Section 1 ...................................................................................................... 4 Calo v. Roldan, 76 Phil. 445 ................................................................................. 4 KO Glass v. Valenzuela, 116 S 563 ........................................................................ 9 General v. De Venecia, 78 Phil. 780, July 30, 1947 ............................................. 14 Miailhe v. De Lencquesaing, 142 S 694 ............................................................... 16 Insular Savings Bank v. CA, 460 S 122 ................................................................ 19 Tan v. Zandueta, 61 Phil. 526 .............................................................................. 23 Walter Olsen v. Olsen, 48 Phil. 238 .................................................................... 25 Santos v. Bernabe, 54 Phil. 19 .............................................................................. 27 State Investment House v. CA, 163 S 799 .......................................................... 29 Aboitiz v. Cotabato Bus, 105 S 88 ....................................................................... 32 People's Bank & Trust Co. v. Syvel, 164 S 247 .................................................... 35 Adlawan v. Torres, 233 S 645 .............................................................................. 39 Claude Neon Lights v. Phil Advertising, 57 Phil. 607 (Case not Found) ......... 45 State Investment House v. Citibank, 203 S 9 .................................................... 46 Mabanag v. Gallemore, 81 Phil. 254 .................................................................... 53 Philippine Bank of Communications v. CA, February 23, 2001 ........................ 56 PCIB v. Alejandro, September 21, 2007 .............................................................. 60 Wee v. Tankiansee, February 13, 2008 ............................................................... 68 Metro, Inc. v. Laras Gift & Decor, November 27, 2009..................................... 72 Section 2 ................................................................................................... 76 Sievert v. CA, 168 S 692 ....................................................................................... 76 Davao Light v. CA, 204 S 343 ............................................................................. 79 Cuartero v. CA, 212 S 260 .................................................................................... 85 Salas v. Adil, 90 S 121 ........................................................................................... 89 La Granja v. Samson, 58 Phil. 378 ..................................................................... 92 Section 3 ................................................................................................... 94 KO Glass v. Valenzuela, 116 S 563 (See under Section 1 page 9) ...................... 94 Guzman v. Catolico, 65 Phil. 261 ........................................................................ 94 Jardine Manila Finance v. CA, 171 S 636 ............................................................ 97 Ting v. Villarin, 176 S 532 ................................................................................... 102 Cu Unjieng v. Goddard, 58 Phil. 482 ................................................................. 106 Carlos v. Sandoval, 471 S 266 ............................................................................. 112 Salgado v. CA, March 26, 1984, 128 SCRA 395 (Case Not Found!) ................. 127 PCIB v. Alejandro, September 21, 2007 (See under Section 1, page 60) .......... 127 Republic v. Flores, July 12, 2007 ......................................................................... 127 Section 4 ................................................................................................... 131 Arellano v. Flojo, 238 S 72 ................................................................................... 131 Calderon v. IAC, 155 S 531 .................................................................................. 134 Section 5 .................................................................................................. 139 Gotauco v. ROD, 59 Phil 756 ............................................................................. 139 Onate v. Abrogar (2 nd Division), 230 S 181/131 .................................................. 140 Onate v. Abrogar (En Banc), 240/241 S 659 ..................................................... 144 HB Zachary v. CA, 232 S 329 ............................................................................. 149 Section 6 .................................................................................................. 159 Roque v. CA, 93 S 540 ........................................................................................ 159 Section 7 .................................................................................................. 164 Siari Valley Estates v. Lucasan, 109 Phil. 294 .................................................. 164 Ravanera v. Imperial, 93 S 589 .......................................................................... 167 Obana v. CA, 172 S 866 ...................................................................................... 175 Du v. Stronghold Insurance, 433 S 43 ................................................................ 181 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
2 of 501
Valdevieso v. Damalerio, 451 S 664 ................................................................... 186 Walker v. McMicking, 14 Phil. 668 ................................................................... 189 NBI v. Tuliao, March 24, 1997 ........................................................................... 193 Villanueva-Fabella v. Judge Ralph Lee, 419 S 440 ............................................ 197 Sebastian v. Valino, 224 S 256 ........................................................................... 203 Villareal v. Rarama, 247 S 493 ......................................................................... 206 Balantes v. Ocampo III, 242 S 327 ..................................................................... 210 Elipe v. Fabre, 241 S 249 ..................................................................................... 212 Roque v. CA, 93 S 540 (See under Section 6) .................................................... 215 Summit Trading v. Avendano, 135 S 397 ........................................................... 215 Chemphil Export and Import v. CA, 251 S 286 ................................................. 217 Tayabas Land v. Sharruf, 41 Phil. 382 ............................................................... 235 Gotauco v. ROD, 59 Phil. 756 (See under Section 5 page 139) ........................ 239 Rural Bank of Sta. Barbara v. Manila Mission, August 19, 2009 .................... 239 Section 8 ................................................................................................. 245 Engineering Construction v. NPC, 163 S 9 ....................................................... 245 RCBC v. Judge Castro, 168 S 49 .........................................................................250 The Manila Remnant v. CA, 231 S 281 ............................................................... 257 Chemphil Export and Import v. CA, 251 S 286 (See under Section 7 page 217) ............................................................................................................................262 Abinujar v. CA, April 18, 1995 ............................................................................262 National Bank v. Olutanga, 54 Phil. 346 ......................................................... 266 Perla Compania de Seguros v. Ramolete, 203 S 487 ....................................... 270 Tec Bi and co. v. Chartered Bank of India, 41 Phil.596 ....................................274 Consolidated Bank and Trust Corporation v. IAC, 150 S 591 .......................... 281 BF Homes v. CA, 190 S 262 ............................................................................... 286 Republic v. Saludares, 327 S 449 .......................................................................292 Section 12 ................................................................................................. 297 The Manila Remnant v. CA, 231 S 281 (See under Section 8 page 257) .......... 297 Insular Savings Bank v. CA, June 15, 2005 (See under Section 1 page 19) ...... 297 KO Glass v. Valenzuela, 116 S 563 (See under Section 1 page 9) .................... 297 Calderon v. IAC, 155 S 531 (See under Section 4 page 134) .............................. 297 Security Pacific Assurance Corp. v. Tria-Infante, 468 S 526 ......................... 298 Section 13 ................................................................................................ 304 Jopillo, Jr. v. CA, 167 S 247 ................................................................................ 304 Mindanao Savings Loan v. CA, 172 S 480 ........................................................ 308 Benitez v. IAC, 154 S 41 ...................................................................................... 314 Davao Light v. CA, 204 S 343 (See under Section 2 page 79) .......................... 317 Cuartero v. CA, 212 S 260 (See under Section 2 page 85) ................................. 317 Uy Kimpang v. Javier, 65 Phil 170 (1937) ........................................................... 318 Filinvest Credit v. Relova, 117 S 420 ................................................................... 323 Miranda v. CA, 178 S 702 ................................................................................... 329 Adlawan v. Torres, 233 S 645 (see under Section 1 page 39) ............................ 331 Peroxide Philippines Corp. v. CA, 199 S 882 ..................................................... 332 Section 14 ................................................................................................. 339 Uy v. CA, 191 S .................................................................................................... 339 Manila Herald Publishing v. Ramos, 88 Phil. 94 ............................................. 345 Traders Royal Bank v. IAC, 133 S 141 ................................................................ 349 Ching v. CA, 423 S 356 ....................................................................................... 353 Section 15 ................................................................................................ 360 Tayabas Land v. Sharruf, 41 Phil. 382 (See under Section 7 page 235) .......... 360 Bilag-Rivera v. Flora, July 6, 1995 ..................................................................... 360 PNB v. Vasquez, 71 Phil. 433 ..............................................................................365 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
3 of 501
PAL v. CA, 181 S 557........................................................................................... 367 Section 17 .................................................................................................385 Luzon Steel v. Sia, 28 S 58 .................................................................................385 Phil. British Assurance Co. v. IAC, 150 S 520 .................................................. 389 The Imperial Insurance v. de los Angeles, 111 S 25 ........................................... 393 Vadil v. de Venecia, 9 S 374 .............................................................................. 399 Zaragoza v. Fidelino, 163 S 443 ........................................................................ 402 Dizon v. Valdez, 23 S 200 ................................................................................. 406 Pioneer Insurance v. Camilon, 116 S 190 .......................................................... 408 UPPC v. Acropolis, January 25, 2012 ................................................................. 410 Section 20 ................................................................................................ 416 Calderon v. IAC, 155 S 531 (See under Section 4 page 134) ............................... 416 Pioneer Insurance and Surety Corp. v. Hontanosas, 78 S 447 ........................ 416 Stronghold Insurance v. CA, November 6, 1989 ............................................. 428 Carlos v. Sandoval, 471 S 266 (See under Section 3 page 112) .......................... 432 Maningo v. IAC, 183 S 691 .................................................................................. 433 Santos v. CA, 95 Phil. 360 ................................................................................. 439 Aquino v. Socorro, 35 S 373 .............................................................................. 442 Hanil Development v. IAC, 144 S 557 ............................................................... 445 BA Finance v. CA, 161 S 608 ............................................................................... 451 Malayan Insurance v. Salas, 90 S 252 .............................................................. 456 Philippine Charter Insurance v. CA, 179 S 468................................................ 464 Zaragoza v. Fidelino, 163 S 443 (See under Section 17 page 402) ................... 469 Zenith Insurance v. CA, 119 S 485 .................................................................... 469 Lazatin v. Twano, 2 S 842 ..................................................................................473 MC Engineering v. CA, 380 S 116 ...................................................................... 477 DM Wenceslao v. Readycon Trading & Const. Corp., 433 S 251 ..................... 491 Sps Yu v. Ngo Yet Te, February 6, 2007 ........................................................... 496 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
4 of 501
Section 1 Calo v. Roldan, 76 Phil. 445 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
5 of 501
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 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, PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
6 of 501
representatives, and other persons acting for or in their behalf, be restrained, enjoined and prohibited from entering in, interfering with, or in any way taking any participation in the harvest of the lands above describe belonging to the plaintiffs." That this is the nature of plaintiffs' action corroborated by the fact that they petitioned in the same complaint for a preliminary prohibitory injunction, which was denied by the court in its order dated August 17, 1945, and that the plaintiffs, in their motion for reconsideration of said order filed on August 20 of the same year, and in their urgent petition dated December 17, moving the court to grant said motion for reconsideration, reiterated that they were actual possessors of the land in question. The fact that plaintiffs, in their reply dated September 4, after reiterating their allegation or claim that they are the owners in fee simple and possessors in good faith of the properties in question, pray that they be declared the owners in fee simple, has not changed the nature of the action alleged in the complaint or added a new cause of action thereto; because the allegations in plaintiffs' reply were in answer to defendants' defenses, and the nature of plaintiffs' cause of action, as set forth in their complaint, was not and could not be amended or changed by the reply, which plaintiffs had the right to present as a matter of course. A plaintiff can not, after defendant's answer, amend his complaint by changing the cause of action or adding a new one without previously obtaining leave of court (section 2, Rule 17).. Respondents' contention in paragraph I of their answer that the action filed by them against petitioners in the case No. 7951 of the Court of First Instance of Laguna is not only for injunction, but also to quiet title over the two parcels of land described in the complaint, is untenable for the reasons stated in the previous paragraph. Besides, an equitable action to quiet title, in order to prevent harrassment by continued assertion of adverse title, or to protect the plaintiff's legal title and possession, may be filed in courts of equity (and our courts are also of equity), only where no other remedy at law exists or where the legal remedy invokable would not afford adequate remedy (32 Cyc., 1306, 1307). In the present case wherein plaintiffs alleged that they are the owners and were in actual possession of the lands described in the complaint and their fruits, the action of injunction filed by them is the proper and adequate remedy in law, for a judgment in favor of plaintiffs would quiet their title to said lands.. The provisional remedies denominated attachment, preliminary injunction, receivership, and delivery of personal property, provided in Rules 59, 60, 61, and 62 of the Rules of Court, respectively, are remedies to which parties litigant may resort for the preservation or protection of their rights or interest, and for no other purpose, during the pendency of the principal action. If an action, by its nature, does not require such protection or preservation, said remedies can not be applied for and granted. To each kind of action or actions a proper provisional remedy is provided for by law. The Rules of Court clearly specify the case in which they may be properly granted. . Attachment may be issued only in the case or actions specifically stated in section 1, Rule 59, in order that the defendant may not dispose of his property attached, and thus secure the satisfaction of any judgment that may be recovered by plaintiff from defendant. For that reason a property subject of litigation between the parties, or claimed by plaintiff as his, can not be attached upon motion of the same plaintiff.. The special remedy of preliminary prohibitory injunction lies when the plaintiff's principal action is an ordinary action of injunction, that is, when the relief demanded in the plaintiff's complaint consists in restraining the commission or continuance of the act complained of, either perpetually or for a limited period, and the other conditions required by section 3 of Rule 60 are present. The purpose of this provisional remedy is to preserve the status quo of the things subject of the action or the relation between the parties, in order to protect the rights of the plaintiff respecting the subject of the action during the pendency of the suit. Because, otherwise or if no preliminary prohibition injunction were issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the plaintiff. But, as this court has repeatedly held, a writ of preliminary injunction should not be granted to take the property out of the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
7 of 501
possession of one party to place it in the hands of another whose title has not been clearly established.. A receiver may be appointed to take charge of personal or real property which is the subject of an ordinary civil action, when it appears that the party applying for the appointment of a receiver has an interest in the property or fund which is the subject of the action or litigation, and that such property or fund is in danger of being lost, removed or materially injured unless a receiver is appointed to guard and preserve it (section 1 [b], Rule 61); or when it appears that the appointment of a receiver is the most convenient and feasible means of preserving, administering or disposing of the property in litigation (section 1 [e] of said Rule). The property or fund must, therefore be in litigation according to the allegations of the complaint, and the object of appointing a receiver is to secure and preserve the property or thing in controversy pending the litigation. Of course, if it is not in litigation and is in actual possession of the plaintiff, the latter can not apply for and obtain the appointment of a receiver thereof, for there would be no reason for such appointment. Delivery of personal property as a provisional remedy consists in the delivery, by order of the court, of a personal property by the defendant to the plaintiff, who shall give a bond to assure the return thereof or the payment of damages to the defendant in the plaintiff's action to recover possession of the same property fails, in order to protect the plaintiff's right of possession of said property, or prevent the defendant from damaging, destroying or disposing of the same during the pendency of the suit. Undoubtedly, according to law, the provisional remedy proper to plaintiffs' action of injunction is a preliminary prohibitory injunction, if plaintiff's theory, as set forth in the complaint, that he is the owner and in actual possession of the premises is correct. But as the lower court found at the hearing of the said petition for preliminary injunction that the defendants were in possession of the lands, the lower court acted in accordance with law in denying the petition, although their motion for reconsideration, which was still pending at the time the petition in the present case was heard in this court, plaintiffs insist that they are in actual possession of the lands and, therefore, of the fruits thereof. From the foregoing it appears evident that the respondent judge acted in excess of his jurisdiction in appointing a receiver in case No. 7951 of the Court of First Instance of Laguna. Appointment of a receiver is not proper or does not lie in an action of injunction such as the one filed by the plaintiff. The petition for appointment of a receiver filed by the plaintiffs (Exhibit I of the petition) is based on the ground that it is the most convenient and feasible means of preserving, administering and disposing of the properties in litigation; and according to plaintiffs' theory or allegations in their complaint, neither the lands nor the palay harvested therein, are in litigation. The litigation or issue raised by plaintiffs in their complaint is not the ownership or possession of the lands and their fruits. It is whether or not defendants intend or were intending to enter or work or harvest whatever existing fruits could then be found in the lands described in the complaint, alleged to be the exclusive property and in the actual possession of the plaintiffs. It is a matter not only of law but of plain common sense that a plaintiff will not and legally can not ask for the appointment or receiver of property which he alleges to belong to him and to be actually in his possession. For the owner and possessor of a property is more interested than persons in preserving and administering it. Besides, even if the plaintiffs had amended their complaint and alleged that the lands and palay harvested therein are being claimed by the defendants, and consequently the ownership and possession thereof were in litigation, it appearing that the defendants (now petitioners) were in possession of the lands and had planted the crop or palay harvested therein, as alleged in paragraph 6 (a) and (b) of the petition filed in this court and not denied by the respondent in paragraph 2 of his answer, the respondent judge would have acted in excess of his jurisdiction or with a grave abuse of discretion in appointing a receiver thereof. Because relief by way of receivership is equitable in nature, and a court of equity will not ordinarily appoint a receiver where the rights of the parties depend on the determination of adverse claims of legal title to real property and one party is in possession (53 C. J., p. 26). The present case falls within this rule.. In the case of Mendoza vs. Arellano and B. de Arellano, this court said: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
8 of 501
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. Moran, C. J., Ozaeta, Jaranilla, De Joya, Pablo, Perfecto, Hilado, and Bengzon, JJ., concur. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
9 of 501
KO Glass v. Valenzuela, 116 S 563 G.R. No. L-48756 September 11, 1982 K.O. GLASS CONSTRUCTION CO., INC., petitioner, vs. THE HONORABLE MANUEL VALENZUELA, Judge of the Court of First Instance of Rizal, and ANTONIO D. PINZON, respondents. Guillermo E. Aragones for petitioner. Ruben V. Lopez for respondent Antonio D. Pinzon.
CONCEPCION, JR., J.: Petition for certiorari to annul and set aside the writ of preliminary attachment issued by the respondent Judge in Civil Case No. 5902-P of the Court of First Instance of Rizal, entitled: Antonio D. Pinzon plaintiff, versus K.O. Glass Construction Co., Inc., and Kenneth O. Glass, defendants, and for the release of the amount of P37,190.00, which had been deposited with the Clerk of Court, to the petitioner. On October 6, 1977, an action was instituted in the Court of First Instance of Rizal by Antonio D. Pinzon to recover from Kenneth O. Glass the sum of P37,190.00, alleged to be the agreed rentals of his truck, as well as the value of spare parts which have not been returned to him upon termination of the lease. In his verified complaint, the plaintiff asked for an attachment against the property of the defendant consisting of collectibles and payables with the Philippine Geothermal, Inc., on the grounds that the defendant is a foreigner; that he has sufficient cause of action against the said defendant; and that there is no sufficient security for his claim against the defendant in the event a judgment is rendered in his favor. 1
Finding the petition to be sufficient in form and substance, the respondent Judge ordered the issuance of a writ of attachment against the properties of the defendant upon the plaintiff's filing of a bond in the amount of P37,190.00. 2
Thereupon, on November 22, 1977, the defendant Kenneth O. Glass moved to quash the writ of attachment on the grounds that there is no cause of action against him since the transactions or claims of the plaintiff were entered into by and between the plaintiff and the K.O. Glass Construction Co., Inc., a corporation duly organized and existing under Philippine laws; that there is no ground for the issuance of the writ of preliminary attachment as defendant Kenneth O. Glass never intended to leave the Philippines, and even if he does, plaintiff can not be prejudiced thereby because his claims are against a corporation which has sufficient funds and property to satisfy his claim; and that the money being garnished belongs to the K.O. Glass Corporation Co., Inc. and not to defendant Kenneth O. Glass. 3
By reason thereof, Pinzon amended his complaint to include K.O. Glass Construction Co., Inc. as co-defendant of Kenneth O. Glass. 4
On January 26, 1978, the defendants therein filed a supplementary motion to discharge and/or dissolve the writ of preliminary attachment upon the ground that the affidavit filed in support of the motion for preliminary attachment was not sufficient or wanting in law for the reason that: (1) the affidavit did not state that the amount of plaintiff's claim was above all legal set-offs or counterclaims, as required by Sec. 3, Rule 57 of the Revised Rules of Court; (2) the affidavit did not state that there is no other sufficient security for the claim sought to be recovered by the action as also required by said Sec. 3; and (3) the affidavit did not specify any of the grounds enumerated in Sec. 1 of Rule 57, 5 but, the respondent Judge denied the motion and ordered the Philippine Geothermal, Inc. to deliver and deposit with the Clerk of Court the amount of P37,190.00 immediately upon receipt of the order which amount shall remain so deposited to await the judgment to be rendered in the case. 6
On June 19, 1978, the defendants therein filed a bond in the amount of P37,190.00 and asked the court for the release of the same amount deposited PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
10 of 501
with the Clerk of Court, 7 but, the respondent Judge did not order the release of the money deposited. 8
Hence, the present recourse. As prayed for, the Court issued a temporary restraining order, restraining the respondent Judge from further proceeding with the trial of the case. 9
We find merit in the petition. The respondent Judge gravely abused his discretion in issuing the writ of preliminary attachment and in not ordering the release of the money which had been deposited with the Clerk of Court for the following reasons: First, there was no ground for the issuance of the writ of preliminary attachment. Section 1, Rule 57 of the Revised Rules of Court, which enumerates the grounds for the issuance of a writ of preliminary attachment, reads, as follows: Sec. 1. Grounds upon which attachment may issue. A plaintiff or any proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: (a) In an action for the recovery of money or damages on a cause of action arising from contract, express or implied, against a party who is about to depart from the Philippines with intent to defraud his creditor; (b) In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty; (c) In an action to recover the possession of personal property unjustly detained, when the property, or any part thereof, has been concealed, removed, or disposed of to prevent its being found or taken by the applicant or an officer; (d) In an action against the party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought; (e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors; (f) In an action against a party who resides out of the Philippines, or on whom summons may be served by publication. In ordering the issuance of the controversial writ of preliminary attachment, the respondent Judge said and We quote: The plaintiff filed a complaint for a sum of money with prayer for Writ of Preliminary Attachment dated September 14, 1977, alleging that the defendant who is a foreigner may, at any time, depart from the Philippines with intent to defraud his creditors including the plaintiff herein; that there is no sufficient security for the claim sought to be enforced by this action; that the amount due the plaintiff is as much as the sum for which an order of attachment is sought to be granted; and that defendant has sufficient leviable assets in the Philippines consisting of collectibles and payables due from Philippine Geothermal, Inc., which may be disposed of at any time, by defendant if no Writ of Preliminary Attachment may be issued. Finding said motion and petition to be sufficient in form and substance. 10
Pinzon however, did not allege that the defendant Kenneth O. Glass "is a foreigner (who) may, at any time, depart from the Philippines with intent to defraud his creditors including the plaintiff." He merely stated that the defendant Kenneth O. Glass is a foreigner. The pertinent portion of the complaint reads, as follows: 15. Plaintiff hereby avers under oath that defendant is a foreigner and that said defendant has a valid and just obligation to plaintiff in the total sum of P32,290.00 arising out from his failure to pay (i) service charges for the hauling of construction materials; (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed spare parts of said leased unit; hence, a sufficient cause of action exists against saiddefendant. Plaintiff also avers under oath that there is no sufficient security for his claim against the defendantin the event a judgment be rendered in favor of the plaintiff. however, defendant has sufficient assets in the Philippines in the form of collectible and payables due from the Philippine Geothermal, Inc. with office address at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be disposed of by defendants and would render ineffectual the reliefs prayed for by plaintiff in this Complaint. 11
In his Amended Complaint, Pinzon alleged the following: 15. Plaintiff hereby avers under oath that defendant GLASS is an American citizen who controls most, if not all, the affairs of defendant CORPORATION. Defendants CORPORATION and GLASS have a valid and just obligation to plaintiff in the total sum of P32,290.00 arising out for their failure to pay (i) service charges for hauling of construction materials, (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed spare parts of said leased unit: hence, a sufficient cause of action exist against saiddefendants. Plaintiff also avers under oath that there is no sufficient security for his claim against thedefendants in the event a judgment be rendered in favor of the plaintiff. however, defendant CORPORATION has sufficient assets in the Philippines in the form of collectibles and payables due from the Philippine Geothermal., Inc. with office address at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be disposed of by defendants and would render ineffectual the reliefs prayed for by plaintiff in this Complaint. 12
There being no showing, much less an allegation, that the defendants are about to depart from the Philippines with intent to defraud their creditor, or that they are non-resident aliens, the attachment of their properties is not justified. Second, the affidavit submitted by Pinzon does not comply with the Rules. Under the Rules, an affidavit for attachment must state that (a) sufficient cause of action exists, (b) the case is one of those mentioned in Section I (a) of Rule 57; (c) there is no other sufficient security 'or the claim sought to be enforced by the action, and (d) the amount due to the applicant for attachment or the value of the property the possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. Section 3, Rule 57 of the Revised Rules of Court reads. as follows: Section 3. Affidavit and bond required.An order of attachment shall be granted only when it is made to appear by the affidavit of the applicant, or of some person who personally knows the facts, that a sufficient cause of action exists that the case is one of those mentioned in Section 1 hereof; that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the applicant, or the value of the property the possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The affidavit, and the bond required by the next succeeding PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
12 of 501
section, must be duly filed with the clerk or judge of the court before the order issues. In his affidavit, Pinzon stated the following: I, ANTONIO D. PINZON Filipino, of legal age, married and with residence and postal address at 1422 A. Mabini Street, Ermita, Manila, subscribing under oath, depose and states that. 1. On October 6,1977,I filed with the Court of First Instance of Rizal, Pasay City Branch, a case against Kenneth O. Glass entitled 'ANTONIO D. PINZON vs. KENNETH O. GLASS', docketed as Civil Case No. 5902-P; 2. My Complaint against Kenneth O. Glass is based on several causes of action, namely: (i) On February 15, 1977, we mutually agreed that I undertake to haul his construction materials from Manila to his construction project in Bulalo, Bay, Laguna and vice-versa, for a consideration of P50.00 per hour; (ii) Also, on June 18, 1977, we entered into a separate agreement whereby my Isuzu cargo truck will be leased to him for a consideration of P4,000.00 a month payable on the 15th day of each month; (iii) On September 7, 1977, after making use of my Isuzu truck, he surrendered the same without paying the monthly rentals for the leased Isuzu truck and the peso equivalent of the spare parts that were either destroyed or misappropriated by him; 3. As of today, October 11, 1977, Mr. Kenneth 0. Glass still owes me the total sum of P32,290.00 representing his obligation arising from the hauling of his construction materials, monthly rentals for the lease Isuzu truck and the peso equivalent of the spare parts that were either destroyed or misappropriated by him; 4. I am executing this Affidavit to attest to the truthfulness of the foregoing and in compliance with the provisions of Rule 57 of the Revised Rules of Court. 13
While Pinzon may have stated in his affidavit that a sufficient cause of action exists against the defendant Kenneth O. Glass, he did not state therein that "the case is one of those mentioned in Section 1 hereof; that there is no other sufficient security for the claim sought to be enforced by the action; and that the amount due to the applicant is as much as the sum for which the order granted above all legal counter-claims." It has been held that the failure to allege in the affidavit the requisites prescribed for the issuance of a writ of preliminary attachment, renders the writ of preliminary attachment issued against the property of the defendant fatally defective, and the judge issuing it is deemed to have acted in excess of his jurisdiction. 14
Finally, it appears that the petitioner has filed a counterbond in the amount of P37,190.00 to answer for any judgment that may be rendered against the defendant. Upon receipt of the counter-bond the respondent Judge should have discharged the attachment pursuant to Section 12, Rule 57 of the Revised Rules of Court which reads, as follows: Section 12. Discharge of attachment upon giving counterbond.At any time after an order of attachment has been granted, the party whose property has been attached, or the person appearing on his behalf, may upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge of the attachment if a cash deposit is made or a counterbond executed to the attaching creditor is PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
13 of 501
filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made, in an amount equal to the value of the property attached as determined by the judge, to secure the payment of any judgment that the attaching creditor may recover in the action. Upon the filing of such counter-bond, copy thereof shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance with the provisions of this section the property attached, or the proceeds of any sale thereof, shall be delivered to the party making the deposit or giving the counter-bond, or the person appearing on his behalf, the deposit or counter-bond aforesaid standing in the place of the property so released. Should such counter-bond for any reason be found to be, or become, insufficient, and the party furnishing the same fail to file an additional counter- bond the attaching creditor may apply for a new order of attachment. The filing of the counter-bond will serve the purpose of preserving the defendant's property and at the same time give the plaintiff security for any judgment that may be obtained against the defendant. 15
WHEREFORE, the petition is GRANTED and the writ prayed for is issued. The orders issued by the respondent Judge on October 11, 19719, January 26, 1978, and February 3, 1978 in Civil Case No. 5902-P of the Court of First Instance of Rizal, insofar as they relate to the issuance of the writ of preliminary attachment, should be as they are hereby ANNULLED and SET ASIDE and the respondents are hereby ordered to forthwith release the garnished amount of P37,190.00 to the petitioner. The temporary restraining order, heretofore issued, is hereby lifted and set aside. Costs against the private respondent Antonio D. Pinzon. SO ORDERED.
General v. De Venecia, 78 Phil. 780, July 30, 1947 G.R. No. L-894 LUIS F. GENERAL, petitioner, vs. JOSE R. DE VENECIA, Judge of First Instance of Camarines Sur, and PETRA VDA. DE RUEDAS, also representing Ernesto, Armando and Gracia (minors), respondents. Cea, Blancaflor and Cea for petitioner. Jose M. Peas for respondents Ruedas. Bengzon (Jose), J.: Petition for certiorari to annul the order of the Court of First Instance of Camarines Sur denying the motion to dismiss the complaint, and to vacate the attachment issued, in civil case No. 364 therein entitled, Ruedas vs. Luis F. General. That complaint was filed on June 4, 1946, to recover the value of a promissory note, worded as follows: For value received, I promise to pay Mr. Gregorio Ruedas the amount of four thousand pesos (P4,000), in Philippine currency within six (6) months after peace has been declared and government established in the Philippines. Naga, Camarines Sur, September 25, 1944. (Sgd.) LUIS F. GENERAL It prayed additionally for preliminary attachment of defendants property, upon the allegation that the latter was about to dispose of his assets to defraud creditors. Two days later, the writ of attachment was issued upon the filing of a suitable bond. Having been served with summons, the defendant therein, Luis F. General, submitted, on June 11, 1946, a motion praying for dismissal of the complaint and dissolution of the attachment. He claimed it was premature, in view of the provisions of the debt moratorium orders of the President of the Philippines (Executive Orders Nos. 25 and 32 of 1945). Denial of this motion and of the subsequent plea for reconsideration, prompted the institution of this special civil action, which we find to be meritorious, for the reason that the attachment was improvidently permitted, the debt being within the terms of the decree of moratorium (Executive Order No. 32). It is our view that, upon objection by the debtor, no court may now proceed to hear a complaint that seeks to compel payment of a monetary obligation coming within the purview of the moratorium. And the issuance of a writ of attachment upon such complaint may not, of course, be allowed. Such levy is necessarily one step in the enforcement of the obligation, enforcement which, as stated in the order, is suspended temporarily, pending action by the Government. But the case for petitioner is stronger when we reflect that his promise is to pay P4,000 within six months after peace has been declared. It being a matter of contemporary history that the peace treaty between the United States and Japan has not even been drafted, and that no competent official has formally declared the advent of peace (see Raquiza vs. Bardford, 75 Phil. 50), it is obvious that the six-month period has not begun; and Luis F. General has at present and in June, 1946, no demandable duty to make payment to plaintiffs, independently of the moratorium directive. On the question of validity of the attachment, the general rule is that, unless the statute expressly so provides, the remedy by attachment is not available in respect to a demand which is not due and payable, and if an attachment is issued upon such a demand without statutory authority it is void. (7 C.J.S., p. 204.) It must be observed that under our rules governing the matter the person seeking a preliminary attachment must show that a sufficient cause of action exists and that the amount due him is as much as the sum for which the order of attachment is granted (sec. 3, Rule 59). Inasmuch as the commitment of Luis F. General has not as yet become demandable, there existed no cause of action against him, and the complaint should have been dismissed and the attachment lifted. (Orbeta vs. Sotto, 58 Phil. 505.) PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
15 of 501
And although it is the general principle that certiorari is not available to correct judicial errors that could be straightened out in an appeal, we have adopted the course that where an attachment has been wrongly levied the writ may be applied for, because the remedy by appeal is either unavailable or inadequate. (Leung Ben vs. OBrien, 38 Phil. 182; Director of Commerce and Industry vs. Concepcion, 43 Phil. 384; Orbeta vs. Sotto, supra.) Wherefore, the writ of attachment is quashed and the complaint is dismissed. Costs for petitioner. So ordered. Moran, C.J., Paras, Feria, Pablo, Hilado, Padilla, and Tuason, JJ., concur. Perfecto, J., concurs in the result. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
16 of 501
Miailhe v. De Lencquesaing, 142 S 694 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. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
17 of 501
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 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; PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
18 of 501
(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought; (e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors; (f) In an action against a party who resides out of the Philippines, or on whom summons may be served by publication. (emphasis supplied) While it is true that from the aforequoted provision attachment may issue "in an action against a party who resides out of the Philippines, " irrespective of the nature of the action or suit, and while it is also true that in the case of Cu Unjieng, et al vs. Albert, 58 Phil. 495, it was held that "each of the six grounds treated ante is independent of the others," still it is imperative that the amount sought be liquidated. In view of the foregoing, the Decision appealed from is hereby AFFIRMED. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
19 of 501
Insular Savings Bank v. CA, 460 S 122 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 Bankseeks 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 itsresolution 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 of P25,200,000.00. The checks were drawn against respondent Bank and were presented by petitioner for clearing. As respondent Bank returned the checks beyond the reglementary period, [but after petitioners account with PCHC was credited with the amount of P25,200,000.00] petitioner refused to refund the money to respondent Bank. While the dispute was pending arbitration, on January 17, 1992, respondent Bank instituted Civil Case No. 92-145 in the Regional Trial Court of Makati and prayed for the issuance of a writ of preliminary attachment. On January 22, 1992, Branch 133 of the Regional Trial Court of Makati issued an Order granting the application for preliminary attachment upon posting by respondent Bank of an attachment bond in the amount of P6,000,000.00. On January 27, 1992, Branch 133 of the Regional Trial Court of Makati issued a writ of preliminary attachment for the amount of P25,200,000.00. During the hearing on February 11, 1992 before the Arbitration Committee of the Philippine Clearing House Corporation, petitioner and respondent Bank agreed to temporarily divide between them the disputed amount of P25,200,000.00 while the dispute has not yet been resolved. As a result, the sum 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). 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
20 of 501
Court, infra. The CA added that, assuming that the RTC erred on the matter of computing the amount of the discharging counter-bond, its error does not amount to grave abuse of discretion. With its motion for reconsideration having been similarly denied, petitioner is now with us, faulting the appellate court, as follows: "I. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE PRINCIPAL AMOUNT CLAIMED BY RESPONDENT BANK SHOULD BE THE BASIS FOR COMPUTING THE AMOUNT OF THE COUNTER-BOND, FOR THE PRELIMINARY ATTACHMENT WAS ISSUED FOR THE SAID AMOUNT ONLY. "II. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE ARGUMENT THAT THE AMOUNT OF THE COUNTER-BOND SHOULD BE BASED ON THE VALUE OF THE PROPERTY ATTACHED CANNOT BE RAISED FOR THE FIRST TIME IN THE COURT OF APPEALS. "III. THE COURT OF APPEALS ERRED IN RULING THAT THE AMOUNT OF THE COUNTER-BOND SHOULD BE BASED ON THE VALUE OF THE PROPERTY ATTACHED EVEN IF IT WILL RESULT IN MAKING THE AMOUNT OF THE COUNTER-BOND EXCEED THE AMOUNT FOR WHICH PRELIMINARY ATTACHMENT WAS ISSUED." Simply put, the issue is whether or not the CA erred in not ruling that the trial court committed grave abuse of discretion in denying petitioners motion to discharge attachment by counter-bond in the amount of P12,600,000.00. Says the trial court in its Order of June 13, 1994: "xxx (T)he counter-bond posted by [petitioner] Insular Savings Bank should include the unsecured portion of [respondents] claim of P12,600,000.00 as agreed by means of arbitration between [respondent] and [petitioner]; Actual damages at 25% percent per annum of unsecured amount of claim from October 21, 1991 in the amount of P7,827,500.00; Legal interest of 12% percent per annum from October 21, 1991 in the amount of P3,805,200.00; Exemplary damages in the amount ofP2,000,000.00; and attorneys fees and expenses of litigation in the amount of P1,000,000.00 with a total amount ofP27,237,700.00 (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 ofP25,200,000.00, 6 representing the three (3) unfunded checks drawn against, and presented for clearing to, respondent bank. Jurisprudence teaches that a writ of attachment cannot be issued for moral and exemplary damages, and other unliquidated or contingent claim. 7
The order of attachment dated January 22, 1992 fixed the bond to be posted by respondent, as applicant, atP6,000,000.00. The writ of attachment issued on January 27, 1992, in turn, expressly indicated that petitioner is justly indebted to respondent in the amount of P25,200,000.00. 8 On February 11, 1992, before the Arbitration Committee of the Philippine Clearing House Corporation, petitioner and respondent, however, agreed to equally divide between themselves, albeit on a temporary basis, the disputed amount of P25,200,000.00, subject to the outcome of the arbitration proceedings. Thus, the release by petitioner of the amount of P12,600,000.00 to respondent. On March 7, 1994, petitioner filed a motion to discharge attachment by counter-bond in the amount of P12,600,000.00 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, PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
22 of 501
obviously glossed over one certain fundamental. We refer to the fact that the attachment respondent applied for and the corresponding writ issued was only for the amount of P25.2 Million. Respondent, it bears to stress, did not pray for attachment on its other claims, contingent and unliquidated as they were. Then, too, the attaching writ rightly excluded such claims. While the records do not indicate, let alone provide a clear answer as to the actual value of the property levied upon, it may reasonably be assumed that it is equal to respondents principal claim. Be that as it may, it was simply unjust for the trial court to base the amount of the counter-bond on a figure beyond the P25,200,000.00 threshold, as later reduced to P12,600,200.00. The trial court, therefore, committed grave abuse of discretion when it denied petitioners motion to discharge attachment by counter-bond in the amount of P12,600,000.00, an amount more than double the attachment bond required of, and given by, respondent. As a necessary consequence, the Court of Appeals committed reversible error when it dismissed petitioners recourse thereto in CA-G.R. SP No. 34876. It bears to stress, as a final consideration, that the certiorari proceedings before the appellate court and the denial of the motion to discharge attachment subject of such proceedings, transpired under the old rules on preliminary attachment which has since been revised. 10 And unlike the former Section 12 of Rule 57 of the Rules of Court where the value of the property attached shall be the defining measure in the computation of the discharging counter-attachment bond, the present less stringent Section 12 of Rule 57 provides that the court shall order the discharge of attachment if the movant "makes a cash deposit, or files a counter-bond . . . in an amount equal to that fixed by the court in the order of attachment, exclusive of costs." Not being in the nature of a penal statute, the Rules of Court cannot be given retroactive effect. 11
This disposition should be taken in the light of then Section 12, Rule 57 of the Rules of Court. WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution of the Courts of Appeals are hereby REVERSED and SET ASIDE, along with the orders dated June 13, 1994 and July 20, 1994 of the Regional Trial Court at Makati, Branch 135, in Civil Case No. 92-145 insofar they denied petitioners motion to discharge attachment by counter-bond in the amount of P12,600,000.00, and a new one entered GRANTING such motion upon the reposting of the same counter- bond. SO ORDERED.
Tan v. Zandueta, 61 Phil. 526 June 15, 1935 G.R. No. L-43772 ISIDRO TAN (alias Tan Lit), petitioner, vs. FRANCISCO ZANDUETA, Judge of First Instances of Manila, the DIRECTOR OF PRISON AND TIU CHAY (alias Tan Kia), respondents. Laurel, Del Rosario and Sabido for petitioner. Palma and Guevara for respondents. Diaz, J.: Isidro Tan (alias Tan Lit), who is at present confined in Bilibid Prison, prays that he be released from confinement alleging that he is deprived of his liberty by virtue of an illegal order entered in civil case No. 47826 of the Court of First Instance of Manila, by the respondent judge, Francisco Zandueta. The order referred to was issued by the said respondent on May 17, 1935, the dispositive part of which reads: The court finds the defendant in contempt of court and order that, pending the deposit by him of the amount of P12,000 above-mentioned in the order of May 6, 1935, or the filing of a bond in the aforesaid amount, he will not be released. The facts alleged in the pleadings may be briefly stated as follows: In case No. 47826 of the Court of First Instance of Manila, the respondent Tiu Chay (alias Tan Kia), as plaintiff, obtained a writ of preliminary attachment against the petitioner Isidro Tan (alias Tan Lit) upon the filing of a bond in the amount of P5,000. The respondent judge issued said writ on February 26, 1935, authorizing the attachment of the properties of the defendant Isidro Tan (alias Tan Lit) to the amount of P22,500. Upon motion of said defendant, the respondent judge issued an order on April 1, 1935, lifting the writ of attachment conditioned on the filing of a counter bond in the amount of P5,000. After sundry proceedings brought about by a motion of reconsideration presented by the defendant, asking that the writ referred to be lifted, the respondent judge issued another order, dated April 20, confirmatory of that of the 1st of said month, by virtue of which the defendant put up the required counter bond, and immediately thereafter, that is, on the same day, April 20, 1935, withdrew from the Philippine National Bank an amount of money of which P22,000 had been attached under the aforesaid order of February 26, 1935. On the third day, that is, on April 23, 1935, the respondent Tiu Chay (alias Tan Kia) asked that Isidro Tan (alias Tan Lit) be required to put up another counter bond in the amount of P22,500 instead of P5,000 already filed. The respondent judge, passing on said motion, already Isidro Tan (alias Tan Lit), on May 2, 1935, to file an additional counter bond in the amount of P10,000 only, giving him ten days to do so. Four days thereafter, that is, on May 6, 1935, the respondent judge entered another order requiring Isidro Tan (alias Tan Lit), to put up a counter bond of P17,000 instead of P15,000, or in default thereof, to deposit anew in the Philippine National Bank P17,000 of the amount withdrawn therefrom days before. For failure to file either the counter bond in the amount of P10,000 or that in the amount of P17,000 to which it was later raised, the respondent judge required Isidro Tan (alias Tan Lit) to appear before him and show cause, if any, why he should not be punished for contempt of court. Believing, however, that Isidro Tan (alias Tan Lit) was not given sufficient time to comply with the order of May 2 and 6, 1935, the respondent judge granted him another day to comply therewith, but reducing this time the counter bond required of him to P12,000 only, with an option to deposit in the bank said amount in case of failure to put up the counter bond as reduced. As the petitioner, notwithstanding these facilities, neither filed any additional counter bond nor made the deposit required of him, the respondent judge ordered his arrest on May 17, 1935, and on the same day, after hearing his explanations which the said judge considered unsatisfactory, he was sent to jail there to remain until he should deposit the amount required of him or file the aforementioned counter bond. The petitioner argues that under the provisions of section 440 of Act No. 190, after filing the counter bond of P5,000 required of him by the court in its order of April 20, 1935, he was authorized and had a perfect right to withdraw from the Philippine National Bank the amount of his deposit which was attached by virtue of the orders of February 26 and April 20, 1935. In truth, when he PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
24 of 501
withdrew the aforesaid amount, there was still no order preventing or restraining him from doing so, and requiring him to file an additional counter bound, because the order which imposed upon him that obligation was issued very much later, that is, on May 2, 1935, or twelve days after the said withdrawal. A reading of the aforesaid section of law readily shows, that when the property release from an attachment cannot be returned by the party who secured its release upon the filing of a bond, the bond takes the place of said property, that is, answers therefor, because the law on the points is couched in the following language: the obligation aforesaid standing in place of the property so released. Moreover, the provision of said section, to the effect that the defendant and surety will, on demand, pay to the plaintiff the full value of the property released, proceeds on the assumption that a judgment has been rendered in favor of the plaintiff; and the case at bar, in connection with the present status of case No. 47826 of the Court of First Instance of Manila, is not such as to fall under said provision of law, because up to the present no judgment has been rendered against the defendant, that is, the petitioner Isidro Tan (alias Tan Lit), the question of whether or not the respondent Tiu Chay (alias Tan Kia) is entitled to the amount claimed by him as plaintiff in the said case, being still pending resolution. Respondents contention that the respondent judge proceeded according to law in requiring an additional counter bond of P12,000 and in later ordering the confinement of the petitioner pending the filing of said bond or the deposit of an equal amount with the bank, because he had not lost jurisdiction over the property released pursuant to the provisions of section 440 of Act No. 90, is not only without merit but also untenable. From the moment the said respondent authorized the petitioner to put up the counter bond of P5,000 and from the moment the said petitioner filed said counter bond in order to be able to withdraw his deposit in the Philippine National Bank, it can be said that the respondent lost jurisdiction over the said property, although he retained jurisdiction to resolve the principal question whether or not the respondent Tiu Chay (alias Tan Kia) was entitled to the relief prayed for in his complaint, because he permitted and the law likewise permits that the counter bond of the petitioner stand and answer for the said property. In view of the foregoing, we are of the opinion, and so hold, that the petitioner is in fact deprived of his liberty by virtue of an illegal order; wherefore, we order his immediate release, with the costs taxes against the respondent Tiu Chay (alias Tan Kia). So ordered.
Walter Olsen v. Olsen, 48 Phil. 238 November 14, 1925 G.R. No. L-23237 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. VILLAREAL, 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. OBrien, 38 Phil., 182.) While it is true that an order denying a motion for the annulment of a preliminary attachment is not subject to review through an appeal independently from the principal case, it not consisting a final order, yet when the writ of preliminary attachment becomes final by virtue of a final judgment rendered in the principal case, said writ is subject to review jointly with the judgment rendered in the principal case through an ordinary appeal. The appellate court has the power to revoke or confirm said order, in like manner as a judgment on the merits; because it is a ruling to which an exception may be taken, and therefore is subject to review in an appeal by bill of exceptions. (Secs. 141-143,Act No. 190.) The fact that section 441 of the Code of Civil Procedure does not provide any remedy against the granting or denial of a motion for the annulment of a writ of preliminary attachment, except in case of excess of jurisdiction, does not confer upon said order a final and irrevocable character, taking it out from the general provisions as to appeal and review, for a special provision is necessary for that purpose. Having arrived at the conclusion that an order denying a motion for the annulment of a preliminary attachment may be reviewed in an appeal taken from a final judgment rendered in the principal case, in which said order was entered as an auxiliary remedy, we will now turn to consider the question whether or not the trial court committed error in denying the motion for the annulment of the preliminary attachment levied upon the property of the defendant-appellant. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
26 of 501
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. 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. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
27 of 501
Santos v. Bernabe, 54 Phil. 19 G.R. No. L-31163 November 6, 1929 URBANO SANTOS, plaintiff-appellee, vs. JOSE C. BERNABE, ET AL., defendants. PABLO TIONGSON and THE PROVINCIAL SHERIFF OF BULACAN, appellants. Arcadio Ejercito and Guevara, Francisco and Recto for appellants. Eusebio Orense And Nicolas Belmonte for appellee.
VILLA-REAL, J.: This appeal was taken by the defendants Pablo Tiongson and the Provincial Sheriff of Bulacan from the judgment of the Court of First of said province, wherein said defendant Pablo Tiongson was ordered to pay the plaintiff Urbano Santos the value of 778 cavans and 38 kilos of palay, at the rate of P3 per cavan, without special pronouncement as to costs. In support of their appeal, the appellants assign the following alleged errors committed by the lower court in its judgment, to wit: 1. The court erred in holding that it has been proved that in the cavans of palay attached by the herein defendant Pablo Tiongson from the defendant Jose C. Bernabe were included those claimed by the plaintiff in this cause. 2. The court erred in ordering the defendant Pablo Tiongson to pay the plaintiff the value of 778 cavans and 38 kilos of palay, the refund of which is claimed by said plaintiff. 3. The court erred in denying the defendants' motion for a new trial.1awphil.net The following facts were conclusively proved at the trial: On March 20, 1928, there were deposited in Jose C. Bernabe's warehouse by the plaintiff Urbano Santos 778 cavans and 38 kilos of palay and by Pablo Tiongson 1,026 cavans and 9 kilos of the same grain. On said date, March 20, 1928, Pablo Tiongson filed with the Court of First Instance of Bulacan a complaint against Jose C. Bernabe, to recover from the latter the 1,026 cavans and 9 kilos of palay deposited in the defendant's warehouse. At the same time, the application of Pablo Tiongson for a writ of attachment was granted, and the attachable property of Jose C. Bernabe, including 924 cavans and 31 1/2 kilos of palay found by the sheriff in his warehouse, were attached, sold at public auction, and the proceeds thereof delivered to said defendant Pablo Tiongson, who obtained judgment in said case. The herein plaintiff, Urbano Santos, intervened in the attachment of the palay, but upon Pablo Tiongson's filing the proper bond, the sheriff proceeded with the attachment, giving rise to the present complaint. It does not appear that the sacks of palay of Urbano Santos and those of Pablo Tiongson, deposited in Jose C. Bernabe's warehouse, bore any marks or signs, nor were they separated one from the other. The plaintiff-appellee Urbano Santos contends that Pablo Tiongson cannot claim the 924 cavans and 31 kilos of palay attached by the defendant sheriff as part of those deposited by him in Jose C. Bernabe's warehouse, because, in asking for the attachment thereof, he impliedly acknowledged that the same belonged to Jose C. Bernabe and not to him. In the complaint filed by Pablo Tiongson against Jose C. Bernabe, civil case No. 3665 of the Court of First Instance of Bulacan, it is alleged that said plaintiff deposited in the defendant's warehouse 1,026 cavans and 9 kilos of PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
28 of 501
palay, the return of which, or the value thereof, at the rate of P3 per cavan was claimed therein. Upon filing said complaint, the plaintiff applied for a preliminary writ of attachment of the defendant's property, which was accordingly issued, and the defendant's property, including the 924 cavans and 31 kilos of palay found by the sheriff in his warehouse, were attached. It will be seen that the action brought by Pablo Tiongson against Jose C. Bernabe is that provided in section 262 of the Code of Civil Procedure for the delivery of personal property. Although it is true that the plaintiff and his attorney did not follow strictly the procedure provided in said section for claiming the delivery of said personal property nevertheless, the procedure followed by him may be construed as equivalent thereto, considering the provisions of section 2 of the Code of Civil Procedure of the effect that "the provisions of this Code, and the proceedings under it, shall be liberally construed, in order to promote its object and assist the parties in obtaining speedy justice." Liberally construing, therefore, the above cited provisions of section 262 of the Code of Civil Procedure, the writ of attachment applied for by Pablo Tiongson against the property of Jose C. Bernabe may be construed as a claim for the delivery of the sacks of palay deposited by the former with the latter. The 778 cavans and 38 kilos of palay belonging to the plaintiff Urbano Santos, having been mixed with the 1,026 cavans and 9 kilos of palay belonging to the defendant Pablo Tiongson in Jose C. Bernabe's warehouse; the sheriff having found only 924 cavans and 31 1/2 kilos of palay in said warehouse at the time of the attachment thereof; and there being no means of separating form said 924 cavans and 31 1/2 of palay belonging to Urbano Santos and those belonging to Pablo Tiongson, the following rule prescribed in article 381 of the Civil Code for cases of this nature, is applicable: Art. 381. If, by the will of their owners, two things of identical or dissimilar nature are mixed, or if the mixture occurs accidentally, if in the latter case the things cannot be separated without injury, each owner shall acquire a right in the mixture proportionate to the part belonging to him, according to the value of the things mixed or commingled. The number of kilos in a cavan not having been determined, we will take the proportion only of the 924 cavans of palay which were attached and sold, thereby giving Urbano Santos, who deposited 778 cavans, 398.49 thereof, and Pablo Tiongson, who deposited 1,026 cavans, 525.51, or the value thereof at the rate of P3 per cavan. Wherefore, the judgment appealed from is hereby modified, and Pablo Tiongson is hereby ordered to pay the plaintiff Urbano Santos the value of 398.49 cavans of palay at the rate of P3 a cavan, without special pronouncement as to costs. So ordered. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
29 of 501
State Investment House v. CA, 163 S 799 G.R. No. 82446 July 29, 1988 STATE INVESTMENT HOUSE, INC., petitioner, vs. HON. COURT OF APPEALS, HON. DOROTEO N. CANEBA, in his capacity as Presiding Judge of Branch 20, Regional Trial Court, Manila, P.O. VALDEZ, INC., and PEDRO 0. VALDEZ, respondents. Macalino, Salonga & Associates for petitioner. Benjamin Relova for private respondents.
GRIO-AQUINO, J.: The issue posed by the petition in this case is whether the trial court (whom the Court of Appeals sustained) gravely abused its discretion in lifting the preliminary attachment on the private respondents' properties. On September 30 and October 31,1977, Pedro 0. Valdez and Rudy H. Sales executed two Comprehensive Surety Agreements to secure any and all loans of P.O. Valdez, Inc. not exceeding the sums of P500,000 (Annex C) and P4,934,000 (Annex D) from the petitioner State Investment House, Inc., a domestic corporation engaged in quasi banking. Four years later, on July 30, 1981, petitioner and P.O. Valdez, Inc. entered into an agreement for discounting with the petitioner the receivables of P.O. Valdez, Inc. (Annex E). The other details of the transactions between the petitioner and P.O. Valdez, Inc. are recited in the decision of the Court of Appeals as follows: At the time the basic loan agreement (which is the Agreement dated July 30, 1981) was entered into, respondent P.O. Valdez, Inc. was required to provide collateral security for the loan. And pursuant thereto, private respondents turned over to the petitioner various certificates of stock of several corporations such as CDCP-Mining, Northern Lines, Inc., Oriental Petroleum and others. In addition, private respondents executed a Real Estate Mortgage in favor of the petitioner covering two (2) parcels of land located outside Baguio City. Later, private respondents were also made to execute a Deed of Sale dated December 29, 1982 covering the proceeds of a postdated check for P4,066,410.20, another Deed of Sale dated January 4, 1983, covering the proceeds as a postdated check for P197,010.31 and a Deed of Assignment dated January 4, 1983, covering P.O. Valdez, Inc.'s construction receivables from the Development Academy of the Philippines to the extent of P100,000.00. (p. 34, Rollo.) When Pedro Valdez' two checks were deposited by the petitioner upon maturity, they bounced for insufficient funds. Despite demands, respondent corporation failed to pay its obligations to petitioner amounting to P6,342,855.70 as of April 11, 1985. Petitioner foreclosed its real estate mortgage on the two lots in Benguet of Pedro and Remedios Valdez on April 11, 1985 and acquired them as the highest bidder in the foreclosure sale. Presumably because the proceeds of the foreclosure were insufficient to satisfy the debt, petitioner also filed a collection suit, with a prayer for preliminary attachment. It was docketed in the Regional Trial Court of Manila as Civil Case No. 8533050 entitled "STATE INVESTMENT HOUSE, INC. vs. P.O. VALDEZ, INC., PEDRO 0. VALDEZ and RUDY H. SALES." On November 5, 1985, the court, through Judge (now CA Justice) Antonio Martinez, issued a writ of preliminary attachment against the defendants' properties (Annex J). Pursuant thereto, certain real and personal properties of the defendants were attached. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
30 of 501
Tropical Homes, Inc. filed a third-party claim to certain properties titled in the name of Pedro Valdez. As the sheriff failed to act on the third-party claim, the claimant filed on March 26, 1986, a motion to lift the attachment on those properties. It was opposed by the petitioner. On May 22, 1 986, respondent Judge Doroteo N. Caneba (who succeeded Justice Martinez) denied the motion. In the meantime, the defendants filed their answer to the complaint. They admitted that they obtained loans from the petitioner to finance their construction projects, namely, the DAP Building in Pasig, the National Engineering Building in the U.P. Campus, and the UP Hostel for Economics, also in U.P. Diliman, Quezon City. On June 24, 1986, P.O. Valdez, Inc. and Pedro Valdez filed a motion to discharge the attachment on the ground that there was no fraud in contracting the loans, and if any fraud existed, it was in the performance of the obligations. The motion was opposed by the petitioner. It was denied by the lower court on November 19, 1986. Valdez filed a motion for reconsideration. The petitioner opposed it. Nevertheless, Judge Caeba granted the motion for reconsideration and discharged the preliminary attachment on the properties of Pedro O. Valdez and Remedios Valdez on the ground that their conjugal properties may not be attached to answer for the debts of the corporation which has a juridical personality distinct from its incorporators. It held that "neither P.O. Valdez, Inc. and (sic) Pedro O. Valdez can be faulted nor could they be charged of incurring fraudulent acts in obtaining the loan agreement." (Annex K). It was the petitioner's turn to file a motion for reconsideration, but without success (Annex L). Petitioner went to the Court of Appeals on a petition for certiorari and prohibition alleging grave abuse of discretion on the part of the lower court in lifting the writ of preliminary attachment on the properties of the Valdez spouses (Annex K). The Court of Appeals dismissed the petition on January 28, 1988 (Annex A). It affirmed the lower court's finding that there was no fraud in contracting the debt. It observed that: 1. With respect to the shares of stock which the respondents pledged as additional security for the loan, the decline in their value did not mean that the private respondents entered into the loan transaction in bad faith or with fraudulent intent. For the private respondents could not have foreseen how the stocks would fare in the market. And if the petitioner thought they were worthless at the time, it should have rejected them as collateral. 2. With respect to the two parcels of land which were mortgaged to the petitioner, the latter should also have declined to accept them as collateral if it believed they were worth less than their supposed value. 3. With respect to the two postdated checks which bounced, the Court of Appeals observed that since they were "sold" to the petitioner after the loan had been granted to private respondents, their issuance did not fraudulently induce the petitioner to grant the loan applied for. They were "mere evidence of the private respondents" standing loan obligation to the petitioner" or "mere collaterals for the loan granted by the petitioner to the private respondents" (Annex A). These factual conclusions of the Court of Appeals are binding on US (Bernardo vs. Bernardo, 101 SCRA 351). Furthermore, We have examined the grounds enumerated in the petitioner's prayer for a writ of preliminary attachment, as reproduced in the decision of the Court of Appeals, the petitioner having failed to submit a copy of its complaint as an annex of its petition for certiorari. The main thrust of the prayer for preliminary attachment is the alleged misrepresentation of the debtor P.O. Valdez, Inc., in the Agreement for Discounting Receivables and in the deeds of sale of said receivables. (Annexes E, F, and G); that the two checks or receivables" issued by Pedro Valdez were payment for "actual sales of its merchandise and/or personalities made to its customers or otherwise arising from its other legitimate business transactions" (par. a) and "that the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
31 of 501
receivables . . . were genuine, valid and subsisting and represent bona fide sales of merchandise and/or personalities made in the ordinary course of business" (par. c). It can hardly be doubted that those representations in petitioner's printed deeds of sale were false. But false though they were, the petitioners cannot claim to have been deceived or deluded by them because it knew, or should have known , that the issuer of the checks, Pedro O. Valdez, was not a "buyer" of the "merchandise and personalities made in the ordinary course of business" by P.O. Valdez, Inc. of which he was the president. Since the petitioner failed to prove during the hearing of private respondents' motion to lift the preliminary writ of attachment, that P.O. Valdez, Inc. received from it independent consideration for the "sale" of Pedro Valdez' checks to it, apart from the loans previously extended to the corporations, We are constrained to affirm the finding of the court of Appeals that Valdez's checks are "mere evidence of the outstanding obligation of P.O. Valdez, Inc. to the petitioner." The petition was not defrauded by their issuance for the loans had been contracted and released to P.O. Valdez, Inc. long before the checks were issued. WHEREFORE, the petition for certiorari is denied for lack of merit. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
32 of 501
Aboitiz v. Cotabato Bus, 105 S 88 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
33 of 501
AND PRESENTED BY PETITIONER COMPANY SHOWING IN THEIR TOTALITY THAT RESPONDENT HAS REMOVED, DIVERTED OR DISPOSED OF ITS BANK DEPOSITS, INCOME AND OTHER LIQUID ASSETS WITH INTENT TO DEFRAUD ITS CREDITORS, ESPECIALLY ITS UNSECURED SUPPLIERS; 3) THE DECISION IGNORES THE SIGNIFICANCE OF THE REFUSAL OF RESPONDENT TO PERMIT, UNDER REP. ACT NO. 1405, THE METROPOLITAN BANK & TRUST CO. TO BRING, IN COMPLIANCE WITH A subpoena DUCES TECUM TO THE TRIAL COURT ALL THE RECORDS OF RESPONDENT'S DEPOSITS AND WITHDRAWALS UNDER ITS CURRENT AND SAVINGS ACCOUNTS (NOW NIL) FOR EXAMINATION BY PETITIONER COMPANY FOR THE PURPOSE OF SHOWING DIRECTLY THE REMOVAL, DIVERSION OR DISPOSAL OF RESPONDENT'S DEPOSITS AND INCOME WITH INTENT TO DEFRAUD ITS CREDITORS. ERROR II THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE FACTS THAT RESPONDENT'S BANK DEPOSITS ARE NIL AS PROOF WHICH - TOGETHER WITH RESPONDENT'S ADMISSION OF AN INCOME OF FROM P10,000.00 to P 14,000.00 A DAY AND THE EVIDENCE THAT IT CANNOT PRODUCE P 634.00 WITHOUT USING A PERSONAL CHECK OF ITS PRESIDENT AND MAJORITY STOCKHOLDER, AND OTHER EVIDENCE SHOWS THE REMOVAL OR CHANNELING OF ITS INCOME TO THE LATTER. ERROR III THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE RESCUE AND REMOVAL BY RESPONDENT OF FIVE ATTACHED BUSES, DURING THE DEPENDENCY OF ITS MOTION TO DISSOLVE THE ATTACHMENT IN THE, TRIAL COURT, AS A FURTHER ACT OF REMOVAL OF PROPERTIES BY RESPONDENT WITH INTENT TO DEFRAUD PETITIONER COMPANY, FOR WHOSE BENEFIT SAID BUSES HAD BEEN ATTACHED. The questions raised are mainly, if not solely, factual revolving on whether respondent bus company has in fact removed its properties, or is about to do so, in fraud of its creditors. This being so, the findings of the Court of Appeals on said issues of facts are generally considered conclusive and final, and should no longer be disturbed. However, We gave due course to the petition because it raises also a legal question of whether the writ of attachment was properly issued upon a showing that defendant is on the verge of insolvency and may no longer satisfy its just debts without issuing the writ. This may be inferred from the emphasis laid by petitioner on the fact that even for the measly amount of P 634.00 payment thereof was made with a personal check of the respondent company's president and majority stockholder, and its debts to several creditors, including secured ones like the DBP, have remained unpaid, despite its supposed daily income of an average of P 12,000.00, as declared by its assistant manager, Baldovino Lagbao. 1
Going forthwith to this question of whether insolvency, which petitioners in effect claims to have been proven by the evidence, particularly by company's bank account which has been reduced to nil, may be a ground for the issuance of a writ of attachment, the respondent Court of Appeals correctly took its position in the negative on the strength of the explicit ruling of this Court in Max Chamorro & Co. vs. Philippine Ready Mix Concrete Company, Inc. and Hon. Manuel P. Barcelona. 2
Petitioner, however, disclaims any intention of advancing the theory that insolvency is a ground for the issuance of a writ of attachment , 3 and insists that its evidence -is intended to prove his assertion that respondent company has disposed, or is about to dispose, of its properties, in fraud of its creditors. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
34 of 501
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. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
35 of 501
People's Bank & Trust Co. v. Syvel, 164 S 247 G.R. No. L-29280 August 11, 1988 PEOPLE'S BANK AND TRUST COMPANY, plaintiff-appellee, vs. SYVEL'S INCORPORATED, ANTONIO Y. SYYAP and ANGEL Y SYYAP, defendants-appellants. Araneta, Mendoza & Papa for plaintiff-appellee. Quasha, Asperilia, Zafra, Tayag & Ancheta for defendants-appellants.
PARAS, J.: This is an appeal from the decision dated May 16, 1968 rendered by the Court of First Instance of Manila, Branch XII in Civil Case No. 68095, the decretal portion of which states: IN VIEW OF THE FOREGOING, judgment is rendered sentencing all the defendants to pay the plaintiff jointly and severally the sum of P601,633.01 with interest thereon at the rate of 11% per annum from June 17, 1967, until the whole amount is paid, plus 10% of the total amount due for attorney's fees and the costs of suit. Should the defendants fail to pay the same to the plaintiff, then it is ordered that all the effects, materials and stocks covered by the chattel mortgages be sold at public auction in conformity with the Provisions of Sec. 14 of the Chattel Mortgage Law, and the proceeds thereof applied to satisfy the judgment herein rendered. The counterclaim of the defendants, upon the evidence presented and in the light of the authorities above cited, is dismissed for lack of merit. SO ORDERED (pp. 89-90, Record on Appeal; p. 15, Rollo) The facts of the case based on the statement of facts, made by the trial court in its decision as cited in the briefs of both parties are as follows: This is an action for foreclosure of chattel mortgage executed in favor of the plaintiff by the defendant Syvel's Incorporated on its stocks of goods, personal properties and other materials owned by it and located at its stores or warehouses at No. 406, Escolta, Manila; Nos. 764-766 Rizal Avenue, Manila; Nos. 10-11 Cartimar Avenue, Pasay City; No. 886 Nicanor Reyes, Sr. (formerly Morayta), Manila; as evidenced by Annex"A."The chattel mortgage was duly registered in the corresponding registry of deeds of Manila and Pasay City. The chattel mortgage was in connection with a credit commercial line in the amount of P900,000.00 granted the said defendant corporation, the expiry date of which was May 20, 1966. On May 20, 1965, defendants Antonio V. Syyap and Angel Y. Syyap executed an undertaking in favor of the plaintiff whereby they both agreed to guarantee absolutely and unconditionally and without the benefit of excussion the full and prompt payment of any indebtedness to be incurred on account of the said credit line. Against the credit line granted the defendant Syvel's Incorporated the latter drew advances in the form of promissory notes which are attached to the complaint as Annexes "C" to "l." In view of the failure of the defendant corporation to make payment in accordance with the terms and conditions agreed upon in the Commercial Credit Agreement the plaintiff started to foreclose extrajudicially the chattel mortgage. However, because of an attempt to have the matter settled, the extra-judicial PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
36 of 501
foreclosure was not pushed thru. As no payment had been paid, this case was even tually filed in this Court. On petition of the plaintiff based on the affidavits executed by Mr. Leopoldo R. Rivera, Assistant Vice President of the plaintiff bank and Atty. Eduardo J. Berenguer on January 12, 1967, to the effect, among others, that the defendants are disposing of their properties with intent to defraud their creditors, particularly the plaintiff herein, a preliminary writ of attachment was issued. As a consequence of the issuance of the writ of attachment, the defendants, in their answer to the complaint set up a compulsory counterclaim for damages. After the filing of this case in this court and during its pendency defendant Antonio v. Syyap proposed to have the case settled amicably and to that end a conference was held in which Mr. Antonio de las Alas, Jr., Vice President of the Bank, plaintiff, defendant Antonio V. Syyap and Atty. Mendoza were present. Mr. Syyap requested that the plaintiff dismiss this case because he did not want to have the goodwill of Syvel's Incorporated impaired, and offered to execute a real estate mortgage on his real property located in Bacoor, Cavite. Mr. De las Alas consented, and so the Real Estate Mortgage, marked as Exhibit A, was executed by the defendant Antonio V. Syyap and his wife Margarita Bengco Syyap on June 22, 1967. In that deed of mortgage, defendant Syyap admitted that as of June 16, 1967, the indebtedness of Syvel's Incorporated was P601,633.01, the breakdown of which is as follows: P568,577.76 as principal and P33,055.25 as interest. Complying with the promise of the plaintiff thru its Vice President to ask for the dismissal of this case, a motion to dismiss this case without prejudice was prepared, Exhibit C, but the defendants did not want to agree if the dismissal would mean also the dismissal of their counterclaim Against the plaintiff. Hence, trial proceeded. As regards the liabilities of the defendants, there is no dispute that a credit line to the maximum amount of P900,000.00 was granted to the defendant corporation on the guaranty of the merchandise or stocks in goods of the said corporation which were covered by chattel mortgage duly registered as required by law. There is likewise no dispute that the defendants Syyap guaranteed absolutely and unconditionally and without the benefit of excussion the full and prompt payment of any indebtedness incurred by the defendant corporation under the credit line granted it by the plaintiff. As of June 16, 1967, its indebtedness was in the total amount of P601,633.01. This was admitted by defendant Antonio V. Syyap in the deed of real estate mortgage executed by him. No part of the amount has been paid by either of the defendants. Hence their liabilities cannot be questioned. (pp. 3-6, Brief for Appellee; p. 26, Rollo) In their brief, appellants assign the following errors: I The lower court erred in not holding that the obligation secured by the Chattel Mortgage sought to be foreclosed in the above-entitled case was novated by the subsequent execution between appellee and appellant Antonio V, Syyap of a real estate mortgage as additional collateral to the obligation secured by said chattel mortgage. II The lower court erred in not dismissing the above-entitled case and in finding appellants liable under the complaint. III PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
37 of 501
The lower court erred in not holding that the writ of preliminary attachment is devoid of any legal and factual basis whatsoever. IV The lower court erred in dismissing appellants'counterclaim and in not holding appellee liable to appellants for the consequent damages arising out of a wrongful attachment. (pp. 1-2, Brief for the Appellants, p. 25, Rollo) Appellants admit that they are indebted to the appellee bank in the amount of P601,633.01, breakdown of which is as follows: P568,577.76 as principal and P33,055.25 as interest. After the filing of the case and during its pendency, defendant Antonio V. Syyap proposed to have the case amicably settled and for that purpose a conference was held in which Mr. Antonio de las Alas, Jr., Vice President of plaintiff People's Bank and Trust Company, defendant Antonio V. Syyap and Atty. Mendoza were present. Mr. Syyap requested that the plaintiff dismiss this case as he did not want to have the goodwill of Syvel's Incorporated impaired, and offered to execute a real estate mortgage on his real property located in Bacoor, Cavite. Mr. de las Alas consented, and so the Real Estate Mortgage (Exhibit "A") was executed by defendant Antonio Syyap and his wife Margarita Bengco Syyap on June 22, 1967. Defendants did not agree with plaintiffs motion to dismiss which included the dismissal of their counterclaim and filed instead their own motion to dismiss (Record on Appeal, pp. 68-72) on the ground that by the execution of said real estate mortgage, the obligation secured by the chattel mortgage subject of this case was novated, and therefore, appellee's cause of action thereon was extinguished. In an Order dated September 23, 1967, the motion was denied for not being well founded (record on Appeal, p. 78). Appellants contention is without merit. Novation takes place when the object or principal condition of an obligation is changed or altered. It is elementary that novation is never presumed; it must be explicitly stated or there must be manifest incompatibility between the old and the new obligations in every aspect (Goni v. CA, 144 SCRA 223 [1986]; National Power Corp. v. Dayrit, 125 SCRA 849 [1983]). In the case at bar, there is nothing in the Real Estate Mortgage which supports appellants'submission. The contract on its face does not show the existence of an explicit novation nor incompatibility on every point between the "old and the "new" agreements as the second contract evidently indicates that the same was executed as new additional security to the chattel mortgage previously entered into by the parties. Moreover, records show that in the real estate mortgage, appellants agreed that the chattel mortgage "shall remain in full force and shall not be impaired by this (real estate) mortgage." The pertinent provision of the contract is quoted as follows: That the chattel mortgage executed by Syvel's Inc. (Doc. No. 439, Book No. I, Series of 1965, Notary Public Jose C. Merris, Manila); real estate mortgage executed by Angel V. Syyap and Rita V. Syyap (Doc. No. 441, Page No. 90, Book No. I, Series of 1965, Notary Public Jose C. Merris, Manila) shall remain in full force and shall not be impaired by this mortgage (par. 5, Exhibit"A," Emphasis ours). It is clear, therefore, that a novation was not intended. The real estate mortgage was evidently taken as additional security for the performance of the contract (Bank of P.I. v. Herrige, 47 Phil. 57). In the determination of the legality of the writ of attachment by the Court of First Instance of Manila, it is a well established rule that the grant or denial of a writ of attachment rests upon the sound discretion of the court. Records are bereft of any evidence that grave abuse of discretion was committed by respondent judge in the issuance of the writ of attachment. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
38 of 501
Appellants contend that the affidavits of Messrs. Rivera and Berenguer on which the lower court based the issuance of the writ of preliminary attachment relied on the reports of credit investigators sent to the field and not on the personal knowledge of the affiants. Such contention deserves scant consideration. Evidence adduced during the trial strongly shows that the witnesses have personal knowledge of the facts stated in their affidavits in support of the application for the writ. They testified that Syvel's Inc. had disposed of all the articles covered by the chattel mortgage but had not remitted the proceeds to appellee bank; that the Syvel's Stores at the Escolta, Rizal Avenue and Morayta Street were no longer operated by appellants and that the latter were disposing of their properties to defraud appellee bank. Such testimonies and circumstances were given full credit by the trial court in its decision (Brief for Appellee, p. 14). Hence, the attachment sought on the ground of actual removal of property is justified where there is physical removal thereof by the debtor, as shown by the records (McTaggert v. Putnam Corset Co., 8 N.Y. S 800 cited in Moran, Comments on the Rules of Court, 1970 Ed., Vol. 3, p. 7). Besides, the actuations of appellants were clearly seen by the witnesses who "saw a Fiat Bantam Car-Fiat Car, a small car and about three or four persons hurrying; they were carrying goods coming from the back portion of this store of Syvels at the Escolta, between 5:30 and 6:00 o'clock in the evening." (Record on Appeal, pp. 45-46). Therefore, "the act of debtor (appellant) in taking his stock of goods from the rear of his store at night, is sufficient to support an attachment upon the ground of the fraudulent concealment of property for the purpose of delaying and defrauding creditors." (4 Am. Jur., 841 cited in Francisco, Revised Rules of Court, Second Edition, 1985, p. 24). In any case, intent to defraud may be and usually is inferred from the facts and circumstances of the case; it can rarely be proved by direct evidence. It may be gleaned also from the statements and conduct of the debtor, and in this connection, the principle may be applied that every person is presumed to intend the natural consequences of his acts (Francisco, Revised Rules of Court, supra, pp. 24-25), In fact the trial court is impressed "that not only has the plaintiff acted in perfect good faith but also on facts sufficient in themselves to convince an ordinary man that the defendants were obviously trying to spirit away a port;.on of the stocks of Syvel's Incorporated in order to render ineffectual at least partially anyjudgment that may be rendered in favor of the plaintiff." (Decision; Civil Case No. 68095; Record on Appeal, pp. 88-89). Appellants having failed to adduce evidence of bad faith or malice on the part of appellee in the procurement of the writ of preliminary attachment, the claim of the former for damages is evidently negated. In fact, the allegations in the appellee's complaint more than justify the issuance of the writ of attachment. PREMISES CONSIDERED, this appeal is DISMISSED for lack of merit and the judgment appealed from is AFFIRMED. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
39 of 501
Adlawan v. Torres, 233 S 645 G.R. Nos. 65957-58 July 5, 1994 ELEAZAR V. ADLAWAN and ELENA S. ADLAWAN, petitioners, vs. Hon. Judge RAMON AM. TORRES, as Presiding Judge of Branch 6, Regional Trial Court Cebu City, ABOITIZ & COMPANY, INC. and THE PROVINCIAL SHERIFFS OF CEBU, DAVAO, RIZAL and METRO MANILA, Respectively,respondents. Pablo P. Garcia for petitioners. Isaias P. Dicdican and Sylva G. Aguirre-Paderanga for Aboitiz & Co., Inc.
QUIASON, J.: This is a petitioner for certiorari and mandamus with preliminary injunction or restraining order to nullify: (1) the Order dated September 14, 1983 of respondent Judge Ramon Am. Torres of the Regional Trial Court, Branch 6, Cebu City, in Civil Case No. CEB-1185 and the Order dated September 26, 1983 of Judge Emilio A. Jacinto of Branch 23 of the same court in Civil Case No. CEB-1186, which granted the motion for the issuance of writs of preliminary attachment for the seizure of the property of petitioners by respondent Provincial Sheriffs; and (2) the Order dated December 12, 1983 of respondent Judge Ramon Am. Torres in the consolidated cases, Civil Case No. CEB-1185 and Civil Case No. CEB-1186. I In a complaint dated April 24, 1982 filed with the Court of First Instance of Cebu, now Regional Trial Court, (Civil Case No. R-21761), respondent Aboitiz and Company, Inc. (Aboitiz) sought to collect from petitioners a sum of money representing payments for: (1) the unpaid amortizations of a loan; (2) technical and managerial services rendered; and (3) the unpaid installments of the equipment provided by respondent Aboitiz to petitioners (Rollo, p. 37). Acting on the ex parte application for attachment, the Executive Judge of the Court of First Instance of Cebu, issued on May 14, 1982, an order directing the issuance of the writ of preliminary attachment against the property of petitioners upon the filing by respondent Aboitiz of an attachment bond. Subsequently, the case was raffled to Branch 11 of the Court of First Instance of Cebu, which issued a writ of attachment addressed to the Provincial Sheriffs of Cebu and the City Sheriff of Davao City. It was the Sheriff of Davao City who enforced the writ of attachment, resulting in the seizure of heavy construction equipment, motor vehicle spare parts, and other personal property with the aggregate value of P15,000,000.00. The said court also granted the motion of respondent Aboitiz to take possession and custody of the attached property of petitioners and ordered the Provincial Sheriff of Davao to deliver the property to respondent Aboitiz. Petitioners moved for a bill of particulars and to set aside the ex parte writ of attachment. Finding merit in the motion to set aside the writ, Branch 11 ordered on July 6, 1982 the lifting of the writ and, consequently, the discharge of the property levied upon. Respondent Aboitiz filed an urgent ex parte motion, praying for the stay of the July 6, 1982 Order for a period of 15 days for it to be able to appeal the order. The motion was favorably acted upon. However, on July 13, 1982, respondent Aboitiz filed a notice of dismissal of its complaint in accordance with Section 1, Rule 17 of the Revised Rules of Court. Consequently, Branch 11 issued an order confirming the notice of dismissal, emphasizing that all orders of the court issued prior to the filing of said notice of dismissal had been rendered functus oficio, and considering all pending incidents in the case as moot and academic. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
40 of 501
Petitioner Eleazar Adlawan filed a motion praying that the July 6, 1982 Order be implemented and enforced. On December 20, however, Branch 11 denied the motion on account of the filing by respondent Aboitiz before Branch 16 of the Court of First Instance of Cebu in Lapu-lapu City of an action for delivery of personal property (Civil Case No. 619-L), and the filing by petitioner Eleazar Adlawan before Branch 10 of the same court of an action for damages in connection with the seizure of his property under the writ of attachment. In the replevin suit, Branch 16 ordered the seizure and delivery of the property described in the complaint. Said property were later delivered by the provincial sheriff to respondent Aboitiz. Alleging that while his office was situated in Cebu City, Adlawan was a resident of Minglanilla, and therefore, the Lapu-lapu City court should not entertain the action for replevin. Petitioner Eleazar Adlawan filed an omnibus motion praying for the reconsideration and dissolution of the writ of seizure, the retrieval of the property seized, and the dismissal of the complaint. He also averred that the property seized were incustodia legis by virtue of the writ of attachment issued by Branch 11. His omnibus motion was denied. Subsequently, he filed a motion for reconsideration which was not granted. The denial of his omnibus motion led petitioner Eleazar Adlawan to file a petition for certiorari and mandamus in the Supreme Court (G.R. No. 63225). The Third Division of this Court ruled on April 3, 1990 that since attachment is an ancillary remedy, the withdrawal of the complaint left it with no leg to stand on. Thus, the Court disposed of the case as follows: WHEREFORE, in view of the foregoing, this Court rules that the attached properties left in the custody of private respondent Aboitiz and Company, Inc. be returned to petitioner Eleazar V. Adlawan without prejudice to the outcome of the cases filed by both parties (Rollo, p. 324). Respondent Aboitiz filed a motion for reconsideration of the decision, contending that the replevin case was distinct and separate from the case where the writ of attachment was issued. It argued that the writ of replevin, therefore, remained in force as the Third Division of the Supreme Court had not found it illegal. The motion was, however, denied with finality in the Resolution of July 11, 1990. Undaunted, respondent Aboitiz filed a second motion for reconsideration with a prayer that the dispositive portion of the decision be clarified. It asserted that because the writ of preliminary attachment was different from the writ of replevin, we should rule that the property subject of the latter writ should remain in custodia legis of the court issuing the said writ. In the Resolution dated September 10, 1990, the Third Division stated that "the properties to be returned to petitioner are only those held by private respondent (Aboitiz) by virtue of the writ of attachment which has been declared non-existent." Accordingly, the dispositive portion of the April 3, 1990 decision of the Third Division of this Court was modified to read as follows: WHEREFORE, in view of the foregoing, this Court rules that the properties in the custody of the private respondent Aboitiz & Company by virtue of the writ of attachment issued in Civil Case No. R-21761 be returned to the petitioner, but properties in the custody of the private respondent by virtue of the writ of replevin issued in Civil Case No. 619-L be continued in custodia legis of said court pending litigation therein. The Decision in G.R. No. 63225 having become final and executory, entry of judgment was made on November 15, 1990. This should have terminated the controversy between petitioners and respondent Aboitiz insofar as the Supreme Court was concerned, but that was not to be. On September 9, 1983 respondent Aboitiz filed against petitioners two complaints for collection of sums of money with prayers for the issuance of writs of attachment in the Regional Trail Court, Branch 23, Cebu City, docketed as Civil Cases Nos. CEB- 1185 and CEB-1186. The complaint in Civil Case No. CEB-1185 alleged that petitioner Eleazar Adlawan (defendant therein) was awarded a contract for the construction of the Tago Diversion Works for the Tago River Irrigation Project by the National Irrigation Administration and that respondent Aboitiz PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
41 of 501
(plaintiff therein) loaned him money and equipment, which indebtedness as of June 30, 1983 totaled P13,430,259.14. Paragraph 16 of the complaint states: 16. That, in view of the enormous liabilities which the defendants have with the plaintiff, defendants executed a real estate mortgage covering eleven (11) parcels of land in favor of Philippine Commercial and Industrial Bank (PCIB) to secure a P1,000,000.00 loan with said bank and was able to remove, conceal and dispose of their properties, obviously to defraud the plaintiff, . . . (Rollo, pp. 65-66). The complaint in Civil Case No. CEB-1186 alleged that petitioner Eleazar Adlawan (defendant therein) was awarded a contract for the construction of the Lasang River Irrigation Project by the National Irrigation Administration and that respondent Aboitiz (plaintiff therein) loaned him money and equipment, which indebtedness as of June 30, 1983 totalled P5,370,672.08. Paragraph 15 of the complaint is similarly worded as paragraph 16 of the complaint in Civil Case No. CEB-1185. Civil Case No. CEB-1185 was raffled to the Regional Trial Court, Branch 6, presided by respondent Judge Ramon Am. Torres. On September 14, 1983, respondent Judge ordered the issuance of a writ of attachment upon respondent Aboitiz' filing of a bond of P5,000,000.00. Similarly, in Civil Case No. CEB-1186, which was raffled to Branch 23, presiding Judge Emilio A. Jacinto ordered the issuance of a writ of attachment upon the filing of a bond of P2,500,000.00. Accordingly, in Civil Case No. CEB-1185, the Acting Provincial Sheriff of Cebu issued separate writs dated September 26, 1983 addressed to the Sheriffs of Cebu, Davao and Metro Manila. No writ of preliminary attachment was, however, issued in Civil Case No. CEB-1186. Petitioners then filed in Civil Cases Nos. CEB-1185 and CEB-1186 urgent motions to hold in abeyance the enforcement of the writs of attachments. They alleged in the main that since their property had been previously attached and said attachment was being questioned before the Supreme Court in G.R. No. 63225, the filing of the two cases, as well as the issuance of the writs of attachment, constituted undue interference with the processes of this court in the then pending petition involving the same property. Upon motion of respondent Aboitiz, Branch 23 issued on October 13, 1983, an order directing the transfer to Branch 6 of Civil Case No. CEB-1186 for consolidation with Civil Case No. CEB-1185. Meanwhile, in its comment on petitioners' motion to withhold the enforcement of the writs of attachment, respondent Aboitiz alleged that the voluntary dismissal of Civil Case No. R-21761 under Section 1, Rule 17 of the Revised Rules of Court was without prejudice to the institution of another action based on the same subject matter. It averred that the issuance of the writ of attachment was justified because petitioners were intending to defraud respondent Aboitiz by mortgaging 11 parcels of land to the Philippine Commercial and Industrial Bank (PCIB) in consideration of the loan of P1,100,000.00, thereby making PCIB a preferred creditor to the prejudice of respondent Aboitiz, which had an exposure amounting to P13,430,259.14. Petitioners then filed a rejoinder to said comment, contending that since the property subject of the writ of attachment have earlier been attached or replevied, the same property were under custodia legis and therefore could not be the subject of other writs of attachment. On December 12, 1983, respondent Judge issued an order finding no merit in petitioners' motion for reconsideration and directing the sheriffs of Cebu, Davao and Metro Manila "to proceed with the enforcement and implementation of the writs of preliminary attachment." Respondent Judge ruled that the writs of attachment were issued on the basis of the supporting affidavits alleging that petitioner had removed or disposed of their property with intent to defraud respondent Aboitiz (Rollo, pp. 109-113). On December 15, petitioners filed an ex parte motion praying: (1) that the December 12, 1983 Order be set for hearing; (2) that they be given 15 days within which to either file a motion for reconsideration or elevate the matter to this Court or the then Intermediate Appellate Court; and (3) that within the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
42 of 501
same 15-day period the implementation or enforcement of the writs of attachment be held in abeyance. On the same day, respondent Judge issued an order holding in abeyance the enforcement of the writs of preliminary attachment in order to afford petitioners an opportunity to seek their other remedies (Rollo, p. 116). On December 27, petitioners filed the instant petition for certiorari and mandamus. They alleged that respondent Judge gravely abused his discretion in ordering the issuance of the writs of preliminary attachment inasmuch as the real estate mortgage executed by them in favor of PCIB did not constitute fraudulent removal, concealment or disposition of property. They argued that granting the mortgage constituted removal or disposition of property, it was not per se a ground for attachment lacking proof of intent to defraud the creditors of the defendant. Petitioners contended that in Civil Case No. 21761, Branch 11 had ruled that the loan for which the mortgage was executed was contracted in good faith, as it was necessary for them to continue their business operations even after respondent Aboitiz had stopped giving them financial aid. Petitioners also contended that respondent Judge exceeded his jurisdiction when he issued the Order of December 12, 1983, without first hearing the parties on the motion for attachment and the motion to dissolve the attachment. Moreover, they argued that respondent Judge gravely abused his discretion in proceeding with the case, notwithstanding that his attention had been called with regard to the pendency of G.R. No. 63225 in this Court. As prayed for by petitioners, we issued a temporary restraining order on January 6, 1984 "enjoining the respondents from enforcing or implementing the writs of preliminary attachment against the property of petitioners, all dated September 26, 1983 and issued in Civil Cases Nos. CEB 1185 and 1186" (Rollo, p. 118). II The resolution of this case centers on the issue of the legality of the writ of attachment issued by respondent Judge in the consolidated cases for collection of sums of money. The affidavit submitted by respondent Aboitiz in support of its prayer for the writ of attachment does not meet the requirements of Rule 57 of the Revised Rules of Court regarding the allegations on impending fraudulent removal, concealment and disposition of defendant's property. As held in Carpio v. Macadaeg, 9 SCRA 552 (1963), to justify a preliminary attachment, the removal or disposal must have been made with intent to defraud defendant's creditors. Proof of fraud is mandated by paragraphs (d) and (e) of Section 1, Rule 57 of the Revised Rules of Court on the grounds upon which attachment may issue. Thus, the factual basis on defendant's intent to defraud must be clearly alleged in the affidavit in support of the prayer for the writ of attachment if not so specifically alleged in the verified complaint. The affidavit submitted by respondent Aboitiz states: REPUBLIC OF THE PHILIPPINES CITY OF CEBU ...............) S.S. I, ROMAN S. RONQUILLO, of legal age, married and a resident of Cebu City, after being sworn in accordance with law, hereby depose and say: That I am the Vice-President of the plaintiff corporation in the above-entitled case; That a sufficient cause of action exists against the defendants named therein because the said defendants are indebted to the plaintiffs in the amount of P13,430,259.14 exclusive of interests thereon and damages claimed; That the defendants have removed or disposed of their properties with intent to defraud the plaintiff, their creditor, because on May 27, 1982 they executed a real estate mortgage in favor of Philippine Commercial and Industrial Bank (PCIB) PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
43 of 501
covering eleven (11) of their fifteen (15) parcels of land in Cebu to secure a P1,000,000.00 loan with the same bank; That this action is one of those specifically mentioned in Section 1, Rule 57 of the Rules of Court, whereby a writ preliminary attachment may lawfully issue because the action therein is one against parties who have removed or disposed of their properties with intent to defraud their creditor, plaintiff herein; That there is no sufficient security for the claims sought to be enforced by the present action; That the total amount due to the plaintiff in the above- entitled case is P13,430,259.14, excluding interests and claim for damages and is as much the sum for which an order of attachment is herein sought to be granted; above all legal counter-claims on the part of the defendants. IN VIEW WHEREOF, I hereunto set my hand this 24th day of August 1983 at Cebu City, Philippines. (Rollo, pp. 171-172) It is evident from said affidavit that the prayer for attachment rests on the mortgage by petitioners of 11 parcels of land in Cebu, which encumbrance respondent Aboitiz considered as fraudulent concealment of property to its prejudice. We find, however, that there is no factual allegation which may constitute as a valid basis for the contention that the mortgage was in fraud of respondent Aboitiz. As this Court said in Jardine-Manila Finance, Inc. v. Court of Appeals, 171 SCRA 636 (1989), "[T]he general rule is that the affidavit is the foundation of the writ, and if none be filed or one be filed which wholly fails to set out some facts required by law to be stated therein, there is no jurisdiction and the proceedings are null and void." Bare allegation that an encumbrance of a property is in fraud of the creditor does not suffice. Factual bases for such conclusion must be clearly averred. The execution of a mortgage in favor of another creditor is not conceived by the Rules as one of the means of fraudulently disposing of one's property. By mortgaging a piece of property, a debtor merely subjects it to a lien but ownership thereof is not parted with. Furthermore, the inability to pay one's creditors is not necessarily synonymous with fraudulent intent not to honor an obligation (Insular Bank of Asia & America, Inc. v. Court of Appeals, 190 SCRA 629 [1990]). Consequently, when petitioners filed a motion for the reconsideration of the order directing the issuance of the writ of attachment, respondent Judge should have considered it as a motion for the discharge of the attachment and should have conducted a hearing or required submission of counter-affidavits from the petitioners, if only to gather facts in support of the allegation of fraud (Jopillo, Jr. v. Court of Appeals, 167 SCRA 247 [1988]). This is what Section 13 of Rule 57 mandates. This procedure should be followed because, as the Court has time and again said, attachment is a harsh, extraordinary and summary remedy and the rules governing its issuance must be construed strictly against the applicant. Verily, a writ of attachment can only be granted on concrete and specific grounds and not on general averments quoting perfunctorily the words of the Rules (D.P. Lub Oil Marketing Center, Inc. v. Nicolas, 191 SCRA 423 [1990]). The judge before whom the application is made exercises full discretion in considering the supporting evidence proffered by the applicant. One overriding consideration is that a writ of attachment is substantially a writ of execution except that it emanates at the beginning, instead of at the termination of the suit (Santos v. Aquino, Jr., 205 SCRA 127 [1992]; Tay Chun Suy v. Court of Appeals, 212 SCRA 713 [1992]). PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
44 of 501
We need not discuss the issue of whether or not Civil Cases Nos. CEB-1185 and CEB-1186 constituted undue interference with the proceedings in G.R. No. 63225 in view of the entry of judgment in the latter case. WHEREFORE, the petition is GRANTED and the Temporary Restraining Order issued on January 6, 1984 is made PERMANENT. Respondent Judge or whoever is the presiding judge of the Regional Trial Court, Branch 6, Cebu City, is DIRECTED to PROCEED with the resolution of Civil Cases Nos. CEB- 1185 and CEB-1186 with deliberate dispatch. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
45 of 501
Claude Neon Lights v. Phil Advertising, 57 Phil. 607 (Case not Found)
State Investment House v. Citibank, 203 S 9 FIRST DIVISION
G.R. Nos. 79926-27 October 17, 1991 STATE INVESTMENT HOUSE, INC. and STATE FINANCING CENTER, INC., petitioners, vs. CITIBANK, N.A., BANK OF AMERICA, NT & SA, HONGKONG & SHANGHAI BANKING CORPORATION, and the COURT OF APPEALS, respondents. Roco, Bunag, Kapunan & Migallos for petitioners. Agcaoili & Associates for Citibank, N.A, and Bank of America NT & SA. Belo, Abiera & Associates for Hongkong & Shanghai Banking Corp.
