section 13, Rule
57 of the Rules of Court. Otherwise, the hearing on the motion for the dissolution of the writ would be
tantamount to a trial on the merits, considering that the writ of preliminary attachment was issued upon
a ground which is, at the same time, the applicants cause of action.
Petitioners insist that the determination of the existence of grounds to discharge a writ of attachment
rests in the sound discretion of the lower court. They argue that the Certification
34
issued by the Office of
the Administrator and the Certifications
35
issued by the clerks of court of the RTCs of Dasmarias and
Imus, Cavite, would show that the bonds offered by Western Guaranty Corporation, the bonding
company which issued the bond, may be accepted by the RTCs of Dasmarias and Imus, Cavite, and that
the said bonding company has no pending liability with the government.
Petitioners contend that respondents are barred by estoppel, laches, and prescription from questioning
the orders of the RTC issuing the writ of attachment. They also maintain that the issue whether there
was impropriety or irregularity in the issuance of the orders is moot and academic, considering that the
attachment bond questioned by the respondent had already expired on November 14, 2003 and
petitioners have renewed the attachment bond covering the period from November 14, 2003 to
November 14, 2004, and further renewed to cover the period of November 14, 2004 to November 14,
2005.
The petition is bereft of merit.
A writ of preliminary attachment is defined as a provisional remedy issued upon order of the court
where an action is pending to be levied upon the property or properties of the defendant therein, the
same to be held thereafter by the sheriff as security for the satisfaction of whatever judgment that might
be secured in the said action by the attaching creditor against the defendant.
36

In the case at bar, the CA correctly found that there was grave abuse of discretion amounting to lack of
or in excess of jurisdiction on the part of the trial court in approving the bond posted by petitioners
despite the fact that not all the requisites for its approval were complied with. In accepting a surety
bond, it is necessary that all the requisites for its approval are met; otherwise, the bond should be
rejected.
37

Every bond should be accompanied by a clearance from the Supreme Court showing that the company
concerned is qualified to transact business which is valid only for thirty (30) days from the date of its
issuance.
38
However, it is apparent that the Certification
39
issued by the Office of the Court Administrator
(OCA) at the time the bond was issued would clearly show that the bonds offered by Western Guaranty
Corporation may be accepted only in the RTCs of the cities of Makati, Pasay, and Pasig. Therefore, the
surety bond issued by the bonding company should not have been accepted by the RTC of Dasmarias,
Branch 90, since the certification secured by the bonding company from the OCA at the time of the
issuance of the bond certified that it may only be accepted in the above-mentioned cities. Thus, the trial
court acted with grave abuse of discretion amounting to lack of or in excess of jurisdiction when it issued
the writ of attachment founded on the said bond.
Moreover, in provisional remedies, particularly that of preliminary attachment, the distinction between
the issuance and the implementation of the writ of attachment is of utmost importance to the validity of
the writ. The distinction is indispensably necessary to determine when jurisdiction over the person of the
defendant should be acquired in order to validly implement the writ of attachment upon his person.
This Court has long put to rest the issue of when jurisdiction over the person of the defendant should be
acquired in cases where a party resorts to provisional remedies. A party to a suit may, at any time after
filing the complaint, avail of the provisional remedies under the Rules of Court. Specifically, Rule 57 on
preliminary attachment speaks of the grant of the remedy "at the commencement of the action or at any
time before entry of judgment."
40
This phrase refers to the date of the filing of the complaint, which is
the moment that marks "the commencement of the action." The reference plainly is to a time before
summons is served on the defendant, or even before summons issues.
41

In Davao Light & Power Co., Inc. v. Court of Appeals,
42
this Court clarified the actual time when
jurisdiction should be had:
It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction
over the person of defendant x x x issuance of summons, order of attachment and writ of attachment x
x x these do not and cannot bind and affect the defendant until and unless jurisdiction over his person
is eventually obtained by the court, either by service on him of summons or other coercive process or
his voluntary submission to the courts 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 applicants affidavit and attachment bond, and of the order of attachment, as
explicitly required by Section 5 of Rule 57, but also thesummons addressed to said defendant as well as a
copy of the complaint x x x. (Emphasis supplied.)
In Cuartero v. Court of Appeals,
43
this Court held that the grant of the provisional remedy of attachment
involves three stages: first, the court issues the order granting the application; second, the writ of
attachment issues pursuant to the order granting the writ; and third, the writ is implemented. For the
initial two stages, it is not necessary that jurisdiction over the person of the defendant be first obtained.
However, once the implementation of the writ commences, the court must have acquired jurisdiction
over the defendant, for without such jurisdiction, the court has no power and authority to act in any
manner against the defendant. Any order issuing from the Court will not bind the defendant.
44

Thus, it is indispensable not only for the acquisition of jurisdiction over the person of the defendant, but
also upon consideration of fairness, to apprise the defendant of the complaint against him and the
issuance of a writ of preliminary attachment and the grounds therefor that prior or contemporaneously
to the serving of the writ of attachment, service of summons, together with a copy of the complaint, the
application for attachment, the applicants affidavit and bond, and the order must be served upon him.
In the instant case, assuming arguendo that the trial court validly issued the writ of attachment on
November 15, 2002, which was implemented on November 19, 2002, it is to be noted that the summons,
together with a copy of the complaint, was served only on November 21, 2002.
37

At the time the trial court issued the writ of attachment on November 15, 2002, it can validly to do so
since the motion for its issuance can be filed "at the commencement of the action or at any time before
entry of judgment." However, at the time the writ was implemented, the trial court has not acquired
jurisdiction over the persons of the respondent since no summons was yet served upon them. The
proper officer should have previously or simultaneously with the implementation of the writ of
attachment, served a copy of the summons upon the respondents in order for the trial court to have
acquired jurisdiction upon them and for the writ to have binding effect. Consequently, even if the writ of
attachment was validly issued, it was improperly or irregularly enforced and, therefore, cannot bind and
affect the respondents.
Moreover, although there is truth in the petitioners contention that an attachment may not be
dissolved by a showing of its irregular or improper issuance if it is upon a ground which is at the same
time the applicants cause of action in the main case, since an anomalous situation would result if the
issues of the main case would be ventilated and resolved in a mere hearing of a motion. However, the
same is not applicable in the case bar. It is clear from the respondents pleadings that the grounds on
which they base the lifting of the writ of attachment are the irregularities in its issuance and in the
service of the writ; not petitioners cause of action.1avvphi1
Further, petitioners contention that respondents are barred by estoppel, laches, and prescription from
questioning the orders of the RTC issuing the writ of attachment and that the issue has become moot
and academic by the renewal of the attachment bond covering after its expiration, is devoid of merit. As
correctly held by the CA:
There are two ways of discharging the attachment. First, to file a counter-bond in accordance with
Section 12 of Rule 57. Second[,] [t]o quash the attachment on the ground that it was irregularly or
improvidently issued, as provided for in Section 13 of the same rule. Whether the attachment was
discharged by either of the two ways indicated in the law, the attachment debtor cannot be deemed to
have waived any defect in the issuance of the attachment writ by simply availing himself of one way of
discharging the attachment writ, instead of the other. The filing of a counter-bond is merely a speedier
way of discharging the attachment writ instead of the other way.
45

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

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


Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 115678 February 23, 2001
PHILIPPINES BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS and BERNARDINO VILLANUEVA, respondents.
x ---------------------------------------- x
G.R. No. 119723 February 23, 2001
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS and FILIPINAS TEXTILE MILLS, INC., respondents.
YNARES-SANTIAGO, J.:
Before us are consolidated petitions for review both filed by Philippine Bank of Communications; one
against the May 24, 1994 Decision of respondent Court of Appeals in CA-G.R. SP No. 32863
1
and the
other against its March 31, 1995 Decision in CA-G.R. SP No. 32762.
2
Both Decisions set aside and nullified
the August 11, 1993 Order
3
of the Regional Trial Court of Manila, Branch 7, granting the issuance of a writ
of preliminary attachment in Civil Case No. 91-56711.
The case commenced with the filing by petitioner, on April 8, 1991, of a Complaint against private
respondent Bernardino Villanueva, private respondent Filipinas Textile Mills and one Sochi Villanueva
(now deceased) before the Regional Trial Court of Manila. In the said Complaint, petitioner sought the
payment of P2,244,926.30 representing the proceeds or value of various textile goods, the purchase of
which was covered by irrevocable letters of credit and trust receipts executed by petitioner with private
respondent Filipinas Textile Mills as obligor; which, in turn, were covered by surety agreements executed
by private respondent Bernardino Villanueva and Sochi Villanueva. In their Answer, private respondents
admitted the existence of the surety agreements and trust receipts but countered that they had already
made payments on the amount demanded and that the interest and other charges imposed by
petitioner were onerous.
On May 31, 1993, petitioner filed a Motion for Attachment,
4
contending that violation of the trust
receipts law constitutes estafa, thus providing ground for the issuance of a writ of preliminary
attachment; specifically under paragraphs "b" and "d," Section 1, Rule 57 of the Revised Rules of Court.
Petitioner further claimed that attachment was necessary since private respondents were disposing of
their properties to its detriment as a creditor. Finally, petitioner offered to post a bond for the issuance
of such writ of attachment.
The Motion was duly opposed by private respondents and, after the filing of a Reply thereto by
petitioner, the lower court issued its August 11, 1993 Order for the issuance of a writ of preliminary
attachment, conditioned upon the filing of an attachment bond. Following the denial of the Motion for
38

Reconsideration filed by private respondent Filipinas Textile Mills, both private respondents filed
separate petitions for certiorari before respondent Court assailing the order granting the writ of
preliminary attachment.1wphi1.nt
Both petitions were granted, albeit on different grounds. In CA-G.R. SP No. 32762, respondent Court of
Appeals ruled that the lower court was guilty of grave abuse of discretion in not conducting a hearing on
the application for a writ of preliminary attachment and not requiring petitioner to substantiate its
allegations of fraud, embezzlement or misappropriation. On the other hand, in CA-G.R. SP No. 32863,
respondent Court of Appeals found that the grounds cited by petitioner in its Motion do not provide
sufficient basis for the issuance of a writ of preliminary attachment, they being mere general averments.
Respondent Court of appeals held that neither embezzlement, misappropriation nor incipient fraud may
be presumed; they must be established in order for a writ of preliminary attachment to issue.
Hence, the instant consolidated
5
petitions charging that respondent Court of Appeals erred in
"1. Holding that there was no sufficient basis for the issuance of the writ of preliminary
attachment in spite of the allegations of fraud, embezzlement and misappropriation of the
proceeds or goods entrusted to the private respondents;
2. Disregarding the fact that the failure of FTMI and Villanueva to remit the proceeds or
return the goods entrusted, in violation of private respondents' fiduciary duty as entrustee,
constitute embezzlement or misappropriation which is a valid ground for the issuance of a
writ of preliminary attachment."
6

We find no merit in the instant petitions.
To begin with, we are in accord with respondent Court of Appeals in CA-G.R. SP No. 32863 that the
Motion for Attachment filed by petitioner and its supporting affidavit did not sufficiently establish the
grounds relied upon in applying for the writ of preliminary attachment.
The Motion for Attachment of petitioner states that
1. The instant case is based on the failure of defendants as entrustee to pay or remit the
proceeds of the goods entrusted by plaintiff to defendant as evidenced by the trust receipts
(Annexes "B", "C" and "D" of the complaint), nor to return the goods entrusted thereto, in
violation of their fiduciary duty as agent or entrustee;
2. Under Section 13 of P.D. 115, as amended, violation of the trust receipt law constitute(s)
estafa (fraud and/or deceit) punishable under Article 315 par. 1[b] of the Revised Penal Code;
3. On account of the foregoing, there exist(s) valid ground for the issuance of a writ of
preliminary attachment under Section 1 of Rule 57 of the Revised Rules of Court particularly
under sub-paragraphs "b" and "d", i.e. for embezzlement or fraudulent misapplication or
conversion of money (proceeds) or property (goods entrusted) by an agent (entrustee) in
violation of his fiduciary duty as such, and against a party who has been guilty of fraud in
contracting or incurring the debt or obligation;
4. The issuance of a writ of preliminary attachment is likewise urgently necessary as there
exist(s) no sufficient security for the satisfaction of any judgment that may be rendered
against the defendants as the latter appears to have disposed of their properties to the
detriment of the creditors like the herein plaintiff;
5. Herein plaintiff is willing to post a bond in the amount fixed by this Honorable Court as a
condition to the issuance of a writ of preliminary attachment against the properties of the
defendants.
Section 1 (b) and (d), Rule 57 of the then controlling Revised Rules of Court, provides, to wit
SECTION 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:
x x x x x x x x x
(b) In an action for money or property embezzled or fraudulently misapplied or converted to
his us 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;
x x x x x x x x x
(d) In an action against a party who has been guilty of fraud in contracting the debt or
incurring the obligation upon which the action is brought, or in concealing or disposing of the
property for the taking, detention or conversion of which the action is brought;
x x x x x x x x x
While the Motion refers to the transaction complained of as involving trust receipts, the violation of the
terms of which is qualified by law as constituting estafa, it does not follow that a writ of attachment can
and should automatically issue. Petitioner cannot merely cite Section 1(b) and (d), Rule 57, of the
Revised Rules of Court, as mere reproduction of the rules, without more, cannot serve as good ground
for issuing a writ of attachment. An order of attachment cannot be issued on a general averment, such
as one ceremoniously quoting from a pertinent rule.
7

The supporting Affidavit is even less instructive. It merely states, as follows
I, DOMINGO S. AURE, of legal age, married, with address at No. 214-216 Juan Luna Street,
Binondo, Manila, after having been sworn in accordance with law, do hereby depose and say,
THAT:
1. I am the Assistant Manager for Central Collection Units Acquired Assets Section of the
plaintiff, Philippine Bank of Communications, and as such I have caused the preparation of the
above motion for issuance of a writ of preliminary attachment;
2. I have read and understood its contents which are true and correct of my own
knowledge;
39

3. There exist(s) sufficient cause of action against the defendants in the instant case;
4. The instant case is one of those mentioned in Section 1 of Rule 57 of the Revised Rules
of Court wherein a writ of preliminary attachment may be issued against the defendants,
particularly subparagraphs "b" and "d" of said section;
5. There is no other sufficient security for the claim sought to be enforced by the instant
case and the amount due to herein plaintiff or the value of the property sought to be
recovered is as much as the sum for which the order for attachment is granted, above all legal
counterclaims.
Again, it lacks particulars upon which the court can discern whether or not a writ of attachment should
issue.
Petitioner cannot insist that its allegation that private respondents failed to remit the proceeds of the
sale of the entrusted goods nor to return the same is sufficient for attachment to issue. We note that
petitioner anchors its application upon Section 1(d), Rule 57. This particular provision was adequately
explained in Liberty Insurance Corporation v. Court of Appeals,
8
as follows
To sustain an attachment on this ground, it must be shown that the debtor in contracting the
debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the
execution of the agreement and must have been the reason which induced the other party
into giving consent which he would not have otherwise given. To constitute a ground for
attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon
contracting the obligation sued upon. A debt is fraudulently contracted if at the time of
contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case.
Fraud is a state of mind and need not be proved by direct evidence but may be inferred from
the circumstances attendant in each case (Republic v. Gonzales, 13 SCRA 633). (Emphasis
ours)
We find an absence of factual allegations as to how the fraud alleged by petitioner was committed. As
correctly held by respondent Court of Appeals, such fraudulent intent not to honor the admitted
obligation cannot be inferred from the debtor's inability to pay or to comply with the obligations.
9
On the
other hand, as stressed, above, fraud may be gleaned from a preconceived plan or intention not to pay.
This does not appear to be so in the case at bar. In fact, it is alleged by private respondents that out of
the total P419,613.96 covered by the subject trust receipts, the amount of P400,000.00 had already been
paid, leaving only P19,613.96 as balance. Hence, regardless of the arguments regarding penalty and
interest, it can hardly be said that private respondents harbored a preconceived plan or intention not to
pay petitioner.
The Court of Appeals was correct, therefore, in its finding in CA-G.R. SP No. 32863 that neither
petitioner's Motion or its supporting Affidavit provides sufficient basis for the issuance of the writ of
attachment prayed for.
We also agree with respondent Court of Appeals in CA-G.R. SP No. 32762 that the lower court should
have conducted a hearing and required private petitioner to substantiate its allegations of fraud,
embezzlement and misappropriation.
To reiterate, petitioner's Motion for Attachment fails to meet the standard set in D.P. Lub Oil Marketing
Center, Inc. v. Nicolas,
10
in applications for attachment. In the said case, this Court cautioned
The petitioner's prayer for a writ of preliminary attachment hinges on the allegations in
paragraph 16 of the complaint and paragraph 4 of the affidavit of Daniel Pe which are
couched in general terms devoid of particulars of time, persons and places to support support
such a serious assertion that "defendants are disposing of their properties in fraud of
creditors." There is thus the necessity of giving to the private respondents an opportunity to
ventilate their side in a hearing, in accordance with due process, in order to determine the
truthfulness of the allegations. But no hearing was afforded to the private respondents the
writ having been issued ex parte. A writ of attachment can only be granted on concrete and
specific grounds and not on general averments merely quoting the words of the rules.
As was frowned upon in D.P. Lub Oil Marketing Center, Inc.,
11
not only was petitioner's application
defective for having merely given general averments; what is worse, there was no hearing to afford
private respondents an opportunity to ventilate their side, in accordance with due process, in order to
determine the truthfulness of the allegations of petitioner. As already mentioned, private respondents
claimed that substantial payments were made on the proceeds of the trust receipts sued upon. They also
refuted the allegations of fraud, embezzlement and misappropriation by averring that private
respondent Filipinas Textile Mills could not have done these as it had ceased its operations starting in
June of 1984 due to workers' strike. These are matters which should have been addressed in a
preliminary hearing to guide the lower court to a judicious exercise of its discretion regarding the
attachment prayed for. On this score, respondent Court of Appeals was correct in setting aside the
issued writ of preliminary attachment.
Time and again, we have held that the rules on the issuance of a writ of attachment must be construed
strictly against the applicants. This stringency is required because the remedy of attachment is harsh,
extraordinary and summary in nature. If all the requisites for the granting of the writ are not present,
then the court which issues it acts in excess of its jurisdiction.
12

WHEREFORE, for the foregoing reasons, the instant petitions are DENIED. The decision of the Court of
Appeals in CA-G.R. SP No. 32863 and CA-G.R. SP No. 32762 are AFFIRMED. No pronouncement as to
costs.1wphi1.nt
SO ORDERED.