NARVASA, J.:p The chief question in the appeal at bar is whether or not foreign banks licensed to do business in the Philippines, may be considered "residents of the Philippine Islands" within the meaning of Section 20 of the Insolvency Law (Act No. 1956, as amended, eff. May 20, 1909) reading in part as follows: 1 An adjudication of insolvency may be made on the petition of three or more creditors, residents of the Philippine Islands, whose credits or demands accrued in the Philippine Islands, and the amount of which credits or demands are in the aggregate not less than one thousand pesos: Provided, that none of said creditors has become a creditor by assignment, however made, within thirty days prior to the filing of said petition. Such petition must be filed in the Court of First Instance of the province or city in which the debtor resides or has his principal place of business, and must be verified by at least three (3) of the petitioners. . . . The foreign banks involved in the controversy are Bank of America NT and SA, Citibank N.A. and Hongkong and Shanghai Banking Corporation. On December 11, 1981, they jointly filed with the Court of First Instance of Rizal a petition for involuntary insolvency of Consolidated Mines, Inc. (CMI), which they amended four days later. 2 The case was docketed as Sp. Proc. No. 9263 and assigned to Branch 28 of the Court. The petition for involuntary insolvency alleged: 1) that CMI had obtained loans from the three petitioning banks, and that as of November/December, 1981, its outstanding obligations were as follows: a) In favor of Bank of America (BA) P15,297,367.67 (as of December 10, 1981) US$ 4,175,831.88 (b) In favor of Citibank US$ 4,920,548.85 (as of December 10, 1981) c) In favor of Hongkong & Shanghai Bank US$ 5,389,434.12 (as of November 30, 1981); P6,233,969.24 2) that in November, 1981, State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI) had separately instituted actions for collection of PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
47 of 501
sums of money and damages in the Court of First Instance of Rizal against CMI, docketed respectively as Civil Cases Numbered 43588 and 43677; and that on application of said plaintiffs, writs of preliminary attachment had been issued which were executed on "the royalty/profit sharing payments due CMI from Benguet Consolidated Mining, Inc;" and 3) that CMI had "committed specific acts of insolvency as provided in Section 20 of the Insolvency Law, to wit: xxx xxx xxx 5. that he (CMI) has suffered his (CMI's) property to remain under attachment or legal process for three days for the purpose of hindering or delaying or defrauding his (CMI's) creditors; xxx xxx xxx 11. that being a merchant or tradesman he (CMI) has generally defaulted in the payment of his (CMI's) current obligations for a period of thirty days; . . . The petition was opposed by State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI). 3 It claimed that: 1) the three petitioner banks had come to court with unclean hands in that they filed the petition for insolvency alleging the CMI was defrauding its creditors, and they wished all creditors to share in its assets although a few days earlier, they had "received for the account of CMI substantial payments aggregating P10,800,000.00;" 2) the Court had no jurisdiction because the alleged acts of insolvency were false: the writs of attachment against CMI had remained in force because there were "just, valid and lawful grounds for the(ir) issuance," and CMI was not a "merchant or tradesman" nor had it "generally defaulted in the payment of (its) obligations for a period of thirty days . . . ;" 3) the Court had no jurisdiction to take cognizance of the petition for insolvency because petitioners are not resident creditors of CMI in contemplation of the Insolvency Law; and 4) the Court has no power to set aside the attachment issued in favor of intervenors-oppositors SIHI and SFCI. CMI filed its Answer to the petition for insolvency, asserting in the main that it was not insolvent, 4 and later filed a "Motion to Dismiss Based on Affirmative Defense of Petitioner's Lack of Capacity to Sue," echoing the theory of SIHI and SFCI that the petitioner banks are not "Philippine residents." 5 Resolution on the motion was "deferred until after hearing of the case on the merits" it appearing to the Court that the grounds therefor did not appear to be indubitable. 6 SIHI and SFCI filed their own Answer-in-Intervention, 7 and served on the three petitioner banks requests for admission of certain facts in accordance with Rule 26 of the Rules of Court, 8 receiving a response only from Hongkong & Shanghai Bank. 9 SIHI and SFCI then filed a Motion for Summary Judgment dated May 23, 1983 "on the ground that, based on the pleadings and admissions on record, the trial court had no jurisdiction to adjudicate CMI insolvent since the petitioners (respondent foreign banks) are not "resident creditors" of CMI as required under the Insolvency Law." 10 Oppositions to the motion were filed, 11 to which a reply was submitted. 12 The Regional Trial Court 13 found merit in the motion for summary judgment. By Order dated October 10, 1983, it rendered "summary judgment dismissing the . . . petition for lack of jurisdiction over the subject matter, with costs against petitioners." 14 It ruled that on the basis of the "facts on record, as shown in the pleadings, motions and admissions of the parties, an insolvency court could "not acquire jurisdiction to adjudicate the debtor as insolvent if the creditors petitioning for adjudication of insolvency are not "residents" of the Philippines" citing a decision of the California Supreme Court which it declared "squarely applicable especially considering that one of the sources of PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
48 of 501
our Insolvency Law is the Insolvency Act of California of 1895 . . . " And it declared that since petitioners had been merely licensed to do business in the Philippines, they could not be deemed residents thereof. The three foreign banks sought to take an appeal from the Order of October 10, 1983. They filed a notice of appeal and arecord on appeal. 15 SIHI and SFCI moved to dismiss their appeal claiming it was attempted out of time. The Trial Court denied the motion. SIHI and SFCI filed with this Court a petition for certiorari and prohibition (G.R. NO. 66449), impugning that denial. The Court dismissed the petition and instead required the three banks to file a petition for review in accordance with Rule 45 of the Rules of Court. 16 This the banks did (their petition was docketed as G.R. No. 66804). However, by Resolution dated May 16, 1984, the court referred the petition for review to the Intermediate Appellate Court, where it was docketed as AC SP-03674. 17 In the meantime, the Trial Court approved on May 3, 1985 the banks' record on appeal and transmitted it to this Court, where it was recorded as UDK-6866. As might have been expected, this Court required the banks to file a petition for review under Rule 45, but they asked to be excused from doing so since they had already filed such a petition, which had been referred to the Intermediate Appellate Court and was there pending as AC-G.R. No. SP 03674, supra. This Court then also referred UDK-6866 to the Intermediate Appellate Court where it was docketed as AC-G.R. No. CV 07830. Both referred cases, AC-G.R. No. SP 03674 and AC-G.R. No. CV 07830, were consolidated by Resolution of the Court of Appeals dated April 9, 1986, and Decision thereon was promulgated on July 14, 1987 by the Fifteenth Division of said Court. 18 The Appellate Court reversed the Trial Court's Order of October 10, 1983 and remanded the case to it for further proceedings. It ruled: 1) that the purpose of the Insolvency Law was "to convert the assets of the bankrupt in cash for distribution among creditors, and then to relieve the honest debtor from the weight of oppressive indebtedness and permit him to start life anew, free from the obligations and responsibilities consequent upon business misfortunes;" 19 and that it was "crystal clear" that the law was "designed not only for the benefit of the creditors but more importantly for the benefit of the debtor himself," the object being "to provide not only for the suspension of payments and the protection of creditors but also the discharge of insolvent honest debtors to enable them to have a fresh start;" 2) that the Trial Court had placed "a very strained and restrictive interpretation of the term "resident," as to exclude foreign banks which have been operating in this country since the early part of the century," and "the better approach . . . would have been to harmonize the provisions . . . (of the Insolvency Law) with similar provisions of other succeeding laws, like the Corporation Code of the Philippines, the General Banking Act, the Offshore Banking Law and the National Internal Revenue Code in connection with or related to their doing business in the Philippines;" 3) that in light of said statutes, the three banks "are in truth and in fact considered as "residents" of the Philippines for purposes of doing business in the Philippines and even for taxation matters;" 4) that the banks had "complied with all the laws, rules and regulations (for doing business in the country) and have been doing business in the Philippines for many years now;" that the authority granted to them by the Securities and Exchange Commission upon orders of the Monetary Board "covers not only transacting banking business . . . but likewise maintaining suits "for recovery of any debt, claims or demand whatsoever," and that their petition for involuntary insolvency was "nothing more than a suit aimed at recovering a debt granted by them to Consolidated Mines, Inc., or at least a portion thereof;" 4) that to deprive the foreign banks of their right to proceed against their debtors through insolvency proceedings would "contravene the basic standards of equity and fair play, . . . would discourage their operations in economic development projects that create not only jobs for our people but also opportunities for advancement as a nation;" and PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
49 of 501
5) that the terms "residence" and "domicile" do not mean the same thing, and that as regards a corporation, it is generally deemed an "inhabitant" of the state under whose law it is incorporated, and has a "residence" wherever it conducts its ordinary business, and may have its legal "domicile" in one place and "residence" in another. SIHI and SFCI moved for reconsideration and then, when rebuffed, took an appeal to this Court. Here, they argue that the Appellate Court's judgment should be reversed because it failed to declare that 1) the failure of the three foreign banks to allege under oath in their petition for involuntary insolvency that they are Philippine residents, wishing only to "be considered Philippine residents," is fatal to their cause; 2) also fatal to their cause is their failure to prove, much less allege, that under the domiciliary laws of the foreign banks, a Philippine corporation is allowed the reciprocal right to petition for a debtor's involuntary insolvency; 3) in fact and in law, the three banks are not Philippine residents because: a) corporations have domicile and residence only in the state of their incorporation or in the place designated by law, although for limited and exclusive purposes, other states may consider them as residents; b) juridical persons may not have residence separate from their domicile; 4) actually, the non-resident status of the banks within the context of the Insolvency Law is confirmed by other laws; 5) the license granted to the banks to do business in the Philippines does not make them residents; 6) no substantive law explicitly grants foreign banks the power to petition for the adjudication of the Philippine corporation as a bankrupt; 7) the Monetary Board can not appoint a conservator or receiver for a foreign bank or orders its liquidation having only the power to revoke its license, subject to such proceedings as the Solicitor General may thereafter deem proper to protect its creditors; 8) the foreign banks are not denied the right to collect their credits against Philippine debtors, only the right to "petition for the harsh remedy of involuntary insolvency" not being conceded to them; 9) said banks have come to court with unclean hands, their filing of the petition for involuntary insolvency being an attempt to defeat validly acquired rights of domestic corporations. The concept of a foreign corporation under Section 123 of the Corporation Code is of "one formed, organized or existing under laws other than those of the Philippines and . . . (which) laws allow Filipino citizens and corporations to do business . . . ." There is no question that the three banks are foreign corporations in this sence, with principal offices situated outside of the Philippines. There is no question either that said banks have been licensed to do business in this country and have in fact been doing business here for many years, through branch offices or agencies, including "foreign currency deposit units;" in fact, one of them, Hongkong & Shanghai Bank has been doing business in the Philippines since as early as 1875. The issue is whether these Philippine branches or units may be considered "residents of the Philippine Islands" as that term is used in Section 20 of the Insolvency Law, supra, 20 or residents of the state under the laws of which they were respectively incorporated. The answer cannot be found in the Insolvency Law itself, which contains no definition of the term, resident, or any clear indication of its meaning. There are however other statutes, albeit of subsequent enactment and effectivity, from which enlightening notions of the term may be derived. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
50 of 501
The National Internal Revenue Code declares that the term "'resident foreign corporation' applies to a foreign corporation engaged in trade or business within the Philippines," as distinguished from a " "non-resident foreign corporation" . . . (which is one) not engaged in trade or business within the Philippines." 21 The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries, affiliation, extension offices or any other units of corporation or juridical person organized under the laws of any foreign country operating in the Philippines shall be considered residents of the Philippines." 22 The General Banking Act, Republic Act No. 337, places "branches and agencies in the Philippines of foreign banks . . . (which are) called Philippine branches," in the same category as "commercial banks, savings associations, mortgage banks, development banks, rural banks, stock savings and loan associations" (which have been formed and organized under Philippine laws), making no distinction between the former and the later in so far, as the terms "banking institutions" and "bank" are used in the Act, 23 declaring on the contrary that in "all matters not specifically covered by special provisions applicable only to foreign banks, or their branches and agencies in the Philippines, said foreign banks or their branches and agencies lawfully doing business in the Philippines "shall be bound by all laws, rules, and regulations applicable to domestic banking corporations of the same class, except such laws, rules and regulations as provided for the creation, formation, organization, or dissolution of corporations or as fix the relation, liabilities, responsibilities, or duties of members, stockholders or officers or corporations." 24 This Court itself has already had occasion to hold 25 that a foreign corporation licitly doing business in the Philippines, which is a defendant in a civil suit, may not be considered a non-resident within the scope of the legal provision authorizing attachment against a defendant not residing in the Philippine Islands;" 26 in other words, a preliminary attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign corporation authorized to do business in the Philippines and is consequently and necessarily, "a party who resides out of the Philippines." Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who resides out of the country, then, logically, it must be considered a party who does reside in the Philippines, who is a resident of the country. Be this as it may, this Court pointed out that: . . . Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business here, to the status of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu; Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be entirely out of line with this policy should we make a discrimination against a foreign corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment when it has complied not only with every requirement of law made specially of foreign corporations, but in addition with every requirement of law made of domestic corporations. . . . . Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the status of domesticcorporations," subsumes their being found and operating as corporations, hence, residing, in the country. The same principle is recognized in American law: that the "residence of a corporation, if it can be said to have a residence, is necessarily where it exercises corporate functions . . . ;" that it is .considered as dwelling "in the place where its business is done . . . ," as being "located where its franchises are exercised . . . ," and as being "present where it is engaged in the prosecution of the corporate enterprise;" that a "foreign corporation licensed to do business in a state is a resident of any country where it maintains an office or agent for transaction of its usual and customary business for venue purposes;" and that the "necessary element in its signification is locality of existence." 27 Courts have held that "a domestic corporation is regarded as having a residence within the state at any place where it is engaged in the particulars of the corporate enterprise, and not only at its chief place or home office;" 28 that "a corporation may be domiciled in one state and resident in another; its legal domicil in the state of its creation presents no impediment to its residence in a real and practical sense in the state of its business activities." 29 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
51 of 501
The foregoing propositions are in accord with the dictionary concept of residence as applied to juridical persons, a term which appears to comprehend permanent as well as temporary residence. The Court cannot thus accept the petitioners' theory that corporations may not have a residence (i.e., the place where they operate and transact business) separate from their domicile (i.e., the state of their formation or organization), and that they may be considered by other states as residents only for limited and exclusive purposes. Of course, as petitioners correctly aver, it is not really the grant of a license to a foreign corporation to do business in this country that makes it a resident; the license merely gives legitimacy to its doing business here. What effectively makes such a foreign corporation a resident corporation in the Philippines is its actually being in the Philippines and licitly doing business here, "locality of existence" being, to repeat, the "necessary element in . . . (the) signification" of the term, resident corporation. Neither can the Court accept the theory that the omission by the banks in their petition for involuntary insolvency of an explicit and categorical statement that they are "residents of the Philippine Islands," is fatal to their cause. In truth, in light of the concept of resident foreign corporations just expounded, when they alleged in that petition that they are foreign banking corporations, licensed to do business in the Philippines, and actually doing business in this Country through branch offices or agencies, they were in effect stating that they are resident foreign corporations in the Philippines. There is, of course, as petitioners argue, no substantive law explicitly granting foreign banks the power to petition for the adjudication of a Philippine corporation as a bankrupt. This is inconsequential, for neither is there any legal provision expressly giving domestic banks the same power, although their capacity to petition for insolvency can scarcely be disputed and is not in truth disputed by petitioners. The law plainly grants to a juridical person, whether it be a bank or not or it be a foreign or domestic corporation, as to natural persons as well, such a power to petition for the adjudication of bankruptcy of any person, natural or juridical, provided that it is a resident corporation and joins at least two other residents in presenting the petition to the Bankruptcy Court. The petitioners next argue that "Philippine law is emphatic that only foreign corporations whose own laws give Philippine nationals reciprocal rights may do business in the Philippines." As basis for the argument they invoke Section 123 of the Corporation Code which, however, does not formulate the proposition in the same way. Section 123 does not say, as petitioners assert, that it is required that the laws under which foreign corporations are formed "give Philippine nationals, reciprocal rights." What it does say is that the laws of the country or state under which a foreign corporation is "formed, organized or existing . . . allow Filipino citizens and corporations to do business in its own country or state," which is not quite the same thing. Now, it seems to the Court that there can be no serious debate about the fact that the laws of the countries under which the three (3) respondent banks were formed or organized (Hongkong and the United States) do "allow Filipino citizens and corporations to do business" in their own territory and jurisdiction. It also seems to the Court quite apparent that the Insolvency Law contains no requirement that the laws of the state under which a foreign corporation has been formed or organized should grant reciprocal rights to Philippine citizens to apply for involuntary insolvency of a resident or citizen thereof. The petitioners' point is thus not well taken and need not be belabored. That the Monetary Board can not appoint a conservator or receiver for a foreign bank or order its liquidation having only the power to revoke its license, subject to such proceedings as the Solicitor General may thereafter deem proper to protect its creditors, which is another point that petitioners seek to make, is of no moment. It has no logical connection to the matter of whether or not the foreign bank may properly ask for a judicial declaration of the involuntary insolvency of a domestic corporation, which is the issue at hand. The fact is, in any event, that the law is not lacking in sanctions against foreign banks or powerless to protect the latter's creditors. The petitioners contend, too, that the respondent banks have come to court with unclean hands, their filing of the petition for involuntary insolvency being an attempt to defeat validly acquired rights of domestic corporations. The Court wishes to simply point out that the effects of the institution of bankruptcy proceedings on all the creditors of the alleged bankrupt are clearly spelled out by the law, and will be observed by the Insolvency Court regardless PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
52 of 501
of whatever motives apart from the desire to share in the assets of the insolvent in satisfying its credits that the party instituting the proceedings might have. Still another argument put forth by the petitioners is that the three banks' failure to incorporate their branches in the Philippines into new banks in accordance with said Section 68 of the General Banking Act connotes an intention on their part to continue as residents of their respective states of incorporation and not to be regarded as residents of the Philippines. The argument is based on an incomplete and inaccurate quotation of the cited Section. What Section 68 required of a "foreign bank presently having branches and agencies in the Philippines, . . . within one year from the effectivity" of the General Banking Act, was to comply with any of three (3) options, not merely with one sole requirement. These three (3) options are the following: 1) (that singled out and quoted by the petitioners, i.e.:) "incorporate its branch or branches into a new bank in accordance with Philippine laws . . . ; or 2) "assign capital permanently to the local branch with the concurrent maintenance of a 'net due to' head office account which shall include all net amounts due to other branches outside the Philippines in an amount which when added to the assigned capital shall at all times be not less than the minimum amount of capital accounts required for domestic commercial banks under section twenty-two of this Act;" or 3) "maintain a "net due to" head office account which shall include all net amounts due to other branches outside the Philippines, in an amount which shall not be less than the minimum amount of capital accounts required for domestic commercial banks under section twenty-two of this Act." The less said about this argument then, the better. The petitioners allege that three days before respondent banks filed their petition for involuntary insolvency against CMI, they received from the latter substantial payments on account in the aggregate amount of P6,010,800.00, with the result that they were "preferred in the distribution of CMI's assets thereby defrauding other creditors of CMI." Non sequitur. It is in any case a circumstance that the Bankruptcy Court may well take into consideration in determining the manner and proportion by which the assets of the insolvent company shall be distributed among its creditors; but it should not be considered a ground for giving the petition for insolvency short shrift. Moreover, the payment adverted to does not appear to be all that large. The total liabilities of CMI to the three respondent banks as of December, 1981 was P21,531,336.91, and US$14,485,814.85. Converted into Philippine currency at the rate of P7.899 to the dollar, the average rate of exchange during December, 1981, 30 the dollar account would be P114,423,451.50. Thus, the aggregate liabilities of CMI to the banks, expressed in Philippine currency, was P135,954,788.41 as of December, 1981, and therefore the payment to them of P6,010,800.00 constituted only some 4.42% of the total indebtedness. WHEREFORE, the petition is DENIED and the challenged Decision of the Court of Appeals is AFFIRMED in toto, with costs against the petitioners. SO ORDERED.
Mabanag v. Gallemore, 81 Phil. 254 EN BANC DECISION July 20, 1948 G.R. No. L-825 ROMAN MABANAG, plaintiff-appellant, vs. JOSEPH M. GALLEMORE, defendant-appellee. Santiago Catane for appellant. No appearance for appellee. , J.: This case, here on appeal from an order dismissal by the Court of First Instance of Occidental Misamis, raises the question of the courts jurisdiction. More specifically, the question is whether the action is in personamor one in rem. The trial court opined that it is the first and that it has no authority nor jurisdiction to render judgment against the herein defendant, Joseph M. Gallemore for being a non-resident. The purpose of the action is to recover P735.18, an amount said to have been paid by the plaintiff to the defendant for two parcels of land whose sale was afterward annulled. The defendant is said to be residing in Los Angeles, California, U. S. A. He has no property in the Philippine except an alleged debt owing him by a resident of the municipality of Occidental Misamis. This debt, upon petition of the plaintiff, after the filing of the complaint and before the suit was dismissed, was attached to the extent of plaintiffs claim for the payment of which the action was brought. But the attachment was dissolved in the same order dismissing the case. It was Atty. Valeriano S. Kaamino who has amicus curi filed the motion to dismiss and to set aside the attachment. There is no appearance before this Court to oppose the appeal. Section 2, Rule 5, of the Rules of Court provides: If any of the defendants does not reside and is not found in the Philippines, and the action effects the personal status of the plaintiff, or any property of the defendant located in the Philippines, the action may be commenced and tried in the province where the plaintiff resides or the property, or any portion thereof, is situated or found. The Philippine leading cases in which this Rule, or its counterpart in the former Code of Civil Procedure, section 377 and 395, were cited and applied, are Banco Espaol-Filipino vs. Palanca, 37 Phil. 921, and Slade Perkins vs. Dizon, 40 O.G. [3d Suppl.], No. 7, p. 216. The gist of this Courts ruling in these cases, in so far as it is relevant to the present issues, is given in I Morans Comments on the Rules of Court, 2d Ed., 105: As a general rule, when the defendant is not residing and is not found in the Philippines, the Philippine courts cannot try any case against him because of the impossibility of acquiring jurisdiction over his person, unless he voluntarily appears in court. But, when the action affects the personal status of the plaintiff residing in the Philippines, or is intended to seize or dispose of any property, real or personal, of the defendant, located in the Philippines, it may be validly tried by the Philippine courts, for then, they have jurisdiction over the res, i.e., the personal status of the plaintiff or the property of the defendant, and their jurisdiction over the person of the non-resident defendant is not essential. Venue in such cases may be laid in the province where the plaintiff whose personal status is in question resides, or where the property of the defendant or a part thereof involved in the litigation is located. Literally this Court said: Jurisdiction over the property which is the subject of litigation may result either from a seizure of the property under legal process, whereby it is brought into the actual custody of the law, or it may result from the institution of legal proceedings wherein, under special provisions of law, the power of the court over the property is recognized and made effective. In the latter case the property, though at all times within the potential power of the court, may never be taken into actual custody at all. An illustration of the jurisdiction PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
54 of 501
acquired by actual seizure is found in attachment proceedings, where the property is seized at the beginning of the action, or some subsequent stage of its progress, and held to abide the final event of the litigation. An illustration of what we term potential jurisdiction over the res, is found in the proceeding to register the title of land under our system for the registration of land. Here the court, without taking actual physical control over the property assumes, at the instance of some person claiming to be owner, to exercise a jurisdiction in rem over the property and to adjudicate the title in favor of the petitioner against all the world. (Banco Espaol-Filipino vs. Palanca, supra, 927-928.). In an ordinary attachment proceeding, if the defendant is not personally served, the preliminary seizure is to be considered necessary in order to confer jurisdiction upon the court. In this case the lien on the property is acquired by the seizure; and the purpose of the proceeding is to subject the property to that lien. If a lien already exists, whether created by mortgage, contract, or statute, the preliminary seizure is not necessary; and the court proceeds to enforce such lien in the manner provided by law precisely as though the property had been seized upon attachment. (Roller vs. Holly, 176 U.S. 398, 405; 44 Law. ed. 520.) It results that the mere circumstance that in an attachment the property may be seized at the inception of the proceedings, while in the foreclosure suit it is not taken into legal custody until the time comes for the sale, does not materially affect the fundamental principle involved in both cases, which is that the court is here exercising a jurisdiction over the property in a proceeding directed essentially in rem. (Id., 929-930.). When, however, the action relates to property located in the Philippines, the Philippine courts may validly try the case, upon the principles that a State, through its tribunals, may subject property situated within its limit owned by non-residents to the payment of the demand of its own citizens against them; and the exercise of this jurisdiction in no respect infringes upon the sovereignty of the State were the owners are domiciled. Every State owes protection to its own citizens; and, when non-residents deal with them, it is a legitimate and just exercise of authority to hold any appropriate any property owned by such non-residents to satisfy the claims of its citizens. It is in virtue of the States jurisdiction over the property of the non-resident situated within its limits that its tribunals can inquire into the non-residents obligations to its own citizens, and the inquiry can then be carried only to the extent necessary to control disposition of the property. If the non-resident has no property in the State, there is nothing upon which the tribunals can adjudicate. (Slade Perkins vs. Dizon, 40 O.G. [3d Supplement], No. 7, p. 216.). A fuller statement of the principle whereunder attachment or garnishment of property of a non-resident defendant confers jurisdiction on the court in an otherwise personal action, appears in two well known and authoritative works: The main action in an attachment or garnishment suit is in rem until jurisdiction of the defendant is secured. Thereafter, it is in personam and also in rem, unless jurisdiction of the res is lost as by dissolution of the attachment. If jurisdiction of the defendant is acquired but jurisdiction of the res is lost, it is then purely in personam. . . a proceeding against property without jurisdiction of the person of the defendant is in substance a proceeding in rem; and where there is jurisdiction of the defendant, but the proceedings against the property continues, that proceedings is none the less necessarily in rem, although in form there is but a single proceeding. (4 Am. Jur., 556-557.) As the remedy is administered in some states, the theory of an attachment, whether it is by process against or to subject the property or effects of a resident or non-resident of the state, is that it partakes essentially of the nature and character of the proceeding in personam and not of a proceeding in rem. And if the defendant appears the action proceeds in accordance with the practice governing proceedings in personam. But were the defendant fails to appear in the action, the proceeding is to be considered as one in the nature of a proceeding in rem. And where the court acts directly on the property, the title thereof being charged by the court without the intervention of the party, the proceeding unquestionably is one in rem in the fullest meaning of the term. In attachment proceedings against a non-resident defendant where personal service on him is lacking, it is elementary that the court must obtain jurisdiction of the property of the defendant. If no steps have been taken to acquire jurisdiction of the defendants person, and he has not appeared and answered or otherwise submitted himself to the jurisdiction of the court, the court is without jurisdiction to render judgment until there has been a lawful seizure of property owned by him within the jurisdiction of the court. (2 R. C. L., 800-804.). PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
55 of 501
Tested by the foregoing decisions and authorities, the Court has acquired jurisdiction of the case at bar by virtue of the attachment of the defendants credit. Those authorities and decisions, so plain and comprehensive as to make any discussion unnecessary, are in agreement that though no jurisdiction is obtained over the debtors person, the case may proceed to judgment if there is property in the custody of the court that can be applied to its satisfaction. It is our judgment that the court below erred in dismissing the case and dissolving the attachment; and it is ordered that, upon petition of the plaintiff, it issue a new writ of attachment and then proceed to trial. The costs of this appeal will be charged to defendant and appellee. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
56 of 501
Philippine Bank of Communications v. CA, February 23, 2001 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 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. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
57 of 501
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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
58 of 501
(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; 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
59 of 501
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.
PCIB v. Alejandro, September 21, 2007 G.R. No. 175587 September 21, 2007 PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner, vs. JOSEPH ANTHONY M. ALEJANDRO, Respondent. D E C I S I O N YNARES-SANTIAGO, J.: This petition for review assails the May 31, 2006 Decision 1 of the Court of Appeals in CA-G.R. CV No. 78200 affirming the August 30, 2000 Decision 2 of the Regional Trial Court of Makati, which granted respondent Joseph Anthony M. Alejandros claim for damages arising from petitioner Philippine Commercial International Banks (PCIB) invalid garnishment of respondents deposits. On October 23, 1997, petitioner filed against respondent a complaint 3 for sum of money with prayer for the issuance of a writ of preliminary attachment. Said complaint alleged that on September 10, 1997, respondent, a resident of Hong Kong, executed in favor of petitioner a promissory note obligating himself to pay P249,828,588.90 plus interest. In view of the fluctuations in the foreign exchange rates which resulted in the insufficiency of the deposits assigned by respondent as security for the loan, petitioner requested the latter to put up additional security for the loan. Respondent, however, sought a reconsideration of said request pointing out petitioners alleged mishandling of his account due to its failure to carry out his instruction to close his account as early as April 1997, when the prevailing rate of exchange of the US Dollar to Japanese yen was US$1.00:JPY127.50. 4 It appears that the amount of P249,828,588.90 was the consolidated amount of a series of yen loans granted by petitioner to respondent during the months of February and April 1997. 5
In praying for the issuance of a writ of preliminary attachment under Section 1 paragraphs (e) and (f) of Rule 57 of the Rules of Court, petitioner alleged that (1) respondent fraudulently withdrew his unassigned deposits notwithstanding his verbal promise to PCIB Assistant Vice President Corazon B. Nepomuceno not to withdraw the same prior to their assignment as security for the loan; and (2) that respondent is not a resident of the Philippines. The application for the issuance of a writ was supported with the affidavit of Nepomuceno. 6
On October 24, 1997, the trial court granted the application and issued the writ ex parte 7 after petitioner posted a bond in the amount of P18,798,734.69, issued by Prudential Guarantee & Assurance Inc., under Bond No. HO-46764- 97. On the same date, the bank deposits of respondent with Rizal Commercial Banking Corporation (RCBC) were garnished. On October 27, 1997, respondent, through counsel, filed a manifestation informing the court that he is voluntarily submitting to its jurisdiction. 8
Subsequently, respondent filed a motion to quash 9 the writ contending that the withdrawal of his unassigned deposits was not fraudulent as it was approved by petitioner. He also alleged that petitioner knew that he maintains a permanent residence at Calle Victoria, Ciudad Regina, Batasan Hills, Quezon City, and an office address in Makati City at the Law Firm Romulo Mabanta Buenaventura Sayoc & De los Angeles, 10 where he is a partner. In both addresses, petitioner regularly communicated with him through its representatives. Respondent added that he is the managing partner of the Hong Kong branch of said Law Firm; that his stay in Hong Kong is only temporary; and that he frequently travels back to the Philippines. On December 24, 1997, the trial court issued an order quashing the writ and holding that the withdrawal of respondents unassigned deposits was not intended to defraud petitioner. It also found that the representatives of petitioner personally transacted with respondent through his home address in Quezon City and/or his office in Makati City. It thus concluded that petitioner misrepresented and suppressed the facts regarding respondents residence considering that it has personal and official knowledge that for purposes of service of summons, respondents residence and office addresses are located in the Philippines. The dispositive portion of the courts decision is as follows: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
61 of 501
WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby GRANTED, and the ORDER of 24 October 1997 is hereby RECONSIDERED and SET ASIDE and the WRIT OF attachment of the same is hereby DISCHARGED. SO ORDERED. 11
With the denial 12 of petitioners motion for reconsideration, it elevated the case to the Court of Appeals (CA-G.R. SP No. 50748) via a petition for certiorari. On May 10, 1999, the petition was dismissed for failure to prove that the trial court abused its discretion in issuing the aforesaid order. 13 Petitioner filed a motion for reconsideration but was denied on October 28, 1999. 14 On petition with this Court, the case was dismissed for late filing in a minute resolution (G.R. No. 140605) dated January 19, 2000. 15 Petitioner filed a motion for reconsideration but was likewise denied with finality on March 6, 2000. 16
Meanwhile, on May 20, 1998, respondent filed a claim for damages in the amount of P25 Million 17 on the attachment bond (posted by Prudential Guarantee & Assurance, Inc., under JCL(4) No. 01081, Bond No. HO-46764-97) on account of the wrongful garnishment of his deposits. He presented evidence showing that his P150,000.00 RCBC check payable to his counsel as attorneys fees, was dishonored by reason of the garnishment of his deposits. He also testified that he is a graduate of the Ateneo de Manila University in 1982 with a double degree of Economics and Management Engineering and of the University of the Philippines in 1987 with the degree of Bachelor of Laws. Respondent likewise presented witnesses to prove that he is a well known lawyer in the business community both in the Philippines and in Hong Kong. 18 For its part, the lone witness presented by petitioner was Nepomuceno who claimed that she acted in good faith in alleging that respondent is a resident of Hong Kong. 19
On August 30, 2000, the trial court awarded damages to respondent in the amount of P25 Million without specifying the basis thereof, thus: WHEREFORE, premises above considered, and defendant having duly established his claim in the amount ofP25,000,000.00, judgment is hereby rendered ordering Prudential Guarantee & [Assurance] Co., which is solidarily liable with plaintiff to pay defendant the full amount of bond under Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081, [Bond No. HO-46764-97], dated 24 October 1997 in the amount of P18,798,734.69. And, considering that the amount of the bond is insufficient to fully satisfy the award for damages, plaintiff is hereby ordered to pay defendant the amount ofP6,201,265.31. SO ORDERED. 20
The trial court denied petitioners motion for reconsideration on October 24, 2000. 21
Petitioner elevated the case to the Court of Appeals which affirmed the findings of the trial court. It held that in claiming that respondent was not a resident of the Philippines, petitioner cannot be said to have been in good faith considering that its knowledge of respondents Philippine residence and office address goes into the very issue of the trial courts jurisdiction which would have been defective had respondent not voluntarily appeared before it. The Court of Appeals, however, reduced the amount of damages awarded to petitioner and specified their basis. The dispositive portion of the decision of the Court of Appeals states: WHEREFORE, the appeal is PARTIALLY GRANTED and the decision appealed from is hereby MODIFIED. The award of damages in the amount of P25,000,000.00 is deleted. In lieu thereof, Prudential Guarantee & [Assurance, Inc.], which is solidarily liable with appellant [herein petitioner], is ORDERED to pay appellee [herein respondent] P2,000,000.00 as nominal damages; P5,000,000.00 as moral damages; and P1,000,000.00 as attorneys fees, to be satisfied against the attachment bond under Prudential Guarantee & Assurance, Inc. JCL (4) No. 01081. SO ORDERED. 22
Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals denied petitioners motion for reconsideration but granted that of respondents by ordering petitioner to pay additional P5Million as exemplary damages. 23
Hence, the instant petition. At the outset, it must be noted that the ruling of the trial court that petitioner is not entitled to a writ of attachment because respondent is a resident of the Philippines and that his act of withdrawing his deposits with petitioner was without intent to defraud, can no longer be passed upon by this Court. More importantly, the conclusions of the court that petitioner bank misrepresented that respondent was residing out of the Philippines and suppressed the fact that respondent has a permanent residence in Metro Manila where he may be served with summons, are now beyond the power of this Court to review having been the subject of a final and executory order. Said findings were sustained by the Court of Appeals in CA-G.R. SP No. 50784 and by this Court in G.R. No. 140605. The rule on conclusiveness of judgment, which obtains under the premises, precludes the relitigation of a particular fact or issue in another action between the same parties even if based on a different claim or cause of action. The judgment in the prior action operates as estoppel as to those matters in issue or points controverted, upon the determination of which the finding or judgment was rendered. The previous judgment is conclusive in the second case, as to those matters actually and directly controverted and determined. 24 Hence, the issues of misrepresentation by petitioner and the residence of respondent for purposes of service of summons can no longer be questioned by petitioner in this case. The core issue for resolution is whether petitioner bank is liable for damages for the improper issuance of the writ of attachment against respondent. We rule in the affirmative. Notwithstanding the final judgment that petitioner is guilty of misrepresentation and suppression of a material fact, the latter contends that it acted in good faith. Petitioner also contends that even if respondent is considered a resident of the Philippines, attachment is still proper under Section 1, paragraph (f), Rule 57 of the Rules of Court since he (respondent) is a resident who is temporarily out of the Philippines upon whom service of summons may be effected by publication. Petitioners contentions are without merit. While the final order of the trial court which quashed the writ did not categorically use the word "bad faith" in characterizing the representations of petitioner, the tenor of said order evidently considers the latter to have acted in bad faith by resorting to a deliberate strategy to mislead the court. Thus In the hearings of the motion, and oral arguments of counsels before the Court, it appears that plaintiff BANK through its contracting officers Vice President Corazon B. Nepomuceno and Executive Vice President Jose Ramon F. Revilla, personally transacted with defendant mainly through defendants permanent residence in METRO-MANILA, either in defendants home address in Quezon City or his main business address at the Romulo Mabanta Buenaventura Sayoc & Delos Angeles in MAKATI and while at times follow ups were made through defendants temporary home and business addresses in Hongkong. It is therefore clear that plaintiff could not deny their personal and official knowledge that defendants permanent and official residence for purposes of service of summons is in the Philippines. In fact, this finding is further confirmed by the letter of Mr. JOHN GOKONGWEI, JR. Chairman, Executive Committee of plaintiff BANK, in his letter dated 6 October 1997 on the subject loan to defendant of the same law firm was addressed to the ROMULO LAW FIRM in MAKATI. [Anent the] second ground of attachment x x x [t]he Court finds that the amount withdrawn was not part of defendants peso deposits assigned with the bank to secure the loan and as proof that the withdrawal was not intended to defraud plaintiff as creditor is that plaintiff approved and allowed said withdrawals. It is even noted that when the Court granted the prayer for attachment it was mainly on the first ground under Section 1(f) of Rule 57 of the 1997 Rules of Civil Procedure, that defendant resides out of the Philippines. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
63 of 501
On the above findings, it is obvious that plaintiff already knew from the beginning the deficiency of its second ground for attachment [i.e.,] disposing properties with intent to defraud his creditors, and therefore plaintiff had to resort to this misrepresentation that defendant was residing out of the Philippines and suppressed the fact that defendants permanent residence is in METRO MANILA where he could be served with summons. On the above findings, and mainly on the misrepresentations made by plaintiff on the grounds for the issuance of the attachment in the verified complaint, the Court concludes that defendant has duly proven its grounds in the MOTION and that plaintiff is not entitled to the attachment. 25
Petitioner is therefore barred by the principle of conclusiveness of judgment from again invoking good faith in the application for the issuance of the writ. Similarly, in the case of Hanil Development Co., Ltd. v. Court of Appeals, 26 the Court debunked the claim of good faith by a party who maliciously sought the issuance of a writ of attachment, the bad faith of said party having been previously determined in a final decision which voided the assailed writ. Thus
Apropos the Application for Judgment on the Attachment Bond, Escobar claims in its petition that the award of attorneys fees and injunction bond premium in favor of Hanil is [contrary] to law and jurisprudence. It contends that no malice or bad faith may be imputed to it in procuring the writ. Escobars protestation is now too late in the day. The question of the illegality of the attachment and Escobars bad faith in obtaining it has long been settled in one of the earlier incidents of this case. The Court of Appeals, in its decision rendered on February 3, 1983 in C.A.-G.R. No. SP-14512, voided the challenged writ, having been issued with grave abuse of discretion. Escobars bad faith in procuring the writ cannot be doubted. Its Petition for the Issuance of Preliminary Attachment made such damning allegations that: Hanil was already able to secure a complete release of its final collection from the MPWH; it has moved out some of its heavy equipments for unknown destination, and it may leave the country anytime. Worse, its Ex Parte Motion to Resolve Petition alleged that "after personal verification by (Escobar) of (Hanils) equipment in Cagayan de Oro City, it appears that the equipments were no longer existing from their compound." All these allegations of Escobar were found to be totally baseless and untrue. Even assuming that the trial court did not make a categorical pronouncement of misrepresentation and suppression of material facts on the part of petitioner, the factual backdrop of this case does not support petitioners claim of good faith. The facts and circumstances omitted are highly material and relevant to the grant or denial of writ of attachment applied for. Finally, there is no merit in petitioners contention that respondent can be considered a resident who is temporarily out of the Philippines upon whom service of summons may be effected by publication, and therefore qualifies as among those against whom a writ of attachment may be issued under Section 1, paragraph (f), Rule 57 of the Rules of Court which provides: (f) In an action against a party x x x on whom summons may be served by publication. In so arguing, petitioner attempts to give the impression that although it erroneously invoked the ground that respondent does not reside in the Philippines, it should not be made to pay damages because it is in fact entitled to a writ of attachment had it invoked the proper ground under Rule 57. However, even on this alternative ground, petitioner is still not entitled to the issuance of a writ of attachment. The circumstances under which a writ of preliminary attachment may be issued are set forth in Section 1, Rule 57 of the Rules of Court, to wit: SEC. 1. Grounds upon which attachment may issue. At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: (a) In an action for the recovery of a specified amount of money or damages, other than moral and exemplary, on a cause of action arising PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
64 of 501
from law, contract, quasi-contract, delict or quasi-delict against a party who is about to depart from the Philippines with intent to defraud his creditors; (b) In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty; (c) In an action to recover the possession of personal property unjustly or fraudulently taken, detained, or converted, when the property, or any part thereof, has been concealed, removed, or disposed of to prevent its being found or taken by the applicant or an authorized person; (d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof; (e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors; (f) In an action against a party who resides out of the Philippines, or on whom summons may be served by publication. The purposes of preliminary attachment are: (1) to seize the property of the debtor in advance of final judgment and to hold it for purposes of satisfying said judgment, as in the grounds stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or (2) to acquire jurisdiction over the action by actual or constructive seizure of the property in those instances where personal or substituted service of summons on the defendant cannot be effected, as in paragraph (f) of the same provision. 27
Corollarily, in actions in personam, such as the instant case for collection of sum of money, 28 summons must be served by personal or substituted service, otherwise the court will not acquire jurisdiction over the defendant. In case the defendant does not reside and is not found in the Philippines (and hence personal and substituted service cannot be effected), the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is to convert the action into a proceeding in rem or quasi in rem by attaching the property of the defendant. 29 Thus, in order to acquire jurisdiction in actions in personam where defendant resides out of and is not found in the Philippines, it becomes a matter of course for the court to convert the action into a proceeding in rem or quasi in rem by attaching the defendants property. The service of summons in this case (which may be by publication coupled with the sending by registered mail of the copy of the summons and the court order to the last known address of the defendant), is no longer for the purpose of acquiring jurisdiction but for compliance with the requirements of due process. 30
However, where the defendant is a resident who is temporarily out of the Philippines, attachment of his/her property in an action in personam, is not always necessary in order for the court to acquire jurisdiction to hear the case. Section 16, Rule 14 of the Rules of Court reads: Sec. 16. Residents temporarily out of the Philippines. When an action is commenced against a defendant who ordinarily resides within the Philippines, but who is temporarily out of it, service may, by leave of court, be also effected out of the Philippines, as under the preceding section. The preceding section referred to in the above provision is Section 15 which provides for extraterritorial service (a) personal service out of the Philippines, (b) publication coupled with the sending by registered mail of the copy of the summons and the court order to the last known address of the defendant; or (c) in any other manner which the court may deem sufficient. In Montalban v. Maximo, 31 however, the Court held that substituted service of summons (under the present Section 7, Rule 14 of the Rules of Court) is the normal mode of service of summons that will confer jurisdiction on the court over the person of residents temporarily out of the Philippines. Meaning, PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
65 of 501
service of summons may be effected by (a) leaving copies of the summons at the defendants residence with some person of suitable discretion residing therein, or (b) by leaving copies at the defendants office or regular place of business with some competent person in charge thereof. 32 Hence, the court may acquire jurisdiction over an action in personam by mere substituted service without need of attaching the property of the defendant. The rationale in providing for substituted service as the normal mode of service for residents temporarily out of the Philippines, was expounded in Montalban v. Maximo, 33 in this wise: A man temporarily absent from this country leaves a definite place of residence, a dwelling where he lives, a local base, so to speak, to which any inquiry about him may be directed and where he is bound to return. Where one temporarily absents himself, he leaves his affairs in the hands of one who may be reasonably expected to act in his place and stead; to do all that is necessary to protect his interests; and to communicate with him from time to time any incident of importance that may affect him or his business or his affairs. It is usual for such a man to leave at his home or with his business associates information as to where he may be contacted in the event a question that affects him crops up. Thus, in actions in personam against residents temporarily out of the Philippines, the court need not always attach the defendants property in order to have authority to try the case. Where the plaintiff seeks to attach the defendants property and to resort to the concomitant service of summons by publication, the same must be with prior leave, precisely because, if the sole purpose of the attachment is for the court to acquire jurisdiction, the latter must determine whether from the allegations in the complaint, substituted service (to persons of suitable discretion at the defendants residence or to a competent person in charge of his office or regular place of business) will suffice, or whether there is a need to attach the property of the defendant and resort to service of summons by publication in order for the court to acquire jurisdiction over the case and to comply with the requirements of due process. In the instant case, it must be stressed that the writ was issued by the trial court mainly on the representation of petitioner that respondent is not a resident of the Philippines. 34 Obviously, the trial courts issuance of the writ was for the sole purpose of acquiring jurisdiction to hear and decide the case. Had the allegations in the complaint disclosed that respondent has a residence in Quezon City and an office in Makati City, the trial court, if only for the purpose of acquiring jurisdiction, could have served summons by substituted service on the said addresses, instead of attaching the property of the defendant. The rules on the application of a writ of attachment must be strictly construed in favor of the defendant. For attachment is harsh, extraordinary, and summary in nature; it is a rigorous remedy which exposes the debtor to humiliation and annoyance. 35 It should be resorted to only when necessary and as a last remedy. It is clear from the foregoing that even on the allegation that respondent is a resident temporarily out of the Philippines, petitioner is still not entitled to a writ of attachment because the trial court could acquire jurisdiction over the case by substituted service instead of attaching the property of the defendant. The misrepresentation of petitioner that respondent does not reside in the Philippines and its omission of his local addresses was thus a deliberate move to ensure that the application for the writ will be granted. In light of the foregoing, the Court of Appeals properly sustained the finding of the trial court that petitioner is liable for damages for the wrongful issuance of a writ of attachment against respondent. Anent the actual damages, the Court of Appeals is correct in not awarding the same inasmuch as the respondent failed to establish the amount garnished by petitioner. It is a well settled rule that one who has been injured by a wrongful attachment can recover damages for the actual loss resulting therefrom. But for such losses to be recoverable, they must constitute actual damages duly established by competent proofs, which are, however, wanting in the present case. 36
Nevertheless, nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
66 of 501
recognizing that right, and not for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right. Indeed, nominal damages are damages in name only and not in fact. 37 They are recoverable where some injury has been done but the pecuniary value of the damage is not shown by evidence and are thus subject to the discretion of the court according to the circumstances of the case. 38
In this case, the award of nominal damages is proper considering that the right of respondent to use his money has been violated by its garnishment. The amount of nominal damages must, however, be reduced from P2 million to P50,000.00 considering the short period of 2 months during which the writ was in effect as well as the lack of evidence as to the amount garnished.1wphi1 Likewise, the award of attorneys fees is proper when a party is compelled to incur expenses to lift a wrongfully issued writ of attachment. The basis of the award thereof is also the amount of money garnished, and the length of time respondents have been deprived of the use of their money by reason of the wrongful attachment. 39 It may also be based upon (1) the amount and the character of the services rendered; (2) the labor, time and trouble involved; (3) the nature and importance of the litigation and business in which the services were rendered; (4) the responsibility imposed; (5) the amount of money and the value of the property affected by the controversy or involved in the employment; (6) the skill and the experience called for in the performance of the services; (7) the professional character and the social standing of the attorney; (8) the results secured, it being a recognized rule that an attorney may properly charge a much larger fee when it is contingent than when it is not. 40
All the aforementioned weighed, and considering the short period of time it took to have the writ lifted, the favorable decisions of the courts below, the absence of evidence as to the professional character and the social standing of the attorney handling the case and the amount garnished, the award of attorneys fees should be fixed not at P1 Million, but only at P200,000.00. The courts below correctly awarded moral damages on account of petitioners misrepresentation and bad faith; however, we find the award in the amount of P5 Million excessive. Moral damages are to be fixed upon the discretion of the court taking into consideration the educational, social and financial standing of the parties. 41 Moral damages are not intended to enrich a complainant at the expense of a defendant. 42 They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has undergone, by reason of petitioners culpable action. Moral damages must be commensurate with the loss or injury suffered. Hence, the award of moral damages is reduced to P500,000.00. Considering petitioners bad faith in securing the writ of attachment, we sustain the award of exemplary damages by way of example or correction for public good. This should deter parties in litigations from resorting to baseless and preposterous allegations to obtain writs of attachments. While as a general rule, the liability on the attachment bond is limited to actual (or in some cases, temperate or nominal) damages, exemplary damages may be recovered where the attachment was established to be maliciously sued out. 43 Nevertheless, the award of exemplary damages in this case should be reduced from P5M to P500,000.00. Finally, contrary to the claim of petitioner, the instant case for damages by reason of the invalid issuance of the writ, survives the dismissal of the main case for sum of money. Suffice it to state that the claim for damages arising from such wrongful attachment may arise and be decided separately from the merits of the main action. 44
WHEREFORE, the petition is PARTIALLY GRANTED. The May 31, 2006 Decision of the Court of Appeals in CA-G.R. CV No. 78200 is AFFIRMED with MODIFICATIONS. As modified, petitioner Philippine Commercial International Bank is ordered to pay respondent Joseph Anthony M. Alejandro the following amounts: P50,000.00 as nominal damages,P200,000.00 as attorneys fees; and P500,000.00 as moral damages, and P500,000.00 as exemplary damages, to be satisfied against the attachment bond issued by Prudential Guarantee & Assurance Inc., 45 under JCL (4) No. 01081, Bond No. HO-46764-97. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
67 of 501
No pronouncement as to costs. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
68 of 501
Wee v. Tankiansee, February 13, 2008
THIRD DIVISION G.R. No. 171124 February 13, 2008 ALEJANDRO NG WEE, petitioner, vs. MANUEL TANKIANSEE, respondent. D E C I S I O N NACHURA, J.: Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the September 14, 2005 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 90130 and its January 6, 2006 Resolution 2 denying the motion for reconsideration thereof. The facts are undisputed. Petitioner Alejandro Ng Wee, a valued client of Westmont Bank (now United Overseas Bank), made several money placements totaling P210,595,991.62 with the bank's affiliate, Westmont Investment Corporation (Wincorp), a domestic entity engaged in the business of an investment house with the authority and license to extend credit. 3
Sometime in February 2000, petitioner received disturbing news on Wincorp's financial condition prompting him to inquire about and investigate the company's operations and transactions with its borrowers. He then discovered that the company extended a loan equal to his total money placement to a corporation [Power Merge] with a subscribed capital of onlyP37.5M. This credit facility originated from another loan of about P1.5B extended by Wincorp to another corporation [Hottick Holdings]. When the latter defaulted in its obligation, Wincorp instituted a case against it and its surety. Settlement was, however, reached in which Hottick's president, Luis Juan L. Virata (Virata), assumed the obligation of the surety. 4
Under the scheme agreed upon by Wincorp and Hottick's president, petitioner's money placements were transferred without his knowledge and consent to the loan account of Power Merge through an agreement that virtually freed the latter of any liability. Allegedly, through the false representations of Wincorp and its officers and directors, petitioner was enticed to roll over his placements so that Wincorp could loan the same to Virata/Power Merge. 5
Finding that Virata purportedly used Power Merge as a conduit and connived with Wincorp's officers and directors to fraudulently obtain for his benefit without any intention of paying the said placements, petitioner instituted, on October 19, 2000, Civil Case No. 00-99006 for damages with the Regional Trial Court (RTC) of Manila. 6 One of the defendants impleaded in the complaint is herein respondent Manuel Tankiansee, Vice-Chairman and Director of Wincorp. 7
On October 26, 2000, on the basis of the allegations in the complaint and the October 12, 2000 Affidavit 8 of petitioner, the trial court ordered the issuance of a writ of preliminary attachment against the properties not exempt from execution of all the defendants in the civil case subject, among others, to petitioner's filing of a P50M-bond. 9 The writ was, consequently, issued on November 6, 2000. 10
Arguing that the writ was improperly issued and that the bond furnished was grossly insufficient, respondent, on December 22, 2000, moved for the discharge of the attachment. 11 The other defendants likewise filed similar motions. 12 On October 23, 2001, the RTC, in an Omnibus Order, 13 denied all the motions for the discharge of the attachment. The defendants, including respondent herein, filed their respective motions for reconsideration 14 but the trial court denied the same on October 14, 2002. 15
Incidentally, while respondent opted not to question anymore the said orders, his co-defendants, Virata and UEM-MARA Philippines Corporation (UEM- MARA), assailed the same via certiorari under Rule 65 before the CA [docketed as CA-G.R. SP No. 74610]. The appellate court, however, denied the certiorari petition on August 21, 2003, 16 and the motion for reconsideration thereof on March 16, 2004. 17 In a petition for review on certiorari before this Court, in G.R. No. 162928, we denied the petition and affirmed the CA rulings on May 19, 2004 for Virata's and UEM-MARA's failure to sufficiently show that the appellate court committed any reversible error. 18 We subsequently denied the petition with finality on August 23, 2004. 19
On September 30, 2004, respondent filed before the trial court another Motion to Discharge Attachment, 20 re-pleading the grounds he raised in his first motion but raising the following additional grounds: (1) that he was not present in Wincorp's board meetings approving the questionable transactions; 21 and (2) that he could not have connived with Wincorp and the other defendants because he and Pearlbank Securities, Inc., in which he is a major stockholder, filed cases against the company as they were also victimized by its fraudulent schemes. 22
Ruling that the grounds raised were already passed upon by it in the previous orders affirmed by the CA and this Court, and that the additional grounds were respondent's affirmative defenses that properly pertained to the merits of the case, the trial court denied the motion in its January 6, 2005 Order. 23
With the denial of its motion for reconsideration, 24 respondent filed a certiorari petition before the CA docketed as CA-G.R. SP No. 90130. On September 14, 2005, the appellate court rendered the assailed Decision 25 reversing and setting aside the aforementioned orders of the trial court and lifting the November 6, 2000 Writ of Preliminary Attachment 26 to the extent that it concerned respondent's properties. Petitioner moved for the reconsideration of the said ruling, but the CA denied the same in its January 6, 2006 Resolution. 27
Thus, petitioner filed the instant petition on the following grounds: A. IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS SHOULD NOT HAVE GIVEN DUE COURSE TO THE PETITION FOR CERTIORARI FILED BY RESPONDENT, SINCE IT MERELY RAISED ERRORS IN JUDGMENT, WHICH, UNDER PREVAILING JURISPRUDENCE, ARE NOT THE PROPER SUBJECTS OF A WRIT OF CERTIORARI. B. MOREOVER, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS COMMITTED SERIOUS LEGAL ERROR IN RESOLVING FAVORABLY THE GROUNDS ALLEGED BY RESPONDENT IN HIS PETITION AND (SIC) LIFTING THE WRIT OF PRELIMINARY ATTACHMENT, SINCE THESE GROUNDS ALREADY RELATE TO THE MERITS OF CIVIL CASE NO. 00-99006 WHICH, UNDER PREVAILING JURISPRUDENCE, CANNOT BE USED AS BASIS (SIC) FOR DISCHARGING A WRIT OF PRELIMINARY ATTACHMENT. C. LIKEWISE, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS ERRED IN SUSTAINING THE ERRORS IN JUDGMENT ALLEGED BY RESPONDENT, NOT ONLY BECAUSE THESE ARE BELIED BY THE VERY DOCUMENTS HE SUBMITTED AS PROOF OF SUCH ERRORS, BUT ALSO BECAUSE THESE HAD EARLIER BEEN RESOLVED WITH FINALITY BY THE LOWER COURT. 28
For his part, respondent counters, among others, that the general and sweeping allegation of fraud against respondent in petitioner's affidavit- respondent as an officer and director of Wincorp allegedly connived with the other defendants to defraud petitioner-is not sufficient basis for the trial court to order the attachment of respondent's properties. Nowhere in the said affidavit does petitioner mention the name of respondent and any specific act committed by the latter to defraud the former. A writ of attachment can only PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
70 of 501
be granted on concrete and specific grounds and not on general averments quoting perfunctorily the words of the Rules. Connivance cannot also be based on mere association but must be particularly alleged and established as a fact. Respondent further contends that the trial court, in resolving the Motion to Discharge Attachment, need not actually delve into the merits of the case. All that the court has to examine are the allegations in the complaint and the supporting affidavit. Petitioner cannot also rely on the decisions of the appellate court in CA-G.R. SP No. 74610 and this Court in G.R. No. 162928 to support his claim because respondent is not a party to the said cases. 29
We agree with respondent's contentions and deny the petition. In the case at bench, the basis of petitioner's application for the issuance of the writ of preliminary attachment against the properties of respondent is Section 1(d) of Rule 57 of the Rules of Court which pertinently reads: Section 1. Grounds upon which attachment may issue.-At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases: 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 the performance thereof. 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 debtor's mere non-payment of the debt or failure to comply with his obligation. 30 The applicant must then be able to demonstrate that the debtor has intended to defraud the creditor. 31 In Liberty Insurance Corporation v. Court of Appeals, 32 we explained 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. 33
In the instant case, petitioner's October 12, 2000 Affidavit 34 is bereft of any factual statement that respondent committed a fraud. The affidavit narrated only the alleged fraudulent transaction between Wincorp and Virata and/or Power Merge, which, by the way, explains why this Court, in G.R. No. 162928, affirmed the writ of attachment issued against the latter. As to the participation of respondent in the said transaction, the affidavit merely states that respondent, an officer and director of Wincorp, connived with the other defendants in the civil case to defraud petitioner of his money placements. No other factual averment or circumstance details how respondent committed a fraud or how he connived with the other defendants to commit a fraud in the transaction sued upon. In other words, petitioner has not shown any specific act or deed to support the allegation that respondent is guilty of fraud. The affidavit, being the foundation of the writ, 35 must contain such particulars as to how the fraud imputed to respondent was committed for the court to decide whether or not to issue the writ. 36 Absent any statement of other factual circumstances to show that respondent, at the time of contracting the obligation, had a preconceived plan or intention not to pay, or without any showing of how respondent committed the alleged fraud, the general averment in the affidavit that respondent is an officer and director of Wincorp who allegedly connived with the other defendants to commit a fraud, is insufficient to support the issuance of a writ of preliminary attachment. 37 In the application for the writ under the said ground, compelling is the need to PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
71 of 501
give a hint about what constituted the fraud and how it was perpetrated 38 because established is the rule that fraud is never presumed. 39 Verily, the mere fact that respondent is an officer and director of the company does not necessarily give rise to the inference that he committed a fraud or that he connived with the other defendants to commit a fraud. While under certain circumstances, courts may treat a corporation as a mere aggroupment of persons, to whom liability will directly attach, this is only done when the wrongdoing has been clearly and convincingly established. 40
Let it be stressed that the provisional remedy of preliminary attachment is harsh and rigorous for it exposes the debtor to humiliation and annoyance. 41 The rules governing its issuance are, therefore, strictly construed against the applicant, 42 such that if the requisites for its grant are not shown to be all present, the court shall refrain from issuing it, for, otherwise, the court which issues it acts in excess of its jurisdiction. 43 Likewise, the writ should not be abused to cause unnecessary prejudice. If it is wrongfully issued on the basis of false or insufficient allegations, it should at once be corrected. 44
Considering, therefore, that, in this case, petitioner has not fully satisfied the legal obligation to show the specific acts constitutive of the alleged fraud committed by respondent, the trial court acted in excess of its jurisdiction when it issued the writ of preliminary attachment against the properties of respondent. We are not unmindful of the rule enunciated in G.B. Inc., etc. v. Sanchez, et al., 45 that [t]he 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. 46
However, the principle finds no application here because petitioner has not yet fulfilled the requirements set by the Rules of Court for the issuance of the writ against the properties of respondent. 47 The evil sought to be prevented by the said ruling will not arise, because the propriety or impropriety of the issuance of the writ in this case can be determined by simply reading the complaint and the affidavit in support of the application. Furthermore, our ruling in G.R. No. 162928, to the effect that the writ of attachment is properly issued insofar as it concerns the properties of Virata and UEM-MARA, does not affect respondent herein, for, as correctly ruled by the CA, respondent is "never a party thereto." 48 Also, he is not in the same situation as Virata and UEM-MARA since, as aforesaid, while petitioner's affidavit detailed the alleged fraudulent scheme perpetrated by Virata and/or Power Merge, only a general allegation of fraud was made against respondent. We state, in closing, that our ruling herein deals only with the writ of preliminary attachment issued against the properties of respondent-it does not concern the other parties in the civil case, nor affect the trial court's resolution on the merits of the aforesaid civil case. WHEREFORE, premises considered, the petition is DENIED. The September 14, 2005 Decision and the January 6, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 90130 are AFFIRMED. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
72 of 501
Metro, Inc. v. Laras Gift & Decor, November 27, 2009 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
73 of 501
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
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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
74 of 501
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; PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
75 of 501
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 as Annex "A". x x x 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. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
76 of 501
Section 2
Sievert v. CA, 168 S 692 G.R. No. L-84034 December 22, 1988 ALBERTO SIEVERT, petitioner, vs. COURT OF APPEALS, HON. JUDGE ARTEMON D. LUNA and AURELIO CAMPOSANO, respondents. King & Adorio Law Offices for petitioner. Moises C. Kallos for private respondent.
FELICIANO, J.: On 18 May 1988 petitioner Alberto Sievert a citizen and resident of the Philippines received by mail a Petition for Issuance of a Preliminary Attachment filed with the Regional Trial Court of Manila Branch 32 in Civil Case No. 88-44346. Petitioner had not previously received any summons and any copy of a complaint against him in Civil Case No. 88-44346. On the day set for hearing of the Petition for a Preliminary Writ of Attachment, petitioner's counsel went before the trial court and entered a special appearance for the limited purpose of objecting to the jurisdiction of the court. He simultaneously filed a written objection to the jurisdiction of the trial court to hear or act upon the Petition for Issuance of a Preliminary Writ of Attachment. In this written objection, petitioner prayed for denial of that Petition for lack of jurisdiction over the person of the petitioner (defendant therein) upon the ground that since no summons had been served upon him in the main case, no jurisdiction over the person of the petitioner had been acquired by the trial court. The trial court denied the petitioner's objection and issued in open court an order which, in relevant part, read as follows: Under Section 1, Rule 57, Rules of Court, it is clear that a plaintiff or any proper party may "... at the commencement of the action or at any time thereafter, have the property of the adverse party attached as the security for the satisfaction of any judgment ..." This rule would overrule the contention that this Court has no jurisdiction to act on the application, although if counsel for defendant so desire, she is given five (5) days from today within which to submit her further position why the writ should not be issued, upon the receipt of which or expiration of the period, the pending incident shall be considered submitted for resolution. (Underscoring in the original) 1
Thereupon, on the same day, petitioner filed a Petition for certiorari with the Court of Appeals. On 13 July 1988, the respondent appellate court rendered a decision, notable principally for its brevity, dismissing the Petition. The relevant portion of the Court of Appeals' decision is quoted below: The grounds raised in this petition state that the court a quo had not acquired jurisdiction over defendant (now petitioner) since no summons had been served on him, and that respondent Judge had committed a grave abuse of discretion in issuing the questioned order without jurisdiction. In short, the issue presented to us is whether respondent Judge may issue a writ of preliminary attachment against petitioner before summons is served on the latter. We rule for respondent Judge. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
77 of 501
Under Sec. 1, Rule 57, it is clear that, at the commencement of the action, a party may have the property of the adverse party attached as security. The resolution of this issue depends, therefore, on what is meant by "Commencement of the action." Moran, citing American jurisprudence on this point, stated thus: "Commencement of action. Action is commenced by filing of the complaint, even though summons is not issued until a later date." (Comment on the Rules of Court, Vol. I, p. 150, 1979). Thus, a writ of preliminary attachment may issue upon filing of the complaint even before issuance of the summons. WHEREFORE, for lack of merit, the petition is hereby denied and, accordingly, dismissed. (Emphasis supplied) 2
The petitioner is now before this Court on a Petition for Review on Certiorari, assailing the above-quoted decision of the Court of Appeals. The petitioner assigns two (2) errors: 1. The proceedings taken and the order issued on plaintiffs petition for attachment prior to the service of summons on the defendant were contrary to law and jurisprudence and violated the defendant's right to due process. 2. The Court of Appeals committed a grave abuse of discretion amounting to lack of jurisdiction in ruling that a writ of preliminary attachment may issue upon filing of the complaint even prior to issuance of the summons. 3
The two (2) assignments of error relate to the single issue which we perceive to be at stake here, that is, whether a court which has not acquired jurisdiction over the person of the defendant in the main case, may bind such defendant or his property by issuing a writ of preliminary attachment. Both the trial court and the Court of Appeals held that the defendant may be bound by a writ of preliminary attachment even before summons together with a copy of the complaint in the main case has been validly served upon him. We are unable to agree with the respondent courts. There is no question that a writ of preliminary attachment may be applied for a plaintiff "at the commencement of the actionor at any time thereafter" in the cases enumerated in Section 1 of Rule 57 of the Revised Rules of Court. The issue posed in this case, however, is not to be resolved by determining when an action may be regarded as having been commenced, a point in time which, in any case, is not necessarily fixed and Identical regardless of the specific purpose for which the deter. nation is to be made. The critical time which must be Identified is, rather, when the trial court acquires authority under law to act coercively against the defendant or his property in a proceeding in attachment. We believe and so hold that critical time is the time of the vesting of jurisdiction in the court over the person of the defendant in the main case. Attachment is an ancillary remedy. It is not sought for its own sake but rather to enable the attaching party to realize upon relief sought and expected to be granted in the main or principal action . 4 A court which has not acquired jurisdiction over the person of defendant, cannot bind that defendant whether in the main case or in any ancillary proceeding such as attachment proceedings. The service of a petition for preliminary attachment without the prior or simultaneous service of summons and a copy of the complaint in the main case and that is what happened in this case does not of course confer jurisdiction upon the issuing court over the person of the defendant. Ordinarily, the prayer in a petition for a writ of preliminary attachment is embodied or incorporated in the main complaint itself as one of the forms of relief sought in such complaint. Thus, valid service of summons and a copy of the complaint will in such case vest jurisdiction in the court over the defendant both for purposes of the main case and for purposes of the ancillary remedy of attachment. In such case, notice of the main case is at the same time notice of the auxiliary proceeding in attachment. Where, however, the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
78 of 501
petition for a writ of preliminary attachment is embodied in a discrete pleading, such petition must be served either simultaneously with service of summons and a copy of the main complaint, or after jurisdiction over the defendant has already been acquired by such service of summons. Notice of the separate attachment petition is not notice of the main action. Put a little differently, jurisdiction whether ratione personae or ratione materiae in an attachment proceeding is ancillary to jurisdiction ratione personae or ratione materiae in the main action against the defendant. If a court has no jurisdiction over the subject matter or over the person of the defendant in the principal action, it simply has no jurisdiction to issue a writ of preliminary attachment against the defendant or his property. It is basic that the requirements of the Rules of Court for issuance of preliminary attachment must be strictly and faithfully complied with in view of the nature of this provisional remedy. In Salas v. Adil, 5 this Court described preliminary attachment as a rigorous remedy which exposes the debtor to humiliation and annoyance, such [that] it should not be abused as to cause unnecessary prejudice. It is, therefore; the duty of the court, before issuing the writ, to ensure that all the requisites of the law have been complied with; otherwise the judge acts in excess of his jurisdiction and the writ so issued shall be null and void. (Emphasis supplied ) 6
The above words apply with greater force in respect of that most fundamental of requisites, the jurisdiction of the court issuing attachment over the person of the defendant. In the case at bar, the want of jurisdiction of the trial court to proceed in the main case against the defendant is quite clear. It is not disputed that neither service of summons with a copy of the complaint nor voluntary appearance of petitioner Sievert was had in this case. Yet, the trial court proceeded to hear the petition for issuance of the writ. This is reversible error and must be corrected on certiorari. WHEREFORE, the Petition for Review on certiorari is GRANTED due course and the Order of the trial court dated 20 May 1988 and the Decision of the Court of Appeals dated 13 July 1988 are hereby SET ASIDE and ANNULLED. No pronouncement as to costs. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
79 of 501
Davao Light v. CA, 204 S 343 EN BANC
G.R. No. 93262 December 29, 1991 DAVAO LIGHT & POWER CO., INC., petitioner, vs. THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLAND TOURIST INN, and TEODORICO ADARNA, respondents. Breva & Breva Law Offices for petitioner. Goc-Ong & Associates for private respondents.
NARVASA, J.:p Subject of the appellate proceedings at bar is the decision of the Court of Appeals in CA-G.R. Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna v. Davao Light & Power Co., Inc.," promulgated on May 4, 1990. 1 That decision nullified and set aside the writ of preliminary attachment issued by the Regional Trial Court of Davao City 2 in Civil Case No. 19513-89 on application of the plaintiff (Davao Light & Power Co.), before the service of summons on the defendants (herein respondents Queensland Co., Inc. and Adarna). Following is the chronology of the undisputed material facts culled from the Appellate Tribunal's judgment of May 4, 1990. 1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light) filed a verified complaint for recovery of a sum of money and damages against Queensland Hotel, etc. and Teodorico Adarna (docketed as Civil Case No. 19513-89). The complaint contained an ex parte application for a writ of preliminary attachment. 2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by raffle, issued an Order granting the ex parte application and fixing the attachment bond at P4,600,513.37. 3. On May 11, 1989 the attachment bond having been submitted by Davao Light, the writ of attachment issued. 4. On May 12, 1989, the summons and a copy of the complaint, as well as the writ of attachment and a copy of the attachment bond, were served on defendants Queensland and Adarna; and pursuant to the writ, the sheriff seized properties belonging to the latter. 5. On September 6, 1989, defendants Queensland and Adarna filed a motion to discharge the attachment for lack of jurisdiction to issue the same because at the time the order of attachment was promulgated (May 3, 1989) and the attachment writ issued (May 11, 1989), the Trial Court had not yet acquired jurisdiction over the cause and over the persons of the defendants. 6. On September 14, 1989, Davao Light filed an opposition to the motion to discharge attachment. 7. On September 19, 1989, the Trial Court issued an Order denying the motion to discharge. This Order of September 19, 1989 was successfully challenged by Queensland and Adarna in a special civil action ofcertiorari instituted by them in the Court of Appeals. The Order was, as aforestated, annulled by the Court of Appeals in its Decision of May 4, 1990. The Appellate Court's decision closed with the following disposition: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
80 of 501
. . . the Orders dated May 3, 1989 granting the issuance of a writ of preliminary attachment, dated September 19, 1989 denying the motion to discharge attachment; dated November 7, 1989 denying petitioner's motion for reconsideration; as well as all other orders emanating therefrom, specially the Writ of Attachment dated May 11, 1989 and Notice of Levy on Preliminary Attachment dated May 11, 1989, are hereby declared null and void and the attachment hereby ordered DISCHARGED. The Appellate Tribunal declared that . . . While it is true that a prayer for the issuance of a writ of preliminary attachment may be included m the complaint, as is usually done, it is likewise true that the Court does not acquire jurisdiction over the person of the defendant until he is duly summoned or voluntarily appears, and adding the phrase that it be issued "ex parte" does not confer said jurisdiction before actual summons had been made, nor retroact jurisdiction upon summons being made. . . . It went on to say, citing Sievert v. Court of Appeals, 3 that "in a proceedings in attachment," the "critical time which must be identified is . . . when the trial court acquires authority under law to act coercively against the defendant or his property . . .;" and that "the critical time is the of the vesting of jurisdiction in the court over the person of the defendant in the main case." Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Light seeks in the present appellate proceedings. The question is whether or not a writ of preliminary attachment may issue ex parte against a defendant before acquisition of jurisdiction of the latter's person by service of summons or his voluntary submission to the Court's authority. The Court rules that the question must be answered in the affirmative and that consequently, the petition for review will have to be granted. It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of the plaintiff has been vested in the court, but before the acquisition of jurisdiction over the person of the defendant (either by service of summons or his voluntary submission to the court's authority), nothing can be validly done by the plaintiff or the court. It is wrong to assume that the validity of acts done during this period should be defendant on, or held in suspension until, the actual obtention of jurisdiction over the defendant's person. The obtention by the court of jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person of the plaintiff or over the subject-matter or nature of the action, or the res or object hereof. An action or proceeding is commenced by the filing of the complaint or other initiatory pleading. 4 By that act, the jurisdiction of the court over the subject matter or nature of the action or proceeding is invoked or called into activity; 5 and it is thus that the court acquires jurisdiction over said subject matter or nature of the action. 6 And it is by that self-same act of the plaintiff (or petitioner) of filing the complaint (or other appropriate pleading) by which he signifies his submission to the court's power and authority that jurisdiction is acquired by the court over his person. 7 On the other hand, jurisdiction over the person of the defendant is obtained, as above stated, by the service of summons or other coercive process upon him or by his voluntary submission to the authority of the court. 8 The events that follow the filing of the complaint as a matter of routine are well known. After the complaint is filed, summons issues to the defendant, the summons is then transmitted to the sheriff, and finally, service of the summons is effected on the defendant in any of the ways authorized by the Rules of Court. There is thus ordinarily some appreciable interval of time between the day of the filing of the complaint and the day of service of summons of the defendant. During this period, different acts may be done by the plaintiff or by the Court, which are unquestionable validity and propriety. Among these, for example, are the appointment of a guardian ad litem, 9 the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
81 of 501
grant of authority to the plaintiff to prosecute the suit as a pauper litigant, 10 the amendment of the complaint by the plaintiff as a matter of right without leave of court, 11authorization by the Court of service of summons by publication, 12 the dismissal of the action by the plaintiff on mere notice. 13 This, too, is true with regard to the provisional remedies of preliminary attachment, preliminary injunction, receivership or replevin. 14 They may be validly and properly applied for and granted even before the defendant is summoned or is heard from. A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of which a plaintiff or other party may, at the commencement of the action or at any time thereafter, have the property of the adverse party taken into the custody of the court as security for the satisfaction of any judgment that may be recovered. 15 It is a remedy which is purely statutory in respect of which the law requires a strict construction of the provisions granting it. 16Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before acquisition of jurisdiction over the person of the defendant. Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time thereafter." 17 The phase, "at the commencement of the action," obviously refers to the date of the filing of the complaint which, as above pointed out, is the date that marks "the commencement of the action;" 18 and the reference plainly is to a time before summons is served on the defendant, or even before summons issues. What the rule is saying quite clearly is that after an action is properly commenced by the filing of the complaint and the payment of all requisite docket and other fees the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counter-claim, cross-claim, third-party claim) and for the Trial Court to issue the writ ex- parte at the commencement of the action if it finds the application otherwise sufficient in form and substance. In Toledo v. Burgos, 19 this Court ruled that a hearing on a motion or application for preliminary attachment is not generally necessary unless otherwise directed by the Trial Court in its discretion. 20 And in Filinvest Credit Corporation v. Relova, 21the Court declared that "(n)othing in the Rules of Court makes notice and hearing indispensable and mandatory requisites for the issuance of a writ of attachment." The only pre-requisite is that the Court be satisfied, upon consideration of "the affidavit of the applicant or of some other person who personally knows the facts, that a sufficient cause of action exists, that the case is one of those mentioned in Section 1 . . . (Rule 57), that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the applicant, or the value of the property the possession of which he is entitled to recover, is as much as the sum for which the order (of attachment) is granted above all legal counterclaims." 22 If the court be so satisfied, the "order of attachment shall be granted," 23 and the writ shall issue upon the applicant's posting of "a bond executed to the adverse party in an amount to be fixed by the judge, not exceeding the plaintiffs claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto." 24 In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18, 1989, 25 this Court had occasion to emphasize the postulate that no hearing is required on an application for preliminary attachment, with notice to the defendant, for the reason that this "would defeat the objective of the remedy . . . (since the) time which such a hearing would take, could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues." As observed by a former member of this Court, 26 such a procedure would warn absconding debtors-defendants of the commencement of the suit against them and the probable seizure of their properties, and thus give them the advantage of time to hide their assets, leaving the creditor- plaintiff holding the proverbial empty bag; it would place the creditor- PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
82 of 501
applicant in danger of losing any security for a favorable judgment and thus give him only an illusory victory. Withal, ample modes of recourse against a preliminary attachment are secured by law to the defendant. The relative ease with which a preliminary attachment may be obtained is matched and paralleled by the relative facility with which the attachment may legitimately be prevented or frustrated. These modes of recourse against preliminary attachments granted by Rule 57 were discussed at some length by the separate opinion in Mindanao Savings & Loans Asso. Inc. v. CA., supra. That separate opinion stressed that there are two (2) ways of discharging an attachment: first, by the posting of a counterbond; and second, by a showing of its improper or irregular issuance. 1.0. The submission of a counterbond is an efficacious mode of lifting an attachment already enforced against property, or even of preventing its enforcement altogether. 1.1. When property has already been seized under attachment, the attachment may be discharged upon counterbond in accordance with Section 12 of Rule 57. Sec. 12. Discharge of attachment upon giving counterbond. At any time after an order of attachment has been granted, the party whose property has been attached or the person appearing in his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given . . . in an amount equal to the value of the property attached as determined by the judge to secure the payment of any judgment that the attaching creditor may recover in the action. . . . 1.2. But even before actual levy on property, seizure under attachment may be prevented also upon counterbond. The defendant need not wait until his property is seized before seeking the discharge of the attachment by a counterbond. This is made possible by Section 5 of Rule 57. Sec. 5. Manner of attaching property. The officer executing the order shall without delay attach, to await judgment and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the applicant, in an amount sufficient to satisfy such demand besides costs, or in an amount equal to the value of the property which is about to be attached, to secure payment to the applicant of any judgment which he may recover in the action. . . . (Emphasis supplied) 2.0. Aside from the filing of a counterbond, a preliminary attachment may also be lifted or discharged on the ground that it has been irregularly or improperly issued, in accordance with Section 13 of Rule 57. Like the first, this second mode of lifting an attachment may be resorted to even before any property has been levied on. Indeed, it may be availed of after property has been released from a levy on attachment, as is made clear by said Section 13, viz.: Sec. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached may also, at any time either BEFORE or AFTER the release of the attached property, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other evidence in PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
83 of 501
addition to that on which the attachment was made. . . . (Emphasis supplied) This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987), The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor instead of the other way, which, in most instances . . . would require presentation of evidence in a fullblown trial on the merits, and cannot easily be settled in a pending incident of the case." 27 It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings & Loans Asso. Inc. v. C.A., supra., 28 to wit: (a) When an attachment may not be dissolved by a showing of its irregular or improper issuance: . . . (W)hen the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty." (Sec. 1 [b], Rule 57), or "an action against a party who has been guilty of fraud m contracting the debt or incurring the obligation upon which the action is brought" (Sec. 1 [d], Rule 57), the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiff's application and affidavits on which the writ was based and consequently that the writ based thereon had been improperly or irregularly issued (SEE Benitez v. I.A.C., 154 SCRA 41) the reason being that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counterbond (G.B. Inc. v. Sanchez, 98 Phil. 886). (b) Effect of the dissolution of a preliminary attachment on the plaintiffs attachment bond: . . . The dissolution of the preliminary attachment upon security given, or a showing of its irregular or improper issuance, does not of course operate to discharge the sureties on plaintiff's own attachment bond. The reason is simple. That bond is "executed to the adverse party, . . . conditioned that the . . . (applicant) will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto" (SEC. 4, Rule 57). Hence, until that determination is made, as to the applicant's entitlement to the attachment, his bond must stand and cannot be with-drawn. With respect to the other provisional remedies, i.e., preliminary injunction (Rule 58), receivership (Rule 59), replevin or delivery of personal property (Rule 60), the rule is the same: they may also issue ex parte. 29 It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of defendant, as above indicated issuance of summons, order of attachment and writ of attachment (and/or appointments of guardian ad litem, or grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment of the complaint by the plaintiff as a matter of right without leave of court 30 and however valid and proper they might otherwise be, these do not and cannot bind and affect the defendant until and unless jurisdiction over his person is eventually obtained by the court, either by service on him of summons or other coercive PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
84 of 501
process or his voluntary submission to the court's authority. Hence, when the sheriff or other proper officer commences implementation of the writ of attachment, it is essential that he serve on the defendant not only a copy of the applicant's affidavit and attachment bond, and of the order of attachment, as explicity required by Section 5 of Rule 57, but also the summons addressed to said defendant as well as a copy of the complaint and order for appointment of guardian ad litem, if any, as also explicity directed by Section 3, Rule 14 of the Rules of Court. Service of all such documents is indispensable not only for the acquisition of jurisdiction over the person of the defendant, but also upon considerations of fairness, to apprise the defendant of the complaint against him, of the issuance of a writ of preliminary attachment and the grounds therefor and thus accord him the opportunity to prevent attachment of his property by the posting of a counterbond in an amount equal to the plaintiff's claim in the complaint pursuant to Section 5 (or Section 12), Rule 57, or dissolving it by causing dismissal of the complaint itself on any of the grounds set forth in Rule 16, or demonstrating the insufficiency of the applicant's affidavit or bond in accordance with Section 13, Rule 57. It was on account of the failure to comply with this fundamental requirement of service of summons and the other documents above indicated that writs of attachment issued by the Trial Court ex parte were struck down by this Court's Third Division in two (2) cases, namely: Sievert v. Court of Appeals, 31 and BAC Manufacturing and Sales Corporation v.Court of Appeals, et al. 32 In contrast to the case at bar where the summons and a copy of the complaint, as well as the order and writ of attachment and the attachment bond were served on the defendant in Sievert, levy on attachment was attempted notwithstanding that only the petition for issuance of the writ of preliminary attachment was served on the defendant, without any prior or accompanying summons and copy of the complaint; and in BAC Manufacturing and Sales Corporation, neither the summons nor the order granting the preliminary attachment or the writ of attachment itself was served on the defendant "before or at the time the levy was made." For the guidance of all concerned, the Court reiterates and reaffirms the proposition that writs of attachment may properly issue ex parte provided that the Court is satisfied that the relevant requisites therefor have been fulfilled by the applicant, although it may, in its discretion, require prior hearing on the application with notice to the defendant; but that levy on property pursuant to the writ thus issued may not be validly effected unless preceded, or contemporaneously accompanied, by service on the defendant of summons, a copy of the complaint (and of the appointment of guardian ad litem, if any), the application for attachment (if not incorporated in but submitted separately from the complaint), the order of attachment, and the plaintiff's attachment bond. WHEREFORE, the petition is GRANTED; the challenged decision of the Court of Appeals is hereby REVERSED, and the order and writ of attachment issued by Hon. Milagros C. Nartatez, Presiding Judge of Branch 8, Regional Trial Court of Davao City in Civil Case No. 19513-89 against Queensland Hotel or Motel or Queensland Tourist Inn and Teodorico Adarna are hereby REINSTATED. Costs against private respondents. SO ORDERED.
Cuartero v. CA, 212 S 260 THIRD DIVISION G.R. No. 102448 August 5, 1992 RICARDO CUARTERO, petitioner, vs. COURT OF APPEALS, ROBERTO EVANGELISTA and FELICIA EVANGELISTA, respondents. Abesamis, Medialdea & Abesamis for petitioner. Eufemio Law Offices for private respondent.
GUTIERREZ, JR., J.: This is a petition for review on certiorari seeking to annul the decision of the Court of Appeals promulgated on June 27, 1991 as well as the subsequent resolution dated October 22, 1991 denying the motion for reconsideration in CA-G.R. SP No. 23199 entitled "Spouses Roberto and Felicia Evangelista v. Honorable Cezar C. Peralejo, Presiding Judge Regional Trial Court of Quezon City, Branch 98, and Ricardo Cuartero," which nullified the orders of the trial court dated August 24, 1990 and October 4, 1990 and cancelled the writ of preliminary attachment issued on September 19, 1990. Following are the series of events giving rise to the present controversy. On August 20, 1990, petitioner Ricardo Cuartero filed a complaint before the Regional Trial Court of Quezon City against the private respondents, Evangelista spouses, for a sum of money plus damages with a prayer for the issuance of a writ of preliminary attachment. The complaint was docketed as Civil Case No. Q-90-6471. On August 24, 1990, the lower court issued an order granting ex-parte the petitioner's prayer for the issuance of a writ of preliminary attachment. On September 19, 1990, the writ of preliminary attachment was issued pursuant to the trial court's order dated August 24, 1990. On the same day, the summons for the spouses Evangelista was likewise prepared. The following day, that is, on September 20, 1990, a copy of the writ of preliminary attachment, the order dated August 24, 1990, the summons and the complaint were all simultaneously served upon the private respondents at their residence. Immediately thereafter, Deputy Sheriff Ernesto L. Sula levied, attached and pulled out the properties in compliance with the court's directive to attach all the properties of private respondents not exempt from execution, or so much thereof as may be sufficient to satisfy the petitioner's principal claim in the amount of P2,171,794.91. Subsequently, the spouses Evangelista filed motion to set aside the order dated August 24, 1990 and discharge the writ of preliminary attachment for having been irregularly and improperly issued. On October 4, 1990, the lower court denied the motion for lack of merit. Private respondents, then, filed a special civil action for certiorari with the Court of Appeals questioning the orders of the lower court dated August 24, 1990 and October 4, 1990 with a prayer for a restraining order or writ of preliminary injunction to enjoin the judge from taking further proceedings below. In a Resolution dated October 31, 1990, the Court of Appeals resolved not to grant the prayer for restraining order or writ of preliminary injunction, there being no clear showing that the spouses Evangelista were entitled thereto. On June 27, 1991, the Court of Appeals granted the petition for certiorari and rendered the questioned decision. The motion for reconsideration filed by PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
86 of 501
herein petitioner Cuartero was denied for lack of merit in a resolution dated October 22, 1991. Hence, the present recourse to this Court. The petitioner raises the following assignment of errors: I THE COURT OF APPEALS ERRED AND COMMITTED A GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK OF JURISDICTION WHEN IT HELD THAT THE REGIONAL TRIAL COURT DID NOT ACQUIRE JURISDICTION OVER RESPONDENT SPOUSES. II THE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT HELD THAT THE REGIONAL TRIAL COURT COULD NOT VALIDLY ISSUE THE SUBJECT WRIT OF PRELIMINARY ATTACHMENT WHICH IS AN ANCILLARY REMEDY. (Rollo, p. 13) The Court of Appeals' decision is grounded on its finding that the trial court did not acquire any jurisdiction over the person of the defendants (private respondents herein). It declared that: . . . the want of jurisdiction of the trial court to proceed in the main case as well as the ancillary remedy of attachment is quite clear. It is not disputed that neither service of summons with a copy of the complaint nor voluntary appearance of petitioners was had in this case before the trial court issued the assailed order dated August 24, 1990, as well as the writ of preliminary attachment dated September 19, 1990. This is reversible error and must be corrected on certiorari. (Rollo, p. 24) The appellate tribunal relied on the case of Sievert v. Court of Appeals, 168 SCRA 692 (1988) in arriving at the foregoing conclusion. It stated that: Valid service of summons and a copy of the complaint vest jurisdiction in the court over the defendant both for the purpose of the main case and for purposes of the ancillary remedy of attachment and a court which has not acquired jurisdiction over the person of defendant, cannot bind the defendant whether in the main case or in any ancillary proceeding such as attachment proceedings (Sievert v. Court of Appeals, 168 SCRA 692). (Rollo, p. 24) The private respondents, in their comment, adopted and reiterated the aforementioned ruling of the Court of Appeals. They added that aside from the want of jurisdiction, no proper ground also existed for the issuance of the writ of preliminary attachment. They stress that the fraud in contracting the debt or incurring the obligation upon which the action is brought which comprises a ground for attachment must have already been intended at the inception of the contract. According to them, there was no intent to defraud the petitioner when the postdated checks were issued inasmuch as the latter was aware that the same were not yet funded and that they were issued only for purposes of creating an evidence to prove a pre-existing obligation. Another point which the private respondents raised in their comment is the alleged violation of their constitutionally guaranteed right to due process when the writ was issued without notice and hearing. In the later case of Davao Light and Power Co., Inc. v. Court of Appeals, G.R. No. 93262, November 29, 1991, we had occasion to deal with certain misconceptions which may have arisen from our Sievert ruling. The question which was resolved in the Davao Light case is whether or not a writ of preliminary attachment may issue ex-parte against a defendant before the court acquires jurisdiction over the latter's person by service of summons or his voluntary submission to the court's authority. The Court answered in the affirmative. This should have clarified the matter but apparently another ruling is necessary. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
87 of 501
A writ of preliminary attachment is defined as a provisional remedy issued upon order of the court where an action is pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by the sheriff as security for the satisfaction of whatever judgment might be secured in said action by the attaching creditor against the defendant (Adlawan v. Tomol, 184 SCRA 31 [1990] citing Virata v. Aquino, 53 SCRA 30-31 [1973]). Under section 3, Rule 57 of the Rules of Court, the only requisites for the issuance of the writ are the affidavit and bond of the applicant. As has been expressly ruled in BF Homes, Inc. v. Court of Appeals, 190 SCRA 262 (1990), citing Mindanao Savings and Loan Association, Inc. v. Court of Appeals, 172 SCRA 480 (1989), no notice to the adverse party or hearing of the application is required inasmuch as the time which the hearing will take could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues. In such a case, a hearing would render nugatory the purpose of this provisional remedy. The ruling remains good law. There is, thus, no merit in the private respondents' claim of violation of their constitutionally guaranteed right to due process. The writ of preliminary attachment can be applied for and granted at the commencement of the action or at any time thereafter (Section 1, Rule 57, Rules of Court). In Davao Light and Power, Co., Inc. v. Court of Appeals, supra, the phrase "at the commencement of the action" is interpreted as referring to the date of the filing of the complaint which is a time before summons is served on the defendant or even before summons issues. The Court added that
. . . after an action is properly commenced by filing of the complaint and the payment of all requisite docket and other fees the plaintiff may apply and obtain a writ of preliminary attachment upon the fulfillment of the pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the defendant. And this, indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counter-claim, cross-claim, third-party-claim) and for the Trial Court to issue the writex-parte at the commencement of the action if it finds the application otherwise sufficient in form and substance. The Court also pointed out that: . . . It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of the plaintiff has been vested in the Court, but before acquisition of jurisdiction over the person of the defendant (either by service of summons or his voluntary submission to the Court's authority), nothing can be validly done by the plaintiff or the Court. It is wrong to assume that the validity of acts done during the period should be dependent on, or held in suspension until, the actual obtention of jurisdiction over the defendants person. The obtention by the court of jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person of the plaintiff or over the subject matter or nature of the action, or the res or object thereof. It is clear from our pronouncements that a writ of preliminary attachment may issue even before summons is served upon the defendant. However, we have likewise ruled that the writ cannot bind and affect the defendant. However, we have likewise ruled that the writ cannot bind and affect the defendant until jurisdiction over his person is eventually obtained. Therefore, it is required that when the proper officer commences implementation of the writ of attachment, service of summons should be simultaneously made. It must be emphasized that the grant of the provisional remedy of attachment practically involves three stages: first, the court issues the order granting the application; second, the writ of attachment issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the defendant PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
88 of 501
should first be obtained. However, once the implementation commences, it is required that the court must have acquired jurisdiction over the defendant for without such jurisdiction, the court has no power and authority to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant. In Sievert v. Court of Appeals, supra, cited by the Court of Appeals in its questioned decision, the writ of attachment issuedex-parte was struck down because when the writ of attachment was being implemented, no jurisdiction over the person of the defendant had as yet been obtained. The court had failed to serve the summons to the defendant. The circumstances in Sievert are different from those in the case at bar. When the writ of attachment was served on the spouses Evangelista, the summons and copy of the complaint were also simultaneously served. It is appropriate to reiterate this Court's exposition in the Davao Light and Power case cited earlier, to wit: . . . writs of attachment may properly issue ex-parte provided that the Court is satisfied that the relevant requisites therefore have been fulfilled by the applicant, although it may, in its discretion, require prior hearing on the application with notice to the defendant, but that levy on property pursuant to the writ thus issued may not be validly effected unless preceded, or contemporaneously accompanied by service on the defendant of summons, a copy of the complaint (and of the appointment of guardian ad litem, if any), the application for attachment (if not incorporated in but submitted separately from the complaint), the order of attachment, and the plaintiff's attachment bond. The question as to whether a proper ground existed for the issuance of the writ is a question of fact the determination of which can only be had in appropriate proceedings conducted for the purpose (Peroxide Philippines Corporation V. Court of Appeals, 199 SCRA 882 [1991]). It must be noted that the spouses Evangelista's motion to discharge the writ of preliminary attachment was denied by the lower court for lack of merit. There is no showing that there was an abuse of discretion on the part of the lower court in denying the motion. Moreover, an attachment may not be dissolved by a showing of its irregular or improper issuance if it is upon a ground which is at the same time the applicant's cause of action in the main case since an anomalous situation would result if the issues of the main case would be ventilated and resolved in a mere hearing of a motion (Davao Light and Power Co., Inc. v. Court of Appeals, supra, The Consolidated Bank and Trust Corp. (Solidbank) v. Court of Appeals, 197 SCRA 663 [1991]). In the present case, one of the allegations in petitioner's complaint below is that the defendant spouses induced the plaintiff to grant the loan by issuing postdated checks to cover the installment payments and a separate set of postdated cheeks for payment of the stipulated interest (Annex "B"). The issue of fraud, then, is clearly within the competence of the lower court in the main action. WHEREFORE, premises considered, the Court hereby GRANTS the petition. The challenged decision of the Court of Appeals is REVERSED, and the order and writ of attachment issued by Hon. Cezar C. Peralejo, Presiding Judge of Branch 98, Regional Trial Court of Quezon City against spouses Evangelista are hereby REINSTATED. No pronouncement as to costs. SO ORDERED.
Salas v. Adil, 90 S 121 SECOND DIVISION G.R. No. L-46009 May 14, 1979 RICARDO T. SALAS and MARIA SALAS, petitioners, vs. HON. MIDPANTAO L. ADIL, as Judge of Branch II, Court of First Instance of Iloilo, ROSITA BEDRO and BENITA YU, respondents. Castro Law Office for petitioners. Tirso Espelete and Fortunato A. Padilla for private respondents.
ANTONIO, J.: Certiorari to nullify the Order of Attachment of May 13, 1977, as well as the Writ of Attachment dated May 16, 1977, issued by respondent Judge in Civil Case No. 10770 of the Court of First Instance of Iloilo, entitled "Rosita Bedro and Benita Yu v. Spouses Ricardo T. Salas and Maria Salas, et al. On September 10, 1976, respondents Rosita Bedro and Benita Yu filed the afore-mentioned civil action with the Court of First Instance of Iloilo against herein petitioners Ricardo T. Salas and Maria Salas, the Philippine Commercial & Industrial Bank, in its capacity as Administrator of the Testate Estate of the deceased Charles Newton Hodges, and Avelina A. Magno, in her capacity as Administratrix of the Testate Estate of the deceased Linnie Jane Hodge to annul the deed of sale of Lot No. 5 executed by administrators of the Hodges Estate in favor of the Spouses Ricardo T. Salas and Maria Salas and for damages. The action for annulment was predicated upon the averment that Lot No. 5, being a subdivision road, is intend for public use and cannot be sold or disposed of by the Hodges Estate. The claim for damages was based on the assertion that after defendant spouses purchased Lots Nos. 2 and 3, they also purchased Lot No. 5 and thereafter "erected wooden posts, laid and plastered at the door of the house on Lot No. 3, with braces of hardwood, lumber and plywood nailed to the post", thereby preventing Rosita Bedro and Benita Yu from using the road on the afore-mentioned lot, Lot No. 5, and that as a result of such obstruction, private respondents Rosita Bedro and Benita Yu sustained actual damages in the amount of P114,000.00, plus the sum of Pl,000.00 as damages daily from June 30, 1976 due to the stoppage in the construction of their commercial buildings on Lot No. 3, and moral damages in the amount of P200,000.00. In their answer to the complaint, the Salas spouses, after specifically denying the material allegations in the complaint, stated that Lot No. 5 had been registered in the name of the C. N. Hodges as their exclusive private property and was never subjected to any servitude or easement of right of way in favor of any person; that any occupants of Lots Nos. 2 and 3 have direct access to Bonifacio Drive, a National Highway, hence, Lot No. 5 is neither needed nor required for the egress or ingress of the occupants thereof; and that private respondents, as a matter of fact, since 1964 had excluded and separated completely their property (Lots Nos. 2 and 3) from Lot No. 5 by building a concrete wall on the boundary thereon without providing any gate as entrance or exit towards Lot No. 5; and that private respondents have no personality to question the validity of the deed of sale over Lot No. 5 since they were not parties to the same and the sale was duly approved by the probate court. In a motion dated May 12, 1977, private respondents filed a Motion for Attachment, alleging, among others, that the case was "for annulment of a deed of sale and recovery of damages" and that the defendants have removed or disposed of their properties or are about to do so with intent to defraud their creditors especially the plaintiffs in this case. On May 13, 1977, respondent Judge issued ex-parte a Writ of Attachment "against the properties of the defendants particularly Lots Nos. 1 and 4 of Psc- 2157 less the building standing thereon upon the plaintiffs filing a bond in the amount of P200,000.00 subject to the approval of this Court." After a surety PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
90 of 501
bond in the amount of P200,000.00, executed on May 11, 1977 by the Central Surety and Insurance Company as surety was filed, the writ itself was issued by respondent Judge on May 16, 1977, directing the Sheriff to attach the properties above-mentioned. On May 17, 1977, the Deputy Sheriff of Iloilo levied upon the aforesaid properties of petitioners. Contending that respondent Judge gravely abused his discretion in issuing the said Writ of Attachment, petitioners filed the present petition. In certiorari proceedings, the cardinal rule is that the court must be given the opportunity to correct itself, Thus, for the special civil action of certiorari to prosper, there must be no appeal nor any plain, speedy and adequate remedy in the ordinary course of law. Petitioners, therefore, must exhaust all available remedies in the lower court before filing a petition for certiorari, otherwise the petition shall be held to be premature. In the instant case, it appears that petitioners have adequate remedy under the law. They could have filed an application with the court a quo for the discharge of the attachment for improper or irregular issuance under section 13, Rule 57, of the Revised Rules of Court, which provides the following SEC. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached may also, at any time either before or after the release of the attached property, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who Salas vs. Adil granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other evidence in addition to that on which the attachment was made. After hearing, the judge shall order the discharge of the attachment if it appears that it was improperly or irregularly issued and the defect is not cured forthwith. Considering that petitioners have not availed of this remedy, the instant petition is premature. We deem it necessary, however, for the guidance of respondent Court and of the parties, to stress herein the nature of attachment as an extraordinary provisional remedy. A preliminary attachment is a rigorous remedy, which exposes the debtor to humiliation and annoyance, such it should not be abused as to cause unnecessary prejudice. It is, therefore, the duty of the court, before issuing the writ, to ensure that all the requisites of the law have been complied with; otherwise the judge acts in excess of his jurisdiction and the so issued shall be null and void . 1
In Carpio v. Macadaeg, 2 this Court said: Respondent Judge should not have issued the two writs of preliminary attachment (Annexes C and C-1) on Abaya's simple allegation that the petitioner was about to dispose of his property, thereby leaving no security for the satisfaction of any judgment. Mere removal or disposal of property, by itself, is not ground for issuance of preliminary attachment, notwithstanding absence of any security for the satisfaction of any judgment against the defendant. The removal or disposal, to justify preliminary attachment, must have been made with intent to defraud defendant's creditors. Respondent Judge in fact corrected himself. Acting on petitioner's motion to discharge attachment and apparently believing the correctness of the grounds alleged therein, he set aside the orders of attachment (Order of March 11, 1960, Annex F) PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
91 of 501
But reversing himself again, he set aside his order of March 11, 1960 (Annex K, dated March 29, 1960). This he did apparently on Abaya's contention that petitioner was about to remove or dispose of his property in order to defraud his creditors, as examples of which disposals he pointed to the alleged sale of the horses and of petitioner's office furniture. ... These averments of fraudulent disposals were controverted by petitioner who ... reiterated the defenses against preliminary attachment which he had previously enumerated in his petition to discharge the two orders of attachment. Thus the question of fraudulent disposal was put in issue; and respondent Judge, before issuing the pre attachment anew, should have given the parties opportunity to prove their respective claims or, at the very least should have provided petitioner with the chance to show that he had not been disposing of his property in fraud of creditors. (citing National Coconut Corporation v. Pecson L-4296, Feb. 25, 1952, Villongco v. Panlilio, 6214, Nov. 20, 1953). And in Garcia v. Reyes, 3 considering the allegation that the debtors were removing or disposing of some of their properties with intent to defraud their creditors, 'this Court said that "(a)ll in all due process would seem to require that both parties further ventilate their respective contentions in a hearing that could indeed reveal the truth. Fairness would be served thereby, the demand of reason satisfied." Considering the gravity of the allegation that herein petitioners have removed or disposed of their properties or are about to do so with intent to defraud their creditors, and further considering that the affidavit in support of the pre attachment merely states such ground in general terms, without specific allegations of lances to show the reason why plaintiffs believe that defendants are disposing of their properties in fraud of creditors, it was incumbent upon respondent Judge to give notice to petitioners and to allow wherein evidence is them to present their position at a to be received. Moreover, it appears from the records that private respondents are claiming unliquidated damages, including moral damages, from petitioners. The authorities agree that the writ of attachment is not available 'm a suit for damages where the amount claimed is contingent or unliquidated. We think, however, that a rule sufficient for the determination of this case has been suggested and acted upon, and that the remedy does not exist where unliquidated damages were demanded. ... In Warwick v. Chase, 23 Md 161, it is said: 'It is necessary that the standard for ascertaining the amount of damages claimed should not only appear, but that it should be fixed and certain, and in no degree dependent on facts either speculative or Uncertain ... The general rule is, that unliquidated damages, ... cannot be recovered by attachment, unless the contract affords a certain measure or standard for ascertaining the amount of the damages ... 4
Further. The statute authorizing the issuance of the writ of garnishment and that relating to the issuance of the writ of attachment ... have not been construed as authorizing the writs to be issued when the plaintiff's suit is technically an action for debt. Neither of the writs may be issued when the suit is for damages for tort, but they may be issued when the plaintiff's claim arises out of contract either express or implied, and the demand is liquidated, that is, the amount of the claim is not contingent, is capable of being definitely ascertained by the usual means of evidence, and does not rest in the discretion of the jury. 5
WHEREFORE, the instant petition is hereby DENIED, in order to enable petitioners to move before respondent Court for the discharge of the attachment on the ground of its improper and irregular issuance, pursuant to section 13, Rule 57, of the Revised Rules of Court, and for the aforesaid Court to act thereon in accordance with the foregoing.
EN BANC DECISION September 14, 1933 G.R. No. 40054 LA GRANJA, INC., petitioner, vs. FELIX SAMSON, Judge of First Instance of Cagayan, CHUA BIAN, CHUA YU LEE and CHUA KI, respondents. Miguel P. Pio for petitioner. The Respondent Judge in his own behalf. Villareal, J.: In this original petition for mandamus filed by the corporate entity, La Granja, Inc., against Felix Samson, as Judge of the Court of First Instance of Cagayan, Chua Bian, Chua Yu Lee and Chua Ki, the petitioner herein, for the reasons stated in its petition, prays that a writ of mandamus be issued against the respondent Judge compelling him to issue a writ of attachment against the properties of the other respondents herein, who are defendants in civil case No. 1888 of the Court of First Instance of Cagayan. The pertinent facts necessary for the solution of the questions raised in the present case are as follows: On July 5, 1932, the petitioner herein, La Granja, Inc., filed a complaint in the Court of First Instance of Cagayan, against Chua Bian, Chua Yu Lee and Chua Ki, for the recovery of the sum of P2,418.18 with interest thereon at the rate of 12 per cent per annum, which case was docketed as civil case No. 1888. The plaintiff at the same time, also prayed for the issuance of an order of attachment against the aforementioned defendants property and accompanied said complaint with an affidavit of the manager of the aforesaid petitioner, La Granja, Inc., wherein it was alleged among other essential things, that the said defendants have disposed or are disposing of their properties in favor of the Asiatic Petroleum Co., with intent to defraud their creditors. The respondent judge, wishing to ascertain or convince himself of the truth of the alleged disposal, required the petitioner herein to present evidence to substantiate its allegation, before granting its petition. Inasmuch as the petitioner refused to comply with the courts requirement, alleging as its ground that was not obliged to do so, the respondent judge dismissed said petition for an order of attachment. The only question to decide in the present case is whether or not the mere filing of an affidavit executed in due form is sufficient to compel a judge to issue an order of attachment. Section 426 of the Code of Civil procedure provides the following: SEC. 426. Granting order of attachment. A judge or justice of the peace shall grant an order of attachment when it is made to appear to the judge or justice of the peace by the affidavit of the plaintiff, or of some other person who knows the facts, that a sufficient cause of action exists, and that the case is one of those mentioned in section four hundred and twenty-four, and that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for which the order is granted. It will be seen that the legal provision just cited orders the granting of a writ of attachment when it has been made to appear by affidavit that the facts mentioned by law as sufficient to warrant the issuance thereof, exist. Although the law requires nothing more than the affidavit as a means of establishing the existence of such facts, nevertheless, such affidavit must be sufficient to convince the court of their existence, the court being justified in rejecting the affidavit if it does not serve this purpose and in denying the petition for an order of attachment. The affidavit filed by the petitioner, La Granja, Inc., must not have satisfied the respondent judge inasmuch as he desired to ascertain or convince himself of the truth of the facts alleged therein by requiring evidence to substantiate them. The sufficiency or insufficiency of an affidavit depends upon the amount of credit given it by the judge, and its acceptance or rejection, upon his sound discretion. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
93 of 501
Hence, the respondent judge, in requiring the presentation of evidence to establish the truth of the allegation of the affidavit that the defendants had disposed or were disposing of their property to defraud their creditors, has done nothing more than exercise his sound discretion in determining the sufficiency of the affidavit. In view of the foregoing considerations, we are of the opinion and so hold that the mere filing of an affidavit executed in due form is not sufficient to compel a judge to issue an order of attachment, but it is necessary that by such affidavit it be made to appear to the court that there exists sufficient cause for the issuance thereof, the determination of such sufficiency being discretionary on the part of the court. Wherefore, the petition for a writ of mandamus is hereby denied and the same is dismissed, with costs against the petitioner. So ordered.
KO Glass v. Valenzuela, 116 S 563 (See under Section 1 page 9)
Guzman v. Catolico, 65 Phil. 261 EN BANC G.R. No. L-45720 December 29, 1937 VENTURA GUZMAN, petitioner, vs. ALFREDO CATOLICO and SIMEON RAMOS, Judge of First Instance of Isabela, respondents. Arnaldo J. Guzman for the petitioner. Alfredo Catolico in his own behalf. No appearance for respondent Judge.
VILLA-REAL, J.: This is a petition filed by Ventura Guzman, praying this court, after proper proceedings, to render judgment declaring illegal and void and setting aside the writ of preliminary attachment issued by the respondent judge, Honorable Simeon Ramos, as judge of the Court of First Instance of Isabela, and ordering the dissolution thereof. The pertinent facts necessary for the resolution of the legal question raised in the present case are as follows: On March 8, 1937, the respondent Alfredo Catolico brought an action against the herein petitioner Ventura Guzman in the Court of First Instance of Isabela, for the recovery from the latter of the amount of his fees for services rendered by him as attorney, praying, at the same time, for the issuance of a writ of preliminary attachment against all of the properties adjudicated to said petitioner in special proceedings No. 179 of said court. As grounds for the issuance of said writ of preliminary attachment, he alleged: "That the herein defendant is trying to sell and dispose of the properties adjudicated to him, with intention to defraud his creditors, particularly the herein plaintiff, thereby rendering illusory the judgment that may be rendered against him, inasmuch as he has no other properties outside the same to answer for the fees the court may fix in favor of the plaintiff, this case being one of those mentioned by the Code of Civil Procedure warranting the issuance of a writ of preliminary attachment" (paragraph 8 of the complaint there appears the following affidavits: "I, Alfredo Catolico, of age, married and resident of Tuguegarao, Cagayan, after being duly sworn, declare: That I am the same plaintiff in this case; that I have prepared and read the same (complaint) and that all the allegations thereof are certain and true, to the best of knowledge and belief." In view of the said complaint and affidavit, the respondent judge, on March 10, 1937, issued an order granting the petition and ordering the issuance of a writ of preliminary attachment, after the filing of the corresponding bond by the plaintiff. On April 15, 1937, said defendant Ventura Guzman filed a motion for the cancellation of said writ of preliminary attachment on the ground that it had been improperly, irregularly and illegally issued, there being no allegation, either in the complaint or in the affidavit solemnizing it, that there is no other sufficient security for the claim sought to be enforced by the action; that the amount due to the plaintiff, above the legal set-off and counterclaim, is as much as the sum of which the preliminary attachment has been granted, and that the affidavit of the plaintiff is base in mere information and belief. Said motion was denied by the respondent judge in an order of July 10, 1937. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
95 of 501
The only question to be decided in this case is whether or not the requisites prescribed by law for the issuance of a writ of preliminary attachment have been complied with. Section 426 of the Code of the Civil Procedure provides that "A judge or justice of the peace shall grant an order of attachment when it is made to appear to the judge or justice of the peace by the affidavit of the plaintiff, or of some other person who knows the facts, that a sufficient cause of action exists, and that the case is one of those mentioned in section four hundred and twenty- four, and that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for which the order is granted." The petitioner, in attacking the legality and validity of the writ of preliminary attachment, which is the subject matter of this petition, relies on the alleged lack of an allegation in the complaint or in the affidavit to the effect "that there is no sufficient security for the claim sought to be enforced by the action and that the amount alleged to be due to the plaintiff above all legal set-offs and counterclaims is as much as the sum for which the writ has been granted", and on the fact that the affidavit is based on mere information and belief of the plaintiff. With respect to the last requisites just stated above, the affidavit is not defective because in it the therein plaintiff and herein respondent Alfredo Catolico states "that all the allegations thereof are certain and true, to the best of my knowledge and belief", and not that they are so according to his information and belief. As to the other two requisites, there is no allegation, either in the complaint or in affidavit solemnizing it, to the effect that there is no other sufficient security for the claim which the plaintiff seeks to enforce by his action, and that the amount due him from the defendant, above all legal set-offs and counterclaims, is as much as the sum for which the writ of preliminary attachment has been granted. Now then, does the omission of these two requisites constitute a defect preventing a judge of the Court of First Instance from issuing a writ of preliminary attachment?lawphil.net Attachment is a juridical institution which has for its purpose to secure the outcome of the trial, that is, the satisfaction of the pecuniary obligation really contracted by a person or believed to have been contracted by him, either by virtue of a civil obligation emanating from contract or law, or by virtue of some crime or misdemeanor that he might have committed, and the writ issued, granting it, is executed by attaching and safely keeping all the movable property of the defendant, or so much thereof as may be sufficient to satisfy the plaintiff's demands (sec. 428, Act No. 190), or by filing a copy of said writ with the register of deeds for the province in which the real property is situated, whether standing upon the records in the name of the defendant or not appearing at all upon the record, which constitutes a limitation of ownership or the right to enjoy or dispose of a thing without further limitations than those established by law (art. 348, Civil Code), since the owner of the property attached cannot dispose of the same free of all liens and encumbrances. The law authorizing the issuance of a writ of preliminary attachment should, therefore, be construed strictly in favor of the judge should require that all the requisites prescribed by law be complied with, without which a judge acquires no jurisdiction to issue the writ. If he does so in spite of noncompliance with said requisites, he acts in excess of his jurisdiction and with the writ so issued by him will be null and void. The jurisdiction of attachment proceedings being a special one, it cannot be legitimately exercised unless the attaching creditor pursues substantially the essential requirements of the statute, and the court can act only under the special power limited by the statute and according to the forms of procedures it prescribes. . . . (6 C. J., 88, paragraph 121.) Where the statutes requires the affidavit to show that defendant is indebted to plaintiff in an amount specified, or that the latter is entitled to recover such an amount, over and above all legal payments, set-offs, or counterclaims, compliance with this requirement is PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
96 of 501
essential to confer jurisdiction to issue the writ. (6 C. J., 132, paragraph 201.) An affidavit is fatally defective where it fails to comply, at least substantially, with a statutory requirement that is shall state that the indebtedness for which the action is brought has not been secured by any mortgage or lien upon real or personal property, or any pledge of personal property, or, if so secured, that the security has become valueless. . . . (6 C. J., 146, paragraph 231.) For the foregoing consideration, this court is of the opinion and so holds that failure to allege in a complaint or in the affidavit solemnizing it, or in a separate one, the requisites prescribed by section 426 of the Code of Civil Procedure for the issuance of a writ of preliminary attachment that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for which the order is sought, renders a writ of preliminary attachments issued against the property of a defendant fatally defective, and the judge issuing it acts in excess of his jurisdiction. Wherefore, the writ of certiorari applied for is granted, and the writ of preliminary attachment issued by the respondent judge in civil case No. 1460 of the Court of First Instance of Isabela, wherein the herein respondent Alfredo Catolico is plaintiff and the herein petitioner Ventura Guzman is defendant, is declared null and void, with costs to respondent Alfredo Catolico. So ordered.
Jardine Manila Finance v. CA, 171 S 636 THIRD DIVISION G.R. No. 55272 April 10, 1989 JARDINE-MANILA FINANCE, INC., petitioner, vs. COURT OF APPEALS, IMPACT CORPORATION, RICARDO DE LEON and EDUARDO DE LEON, respondents.
FERNAN, C.J.: This is a petition for review on certiorari seeking to reverse and set aside: (a) the August 29, 1980 decision of the Court of Appeals 1 in Special Proceedings CA-G.R. No. SP-09972-R entitled "Impact Corporation, et al. v. Hon. Buenaventura Guerrero, etc., et al." annulling the order and the writ of attachment issued by the Court of First Instance of Rizal in Civil Case No. 34617 entitled "Jardine-Manila Finance, Inc. v. Impact Corporation, et al." 2 and (b) the Resolution dated October 7, 1980 denying herein petitioners motion for reconsideration. 3 On September 28, 1979, petitioner Jardine-Manila Finance, Inc. (JARDINE) filed a complaint in the then Court of First Instance (CFI) of Rizal, docketed as Civil Case No. 34617, against private respondents Impact Corporation (IMPACT), Ricardo de Leon and Eduardo de Leon, to collect various sums of money allegedly due from therein defendant IMPACT under a credit accomodation by way of a discounting line agreement. 4 Herein private respondents Ricardo de Leon and Eduardo de Leon were included as defendants by virtue of their undertaking covered by a Surety Agreement under which they bound themselves jointly and severally with defendant IMPACT to pay herein petitioner all of IMPACT's obligations under the aforesaid agreement. 5 It was alleged that in April and May 1979, IMPACT assigned its receivables to JARDINE on the condition that IMPACT was to collect them on their due dates from their issuers and remit the collected amounts to JARDINE and/or repurchase the assigned receivables; 6 but despite the fact that IMPACT had collected the amounts due on said receivables, it failed or refused to turn over the amounts so collected to JARDINE. JARDINE thus demanded payment of P 1,000,212.64, the total amount due under said various deeds of assignment, plus interest of P 16,614.64 as of September 6, 1979 and 25 % of the aforesaid amount as attorney's fees, exemplary damages and other expenses of litigation. Likewise contained in said complaint is petitioner's application for a writ of preliminary attachment against private respondents. The allegations in support of said petition for a writ of preliminary attachment are quoted in full: Special Allegations for Preliminary Attachment A. The foregoing allegations are hereby repleaded and made integral parts hereof. B. The defendant corporation at the time of the execution of the aforesaid deeds of assignment had reservation not to remit to plaintiff the proceeds of the receivables assigned to plaintiff as confirmed by their refusal to remit the same to plaintiff although the issuers of the receivables assigned to plaintiff had already paid to defendant corporation their obligations on said receivables to the latter. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
98 of 501
C. Defendants Ricardo de Leon and Eduardo de Leon who are likewise officers of defendant corporation in order to elicit plaintiffs approval to enter into said deeds of assignment with defendant corporation, executed the aforesaid surety agreement (Annex L), likewise, with reservation in their minds not to honor their obligations under the same as what they actually did when they refused to pay the obligations of defendant corporation to plaintiff pursuant to the provisions of said surety agreement. (Annex L) D. Defendant corporation, Ricardo de Leon and Eduardo de Leon have no visible other sufficient security for the claim sought to be enforced by this action of plaintiff other than their real and personal properties which are located in Metro Manila and in the province of Rizal, Province of Nueva Ecija or elsewhere. (Emphasis supplied) E. Plaintiffs action against defendant corporation is based upon documents and therefrom a sufficient cause of action exists. F. Plaintiff is willing to post a bond in an amount to be fixed by the Honorable Court, not exceeding plaintiffs claim which will be conditioned to the effect that plaintiff will pay all the costs which may be adjudged to the adverse party and all damages which they may sustain by reason of attachment, if the Honorable Court should finally adjudge that the applicant plaintiff is not entitled thereto.7 On the basis of the foregoing allegations, the lower court granted JARDINE's petition for the issuance of a writ of preliminary attachment on October 16, 1979. 8 On October 19, 1979, therein defendants filed a motion to set aside the writ of preliminary attachment. They also submitted to the court a quo a memorandum in support of their motion to dissolve the attachment contending that the grounds alleged by the plaintiff in its application for a writ of attachment are not among the grounds specified under Section 1 of Rule 57; that the defendants have other sufficient security; that there was no affidavit of merit to support the application for attachment as required by Section 3 of Rule 57 and that the verification of the complaint was defective as it did not state that the amount due to the plaintiff above all legal set-ups or counterclaims is as much as the sum for which the order is sought. 9 JARDINE opposed the motion arguing that the mental reservation of defendants at the time of the execution of the deeds of assignment constituted fraud; that such fraud was further confirmed by the fact that defendants actually failed to remit the proceeds of the collection of receivables assigned by them; that defendants failed to disclose to the plaintiff the fact that they had already collected the receivables assigned by them; that the amounts collected by defendant corporation were received by defendants in trust for plaintiff and defendant corporation appropriated for itself said collection. 10 On November 7, 1979, the trial court denied defendant's motion to annul the writ of preliminary attachment. Thereupon, defendant Impact Corporation went to the appellate court on a petition for certiorari seeking to annul said writ. 11 The findings of the Court of Appeals are as follows: To our mind there is no question that the allegations of the complaint proper which were repleaded and made integral PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
99 of 501
part of the application for preliminary attachment (paragraph A) made out a case of conversion or misappropriation of property held in trust which is the subject of the complaint for the allegations stated that IMPACT had assigned to JARDINE certain receivables with the understanding that it was to collect the same from the issuers of said receivables and deliver the amounts collected to JARDINE, but in spite of the fact that IMPACT had actually collected said amounts, it failed to turn over said receivables to JARDINE. There was, therefore, in the allegations of said complaint true conversion of the amounts received by defendant in trust for plaintiff. Defendants in their motion to discharge the attachment and the memorandum filed by them in support of said motion had in effect, admitted the conversion of the amounts collected by defendant IMPACT, but justified the use of said amounts to meet its operational expenses to prevent a complete shutdown of its operations. While we find that the grounds alleged by plaintiff, the herein private respondent, to support its application for preliminary attachment are among those enumerated in Section 1 of Rule 57 as grounds upon which an attachment may be issued, we are constrained nonetheless to rule against the regularity or legality of the attachment issued by respondent Court because there was no allegation made by plaintiff in its application for the issuance of a writ of attachment to the effect 'that there is no sufficient security for the claim sought to be enforced, by the action, and the amount due to the applicant or the value of the property on the basis of which is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims, a requirement for the granting of an order of attachment under Section 3 of Rule 57. 12 Thus, on August 29, 1980, the Court of Appeals annulled the assailed writ of attachment for having been issued improperly and irregularly, the dispositive portion of which reads: IN VIEW OF THE FOREGOING, the petition to annul the order and the writ of attachment issued by respondent Court is hereby GRANTED and judgment is rendered declaring said order and writ of attachment null and void for having been issued improperly and regularly. The restraining order issued by this Court on November 9, 1979 restraining respondents from enforcing the writ of attachment issued by respondent Judge on October 16, 1979 is hereby made PERMANENT. With costs against private respondents. 13 Hence this recourse. Reduced to bare essentials, the records show that in the exercise of its discretion, the lower court found justification in the issuance of the attachment. On the other hand, the Court of Appeals while in accord with the lower court that a sufficient cause of action exists for petitioner and that the ground for its application for attachment is one of those mentioned in Section 1, Rule 57 of the Rules of Court, found the issuance of the attachment irregular or illegal in the absence of the following allegations in the application for attachment: (1) that "there is no sufficient security for the claim sought to be enforced by the action; and (2) that the amount due to the applicant or the value of the property on the basis of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims." Ultimately, the issue therefore, is whether or not non-compliance with the formal requirements invalidate the writ of attachment. On both counts, petitioner admits not having used the exact words of the Rules in making the requisite allegations, but nonetheless it alleged that it presented ultimate and specific facts, first-in showing that there is indeed no other sufficient security for the claim sought to be enforced as shown in paragraph D of the Complaint earlier quoted; and second-while it did not PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
100 of 501
specifically state that the sum due is above all legal counterclaims, such conclusion of fact is no longer necessary in the face of actual proof in the answer which did not carry any counterclaim. In fine, petitioner stresses that mere forms must not be given more weight than substance. 14 In excusing the deficiencies of its application for a writ of preliminary attachment, petitioner relies heavily on the case of De Borja v. Platon, 15 where this Court sustained the writ of attachment issued by the lower court in favor of the defendants based on the counterclaim of the latter despite the lack of allegations in the affidavit attached to the petition for the issuance of the writ of attachment that the amount due the counterclaim was as much as the sum for which the order is granted above all legal counterclaims. It will be noted however, that the trial court found that the counterclaim of the defendants exceeded the claims of the plaintiff. Thus, this Court held that "as the trial court had before it the evidence adduced by both sides, the petition for a writ of preliminary attachment having been filed four years after the trial court had begun, we presume that the lower court having in mind such evidence, ordered the attachment accordingly." 16 In sharp contrast, in the case at bar, where the records undeniably reveal that: (1) the complaint was filed on September 28, 1979; 17 (2) the writ of preliminary attachment was issued on October 16, 1979; 18 (3) the motion to annul preliminary attachment dated October 19, 1979 was filed on the same day; 19 (4) the answer of defendant IMPACT dated October 30, 1979 20 was received by the RTC Pasig only on November 5, 1979, 21 it is evident that the questioned writ was issued ex parte; and at a time when the Court a quo had yet no basis for concluding that the amount due to petitioner is as much as the sum for which the order is granted above all legal counterclaims. It is therefore, readily apparent that the conclusions in the De Borja case cannot be applied to the case at bar. In fact even petitioner's plea for liberality as it vigorously invokes the doctrine on said case which refused "to sanction that formalism and that technicality which are discountenanced by the modern laws of procedure" is an obvious misreading of the ruling of this Court which states: On the first point, we believe a writ of preliminary attachment may be issued in favor of a defendant who sets up a counterclaim. For the purpose of the protection afforded by such attachment, it is immaterial whether the defendants Borja and wife simply presented a counterclaim or brought a separate civil action against Jose de Borja, plaintiff in the previous case and petitioner herein. To lay down a subtle distinction would be to sanction that formalism and that technicality which are discountenanced by the modern laws of procedure for the sake of speedy and substantial justice. . . . 22 as a liberal approach to the required allegations in the application for a writ of preliminary attachment when what this Court actually allowed was the presentation of a counterclaim by the defendant instead of a separate civil action in compliance with one of the basic requirements for the issuance of said writ. The authority to issue an attachment, like the jurisdiction of the court over such proceedings rests on express statutory provisions and unless there is authority in the statute, there is no power to issue the writ, and such authority as the statute confers must be strictly construed.23 In fact, "(E)ven where liberal construction is the rule, the statute or the right to attachment thereby granted may not be extended by judicial interpretation beyond the meaning conveyed by the words of the statute." 24 Petitioner's application for a writ of preliminary attachment must therefore be scrutinized and assessed by the requisites and conditions specifically prescribed by law for the issuance of such writ. Section 3, Rule 57 of the Revised Rules of Court governs the issuance of a writ of attachment, to wit: Sec. 3. Affidavit and bond required.-An order of attachment shall be granted only when it is made to appear by the affidavit of the applicant or some other person who personally knows of the facts, that a sufficient cause of action exists, that PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
101 of 501
the case is one of those mentioned in section 1 hereof, that there is no sufficient security for the claim sought to be enforced by the action, and that the amount due to applicant or the value of the property the possession of which he is entitled to recover is as much as the sum for which the order is granted above all legal counterclaims. The stringent conditions for the issuance of the writ have been echoed in all subsequent cases, even as late as K.O. Glass Construction Co. Inc. vs. Valenzuela, 25 wherein the writ of preliminary attachment issued was annulled and set aside on the findings that while the plaintiff "may have stated in his affidavit that a sufficient cause of action exists against the defendant Kenneth O. Glass, he did not state therein that the case is one of those mentioned in Section 1 hereof; that there is no other sufficient security for the claim sought to be enforced by the action; and that the amount due to the applicant is as much as the sum for which the order is granted above all legal counterclaims." More specifically, it has been held that the failure to allege in the affidavit the requisites prescribed for the issuance of the writ of preliminary attachment, renders the writ of preliminary attachment issued against the property of the defendant fatally defective, and the judge issuing it is deemed to have acted in excess of his jurisdiction. 26 In fact, in such cases, the defect cannot even be cured by amendment. 27 Since the attachment is a harsh and rigorous remedy which exposes the debtor to humiliation and annoyance, the rule authorizing its issuance must be strictly construed in favor of defendant. It is the duty of the court before issuing the writ to ensure that all the requisites of the law have been complied with. 28 Otherwise, a judge acquires no jurisdiction to issue the writ. The general rule is that the affidavit is the foundation of the writ, and if none be filed or one be filed which wholly fails to set out some facts required by law to be stated therein, there is no jurisdiction and the proceedings are null and void. Thus, while not unmindful of the fact that the property seized under the writ and brought into court is what the court finally exercises jurisdiction over, the court cannot subscribe to the proposition that the steps pointed out by statutes to obtain such writ are inconsequential, and in no sense jurisdictional. 29 Considering that petitioner's application for the subject writ of preliminary attachment did not fully comply with the requisites prescribed by law, said writ is, as it is hereby declared null and void and of no effect whatsoever. This conclusion renders a discussion of petitioner's other argument unnecessary. WHEREFORE, the decision of the Court of Appeals dated August 29, 1980 is hereby AFFIRMED. Costs against petitioner. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
102 of 501
Ting v. Villarin, 176 S 532 SECOND DIVISION G.R. No. L-61754 August 17, 1989 ROBERTO TING, and DOLORES TING, petitioners, vs. HON. AUGUSTO E. VILLARIN, FELICIANO GERVACIO, FERDINAND J. GUERRERO, and CONSOLIDATED BANK & TRUST COMPANY, respondents. Santos, Valmonte & Associates for petitioners.
SARMIENTO, J.: On September 17, 1981, private respondent Consolidated Bank and Trust Company (hereinafter "Consolidated Bank") filed a complaint 1 for a sum of money with prayer for a writ of preliminary attachment against Perlon Textile Mills and its directors. Roberto Ting, a director, was impleaded with his wife Dolores Lim Ting. The complaint recites that the wife was impleaded as a party defendant in order to bind their conjugal partnership of gains which allegedly benefitted from the transactions subject of the complaint. The, spouses Ting are the present petitioners. Consolidated Bank actually sued on two (2) causes of action. The first was targeted at recovering on several promissory notes the amount of P2,972,955.51, allegedly obtained for the defendant corporation by its duly authorized officers Lu Cheng Peng, Teng See, and Roberto Ting. These officers allegedly signed the promissory notes in their personal and official capacities thereby binding themselves jointly and severally to Consolidated Bank for the payment of the promissory notes. The second cause of action dwells on several violations of trust receipt agreements which the defendant corporation executed in favor of Consolidated Bank. The defendant corporation's faithful compliance with the trust receipt agreements appears to have been secured by the continuing guaranty of defendants Liu Suy Lin Angelo Leonar, and Lu Cheng Peng. In support of the application for preliminary attachment, Consolidated Bank averred the ground of "fraud in contracting an obligation" thus 16. Defendants are guilty of fraud in contracting their obligations more specifically illustrated by their violation of the trust receipt agreement which is a ground defined under Sec. 1, Rule 57 of the Rules of Court for the issuance of a writ of preliminary attachment. 2
On September 23, 1981, acting on the application for a writ of attachment by Consolidated Bank, the respondent judge issued the orders under question, to wit: xxx xxx xxx We, therefore, command you [Deputy Sheriffs Feliciano Gervacio and Ferdinand J. Guerrero] that you attach the estate, real and personal, of the said defendants Perlon Textile Mills, Inc., Lu Cheng Peng and Spouse; Teng See @ Teng Tik Hua and Spouse; Spouses Roberto Ting and Dolores Lim Ting; Angelo Leonor and Spouse, Liu Suy Lin and Spouse, and Yap Chi and Spouse, within your province to the value of said demands, and costs of suit, and that you keep safely the same according to the Rules of Court, unless the defendant gives security to pay such judgment as may be recovered in this action in the manner provided for by the Rules of Court; and that you return immediately this order after executing the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
103 of 501
same with a full statement of your proceedings and a complete inventory of the properties attached. 3
On March 3, 1982, acting on the petitioners' Motion to Quash Attachment, the respondent judge issued a second order, to wit: xxx xxx xxx Acting on defendants Roberto and Dolores Ting's motion to quasi attachment and plaintiffs' opposition thereto, it appearing from plaintiffs' allegations that the alleged fraud was effected through the collective action of the defendants, the court finds the motion to be without sufficient merit. 4
xxx xxx xxx On July 19, 1982, acting on the petitioners' motion for reconsideration, the respondent judge issued the last disputed order the dispositive portion of which states: xxx xxx xxx WHEREFORE, under the circumstances, and finding no sufficient justification for the reconsideration of the order of March 3, 1982, the motion for reconsideration is hereby DENIED. 5
xxx xxx xxx The petitioners came to this Court via a petition for certiorari. They are questioning the writ of preliminary attachment principally on the ground that the application therefor hinges on "fraud in contracting" the trust receipt agreements under the second cause of action. On the other hand, the petitioners are impleaded in the complaint merely under the first cause of action. Moreover, the petitioners challenge the writ of preliminary attachment issued because, in effect, it pierced the veil of corporate fiction. The petitioners explain that the corporation alone should be held liable for the violation of the trust receipt agreements. Finally, the petitioners ask that the writ of preliminary attachment be struck down by this Court because it authorized an attachment over the petitioners' conjugal partnership property. We agree with the petitioners. The complaint did not provide for a sufficient basis for the issuance of a writ of preliminary attachment. It is not enough for the complaint to ritualistic ally cite, as here, that the defendants are "guilty of fraud in contracting an obligation." An order of attachment cannot be issued on a general averment, such as one ceremoniously quoting from a pertinent rule. 6 The need for a recitation of factual circumstances that support the application becomes more compelling here considering that the ground relied upon is "fraud in contracting an obligation." The complaint utterly failed to even give a hint about what constituted the fraud and how it was perpetrated. Fraud cannot be presumed. 7
The respondent judge thus failed in this duty to ensure that, before issuing the writ of preliminary attachment, all the requisites of the law have been complied with. He acted in excess of his jurisdiction and the writ he so issued is thus null and void. 8
What is more, the respondent judge plainly ignored that, as correctly pointed out by the petitioners, the application for preliminary attachment rests on "fraud in contracting" the trust receipt agreements. The complaint itself, save for the unwarranted sweeping reference to "defendants," alleged that only Consolidated Bank, as principals, and Liu Suy Lin Angelo Leonar, and Lu Cheng Peng, as guarantors, were privy to the trust receipt agreements under the second cause of action. Petitioner Roberto Ting's involvement is limited only to the promissory notes under the first cause of action. The complaint thus relevantly alleges PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
104 of 501
FIRST CAUSE OF ACTION 7. On March 15, 1979, defendant corporation, through its duly authorized officers Lu Cheng Peng, Tang See and Roberto Ting obtained from plaintiff loan accommodations in the amount of P2,972,955.51 and as evidence thereof, the aforementioned defendants in their personal and official capacities executed promissory notes undertaking therein jointly and severally with the corporation to pay plaintiff the above-mentioned amount with interest .... SECOND CAUSE OF ACTION 8. On different occasions in 1978-1979, defendants applied to plaintiff for the opening of numerous letters of credit to finance its purchase of goods from various suppliers. xxx xxx xxx ALLEGATIONS COMMON TO ALL CAUSES OF ACTION 12. In order to secure the credit accommodations obtained and all those that the defendant Perlon Textile Mills, Inc. may thereafter obtain from plaintiff, defendants Liu Suy Lin Angelo Leonar and Lu Cheng Peng executed a continuing guaranty ... . 9
The sweeping nature of the attachment order probably stemmed from the respondent judge's failure to detect that the two (2) causes of action had been misproperly joined. Joinder of causes of action is, among others, subject to the rules on joinder of parties. 10 And the rule on joinder of parties is enunciated in Sec. 6, Rule 3, Revised Rules of Court, thus Sec. 6. Permissive joinder of parties. All persons ... against whom any right to relief in respect to or arising out of the same transaction or series transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these rules ... be joined as defendants in one complaint, where any question of law or fact common to all such ... defendants may arise in the action ... . Here, the two causes of action arose from different transactions. There was no "series of transactions" to speak of. But above all, the complaint can conceivably affect adversely petitioner Roberto Ting under the first cause of action only but not in the second cause of action. 11
That the attachment ordered by the respondent judge called for the sheriffs to "attach the estate, real and personal of ... Spouses Roberto Ting and Dolores Lim Ting" (Order of September 23, 1981) likewise gives cause for this Court to strike it down for being null and void. The attached property of the spouses Ting are conjugal, the same cannot be validly brought under the painful process of attachment because: (a) First, the wife Dolores was impleaded merely because of the fact that she is the spouse of Roberto; (b) Second, the conjugal partnership cannot possibly be benefitted (again, here, Consolidated Bank's allegation that the act of the husband redounded to the benefit of the conjugal partnership is mere "book form" when the husband binds himself, as guarantor, because this act does not conserve or augment conjugal funds but instead threatens to dissipate them 12 by unnecessary and unwarranted risks to the partnership's financial stability. When the husband assumes the obligation of a guarantor, the presumption that he acts, as administrator, for the benefit of the conjugal partnership, is lost. WHEREFORE, the petition is hereby GRANTED. The questioned Orders, dated September 23, 1981, March 3, 1982, and July 19,1982, of the respondent judge, and the levy on attachment made by the deputy sheriffs against the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
105 of 501
parcel of land covered by TCT No. T-7232 and registered in the names of the petitioners, are declared NULL AND VOID. Costs against the private respondent. SO ORDERED.
Cu Unjieng v. Goddard, 58 Phil. 482 EN BANC DECISION September 17, 1933 G.R. No. 38284 GUILLERMO A. CU UNJIENG and MARIANO CU UNJIENG, petitioners, vs. LEONARD S. GODDARD, acting as Judge of First Instance of Manila, and HONGKONG & SHANGHAI BANKING CORPORATION, respondents. Gibbs and McDonough and Duran, Lim and Tuason for petitioners. DeWitt, Perkins and Brady for respondents. Hull, J.: Original action for certiorari praying that a writ of attachment levied against the properties of the petitioners and defendants in a civil action in the Court of First Instance of Manila, brought by respondent Hongkong & Shanghai Banking Corporation, be declared null and void. In that civil action it was alleged in substance that the defendants, the petitioners in this proceeding, entered into a fraudulent conspiracy or combination with one Fernandez, by which the conspirators would hypothecate and pledge forged securities of various kinds with the various banking institutions and other commercial firms of the City of Manila, and pursuant to said fraudulent conspiracy, secured credit with the bank, and the plaintiff was defrauded by the defendants and Fernandez in the sum of P1,411,312.80. Simultaneously with the filing of the complaint, plaintiffs asked for a writ of attachment, which was granted. The affidavit filed at the time reads: AFFIDAVIT B.C.M. Johnston, of legal age and resident of the City of Manila, being duly sworn, states: That he is the Manager of the Hongkong and Shanghai Banking Corporation, the plaintiff in the above-entitled cause, and that he knows that there exists a cause of action in favor of said plaintiff and against the defendants, as appears in the complaint on file in this case, reference to which is hereby made as an integral part of this affidavit; That the complaint is one for the recovery of money on a cause of action arising from a fraud; and That, as set out in the complaint, the defendants in said cause have been guilty of fraud in contracting the debt in incurring the obligation upon which this action is brought. (Sgd.) B.C.M. JOHNSTON About one week thereafter, on October 20, 1931, petitioners herein filed a motion to discharge the attachment on the ground that it had been improperly and irregularly issued, which motion contains eight paragraphs. Paragraph (4) alleges that the affidavit was defective in that it fails to state that there is no other sufficient security for the claim sought to be enforced by the action and that the amount due the plaintiff involves as much as the sum for which the order of attachment was granted, while paragraph (5) alleges that the affidavit for attachment fails to estate that the allegations contained in the unverified complaint to which it refers are true and that likewise the affidavit fails to estate that affiant knows the facts. Shortly after the hearing to discharge the attachment had begun, plaintiff asked leave to file an amended affidavit in support of its petition for a writ of attachment. After oral and written arguments, the respondent judge on November 25, 1931, entered an order admitting the amended affidavit of attachment. The amended affidavit consists of three pages and is admitted to be in full compliance with the provisions of section 426 of the Code of Civil Procedure, PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
107 of 501
which sets out what must be shown to the court before a writ of attachment shall issue. Further proceedings were had in the trial court, and on March 4 and April 11, 1932, it entered an order refusing on the showing so far made to dissolve the attachment. On October 4, 1932, these proceedings were instituted, based on the two propositions (1) that an affidavit of attachment cannot be amended and (2) that if a cause of action arises ex delicto, it is not within the terms of our attachment statutes. Respondents claim that petitioners had not exhausted their rights in the trial court and that if the petitioner regarded the order of April 11 as a final order, petitioners are guilty of laches by waiting until October before filing a complaint. Without considering the minor questions raised by respondents, we believe it is for the best interests of all concerned to dispose of the case on the points raised by petitioners. As to whether amendments should be admitted, respondents rely upon section 110 of the Code of Civil Procedure, which reads: SEC. 110. Amendments in General. The court shall, in furtherance of justice, and on such terms, if any, as may be proper, allow a party to amend any pleading or proceeding and at any stage of the action, in either the Court of first Instance or the Supreme Court, by adding or striking out the name of any party, either plaintiff or defendant, or by correcting a mistake in the name of a party, or a mistaken or inadequate allegation or description in any other respect, so that the actual merits of the controversy may speedily be determined, without regard to technicalities, and in the most expeditious and inexpensive manner. The court may also, upon like terms, allow an answer or other pleading to be made after the time limited by the rules of the court for filing the same. Orders of the court upon the matters provided in this section shall be made upon motion filed in this court, and after notice to the adverse party, and an opportunity to be heard. and claim it should read in connection with section 2 of the same Code: SEC. 2. Construction of Code. The provisions of this Code and the proceedings under it, shall be liberally construed, in order to promote its object and assist the parties in obtaining speedy justice. This court has held in the case of Central Capiz vs. Salas (43 Phil. 930), that section 2 applies to applications for writs of attachment and that the affidavit may be read in connection with the complaint. In the original affidavit, affiant did not swear on information and relief but expressly on knowledge. It is also clear from the affidavit that the ground on which the attachment was sought to be secured, is paragraph 4 of section 412 of the Code of Civil Procedure. It is defective in (a) that there is no allegation, either in the affidavit or the complaint, that there was no other sufficient security for the claim sought to be enforced by the action and (b) that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for which the order is granted. The claim of petitioners that the original affidavit is defective is virtually admitted by respondents by their having filed a amended affidavit and by their insistence upon their right to amend. Our section 110 of the Code of Civil Procedure is based on section 473 of the California Code of Civil Procedure and is a general statute authorizing, in the discretion of the court, any amendment, in the further interest of justice, of pleadings or procedure at any stage of the action. Proceedings in the Court of First Instance to discharge the attachment were taken under section 441 of the Code of Civil Procedure, which reads: SEC. 441. Discharge of Attachment on Motion. The defendant may also at any time either before or after the release of the attachment property, or before any attachment shall have been actually levied, upon reasonable notice to the plaintiff, apply to the judge or justice of the peace who granted the order of attachment, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the defendant, but not otherwise, the plaintiff may oppose the same by affidavits or other evidence in addition to those on which the attachment was made. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
108 of 501
If upon such application it satisfactorily appears that the writ of attachment was improperly or irregularly issued, it must be discharged. The corresponding sections of the California Code, namely section 556, 557, and 558, read: SEC. 556. When a motion to discharge attachment may be made, and upon what grounds. The defendant may also at any time, either before or after the release of the attached property, or before any attachment shall have been actually levied, apply, on motion, upon reasonable notice to the plaintiff, to the court in which the action is brought, or to a judge thereof, that the writ of attachment be discharged on the ground that the same was improperly or irregularly issued. SEC. 557. When motion made on affidavit, it may be opposed by affidavit. If the motion be made upon affidavits on the part of the defendant, but not otherwise, the plaintiff may oppose the same by affidavits or other evidence, in addition to those on which the attachment was made. SEC. 558. When writ must be discharged. If upon such application it satisfactorily appears that the writ of attachment was improperly or irregularly issued it must be discharged; provided that such attachment shall not be discharged if at or before the hearing of such application, the writ of attachment, or the affidavit, or undertaking upon which such attachment was based shall be amended and made to conform to the provisions of this chapter. In a long line of decisions from Castle Bros., Wolf & Sons vs. Go-Juno (7 Phil. 144), where it was said: Inasmuch as this section 95 is taken bodily from the California Code of Procedure, we feel justified in following the decisions of the Supreme Court of California in the interpretation of the same. to Pando vs. Kette and Sellner (54 Phil. 683), where this court uses the following language: The provision of our Code of Civil Procedure having been adopted from section 692 of the California Code, it must be understood that our law was promulgated with the construction placed upon it by the State of California. Where a provision of the Code of Civil Procedure has been adopted bodily from one of the States of the Union, we have followed the rule that it was undoubtedly the intention of the Legislature to promulgate the law with the construction that had already been placed upon it. At the time sections 110 and 114 were adopted, the similar provisions of the California Code had already been construed by the Supreme Court of California. In Winters vs. Pearson (72 Cal., 553), that court used the following language: On a motion to discharge a writ of attachment, on the ground that it was improperly or irregularly issued, the affidavit on which the writ was issued is not amendable. This, in our opinion, is in accordance with section 558 of the Code of Civil Procedure, which provides that the writ was improperly or irregularly issued, it must be discharged. To allow the affidavit to be made good by amendment, and upon such action refused to discharge the writ, would, in our judgment, violate the requirements of the section just above cited. In Tibbet vs. Tom Sue (122 Cal., 206), the court followed Winters vs. Pearson, saying: Respondent asks the privilege of amending the undertaking, if it be held defective by this court. From such relief he invokes section 473 of the Code of Civil Procedure, wherein amendments are allowed to pleadings or proceedings in furtherance of justice. In speaking as to an application to discharge a writ of attachment, the Code says: If upon such application it satisfactorily appears that the writ of attachment was improperly or irregularly issued, it must be discharged. (Code Civ. Proc., sec. 558.) This section is specific and expressly directed to the subject of attachments. It must be held to control and limit the general provisions of the aforesaid section 473. The lawmaking body has declared what shall be the action of the court under the circumstances here presented, and such action demands that the writ should be discharged. It is PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
109 of 501
said in Winters vs. Pearson (72 Cal., 553), that the affidavit on attachment is not amendable. The undertaking upon attachment stands upon the same ground. The facts that California in 1909 changed the law by permitting amendments of a defective affidavit for attachment under certain specified circumstances, does not affect this case, as our Legislature has allowed the law to stand unchanged. It therefore allows that where the affidavit for attachment is fatally defective, the attachment must be held to have been improperly or irregularly issued and must be discharged, and such fatal defect cannot be cured by amendment. The writ of attachment in this case should therefore have been discharged. In view of the above views, the second ground for the discharge of the writ of attachment presented by petitioners herein, is reserved for discussion in another case. The writ of certiorari herein prayed for must be granted. So ordered. Avancea, C.J., Street, Malcolm, Villa-Real, Abad Santos, and Butte, JJ., concur. IMPERIAL, J.: Petitioners brought this certiorari proceeding to annul the writ of attachment issued by the Court of First Instance of Manila on October 14, 1931, as well as the orders of November 25, 1931, March 4 and April 11, 1932, granting the admission of an amended affidavit and denying the motion to dissolve the attachment, respectively. It is the purpose of this opinion to show: (a) That the averments of the complaint, which were made integral part of the affidavit supporting the petition for the issuance of the writ of attachment, meet substantially the requirements of the statute on attachment; (b) that the affidavit on which the petition for attachment was based is sufficient and has substantially complied with the grounds required by section 426 of the Code of Civil Procedure, and (c) that the respondent judge did not act in excess of his jurisdiction when issued the writ of attachment and denied the motion for dissolution. The complaint filed in the civil action in which the writ of attachment was issued contains, among others, the following allegations: III That during the years 1930 and 1931, the said defendants entered into a fraudulent conspiracy or combination with one Rafael Fernandez, who has been adjudicated an involuntary insolvent by the Court of First Instance of Manila, and for that reason is not made a defendant in this action, pursuant to which fraudulent conspiracy and combination, it was agreed that the said Fernandez, or the said Fernandez, or the said defendant Guillermo A. Cu Unjieng, or the said Mariano Cu Unjieng should hypothecate and pledge forged share certificates, forged warehouse receipts, and forged securities of other kinds, in large amounts, with various banking institutions and other commercial firms of the City of Manila, with a view to a division of the proceeds among the said fraudulent conspirators. IV That pursuant to said fraudulent combination and conspiracy the said Guillermo A. Cu Unjieng employed a forger to forge the signatures of the proper officers on a large number of warehouse receipts and share certificates of the Pampanga Sugar Development Company, Inc., a corporation organized under the laws of the Philippine Islands, and operating a large sugar central in the Province of Pampanga, Philippine Islands, after the said Rafael Fernandez, pursuant to said fraudulent combination and conspiracy, had caused a large number of said share certificates and warehouse receipts to be printed in blank, for the purpose of having them so forged. V That pursuant to said fraudulent combination and conspiracy, the said defendants, Guillermo and Mariano Cu Unjieng and the said Rafael Fernandez pledged and hypothecated said forged share certificates and said forged warehouse receipts in large amounts with various banking institutions and commercial firms of the City of Manila, using the proceeds in some cases for the purpose of taking up the forged certificates and warehouse receipts so pledged and hypothecated in other cases, so as to continue the scheme for the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
110 of 501
longest in other time, and in other cases, dividing among themselves the proceeds of the loans obtained on the security of said forged share certificates and forged warehouse receipts so fraudulently pledged and hypothecated. VI That pursuant to said fraudulent conspiracy and combination, the said Rafael Fernandez, at various dates, on and after June 16th, 1931, pledged and hypothecated various forged warehouse receipts and promissory notes to the plaintiff herein, as security for loans in account current granted said Fernandez by the plaintiff in reliance therein, on which there was a total debit balance due of P1,411,312.80, on the date of the adjudication of Fernandez as an insolvent, that is, on the 1st day of August, 1931, together with interest at 9 per cent per annum on P1,010,886.96 thereof from the 1st day of July, 1931, and interest on the balance at the rate of 9 per cent per annum from July 8, 1931. VII That of the amounts so obtained by the said Fernandez from this plaintiff by the fraudulent pledging and hypothecation of said forged warehouse receipts and promissory notes, pursuant to said fraudulent combination and conspiracy, as hereinbefore alleged, said Fernandez, pursuant to said combination and conspiracy, paid directly to the defendant herein, Guilermo A. Cu Unjieng, sums aggregating P325,000; to the defendant herein, Mariano Cu Unjieng, the sum of P10,000; caused other large amounts to be paid said defendants indirectly through other banking institutions in the City of Manila; and utilized the balance in covering overdrafts and loans obtained in his name with other banking institutions in the City of Manila, on the security of forged share certificates, warehouse receipts and other forged securities the proceeds of which were divided between him and the defendants herein pursuant to said fraudulent combination and conspiracy. VIII That as a result of said fraudulent conspiracy and combination, between the defendants herein and the said insolvent, Rafael Fernandez, and the pledging and hypothecation by said Fernandez of said forged warehouse receipts and promissory notes with the plaintiff herein, the said plaintiff has been defrauded by the defendants herein and by the said Fernandez in the sum of P1,411,312.80, with interest on P1,010,886.96 thereof at the rate of 9 per cent per annum from July 1, 1931, and with interest on the balance thereof at the rate of 9 per cent per annum from July 8, 1931. The affidavit above referred to read as follows: AFFIDAVIT B.C.M. Johnston, of legal age and a resident of the City of Manila, being duly sworn states: That he is the Manager of the Hongkong & Shanghai Banking Corporation, the plaintiff in the above entitled cause, and that he knows that there exists a cause of action in favor of the said plaintiff and against the defendant, as appears in the complaint on file in this case, reference to which is hereby made as an integral part of this affidavit. That the complaint is one for the recovery of money on a cause of action arising from a fraud: and That as set out in the complaint, the defendant in said cause has been guilty of fraud in contracting the debt and in incurring the obligation upon this action is brought. (Sgd.) B.C.M. JOHNSTON Subscribed and sworn to before me this 11th day of July, 1931, affiant exhibiting to me his cedula certificate No. F-14401, issued at Manila, P.I., January 19, 1931. Doc. No. 420 (Sgd.) DOMINGO A. GUEVARA Page 71 Notary Public Book III Until December 31, 1932 Section 426 of Act No. 190 provides: SEC. 426. Granting order of attachment. A judge or justice of the peace shall grant an order of attachment when it is made to appear to the judge or justice PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
111 of 501
of the peace by the affidavit of the plaintiff, or of some other person who knows the facts, that a sufficient cause of action exists, and that the case is one of those mentioned in section four hundred and twenty-four, and that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for which the order is granted. From a perusal of said section it is obvious that the law does not require conclusive evidence to establish the requisites necessary in order a justice or judge may issue a writ of attachment; all what the law requires is the presentation of prima facie evidence which shows the existence of said grounds. This is the reason why it calls for affidavit in lieu of other material and competent evidence. As alleged in the affidavit affiant made a part of his statement all material and necessary averments contained in the complaint undoubtedly for the purpose of making a complete narration of the facts and at the same time to avoid superfluous repetition. In substance, it was alleged in the complaint that the defendants in the civil action were guilty of fraud at the time they incurred in the obligations set forth and that Rafael Fernandez secured from the plaintiff the amount of over P1,000,000, which is the subject matter of the action, thru conspiracy and collusion with the defendants-petitioners, having delivered said Fernandez warehouse receipts and shares certificates which were forged and valueless. It is argued that the original affidavit was fatally defective because it failed to recite: (1) That the plaintiff in the action has no other sufficient security for the claims sought to be enforced, and (2) that the amount due it above all legal set-offs or counterclaims is as much as the sum for which the order is prayed for. While it may be conceded that the original affidavit as well as the complaint are lacking of such specific averments, still from the above quoted allegations the facts can be reasonably inferred, If the action was brought by plaintiff to recover the amount of over P1,000,000 which it lost in the manner above described and if it is especially alleged that the security given by the defendants became valueless because they were all forged it is hard to conceived how one could not deduce the inference that no other security has been given the plaintiff with the exception of those especifically alleged in the complaint. The same inference was undoubtedly gathered by the respondent judge when he granted the attachment upon said original affidavit and as far as I am concerned I believed he did not exceed in the exercise of the jurisdiction conferred upon him by the law. As to the other ground, the same thing could be said. In deciding this case I believe technicalities of law should be overlooked in order to attain the ends of justice. If the main action fails the petitioners, as defendants, will get compensation for any damages or injury they may have suffered upon the bond given by plaintiff-respondent, while should the action prosper and the attachment is already quashed plaintiff would not get anything so much so as there are other creditors who are claiming big amounts from the same defendants. Based on the foregoing reasons I dissent from the majoritys decision and I am of the opinion that the liberal construction of the statute on attachment should have been applied in this particular instance and the petition denied.