40

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 167741 July 12, 2007
REPUBLIC OF THE PHILIPPINES, Petitioner,
vs.
MAJ. GEN. CARLOS FLORES GARCIA, CLARITA DEPAKAKIBO GARCIA, IAN CARL DEPAKAKIBO GARCIA,
JUAN PAULO DEPAKAKIBO GARCIA, TIMOTHY DEPAKAKIBO GARCIA and THE SANDIGANBAYAN
(FOURTH DIVISION), Respondents.
D E C I S I O N
CORONA, J.:
This petition for certiorari
1
assails the January 14, 2005 and March 2, 2005 resolutions
2
of the Fourth
Division of the Sandiganbayan in Civil Case No. 0193 entitled Republic of the Philippines v. Maj. Gen.
Carlos Flores Garcia, Clarita Depakakibo Garcia, Ian Carl Depakakibo Garcia, Juan Paulo Depakakibo
Garcia and Timothy Mark Depakakibo Garcia.
Civil Case No. 0193 was a petition for forfeiture of unlawfully acquired properties, with a verified urgent
ex-parte application for the issuance of a writ of preliminary attachment, filed by the Republic of the
Philippines against Maj. Gen. Carlos F. Garcia, his wife
3
and children
4
in the Sandiganbayan on October
27, 2004. In praying for the issuance of a writ of preliminary attachment, the Republic maintained that,
as a sovereign political entity, it was exempt from filing the required attachment bond.
On October 29, 2004, the Sandiganbayan issued a resolution ordering the issuance of a writ of
preliminary attachment against the properties of the Garcias upon the filing by the Republic of a P1
million attachment bond.
5
On November 2, 2004, the Republic posted the required attachment bond to
avoid any delay in the issuance of the writ as well as to promptly protect and secure its claim.
On December 7, 2004, the Republic filed a motion for partial reconsideration of the October 29, 2004
resolution claiming that it was exempt from filing an attachment bond and praying for the release
thereof.
In a resolution dated January 14, 2005, the Sandiganbayan ruled that there was nothing in the Rules of
Court that exempted the Republic from filing an attachment bond. It reexamined Tolentino v.
Carlos
6
which was invoked by the Republic to justify its claimed exemption. That case was decided under
the old Code of Civil Procedure enacted more than a century ago.
The Sandiganbayan denied the Republics motion. Reconsideration was also denied in a resolution dated
March 2, 2005.
As already stated, these two resolutions (January 14, 2005 and March 2, 2005) are the subject of the
present petition.
Did the Sandiganbayan commit grave abuse of discretion when it rejected the Republics claim of
exemption from the filing of an attachment bond? Yes.
Sections 3 and 4, Rule 57 of the Rules of Court provide:
Sec. 3. Affidavit and bond required. An order of attachment shall be granted only when it appears by
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 hereof, that there is no other
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 affidavit, and the bond required by
the next succeeding section, must be duly filed with the court before the order issues.
Sec. 4. Condition of applicants bond. The party applying for the order must thereafter give a bond
executed to the adverse party in the amount fixed by the court in its order granting the issuance of the
writ, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all
damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the
applicant was not entitled thereto. (emphasis supplied)
Under these provisions, before a writ of attachment may issue, a bond must first be filed to answer for
all costs which may be adjudged to the adverse party and for the damages he may sustain by reason of
the attachment. However, this rule does not cover the State. In Tolentino,
7
this Court declared that the
State as represented by the government is exempt from filing an attachment bond on the theory that it
is always solvent.
2. Section 427 of the Code of Civil Procedure provides that before the issuance of a writ of attachment,
the applicant therefor or any person in his name, should file a bond in favor of the defendant for an
amount not less than P400 nor more than the amount of the claim, answerable for damages in case it is
shown that the attachment was obtained illegally or without sufficient cause; but in the case at bar the
one who applied for and obtained the attachment is the Commonwealth of the Philippines, as
plaintiff, and under the theory that the State is always solvent it was not bound to post the required
bond and the respondent judge did not exceed his jurisdiction in exempting it from such requirement. x
x x
8
(emphasis supplied)
In other words, the issuance of a writ of preliminary attachment is conditioned on the filing of a bond
unless the applicant is the State. Where the State is the applicant, the filing of the attachment bond is
excused.
9

The attachment bond is contingent on and answerable for all costs which may be adjudged to the
adverse party and all damages which he may sustain by reason of the attachment should the court finally
rule that the applicant is not entitled to the writ of attachment. Thus, it is a security for the payment of
the costs and damages to which the adverse party may be entitled in case there is a subsequent finding
that the applicant is not entitled to the writ. The Republic of the Philippines need not give this security as
it is presumed to be always solvent and able to meet its obligations.
The Sandiganbayan thus erred when it disregarded the foregoing presumption and instead ruled that the
Republic should file an attachment bond. The error was not simply an error of judgment but grave abuse
of discretion.
41

There is grave abuse of discretion when an act is done contrary to the Constitution, the law or
jurisprudence.
10
Here, the Sandiganbayans January 14, 2005 resolution was clearly contrary to Tolentino.
Worse, the Sandiganbayan transgressed the Constitution and arrogated upon itself a power that it did
not by law possess. All courts must take their bearings from the decisions and rulings of this
Court. Tolentino has not been superseded or reversed. Thus, it is existing jurisprudence and continues to
form an important part of our legal system.
11
Surprisingly, the Sandiganbayan declared
that Tolentino "need(ed) to be carefully reexamined in the light of the changes that the rule on
attachment ha(d) undergone through the years."
12
According to the court a quo:
[Tolentino] was decided by the Supreme Court employing the old Code of Civil Procedure (Act No. 190)
which was enacted by the Philippine Commission on August 7, 1901 or more than a century ago.
That was then, this is now. The provisions of the old Code of Civil Procedure governing attachment have
been substantially modified in the subsequent Rules of Court. In fact, Rule 57 of the present 1997 Rules
of Civil Procedure is an expanded modification of the provisions of the old Code of Civil Procedure
governing attachment. Unlike the old Code of Civil Procedure, the present 1997 Rules of Civil Procedure
is noticeably explicit in its requirement that the party applying for an order of attachment should file a
bond.
On this, Article VIII, Section 4(3) of the Constitution provides:
(3) Cases or matters heard by a division shall be decided or resolved with the concurrence of majority of
the Members who actually took part in the deliberations on the issues in the case and voted thereon,
and in no case without the concurrence of at least three of such Members. When the required number is
not obtained, the case shall be decided en banc; Provided, that no doctrine or principle of law laid down
by the court in a decision rendered en banc or in division may be modified or reversed except by the
court sitting en banc. (emphasis supplied)
The Constitution mandates that only this Court sitting en banc may modify or reverse a doctrine or
principle of law laid down by the Court in a decision rendered en banc or in division. Any court, the
Sandiganbayan included, which renders a decision in violation of this constitutional precept exceeds its
jurisdiction.
Therefore, the Sandiganbayan could not have validly "reexamined," much less reversed, Tolentino. By
doing something it could not validly do, the Sandiganbayan acted ultra vires and committed grave abuse
of discretion.
The fact was, the revisions of the Rules of Court on attachment, particularly those pertaining to the filing
of an attachment bond, did not quash Tolentino.
Tolentino applied Sec. 247 of Act No. 190 which provided:
Sec. 247. Obligation for damages in case of attachment. Before the order is made, the party applying
for it, or some person on his behalf, must execute to the defendant an obligation in an amount to be
fixed by the judge, or justice of the peace, and with sufficient surety to be approved by him, which
obligation shall be for a sum not less than two hundred dollars, and not exceeding the amount claimed
by the plaintiff, that the plaintiff will pay all the costs which may be adjudged to the defendant, and all
damages which he may sustain by reason of the attachment, if the same shall finally be adjudged to have
been wrongful or without sufficient cause. (emphasis supplied)
Contrary to the pronouncement of the Sandiganbayan, Section 247 of Act No. 190 explicitly required the
execution of an attachment bond before a writ of preliminary attachment could be issued.
The relevant provisions of Act No. 190 on attachment were later substantially adopted as Sections
3
13
and 4, Rule 59 of the 1940 Rules of Court.
Sec. 3. Order issued only when affidavit and bond filed. An order of attachment shall be granted only
when it is made to appear by the affidavit of the plaintiff, or of some other person who personally knows
the facts, 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 plaintiff, or
the value of the property which he is entitled to recover possession of, is as much as the sum for which
the order is granted above all legal counterclaims; which 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.
(emphasis supplied)
Sec. 4. Bond required from plaintiff. The party applying for the order must give a bond executed to the
defendant in an amount to be fixed by the judge, not exceeding the plaintiffs claim, that the plaintiff will
pay all the costs which may be adjudged to the defendant and all damages which he may sustain by
reason of the attachment, if the court shall finally adjudge that the plaintiff was not entitled thereto.
And with the promulgation of the 1964 Rules of Court, the rules on attachment were renumbered as
Rule 57, remaining substantially the same:
Sec. 3. Affidavit and bond required. An order of attachment shall be granted only when it appears by
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 hereof, that there is no other
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 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. (emphasis supplied)
Sec. 4. Condition of applicants bond. The party applying for the order must thereafter give a bond
executed to the adverse party in an amount to be fixed by the judge, not exceeding the applicants
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.
Clearly, the filing of an attachment bond before the issuance of a writ of preliminary attachment was
expressly required under the relevant provisions of both the 1940 and 1964 Rules of Court.
Commentaries on Sections 3 and 4 of the 1964 Rules of Court uniformly cited Tolentino. They stated that
the government is exempt from filing an attachment bond
14
and that the State need not file an
attachment bond.
15

Where the Republic of the Philippines as a party to an action asks for a writ of attachment against the
properties of a defendant, it need not furnish a bond. This is so because the State is presumed to be
solvent.
16

42

When plaintiff is the Republic of the Philippines, it need not file a bond when it applies for a preliminary
attachment. This is on the premise that the State is solvent.
17

And then again, we note the significant fact that Sections 3 and 4, Rule 57 of the 1964 Rules of Court
were substantially incorporated as Sections 3 and 4, Rule 57 of the present (1997) Rules of Court.
18
There
is thus no reason why the Republic should be made to file an attachment bond.1avvphi1
In fact, in Spouses Badillo v. Hon. Tayag,
19
a fairly recent case, this Court declared that, when the State
litigates, it is not required to put up a bond for damages or even an appeal bond because it is presumed
to be solvent. In other words, the State is not required to file a bond because it is capable of paying its
obligations.
20

The pronouncement in Spouses Badillo applies in this case even if Spouses Badillo involved the filing of a
supersedeas bond. The pronouncement that the State "is not required to put up a bond for damages or
even an appeal bond" is general enough to encompass attachment bonds. Moreover, the purpose of an
attachment bond (to answer for all costs and damages which the adverse party may sustain by reason of
the attachment if the court finally rules that the applicant is not entitled to the writ) and a supersedeas
bond (to answer for damages to the winning party in case the appeal is found frivolous) is essentially the
same.1awphil.zw+
In filing forfeiture cases against erring public officials and employees, the Office of the Ombudsman
performs the States sovereign functions of enforcing laws, guarding and protecting the integrity of the
public service and addressing the problem of corruption in the bureaucracy.
The filing of an application for the issuance of a writ of preliminary attachment is a necessary incident in
forfeiture cases. It is needed to protect the interest of the government and to prevent the removal,
concealment and disposition of properties in the hands of unscrupulous public officers. Otherwise, even
if the government subsequently wins the case, it will be left holding an empty bag.
Accordingly, the petition is hereby GRANTED. The January 14, 2005 and March 2, 2005 resolutions of the
Sandiganbayan are REVERSED and SET ASIDE. The Republic of the Philippines is declared exempt from
the payment or filing of an attachment bond for the issuance of a writ of preliminary attachment issued
in Civil Case No. 0193. The Sandiganbayan is hereby ordered to release the P1,000,000 bond posted by
the Republic of the Philippines to the Office of the Ombudsman.
SO ORDERED.







Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
A.M. No. P-11-2986 June 13, 2012
(Formerly A.M. OCA IPI No. 10-3460-P)
SPOUSES RAINER TIU and JENNIFER TIU, Complainants,
vs.
VIRGILIO F. VILLAR, Sheriff IV, Regional Trial Court, Office of the Clerk of Court, Pasay City, Respondent.
D E C I S I O N
MENDOZA, J.:
This is an administrative matter for Grave Misconduct, Grave Abuse of Authority and Conduct Prejudicial
to the Best Interest of the Service filed against respondent Virgilio F. Villar, Sheriff IV, Office of the Clerk
of Court, Regional Trial Court, Pasay City (Sheriff Villar), relating to the implementation of the Writ of
Preliminary Attachment in Civil Case No. R-PSY-10-02698-CV, a case for Sum of Money and Damages,
captioned as "Henry Sia and Hankook Industrial Sales Co. v. Spouses Rainer Tiu and Jennifer Calacday Tiu,
et al."
1

The factual antecedents are as follows:
On February 17, 2010, Henry Sia (Sia) and Hankook Industrial Sales Co. filed a Complaint for Sum of
Money and Damages with prayer for Preliminary Attachment against Classique Concept International
Corporation (Classique),First Global Ventures, Inc. (First Global) and herein complainants, spouses Rainer
and Jennifer Tiu (Spouses Tiu), before the Regional Trial Court, Pasay City, Branch 115 (RTC). In its
Order
2
dated February 25, 2010, the RTC granted the prayer for the issuance of a writ of preliminary
attachment. Accordingly, on March 8, 2010, the Writ of Preliminary Attachment addressed to Sheriff
Carlos G. Tadeo and Sheriff Virgilio Villar was issued. Preliminarily, on March 17, 2010, Sheriff Villar
served copies of the summons, complaint and the writ of preliminary attachment to Spouses Tiu in the
office of First Global at Unit 1905 Raffles Corporate Center, Emerald Avenue, Ortigas Center, Pasig City.
The copies were received by Grace Tan Bauco (Bauco), who introduced herself as the companys General
Manager and Caretaker, after efforts to personally serve them to Spouses Tiu failed. Thereafter, Sheriff
Villar attached the personal properties found in said address.
Unperturbed, Spouses Tiu moved to have the case against them dismissed on the ground of improper
venue.
3

In its Order
4
dated July 8, 2010, the RTC granted the motion and ordered the release of the attached
properties in favor of Spouses Tiu. The decretal portion of the order reads:
WHEREFORE, under Rule 4, Sec. 2, in relation to Rule 16, Sec. 1 (c), because of improper venue, the
defendants Motion to Dismiss and Supplemental Motion to Dismiss are GRANTED, and this case is
DISMISSED.
43

The writ of preliminary attachment dated March 8, 2010 previously issued by this Court is set aside, and
everything seized thereby be immediately returned by the sheriff responsible to the defendants.
[Emphasis ours]
SO ORDERED.
5

The motion for reconsideration filed by the group of Sia was denied by the RTC in a subsequent
order
6
dated July 16, 2010. The RTC reiterated its previous order to return the attached items to Spouses
Tiu. The fallo reads:
WHEREFORE, finding no cogent or legal reason to reverse or modify the Order dated July 8, 2010, the
plaintiffs Motion for Reconsideration with Motion to Conduct Ocular Inspection is DENIED.
Sheriff Virgilio Villar is directed to immediately return to defendants the seized items.
7

Acting on the RTCs directive, Sheriff Villar submitted his Sheriffs Report with Urgent Prayer for Issuance
of Clarificatory Order.
8
He wanted to be clarified on whether or not he should wait for the trial courts
order to attain finality before returning the attached personal properties.
In the meantime, Sia filed his Notice of Appeal and Very Urgent Motion to Stay Enforcement of Order to
Return Seized Properties while Spouses Tiu filed an Urgent Ex-Parte Motion to Cite Sheriff Virgilio Villar
in Contempt of Court.
9