Carlos v. Sandoval, 471 S 266 SECOND DIVISION G.R. No. 135830 September 30, 2005 JUAN DE DIOS CARLOS, Petitioners, vs. FELICIDAD SANDOVAL, also known as FELICIDAD S. VDA. DE CARLOS or FELICIDAD S. CARLOS or FELICIDAD SANDOVAL DE CARLOS, and TEOFILO CARLOS II, Respondent. x-------------------------------------------------------------------x G.R. No. 136035 SIDDCOR (now MEGA PACIFIC) INSURANCE CORPORATION, Petitioners, vs. FELICIAD SANDOVAL VDA. DE CARLOS and TEOFILO CARLOS II, Respondent. x------------------------------------------------------------------x G.R. No. 137743 SIDDCOR (now MEGA PACIFIC) INSURANCE CORPORATION, Petitioners, vs. HON. COURT OF APPEALS (FORMER SPECIAL FOURTH DIVISION), HON. ALBERTO L. LERMA and/or the REGIONAL TRIAL COURT OF THE CITY OF MUNTINLUPA, BRANCH 256, FELICIDAD SANDOVAL, also known as FELICIDAD S. VDA. DE CARLOS OR FELICIDAD S. CARLOS OR FELICIDAD SANDOVAL CARLOS OR FELICIDAD SANDOVAL VDA. DE CARLOS and TEOFILO CARLOS II, Respondent. D E C I S I O N Tinga, J.: These consolidated petitions emanated from a civil case filed by Juan de Dios Carlos ("Carlos") against respondents Felicidad Sandoval ("Sandoval") and Teofilo Carlos II (Teofilo II) docketed with the Regional Trial Court (RTC) of Muntinlupa City as Civil Case No. 95-135. In his Complaint before the RTC, Carlos asserted that he was the sole surviving compulsory heir of his parents, Felix B. Carlos and Felipa Elemia, 1 who had acquired during their marriage, six parcels of land (subject properties). His brother, Teofilo ("Teofilo"), died intestate in 1992. At the time of his death, Teofilo was apparently married to Sandoval, and cohabiting with her and their child, respondent Teofilo II. Nonetheless, Carlos alleged in his Complaint that Teofilo and Sandoval were not validly married as they had not obtained any marriage license. 2 Furthermore, Carlos also asserted that Teofilo II could not be considered as Teofilos child. As a result, Carlos concluded that he was also the sole heir of his brother Teofilo, since the latter had died without leaving any heirs. Carlos also claimed that Teofilo, prior to their father Felixs death in 1963, developed a scheme to save the elder Carloss estate from inheritance taxes. Under the scheme, the properties of the father would be transferred to Teofilo who would, in turn, see to it that the shares of the legal heirs are protected and delivered to them. Felix assented to the plan, and the subject properties were transferred in the name of Teofilo. After Teofilos death, Carlos entered into certain agreements with Sandoval in connection with the subject properties. Carlos did so, believing that the latter was the lawful wife of his brother Teofilo. Subsequently though, Carlos discovered that Sandoval and his brother were never validly married, as their marriage was contracted without a marriage license. 3
Carlos now sought to nullify these agreements with Sandoval for want of consideration, the premise for these contracts being non-existent. Thus, Carlos prayed of the RTC to declare the alleged marriage between Teofilo and Sandoval void ab initio, provided that Teofilo died without issue, order that new titles covering the subject properties be issued in the name of Carlos, and require Sandoval to restitute Carlos in the amount of P18,924,800.00. 4
Carlos likewise prayed for the issuance of the provisional relief of preliminary attachment. The RTC issued an Order dated 7 September 1995 granting the prayer for preliminary attachment, and on 15 September 1995, a writ of preliminary attachment. Carlos posted a bond for P20,000,000.00 issued by herein petitioner SIDDCOR Insurance Corporation (SIDDCOR). 5 Shortly thereafter, a Notice of Garnishment was served upon the Philippine National Bank (PNB) over the deposit accounts maintained by respondents. Respondents filed an Urgent Motion to Discharge the Writ of Attachment, which was opposed by Carlos. On 4 December 1995, the RTC rendered an order denying the motion. This caused respondents to file a Petition for Certiorari with the Court of Appeals, seeking to set aside the RTC order granting the writ of preliminary attachment denying the motion for the discharge of the writ. This case was docketed as CA-G.R. SP No. 39267. 6
On 27 February 1996, the Court of Appeals Second Division promulgated its Decision in CA-G.R. SP No. 39267, wherein itgranted the Petition for Certiorari and ordered the discharge and dissolution of the Writ of Attachment and Notice of Garnishment. 7 The Court of Appeals found that there was no sufficient cause of action to warrant the preliminary attachment, since Carlos had merely alleged general averments in order to support his prayer. 8 Carlos elevated the said Decision to this Court by way of Petition for Review on Certiorari, which was docketed as G.R. No. L-125717. In aResolution dated 21 October 1996, the Court denied Carloss Petition, and thus the Court of Appeals Decision ordering the dissolution of the Writ of Attachment and Notice of Garnishment became final. In the meantime, the hearing on Carloss Complaint ensued before the RTC. Respondents duly filed their Answer and thereafter filed a Motion for Summary Judgment. Carlos opposed the motion and countered with his own Motion for Summary Judgment. On 8 April 1996, the RTC rendered a summary judgment in favor of Carlos. Carloss victory was wholesale, with the RTC making the following pronouncements: 1. Declaring the marriage between defendant Felicidad Sandoval and Teofilo Carlos solemnized at Silang, Cavite, on May 14, 1962, evidenced by the Marriage Contract submitted in this case, null and void ab initio for lack of the requisite marriage license; 2. Declaring that the defendant minor, Teofilo S. Carlos II, is not the natural, illegitimate, or legally adopted child of the late Teofilo E. Carlos; 3. Ordering defendant Sandoval to pay and restitute to plaintiff the sum of P18,924,800.00, together with the interest thereon at the legal rate from date of filing of the instant complaint until fully paid; 4. Declaring plaintiff as the sole and exclusive owner of the parcel of land, less the portion adjudicated to the plaintiffs in Civil Case No. 11975, covered by TCT No. 139061 of the Register of Deeds of Makati City, and ordering said Register of Deeds to cancel said title and to issue another title in the sole name of plaintiff herein; 5. Declaring the Contract, Annex K of the Complaint, between plaintiff and defendant Sandoval null and void, and ordering the Register of Deeds of Makati City to cancel TCT No. 139058 in the name of Teofilo Carlos, and to issue another title in the sole name of the plaintiff herein; 6. Declaring the Contract, Annex M of the Complaint, between plaintiff and defendant Sandoval null and void; 7. Ordering the cancellation of TCT No. 210877 in the names of defendant Sandoval and defendant minor Teofilo S. Carlos II and ordering the Register of Deeds of Manila to issue another title in the exclusive name of plaintiff herein. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
114 of 501
8. Ordering the cancellation of TCT No. 210878 in the names of defendant Sandoval and defendant minor Teofilo S. Carlos II and ordering the Register of Deeds of Manila to issue another title in the sole name of plaintiff herein. 9
Upon promulgation of the Summary Judgment, Carlos moved before the RTC for execution pending appeal. The RTC granted the motion for execution pending appeal upon the filing of a bond. 10 On 27 May 1996, the RTC issued a Writ of Execution. Meanwhile, respondents filed a Motion for Reconsideration of the Summary Judgment, which was denied in an Orderdated 20 May 1996. Respondents then appealed the RTC Decision to the Court of Appeals, wherein such appeal was docketed as CA-G.R. CV No. 53229. The case was raffled to the appellate courts Fourteenth Division for completion of records. Sandoval and Carlos also filed a Petition for Certiorari with Temporary Restraining Order dated 2 June 1996. This special civil action primarily attacked the allowance of execution pending appeal, and prayed for the annulment of the Ordergranting execution pending appeal, and of the Writ of Execution On 10 December 1996, in CA-G.R. CV No. 53229, respondents filed a Motion for Judgment On the Attachment Bond.They noted that the Court of Appeals had already ruled that the Writ of Preliminary Attachment issued by the RTC was improperly granted and that its Decision, as affirmed by the Supreme Court, had attained finality. Accordingly, they were entitled to damages under Section 20, Rule 57 of the then Rules of Civil Procedure, which governed claims for damages on account of unlawful attachment. In support of their allegation of damages, they cite the Notice of Garnishment served on PNB Malolos Branch, where Felicidad Carlos maintained deposits amounting to P15,546,121.98. 11 Also presented in support of the motion was a Notice of Delivery/Payment by the RTC Sheriff, directing the PNB Malolos Branch to deliver the amounts previously garnished by virtue of the Writ of Execution dated 27 May 1996; 12 a Manifestation filed by PNB dated 19 July 1996 in CA-G.R. SP No. 40819, stating that PNB had already delivered to the RTC Sheriff on 27 June 1996 the amount of P15,384,509.98 drawn against the accounts of Carlos; and a Certification to the same effect issued by the PNB Malolos Branch. In an Addendum to Motion for Judgment on the Attachment Bond, respondents additionally prayed for moral and exemplary damages. 13
After various pleadings were duly filed by the parties, the Court of Appeals Special Fourth Division issued a Resolutiondated 23 March 1998, certifying that all the necessary pleadings have been filed, and that the case may already be referred to the Raffle Committee for assignment to a ponente for study and report. The same Resolution likewise denied without elaboration a Motion to Dismiss on the ground of forum-shopping filed earlier by Carlos. 14
On such denial, Carlos filed a Motion for Reconsideration. Respondents likewise filed a Motion for Partial Reconsiderationdated 17 April 1998, arguing that under the Revised Internal Rules of the Court of Appeals (RIRCA), the case may be re-raffled for assignment for study and report only after there is a resolution that the case is deemed submitted for decision. 15 They pointed out that re-raffle could not yet be effected, as there were still pending incidents, particularly the motions for reconsideration of Carlos and themselves, as well as the Motion for Judgment on Attachment Bond. On 26 June 1998, the Court of Appeals Former Special Fourth Division promulgated two resolutions. 16 The first, in response to Carloss Motion for Reconsideration, again denied Carloss Motion to Dismiss the Appeal and Motion for Suspension, but explained the reasons for such denial. The second resolution is at the center of the present petitions. The assailed Resolution agreed with respondents that it was first necessary to resolve the pending incidents before the case could be re-raffled for study and report. Accordingly, the Court of Appeals proceeded to rule on these pending incidents. While the first resolution dwelt on the pending motions filed by Carlos, thisResolution tackled the other matter left unresolved, the Motion for Judgment on Attachment Bond. The Court of Appeals found the claim for damages meritorious, citing the earlier decisions ruling that Carlos was not entitled to the preliminary attachment. Invoking Section 20, Rule 57 of the Rules of Court, as well as jurisprudence, 17 the Court of Appeals ruled that it was not necessary for the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
115 of 501
determination of damages on the injunction bond to await the decision on appeal. The Court of Appeals then proceeded to determine to what damages respondents were entitled to. In ruling that the award of actual damages was warranted, the court noted: It is also not disputed that the PNB, on June 27, 1996, issued two managers checks: MC No. 938541 for P4,932,621.09 and MC 938542 for P10,451,888.89 payable to the order of "Luis C. Bucayon II, Sheriff IV, RTC, Branch 256, Muntinlupa", duly received by the latter in the total amount of PESOS FIFTEEN MILLION THREE HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED NINE & 98/100 (P15,384,509.98), drawn against the accounts of Ms. Felicidad Sandoval Vda. de Carlos which were earlier garnished for the satisfaction of the above-mentioned writ of attachment (Annex "E", Motion for Judgment on the Attachment Bond, pp. 7-8) 18
. . . . The contention of [Carlos] that the writ of attachment was not implemented falls flat on the face of the manifestation of PNB that the delivery of the garnished P15,384,509.98 to him was effected through the sheriff. 19
The Court of Appeals found that moral and exemplary damages were not warranted, there being no malice in pursuing the attachment. The appellate court also found the claim of P2,000,000.00 for attorneys fees as excessive, and reduced the sum by half. Correspondingly, the dispositive portion of the assailed Resolution reads: WHEREFORE, premises considered, judgment is hereby rendered against the attachment bond, ordering SIDDCOR INSURANCE CORPORATION and plaintiff-appellee to pay defendants-appellants, jointly and severally, the sum ofP15,384,509.98 and 12% interest per annum from June 27, 1996 when the unlawful garnishment was effected until fully paid and P1,000,000.00 as attorneys fees with 6% interest thereon from the trial courts decision on April 8, 1986 until fully paid. SO ORDERED. 20
Both Carlos and SIDDCOR filed their respective motions for reconsideration of the Resolution. For their part, respondents filed a Motion for Immediate Execution dated 7 August 1998 in regard to the Resolution of 26 June 1998 awarding them damages. In the Resolution dated 10 October 1998, 21 the Court of Appeals denied the motions for reconsideration and granted theMotion for Immediate Execution. In granting the Motion for Immediate Execution, the Court of Appeals cited the reasons that the appeal to be undertaken from the 26 June 1998 Resolution was patently dilatory; that there were no material and substantial defenses against the motion for judgment on the attachment bond, rendering the appeal pro- forma and dilatory; that Sandoval was of advanced age and might not enjoy the fruits of the judgment on the attachment bond; and that immediate execution would end her suffering due to the arbitrary garnishment of her account pursuant to an improper attachment. 22
In its Motion for Reconsideration, SIDDCOR explicitly assailed the allowance of the Motion for Immediate Execution. 23 This was denied by the Court of Appeals in a Resolution dated 22 December 1998. 24
From these antecedents, the following petitions were filed before this Court: G.R. No. 135830 This Appeal by Certiorari with Prayer for Temporary Restraining Order/Preliminary Injunction dated 26 October 1998 filed by Carlos assailed the two resolutions of the Court of Appeals both dated 26 June 1998, as well as the Resolution of 10 October 1998, which denied Carloss motion for reconsideration. Carlos argues that the Court of Appeals, through the Former Special Fourth Division, could not have resolved the Motion for Judgment on the Attachment Bond since the case had not yet been re-raffled under the two- raffle system for study and report; that the Court of Appeals erred in resolving the motion without conducting any hearing; that the Court of Appeals had no jurisdiction over the motion as the docketing fees had not yet been filed; that PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
116 of 501
the motion for judgment, which did not contain any certification against forum-shopping, was an application subject to the requirements of certification against forum-shopping; that there was no supporting evidence to support the award of damages; and that the Court of Appeals committed grave abuse of discretion in denying the Motion for Reconsideration without adverting to specific reasons mentioned for the denial of each issue. 25
Carlos likewise ascribes grave abuse of discretion to the Court of Appeals in its other Resolution dated 26 June 1998 for its refusal to dismiss CA-G.R. CV No. 53229 on the ground of forum-shopping, adding that the appellate court should have deferred resolution of the Motion for Judgment on the Attachment Bond considering the prejudicial question raised in Carloss motion to dismiss the main case on the ground of forum-shopping. G.R. No. 136035 This concerns a Petition for Review filed by SIDDCOR, likewise challenging the Resolution of 26 June 1998 of the Court of Appeals and the 10 October 1998 Resolution wherein Siddcors Motion for Reconsideration, among others, was denied. Siddcor argues therein that the Court of Appeals erred in ruling on the motion for damages without awaiting judgment in the main case; granting that damages may be awarded, these should encompass only such damages incurred during the pendency of the appeal; and that a hearing was necessary to prove the claim for damages and the appellate court erred in granting the award for damages despite lack of hearing. G.R. No. 137743 The third petition for adjudication, a Petition for Certiorari under Rule 65 with Prayer for Temporary Restraining Order or Preliminary Injunction, was also filed by SIDDCOR. This petition, dated 8 March 1999, specifically assails the allowance by the Court of Appeals of the immediate execution of the award of damages, made through the resolutions dated 10 October 1998 and 22 December 1998. SIDDCOR hereunder argues that Section 2, Rule 39 of the Rules of Civil Procedure requires that execution of a judgment or final order pending appeal may be made only on motion of the prevailing party and may be made "even before the expiration of the period to appeal." 26 Respondents had argued in their Motion for Immediate Execution that the judgment sought to be executed (that on the attachment bond) was interlocutory and not appealable, yet cited rulings on execution pending appeal under Section 2, Rule 39 in support of their position. SIDDCOR cites this inconsistency as proof of a change of theory on the part of respondents which could not be done for the theories are incompatible. Such being the case, SIDDCOR argues, the Court of Appeals gravely abused its discretion in granting immediate execution since respondents had filed its motion on the premise that the award on the judgment bond was interlocutory and not appealable. SIDDCOR also claims that the judgment on the attachment bond is not interlocutory, citing Stronghold Insurance Co., Inc. v. Court of Appeals 27 wherein it was ruled that such indeed constitutes a final and appealable order. SIDDCOR points out that no hearing was conducted on the Motion for Immediate Execution despite the requirement in Section 2, Rule 39 that "discretionary execution may only issue upon good reasons to be stated in a special order after due hearing." SIDDCOR likewise notes that the motion granting immediate execution was granted in the very same resolution which had denied the motion for reconsideration of the resolution sought to be immediately executed. For SIDDCOR, such constituted a denial of procedural due process insofar as its statutory right to appeal was concerned, as the resolution that it intended to appeal from was already the subject of immediate execution. Finally, SIDDCOR contests the special reasons cited by the Court of Appeals in granting the Motion for Immediate Execution. Facts Arising Subsequent to the Filing of Instant Petitions On 7 May 1999, the Court of Appeals issued a Writ of Execution directing the enforcement of the judgment on the attachment bond. 28 However, in a Resolution dated 9 June 1999, this Court through the First Division issued PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
117 of 501
a Temporary Restraining Order, enjoining the enforcement of the said Writ of Execution. On 15 October 2002, the Court of Appeals First Division rendered a Decision 29 on the merits of CA-G.R. CV No. 53229, setting aside the Summary Judgment and ordering the remand of the case for further proceedings. 30 Both parties filed their respective motions for reconsideration. 31 In addition, Carlos filed a motion to inhibit the author of the assailed decision, Justice Rebecca de Guia-Salvador, 32 who thereafter agreed to inhibit herself. 33 Then on 7 August 2003, the Court of Appeals Former First Division issued a Resolution deferring action on the motions for reconsideration in light of the temporary restraining order issued by this Court until the resolution of the present petitions. The factual background may be complicated, but the court need only concern itself with the propriety of the judgment on the attachment bond and the subsequent moves to secure immediate execution of such judgment. Should this Court be called upon to tackle the merits of the original action, Carloss complaint, it shall be in the review of the final resolution of the Court of Appeals in CA-G.R. CV No. 53229. Consolidation of Issues in G.R. Nos. 135830 and 136035 The petitions in G.R. Nos. 135830 and 136035 are concerned with the award of damages on the attachment bond. They may be treated separately from the petition in G.R. No. 137743, which relates to the immediate execution of the said award. We consolidate the main issues in G.R. Nos. 135830 and 136035, as follows: (1) whether the assailed judgment on the attachment bond could have been rendered, as it was, prior to the adjudication of the main case; (2) whether the Court of Appeals properly complied with the hearing requirement under Section 20, Rule 57 prior to its judgment on the attachment bond; and (3) whether the Court of Appeals properly ascertained the amount of damages it awarded in the judgment on the attachment bond. Resolving these issues requires the determination of the proper scope and import of Section 20, Rule 57 of the 1997 Rules of Civil Procedure. The provision governs the disposal of claims for damages on account of improper, irregular or excessive attachment. SECTION 20. Claim for damages on account of improper, irregular or excessive attachment.An application for damages on account of improper, irregular or excessive attachment must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching obligee or his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. Such damages may be awarded only after proper hearing and shall be included in the judgment on the main case. If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages sustained during the pendency of the appeal by filing an application in the appellate court with notice to the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court. Nothing herein contained shall prevent the party against whom the attachment was issued from recovering in the same action the damages awarded to him from any property of the attaching obligee not exempt from execution should the bond or deposit given by the latter be insufficient or fail to fully satisfy the award. (Emphasis supplied.) Section 20 essentially allows the application to be filed at any time before the judgment becomes executory. It should be filed in the same case that is the main action, and cannot be instituted separately. 34 It should be filed with the court having jurisdiction over the case at the time of the application. 35 The remedy provided by law is exclusive and by failing to file a motion for the determination of the damages on time and while the judgment is still under the control of the court, the claimant loses his right to damages. 36
There is no question in this case that the Motion for Judgment on the Attachment Bond filed by respondents on 10 December 1996 was properly filed since it was filed with the Court of Appeals during the pendency of the appeal in the main case and also as an incident thereto. The core questions though lie in the proper interpretation of the condition under Section 20, Rule 57 that reads: "Such damages may be awarded only after proper hearing and shall be included in the judgment on the main case." Petitioners assert that there was no proper hearing on the application for damages and that the Court of Appeals had wrongfully acted on the application in that it resolved it prior to the rendition of the main judgment. "Such Damages May Be Awarded Only After Proper Hearing." We first discuss whether the "proper hearing" requirement under Section 20, Rule 57 had been satisfied prior to the award by the Court of Appeals of damages on the attachment bond. Section 20 of Rule 57 requires that there be a "proper hearing" before the application for damages on the attachment bond may be granted. The hearing requirement ties with the indispensable demand of procedural due process. Due notice to the adverse party and its surety setting forth the facts supporting the applicant's right to damages and the amount thereof under the bond is essential. No judgment for damages may be entered and executed against the surety without giving it an opportunity to be heard as to the reality or reasonableness of the damages resulting from the wrongful issuance of the writ. 37
In Paramount Insurance v. Court of Appeals, 38 the Court held that under the rule, it was neither mandatory nor fatal that there should be a separate hearing in order that damages upon the bond can be claimed, ascertained and awarded. 39 What is necessary only is for the attaching party and his surety or sureties to be duly notified and given the opportunity to be heard. 40
In this case, both Carlos and SIDDCOR were duly notified by the appellate court of the Motion for Judgment on the Attachment Bond and were required to file their respective comments thereto. 41 Carlos and SIDDCOR filed their respective comments in opposition to private respondents motion. 42 Clearly, all the relevant parties had been afforded the bare right to be heard on the matter. Concededly, the facts of this case differ from that in Paramount, wherein the award of damages was predicated under Section 8, Rule 58, and the trial on the merits included the claim for damages on the attachment bond. The Court did note therein that the counsel of the surety was present during the hearings. 43 In this case, unlike in Paramount, there were no open court hearings conducted by the Court of Appeals, and it is precisely this absence that the petitioners assert as fatal. Plainly, there is no express requirement under the rule that the hearing be done in open court, or that the parties be allowed to confront adverse witnesses to the claim of damages on the bond. The proper scope of the hearing requirement was explained before Paramount in Peroxide Philippines Corp. v. Court of Appeals, 44 thus: . . . [It] is undeniable that when the attachment is challenged for having been illegally or improperly issued, there must be a hearing with the burden of proof to sustain the writ being on the attaching creditor. That hearing embraces not only the right to present evidence but also a reasonable opportunity to know the claims of the opposing parties and meet them. The right to submit arguments implies that opportunity, otherwise the right would be a barren one. It means a fair and open hearing. From this pronouncement, we can discern that the "proper hearing" contemplated would not merely encompass the right of the parties to submit their respective positions, but also to present evidence in support of their claims, and to rebut the submissions and evidence of the adverse party. This is especially crucial considering that the necessary elements to be established in an application for damages are essentially factual: namely, the fact of damage PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
119 of 501
or injury, and the quantifiable amount of damages sustained. Such matters cannot be established on the mere say-so of the applicant, but require evidentiary support. At the same time, there was no equivocal statement from the Court in Peroxide that the hearing required under the rule should be a full- blown hearing on the merits In this case, we rule that the demands of a "proper hearing" were satisfied as of the time the Court of Appeals rendered its assailed judgment on the attachment bond. The circumstances in this case that we consider particularly telling are the settled premises that the judicial finding on the wrongfulness of the attachment was then already conclusive and beyond review, and that the amount of actual damages sustained was likewise indubitable as it indeed could be found in the official case record in CA-G.R. CV No. 53229. As a result, petitioners would have been precluded from either raising the defenses that the preliminary attachment was valid or disputing the amount of actual damages sustained by reason of the garnishment. The only matter of controversy that could be litigable through the traditional hearing would be the matter of moral and exemplary damages, but the Court of Appeals appropriately chose not to award such damages. Moreover, petitioners were afforded the opportunity to counter the arguments extended by the respondents. They fully availed of that right by submitting their respective comments/oppositions. In fine, the due process guarantee has been satisfied in this case. It should be noted that this case poses a situation different from what is normally contemplated under Section 20, Rule 57wherein the very wrongfulness of the attachment remains one of the issues in contention in the main case. In such a case, there would be a greater demand for a more extensive hearing on the application of damages. The modality of hearing should remain within the discretion of the court having jurisdiction to hear the application for damages. The only demand, concordant to due process, would be the satisfaction of the right to be heard, to present evidence, and to rebut the evidence and arguments of the opposing party. Some disquisition is necessary on whether or not, as petitioners submit, a full- blown hearing in open court is compulsory under Section 20, Rule 57. To impose this as a mandatory requirement would ultimately prove too onerous to our judicial system. Perhaps such a demand would be less burdensome on the regional trial courts, which, as a matter of routine, receive testimonial or documentary evidence offered de novo, and to formulate conclusions on the admissibility and credibility of the same. However, a different situation applies if it is the Court of Appeals or the Supreme Court before which the application for damages is filed. Both these courts, which are capacitated to receive and act on such actions, are generally not triers of facts, and do not, in the course of daily routine, conduct hearings. It is partly for such reason that Section 20, Rule 57 authorizes these appellate courts to refer the application for damages to the trial court for hearing and decision. The trial courts are functionally attuned to ascertain and evaluate at the first instance the necessary factual premises that would establish the right to damages. Still, reference of the application for damages to the trial court is discretionary on the part of the appellate courts. The latter, despite their traditional appellate jurisdiction and review function, are still empowered under Section 20 to rule on the application for damages, notwithstanding the factual dimension such question presents. To impose as mandatory on the Court of Appeals or the Supreme Court to hear the application for damages through full-blown hearings in open court is supremely unwise and beyond the demands of Section 20, Rule 57. The effect would be unduly disruptive on the daily workflow of appellate courts such as the Court of Appeals and the Supreme Court, which rarely conduct open court hearings. Neither could the Court see what is so markedly special about an application for damages, fact-oriented as it may be, that would require it to be heard by the appellate courts in open court when no such mandatory rule applies to other judicial matters for resolution that are also factual in nature. For example, the review of death penalty convictions by the Court of Appeals and the Supreme Court necessitates a thorough evaluation of the evidence presented, notwithstanding the prior factual appreciation made by the trial court. 45 Notwithstanding the factual nature of the questions involved, there is PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
120 of 501
no rule requiring the Court of Appeals or the Supreme Court to call death penalty cases for hearing or oral argument. If no such mandatory rule for hearing is imposed on the appellate courts when the supreme penalty of death is involved, why then should an exceptional rule be imposed in the case for the relatively insignificant application for damages on the attachment bond? If open court hearings are ever resorted to by appellate courts, such result from the exercise of discretion rather than by imposition by statute or procedural rule. Indeed, there is no existing statute, procedural rule, or jurisprudential fiat that makes it mandatory on the Court of Appeals or the Supreme Court to conduct an open-court hearing on any matter for resolution. There is nothing demonstrably urgent with an application for damages under Section 20, Rule 57 that would necessitate this Court to adopt an unprecedented rule mandating itself or the Court of Appeals to conduct full-blown open court hearings on a particular type of action. This pronouncement does not contradict our ruling in Hanil Development v. IAC, 46 which Carlos interprets as requiring the Court of Appeals to conduct a proper hearing on an application for damages on the attachment bond. Hanil concerned the refusal by the Intermediate Appellate Court (now Court of Appeals) to take cognizance of the application for damages on the attachment bond, such refusal being reversed by the Court, which ruled that the Intermediate Appellate Court (IAC) had jurisdiction to accept and rule on such application. While the Court therein recognized that the IAC was empowered to try cases and conduct hearings, or otherwise perform acts necessary to resolve factual issues in cases, 47 it did not require the appellate court to conduct a hearing in open court, but merely to reinstate the application for damages. Admittedly, the dispositive portion of Hanil required the Court of Appeals to conduct hearings on the application for damages, 48 but nowhere in the decision was a general rule laid down mandating the appellate court to conduct such hearings in open court. The ascertainment of the need to conduct full-blown hearings is best left to the discretion of the appellate court which chooses to hear the application. At the same time, the Court cautions the appellate courts to carefully exercise their discretion in determining the need for open-court hearings on the application for damages on the attachment bond. The Court does not sanction the indolent award of damages on the attachment bond by the appellate court without affording the adverse party and the bonding company concerned the opportunity to present their sides and adduce evidence in their behalf, or on the basis of unsubstantiated evidence. "And Shall be Included in the Judgment on the Main Case" Section 20, Rule 57 does state that the award of damages shall be included in the judgment on the main case, and seemingly indicates that it should not be rendered prior to the adjudication of the main case. The rule, which guarantees a right to damages incurred by reason of wrongful attachment, has long been recognized in this jurisdiction. 49 Under Section 20, Rule 57 of the 1964 Rules of Court, it was provided that there must be first a judgment on the action in favor of the party against whom attachment was issued before damages can be claimed by such party. 50 The Court however subsequently clarified that under the rule, "recovery for damages may be had by the party thus prejudiced by the wrongful attachment, even if the judgment be adverse to him." 51
The language used in the 1997 revision of the Rules of Civil Procedure leaves no doubt that there is no longer need for a favorable judgment in favor of the party against whom attachment was issued in order that damages may be awarded. It is indubitable that even a party who loses the action in main but is able to establish a right to damages by reason of improper, irregular, or excessive attachment may be entitled to damages. This bolsters the notion that the claim for damages arising from such wrongful attachment may arise and be decided separately from the merits of the main action. As noted by the Court in Philippine Charter Insurance Corp. v. Court of Appeals: 52
The surety does not, to be sure, become liable on its bond simply because judgment is subsequently rendered against the party who obtained the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
121 of 501
preliminary attachment. The surety becomes liable only when and if "the court shall finally adjudge that the applicant was not entitled to the attachment." This is so regardless of the nature and character of the judgment on the merits of the principal claims, counterclaims or cross- claims, etc. asserted by the parties against each other. Indeed, since an applicant's cause of action may be entirely different from the ground relied upon by him for a preliminary attachment, it may well be that although the evidence warrants judgment in favor of said applicant, the proofs may nevertheless also establish that said applicant's proferred ground for attachment was inexistent or specious and hence, the writ should not have issued at all; i.e., he was not entitled thereto in the first place. In that event, the final verdict should logically award to the applicant the relief sought in his basic pleading, but at the same time sentence him usually on the basis of a counterclaimto pay damages caused to his adversary by the wrongful attachment. [Emphasis supplied.] Moreover, a separate ruleSection 8, Rule 58 covers instances when it is the trial court that awards damages upon the bond for preliminary injunction of the adverse party. Tellingly, it requires that the amount of damages to be awarded be claimed, ascertained, and awarded under the same procedure prescribed in Section 20 of Rule 57. In this case, we are confronted with a situation wherein the determination that the attachment was wrongful did not come from the trial court, or any court having jurisdiction over the main action. It was rendered by the Court of Appeals in the exercise of its certiorari jurisdiction in the original action reviewing the propriety of the issuance of the Writ of Preliminary Attachment against the private respondents. Said ruling attained finality when it was affirmed by this Court. The courts are thus bound to respect the conclusiveness of this final judgment, deeming as it does the allowance by the RTC of preliminary attachment as improper. This conclusion is no longer subject to review, even by the court called upon to resolve the application for damages on the attachment bond. The only matter left for adjudication is the proper amount of damages. Nevertheless, Section 20, Rule 57 explicitly provides that the award for damages be included in the judgment on the main case. This point was apparently not lost on the Court of Appeals when it rendered its Resolution dated 23 March 1998, certifying that the case may now be referred to the Raffle Committee for assignment to a ponente. The appellate court stated therein: "The Resolution of defendants-appellants motion for judgment on the attachment may be incorporated in the decision by the ponente for study and report," 53 and such observation is in conformity with Section 20. However, this reasoning was assailed by respondents, who argued that the motion for judgment on the attachment bond was a pending incident that should be decided before the case can be re-raffled to a ponente for decision. Respondents may be generally correct on the point that a case can only be deemed submitted for decision only after all pending incidents are resolved. Yet since Section 20, Rule 57 provides that their application for damages on the attachment bond "shall be included in the judgment on the main case," it is clear that the award for damages need not be resolved before the case is submitted for decision, but should instead be resolved and included in the judgment on the main case, or the decision on the Appeal by Certiorari filed by the respondents. Thus, the action of the Court of Appeals in resolving the application for damages even before the main judgment was issued does not conform to Section 20, Rule 57. However, the special particular circumstances of this case lead us to rule that such error is not mortal to the award of damages. As noted earlier, the award of damages was made after a proper hearing had occurred wherein all the concerned parties had been given the opportunity to present their arguments and evidence in support and in rebuttal of the application for damages. The premature award of damages does not negate the fact that the parties were accorded due process, and indeed availed of their right to be heard. Moreover, we are compelled to appreciate the particular circumstance in this case that the right of private respondents to acquire relief through the award PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
122 of 501
of damages on account of the wrongful preliminary attachment has been conclusively affirmed by the highest court of the land. This differs from the normal situation under Section 20, Rule 57 wherein the court having jurisdiction over the main action is still required to ascertain whether the applicant actually has a right to damages. To mandatorily require that the award of damages be included in the judgment in the main case makes all the sense if the right to damages would be ascertained at the same time the main judgment is made. However, when the said right is already made viable by reason of a final judgment which is no longer subject to review, there should be no unnecessary impediments to its immediate implementation. And finally, any ruling on our part voiding the award of damages solely for the reason that it was not included in the judgment on the main case, and remanding the motion to the Court of Appeals for proper adjudication together with the main case may exhibit fealty to the letter of the procedural rule, but not its avowed aims of promoting a just and speedy disposition of every action and proceeding. After all, if we were to compel the Court of Appeals to decide again on the application for damages and incorporate its ruling in the judgment on the main action, the appellate court will be examining exactly the same evidence and applying exactly the same rules as it already did when it issued the assailed resolution awarding damages on the bond. This would be unnecessarily redundant especially considering that the Supreme Court had already affirmed that there was wrongful attachment in this case. There is also the fact that remanding the question of damages, singly for the purpose of adhering to the letter of the procedural rule, would further prolong the resolution of the main case, which has been with the Court of Appeals for more than nine years now. 54 Our Rules of Court precisely requires liberal construction of the procedural rules to promote the objective of securing a just, speedy and inexpensive disposition of every action and proceeding. 55 With this precept, all the more justification is supplied for allowing the award for damages despite its apparent prematurity, if it is in all other respects proper. The same reasons apply in resolving the question of whether the Court of Appeals could have decided the Motion for Judgment on the Attachment Bond considering that the case had not yet been re-raffled under the two-raffle system for study and report. Under Section 5, Rule 3 of the RIRCA, a case filed with the Court of Appeals undergoes two raffles for assignment to a particular Justice. The first raffle is made for completion of records. 56 Afterwards, "all raffled appealed cases, the records of which have been completed and submitted for decision, shall be re-raffled for assignment to a Justice for study and report." 57
The fact that Section 20, Rule 57 provides that the award of damages on the attachment bond "shall be included in the judgment on the main case" necessarily implies that it is to be made only after the case has been re-raffled for study and report, and concurrently decided with the judgment of the ponente in the main case. Again, the Court of Appeals failed to consider Section 20, Rule 57 when it acted upon the application even before the second raffle was made. Had Section 20, Rule 57 been faithfully complied with, a different Justice of the Court of Appeals would have penned the ruling on the application for damages, in accordance with the RIRCA. Yet this circumstance does not outweigh the other considerations earlier mentioned that would warrant a liberal interpretation of the procedural rules in favor of respondents. The parties had adduced all their arguments and evidence before the Court of Appeals, and indeed, these were appreciated on first instance by Justice Demetria, who eventually penned the assailed resolutions. There was already a final determination that the attachment was wrongful. And any delay brought about by requiring that it be the ponencia, determined after the second raffle, who decides the application for damages may bear pro forma adherence to the letter of the rule, but would only cause the delay of the resolution of this long- pending case. Procedural rules are designed, and must therefore be so interpreted as, to give effect to lawful and valid claims and not to frustrate them. 58
Even SIDDCOR acknowledges that there are recognized instances where the award of damages or judgment on the attachment bond may not be included PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
123 of 501
in the decision on the main case, such as if the main case was dismissed for lack of jurisdiction and no claim for damages could have been presented in the main case. 59
Scope of Damages Properly Awardable Next, we examine the particular award of damages made in this case, consisting of P15,384,509.98, plus interest, as well as P1,000,000.00 as attorneys fees. There seems to be no dispute that the former amount constituted the amount drawn against the account of Sandoval by reason of the writ of execution issued by the trial court on 27 May 1996. This fact was confirmed by the PNB, in its Manifestation dated 19 July 1996, confirming the garnishment. Respondents burden in proving damages in this case was considerably lessened by the fact that there was already a final judgment, no longer subject to review, that the preliminary attachment allowed by the trial court was indeed wrongful. Hence, all that was necessary to be proved was the amount of damage actually sustained by respondents by reason of the wrongful attachment. It is unquestioned that by virtue of the writ of preliminary attachment, a Notice of Garnishment was served upon the PNB over deposit accounts maintained by respondents. Said Notice of Garnishment placed under the control of the RTC all the accounts maintained by respondents, and prevented the transfer or disposition of these accounts. 60 Then the subsequent Writ of Execution dated 27 May 1996 ordered the delivery to Carlos of these accounts earlier subjected to garnishment. 61
Clearly, the amount of actual pecuniary loss sustained by respondents has been well established. The Manifestationsubmitted by the PNB further affirmed the actual amount seized by Carlos, an amount which could not have been acquired had it not been for the writ of preliminary attachment which was wrongfully issued. Carlos lamely argues in his petition that there was no concrete or supporting evidence to justify the amount of actual damages, a claim that is belied by the official case records. The more substantive argument is presented by SIDDCOR, which submits that any damages that may be awarded to respondents can include only those that were incurred, if any, during the pendency of the appeal. But this contention is belied by Section 4, Rule 57 of the 1997 Rules of Civil Procedure, which provides that the bond issued for preliminary attachment is conditioned that the applicant "will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto." 62
The case Paramount Insurance Corp. v. Court of Appeals 63 is instructive. It discusses the scope of the bond executed by upon an application for preliminary injunction, 64 which similarly covers "all damages which [may be] sustain[ed] by reason of the injunction or temporary restraining order if the court should finally decide that the applicant was not entitled thereto." 65 The surety in that case claimed that it could be liable "only to the amount of damages accruing from the time the injunction bond was issued until the termination of the case, and not from the time the suit was commenced." 66 In rebutting this claim, the Court ruled: . . . . Rule 58, Section 4(b), provides that a bond is executed in favor of the party enjoined to answer for all damages which he may sustain by reason of the injunction. This Court already had occasion to rule on this matter in Mendoza v. Cruz, where it held that "(t)he injunction bond is intended as a security for damages in case it is finally decided that the injunction ought not to have been granted. It is designed to cover all damages which the party enjoined can possibly suffer. Its principal purpose is to protect the enjoined party against loss or damage by reason of an injunction." No distinction was made as to when the damages should have been incurred. 67
Our ruling in Philippine Charter Insurance Corp. v. Court of Appeals, relied upon by the Court of Appeals, squarely applies to this case: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
124 of 501
Under the circumstances, too, there can be no gainsaying the suretys full awareness of its undertakings under its bond: that, as the law puts it: "the plaintiff will pay all costs which may be adjudged to the defendant(s), and all damages which may be sustained by reason of the attachment, if the same shall finally be adjudged to have been wrongful and without cause," and that those damages plainly comprehended not only those sustained during the trial of the action but also those during the pendency of the appeal. This is the law, and this is how the surety's liability should be understood. The surety's liability may be enforced whether the application for damages for wrongful attachment be submitted in the original proceedings before the Trial Court, or on appeal, so long as the judgment has not become executory. The surety's liability is not and cannot be limited to the damages caused by the improper attachment only during the pendency of the appeal. That would be absurd. The plain and patent intendment of the law is that the surety shall answer for all damages that the party may suffer as a result of the illicit attachment, for all the time that the attachment was in force; from levy to dissolution. . . . The fact that the second paragraph of the rule speaks only of "damages sustained during the pendency of the appeal" is of no moment; it obviously proceeds from the assumption in the first paragraph that the award for the damages suffered during the pendency of the case in the trial court was in fact "included in the final judgment"(or applied for therein before the appeal was perfected or the judgment became executory); hence, it states that the damages additionally suffered thereafter, i.e., during the pendency of the appeal, should be claimed before the judgment of the appellate tribunal becomes executory. It however bears repeating that where. as in the case at bar, the judgment of the Trial Court has expressly or impliedly sustained the attachment and thus has given rise to no occasion to speak of, much less, file an application for damages for wrongful attachment, and it is only in the decision of the Court of Appeals that the attachment is declared wrongful and that the applicant "was not entitled thereto," the rule is, as it should be, that it is entirely proper at this time for the application for damages for such wrongful attachment to be filedi.e., for all the damages sustained thereby, during all the time that it was in force, not only during the pendency of the appeal. . . . 68
The rule is thus well-settled that the bond issued upon an application for preliminary attachment answers for all damages, incurred at whatever stage, which are sustained by reason of the attachment. The award of actual damages by the Court of Appeals is thus proper in amount. However, we disagree that the rate of legal interest be counted from the date of the "unlawful garnishment," or on 27 June 1996. Properly, interest should start to accrue only from the moment it had been finally determined that the attachment was unlawful, since it is on that basis that the right to damages comes to existence. In this case, legal interest commences from the date the Court of Appeals decision in CA-G.R. SP No. 39267 became final, by reason of its affirmation by this Court. The award of attorneys fees in the amount of P1,000,000.00 is also questioned before this Court, considering that the Court of Appeals did not award moral or exemplary damages. The general rule may be that an award of attorneys fees should be deleted where the award of moral and exemplary damages are eliminated. 69 Nonetheless, attorneys fees may be awarded under the Civil Code where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered, 70 even if moral and exemplary damages are unavailing. 71
Particularly, the Court has recognized as just and equitable that attorney's fees be awarded when a party is compelled to incur expenses to lift a wrongfully issued writ of attachment. 72 The amount of money garnished, and the length of time respondents have been deprived from use of their money by reason of the wrongful attachment, all militate towards a finding that attorneys fees are just and equitable under the circumstances. However, we deem the amount ofP1,000,000.00 as excessive, and modify the award of attorneys fees to P500,000.00 which represents merely approximately three percent of the actual damages suffered by and awarded to respondents. We also delete the imposition of legal interest made by the Court of Appeals on the awarded attorneys fees. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
125 of 501
Other Issues Raised in G.R. No. 135830 The issues raised in G.R. No. 136035 have been dispensed with, and the remaining issues in G.R. No. 135830 are relatively minor. There is no need to dwell at length on them. Carlos insists that respondents were liable to have paid docket fees upon filing of their Motion for Judgment on Attachment Bond, on the theory that they claimed therein for the first time the alleged damages resulting from the dissolved attachment. The said motion is characterized as an initiatory proceeding because it is claimed therein for the first time, the damages arising from the attachment. In the same vein, Carlos argues that the absence of a certification against forum-shopping attached to the motion renders the said motion as fatal. Again, it is pointed out that initiatory pleadings must contain the said certification against forum-shopping. Our ruling in Santo Tomas University Hospital v. Surla 73 is instructive. It was argued therein that the requirement of the certification against forum- shopping, as contained in Administrative Circular No. 04-94, 74 covered compulsory counterclaims. The Court ruled otherwise: It bears stressing, once again, that the real office of Administrative Circular No. 04-94, made effective on 01 April 1994, is to curb the malpractice commonly referred to also as forum-shopping. . . . The language of the circular distinctly suggests that it is primarily intended to cover an initiatory pleading or an incipient application of a party asserting a claim for relief. It should not be too difficult, the foregoing rationale of the circular aptly taken, to sustain the view that the circular in question has not, in fact, been contemplated to include a kind of claim which, by its very nature as being auxiliary to the proceeding in the suit and as deriving its substantive and jurisdictional support therefrom, can only be appropriately pleaded in the answer and not remain outstanding for independent resolution except by the court where the main case pends. Prescinding from the foregoing, the proviso in the second paragraph of Section 5, Rule 8, of the 1997 Rules of Civil Procedure, i.e., that the violation of the anti-forum shopping rule "shall not be curable by mere amendment . . . but shall be cause for the dismissal of the case without prejudice," being predicated on the applicability of the need for a certification against forum shopping, obviously does not include a claim which cannot be independently set up. 75 (Emphasis supplied.) It is clear that under Section 20, Rule 57, the application for damages on the attachment bond cannot be independently set up, but must be filed in the main case, before the judgment therein becomes final and executory. Santo Tomas squarely applies in determining that no certification against forum- shopping was required in the Motion for Judgment on the Attachment Bond. The same reasoning also sustains a ruling that neither legal fees were required for the filing of the said motion. Section 1, Rule 141 of the Rules of Court provides that legal fees are prescribed upon the filing of the pleading or other application which initiates an action or proceeding. 76 Since the said application for judgment on the attachment bond cannot be considered as an initiatory pleading, as it cannot be independently set up from the main action, it is not likewise chargeable with legal fees. As to the issue relating to the other Resolution dated 26 June 1998 denying the motion to dismiss appeal on the ground of forum-shopping, we find Carloss arguments as unmeritorious. Forum-shopping allegedly existed because petitioners had filed two cases before the Court of Appeals, CA-G.R. CV No. 53229, and the Petition for Certiorari with Temporary Restraining Order dated 2 June 1996 attacking the allowance of execution pending appeal. Evidently, the two causes of action in these two petitions are different, CA-G.R. CV No. 53229 being an appeal from the Summary Judgment rendered by the RTC, and the second petition assailing the subsequent allowance by the RTC of execution pending appeal. There is no identity between these two causes of action that would warrant a finding of forum-shopping. Issues Raised in G.R. No. 137743 To recount, respondents, having obtained a favorable decision on their Motion for Judgment on the Attachment Bond, filed a Motion for Immediate Execution of the award of damages. This was granted by the Court of Appeals PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
126 of 501
in its Resolutiondated 16 October 1998, said resolution now specifically assailed by SIDDCOR in G.R. No. 137743. In their Motion for Immediate Execution, respondents theory in seeking the immediate execution of the award of damages was that said award was not subject to appeal, the ruling thereupon being an interlocutory order. 77 This position was not adopted by the Court of Appeals in its 16 October 1998 Resolution, which was otherwise favorably disposed to respondents. Instead, the Court of Appeals predicated the immediate execution on the following grounds: (1) that the judicial finding that the writ of preliminary attachment was wrongful was already final and beyond review; (2) there were no material and substantial defenses against the motion for the issuance of the judgment bond; (3) Sandoval was elderly and sickly, without means of livelihood and may not be able to enjoy the fruits of the judgment on the attachment bond; (4) that immediate execution would end her suffering caused by the arbitrary garnishment of her PNB account. There is no doubt that a judgment on the attachment bond is a final and appealable order. As stated earlier, it is, under normal course, included in the main judgment, which in turn is final and appealable. Respondents admit that they had erred in earlier characterizing the said judgment as an interlocutory order. Still, SIDDCOR argues that such earlier error is fatal, and that the Court of Appeals abused its discretion in ruling on the motion on a theory different from that urged on by respondents. By no means could respondents be deemed as estopped from changing their legal theory, since the rule on estoppel applies to questions of fact and not questions of law. 78 Moreover, courts are empowered to decide cases even if the parties raise legal rationales other than that which would actually apply in the case. The basis of whether respondents are entitled to immediate execution arises from law, particularly Section 2(a), Rule 39 of the Rules of Court, and not solely on whatever allegations may be raised by the movant. Thus, we find no grave abuse of discretion on the part of the Court of Appeals, even though it allowed execution pending appeal on a legal basis different from that originally adduced by respondents. After all, the reasoning ultimately employed by the appellate court is correct, and it hardly would be judicious to require the lower court to adhere to the movants erroneous ratiocination and preclude the proper application of the law. We need not review in length the justification of the Court of Appeals in allowing execution pending appeal. The standard set under Section 2(a), Rule 39 merely requires "good reasons," a "special order," and "due hearing." Due hearing would not require a hearing in open court, but simply the right to be heard, which SIDDCOR availed of when it filed its opposition to the motion for immediate execution. The Resolution dated 16 October 1998 satisfies the "special order" requirement, and it does enumerate at length the "good reasons" for allowing execution pending appeal. As to the appreciation of "good reasons," we simply note that the advanced age alone of Sandoval would have sufficiently justified execution pending appeal, pursuant to the well- settled jurisprudential rule. 79 The wrongfulness of the attachment, and the length of time respondents have been deprived of their money by reason of the wrongful attachment further justifies execution pending appeal under these circumstances. WHEREFORE, the petitions are DISMISSED. The Temporary Restraining Order issued in the Resolution dated 9 June 1999 is hereby LIFTED. The assailed Resolution of the Court of Appeals Special Fourth Division dated 26 June 1998 is AFFIRMED with the MODIFICATIONS that the legal interest on the award of actual damages should commence from the date of the finality of the Decision of the Court of Appeals in CA G.R. SP No. 39267 and that the award of attorneys fees is in the amount of P500,000. Costs against petitioners. SO ORDERED.
Salgado v. CA, March 26, 1984, 128 SCRA 395 (Case Not Found!) PCIB v. Alejandro, September 21, 2007 (See under Section 1, page 60) Republic v. Flores, July 12, 2007 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
128 of 501
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. 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: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
129 of 501
(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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
130 of 501
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
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. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
131 of 501
Section 4
Arellano v. Flojo, 238 S 72 THIRD DIVISION
A.M. No. RTJ-93-1008 November 14, 1994 TERESITA P. ARELLANO, petitioner, vs. JUDGE NAPOLEON R. FLOJO, FELINO BANGALAN, Clerk of Court III, HERMINIO DEL CASTILLO, RTC-OCC.; LUCINO JOVE, Deputy Sheriff, respondents. Wilfredo O. Paraiso for petitioner. Tumaru, Guerrero & Tumaru Law Offices for respondents Judge Bangalan and Sheriff Jove. R E S O L U T I O N MELO, J.: Teresita P. Arellano, defendant in Civil Case No. 11-1041 then pending before Branch 6 of the Regional Trial Court of the Second Judicial Region and stationed in Aparri, Cagayan, filed a verified complaint for neglect of duty, misconduct, bias, and partiality against (a) Judge Napoleon R. Flojo, then Presiding Judge of the aforementioned Branch 6, now assigned as Presiding Judge of Branch 2 of the Regional Trial Court of Manila, for having irregularly issued an order dated January 21, 1986 for the issuance of a writ of attachment in the said case on the same date despite the lack of legal basis therefor. (b) Felino Bangalan, then Acting Clerk of Court III, of the Aparri RTC (now Presiding Judge, MTC, Branch 1, Aparri, Cagayan) for issuing the writ of attachment in the said case despite the failure of the plaintiffs to post the required attachment bond of P100,000.00 and for deliberately delaying the issuance of service of summons to the defendant in that although the case was filed on January 21, 1986, the defendant (complainant herein) was served summons only on May 13, 1986 or four (4) months thereafter, and that she was not even furnished a copy of the Order authorizing the issuance of a writ of attachment, the so-called attachment bond, as well as the writ of attachment itself. (c) Herminio del Castillo, Branch Clerk of Court of the Aparri RTC for deliberately delaying the issuance of service of summons on the defendant. (d) Luciano Jove, Deputy Sheriff, Aparri, Cagayan for seizing a vehicle not owned by the defendant and entrusting the custody thereof to Sheriff Guards Rodolfo Auringan and Dioniso Co., Jr., instead of personally keeping it under his custody, resulting in the said vehicle being cannibalized to the damage and prejudice of the complainant and the heirs of the late Ruperto Arellano. The complaint against Clerk of Court Herminio del Castillo was dismissed for lack of merit by the Court in its Resolution dated June 28, 1993, as he did not appear to have had any participation in the issuance and service of summons on the defendant in the aforementioned civil case (pp. 42-43, Rollo.) With respect to Judge Napoleon R. Flojo, inasmuch as the charges against him were mere reiterations of the charges filed by the same complainant in A.M. Case No. RTJ-86-52 which had been earlier dismissed for lack of merit by the Court en banc on March 24, 1987, the instant complaint against him was likewise dismissed in the resolution of the Court dated November 8, 1993 (p. 83, Rollo). PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
132 of 501
Thereafter, the case was referred to Justice Ramon A. Barcelona of the Court of Appeals, for investigation, report, and recommendation in regard to the remaining respondents. Justice Barcelona finds Judge Bangalan (then Clerk of Court III) guilty of negligence for (1) having issued the writ of attachment on January 21, 1986 in spite of the applicants' failure to post an acceptable bond as required under Section 4, Rule 57 of the Rules of Court for what appears in the record is only a promissory note in the form of an affidavit executed by Victor Suguitan, Andres Langaman, and Mariano Retreta; having caused the implementation through Sheriff Jove, of the said writ of attachment on January 23, 1986, knowingly fully well that no summons had as yet been issued and served as of said date upon defendant therein in violation of Section 5, Rule 57 of the Rules of Court and Section 3, Rule 14 of the same rules. As for Sheriff Jove, Justice Barcelona found that in serving the writ of attachment, the sheriff did not serve the same on the defendant but on somebody whom he suspected only as holding the property of the complainant. He failed to verify the ownership of the cargo truck he attached. To compound the sheriff's failure to exercise diligence in the execution of the writ of attachment, he surrendered the custody of the property to the two alleged guards instead of depositing the same in a bonded warehouse. Finding both Judge Bangalan and Sheriff Jove remiss in the performance of their duties, Justice Barcelona recommends that they each be suspended for one (1) month (not chargeable to their accumulated leave) without pay. However, this Court is of the opinion and thus hereby holds that a fine of P5,000.00 each for Judge Bangalan and Sheriff Jove is the commensurate penalty for the irregularity that attended the civil case below. In this respect, we agree with the factual findings and analysis of the Office of the Court Administrator, thus: Indeed, he issued the Writ of Attachment although the plaintiffs have not yet posted the required attachment bond. It is explicitly stated in his Comment that what was filed was merely an undertaking. The fact that the "Undertaking" was subscribed by the branch clerk of court does not necessarily follow that it carried the imprimatur of the presiding judge thereof. As a lawyer, respondent Bangalan, who is now a Judge should have known the glaring distinctions between a plain undertaking and a real attachment bond. The difference between the two is not that hard to discern. As ruled by Judge Ernesto A. Talamayan in his order of April 23, 1993 (Rollo, pp. 18-19), no bond can be confiscated to answer for the damages sustained by defendants. He discovered that only a promissory note in the form of an affidavit executed by the bondsmen denominated as an attachment bond appears on the record. Had respondent Bangalan carefully examined the undertaking filed before he issued the writ of attachment, such a situation could have been obviated. Where a statute authorizing attachment requires, as a condition to the issuance of the writ, that a bond shall be given by plaintiff to indemnify defendant for any loss or injury resulting from the attachment in case it proves to be wrongful, a failure to give such bond is fatal, and an attachment issued without the necessary bond is invalid (7 C.J.S. 326). However, we do not find that the delay in the issuance and service of summons was deliberately done to prejudice the defendant. Bad faith cannot be inferred by the mere fact of delay considering that it was issued by the Office of the Clerk of Court and not by the branch clerk to whom the case was already assigned. For seizing a vehicle which is not owned by the defendant, respondent Sheriff Jove may be held administratively liable. Although his actuation may not have been tainted with bad faith or malice, he failed to exercise due prudence in attaching the truck. He should have verified first if the truck he seized was owned by the judgment debtor, especially in this case where it was found in the possession of a person other than its real owner. Consequently, the writ of attachment was ordered dissolved in the Decision of Judge Tumacder dated August 9, 1989 (Rollo, pp. 25 to 41) as the property attached PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
133 of 501
does not belong to the judgment debtor but to her father, Ruperto Arellano. A sheriff incurs liability if he wrongfully levies upon the property of a third person (47 Am Jr 857). A sheriff has no authority to attach the property of any person under execution except that of the judgment debtor. If he does so, the writ of execution affords him no justification, for the action is not in obedience to the mandate of the writ (Codesal and Ocampo vs. Ascue, 38 Phil. 902). The sheriff maybe liable for enforcing execution on property belonging to a third party (Sec. 17, Rule 39, Rules of Court). However, he cannot be faulted for entrusting the custody thereof to the sheriff guards considering that he can not physically keep the cargo truck under his custody. His stand is sustained by the Court in its Order of October 10, 1989 (Rollo, pp. 110 to 111), holding the two (2) sheriff guards liable for the cannibalism of the truck. (pp. 132-133. Rollo) WHEREFORE, premises considered, Judge Felino Bangalan and Sheriff Lucinio Jove are hereby each fined the amount of FIVE THOUSAND PESOS (P5,000.00), with the severe warning that a repetition of the same or similar acts in the future will be dealt with more severely. SO ORDERED.
Calderon v. IAC, 155 S 531 SECOND DIVISION G.R. No. 74696 November 11, 1987 JOSE D. CALDERON, petitioner, vs. THE INTERMEDIATE APPELLATE COURT, GEORGE SCHULZE, GEORGE SCHULZE, JR., ANTONIO C. AMOR, MANUEL A. MOZO, and VICTOR M. NALUZ, respondents. G. R. No. 73916 November 11, 1987 FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC., petitioner, vs. THE INTERMEDIATE APPELLATE COURT, GEORGE SCHULZE, ANTONIO C. AMOR, MANUEL A. MOZO and VICTOR M. NALUZ, respondents.
PARAS, J.: For review on certiorari is respondent appellate Court's decision 1 in AC-G.R. No. 01420, which affirmed the Regional Trial Court's decision 2 appealed from holding the plaintiff Jose D. Calderon (petitioner herein) and his bondsman the Integrated Bonding and Insurance Company, Inc., jointly and severally liable to pay defendants (private respondents herein), damages caused by the filing by Calderon of the allegedly unwarranted suit and the wrongful and malicious attachment of private respondents' properties. The facts of the case are briefly as follows: On November 2, 1976, petitioner Calderon purchased from the private respondents the following: the Luzon Brokerage Corporation (LBC for brevity) and its five (5) affiliate companies, namely, Luzon Air Freight, Inc., Luzon Port Terminals Services, Inc., Luzon (GS) Warehousing Corporation, GS Industrial Management Corporation, and GS Luzon Trucking Corporation. Twenty one (21) days thereafter or on November 23, 1976, the Bureau of Customs suspended the operations of LBC for failure to pay the amount of P1,475,840.00 representing customs taxes and duties incurred prior to the execution of the sale. In order to lift the suspension Calderon paid the sum of P606,430.00 to the Bureau of Customs. On October 27, 1977, Calderon filed a complaint against private respondents to recover said amount of P1,475,840.00, with damages by reason of breach of warranty. In the same complaint, the petitioner prayed for a preliminary attachment, alleging: that private respondents had deliberately and willfully concealed from his knowledge such staggering liability of the LBC for the purpose of misleading him into buying the six aforesaid companies; and that private respondent Schulze is about to depart from the Philippines in order to defraud his creditors. To support the petition for preliminary attachment, the petitioner posted a surety bond of P1,475,840.00. On October 28, 1977, the trial court issued a writ of preliminary attachment, whereupon properties of the private respondents were attached and their bank deposits were garnished. On November 10, 1977, petitioner Calderon filed an amended complaint, alleging that while the liabilities of LBC are reflected in its books, the aforesaid amount was fraudulently withdrawn and misappropriated by private respondent Schulze. (pp. 7-18, Rollo) On the other hand, private respondents claimed: that the amount of P1,475,840.00 due to the Bureau of Customs represents the duties and taxes payable out of the advanced payments made by LBC's client, Philippine Refining Company (PRC, for brevity) in August, September and October, 1976, and in the first and second weeks of November 1976, after Calderon himself had taken control of the management of LBC (Exhibit A); that these deposit PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
135 of 501
payments were properly recorded in the books of the corporation and existing as part of the corporate funds; that from the first week of June, 1976 up to October 30, 1976, private respondent Schulze fully disclose and explained to Calderon that these customer's advanced deposit payments (including those of the PRC) are to be paid to the Bureau of Customs when their corresponding customs taxes and duties become due; that during this phase of the negotiation, Calderon and his representatives inspected and studied the corporate books and records at will and learned the daily operations and management of LBC; that the petitioner did not pay out of his own pocket but out of the LBC funds the said amount of P606,430,30 demanded by the Bureau of Customs, as evidenced by a manager's check No. FEBTC 25092 (Exhibits 9, 10, 11 & 38) and another facility negotiated with the Insular Bank of Asia and America (Exhibit K-2); and that private respondents are setting up a counterclaim for actual, moral and exemplary damages as well as attorney's fees, as a consequence of the filing of the baseless suit and the wrongful and malicious attachment of their properties, (pp. 217-221, Rollo) On November 17, 1977, private respondents filed a counterbond, whereupon the trial court issued an order directing the sheriff to return all real and personal properties already levied upon and to lift the notices of garnishment issued in connection with the said attachment (Annex B, p. 42, Rollo). After trial, the trial court dismissed the complaint, holding Calderon and his surety First integrated Bonding and Insurance Co., Inc., jointly and severally liable to pay the damages prayed for by the private respondents. Said decision was affirmed on appeal, although slightly modified in the sense that the award of moral and exemplary damages in favor of private respondents Schulze and Amor was reduced. The dispositive portion of the judgment of affirmance and modification reads: WHEREFORE, the judgment of the lower court is modified as follows: To defendant-appellee George Schulze: P650,000.00 as moral damages and P200,000.00 as exemplary damages. To defendant-appellee Antonio C. Amor: P150,000.00 as moral damages and P30,000.00 as exemplary damages, An other dispositions in the judgment appealed from, including the dismissal of the amended complainant are hereby affirmed in toto. SO ORDERED. In his petition, petitioner Calderon asserts, among other things, that the court below erred: I IN HOLDING THAT THE PETITIONER FAILED TO ESTABLISH HIS CLAIMS. II IN HOLDING THAT THE PRELIMINARY ATTACHMENT HAD BEEN WRONGFULLY AND MALICIOUSLY SUED OUT. III IN HOLDING THAT THE PETITIONER IS LIABLE NOT ONLY FOR ACTUAL DAMAGES BUT MORAL AND EX- EXEMPLARY DAMAGES AS WELL. On the other hand, petitioner Insurance Company raises the following issues: I PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
136 of 501
WHETHER OR NOT THE PETITIONER SURETY IS LIABLE FOR DAMAGES ON ITS CONTRACTED SURETYSHIP NOTWITHSTANDING THE DISSOLUTION OF THE WRIT OF PRELIMINARY ATTACHMENT, AS A CON. SEQUENCE OF THE FILING OF THE DEFENDANT'S COUNTER- BOND, WHEREBY LEVIED PROPERTIES WERE ORDERED BY THE COURT RETURNED TO PRIVATE RESPONDENTS AND THE NOTICES OF GARNISHMENT ISSUED IN CONNECTION THEREWITH ORDERED LIFTED. II WHETHER OR NOT THE SUBSEQUENT FILING BY PRIVATE RESPONDENTS OF A COUNTER-BOND TO DISCHARGE THE WRIT OF PRELIMINARY ATTACHMENT CONSTITUTE A WAIVER ON ANY DEFECT IN THE ISSUANCE OF THE ATTACHMENT WRIT. III WHETHER OR NOT A SURETY IS A GUARANTOR OF THE EXISTENCE OF A GOOD CAUSE OF ACTION IN THE COMPLAINT. The petition is devoid of merit. Whether or not the amount of P1,475,840.00 was duly disclosed as an outstanding liability of LBC or was misappropriated by private respondent Schulze is purely a factual issue. That Calderon was clearly in bad faith when he asked for the attachment is indicated by the fact that he failed to appear in court to support his charge of misappropriation by Schulze, and in effect, preventing his being cross-examined, no document on the charges was presented by him. What the Appellate Court found in this regard need not be further elaborated upon. The Appellate Court ruled: ... The record shows that appellant Calderon failed to produce any evidence in support of his sworn charge that appellee Schulze had deliberately and willfully concealed the liabilities of Luzon Brokerage Corporation. Neither did appellant Calderon prove his sworn charges that appellee Schulze had maliciously and fraudulently withdrawn and misappropriated the amount of Pl,475,840.00 and that an the defendants had maliciously and fraudulently concealed and withheld from him this alleged liability of Luzon Brokerage Corporation in breach of the contract-warranty that said corporation had no obligations or liabilities except those appearing in the books and records of the said corporation. Indeed, appellant Calderon never appeared in the trial court to substantiate the charges in his verified complaints and in his affidavit to support his petition for the issuance of a writ of attachment. He distanced himself from the appellees and avoided cross- examination regarding his sworn allegations. ... ... But even though appellant Calderon failed to prove his serious charges of fraud, malice and bad faith, the appellees took it upon themselves to show that they did not conceal or withhold from appellant's knowledge the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation and that they did not withdraw and misappropriate the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation. The books and records of Luzon Brokerage Corporation on which the Financial Statement of Luzon Brokerage Corporation, as of October 31, 1976 was prepared by the auditing firm retained by appellant Calderon himself (Exhibit 1), disclose that the liabilities of Luzon Brokerage Corporation in the total amount of P4,574,498.32 appear under the heading 'Customers Deposit' (Exhibit 1-A) this amount includes the deposit of Philippine Refining Co., Inc. in the sum of Pl,475,840.00. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
137 of 501
But appellant Calderon contends that this financial statement was dated February 4, 1977 (see Exhibit 1-C). There is nothing commendable in this argument because the bases of the financial statement were the books, records and documents of Luzon Brokerage Corporation for the period ending October 31, 1976, which were all turned over to and examined by appellant Calderon and his executive, legal and financial staffs. There is also no merit in the contention of appellant Calderon that the appellees have tampered the books of Luzon Brokerage Corporation because there is no proof to back this charge, let alone the fact that appellant Calderon did not even present the said books to support his charge. As stated above, the amount of customers' deposits in the sum of P4,574,498.32 includes the deposits of Philippine Refining Co., Inc. (Exhibits 46-A, 46-B, 46-C, 46-D, 46-E, 46- F, 46-G, 46-H, 46-1, 46-J, t.s.n. July 23, 1980, pp. 12-13, 14-15). The amounts deposited by Philippine Refining Co., Inc. on various dates with Luzon Brokerage Corporation made before the execution of the sale were all entered in three other corporate books of Luzon Brokerage Corporation namely, the Cash Receipts Register (Exhibits 39-A-1 to 39-K-1 and 39-A-1-B to 39-K-1-B), the Journal Vouchers (Exhibits 42 to 46 and 42-A to 43- A), and the Customer's Deposit Ledger (Exhibit 46-A to 46-J) ... . Thus, the claim of appellant Calderon that the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation of P406,430.00 on August 24, 1976 (Exhibit N P53,640.00 on October 13, 1976 (Exhibit 0), P406,430.00 on September 8, 1976 (Exhibit P P199,508.00 on September 24, 1976 (Exhibit Q P52,738.00 on October 22, 1976 (Exhibit R and P264,436.00 on October 7, 1976 (Exhibit S) were not entered in the books of Luzon Brokerage Corporation, is completely without merit. ... (pp. 85-87, Rollo) It is evident from the foregoing that the attachment was maliciously sued out and that as already pointed out Schulze was not in bad faith. While as a general rule, the liability on the attachment bond is limited to actual damages, moral and exemplary damages may be recovered where the attachment was alleged to be maliciously sued out and established to be so. (Lazatin vs. Twano et al, L-12736, July 31, 1961). In the instant case, the issues of wrongful and malicious suing out of the writ of preliminary attachment were joined not only in private respondents' motion to discharge the attachment but also in their answer to the amended complaint (p. 38, Rollo). The trial court observed that the books and records of Luzon Brokerage Corporation disclose that the liabilities of the said corporation in the total amount of P4,574,498.32 appear under the heading "Customs Deposit" (Exhibit 1-A) and this amount includes the deposit of Philippine Refining Co., Inc. in the sum of P1,475,840.00 (p. 26, Rollo). On the other hand, plaintiff never appeared in court, and failed to produce any evidence to substantiate his charges (p. 26, Rollo). Well settled is the rule that the factual findings of the trial court are entitled to great weight and respect on appeal, especially when established by unrebutted testimonial and documentary evidence, as in this case. Anent the petition of the surety, We say the following: Specifically, petitioner surety contends that the dissolution of the attachment extinguishes its obligation under the bond, for the basis of its liability, which is wrongful attachment, no longer exists, the attachment bond having been rendered void and ineffective, by virtue of Section 12, Rule 57 of the Rules of Court. (p. 5, Petition) While Section 12, Rule 57 of the Rules of Court provides that upon the filing of a counterbond, the attachment is discharged or dissolved, nowhere is it provided that the attachment bond is rendered void and ineffective upon the filing of counterbond. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
138 of 501
The liability of the attachment bond is defined in Section 4, Rule 57 of the Rules of Court, as follows: Sec. 4. Condition of applicant's bond. The party applying for the order must give a bond executed to the adverse party in an amount to be fixed by the judge, not exceeding the applicant's claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto. It is clear from the above provision that the responsibility of the surety arises "if the court shall finally adjudge that the plaintiff was not entitled thereto." In Rocco vs. Meads, 96 Phil. Reports 884, we held that the liability attaches if the plaintiff is not entitled to the attachment because the requirements entitling him to the writ are wanting, or if the plaintiff has no right to the attachment because the facts stated in his affidavit, or some of them, are untrue. It is, therefore, evident that upon the dismissal of an attachment wrongfully issued, the surety is liable for damages as a direct result of said attachment. Equally untenable is the Surety's contention that by filing a counterbond, private respondents waived any defect or flaw in the issuance of the attachment writ, for they could have sought, without need of filing any counterbond, the discharge of the attachment if the same was improperly or irregularly issued, as provided in Section 13, Rule 57 of the Rules of Court. Whether the attachment was discharged by either of the two (2) ways indicated in the law, i.e., by filing a counterbond or by showing that the order of attachment was improperly or irregularly issued, the liability of the surety on the attachment bond subsists because the final reckoning is when "the Court shall finally adjudge that the attaching creditor was not entitled" to the issuance of the attachment writ in the first place. The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor instead of the other way, which, in most instances like in the present case, would require presentation of evidence in a full-blown trial on the merits and cannot easily be settled in a pending incident of the case. We believe, however, that in the light of the factual situation in this case, the damages awarded by the Intermediate Appellate Court are rather excessive. They must be reduced. WHEREFORE, the judgment of said Appellate Court is hereby modified as follows: Both petitioner Calderon and petitioner First Integrated Bonding and Insurance Company, Inc. are hereby ordered to give jointly and severally: 1. Respondent George Schulze, P250,000.00 as moral damages and P50,000.00 as exemplary damages; and 2. Respondent Antonio C. Amor, P50,000.00 as moral damages and P10,000.00 as exemplary damages. The rest of the judgment of the Intermediate Appellate Court is hereby AFFIRMED. SO ORDERED.
Gotauco v. ROD, 59 Phil 756 EN BANC DECISION March 23, 1934 G.R. No. L-39596 CONSULTA No. 1013 OF THE REGISTER OF DEEDS OF TAYABAS. GOTAUCO & CO., applicant-appellant, vs. THE REGISTER OF DEEDS OF TAYABAS, oppositor-appellee. Godofredo Reyes for appellant. Office of the Solicitor-General Hilado for appellee. BUTTE, J.: This is an appeal from a judgment of the Fourth Branch of the Court of First Instance of Manila in a consulta submitted by the register of deeds of Tayabas. Our decision upon this appeal has been facilitated because both the appellant and the appellee, the latter being represented by the Solicitor-General, agreed that the judgment should be reversed. On August 12, 1932, when Exhibits A and B were presented to the register, by which a levy of execution against the judgment debtor, Rafael Vilar was made on fifteen contracts of land described in Exhibit B and registered in the name of Florentino Vilar, the register properly denied the inscription of said levy of execution because the title to the lands was in the name of Florentino Vilar and no evidence was submitted that Rafael Vilar had any present or possible future interest in the land. On September 17, 1932, there was presented to him a copy of a petition filed in the Court of First Instance of the province, entitled, Intestado del Finado Florentino Vilar, from which he could properly infer that Florentino Vilar was dead and that the judgment debtor Rafael Vilar is one of the heirs of the deceased Florentino Vilar. Although the value of the participation of Rafael Vilar in the estate of Florentino Vilar was indeterminable before the final liquidation of the estate, nevertheless, the right of participation in the estate and the lands thereof may be attached and sold. The real test was laid down by this court in the case of Reyes vs. Grey (21 Phil. 73, 76), namely: Does the judgment debtor hold such a beneficial interest in the property that he can sell or otherwise dispose of it for value? Nothing appears in this record to indicate that Rafael Vilar being sui juris could not dispose of his interest or share as heir in the estate of Florentina Vilar. Having this right, he could by a conveyance defeat pro tanto the provisions of section 450 of the Code of Civil Procedure and thus deprive the judgment creditor of the benefit of a lawful execution. (See also Consulta No. 441 de los Abogados de Smith, Bell & Co., 48 Phil. 656, 664, 665.) On October 12, 1932, with the knowledge which he them had, the register should have accepted and inscribed Exhibit A, B and D. The judgment in this consulta is reversed without special pronouncement as to costs. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
140 of 501
Onate v. Abrogar (2 nd Division), 230 S 181/131 SECOND DIVISION
G.R. No. 107303 February 21, 1994 EMMANUEL C. OATE and ECON HOLDINGS CORPORATION, petitioners, vs. HON. ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents. G.R. No. 107491 February 21, 1994 BRUNNER DEVELOPMENT CORPORATION, petitioner, vs. HON. ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents. Florante A. Bautista for petitioner in G.R. No. 107303. Andin & Andin Law Offices for Brunner Development Corporation. Quasha, Asperilla, Ancheta, Pena & Nolasco for Sun Life Assurance Company of Canada.
NOCON, J.: These are separate petitions for certiorari with a prayer for temporary restraining order filed by Emmanuel C. Oate and Econ Holdings Corporation (in G.R. No. 107303), and Brunner Development Corporation (in G.R. No. 107491), both of which assail several orders issued by respondent Judge Zues C. Abrogar in Civil Case No. 91-3506. The pertinent facts are as follows: On December 23, 1991, respondent Sun Life Assurance Company of Canada (Sun Life, for brevity) filed a complaint for a sum of money with a prayer for the immediate issuance of a writ of attachment against petitioners, and Noel L. Dio, which was docketed as Civil Case No. 91-3506 and raffled to Branch 150 of the RTC Makati, presided over by respondent Judge. The following day, December 24, 1991, respondent Judge issued an order granting the issuance of a writ of attachment, and the writ was actually issued on December 27, 1991. On January 3, 1992, upon Sun Life's ex-parte motion, the trial court amended the writ of attachment to reflect the alleged amount of the indebtedness. That same day, Deputy Sheriff Arturo C. Flores, accompanied by a representative of Sun Life, attempted to serve summons and a copy of the amended writ of attachment upon petitioners at their known office address at 108 Aguirre St., Makati but was not able to do so since there was no responsible officer to receive the same. 1 Nonetheless, Sheriff Flores proceeded, over a period of several days, to serve notices of garnishment upon several commercial banks and financial institutions, and levied on attachment a condominium unit and a real property belonging to petitioner Oate. Summons was eventually served upon petitioners on January 9, 1992, while defendant Dio was served with summons on January 16, 1992. On January 21, 1992, petitioners filed an "Urgent Motion to Discharge/Dissolve Writ of Attachment." That same day, Sun Life filed an ex-parte motion to examine the books of accounts and ledgers of petitioner Brunner Development Corporation (Brunner, for brevity) at the Urban Bank, Legaspi Village Branch, and to obtain copies thereof, which motion was granted by respondent Judge. The examination of said account took place on January 23, 1992. Petitioners PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
141 of 501
filed a motion to nullify the proceedings taken thereat since they were not present. On January 30, 1992, petitioners and their co-defendants filed a memorandum in support of the motion to discharge attachment. Also on that same day, Sun Life filed another motion for examination of bank accounts, this time seeking the examination of Account No. 0041-0277-03 with the Bank of Philippine Islands (BPI) which, incidentally, petitioners claim not to be owned by them and the records of Philippine National Bank (PNB) with regard to checks payable to Brunner. Sun Life asked the court to order both banks to comply with the notice of garnishment. On February 6, 1992, respondent Judge issued an order (1) denying petitioners' and the co-defendants' motion to discharge the amended writ of attachment, (2) approving Sun Life's additional attachment, (3) granting Sun Life's motion to examine the BPI account, and (4) denying petitioners' motion to nullify the proceedings of January 23, 1992. On March 12, 1992, petitioners filed a motion for reconsideration of the February 6, 1992 order. On September 6, 1992, respondent Judge denied the motion for reconsideration. Hence, the instant petitions. Petitioners' basic argument is that respondent Judge had acted with grave abuse of discretion amounting to lack or in excess of jurisdiction in (1) issuing ex parte the original and amended writs of preliminary attachment and the corresponding notices of garnishment and levy on attachment since the trial court had not yet acquired jurisdiction over them; and (2) allowing the examination of the bank records though no notice was given to them. We find both petitions unmeritorious. Petitioners initially argue that respondent Judge erred in granting Sun Life's prayer for a writ of preliminary attachment on the ground that the trial court had not acquired jurisdiction over them. This argument is clearly unavailing since it is well-settled that a writ of preliminary attachment may be validly applied for and granted even before the defendant is summoned or is heard from. 2 The rationale behind this rule was stated by the Court in this wise: A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of which a plaintiff or other proper party may, at the commencement of the action or any time thereafter, have the property of the adverse party taken into the custody of the court as security for the satisfaction of any judgment that may be recovered. It is a remedy which is purely statutory in respect of which the law requires a strict construction of the provisions granting it. Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before acquisition of jurisdiction over the person of the defendant. Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time thereafter." The phrase "at the commencement of the action," obviously refers to the date of the filing of the complaint which, as abovepointed out, its the date that marks "the commencement of the action;" and the reference plainly is to a time before summons is served on the defendant or even before summons issues. What the rule is saying quite clearly is that after an action is properly commenced by the filing of the complaint and the payment of all requisite docket and other fees the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counterclaim, cross-claim, third-party claim) and for the Trial Court to issue the writ ex-parte at the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
142 of 501
commencement of the action if it finds the application otherwise sufficient in form and substance. 3
Petitioners then contended that the writ should have been discharged since the ground on which it was issued fraud in contracting the obligation was not present. This cannot be considered a ground for lifting the writ since this delves into the very complaint of the Sun Life. As this Court stated in Cuatro v. Court of Appeals: 4
Moreover, an attachment may not be dissolved by a showing of its irregular or improper issuance if it is upon a ground which is at the same time the applicant's cause of action in the main case since an anomalous situation would result if the issues of the main case would be ventilated and resolved in a mere hearing of the motion (Davao Light and Power Co., Inc. vs. Court of Appeals, supra, The Consolidated Bank and Trust Corp. (Solidbank) vs. Court of Appeals, 197 SCRA 663 [1991]). In the present case, one of the allegation in petitioner's complaint below is that the defendant spouses induced the plaintiff to grant the loan by issuing postdated checks to cover the installment payments and a separate set of postdated checks for payment of the stipulated interest (Annex "B"). The issue of fraud, then, is clearly within the competence of the lower court in the main action. 5
The fact that a criminal complaint for estafa filed by Sun Life against the petitioners was dismissed by the Provincial Prosecutor of Rizal for Makati on April 21, 1992 and was upheld by the Provincial Prosecutor on July 13, 1992 is of no moment since the same can be indicative only of the absence of criminal liability, but not of civil liability. Besides, Sun Life had elevated the case for review to the Department of Justice, where the case is presently pending. Finally, petitioners argue that the enforcement of the writ was invalid since it undisputedly preceded the actual service of summons by six days at most. Petitioners cite the decisions in Sievert vs. Court of Appeals, et al. 6 and BAC Manufacturing and Sales Corp. vs. Court of Appeals, et al., 7 wherein this Court held that enforcement of the writ of attachment can not bind the defendant in view of the failure of the trial court to acquire jurisdiction over the defendant through either summons or his voluntary appearance. We do not agree entirely with petitioners. True, this Court had held in a recent decision that the enforcement of writ of attachment may not validly be effected until and unless proceeded or contemporaneously accompanied by service of summons. 8
But we must distinguish the case at bar from the Sievert and BAC Manufacturing cases. In those two cases, summons was never served upon the defendants. The plaintiffs therein did not even attempt to cause service of summons upon the defendants, right up to the time the cases went up to this Court. This is not true in the case at bar. The records reveal that Sheriff Flores and Sun Life did attempt a contemporaneous service of both summons and the writ of attachment on January 3, 1992, but we stymied by the absence of a responsible officer in petitioners' offices. Note is taken of the fact that petitioners Oate and Econ Holdings admitted in their answer 9 that the offices of both Brunner Development Corporation and Econ Holdings were located at the same address and that petitioner Oate is the President of Econ Holdings while petitioner Dio is the President of Brunner Development Corporation as well as a stockholder and director of Econ Holdings. Thus, an exception to the established rule on the enforcement of the writ of attachment can be made where a previous attempt to serve the summons and the writ of attachment failed due to factors beyond the control of either the plaintiff or the process server, provided that such service is effected within a reasonable period thereafter. Several reasons can be given for the exception. First, there is a possibility that a defendant, having been alerted of plaintiffs action by the attempted service of summons and the writ of attachment, would put his properties beyond the reach of the plaintiff while the latter is trying to serve the summons and the writ anew. By the time the plaintiff may have caused the service of summons and the writ, there might not be any property of the defendant left to attach. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
143 of 501
Second, the court eventually acquired jurisdiction over the petitioners six days later. To nullify the notices of garnishment issued prior thereto would again open the possibility that petitioners would transfer the garnished monies while Sun Life applied for new notices of garnishment. Third, the ease by which a writ of attachment can be obtained is counter- balanced by the ease by which the same can be discharged: the defendant can either make a cash deposit or post a counter-bond equivalent to the value of the property attached. 10 The petitioners herein tried to have the writ of attachment discharged by posting a counter-bond, the same was denied by respondent Judge on the ground that the amount of the counter-bond was less than that of Sun Life's bond. II. Petitioners' second ground assail the acts of respondent Judge in allowing the examination of Urban Banks' records and in ordering that the examination of the bank records of BPI and PNB as invalid since no notice of said examinations were ever given them. Sun Life grounded its requests for the examination of the bank accounts on Section 10, Rule 57 of the Rules of Court, which provided, to wit: Sec. 10. Examination of party whose property is attached and persons indebted to him or controlling his property; delivery of property to officer. Any person owing debts to the party whose property is attached or having in his possession or under his control any credit or other personal property belonging to such party, may be required to attend before the court in which the action is pending, or before a commissioner appointed by the court and be examined on oath respecting the same. The party whose property is attached may also be required to attend for the purpose of giving information respecting his property, and may be examined on oath. The court may, after such examination, order personal property capable of manual delivery belonging to him, in the possession of the person so required to attend before the court, to be delivered to the clerk or court, sheriff, or other proper officer on such terms as may be just, having reference to any lien thereon or claim against the same, to await the judgment in the action. It is clear from the foregoing provision that notice need only be given to the garnishee, but the person who is holding property or credits belonging to the defendant. The provision does not require that notice be furnished the defendant himself, except when there is a need to examine said defendant "for the purpose of giving information respecting his property. Furthermore, Section 10 Rule 57 is not incompatible with Republic Act No. 1405, as amended, "An Act Prohibiting Disclosure or Inquiry Into, Deposits With Any Banking Institution and Providing Penalty Therefore," for Section 2 therefore provides an exception "in cases where the money deposited or invested is the subject matter of the litigation." The examination of the bank records is not a fishing expedition, but rather a method by which Sun Life could trace the proceeds of the check it paid to petitioners. WHEREFORE, the instant petitions are hereby DISMISSED. The temporary restraining order issued on June 28, 1993 is hereby lifted. SO ORDERED.