Not contented with the motion, Spouses Tiu also lodged the present administrative complaint
10
against
Sheriff Villar for his alleged questionable actions regarding the implementation of the writ of attachment
against them.
First, Spouses Tui alleged that there was no proper service of summons upon them by Sheriff Villar
before the writ of attachment was implemented. They claimed that Sheriff Villar merely left a copy of
the summons with one of their employees in violation of the rule on personal service of summons to the
parties concerned as required by the Rules of Court. Second, they averred that Sheriff Villar improperly
implemented the writ against them without prior coordination with the Sheriffs Office of Pasig City.
Third, they insinuated that Sheriff Villar asked for money for the release of their seized properties.
Fourth, they charged that Sheriff Villar maliciously refused to return their attached properties despite
the RTCs clear directive after the case against them was dismissed.
In his Comment,
11
Sheriff Villar denied all the charges against him. He denied the allegation of Spouses
Tiu that there was no valid service of summons for the writ of preliminary attachment. He explained that
he effected a substituted service after several unsuccessful attempts to personally serve the summons
on them. He also added that he made the proper coordination with the Sheriffs office of Pasig City
before implementing the writ of preliminary attachment against them. He denied receiving P35,000.00
from their driver in exchange for the release of the couples seized properties. He asserted that he had
no ill-motive against the return of the seized properties to them and even sought clarification from the
RTC.
Incidentally, the RTC, in its Order
12
dated August 17, 2010, gave due course to the Notice of Appeal and
stated that by virtue of Sias timely appeal it had no recourse but to elevate the entire records of the
case, including the issue of the return of Spouses Tius attached properties, to the Court of Appeals.
The Office of the Court Administrator (OCA), in its Report
13
dated June 22, 2011, stated that the factual
and conflicting allegations of the parties must be threshed out in an appropriate investigation
considering the seriousness of the charge being imputed against Sheriff Villar. Accordingly, the OCA
made the following recommendations:
RECOMMENDATION: We respectfully submit for the consideration of the Honorable Court the
recommendation that the instant administrative complaint against Virgilio F. Villar, Sheriff IV, Office of
the Clerk of Court, Regional Trial Court, Pasay City, be RE-DOCKETED as a regular administrative matter
and REFERRED to the Executive Judge of the Regional Trial Court, Pasay City for investigation. The report
and recommendation relative to the investigation shall be submitted within sixty (60) days from receipt
of the records of the administrative complaint.
14

In its Resolution
15
dated September 12, 2011, the Court resolved to re-docket the administrative
complaint into a regular administrative matter and referred the same to the Executive Judge of the
Regional Trial Court, Pasay City for investigation, report and recommendation.
In his Report and Recommendation
16
dated February 8, 2012, Executive Judge Edwin B. Ramizo (Judge
Ramizo)recommended the dismissal of the administrative complaint against Sheriff Villar.
Judge Ramizo found that Sheriff Villar complied with the instruction embodied in Administrative Circular
No. 12 requiring a sheriff to notify in writing the sheriff of the place where the execution of a writ is to
take place. He likewise found nothing irregular in the substituted service of summons effected by Sheriff
Villar as the same complied with the requisites mandated by the Rules of Court. Furthermore, the
investigating judge saw no bad faith when Sheriff Villar failed to return the attached properties after the
dismissal of the case and the issuance of the RTC order to release the seized properties. According to
him, Sheriff Villar merely retained the properties because he was uncertain whether or not he should
wait for the finality of the order dismissing the case. Judge Ramizo gave no weight to Spouses Tius
allegation that Sheriff Villar demanded money from them to regain possession of their seized properties.
After a careful examination of the records, the Court agrees with the recommendation of Judge Ramizo
that the complaint against Sheriff Villar be dismissed.
On the questioned substituted service of summons, the Court concurs with the findings of the
investigating judge that there was a valid substituted service of summons. As a rule, personal service of
summons is preferred as against substituted service. Thus, substituted service can only be resorted to by
the process server only if personal service cannot be made promptly. Most importantly, the proof of
substituted service of summons must (a) indicate the impossibility of service of summons within a
reasonable time; (b) specify the efforts exerted to locate the defendant; and (c) state that the summons
was served upon a person of sufficient age and discretion who is residing in the address, or who is in
charge of the office or regular place of business, of the defendant. It is likewise required that the
pertinent facts proving these circumstances be stated in the proof of service or in the officers return.
17

Based on the records, Sheriff Villar exhausted efforts to personally serve the summons to Spouses Tiu as
indicated in his Sheriffs Return of Summons
18
dated April 23, 2010. When it was apparent that the
summons could not be served personally on the spouses, Sheriff Villar served the summons through
Bauco, their employee, at the office address of the couples business, First Global and Classique. It was
evident that Bauco was competent and of sufficient age to receive the summons on their behalf as she
represented herself to be their General Manager and Caretaker.
On the charge that Sheriff Villar did not comply with the requirement of prior coordination as mandated
in Administrative Circular No. 12, Judge Ramizo found it baseless and stated that the sheriff properly
44

complied with the circular. Administrative Circular No. 12
19
lays down the guidelines and procedure in
the service and execution of court writs and processes in the reorganized courts. In particular, paragraph
2 thereof states:
x x x x
2. All Clerks of Court of the Metropolitan Trial Court and Municipal Trial Courts in Cities, and/or their
deputy sheriffs shall serve all court processes and execute all writs of their respective courts within their
territorial jurisdiction; [Emphasis ours]
x x x x
Paragraph 5 of the same circular requires prior coordination with the sheriff of the place where the
execution of the writ will take place, to wit:
5. No sheriff or deputy sheriff shall execute a court writ outside his territorial jurisdiction without first
notifying in writing, and seeking the assistance of, the sheriff of the place where the execution shall take
place; [Emphasis ours]
In the case at bench, documentary evidence indeed discloses that Sheriff Villar of Pasay City coordinated
with the Sheriff of Pasig City, in compliance with Administrative Circular No. 12, before he implemented
the writ of preliminary attachment. In the Certification
20
dated November 17, 2011, the Clerk of Court of
Pasig City attested to the fact that Sheriff Villar formally coordinated with their office in connection with
the implementation of the writ of attachment. Attached to said certification is a certified true copy of
Sheriff Villars request for coordination
21
dated March 12, 2010, on which the word "received" was
stamped by the Office of the Clerk of Court and Ex-officio Sheriff, RTC-Pasig City.
As to Sheriff Villars failure to effect the immediate release of the attached properties despite the RTCs
order of release, the Court finds the explanation of the respondent sheriff acceptable enough as not to
earn a sanction from the Court.
By law, sheriffs are obligated to maintain possession of the seized properties absent any instruction to
the contrary. In this case, the writ of preliminary attachment authorizing the trial court to legally hold
the attached items was set aside by the RTC Order dated July 8, 2010 specifically ordering Sheriff Villar to
immediately release the seized items to Spouses Tiu. Pertinently, Rule 57, Section 19 of the Rules of Civil
Procedure provides:
SEC. 19. Disposition of attached property where judgment is for party against whom attachment was
issued.Ifjudgment be rendered against the attaching party, all the proceeds of sales and money
collected or received by the sheriff, under the order of attachment, and all property attached remaining
in any such officers hands, shall be delivered to the party against whom attachment was issued, and the
order of attachment discharged.
The instruction of the trial court was clear and simple. Sheriff Villar was to return the seized properties to
Spouses Tiu. He should have followed the courts order immediately. He had no discretion to wait for the
finality of the courts order of dismissal before discharging the order of attachment. Nevertheless, Sheriff
Villar showed no deliberate defiance of, or disobedience to, the courts order of release. Records show
that he took the proper step under the circumstances. He filed with the trial court his Sheriffs Report
with Urgent Prayer for the Issuance of a Clarificatory Order. The Court perceives nothing amiss in
consulting the judge before taking action on a matter of which he is not an expert.
As to the allegation of grave misconduct for supposedly asking P35,000.00 to facilitate the return of the
attached items, the records bear out that it was a baseless charge. In administrative proceedings, the
complainant bears the onus of establishing, by substantial evidence, the averments of his
complaint.
22
Other than the bare allegations of Spouses Tiu, no evidence showing that Sheriff Villar
surreptitiously demanded money from them for the release of their attached properties was adduced.
Mere suspicion without proof cannot be the basis of conviction.
23

WHEREFORE, the complaint against Virgilio F. Villar, Sheriff IV, Office of the Clerk of Court, Regional Trial
Court, Pasay City, is hereby DISMISSED.
SO ORDERED.



















45

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-7717 April 27, 1956
G.B., INC., ETC., petitioner,
vs.
THE HONORABLE JUDGE CONRADO V. SANCHEZ, ET AL., respondents.
Zafra, Lara, De Leon and Veneracion for petitioner.
Juan T. Chuidian for respondents.
PARAS, C.J.:
Petitioner herein G.B. Inc. is the Trustee of Juan Luna Subdivision Inc. Allison Gibbs is the President of the
petitioner and manager of Juan Luna Subdivision, Inc. Before December 31, 1953, herein respondent
Juan T. Chuidian and Allison Gibbs were partners of the law firm "Gibbs, Gibbs, Chuidian and Quasha",
the retaining counsel of Juan Luna Subdivision, Inc. On June 18, 1948, a loan of P40,000 was granted by
Juan Luna Subdivision, Inc. to respondent Chuidian, and an "Agreement to sell" was executed on that
date whereby respondent Chuidian acknowledge the receipt of said amount for which he agreed and
promised to transfer within 60 days to Juan Luna Subdivision, Inc. the land which he bought from one
Florence Shuster the loan thus obtained. On June 19, 1948, respondent Chuidian addressed a letter to
Juan Luna Subdivision, Inc. indicating his intention to secure a loan from the Rehabilitation Finance
Corporation with which to pay his debt to Juan Luna Subdivision, Inc. On May 5, 1953, in his letter to
Juan Luna Subdivision, Inc. respondent Chuidian acknowledged his indebtedness of P53,817.72,
representing balance of principal and interest. Instead of conveying the land bought from Florence
Shuster to Juan Luna Subdivision, Inc. respondent Chuidian sold the same to Elenita Hernandez for
P25,000 in order to pay his wife's gambling death. On December 1, 1953, Allison Gibbs and respondent
Chuidian ceased to be law partners. On March 4, 1954, the petitioner filed a complaint against
respondent Chuidian in the Court of First Instance of Manila, Civil Case No. 22183, for the collection of
his indebtedness based on his "Agreement to Sell". At the commencement of the action, the petitioner
asked for the issuance ex-parte of a writ of preliminary attachment which as granted by the court upon
the filing by the petitioner of a bond of P57,000. On March 12, 1954, respondent Chuidian filed a
"Motion to Discharge Attachment" based on the ground that said attachment was improperly issued, to
which the petitioner filed an opposition on March 16, 1954. On March 31, 1954, the petition filed an
urgent motion praying that respondent Chuidian's "Motion to Discharge Attachment" be denied or that
it be granted after the filing of a counter bound or that the hearing of said "Motion to Discharge
Attachment" be held after respondent Chuidian shall have filed an answer to the complaint. The
respondent Judge of the Court of First Instance of Manila denied petitioner's urgent motion and set the
hearing of the "Motion to Discharge Attachment" on April 3, 1954. Such hearing was held on April 3 and
6, 1954. When the hearing in the afternoon of April 6 and was about to end, counsel for petitioner
requested that the latter be given a chance to present an absent witness, which the court denied on the
ground that it had previously warned the parties that will witnesses should be presented on said date.
On April 22, 1954, the respondent Judge issued an order granting respondent Chuidian's "Motion to
Discharge Attachment" under section 13 of Rule 59 of the Rules of Court. A motion for reconsideration
having been denied, the petitioner filed the present petition for certiorari with preliminary injunction. On
May 4, 1954, this Court issued the preliminary injunction prayed for, restraining the respondent Judge
and the sheriff of the City of Manila from enforcing the order of April 22, 1945, discharging the writ of
attachment.
The grounds advanced by the petitioner for the issuance of the writ of attachment were (a) respondent
Chuidian converted to his own use the land which he bought in a fiduciary capacity for Juan Luna
Subdivision, Inc.; (b) that respondent Chuidian is guilty of fraud in contracting his indebtedness and
incurring the obligations upon which the action is brought; and (c) that respondent Chuidian has
removed or disposed of his property or is about to do so with intent to defraud his creditor. the
petitioner also points out that in addition to the grounds set forth in the motion for the issuance of an ex
parte writ of preliminary attachment, other grounds contained in the allegations of the complaint were
made a part of said ex parte motion by reference. Attached to the "Motion to Discharge Attachment"
filed by the respondent Chuidian, was an affidavit contradicting the grounds alleged by the petitioner.
Respondent Chuidian herein stresses the fact that while the writ of attachment was obtained by
petitioner ex parte, its discharge was ordered by the respondent Judge after extended hearings and the
submission of memoranda.
Stripped of non-essentials, the petitioner argues that respondent Chuidian converted to his own use the
land which he brought in the fiduciary for Juan Luna Subdivision, Inc., or at least is guilty of fraud in
contracting his indebtedness and incurring the obligation upon which the action in Civil Case No. 22138
is brought reliance being placed on the "Agreement to Sell" executed by respondent Chuidian on June
18, 1948, and the letter written by him to Juan Luna Subdivision, Inc., on June 19, 1948, herein above
already referred to. Respondent Chuidian in his testimony during the hearing of his "Motion to Discharge
Attachment" alleged that said "Agreement to Sell" did not express the true intentions of the parties; that
all the papers relied upon by the petitioner were mere formalities to avoid criticisms of the monitory
stockholders of Juan Luna Subdivision, Inc., conceived by Allison Gibbs; that the real and true intention of
the parties was that the money would be advanced by Allison Gibbs to respondent Chuidian and the
former would pay the Juan Luna Subdivision, Inc.
Petitioner also alleges that if it had been allowed to present its absent witness, Elenita Hernandez, the
following facts would have been proven: (1) that Chuidian's wife's indebtedness to Elenita Hernandez
was contracted before the "Agreement to Sell"; (2) that such indebtedness has been outstanding for
some time before such date (June 18, 1948); and (3) that the "Agreement to Sell" dated June 18, 1948
and letter on June 19, 1948, were executed with the preconceived intention of not complying with them.
It is therefore obvious that, in order to determine whether or not respondent Chuidian converted to his
own use the land which he bought in a fiduciary capacity for the Juan Luna Subdivision, Inc., or was guilty
of fraud in contracting his debt and incurring the obligations upon which the action is brought,
considering that respondent Chuidian has alleged that the "Agreement to Sell" executed by him and
other papers relief upon by the petitioner, did not express the real intentions of the parties; and
considering that the grounds invoked by the petitioner for the issuance of the writ attachment form the
very basis of its complaint in Civil Case No. 22138,a trial of the merits, after answer shall have been filed
by respondent Chuidian, was necessary. In this case the hearings of the "Motion to Discharge" were held
before the issues have been joined (respondent Chuidian not having as yet filed his answer to the
complaint), and the order of the respondent Judge discharging the attachment would have the effect of
deciding or prejudging the main action. "The merits of the main action are not triable in a motion to
discharge an attachment otherwise an applicant for the dissolution could force a trial of the merits of the
case on his motion." (4 Am. Jur., Sec. 635, 934.) The petitioner's case is rather strengthened by the fact
that it was not given an opportunity to present an absent material witness, in the person of Elenita
Hernandez.
In holding that there was no fraud on the part of respondent Chuidian, the respondent Judge held as
follows: "It must be borne in mind that defendant did not pocket the money no money passed hands
with that conveyance to Elenita Hernandez. The conveyance was in the form of a dacion en pago.
46

Defendant was practically driven to the wall the family name must be reserved. If defendant received
actually that sum of P25,000 consideration for the conveyance, perhaps there may yet be reason for
branding defendant as a fraud. But such was not the case.' It is evident, however, that the fact that
respondent Chuidian did not pocked the money paid for the conveyance by Elenita Hernandez, is
immaterial, inasmuch as the petitioner was deprived of the same amount of P25,000, assuming that
under its complaint respondent Chuidian was in fact indebted to the petitioner in the manner stated in
said complaint.
We are, therefore, of the opinion that, from what has been said, in a view of the return of the sheriff
showing financial instability on the part of respondent Chuidian, the most that the respondent Judge
could have done in his favor to which the petitioner has expressed its agreement was to discharge
the attachment in question upon the filing upon respondent Chuidian of a counter bond in the sum of
P57,000, under section 12 of Rule 59 of the Rules of Court. This would have accomplished respondent
Chuidian's purpose of preserving his property and family name, at the same time giving the petitioner
security for any judgment that it may obtain against him. We are constrained to hold the respondent
Judge acted with grave abuse of discretion.
Wherefore, the order of the respondent Judge dated April 22, 1954, is hereby set aside, and the writ of
preliminary attachment issued on March 4, 1954 maintained.
So ordered with costs against respondent Juan T. Chuidian.














Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. NO. 123638 June 15, 2005
INSULAR SAVINGS BANK, Petitioner,
vs.
COURT OF APPEALS, JUDGE OMAR U. AMIN, in his capacity as Presiding Judge of Branch 135 of the
Regional Trial Court of Makati, and FAR EAST BANK AND TRUST COMPANY, Respondents.
D E C I S I O N
GARCIA, J.:
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 N
1
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 decision
3
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 ofP25,200,000.00. 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 ofP12,600,000.00 is in the possession of respondent Bank. On March
9, 1994, petitioner filed a motion to discharge attachment by counter-bond in the amount
of P12,600,000.00. On June 13, 1994, respondent Judge issued the first assailed order denying the
motion. On June 27, 1994, petitioner filed a motion for reconsideration which was denied in the
second assailed order dated July 20, 1994" (Emphasis and words in bracket added).
47

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 ofP12,600,000.00.
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 of P1,000,000.00 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 of P12,600,000.00 should, so petitioner argues, be the
basis for computing the amount of the counter-bond.
The Court rules for the petitioner.
The then pertinent provision of Rule 57 (Preliminary Attachment) of the Rules of Court under which the
appellate court issued its assailed decision and resolution, provides as follows:
"SEC. 12. Discharge of attachment upon giving counter-bond. At any time after an order of attachment
has been granted, the party whose property has been attached, . . . may upon reasonable notice to the
applicant, apply to the judge who granted the order or to the judge of the court which the action is
pending, for an order discharging the attachment wholly or in part on the security given. The judge shall,
after hearing, order the discharge of the attachment if a cash deposit is made, or a counter-bond
executed to the attaching creditor is filed, on behalf of the adverse party, with the clerk or judge of the
court where the application is made in an amount equal to the value of the property attached as
determined by the judge, to secure the payment of any judgment that the attaching creditor may
recover in the action. x x x . Should such counter-bond for any reason be found to be, or become
insufficient, and the party furnishing the same fail to file an additional counter-bond, the attaching party
may apply for a new order of attachment"
4
(Emphasis supplied).
4

As may be noted, the amount of the counter-attachment bond is, under the terms of the aforequoted
Section 12, to be measured 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

48

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 ofP12,600,000.00
9
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 GRANTINGsuch motion upon the reposting of the same counter-bond.
SO ORDERED.





