Onate v. Abrogar (En Banc), 240/241 S 659 EN BANC G.R. No. 107303 February 23, 1995 EMMANUEL C. OATE and ECON HOLDINGS CORPORATION, petitioners, vs. HON. ZEUS C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents. BRUNNER DEVELOPMENT CORPORATION, petitioner, vs. HON. ZEUS C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents. R E S O L U T I O N
MENDOZA, J.: These are motions separately filed by petitioners, seeking reconsideration of the decision of the Second Division holding that although the levy on attachment of petitioners' properties had been made before the trial court acquired jurisdiction over them, the subsequent service of summons on them cured the invalidity of the attachment. The motions were referred to the Court en banc in view of the fact that in another decision rendered by the Third Division on the same question, it was held that the subsequent acquisition of jurisdiction over the person of a defendant does not render valid the previous attachment of his property. 1 The Court en banc accepted the referral and now issues this resolution. Petitioners maintain that, in accordance with prior decisions of this Court, the attachment of their properties was void because the trial court had not at that time acquired jurisdiction over them and that the subsequent service of summons on them did not cure the invalidity of the levy. They further contend that the examination of the books and ledgers of the Bank of the Philippine Islands (BPI), the Philippine National Bank (PNB) and the Urban Bank was a "fishing expedition" which the trial court should not have authorized because petitioner Emmanuel C. Oate, whose accounts were examined, was not a signatory to any of the documents evidencing the transaction between Sun Life Assurance of Canada (Sun Life) and Brunner Development Corporation (Brunner). On the other hand private respondent Sun Life stresses the fact that the trial court eventually acquired jurisdiction over petitioners and contends that this cured the invalidity of the attachment of petitioners' properties. With respect to the second contention of petitioners, private respondent argues that the examination of petitioner Oate's bank account was justified because it was he who signed checks transferring huge amounts from Brunner's account in the Urban Bank to the PNB and the BPI. I At the outset, it should be stated that the Court does not in the least doubt the validity of the writ of attachment issued in these cases. The fact that a criminal complaint for estafa which Sun Life had filed against petitioner Oate and Noel L. Dio, president of Brunner, was dismissed by the Office of the Provincial Prosecutor is immaterial to the resolution of the motions for reconsideration. In the first place, the dismissal, although later affirmed by the Department of Justice, is pending reconsideration. In the second place, since the issue in the case below is precisely whether petitioners were guilty of fraud in contracting their obligation, resolution of the question must await the trial of the main case. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
145 of 501
However, we find petitioners' contention respecting the validity of the attachment of their properties to be well taken. We hold that the attachment of petitioners' properties prior to the acquisition of jurisdiction by the respondent court is void and that the subsequent service of summons on petitioners did not cure the invalidity of such attachment. The records show that before the summons and the complaint were served on petitioners Oate and Econ Holdings Corporation (Econ) on January 9, 1992, Deputy Sheriff Arturo C. Flores had already served on January 3, 1992 notices of garnishment on the PNB Head office 2 and on all its Metro Manila branches and an A.B capital. 3 In addition he made other levies before the service of summons on petitioners, to wit: On January 6, 1992, he served notices of garnishment on the Urban Bank Head Office and all its Metro Manila branches, 4 and on the BPI. 5
On the same day, he levied on attachment Oate's condominium unit at the Amorsolo Apartments Condominium Project, covered by Condominium Certificate of Title No. S-1758. 6
On January 7, 1992, he served notice of garnishment on the Union Bank of the Philippines. 7
On January 8, 1992, he attached Oate's lot, consisting of 1,256 square meters, at the Ayala-Alabang Subdivision, Alabang, Muntinlupa, covered by TCT No. 112673. 8
First. The Deputy Sheriff claims that he had tried to serve the summons with a copy of the complaint on petitioners on January 3, 1992 but that there was no one in the offices of petitioners on whom he could make a service. This is denied by petitioners who claim that their office was always open and that Adeliza M. Jaranilla, Econ's Chief Accountant who eventually received summons on behalf of Oate and Econ, was present that day. Whatever the truth is, the fact is that no other attempt was made by the sheriff to serve the summons except onJanuary 9, 1992, in the case of Oate and Econ, and on January 16, 1992, in the case of Dio. Meantime, he made several levies, which indicates a predisposition to serve the writ of attachment in anticipation of the eventualacquisition by the court of jurisdiction over petitioners. Second. Private respondent invokes the ruling in Davao Light & Power Co. v. Court of Appeals 9 in support of its contention that the subsequent acquisition of jurisdiction by the court cured the defect in the proceedings for attachment. It cites the following portion of the decision in Davao Light and Power, written by Justice, now Chief Justice, Narvasa: It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of the defendant, as above indicated issuance of summons, order of attachment and writ of attachment (and/or appointment of guardian ad litem, or grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment of the complaint by the plaintiff as a matter of right without leave of court and however valid and proper they might otherwise be, these do not and cannot bind and affect the defendant until and unless jurisdiction over his person is eventually obtained by the court, either by service on him of summons or other coercive process or his voluntary submission to the court's authority. Hence, when the sheriff or other proper officer commences implementation of the writ of attachment, it is essential that he serve on the defendant not only a copy of the applicant's affidavit and attachment bond, and of the order of attachment, as explicitly required by Section 5 of Rule 57, but also the summons addressed to said defendant as well as a copy of the complaint and order for appointment of guardian ad litem, if any, as also explicitly directed by Section 3, Rule 14 of the Rules of Court. 10
It is clear from the above excerpt, however, that while the petition for a writ of preliminary attachment may begranted and the writ itself issued before the defendant is summoned, the writ of attachment cannot beimplemented until jurisdiction over the person of the defendant is obtained. As this Court PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
146 of 501
explained, "levy on property pursuant to the writ thus issued may not be validly effected unless preceded, or contemporaneouslyaccompanied, by service on the defendant of summons, a copy of the complaint (and of the appointment of guardian ad litem, if any), the application for attachment (if not incorporated in but submitted separately from the complaint), the order of attachment, and the plaintiff's attachment bond." 11
Further clarification on this point was made in Cuartero v. Court of Appeals, 12 in which it was held: It must be emphasized that the grant of the provisional remedy of attachment practically involves three stages; first, the court issues the order granting the application; second, the writ of attachment issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the defendant should first be obtained. However, once the implementation commences, it is required that the court must have acquired jurisdiction over the defendant for without such jurisdiction, the court has no power and authority to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant. Private respondent argues that the case of Cuartero itself provides for an exception as shown in the statement that "the court [in issuing the writ of preliminary attachment] cannot bind and affect the defendant until jurisdiction is eventually obtained" and that since petitioners were subsequently served with summons, no question can be raised against the validity of the attachment of petitioners' properties before such service. The statement in question has been taken out of context. The full statement reads: It is clear from our pronouncements that a writ of preliminary attachment may issue even before summons is served upon the defendant. However, we have likewise ruled that the writ cannot bind and affect the defendant until jurisdiction over his person is eventually obtained. Therefore, it is required that when proper officer commences implementation of the writ of attachment service of summons should be simultaneously made. 13
Indeed, as this Court through its First Division has ruled on facts similar to those in these cases, the attachment of properties before the service of summons on the defendant is invalid, even though the court later acquires jurisdiction over the defendant. 14 At the very least, then, the writ of attachment must be served simultaneouslywith the service of summons before the writ may be enforced. As the properties of the petitioners were attached by the sheriff before he had served the summons on them, the levies made must be considered void. Third. Nor can the attachment of petitioners' properties before the service of summons on them was made be justified an the ground that unless the writ was then enforced, petitioners would be alerted and might dispose of their properties before summons could be served on them. The Rules of Court do not require that issuance of the writ be kept a secret until it can be enforced. Otherwise in no case may the service of summons on the defendant precede the levy on attachment. To the contrary, Rule 57, 13 allows the defendant to move to discharge the attachment even before any attachment is actually levied upon, thus negating any inference that before its enforcement, the issuance of the writ must be kept secret. Rule 57, 13 provides: Sec. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached may also, at any time either before or after the release of the attached property, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
147 of 501
to discharge the attachment on the ground that the same was improperly or irregularly issued. . . . (Emphasis added). As this Court pointed out in Davao Light and Power, 15 the lifting of an attachment "may be resorted to even before any property has been levied on." It is indeed true that proceedings for the issuance of a writ of attachment are generally ex parte. In Mindanao Savings and Loans Ass'n v. Court of Appeals 16 it was held that no hearing is required for the issuance of a writ of attachment because this "would defeat the objective of the remedy [because] the time which such hearing would take could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues." It is not, however, notice to defendant that is sought to be avoided but the "time which such hearing would take" because of the possibility that defendant may delay the hearing to be able to dispose of his properties. On the contrary there may in fact be a need for a hearing before the writ is issued as where the issue of fraudulent disposal of property is raised. 17 It is not true that there should be no hearing lest a defendant learns of the application for attachment and he remove's his properties before the writ can be enforced. On the other hand, to authorize the attachment of property even before jurisdiction over the person of the defendant is acquired through the service of summons or his voluntary appearance could lead to abuse. It is entirely possible that the defendant may not know of the filing of a case against him and consequently may not be able to take steps to protect his interests. Nor may sheriff's failure to abide by the law be excused on the pretext that after all the court later acquired jurisdiction over petitioners. More important than the need for insuring success in the enforcement of the writ is the need for affirming a principle by insisting on that "most fundamental of all requisites the jurisdiction of the court issuing attachment over the person of the defendant." 18 It may be that the same result would follow from requiring that a new writ be served all over again. The symbolic significance of such an act, however, is that it would affirm our commitment to the rule of law. 19
II We likewise find petitioners' second contention to be meritorious. The records show that, on January 21, 1992, respondent judge ordered the examination of the books of accounts and ledgers of Brunner at the Urban Bank, Legaspi Village branch, and on January 30, 199 the records of account of petitioner Oate at the BPI, even as he ordered the PNB to produce the records regarding certain checks deposited in it. First. Sun Life defends these court orders on the ground that the money paid by it to Brunner was subsequently withdrawn from the Urban Bank after it had been deposited by Brunner and then transferred to BPI and to the unnamed account in the petitioner Oate's account in the BPI and to the unnamed account in the PNB. The issue before the trial court, however, concerns the nature of the transaction between petitioner Brunner and Sun Life. In its complaint, Sun Life alleges that Oate, in his personal capacity and as president of Econ, offered to sell to Sun Life P46,990,000.00 worth of treasury bills owned by Econ and Brunner at the discounted price of P39,526,500.82; that on November 27, 1991, Sun Life paid the price by means of a check payable to Brunner; that Brunner, through its president Noel L. Dio, issued to it a receipt with undertaking to deliver the treasury bills to Sun Life; and that on December 4, 1991, Brunner and Dio delivered instead a promissory note, dated November 27, 1991, in which it was made to appear that the transaction was a money placement instead of sale of treasury bills. Thus the issue is whether the money paid to Brunner was the consideration for the sale of treasury bills, as Sun Life claims, or whether it was money intended for placement, as petitioners allege. Petitioners do not deny receipt of P39,526,500.82 from Sun Life. Hence, whether the transaction is considered a sale or money placement does not make the money the "subject matter of litigation" within the meaning of 2 of Republic Act No. 1405 which prohibits the disclosure or inquiry into bank deposits except "in cases where the money deposited or invested is the subject matter of litigation." Nor will it matter whether the money was "swindled" as Sun Life contends. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
148 of 501
Second. The examination of bank books and records cannot be justified under Rule 57, 10. This provision states: Sec. 10. Examination of party whose property is attached and persons indebted to him or controlling his property; delivery of property to officer. Any person owing debts to the party whose property is attached or having in his possession or under his control any credit or other personal property belonging to such party, may be required to attend before the court in which the action is pending, or before a commissioner appointed by the court, and be examined on oath respecting the same. The party whose property is attached may also be required to attend for the purpose of giving information respecting his property, and may be examined on oath. The court may, after such examination, order personal property capable of manual delivery belonging to him, in the possession of the person so required to attend before the court, to be delivered to the clerk of the court, sheriff, or other proper officer on such terms as may be just, having reference to any lien thereon or claims against the same, to await the judgment in the action. Since, as already stated, the attachment of petitioners' properties was invalid, the examination ordered in connection with such attachment must likewise be considered invalid. Under Rule 57, 10, as quoted above, such examination is only proper where the property of the person examined has been validly attached. WHEREFORE, the decision dated February 21, 1994 is RECONSIDERED and SET ASIDE and another one is rendered GRANTING the petitions for certiorari and SETTING ASIDE the orders dated February 26, 1992 and September 9, 1992, insofar as they authorize the attachment of petitioners' properties and the examination of bank books and records pertaining to their accounts, and ORDERING respondent Judge Zeus C. Abrogar (1) forthwith to issue an alias writ of attachment upon the same bond furnished by respondent Sun Life Assurance Company of Canada; (2) direct the sheriff to lift the levy under the original writ of attachment and simultaneously levy on the same properties pursuant to the alias writ so issued; and (3) take such steps as may be necessary to insure that there will be no intervening period between the lifting of the original attachment and the subsequent levy under the alias writ. Petitioners may file the necessary counterbond to prevent subsequent levy or to dissolve the attachment after such levy. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
149 of 501
HB Zachary v. CA, 232 S 329 FIRST DIVISION G.R. No. 106989 May 10, 1994 H.B. ZACHRY COMPANY INTERNATIONAL, petitioner, vs. HON. COURT OF and VINNEL-BELVOIR CORPORATION, respondents. G.R. No. 107124 May 10, 1994 VINNEL-BELVOIR CORPORATION, petitioner, vs. THE COURT OF APPEALS and H.B. ZACHRY COMPANY INTERNATIONAL, respondents. DAVIDE, JR., J.: Challenged in these petitions for review, which were ordered consolidated on 9 December 1992, 1 is the decision of the Court of Appeals in CA-G.R. SP No. 24174, 2 promulgated on 1 July 1992, the dispositive portion of which reads: WHEREFORE, premises considered, this Petition for Certiorari and Prohibition is hereby granted in so far as it prayed for the dissolution of the writ of preliminary attachment inasmuch as it was issued prior to the service of summons and a copy of the complaint on petitioner. The writ of preliminary attachment issued by respondent Court on March 21, 1990 is hereby ordered lifted and dissolved as having been issued in grave abuse of discretion by respondent Court. With respect to the issue of whether or not parties should submit the instant dispute [to] arbitration, We hereby order public respondent to conduct a hearing for the determination of the proper interpretation of the provisions of the Subcontract Agreement. No pronouncement as to costs. 3
and its 2 September 1992 Resolution 4 which denied the motion for partial reconsideration of H.B. Zachry Company International (hereinafter Zachry) and the motion for reconsideration of Vinnel-Belvoir Corporation (hereinafter VBC). The pleadings of the parties and the challenged decision disclose the following material facts: On 17 July 1987, VBC entered into a written Subcontract Agreement 5 with Zachry, a foreign corporation. The latter had been engaged by the United States Navy to design and construct 264 Family Housing Units at the US Naval Base at Subic, Zambales. Under the agreement, specifically under Section 3 on Payment, VBC was to perform all the construction work on the housing project and would be paid "for the performance of the work the sum of Six Million Four Hundred Sixty-eight Thousand U.S. Dollars (U.S. $6,468,000.00), subject to additions and deductions for changes as hereinafter provided." This "lump sum price is based on CONTRACTOR'S proposal, dated 21 May 1987 (including drawings), submitted to OWNER for Alternate Design- Apartments." It was also provided "that substantial differences between the proposal and the final drawings and Specification approved by the OWNER may be grounds for an equitable adjustment in price and/or time of performance if requested by either party in accordance with Section 6 [on] Changes." 6 Section 27 of the agreement reads: Section 27. DISPUTES PROCEDURE A. In case of any dispute, except those that are specifically provided for in this SUBCONTRACT, between the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
150 of 501
SUBCONTRACTOR and the CONTRACTOR, the SUBCONTRACTOR agrees to be bound to the CONTRACTOR to the same extent that the CONTRACTOR is bound to the OWNER by the terms of the GENERAL CONTRACT and by any and all decisions or determinations made thereunder by the party or boards so authorized in the GENERAL CONTRACT. The SUBCONTRACTOR, on items or issues relating or attributable to the SUBCONTRACTOR, also agrees to be bound to the CONTRACTOR to the same extent that the CONTRACTOR is bound to the OWNER by the final decision of a court of competent jurisdiction, whether or not the SUBCONTRACTOR is a party to such proceeding. If such a dispute is prosecuted or defended by the CONTRACTOR against the OWNER under the terms of the GENERAL CONTRACT or in court action, the SUBCONTRACTOR agrees to furnish all documents, statements, witnesses and other information required by the CONTRACTOR for such purpose. It is expressly understood that as to any and all work done and agreed to be done by the CONTRACTOR and as to any and all materials, equipment or services furnished or agreed to be furnished by the SUBCONTRACTOR, and as to any and all damages incurred by the SUBCONTRACTOR in connection with this SUBCONTRACT, the CONTRACTOR shall not be liable to the SUBCONTRACTOR to any greater extent than the OWNER is liable to and pays the CONTRACTOR for the use and benefit of the SUBCONTRACTOR for such claims, except those claims arising from acts of the CONTRACTOR. No dispute shall interfere with the progress of the WORK and the SUBCONTRACTOR agrees to proceed with his WORK as directed, despite any disputes it may have with the CONTRACTOR, the OWNER, or other parties. B. If at any time any controversy should arise between the CONTRACTOR and the SUBCONTRACTOR, with respect to any matter or thing involved in, related to or arising out of this SUBCONTRACT, which controversy is not controlled or determined by subparagraph 27.A. above or other provisions in this SUBCONTRACT, then said controversy shall be decided as follows: 1. The SUBCONTRACTOR shall be conclusively bound and abide by the CONTRACTOR'S written decision respecting said controversy, unless the SUBCONTRACTOR shall commence arbitration proceedings as hereinafter provided within thirty (30) days following receipt of such written decision. 2. If the SUBCONTRACTOR decides to appeal from the written decision of the CONTRACTOR, then the controversy shall be decided by arbitration in accordance with the then current rules of the Construction Industry Arbitration Rules of the American Arbitration Association, and the arbitration decision shall be final and binding on both parties; provided, however, that proceedings before the American Arbitration Association shall be commenced by the SUBCONTRACTOR not later than thirty (30) days following the CONTRACTOR'S written decision pursuant to subparagraph 27.B.1 above. If the SUBCONTRACTOR does not file a demand for arbitration with the American Arbitration Association and CONTRACTOR within this thirty (30) day period, then the CONTRACTOR'S written decision is final and binding. 3. This agreement to arbitrate shall be specifically enforceable. 7
When VBC had almost completed the project, Zachry complained of the quality of work, making it a reason for its decision to take over the management of the project, which paragraph c, Section 7 of the Subcontract Agreement authorized. However, prior to such take-over, the parties executed on 18 December 1989 a Supplemental Agreement, 8 pertinent portions of which read as follows: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
151 of 501
2. All funds for progress as computed by the schedule of prices under the subcontract will be retained by ZACHRY to insure sufficiency of funds to finish the lump sum project as scoped by the subcontract. However, one month after the date of this agreement, when ZACHRY shall have determined the cost to complete the subcontract, ZACHRY shall as appropriate, release to VBC the corresponding portion of the amounts retained. xxx xxx xxx 7. All costs incurred by ZACHRY chargeable to VBC under the subcontract from the date of the takeover to complete the scope of the subcontract will be to the account of VBC and/or its sureties. Zachry will advise both VBC and its sureties on a periodic basis as to progress and accumulated costs. xxx xxx xxx 9. VBC will be invited to participate in negotiations with the Navy in Change Orders concerning its scope of work. VBC will accept as final, without recourse against ZACHRY the Navy's decision regarding its interest in these Change Orders or modifications. In accordance with the above conditions, VBC submitted to Zachry on 10 January 1990 a detailed computation of the cost to complete the subcontract on the housing project. According to VBC's computation, there remains a balance of $1,103,000.00 due in its favor as of 18 January 1990. This amount includes the sum of $200,000.00 allegedly withheld by Zachry and the labor escalation adjustment granted earlier by the US Navy in the amount of $282,000.00 due VBC. Zachry, however, not only refused to acknowledge the indebtedness but continually failed to submit to VBC a statement of accumulated costs, as a result of which VBC was prevented from checking the accuracy of the said costs. On 2 March 1990, VBC wrote Zachry a letter demanding compliance with its obligations. 9 Zachry still failed to do so. VBC made representations to pursue its claim, including a formal claim with the Officer-in-Charge of Construction, NAVFAC Contracts, Southwest Pacific, 10 which also failed. Hence, on 20 March 1990, VBC filed a Complaint 11 with the Regional Trial Court (RTC) of Makati against Zachry for the collection of the payments due it with a prayer for a writ of preliminary attachment over Zachry's bank account in Subic Base and over the remaining thirty-one undelivered housing units which were to be turned over to the US Navy by Zachry on 30 March 1990. The case was docketed as Civil Case No. 90-772 and was raffled to Branch 142 of the said court presided over by Judge Salvador P. de Guzman, Jr. Paragraph 2 of the Complaint alleges that defendant Zachry "is a foreign corporation with address at 527 Longwood Street, San Antonio, Texas, U.S.A. and has some of its officers working at U.S. Naval Base, Subic Bay, Zambales where it may be served with summons." On 21 March 1990, the trial court issued an order granting the application for the issuance of the writ of preliminary attachment and fixing the attachment bond at P24,266,000.00. 12 VBC put up the required bond and on 26 March 1990, the trial court issued the writ of attachment, 13 which was served, together with the summons, a copy of the complaint with annexes, the bond, and a copy of the order of attachment, on 27 March 1990 in the manner described in the Sheriff's Partial Return 14 of 29 March 1990: upon defendant H.B. Zachry Company (International) at its field office in U.S. Naval Base, Subic Bay, Zambales thru Ruby Apostol who acknowledged receipt thereof. Mr. James M. Cupit, defendant's authorized officer was in their Manila office at the time of service. The return further states: That on March 28, 1990, the undersigned sheriff went to the office of defendant H. B. Zachry Company (International) at c/o A.M. Oreta & Co. at 5th Floor, Ermita Building, Arquiza corner Alhambra streets, Ermita, Manila to serve the Court's PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
152 of 501
processes but was informed by Atty. Felix Lobiro of A.M. Oreta & Co., that defendant H.B. Zachry Company has its own office at Room 600, 6th Floor of the same building (Ermita Building). However, said defendant's office was closed and defendant company (ZACHRY) only holds office during Mondays and Tuesdays of the week as per information gathered from the adjacent office. On 27 March 1990, VBC filed an Amended Complaint 15 in Civil Case No. 90- 772 to implead as additional defendants the US Navy Treasury Office-Subic Naval Base and Captain A.L. Wynn, an officer of the US Navy, against whom VBC prayed for a restraining order or preliminary injunction to restrain the latter from preparing the treasury warrant checks to be paid to Zachry and the former from signing the said checks and to restrain both from making any further payments to Zachry. It also amended paragraph 2 on the status and circumstances of Zachry as follows: 2. Defendant, H.B. Zachry Co. (International) . . . is a foreign corporation with address at 527 Longwood Street, San Antonio, Texas, U.S.A. and may be served with summons and all other legal processes at the following addresses: a) H.B. Zachry Company (International), U.S. Naval Base, Subic Bay, Zambales; and b) H.B. Zachry Company (International) c/o A.M. Oreta & Co., 5th Floor Ermita Building, Arquiza corner Alhambra Streets, Ermita, Manila, through its authorized officer James C. Cupit. 16
On 6 April 1990, Zachry filed a motion to dismiss the complaint 17 on the ground of lack of jurisdiction over its person because the summons was not validly served on it. It alleges that it is a foreign corporation duly licensed on 13 November 1989 by the Securities and Exchange Commission to do business in the Philippines 18 and, pursuant to Section 128 of the Corporation Code of the Philippines, had appointed Atty. Lucas Nunag 19 as its resident agent on whom any summons and legal processes against it may be served. Atty. Nunag's address is at the 10th Floor, Shell House, 156 Valero St., Makati, Metro Manila. Summons and a copy of the Amended Complaint were served on 24 April 1990 on Zachry through Atty. Nunag as shown in the sheriff's return dated 24 April 1990. 20
On 26 April 1990, VBC filed a Manifestation 21 to inform the court of the above service of summons on Zachry which it claimed rendered moot and academic the motion to dismiss. On 24 May 1990, Zachry filed an Omnibus Motion 22 (a) to dismiss the complaint for lack of jurisdiction over its person since the subsequent service of summons did not cure the jurisdictional defect it earlier pointed out and, in the alternative, to dismiss the case or suspend the proceedings therein for failure of the plaintiff to submit the controversy in question to arbitration as provided for in its contract with Zachry; and (b) to dissolve the writ of attachment of 26 March 1990 "for having been issued without jurisdiction, having been issued prior to the service of summons." The arbitration provision referred to is Section 27.B of the Subcontract Agreement quoted earlier. In support of its alternative prayer for the suspension of proceedings, it cited Section 7 of R.A. No. 876, otherwise known as the Arbitration Act which provides: Sec. 7. Stay of Civil Action If any suit or proceeding be brought upon an issue, arising out of an agreement providing for the arbitration thereof, the Court in which such suit or proceeding is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration, shall stay the action or proceeding until an arbitration has been had in accordance with the terms of the agreement. . . . This provision is almost identical with Section 3 of the United States Arbitration Act. As to the invalidity of the writ of attachment, Zachry avails of the decision in Sievert vs. Court of Appeals 23 wherein this Court said: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
153 of 501
Attachment is an ancillary remedy. It is not sought for its own sake but rather to enable the attaching party to realize upon relief sought and expected to be granted in the main or principal action. A court which has not acquired jurisdiction over the person of the defendant, cannot bind that defendant whether in the main case or in any ancillary proceeding such as attachment proceedings. The service of a petition for preliminary attachment without the prior or simultaneous service of summons and a copy of the complaint in the main case and that is what happened in this casedoes not of course confer jurisdiction upon the issuing court over the person of the defendant. 24
VBC opposed the Omnibus Motion. Pleadings related to the Omnibus Motion were subsequently filed. 25
In its Order of 19 September 1990, 26 the trial court resolved the Omnibus Motion and the related incidents by declaring that "the merits of the case can only [be] reached after due presentation of evidence." Hence, it denied the motion and directed the defendants to file their answer within the period provided by law. On 8 October 1990, Zachry filed a motion for the reconsideration 27 of the above order assailing the court's inaction on the second and third issues raised in its Omnibus Motion, viz., the necessity of arbitration and the invalidity of the writ of attachment. VBC opposed the motion. 28 On 9 January 1991, the court issued an order denying the motion for reconsideration by ruling that the writ of preliminary attachment was regularly issued and that the violations of the Subcontract Agreement can be "tranced [sic] only after the case is heard on the merits." Dissatisfied with the denial, Zachry filed with the Court of Appeals on 14 February 1991 a petition for certiorariand prohibition, 29 which was docketed as CA-G.R. SP No. 24174. Zachry contends therein that: 1. The proceedings before respondent trial court should be suspended, pending submission of the dispute to arbitration pursuant to Section 27-B of the Subcontract Agreement; 2. Alternatively, the complaint should be dismissed, pending arbitration pursuant to Section 27-B of the Subcontract Agreement; 3. As a third alternative, the complaint should be dismissed, because the dispute has been resolved with finality under Section 27-B of the Subcontract Agreement; and 4. The writ of preliminary attachment should be dissolved, as having been outside, or in excess of respondent court's jurisdiction, having been issued prior to the service of summons on petitioner. It then prays that (a) the orders of the trial court of 19 September 1990 and 9 January 1991 be annulled for having been issued without or in excess of jurisdiction or with grave abuse of discretion; and (b) the trial court be directed to immediately suspend the proceedings in Civil Case No. 90-772 pending arbitration proceedings in accordance with the terms of Section 27.B of the Subcontract Agreement or, alternatively, to dismiss the amended complaint and dissolve the writ of attachment. It also prays for the issuance of a temporary restraining order and a writ of preliminary injunction to restrain the trial court from proceeding further in Civil Case No. 90-772. On 18 February 1991, the Court of Appeals issued a temporary restraining order. 30
On 1 July 1991, the Court of Appeals promulgated the challenged decision 31 dissolving the writ of preliminary attachment issued by the trial court and ordering it to conduct a hearing to determine the proper interpretation of the provisions of the Subcontract Agreement. As to the writ of attachment, the Court of Appeals held that summons was served on Zachry only on 24 April 1990; hence, applying Sievert vs. Court of Appeals, 32 the trial PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
154 of 501
court "had no authority yet to act coercively against the defendant" when it issued the writ of attachment on 21 March 1990. As to arbitration, it ruled: We are of the reasoned opinion that unlike in the factual situation in the cases cited by petitioner, the contract involved in the case at bar is, with respect to its arbitration clause, vogue [sic] and uncertain. Section 27.B which is the provision upon which petitioner anchors its claims is ambiguous in its terminology when it states that "if at anytime any controversy should arise between the contractor and the subcontractor . . . which controversy is not controlled or determined by Section 27.A above or other provision of this subcontract . . . ." This provision states that only when a controversy arises between the contractor and the subcontractor which is not covered by Section 27.A or any provision of the Subcontract Agreement will the parties submit to arbitration. As to what controversies fall under Section 27.B, it is not clear from a mere perusal of the provisions. It is therefore not correct for petitioner to say that any and all dispute arising between the contracting parties should be resolved by arbitration prior to a filing of a suit in court. 33
VBC and Zachry filed a motion for reconsideration and a partial motion for reconsideration, respectively. 34 The former urged the Court of Appeals to consider the decision of this Court of 29 November 1991 in Davao Light & Power Co. vs. Court of Appeals 35 wherein this Court ruled that a writ of preliminary attachment may be issuedex-parte prior to the service of summons and a copy of the complaint on the defendants. On the other hand, Zachry insists that "[t]here is nothing 'vague' or 'ambiguous about' " the provision on dispute procedures set forth in Subsections 27.B.1 to 27.B.3 of the Subcontract Agreement. In its Resolution of 2 September 1992, 36 the Court of Appeals denied the above motions of the parties. Hence, these petitions which were given due course in this Court's Resolution of 8 March 1993. 37
In G.R. No. 106989, petitioner Zachry reiterates all the issues it raised before the Court of Appeals, except that regarding the validity of the writ of attachment which was decided in its favor. In G.R. No. 107124, petitioner VBC raises the following issues: A. WHETHER THE ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT PRIOR TO THE SERVICE OF THE SUMMONS AND A COPY OF THE AMENDED COMPLAINT ON THE RESPONDENT IS VALID. B. WHETHER RESORT TO ARBITRATION PRIOR TO FILING A SUIT IN COURT IS REQUIRED BY THE SUBCONTRACT AGREEMENT UNDER THE FACTS OBTAINING IN THE PRESENT CASES. As to the first issue, VBC takes refuge in the ruling in Davao Light & Power Co. vs. Court of Appeals 38 and argues that the issuance of the writ of attachment on 21 March 1990, although before the service of the summons, was valid. Its issuance and implementation are two different and separate things; the first is not affected by any defect in the implementation which may be corrected. Moreover, assuming arguendo that the initial service of summons was defective, it was cured by the numerous pleadings thereafter filed. Finally, whatever doubts existed on the effectiveness of the implementation of the writ was erased by its re-service on the resident agent of Zachry. As to the issue on arbitration, VBC maintains that arbitration is not required under the facts obtaining in the present case because the applicable provision of the Subcontract Agreement is Section 3 on Payment and not Section 27.B on Arbitration. Zachry's fraudulent actuations and gross violation of the Subcontract Agreement render prior resort to arbitration futile and useless. The preliminary attachment, which was essential to secure the interest of the petitioner, could not have been obtained through arbitration proceedings. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
155 of 501
Zachry, in its Comment, 39 contends that pursuant to the Sievert and Davao Light rulings, the issuance of the writ of attachment before the service of summons on Zachry's resident agent was invalid and that the various pleadings filed by the parties did not cure its invalidity. It argues that the arbitration procedure is set forth in Section 27.B of the Subcontract Agreement. It further maintains that pursuant to General Insurance vs. Union Insurance, 40 the alleged fraudulent actuations which relate to the merits of the case may be properly addressed to the arbitrators and that there is no merit to the claim that arbitration would be useless since the arbitration proceeding would be presided over by an independent and competent arbitral tribunal. The issues in these petitions are properly defined by VBC in G.R. No. 107124. We find for petitioner VBC. It was error for the Court of Appeals to declare, on the ground of grave abuse of discretion, the nullity of the writ of attachment issued by the trial court on 21 March 1990. In the first place, the writ was in fact issued only on 26 March 1990 and served, together with the summons, copy of the complaint, the Order of 21 March 1990, and the bond, on 27 March 1990 on Zachry at its field office in Subic Bay, Zambales, through one Ruby Apostol. What the Court of Appeals referred to as having been issued on 21 March 1990 is the order granting the application for the issuance of a writ of preliminary attachment upon the posting of a bond of P24,266,000.00. 41 In the second place, even granting arguendo that the Court of Appeals had indeed in mind the 26 March 1990 writ of attachment, its issuance, as well as the issuance of the 21 March 1990 Order, did not suffer from any procedural or jurisdictional defect; the trial court could validly issue both. However, the writ of attachment cannot be validly enforced through the levy of Zachry's property before the court had acquired jurisdiction over Zachry's person either through its voluntary appearance or the valid service of summons upon it. 42 To put it in another way, a distinction should be made between the issuance and the enforcement of the writ. The trial court has unlimited power to issue the writ upon the commencement of the action even before it acquires jurisdiction over the person of the defendant, but enforcement thereof can only be validly done after it shall have acquired such jurisdiction. This is the rule enunciated in Davao Light & Power Co. vs. Court of Appeals. 43 In that case, this Court stated: The question is whether or not a writ of preliminary attachment may issue ex parte against a defendant before acquisition of jurisdiction of the latter's person by service of summons or his voluntary submission to the Court's authority. The Court rules that the question must be answered in the affirmative and that consequently, the petition for review will have to be granted. It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of the plaintiff has been vested in the court, but before the acquisition of jurisdiction over the person of the defendant (either by service of summons or his voluntary submission to the court's authority), nothing can be validly done by the plaintiff or the court. It is wrong to assume that the validity of acts done during this period should be dependent on, or held in suspension until, the actual obtention of jurisdiction over the defendant's person. The obtention by the court of jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person of the plaintiff or over the subject-matter or nature of the action, or the res or object thereof. 44
xxx xxx xxx A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of which a plaintiff or other proper party may, at the commencement of the action or at any time thereafter, have the property of the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
156 of 501
adverse party taken into the custody of the court as security for the satisfaction of any judgment that may be recovered. It is a remedy which is purely statutory in respect of which the law requires a strict construction of the provisions granting it. Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before acquisition of jurisdiction over the person of the defendant. Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time thereafter." The phrase "at the commencement of the action," obviously refers to the date of the filing of the complaint which, as above pointed out, is the date that marks "the commencement of the action;" and the reference plainly is to a time before summons is served on the defendant, or even before summons issues. What the rule is saying quite clearly is that after an action is properly commenced by the filing of the complaint and the payment of all requisite docket and other fees the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counterclaim, cross-claim, third-party claim) and for the Trial Court to issue the writ ex-parte at the commencement of the action if it finds the application otherwise sufficient in form and substance. 45
xxx xxx xxx It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of the defendant, as above indicated issuance of summons, order of attachment and writ of attachment (and/or appointment of guardian ad litem, or grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment of the complaint by the plaintiff as a matter of right without leave of court) and however valid and proper they might otherwise be, these do not and cannot bind and affect the defendant until and unless jurisdiction over his person is eventually obtained by the court, either by service on him of summons or other coercive process or his voluntary submission to the court's authority. Hence, when the sheriff or other proper officer commences implementation of the writ of attachment, it is essential that he serve on the defendant not only a copy of the applicant's affidavit and attachment bond, and of the order of attachment, as explicitly required by Section 5 of Rule 57, but also the summons addressed to said defendant as well as a copy of the complaint and order for appointment of guardian ad litem, if any, as also explicitly directed by Section 3, Rule 14 of the Rules of Court. Service of all such documents is indispensable not only for the acquisition of jurisdiction over the person of the defendant, but also upon considerations of fairness, to apprise the defendant of the complaint against him, of the issuance of a writ of preliminary attachment and the grounds therefor and thus accord him the opportunity to prevent attachment of his property by the posting of a counterbond in an amount equal to the plaintiff's claim in the complaint pursuant to Section 5 (or Section 12), Rule 57, or dissolving it by causing dismissal of the complaint itself on any of the grounds set forth in Rule 16, or demonstrating the insufficiency of the applicant's affidavit or bond in accordance with Section 13, Rule 57. 46
xxx xxx xxx For the guidance of all concerned, the Court reiterates and reaffirms the proposition that writs of attachment may properly issue ex parte provided that the Court is satisfied PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
157 of 501
that the relevant requisites therefor have been fulfilled by the applicant, although it may, in its discretion, require prior hearing on the application with notice to the defendant; but that levy on property pursuant to the writ thus issued may not be validly effected unless preceded, or contemporaneously accompanied, by service on the defendant of summons, a copy of the complaint (and of the appointment of guardian ad litem, if any), the application for attachment (if not incorporated in but submitted separately from the complaint), the order of attachment, and the plaintiff's attachment bond. 47
We reiterated the rule laid down in Davao Light in the subsequent case of Cuartero vs. Court of Appeals 48 wherein we stated: It must be emphasized that the grant of the provisional remedy of attachment practically involves three stages: first, the court issues the order granting the application; second, the writ of attachment issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the defendant should first be obtained. However, once the implementation commences, it is required that the court must have acquired jurisdiction over the person of the defendant for without such jurisdiction, the court has no power and authority to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant. The validity then of the order granting the application for a writ of preliminary attachment on 21 March 1990 and of the issuance of the writ of preliminary attachment on 26 March 1990 is beyond dispute. However, the enforcement of the preliminary attachment on 27 March 1990, although simultaneous with the service of the summons and a copy of the complaint, did not bind Zachry because the service of the summons was not validly made. When a foreign corporation has designated a person to receive service of summons pursuant to the Corporation Code, that designation is exclusive and service of summons on any other person is inefficacious. 49 The valid service of summons and a copy of the amended complaint was only made upon it on 24 April 1990, and it was only then that the trial court acquired jurisdiction over Zachry's person. Accordingly, the levy on attachment made by the sheriff on 27 April 1990 was invalid. However, the writ of preliminary attachment may be validly served anew. As to the second issue of arbitration, we find that although the order of the trial court denying the motion to dismiss did not clearly state so, it is evident that the trial court perceived the ground of the motion to be not indubitable; hence, it could defer its resolution thereon until the trial of the case. In deciding a motion to dismiss, Section 3, Rule 16 of the Rules of Court grants the court four options: (1) to deny the motion, (2) to grant the motion, (3) to allow amendment of pleadings, or (4) to defer the hearing and determination of the motion until the trial, if the ground alleged therein does not appear to be indubitable. Under the fourth option, the court is under no obligation to immediately hold a hearing on the motion; it is vested with discretion to defer such hearing and the determination of the motion until the trial of the case. 50 The lack of indubitability of the ground involved in Zachry's motion to dismiss is confirmed by the Court of Appeals when it declared: Section 27. B which is the provision upon which petitioner [Zachry] anchors its claim is ambiguous in its terminology when it states that "if at any time any controversy should arise between the contractor and the subcontractor . . . which controversy is not controlled or determined by Section 27.A above or other provisions of this subcontract' . . . . This provision states that only when a controversy arises between the contractor and subcontractor which is not covered by Section 27.A or any provision of the Subcontract will the parties submit to arbitration. As to what controversies fall under Section 27.B, it is not clear from a mere perusal of the provisions. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
158 of 501
Indeed, the parties could not even agree on what controversies fall within Section 27.B, and, perhaps, rightly so because the said Section 27.B excludes controversies controlled or determined by Section 27.A and other provisions of the Subcontract Agreement, which are themselves unclear. For that reason, VBC insists that its cause of action in Civil Case No. 90-772 is based on Section 3 of the Subcontract Agreement. It may further be emphasized that VBC's complaint was precipitated by Zachry's refusal to comply with the Supplemental Agreement. Evidently, Section 3 of the Subcontract Agreement and the Supplemental Agreement are excluded by Section 27.B. The trial court was, therefore, correct in denying Zachry's motion to dismiss. However, we cannot give our assent to the Court of Appeals' order directing the trial court to conduct a hearing for the determination of the proper interpretation of the provisions of the Subcontract Agreement. It would re- open the motion to dismiss which, upon the trial court's exercise of its discretion, was properly denied for lack of indubitability of the ground invoked and thereby unduly interfere with the trial court's discretion. The proper interpretation could only be done by the trial court after presentation of evidence during trial on the merits pursuant to the tenor of its order denying the motion to dismiss. If the trial court should find that, indeed, arbitration is in order, then it could apply Section 7 of R.A. No. 876 which reads as follows: Sec. 7. Stay of civil action. If any suit or proceeding be brought upon an issue arising out of an agreement providing for the arbitration thereof, the court in which such suit or proceeding is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration, shall stay the action or proceeding until an arbitration has been had in accordance with the terms of the agreement: Provided, That the applicant for the stay is not in default in proceeding with such arbitration. WHEREFORE, the petition in G.R. No. 107124 is GRANTED while that in G.R. No. 106989 is DENIED for lack of merit. The challenged Decision of 1 July 1992 and Resolution of 2 September 1992 are hereby SET ASIDE. The orders of Branch 142 of the Regional Trial Court of Makati in Civil Case No. 90-772 of 19 September 1990 denying the motion to dismiss and of 8 October 1990 denying the motion to reconsider the former are REINSTATED. However, the service of the writ of preliminary attachment on 26 March 1990 is hereby declared invalid. The writ may, nevertheless, be served anew. No pronouncement as to costs. SO ORDERED.
Roque v. CA, 93 S 540 FIRST DIVISION G.R. No. L-42594 October 18, 1979 ELIGIO ROQUE and RODRIGO G. MALONJAO, petitioners, vs. HON. COURT OF APPEALS, HON. JUDGE CARLOS L. SUNDIAM, (CFI- Manila, Branch XXVIII) ASSOCIATED BANKING CORPORATION FIL- EASTERN WOOD INDUSTRIES, INC., CITY SHERIFF OF MANILA, DEPUTY SHERIFFS ADRIEL GARCIA and BENJAMIN GARVIDA, respondents. Laurel Law Office for petitioner. Paterno C. Pajares for respondents.
MELENCIO-HERRERA, J.: Treating this Petition as a special civil action for Certiorari, we affirm the Decision of the Court of Appeals denying petitioners' prayer to set aside the trial Court Order, dated April 14, 1975, to surrender the barge in question under pain of contempt, and its subsequent Orders denying their Motion for Reconsideration. There is no dispute as to the following background facts: On January 31, 1973, respondent Associated Banking Corporation (the Bank, for short) instituted an action, Civil Case No. 89692, in the Court of First Instance of Manila, Branch XXVIII, respondent Judge, presiding, against private respondent Fil-Eastern Wood Industries, Inc. (Fil-Eastern, for brevity), a domestic corporation, for recovery of a sum of money. Upon ex-parte application by the Bank for a Writ of Preliminary Attachment, respondent Judge, after the filing and approval of the required bond of P220,000.00, issued, on February 4, 1974, an Order of Attachment commanding the Sheriff to attach the estate, real and personal, of Fil-Eastern. 1
On February 7, 1974, the Sheriff's "Notice of Levy Pursuant to the Writ of Attachment" was registered in the Office of the Commander of the First Coast Guard, District of Manila, 2 pursuant to Sec. 805 of the Tariff and Customs Code, as amended by Presidential Decree No. 34, requiring the registration of documents affecting titles of vessels with that entity. The said notice read, "levy is hereby made upon all the rights, titles, interest, shares and participation which the defendant Fil-Eastern Wood Industries, Inc. has or might have over a sea vessel or barge named Fil-Eastern V. It appears that prior to the issuance of said Writ of Attachment, Fil-Eastern had delivered the barge to the Cotabato Visayan Development Corporation sometime in April, 1973, for repair. The job was completed in June 1973, but Fil-Eastern failed to pay the cost of repairs of P261,190.59. Pursuant to the provisions of Article 2112 3 in relation to Article 1731 4 of the Civil Code, the Cotabato Visayan Development Corporation proceeded before Notary Public Clemente R. Gonzales of Manila to the sale of said barge. In the public auction sale conducted by said Notary Public on April 24, 1974, petitioner Eligio Roque acquired the barge as the highest bidder, and was accordingly issued a Certificate of Sale by the Notary Public. On the same date, the Cotabato Visayan Development Corporation issued an Affidavit of Release of mechanic's lien against Fil-Eastern. The Certificate of Sale was received in the office of the Philippine Coast Guard on May 3, 1974. 5 It wag not until December 24, 1974, however, that Certificate of Ownership No. 8647, a Certificate. of Philippine Register, a Certificate of Change of Name of Vessel from Fil-Eastern V" to "Satellite I I, " as well as a Coastwise License, were issued to Roque by the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
160 of 501
Philippine Coast Guard. 6 These muniments of title were issued only after counsel for Eligio Roque had assured the Philippine Coast Guard, in a letter dated November 13, 1974, that "without touching on the merit of the preference of our client's claim in relation to the levy registered by other claimants, such levy is not in any manner a legal obstacle to the registration of the vessels in our client's name." 7 Acting thereon, the Acting Commandant of the Philippine Coast Guard in a letter dated November 23, 1974, authorized the issuance of a new certificate of registration annotating thereon any levy validly registered against said vessel(s)." 8 However, neither the Certificate of Ownership nor the Certificate of Philippine Register appended as Annexes "C" and "D", respectively, to petitioners' Urgent Manifestation and Motion filed before the lower Court 9 carry that annotation. On August 29, 1974, the Bank filed a "Motion for the Issuance of Another Writ of Attachment" stating that at the time of the issuance of the Writ on February 4, 1974, the barge in question could not be located within the jurisdiction of the trial Court. having been anchored somewhere in the Visayas, and that actual levy on the barge could not be made as "the original Order of attachment is allegedly in the possession of the Branch Deputy Sheriff appointed by the Honorable Court, who has not reported to the office since August 26, 1974, and, therefore, could not implement the writ." 10 On the same date, August 29, 1974, the trial Court (Judge Rafael S. Sison, presiding) denied the issuance of another Writ (apparently ' v because it was deemed unnecessary), but instead ordered the Deputy Sheriff of Branch XXVIII to coordinate with the City Sheriff of Manila in the implementation of the Writ previously issued. 11 On August 30, 1974, Deputy Sheriff Garvida actually seized and levied upon the vessel. On October 7, 1974, respondent Bank and respondent Fil-Eastern submitted a Compromise Agreement whereby Fil-Eastern bound itself to pay to the Bank the principal amount of P200,000.00, with 1417,9 interest, plus other amounts stated therein. On October 9, 1974, respondent Judge approved the Agreement and rendered judgment accordingly. On November 6, 1974, the Bank moved for the issuance of a Writ of Execution for failure of Fil-Eastern to make payments within the period stipulated in the Compromise Agreement. Meanwhile, without prior authority from Deputy Sheriff Garvida the barge in question was "spirited away" to Bacolod City by a certain Captain Marcelino Agito, who claimed to have been given the right to use the same by Fil- Eastern. 12
On January 6, 1975, respondent Judge issued an Order requiring Capt. Marcelino Agito, in coordination with Deputy Sheriff Benjamin E. Garvida to bring back to Manila the barge in question. 13
On March 7, 1975, respondent Judge issued a Writ of Execution and ordered the sale of the barge at public auction, as follows: ORDER The Decision rendered by this Court under date of October 9, 1974 having already become final and executory, let a Writ of Execution be issued to be enforced by Sheriff Adriel V. Garcia by conducting an auction sale on the vessel placed under attachment. The satisfaction of the judgment in this case shall be given preference and the payment of the third party claim of Alfredo H. Maligaya for and in behalf of Leonardo M. Canoso shall be satisfied from whatever remaining proceeds of the auction sale on the aforedsaid vessel, if there be any. SO ORDERED. 14
On April 7, 1975, Capt. Marcelino Aguito and Deputy Sheriff Benjamin Garvida filed a Manifestation stating that petitioner Rodrigo Malonjao, acting for and in behalf of his co-petitioner Eligio Roque, refused to-surrender the barge on the ground I d that Eligio Roque is now the new owner, having acquired the same by purchase at public auction, and praying that petitioners, and all persons claiming under them, be directed to surrender the barge to the custody of the Court through its duly authorized representative. On April 14, 1975, respondent Judge issued the following Order: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
161 of 501
Upon motion filed by Capt. Marcelino Agito and Deputy Sheriff Benjamin Garvida and considering the absence of a formal claim with this Court filed by Eulogio Roque, personally or through counsel, relative to the barge SATELLITE II, EX-FIL-EASTERN V', subject of the writ of Attachment issued by this Court on February 7, 1974, and in order to prevent further delay in the implementation of the Order of this Court dated March 7, 1975, Rodrigo Malonjao and Eulogio Roque and an persons claiming right under them over the aforesaid vessel, including those acting under their direction or supervision, are hereby ordered under pain of being cited in contempt of Court to forthwith surrender possession of the above said vessel to Sheriff Adriel V. Garcia so that the latter may be able to implement fully and expeditiously the aforesaid Order of this Court dated March 7, 1975. ... 15
On April 24, 1975, petitioners filed before the trial Court an Urgent Manifestation and Motion seeking to set aside the Order of April 14, 1975, claiming that Roque is now the new owner of the barge having acquired the same at a public auction sale arising from a mechanic's lien. The Motion was denied by respondent Judge on the ground that the records belied petitioners' claim that the auction sale occurred very much ahead of the notice of levy. Petitioners' first and second Motion for Reconsideration were similarly denied. On July 16, 1975, respondent Deputy Sheriff Adriel V. Garcia submitted a report informing the Court that the barge in question had been turned over to him and was anchored along Pasig River, under guard. On August 28, 1975, petitioners sought relief from the Court of Appeals by filing a "Petition for certiorari and Prohibition with Preliminary Injunction and Preliminary Mandatory Injunction" assailing and asking to vacate the Orders issued in Civil Case No. 89692 by respondent Judge as well as the Writs, notices and other processes emanating therefrom. The Court of Appeals, * in denying the Petition in its Decision promulgated on November 24, 1975, ruled that certiorari did not lie as petitioner was not without sufficient and adequate remedy to obtain relief from the damaging effects of the Orders complained of. Petitioner filed the present Petition on March 1, 1976 before this Court, claiming that they are purchasers in good faith and for valuable consideration, having actually paid the total amount of P354,689.00 to the Cotabato Visayan Development Corporation for three barges, one of which is the barge in question. They have also raised the following legal issues: 1. The decision of the respondent Court of Appeals sustaining the challenged orders, writs and other processes issued by the respondent Judge is contrary to the provisions of Art. 1731 in relation to Art. 2112 of the New Civil Code and to the ruling laid down in Bank of P.I. vs. Walter A. Smith' & Co., 55 Phil. 533 and Bachrach Motor Co. vs. Mendoza, 43 Phil. 410. 2. If the levy and/or attachment by the sheriff of the barge in question are illegal, will herein petitioner be required to avail of Section 14, Rule 57 and/or Section 17, Rule 39 of the Revised Rules of Court? On July 19, 1976, we issued a Restraining Order enjoining respondents from proceeding with the projected sale at public auction of the barge, subject of this litigation. We also declared the case submitted for decision. On January 18, 1977, the Bank filed a Motion for Authority to Sell the barge under attachment. This was opposed, however, by petitioners and we resolved to defer resolution until decision on the merits is rendered. On May 31, 1979, the Bank filed a Motion for Early Resolution, but the same was agendaed only on September 24, 1979. We take note of the BANK's contention that ever since the Sheriff took custody of the vessel on July 16, 1975, the same has been lying Idle, moored at the Muelle de la Industrial, Pasig River, exposed to the elements, and has deteriorated rapidly, hence the need for early resolution. It should be reiterated that this is a special civil action for Certiorari, the main requisites for the issuance of which Writ are: 1) that the Writ be directed against a tribunal, board or officer exercising judicial PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
162 of 501
functions; 2) that such tribunal, board or officer has acted without or in excess of jurisdiction or with grave abuse of discretion; and 3) that there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law. 16 While the first requisite has been met, the second-hand the third have not. We agree with the findings of the Court of Appeals that petitioners were not without any plain, speedy and adequate remedy in the ordinary course of law. For one, upon the issuance of the Order, dated August 29, 1974, commanding the implementation of the Writ of Attachment, petitioners could have availed themselves of the remedy provided for in Section 14, Rule 57 of the Rules of Court, which reads: If the property taken be claimed by any person other than the party against whom attachment had been issued or his agent, and such person makes an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serves such affidavit upon the officer while the latter has possession of the property, and a copy thereof upon the attaching creditor, the officer shall not be bound to keep the property under attachment, unless the attaching creditor or his agent, on demand of the said officer, secures him against such claim by a bond in a sum not greater than the value of the property attached. ... For another, when respondent Sheriff seized the vessel in question to be sold at public auction in accordance with the Order of execution of March 7, 1975, petitioner could have availed of the remedy under Section 17, Rule 39 of the Rules of Court which provides: If the property levied on be claimed by any other person than the Judgment debtor or his agent, and such person make an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serve the same upon the officer making the levy, and a copy thereof upon the judgment creditor, the officer shall not be bound to keep the property, unless such judgment creditor or his agent, on demand of the officer, indemnify the officer against such claim by a bond in a sum not greater than the value of the property levied on. ... Petitioner Eligio Roque argues, however, that he could not avail of the foregoing Rules inasmuch as the vessel was not in the actual custody of the Sheriff nor of the Court, since the supposed levy by the Sheriff on February 7, 1974 was a mere paper levy which, in legal contemplation, is no levy at an. It is a fact that respondent Sheriff could not effect seizure immediately, first, because the barge could nowhere be found in this vicinity, and subsequently when found, because petitioners would not deliver possession to the Sheriff. It was not until the trial Court granted the Sheriff's Motion praying for an Order directing petitioners or their agents to surrender the barge to the custody of the Court, that the Sheriff was able to take physical custody. As a general rule, however, a levy of an attachment upon personal property may be either actual or constructive. 17 In this case, levy had been constructively made by the registration of the same with the Philippine Coast Guard on February 7, 1974. Constructive possession should be held sufficient where actual possession is not feasible, 18 particularly when it was followed up by the actual seizure of the property as soon as that could possibly be effected. Petitioners further argue that the levy was illegal because the Writ was implemented more than sixty days after its issuance so that they need not have complied with Section 14, Rule 57, supra. The Rules do not provide any lifetime for a Writ of Attachment unlike a Writ of Execution. But even granting that a Writ of Attachment is valid for only sixty days, yet, since there was constructive levy within that period the fact that actual seizure was effected only thereafter cannot affect the validity of that levy. Neither can it be said that respondent Judge committed grave abuse of discretion in issuing the challenged Order of April 14, 1975, supra, whereby it commanded the immediate implementation of the Order of execution of March 7, 1975 and ordered petitioners to surrender possession of the barge to the Sheriff under pain of contempt. A trial Court is enjoined by law to bring about a prompt dispatch of the controversy pending before it. As it was, it took PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
163 of 501
the trial Court more than a year to cause the enforcement of its Writs and processes. Moreover, its Decision of October 9, 1974 had become final and executory, and execution then became purely a ministerial phase of adjudication. It had no jurisdiction to pass upon petitioners' claim of ownership not only because trial in that, case had already been terminated but also considering that petitioners were not parties in the case below nor had they filed any third-party claim for the enforcement of their rights. Verily, petitioners' remedy was to ventilate their claims of ownership in a separate and independent reivindicatory action, as even then suggested by the Court of Appeals. That was the arena where the question of preferential rights, if any, impliedly raised in the first assigned error, could have been fully threshed out. ...a third person claiming to be the owner of the property attached or levied upon is required to file a separate or independent action to determine whether the property should answer for the claim of the attaching or judgment creditor instead of being allowed to raise that issue in the case where the writ of attachment or execution was issued (Sec. 17, Rule 39 and sec. 14, Rule 57, Rules of Court; Bayer Philippines, Inc. vs. Agana, L-38701, April 8, 1975, 63 SCRA 355). 19
In the interest of justice, petitioners can still file an independent civil action to establish their ownership over the barge, if they have not yet done so. WHEREFORE, in the absence of jurisdictional errors, this Petition is dismissed, and the Restraining Order, heretofore issued, hereby lifted effective immediately. No costs. SO ORDERED.
Siari Valley Estates v. Lucasan, 109 Phil. 294 EN BANC DECISION August 31, 1960 G.R. No. L-13281 SIARI VALLEY ESTATES, INC., petitioner, vs. FILEMON LUCASAN, ET AL., respondents. Orendain and Sarmiento for petitioner. Barrios, Lucasan and Lucasan for respondents. , J.: On January 30, 1952, the Court of First Instance of Zamboanga del Norte rendered decision ordering Filemon Lucasan to deliver to the Siari Valley Estates, Inc. the cattle inside the formers pasture or pay its value amounting to P40,000.00 and damages in another sum of P40,000.00, This decision was affirmed in toto by the Supreme Court, and when the same became final and executory, a writ of execution was issued. In carrying out this writ, the sheriff proceeded to levy on certain parcels of lands belonging to defendant. These lands were sold by the sheriff at public auction to the corporation as the highest bidder on January 14, 1956. The judgment debtor having failed to redeem the land within the period of one year, on January 26, 1957, the sheriff issued in favor of the purchaser the final certificate of sale, copy of which was registered in the Office of the Register of Deeds of Zamboanga. On February 16, 1957, upon petition of the corporation, a writ of possession was issued directing the sheriff to place said corporation in possession thereof. Notwithstanding said writ, however, the corporation failed to take possession of the lands, hence it filed a motion reiterating its petition that it be placed in their possession. This time judgment debtor Filemon Lucasan filed an opposition alleging that he was in possession of one of the parcels of land sold at public auction on which he has erected a house and which he has extra judicially constituted as a family home, the rest being in possession of third parties. On April 30, 1957, the court, overruling the opposition, issued an order directing the sheriff to place the corporation in possession of the lands sold to it. On August 7, 1957, debtor Lucasan filed a motion for reconsideration which was denied, the court reiterating its previous order with little amendment, but on August 23, 1957 issued another order allowing the corporation to take possession of all lands sold, with the exception of parcel 1 on which the family home was constituted, holding that the levy and sale made by the sheriff with regard to said parcel were not made in accordance with law and so are null and void. Having failed to have this last order reconsidered, the corporation interposed the present petition for certiorari. It appears that parcel 1 is a registered land covered by Certificate of Title No. OCT-2492, Patent No. 50967, duly registered in the Office of the Register of Deeds of Zamboanga del Norte in the name of Filemon Lucasan. On this land stands a big house of mixed materials which is asserted in the amount of P23,270.00 as evidenced by Tax Declaration No. 7653. It also 37 3 appears that Filemon Lucasan and his wife constituted this house and the lot on which stands into a family home, the pertinent document having been registered in the office of the register of deeds on June 21, 1955. In opposing the petition of the corporation for a writ of possession insofar as this property is concerned, Lucasan contended that said lot and house having been constituted as a family home are beyond the reach of judicial execution. He contended that the levy made by the sheriff on said property is legally ineffective because it was not effected in accordance with what is prescribed in Section 14, Rule 39, in relation to Section 7, Rule 59, of the Rules of Court. There is merit in this contention. The evidence shows that when this property was levied on execution by the sheriff to satisfy the judgment rendered against Filemon Lucasan in favor of petitioner corporation the notice of levy merely described the property as unregistered land and the same was registered under Act 3344 in the office of the register of deeds. It also appears that in the notice PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
165 of 501
of sale the property was merely described according to the boundaries and area appearing in the tax declaration and not according to what appears in the certificate of title. On the other hand, the rule provides that real property shall be levied on in like manner and with like effect as under an order of attachment (Section 14, Rule 39), and the provision regarding attachment of real property postulates that the attachment shall be made by filing with the register of deeds a copy of the order, together with the description of the property attached, and a notice that it is attached, and by leaving a copy of said order, description, and notice with the occupant of the property, if any there be, and that Where the property has been brought under the operation of the Land Registration Act, the notice shall contain a reference to the number of the certificate of title and the volume and page in the registration book where the certificate is registered (Section 7 [a], Rule 59). These provisions should be strictly construed if their purpose has to be accomplished. The requirement that the notice of levy should contain a reference to the number of the certificate of title and the volume and page in the registration book where the certificate is registered is made in order that the debtor as well as a third person may be properly informed of the particular land or property that is under the custody of the court. This can only be accomplished by making a reference to the certificate of title covering the property. The situation differs if the land is unregistered in which case it is enough that the notice be registered under Act 3344. This conclusion finds support in the following authorities: An attachment levied on real estate not duly recorded in the registry of property is not an encumbrance on the attached property, nor can such attachment, unrecorded in the registry, serve as a ground for decreeing the annulment of the sale of the property, at the request of another creditor. (Gonzales Diez vs. Delgado and Imperial, 37 Phil. 389) In conformity with the provisions of section 71 of the Land Registration Act, the sheriff of the City of Manila filed a notice of the levy with the register of deeds, which notice was entered in the primary entry book of the registers office, but was afterwards, on May 20, 1920, returned to the sheriff with the information that the property was registered in the name of Buenaventura Dizon, having been conveyed to the latter by the defendant in execution, Celerino Arellano, and that, therefore, no memorandum of the notice had been entered upon the outstanding certificate of title. It may be noted that the notice contained no reference to the number of the certificate of title of the land to be effected and the volume and page in the registry book where the certificate is registered, and that t that extent, the notice did not meet the requirements of said section 71. (De Ocampo vs. Treasurer of the Philippine Islands, 50 Phil. 140, 141; Emphasis supplied). Since the notice of levy made by the sheriff as regards parcel number 1 which is a registered land contains no reference to the number of its certificate of title and the volume and page in the registry book where the title is registered, it follows that said notice is legally ineffective and as such did not have the effect of binding the property for purposes of execution. Consequently, the sale carried out by virtue of said levy is also invalid and of no legal effect. The second issue raised is: Is the family home extra judicially established by respondent on the lot and house in question exempt from execution? Respondent sustains the affirmative considering that the money judgment rendered against him was appealed to the Supreme Court in which event, he contends, the same could not be considered as a debt at the time the family home was constituted for it was still inchoate and as such cannot come under the provisions of Article 243 (2) of the new Civil Code. The article above referred to provides that The family home extra judicially formed shall be exempt from execution except for debts incurred before the declaration was recorded in the Registry of Property. What if the meaning of the word debt used in this article? Does it refer to a debt that is undisputed, or may it also refer to any pecuniary obligation even if the same has not yet been finally determined? In other words, can a judgment for a sum of money be considered a debt within the meaning of this provision even if said judgment is still pending appeal? We are inclined to uphold the affirmative considering the real purpose of the law. The reason why a family home constituted after a debt had been incurred is not exempt from execution is to protect the creditor against a debtor who may act in bad faith by resorting to such declaration just to defeat the claim PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
166 of 501
against him. If the purpose is to protect the creditor from fraud it would be immaterial if the debt incurred be undisputed or inchoate, for a debtor acting in good faith would prefer to wait until his case is definitely decided before constituting the family home. Indeed, it may result, as in this case, that the Supreme Court may affirm the judgment of the lower court. If the contention of respondent be sustained a debtor may be allowed to circumvent this provision of the law to the prejudice of the creditor. This the Court cannot countenance. Hence, we are persuaded to conclude that the money judgment in question comes within the purview of the word debt used in Article 243 (2) of the new Civil Code. WHEREFORE, the order appealed from is hereby affirmed, without prejudice of the part of petitioner to file a new petition for execution following strictly the requirements of the rule on the matter. No pronouncement as to costs.
Ravanera v. Imperial, 93 S 589 FIRST DIVISION G.R. No. L-34657 October 23, 1979 ERLINDA RAVANERA and husband OSCAR RAVANERA, petitioners, vs. FELIPE I. IMPERIAL, respondent. Borja & Naval for petitioners. Abonal & Abonal for respondent.
DE CASTRO, J.: Appeal by certiorari taken by petitioners from (a) the decision of the Court of Appeals in CA-G.R. No. SP-00080, entitled "Felipe I. Imperial, petitioner versus Hon. Delfin Vir. Sunga, Judge, Court of First Instance of Camarines Sur, Erlinda Ravanera and husband Oscar Ravanera, respondents" promulgated on November 16, 1971 setting aside the orders dated March 18, 1971 and March 30, 1971 issued by the Court of First Instance of Camarines Sur in Civil Case No. 5292, entitled "The Roman Catholic Archbishop of Caceres, plaintiff, versus Felipe I. Imperial, defendant," and from (b) the former's resolution of January 10, 1972 denying petitioners' motion for reconsideration. The facts found by the Court of Appeals are as follows: It appears that on October 17, 1961 the Roman Catholic Archbishop of Caceres filed an action for Rescission of Contract and Recovery of Possession against the herein petitioner before the respondent court. Said case was decided by the respondent court in favor of the plaintiff on January 28, 1966. On February 17, 1966 pending approval of the Record on Appeal, plaintiff Archbishop of Nueva Caceres filed a Motion for Execution of the decision or to order defendant to file supersedeas bond and to deposit the amount of P500.00 every month as rentals. On May 6, 1966 the respondent Court granted the motion for execution pending appeal and at the same time ordered that to stay the execution, the defendant put up a supersedeas bond in the amount of P40,000.00 for the rents due as of February, 1966, for the amount of moral damages, and for the expenses of suit and to deposit the amount of P500.00 as monthly rental of the property. This order became the subject of a Special Civil Action for certiorari and prohibition before the Supreme Court and by reason of the pendency of said special civil action the order of execution was not enforced by the plaintiff. On December 10, 1966, the record on appeal was approved and the appealed case is now docketed as CA-G.R. No. 39115- R, in this Court. On May 22, 1968, the Supreme Court dismissed the petition for certiorari on the ground that the order of execution being incidental to the appeal, the same should be addressed to the Court of Appeals. So on June 21, 1968, the plaintiff filed another motion for execution. On July 16, 1968 the respondent Court ordered the issuance of a writ of execution, but the petitioner was given fifteen (15) days from receipt of the order to put up the P40,000.00 supersedeas bond and to deposit the monthly rental of P500.00 in order to stay the execution. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
168 of 501
Inspite of his receipt of the order on July 23, 1968, petitioner failed to post the required supersedeas bond and to deposit the P500.00 monthly rental. Thus, on November 20, 1968, the plaintiff Archbishop filed a motion for the issuance of a writ of execution. On December 20, 1968 the respondent Court granted the motion for execution requiring however the plaintiff to put up a bond in the amount of P20,000.00 to answer for any judgment that may be awarded to petitioners should the decision be reversed on appeal. The plaintiff Archbishop posted the required bond of P20,000.00 and on February 14, 1969 a writ of execution was issued. Said writ was not enforced upon instance of the counsel for plaintiff as an amicable settlement was proposed and after the 60 days period had lapsed the Sheriff made a return of the writ stating therein: This is to certify that this writ was not acted upon at the instance of counsel for the plaintiff for the reason that amicable settlement between parties was proposed. Upon request of counsel for the plaintiff let this writ be returned and an alias writ be issued for the proposed amicable settlement abovestated failed to materialize. Naga City, Philippines, July 14,1969. S G D .
M A U R O
B .
F A J A R D O E x
O f i c i o
C i t y
S h e r i PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
169 of 501
f f Pursuant to this return, the Clerk of Court of the respondent Court, issued an alias writ of execution on August 24, 1969. On September 24, 1969 the Sheriff issued a notice of Levy by which certain properties of the petitioner were attached or levied upon. On September 25, 1969 the alias writ was personally served by the Sheriff upon the petitioner. On October 7, 1969, the Sheriff issued a Notice of Public Auction sale of the properties levied upon which was published in the "Bicol Star" a weekly newspaper of general circulation on October 11, 18 and 25, 1969. Private respondent alleges that copies of the Notice of Levy and the Notice of Sale were sent by Registered Mail which according to the certificate of the Postmaster was received on October 15, 1969. Receipt of the Notice of Levy is denied by petitioner. On November 7, 1969 the public auction sale was held, and the respondent Erlinda Ravanera being the highest bidder a Provisional Deed of Sale was issued in her favor. Within the one-year period of redemption, the petitioner redeemed some of the properties bought at auction sale, but he failed to redeem some others on account of which at the end of the redemption period or on December 8, 1970 the Sheriff executed a Definite Deed of Sale of said unredeemed properties in the name of respondent Erlinda Ravanera. She likewise paid the arrears in real estate taxes of said properties, redeemed a mortgage on one of them and caused the property to be declared in her name. On February 9, 1971 respondent Erlinda Ravanera filed a motion for a writ of possession of the properties covered by the Definite Deed of Sale, to which motion petitioner filed his opposition alleging that the notice of levy was null and void and hence the provisional as well as the definite deed of sale were likewise void, and that respondent Ravanera had no personality in the case, she not being a party thereto. On March 18, 1971, the respondent Court issued an order granting the motion for a writ of possession and on March 27, 1971 the petitioner filed a motion for reconsideration on the ground that there was no formal hearing and reception of evidence on the motion and that the order did not state the finding of facts which could be the basis for the grant of the motion. On March 30, 1971 the respondent Court issued an order denying the motion for reconsideration, however, it suspended the effectivity of the writ of possession to April 25, 1971. Hence this petition. The petitioner attacks the order of March 15, 1971 granting the motion for a writ of possession on the following grounds: 1. That the writ of execution issued by the Court on December 30, 1968 is void defendant having on December 10, 1966 perfected his appeal; 2. That the Alias writ of Execution issued by the Deputy Provincial Sheriff is void there having been no order corning from the Court granting such issuance of an Alias Writ; 3. Notice of Levy Null and Void; 4. That Erlinda Ravanera has no personality to file Motion for Writ of Possession; 5. That there was no formal hearing or reception of evidence from the parties; 6. That there is a pending appeal before the Court of Appeals under G.R. No. 39-115-R; PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
170 of 501
7. That order issuing the Writ of Possession did not state findings of facts as basis for the order or issuance of the writ; 8. That the price for which the properties have been bidded is grossly inadequate and is therefore unconscionable amounting to lack of consideration. From the facts recited in the complaint, the answer as well as the decision of the respondent court appears that the main case partakes more of the nature of an unlawful detainer and damages case rather than one for recission of contract as it is admitted by the parties that the contract of lease had already expired and there is no showing that the same had been expressive or impliedly renewed. Hence there was actually no contract to be rescinded and subsequent orders of the respondent court reveal that it considered the case as one for ejectment and damages. 1
On November 16, 1971, the Court of Appeals rendered a decision setting aside the orders dated March 18, 1971 and March 30, 1971 issued by the Court of First Instance of Camarines Sur and making the preliminary injunction previously issued permanent. 2
Petitioners filed a motion for reconsideration of the decision which was denied by the Court of Appeals in its resolution of January 10, 1972. 3
From the above-mentioned decision and resolution, petitioners seek in this petition to correct errors committed by the Court of Appeals as follows: 1. The Court of Appeals erred in annulling the Notice of Levy merely because it did not comply with some of the formal requirements of the Rules of Court which were not shown to have prejudiced any substantial rights of the respondent Imperial; 2. The Court of Appeals erred in applying to one unregistered parcel of land and the one unregistered residential house described in the Notice of Levy the formal requirements of the Rules of Court which are applicable only to registered properties; 3. The Court of Appeals erred in requiring service upon respondent Imperial of the Notice of Levy before the publication of the Notice of Public Auction Sale considering that the Rules of Court does not so require; 4. That the Court of Appeals erred in not applying to the case at bar the presumption of regularity in the official acts and proceedings of the Sheriff, particularly in the matter of leaving with the occupant of the land, copy of the Notice of Levy, considering that there is no evidence to the contrary; 5. The Court of Appeals erred in not applying against respondent Imperial the principle of estoppel or waiver of whatever procedural defects there were in the Levy when he repurchased part of the properties levied upon by the Sheriff but failed to repurchase properties which are now in question herein; 6. That the Court of Appeals erred in not considering against respondent Imperial undisputed facts which show bad faith and intent to delay the proceedings and to thwart a fair administration of justice, 7. The Court of Appeals erred in not considering in favor of the petitioners undisputed facts showing that they were innocent purchasers for value, and therefore, should not be made to suffer the prejudice caused by the alleged invalidity or ineffectiveness of the levy. (pp. 9-1 0, Rollo) PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
171 of 501
The main issue raised before Us in this petition is whether or not there was a valid levy upon the properties of respondent Felipe I. Imperial. The Court of Appeals annulled the levy and all the proceedings subsequent thereto on two grounds, to wit: 1) The occupants or possessors of the properties levied upon were not furnished with a notice of levy and as Section 7 of Rule 57, paragraph (a) makes this a requirement for the validity of the levy, non-compliance therewith has made the levy ineffective, and 2) The Notice of levy made by the sheriff did not contain the volume and the page in the Registry where the certificates registered. 4
Anent the first ground, the Court of Appeals, in support thereof, cited the case of Philippine Surety vs. Zabal 5 wherein this Court held: In the case at bar, no notice of the levy was given to the occupant of the land. There was, therefore, no valid levy on the land, and its registration in the registry of deeds and annotation in the title were invalid and ineffective. The fact that the person in whose name the land was registered was duly notified of the attachment does not cure the defect, because personal service of the copy of the writ, description of the property and notice to the owner, who is not the occupant, does not constitute compliance with the statute. The evident purpose of the law in imposing these requirements is to make the levy public and notorious, to prevent liens from attaching secretly and by surreptitious entries and endorsements, and to enable the affected party to inquire into the date and circumstances surrounding the creation of the encumbrance, as well as to give him ample opportunity to file timely claims to the property levied upon. The ruling relied upon by the Court of Appeals has already been modified by the case of Pamintuan vs. Muoz, 22 SCRA 1109 wherein tills Court briefly stated: Petitioners finally argue that they had not been served a notice of the levy nor a notice of the sale as required by the Rules. The sheriffs return, however shows that the notice of levy had been registered with the Register of Deeds pursuant to Rule 57, Section 7 in connection with Rule 39, Section 15 of the Rules, and that the notice of sale had been sent by registered mil on December 28, 1964, to petitioners. Even assuming then that petitioners were not served a copy of the notice of levy, yet We have already ruled in Philippine Bank of Commerce vs. Macaraeg, L-14174, October 31, 1960, that this defect is cured by service of notice of sate upon the judgment debtors prior to the sale, which was done here. The levy was validly effected then. It appears in this case that the notice of levy was registered with the Register of Deeds on September 29, 1969. From a certification of the Postmaster at Naga City, it also appears that registered letter No. 13681 containing the notice of levy and the notice of auction sale addressed to respondent Felipe Imperial was delivered on October 15, 1969 to Pelaguia Comba, member of the household of the addressee. Respondent Imperial was, therefore, notified by registered mail of the levy and the auction sale long before November 3, 1969, the date of the auction sale. What is required is that the judgment debtor must be notified of the auction sale before the actual date of sale which was done in the case at bar. 6
It cannot be gainsaid that if it were only to afford an opportunity to respondent Imperial to avoid the auction sale, he had ample opportunity to file his objection to such sale because the auction sale took place on November 3, 1969. The respondent had nineteen days after he received the notice of levy and the notice of auction sale on October 15, 1969 and thirty-nine (39) days from September 25, 1969 when he was served personally by the Sheriff a copy of the writ of execution to avoid the sale had he wanted to. Moreover, he had exactly one year from November 27, 1969 when the provisional Deed of Sale executed in favor of the petitioner was registered with the Register of Deeds to redeem the property. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
172 of 501
Regarding the second ground, We are constrained to make a distinction for the levy of property registered under Act 496 (Land Registration Act) and the property not brought under the operation of said Act. The Court of Appeals concluded in its Resolution dated January 10, 1972 that the requirements of Section 7 of Rule 57 do not make distinction whether the property is under the operation of the Land Registration Act or not. Petitioners contend otherwise and such contention is not without merit, under the provisions of Section 15 (Paragraph 2) of Rule 39 and Section 7 (Paragraph a) of Rule 57, which are pertinent. Section 15 (Paragraph 2) of Rule 39 expressly provides: xxx xxx xxx Real property, stocks, shares, debts, credits and other personal property, or any interest in either real or personal property, may be levied on in like manner and with like effect as under a writ of attachment. Section 7 (paragraph a) of Rule 57 also provides the following: Attachment of real and personal property, recording thereof.- Properties shall be attached by the officer executing the order in the following manner: (a) ... Where the property had been brought under the operation of the Land Registration Act, the nonce shall contain a reference to the number of the certificate of title and the volume and page in the registration book where the certificate is registered. The registrar must index attachments filed under this paragraph in the names both of the plaintiff and of the defendants. Section 7 (paragraph a) of Rule 57 is so explicit that only as to property which has been brought under the operation of the Land Registration Act should the notice of levy contain the volume and page in the registration book where the certificate is registered, impliedly, the requirement does not apply to property not registered under the said Act. It is enough that the notice of levy upon unregistered land be registered under Act 3344, as was done in this case. In the case of Siari Valley Estates vs. Lucasan, 7 which clearly applies to this case, it was held by this Court: The requirement that the notice of levy should contain a reference to the number of the certificate of title and the volume and page in the registration book where the certificate is registered is made in order that the debtor as well as a third person may be properly informed of the particular land or property that is under the custody of the court. This can only be accomplished by making a reference to the certificate of title covering the property. The situation differs if the land is unregistered, in which case it is enough that the notice be registered under Act 3344. This conclusion finds support in the following authorities: An attachment levied on real estate not only recorded in the registry of property is not an encumbrance on the attached property, nor can such attachment, unrecorded in the registry, serve as a ground for decreeing the annulment of the sale of the property, at the request of another creditor.(Gonzalez Diez v. Delgado and Imperial, 37 Phil. 389) ... In conformity with the provisions of Section 71 of the Land Registration Act, the sheriff of the City of Manila filed a notice of the levy with the register of deeds, which notice was entered in the primary entry book of the register's office, but was afterwards, on May 20, 1920, returned to the sheriff with the information that the property was registered in the name of Buenaventura Dizon, having been conveyed to the latter by the defendant in execution, Celerino Arellano, and that, therefore, no memorandum of the notice had been entered PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
173 of 501
upon the outstanding certificate of title. It may be noted that the notice contained no reference to the number of the certificate of title of the land to be effected, and the volume and page in the registry book where the certificate is registered, and that to that extent the notice did not meet the requirements of said section 71. (De Ocampo v. Treasurer of the Philippine Islands, 50 Phil. 140, 141; Emphasis supplied.) The properties which were acquired by the petitioners as the highest bidders in the auction sale on November 3, 1969 are as follows: 1. A parcel of land located at Naga City registered under Act 496 and covered by Transfer Certificate of Title No. 257; 2. A two-storey residential house located at Naga City not registered under Act 496 but covered by Tax Declaration No. 14276; and 3. A parcel of residential land located at Naga City not registered under Act 496 but covered by Tax Declaration No. 8732. (Annex J to Petition, pages 39 and 40, Rollo.) From the records of the case, the notice of levy made by the sheriff as regards the registered land contains reference to the number of its certificate of title but not to the volume and page in the registry book where the title is registered. Nevertheless from what was stated in the case of Siari Valley Estate vs. Lucasan, supra, it would seem that the purpose of the requirement of Section 7(a), Rule 39 of the Revised Rules of Court is substantially complied with. This is more so where as in this case, there appears in the notice of levy the following certification: It is hereby certified that this instrument has been duly registered proper memorandum hereof made on transfer Certificate of Title No. 257 & 258 and on its owner's duplicate Reg. Book No. 3; File No. 1-248. Naga City, Sept. 29, 1969. Reference to the number of the certificate of title of every registered land in the notice of levy, together with the technical description thereof, would certainly suffice to inform the debtor, as well as third persons what particular land or property is brought to the custody of the court, as is the purpose of the aforecited provision of the Rules of Court. Incidentally, no third person appears, to be interested in the matter now before this Court. From the fact that respondent Imperial was able to exercise his right of redemption with reference to three registered parcels of land, it can be easily deduced that insofar as respondent Imperial is concerned, the purpose of the requirement of reference having to be made to the number of the certificate of title, and also the volume and page in the registration book where the certificate is registered, has been fully served or attained. It may also be pertinent to note that in the Siari Valley case, heavily relied upon by the respondent court in voiding the notice of levy in the instant case, the land involved which was actually registered with OCT No. 2492 was described in the notice of levy as unregistered land, which was thus a misleading information. We, therefore, find no substantial defect in the notice of levy on all the properties levied upon and sold to petitioners in the auction sale, that should be a basis, as the respondent court deemed it to be, for annulling the sale made pursuant to the levy. Respondent Imperial also brands the levy as irregular for failure of the occupants of the attached or levied properties to be left with copy of the order, notice of levy and description of the properties. The finding of facts of the respondent Court of Appeals which was quoted in full above, fails to disclose the existence of occupants of the properties levied upon other than the owner, respondent Imperial. It was incumbent on said respondent to prove by evidence duly submitted to the Court a fact that would tend to support his claim that the levy is void or otherwise illegal. The levy being an official act of a government functionary its regularity is presumed. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
174 of 501
The alleged inadequacy of the purchase price of the properties sold in the execution sale is no ground to assail the validity of the sale, for the judgment debtor has the right to redeem the property, and the smaller the price, the easier is it for him to buy back the property. 8
Respondent Imperial goes back to the issuance of the order of execution on December 30, 1968 to show that the order is invalid because it was issued after he has perfected his appeal on December 10, 1966 (p. 22, Respondent's Brief). What the Court of Appeals, however, stated in its decision is that "on February 17, 1966, pending approval of the Record on Appeals, plaintiff Archbishops of Nueva Caceres filed a Motion for Execution of the decision or to order defendant to file supersedeas bond and to deposit the amount of P500.00 every month as rentals," and that on May 6, 1966, the respondent court (CFI of Camarines Sur) granted the motion for execution pending appeal. This order was brought up by respondent Imperial to the Supreme Court on certiorari as a special civil action, resulting in the stay of the enforcement of the order of the execution. The special civil action, however, was dismissed on May 22,1968, by the Supreme Court, and the dismissal merely reactivated the order of execution pending appeal issued on May 6,1966. Clearly, the original order of execution pending appeal was perfectly valid, and the issuance of alias writ when the original writ was not acted upon at the instance of the plaintiff for the reason that amicable settlement between the parties was proposed but failed to materialize, did not affect the validity of either the original or alias writ of execution. Accordingly, We rule that contrary to the contention of respondent Imperial (see pages 22-23, Brief for the Respondent), the writ of execution that gave rise to the levy of the properties in question and their sale in a public auction is valid and regular in all respects. 'That the alias writ of execution was issued by the Clerk of Court and not by the judge is no ground for holding invalid said alias writ, considering that the Clerk of Court is not without authority to issue ordinary writs and processes, under the seal of the Court (Session 4, Rule 136, Revised Rules of Court). In any event, respondent Imperial as judgment debtor is in estoppel by his failure to seasonably make an objection to the allegedly defective notice of levy and notice of sale before the actual sale, or before redeeming some of his properties despite the supposed defect of the notice of levy. He should have interposed objection to the levy and the sale from the very beginning, from October 15, 1969 when he received notice of levy and notice of sale. A waiver on his part to question the validity of the auction sale may also be said to arise from his failure to pay the arrears in real estate taxes, or to redeem the mortgage of one of the properties sold at public auction, during the period of redemption. These are omissions which are clearly an indication of acquiescence in the sale, or his awareness that the execution sale was valid and legally unassailable. To allow him to turn back on his manifest conformity to the levy and sale on execution of his properties, after petitioners have bought the property as the highest bidder during the auction sale, would be patently unjust to the said petitioners, who had every reason to rely on the presumed regularity of the proceedings as official acts of both the judge and his own court officer, the sheriff. WHEREFORE the decision appealed from is hereby reversed. The notice of levy and the sale of the properties in question, both registered and unregistered in favor of the petitioners are hereby declared valid. No pronouncement as to cost. SO ORDERED.
Obana v. CA, 172 S 866 THIRD DIVISION G.R. No. 78635 April 27, 1989 LEONORA OBAA, petitioner, vs. COURT OF APPEALS, RAFAEL G. SUNTAY, REGISTER OF DEEDS OF QUEZON CITY, and the EX-OFICIO SHERIFF OF QUEZON CITY, respondents. George L. Howard and Ambrosio Padilla, Mempin & Reyes Law Offices for petitioner. Rafael G. Suntay for private respondent.
GUTIERREZ, JR., J.: This is a petition to review on certiorari the decision of the Court of Appeals which set aside the trial court's decision, dismissed herein petitioner Leonora Obaa's complaint and ordered her to pay Rafael G. Suntay the amount of P5,000.00 as attorney's fees with costs against her. The facts of the case as stated in the Court of Appeals' decision are as follows: Records show that defendant-appellant (Rafael G. Suntay) was the former counsel of Liberty H. Dizon and her minor children, Nicolas and Noel Patrick, both surnamed Torio, in an intestate proceeding docketed as No. 142 and in the petition for guardianship over said minors in Sp. Proc. No. C- 00565. On April 28, 1972, said defendant-appellant as such counsel in Sp. Proc. No. C-00565, filed an 'Explanation and Motion' for the approval of attorney's fees. The defunct JDRC of Quezon City, acting on said motion, issued an order dated May 9, 1972, the pertinent portion of which reads: Considering the foregoing, the Court believes that P10,000.00 attorney's fees is too burdensome for the wards to shoulder alone and that the guardian should be able to be responsible for half of it. WHEREFORE, further to order dated April 11, 1972, counsel is hereby authorized to collect P5,000.00, from the ward's guardianship estate. (p. 3, Appellant's Brief). On August 24, 1972, appellant filed in the same proceedings a 'Motion to Order the Guardian To Pay The Attorney's Fees,' with prayer that the guardian be ordered to pay immediately the amount of P5,000.00 out of the ward's guardianship estate (Exh. W). Acting upon said motion, the JDRC of Quezon City issued an order dated September 14, 1972, requiring Liberty B. Dizon to show proof of payment of attorney's fees in accordance with Order of May 9, 1972 and to submit a new a bond releasing her former counsel as surety; failing which, she shall be declared in contempt of court (Exh. X). It would appear that the above order was not complied with by Liberty H. Dizon because on November 9, 1972, defendant- appellant Atty. Suntay, filed with the defunct CFI of Bulacan an action for a sum of money (Civil Case No. 4238-M) against said Liberty M. Dizon, Nicolas Torio, Jr. and Noel Patrick Torio (pp. 28, Record). In his complaint, defendant-appellant averred among others: that his attorney's fees in Sp. Proceedings Nos. C-412. and QC-00565 was (sic) not paid by his former clients, despite repeated demands. In connection PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
176 of 501
with said complaint, appellant moved for the issuance of an order of attachment upon a certain parcel of land covered by TCT No. 173792 together with the improvements belonging to Liberty H. Dizon and her wards, located at 48 Damar Village, Balintawak, Quezon City. On December 1, 1972, by virtue of the Writ of Attachment issued in Civil Case No. 4238-M, a levy was made on said property, which levy was annotated at the back of TCT No. 173792 of the Register of Deeds of Quezon City, to wit: 'PE-5839\T173792 NOTICE OF LEVY Affecting the rights, interests and participation of the registered owners hereof, the same having been levied by the Sheriff of Q. City by virtue of an order of attachment issued by the CFI of Bulacan in Civil Case No. 4238-M, entitled 'Rafael G. Suntay, Pltf v. Liberty H. Dizon, Nicolas Torio, Jr. and Joel Patrick Torio, defs. to the amount of P10,000.00. Date of Instrument Nov. 29, 1972 Date of Inscription Dec. 1, 1972. (Exh. 1-A)' Due to the failure of the sheriff to serve the summonses issued in Civil Case 4238 for the reason that Mrs. Dizon and her wards no longer resided at the last known address at 34-H Road, Cypress Village, Quezon City, and that their present address cannot be ascertained appellant as plaintiff in said civil case filed a Motion for Service of Summons by Publication (Exh. H) which was granted by the court in its Order dated February 12, 1973 (Exh. 1). Accordingly, summons were served upon Mrs. Dizon and her wards through publication. Meanwhile, pursuant to a Deed of Absolute Sale dated May 16, 1973 executed by and between Liberty H. Dizon, et al., and appellee Leonora Obaa involving the attached property (Exh. S) the register of deeds of Quezon City cancelled TCT No. 173792 in the name of Liberty H. Dizon and her wards, and, in lieu thereof, executed in favor of Leonora Obaa a new TCT No. 191069 necessarily transferring in the process the encumbrance consisting of notice of levy in favor of appellant. On August 10, 1973, after summons by publication had been effected in Civil Case No. 4238-M, upon motion of appellant Atty. Suntay, the court declared the defendants therein, Liberty H. Dizon and her wards, in default and allowed plaintiffs evidence to be presented ex-parte. Consequently, a decision was rendered on September 28, 1973 awarding to appellant Atty. Suntay the amount of P10,000.00 representing his claim for attorney's fees relative to the prosecution of said case (Exhibit K). Pursuant to said decision, a writ of execution was issued per order of the court, and then followed by a Notice of Levy on Execution dated August 7, 1974, issued by the sheriff of Quezon City. Thereafter, a certificate of sale (Exh. M) over the subject property (now covered by TCT 191059 in the name of Leonora Obaa) was issued in favor of the appellant, being the highest bidder. For failure of Mrs. Dizon and her wards or by appellee Leonora Obaa to redeem the property on or before October 15, 1975, a 'Sheriffs Final Deed of Sale' (Exh. N) was issued in favor of appellant. Both certificates of sale were registered in the Register of Deeds of Quezon City and was annotated at the back of TCT No. 191059 (Exh. A). PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
177 of 501
Appellant then filed a petition in the then CFI of Rizal, Quezon City, for the cancellation; of TCT No. 191059 which was opposed by appellee Leonora Obaa. On April 28, 1977, said CFI of Quezon City in LRC-750 issued an order cancelling TCT No. 191059 and directing the Register of Deeds of Quezon to issue a new title covering the subject land in the name of Rafael G. Suntay married to Victoria J. Suntay. To stop the registration of the subject land in the name of appellant, appellee filed an action on August 28, 1978 before the court a quo for annulment of judgment rendered in Civil Case No. 4238-M. In her complaint, appellee as plaintiff, contended that the decision rendered in Civil Case No. 4238- M by the then CFI of Bulacan is null and void for the reason that said court did not acquire jurisdiction over Liberty H. Dizon and her wards, since they were not properly served with summons. Appellee also claimed that the proceedings before the sheriff were defective in that the sheriff failed to comply with the jurisdictional requirements on the manner of service of notice in the New Rules of Court thus rendering the proceedings void ab initio. The defendant-appellant, on the other hand, countered in his answer that LRC-750 granting the petition for the cancellation of TCT No. 191059 in favor of said appellant is res judicata to the instant case; that plaintiffs recourse under Rule 38 has long prescribed; that insofar as the plaintiff is concerned, when she bought the property in question and title was transferred to her on July 2, 1973, she is charged with knowledge of the pendency of Civil Case No. 4238-M thru the annotation at the back of TCT No. 173792 of the Registry of Deeds of Quezon City; and that there was no-extrinsic fraud committed by defendant-appellant that may constitute a ground to nullify the judgment in Civil Case No. 4238-M. The court a quo in nullifying the judgment in Civil Case No. 4238 held that no jurisdiction was acquired over the persons of defendants therein, the action being strictly in personam and summons by publication is insufficient; and that no valid attachment and levy were made by the sheriff as no personal service of the copy of the notice to the occupant of the property was made. (Rollo, pp. 37-40). There are, therefore, three cases which eventually led to this petition. First was SP-C-00565, the guardianship case before the Juvenile and Domestic Relations Court of Quezon City where the attorney's fees for Suntay were initially awarded. Second was CC 4238-M before Branch VII of the Bulacan Court of First Instance where Atty. Suntay filed his action for sum of money to collect his fees and where a default judgment against Liberty Dizon and the Torio children was rendered. The third is the case now before us from the Court of Appeals Civil Case No. 5418-M, the annulment of judgment case filed in Branch VIII of the Regional Trial Court of Bulacan to set aside as null and void the CFI decision in Civil Case No. 4238-M. There is actually a fourth case, No. LRC 750, a petition for cancellation of the petitioner's TCT No. 191059 filed by respondent Suntay with the Court of First Instance of Quezon City. On appeal in Civil Case No. 5418-M, the Court of Appeals dismissed petitioner Obaa's complaint on the grounds of lack of cause of action and res judicata. Hence, this present petition. Petitioner raises the following assignment of errors, namely: (T)hat the public respondent Court of Appeals committed a grave abuse of discretion amounting to a lack of or in excess of jurisdiction, in REVERSING and SETTING ASIDE, the appealed decision of the Trial Court a quo, despite the clear merits thereof, and these errors of public respondent are manifest in the following: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
178 of 501
1. THAT PETITIONER HAS NO CAUSE OF ACTION, SINCE SHE WAS NOT A DEFENDANT NOR A PARTY IN INTEREST IN CC NO. 4238-M (BRANCH VII, CFI, BULACAN); 2. THAT THE COMPLAINT FOR ANNULMENT OF DECISION IS BARRED FOR REASON OF RES JUDICATA, SINCE BETWEEN LRC-750 AND CC 5418-M, THERE IS AN IDENTITY OF PARTIES AND SUBJECT MATTER, AND CAUSES OF ACTIONS. (Rollo, pp. 10-11) There are certain facts overlooked by the Court of Appeals which call for the setting aside of its decision. Civil Case No. 4238-M was an action for sum of money filed by Atty. Suntay against liberty Dizon and her minor children in an effort to collect attorney's fees in the guardianship case he handled for them. The guardianship court authorized the payment of P5,000.00. According to the Court of Appeals, the collection case was between Suntay on one hand and Dizon and her children on the other. It ruled that petitioner Obaa the buyer of the lot, is not a party in interest and had neither personality nor cause of action to ask for the annulment of the judgment in that case. This may be so, if the facts end there. However, the judgment in Civil Case No. 4238-M, while against Dizon and her children was executed against property belonging to petitioner Obaa. The house and lot in Quezon City which Dizon sold to Obaa for P150,000.00 was executed upon by the Sheriff to satisfy the P10,000.00 attorney's fees in the Dizon guardianship case and another P5,000.00 awarded to Suntay for his fees in prosecuting his own collection case. The house and lot were sold for P17,402.90 to respondent Suntay. According to the petitioner, the Property she purchased for P150,000.00 on May 16, 1973 is now worth over Pl,000,000.00. The sheriffs sale was affected without any personal notice to Liberty H. Dizon on the ground that she had moved out of her old address and her "present address" was unknown. No notice was served on Obaa because she was not a party in the collection case. All notices and summonses in the collection case filed on November 9, 1972 including the copy of the complaint, the original summons, the alias summons, the notice of levy on attachment of the disputed property, the notice of levy on execution and the notice of sheriffs sale were served through mail to defendant Dizon at 34-H Caingin Road, Cypress Village, Quezon City. As earlier stated, because the Sheriff could not serve the complaint and the summons on Dizon who had moved out of the above address, service by publication upon Dizon was authorized by the court in the collection case. In the annulment of judgment case which led to this petition, the trial court ruled: On the question as to whether the Bulacan Court of First Instance had acquired jurisdiction over the defendants in the civil case in question thru summons by publication, the latest case law on the matter is to the affect that in an action strictly in personam personal service of summons within the forum is essential to the acquisition of jurisdiction over the person of the defendant who does not voluntarily submit to the authority of the court. In other words by publication cannot consistently with the due process clause in the Bill of Rights confer upon the court jurisdiction over said defendants (Magdalena Estate, Inc. v. Nieto, et al. G. R. No. 54242, November 25, 1983, citing Citizens Surety & , Inc. v. Judge Melencio Herrera, et al. 38 SCRA 369 [1971]; see also Pantaleon v. Asuncion, 105 Phil. 761 [1059]; contra Fontanillal v. Dominguez, 73 Phil. 579 [1042]). There is no question that Civil Case No. 4238-M filed before the Court of First of Bulacan was a personal action being one for the recovery of a sum of money as it prayed for judgment ordering the defendants jointly and severally to pay plaintiff the sum of P10,000.00 with legal interest thereon from the date of the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
179 of 501
filing of this complaint; the sum of P5,000.00 as attorney's fees plus actual, moral and exemplary damages upon such amounts as this Honorable Court may deem just and equitable and the costs of suit. The creditor, however, in an action in personam can take the recourse to locate properties, real or personal of the resident defendant-debtor with unknown address and causing said properties to be attached under Rule 57 of Section l(f) in which case the attachment converts the action into a proceeding in rem or quasi in rem and the summons by publication may then be deemed valid and effective. (Ibid) In the at bar, it appears on record that the plaintiff who is supposed to be the creditor availed of this remedy of attachment. This would have converted the action into a proceeding in rem and thus rendered as proper the summons by publication. But the validity of the attachment is now contented by the herein plaintiff on the ground that the proceedings before the sheriff in connection with Civil Case No. 4238-M especially the notice of levy of attachment of the property subject matter of the action were defective and invalid for not having been in accordance with the provisions of Rule 57 of the Rules of Court on attachment. (pp. 27-29, Rollo) In Venturanza v. Court of Appeals (156 SCRA 305, 312 [1987}), this Court ruled: There is no question that the case at bar which is an action for collection of a sum of money is an action in personam thereby requiring personal service of summons on the defendants. It should be noted that Section 7 of Rule 57 requires that in attaching real property a copy of the order, description, and notice must be served on the occupant, in this case the occupant at 48 Damortiz Street, Damar Village, Quezon City. The trial court in the annulment case ruled that the attachment was void from the beginning. The action in personam which required personal service was never converted into an action in rem where service by publication would have been valid. In Baltazar v. Court of Appeals (G.R. No. 78728, December 8, 1988) we stated that the propriety of service of summons by publication is not dependent upon the technical characterization of the action as one in rem or quasi in rem but upon compliance with the requirements for the situations found in Sections 16, 17, and 18 of Rule 14 of the Rules of Court. We declared the service of summons by publication as "legally and constitutionally vitiated." In the present case, however, the action was one in personam. The service was equally void and of no effect. The Court of Appeals reversed the trial court principally on the ground that Leonora Obaa was neither a defendant nor a party-in-interest in the collection case. It ignored the fact that property already sold to her was attached and then bedded out to Atty. Suntay without any notice to her. And because the notice of lis pendens in the collection case was secured ex-parte without the defendant Dizon and petitioner Obaa who were never brought to court, having any inkling about it, the notice was not annotated on the owner's duplicate copy of Transfer Certificate of Title No. 173792. Respondent Suntay cannot claim ignorance of the sale to petitioner Obaa as a ground for not bringing her into the picture. As stressed by the petitioner, Liberty Dizon filed her motion for the approval of the sale of the disputed house and lot in the guardianship case SP-C-00565 through her counsel, herein private respondent Suntay (Exh. Q, original records). He could not have been unaware that the house and lot he was attaching had been sold to Obaa because the sale of the Dalmar property was authorized by the guardianship court in the case where he was counsel for the guardian. Considering all the foregoing circumstances, the order in LRC 750 which is based on irregular proceedings in the prior case and which directed the cancellation of Obaa's transfer certificate of title cannot assume finality. The respondent court committed reversible error in using it as a basis for res judicata. There is the added factor that a land registration court in a cancellation of title case could not possibly inquire into the controversial matters raised in the annulment of judgment case. (See Register of Deeds of Iloilo v. Hodges, 7 SCRA 149 [1963]; Sunpongco v. Heirs of Nicolas Ronquillo, PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
180 of 501
36 SCRA 395 [1970] and Development Bank of the Philippines v. Jimenez, 36 SCRA 426 [1976]). The respondent court ruled that Liberty H. Dizon and her wards should have been joined as plaintiffs by petitioner Obaa in the action to annul the judgment in the collection case. This ruling ignores the fact that Dizon could not even be summoned in the collection case; her whereabouts are unknown: the judgment against her was a default judgment; she has apparently no more interest whatsoever in the house and lot she sold to Obaa and she still owes Atty. Suntay P10,000.00. And finally in our capacity as a court of equity in addition to being a court of law, we cannot close our eyes to the rank injustice whereby the owner of a minion peso house and lot is compelled to give up her property to answer for a P10,000.00 attorney's fee incurred by its former owner and which the lawyer cannot apparently collect from his own client. WHEREFORE, the petition is hereby GRANTED. The questioned decision of the Court of Appeals is REVERSED and SET ASIDE. The decision of the trial court in Civil Case No. 5418-M which reads: "Premises considered, the judgment issued in Civil Case No. 4238-OM as well as the proceedings, orders and notices issued therein including the writ of attachment, levy and execution sale are hereby declared null and void. The Register of Deeds is therefore permanently restrained from effecting the cancellation of title in the name of herein plaintiff. For moral damages, the said plaintiff is hereby awarded the amount of P10,000.00, and for attorney's fees, the amount of P15,000.00. Costs against the defendant." (p. 35, Rollo) is REINSTATED. SO ORDERED.
FIRST DIVISION G.R. No. 156580 June 14, 2004 LUZ DU, petitioner, vs. STRONGHOLD INSURANCE Promulgated: CO., INC., respondent. D E C I S I O N PANGANIBAN, J.: Preference is given to a duly registered attachment over a subsequent notice of lis pendens, even if the beneficiary of the notice acquired the subject property before the registration of the attachment. Under the torrens system, the auction sale of an attached realty retroacts to the date the levy was registered. The Case Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking to nullify the March 19, 2002 Decision 2 and the December 5, 2002 Resolution 3 of the Court of Appeals (CA) in CA-GR CV No. 50884. The CA disposed as follows: "Parenthetically, when the decision in Civil Case No. 90-1848 became final and executory, levy on execution issued and the attached property sold at public auction, the latter retroacts to the date of the levy. Said the High Court: In line with the same principle, it was held that where a preliminary attachment in favor of A was recorded on November 11, 1932, and the private sale of the attached property in favor of B was executed on May 29, 1933, the attachment lien has priority over the private sale, which means that the purchaser took the property subject to such attachment lien and to all of its consequences, one of which is the subsequent sale on execution (Tambao v. Suy, 52 Phil. 237). The auction sale being a necessary sequel to the levy, it enjoys the same preference as the attachment lien enjoys over the private sale. In other words, the auction sale retroacts to the date of the levy. [Were] the rule be otherwise, the preference enjoyed by the levy of execution would be meaningless and illusory (Capistrano v. Phil. Nat. Bank, 101 Phil. 1117). (Underscoring supplied) "By and large, We find no reversible error in the appealed decision. "IN VIEW OF ALL THE FOREGOING, the instant appeal is ordered DISMISSED. No pronouncement as to cost." 4
The questioned Resolution, on the other hand, denied petitioners Motion for Reconsideration. The Facts The CA narrated the facts as follows: "x x x Aurora Olarte de Leon was the registered owner of Lot No. 10-A (LRC Psd 336366) per Transfer Certificate of Title No. 582/T-3. Sometime in January 1989, De Leon sold the property to Luz Du under a Conditional Deed of Sale wherein said vendee paid a down payment of P75,000.00 leaving a balance of P95,000.00. "Then again, on April 28, 1989, Aurora de Leon sold [the] same property to spouses Enrique and Rosita Caliwag without prior notice PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
182 of 501
to Luz Du. As a result, Transfer Certificate of Title No. 582/T-3 was cancelled and Transfer Certificate of Title No. 2200 was issued in favor of the Caliwag spouses. "Meanwhile, Stronghold Insurance Corp., Inc. x x x commenced Civil Case No. 90-1848 against spouses Rosita and Enrique Caliwag et al., for allegedly defrauding Stronghold and misappropriating the companys fund by falsifying and simulating purchases of documentary stamps. The action was accompanied by a prayer for a writ of preliminary attachment duly annotated at the back of Transfer Certificate of Title No. 2200 on August 7, 1990. "On her part, on December 21, 1990, Luz Du initiated Civil Case No. 60319 against Aurora de Leon and the spouses Caliwag for the annulment of the sale by De Leon in favor of the Caliwags, anchored on the earlier mentioned Deed of Conditional Sale. "On January 3, 1991, Luz Du caused the annotation of a Notice Of Lis Pendens at the back of Transfer Certificate of Title No. 2200. "On February 11, 1991, the decision was handed down in Civil Case No. 90-1848 in favor of Stronghold, ordering the spouses Caliwag jointly and severally to pay the plaintiff P8,691,681.60, among others. When the decision became final and executory, on March 12, 1991, a notice of levy on execution was annotated on Transfer Certificate of Title No. 2200 and the attached property was sold in a public auction. On [August] 5, 1991, 5 the certificate of sale and the final Deed of Sale in favor of Stronghold were inscribed and annotated leading to the cancellation of Transfer Certificate of Title No. 2200 and in lieu thereof, Transfer Certificate of Title No. 6444 was issued in the name of Stronghold. "It came to pass that on August 5, 1992, Luz Du too was able to secure a favorable judgment in Civil Case No. 60319 and which became final and executory sometime in 1993, as well. "Under the above historical backdrop, Luz Du commenced the present case (docketed as Civil Case No. 64645) to cancel Transfer Certificate of Title No. 6444 in the name of Stronghold with damages claiming priority rights over the property by virtue of her Notice Of Lis Pendens under Entry No. 13305 and inscribed on January 3, 1991, and the final and executory decision in Civil Case No. 60319 she filed against spouses Enrique and Rosita Caliwag. According to Luz Du, despite her said notice of lis pendens annotated, Stronghold still proceeded with the execution of the decision in Civil Case No. 90-1848 against the subject lot and ultimately the issuance of Transfer Certificate of Title No. 6444 in its (Strongholds) name." 6
The trial court ruled that Stronghold had superior rights over the property because of the prior registration of the latters notice of levy on attachment on Transfer Certificate of Title (TCT) No. 2200. For this reason, it found no basis to nullify TCT No. 6444, which was issued in the name of respondent after the latter had purchased the property in a public auction. Ruling of the Court of Appeals Sustaining the trial court in toto, the CA held that Strongholds notice of levy on attachment had been registered almost five (5) months before petitioners notice of lis pendens. Hence, respondent enjoyed priority in time. Such registration, the appellate court added, constituted constructive notice to petitioner and all third persons from the time of Strongholds entry, as provided under the Land Registration Act -- now the Property Registration Decree. The CA also held that respondent was a purchaser in good faith. The necessary sequels of execution and sale retroacted to the time when Stronghold registered its notice of levy on attachment, at a time when there was nothing on TCT No. 2200 that would show any defect in the title or any adverse claim over the property. Hence, this Petition. 7
Issues Petitioner submits the following issues for our consideration: "I. "Whether a Notice of Levy on Attachment on the property is a superior lien over that of the unregistered right of a buyer of a property in possession pursuant to a Deed of Conditional Sale. "II. "Whether the acquisition of the subject property by Respondent Stronghold was tainted with bad faith." 8
The Courts Ruling The Petition has no merit. Main Issue: Superiority of Rights Petitioner submits that her unregistered right over the property by way of a prior conditional sale in 1989 enjoys preference over the lien of Stronghold -- a lien that was created by the registration of respondents levy on attachment in 1990. Maintaining that the ruling in Capistrano v. PNB was improperly applied by the Court of Appeals, petitioner avers that unlike the circumstances in that case, the property herein had been sold to her before the levy. We do not agree. The preference given to a duly registered levy on attachment or execution over a prior unregistered sale is well-settled in our jurisdiction. As early as Gomez v. Levy Hermanos, 9 this Court has held that an attachment that is duly annotated on a certificate of title is superior to the right of a prior but unregistered buyer. In that case, the Court explained as follows: "x x x. It is true that she bought the lots with pacto de retro but the fact of her purchase was not noted on the certificates of title until long after the attachment and its inscription on the certificates. In the registry, therefore, the attachment appeared in the nature of a real lien when Apolonia Gomez had her purchase recorded. The legal effect of the notation of said lien was to subject and subordinate the right of Apolonia Gomez, as purchaser, to the lien. She acquired the ownership of the said parcels only from the date of the recording of her title in the register, which took place on November 21, 1932 (sec. 51 of Act No. 496; Liong-Wong-Shih vs. Sunico and Peterson, 8 Phil. 91; Tabigue vs. Green, 11 Phil. 102; Buzon vs. Lucauco, 13 Phil. 354; and Worcester vs. Ocampo and Ocampo, 34 Phil. 646), and the right of ownership which she inscribed was not an absolute but a limited right, subject to a prior registered lien, by virtue of which Levy Hermanos, Inc. was entitled to the execution of the judgment credit over the lands in question, a right which is preferred and superior to that of the plaintiff (sec, 51, Act No. 496 and decisions cited above). x x x" 10
Indeed, the subsequent sale of the property to the attaching creditor must, of necessity, retroact to the date of the levy. Otherwise, the preference created by the levy would be meaningless and illusory, as reiterated in Defensor v. Brillo: 11
"x x x. The doctrine is well-settled that a levy on execution duly registered takes preference over a prior unregistered sale; and that even if the prior sale is subsequently registered before the sale in execution but after the levy was duly made, the validity of the execution sale should be maintained, because it retroacts to the date of the levy; otherwise, the preference created by the levy would be meaningless and illusory. "Even assuming, therefore, that the entry of appellants sales in the books of the Register of Deeds on November 5, 1949 operated to convey the lands to them even without the corresponding entry in the owners duplicate titles, the levy on execution on the same lots in Civil Case No. 1182 on August 3, 1949, and their subsequent sale to appellee PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
184 of 501
Brillo (which retroacts to the date of the levy) still takes precedence over and must be preferred to appellants deeds of sale which were registered only on November 5, 1949. "This result is a necessary consequence of the fact that the properties herein involved were duly registered under Act No. 496, and of the fundamental principle that registration is the operative act that conveys and binds lands covered by Torrens titles (sections 50, 51, Act 496). Hence, if appellants became owners of the properties in question by virtue of the recording of the conveyances in their favor, their title arose already subject to the levy in favor of the appellee, which had been noted ahead in the records of the Register of Deeds." 12 (Citations omitted, italics supplied) The Court has steadfastly adhered to the governing principle set forth in Sections 51 and 52 of Presidential Decree No. 1529: 13
"SEC. 51. Conveyance and other dealings by registered owner. - An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Registry of Deeds to make registration. "The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or the city where the land lies. "SEC. 52. Constructive notice upon registration. - Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing or entering."(Italics supplied)1avvphil.net As the property in this case was covered by the torrens system, the registration of Strongholds attachment 14 was the operative act that gave validity to the transfer and created a lien upon the land in favor of respondent. 15
Capistrano Ruling Correctly Applied The preference created by the levy on attachment is not diminished even by the subsequent registration of the prior sale. 16 That was the import of Capistrano v. PNB, 17 which held that precedence should be given to a levy on attachment or execution, whose registration was before that of the prior sale. In Capistrano, the sale of the land in question -- though made as far back as 1946 -- was registered only in 1953, after the property had already been subjected to a levy on execution by the Philippine National Bank. The present case is not much different. The stipulation of facts shows that Stronghold had already registered its levy on attachment before petitioner annotated her notice of lis pendens. As in Capistrano, she invokes the alleged superior right of a prior unregistered buyer to overcome respondents lien. If either the third-party claim or the subsequent registration of the prior sale was insufficient to defeat the previously registered attachment lien, as ruled by the Court in Capistrano, it follows that a notice of lis pendens is likewise insufficient for the same purpose. Such notice does not establish a lien or an encumbrance on the property affected. 18 As the name suggests, a notice of lis pendens with respect to a disputed property is intended merely to inform third persons that any of their transactions in connection therewith -- if entered into subsequent to the notation -- would be subject to the result of the suit. In view of the foregoing, the CA correctly applied Capistrano, as follows: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
185 of 501
"x x x the rule now followed is that if the attachment or levy of execution, though posterior to the sale, is registered before the sale is registered, it takes precedence over the latter. "The rule is not altered by the fact that at the time of the execution sale the Philippine National Bank had information that the land levied upon had already been deeded by the judgment debtor and his wife to Capistrano. The auction sale being a necessary sequel to the levy, for this was effected precisely to carry out the sale, the purchase made by the bank at said auction should enjoy the same legal priority that the levy had over the sale in favor of plaintiff. In other words, the auction sale retroacts to the date of the levy. Were the rule otherwise, the preference enjoyed by the levy of execution in a case like the present would be meaningless and illusory." 19 (Citations omitted, italics supplied) Second Issue: Taking in Bad Faith We now tackle the next question of petitioner: whether Stronghold was a purchaser in good faith. Suffice it to say that when Stronghold registered its notice of attachment, it did not know that the land being attached had been sold to petitioner. It had no such knowledge precisely because the sale, unlike the attachment, had not been registered. It is settled that a person dealing with registered property may rely on the title and be charged with notice of only such burdens and claims as are annotated thereon. 20 This principle applies with more force to this case, absent any allegation or proof that Stronghold had actual knowledge of the sale to petitioner before the registration of its attachment. Thus, the annotation of respondents notice of attachment was a registration in good faith, the kind that made its prior right enforceable. 21
Moreover, it is only after the notice of lis pendens is inscribed in the Office of the Register of Deeds that purchasers of the property become bound by the judgment in the case. As Stronghold is deemed to have acquired the property - - not at the time of actual purchase but at the time of the attachment -- it was an innocent purchaser for value and in good faith. WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
186 of 501
Valdevieso v. Damalerio, 451 S 664 SECOND DIVISION G.R. No. 133303 February 17, 2005 BERNARDO VALDEVIESO, petitioner,vs. CANDELARIO DAMALERIO AND AUREA C. DAMALERIO, respondents. D E C I S I O N CHICO-NAZARIO, J.:
Before this Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to set aside the 25 September 1997 Decision and the 10 February 1998 Resolution of the Court of Appeals in CA-G.R. SP No. 43082 entitled, "Candelario Damalerio and Aurea Damalerio v. Honorable Antonio S. Alano, et al." 1
There is no dispute as to the following facts: On 05 December 1995, Bernardo Valdevieso (petitioner) bought from spouses Lorenzo and Elenita Uy a parcel of land consisting of 10,000 square meters, more or less, located at Bo. Tambler, General Santos City, and covered by Transfer Certificate of Title (TCT) No. T-30586. 2
The deed of sale was not registered, nor was the title of the land transferred to petitioner. 3
On 07 December 1995, the said property was immediately declared by petitioner for taxation purposes as Tax Declaration No. l6205 with the City Assessors Office. 4
It came to pass that on 19 April 1996, spouses Candelario and Aurea Damalerio (respondents) filed with the Regional Trial Court (RTC) of General Santos City, a complaint for a sum of money against spouses Lorenzo and Elenita Uy docketed as Civil Case No. 5748 with application for the issuance of a Writ of Preliminary Attachment. 5
On 23 April 1996, the trial court issued a Writ of Preliminary Attachment by virtue of which the property, then still in the name of Lorenzo Uy but which had already been sold to petitioner, was levied. The levy was duly recorded in the Register of Deeds of General Santos City and annotated upon TCT No. T- 30586. 6
On 06 June 1996, TCT No. T-30586 in the name of Lorenzo Uy was cancelled and, in lieu thereof, TCT No. T-74439 was issued in the name of petitioner. 7 This new TCT carried with it the attachment in favor of respondents. On 14 August 1996, petitioner filed a third-party claim in Civil Case No. 5748 to discharge or annul the attachment levied on the property covered by TCT No. T-74439 on the ground that the said property belongs to him and no longer to Lorenzo and Elenita Uy. 8
In a resolution dated 21 October 1996, the trial court ruled for the petitioner. 9 Citing Manliguez v. Court of Appeals 10 andSantos v. Bayhon, 11 it held that the levy of the property by virtue of attachment is lawful only when the levied property indubitably belongs to the defendant. Applying the rulings in the cited cases, it opined that although defendant Lorenzo Uy remained the registered owner of the property attached, yet the fact was that he was no longer the owner thereof as it was already sold earlier to petitioner, hence, the writ of attachment was unlawful.1awphi1.nt Respondents sought reconsideration thereof which was denied by the trial court in a resolution dated 03 January 1997. 12
From the unfavorable resolution of the trial court in the third-party claim, respondents appealed to the Court of Appeals. The appellate court reversed the resolution and by judgment promulgated on 25 September 1997, it declared that an attachment or levy of execution, though posterior to the sale, but if registered before the sale is registered, takes precedence over the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
187 of 501
sale. 13 The writ of attachment in favor of the respondents, being recorded ahead of the sale to petitioner, will therefore take precedence. Petitioner moved for reconsideration but this was denied by the Court of Appeals in its Resolution of 10 February 1998. 14
Hence, this Petition for Review on Certiorari. 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. Petitioner maintains that he has a superior right over the questioned property because when the same was attached on 23 April 1996, this property was no longer owned by spouses Uy against whom attachment was issued as it was already sold to petitioner on 05 December 1995. The ownership thereof was already transferred to petitioner pursuant to Article 1477 15 in relation to Article 1498 16 of the Civil Code. Dismissing the allegation that he slept on his rights by not immediately registering at least an adverse claim based on his deed of sale, petitioner avers that he promptly worked out for the transfer of registration in his name. The slight delay in the registration, he claims was not due to his fault but attributable to the process involved in the registration of property such as the issuance of the Department of Agrarian Reform clearance which was effected only after compliance with several requirements.1awphi1.nt Considering the peculiar facts and circumstances obtaining in this case, petitioner submits it would be in accord with justice and equity to declare him as having a superior right to the disputed property than the respondents. Respondents maintain the contrary view. They aver that registration of a deed of sale is the operative act which binds the land and creates a lien thereon. Before the registration of the deed, the property is not bound insofar as third persons are concerned. Since the writ of attachment in favor of respondents was registered earlier than the deed of sale to petitioner, respondents were of the belief that their registered writ of attachment on the subject property enjoys preference and priority over petitioners earlier unregistered deed of sale over the same property. They also contend that Articles 1477 and 1498 of the Civil Code as cited by petitioner are not applicable to the case because said provisions apply only as between the parties to the deed of sale. These provisions do not apply to, nor bind, third parties, like respondents, because what affects or binds third parties is the registration of the instrument in the Register of Deeds. Furthermore, respondents argue that petitioner cannot invoke equity in his favor unless the following conditions are met: (a) the absence of specific provision of a law on the matter; and (b) if the person who invokes it is not guilty of delay. Both conditions have not been met, however, since there is a law on the subject matter, i.e., Section 51 of Presidential Decree No. 1529, and that petitioner allegedly slept on his rights by not immediately registering an adverse claim based on his deed of sale. We agree with the respondents. The law applicable to the facts of this case is Section 51 of P.D. No. 1529. Said Section provides: Sec. 51. Conveyance and other dealings by registered owner. - An owner of registered land may convey, mortgage, lease, charge, or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land, shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration. The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies. It is to be noted that though the subject land was deeded to petitioner as early as 05 December 1995, it was not until 06 June 1996 that the conveyance was registered, and, during that interregnum, the land was subjected to a levy on PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
188 of 501
attachment. It should also be observed that, at the time of the attachment of the property on 23 April 1996, the spouses Uy were still the registered owners of said property. Under the cited law, the execution of the deed of sale in favor of petitioner was not enough as a succeeding step had to be taken, which was the registration of the sale from the spouses Uy to him. Insofar as third persons are concerned, what validly transfers or conveys a persons interest in real property is the registration of the deed. Thus, when petitioner bought the property on 05 December 1995, it was, at that point, no more than a private transaction between him and the spouses Uy. It needed to be registered before it could bind third parties, including respondents. When the registration finally took place on 06 June 1996, it was already too late because, by then, the levy in favor of respondents, pursuant to the preliminary attachment ordered by the General Santos City RTC, had already been annotated on the title. The settled rule is that levy on attachment, duly registered, takes preference over a prior unregistered sale. 17 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. 18
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. 19 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. 20 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. 21 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. 22
Anent petitioners reliance on the rulings laid down in Manliguez v. Court of Appeals and Santos v. Bayhon, we find the same to be misplaced. These cases did not deal at all with the dilemma at hand, i.e. the question of whether or not a registered writ of attachment on land is superior to that of an earlier unregistered deed of sale. In Santos, what was involved were machinery and pieces of equipment which were executed upon pursuant to the favorable ruling of the National Labor Relations Commission. A third party claimed that the machinery were already sold to her, but it does not appear in the facts of the case if such sale was ever registered.l^vvphi1.net Manliguez is similar to Santos, except that the former involved buildings and improvements on a piece of land. To stress, in both cited cases, the registration of the sale, if any, of the subject properties was never in issue.1awphi1.nt As to petitioners invocation of equity, we cannot, at this instance, yield to such principle in the presence of a law clearly applicable to the case. We reiterate that this Court, while aware of its equity jurisdiction, is first and foremost, a court of law. 23 While equity might tilt on the side of one party, the same cannot be enforced so as to overrule positive provisions of law in favor of the other. 24 Equity cannot supplant or contravene the law. 25 The rule must stand no matter how harsh it may seem. Dura lex sed lex. WHEREFORE, the appealed Decision of the Court of Appeals in CA-G.R. SP No. 43082 dated 25 September 1997, and its Resolution dated 10 February 1998, are hereby AFFIRMED. No costs. SO ORDERED.
EN BANC DECISION December 23, 1909 G.R. No. 5534 HERBERT S. WALKER and W. J. ROHDE, plaintiffs-appellees, vs. JOSE McMICKING, defendant-appellant. OBrien and De Witt for appellant. Roman Lacson for appellees. JOHNSON, J.: On the 5th day of February, 1909, the plaintiff commenced an action in the Court of First Instance of the city of Manila to recover the possession of certain personal property mentioned in paragraph 1 of the complaint, or in default thereof the sum of P1,500, its value, and costs. The defendant filed a general denial. After hearing the evidence adduced during the trial of the cause, the lower court rendered a judgment adjudging to Herbert S. Walker, the right to recover the articles mentioned in paragraph 1 of the complaint, of the defendant, or in default, the sum of P539, with interest at the rate of 5 per cent per annum, from February 6, 1909. From this judgment the defendant appealed and made the following assignments of error: 1. The court erred in holding that the attachment of December 17, 1908, was null as to this defendant. 2. The court erred in holding that the sale of June 16, 1908, was rescinded in a way affecting this defendant. 3. The court erred in holding that the rescission does not involve a precedent condition to return the amounts paid on account of the purchase price. 4. The court erred in making an excessive valuation of the goods in question. Under the first above assignment of error, the appellant contends that the lower court committed an error in holding the attachment of the 17th of December, 1908, was null and void. The appellant relies upon Exhibit 1 (the writ of attachment) for the purpose of showing that said attachment was valid. Exhibit 1 was not made a part of the record in this court. We can not, therefore, examine it for the purpose of ascertaining just what its contents were. The lower court, in discussing the validity of said attachment and its effect upon the present action, said: The defendant is not sued in any official capacity, nor does he, in answer, or elsewhere, claim any such status. In fact his answer is only a general denial. He offers in evidence, however, a writ of attachment (Exhibit 1) issued by one of the judges of this court on December 16, 1908, on the back of which appears an indorsement to the effect that the sheriff of Manila delivered a copy of the writ and affidavit upon the which the same was founded, to Arenas & Co. and that said sheriff attached certain articles therein mentioned, some of which appear to be similar to those in controversy, though the identity does not seem to be clearly established. The indorsement further recites that the goods are found deposited . . . in the possession of the same defendants according to a stipulation signed by both parties which is attached to this writ. The attached stipulation recites that all the goods attached shall remain in the possession of the same defendants, relieving the sheriff of all responsibility as regards the care and custody thereof. Plaintiff Rohde further testifies (p. 13) that he never heard of the attachment until about the 29th of January, that he continued in possession from the time Arenas surrender to him and that the latter was permitted to enter only for the purpose of preparing the articles for sale. Section 428 of the Code of Civil Procedure requires: The order of attachment shall be served by the officer of the court by attaching, and safely keeping all the movable property of the defendant. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
190 of 501
It will be seem from the recitals above quoted that the sheriff never claims to have taken into his keeping the articles in controversy, but, on the contrary, left them with the attachment defendants, expressly relieving himself of all responsibility. This is clearly not a compliance with the statute and did not effect a valid attachment. A mere verbal declaration of seizure or service of writ is insufficient. (Hollister vs. Goodale, 21 Am. Dec. 674; Jones vs. Howard, 59 Am. St. Rep. 231; Miles vs. Brown, 38 N.Y. Supr. Ct., 400.) There must be actual assumption of control (4 Cyc., 484, 485.) This is not saying that a defendant may not be custodian; but the possession and responsibility must be the sheriffs and not the defendants. If as stated in defendants brief, such an arrangement is an everyday occurrence in attachment levies, here the vice of it can too soon be declared. The facts presented by a preponderance of the evidence seem to be as follows: The plaintiff, Walker, was the owner of a Filipino carriage factory. The building in which the factory was operated and its contents were, on the 30th of June, 1908, sold to a partnership known as Arenas & Co., by plaintiff, Walker, whose ownership, at the time of the sale, was not disputed by any of the parties to this action. The contract was evidenced by a writing (Exhibit A), from which it appears that the said company was to pay for the said factory and its contents the sum of P3,200, P600 of which was paid at the time of the sale (June 30, 1908) and the balance was to be paid in three installments, due, respectively, P600 on the 15th of July, 1908, P1,000 due on the 15th of September, 1908, and P1,000 due on the 31st of December, 1908. The said company paid the installment due on the 15th of July, 1908, but failed to pay said installments due in September and December. Paragraph 4 of said contract (Exhibit A) contains the following provision: That, should the said firm of Arenas & Co. not pay me the amounts agreed to on the dates stated in the previous paragraph or within the thirty days following any of said terms, the present sale shall be rescinded, and I, Herbert S. Walker, shall be entitled to take possession of the building as well as of the business and all the goods constituting the same. The said company having failed to pay the second and third installments due respectively in September and December, as above indicated, the plaintiff Walker, early in the month of January, 1909, by virtue of the said provision of the contract, rescinded said sale and took possession of said factory with its contents. The factory was located upon land belonging to the plaintiff Rohde. The said company had failed for some months to pay the rent for the land. The plaintiff Rohde claimed that by virtue of the provisions of paragraph 7 of article 1922 of the Civil Code that he had a preferred claim against the said factory and its contents for the payment of the rent. The plaintiff Rohde, acting for himself and for the plaintiff Walker, took possession of said factory and its contents, on or about the first of January, 1909. Mr. Rohde testified that at the time he took possession of said factory, representing himself and the said Walker, there was no one in possession of said property except the said Arenas & Co., and that Arenas & Co. turned said property over to him without any objection whatever, in fact, that the delivery was made by mutual consent and agreement. It appears, however, that on or about the 16th of December, 1908, the defendant, acting as sheriff of the city of Manila, levied an attachment upon the said factory and its contents, by virtue of a judgment theretofore rendered against the said Arenas & Co. The record does not disclose fully just what was done in effecting said attachment. It appears, however, by an indorsement upon said alleged writ of attachment, or perhaps by a stipulation between the parties (to the attachment), that the goods attached shall remain in the possession of the same defendants, relieving the sheriff of all responsibility as regards the care and custody thereof. The plaintiff Rohde testified that he had never heard of said attachment until about the 29th of January, 1909; that he continued in possession from the time (about January 1) that Arenas & Co. surrendered possession to him, and that Arenas & Co. was only permitted to enter the premises thereafter for the purpose of preparing the contents of said factory for sale. The evident theory of the defendant and appellant is that the attachment had the effect of defeating the right of the plaintiffs in said factory and its contents. It appears in the record, that in some way the defendant obtained possession of the articles mentioned in paragraph 1 of the complaint, and that some time early in the month of February, 1909, they were sold for the sum of P191, and a few cents. It is not suggested in the record that the defendant, McMicking, is PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
191 of 501
sued as sheriff. The defendant does not pretend that what he did was done as sheriff. The plaintiff does not attempt to recover of the defendant as sheriff. The pretension of the plaintiff is that the defendant, Jose McMicking, took possession of certain personal property, and retains the possession of the same, which belongs to them. Even admitting that the defendant did, by virtue of an attachment, as sheriff, pretend to take possession of the property in question, the plaintiffs contend that the attachment was void for the reason that the defendant, as sheriff, did not comply with the law in levying the said attachment. The lower court, basing his conclusions upon the provisions of section 428 of the Code of Procedure in Civil Actions, held that the attachment was null for the reason that the defendant did not comply with said section. Section 428 provides that - The order of attachment shall be served by the officer of the court by attaching and safely keeping all the movable property of the defendant in the Philippine Islands, or so much thereof as may be sufficient to satisfy the plaintiffs demands, unless the defendants gives security by obligation to the plaintiff, with sufficient surety, to be approved by the judge who granted the order of attachment, in an amount sufficient to satisfy such demands besides costs, . . . . The property so attached shall be held to await final judgment in execution, unless released as provided in this section or section four hundred and forty. It will be noted, even admitting that the defendant is here sued as sheriff, and that his responsibility in this action is as sheriff, that he did not comply with said section 428, in making said attachment. He did not attach and safely keep the movable property attached. A verbal declaration of seizure of service of a writ of attachment is not sufficient. There must be an actual taking of possession and placing the attached property under the control of the officer or someone representing him. (Hollister vs. Goodale, 8 Conn. 332, 21 Am. Dec. 674; Jones vs. Howard, 99 Ga. 451, 59 Am. St. Rep. 231.) We believe that under said section 428 to constitute a valid levy of an attachment, the officer levying it must take actual possession of the property attached as far as under the circumstances is practicable. He must put himself in position to, and must assert and, in fact, enforce a dominion over the property adverse to and exclusive of the attachment debtor, and such property must be in substantial presence and possession. (Corniff vs. Cook, 95 Ga., 61, 51 Am. St. Rep., 55, 61.) Of course, this does not mean that the attaching officer may not, under an arrangement satisfactory to himself, put anyone in possession of the property for the purpose of guarding it, but he can not in this way relieve himself from liability to the parties interested in said attachment. We are of the opinion, and so hold, that the attachment was not properly made in accordance with the provisions of the Code of the Procedure in Civil Actions. There is no pretension, however, in record, on the part of the defendant, that he attached said property and held the same by virtue of such attachment. Even thought this defense had been made by the defendant, which is only made by his attorney, it would be an admission of the principal facts alleged by the plaintiffs in their complaint to wit, that he had taken possession of personal property belonging to them. The defense made by the defendant is new matter to which no reference whatever was made in the pleadings, and it is, therefore, upon the whole, inadmissible. Facts not alleged in the pleadings but offered as evidence, which admit the facts alleged, but tend to confess and avoid the facts alleged are not admissible in evidence. (Bliss on Code Pleadings, 3d ed., 427, and cases cited.) For example: A sues B on a promissory note, setting up the necessary facts in his petition. B answered by a general denial. Bs real defense is prescription. B will not be permitted to prove prescription for the reasons that (a) he denied the existence of the debt, and (b) by his evidence tending to show that the said debt is prescribed, he thereby admits the existence of the debt, which is a confession of his liability. In other words, the defense of prescriptions is a confession and an avoidance of the obligation. Under the second assignment of error the appellant contends that the original sale of said factory and its contents had not been rescinded by the plaintiffs herein in a manner which in any way affected the defendant. The fourth clause of the contract of sale (Exhibit A) quoted above, gave the vendor of said factory and contents the right to rescind the sale for a failure to pay any of the subsequent installments. The plaintiffs testified during the trial that the second installment had not been paid, in accordance with the terms of the contract and that he, therefore, rescinded the contract of sale, to which rescission, the said company (the purchaser) acceded and delivered to the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
192 of 501
plaintiff Walker the said carriage factory and its contents. No allegation is made by the defendant that either the contract or the rescission of the contract was corruptly made, or for the purpose of defrauding any of the creditors. Exhibit A was the contract between the said company and the plaintiff Walker. It constituted that law covering the rights of the respective parties to it. (Arts. 1254 and 1255, Civil Code.) The plaintiff Walker did all that was necessary for him to do to rescind said contract. Under the third assignment of error, the appellant insists that the contract could not be rescinded by Walker without returning to Arenas & Co. the amount of money which Arenas & Co. had paid on said contract, and cities several provisions of the Civil Code in support of his contention, especially article 1295. Arenas & Co. are not parties to this action. Arenas & Co. have made no claim for the return of the money which they paid on said contract. If they have a right to a return of the money which they paid on said contract upon a rescission by Walker, a question which we do not now decide, they are the only ones which can insist upon it. No such claim is here made. It is not a right which the defendant in this action can insist upon. This question is not involved in the present action for the reason that Arenas & Co. make no such claim. They are not parties to this action. Under the fourth assignment of error, the defendant insists or contends that the value allowed by the lower court for the property in question was excessive. Upon an examination of the evidence brought to this court, relating to the value of the property in question, we are of the opinion, and so hold, that the lower court committed no error in fixing the value of said property at the sum of P539. The price obtained for property under a forced sale is not a fair criterion for the purpose of ascertaining the true value of such property. We have discussed at length assignments of error made by the appellant, but in our opinion the whole case may be stated briefly as follows: First. The defendant attached certain property under a writ of execution issued by one of the courts of the city of Manila, which attachment, however, was levied upon the property in question. This attachment, however, was rendered invalid and of no effect for the reason that the defendant did not maintain his control over the same, either personally or by his representatives. The attachment became invalid the moment the sheriff lost either his actual or constructive control over the property. Second. The plaintiffs herein, innocently and in good faith and under a right, acquired possession of the property in question. Third. That subsequent to the acquisition of the possession by the plaintiffs, the defendant, in some way which does not appear of record, acquired possession of the property in question, and admits that he subsequently sold it. Fourth. The plaintiffs allege that the defendant is in possession of property belonging to them, and prays that the same may be returned or its value. The defendant denies (general denial) that he has the possession of the property. The evidence clearly shows that the defendant did take possession of property which was rightfully in possession of the plaintiffs. He is therefore liable, either to return said property or its value. For all of the foregoing reasons, we are of the opinion and so hold that the judgment of the lower court should be affirmed, with costs. So ordered. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
193 of 501
NBI v. Tuliao, March 24, 1997 THIRD DIVISION
A.M. No. P-96-1184 March 24, 1997 NATIONAL BUREAU OF INVESTIGATION and SANTIAGO N. SALVADOR, complainants, vs. RODOLFO G. TULIAO, Sheriff IV of the RTC of Cauayan, Isabela, Branch 20, respondent.
PANGANIBAN, J.: Sheriffs play an important role in the administration of justice. They form an integral part thereof because they are called upon to serve court writs, execute all processes, and carry into effect the orders of the court with due care and utmost diligence. 1 As agents of the law, high standards are expected of them. In the present case, respondent sheriff failed to live up to these standards. A complaint against Respondent Deputy Provincial Sheriff Rodolfo G. Tuliao of the Regional Trial Court of Cauayan, Isabela, Branch 20 was filed by Santiago N. Salvador before the Tuguegarao Sub-Office (TUGSO) of the National Bureau of Investigation ("NBI"). 2 An investigation was conducted by Agent-in-Charge Franklin Javier and Agent Raul A. Ancheta. On November 24, 1994, complainant gave his statement 3 to Agent Paul Gino Rivera. Invoking his right to remain silent, respondent sheriff refused to "submit himself to custodial investigation" before Agent Javier. Instead, he submitted a Compliance 4 dated July 22, 1995 and an Answer 5 dated August 4, 1995. After the investigation, Agents Javier and Ancheta recommended, inter alia, the filing of an administrative case with the Office of the Court Administrator. 6 Atty. Gerarda G. Galang, Chief of the NBI Legal and Evaluation Division, concurred with said recommendation. 7 On November 13, 1995, Director Mariano M. Mison of the NBI transmitted to this Court a copy of the evaluation with the recommendation that appropriate action be taken against respondent. 8
Hence, this administrative complaint now before us. The Facts Complainant Salvador bought a passenger jeep from Lito G. Ignacio to be paid in monthly installments of P7,000.00 with a down payment of P50,000.00. After remitting the down payment, complainant diligently paid all monthly amortizations until March 1994 when, in the absence of Ignacio, the complainant was forced to pay to an unnamed brother of the seller the amounts due for the months of April and May 1994. However, the brother failed to remit said amount to the seller; thus, the latter filed with the Regional Trial Court of Cauayan, Isabela, Branch 20 9 a suit for collection docketed as Civil Case No. 20-757, entitled Pisces Motor Works, Represented by Lito D. Ignacio vs. Santiago Salvador. Subsequently, an order was issued by the RTC directing respondent sheriff to attach the passenger jeep. Complainant, through counsel, filed a motion to discharge attachment upon filing of a counterbond for the release of the vehicle in his favor. Due to some defects in the aforementioned motion, a second motion with counterbond was filed. On July 13, 1994, the trial court issued an order, the decretal portion of which reads, to wit: 10
WHEREFORE, and in view of the foregoing, the counterbond of the defendant, is hereby approved. The Sheriff is hereby ordered to release to the defendant the attached vehicle bearing Motor No. 6D-57-51813 with Plate No. UV BBR-127. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
194 of 501
Respondent refused to comply with the said order. Instead, he released the passenger jeep to Ignacio after the latter had executed a receipt therefor together with an undertaking that he would produce the jeep whenever required by the court. Respondent justified such release by saying that the court had no storage building that would protect the jeep from damage or loss. 11
Despite the pendency of a motion for contempt 12 filed by complainant against respondent, the case was dismissed 13 on August 31, 1994 because jurisdiction over the case had been transferred to the municipal trial court as mandated by Republic Act No. 7691 which expanded said court's jurisdiction. After receipt of respondent's Comment dated April 20, 1996, the Court referred the case to the Office of the Court Administrator for evaluation, report and recommendation. In a memorandum to the Chief Justice dated August 29, 1996, Acting Court Administrator Reynaldo L. Suarez recommended a finding of guilt and suspension of respondent for six (6) months without pay. 14
Issue The main issue in this case is whether respondent sheriff is administratively liable for failing to release the property undercustodia legis to the complainant in accordance with the order of the regional trial court. Respondent sheriff contends that his act of not taking into his official custody the attached property was not unlawful but was in fact reasonable because the court had no facility for its storage. That it could no longer be returned to complainant's possession in accordance with the court's order was not his fault but that of the attaching creditor who had violated his obligation to produce the same whenever required by the court. He offers "to pay a fine in the discretion of the Honorable Court as he has not benefited any pecuniary interest (sic)." 15
The Court's Ruling Respondent's contentions are without merit. We agree with the Court Administrator that respondent should be held administratively liable. First Issue: Manner of Attachment This Court finds respondent sheriff's manner of attachment irregular and his reason therefor totally unacceptable. Rule 57 of the Rules of Court provides: Sec. 5. Manner of attaching property. The officer executing the order shall without delay attach, to await judgment and execution in the action, all the properties of the party against whom the order is issued in the province, . . . xxx xxx xxx Sec. 7. Attachment of real and personal property, recording thereof Properties shall be attached by the officer executing the order in the following manner: xxx xxx xxx (c) Personal property capable of manual delivery, by taking and safely keeping it in his capacity, after issuing the corresponding receipt therefor; xxx xxx xxx Clearly, respondent's act of leaving the passenger jeep in the possession and control of the creditor did not satisfy the foregoing requirements of the Rules; neither did it conform to the plainly worded RTC order. The note in the receipt that imposed on Ignacio the obligation to produce the same whenever required by the court was no compliance either, because it did not establish that the property was in respondent sheriff's substantial presence and possession. Respondent fell short of his obligation to take and safely keep the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
195 of 501
attached property "in his capacity." He cannot feign ignorance of this duty as he himself correctly cited an early decision of this Court explaining a sheriff's duty in attachment, as follows: 16
. . . A verbal declaration of seizure or service of a writ of attachment is not sufficient. There must be an actual taking of possession and placing of the attached property under the control of the officer or someone representing him. (Hollister vs. Goodale, 8 Conn., 332, 21 Am. Dec., 674; Jones vs. Howard, 99 Ga., 451, 59 Am. St. Rep., 231.) We believe that . . . to constitute a valid levy of an attachment, the officer levying it must take actual possession of the property attached as far as . . . practicable (under the circumstances). He must put himself in (a) position to, and must assert and, in fact, enforce a dominion over the property adverse to and exclusive of the attachment debtor, and such property must be in his substantial presence and possession. (Corniff vs. Cook, 95 Ga., 61, 51 Am. St. Rep., 55, 61.) Of course, this does not mean that the attaching officer may not, under an arrangement satisfactory to himself, put anyone in possession of the property for the purpose of guarding it, but he can not in this way relieve himself from liability to the parties interested in said attachment. That Ignacio was able to move the passenger jeep to an unknown location is further proof that respondent sheriff had not taken and safely kept it in his substantial presence, possession and control. His claim that the regional trial court did not have any storage facility to house said property is no justification. He could have deposited it in a bonded warehouse. 17
Contrary to respondent sheriff's contention, compelling the attaching creditor to release the property in question was not in order, because the proper remedy provided by the Rules of Court was for the party whose property had been attached to apply for the discharge of the attachment by filing a counterbond. 18 The effect of this remedy is the delivery of possession of the attached property to the party giving the counterbond. The attaching creditor was not authorized to have possession of the attached property, contrary to the insistence of respondent sheriff. Second Issue: Liability of a Sheriff A court employee should keep in mind that he is an integral part of that organ of the government that is involved in the sacred task of administering justice. His conduct and behavior should perforce be circumscribed with the heavy burden of responsibility and must at all times be characterized by propriety and decorum. 19
Section 4(c) of Republic Act No. 6713 requires of every public official and employee justness and sincerity in the discharge and execution of official duties. It exacts from him at all times respect for the rights of others and proscribes him from dispensing or extending undue favors on account of his office. The Court in Chan vs. Castillo held: 20
Every officer or employee in the judiciary is duty bound to obey the orders and processes of the court without the least delay (Pascual vs. Duncan, 216 SCRA 786 [1992]), . . . Leaving the attached property in the possession of the attaching creditor makes a farce of the attachment. This is not compliance with the issuing court's order. When a writ is placed in the hands of a sheriff, it is his duty, in the absence of any instructions to the contrary, to proceed with reasonable celerity and promptness to execute it according to its mandate. 21 He is supposed to execute the order of the court strictly to the letter. 22 If he fails to comply, he is liable to the person in whose favor the process or writ runs. 23
Respondent's pretense of having acted in utmost good faith for the preservation of the attached property is hardly credible because there was no reason for his having acted thus. In sum, he is unable to satisfactorily explain why he failed to take such movable in his control. By acceding to the request of Ignacio, respondent sheriff actually extended an undue favor which prejudiced the complainant as well as the orderly administration of justice. He exceeded his powers which were limited to the faithful execution of the court's orders and service of its processes. 24 His prerogatives did not give him any discretion to determine who among the parties was entitled to possession of the attacked property. That he exerted efforts in going to the creditor's residence in Tuguegarao, Cagayan to obtain possession of the attached property was an act of compliance with the writ of attachment. This action, belated as it was, did not mitigate his liability. Much less did it exculpate him from penalty. IN VIEW OF THE FOREGOING, respondent sheriff is hereby found administratively liable as charged and is SUSPENDEDfor six (6) months without pay with a warning that the commission of the same or similar acts in the future shall be dealt with more severely by this Court. SO ORDERED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
197 of 501
Villanueva-Fabella v. Judge Ralph Lee, 419 S 440 FIRST DIVISION A.M. No. MTJ-04-1518 January 15, 2004 Attys. VILMA HILDA D. VILLANUEVA-FABELLA and WILMAR T. ARUGAY, complainants, vs. Judge RALPH S. LEE and Sheriff JUSTINIANO C. DE LA CRUZ JR., both of the Metropolitan Trial Court, Branch 38, Quezon City, respondents. D E C I S I O N PANGANIBAN, J.: Once more, we remind members of the judicial branch judges and judicial personnel alike -- to be conscientious, diligent and thorough in the performance of their functions. At all times they must observe the high standards of public service required of them. The Case and the Facts In an administrative Complaint 1 dated November 12, 2002, Attys. Vilma Hilda D. Villanueva-Fabella and Wilmar T. Arugay charged Judge Ralph S. Lee of the Metropolitan Trial Court (MeTC) of Quezon City (Branch 38) with manifest partiality, incompetence and gross ignorance of the law; and Sheriff Justiniano C. de la Cruz Jr. of the same MeTC, with unjust, oppressive, irregular and excessive enforcement of a writ of attachment. The factual antecedents of the matters are summarized by the Office of the Court Administrator (OCA) as follows: "The complainants are counsels for the defendants in Civil Case No. [38]-28457 entitled Star Paper Corporation vs. Society of St. Paul and Fr. Leonardo Eleazar for Sum of Money with Prayer for Preliminary Attachment. They narrated that on 19 June 2002, their clients were served a copy of the complaint and a Writ of Attachment by Sheriff Dela Cruz based on the plaintiffs allegation that the defendants contracted a debt in bad faith with no intention of paying the same. "On the aforementioned day, a printing machine was levied and delivered to the plaintiffs warehouse, although there was an offer by the defendants to pay right there and then P223,457.75, the amount fixed in the order of attachment, but the plaintiff denied the defendants plea not to attach the machine, saying that [it] had already set [its] mind on attaching the same. "Atty. Fabella, together with three (3) priests, asked the sheriff to levy on a less expensive machine but to no avail. She then told the sheriff that he [would] unnecessarily levy on the machinery because a cash deposit to discharge the attachment could be filed that same afternoon but he just dismissed the same, saying that it takes time before the court could approve the counterbond. "The complainants claim[ed] that Sheriff Dela Cruz violated x x x Rule 57, Section 7, 1997 Rules of Civil Procedure which provide[d] that in the attachment of personal property capable of manual delivery, [the property should] be taken and safely kept in the sheriffs custody. The machinery, according to complainants, [was] brought to [the] plaintiffs warehouse in San Francisco del Monte, Quezon City. The foregoing show[ed] that the implementation of the writ of attachment was marred by excessiveness, irregularity and oppressiveness. x x x x x x x x x "On 3 July 2002, Judge Lee granted the defendants Urgent Motion to Discharge Attachment filed 19 June 2002. Thereafter, on 9 July 2002, an Urgent Ex-Parte Motion to Withdraw Cash Deposit was filed, without notice to the defendants and despite failure of the plaintiff to set such litigious motion for hearing and contrary to existing laws and jurisprudence. Judge Lee granted the same in his Order of 17 July 2002. Defendants only learned of the withdrawal when they received a copy of the said Order. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
198 of 501
"A Motion for reconsideration of the 17 July 2002 Order was filed on 30 August 2002. Defendants stressed that the Motion to Withdraw Cash Deposit has no basis, shows no urgency, lacks notice and hearing, and is already a prejudgment of the case even before the pre-trial stage which is tantamount to the taking of property without due process of law. "For failure of the plaintiff to appear at the pre-trial conference, the court granted the motion to declare the plaintiff as non-suited as well as the prayer to allow the ex parte presentation of the defenses evidence on its counterclaim. "The plaintiff then filed a Verified Motion for Reconsideration of the Order declaring it as non-suited[,] which was set for hearing in the morning of 24 October 2002, the same day the aforementioned ex parte presentation of evidence was supposed to commence. "Judge Lee was not around in the morning so the hearing on the motion did not materialize with the ex-parte presentation of evidence in the afternoon because the Clerk of Court refused to proceed for the reason that a motion for reconsideration had been filed the day before. The Clerk of Court then conferred with the respondent Judge in his chambers who produced a handwritten note granting the said motion. She explained to complainant Atty. Arugay that she did not notice that Judge Lee had already issued the Order granting such motion[;] thus, the ex parte presentation of evidence could not proceed. "According to complainants, the Clerk of Court could not explain the irregularity in the granting of the plaintiffs Motion for Reconsideration and the fact that the same was swiftly resolved[,] while the defendants similar motion [had] not been resolved for more than two (2) months already." 2
In his Comment 3 dated January 9, 2003, respondent judge claimed that the Complaint was fatally defective, because complainants did not have legal personality to file it; neither did they present affidavits, verified statements or any authority to represent their clients. Further, the Complaint did not contain a certification of non-forum shopping, but instead had a handwritten verification not sworn to or subscribed before an administering officer. He likewise assailed complainants allegations as hearsay. As to what had allegedly transpired during the implementation of the subject Writ of Attachment, he adopted the averments in respondent sheriffs Comment 4 alleging the presumption of regularity in the discharge of official functions. Respondent judge admitted that he had committed a procedural error when he released the counter-bond 5 to the plaintiff in the said civil case. However, when the defendants therein, through their Motion for Reconsideration, called his attention to the mistake, he immediately ordered 6 the return 7 of the counter-bond to the custody of the Office of the Clerk of Court. He cited jurisprudence to defend his acts and asserted his good faith and lack of malice. Moreover, he averred that he had not delayed the resolution of the Motion. Finally, he urged the Court to dismiss the instant Complaint outright for being instituted without basis and merely to harass him. In his Comment, 8 respondent sheriff claimed that after receiving the Writ of Preliminary Attachment, he sought its implementation through the assistance of the clerk of court of the MTC-Makati, Sheriff Ernesto Adan, and the Makati police. He allowed the parties in the civil case to negotiate for a settlement, but when the negotiations bogged down, he attached a printing machine that was not in use at the time. He denied that there was abuse in the levy, claiming that the machine was an old 1970 model. Moreover, he said that, contrary to complainants allegation that the machine was valuable, no receipt to prove its true value was ever shown. Respondent sheriff added that it was in his own belief and best judgment to temporarily place the delicate printing machine in the warehouse of the plaintiff for safekeeping. The machine was eventually returned to the defendants by virtue of the Order discharging the Writ. In fact, one of the complainants personally acknowledged receipt of the machine. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
199 of 501
As to the allegation that he was arrogant, respondent sheriff claimed that he waited for more than three hours before exercising his ministerial function. Lastly, he adopted the averments in the Comment of respondent judge on other events that had transpired during the pendency of the civil case, the subject of the instant Complaint. Evaluation and Recommendation of the OCA The OCA opined that the provisions cited by complainants -- those in Sections 12 and 18 of Rule 57 of the 1997 Rules of Civil Procedure 9 -- did not require the adverse party to be first notified and then heard before an attachment bond may be released. Considering that the bond posted by the attaching creditor would answer for the damages and costs the court may award the adverse party by reason of the attachment, the better practice was for the latter to be notified and heard before the motion to discharge attachment could be resolved. According to the OCA, the error was corrected when respondent judge, on Motion for Reconsideration, reversed himself before the adverse party incurred any damage. The OCA emphasized that before the full disciplinary powers of this Court could befall a judge, the erroneous act should have been committed with fraud, dishonesty, corruption, malice or bad faith. It opined that such fact had not been clearly and convincingly shown in the instant case. 10
The OCA found that respondent sheriff had erred when he deposited the plaintiffs levied property in the warehouse and thereby lost actual or constructive possession thereof. The OCA said that this legal violation could not be justified by the weight and the condition of the machine, which could have been deposited in a rented private warehouse where it could have been guarded under his strict supervision. Consequently, the OCA recommended that respondent judge "be REMINDED to be more circumspect in the performance of his duties and to keep abreast with the law and jurisprudence"; and that respondent sheriff "be SUSPENDED for one (1) month without pay for violation of Rule 57, Section 7(b) of the 1997 Rules of Civil Procedure with a WARNING that a repetition of the same or similar act(s) shall be dealt with more severely in the future." 11
The Courts Ruling We agree with the findings and the recommendation of the OCA. Administrative Liability With respect to the charges against respondent judge, we find that his grant of the withdrawal of the cash deposit -- an Order he later reversed by ruling that the deposit be returned to the clerk of court -- was a mere error of judgment, not an act revealing gross ignorance of the law or procedure. Attachment is a juridical institution intended to secure the outcome of a trial - - specifically, the satisfaction of a pecuniary obligation. 12 Such order is enforced through a writ that may be issued at the commencement of an action, 13 commanding the sheriff to attach property, rights, credits or effects of a defendant to satisfy the plaintiffs demand. 14 Hence, the property of a defendant, when taken, is put in custodia legis. 15
In order to prevent the sheriff from levying an attachment on property, the defendant (also called the adverse party) may make a deposit or give a counter-bond in an amount equal to that fixed in the order of attachment. Such deposit or counter-bound is intended to secure the payment of any judgment that the plaintiff (also called the attaching party or the applicant to the writ) may recover in the action. 16 After a writ has been enforced, however, the adverse party may still move for the discharge of the attachment, wholly or in part, by also making a deposit or giving a counter-bond to secure the payment of any judgment 17 the attaching party may recover in the action. 18 The property attached shall then be released and delivered to the adverse party; and the money deposited shall be applied under the direction of the court to the satisfaction of any judgment that may be rendered in favor of the prevailing party. 19
In the instant case, respondent judge had ordered 20 the withdrawal of the cash deposit of the defendant and released it in favor of the plaintiff, even before judgment was rendered. This action was clearly in violation of the Rules mandating that after the discharge of an attachment, the money deposited shall stand in place of the property released. 21 However, the inadvertence 22 of respondent judge was not gross enough to merit sanction. First, he rectified himself within the period given for deciding motions. Section 15(1) of Article VIII of the Constitution mandates all trial courts to resolve all matters filed within three months from date of submission. 23 The Motion for Reconsideration 24 of the July 17, 2002 Order granting the withdrawal of the deposit was filed on August 30, 2002, and submitted for resolution on September 5, 2002, 25 the date of hearing. 26 The Order 27 granting this Motion was then issued on November 4, 2002, well within the three- month period. The money was returned, and no prejudice was suffered by any of the parties. Second, respondent judge owned up to his mistake 28 in his Comment. This is an admirable act. Under the Code of Judicial Conduct, judges should be the embodiment of competence 29 and should so behave at all times as to promote public confidence in the integrity of the judiciary. 30 They must be faithful to the law. 31 That respondent judge admitted his mistake shows his recognition of his fallibility and his openness to punishment, the imposition of which restores public confidence in the judicial system. His July 17, 2002 Order was merely an honest mistake of judgment -- an innocent error in the exercise of discretion -- but not a display of gross incompetence or unfaithfulness to the law. We have already ruled that as long as the judgment remains unsatisfied, it would be erroneous to order the cancellation of a bond filed for the discharge of a writ of attachment. 32 In like manner, it would be erroneous to order the withdrawal of a cash deposit before judgment is rendered. Be that as it may, "a [judge] may not be held administratively accountable for every erroneous order x x x he renders." 33 Otherwise, a judicial office would be untenable, 34 for "no one called upon to try the facts or interpret the law in the administration of justice can be infallible." 35 For liability to attach for ignorance of the law, the assailed order of a judge must not only be erroneous; more important, it must be motivated by bad faith, dishonesty, hatred or some other similar motive. 36 Certainly, mere error of judgment is not a ground for disciplinary proceedings. 37
Complainants alleged that respondent judge committed another violation of the Rules of Court when he granted 38 the plaintiffs Urgent Ex-Parte Motion to Withdraw Cash Deposit. 39 The Rules mandate that, except for motions that the court may act upon without prejudicing the rights of the adverse party, every written motion shall be set for hearing by the applicant. 40 The notice of hearing shall be addressed to the defendants therein and shall specify the time and date of the hearing, which must not be later than ten (10) days after the filing of the motion. 41 The motion and notice shall be served at least three days before the date of hearing. 42 Without proof of its service, the court cannot act upon it. 43
Indeed, the plaintiffs Motion to withdraw the cash deposit lacked notice of hearing and proof of service. Respondent judge should not have acted upon it. However, because he had erroneously thought that the rights of the defendants would not be prejudiced thereby, he took action. His poor judgment obviously resulted in his issuance of the erroneous Order that granted the release of the deposit. Similarly, the verified Motion for Reconsideration of the Order declaring plaintiff as non-suited and allowing the ex-parte presentation of evidence by the defense should have been heard in open court, not granted in chamber. Respondent judge must have thought that this Motion, which had been filed by the plaintiff, required immediate action; and so the former granted it by ordering -- through a handwritten note which we do not approve of -- the deferment of the scheduled presentation. 44 This Order should not have been issued, because the Motion had been filed only a day before the scheduled hearing. 45 The rules on notice of hearing and proof of service should have been observed by both the plaintiffs counsel and respondent judge. Unfortunately, the latters poor judgment likewise prevailed, but still fell short of gross ignorance of the law or procedure. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
201 of 501
Specious is the argument of respondent judge that complainants have no legal personality to file the instant Administrative Complaint against him. His contention that the allegations contained therein are hearsay 46 also deserves scant consideration. Rule 140 allows the institution of disciplinary proceedings against judges, not only upon a verified complaint -- supported by affidavits of persons who have personal knowledge of the facts alleged therein or by documents substantiating the allegations -- but even upon an anonymous one. 47 Complainants herein have the requisite personal knowledge and have, in fact, executed a joint Complaint-Affidavit and substantiated their allegations with pertinent documents. The verification 48 in their Complaint, albeit handwritten after the jurat, is sufficient in form and substance. 49 Such verification is a clear affirmation that they are prepared to establish the truth of the facts pleaded. 50 In fact, the lack of it is "merely a formal defect that is neither jurisdictional nor fatal." 51 This Court may order the correction of a pleading, "if the attending circumstances are such that strict compliance with the rule may be dispensed with in order to serve the ends of justice." 52 The jurat that preceded the verification simply evidences the fact that the Affidavit was properly made and sworn to before the officer certifying it. 53 Furthermore, a certification against forum shopping is not needed in this case; Rule 140 makes no such requirement. We find that the charges against respondent sheriff have bases. Verily, he blatantly violated Section 7(b) of Rule 57 of the Rules of Court when he deposited the machine in the warehouse of the plaintiff. In enforcing a writ of attachment, a sheriff who takes personal property capable of manual delivery shall safely keep it in custody after issuing the corresponding receipt therefor. 54 Respondent sheriff failed to do so. To constitute a valid levy of attachment, the officer levying it must have "actual possession of the property attached." 55 "He must put himself in [a] position to, and must assert and, in fact, enforce a dominion over the property adverse to and exclusive of the attachment debtor." 56 To this rule we add that the officer cannot even deliver the property to the attachment creditor, as the parties must await the judgment in the action. The levied property must be in the "substantial presence and possession" 57 of the levying officer, who "cannot act as special deputy sheriff of any party litigant." 58 The officer may put someone "in possession of the property for the purpose of guarding it," but the former cannot be "relieve[d] x x x from liability to the parties interested in said attachment." 59
Sheriffs are officers of the court 60 who serve and execute writs addressed to them by the court, and who prepare and submit returns of their proceedings. 61 They also keep custody of attached properties. 62 As officers of the court, they must discharge their duties with "great care and diligence." 63 They have to "perform faithfully and accurately what is incumbent upon [them]" 64 and show at all times a "high degree of professionalism in the performance of [their] duties." 65
The duty of sheriffs to execute a writ issued by a court is purely ministerial, 66 not discretionary. 67 Clearly, they must keep the levied property safely in their custody, not in that of any of the parties. They exercise no discretion in this regard, for attachment is harsh, extraordinary and summary in nature -- a "rigorous remedy which exposes the debtor to humiliation and annoyance." 68 Contrary to the claim of respondent sheriff, his unusual zeal and precipitate decision to give possession of the machine to the plaintiff effectively destroys, the presumption of regularity in his performance of official duties. 69 "Any method of execution falling short of the requirement of the law deserves reproach and should not be countenanced." 70
In implementing the Writ, respondent sheriff cannot afford to err without adversely affecting the proper dispensation of justice. 71 1wphi1 "Sheriffs play an important role in the administration of justice. As agents of the law, high standards are expected of them. x x x His conduct, at all times, must not only be characterized by propriety and decorum but must, and above all else, be above suspicion." 72
As a public officer who is a repository of public trust, respondent sheriff has the obligation to perform the duties of his office "honestly, faithfully and to the best of his ability." 73 He must be "circumspect and proper in his behavior." 74 Reasonable skill and diligence he must use in the performance of PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
202 of 501
official duties, especially when the rights of individuals may be jeopardized by neglect. 75
Sheriffs must always "hold inviolate and invigorate the tenet that a public office is a public trust." 76 As court personnel, their conduct must be beyond reproach and free from any suspicion that may taint the judiciary. 77 In view of their exalted position as keepers of public faith, court personnel are indeed saddled with a heavy burden of responsibility 78 to the public. Hence, they must thoroughly avoid any impression of impropriety, misdeed or negligence in the performance of official duties. 79 We have held thus: "x x x [T]his Court condemns and would never countenance such conduct, act or omission on the part of all those involved in the administration of justice which would violate the norm of public accountability and diminish or even just tend to diminish the faith of the people in the Judiciary." 80
Once again we emphasize that "[a]t the grassroots of our judicial machinery, sheriffs x x x are indispensably in close contact with the litigants, hence, their conduct should be geared towards maintaining the prestige and integrity of the court, for the image of a court of justice is necessarily mirrored in the conduct, official or otherwise, of the men and women who work thereat, from the judge to the least and lowest of its personnel; 81 hence, it becomes the imperative sacred duty of each and everyone in the court to maintain its good name and standing as a temple of justice." 82 Dismissed for lack of basis, however, is the charge of excessive enforcement of a writ filed against respondent sheriff. Applying Section 8 of Rule 140 of the Rules of Court, respondent judge is found wanting in the exercise of good discretion only. His errors of judgment fall short of gross ignorance of the law or procedure, yet reflect poorly on his esteemed position as a public officer in a court of justice. Judges must be conscientious, studious and thorough, 83 observing utmost diligence in the performance of their judicial functions. 84 They have to "exhibit more than just cursory acquaintance with statutes and procedural rules." 85 Moreover, they must require court personnel to observe at all times high standards of public service and fidelity. 86
Applying the Uniform Rules on Administrative Cases in the Civil Service, 87 we find respondent sheriff guilty of simple neglect of duty for violating Section 7(b) of Rule 57 of the Rules of Court. Simple neglect of duty is the "failure x x x to give proper attention to a task expected" 88 of an employee, thus signifying a "disregard of a duty resulting from carelessness or indifference." 89 Classified as a less grave offense, it is punishable by a suspension of one month and one day to six months. Considering that the failure of respondent sheriff to fulfill his duty seems to be his first infraction during his stint in the judiciary, the Court considers the recommended sanction appropriate. WHEREFORE, the Court reiterates its REMINDER 90 to Judge Ralph S. Lee of the Metropolitan Trial Court of Quezon City (Branch 38) to evince due care in the exercise of his adjudicative functions. On the other hand, Sheriff Justiniano C. de la Cruz Jr. of the same branch is found GUILTY of simple neglect of duty and is hereby SUSPENDED for one month and one day without pay, with a warning that a repetition of the same or of a similar act in the future shall be dealt with more severely. SO ORDERED.
A.M. No. P-91-549 July 5, 1993 REYNALDO SEBASTIAN, complainant, vs. SHERIFF ALBERTO A. VALINO, respondent. Bautista, Picaso, Buyco, Tan & Fider Law Offices for complainant. Teresita G. Oledan for respondent.
QUIASON, J.: Marblecraft, Inc., represented by its Assistant General Manager, Reynaldo Sebastian, charges Alberto A. Valino, Senior Deputy Sheriff, Office of the Regional Sheriff, Pasig, Metro Manila, with (1) gross abuse of authority committed in connection with the implementation of the writ issued by the Regional Trial Court, Makati, Metro Manila, in Civil Case No. 89-3368, and (2) refusal to enforce the trial court's for the return of the seized items. Complainant alleges that: 1. On March 3, 1989, Private Development Corporation of the Philippines (PDCP) filed a replevin suit against Marblecraft, Inc., in Civil Case No. 89- 3368, in order to foreclose the chattels mortgaged by Marblecraft. On March 30, 1989, the Regional Trial Court, Makati, issued a writ of seizure directed against Marblecraft covering the chattels sought to be replevied. 2. The enforcement of the writ of seizure was delayed because of the writ of preliminary injunction enjoining PDCP from proceeding with the foreclosure sale issued by the Regional Trial Court, Pasig, Metro Manila in Civil Case No. 58006, It was only on October 31,1990, when the Regional Trial Court, Pasig, dissolved the writ of preliminary injunction. 3. On November 9, 1990, at around 10:37 A.M., respondent, accompanied by several policemen and PDCP employees, went to the office of Marblecraft at Barrio Santolan, Pasig, to implement the writ of seizure. Respondent and his companions forcibly opened the lockers and desk drawers of the employees of complainant and took their personal belongings, as well as some office equipment issued to them. The employees filed with the Office of the Provincial Prosecutor of Rizal two criminal complaints for robbery against respondent and his companions. 4. Respondent only showed to complainant's counsel a copy of the writ but did not furnish him with a copy of the application for the writ, the supporting affidavit and the bond. 5. In the course of the implementation of the writ, which lasted for four days, several pieces of machinery and equipment were destroyed or taken away by respondent. 6. Respondent turned over the seized articles to the counsel of PDCP and allowed these items to be stored in PDCP's warehouse in Taguig, Metro Manila. 7. On November 14, 1990, complainant posted a counterbond. In an order issued on the same day, the Regional Trial Court, Makati, approved the bond and directed the immediate return of the seized items. After denying PDCP's motion to set aside the November 14 Order, the trial court reiterated the directive for the return of the seized items in its November 26 Order. Respondent did not implement the orders. 8. PDCP filed a motion for reconsideration of the November 26 Order, which was denied in an Order dated December 11, 1990. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
204 of 501
In his comment, respondent branded the administrative complaint against him as pure harassment filed by Marblecraft after he had refused to defer the implementation of the writ of seizure. He said that if he did not implement the writ, he would have been accused by PDCP of non-performance of his duties as a sheriff. He pointed out that the criminal complaints for theft filed against him by the employees of complainant were dismissed by the Provincial Prosecutor of Rizal. The administrative complaint was referred to Judge Martin S. Villarama Jr. of the Regional Trial Court, Pasig, for investigation, report and recommendation. In his report, Judge Villarama, found respondent guilty of partiality when he immediately turned over the seized items to PDCP, and of willful refusal to enforce the November 14, 26 and December 11, 1990 Orders of the Regional Trial Court, Makati. Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the plaintiff. The sheriff must retain it in his custody for five days and shall return it to the defendant, If the latter, as in the case, requires its return and files a counterbond (Sec. 4, Rule 60, Revised Rules of Court). In violation of said Rule, respondent immediately turned over the seized articles to PDCP. His claim that the Office of the Regional Sheriff did not have a place to store the seized items, cannot justify his violation of the Rule. As aptly noted by the Investigating Judge, the articles could have been deposited in a bonded warehouse. Respondent must serve on Marblecraft not only a copy of the order of seizure but also a copy of the application, affidavit and bond (Sec. 4, Rule 60, Revised Rules of Court). Respondent did not furnish defendant with a copy of the application, affidavit and bond. By his own admission, he only served it with a copy of the order of seizure (Rollo, p. 37). The more serious infraction of respondent is his refusal to implement the order of the Regional Trial Court, Makati for him to return to complainant the articles seized pursuant to the writ of seizure dated March 30, 1990. The Order dated November 14, 1990 directed him "to immediately return to defendant all its properties seized and taken from its premises pursuant to the writ of seizure of March 30, 1989, from receipt of this Order (sic)" (Rollo, p. 42) The Order dated November 26, 1990 directed him "to implement the Order of this Court dated November 14, 1990 and to immediately return to defendant all its properties seized and taken from its premises pursuant to the writ of seizure dated March 30, 1989 from receipt of this Order (sic)" (Rollo, p. 44). The Order dated December 11, 1990 directed him "to implement the Order of this Court dated November 26, 1990, within three (3) days from the receipt hereof, otherwise this Court will be constrained to appoint and deputize another sheriff to implement the order dated November 26, 1990" (Rollo, p. 47). The only action taken by respondent to implement the Order dated December 11, 1990 was to write a letter on December 12, 1990, addressed to the counsel of PDCP, requesting the turnover of seized articles. As expected, PDCP's counsel refused to part with the possession of the seized articles and to issue a letter of authorization to withdraw the same from the warehouse. Instead of taking possession of the articles, respondent merely reported to the Regional Trial Court that "[i]t is now clear that the undersigned cannot implement the Court order dated December 11, 1990 by reason of the refusal of PDCP to accept or to honor said Court order" (Rollo, p.48). The petition for certiorari of PDCP to question the orders of the Regional Trial Court, Makati, was filed with the Court of Appeals only on December 17, 1990. The Court of Appeals issued a temporary restraining order only on December 21, 1990. Respondent therefore had more than seven days within which to enforce the orders of the trial court if he was minded to do so. Respondent could have avoided getting into his present predicament had he not turned over the possession of the seized goods prematurely to the PDCP. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
205 of 501
The complainant cannot be blamed if it harbored the suspicion that respondent was beholden to PDCP. The zeal with which respondent enforced the order of seizure in favor of PDCP was in sharp contrast with his inaction in enforcing the three orders of the trial court directing him to return the seized items to complainant. It is not for respondent to question the validity of the orders of the trial court. It is for him to execute them. As observed by the Investigating Judge, "[t]here is therefore no excuse for respondent's wilfull refusal to implement the Order of the Court" (Report and Recommendation, p. 10). Disobedience by court employees of orders of the court is not conducive to the orderly administration of justice. The display of partially in favor of a party as against the other party erodes public confidence in the integrity of the courts. IN VIEW OF THE FOREGOING, the Court finds respondent guilty of serious misconduct and RESOLVED to impose upon him the penalty of FOUR (4) MONTHS SUSPENSION without pay, the period of which should not be charged to his accumulated leave, with a WARNING that a repetition of the same or of acts calling for disciplinary action will be dealt with more severely. This resolution is IMMEDIATELY EXECUTORY, and respondent is hereby ordered to forthwith desist from performing any further official functions appertaining to said office. SO ORDERED.
A.M. No. P-94-1108 August 23, 1995 MARIANETTE VILLAREAL, complainant, vs. ROLANDO T. RARAMA, RESTITUTO MADRAZO, FIDEL CASUYON, and AGUINALDO DEL CAMPO, respondents.
REGALADO, J.: The present administrative case arose from a sworn complaint 1 filed by Marianette Villareal against respondents Rolando T. Rarama, Restituto Madrazo, Fidel Casuyon, and Aguinaldo del Campo who are all serving as Sheriff III in Branches V, VII, II, and III, respectively, of the Municipal Trial Courts in cities (MTCC), Davao City, for allegedly "conniving and confederating in maliciously serving a writ of execution intended for another person who is living in another place." Pursuant to the First Indorsement of Deputy Court Administrator Reynaldo L. Suarez dated August 24, 1994, 2 the complaint was referred to respondent Sheriff Rolando T. Rarama, through Judge Roberto Q. Canete, MTCC, Branch 5, Davao City, for comment. Subsequently, respondents submitted their joint counter-affidavit 3 to which a reply 4 was filed by herein complainant. A rejoinder to complainant's reply 5 was also submitted by respondents. It appears that an action for collection of a sum of money was filed by the Cooperative Rural Bank of Davao City against the spouses Marianette (herein complainant) and Roy Villareal, Lito Lacorda and Felimon Cangrejo before the MTCC, Branch 5, of Davao City docketed as Civil Case No. 548-E-M. The records show that summons was served upon respondent Cangrejo who, however, failed to file his answer, as a consequence of which he was declared in default. On April 19, 1989, judgment 6 was rendered against him in favor of the plaintiff bank without prejudice to his right to proceed against his co- debtors. On March 29, 1994, an alias writ of execution 7 was issued by the trial court against Cangrejo. According to complainant, at around 1:30 P.M. of April 25, 1994, respondent Rarama arrived at her house in Digos, Davao del Sur, together with the other respondents and three employees of the Cooperative Rural Bank of Davao City, Inc., including one Vic Belo who is a collector of the bank. Respondent Rarama introduced himself as a sheriff of Davao City and informed her that they were going to attach her properties because she lost in a case. Complainant denied having been charged in court, much more of having lost in a case, and that she did not owe anything to the bank. When respondent Rarama persisted in getting her properties, she demanded and was shown the writ of execution. She objected thereto, claiming that the same was not addressed to her but to Felimon Cangrejo and that the writ was being served after more than five years from the date the decision was rendered. The reply given her was that she is the principal borrower and the only one who is solvent. Despite the pleas of complainant and a neighbor for the postponement of the implementation of the writ until she shall have consulted her lawyer, respondents immediately proceeded to pull out from complainant's house the following items, viz.: one VHS player, one Singer sewing machine, one Chinese cabinet, and another Chinese cabinet with glass shelves. Allegedly, complainant was forced to sign an inventory receipt because she would otherwise not be able to get back her things. She hastened to add that when she signed the receipt, the words "with my conformity" were not written thereon. The following day, complainant and her husband went to the bank to inquire about the status of her loan and she was informed that, unless she settled her account, her properties would not be released. Complainant avers that because of this she was constrained to pay the amount of P10,000.00 despite earlier representations made with the bank that she had fully paid her loan to the bank collector. She further asserts that she was thereafter forced to write a promissory note as dictated by the assistant manager of the bank, Gerry Alag, and the bank's lawyer, Atty. Herbert Arteg. Eventually, after she presented the receipt of payment and the promissory note to respondent Rarama, the attached properties were released to herein complainant. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
207 of 501
On the other hand, respondent Rarama claims that on April 25, 1994, he went to Digos, together with Vic Belo and Bading dela Fuente, employees of the bank, to coordinate with Provincial Sheriff Andres regarding the implementation of the aliaswrit of execution issued in the aforementioned Civil Case No. 548-E-M. However, he was informed that he would have to implement the writ on his own because the other sheriffs were not available. On their way out of the Hall of Justice, they met respondents Madrazo, Casuyon and del Campo who, upon learning that Rarama's group was going to Digos where they all lived, decided to join the group so they could get a free ride. Upon the suggestion of Vic Belo, the bank collector, the group first went to the house of complainant purportedly to ask for the exact address of Felimon Cangrejo against whom the writ was issued. When they reached the house of complainant, respondent Rarama introduced himself and his other companions, and then inquired from the former about the address of Cangrejo. When complainant asked why they were asking her, Rarama showed her the writ of execution and the court decision. It was then that complainant stated that she was the principal defendant in the case. Respondents further allege that complainant requested Rarama not to implement the writ against Cangrejo because he was merely her co-maker who never benefited from the loan extended to her by the Rural Bank of Davao, after which she offered to pay her obligations in monthly installments. Respondent Rarama did not agree to the proposal since he was not authorized to enter into that compromise but, at the same time, he suggested that complainant deposit some of her personal properties as security for the settlement of her obligation, and the latter allegedly agreed. Much later, the properties hereinbefore mentioned were released to complainant by virtue of a letter from the creditor bank. In addition, respondents controvert the claims of complainant that they forcibly entered her house and took possession of her personal properties without her consent. On the contrary, they insist that complainant deposited her personal properties voluntarily and of her own free will. They likewise contend that it is not true that complainant has never been charged in court for in fact there was a pending criminal case for violation of the law on bouncing checks, as well as a civil case for collection of a sum of money, filed against her. In her aforesaid reply to respondents' counter-affidavit, complainant maintains her original stand that she did not voluntarily deposit her personal properties with respondents and declares as untrue respondents' claim that they merely came to see her to ask for the address of Felimon Cangrejo. On January 16, 1995, this Court issued a resolution, 8 as recommended by Deputy Court Administrator Reynaldo L. Suarez, referring the case to Executive Judge Augusto B. Breva of the Regional Trial Court of Davao City for investigation, report and recommendation within sixty (60) days from receipt of the records thereof. Thereafter, Judge Breva submitted his report dated July 12, 1995, with the recommendation that respondent sheriff Rolando T. Rarama be declared guilty of an administrative offense and that he be suspended for three months, with a stern warning that a repetition of a similar offense will be dealt with more severely. He further recommended that the three other respondents be exonerated. We quote with approval the findings of the investigating judge regarding the propriety of the respective claims of the parties and the culpability, or absence thereof, with respect to each of the respondents herein: RATIONALIZATION: The defense of Sheriff Rarama that he along with the representatives of the plaintiff bank went to the house of the complainant only to ask for the address of Felimon Cangrejo; that the four items taken by them were offered as deposit by the complainant after requesting Rarama not to implement the alias writ against Cangrejo as it was her loan and Cangrejo was only her co-maker; and that two days after, she got the items back upon making a partial payment of P10,000.00 to said bank and promising in writing to pay the balance within sixty days cannot be accepted as true in view of the followings points of the evidence: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
208 of 501
(1) The alias writ of execution (Exh. "5"), although directed against Felimon Cangrejo only, was actually served by Sheriff Rarama on the complainant as evidenced by her signature at the bottom thereof along with the date "4-25-94" (Exh. "5-A"), the date of the taking of the four items. Service of the writ on her was indicative of the intent to implement it against her personal interests. (2) The RECEIPT (Exh. "6") issued by Rarama to the complainant, for the four items, positively shows that it was prepared in advance. The opening paragraph is typewritten and reads: "Received from defendants MARIANETTE & ROY VILLAREAL the personal properties mentioned and particularly described below, to wit:" Thus the fact that the names "MARIANETTE & ROY VLLLAREAL" had already been typewritten beforehand is a further indication of said intent, otherwise their names would have been handwritten like the descriptions of the four items appearing therein. (3) There is nothing in the RECEIPT showing that the items were only deposited. On the contrary, it contains a typewritten paragraph which reads: "That the above-mentioned personal property/ies was/were levied and attached by virtue of the Writ of Execution issued by Honorable ROBERTO Q. CANETE, Presiding Judge, MTCC, Branch 5, Davao City, dated March 29, 1994". (4) The four items were not brought to the plaintiff bank (which would have been the case if they were merely deposited by private arrangement) but to the MTCC which issued the alias writ and from which the complainant recovered them after paying P10,000.00 to the bank. (5) Vic Belo the collector of the bank, when asked in the course of his testimony in this case why he did not inquire before proceeding to Digos on April 25, 1994, (about) the address of Felimon Cangrejo from the NFA in Davao City, where the latter had been employed answered ". . . my perception is that since Mrs. Villareal is the principal borrower I focused more my attention on her" (TSN 6-7-95 p. 100). On the other hand, the testimony of the complainant cannot be entirely believed for the following reasons: (a) She claims to have already fully paid her loan account with the plaintiff bank but has not produced any receipt to substantiate it other than the official receipt for the P10,000.00 she paid on April 27, 1994, two days after the incident complained of in this case happened (Exh. "G"). (b) In her affidavit in support of her administrative complaint she alleges that "I and my husband have never been charged of (sic) any criminal and/or civil case in Davao City." But it turned out that she actually received the summons issued in the same Civil Case No. 548- E-M on September 27, 1990 as evidenced by her signature thereon (Exh."2", "2-A" & TSN 6-5-95 pp. 29-30). The decision rendered in that case against Cangrejo alone is dated April 19, 1989. The alias writ directed against Cangrejo was issued on March 29, 1994, which was within the five-year period. There appears to be no clear positive evidence that respondents Casuyon, Madrazo and del Campo really knew that the alias writ was directed only against Cangrejo. And in her testimony the complainant for the most part only named Sheriff Rarama, and named sheriff Casuyon only in the re-direct examination as the one who wrote down the descriptions of the four items taken from her house, writing as the things were accordingly being pulled out "by the other sheriffs" without naming them (TSN 6-5-95 pp. 46-47). She did not even identify them during the hearing, and she got the names of Madrazo and del Campo only days later from the Court upon instruction of her adviser, then Provincial Prosecutor Aves (same TSN p. 39). She did not particularize the participation of each of the respondents except as to Rarama and the writing of the RECEIPT by Casuyon, referring to the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
209 of 501
respondents only as Rarama, or as Rarama and the other sheriffs, or the sheriffs. But Rarama was not only with the other respondents sheriffs but with two employees of the bank. Hence, we believe that the evidence only warrants a finding of administrative accountability on the part of Rolando Rarama. While there is evidence to show that indeed complainant Marianette Villareal is the principal debtor while Felimon Cangrejo is merely a co-maker, the fact remains that Cangrejo was the sole debtor adjuged liable for the loan obtained from the Cooperative Rural Bank of Davao City, Inc. and the alias writ of execution was directed only against him. Hence, respondent Rarama had no authority to implement the same against herein complainant considering that, although she was named as a defendant in the collection case, there was no judgment against her as of the date of the incident. The sheriff, as an officer of the court upon whom the execution of a final judgment depends, must necessarily be circumspect and proper in his behavior. Execution is the fruit and end of the suit and is the life of the law. 9 Thus, when a writ is placed in the hands of a sheriff it is his duty, in the absence of any instructions to the contrary, to proceed with reasonable celerity and promptness to execute it according to its mandate. He is to execute the directives of the court therein strictly in accordance with the letter thereof and without any deviation therefrom. Hence, a sheriff has no authority to levy on execution upon the property of any person other than that of the judgment debtor. If he does so, the writ of execution affords him no justification, for such act is not in obedience to the mandate of the writ. 10 As long as the sheriff confines his acts to the authority of the process, he is not liable, but all of his acts which are not justified by the writ are without authority of law. This is so because if an execution against one man would excuse the sheriff for taking the property of another, every citizen would be at his mercy and none could call his estate his own. 11
Respondent Rarama's improvidence in enforcing a judgment against complainant who is not the judgment debtor in the case calls for disciplinary action. Considering the ministerial nature of his duty in enforcing writs of execution, it is incumbent upon him to ensure that only that part of a decision ordained or decreed in the dispositive portion should be the subject of execution, no more and no less. That the title of the case specifically names complainant as one of the defendants is of no moment as execution must conform to that which is directed in the dispositive portion and not what appears in the title of the case. 12
We find the recommended penalty of three month's suspension proper and commensurate under the circumstances obtaining in this case. However, the policy adopted by the Court, a fine equivalent to the salary of respondent for three months should instead be imposed, but with some mitigation considering the nominal extent of the damages sustained by complainant who, to a certain extent, also contributed in bringing about the situation which gave rise to the incident. ACCORDINGLY, respondent Sheriff Rolando T. Rarama is hereby declared GUILTY of serious misconduct in the enforcement of the alias writ of execution in Civil Case No. 548-E-M of the Municipal Trial Courts in Cities, Branch 5, Davao City and he is hereby ordered to pay a FINE of ten thousand pesos (P10,000.00). He is further sternly warned that the commission of the same or a similar offense hereafter will be punished with a more severe sanction. The complaint against respondents Restituto Madrazo, Fidel Casuyon and Aguinaldo del Campo is hereby DISMISSED for lack of merit. SO ORDERED.