49

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171750 January 25, 2012
UNITED PULP AND PAPER CO., INC., Petitioner,
vs.
ACROPOLIS CENTRAL GUARANTY CORPORATION, Respondent.
D E C I S I O N
MENDOZA, J.:
This is a petition for review under Rule 45 praying for the annulment of the November 17, 2005
Decision
1
and the March 2, 2006 Resolution
2
of the Court of Appeals (CA) in CA-G.R. SP No. 89135
entitled Acropolis Central Guaranty Corporation (formerly known as the Philippine Pryce Assurance
Corp.) v. Hon. Oscar B. Pimentel, as Presiding Judge, RTC of Makati City, Branch 148 (RTC), and United
Pulp and Paper Co., Inc.
The Facts
On May 14, 2002, United Pulp and Paper Co., Inc. (UPPC) filed a civil case for collection of the amount
ofP42,844,353.14 against Unibox Packaging Corporation (Unibox) and Vicente Ortega (Ortega) before
the Regional Trial Court of Makati, Branch 148 (RTC).
3
UPPC also prayed for a Writ of Preliminary
Attachment against the properties of Unibox and Ortega for the reason that the latter were on the verge
of insolvency and were transferring assets in fraud of creditors.
4
On August 29, 2002, the RTC issued the
Writ of Attachment
5
after UPPC posted a bond in the same amount of its claim. By virtue of the said writ,
several properties and assets of Unibox and Ortega were attached.
6

On October 10, 2002, Unibox and Ortega filed their Motion for the Discharge of Attachment,
7
praying
that they be allowed to file a counter-bond in the amount of P42,844,353.14 and that the writ of
preliminary attachment be discharged after the filing of such bond. Although this was opposed by UPPC,
the RTC, in its Order dated October 25, 2002, granted the said motion for the discharge of the writ of
attachment subject to the condition that Unibox and Ortega file a counter-bond.
8
Thus, on November 21,
2002, respondent Acropolis Central Guaranty Corporation (Acropolis) issued the Defendants Bond for
Dissolution of Attachment
9
in the amount ofP42,844,353.14 in favor of Unibox.
Not satisfied with the counter-bond issued by Acropolis, UPPC filed its Manifestation and Motion to
Discharge the Counter-Bond
10
dated November 27, 2002, claiming that Acropolis was among those
insurance companies whose licenses were set to be cancelled due to their failure to put up the minimum
amount of capitalization required by law. For that reason, UPPC prayed for the discharge of the counter-
bond and the reinstatement of the attachment. In its December 10, 2002 Order,
11
the RTC denied UPPCs
Motion to Discharge Counter-Bond and, instead, approved and admitted the counter-bond posted by
Acropolis. Accordingly, it ordered the sheriff to cause the lifting of the attachment on the properties of
Unibox and Ortega.
On September 29, 2003, Unibox, Ortega and UPPC executed a compromise agreement,
12
wherein Unibox
and Ortega acknowledged their obligation to UPPC in the amount of P35,089,544.00 as of August 31,
2003, inclusive of the principal and the accrued interest, and bound themselves to pay the said amount
in accordance with a schedule of payments agreed upon by the parties. Consequently, the RTC
promulgated its Judgment
13
dated October 2, 2003 approving the compromise agreement.
For failure of Unibox and Ortega to pay the required amounts for the months of May and June 2004
despite demand by UPPC, the latter filed its Motion for Execution
14
to satisfy the remaining unpaid
balance. In the July 30, 2004 Order,
15
the RTC acted favorably on the said motion and, on August 4, 2004,
it issued the requested Writ of Execution.
16

The sheriff then proceeded to enforce the Writ of Execution. It was discovered, however, that Unibox
had already ceased its business operation and all of its assets had been foreclosed by its creditor bank.
Moreover, the responses of the selected banks which were served with notices of garnishment indicated
that Unibox and Ortega no longer had funds available for garnishment. The sheriff also proceeded to the
residence of Ortega to serve the writ but he was denied entry to the premises. Despite his efforts, the
sheriff reported in his November 4, 2008 Partial Return
17
that there was no satisfaction of the remaining
unpaid balance by Unibox and Ortega.
On the basis of the said return, UPPC filed its Motion to Order Surety to Pay Amount of Counter-
Bond
18
directed at Acropolis. On November 30, 2004, the RTC issued its Order
19
granting the motion and
ordering Acropolis to comply with the terms of its counter-bond and pay UPPC the unpaid balance of the
judgment in the amount ofP27,048,568.78 with interest of 12% per annum from default.
Thereafter, on December 13, 2004, Acropolis filed its Manifestation and Very Urgent Motion for
Reconsideration,
20
arguing that it could not be made to pay the amount of the counter-bond because it
did not receive a demand for payment from UPPC. Furthermore, it reasoned that its obligation had been
discharged by virtue of the novation of its obligation pursuant to the compromise agreement executed
by UPPC, Unibox and Ortega. The motion, which was set for hearing on December 17, 2004, was
received by the RTC and UPPC only on December 20, 2004.
21
In the Order dated February 22, 2005, the
RTC denied the motion for reconsideration for lack of merit and for having been filed three days after the
date set for the hearing on the said motion.
22

Aggrieved, Acropolis filed a petition for certiorari before the CA with a prayer for the issuance of a
Temporary Restraining Order and Writ of Preliminary Injunction.
23
On November 17, 2005, the CA
rendered its Decision
24
granting the petition, reversing the February 22, 2005 Order of the RTC, and
absolving and relieving Acropolis of its liability to honor and pay the amount of its counter-attachment
bond. In arriving at said disposition, the CA stated that, firstly, Acropolis was able to comply with the
three-day notice rule because the motion it filed was sent by registered mail on December 13, 2004, four
days prior to the hearing set for December 17, 2004;
25
secondly, UPPC failed to comply with the
following requirements for recovery of a judgment creditor from the surety on the counter-bond in
accordance with Section 17, Rule 57 of the Rules of Court, to wit: (1) demand made by creditor on the
surety, (2) notice to surety and (3) summary hearing as to his liability for the judgment under the
counter-bond;
26
and, thirdly, the failure of UPPC to include Acropolis in the compromise agreement was
fatal to its case.
27

UPPC then filed a motion for reconsideration but it was denied by the CA in its Resolution dated March
1, 2006.
28

Hence, this petition.
50

The Issues
For the allowance of its petition, UPPC raises the following
GROUNDS
I.
The Court of Appeals erred in not holding respondent liable on its counter-attachment bond which it
posted before the trial court inasmuch as:
A. The requisites for recovering upon the respondent-surety were clearly complied with by petitioner
and the trial court, inasmuch as prior demand and notice in writing was made upon respondent, by
personal service, of petitioners motion to order respondent surety to pay the amount of its counter-
attachment bond, and a hearing thereon was held for the purpose of determining the liability of the
respondent-surety.
B. The terms of respondents counter-attachment bond are clear, and unequivocally provide that
respondent as surety shall jointly and solidarily bind itself with defendants to secure and pay any
judgment that petitioner may recover in the action. Hence, such being the terms of the bond, in
accordance with fair insurance practices, respondent cannot, and should not be allowed to, evade its
liability to pay on its counter-attachment bond posted by it before the trial court.
II.
The Court of Appeals erred in holding that the trial court gravely abused its discretion in denying
respondents manifestation and motion for reconsideration considering that the said motion failed to
comply with the three (3)-day notice rule under Section 4, Rule 15 of the Rules of Court, and that it had
lacked substantial merit to warrant a reversal of the trial courts previous order.
29

Simply put, the issues to be dealt with in this case are as follows:
(1) Whether UPPC failed to make the required demand and notice upon Acropolis; and
(2) Whether the execution of the compromise agreement between UPPC and Unibox and Ortega was
tantamount to a novation which had the effect of releasing Acropolis from its obligation under the
counter-attachment bond.
The Courts Ruling
UPPC complied with the twin requirements of notice and demand
On the recovery upon the counter-bond, the Court finds merit in the arguments of the petitioner.
UPPC argues that it complied with the requirement of demanding payment from Acropolis by notifying
it, in writing and by personal service, of the hearing held on UPPCs Motion to Order Respondent-Surety
to Pay the Bond.
30
Moreover, it points out that the terms of the counter-attachment bond are clear in
that Acropolis, as surety, shall jointly and solidarily bind itself with Unibox and Ortega to secure the
payment of any judgment that UPPC may recover in the action.
31

Section 17, Rule 57 of the Rules of Court sets forth the procedure for the recovery from a surety on a
counter-bond:
Sec. 17. Recovery upon the counter-bond. When the judgment has become executory, the surety or
sureties on any counter-bond given pursuant to the provisions of this Rule to secure the payment of the
judgment shall become charged on such counter-bond and bound to pay the judgment obligee upon
demand the amount due under the judgment, which amount may be recovered from such surety or
sureties after notice and summary hearing on the same action.
From a reading of the abovequoted provision, it is evident that a surety on a counter-bond given to
secure the payment of a judgment becomes liable for the payment of the amount due upon: (1) demand
made upon the surety; and (2) notice and summary hearing on the same action. After a careful scrutiny
of the records of the case, the Court is of the view that UPPC indeed complied with these twin
requirements.
This Court has consistently held that the filing of a complaint constitutes a judicial
demand.
32
Accordingly, the filing by UPPC of the Motion to Order Surety to Pay Amount of Counter-Bond
was already a demand upon Acropolis, as surety, for the payment of the amount due, pursuant to the
terms of the bond. In said bond, Acropolis bound itself in the sum of P 42,844,353.14 to secure the
payment of any judgment that UPPC might recover against Unibox and Ortega.
33

Furthermore, an examination of the records reveals that the motion was filed by UPPC on November 11,
2004 and was set for hearing on November 19, 2004.
34
Acropolis was duly notified of the hearing and it
was personally served a copy of the motion on November 11, 2004,
35
contrary to its claim that it did not
receive a copy of the motion.
On November 19, 2004, the case was reset for hearing on November 30, 2004. The minutes of the
hearing on both dates show that only the counsel for UPPC was present. Thus, Acropolis was given the
opportunity to defend itself. That it chose to ignore its day in court is no longer the fault of the RTC and
of UPPC. It cannot now invoke the alleged lack of notice and hearing when, undeniably, both
requirements were met by UPPC.
No novation despite compromise agreement; Acropolis still liable under the terms of the counter-bond
UPPC argues that the undertaking of Acropolis is to secure any judgment rendered by the RTC in its
favor. It points out that because of the posting of the counter-bond by Acropolis and the dissolution of
the writ of preliminary attachment against Unibox and Ortega, UPPC lost its security against the latter
two who had gone bankrupt.
36
It cites the cases of Guerrero v. Court of Appeals
37
and Martinez v.
Cavives
38
to support its position that the execution of a compromise agreement between the parties and
the subsequent rendition of a judgment based on the said compromise agreement does not release the
surety from its obligation nor does it novate the obligation.
39

Acropolis, on the other hand, contends that it was not a party to the compromise agreement. Neither
was it aware of the execution of such an agreement which contains an acknowledgment of liability on
the part of Unibox and Ortega that was prejudicial to it as the surety. Accordingly, it cannot be bound by
the judgment issued based on the said agreement.
40
Acropolis also questions the applicability
of Guerrero and draws attention to the fact that in said case, the compromise agreement specifically
51

stipulated that the surety shall continue to be liable, unlike in the case at bench where the compromise
agreement made no mention of its obligation to UPPC.
41

On this issue, the Court finds for UPPC also.
The terms of the Bond for Dissolution of Attachment issued by Unibox and Acropolis in favor of UPPC are
clear and leave no room for ambiguity:
WHEREAS, the Honorable Court in the above-entitled case issued on _____ an Order dissolving / lifting
partially the writ of attachment levied upon the defendant/s personal property, upon the filing of a
counterbond by the defendants in the sun of PESOS FORTY TWO MILLION EIGHT HUNDRED FORTY FOUR
THOUSAND THREE HUNDRED FIFTY THREE AND 14/100 ONLY (P 42,844,353.14) Philippine Currency.
NOW, THEREFORE, we UNIBOX PACKAGING CORP. as Principal and PHILIPPINE PRYCE ASSURANCE CORP.,
a corporation duly organized and existing under and by virtue of the laws of the Philippines, as Surety, in
consideration of the dissolution of said attachment, hereby jointly and severally bind ourselves in the
sum of FORTY TWO MILLION EIGHT HUNDRED FORTY FOUR THOUSAND THREE HUNDRED FIFTY THREE
AND 14/100 ONLY (P 42,844,353.14) Philippine Currency, in favor of the plaintiff to secure the
payment of any judgment that the plaintiff may recover against the defendants in this
action.
42
[Emphasis and underscoring supplied]
Based on the foregoing, Acropolis voluntarily bound itself with Unibox to be solidarily liable to answer
for ANY judgment which UPPC may recover from Unibox in its civil case for collection. Its counter-bond
was issued in consideration of the dissolution of the writ of attachment on the properties of Unibox and
Ortega. The counter-bond then replaced the properties to ensure recovery by UPPC from Unibox and
Ortega. It would be the height of injustice to allow Acropolis to evade its obligation to UPPC, especially
after the latter has already secured a favorable judgment.
This issue is not novel. In the case of Luzon Steel Corporation v. Sia,
43
Luzon Steel Corporation sued Metal
Manufacturing of the Philippines and Jose Sia for breach of contract and damages. A writ of preliminary
attachment was issued against the properties of the defendants therein but the attachment was lifted
upon the filing of a counter-bond issued by Sia, as principal, and Times Surety & Insurance Co., as surety.
Later, the plaintiff and the defendants entered into a compromise agreement whereby Sia agreed to
settle the plaintiffs claim. The lower court rendered a judgment in accordance with the terms of the
compromise. Because the defendants failed to comply with the same, the plaintiff obtained a writ of
execution against Sia and the surety on the counter-bond. The surety moved to quash the writ of
execution on the ground that it was not a party to the compromise and that the writ was issued without
giving the surety notice and hearing. Thus, the court set aside the writ of execution and cancelled the
counter-bond. On appeal, this Court, speaking through the learned Justice J.B.L. Reyes, discussed the
nature of the liability of a surety on a counter-bond:
Main issues posed are (1) whether the judgment upon the compromise discharged the surety from its
obligation under its attachment counterbond and (2) whether the writ of execution could be issued
against the surety without previous exhaustion of the debtor's properties.
Both questions can be solved by bearing in mind that we are dealing with a counterbond filed to
discharge a levy on attachment. Rule 57, section 12, specifies that an attachment may be discharged
upon the making of a cash deposit or filing a counterbond "in an amount equal to the value of the
property attached as determined by the judge"; that upon the filing of the counterbond "the property
attached ... shall be delivered to the party making the deposit or giving the counterbond, or the person
appearing on his behalf, the deposit or counterbond aforesaid standing in place of the property so
released."
The italicized expressions constitute the key to the entire problem. Whether the judgment be rendered
after trial on the merits or upon compromise, such judgment undoubtedly may be made effective upon
the property released; and since the counterbond merely stands in the place of such property, there is
no reason why the judgment should not be made effective against the counterbond regardless of the
manner how the judgment was obtained.
x x x
As declared by us in Mercado v. Macapayag, 69 Phil. 403, 405-406, in passing upon the liability of
counter sureties in replevin who bound themselves to answer solidarily for the obligations of the
defendants to the plaintiffs in a fixed amount of P 912.04, to secure payment of the amount that said
plaintiff be adjudged to recover from the defendants,
the liability of the sureties was fixed and conditioned on the finality of the judgment rendered regardless
of whether the decision was based on the consent of the parties or on the merits. A judgment entered
on a stipulation is nonetheless a judgment of the court because consented to by the parties.
44

[Emphases and underscoring supplied]
The argument of Acropolis that its obligation under the counter-bond was novated by the compromise
agreement is, thus, untenable. In order for novation to extinguish its obligation, Acropolis must be able
to show that there is an incompatibility between the compromise agreement and the terms of the
counter-bond, as required by Article 1292 of the Civil Code, which provides that:
Art. 1292. In order that an obligation may be extinguished by another which substitute the same, it is
imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on
every point incompatible with each other. (1204)
Nothing in the compromise agreement indicates, or even hints at, releasing Acropolis from its obligation
to pay UPPC after the latter has obtained a favorable judgment. Clearly, there is no incompatibility
between the compromise agreement and the counter-bond. Neither can novation be presumed in this
case. As explained inDugo v. Lopena:
45

Novation by presumption has never been favored. To be sustained, it need be established that the old
and new contracts are incompatible in all points, or that the will to novate appears by express
agreement of the parties or in acts of similar import.
46

All things considered, Acropolis, as surety under the terms of the counter-bond it issued, should be held
liable for the payment of the unpaid balance due to UPPC.
Three-day notice rule, not a hard and fast rule
Although this issue has been obviated by our disposition of the two main issues, the Court would like to
point out that the three-day notice requirement is not a hard and fast rule and substantial compliance is
allowed.
52

Pertinently, Section 4, Rule 15 of the Rules of Court reads:
Sec. 4. Hearing of motion. Except for motions which the court may act upon without prejudicing the
rights of the adverse party, every written motion shall be set for hearing by the applicant.
Every written motion required to be heard and the notice of the hearing thereof shall be served in such
a manner as to insure its receipt by the other party at least three (3) days before the date of hearing,
unless the court for good cause sets the hearing on shorter notice. [Emphasis supplied]1wphi1
The law is clear that it intends for the other party to receive a copy of the written motion at least three
days before the date set for its hearing. The purpose of the three (3)-day notice requirement, which was
established not for the benefit of the movant but rather for the adverse party, is to avoid surprises upon
the latter and to grant it sufficient time to study the motion and to enable it to meet the arguments
interposed therein.
47
In Preysler, Jr. v. Manila Southcoast Development Corporation,
48
the Court restated
the ruling that "the date of the hearing should be at least three days after receipt of the notice of hearing
by the other parties."
It is not, however, a hard and fast rule. Where a party has been given the opportunity to be heard, the
time to study the motion and oppose it, there is compliance with the rule. This was the ruling in the case
of Jehan Shipping Corporation v. National Food Authority,
49
where it was written:
Purpose Behind the
Notice Requirement
This Court has indeed held time and time again that, under Sections 4 and 5 of Rule 15 of the Rules of
Court, mandatory is the notice requirement in a motion, which is rendered defective by failure to comply
with the requirement. As a rule, a motion without a notice of hearing is considered pro forma and does
not affect the reglementary period for the appeal or the filing of the requisite pleading.
As an integral component of procedural due process, the three-day notice required by the Rules is not
intended for the benefit of the movant. Rather, the requirement is for the purpose of avoiding surprises
that may be sprung upon the adverse party, who must be given time to study and meet the arguments in
the motion before a resolution by the court. Principles of natural justice demand that the right of a party
should not be affected without giving it an opportunity to be heard.
The test is the presence of the opportunity to be heard, as well as to have time to study the motion
and meaningfully oppose or controvert the grounds upon which it is based. Considering the
circumstances of the present case, we believe that the requirements of procedural due process were
substantially complied with, and that the compliance justified a departure from a literal application of
the rule on notice of hearing.
50
[Emphasis supplied]
In the case at bench, the RTC gave UPPC sufficient time to file its comment on the motion. On January
14, 2005, UPPC filed its Opposition to the motion, discussing the issues raised by Acropolis in its motion.
Thus, UPPCs right to due process was not violated because it was afforded the chance to argue its
position.
WHEREFORE, the petition is GRANTED. The November 17, 2005 Decision and the March 1, 2006
Resolution of the Court of Appeals, in CA-G.R. SP No. 89135, are hereby REVERSED and SET ASIDE. The
November 30, 2004 Order of the Regional Trial Court, Branch 148, Makati City, ordering Acropolis to
comply with the terms of its counter-bond and pay UPPC the unpaid balance of the judgment in the
amount of P27,048,568.78 with interest of 12% per annum from default is REINSTATED.
























53

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 130223 August 19, 2009
RURAL BANK OF STA. BARBARA [PANGASINAN], INC., Petitioner,
vs.
THE MANILA MISSION OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS, INC., Respondent.
D E C I S I O N
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the
Decision
1
dated 29 July 1997 of the Court of Appeals in CA-G.R. SP No. 41042 affirming the Orders dated
9 October 1995 and 27 February 1996 of the Regional Trial Court (RTC), Branch 43, of Dagupan City, in
Civil Case No. D-10583.
Spouses Tomas and Maria Soliven (spouses Soliven) were the registered owners, under Transfer
Certificate of Title (TCT) No. T-125213, of a parcel of land located in Barangay Maninding, Sta. Barbara,
Pangasinan (subject property). On 18 May 1992, the spouses Soliven sold the subject property to
respondent Manila Mission of the Church of Jesus Christ of Latter Day Saints, Inc. (Manila Mission).
However, it was only on 28 April 1994 when TCT No. T-125213 in the name of the spouses Soliven was
cancelled, and TCT No. 195616 was issued in the name of respondent.
In the meantime, on 15 April 1993, petitioner Rural Bank of Sta. Barbara (Pangasinan), Inc. filed with the
RTC a Complaint against the spouses Soliven for a sum of money, docketed as Civil Case No. D-10583.
The Complaint of petitioner included a prayer for the issuance of a Writ of Preliminary Attachment.
In an Order dated 7 May 1993, the RTC ordered the issuance of the Writ of Attachment petitioner prayed
for, to wit:
WHEREFORE, let a Writ of Attachment be issued against all the properties of [Spouses Soliven] not
exempt from execution or so much thereof as may be sufficient to satisfy the *herein petitioners+
principal claim of P338,000.00 upon filing of *petitioners+ bond in the amount of P100,000.00.
2

Upon the filing by petitioner of the required bond, the RTC issued the Writ of Attachment on 21 May
1993. Acting on the authority of said Writ, Sheriff Reynaldo C. Daray attached the subject property,
which was then still covered by TCT No. T-125213 in the name of the spouses Soliven. The Writ of
Attachment was annotated on TCT No. T-125213 on 24 May 1993. Thus, when TCT No. T-125213 of the
spouses Soliven was cancelled and TCT No. 195616 of petitioner was issued on 28 April 1994, the
annotation on the Writ of Attachment was carried from the former to the latter.
While Civil Case No. D-10583 was still pending before the RTC, respondent executed an Affidavit claiming
title and ownership over the subject property, and requested the Ex-Officio Provincial and City Sheriff to
release the said property from attachment. The Sheriff, however, advised respondent to file a motion
directly with the RTC.
On 16 March 1995, respondent filed with the RTC, in Civil Case No. D-10583, a Motion to Release
Property from Attachment, to which petitioner, in turn, filed an Opposition. After hearing, the RTC issued
an Order on 9 October 1995 discharging the subject property from attachment. The RTC decreed in said
Order:
WHEREFORE, the Court hereby directs the Ex-Officio Provincial Sheriff of Pangasinan and City Sheriff of
Dagupan to discharge and release the subject land from attachment and orders the notice of attachment
on T.C.T. No. 195616 of the Register of Deeds of Pangasinan be cancelled.
3

Petitioner filed a Motion for Reconsideration of the 9 October 1995 Order of the RTC, arguing that it had
a better right over the subject property and that the filing by respondent with the RTC, in Civil Case No.
D-10583, of a Motion to Release Property from Attachment, was the improper remedy. In an Order
dated 27 February 1996, the RTC denied the Motion for Reconsideration of petitioner for lack of merit.
On 12 April 1997, petitioner filed a Petition for Certiorari with this Court, alleging that the RTC
committed grave abuse of discretion, amounting to lack or excess of jurisdiction, in canceling the Writ of
Attachment and ordering the release of the subject property. The Petition was docketed as G.R. No.
124343. In a Resolution dated 27 May 1997, this Court referred the case to the Court of Appeals for
appropriate action.
The Court of Appeals docketed the Petition for Certiorari as CA-G.R. SP No. 41042. On 29 July 1997, the
Court of Appeals issued the assailed Decision dismissing the Petition.
Hence, petitioner again comes before this Court via the present Petition for Review, contending that the
Court of Appeals erred in not finding grave abuse of discretion on the part of the RTC when the latter
directed the release of the subject property from attachment. Petitioner insists that it has a better right
to the subject property considering that: (1) the attachment of the subject property in favor of petitioner
was made prior to the registration of the sale of the same property to respondent; and (2) respondent
availed itself of the wrong remedy in filing with the RTC, in Civil Case No. D-10583, a Motion to Release
Property from Attachment. We shall discuss ahead the second ground for the instant Petition, a matter
of procedure, since its outcome will determine whether we still need to address the first ground, on the
substantive rights of the parties to the subject property.
Propriety of the Motion to Release Property from Attachment
According to petitioner, the Motion to Release Property from Attachment filed by respondent before the
RTC, in Civil Case No. D-10583, is not the proper remedy under Section 14, Rule 57 of the Rules of
Court,
4
which provides:
SEC. 14. Proceedings where property claimed by third person.If the property attached is 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 sheriff while the latter has possession of the attached
property, and a copy thereof upon the attaching party, the sheriff shall not be bound to keep the
property under attachment, unless the attaching party or his agent, on demand of the sheriff, shall file a
bond approved by the court to indemnify the third-party claimant in a sum not less than the value of the
property levied upon. In case of disagreement as to such value, the same shall be decided by the court
54

issuing the writ of attachment. No claim for damages for the taking or keeping of the property may be
enforced against the bond unless the action therefor is filed within one hundred twenty (120) days from
the date of the filing of the bond.
The sheriff shall not be liable for damages for the taking or keeping of such property, to any such third-
party claimant, if such bond shall be filed. Nothing herein contained shall prevent such claimant or any
third person from vindicating his claim to the property, or prevent the attaching party from claiming
damages against a third-party claimant who filed a frivolous or plainly spurious claim, in the same or a
separate action.
When the writ of attachment is issued in favor of the Republic of the Philippines, or any officer duly
representing it, the filing of such bond shall not be required, and in case the sheriff is sued for damages
as a result of the attachment, he shall be represented by the Solicitor General, and if held liable therefor,
the actual damages adjudged by the court shall be paid by the National Treasurer out of the funds to be
appropriated for the purpose.
Petitioner argues that, pursuant to the aforequoted section, the remedy of a third person claiming to be
the owner of an attached property are limited to the following: (1) filing with the Sheriff a third-party
claim, in the form of an affidavit, per the first paragraph of Section 14; (2) intervening in the main action,
with prior leave of court, per the second paragraph of Section 14, which allows a third person to
vindicate his/her claim to the attached property in the "same x x x action"; and (3) filing a separate and
independent action, per the second paragraph of Section 14, which allows a third person to vindicate
his/her claim to the attached property in a "separate action."
Respondent explains that it tried to pursue the first remedy, i.e., filing a third-party claim with the
Sheriff. Respondent did file an Affidavit of Title and Ownership with the Sheriff, but said officer advised
respondent to file a motion directly with the RTC in the main case. Respondent heeded the Sheriffs
advice by filing with the RTC, in Civil Case No. D-10583, a Motion to Release Property from Attachment.
The Court of Appeals recognized and allowed said Motion, construing the same as an invocation by
respondent of the power of control and supervision of the RTC over its officers, which includes the
Sheriff.
We agree with the Court of Appeals on this score. The filing by respondent of the Motion to Release
Property from Attachment was made on the advice of the Sheriff upon whom respondent served its
Affidavit of Title and Ownership. Respondent should not be faulted for merely heeding the Sheriffs
advice. Apparently, the Sheriff, instead of acting upon the third-party claim of respondent on his own,
would rather have some direction from the RTC. Indeed, the Sheriff is an officer of the RTC and may be
directed by the said court to allow the third-party claim of respondent. Therefore, the filing of the
Motion in question can be deemed as a mere continuation of the third-party claim of respondent, in the
form of its Affidavit of Title and Ownership, served upon the Sheriff, in accord with the first paragraph of
Section 14, Rule 57 of the Rules of Court.
Alternatively, we may also consider the Motion to Release Property from Attachment, filed by
respondent before the RTC, as a Motion for Intervention in Civil Case No. D-10583, pursuant to the
second paragraph of Section 14, Rule 56, in relation to Rule 19 of the Rules of Court. Respondent, to
vindicate its claim to the subject property, may intervene in the same case, i.e., Civil Case No. D-10583,
instituted by petitioner against the spouses Soliven, in which the said property was attached.
Respondent has the personality to intervene, as it "is so situated as to be adversely affected by a
distribution or other disposition of property in the custody of the court or of an officer thereof."
5
The
RTC, in acting upon and granting the Motion to Release Property from Attachment in its Order dated 9
October 1995, is deemed to have allowed respondent to intervene in Civil Case No. D-10583.
Moreover, it may do petitioner well to remember that rules of procedure are merely tools designed to
facilitate the attainment of justice. They were conceived and promulgated to effectively aid the court in
the dispensation of justice. Courts are not slaves to or robots of technical rules, shorn of judicial
discretion. In rendering justice, courts have always been, as they ought to be, conscientiously guided by
the norm that on the balance, technicalities take a backseat to substantive rights, and not the other way
around. Thus, if the application of the Rules would tend to frustrate rather than promote justice, it is
always within the power of the Court to suspend the rules, or except a particular case from its
operation.
6
Hence, even if the Motion to Release Property from Attachment does not strictly comply
with Section 14, Rule 56 of the Rules of Court, the RTC may still allow and act upon said Motion to render
substantive justice.
This leads us to the substantive issue in this case, on which between the two transactions should be
given priority: the previous yet unregistered sale of the subject property by the spouses Soliven to
respondent, or the subsequent but duly annotated attachment of the same property by petitioner.
Previous yet unregistered sale versus subsequent but duly annotated attachment
Petitioner does not dispute the allegation of respondent that the subject property was sold by the
spouses Soliven to respondent on 18 May 1992, before petitioner instituted Civil Case No. D-10583
against the spouses Soliven on 15 April 1993; the RTC ordered the issuance of the Writ of Attachment on
7 May 1993; and the attachment of the subject property pursuant to the Writ on 27 May 1993.
Neither did petitioner offer evidence to counter the following documents presented by respondent
establishing the fact of the sale of the subject property to the latter by the spouses Soliven: (1) the
notarized Deed of Sale dated 18 May 1992; (2) BPI Managers Check No. 010685 dated 8 May 1992 in the
sum of P42,500.00 to represent the tender of payment of capital gains tax; (3) BIR Official Receipt No.
0431320 dated 18 May 1992 of BPI Check No. 010625 for the payment of the sum of P8,5000.00; and (4)
a letter dated 11 August 1992 of Manila Missions former counsel, Lim Duran & Associates, to the
Revenue District Officer, District 7, Bureau of Internal Revenue, relative to its request for the
"reconsideration/condonation" of the assessment of the capital gains tax on its purchase of the subject
property.
Petitioner, however, invokes jurisprudence wherein this Court in a number of instances allegedly upheld
a subsequent but duly annotated attachment, as opposed to a previous yet unregistered sale of the
same property. Petitioner particularly calls our attention to the following paragraph in Ruiz, Sr. v. Court
of Appeals
7
:
[I]n case of a conflict between a vendee and an attaching creditor, an attaching creditor who registers
the order of attachment and the sale of the property to him as the highest bidder acquires a valid title to
the property, as against a vendee who had previously bought the same property from the registered
owner but who failed to register his deed of sale. This is because registration is the operative act that
binds or affects the land insofar as third persons are concerned. It is upon registration that there is
notice to the whole world.
In the more recent case Valdevieso v. Damalerio,
8
we have expounded on our foregoing pronouncement
in Ruiz.
On 5 December 1995, therein petitioner Bernardo Valdevieso (Valdevieso) bought a parcel of land from
spouses Lorenzo and Elenita Uy (spouses Uy), the registered owners thereof. On 19 April 1996, therein
respondents, spouses Candelario and Aurea Damalerio (spouses Damalario), filed a Complaint against
the spouses Uy for a sum of money before the RTC of General Santos City. On 23 April 1996, the RTC
55

issued a Writ of Preliminary Attachment by virtue of which the subject parcel of land was levied. The levy
was duly recorded in the Register of Deeds, and annotated on the TCT of the spouses Uy over the subject
parcel of land. It was only on 6 June 1996 that the TCT in the name of the spouses Uy was cancelled, and
a new one issued in the name of Valdevieso. As in the case at bar, the annotation on the attachment was
carried over to Valdeviesos TCT. Valdevieso filed a third-party claim before the RTC seeking to annul the
attachment. In a resolution, the RTC ruled in Valdeviesos favor, but the Court of Appeals reversed said
RTC resolution. On appeal, we adjudged:
The sole issue in this case is whether or not a registered writ of attachment on the land is a superior lien
over that of an earlier unregistered deed of sale.
x x x x
The settled rule is that levy on attachment, duly registered, takes preference over a prior unregistered
sale. This result is a necessary consequence of the fact that the property involved was duly covered by
the Torrens system which works under the fundamental principle that registration is the operative act
which gives validity to the transfer or creates a lien upon the land.
The preference created by the levy on attachment is not diminished even by the subsequent registration
of the prior sale. This is so because an attachment is a proceeding in rem. It is against the particular
property, enforceable against the whole world. The attaching creditor acquires a specific lien on the
attached property which nothing can subsequently destroy except the very dissolution of the
attachment or levy itself. Such a proceeding, in effect, means that the property attached is an indebted
thing and a virtual condemnation of it to pay the owners debt. The lien continues until the debt is paid,
or sale is had under execution issued on the judgment, or until the judgment is satisfied, or the
attachment discharged or vacated in some manner provided by law.
Thus, in the registry, the attachment in favor of respondents appeared in the nature of a real lien when
petitioner had his purchase recorded. The effect of the notation of said lien was to subject and
subordinate the right of petitioner, as purchaser, to the lien. Petitioner acquired ownership of the land
only from the date of the recording of his title in the register, and the right of ownership which he
inscribed was not absolute but a limited right, subject to a prior registered lien of respondents, a right
which is preferred and superior to that of petitioner.
9