Balantes v. Ocampo III, 242 S 327 THIRD DIVISION A.M. No. MTJ-93-853 March 14, 1995 DOMINGO BALANTES, complainant, vs. JUDGE JULIAN OCAMPO III, Municipal Trial Court in Cities, Branch I, Naga City, respondent. A.M. No. P-94-1013 March 14, 1995 DOMINGO BALANTES, complainant, vs. LILIA S. BUENA, Clerk of Court, MTCC, Naga City/Ex-officio Naga City Sheriff, respondent. R E S O L U T I O N ROMERO, J.: This resolution disposes of two related complaints of Domingo Balantes, one of which is against respondent Judge Julian Ocampo III (A.M. No. MTJ- 93-853) 1 and the other against Clerk of Court Lilia S. Buena (A.M. No. P-94- 1013). 2
Records show that complainant is the defendant in an ejectment case (Civil Case No. 8339) filed by plaintiff Roberto Roco but which was decided by respondent judge against complainant. Complainant appealed the adverse decision to the RTC, Branch 23, Naga City (docketed as RTC 88-1467). On motion of the plaintiff-appellee, the RTC, on October 23, 1989 issued a Writ of Execution and Demolition pending appeal, ordering the removal of one-half (1/2) portion of complainant's residential house found to be built inside the titled property of the plaintiff. Subsequently, the decision on appeal was affirmed by the same Regional Trial Court and the records of the case were remanded to respondent's sala for execution of the judgment. On November 25, 1991, respondent Judge issued a writ ordering the demolition of the remaining half portion of complainant's residential house found standing on a public property (legal easement). Complainant filed a motion for reconsideration of the demolition order but the same was denied on December 5, 1991. It further appears that on August 19, 1992, a second writ of demolition was issued by the respondent Judge, followed by a third one dated February 3, 1993. Complainant now alleges that respondent judge issued the orders granting plaintiff's motion for issuance of writ of demolition with precipitate haste, hence, he was deprived of his right to oppose the same, that the effect of these writs of demolition is to demolish complainant's entire house, notwithstanding that the appellate court's 3 writ of execution and demolition issued pending appeal ordered the demolition only of the half portion of his house found standing on plaintiff's land. Respondent Judge Julian Ocampo III filed his comment on November 25, 1993 (A.M. No. MTJ-93-853, pp. 30-34). He explained that after a series of appeals (to RTC, Court of Appeals and the Supreme Court), and the remand of records to court a quo, he issued the questioned writs of demolition with respect to the remaining portion of complainant's house situated inside the property which court a quo found to be owned by the plaintiff by right of accretion. Respondent Judge argues that a writ of demolition, being merely incidental to the execution of a final judgment, is immediately enforceable after hearing the arguments of both parties; that though the writ of demolition was issued on the same day the court issued its order of August 19, 1992, the writ was implemented only on September 2, 1992; that a motion for reconsideration was filed by herein complainant on August 29, 1992 to forestall its implementation but the same was submitted for the court's consideration only on September 3, 1992 and by that time the writ had already been implemented. Respondent Judge further argues that the restraining order issued on September 2, 1992 cannot be complied with because by the time it was received by the City Sheriff, the writ of demolition had already been effected and the premises delivered to the plaintiff. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
211 of 501
With respect to the complaint filed against respondent Clerk of Court, complainant alleges that she immediately proceeded to implement the writs of demolition without giving him a chance to move for a reconsideration of the order granting issuance thereof. We find respondent judge to have grossly abused his authority in issuing the questioned writs of demolition. A precise determination of the total land area encroached upon by complainant over subject property in Civil Case No. 8339 has been ordered by Judge Gregorio Manio, RTC, Branch 23, Naga City in the course of the appeal thereof. Records show that previous to the issuance of the writ of execution and demolition pending appeal, said judge ordered the deputy sheriff with the assistance of a geodetic engineer to determine the metes and bounds of the plaintiff's property. The Sheriff's Return clearly showed that two (2) meters of plaintiff's property had been more or less encroached upon by complainant's house while it occupied three (3) meters, more or less, of the legal easement formed by accretion. The writ of demolition thus issued by the appellate court contained specifications in accordance with such findings and was returned fully satisfied on January 20, 1990. Moreover, the decision of the RTC, Branch 23, Naga City which incorporated such findings was successively affirmed by the Court of Appeals and the Supreme Court. Respondent Judge, therefore, was fully aware of the previous delineation of the property of the plaintiff. Nevertheless, when the records were remanded to him and upon motion of the plaintiff's counsel, he issued another writ of demolition which sought to demolish the remaining portion of the defendant's house which, as already found by the appellate court(s), was standing upon a public property. The order of demolition dated November 20, 1991 which he issued, in fact, was the subject of a petition for certiorari (SPL. Civil Action No. RTC 91-2467) before the same RTC, Branch 23, Naga City where Judge Gregorio A. Manio declared said order of demolition and the writ issued pursuant thereto as null and void, having been issued with grave abuse of discretion and enjoined respondent Judge from issuing any further writs of demolition in Civil Case No. 8339. Despite this directive, respondent Judge exhibited a defiant attitude by issuing another writ of demolition dated August 19, 1992. Said order was the subject of another petition for certiorari/prohibition (SPL. Civil Action No. 92-2651) wherein Judge Antonio N. Gerona of Branch 27, RTC, Naga City issued an order dated September 2, 1992 restraining the implementation of the aforesaid writ of demolition by the sheriff of MTC, Naga City. As regards the charge against respondent Clerk of Court and Ex-Officio Sheriff Lilia S. Buena, the same is dismissed, it appearing from the certification she issued that the Temporary Restraining Order issued by the RTC, Branch 27, Naga City was received by her on September 2, 1992 at 2:15 p.m., after the demolition had been completely effected and the premises delivered to the plaintiff at 1:30 p.m. of same date. It appears that respondent Buena was not aware of the existing TRO which she received within the hour after the demolition had taken place, thus rendering said restraining order a fait accompli. The rule is that when a writ is placed in the hands of a sheriff, it is his duty, in the absence of instructions, to proceed with reasonable celerity and promptness to execute it according to its mandate. He may not apply his discretion as to whether to execute it or not. 4
WHEREFORE, in view of the foregoing, respondent Judge Julian Ocampo III, MTCC, Branch I, Naga City is hereby ordered to pay a FINE of P5,000.00 with WARNING that a repetition of the same or similar infraction in the future will merit a stiffer penalty. The complaint against respondent Clerk of Court and Ex-Officio Sheriff Lilia S. Buena is hereby DISMISSED. SO ORDERED.
A.M. No. P-94-1068 February 13, 1995 VICTOR ELIPE, complainant, vs. HONESTO FABRE, Deputy Sheriff, MTCC, Cagayan de Oro City, respondent R E S O L U T I O N
MENDOZA, J.: This is an administrative complaint filed against respondent Honesto G. Fabre, charging him with nonfeasance and incompetence in the performance of his duties as Deputy Sheriff of Branch 3 of the Municipal Trial Court in the Cities (MTCC) at Cagayan de Oro City. The complaint was referred to Judge Antonio A. Orcullo of MTCC, Branch 3, Cagayan de Oro City who, in a report dated November 15, 1993, found the charges to be true and accordingly recommended that respondent be reprimanded and given a stern warning that a repetition of the same acts would be dealt with more severely. In its memorandum dated August 29, 1994, the Office of the Court Administrator concurs with the findings of the investigating judge and recommends that respondent deputy sheriff be fined P1,000.00 and given a stern warning. The record discloses that on June 19, 1992, the MTCC, Branch 3, at Cagayan de Oro issued a writ of execution for the enforcement of a barangay agreement in Case No. 91-144 for collection of unpaid rentals and construction materials amounting to P100,000.00. Complainant testified that on June 25, 1992, at nine o'clock in the morning, respondent served the writ or judgment debtors Michael dela Cerna and his wife but the respondent was able to levy only upon a dilapidated vehicle and an old piano. 1 Complainant stated that at ten o'clock in the evening of the same day, the judgment debtors surreptitiously removed several pieces of furniture from the house which they rented. 2 On June 26 and 30 and again on July 4, 11, 38 and 19, 1992, they removed appliances and other personal properties and destroyed building fixtures on the property owned by complainant. 3 On these occasions, according to the complainant, respondent did not make any effort to prevent the judgment debtors from removing leviable properties to implement the writ, despite the fact that he had been told by complainant of the judgment debtors' activities. Respondent Fabre denied the complainant's allegation. He claimed that he levied on several properties of the judgment debtors, but unfortunately the bid price paid for them at the public auction was only P10,000.00. 4 He justified his action in levying only on the personal properties which he found at the business establishment and in desisting from enforcing the writ with respect to properties on the second floor of the residence of the judgment debtors on two grounds: (1) the judgment debtors refused to let him in; and (2) he did not have any order from the MTCC to force open the door which had been locked. The records show that on July 10, 1992, respondent sold to the complainant, as the highest bidder at public auction, personal properties of the judgment debtors for P10,000.00. On July 13, 1992, respondent levied on a parcel of land owned by the judgment debtors which on August 14, 1992 was also sold to complainant for P15,006.00. 5 On December 17, 1992, personal properties of the judgment debtors which had been levied upon were sold, also to the complainant as the highest bidder, for P2,001.00. 6 The result is that the judgment debt of P100,000.00 was only partially satisfied to the extent of P27,007.00. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
213 of 501
In his memorandum report, Deputy Court Administrator Juanito A. Bernad found that, because of respondent's inaction and lack of diligence in enforcing the writ of execution, the judgment debtors were able to cart away properties which he could have levied upon execution. There is merit in the following observations contained in his memorandum: Respondent Deputy Sheriff correctly argued that he was not directed by any Judge by court orders to stop the carting away of properties or the demolition of the fixtures. But respondent Sheriff should understand that by virtue of the writ of execution issued in favor of herein complainant, he (respondent Sheriff) was mandated to levy upon properties of judgment debtor to satisfy an obligation amounting to P100,000.00. However, in disregard of this Order, respondent Sheriff chose to levy the properties of the judgment debtor which amounted only to P27,000.00. If indeed respondent Sheriff is dedicated in his work, respondent Sheriff could have chosen to stop the carting away of the valuable properties of judgment debtor for the very purpose of levying it and for the purpose of complying with the Order. If the arguments of respondent Sheriff will be sustained, all judgment debtors can easily circumvent the orders of the court by carting away their properties thinking that sheriffs have no authority to stop them. This line of thinking and reasoning will create chaos and instability in the administration of justice. Furthermore, respondent Sheriff exhibited an utter disregard of what is incumbent upon him when he failed to inform the complainant that in order to levy properties of the defendant on the second floor of the establishment, a special order of the court is necessary to force or break-open the closed door in accordance with Section 14, Rule 39 of the Rules of Court. The respondent Sheriff's duty was apparent but he did not comply with it as he should have. The attack on the complainant's moral character was not necessary in this case, as it would not justify the non-performance of his duties. When a writ is placed in the hands of a sheriff, it is his duty, in the absence of instructions, to proceed with reasonable celerity and promptness to execute it according to its mandate. He has no discretion whether to execute it or not (Young vs. Momblan, A.M. No. P89-367, 9 January 1992, Second Division, Melencio-Herrera, J.). Indeed, as clearly stated in the Manual for Clerks of Court, a sheriff, to whom a valid writ or process is delivered to be levied upon a property within his jurisdiction, is liable to the person in whose favor the process or writ runs if he fails to make a levy upon property owned by the judgment debtor within his jurisdiction and by reason thereof the judgment creditor is injured. It is omission not dependent upon intentional wrong or negligent omission to seize property of judgment debtor. 7
In Eduarte v. Ramos 8 we said: Respondent ought to have known the correct procedure to be followed in order to ensure proper administration of justice, especially in its concluding stage. He failed observe that degree of dedication to the duties and responsibilities required of him as a sheriff. He is bound to discharge his duties with prudence, caution and attention which careful men usually exercise in the management of their affairs. The sheriff, an officer of the court upon whom the execution of a final judgment depends, must be circumspect and proper in his behavior. Execution is the fruit and end of the suit and is the life of the law. In the case at bar, it is not that respondent did not know what he should do, given the problem that he was confronted with. In his answer 9 respondent tried to excuse himself from what was his duty, claiming that he did not force his way into the second floor where the judgment debtors resided because a PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
214 of 501
special court order was needed to enable him to do this. Knowing this to be the case, it was his duty to see to it that such an order was secured from the court. The fact is that he has shown himself to be less than energetic and zealous in the performance of his duty. His lackadaisical attitude betrays his inefficiency and incompetence which in accordance with sec. 46(b)(8) of the Civil Service Law is a ground for disciplinary action. 10
WHEREFORE, a FINE of P2,000.00 is hereby imposed on Deputy Sheriff Honesto G. Fabre, with a STERN WARNING that a repetition of the same or of any act calling for disciplinary action will be dealt with more severely. SO ORDERED.
Roque v. CA, 93 S 540 (See under Section 6) Summit Trading v. Avendano, 135 S 397 SECOND DIVISION G.R. No. L-60038 March 18, 1985 SUMMIT TRADING AND DEVELOPMENT CORPORATION, petitioner, vs. JUDGE HERMINIO A. AVENDANO, Court of First Instance of Laguna, Binan Branch I, SEGUNDO PILIPINIA and EDGARDO MINDO, represented by ERNESTO PILIPINIA, respondents.
AQUINO, J.: This case is about the summons intended for defendant Summit Trading and Development Corporation. As background, it should be stated that Segundo Pilipinia and Edgardo Mindo in 1973 acquired under Land Authority Administrative Order No. 4 two registered lots with a total area of 2 hectares located at Barrio San Vicente, San Pedro, Laguna. The titles of the lots contain the annotation that should Pilipinia and Mindo sell the same, they have the right to redeem the lots within five years from the date of the sale (Exh. H and I). Pilipinia and Mindo sold the lots for P16,000 and P12,000 to Gavino Ortega on February 14 and April 19, 1977. They have retained possession of the lots which are ricelands. They became tenants thereof. At the instance of Ortega, the said annotation was cancelled by Judge Avendao in his order of September 24, 1979 ostensibly because the lots would be converted into commercial, industrial or residential sites (Exh. M). That conversion has not taken place. At present the two lots are still ricelands. In a letter dated October 16, 1979, Ortega advised Ernesto Pilipinia (attorney- in-fact of Segundo and Mindo) that he and his father would have the right of first refusal in case the lots were sold (Exh. E and O). Ortega resold the two lots on November 14, 1979 for P16,000 and P11,000 to Summit Trading through its president, Virgilio P. Balaguer (Exh. N and N-1). On August 10, 1981, or within the five-year period, Pilipinia and Mindo filed a complaint against Ortega and Summit Trading for the redemption or repurchase of the two lots. They deposited P100,000 with the Royal Savings and Loan Association for that purpose. Ortega was duly summoned. He failed to answer the complaint. He was declared in default. Summit Trading was also declared in default. In his judgment by default dated October 29, 1981, Judge Avendano (the same judge who ordered the cancellation of the annotation) gave plaintiffs Pilipinia and Mindo 15 days from notice within which to redeem the lots for P16,000 and P12,000 and ordered Summit Trading to execute the corresponding deeds of sale and surrender the Torrens titles. If it failed to do so, the clerk of court was directed to perform that task. The register of deeds was ordered to issue new titles to Pilipinia and Mindo. The default judgment was rendered on the assumption that Summit Trading was duly summoned through Marina Saquilayan as secretary of Summit Trading. She received the summons on August 28, 1981. A copy of the judgment was also served on her on November 13, 1981 (Exh. B, pp. 31-32, 64, Record). Actually, Saquilayan received the summons as secretary of Balaguer, already mentioned as the president of Summit Trading which purchased the lots from Ortega. Bonifacio Tiongson was the corporate secretary. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
216 of 501
Nineteen days after Saquilayan received a copy of the decision, Summit Trading filed a motion for reconsideration on the ground that the trial court did not acquire jurisdiction over it because summons was not served upon it in accordance with Rule 14 of the Rules of Court which provides: SEC. 13. Service upon private domestic corporation or partnership.-If the defendant is a corporation organized under the laws of the Philippines or a partnership duly registered, service may be made on the president, manager, secretary, cashier, agent, or any of its directors. It is true that Saquilayan is not among the persons mentioned in section 13. However, she, being under the control of Summit Trading, has not explained what she has done with the summons and complaint. The logical assumption is that she delivered it to her boss, the president of Summit Trading. As already stated, she received a copy of the decision and Summit Trading became aware of it. Summit Trading's motion for reconsideration was denied. While Summit Trading is technically correct in contending that there was no strict compliance with section 13, we cannot close our eyes to the realities of the situation. Under the facts of this case, Saquilayan, being the secretary of the president (whose contact with the outside world is normally through his secretary), may be regarded as an "agent" within the meaning of section 13.(See Villa Rey Transit, Inc. vs. Far East Motor Corporation, L-31339, January 31, 1978, 81 SCRA 298; Filoil Marketing Corporation vs. Marine Development Corporation of the Phil., L-29636, September 30, 1982, 117 SCRA 86.) Hence summons was validly served upon Summit Trading. Its negligence in not answering the complaint was inexcusable. In fact, up to this time, Summit Trading has not bothered to state its defenses to the action nor stated whether it has ameritorious case warranting the setting aside of the default judgment. The cases of Delta Motor Sales Corporation vs. Mangosing, L-41667, April 30,1976, 70 SCRA 598 and ATM Trucking Inc. vs. Buencamino, G.R. No. 62445, August 31, 1983, 124 SCRA 434 are not in point because the summons in the two cases was served upon mere clerks or employees of the corporations who cannot be relied upon to know what to do with the legal papers served upon them. In the instant case, service was made on the president's secretary who could have easily notified the president that an action was filed against the corporation just as she had apprised him of the judgment in this case. The instant petition for certiorari, treated as an appeal under Republic Act No. 5440, was filed out of time. Considered as a special civil action under Rule 65 of the Rules of Court, it is baseless because the trial court had acquired jurisdiction over Summit Trading. As already shown, summons was properly served on the president's secretary. We are not saying that service on such a secretary is always proper. Generally, it is improper. The president himself must be served personally with the summons if it is desired to effect the service on that particular officer. But, as already stated, under the facts of this case, the president's secretary may be regarded as the "agent" within the meaning of section 13 since service upon her of the judgment itself came to the notice of Summit Trading. WHEREFORE, the petition is dismissed. The trial court's judgment is affirmed. Its implementation is now in order. The restraining order is dissolved. Costs against the petitioner. SO ORDERED.
Chemphil Export and Import v. CA, 251 S 286 EN BANC
G.R. Nos. 112438-39 December 12, 1995 CHEMPHIL EXPORT & IMPORT CORPORATION (CEIC), petitioner, vs. THE HONORABLE COURT OF APPEALS JAIME Y. GONZALES, as Assignee of the Bank of the Philippine Islands (BPI), RIZAL COMMERCIAL BANKING CORPORATION (RCBC), LAND BANK OF THE PHILIPPINES (LBP), PHILIPPINE COMMERCIAL & INTERNATIONAL BANK (PCIB) and THE PHILIPPINE INVESTMENT SYSTEM ORGANIZATION (PISO), respondents. G.R. No. 113394 December 12, 1995 PHILIPPINE COMMERCIAL INDUSTRIAL BANK (AND ITS ASSIGNEE JAIME Y. GONZALES) petitioner, vs. HONORABLE COURT OR APPEALS and CHEMPHIL EXPORT AND IMPORT CORPORATION (CEIC), respondents.
KAPUNAN, J.: Before us is a legal tug-of-war between the Chemphil Export and Import Corporation (hereinafter referred to as CEIC), on one side, and the PISO and Jaime Gonzales as assignee of the Bank of the Philippine Islands (BPI), Rizal Commercial Banking Corporation (RCBC), Land Bank of the Philippines (LBP) and Philippine Commercial International Bank (PCIB), on the other (hereinafter referred to as the consortium), over 1,717,678 shares of stock (hereinafter referred to as the "disputed shares") in the Chemical Industries of the Philippines (Chemphil/CIP). Our task is to determine who is the rightful owner of the disputed shares. Pursuant to our resolution dated 30 May 1994, the instant case is a consolidation of two petitions for review filed before us as follows: In G.R. Nos. 112438-39, CEIC seeks the reversal of the decision of the Court of Appeals (former Twelfth Division) promulgated on 30 June 1993 and its resolution of 29 October 1993, denying petitioner's motion for reconsideration in the consolidated cases entitled "Dynetics, Inc., et al. v. PISO, et al." (CA-G.R. No. 20467) and "Dynetics, Inc., et al. v. PISO, et al.; CEIC, Intervenor- Appellee" (CA-G.R. CV No. 26511). The dispositive portion of the assailed decision reads, thus: WHEREFORE, this Court resolves in these consolidated cases as follows: 1. The Orders of the Regional Trial Court, dated March 25, 1988, and May 20, 1988, subject of CA-G.R. CV No. 10467, are SET ASIDE and judgment is hereby rendered in favor of the consortium and against appellee Dynetics, Inc., the amount of the judgment, to be determined by Regional Trial Court, taking into account the value of assets that the consortium may have already recovered and shall have recovered in accordance with the other portions of this decision. 2. The Orders of the Regional Trial Court dated December 19, 1989 and March 5, 1990 are hereby REVERSED and SET ASIDE and judgment is hereby rendered confirming the ownership of the consortium over the Chemphil shares of stock, subject of CA-G.R. CV No. 26511, and the Order dated September 4, 1989, is reinstated. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
218 of 501
No pronouncement as to costs. SO ORDERED. 1
In G.R. No. 113394, PCIB and its assignee, Jaime Gonzales, ask for the annulment of the Court of Appeals' decision (former Special Ninth Division) promulgated on 26 March 1993 in "PCIB v. Hon. Job B. Madayag & CEIC" (CA- G.R. SP NO. 20474) dismissing the petition for certiorari, prohibition and mandamus filed by PCIB and of said court's resolution dated 11 January 1994 denying their motion for reconsideration of its decision. 2
The antecedent facts leading to the aforementioned controversies are as follows: On September 25, 1984, Dynetics, Inc. and Antonio M. Garcia filed a complaint for declaratory relief and/or injunction against the PISO, BPI, LBP, PCIB and RCBC or the consortium with the Regional Trial Court of Makati, Branch 45 (Civil Case No. 8527), seeking judicial declaration, construction and interpretation of the validity of the surety agreement that Dynetics and Garcia had entered into with the consortium and to perpetually enjoin the latter from claiming, collecting and enforcing any purported obligations which Dynetics and Garcia might have undertaken in said agreement. 3
The consortium filed their respective answers with counterclaims alleging that the surety agreement in question was valid and binding and that Dynetics and Garcia were liable under the terms of the said agreement. It likewise applied for the issuance of a writ of preliminary attachment against Dynetics and Garcia. 4
Seven months later, or on 23 April 1985, Dynetics, Antonio Garcia and Matrix Management & Trading Corporation filed a complaint for declaratory relief and/or injunction against the Security Bank & Trust Co. (SBTC case) before the Regional Trial Court of Makati, Branch 135 docketed as Civil Case No. 10398. 5
On 2 July 1985, the trial court granted SBTC's prayer for the issuance of a writ of preliminary attachment and on 9 July 1985, a notice of garnishment covering Garcia's shares in CIP/Chemphil (including the disputed shares) was served on Chemphil through its then President. The notice of garnishment was duly annotated in the stock and transfer books of Chemphil on the same date. 6
On 6 September 1985, the writ of attachment in favor of SBTC was lifted. However, the same was reinstated on 30 October 1985. 7
In the meantime, on 12 July 1985, the Regional Trial Court in Civil Case No. 8527 (the consortium case) denied the application of Dynetics and Garcia for preliminary injunction and instead granted the consortium's prayer for a consolidated writ of preliminary attachment. Hence, on 19 July 1985, after the consortium had filed the required bond, a writ of attachment was issued and various real and personal properties of Dynetics and Garcia were garnished, including the disputed shares. 8 This garnishment, however, was not annotated in Chemphil's stock and transfer book. On 8 September 1987, PCIB filed a motion to dismiss the complaint of Dynetics and Garcia for lack of interest to prosecute and to submit its counterclaims for decision, adopting the evidence it had adduced at the hearing of its application for preliminary attachment. 9
On 25 March 1988, the Regional Trial Court dismissed the complaint of Dynetics and Garcia in Civil Case No. 8527, as well as the counterclaims of the consortium, thus: Resolving defendant's, Philippine Commercial International Bank, MOTION TO DISMISS WITH MOTION TO SUBMIT DEFENDANT PCIBANK's COUNTERCLAIM FOR DECISION, dated September 7, 1987: (1) The motion to dismiss is granted; and the instant case is hereby ordered dismissed pursuant to Sec. 3, Rule 17 of the Revised Rules of Court, plaintiff having failed to comply with PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
219 of 501
the order dated July 16, 1987, and having not taken further steps to prosecute the case; and (2) The motion to submit said defendant's counterclaim for decision is denied; there is no need; said counterclaim is likewise dismissed under the authority of Dalman vs. City Court of Dipolog City, L-63194, January 21, 1985, wherein the Supreme Court stated that if the civil case is dismissed, so also is the counterclaim filed therein. "A person cannot eat his cake and have it at the same time" (p. 645, record, Vol. I). 10
The motions for reconsideration filed by the consortium were, likewise, denied by the trial court in its order dated 20 May 1988: The Court could have stood pat on its order dated 25 March 1988, in regard to which the defendants-banks concerned filed motions for reconsideration. However, inasmuch as plaintiffs commented on said motions that: "3). In any event, so as not to unduly foreclose on the rights of the respective parties to refile and prosecute their respective causes of action, plaintiffs manifest their conformity to the modification of this Honorable Court's order to indicate that the dismissal of the complaint and the counterclaims is without prejudice." (p. 2, plaintiffs' COMMENT etc. dated May 20, 1988). The Court is inclined to so modify the said order. WHEREFORE , the order issued on March 25, 1988, is hereby modified in the sense that the dismissal of the complaint as well as of the counterclaims of defendants RCBC, LBP, PCIB and BPI shall be considered as without prejudice (p. 675, record, Vol. I). 11
Unsatisfied with the aforementioned order, the consortium appealed to the Court of Appeals, docketed as CA-G.R. CV No. 20467. On 17 January 1989 during the pendency of consortium's appeal in CA-G.R. CV No. 20467, Antonio Garcia and the consortium entered into a Compromise Agreement which the Court of Appeals approved on 22 May 1989 and became the basis of its judgment by compromise. Antonio Garcia was dropped as a party to the appeal leaving the consortium to proceed solely against Dynetics, Inc. 12 On 27 June 1989, entry of judgment was made by the Clerk of Court. 13
Hereunder quoted are the salient portions of said compromise agreement: xxx xxx xxx 3. Defendants, in consideration of avoiding an extended litigation, having agreed to limit their claim against plaintiff Antonio M. Garcia to a principal sum of P145 Million immediately demandable and to waive all other claims to interest, penalties, attorney's fees and other charges. The aforesaid compromise amount of indebtedness of P145 Million shall earn interest of eighteen percent (18%) from the date of this Compromise. 4. Plaintiff Antonio M. Garcia and herein defendants have no further claims against each other. 5. This Compromise shall be without prejudice to such claims as the parties herein may have against plaintiff Dynetics, Inc. 6. Plaintiff Antonio M. Garcia shall have two (2) months from date of this Compromise within which to work for the entry and participation of his other creditor, Security Bank and Trust Co., into this Compromise. Upon the expiration of this period, without Security Bank and Trust Co. having joined, this Compromise shall be submitted to the Court for its information and approval (pp. 27, 28-31, rollo, CA-G.R. CV No. 10467). 14
It appears that on 15 July 1988, Antonio Garcia under a Deed of Sale transferred to Ferro Chemicals, Inc. (FCI) the disputed shares and other properties for P79,207,331.28. It was agreed upon that part of the purchase price shall be paid by FCI directly to SBTC for whatever judgment credits that may be adjudged in the latter's favor and against Antonio Garcia in the aforementioned SBTC case. 15
On 6 March 1989, FCI, through its President Antonio M. Garcia, issued a Bank of America Check No. 860114 in favor of SBTC in the amount of P35,462,869.62. 16 SBTC refused to accept the check claiming that the amount was not sufficient to discharge the debt. The check was thus consigned by Antonio Garcia and Dynetics with the Regional Trial Court as payment of their judgment debt in the SBTC case. 17
On 26 June 1989, FCI assigned its 4,119,614 shares in Chemphil, which included the disputed shares, to petitioner CEIC. The shares were registered and recorded in the corporate books of Chemphil in CEIC's name and the corresponding stock certificates were issued to it. 18
Meanwhile, Antonio Garcia, in the consortium case, failed to comply with the terms of the compromise agreement he entered into with the consortium on 17 January 1989. As a result, on 18 July 1989, the consortium filed a motion for execution which was granted by the trial court on 11 August 1989. Among Garcia's properties that were levied upon on execution were his 1,717,678 shares in Chemphil (the disputed shares) previously garnished on 19 July 1985. 19
On 22 August 1989, the consortium acquired the disputed shares of stock at the public auction sale conducted by the sheriff for P85,000,000.00. 20 On same day, a Certificate of Sale covering the disputed shares was issued to it. On 30 August 1989, 21 the consortium filed a motion (dated 29 August 1989) to order the corporate secretary of Chemphil to enter in its stock and transfer books the sheriff's certificate of sale dated 22 August 1989, and to issue new certificates of stock in the name of the banks concerned. The trial court granted said motion in its order dated 4 September 1989, thus: For being legally proper, defendant's MOTION TO ORDER THE CORPORATE SECRETARY OF CHEMICAL INDUSTRIES OF THE PHILS., INC. (CHEMPIL) TO ENTER IN THE STOCK AND TRANSFER BOOKS OF CHEMPHIL THE SHERIFF'S CERTIFICATE OF SALE DATED AUGUST 22, 1989 AND TO ISSUE NEW CERTIFICATES OF STOCK IN THE NAME OF THE DEFENDANT BANKS, dated August 29, 1989, is hereby granted. WHEREFORE, the corporate secretary of the aforesaid corporation, or whoever is acting for and in his behalf, is hereby ordered to (1) record and/or register the Certificate of Sale dated August 22, 1989 issued by Deputy Sheriff Cristobal S. Jabson of this Court; (2) to cancel the certificates of stock of plaintiff Antonio M. Garcia and all those which may have subsequently been issued in replacement and/or in substitution thereof; and (3) to issue in lieu of the said shares new shares of stock in the name of the defendant Banks, namely, PCIB, BPI, RCBC, LBP and PISO bank in such proportion as their respective claims would appear in this suit (p. 82, record, Vol. II). 22
On 26 September 1989, CEIC filed a motion to intervene (dated 25 September 1989) in the consortium case seeking the recall of the abovementioned order on grounds that it is the rightful owner of the disputed shares. 23 It further alleged that the disputed shares were previously owned by Antonio M. Garcia but subsequently sold by him on 15 July 1988 to Ferro Chemicals, Inc. (FCI) which in turn assigned the same to CEIC in an agreement dated 26 June 1989. On 27 September 1989, the trial court granted CEIC's motion allowing it to intervene, but limited only to the incidents covered by the order dated 4 September 1989. In the same order, the trial court directed Chemphil's corporate secretary to temporarily refrain from implementing the 4 September 1989 order. 24
On 2 October 1989, the consortium filed their opposition to CEIC's motion for intervention alleging that their attachment lien over the disputed shares of stocks must prevail over the private sale in favor of the CEIC considering that said shares of stock were garnished in the consortium's favor as early as 19 July 1985. 25
On 4 October 1989, the consortium filed their opposition to CEIC's motion to set aside the 4 September 1989 order and moved to lift the 27 September 1989 order. 26
On 12 October 1989, the consortium filed a manifestation and motion to lift the 27 September 1989 order, to reinstate the 4 September 1989 order and to direct CEIC to surrender the disputed stock certificates of Chemphil in its possession within twenty-four (24) hours, failing in which the President, Corporate Secretary and stock and transfer agent of Chemphil be directed to register the names of the banks making up the consortium as owners of said shares, sign the new certificates of stocks evidencing their ownership over said shares and to immediately deliver the stock certificates to them. 27
Resolving the foregoing motions, the trial court rendered an order dated 19 December 1989, the dispositive portion of which reads as follows: WHEREFORE, premises considered, the Urgent Motion dated September 25, 1989 filed by CEIC is hereby GRANTED. Accordingly, the Order of September 4, 1989, is hereby SET ASIDE, and any and all acts of the Corporate Secretary of CHEMPHIL and/or whoever is acting for and in his behalf, as may have already been done, carried out or implemented pursuant to the Order of September 4, 1989, are hereby nullified. PERFORCE, the CONSORTIUM'S Motions dated October 3, 1989 and October 11, 1989, are both hereby denied for lack of merit. The Cease and Desist Order dated September 27, 1989, is hereby AFFIRMED and made PERMANENT. SO ORDERED. 28
In so ruling, the trial court ratiocinated in this wise: xxx xxx xxx After careful and assiduous consideration of the facts and applicable law and jurisprudence, the Court holds that CEIC's Urgent Motion to Set Aside the Order of September 4, 1989 is impressed with merit. The CONSORTIUM has admitted that the writ of attachment/garnishment issued on July 19, 1985 on the shares of stock belonging to plaintiff Antonio M. Garcia was not annotated and registered in the stock and transfer books of CHEMPHIL. On the other hand, the prior attachment issued in favor of SBTC on July 2, 1985 by Branch 135 of this Court in Civil Case No. 10398, against the same CHEMPHIL shares of Antonio M. Garcia, was duly registered and annotated in the stock and transfer books of CHEMPHIL. The matter of non-recording of the Consortium's attachment in Chemphil's stock and transfer book on the shares of Antonio M. Garcia assumes significance considering CEIC's position that FCI and later CEIC acquired the CHEMPHIL shares of Antonio M. Garcia without knowledge of the attachment of the CONSORTIUM. This is also important as CEIC claims that it has been subrogated to the rights of SBTC since CEIC's predecessor-in-interest, the FCI, had paid SBTC the amount of P35,462,869.12 pursuant to the Deed of Sale and Purchase of Shares of Stock executed by Antonio M. Garcia on July 15, 1988. By reason of such payment, sale with the knowledge and consent of Antonio M. Garcia, FCI and CEIC, as party-in-interest to FCI, are subrogated by operation of law to the rights of SBTC. The Court is not unaware of the citation in CEIC's reply that "as between two (2) attaching PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
222 of 501
creditors, the one whose claims was first registered on the books of the corporation enjoy priority." (Samahang Magsasaka, Inc. vs. Chua Gan, 96 Phil. 974.) The Court holds that a levy on the shares of corporate stock to be valid and binding on third persons, the notice of attachment or garnishment must be registered and annotated in the stock and transfer books of the corporation, more so when the shares of the corporation are listed and traded in the stock exchange, as in this case. As a matter of fact, in the CONSORTIUM's motion of August 30, 1989, they specifically move to "order the Corporate Secretary of CHEMPHIL to enter in the stock and transfer books of CHEMPHIL the Sheriff's Certificate of Sale dated August 22, 1989." This goes to show that, contrary to the arguments of the CONSORTIUM, in order that attachment, garnishment and/or encumbrances affecting rights and ownership on shares of a corporation to be valid and binding, the same has to be recorded in the stock and transfer books. Since neither CEIC nor FCI had notice of the CONSORTIUM's attachment of July 19, 1985, CEIC's shares of stock in CHEMPHIL, legally acquired from Antonio M. Garcia, cannot be levied upon in execution to satisfy his judgment debts. At the time of the Sheriff's levy on execution, Antonio M. Garcia has no more in CHEMPHIL which could be levied upon. 29
xxx xxx xxx On 23 January 1990, the consortium and PCIB filed separate motions for reconsideration of the aforestated order which were opposed by petitioner CEIC. 30
On 5 March 1990, the trial court denied the motions for reconsideration. 31
On 16 March 1990, the consortium appealed to the Court of Appeals (CA-G.R. No. 26511). In its Resolution dated 9 August 1990, the Court of Appeals consolidated CA-G.R. No. 26511 with CA-G.R. No. 20467. 32
The issues raised in the two cases, as formulated by the Court of Appeals, are as follows: I WHETHER OR NOT, UNDER THE PECULIAR CIRCUMSTANCES OF THE CASE, THE TRIAL COURT ERRED IN DISMISSING THE COUNTERCLAIMS OF THE CONSORTIUM IN CIVIL CASE NO. 8527; II WHETHER OR NOT THE DISMISSAL OF CIVIL CASE NO. 8527 RESULTED IN THE DISCHARGE OF THE WRIT OF ATTACHMENT ISSUED THEREIN EVEN AS THE CONSORTIUM APPEALED THE ORDER DISMISSING CIVIL CASE NO. 8527; III WHETHER OR NOT THE JUDGMENT BASED ON COMPROMISE RENDERED BY THIS COURT ON MAY 22, 1989 HAD THE EFFECT OF DISCHARGING THE ATTACHMENTS ISSUED IN CIVIL CASE NO. 8527; IV WHETHER OR NOT THE ATTACHMENT OF SHARES OF STOCK, IN ORDER TO BIND THIRD PERSONS, MUST BE RECORDED IN THE STOCK AND TRANSFER BOOK OF THE CORPORATION; AND PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
223 of 501
V WHETHER OR NOT FERRO CHEMICALS, INC. (FCI), AND ITS SUCCESSOR-IN-INTEREST, CEIC, WERE SUBROGATED TO THE RIGHTS OF SECURITY BANK & TRUST COMPANY (SBTC) IN A SEPARATE CIVIL ACTION. (This issue appears to be material as SBTC is alleged to have obtained an earlier attachment over the same Chemphil shares that the consortium seeks to recover in the case at bar). 33
On 6 April 1990, the PCIB separately filed with the Court of Appeals a petition for certiorari, prohibition and mandamus with a prayer for the issuance of a writ of preliminary injunction (CA-G.R. No. SP-20474), likewise, assailing the very same orders dated 19 December 1989 and 5 March 1990, subject of CA- G.R. No. 26511. 34
On 30 June 1993, the Court of Appeals (Twelfth Division) in CA-G.R. No. 26511 and CA-G.R. No. 20467 rendered a decision reversing the orders of the trial court and confirming the ownership of the consortium over the disputed shares. CEIC's motion for reconsideration was denied on 29 October 1993. 35
In ruling for the consortium, the Court of Appeals made the following ratiocination: 36
On the first issue, it ruled that the evidence offered by the consortium in support of its counterclaims, coupled with the failure of Dynetics and Garcia to prosecute their case, was sufficient basis for the RTC to pass upon and determine the consortium's counterclaims. The Court of Appeals found no application for the ruling in Dalman v. City Court of Dipolog, 134 SCRA 243 (1985) that "a person cannot eat his cake and have it at the same time. If the civil case is dismissed, so also is the counterclaim filed therein" because the factual background of the present action is different. In the instant case, both Dynetics and Garcia and the consortium presented testimonial and documentary evidence which clearly should have supported a judgment on the merits in favor of the consortium. As the consortium correctly argued, the net atrocious effect of the Regional Trial Court's ruling is that it allows a situation where a party litigant is forced to plead and prove compulsory counterclaims only to be denied those counterclaims on account of the adverse party's failure to prosecute his case. Verily, the consortium had no alternative but to present its counterclaims in Civil Case No. 8527 since its counterclaims are compulsory in nature. On the second issue, the Court of Appeals opined that unless a writ of attachment is lifted by a special order specifically providing for the discharge thereof, or unless a case has been finally dismissed against the party in whose favor the attachment has been issued, the attachment lien subsists. When the consortium, therefore, took an appeal from the Regional Trial Court's orders of March 25, 1988 and May 20, 1988, such appeal had the effect of preserving the consortium's attachment liens secured at the inception of Civil Case No. 8527, invoking the rule in Olib v. Pastoral, 188 SCRA 692 (1988) that where the main action is appealed, the attachment issued in the said main case is also considered appealed. Anent the third issue, the compromise agreement between the consortium and Garcia dated 17 January 1989 did not result in the abandonment of its attachment lien over his properties. Said agreement was approved by the Court of Appeals in a Resolution dated 22 May 1989. The judgment based on the compromise agreement had the effect of preserving the said attachment lien as security for the satisfaction of said judgment (citing BF Homes, Inc. v. CA, 190 SCRA 262, [1990]). PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
224 of 501
As to the fourth issue, the Court of Appeals agreed with the consortium's position that the attachment of shares of stock in a corporation need not be recorded in the corporation's stock and transfer book in order to bind third persons. Section 7(d), Rule 57 of the Rules of Court was complied with by the consortium (through the Sheriff of the trial court) when the notice of garnishment over the Chemphil shares of Garcia was served on the president of Chemphil on July 19, 1985. Indeed, to bind third persons, no law requires that an attachment of shares of stock be recorded in the stock and transfer book of a corporation. The statement attributed by the Regional Trial Court to the Supreme Court in Samahang Magsasaka, Inc. vs. Gonzalo Chua Guan, G.R. No. L-7252, February 25, 1955 (unreported), to the effect that "as between two attaching creditors, the one whose claim was registered first on the books of the corporation enjoys priority," is an obiter dictum that does not modify the procedure laid down in Section 7(d), Rule 57 of the Rules of Court. Therefore, ruled the Court of Appeals, the attachment made over the Chemphil shares in the name of Garcia on July 19, 1985 was made in accordance with law and the lien created thereby remained valid and subsisting at the time Garcia sold those shares to FCI (predecessor-in-interest of appellee CEIC) in 1988. Anent the last issue, the Court of Appeals rejected CEIC's subrogation theory based on Art. 1302 (2) of the New Civil Code stating that the obligation to SBTC was paid by Garcia himself and not by a third party (FCI). The Court of Appeals further opined that while the check used to pay SBTC was a FCI corporate check, it was funds of Garcia in FCI that was used to pay off SBTC. That the funds used to pay off SBTC were funds of Garcia has not been refuted by FCI or CEIC. It is clear, therefore, that there was an attempt on the part of Garcia to use FCI and CEIC as convenient vehicles to deny the consortium its right to make itself whole through an execution sale of the Chemphil shares attached by the consortium at the inception of Civil Case No. 8527. The consortium, therefore, is entitled to the issuance of the Chemphil shares of stock in its favor. The Regional Trial Court's order of September 4, 1989, should, therefore, be reinstated in toto. Accordingly, the question of whether or not the attachment lien in favor of SBTC in the SBTC case is superior to the attachment lien in favor of the consortium in Civil Case No. 8527 becomes immaterial with respect to the right of intervenor-appellee CEIC. The said issue would have been relevant had CEIC established its subrogation to the rights of SBTC. On 26 March 1993, the Court of Appeals (Special Ninth Division) in CA-G.R. No. SP 20474 rendered a decision denying due course to and dismissing PCIB's petition for certiorari on grounds that PCIB violated the rule against forum- shopping and that no grave abuse of discretion was committed by respondent Regional Trial Court in issuing its assailed orders dated 19 December 1989 and 5 March 1990. PCIB's motion for reconsideration was denied on 11 January 1994. 37
On 7 July 1993, the consortium, with the exception of PISO, assigned without recourse all its rights and interests in the disputed shares to Jaime Gonzales. 38
On 3 January 1994, CEIC filed the instant petition for review docketed as G.R. Nos. 112438-39 and assigned the following errors: I. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN SETTING ASIDE AND REVERSING THE ORDERS OF THE PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
225 of 501
REGIONAL TRIAL COURT DATED DECEMBER 5, 1989 AND MARCH 5, 1990 AND IN NOT CONFIRMING PETITIONER'S OWNERSHIP OVER THE DISPUTED CHEMPHIL SHARES AGAINST THE FRIVOLOUS AND UNFOUNDED CLAIMS OF THE CONSORTIUM. II. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED: (1) In not holding that the Consortium's attachment over the disputed Chemphil shares did not vest any priority right in its favor and cannot bind third parties since admittedly its attachment on 19 July 1985 was not recorded in the stock and transfer books of Chemphil, and subordinate to the attachment of SBTC which SBTC registered and annotated in the stock and transfer books of Chemphil on 2 July 1985, and that the Consortium's attachment failed to comply with Sec. 7(d), Rule 57 of the Rules as evidenced by the notice of garnishment of the deputy sheriff of the trial court dated 19 July 1985 (annex "D") which the sheriff served on a certain Thelly Ruiz who was neither President nor managing agent of Chemphil; (2) In not applying the case law enunciated by this Honorable Supreme Court in Samahang Magsasaka, Inc. vs. Gonzalo Chua Guan, 96 Phil. 974 that as between two attaching creditors, the one whose claim was registered first in the books of the corporation enjoys priority, and which respondent Court erroneously characterized as mere obiter dictum; (3) In not holding that the dismissal of the appeal of the Consortium from the order of the trial court dismissing its counterclaim against Antonio M. Garcia and the finality of the compromise agreement which ended the litigation between the Consortium and Antonio M. Garcia in theDynetics case had ipso jure discharged the Consortium's purported attachment over the disputed shares. III. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT CEIC HAD BEEN SUBROGATED TO THE RIGHTS OF SBTC SINCE CEIC'S PREDECESSOR IN INTEREST HAD PAID SBTC PURSUANT TO THE DEED OF SALE AND PURCHASE OF STOCK EXECUTED BY ANTONIO M. GARCIA ON JULY 15, 1988, AND THAT BY REASON OF SUCH PAYMENT, WITH THE CONSENT AND KNOWLEDGE OF ANTONIO M. GARCIA, FCI AND CEIC, AS PARTY IN INTEREST TO FCI, WERE SUBROGATED BY OPERATION OF LAW TO THE RIGHTS OF SBTC. IV. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED AND MADE UNWARRANTED INFERENCES AND CONCLUSIONS, WITHOUT ANY SUPPORTING EVIDENCE, THAT THERE WAS AN ATTEMPT ON THE PART OF ANTONIO M. GARCIA TO USE FCI AND CEIC AS CONVENIENT VEHICLES TO DENY THE CONSORTIUM ITS RIGHTS TO MAKE ITSELF WHOLE THROUGH AN PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
226 of 501
EXECUTION OF THE CHEMPHIL SHARES PURPORTEDLY ATTACHED BY THE CONSORTIUM ON 19 JULY 1985. 39
On 2 March 1994, PCIB filed its own petition for review docketed as G.R. No. 113394 wherein it raised the following issues: I. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN RENDERING THE DECISION AND RESOLUTION IN QUESTION (ANNEXES A AND B) IN DEFIANCE OF LAW AND JURISPRUDENCE BY FINDING RESPONDENT CEIC AS HAVING BEEN SUBROGATED TO THE RIGHTS OF SBTC BY THE PAYMENT BY FCI OF GARCIA'S DEBTS TO THE LATTER DESPITE THE FACT THAT A. FCI PAID THE SBTC DEBT BY VIRTUE OF A CONTRACT BETWEEN FCI AND GARCIA, THUS, LEGAL SUBROGATION DOES NOT ARISE; B. THE SBTC DEBT WAS PAID BY GARCIA HIMSELF AND NOT BY FCI, HENCE, SUBROGATION BY PAYMENT COULD NOT HAVE OCCURRED; C. FCI DID NOT ACQUIRE ANY RIGHT OVER THE DISPUTED SHARES AS SBTC HAD NOT YET LEVIED UPON NOR BOUGHT THOSE SHARES ON EXECUTION. ACCORDINGLY, WHAT FCI ACQUIRED FROM SBTC WAS SIMPLY A JUDGMENT CREDIT AND AN ATTACHMENT LIEN TO SECURE ITS SATISFACTION. II. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN SUSTAINING THE ORDERS OF THE TRIAL COURT DATED DECEMBER 19, 1989 AND MARCH 5, 1990 WHICH DENIED PETITIONER'S OWNERSHIP OVER THE DISPUTED SHARES NOTWITHSTANDING PROVISIONS OF LAW AND EXTANT JURISPRUDENCE ON THE MATTER THAT PETITIONER AND THE CONSORTIUM HAVE PREFERRED SENIOR RIGHTS THEREOVER. III. RESPONDENT COURT OF APPEAL COMMITTED SERIOUS ERROR IN CONCLUDING THAT THE DISMISSAL OF THE COMPLAINT AND THE COUNTERCLAIM IN CIVIL CASE NO. 8527 ALSO RESULTED IN THE DISCHARGE OF THE WRIT OF ATTACHMENT DESPITE THE RULINGS OF THIS HONORABLE COURT IN BF HOMES VS. COURT OF APPEALS, G.R. NOS. 76879 AND 77143, OCTOBER 3, 1990, 190 SCRA 262, AND IN OLIB VS. PASTORAL, G.R. NO. 81120, AUGUST 20, 1990, 188 SCRA 692 TO THE CONTRARY. IV. RESPONDENT COURT OF APPEALS EXCEEDED ITS JURISDICTION IN RULING ON THE MERITS OF THE MAIN CASE NOTWITHSTANDING THAT THOSE MATTERS WERE NOT ON APPEAL BEFORE IT. V. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT PETITIONER IS GUILTY OF FORUM SHOPPING DESPITE THE FACT THAT SC CIRCULAR NO. 28-91 WAS NOT YET IN FORCE AND EFFECT AT THE TIME THE PETITION WAS FILED BEFORE RESPONDENT APPELLATE COURT, AND THAT ITS COUNSEL AT THAT TIME HAD ADEQUATE BASIS TO BELIEVE THAT CERTIORARI AND NOT AN APPEAL OF THE TRIAL COURT'S ORDERS WAS THE APPROPRIATE RELIEF. 40
As previously stated, the issue boils down to who is legally entitled to the disputed shares of Chemphil. We shall resolve this controversy by examining PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
227 of 501
the validity of the claims of each party and, thus, determine whose claim has priority. CEIC's claim CEIC traces its claim over the disputed shares to the attachment lien obtained by SBTC on 2 July 1985 against Antonio Garcia in Civil Case No. 10398. It avers that when FCI, CEIC's predecessor-in-interest, paid SBTC the due obligations of Garcia to the said bank pursuant to the Deed of Absolute Sale and Purchase of Shares of Stock, 41 FCI, and later CEIC, was subrogated to the rights of SBTC, particularly to the latter's aforementioned attachment lien over the disputed shares. CEIC argues that SBTC's attachment lien is superior as it was obtained on 2 July 1985, ahead of the consortium's purported attachment on 19 July 1985. More importantly, said CEIC lien was duly recorded in the stock and transfer books of Chemphil. CEIC's subrogation theory is unavailing. By definition, subrogation is "the transfer of all the rights of the creditor to a third person, who substitutes him in all his rights. It may either be legal or conventional. Legal subrogation is that which takes place without agreement but by operation of law because of certain acts; this is the subrogation referred to in article 1302. Conventional subrogation is that which takes place by agreement of the parties . . ." 42
CEIC's theory is premised on Art. 1302 (2) of the Civil Code which states: Art. 1302. It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred, even without the debtor's knowledge; (2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor; (3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share. (Emphasis ours.) Despite, however, its multitudinous arguments, CEIC presents an erroneous interpretation of the concept of subrogation. An analysis of the situations involved would reveal the clear inapplicability of Art. 1302 (2). Antonio Garcia sold the disputed shares to FCI for a consideration of P79,207,331.28. FCI, however, did not pay the entire amount to Garcia as it was obligated to deliver part of the purchase price directly to SBTC pursuant to the following stipulation in the Deed of Sale: Manner of Payment Payment of the Purchase Price shall be made in accordance with the following order of preference provided that in no instance shall the total amount paid by the Buyer exceed the Purchase Price: a. Buyer shall pay directly to the Security Bank and Trust Co. the amount determined by the Supreme Court as due and owing in favor of the said bank by the Seller. The foregoing amount shall be paid within fifteen (15) days from the date the decision of the Supreme Court in the case entitled "Antonio M. Garcia, et al. vs. Court of Appeals, et al." G.R. Nos. 82282-83 becomes final and executory. 43 (Emphasis ours.) Hence, when FCI issued the BA check to SBTC in the amount of P35,462,869.62 to pay Garcia's indebtedness to the said bank, it was in effect paying with Garcia's money, no longer with its own, because said amount was part of the purchase price which FCI owed Garcia in payment for the sale of the disputed shares by the latter to the former. The money "paid" by FCI to PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
228 of 501
SBTC, thus properly belonged to Garcia. It is as if Garcia himself paid his own debt to SBTC but through a third party FCI. It is, therefore, of no consequence that what was used to pay SBTC was a corporate check of FCI. As we have earlier stated, said check no longer represented FCI funds but Garcia's money, being as it was part of FCI's payment for the acquisition of the disputed shares. The FCI check should not be taken at face value, the attendant circumstances must also be considered. The aforequoted contractual stipulation in the Deed of Sale dated 15 July 1988 between Antonio Garcia and FCI is nothing more but an arrangement for the sake of convenience. Payment was to be effected in the aforesaid manner so as to prevent money from changing hands needlessly. Besides, the very purpose of Garcia in selling the disputed shares and his other properties was to "settle certain civil suits filed against him." 44
Since the money used to discharge Garcia's debt rightfully belonged to him, FCI cannot be considered a third party payor under Art. 1302 (2). It was but a conduit, or as aptly categorized by respondents, merely an agent as defined in Art. 1868 of the Civil Code: Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. FCI was merely fulfilling its obligation under the aforementioned Deed of Sale. Additionally, FCI is not a disinterested party as required by Art. 1302 (2) since the benefits of the extinguishment of the obligation would redound to none other but itself. 45 Payment of the judgment debt to SBTC resulted in the discharge of the attachment lien on the disputed shares purchased by FCI. The latter would then have a free and "clean" title to said shares. In sum, CEIC, for its failure to fulfill the requirements of Art. 1302 (2), was not subrogated to the rights of SBTC against Antonio Garcia and did not acquire SBTC's attachment lien over the disputed shares which, in turn, had already been lifted or discharged upon satisfaction by Garcia, through FCI, of his debt to the said bank. 46
The rule laid down in the case of Samahang Magsasaka, Inc. v. Chua Guan, 47 that as between two attaching creditors the one whose claim was registered ahead on the books of the corporation enjoys priority, clearly has no application in the case at bench. As we have amply discussed, since CEIC was not subrogated to SBTC's right as attaching creditor, which right in turn, had already terminated after Garcia paid his debt to SBTC, it cannot, therefore, be categorized as an attaching creditor in the present controversy. CEIC cannot resurrect and claim a right which no longer exists. The issue in the instant case, then, is priority between an attaching creditor (the consortium) and a purchaser (FCI/CEIC) of the disputed shares of stock and not between two attaching creditors the subject matter of the aforestated Samahang Magsasaka case. CEIC, likewise, argues that the consortium's attachment lien over the disputed Chemphil shares is null and void and not binding on third parties due to the latter's failure to register said lien in the stock and transfer books of Chemphil as mandated by the rule laid down by the Samahang Magsasaka v. Chua Guan. 48
The attachment lien acquired by the consortium is valid and effective. Both the Revised Rules of Court and the Corporation Code do not require annotation in the corporation's stock and transfer books for the attachment of shares of stock to be valid and binding on the corporation and third party. Section 74 of the Corporation Code which enumerates the instances where registration in the stock and transfer books of a corporation provides: Sec. 74. Books to be kept; stock transfer agent. xxx xxx xxx PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
229 of 501
Stock corporations must also keep a book to be known as the stock and transfer book, in which must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any settlement; a statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made; and such other entries as the by-laws may prescribe. The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open for inspection by any director or stockholder of the corporation at reasonable hours on business days. (Emphasis ours.) xxx xxx xxx Section 63 of the same Code states: Sec. 63. Certificate of stock and transfer of shares. The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice- president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred. No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation. (Emphasis ours.) Are attachments of shares of stock included in the term "transfer" as provided in Sec. 63 of the Corporation Code? We rule in the negative. As succinctly declared in the case of Monserrat v. Ceron, 49 "chattel mortgage over shares of stock need not be registered in the corporation's stock and transfer book inasmuch as chattel mortgage over shares of stock does not involve a "transfer of shares," and that only absolute transfers of shares of stock are required to be recorded in the corporation's stock and transfer book in order to have "force and effect as against third persons." xxx xxx xxx The word "transferencia" (transfer) is defined by the "Diccionario de la Academia de la Lengua Castellana" as "accion y efecto de transfeir" (the act and effect of transferring); and the verb "transferir", as "ceder or renunciar en otro el derecho o dominio que se tiene sobre una cosa, haciendole dueno de ella" (to assign or waive the right in, or absolute ownership of, a thing in favor of another, making him the owner thereof). In the Law Dictionary of "Words and Phrases", third series, volume 7, p. 5867, the word "transfer" is defined as follows: "Transfer" means any act by which property of one person is vested in another, and "transfer of shares", as used in Uniform Stock Transfer Act (Comp. St. Supp. 690), implies any means whereby one may be divested of and another acquire ownership of stock. (Wallach vs. Stein [N.J.], 136 A., 209, 210.) xxx xxx xxx In the case of Noble vs. Ft. Smith Wholesale Grocery Co. (127 Pac., 14, 17; 34 Okl., 662; 46 L.R.A. [N.S.], 455), cited in Words PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
230 of 501
and Phrases, second series, vol. 4, p. 978, the following appears: A "transfer" is the act by which the owner of a thing delivers it to another with the intent of passing the rights which he has in it to the latter, and a chattel mortgage is not within the meaning of such term. xxx xxx xxx. 50
Although the Monserrat case refers to a chattel mortgage over shares of stock, the same may be applied to the attachment of the disputed shares of stock in the present controversy since an attachment does not constitute an absolute conveyance of property but is primarily used as a means "to seize the debtor's property in order to secure the debt or claim of the creditor in the event that a judgment is rendered." 51
Known commentators on the Corporation Code expound, thus: xxx xxx xxx Shares of stock being personal property, may be the subject matter of pledge and chattel mortgage. Suchcollateral transfers are however not covered by the registration requirement of Section 63, since our Supreme Court has held that such provision applies only to absolute transfers thus, the registration in the corporate books of pledges and chattel mortgages of shares cannot have any legal effect. 52 (Emphasis ours.) xxx xxx xxx The requirement that the transfer shall be recorded in the books of the corporation to be valid as against third persons has reference only to absolute transfers or absolute conveyance of the ownership or title to a share. Consequently, the entry or notation on the books of the corporation of pledges and chattel mortgages on shares is not necessary to their validity (although it is advisable to do so) since they do not involve absolute alienation of ownership of stock (Monserrat vs. Ceron, 58 Phil. 469 [1933]; Chua Guan vs. Samahang Magsasaka, Inc., 62 Phil. 472 [1935].) To affect third persons, it is enough that the date and description of the shares pledged appear in a public instrument. (Art. 2096, Civil Code.) With respect to a chattel mortgage constituted on shares of stock, what is necessary is its registration in the Chattel Mortgage Registry. (Act No. 1508 and Art. 2140, Civil Code.) 53
CEIC's reliance on the Samahang Magsasaka case is misplaced. Nowhere in the said decision was it categorically stated that annotation of the attachment in the corporate books is mandatory for its validity and for the purpose of giving notice to third persons. The only basis, then, for petitioner CEIC's claim is the Deed of Sale under which it purchased the disputed shares. It is, however, a settled rule that a purchaser of attached property acquires it subject to an attachment legally and validly levied thereon. 54
Our corollary inquiry is whether or not the consortium has indeed a prior valid and existing attachment lien over the disputed shares. Jaime Gonzales' /Consortium's Claim Is the consortium's attachment lien over the disputed shares valid? CEIC vigorously argues that the consortium's writ of attachment over the disputed shares of Chemphil is null and void, insisting as it does, that the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
231 of 501
notice of garnishment was not validly served on the designated officers on 19 July 1985. To support its contention, CEIC presented the sheriff's notice of garnishment 55 dated 19 July 1985 which showed on its face that said notice was received by one Thelly Ruiz who was neither the president nor managing agent of Chemphil. It makes no difference, CEIC further avers, that Thelly Ruiz was the secretary of the President of Chemphil, for under the above-quoted provision she is not among the officers so authorized or designated to be served with the notice of garnishment. We cannot subscribe to such a narrow view of the rule on proper service of writs of attachment. A secretary's major function is to assist his or her superior. He/she is in effect an extension of the latter. Obviously, as such, one of her duties is to receive letters and notices for and in behalf of her superior, as in the case at bench. The notice of garnishment was addressed to and was actually received by Chemphil's president through his secretary who formally received it for him. Thus, in one case, 56 we ruled that the secretary of the president may be considered an "agent" of the corporation and held that service of summons on him is binding on the corporation. Moreover, the service and receipt of the notice of garnishment on 19 July 1985 was duly acknowledged and confirmed by the corporate secretary of Chemphil, Rolando Navarro and his successor Avelino Cruz through their respective certifications dated 15 August 1989 57 and 21 August 1989. 58
We rule, therefore, that there was substantial compliance with Sec. 7(d), Rule 57 of the Rules of Court. Did the compromise agreement between Antonio Garcia and the consortium discharge the latter's 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, 59 which resulted in the termination of their case, the disputed shares were released from garnishment. We disagree. To subscribe to CEIC's contentions would be to totally disregard the concept and purpose of a preliminary attachment. A writ of preliminary attachment is a provisional remedy issued upon order of the court where an action is pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by the Sheriff as security for the satisfaction of whatever judgment might be secured in said action by the attaching creditor against the defendant. 60 (Emphasis ours.) Attachment is a juridical institution which has for its purpose to secure the outcome of the trial, that is, the satisfaction of the pecuniary obligation really contracted by a person or believed to have been contracted by him, either by virtue of a civil obligation emanating from contract or from law, or by virtue of some crime or misdemeanor that he might have committed, and the writ issued, granted it, is executed by attaching and safely keeping all the movable property of the defendant, or so much thereof may be sufficient to satisfy the plaintiff's demands . . . 61 (Emphasis ours.) The chief purpose of the remedy of attachment is to secure a contingent lien on defendant's property until plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction, or to make some provision for unsecured debts in cases where the means of satisfaction thereof are liable to be removed beyond the jurisdiction, or improperly disposed of or concealed, or otherwise placed beyond the reach of creditors. 62 (Emphasis ours.) We reiterate the rule laid down in BF Homes, Inc. v. CA 63 that an attachment lien continues until the debt is paid, or sale is had under execution issued on PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
232 of 501
the judgment or until judgment is satisfied, or the attachment discharged or vacated in the same manner provided by law. We expounded in said case that: The appointment of a rehabilitation receiver who took control and custody of BF has not necessarily secured the claims of Roa and Mendoza. In the event that the receivership is terminated with such claims not having been satisfied, the creditors may also find themselves without security therefor in the civil action because of the dissolution of the attachment. This should not be permitted. Having previously obtained the issuance of the writ in good faith, they should not be deprived of its protection if the rehabilitation plan does not succeed and the civil action is resumed. xxx xxx xxx As we ruled in Government of the Philippine Islands v. Mercado: Attachment is in the nature of a proceeding in rem. It is against the particular property. The attaching creditor thereby acquires specific lien upon the attached property which ripens into a judgment against the res when the order of sale is made. Such a proceeding is in effect a finding that the property attached is an indebted thing and a virtual condemnation of it to pay the owner's debt. The law does not provide the length of time an attachment lien shall continue after the rendition of judgment, and it must therefore necessarily continue until the debt is paid, or sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in some manner provided by law. It has been held that the lien obtained by attachment stands upon as high equitable grounds as a mortgage lien: The lien or security obtained by an attachment even before judgment, is a fixed and positive security, a specific lien, and, although whether it will ever be made available to the creditor depends on contingencies, its existence is in no way contingent, conditioned or inchoate. It is a vested interest, an actual and substantial security, affording specific security for satisfaction of the debt put in suit, which constitutes a cloud on the legal title, and is as specific as if created by virtue of a voluntary act of the debtor and stands upon as high equitable grounds as a mortgage. (Corpus Juris Secundum, 433, and authorities therein cited.) xxx xxx xxx The case at bench admits of a peculiar character in the sense that it involves a compromise agreement. Nonetheless, the rule established in the aforequoted cases still applies, even more so since the terms of the agreement have to be complied with in full by the parties thereto. 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. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
233 of 501
Moreover, a violation of the terms and conditions of a compromise agreement entitles the aggrieved party to a writ of execution. In Abenojar & Tana v. CA, et al., 64 we held: The non-fulfillment of the terms and conditions of a compromise agreement approved by the Court justifies execution thereof and the issuance of the writ for said purpose is the Court's ministerial duty enforceable bymandamus. Likewise we ruled in Canonizado v. Benitez: 65
A judicial compromise may be enforced by a writ of execution. If a party fails or refuses to abide by the compromise, the other party may enforce the compromise or regard it as rescinded and insist upon his original demand. 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. From the foregoing, it is clear that the consortium and/or its assignee Jaime Gonzales have the better right over the disputed shares. When CEIC purchased the disputed shares from Antonio Garcia on 15 July 1988, it took the shares subject to the prior, valid and existing attachment lien in favor of and obtained by the consortium. Forum Shopping in G.R. No. 113394 We uphold the decision of the Court of Appeals finding PCIB guilty of forum- shopping. 66
The Court of Appeals opined: True it is, that petitioner PCIB was not a party to the appeal made by the four other banks belonging to the consortium, but equally true is the rule that where the rights and liabilities of the parties appealing are so interwoven and dependent on each other as to be inseparable, a reversal of the appealed decision as to those who appealed, operates as a reversal to all and will inure to the benefit of those who did not join the appeal (Tropical Homes vs. Fortun, 169 SCRA 80, p. 90, citing Alling vs. Wenzel, 133 111. 264-278; 4 C.J. 1206). Such principal, premised upon communality of interest of the parties, is recognized in this jurisdiction (Director of Lands vs. Reyes, 69 SCRA 415). The four other banks which were part of the consortium, filed their notice of appeal under date of March 16, 1990, furnishing a copy thereof upon the lawyers of petitioner. The petition for certiorari in the present case was filed on April 10, 1990, long after the other members of the consortium had appealed from the assailed order of December 19, 1989. We view with skepticism PCIB's contention that it did not join the consortium because it "honestly believed that certiorariwas the more efficacious and speedy relief available under the circumstances." 67 Rule 65 of the Revised Rules of Court is not difficult to understand. Certiorari is available only if there is no appeal or other plain, speedy and adequate remedy in the ordinary course of law. Hence, in instituting a separate petition for certiorari, PCIB has deliberately resorted to forum-shopping. PCIB cannot hide behind the subterfuge that Supreme Court Circular 28-91 was not yet in force when it filed the certiorariproceedings in the Court of Appeals. The rule against forum-shopping has long been established. 68 Supreme Court Circular 28-91 merely formalized the prohibition and provided the appropriate penalties against transgressors. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
234 of 501
It alarms us to realize that we have to constantly repeat our warning against forum-shopping. We cannot over-emphasize its ill-effects, one of which is aptly demonstrated in the case at bench where we are confronted with two divisions of the Court of Appeals issuing contradictory decisions 69 one in favor of CEIC and the other in favor of the consortium/Jaime Gonzales. Forum-shopping or the act of a party against whom an adverse judgment has been rendered in one forum, of seeking another (and possibly favorable) opinion in another forum (other than by appeal or the special civil action of certiorari), or the institution of two (2) or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition, 70 has been characterized as an act of malpractice that is prohibited and condemned as trifling with the Courts and abusing their processes. It constitutes improper conduct which tends to degrade the administration of justice. It has also been aptly described as deplorable because it adds to the congestion of the already heavily burdened dockets of the courts. 71
WHEREFORE, premises considered the appealed decision in G.R. Nos. 112438- 39 is hereby AFFIRMED and the appealed decision in G.R. No. 113394, insofar as it adjudged the CEIC the rightful owner of the disputed shares, is hereby REVERSED. Moreover, for wantonly resorting to forum-shopping, PCIB is hereby REPRIMANDED and WARNED that a repetition of the same or similar acts in the future shall be dealt with more severely. SO ORDERED.
Tayabas Land v. Sharruf, 41 Phil. 382 EN BANC G.R. No. L-15499 February 9, 1921 THE TAYABAS LAND COMPANY, plaintiff-appellee, vs. SALOMON SHARRUF, CANUTO BARTOLOME, sheriff of Tayabas, SALVADOR FARRE and FRANCISCO ALVAREZ, defendants. SALOMON SHARRUF, appellant. Crossfield and O'Brien for appellant. Alfredo Chicote and Jose Arnaiz for appellee. STREET, J.: On December 10, 1914, one Salvador Farre recovered a joint and several judgment against Salomon M. Sharruf and Farham M. Sharruf in the Court of First Instance of the city of Manila for the sum of P1,300, with legal interest from September 5, 1914, and with costs. This judgment having remained unsatisfied, and execution was upon April 3, 1916, issued thereon at the instance of the plaintiff. Meanwhile on March 27, 1915, Salomon M. Sharruf had himself recovered a judgment, also in the Court of First Instance of the city of Manila, against the Tayabas Land Company and A.M. Ginainati, for the sum of P6,841.36, with interest and costs; and as there seems to have been no visible property belonging to Salomon M. Sharruf and Farham M. Sharruf subject to seizure by the sheriff to satisfy the execution in favor of Salvador Farre, it became important for Farre to subject the judgment in favor of Salomon M. Sharruf against the Tayabas Land Company and A.M. Ginainati to the payment of his own claim. To this end process of garnishment (notification de embargo) was, on April 6, 1916, issued at the instance of Salvador Farre in aid of his execution against the Sharrufs and was on the same or succeeding day duly served upon the Tayabas Land Company. By this process the Tayabas Land Company was informed that levy had, by virtue of the execution aforesaid, been made upon all the property of S. M. Sharruf in the possession of said Tayabas Land Company and upon all debts owing by the latter to said Sharruf, and in particular upon all participation and interest of S. M. Sharruf in the judgment rendered in his favor in the action prosecuted by him against the Tayabas Land Company and others. In pursuance of the levy thus effected upon the judgment in favor of Salomon M. Sharruf against the Tayabas Land Company, the sheriff of the city of Manila, as in ordinary cases of levy upon chattels of real property, proceeded upon April 15, 1916, to expose to sale all right, title, and interest of said Sharruf in the judgment aforesaid. At this sale Salvador Farre, the execution creditor himself, became the purchaser of the judgment in question for the sum of P200; but the Tayabas Land Company, with a legitimate view to its own protection, afterwards stepped in, and acting through Mr. Francisco Alvarez, as attorney and intermediary, purchased from Farre, on October 6, 1917, the judgment of Salomon M. Sharruf against itself, paying to Farre the full amount due him, to wit, the sum of P1,588.24. At this point it should be stated that when levy of execution was made in the manner above stated, upon the judgment in favor of Sharruf against the Tayabas Land Company and others, the time allowed by law for an appeal in that case of the Supreme Court had not passed; and said cause was in fact subsequently appealed to the Supreme Court, where final judgment was rendered, affirming the decision of the lower court, on February 15, 1918.1 It may also be stated that on April 4, 1916, Salomon M. Sharruf, by a public document, which was duly incorporated in the record in his case against the Tayabas Land Company, et al., sold and transferred unto O'Brien & Company, a corporation, his right, title, and interest in the judgment aforesaid to the extent necessary to satisfy a debt for P988.14, owing to O'Brien & Company, for merchandise purchased from said entity by Sharruf; and upon the same date PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
236 of 501
Messrs. Crossfield & O'Brien, as attorneys, filed a memorandum of an attorney's lien in their favor to the extent of 25 per cent of the amount of the judgment. These transactions, as will be seen, had the result of reducing in a considerable degree the apparent beneficial interest of Salomon M. Sharruf in the result of the litigation, but they do not affect the fundamentals of the case. As a consequence of the facts above narrated the Tayabas Land Company supposes that the judgment obtained by Salomon M. Sharruf against it and A.M. Ginainati has been wholly satisfied, while Salomon M. Sharruf and those interested under him claim that the execution sale of the judgment in question was void and that as a consequence said judgment remains wholly unsatisfied. Proceeding upon this conception of the case, Messrs. Crossfield and O'Brien, as attorneys for the plaintiff in that action, procured an execution to be issued on August 30, 1918, upon said judgment for the entire amount of the recovery, including accrued interest and costs, less the sum of P13.21, which had been secured in a garnishment proceeding against one of the local banks. Being thus menaced with the levy of an execution upon its property, the Tayabas Land Company instituted the present action in the Court of First Instance of the city of Manila, Against Salomon M. Sharruf and others, including the sheriff of the Province of Tayabas, to obtain an order restraining the threatened levy of execution and perpetually enjoining all proceedings for the enforcement of the judgment against it. Upon hearing the cause the trial court, while recognizing the validity of the claims of O'Brien & Company and of Crossfield and O'Brien, held that all other interest in said judgment pertaining to Salomon M. Sharruf had passed by virtue of the execution sale to Salvador Farre and thence by transfer through Francisco Alvarez to the Tayabas Land Company. As a consequence the court declared the preliminary injunction perpetual. From said judgment Salomon M. Sharruf appealed to this court. The principal question in the case relates to the validity of the proceedings whereby the judgment against the Tayabas Land Company and A.M. Ginainati in favor of Salomon M. Sharruf was, on April 15, 1916, exposed to sale by the sheriff under the execution issued in the action of Salvador Farre against the two Sharrufs; and we believe it will be conducive to clarity in the discussion for us to proceed at once to consider the manner in which, under the provisions of our Code of Civil Procedure, a judgment for a sum of money entered in favor of the plaintiff in one case can be reached and applied to the payment of a judgment in another case against the party who occupies the position of creditor in the former. In the first place, we have no hesitancy in saying that a judgment for a sum of money, that is, the interest of the plaintiff in such a judgment, is liable to execution. A judgment for a sum of money is, as to the party entitled to payment, a credit; and as to the party who ought to pay the money, a debt. Furthermore, the interest of the creditor in such a judgment is clearly property, though not capable of manual delivery. All of these elements of value "debts." "credits," and "all other property not capable of manual delivery" are expressly declared, in section 450 of the Code of Civil Procedure, to be liable to execution. It will be noted, however, that under the section just cited, debts, credits, and other property not capable of manual delivery are to be dealt with in a different manner from that prescribed in case of the execution of tangible property; for while tangible property is proceeded with by seizure and sale under execution, debts and credits are to be attached by the citation of the debtor. The provisions governing the execution of tangible property are found in sections 453 to 457, inclusive, of the Code of Civil Procedure; while the provisions prescribing the method of reaching debts and credits are found chiefly in the chapter relating to attachment, consisting principally of sections 431 to 436, inclusive, of the Code of Civil Procedure. The proceeding thus indicated as proper, in order to subject a debt or credit is known in American civil procedure as the process of garnishment; and it may be truly said that garnishment is one of the simplest processes, and the least involved in technicalities, of any proceeding known to the law. It consists in the citation of some stranger to the litigation, who is debtor to one of the parties to the action. By this means such debtor stranger becomes a forced intervenor; and the court, having acquired jurisdiction over his person by means of the citation, requires him to pay his debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. It is merely a case of involuntary novation by the substitution of one creditor for another. Upon principle the remedy is a species of attachment or execution for reaching PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
237 of 501
any property pertaining to a judgment debtor which may be found owing to such debtor by a third person. The situation involved supposes the existence of at least three persons, to wit, a judgment creditor, a judgment debtor, and the garnishee, or person cited, who in turn is supposed to be indebted to the first debtor (i.e., judgment debtor). To proceed a little further with the barest details of the process of garnishment, we note that a citation issues from the court having jurisdiction of the principal litigations, notifying the garnishee that the property and credits of the judgment debtor have been levied upon or attached in the hands of such garnishee, and enjoining him not to deliver, transfer, or otherwise dispose of any effects or credits belonging to that person, and requiring him furthermore to make a statement to the court of the property of the judgment debtor in his hands and of the debts owing by the garnishee to such debtor. In cases where indebtedness is admitted, as not infrequently occurs, the payment of the money by the garnishee to the judgment creditor or into court, brings the proceeding to a close, so far as the garnishee is concerned; but if the garnishee fails to answer, or does not admit the indebtedness, he may be required to attend before the court in which the action is pending to be examined on oath respecting the same. Finally, if the liability of the garnishee is made manifest, the officer of the court may, under paragraph No. 3 of section 436 of the Code of Civil Procedure, collect the money and pay it to the person entitled. The circumstances that garnishment has not been made the subject of independent treatment in our Code of Civil Procedure and that the rules relating thereto are only brought out inferentially in connection with the subject of attachment has undoubtedly contributed to obscure a matter which upon principle is simple enough. Additional light on the subject may, however, be acquired by referring to sections 476, 481, and 486 of the Code of Civil Procedures, which treat of supplementary proceedings. It will be found that those proceedings are identical in principle with the proceeding for the citation of debtors explained in the chapter on attachment. Enough has now been said to show clearly that the action of the sheriff in exposing to public sale the judgment which had been procured by Salomon M. Sharruf in the action against the Tayabas Land Company, et al., was wholly unauthorized, and said sale must be considered void. The proper step would have been for the court to require the Tayabas Land Company, after the judgment against it had become final, to pay into court, in the cause wherein Salvador Farre was plaintiff, a sufficient amount of money to satisfy Farre's claim against Sharruf; and if the judgment against the Tayabas Land Company had been permitted to go to the stage of execution, the proceeds in the hands of the sheriff would have been applied, under the direction of the court, to the payment of Farre's claim before any part would have been payable to Sharruf. In dealing with the problems which have from time to time arisen in connection with garnishment proceedings, courts have sometimes been perplexed over the matter of protecting the garnishee from the danger of having to pay his debt twice; and it goes without saying that the procedure must be so adjusted as not to subject the garnishee to this risk. Otherwise it is a fatal obstacle to the garnishment. No such difficulty would arise in a case like this, where the two judgments are both of record in the same court, and where consequently that court has control over the process in both cases. Our conclusion that the sale of the judgment in question under process of execution was void is supported by the decisions of the Supreme Court of California, construing the very section of the California Code of Civil Procedure from which section 450 of the Code of Civil Procedure of the Philippine Islands was taken. Thus, in McBride vs. Fallon (65 Cal., 301, 303), the Supreme Court of that State said: After enumerating the kinds of property of a judgment debtor liable to execution, the Code provides that "shares and interests in any corporation or company" and debts and credits . . . and all other property not capable of manual delivery, may be attached on execution in like manner as upon writs of attachments. "Debts and credits and property not capable of manual delivery must be attached in the mode pointed out by subdivision 5, sec. 542." PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
238 of 501
(Corresponding to section 431 of the Philippine Code of Civil Procedure.) "That is "by leaving with the person owing the debt or having in possession or under his control such credits and other personal property" or with his agent, a copy of the writ, and a notice that the debts owing by him to the defendant, or the credits and other personal property' in his possession or under his control, belonging to the defendant are attached in pursuance of such writ. "The fact that a debt is evidenced by a judgment does not, in our opinion, make it anything more or less than a debt, or more capable of manual delivery than it would be if not so evidenced. No provision is made for attaching or levying on evidences of debt. It is the debt itself which may be attached by writ of attachment, or on execution in like manner as upon writs of attachment." This we think to be the meaning of the Code, and the mode prescribed by it is exclusively . . . In order to avoid misunderstanding, we wish to say that we make no question as to the propriety of the proceedings up to the time when the judgment in question was advertised and exposed to sale by the sheriff. The issuance of the execution and the service of the garnishment were appropriate; and the garnishment was effective for the purpose of preventing the garnishee, the Tayabas Land Company, from paying the judgment to Salomon M. Sharruf. Moreover, the garnishment was effective for the purpose of conferring upon the Tayabas Land Company the right to pay off the judgment which Farre had obtained against Sharruf. This right is not only recognized in section 481 of the Code of Civil Procedure but also in subsection 3 of article 1210 of the Civil Code; and by satisfying Farre's claim, regardless of the manner in which it was accomplished, the Tayabas Land Company absolved itself pro tanto from its indebtedness to Sharruf. It results that, although the judgment against the Tayabas Land Company has not yet been satisfied in full, said company is entitled to be credited with the sum of P1,588.24, said by it, through Francisco Alvarez, to Farre on October 6, 1917, with interest. In the view we take of the case it becomes unnecessary to consider at length the fact that Sharruf's judgment against the Tayabas Land Company was appealed to the Supreme Court after the process of garnishment had been served on the company. Suffice is to say that this circumstance would at most merely postpone the realization of the results without defeating the garnishment. Reflection upon this feature of the case, however, confirms the opinion that our lawmakers acted wisely in requiring that debts and credits should be executed by means of the process of garnishment rather than by exposing them to public sale. In the case before us a judgment for a large amount was sold for a merely nominal sum, and such would generally be the case at a sale under similar conditions. This cannot fail to be highly prejudicial to the debtor who is under immediate execution. The proceeding by garnishment, on the contrary, enables all parties to realize their rights without unduly disturbing the position of any. The judgment must be reserved, and the defendants will be absolved from the complaint. It is so ordered, without express pronouncement as to costs of either instance.
Gotauco v. ROD, 59 Phil. 756 (See under Section 5 page 139) Rural Bank of Sta. Barbara v. Manila Mission, August 19, 2009 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 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
241 of 501
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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
242 of 501
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 ofP8,5000.00; 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 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
244 of 501
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 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.
Engineering Construction v. NPC, 163 S 9 THIRD DIVISION G.R. No. L-34589 June 29, 1988 ENGINEERING CONSTRUCTION INCORPORATED, petitioner, vs. NATIONAL POWER CORPORATION and COURT OF APPEALS, respondents. G.R. No. L-34656 June 29, 1988 MANILA ELECTRIC COMPANY, petitioner, vs. COURT OF APPEALS and NATIONAL POWER CORPORATION, respondents.