It is settled, therefore, that a duly registered levy on attachment takes preference over a prior
unregistered sale.
Nonetheless, respondent argues that there is a special circumstance in the case at bar, which should be
deemed a constructive registration of the sale of the subject property in its favor, preceding the
attachment of the same property by petitioner.
Knowledge of previous yet unregistered sale
In Ruiz, the very case cited by petitioner, we made a qualification of the general rule that a duly
annotated attachment is superior to an unregistered prior sale. In fact, we resolved Ruiz in favor of the
vendee in the unregistered prior sale, because knowledge of the unregistered sale by the attaching
creditor is deemed equivalent to registration. We explained in Ruiz:
But where a party has knowledge of a prior existing interest which is unregistered at that time he
acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of
registration as to him. Knowledge of an unregistered sale is equivalent to registration. As held in
Fernandez v. Court of Appeals [189 SCRA 780 (1990)],
Section 50 of Act No. 496 (now Sec. 51 of P.D. 1529), provides that the registration of the deed is the
operative act to bind or affect the land insofar as third persons are concerned. But where the party has
knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same
land, his knowledge of that prior unregistered interest has the effect of registration as to him. The
torrens system cannot be used as a shield for the commission of fraud (Gustillo v. Maravilla, 48 Phil.
442). As far as private respondent Zenaida Angeles and her husband Justiniano are concerned, the non-
registration of the affidavit admitting their sale of a portion of 110 square meters of the subject land to
petitioners cannot be invoked as a defense because (K)nowledge of an unregistered sale is equivalent to
registration (Winkleman v. Veluz, 43 Phil. 604).
This knowledge of the conveyance to Honorato Hong can not be denied. The records disclose that after
the sale, private respondent was able to introduce improvements on the land such as a concrete two-
door commercial building, a concrete fence around the property, concrete floor of the whole area and
G.I. roofing. Acts of ownership and possession were exercised by the private respondent over the land.
By these overt acts, it can not therefore be gainsaid that petitioner was not aware that private
respondent had a prior existing interest over the land.
10

In the case at bar, respondent averred in its Motion to Release Property from Attachment that the
construction of a church edifice on the subject property was about to be finished at the time the Writ of
Preliminary Attachment was implemented on 24 May 1993, and that the construction of the church was
actually completed by mid-1993. Respondent asserts that since petitioner did not deny these allegations,
much less adduce evidence to the contrary, then the latter tacitly recognized the construction of the
church.
Petitioner contends, on the other hand, that respondent failed to present evidence to prove the fact that
a church had already been constructed on the subject property by the time the said property was
attached, thus, constituting notice to petitioner of the claim or right of respondent to the same.lawph!1
Was there, at the time of the attachment, knowledge on the part of petitioner Rural Bank of the interest
of respondent Manila Mission on the subject property?
If the allegation of respondent Manila Mission anent the building of the chapel even before the issuance
of the writ of attachment is true, this case would be similar to Ruiz where the vendee of the subject
property was able to introduce improvements. However, respondent Manila Mission presented no
evidence of the building of the chapel other than its bare allegation thereof. More importantly, even
assuming for the sake of argument that the chapel was indeed being built at the time of the attachment
of the property, we cannot simply apply Ruiz and conclude that this confirms knowledge of a previous
conveyance of the property at that time. In Ruiz, the attaching party was the wife of the vendor of the
subject property, whom she sued for support. It was thus very probable that she knew of the sale of the
property to the vendee therein, considering that the vendee had already introduced improvements
thereon. In the case at bar, there is no special relationship between petitioner Rural Bank and the
spouses Soliven sufficient to charge the former with an implied knowledge of the state of the latters
properties. Unlike in the sale of real property, an attaching creditor is not expected to inspect the
property being attached, as it is the sheriff who does the actual act of attaching the property.
Neither did respondent Manila Mission present any evidence of knowledge on the part of petitioner
Rural Bank of the prior existing interest of the former at the time of the attachment. Respondent Manila
Mission merely argues that there was a tacit recognition on the part of petitioner Rural Bank of the
56

construction of the chapel when the latter did not deny this allegation in its Opposition to the Motion to
Discharge Property from Attachment.
The Motion, however, merely mentions the construction of the chapel and does not charge petitioner
Rural Bank with knowledge of the construction. There was, therefore, nothing to deny on the part of
petitioner Rural Bank, as the mere existence of such construction at that time would not affect the right
of petitioner Rural Bank to its lien over the subject property. Also, the mention in the Motion of the
construction of the chapel would have the effect of being a notice of an adverse third-party claim only at
the time of such Motion. Since such notice, which was deemed in Ruiz as constructive registration of the
sale, was effected only after the attachment of the subject property, it could not affect the validity of the
attachment lien.
In sum, our decisions in Ruiz v. Court of Appeals and Valdevieso v. Damalerio oblige us to rule that the
duly registered levy on attachment by petitioner Rural Bank takes preference over the prior but then
unregistered sale of respondent Manila Mission. There was likewise no evidence of knowledge on the
part of petitioner Rural Bank of any third-party interest in the subject property at the time of the
attachment. We are, therefore, constrained to grant the instant Petition for Review and nullify the
Orders of the RTC discharging the subject property from attachment.
Nevertheless, respondent Manila Mission would not be left without remedy. It could file a counter-bond
pursuant to Section 12, Rule 57
11
of the Rules of Court in order to discharge the attachment. If
respondent Manila Mission fails to do the same and the property ends up being subjected to execution,
respondent can redeem the property and seek reimbursement from the spouses Soliven.
WHEREFORE, the instant Petition for Review on Certiorari is hereby GRANTED. The Decision dated 29
July 1997 of the Court of Appeals in CA-G.R. SP No. 41042 affirming the Orders of the Regional Trial Court
of Dagupan City dated 9 October 1995 and 27 February 1996 issued in Civil Case No. D-10583 is hereby
REVERSED and SET ASIDE. No pronouncement as to costs.
SO ORDERED.










Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 173297 March 6, 2013
STRONGHOLD INSURANCE COMPANY, INC., Petitioner,
vs.
TOMAS CUENCA, MARCELINA CUENCA, MILAGROS CUENCA, BRAMIE T. TAYACTAC, and MANUEL D.
MARANON, JR., Respondents.
D E C I S I O N
BERSAMIN, J.:
The personality of a corporation is distinct and separate from the personalities of its stockholders.
Hence, its stockholders are not themselves the real parties in interest to claim and recover compensation
for the damages arising from the wrongful attachment of its assets. Only the corporation is the real party
in interest for that purpose.
The Case
Stronghold Insurance Company, Inc. (Stronghold Insurance), a domestic insurance company, assails the
decision promulgated on January 31, 2006,
1
whereby the Court of Appeals (CA) in CA-G.R. CV No. 79145
affirmed the judgment rendered on April 28, 2003 by the Regional Trial Court in Parafiaque City (RTC)
holding Stronghold Insurance and respondent Manuel D. Marafion, Jr. jointly and solidarily liable for
damages to respondents Tomas Cuenca, Marcelina Cuenca, Milagros Cuenca (collectively referred to as
Cuencas), and Bramie Tayactac, upon the latters claims against the surety bond issued by Stronghold
Insurance for the benefit of Maraon.
2

Antecedents
On January 19, 1998, Maraon filed a complaint in the RTC against the Cuencas for the collection of a
sum of money and damages. His complaint, docketed as Civil Case No. 98-023, included an application
for the issuance of a writ of preliminary attachment.
3
On January 26, 1998, the RTC granted the
application for the issuance of the writ of preliminary attachment conditioned upon the posting of a
bond of P1,000,000.00 executed in favor of the Cuencas. Less than a month later, Maraon amended the
complaint to implead Tayactac as a defendant.
4

On February 11, 1998, Maraon posted SICI Bond No. 68427 JCL (4) No. 02370 in the amount
of P1,000,000.00 issued by Stronghold Insurance. Two days later, the RTC issued the writ of preliminary
attachment.
5
The sheriff served the writ, the summons and a copy of the complaint on the Cuencas on
the same day. The service of the writ, summons and copy of the complaint were made on Tayactac on
February 16, 1998.
6

Enforcing the writ of preliminary attachment on February 16 and February 17, 1998, the sheriff levied
upon the equipment, supplies, materials and various other personal property belonging to Arc Cuisine,
57

Inc. that were found in the leased corporate office-cum-commissary or kitchen of the corporation.
7
On
February 19, 1998, the sheriff submitted a report on his proceedings,
8
and filed an ex parte motion
seeking the transfer of the levied properties to a safe place. The RTC granted the ex parte motion on
February 23, 1998.
9

On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion to Dismiss and to Quash
Writ of Preliminary Attachment on the grounds that: (1) the action involved intra-corporate matters that
were within the original and exclusive jurisdiction of the Securities and Exchange Commission (SEC); and
(2) there was another action pending in the SEC as well as a criminal complaint in the Office of the City
Prosecutor of Paraaque City.
10

On March 5, 1998, Maraon opposed the motion.
11

On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ of Preliminary Attachment,
stating that the action, being one for the recovery of a sum of money and damages, was within its
jurisdiction.
12

Under date of September 3, 1998, the Cuencas and Tayactac moved for the reconsideration of the denial
of their Motion to Dismiss and to Quash Writ of Preliminary Attachment, but the RTC denied their
motion for reconsideration on September 16, 1998.
Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on certiorari and prohibition to
challenge the August 10, 1998 and September 16, 1998 orders of the RTC on the basis of being issued
with grave abuse of discretion amounting to lack or excess of jurisdiction (C.A.-G.R. SP No. 49288).
13

On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R. SP No. 49288,
14
granting the
petition. It annulled and set aside the challenged orders, and dismissed the amended complaint in Civil
Case No. 98-023 for lack of jurisdiction, to wit:
WHEREFORE, the Orders herein assailed are hereby ANNULLED AND SET ASIDE, and the judgment is
hereby rendered DISMISSING the Amended Complaint in Civil Case No. 98-023 of the respondent court,
for lack of jurisdiction.
SO ORDERED.
On December 27, 1999, the CA remanded to the RTC for hearing and resolution of the Cuencas and
Tayactacs claim for the damages sustained from the enforcement of the writ of preliminary
attachment.
15

On February 17, 2000,
16
the sheriff reported to the RTC, as follows:
On the scheduled inventory of the properties (February 17, 2000) and to comply with the Resolution of
the Court of Appeals dated December 24, 1999 ordering the delivery of the attached properties to the
defendants, the proceedings thereon being:
1. With the assistance for (sic) the counsel of Cuencas, Atty. Pulumbarit, Atty. Ayo, defendant
Marcelina Cuenca, and two Court Personnel, Robertson Catorce and Danilo Abanto, went to
the warehouse where Mr. Maraon recommended for safekeeping the properties in which he
personally assured its safety, at No. 14, Marian II Street, East Service Road, Paraaque Metro
Manila.
2. That to our surprise, said warehouse is now tenanted by a new lessee and the properties
were all gone and missing.
3. That there are informations (sic) that the properties are seen at Contis Pastry & Bake Shop
owned by Mr. Maraon, located at BF Homes in Paraaque City.
On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to Deliver Attached
Properties and to Set Case for Hearing,
17
praying that: (1) the Branch Sheriff be ordered to immediately
deliver the attached properties to them; (2) Stronghold Insurance be directed to pay them the damages
being sought in accordance with its undertaking under the surety bond for P1,000,0000.00; (3) Maraon
be held personally liable to them considering the insufficiency of the amount of the surety bond; (4) they
be paid the total of P1,721,557.20 as actual damages representing the value of the lost attached
properties because they, being accountable for the properties, would be turning that amount over to Arc
Cuisine, Inc.; and (5) Maraon be made to pay P200,000.00 as moral damages, P100,000.00 as exemplary
damages, and P100,000.00 as attorneys fees.
Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn, the Cuencas and Tayactac
filed their reply on May 5, 2000.
On May 25, 2000, Maraon filed his own comment/opposition to the Motion to Require Sheriff to
Deliver Attached Properties and to Set Case for Hearing of the Cuencas and Tayactac, arguing that
because the attached properties belonged to Arc Cuisine, Inc. 50% of the stockholding of which he and
his relatives owned, it should follow that 50% of the value of the missing attached properties constituted
liquidating dividends that should remain with and belong to him. Accordingly, he prayed that he should
be required to return only P100,000.00 to the Cuencas and Tayactac.
18

On June 5, 2000, the RTC commanded Maraon to surrender all the attached properties to the RTC
through the sheriff within 10 days from notice; and directed the Cuencas and Tayactac to submit the
affidavits of their witnesses in support of their claim for damages.
19

On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and Compliance.
20

Ruling of the RTC
After trial, the RTC rendered its judgment on April 28, 2003, holding Maraon and Stronghold Insurance
jointly and solidarily liable for damages to the Cuencas and Tayactac,
21
viz:
WHEREFORE, premises considered, as the defendants were able to preponderantly prove their
entitlement for damages by reason of the unlawful and wrongful issuance of the writ of attachment,
MANUEL D. MARAON, JR., plaintiff and defendant, Stronghold Insurance Company Inc., are found to be
jointly and solidarily liable to pay the defendants the following amount to wit:
(1) PhP1,000,000.00 representing the amount of the bond;
(2) PhP 100,000.00 as moral damages;
58

(3) PhP 50,000.00 as exemplary damages;
(4) Php 100,000.00 as attorneys fees; and
(5) To pay the cost of suit.
SO ORDERED.
Ruling of the CA
Only Stronghold Insurance appealed to the CA (C.A.-G.R. CV No. 79145), assigning the following errors to
the RTC, to wit:
I.
THE LOWER COURT ERRED IN ORDERING SURETY-APPELLANT TO PAY THE AMOUNT OF P1,000,000.00
REPRESENTING THE AMOUNT OF THE BOND AND OTHER DAMAGES TO THE DEFENDANTS.
II.
THE LOWER COURT ERRED IN NOT TAKING INTO ACCOUNT THE INDEMNITY AGREEMENT (EXH. "2-
SURETY") EXECUTED BY MANUEL D. MARAON, JR. IN FAVOR OF STRONGHOLD WHEREIN HE BOUND
HIMSELF TO INDEMNIFY STRONGHOLD OF WHATEVER AMOUNT IT MAY BE HELD LIABLE ON ACCOUNT
OF THE ISSUANCE OF THE ATTACHMENT BOND.
22

On January 31, 2006, the CA, finding no reversible error, promulgated its decision affirming the judgment
of the RTC.
23

Stronghold Insurance moved for reconsideration, but the CA denied its motion for reconsideration on
June 22, 2006.
Issues
Hence, this appeal by petition for review on certiorari by Stronghold Insurance, which submits that:
I.
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR AND DECIDED QUESTIONS OF
SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND APPLICABLE DECISIONS OF THE
HONORABLE COURT CONSIDERING THAT THE COURT OF APPEALS AFFIRMED THE ERRONEOUS DECISION
OF THE TRIAL COURT HOLDING RESPONDENT MARA[]ON AND PETITIONER STRONGHOLD JOINTLY AND
SOLIDARILY LIABLE TO PAY THE RESPONDENTS CUENCA, et al., FOR PURPORTED DAMAGES BY REASON
OF THE ALLEGED UNLAWFUL AND WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT, DESPITE THE
FACT THAT:
A) RESPONDENT CUENCA et al., ARE NOT THE OWNERS OF THE PROPERTIES ATTACHED AND
THUS, ARE NOT THE PROPER PARTIES TO CLAIM ANY PURPORTED DAMAGES ARISING
THEREFROM.
B) THE PURPORTED DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND WRONGFUL
ISSUANCE OF THE WRIT OF ATTACHMENT WERE CAUSED BY THE NEGLIGENCE OF THE
BRANCH SHERIFF OF THE TRIAL COURT AND HIS FAILURE TO COMPLY WITH THE PROVISIONS
OF THE RULES OF COURT PERTAINING TO THE ATTACHMENT OF PROPERTIES.
C) THE TRIAL COURT GRAVELY ERRED WHEN IT HELD PETITIONER STRONGHOLD TO BE
SOLIDARILY LIABLE WITH RESPONDENT MARA[]ON TO RESPONDENTS CUENCA et al., FOR
MORAL DAMAGES, EXEMPLARY DAMAGES, ATTORNEYS FEES AND COST OF SUIT DESPITE THE
FACT THAT THE GUARANTY OF PETITIONER STRONGHOLD PURSUANT TO ITS SURETY BOND IS
LIMITED ONLY TO THE AMOUNT OF P1,000,000.00.
II
IN ANY EVENT, THE DECISION OF THE COURT APPEALS SHOULD HAVE HELD RESPONDENT MARA[]ON
TO BE LIABLE TO INDEMNIFY PETITIONER STRONGHOLD FOR ALL PAYMENTS, DAMAGES, COSTS, LOSSES,
PENALTIES, CHARGES AND EXPENSES IT SUSTAINED IN CONNECTION WITH THE INSTANT CASE,
PURSUANT TO THE INDEMNITY AGREEMENT ENTERED INTO BY PETITIONER STRONGHOLD AND
RESPONDENT MARA[]ON.
24

On their part, the Cuencas and Tayactac counter:
A. Having actively participated in the trial and appellate proceedings of this case before the
Regional Trial Court and the Court of Appeals, respectively, petitioner Stronghold is legally
and effectively BARRED by ESTOPPEL from raising for the first time on appeal before this
Honorable Court a defense and/or issue not raised below.
25

B. Even assuming arguendo without admitting that the principle of estoppel is not applicable
in this instant case, the assailed Decision and Resolution find firm basis in law considering that
the writ of attachment issued and enforced against herein respondents has been declared
ILLEGAL, NULL AND VOID for having been issued beyond the jurisdiction of the trial court.
C. There having been a factual and legal finding of the illegality of the issuance and
consequently, the enforcement of the writ of attachment, Maranon and his surety
Stronghold, consistent with the facts and the law, including the contract of suretyship they
entered into, are JOINTLY AND SEVERALLY liable for the damages sustained by herein
respondents by reason thereof.
D. Contrary to the allegations of Stronghold, its liability as surety under the attachment bond
without which the writ of attachment shall not issue and be enforced against herein
respondent if prescribed by law. In like manner, the obligations and liability on the
attachment bond are also prescribed by law and not left to the discretion or will of the
contracting parties to the prejudice of the persons against whom the writ was issued.
E. Contrary to the allegations of Stronghold, its liability for the damages sustained by herein
respondents is both a statutory and contractual obligation and for which, it cannot escape
accountability and liability in favor of the person against whom the illegal writ of attachment
59

was issued and enforced. To allow Stronghold to delay, excuse or exempt itself from liability is
unconstitutional, unlawful, and contrary to the basic tenets of equity and fair play.
F. While the liability of Stronghold as surety indeed covers the principal amount
of P1,000,000.00, nothing in the law and the contract between the parties limit or exempt
Stronghold from liability for other damages. Including costs of suit and interest.26
In his own comment,27
Maraon insisted that he could not be personally held liable under the attachment bond because the
judgment of the RTC was rendered without jurisdiction over the subject matter of the action that
involved an intra-corporate controversy among the stockholders of Arc Cuisine, Inc.; and that the
jurisdiction properly pertained to the SEC, where another action was already pending between the
parties.
Ruling
Although the question of whether the Cuencas and Tayactac could themselves recover damages arising
from the wrongful attachment of the assets of Arc Cuisine, Inc. by claiming against the bond issued by
Stronghold Insurance was not raised in the CA, we do not brush it aside because the actual legal interest
of the parties in the subject of the litigation is a matter of substance that has jurisdictional impact, even
on appeal before this Court.
The petition for review is meritorious.
There is no question that a litigation should be disallowed immediately if it involves a person without any
interest at stake, for it would be futile and meaningless to still proceed and render a judgment where
there is no actual controversy to be thereby determined. Courts of law in our judicial system are not
allowed to delve on academic issues or to render advisory opinions. They only resolve actual
controversies, for that is what they are authorized to do by the Fundamental Law itself, which
forthrightly ordains that the judicial power is wielded only to settle actual controversies involving rights
that are legally demandable and enforceable.
28

To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of the Rules of Court
requires that unless otherwise authorized by law or the Rules of Court every action must be prosecuted
or defended in the name of the real party in interest.
29
Under the same rule, a real party in interest is
one who stands to be benefited or injured by the judgment in the suit, or one who is entitled to the
avails of the suit. Accordingly, a person , to be a real party in interest in whose name an action must be
prosecuted, should appear to be the present real owner of the right sought to be enforced, that is, his
interest must be a present substantial interest, not a mere expectancy, or a future, contingent,
subordinate, or consequential interest.
30

Where the plaintiff is not the real party in interest, the ground for the motion to dismiss is lack of cause
of action.
31
The reason for this is that the courts ought not to pass upon questions not derived from any
actual controversy. Truly, a person having no material interest to protect cannot invoke the jurisdiction
of the court as the plaintiff in an action.
32
Nor does a court acquire jurisdiction over a case where the real
party in interest is not present or impleaded.
The purposes of the requirement for the real party in interest prosecuting or defending an action at law
are: (a) to prevent the prosecution of actions by persons without any right, title or interest in the case;
(b) to require that the actual party entitled to legal relief be the one to prosecute the action; (c) to avoid
a multiplicity of suits; and (d) to discourage litigation and keep it within certain bounds, pursuant to
sound public policy.
33
Indeed, considering that all civil actions must be based on a cause of
action,
34
defined as the act or omission by which a party violates the right of another,
35
the former as the
defendant must be allowed to insist upon being opposed by the real party in interest so that he is
protected from further suits regarding the same claim.
36
Under this rationale, the requirement benefits
the defendant because "the defendant can insist upon a plaintiff who will afford him a setup providing
good res judicata protection if the struggle is carried through on the merits to the end."
37

The rule on real party in interest ensures, therefore, that the party with the legal right to sue brings the
action, and this interest ends when a judgment involving the nominal plaintiff will protect the defendant
from a subsequent identical action. Such a rule is intended to bring before the court the party rightfully
interested in the litigation so that only real controversies will be presented and the judgment, when
entered, will be binding and conclusive and the defendant will be saved from further harassment and
vexation at the hands of other claimants to the same demand.
38

But the real party in interest need not be the person who ultimately will benefit from the successful
prosecution of the action. Hence, to aid itself in the proper identification of the real party in interest, the
court should first ascertain the nature of the substantive right being asserted, and then must determine
whether the party asserting that right is recognized as the real party in interest under the rules of
procedure. Truly, that a party stands to gain from the litigation is not necessarily controlling.
39

It is fundamental that the courts are established in order to afford reliefs to persons whose rights or
property interests have been invaded or violated, or are threatened with invasion by others conduct or
acts, and to give relief only at the instance of such persons. The jurisdiction of a court of law or equity
may not be invoked by or for an individual whose rights have not been breached.
40

The remedial right or the remedial obligation is the persons interest in the controversy. The right of the
plaintiff or other claimant is alleged to be violated by the defendant, who has the correlative obligation
to respect the right of the former. Otherwise put, without the right, a person may not become a party
plaintiff; without the obligation, a person may not be sued as a party defendant; without the violation,
there may not be a suit. In such a situation, it is legally impossible for any person or entity to be both
plaintiff and defendant in the same action, thereby ensuring that the controversy is actual and exists
between adversary parties. Where there are no adversary parties before it, the court would be without
jurisdiction to render a judgment.
41

There is no dispute that the properties subject to the levy on attachment belonged to Arc Cuisine, Inc.
alone, not to the Cuencas and Tayactac in their own right. They were only stockholders of Arc Cuisine,
Inc., which had a personality distinct and separate from that of any or all of them.
42
The damages
occasioned to the properties by the levy on attachment, wrongful or not, prejudiced Arc Cuisine, Inc., not
them. As such, only Arc Cuisine, Inc. had the right under the substantive law to claim and recover such
damages. This right could not also be asserted by the Cuencas and Tayactac unless they did so in the
name of the corporation itself. But that did not happen herein, because Arc Cuisine, Inc. was not even
joined in the action either as an original party or as an intervenor.
The Cuencas and Tayactac were clearly not vested with any direct interest in the personal properties
coming under the levy on attachment by virtue alone of their being stockholders in Arc Cuisine, Inc. Their
stockholdings represented only their proportionate or aliquot interest in the properties of the
corporation, but did not vest in them any legal right or title to any specific properties of the corporation.
Without doubt, Arc Cuisine, Inc. remained the owner as a distinct legal person.
43

60

Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuencas and Tayactac lacked the
legal personality to claim the damages sustained from the levy of the formers properties. According to
Asset Privatization Trust v. Court of Appeals,
44
even when the foreclosure on the assets of the
corporation was wrongful and done in bad faith the stockholders had no standing to recover for
themselves moral damages; otherwise, they would be appropriating and distributing part of the
corporations assets prior to the dissolution of the corporation and the liquidation of its debts and
liabilities. Moreover, in Evangelista v. Santos,
45
the Court, resolving whether or not the minority
stockholders had the right to bring an action for damages against the principal officers of the corporation
for their own benefit, said:
As to the second question, the complaint shows that the action is for damages resulting from
mismanagement of the affairs and assets of the corporation by its principal officer, it being alleged that
defendants maladministration has brought about the ruin of the corporation and the consequent loss of
value of its stocks. The injury complained of is thus primarily to the corporation, so that the suit for the
damages claimed should be by the corporation rather than by the stockholders (3 Fletcher, Cyclopedia of
Corporation pp. 977-980). The stockholders may not directly claim those damages for themselves for
that would result in the appropriation by, and the distribution among them of part of the corporate
assets before the dissolution of the corporation and the liquidation of its debts and liabilities, something
which cannot be legally done in view of section 16 of the Corporation Law, which provides:
No shall corporation shall make or declare any stock or bond dividend or any dividend whatsoever
except from the surplus profits arising from its business, or divide or distribute its capital stock or
property other than actual profits among its members or stockholders until after the payment of its
debts and the termination of its existence by limitation or lawful dissolution.
x x x x
In the present case, the plaintiff stockholders have brought the action not for the benefit of the
corporation but for their own benefit, since they ask that the defendant make good the losses
occasioned by his mismanagement and pay to them the value of their respective participation in the
corporate assets on the basis of their respective holdings. Clearly, this cannot be done until all corporate
debts, if there be any, are paid and the existence of the corporation terminated by the limitation of its
charter or by lawful dissolution in view of the provisions of section 16 of the Corporation Law. (Emphasis
ours)
It results that plaintiffs complaint shows no cause of action in their favor so that the lower court did not
err in dismissing the complaint on that ground.
While plaintiffs ask for remedy to which they are not entitled unless the requirement of section 16 of the
Corporation Law be first complied with, we note that the action stated in their complaint is susceptible
of being converted into a derivative suit for the benefit of the corporation by a mere change in the
prayer. Such amendment, however, is not possible now, since the complaint has been filed in the wrong
court, so that the same has to be dismissed.
46

That Maraon knew that Arc Cuisine, Inc. owned the properties levied on attachment but he still
excluded Arc Cuisine, Inc. from his complaint was of no consequence now. The Cuencas and Tayactac still
had no right of action even if the affected properties were then under their custody at the time of the
attachment, considering that their custody was only incidental to the operation of the corporation.
It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine, Inc. a proper action to
recover damages resulting from the attachment. Such action would be one directly brought in the name
of the corporation. Yet, that was not true here, for, instead, the Cuencas and Tayactac presented the
claim in their own names.
In view of the outcome just reached, the Court deems it unnecessary to give any extensive consideration
to the remaining issues.
WHEREFORE, the Court GRANTS the petition for review; and REVERSES and SETS ASIDE the decision of
the Court of Appeals in CA-G.R. CV No. 79145 promulgated on January 31,2006.
No pronouncements on costs of suit.
SO ORDERED.


















61

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 175350 June 13, 2012
EQUITABLE BANKING CORPORATION, INC. Petitioner,
vs.
SPECIAL STEEL PRODUCTS, and AUGUSTO L. PARDO, Respondents.
D E C I S I O N
DEL CASTILLO, J.:
A crossed check with the notation "account payee only" can only be deposited in the named payees
account. It is gross negligence for a bank to ignore this rule solely on the basis of a third partys oral
representations of having a good title thereto.
Before the Court is a Petition for Review on Certiorari of the October 13, 2006 Decision of the Court of
Appeals (CA) in CA-G.R. CV No. 62425. The dispositive portion of the assailed Decision reads:
WHEREFORE, premises considered, the May 4, 1998 Decision of the Regional Trial Court of Pasig City,
Branch 168, in Civil Case No. 63561, is hereby AFFIRMED.
SO ORDERED.
1

Factual Antecedents
Respondent Special Steel Products, Inc. (SSPI) is a private domestic corporation selling steel products. Its
co-respondent Augusto L. Pardo (Pardo) is SSPIs President and majority stockholder.
2

International Copra Export Corporation (Interco) is its regular customer.
3

Jose Isidoro
4
Uy, alias Jolly Uy (Uy), is an Interco employee, in charge of the purchasing department, and
the son-in-law of its majority stockholder.
5

Petitioner Equitable Banking Corporation (Equitable or bank) is a private domestic corporation engaged
in banking
6
and is the depository bank of Interco and of Uy.
In 1991, SSPI sold welding electrodes to Interco, as evidenced by the following sales invoices:
Sales Invoice No. 65042 dated February 14, 1991 for P325,976.34
7

Sales Invoice No. 65842 dated April 11, 1991 for P345,412.80
8

Sales Invoice No. 65843 dated April 11, 1991 for P313,845.84
9

The due dates for these invoices were March 16, 1991 (for the first sales invoice) and May 11, 1991 (for
the others). The invoices provided that Interco would pay interest at the rate of 36% per annum in case
of delay.
In payment for the above welding electrodes, Interco issued three checks payable to the order of SSPI on
July 10, 1991,
10
July 16, 1991,
11
and July 29, 1991.
12
Each check was crossed with the notation "account
payee only" and was drawn against Equitable. The records do not identify the signatory for these three
checks, or explain how Uy, Intercos purchasing officer, came into possession of these checks.
The records only disclose that Uy presented each crossed check to Equitable on the day of its issuance
and claimed that he had good title thereto.
13
He demanded the deposit of the checks in his personal
accounts in Equitable, Account No. 18841-2 and Account No. 03474-0.
14

Equitable acceded to Uys demands on the assumption that Uy, as the son-in-law of Intercos majority
stockholder,
15
was acting pursuant to Intercos orders. The bank also relied on Uys status as a valued
client.
16
Thus, Equitable accepted the checks for deposit in Uys personal accounts
17
and stamped "ALL
PRIOR ENDORSEMENT AND/OR LACK OF ENDORSEMENT GUARANTEED" on their dorsal portion.
18
Uy
promptly withdrew the proceeds of the checks.
In October 1991, SSPI reminded Interco of the unpaid welding electrodes, amounting to P985,234.98.
19
It
reiterated its demand on January 14, 1992.
20
SSPI explained its immediate need for payment as it was
experiencing some financial crisis of its own. Interco replied that it had already issued three checks
payable to SSPI and drawn against Equitable. SSPI denied receipt of these checks.
On August 6, 1992, SSPI requested information from Equitable regarding the three checks. The bank
refused to give any information invoking the confidentiality of deposits.
21

The records do not disclose the circumstances surrounding Intercos and SSPIs eventual discovery of
Uys scheme. Nevertheless, it was determined that Uy, not SSPI, received the proceeds of the three
checks that were payable to SSPI. Thus, on June 30, 1993 (twenty-three months after the issuance of the
three checks), Interco finally paid the value of the three checks to SSPI, plus a portion of the accrued
interests. Interco refused to pay the entire accrued interest of P767,345.64 on the ground that it was not
responsible for the delay. Thus, SSPI was unable to collect P437,040.35 (at the contracted rate of 36%
per annum) in interest income.
22

SSPI and its president, Pardo, filed a complaint for damages with application for a writ of preliminary
attachment against Uy and Equitable Bank. The complaint alleged that the three crossed checks, all
payable to the order of SSPI and with the notation "account payee only," could be deposited and
encashed by SSPI only. However, due to Uys fraudulent representations, and Equitables indispensable
connivance or gross negligence, the restrictive nature of the checks was ignored and the checks were
deposited in Uys account. Had the defendants not diverted the three checks in July 1991, the plaintiffs
could have used them in their business and earned money from them. Thus, the plaintiffs prayed for an
award of actual damages consisting of the unrealized interest income from the proceeds of the checks
for the two-year period that the defendants withheld the proceeds from them (from July 1991 up to
June 1993).
23

In his personal capacity, Pardo claimed an award of P3 million as moral damages from the defendants.
He allegedly suffered hypertension, anxiety, and sleepless nights for fear that the government would
62

charge him for tax evasion or money laundering. He maintained that defendants actions amounted to
money laundering and that it unfairly implicated his company in the scheme. As for his fear of tax
evasion, Pardo explained that the Bureau of Internal Revenue might notice a discrepancy between the
financial reports of Interco (which might have reported the checks as SSPIs income in 1991) and those of
SSPI (which reported the income only in 1993). Since Uy and Equitable were responsible for Pardos
worries, they should compensate him jointly and severally therefor.
24

SSPI and Pardo also prayed for exemplary damages and attorneys fees.
25

In support of their application for preliminary attachment, the plaintiffs alleged that the defendants are
guilty of fraud in incurring the obligation upon which the action was brought and that there is no
sufficient security for the claim sought to be enforced in this action.
26

The trial court granted plaintiffs application.
27
It issued the writ of preliminary attachment on September
20, 1993,
28
upon the filing of plaintiffs bond for P500,000.00. The sheriff served and implemented the
writ against the personal properties of both defendants.
29

Upon Equitables motion and filing of a counter-bond, however, the trial court eventually discharged the
attachment
30
against it.
31

Equitable then argued for the dismissal of the complaint for lack of cause of action. It maintained that
interest income is due only when it is expressly stipulated in writing. Since Equitable and SSPI did not
enter into any contract, Equitable is not liable for damages, in the form of unobtained interest income,
to SSPI.
32
Moreover, SSPIs acceptance of Intercos payment on the sales invoices is a waiver or extinction
of SSPIs cause of action based on the three checks.
33

Equitable further argued that it is not liable to SSPI because it accepted the three crossed checks in good
faith.
34
Equitable averred that, due to Uys close relations with the drawer of the checks, the bank had
basis to assume that the drawer authorized Uy to countermand the original order stated in the check
(that it can only be deposited in the named payees account). Since only Uy is responsible for the
fraudulent conversion of the checks, he should reimburse Equitable for any amounts that it may be
made liable to plaintiffs.
35

The bank counter-claimed that SSPI is liable to it in damages for the wrongful and malicious attachment
of Equitables personal properties. The bank maintained that SSPI knew that the allegation of fraud
against the bank is a falsehood. Further, the bank is financially capable to meet the plaintiffs claim
should the latter receive a favorable judgment. SSPI was aware that the preliminary attachment against
the bank was unnecessary, and intended only to humiliate or destroy the banks reputation.
36

Meanwhile, Uy answered that the checks were negotiated to him; that he is a holder for value of the
checks and that he has a good title thereto.
37
He did not, however, explain how he obtained the checks,
from whom he obtained his title, and the value for which he received them. During trial, Uy did not
present any evidence but adopted Equitables evidence as his own.
Ruling of the Regional Trial Court
38

The RTC clarified that SSPIs cause of action against Uy and Equitable is for quasi-delict. SSPI is not
seeking to enforce payment on the undelivered checks from the defendants, but to recover the damage
that it sustained from the wrongful non-delivery of the checks.
39

The crossed checks belonged solely to the payee named therein, SSPI. Since SSPI did not authorize
anyone to receive payment in its behalf, Uy clearly had no title to the checks and Equitable had no right
to accept the said checks from Uy. Equitable was negligent in permitting Uy to deposit the checks in his
account without verifying Uys right to endorse the crossed checks. The court reiterated that banks have
the duty to scrutinize the checks deposited with it, for a determination of their genuineness and
regularity. The law holds banks to a high standard because banks hold themselves out to the public as
experts in the field. Thus, the trial court found Equitables explanation regarding Uys close relations with
the drawer unacceptable.
40

Uys conversion of the checks and Equitables negligence make them liable to compensate SSPI for the
actual damage it sustained. This damage consists of the income that SSPI failed to realize during the
delay.
41
The trial court then equated this unrealized income with the interest income that SSPI failed to
collect from Interco. Thus, it ordered Uy and Equitable to pay, jointly and severally, the amount
of P437,040.35 to SSPI as actual damages.
42

It also ordered the defendants to pay exemplary damages of P500,000.00, attorneys fees amounting
toP200,000.00, as well as costs of suit.
43

The trial court likewise found merit in Pardos claim for moral damages. It found that Pardo suffered
anxiety, sleepless nights, and hypertension in fear that he would face criminal prosecution. The trial
court awarded Pardo the amount of P3 million in moral damages.
44

The dispositive portion of the trial courts Decision reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs Special Steel Products, Inc., and Augusto
L. Pardo and against defendants Equitable Banking Corporation [and] Jose Isidoro Uy, alias "Jolly Uy,"
ordering defendants to jointly and severally pay plaintiffs the following:
1. P437,040.35 as actual damages;
2. P3,000,000.00 as moral damages to Augusto L. Pardo;
3. P500,000.00 as exemplary damages;
4. P200,000.00 as attorneys fees; and
5. Costs of suit.
Defendant EBCs counterclaim is hereby DISMISSED for lack of factual and legal basis.
Likewise, the crossclaim filed by defendant EBC against defendant Jose Isidoro Uy and the crossclaim
filed by defendant Jose Isidoro Uy against defendant EBC are hereby DISMISSED for lack of factual and
legal basis.
SO ORDERED.
Pasig City, May 4, 1998.
45

63

The trial court denied Equitables motion for reconsideration in its Order dated November 19, 1998.
46

Only Equitable appealed to the CA,
47
reiterating its defenses below.
Appealed Ruling of the Court of Appeals
48

The appellate court found no merit in Equitables appeal.
It affirmed the trial courts ruling that SSPI had a cause of action for quasi-delict against Equitable.
49
The
CA noted that the three checks presented by Uy to Equitable were crossed checks, and strictly made
payable to SSPI only. This means that the checks could only be deposited in the account of the named
payee.
50
Thus, the CA found that Equitable had the responsibility of ensuring that the crossed checks are
deposited in SSPIs account only. Equitable violated this duty when it allowed the deposit of the crossed
checks in Uys account.
51

The CA found factual and legal basis to affirm the trial courts award of moral damages in favor of
Pardo.
52

It likewise affirmed the award of exemplary damages and attorneys fees in favor of SSPI.
53

Issues
1. Whether SSPI has a cause of action against Equitable for quasi-delict;
2. Whether SSPI can recover, as actual damages, the stipulated 36% per annum interest from Equitable;
3. Whether speculative fears and imagined scenarios, which cause sleepless nights, may be the basis for
the award of moral damages; and
4. Whether the attachment of Equitables personal properties was wrongful.
Our Ruling
SSPIs cause of action
This case involves a complaint for damages based on quasi-delict. SSPI asserts that it did not receive
prompt payment from Interco in July 1991 because of Uys wilful and illegal conversion of the checks
payable to SSPI, and of Equitables gross negligence, which facilitated Uys actions. The combined actions
of the defendants deprived SSPI of interest income on the said moneys from July 1991 until June 1993.
Thus, SSPI claims damages in the form of interest income for the said period from the parties who
wilfully or negligently withheld its money from it.
Equitable argues that SSPI cannot assert a right against the bank based on the undelivered checks.
54
It
cites provisions from the Negotiable Instruments Law and the case of Development Bank of Rizal v. Sima
Wei
55
to argue that a payee, who did not receive the check, cannot require the drawee bank to pay it the
sum stated on the checks.
Equitables argument is misplaced and beside the point. SSPIs cause of action is not based on the three
checks. SSPI does not ask Equitable or Uy to deliver to it the proceeds of the checks as the rightful payee.
SSPI does not assert a right based on the undelivered checks or for breach of contract. Instead, it asserts
a cause of action based on quasi-delict. A quasi-delict is an act or omission, there being fault or
negligence, which causes damage to another. Quasi-delicts exist even without a contractual relation
between the parties. The courts below correctly ruled that SSPI has a cause of action for quasi-delict
against Equitable.
The checks that Interco issued in favor of SSPI were all crossed, made payable to SSPIs order, and
contained the notation "account payee only." This creates a reasonable expectation that the payee alone
would receive the proceeds of the checks and that diversion of the checks would be averted. This
expectation arises from the accepted banking practice that crossed checks are intended for deposit in
the named payees account only and no other.
56
At the very least, the nature of crossed checks should
place a bank on notice that it should exercise more caution or expend more than a cursory inquiry, to
ascertain whether the payee on the check has authorized the holder to deposit the same in a different
account. It is well to remember that "[t]he banking system has become an indispensable institution in
the modern world and plays a vital role in the economic life of every civilized society. Whether as mere
passive entities for the safe-keeping and saving of money or as active instruments of business and
commerce, banks have attained an [sic] ubiquitous presence among the people, who have come to
regard them with respect and even gratitude and, above all, trust and confidence. In this connection, it is
important that banks should guard against injury attributable to negligence or bad faith on its part. As
repeatedly emphasized, since the banking business is impressed with public interest, the trust and
confidence of the public in it is of paramount importance. Consequently, the highest degree of diligence
is expected, and high standards of integrity and performance are required of it."
57

Equitable did not observe the required degree of diligence expected of a banking institution under the
existing factual circumstances.
The fact that a person, other than the named payee of the crossed check, was presenting it for deposit
should have put the bank on guard. It should have verified if the payee (SSPI) authorized the holder (Uy)
to present the same in its behalf, or indorsed it to him. Considering however, that the named payee does
not have an account with Equitable (hence, the latter has no specimen signature of SSPI by which to
judge the genuineness of its indorsement to Uy), the bank knowingly assumed the risk of relying solely
on Uys word that he had a good title to the three checks. Such misplaced reliance on empty words is
tantamount to gross negligence, which is the "absence of or failure to exercise even slight care or
diligence, or the entire absence of care, evincing a thoughtless disregard of consequences without
exerting any effort to avoid them."
58

Equitable contends that its knowledge that Uy is the son-in-law of the majority stockholder of the
drawer, Interco, made it safe to assume that the drawer authorized Uy to countermand the order
appearing on the check. In other words, Equitable theorizes that Interco reconsidered its original order
and decided to give the proceeds of the checks to Uy.
59
That the bank arrived at this conclusion without
anything on the face of the checks to support it is demonstrative of its lack of caution. It is troubling that
Equitable proceeded with the transaction based only on its knowledge that Uy had close relations with
Interco. The bank did not even make inquiries with the drawer, Interco (whom the bank considered a
"valued client"), to verify Uys representation. The banking system is placed in peril when bankers act out
of blind faith and empty promises, without requiring proof of the assertions and without making the
appropriate inquiries. Had it only exercised due diligence, Equitable could have saved both Interco and
the named payee, SSPI, from the trouble that the banks mislaid trust wrought for them.
Equitables pretension that there is nothing under the circumstances that rendered Uys title to the
checks questionable is outrageous. These are crossed checks, whose manner of discharge, in banking
64

practice, is restrictive and specific. Uys name does not appear anywhere on the crossed checks.
Equitable, not knowing the named payee on the check, had no way of verifying for itself the alleged
genuineness of the indorsement to Uy. The checks bear nothing on their face that supports the belief
that the drawer gave the checks to Uy. Uys relationship to Intercos majority stockholder will not justify
disregarding what is clearly ordered on the checks.
Actual damages
For its role in the conversion of the checks, which deprived SSPI of the use thereof, Equitable is solidarily
liable with Uy to compensate SSPI for the damages it suffered.
Among the compensable damages are actual damages, which encompass the value of the loss sustained
by the plaintiff, and the profits that the plaintiff failed to obtain.
60
Interest payments, which SSPI claims,
fall under the second category of actual damages.
SSPI computed its claim for interest payments based on the interest rate stipulated in its contract with
Interco. It explained that the stipulated interest rate is the actual interest income it had failed to obtain
from Interco due to the defendants tortious conduct.
The Court finds the application of the stipulated interest rate erroneous.
SSPI did not recover interest payments at the stipulated rate from Interco because it agreed that the
delay was not Intercos fault, but that of the defendants. If that is the case, then Interco is not in delay
(at least not after issuance of the checks) and the stipulated interest payments in their contract did not
become operational. If Interco is not liable to pay for the 36% per annum interest rate, then SSPI did not
lose that income. SSPI cannot lose something that it was not entitled to in the first place. Thus, SSPIs
claim that it was entitled to interest income at the rate stipulated in its contract with Interco, as a
measure of its actual damage, is fallacious.
More importantly, the provisions of a contract generally take effect only among the parties, their assigns
and heirs.
61
SSPI cannot invoke the contractual stipulation on interest payments against Equitable
because it is neither a party to the contract, nor an assignee or an heir to the contracting parties.
Nevertheless, it is clear that defendants actions deprived SSPI of the present use of its money for a
period of two years. SSPI is therefore entitled to obtain from the tortfeasors the profits that it failed to
obtain from July 1991 to June 1993. SSPI should recover interest at the legal rate of 6% per annum,
62
this
being an award for damages based on quasi-delict and not for a loan or forbearance of money.
Moral damages
Both the trial and appellate courts awarded Pardo P3 million in moral damages. Pardo claimed that he
was frightened, anguished, and seriously anxious that the government would prosecute him for money
laundering and tax evasion because of defendants actions.
63
In other words, he was worried about the
repercussions that defendants actions would have on him.
Equitable argues that Pardos fears are all imagined and should not be compensated. The bank points
out that none of Pardos fears panned out.
64

Moral damages are recoverable only when they are the proximate result of the defendants wrongful act
or omission.
65
Both the trial and appellate courts found that Pardo indeed suffered as a result of the
diversion of the three checks. It does not matter that the things he was worried and anxious about did
not eventually materialize. It is rare for a person, who is beset with mounting problems, to sift through
his emotions and distinguish which fears or anxieties he should or should not bother with. So long as the
injured partys moral sufferings are the result of the defendants actions, he may recover moral
damages.
The Court, however, finds the award of P3 million excessive. Moral damages are given not to punish the
defendant but only to give the plaintiff the means to assuage his sufferings with diversions and
recreation.
66
We find that the award of P50,000.00
67
as moral damages is reasonable under the
circumstances.
Equitable to recover amounts from Uy
Equitable then insists on the allowance of their cross-claim against Uy. The bank argues that it was Uy
who was enriched by the entire scheme and should reimburse Equitable for whatever amounts the Court
might order it to pay in damages to SSPI.
68

Equitable is correct. There is unjust enrichment when (1) a person is unjustly benefited, and (2) such
benefit is derived at the expense of or with damages to another.
69
In the instant case, the fraudulent
scheme concocted by Uy allowed him to improperly receive the proceeds of the three crossed checks
and enjoy the profits from these proceeds during the entire time that it was withheld from SSPI.
Equitable, through its gross negligence and mislaid trust on Uy, became an unwitting instrument in Uys
scheme. Equitables fault renders it solidarily liable with Uy, insofar as respondents are concerned.
Nevertheless, as between Equitable and Uy, Equitable should be allowed to recover from Uy whatever
amounts Equitable may be made to pay under the judgment. It is clear that Equitable did not profit in
Uys scheme. Disallowing Equitables cross-claim against Uy is tantamount to allowing Uy to unjustly
enrich himself at the expense of Equitable. For this reason, the Court allows Equitables cross-claim
against Uy.
Preliminary attachment
Equitable next assails as error the trial courts dismissal of its counter-claim for wrongful preliminary
attachment. It maintains that, contrary to SSPIs allegation in its application for the writ, there is no
showing whatsoever that Equitable was guilty of fraud in allowing Uy to deposit the checks. Thus, the
trial court should not have issued the writ of preliminary attachment in favor of SSPI. The wrongful
attachment compelled Equitable to incur expenses for a counter-bond, amounting to P30,204.26, and
caused it to sustain damage, amounting to P5 million, to its goodwill and business credit.
70

SSPI submitted the following affidavit in support of its application for a writ of preliminary attachment:
I, Augusto L. Pardo, of legal age, under oath hereby depose and declare:
1. I am one of the plaintiffs in the above-entitled case; the other plaintiff is our family
corporation, Special Steel Products, Inc., of which I am the president and majority
stockholder; I caused the preparation of the foregoing Complaint, the allegations of which I
have read, and which I hereby affirm to be true and correct out of my own personal
knowledge;
65

2. The corporation and I have a sufficient cause of action against defendants Isidoro Uy alias
Jolly Uy and Equitable Banking Corporation, who are guilty of fraud in incurring the obligation
upon which this action is brought, as particularly alleged in the Complaint, which allegations I
hereby adopt and reproduce herein;
3. There is no sufficient security for our claim in this action and that the amount due us is as
much as the sum for which the order is granted above all legal counterclaims;
4. We are ready and able to put up a bond executed to the defendants in an amount to be
fixed by the Court[,] conditioned on the payment of all costs[,] which may be adjudged to
defendants[,] and all damages[,] which they may sustain by reason of the attachment of the
court, should [the court] finally adjudge that we are not entitled thereto.
71

The complaint (to which the supporting affidavit refers) cites the following factual
circumstances to justify SSPIs application:
6. x x x Yet, notwithstanding the fact that SPECIAL STEEL did not open an account with
EQUITABLE BANK as already alleged, thru its connivance with defendant UY in his fraudulent
scheme to defraud SPECIAL STEEL, or at least thru its gross negligence EQUITABLE BANK
consented to or allowed the opening of Account No. 18841-2 at its head office and Account
No. 03474-0 at its Ermita Branch in the name of SPECIAL STEEL without the latters
knowledge, let alone authority or consent, but obviously on the bases of spurious or falsified
documents submitted by UY or under his authority, which documents EQUITABLE BANK did
not bother to verify or check their authenticity with SPECIAL STEEL.
72

x x x x
9. On August 6, 1992, plaintiffs, thru counsel, wrote EQUITABLE BANK about the fraudulent
transactions involving the aforesaid checks, which could not have been perpetrated without
its indispensable participation and cooperation, or gross negligence, and therein solicited its
cooperation in securing information as to the anomalous and irregular opening of the false
accounts maintained in SPECIAL STEELs name, but EQUITABLE BANK malevolently shirking
from its responsibility to prevent the further perpetration of fraud, conveniently, albeit
unjustifiably, invoked the confidentiality of the deposits and refused to give any information,
and accordingly denied SPECIAL STEELs valid request, thereby knowingly shielding the
identity of the ma[le]factors involved [in] the unlawful and fraudulent transactions.
73

The above affidavit and the allegations of the complaint are bereft of specific and definite allegations of
fraud against Equitable that would justify the attachment of its properties. In fact, SSPI admits its
uncertainty whether Equitables participation in the transactions involved fraud or was a result of its
negligence. Despite such uncertainty with respect to Equitables participation, SSPI applied for and
obtained a preliminary attachment of Equitables properties on the ground of fraud. We believe that
such preliminary attachment was wrongful. "[A] writ of preliminary attachment is too harsh a provisional
remedy to be issued based on mere abstractions of fraud. Rather, the rules require that for the writ to
issue, there must be a recitation of clear and concrete factual circumstances manifesting that the debtor
practiced fraud upon the creditor at the time of the execution of their agreement in that said debtor had
a preconceived plan or intention not to pay the creditor."
74
No proof was adduced tending to show that
Equitable had a preconceived plan not to pay SSPI or had knowingly participated in Uys scheme.
That the plaintiffs eventually obtained a judgment in their favor does not detract from the wrongfulness
of the preliminary attachment.1wphi1 While "the evidence warrants [a] judgment in favor of [the]
applicant, the proofs may nevertheless also establish that said applicants proffered ground for
attachment was inexistent or specious, and hence, the writ should not have issued at all x x x."
75

For such wrongful preliminary attachment, plaintiffs may be held liable for damages. However, Equitable
is entitled only to such damages as its evidence would allow,
76
for the wrongfulness of an attachment
does not automatically warrant the award of damages. The debtor still has the burden of proving the
nature and extent of the injury that it suffered by reason of the wrongful attachment.
77

The Court has gone over the records and found that Equitable has duly proved its claim for, and is
entitled to recover, actual damages. In order to lift the wrongful attachment of Equitables properties,
the bank was compelled to pay the total amount of P30,204.26 in premiums for a counter-
bond.
78
However, Equitable failed to prove that it sustained damage to its "goodwill and business credit"
in consequence of the alleged wrongful attachment. There was no proof of Equitables contention that
respondents actions caused it public embarrassment and a bank run.
WHEREFORE, premises considered, the Petition is PARTIALLY GRANTED. The assailed October 13, 2006
Decision of the Court of Appeals in CA-G.R. CV No. 62425 is MODIFIED by:
1. REDUCING the award of actual damages to respondents to the rate of 6% per annum of the
value of the three checks from July 1991 to June 1993 or a period of twenty-three months;
2. REDUCING the award of moral damages in favor of Augusto L. Pardo from P3,000,000.00
to P50,000.00; and
3. REVERSING the dismissal of Equitable Banking Corporations cross-claim against Jose
Isidoro Uy, alias Jolly Uy. Jolly Uy is hereby ORDERED to REIMBURSE Equitable Banking
Corporation the amounts that the latter will pay to respondents.
Additionally, the Court hereby REVERSES the dismissal of Equitable Banking Corporations counterclaim
for damages against Special Steel Products, Inc. This Court ORDERS Special Steel Products, Inc. to PAY
Equitable Banking Corporation actual damages in the total amount of P30,204.36, for the wrongful
preliminary attachment of its properties.
The rest of the assailed Decision is AFFIRMED.
SO ORDERED.