FERNAN, J.: In these related petitions for review under Rule 45 of the Rules of Court, the Engineering Construction, Inc. [ECI] and the Manila Electric Company [MERALCO] question the decision of the Court of Appeals in CA-G.R. No. 47528-R which set aside the orders of the trial court directing execution pending appeal of a judgment for P1,108,985.31 in damages in favor of ECI. Petitioners also question the resolution of said court holding them liable for restitution of the garnished funds to the National Power Corporation [NPC]. On August 29, 1968, ECI filed a complaint for damages against the NPC in the then Court of First Instance of Manila, Branch 15, alleging that it suffered damages to its facilities and equipment due to the inundation of its campsite in Ipo, Norzagaray, Bulacan, as a direct result of the improper and careless opening by NPC of the spillway gates of Angat Dam at the height of typhoon "Welming" on November 4,1967. 1
On December 23, 1970, the trial court found NPC guilty of gross negligence and rendered its judgment, thus: WHEREFORE, judgment is rendered in favor of plaintiff and against defendant as follows: 1. Ordering defendant to pay plaintiff actual or compensatory damages in the amount of P675,785.31; 2. Ordering defendant to pay consequential damages in the amount of P233,200.00; * 3. Ordering defendant to pay plaintiff the amount of P50,000 as and by way of exemplary damages; and 4. Ordering defendant to pay plaintiff the amount of P50,000 as and for attorney's fees ... 2
NPC filed a notice of appeal from that decision but before it could perfect its appeal, ECI moved for and was granted execution pending appeal upon posting a covering bond of P200,000 which it later increased to P1,109,000 to fully answer for whatever damages NPC might incur by reason of the premature execution of the lower court's decision. 3
In granting said motion for the exceptional writ over the strong opposition of the NPC, the trial court adopted the grounds adduced by movant ECI. 1. x x x. 2. That the substantial portion of the award of damages refers to the actual or compensatory damages incurred by plaintiff, which are supported by voluminous documentary evidence, PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
246 of 501
the genuineness and due execution of which were admitted and further, no evidence whatever was presented to contest the same; 3. That this case has been pending for years, as the plaintiff and the Honorable Court were led to believe that the matter in dispute would be settled amicably; 4. That an appeal by defendant would obviously be for purposes of delay; 5. That on appeal, the case would certainly drag on for many years, and in the meantime, the actual loss and damages sustained by plaintiff, who because of such loss have become heavily obligated and financially distressed, would remain uncompensated and unsatisfied 6. That also, plaintiff is willing and able to file a bond to answer for any damage which defendant may suffer as a result of an execution pending appeal. 4
Subsequently, Deputy Sheriff Restituto R. Quemada who was assigned to enforce the writ of execution, garnished in favor of ECI all amounts due and payable to NPC which were then in possession of MERALCO and sufficient to cover the judgment sum of P1,108,985.31. 5
Attempts to lift the order of execution having proved futile and the offer of a supersedeas bond having been rejected by the lower court, NPC filed with the Appellate Court a petition for certiorari. 6
In its challenged decision of October 20, 1971, the Court of Appeals granted NPCs petition and nullified the execution pending appeal of the judgment rendered by the trial court on December 28, 1970, as well as all issued writs and processes in connection with the execution. One justice dissented. 7
On November 11, 1971, MERALCO sought from the Appellate Court a clarification and reconsideration of the aforesaid decision on the ground, among others, that the decision was being used by NPC to compel MERALCO to return the amount of P1,114,545.23 (inclusive of sheriff's fees) in two checks which it had already entrusted to the deputy sheriff on February 23, 1971, who then indorsed and delivered the same to ECI. Whereupon, in its resolution of January 7, 1972, the Appellate Court held the sheriff, MERALCO and ECI liable to restore to NPC the amount due to NPC which MERALCOhad earlier turned over to the sheriff for payment to ECI. 8
Their two motions for reconsideration having been denied, ECI and MERALCO filed separate petitions for review before this Court: Nos. L-34589 and 34656, the very petitions before us for adjudication. In this connection, it must be made clear that we are not concemed with the main appeal. For the present, we limit our discussion to the correctness of the extraordinary writ of execution pending appeal and the ordered restitution of the garnished funds---two collateral matters which have greatly exacerbated the existing dispute between the parties. We shall deal first with the propriety of the execution pending appeal. Section 2, Rule 39 of the Rules of Court provides: Execution pending appeal. On motion of the prevailing party with notice to the adverse party the court may, in its discretion, order execution to issue even before the expiration of the time to appeal, upon good reasons to be stated in a special order. If a record on appeal is filed thereafter, the motion and the special order shall be included thereon. While the rule gives the court the discretionary power to allow immediate execution, the following requisites must be satisfied for its valid exercise: (a) There must be a motion by the prevailing party with notice to the adverse party; PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
247 of 501
(b) There must be a good reasons for issuing the execution; and (c) The good reasons must be stated in a special order. In its assailed decision, the Appellate Court, through Justice Salvador V. Esguerra, observe that NPC, as defendant in the civil case for damages, was being ordered to pay the amount of P 1,108,985.31 pending appeal when practically 40% thereof was made up of awards of damages based on the court's sole and untrammeled discretion. Such amount might greatly be reduced by the superior court, especially the items for consequential and exemplary damages and attorney's fees which by themselves would amount to the "staggering" sum of P433,220.00 The Appellate Court noted the many instances when on review, the amounts for attorney's fees and exemplary and moral damages were drastically cut or eliminated altogether in the absence of proof that the losing party acted with malice, evident bad faith or in an oppressive manner. Inasmuch as the list submitted by ECI of the estimated losses and damages to its tunnel project caused by the instant flooding on November 4, 1967 was duly supported by vouchers presented in evidence, and considering that NPC, for its part, failed to submit proofs to refute or contradict such documentary evidence, we are constrained to sustain the order of execution pending appeal by the trial court but only as far as the award for actual or compensatory damages is concemed. We are not prepared to disagree with the lower court on this point since it was not sufficiently shown that it abused or exceeded its authority. With respect to the consequential and exemplary damages as well as attorney's fees, however, we concur with the Appellate Court in holding that the lower court had exceeded the limits of its discretion. Execution should have been postponed until such time as the merits of the case have been finally determined in the regular appeal. In the fairly recent case of RCPI, et al vs. Lantin Nos. L-59311 and 59320, January 31, 1985 , 134 SCRA 395, 400-401, the Court said: The execution of any award for moral and exemplary damages is dependent on the outcome of the main case. Unlike actual damages for which the petitioners may clearly be held liable if they breach a specific contract and the amounts of which are fixed and certain, liabilities with respect to moral and exemplary damages as well as the exact amounts remain uncertain and indefinite pending resolution by the Intermediate Appellate Court and eventually the Supreme Court. The existence of the factual bases of these types of damages and their casual relation to petitioners' act will have to be determined in the light of the assignments or errors on appeal. It is possible that the petitioners, after all, while liable for actual damages may not be liable for moral and exemplary damages. Or as in some cases elevated to the Supreme Court, the awards may be reduced. Indeed, as later events would show, the Appellate Court was proven right when it postulated that it is not beyond the realm of probability that NPCs appeal from the lower court's judgment could result in the substantial reduction of the consequential damages and attorney's fees and the deletion of exemplary damages. We take judicial notice of the fact that on August 24, 1987, the Court of Appeals rendered a decision on the main appeal. 9 It affirmed the trial court's conclusion that NPC was guilty of negligence but differred in the award of damages. While it upheld the court a quo's award of P675,785.31 as actual damages, it reduced the consequential damages from P333,200.00 to P19,200.00 and the attorney's fees from P50,000 to P30,000.00 The grant of P50,000 as exemplary damages was eliminated. Altogether, the award of damages was modified from P1,108,985.31 to P724,985.31. From that PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
248 of 501
decision, both the ECI and NPC filed their separate appeals to this Court. 10 Finally, on May 16, 1988, the Court promulgated its judgment affirming in all respects the Appellate Court's decision in CA-G.R. No. 49955-R, thus putting to rest the question of negligence and NPCs liability for damages. The point that the Court wishes to emphasize is this: Courts look with disfavor upon any attempt to execute a judgment which has not acquired a final character. Section 2, Rule 39, authorizing the premature execution of judgments, being an exception to the general rule, must be restrictively construed. It would not be a sound rule to allow indiscriminately the execution of a money judgment, even if there is a sufficient bond. "The reasons allowing execution must constitute superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment."' 11
We come now to the second issue of whether petitioners, including the sheriff, are bound to restore to NPC the judgment amount which has been delivered to ECI in compliance with the writ of garnishment. In line with our pronouncement that we are sanctioning in this particular instance the execution pending appeal of actual but not consequential and exemplary damages and attorney's fees which must necessarily depend on the final resolution of the main cases, i.e., Nos. L-47379 and 47481, the direct consequence would be to authorize NPC to proceed against the covering bond filed by ECI but only to the extent of the difference between the amount finally adjudicated by this Court in the main cases [P724,985.31] and the amount originally decreed by the trial court relating to the consequential and exemplary damages and attorney's fees [P1,108.985.31]. In other words, ECIs bond is held answerable to NPC for P384,000. But while partial restitution is warranted in favor of NPC, we find that the Appellate Court erred in not absolving MERALCO, the garnishee, from its obligations to NPC with respect to the payment to ECI of P1,114,543.23, thus in effect subjectingMERALCO to double liability. MERALCO should not have been faulted for its prompt obedience to a writ of garnishment. Unless there are compelling reasons such as: a defect on the face of the writ or actual knowledge on the part of the garnishee of lack of entitlement on the part of the garnisher, it is not incumbent upon the garnishee to inquire or to judge for itself whether or not the order for the advance execution of a judgment is valid. Section 8, Rule 57 of the Rules of Court provides, Effect of attachment of debts and credits.-All persons having in their possession or under their control any credits or other similar personal property belonging to the party against whom attachment is issued, or owing any debts to the same, at the time of service upon them of a copy of the order of attachment and notice as provided in the last preceding section, shall be liable to the applicant for the amount of such credits, debts or other property, until the attachment be discharged, or any judgment recovered by him be satisfied, unless such property be delivered or transferred, or such debts be paid, to the clerk, sheriff or other proper officer of the court issuing the attachment. Garnishment is considered as a specie of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. Under the above-cited rule, the garnishee [the third person] is obliged to deliver the credits, etc. to the proper officer issuing the writ and "the law exempts from liability the person having in his possession or under his control any credits or other personal property be, longing to the defendant, ..., if such property be delivered or transferred, ..., to the clerk, sheriff, or other officer of the court in which the action is pending." 12
Applying the foregoing to the case at bar, MERALCO, as garnishee, after having been judicially compelled to pay the amount of the judgment represented by funds in its possession belonging to the judgment debtor or NPC, should be released from all responsibilities over such amount after delivery thereof to the sheriff. The reason for the rule is self-evident. To expose PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
249 of 501
garnishees to risks for obeying court orders and processes would only undermine the administration of justice. WHEREFORE, the Court in disposing of the two side issues of execution pending appeal and petitioners' liability for restitution, hereby MODIFIES the Court of Appeals' decision and resolution under review, and rules as follows: [a] NPC is authorized to proceed against the P1,109,000 bond filed by ECI to the extent of P384,000 which corresponds to the difference between the awards for consequential and exemplary damages and attorney's fees upheld by the Court in the main cases (Nos. L-47379 and 47481) and those decreed for the same items by the trial court; [b] MERALCO is declared absolved from any and all responsibilities in connection with the amount of P1,114,545.23 representing the NPC garnished funds and therefore relieved from the burden of restoring the same to NPC. SO ORDERED .
RCBC v. Judge Castro, 168 S 49 THIRD DIVISION G.R. No. L-34548 November 29, 1988 RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. THE HONORABLE PACIFICO P. DE CASTRO and PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION,respondents Meer, Meer & Meer for petitioner. The Solicitor General for respondents.
CORTES, J.: The crux of the instant controversy dwells on the liability of a bank for releasing its depositor's funds upon orders of the court, pursuant to a writ of garnishment. If in compliance with the court order, the bank delivered the garnished amount to the sheriff, who in turn delivered it to the judgment creditor, but subsequently, the order of the court directing payment was set aside by the same judge, should the bank be held solidarily liable with the judgment creditor to its depositor for reimbursement of the garnished funds? The Court does not think so. In Civil Case No. Q-12785 of the Court of First Instance of Rizal, Quezon City Branch IX entitled "Badoc Planters, Inc. versus Philippine Virginia Tobacco Administration, et al.," which was an action for recovery of unpaid tobacco deliveries, an Order (Partial Judgment) was issued on January 15, 1970 by the Hon. Lourdes P. San Diego, then Presiding Judge, ordering the defendants therein to pay jointly and severally, the plaintiff Badoc Planters, Inc. (hereinafter referred to as "BADOC") within 48 hours the aggregate amount of P206,916.76, with legal interests thereon. On January 26,1970, BADOC filed an Urgent Ex-Parte Motion for a Writ of Execution of the said Partial Judgment which was granted on the same day by the herein respondent judge who acted in place of the Hon. Judge San Diego who had just been elevated as a Justice of the Court of Appeals. Accordingly, the Branch Clerk of Court on the very same day, issued a Writ of Execution addressed to Special Sheriff Faustino Rigor, who then issued a Notice of Garnishment addressed to the General Manager and/or Cashier of Rizal Commercial Banking Corporation (hereinafter referred to as RCBC), the petitioner in this case, requesting a reply within five (5) days to said garnishment as to any property which the Philippine Virginia Tobacco Administration (hereinafter referred to as "PVTA") might have in the possession or control of petitioner or of any debts owing by the petitioner to said defendant. Upon receipt of such Notice, RCBC notified PVTA thereof to enable the PVTA to take the necessary steps for the protection of its own interest [Record on Appeal, p. 36] Upon an Urgent Ex-Parte Motion dated January 27, 1970 filed by BADOC, the respondent Judge issued an Order granting the Ex-Parte Motion and directing the herein petitioner "to deliver in check the amount garnished to Sheriff Faustino Rigor and Sheriff Rigor in turn is ordered to cash the check and deliver the amount to the plaintiff's representative and/or counsel on record." [Record on Appeal, p. 20; Rollo, p. 5.] In compliance with said Order, petitioner delivered to Sheriff Rigor a certified check in the sum of P 206,916.76. Respondent PVTA filed a Motion for Reconsideration dated February 26,1970 which was granted in an Order dated April 6,1970, setting aside the Orders of Execution and of Payment and the Writ of Execution and ordering petitioner and BADOC "to restore, jointly and severally, the account of PVTA with the said bank in the same condition and state it was before the issuance of the aforesaid Orders by reimbursing the PVTA of the amount of P 206, 916.76 with interests at the legal rate from January 27, 1970 until fully paid to the account of the PVTA This is without prejudice to the right of plaintiff to move for the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
251 of 501
execution of the partial judgment pending appeal in case the motion for reconsideration is denied and appeal is taken from the said partial judgment." [Record on Appeal, p. 58] The Motion for Reconsideration of the said Order of April 6, 1970 filed by herein petitioner was denied in the Order of respondent judge dated June 10, 1970 and on June 19, 1970, which was within the period for perfecting an appeal, the herein petitioner filed a Notice of Appeal to the Court of Appeals from the said Orders. This case was then certified by the Court of Appeals to this Honorable Court, involving as it does purely questions of law. The petitioner raises two principal queries in the instant case: 1) Whether or not PVTA funds are public funds not subject to garnishment; and 2) Whether or not the respondent Judge correctly ordered the herein petitioner to reimburse the amount paid to the Special Sheriff by virtue of the execution issued pursuant to the Order/Partial Judgment dated January 15, 1970. The record reveals that on February 2, 1970, private respondent PVTA filed a Motion for Reconsideration of the Order/ Partial Judgment of January 15, 1970. This was granted and the aforementioned Partial Judgment was set aside. The case was set for hearings on November 4, 9 and 11, 1970 [Rollo, pp. 205-207.] However, in view of the failure of plaintiff BADOC to appear on the said dates, the lower court ordered the dismissal of the case against PVTA for failure to prosecute [Rollo, p. 208.] It must be noted that the Order of respondent Judge dated April 6, 1970 directing the plaintiff to reimburse PVTA t e amount of P206,916.76 with interests became final as to said plaintiff who failed to even file a motion for reconsideration, much less to appeal from the said Order. Consequently, the order to restore the account of PVTA with RCBC in the same condition and state it was before the issuance of the questioned orders must be upheld as to the plaintiff, BADOC. However, the questioned Order of April 6, 1970 must be set aside insofar as it ordered the petitioner RCBC, jointly and severally with BADOC, to reimburse PVTA. The petitioner merely obeyed a mandatory directive from the respondent Judge dated January 27, 1970, ordering petitioner 94 "to deliver in check the amount garnished to Sheriff Faustino Rigor and Sheriff Rigor is in turn ordered to cash the check and deliver the amount to the plaintiffs representative and/or counsel on record." [Record on Appeal, p. 20.] PVTA however claims that the manner in which the bank complied with the Sheriffs Notice of Garnishment indicated breach of trust and dereliction of duty on the part of the bank as custodian of government funds. It insistently urges that the premature delivery of the garnished amount by RCBC to the special sheriff even in the absence of a demand to deliver made by the latter, before the expiration of the five-day period given to reply to the Notice of Garnishment, without any reply having been given thereto nor any prior authorization from its depositor, PVTA and even if the court's order of January 27, 1970 did not require the bank to immediately deliver the garnished amount constitutes such lack of prudence as to make it answerable jointly and severally with the plaintiff for the wrongful release of the money from the deposit of the PVTA. The respondent Judge in his controverted Order sustained such contention and blamed RCBC for the supposed "hasty release of the amount from the deposit of the PVTA without giving PVTA a chance to take proper steps by informing it of the action being taken against its deposit, thereby observing with prudence the five-day period given to it by the sheriff." [Rollo, p. 81.] Such allegations must be rejected for lack of merit. In the first place, it should be pointed out that RCBC did not deliver the amount on the strength solely of a Notice of Garnishment; rather, the release of the funds was made pursuant to the aforesaid Order of January 27, 1970. While the Notice of Garnishment dated January 26, 1970 contained no demand of payment as it was a mere request for petitioner to withold any funds of the PVTA then in its possession, the Order of January 27, 1970 categorically required the delivery in check of the amount garnished to the special sheriff, Faustino Rigor. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
252 of 501
In the second place, the bank had already filed a reply to the Notice of Garnishment stating that it had in its custody funds belonging to the PVTA, which, in fact was the basis of the plaintiff in filing a motion to secure delivery of the garnished amount to the sheriff. [See Rollo, p. 93.] Lastly, the bank, upon the receipt of the Notice of Garnishment, duly informed PVTA thereof to enable the latter to take the necessary steps for the protection of its own interest [Record on Appeal, p. 36] It is important to stress, at this juncture, that there was nothing irregular in the delivery of the funds of PVTA by check to the sheriff, whose custody is equivalent to the custody of the court, he being a court officer. The order of the court dated January 27, 1970 was composed of two parts, requiring: 1) RCBC to deliver in check the amount garnished to the designated sheriff and 2) the sheriff in turn to cash the check and deliver the amount to the plaintiffs representative and/or counsel on record. It must be noted that in delivering the garnished amount in check to the sheriff, the RCBC did not thereby make any payment, for the law mandates that delivery of a check does not produce the effect of payment until it has been cashed. [Article 1249, Civil Code.] Moreover, by virtue of the order of garnishment, the same was placed in custodia legis and therefore, from that time on, RCBC was holding the funds subject to the orders of the court a quo. That the sheriff, upon delivery of the check to him by RCBC encashed it and turned over the proceeds thereof to the plaintiff was no longer the concern of RCBC as the responsibility over the garnished funds passed to the court. Thus, no breach of trust or dereliction of duty can be attributed to RCBC in delivering its depositor's funds pursuant to a court order which was merely in the exercise of its power of control over such funds. ... The garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property a lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia legis, under the sole control of such court [De Leon v. Salvador, G.R. Nos. L-30871 and L-31603, December 28,1970, 36 SCRA 567, 574.] The respondent judge however, censured the petitioner for having released the funds "simply on the strength of the Order of the court which. far from ordering an immediate release of the amount involved, merely serves as a standing authority to make the release at the proper time as prescribed by the rules." [Rollo, p. 81.] This argument deserves no serious consideration. As stated earlier, the order directing the bank to deliver the amount to the sheriff was distinct and separate from the order directing the sheriff to encash the said check. The bank had no choice but to comply with the order demanding delivery of the garnished amount in check. The very tenor of the order called for immediate compliance therewith. On the other hand, the bank cannot be held liable for the subsequent encashment of the check as this was upon order of the court in the exercise of its power of control over the funds placed in custodia legis by virtue of the garnishment. In a recent decision [Engineering Construction Inc., v. National Power Corporation, G.R. No. L-34589, June 29, 1988] penned by the now Chief Justice Marcelo Fernan, this Court absolved a garnishee from any liability for prompt compliance with its order for the delivery of the garnished funds. The rationale behind such ruling deserves emphasis in the present case: But while partial restitution is warranted in favor of NPC, we find that the Appellate Court erred in not absolving MERALCO, the garnishee, from its obligations to NPC with respect to the payment of ECI of P 1,114,543.23, thus in effect subjecting MERALCO to double liability. MERALCO should not have been faulted for its prompt obedience to a writ of garnishment. Unless there are compelling reasons such as: a defect on the face of the writ or actual knowledge on the part of the garnishee of lack of entitlement on the part of the garnisher, it is not incumbent upon the garnishee to inquire or PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
253 of 501
to judge for itself whether or not the order for the advance execution of a judgment is valid. Section 8, Rule 57 of the Rules of Court provides: Effect of attachment of debts and credits. All persons having in their possession or under their control any credits or other similar personal property belonging to the party against whom attachment is issued, or owing any debts to the same, all the time of service upon them of a copy of the order of attachment and notice as provided in the last preceding section, shall be liable to the applicant for the amount of such credits, debts or other property, until the attachment be discharged, or any judgment recovered by him be satisfied, unless such property be delivered or transferred, or such debts be paid, to the clerk, sheriff or other proper officer of the court issuing the attachment. Garnishment is considered as a specie of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. Under the above- cited rule, the garnishee [the third person] is obliged to deliver the credits, etc. to the proper officer issuing the writ and "the law exempts from liability the person having in his possession or under his control any credits or other personal property belonging to the defendant, ..., if such property be delivered or transferred, ..., to the clerk, sheriff, or other officer of the court in which the action is pending. [3 Moran, Comments on the Rules of Court 34 (1970 ed.)] Applying the foregoing to the case at bar, MERALCO, as garnishee, after having been judicially compelled to pay the amount of the judgment represented by funds in its possession belonging to the judgment debtor or NPC, should be released from all responsibilities over such amount after delivery thereof to the sheriff. The reason for the rule is self-evident. To expose garnishees to risks for obeying court orders and processes would only undermine the administration of justice. [Emphasis supplied.] The aforequoted ruling thus bolsters RCBC's stand that its immediate compliance with the lower court's order should not have been met with the harsh penalty of joint and several liability. Nor can its liability to reimburse PVTA of the amount delivered in check be premised upon the subsequent declaration of nullity of the order of delivery. As correctly pointed out by the petitioner: xxx xxx xxx That the respondent Judge, after his Order was enforced, saw fit to recall said Order and decree its nullity, should not prejudice one who dutifully abided by it, the presumption being that judicial orders are valid and issued in the regular performance of the duties of the Court" [Section 5(m) Rule 131, Revised Rules of Court]. This should operate with greater force in relation to the herein petitioner which, not being a party in the case, was just called upon to perform an act in accordance with a judicial flat. A contrary view will invite disrespect for the majesty of the law and induce reluctance in complying with judicial orders out of fear that said orders might be subsequently invalidated and thereby expose one to suffer some penalty or prejudice for obeying the same. And this is what will happen were the controversial orders to be sustained. We need not underscore the danger of this as a precedent. xxx xxx xxx [ Brief for the Petitioner, Rollo, p. 212; Emphasis supplied.] PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
254 of 501
From the foregoing, it may be concluded that the charge of breach of trust and/or dereliction of duty as well as lack of prudence in effecting the immediate payment of the garnished amount is totally unfounded. Upon receipt of the Notice of Garnishment, RCBC duly informed PVTA thereof to enable the latter to take the necessary steps for its protection. However, right on the very next day after its receipt of such notice, RCBC was already served with the Order requiring delivery of the garnished amount. Confronted as it was with a mandatory directive, disobedience to which exposed it to a contempt order, it had no choice but to comply. The respondent Judge nevertheless held that the liability of RCBC for the reimbursement of the garnished amount is predicated on the ruling of the Supreme Court in the case of Commissioner of Public Highways v. Hon. San Diego [G.R. No. L-30098, February 18, 1970, 31 SCRA 616] which he found practically on all fours with the case at bar. The Court disagrees. The said case which reiterated the rule in Republic v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA 899] that government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgment is definitely distinguishable from the case at bar. In the Commissioner of Public Highways case [supra], the bank which precipitately allowed the garnishment and delivery of the funds failed to inform its depositor thereof, charged as it was with knowledge of the nullity of the writ of execution and notice of garnishment against government funds. In the aforementioned case, the funds involved belonged to the Bureau of Public Highways, which being an arm of the executive branch of the government, has no personality of its own separate from the National Government. The funds involved were government funds covered by the rule on exemption from execution. This brings us to the first issue raised by the petitioner: Are the PVTA funds public funds exempt from garnishment? The Court holds that they are not. Republic Act No. 2265 created the PVTA as an ordinary corporation with all the attributes of a corporate entity subject to the provisions of the Corporation Law. Hence, it possesses the power "to sue and be sued" and "to acquire and hold such assets and incur such liabilities resulting directly from operations authorized by the provisions of this Act or as essential to the proper conduct of such operations." [Section 3, Republic Act No. 2265.] Among the specific powers vested in the PVTA are: 1) to buy Virginia tobacco grown in the Philippines for resale to local bona fide tobacco manufacturers and leaf tobacco dealers [Section 4(b), R.A. No. 2265]; 2) to contracts of any kind as may be necessary or incidental to the attainment of its purpose with any person, firm or corporation, with the Government of the Philippines or with any foreign government, subject to existing laws [Section 4(h), R.A. No. 22651; and 3) generally, to exercise all the powers of a corporation under the Corporation Law, insofar as they are not inconsistent with the provisions of this Act [Section 4(k), R.A. No. 2265.] From the foregoing, it is clear that PVTA has been endowed with a personality distinct and separate from the government which owns and controls it. Accordingly, this Court has heretofore declared that the funds of the PVTA can be garnished since "funds of public corporation which can sue and be sued were not exempt from garnishment" [Philippine National Bank v. Pabalan, G.R. No. L-33112, June 15, 1978, 83 SCRA 595, 598.] In National Shipyards and Steel Corp. v. CIR [G.R. No. L-17874, August 31, 1964, 8 SCRA 781], this Court held that the allegation to the effect that the funds of the NASSCO are public funds of the government and that as such, the same may not be garnished, attached or levied upon is untenable for, as a government-owned or controlled corporation, it has a personality of its own, distinct and separate from that of the government. This court has likewise ruled that other govemment-owned and controlled corporations like National Coal Company, the National Waterworks and Sewerage Authority (NAWASA), the National Coconut Corporation (NACOCO) the National Rice and Corn Corporation (NARIC) and the Price Stabilization Council (PRISCO) which possess attributes similar to those of the PVTA are clothed with personalities of their own, separate and distinct from that of the government [National Coal PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
255 of 501
Company v. Collector of Internal Revenue, 46 Phil. 583 (1924); Bacani and Matoto v. National Coconut Corporation et al., 100 Phil. 471 (1956); Reotan v. National Rice & Corn Corporation, G.R. No. L-16223, February 27, 1962, 4 SCRA 418.] The rationale in vesting it with a separate personality is not difficult to find. It is well-settled that when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation [Manila Hotel Employees' Association v. Manila Hotel Co. and CIR, 73 Phil. 734 (1941).] Accordingly, as emphatically expressed by this Court in a 1978 decision, "garnishment was the appropriate remedy for the prevailing party which could proceed against the funds of a corporate entity even if owned or controlled by the government" inasmuch as "by engaging in a particular business thru the instrumentality of a corporation, the government divests itselfpro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations" [Philippine National Bank v. CIR, G.R No. L-32667, January 31, 1978, 81 SCRA 314, 319.] Furthermore, in the case of PVTA, the law has expressly allowed it funds to answer for various obligations, including the one sought to be enforced by plaintiff BADOC in this case (i.e. for unpaid deliveries of tobacco). Republic Act No. 4155, which discounted the erstwhile support given by the Central Bank to PVTA, established in lieu thereof a "Tobacco Fund" to be collected from the proceeds of fifty per centum of the tariff or taxes of imported leaf tobacco and also fifty per centum of the specific taxes on locally manufactured Virginia type cigarettes. Section 5 of Republic Act No. 4155 provides that this fund shall be expended for the support or payment of: 1. Indebtedness of the Philippine Virginia Tobacco Administration and the former Agricultural Credit and Cooperative Financing Administration to FACOMAS and farmers and planters regarding Virginia tobacco transactions in previous years; 2. Indebtedness of the Philippine Virginia Tobacco Administration and the former Agricultural Credit and Cooperative Financing Administration to the Central Bank in gradual amounts regarding Virginia tobacco transactions in previous years; 3. Continuation of the Philippine Virginia Tobacco Administration support and subsidy operations including the purchase of locally grown and produced Virginia leaf tobacco, at the present support and subsidy prices, its procurement, redrying, handling, warehousing and disposal thereof, and the redrying plants trading within the purview of their contracts; 4. Operational, office and field expenses, and the establishment of the Tobacco Research and Grading Institute. [Emphasis supplied.] Inasmuch as the Tobacco Fund, a special fund, was by law, earmarked specifically to answer obligations incurred by PVTA in connection with its proprietary and commercial operations authorized under the law, it follows that said funds may be proceeded against by ordinary judicial processes such as execution and garnishment. If such funds cannot be executed upon or garnished pursuant to a judgment sustaining the liability of the PVTA to answer for its obligations, then the purpose of the law in creating the PVTA would be defeated. For it was declared to be a national policy, with respect to the local Virginia tobacco industry, to encourage the production of local Virginia tobacco of the qualities needed and in quantities marketable in both domestic and foreign markets, to establish this industry on an efficient and economic basis, and to create a climate conducive to local cigarette manufacture of the qualities desired by the consuming public, blending imported and native Virginia leaf tobacco to improve the quality of locally manufactured cigarettes [Section 1, Republic Act No. 4155.] The Commissioner of Public Highways case is thus distinguishable from the case at bar. In said case, the Philippine National Bank (PNB) as custodian of funds belonging to the Bureau of Public Highways, an agency of the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
256 of 501
government, waschargeable with knowledge of the exemption of such government funds from execution and garnishment pursuant to the elementary precept that public funds cannot be disbursed without the appropriation required by law. On the other hand, the same cannot hold true for RCBC as the funds entrusted to its custody, which belong to a public corporation, are in the nature of private funds insofar as their susceptibility to garnishment is concerned. Hence, RCBC cannot be charged with lack of prudence for immediately complying with the order to deliver the garnished amount. Since the funds in its custody are precisely meant for the payment of lawfully- incurred obligations, RCBC cannot rightfully resist a court order to enforce payment of such obligations. That such court order subsequently turned out to have been erroneously issued should not operate to the detriment of one who complied with its clear order. Finally, it is contended that RCBC was bound to inquire into the legality and propriety of the Writ of Execution and Notice of Garnishment issued against the funds of the PVTA deposited with said bank. But the bank was in no position to question the legality of the garnishment since it was not even a party to the case. As correctly pointed out by the petitioner, it had neither the personality nor the interest to assail or controvert the orders of respondent Judge. It had no choice but to obey the same inasmuch as it had no standing at all to impugn the validity of the partial judgment rendered in favor of the plaintiff or of the processes issued in execution of such judgment. RCBC cannot therefore be compelled to make restitution solidarily with the plaintiff BADOC. Plaintiff BADOC alone was responsible for the issuance of the Writ of Execution and Order of Payment and so, the plaintiff alone should bear the consequences of a subsequent annulment of such court orders; hence, only the plaintiff can be ordered to restore the account of the PVTA. WHEREFORE, the petition is hereby granted and the petitioner is ABSOLVED from any liability to respondent PVTA for reimbursement of the funds garnished. The questioned Order of the respondent Judge ordering the petitioner, jointly and severally with BADOC, to restore the account of PVTA are modified accordingly. SO ORDERED.
The Manila Remnant v. CA, 231 S 281 FIRST DIVISION
G.R. No. 107282 March 16, 1994 THE MANILA REMNANT CO., INC., petitioner, vs. HON. COURT OF APPEALS, AND SPS. OSCAR C. VENTANILLA AND CARMEN GLORIA DIAZ, respondents. Tabalingcos & Associates Law Office for petitioner. Oscar C. Ventanilla, Jr. and Augusto Garmaitan for private respondents.
CRUZ, J.: The present petition is an offshoot of our decision in Manila Remnant Co., Inc., (MRCI) v. Court of Appeals, promulgated on November 22, 1990. That case involved parcels of land in Quezon City which were owned by petitioner MRCI and became the subject of its agreement with A.U. Valencia and Co., Inc., (AUVCI) by virtue of which the latter was to act as the petitioner's agent in the development and sale of the property. For a stipulated fee, AUVCI was to convert the lands into a subdivision, manage the sale of the lots, execute contracts and issue official receipts to the lot buyers. At the time of the agreement, the president of both MRCI and AUVCI was Artemio U. Valencia. Pursuant to the above agreement, AUVCI executed two contracts to sell dated March 3, 1970, covering Lots 1 and 2, Block 17, in favor of spouses Oscar C. Ventanilla and Carmen Gloria Diaz for the combined contract price of P66,571.00, payable monthly in ten years. After ten days and without the knowledge of the Ventanilla couple, Valencia, as president of MRCI, resold the same parcels to Carlos Crisostomo, one of his sales agents, without any consideration. Upon orders of Valencia, the monthly payments of the Ventanillas were remitted to the MRCI as payments of Crisostomo, for which receipts were issued in his name. The receipts were kept by Valencia without the knowledge of the Ventanillas and Crisostomo. The Ventanillas continued paying their monthly installments. On May 30, 1973, MRCI informed AUVCI that it was terminating their agreement because of discrepancies discovered in the latter's collections and remittances. On June 6, 1973, Valencia was removed by the board of directors of MRCI as its president. On November 21, 1978, the Ventanilla spouses, having learned of the supposed sale of their lots to Crisostomo, commenced an action for specific performance, annulment of deeds, and damages against Manila Remnant Co., Inc., A.U. Valencia and Co., Inc., and Carlos Crisostomo. It was docketed as Civil Case No. 26411 in the Court of First Instance of Quezon City, Branch 7-B. On November 17, 1980, the trial court rendered a decision declaring the contracts to sell in favor of the Ventanillas valid and subsisting, and annulling the contract to sell in favor of Crisostomo. It ordered the MRCI to execute an absolute deed of sale in favor of the Ventanillas, free from all liens and encumbrances. Damages and attorney's fees in the total amount of P210,000.00 were also awarded to the Ventanillas for which the MRCI, AUVCI, and Crisostomo were held solidarily liable. The lower court ruled further that if for any reason the transfer of the lots could not be effected, the defendants would be solidarily liable to the Ventanillas for reimbursement of the sum of P73,122.35, representing the amount paid for the two lots, and legal interest thereon from March 1970, plus the decreed damages and attorney's fees. Valencia was also held liable to MRCI for moral and exemplary damages and attorney's fees. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
258 of 501
From this decision, separate appeals were filed by Valencia and MRCI. The appellate court, however, sustained the trial court in toto. MRCI then filed before this Court a petition for certiorari to review the portion of the decision of the Court of Appeals upholding the solidary liability of MRCI, AUVCI and Carlos Crisostomo for the payment of moral and exemplary damages and attorney's fees to the Ventanillas. On November 22, 1990, this Court affirmed the decision by the Court of Appeals and declared the judgment of the trial court immediately executory. The Present Case On January 25, 1991, the spouses Ventanilla filed with the trial court a motion for the issuance of a writ of execution in Civil Case No. 26411. The writ was issued on May 3, 1991, and served upon MRCI on May 9, 1991. In a manifestation and motion filed by MRCI with the trial court on May 24, 1991, the petitioner alleged that the subject properties could not be delivered to the Ventanillas because they had already been sold to Samuel Marquez on February 7, 1990, while their petition was pending in this Court. Nevertheless, MRCI offered to reimburse the amount paid by the respondents, including legal interest plus the aforestated damages. MRCI also prayed that its tender of payment be accepted and all garnishments on their accounts lifted. The Ventanillas accepted the amount of P210,000.00 as damages and attorney's fees but opposed the reimbursement offered by MRCI in lieu of the execution of the absolute deed of sale. They contended that the alleged sale to Samuel Marquez was void, fraudulent, and in contempt of court and that no claim of ownership over the properties in question had ever been made by Marquez. On July 19, 1991, Judge Elsie Ligot-Telan issued the following order: To ensure that there is enough amount to cover the value of the lots involved if transfer thereof to plaintiff may no longer be effected, pending litigation of said issue, the garnishment made by the Sheriff upon the bank account of Manila Remnant may be lifted only upon the deposit to the Court of the amount of P500,000.00 in cash. MRCI then filed a manifestation and motion for reconsideration praying that it be ordered to reimburse the Ventanillas in the amount of P263,074.10 and that the garnishment of its bank deposit be lifted. This motion was denied by the trial court in its order dated September 30, 1991. A second manifestation and motion filed by MRCI was denied on December 18, 1991. The trial court also required MRCI to show cause why it should not be cited for contempt for disobedience of its judgment. These orders were questioned by MRCI in a petition for certiorari before the respondent court on the ground that they were issued with grave abuse of discretion. The Court of Appeals ruled that the contract to sell in favor of Marquez did not constitute a legal impediment to the immediate execution of the judgment. Furthermore, the cash bond fixed by the trial court for the lifting of the garnishment was fair and reasonable because the value of the lot in question had increased considerably. The appellate court also set aside the show-cause order and held that the trial court should have proceeded under Section 10, Rule 39 of the Rules of Court and not Section 9 thereof. 1
In the petition now before us, it is submitted that the trial court and the Court of Appeals committed certain reversible errors to the prejudice of MRCI. The petitioner contends that the trial court may not enforce it garnishment order after the monetary judgment for damages had already been satisfied and the amount for reimbursement had already been deposited with the sheriff. Garnishment as a remedy is intended to secure the payment of a judgment debt when a well-founded belief exists that the erring party will abscond or deliberately render the execution of the judgment nugatory. As there is no such situation in this case, there is no need for a garnishment order. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
259 of 501
It is also averred that the trial court gravely abused its discretion when it arbitrarily fixed the amount of the cash bond for the lifting of the garnishment order at P500,000.00. MRCI further maintains that the sale to Samuel Marquez was valid and constitutes a legal impediment to the execution of the absolute deed of sale to the Ventanillas. At the time of the sale to Marquez, the issue of the validity of the sale to the Ventanillas had not yet been resolved. Furthermore, there was no specific injunction against the petitioner re-selling the property. Lastly, the petitioner insists that Marquez was a buyer in good faith and had a right to rely on the recitals in the certificate of title. The subject matter of the controversy having passed to an innocent purchaser for value, the respondent court erred in ordering the execution of the absolute deed of sale in favor of the Ventanillas. For their part, the respondents argue that the validity of the sale to them had already been established even while the previous petition was still pending resolution. That petition only questioned the solidary liability of MRCI to the Ventanillas. The portion of the decision ordering the MRCI to execute an absolute deed of sale in favor of the Ventanillas became final and executory when the petitioner failed to appeal it to the Supreme Court. There was no need then for an order enjoining the petitioner from re-selling the property in litigation. They also point to the unusual lack of interest of Marquez in protecting and asserting his right to the disputed property, a clear indication that the alleged sale to him was merely a ploy of the petitioner to evade the execution of the absolute deed of sale in their favor. The petition must fail. The validity of the contract to sell in favor of the Ventanilla spouses is not disputed by the parties. Even in the previous petition, the recognition of that contract was not assigned as error of either the trial court or appellate court. The fact that the MRCI did not question the legality of the award for damages to the Ventanillas also shows that it even then already acknowledged the validity of the contract to sell in favor of the private respondents. On top of all this, there are other circumstances that cast suspicion on the validity, not to say the very existence, of the contract with Marquez. First, the contract to sell in favor of Marquez was entered into after the lapse of almost ten years from the rendition of the judgment of the trial court upholding the sale to the Ventanillas. Second, the petitioner did not invoke the contract with Marquez during the hearing on the motion for the issuance of the writ of execution filed by the private respondents. It disclosed the contract only after the writ of execution had been served upon it. Third, in its manifestation and motion dated December 21, 1990, the petitioner said it was ready to deliver the titles to the Ventanillas provided that their counterclaims against private respondents were paid or offset first. There was no mention of the contract to sell with Marquez on February 7, 1990. Fourth, Marquez has not intervened in any of these proceedings to assert and protect his rights to the subject property as an alleged purchaser in good faith. At any rate, even if it be assumed that the contract to sell in favor of Marquez is valid, it cannot prevail over the final and executory judgment ordering MRCI to execute an absolute deed of sale in favor of the Ventanillas. No less importantly, the records do not show that Marquez has already paid the supposed balance amounting to P616,000.00 of the original price of over P800,000.00. 2
The Court notes that the petitioner stands to benefit more from the supposed contract with Marquez than from the contract with the Ventanillas with the agreed price of only P66,571.00. Even if it paid the P210,000.00 damages to the private respondents as decreed by the trial court, the petitioner would still earn more profit if the Marquez contract were to be sustained. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
260 of 501
We come now to the order of the trial court requiring the posting of the sum of P500,000.00 for the lifting of its garnishment order. While the petitioners have readily complied with the order of the trial court for the payment of damages to the Ventanillas, they have, however, refused to execute the absolute deed of sale. It was for the purpose of ensuring their compliance with this portion of the judgment that the trial court issued the garnishment order which by its term could be lifted only upon the filling of a cash bond of P500,000.00. The petitioner questions the propriety of this order on the ground that it has already partially complied with the judgment and that it has always expressed its willingness to reimburse the amount paid by the respondents. It says that there is no need for a garnishment order because it is willing to reimburse the Ventanillas in lieu of execution of the absolute deed of sale. The alternative judgment of reimbursement is applicable only if the conveyance of the lots is not possible, but it has not been shown that there is an obstacle to such conveyance. As the main obligation of the petitioner is to execute the absolute deed of sale in favor of the Ventanillas, its unjustified refusal to do so warranted the issuance of the garnishment order. Garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. 3 It is an attachment by means of which the plaintiff seeks to subject to his claim property of the defendant in the hands of a third person or money owed by such third person or garnishee to the defendant. 4 The rules on attachment also apply to garnishment proceedings. A garnishment order shall be lifted if it established that: (a) the party whose accounts have been garnished has posted a counterbond or has made the requisite cash deposit; 5
(b) the order was improperly or irregularly issued 6 as where there is no ground for garnishment 7 or the affidavit and/or bond filed therefor are defective or insufficient; 8
(c) the property attached is exempt from execution, hence exempt from preliminary attachment 9 or (d) the judgment is rendered against the attaching or garnishing creditor. 10
Partial execution of the judgment is not included in the above enumeration of the legal grounds for the discharge of a garnishment order. Neither does the petitioner's willingness to reimburse render the garnishment order unnecessary. As for the counterbond, the lower court did not err when it fixed the same at P500,000.00. As correctly pointed out by the respondent court, that amount corresponds to the current fair market value of the property in litigation and was a reasonable basis for determining the amount of the counterbond. Regarding the refusal of the petitioner to execute the absolute deed of sale, Section 10 of Rule 39 of the Rules of Court reads as follows: Sec. 10. Judgment for specific act; vesting title If a judgment directs a party to execute a conveyance of land, or to deliver deeds or other documents, or to perform any other specific act, and the party fails to comply within the time specified, the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done shall have like effect as if done by the party. If real or personal property is within the Philippines, the court in lieu of directing a conveyance thereof may enter judgment divesting the title of any party and vesting it in others and such judgment shall have the force and effect of a conveyance executed in due form of law. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
261 of 501
Against the unjustified refusal of the petitioner to accept payment of the balance of the contract price, the remedy of the respondents is consignation, conformably to the following provisions of the Civil Code: Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due. . . Art. 1258. Consignation shall be made by depositing the things due at the disposal of the judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases. The consignation having been made, the interested parties shall also be notified thereof. Art. 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation. Accordingly, upon consignation by the Ventanillas of the sum due, the trial court may enter judgment canceling the title of the petitioner over the property and transferring the same to the respondents. This judgment shall have the same force and effect as conveyance duly executed in accordance with the requirements of the law. In sum, we find that: 1. No legal impediment exists to the execution, either by the petitioner or the trial court, of an absolute deed of sale of the subject property in favor of the respondent Ventanillas; and 2. The lower court did not abuse its discretion when it required the posting of a P500,000.00 cash bond for the lifting of the garnishment order. WHEREFORE, the petition is DENIED and the challenged decision of the Court of Appeals is AFFIRMED in toto, with costs against the petitioner. It is so ordered.
Chemphil Export and Import v. CA, 251 S 286 (See under Section 7 page 217) Abinujar v. CA, April 18, 1995 FIRST DIVISION G.R. No. 104133 April 18, 1995 SPOUSES EMILIO ABINUJAR and MILAGROS M. LANA, petitioners, vs. THE COURT OF APPEALS and SPOUSES SANTIAGO RAMIRO and FLORENTINA RAMIRO, respondents.
QUIASON, J.: This is a petition for review on ceitiorari under Rule 45 of the Revised Rules of Court of the Decision dated December 27, 1991 and the Resolution dated February 11, 1992 of the Court of Appeals in CA-G.R. SP No. 24683. I On October 10, 1987, petitioners executed a Deed of Sale with Right to Repurchase in favor of private respondents, involving a residential house located at No. 346 Algeciras St., Sampaloc, Manila. Due to serious financial and business reverses, petitioners were not able to redeem the property within four months as agreed upon. On October 24, 1989, private respondents filed a complaint for ejectment in the Metropolitan Trial Court of the City of Manila, docketed as Civil Case No. 130352-CV against petitioners. On December 27, 1989, the parties, assisted by their counsels, executed a compromise agreement. In an order dated March 15, 1990, the Metropolitan Trial Court approved the compromise agreement. The order reproduced the agreement as follows: 1. That defendants [petitioners herein] agree to pay plaintiffs [private respondents herein] in the amounts and on the dates specifically indicated herein below: a. P50,000.00 on Jan. 31, 1990; b. 10,000.00 on Feb. 28, 1990; c. 10,000.00 on March 31, 1990; d. 10,000.00 on April 30, 1990; e. 10,000.00 on May 31, 1990; f. 10,000.00 on June 30, 1990; g. 10,000.00 on July 31,1990; h. 10,000.00 on August 31, 1990; i. 10,000.00 on September 30, 1990; 2. That failure on the part of the defendants to pay three (3) consecutive payments, plaintiffs will be entitled to a writ of execution, unless the parties agree to extend the period of entitlement to a writ of execution in writing to be submitted and/or approved by this Honorable Court; . . . (Rollo, p. 53). On April 15, 1990, private respondents filed a motion for execution on the ground that petitioners failed to pay the first three installments stipulated in the compromise agreement, to wit: P50,000.00 on January 31, 1990; P10,000.00 on February 28, 1990; and P10,000.00 on March 31, 1990. On April 6, 1990, petitioners filed an "Urgent Ex-Parte Motion for Reconsideration and/or Correct Order of this Court" calling attention to a typographical error in the Order dated March 15, 1990, and asking that the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
263 of 501
amount of P10.000.00 payable on September 30, 1990 be corrected and changed to the agreed amount of P50,000. On April 25, 1990, the Metropolitan Trial Court issued an order granting the motion for correction of the typographical error in the decision. On August 17, 1990, petitioners filed a motion asking that the check payments previously deposited by them with the court, be accepted and be given to respondents in compliance with their compromise agreement. On August 23, 1990, respondents opposed petitioners' ex-parte motion and stated that they would not renew the compromise agreement with petitioners. The Metropolitan Trial Court denied private respondents' motion for execution dated April 15, 1990 and another similar motion dated June 26, 1990. On October 12, 1990, respondents filed a petition for mandamus with us (G.R. No. 95470). In a resolution dated November 5, 1990, we referred the case to the Executive Judge of the Regional Trial Court, Manila. petitioners moved to dismiss the petition for mandamus. On March 14, 1991 the Regional Trial Court denied the motion to dismiss and issued the assailed resolution commanding the Metropolitan Trial Court to issue a writ of execution of the decision approving the compromise agreement in Civil Case No. 130352-CV. In compliance with the said resolution, the Metropolitan Trial Court issued an order dated March 27, 1991 directing the issuance of a writ of execution to enforce the compromise agreement entered into by the parties. On April 11, 1991, a "Sheriffs' Notice to Voluntarily Vacate the Premises" was served on petitioner. Petitioners then filed a petition for certiorari with a prayer for the issuance of a temporary restraining order and a writ of injunction with the Court of Appeals (CA-G.R. SP No. 24683). On December 27, 1991, the Court of Appeals dismissed the petition. Likewise, the said court denied the motion for reconsideration filed by petitioner. II Petitioners contend that both the Regional Trial Court and Metropolitan Trial Court acted with grave abuse of discretion, the former in issuing a resolution directing the Metropolitan Trial Court to issue a writ of execution against petitioners herein, and the latter, in issuing said writ of execution. III A compromise agreement is a contract between the parties, which if not contrary to law, morals or public policy, is valid and enforceable between them (Municipal Board of Cabanatuan City v. Samahang Magsasaka, Inc., 62 SCRA 435 [1975]). There are two kinds of compromise agreements, the judicial, which puts an end to a pending litigation, and the extrajudicial, which is to avoid a litigation (Civil Code of the Philippines, Art. 2028; Caguioa, VI Commentaries and Cases, on Civil Law 292 [1970]). As a contract, a compromise agreement is perfected by mutual consent (Rovero v. Amparo, 91 Phil. 228 [1952]). A judicial compromise, however, while binding between the parties upon its execution, is not executory until it is approved by the court and reduced to a judgment. Article 2037 of the Civil Code of the Philippines provides: A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in compliance with a judicial compromise. The non-fulfillment of the terms and conditions of a compromise agreement approved by the court justifies execution thereof and the issuance of the writ for said purpose is the court's ministerial duty enforceable bymandamus (Maceda, Jr. v. Moreman Builders Co., Inc., 203 SCRA 293 [1991]). PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
264 of 501
In the compromise agreement, petitioners obligated themselves to pay private respondents the amount of P50,000.00 on January 31, 1990, P10,000.00 on February 28, 1990, and P10,000.00 on March 31, 1990. Petitioners received a copy of the decision of the Metropolitan Trial Court approving the compromise agreement on March 26, 1990. Clearly, there was a breach, for it was only on August 17, 1990 that petitioners attempted to pay by means of nine postdated checks the amounts agreed upon. In effect, the first installment payment of P50,000.00 due on January 31, 1990 was moved to August 31, 1990, the second installment of P10,000.00 due on February 28, 1990 was moved to September 30, 1990 and so forth, thereby making the last installment of P5,000.00 due on September 30, 1990 moved to April 30, 1991. This is tantamount to novating the original agreement entered into by the parties without the consent of private respondents. Inasmuch as a judicial compromise becomes binding between the parties upon its execution, petitioners should have paid the installments falling due even before the approval thereof by the trial court. But assuming that a judicial compromise is not perfected until it is approved by the court, still petitioner should have paid the compromise agreement installments due on March 31, 1990, together with the installments due on January 31 and February 28, 1990 on or before March 31, 1990. Petitioners also assail the validity of the issuance by the Deputy Sheriff of the notice to voluntarily vacate the premises by way of enforcing the decision approving the compromise agreement. They maintain that their obligation is monetary in nature and the applicable rule should have been Section 15, Rule 39 and not Section 13, Rule 39 of the Revised Rules of Court. Petitioners contention has merit. When the parties entered into a compromise agreement, the original action for ejectment was set aside and the action was changed to a monetary obligation. A perusal of the compromise agreement signed by the parties and approved by the inferior court merely provided that in case the defendants (petitioners herein) failed to pay three monthly installments, the plaintiffs (private respondents herein) would be entitled to a writ of execution, without specifying what the subject of execution would be. Said agreement did not state that petitioners would be evicted from the premises subject of the suit in case of any default in complying with their obligation thereunder. This was the result of the careless drafting thereof for which only private respondents were to be blamed. A judgment is the foundation of a writ of execution which draws its vitality therefrom (Monaghon v. Monaghon, 25 Ohio St. 325). An officer issuing a writ of execution is required to look to the judgment for his immediate authority (Sydnor v. Roberts, 12 Tex. 598). An execution must conform to and be warranted by the judgment on which it was issued (Francisco, The Revised Rules of Court 641 [1966]; Kramer v. Montgomery, 206 Okla.190, 242 p. 2d 414 [1952]). There should not be a substantial variance between the judgment and the writ of execution (Avery v. Lewis, 10 Vt. 332). Thus, an execution is fatally defective if the judgment was for a sum of money and the writ of execution was for the sale of mortgaged property (Bank of Philippine Islands v. Green, 48 Phil. 284 [1925]). As petitioners' obligation under the compromise agreement as approved by the court was monetary in nature, private respondents can avail only of the writ of execution provided in Section 15, Rule 39 of the Revised Rules of Court, and not that provided in Section 13. Section 15, Rule 39 provides: Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the property, real and personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution, or on a sufficient amount of such property, if there be sufficient, and PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
265 of 501
selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment. Any excess in the proceeds over the judgment and accruing costs must be delivered to the judgment debtor, unless otherwise directed by the judgment or order of the court. When there is more property of the judgment debtor than is sufficient to satisfy the judgment and accruing costs, within the view of the officer, he must levy only on such part of the property as is amply sufficient to satisfy the judgment and costs. Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied on in like manner and with like effect as under a writ of attachment. On the other hand, Section 13, Rule 39 provides: How execution for the delivery or restitution of property enforced. The officer must enforce an execution for the delivery or restitution of property by ousting therefrom the person against whom the judgment is rendered and placing the judgment creditor in possession of such property, and by levying as hereinafter provided upon so much of the property of the judgment debtor as will satisfy the amount of the judgment and costs included in the writ of execution. WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the Sheriff is directed to enforce the execution only of the money judgment in accordance with Section 15, Rule 39 of the Revised Rules of Court. SO ORDERED.
National Bank v. Olutanga, 54 Phil. 346 EN BANC G.R. No. L-30982 January 31, 1930 THE PHILIPPINE NATIONAL BANK, plaintiff-appellant, vs. OLUTANGA LUMBER COMPANY, defendant-appellee. Camus and Delgado for appellant. Jose Erquiaga for defendant-appellee. Araneta and Zaragoza for appellee Bank of the Philippine Islands. VILLA-REAL, J.: This appeal is taken by the Philippine National Bank from an order of the Court of First Instance of Manila, the dispositive part of which is as follows: The Philippine National Bank having appeared as an ordinary creditor in the involuntary insolvency of the Olutanga Lumber Company, civil case No. 33048 of this court, claiming the sum attached by the sheriff, it thereby renounced its preferred right acquired through garnishment issued in the present case; and for that reason, the motion of the Bank of the Philippine Islands is hereby granted, and the sheriff of the City of Manila is hereby ordered to return to it the sum deposited by virtue of the garnishment, after deducting therefrom his legal fees to which he has a perfect right notwithstanding the result arrived at. In support of its appeal, the appellant assigns the following alleged errors committed by the trial court in its judgment, to wit: 1. The lower court erred in holding, in its said order of March 31, 1928, that appellant the Philippine National Bank had waived its lien acquired by garnishment in the present case by joining as an unsecured creditor the petition for the involuntary insolvency of the Olutanga Lumber Company. 2. The lower court erred in holding, in its said order of March 31, 1928, that the garnishment issued in the present case referred only to P16,656.30, and in ordering the difference between said sum and the amount of P30,092.11 deposited with the sheriff of Manila to be returned to the Bank of the Philippine Islands after deducting the sheriff's fees therefrom. 3. The lower court erred in denying the motion of the appellant of November 14, 1928. The following facts are necessary and pertinent to resolve the questions raised in the present appeal: In civil case entitled the Bank of the Philippine Islands, plaintiff and appellee, vs. Olutanga Lumber Company, defendant and appellant, G. R. No. 27045, 1 said plaintiff and appellee was ordered by this court to pay to the aforesaid defendant and appellant a certain sum amounting to P31,242.11, Philippine currency. Upon the return of the case to the Court of First Instance of Zamboanga, the corresponding writ of execution was issued, which was complied with by the sheriff of said province by presenting it to the manager of the branch of the Bank of the Philippine Islands in the City of Zamboanga, on January 10, 1928, but without levying execution on any property belonging to the execution debtor. On the same date, the aforesaid sheriff addressed to the central office of said bank at Manila the following telegram: Execution Bank Philippine Islands versus Olutanga Lumber Company served today manager Zamboanga branch. Please authorize him pay amount due defendant Olutanga Lumber plus sheriff fees otherwise levy will be made on your Zamboaga office. LUIS PANAGUITON, Provincial Sheriff. On the same date, January 10, 1928, before receiving the foregoing telegram, the central office of the Bank of the Philippine Islands in Manila was notified PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
267 of 501
by the sheriff of the City of Manila that all the credits and debts contracted by it with the Olutanga Lumber Company, amounting to P16,656.30, plus the interest at the rate of 12 per cent per annum from April 19, 1922 until fully paid, were levied upon in the name of the Philippine National Rank by virtue of a writ of attachment issued in civil case No. 32936 of the Court of First Instance of Manila. On the following day, January 11, 1928, the Bank of the Philippine Islands, in reply to said notice, addressed a letter to the sheriff of the City of Manila, notifying the latter that, pursuant to his notice of attachment, it retained at the disposal of said sheriff the aforesaid sum of P16,656.30, plus interest at the rate of 12 per cent per annum from April 19, 1922 until such date as may be designated. On the same date, January 11, 1928, the sheriff of the City of Manila sent a letter to the Bank of the Philippine Islands at Manila, requiring the latter to deliver to him the sum of P32,109,45, theretofore attached, belonging to the Olutanga Lumber Company. After the delivery to the sheriff of the City of Manila of the amount of the judgment in favor of the Olutanga Lumber Company, rendered in civil case No. 1176 of the Court of First Instance of Zamboanga, G. R. No. 27045 of this court, the Bank of the Philippine Islands notified the provincial sheriff of Zamboanga by telegram, on January 12, 1928, that the amount of the judgment in favor of the Olutanga Lumber Company against said bank had been delivered to the sheriff of the City of Manila, and that any question on that subject should be taken up with him. On January 14, 1928, the provincial sheriff of Zamboanga sent a communication to the manager of the Bank of the Philippine Islands in said city, notifying him that all the money he had in his possession or control, belonging to the Bank of the Philippine Islands, was levied upon by virtue of an order of execution issued by the Court of First Instance of Zamboanga in civil case No. 1176, entitled Bank of the Philippine Islands vs. Olutanga Lumber Company, G. R. No. 27045 of this court, copy of which order of execution was served upon him on January 10, 1928. On January 14, 1928, the sheriff of the City of Manila sent a telegram to the sheriff of the Province of Zamboanga, telling him that the amount of the judgment against the Bank of the Philippine Islands and in favor of the Olutanga Lumber Company, which had been attached by virtue of two writs of attachment issued by the Philippine National Bank and the Standard Oil company of New York against the Olutanga Lumber Company, had been deposited with him by said Bank of the Philippine Islands. Notwithstanding the fact that the provincial sheriff of Zamboanga had been duly informed of the levy made by the sheriff of the City of Manila upon the funds of the Olutanga Lumber Company in possession of the herein appellee, the Bank of the Philippine Islands, and of the delivery of said funds to said judicial officer of the City of Manila, he attempted to collect from the branch of said Bank of the Philippine Islands at Zamboanga the amount of the judgment in favor of the Olutanga Lumber Company, threatening to levy, and in fact did levy, an attachment against said branch. In view of this act of the provincial sheriff of Zamboanga, the herein appellee, the Bank of the Philippine Islands, had to file a petition for prohibition with this court against the Judge of the Court of First Instance of Zamboanga, the provincial sheriff of said province and the Olutanga Lumber Company, docketed as G. R. No. 29043 of this court. Upon hearing said petition, this court entered the following resolution on February 9, 1928: Upon consideration of the petition filed in case G. R. No. 29043, Banco de las Islas Filipinas vs. J. Horilleno et al., and of the answer interposed by the respondents in connection with the arguments adduced by both parties in their memoranda and during the hearing of said case, and it appearing that the writ of execution complained of was issued and served upon the petitioner before the latter received notice by the garnishment, and two days before he was required by the sheriff of Manila to deliver the amount mentioned in the said garnishment proceedings, wherefore, the respondent judge did not exceed its jurisdiction in issuing the aforesaid writ of execution, it is ordered that the petition for a writ of prohibition be and is hereby PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
268 of 501
denied, with costs against the petitioner. Mr. Justice Street took no part. On February 10, 1928, the clerk of this court sent the following telegram to the provincial sheriff of Zamboanga: Supreme Court denied writ of prohibition requested by Bank Philippine Islands to stop execution judgment in favor Olutanga Lumber Company you may proceed with execution forthwith. Upon receipt of the foregoing telegram, the provincial sheriff of Zamboanga sent the following letter to the manager of the Bank of the Philippine Islands at Zamboanga: SIR: With reference to the levy made by the undersigned on your office on January 14, 1928, in the sum of thirty-two thousand pesos (P32,000), Philippine currency, to cover the amount claimed in the order of execution issued by the Court of First Instance of Zamboanga in civil case No. 1176, "The Bank of the Philippine Islands vs. Olutanga Lumber Company," and R. G. No. 27045, which levy has been suspended by order of the Honorable Supreme Court by virtue of the writ of prohibition filed by the Bank of the Philippine Islands against the undersigned and others, I have the honor to inform you that said writ of prohibition has been denied by the Supreme Court as per telegram received by the undersigned, a copy of which is herewith inclosed. In view thereof, and in pursuance of the order of execution above referred to, you are hereby ordered to deliver to the undersigned, immediately upon your receipt hereof, the sum of thirty-one thousand five hundred ninety-six pesos and eighty-three centavos (P31,596.83), Philippine currency, which is the amount recovered by the Olutanga Lumber company in the Supreme Court including interests, costs and sheriff's fees. Zamboanga, Zamboanga, February 11, 1928. (Sgd.) LUIS PANAGUITON Provincial Sheriff In view of this urgent and peremptory demand of the provincial sheriff of Zamboanga, the manager of the Bank of the Philippine Islands at Zamboanga had no other remedy than to deliver to the sheriff of Zamboanga the sum of P31,596.83. The only question necessary to be decided in this appeal is whether the funds placed by the Bank of the Philippine Islands in possession of the sheriff of the City of Manila, which had been attached in the name of the Philippine National Bank and against the Olutanga Lumber Company, had been released from said attachment when the aforesaid Bank of the Philippine Islands, by judicial order, paid the judgment rendered by this court against the said Bank of the Philippine Islands and in favor of the Olutanga Lumber Company. We have seen that after the central office of the Bank of the Philippine Islands in the City of Manila had deposited with the sheriff of the City of Manila the sum of P32,109.45, by virtue of a demand made upon it by the latter in compliance with an order of attachment issued by the Court of First Instance of Manila in civil case No. 32936, wherein the Philippine National Bank was and still is the plaintiff and the Olutanga Lumber Company was and still is the defendant, which sum of P32,109.45 was the amount of the judgment rendered in civil case No. 1176 of the Court of First Instance of Zamboanga, G. R. No. 27045 of this court, in favor of the Olutanga Lumber Company and against the Bank of the Philippine Islands, said central office of the Bank of the Philippine Islands notified the provincial sheriff of Zamboanga of said consignation; but the latter, notwithstanding the attachment of said amount by the sheriff of the City of Manila, tried to collect from the branch office in Zamboanga of the Bank of the Philippine Islands the amount of said judgment. Under the circumstances the Zamboanga branch had to resort to this court for a remedy to prevent execution of said judgment. This court denied the remedy prayed for, and upon receipt of notice of said denial the provincial sheriff of Zamboanga insisted in collecting from the Zamboanga branch of the Bank of the Philippine Islands the amount of said judgment, which said bank had to PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
269 of 501
pay. The general rule is that, where attached properties belonging to the principal debtor are taken out of the hands of a person by legal process, after he had been notified of the order of attachment, said person cannot be made to answer for the properties in a proceeding to carry out said attachment (28 Corpus Juris, paragraph 362, page 264). In the present case, the fact that the funds attached in the possession of the Bank of the Philippine Islands, belonging to the Olutanga Lumber Company, had been deposited with the sheriff of the City of Manila by order of said officer, does not change the juridical situation of said funds as attached in the possession of the Bank of the Philipine Islands, and, according to the above-quoted rule, the aforesaid Bank of the Philippine Islands, having been judicially compelled to pay the amount of the judgment represented by said funds to the Olutanga Lumber Company, after having employed all the legal means to avoid it, is released from all responsibility to the Philippine National Bank in whose favor the writ of attachment was issued. For the foregoing considerations, we are of the opinion, and so hold, that when a person has funds in his possession belonging to a debtor, and said funds are attached by a creditor of the latter, said person is relieved from all responsibility to said creditor if he is judicially compelled to deliver said funds to the aforesaid debtor. Wherefore, the dispositive part of the order appealed from is affirmed in so far as it grants the motion of the Bank of the Philippine Islands, and the sheriff of the City of Manila is hereby ordered to return to said bank the amount deposited by virtue of the writ of attachment, after deducting his legal fees, with costs against the appellant. So ordered.
Perla Compania de Seguros v. Ramolete, 203 S 487 FIRST DIVISION G.R. No. L-60887 November 13, 1991 PERLA COMPANIA DE SEGUROS, INC., petitioner, vs. HON. JOSE R. RAMOLETE, PRIMITIVA Y. PALMES, HONORATO BORBON, SR., OFFICE OF THE PROVINCIAL SHERIFF, PROVINCE OF CEBU, respondents. Hector L. Fernandez for petitioner. Domingo Quibranza and Vicente A. Quibranza for private respondents.
FELICIANO, J.:p The present Petition for Certiorari seeks to annul: (a) the Order dated 6 August 1979 1 which ordered the Provincial Sheriff to garnish the third-party liability insurance policy issued by petitioner Perla Compania de Seguros, Inc. ("Perla") in favor of Nelia Enriquez, judgment debtor in Civil Case No. R-15391; (b) the Order dated 24 October 1979 2 which denied the motion for reconsideration of the 6 August 1979 Order; and (c) the Order dated 8 April 1980 3 which ordered the issuance of an alias writ of garnishment against petitioner. In the afternoon of 1 June 1976, a Cimarron PUJ owned and registered in the name of Nelia Enriquez, and driven by Cosme Casas, was travelling from Cebu City to Danao City. While passing through Liloan, Cebu, the Cimarron PUJ collided with a private jeep owned by the late Calixto Palmes (husband of private respondent Primitiva Palmes) who was then driving the private jeep. The impact of the collision was such that the private jeep was flung away to a distance of about thirty (30) feet and then fell on its right side pinning down Calixto Palmes. He died as a result of cardio-respiratory arrest due to a crushed chest. 4 The accident also caused physical injuries on the part of Adeudatus Borbon who was then only two (2) years old. On 25 June 1976, private respondents Primitiva Palmes (widow of Calixto Palmes) and Honorato Borbon, Sr. (father of minor Adeudatus Borbon) filed a complaint 5 against Cosme Casas and Nelia Enriquez (assisted by her husband Leonardo Enriquez) before the then Court of First Instance of Cebu, Branch 3, claiming actual, moral, nominal and exemplary damages as a result of the accident. The claim of private respondent Honorato Borbon, Sr., being distinct and separate from that of co-plaintiff Primitiva Palmes, and the amount thereof falling properly within the jurisdiction of the inferior court, respondent Judge Jose R. Ramolete ordered the Borbon claim excluded from the complaint, without prejudice to its being filed with the proper inferior court. On 4 April 1977, the Court of First Instance rendered a Decision 6 in favor of private respondent Primitiva Palmes, ordering common carrier Nelia Enriquez to pay her P10,000.00 as moral damages, P12,000.00 as compensatory damages for the death of Calixto Palmes, P3,000.00 as exemplary damages, P5,000.00 as actual damages, and P1,000.00 as attorney's fees. The judgment of the trial court became final and executory and a writ of execution was thereafter issued. The writ of execution was, however, returned unsatisfied. Consequently, the judgment debtor Nelia Enriquez was summoned before the trial court for examination on 23 July 1979. She declared under oath that the Cimarron PUJ registered in her name was covered by a third-party liability insurance policy issued by petitioner Perla. Thus, on 31 July 1979, private respondent Palmes filed a motion for garnishment 7 praying that an order of garnishment be issued against the insurance policy issued by petitioner in favor of the judgment debtor. On 6 August 1979, respondent Judge issued an Order 8 directing the Provincial Sheriff or his deputy to garnish the third-party liability insurance policy. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
271 of 501
Petitioner then appeared before the trial court and moved for reconsideration of the 6 August 1979 Order and for quashal of the writ of garnishment, 9 alleging that the writ was void on the ground that it (Perla) was not a party to the case and that jurisdiction over its person had never been acquired by the trial court by service of summons or by any process. The trial court denied petitioner's motion.10 An Order for issuance of an alias writ of garnishment was subsequently issued on 8 April 1980. 11 More than two (2) years later, the present Petition for Certiorari and Prohibition was filed with this Court on 25 June 1982 alleging grave abuse of discretion on the part of respondent Judge Ramolete in ordering garnishment of the third-party liability insurance contract issued by petitioner Perla in favor of the judgment debtor, Nelia Enriquez. The Petition should have been dismissed forthwith for having been filed way out of time but, for reasons which do not appear on the record, was nonetheless entertained. In this Petition, petitioner Perla reiterates its contention that its insurance contract cannot be subjected to garnishment or execution to satisfy the judgment in Civil Case No. R-15391 because petitioner was not a party to the case and the trial court did not acquire jurisdiction over petitioner's person. Perla further argues that the writ of garnishment had been issued solely on the basis of the testimony of the judgment debtor during the examination on 23 July 1979 to the effect that the Cimarron PUJ was covered by a third-party liability insurance issued by Perla, without granting it the opportunity to set up any defenses which it may have under the insurance contract; and that the proceedings taken against petitioner are contrary to the procedure laid down in Economic Insurance Company, Inc. v. Torres, et al., 12 which held that under Rule 39, Section 45, the Court "may only authorize" the judgment creditor to institute an action against a third person who holds property belonging to the judgment debtor. We find no grave abuse of discretion or act in excess of or without jurisdiction on the part of respondent Judge Ramolete in ordering the garnishment of the judgment debtor's third-party liability insurance. Garnishment has been defined as a species of attachment for reaching any property or credits pertaining or payable to a judgment debtor. 13 In legal contemplation, it is a forced novation by the substitution of creditors: 14 the judgment debtor, who is the original creditor of the garnishee is, through service of the writ of garnishment, substituted by the judgment creditor who thereby becomes creditor of the garnishee. Garnishment has also been described as a warning to a person having in his possession property or credits of the judgment debtor, not to pay the money or deliver the property to the latter, but rather to appear and answer the plaintiff's suit. 15 In order that the trial court may validly acquire jurisdiction to bind the person of the garnishee, it is not necessary that summons be served upon him. The garnishee need not be impleaded as a party to the case. All that is necessary for the trial court lawfully to bind the person of the garnishee or any person who has in his possession credits belonging to the judgment debtor is service upon him of the writ of garnishment. The Rules of Court themselves do not require that the garnishee be served with summons or impleaded in the case in order to make him liable. Rule 39, Section 15 provides: Sec. 15. Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the property, real or personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution . . . Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied on in like manner and with like effect as under a writ of attachment.(Emphasis supplied). Rule 57, Section 7(e) in turn reads: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
272 of 501
Sec. 7. Attachment of real and personal property; recording thereof. Properties shall be attached by the officer executing the order in the following manner: xxx xxx xxx (e) Debts and credits, and other personal property not capable of manual delivery, by leaving with the person owing such debts, or having his possession or under his control such credits or other personal property, or with his agent, a copy of the order, and notice that the debts owing by him to the party against whom attachment is issued, and the credits and other personal property in his possession, or under his control, belonging to said party, are attached in pursuance of such order; xxx xxx xxx (Emphasis supplied) Through service of the writ of garnishment, the garnishee becomes a "virtual party" to, or a "forced intervenor" in, the case and the trial court thereby acquires jurisdiction to bind him to compliance with all orders and processes of the trial court with a view to the complete satisfaction of the judgment of the court. In Bautista v. Barredo, 16 the Court, through Mr. Justice Bautista Angelo, held: While it is true that defendant Jose M. Barredo was not a party in Civil Case No. 1636 when it was instituted by appellant against the Philippine Ready Mix Concrete Company, Inc., however, jurisdiction was acquired over him by the court and he became a virtual party to the case when, after final judgment was rendered in said case against the company, the sheriff served upon him a writ of garnishment in behalf of appellant.Thus, as held by this Court in the case of Tayabas Land Company vs. Sharruf, 41 Phil. 382, the proceeding by garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. By means of the citation, the stranger becomes a forced intervenor; and the court, having acquired jurisdiction over him by means of the citation, requires him to pay his debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. (Emphasis supplied). In Rizal Commercial Banking Corporation v. De Castro, 17 the Court stressed that the asset or credit garnished is thereupon subjected to a specific lien: The garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property a lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia legis, under the sole control of such court. 18 (Emphasis supplied) In the present case, there can be no doubt, therefore, that the trial court actually acquired jurisdiction over petitioner Perla when it was served with the writ of garnishment of the third-party liability insurance policy it had issued in favor of judgment debtor Nelia Enriquez. Perla cannot successfully evade liability thereon by such a contention. Every interest which the judgment debtor may have in property may be subjected to execution.19 In the instant case, the judgment debtor Nelia Enriquez clearly had an interest in the proceeds of the third-party liability insurance contract. In a third-party liability insurance contract, the insurer assumes the obligation of paying the injured third party to whom the insured is liable. 20 The insurer becomes liable as soon as the liability of the insured to the injured third person attaches. Prior payment by the insured to the injured third person is not necessary in order that the obligation of the insurer may arise. From the moment that the insured became liable to the third person, the insured acquired an interest in the insurance contract, which interest may be garnished like any other credit. 21 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
273 of 501
Petitioner also contends that in order that it may be held liable under the third-party liability insurance, a separate action should have been commenced by private respondents to establish petitioner's liability. Petitioner invokes Economic Insurance Company, Inc. vs. Torres, 22 which stated: It is clear from Section 45, Rule 39 that if a persons alleged to have property of the judgment debtor or to be indebted to him claims an interest in the property adverse to him or denies the debt, the court may only authorize the judgment creditor to institute an action against such person for the recovery of such interest or debt. Said section does not authorize the court to make a finding that the third person has in his possession property belonging to the judgment debtor or is indebted to him and to order said third person to pay the amount to the judgment creditor. It has been held that the only power of the court in proceedings supplemental to execution is to niake an order authorizing the creditor to sue in the proper court to recover an indebtedness due to the judgment debtor. The court has no jurisdiction to try summarily the question whether the third party served with notice of execution and levy is indebted to defendant when such indebtedness is denied. To make an order in relation to property which the garnishee claimed to own in his own right, requiring its application in satisfaction of judgment of another, would be to deprive the garnishee of property upon summary proceeding and without due process of law. (Emphasis supplied) But reliance by petitioner on the case of Economic Insurance Company, Inc. v. Torres (supra) is misplaced. The Court there held that a separate action needs to be commenced when the garnishee "claims an interest in the property adverse to him (judgment debtor) or denies the debt." In the instant case, petitioner Perla did not deny before the trial court that it had indeed issued a third-party liability insurance policy in favor of the judgment debtor. Petitioner moreover refrained from setting up any substantive defense which it might have against the insured-judgment debtor. The only ground asserted by petitioner in its "Motion for Reconsideration of the Order dated August 6, 1979 and to Quash Notice of Garnishment" was lack of jurisdiction of the trial court for failure to implead it in the case by serving it with summons. Accordingly, Rule 39, Section 45 of the Rules of Court is not applicable in the instant case, and we see no need to require a separate action against Perla: a writ of garnishment suffices to hold petitioner answerable to the judgment creditor. If Perla had any substantive defenses against the judgment debtor, it is properly deemed to have waived them by laches. WHEREFORE, the Petition for Certiorari and Prohibition is hereby DISMISSED for having been filed out of time and for lack of merit. The assailed Orders of the trial court are hereby AFFIRMED. Costs against petitioner. This Decision is immediately executory. SO ORDERED.
Tec Bi and co. v. Chartered Bank of India, 41 Phil.596 EN BANC G.R. No. L-9802 February 5, 1916 TEC BI & CO., plaintiff-appelle, vs. THE CHARTERED BANK OF INDIA, AUSTRALIA & CHINA, defendant- appellant. Gibbs, McDonough and Blanco for appellant. Herrero and Masigan for appellee. CARSON, J.: The following statement of the facts upon which this case was submitted in the court below is taken literally from the brief of counsel for the appellant: This is an action to recover from the defendant bank the sum of P11,572.96, the amount of a judgment recovered by the plaintiff against "La Urania Cigar Factory (Ltd.)," and for which the plaintiff seeks to hold the defendant liable by virtue of an attempted levy of attachment upon certain leaf tobacco in the possession of the defendant bank under a pledge executed by the said "La Urania Cigar Factory (Ltd.)." The Tobacco being pledged for an amount largely in excess of its value, the bank refused to deliver it to the sheriff, and the pledge having become due, sold the tobacco and applied the proceeds on account of the indebtedness, previous to the time when the plaintiff finally secured judgment against "La Urania Cigar Factory (Ltd.)." and issued execution thereon. The case was submitted upon a stipulation of facts as follows: It is hereby agreed that all the facts contained in paragraphs 1, 2, 3, and 4 of the complaint are true, with the exception of that part of the first five lines of paragraph 2, which alleges that the plaintiff had notice that some of the bales of tobacco in leaf which were sold to the "La Urania Cigar Factory (Ltd.)," were attempted to be sold for the manifest purpose of defrauding the plaintiff. Referring to the answer of defendant corporation it stipulated that the allegations of paragraphs 2, 3, 4, 5, and 6 are true. The defendant corporation offers in evidence the original contract of pledge marked Exhibit 1, as part of this stipulation. With reference to the admission of the contents of paragraph 3 of the answer, it is understood that the word "neutral" is eliminated. From the allegations of the complain and answer admitted to be true in conformity with the foregoing stipulation, it appears: (1) That on the 7th of November 1912, the plaintiff sold to the "La Urania Cigar Factory (Ltd.)," a quantity of leaf tobacco. (Paragraph 1 of complaint.) (2) That on the 16th January, 1913, the "La Urania Cigar Factory (Ltd.)," pledged to the defendant corporation as security for the payment of an indebtedness of P25,000 the bales of tobacco described in Exhibit A of the answer, the original of which has been offered in evidence in connection with the stipulation of facts as Exhibit 1. (3) That the bales of tobacco thus pledged and described in Exhibit 1 were stored in the bodega of a third person, that is to say, in the bodega of Messrs. Sprungli & Co., situated at No. 42 (now No. 214) of Calle David, Manila. (Paragraph 3 of answer.) (4) That on or about the 1st day of February, 1913, the defendant corporation demanded of the obtained from Messrs. Sprungli & Co. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
275 of 501
the keys to the said bodega, and discovered that of the 436 bales of tobacco described in Exhibit 1 there remained only those set forth in paragraph 4 of the answer. (Paragraph 4 of answer.) (5) That the defendant bank did not know and had been unable to ascertain whether "La Urania Cigar Factory (Ltd.)," misrepresented the quantity of the tobacco in the said warehouse at the time of the execution of said document of pledge, or whether the difference between the amount described in the document of pledge and that found on hand on the 1st of February, 1913, and in the meantime been disposed of by "La Urania Cigar Factory (Ltd.)," in collusion with Messrs. Sprungli & Co., but that if such disposition was made it was without the knowledge or consent of the defendant bank. (Paragraph 5 of answer.) (6) That from said 1st day of February, 1913, the defendant corporation had been in the absolute and exclusive possession of the tobacco described in the fourth paragraph of the answer and in Exhibit 1 of the stipulation of facts, until the 15th of May, 1913, when same was sold under and by virtue of the document of pledge Exhibit 1 by the defendant bank for the sum of P12,722.36 which was applied on account of said loan, the entire amount of which was then past due and unpaid, leaving a large balance thereof still due and unpaid. (Paragraph 6 of answer.) (7) That on the 22nd day of April, 1913, the plaintiff Tec Bi & Co., filed a complaint in the Court of First Instance of Manila against "La Urania Cigar Factory (Ltd.)," claiming the payment of the sum of P11,572.96 as the balance of the unpaid purchase price of the tobacco referred to in paragraph 2. (Paragraph 1 of complaint.) (8) That on the 5th day of May, 1913, Tec Bi & Co. asked for and obtained from the Court of First Instance an attachment against the said bales of tobacco, but inasmuch as the bodega was locked and the sheriff was informed that the keys were in the possession of the bank, he demanded the delivery thereof from the latter, which demand was refused by the bank, alleging that it held possession of the tobacco under a pledge. (Paragraph 2 of complaint.) (9) That in view of the statement of the bank, the sheriff notified it that the bales of tobacco identified in Exhibit A of the complaint were attached subject to the results of the complaint were attached subject to the results of the complaint filed by Tec Bi & Co. against "La Urania Cigar Factory (Ltd.)," (Paragraph 2 of complaint.) (10) That on the 8th day of May, 1913, the bank answered the notification of the sheriff, confirming the fact that it had in its possession the bales of tobacco specified in the notification, as security for the payment of a loan and that it intended to sell the same; that the sheriff communicated the answer of the bank to the attorneys to Tec Bi & Co., who replied insisting upon the levy of the attachment. (Paragraph 3 of complaint.) (11) That on the 19th day of May, 1913, the Court of First Instance rendered judgment in said case against "La Urania Cigar Factory (Ltd.)," in favor of Tec Bi & Co., for the sum of P11,572.96, with legal interest from April 22, 1913, and costs. (Paragraph 4 of complaint.) (12) That on the 22d day of May, 1913, the sheriff attempted to execute the judgment upon the bales of tobacco attached and in the possession of the defendant corporation, but was unable to do so due to the statement of the agent of said corporation, that the tobacco had been sold and that the proceeds of the sale had been applied upon the payment of the amount due to from "La Urania Cigar Factory (Ltd.)," (Paragraph 4 of complaint.) The case having been submitted on the foregoing stipulation of facts, the Court of First Instance found that the plaintiff's claim was a preferred credit under the provisions of paragraph 1 of article 1922 of the Civil Code; that the pledge executed by "La Urania Cigar Factory (Ltd.)," in favor of the defendant corporation (Exhibit 1) was not binding upon the plaintiff for the reason that it was not set forth in a PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
276 of 501
public instrument as required by article 1865 of the Civil Code in order to be effective against, third person, and rendered judgment in favor of the plaintiff and against the defendant for the amount of the former's judgment against "La Urania Cigar Factory (Ltd.)," with interest and costs. (Pages 17 to 23, inclusive, bill of exceptions.) From this judgment the defendant corporation appeals, assigning the following errors: ASSIGNMENT OF ERRORS I. The court erred in holding that the plaintiff's claim as vendor of the tobacco was entitled to preference over that of the defendant bank secured by a pledge on the same tobacco. II. The court erred in applying article 1865 of the Civil Code to the defendant's pledge, and in holding that such pledge was ineffective as to the plaintiff. III. The court erred in holding that the plaintiff was a third person as contemplated by that term in article 1865 of the Civil Code. IV. Assuming that article 1865 is applicable to the transaction in question, the court erred in holding that the plaintiff did not waive any defect in the private instrument of pledge by expressly admitting its genuineness and the correctness of its date by stipulation, and by failure to object to its introduction in evidence. V. The court erred in rendering judgment in favor of the plaintiff and against the defendant, and in denying the latter's motion for a new trial. It will readily be seen that our disposition of this appeal must turn upon the force and effect which should be given the instrument referred to in the statement of facts as the "original contract of pledge marked Exhibit 1." Plaintiff's contention is that under the provisions of clause 1 of article 1922, his right as a preferred creditor for the amount of the purchase price of the tobacco was not prejudice and could not be prejudiced by the pledge of the tobacco to the defendant, since the date of the contract of pledge is not evidenced by a public document; and, further, that he had a perfect right to attach the tobacco in the course of judicial proceedings for the recovery of his claim against the pledgor, for the purchase price of the tobacco pledged to the defendant bank. The defendant bank, on the other hand, contends that under the provisions of clause 2 of article 1922 of the Civil Code read together with clause 1 of section 1926, the right of preference in favor of the bank, to which the tobacco had been pledged by the common debtor, excluded the preference in favor of the plaintiff; and that plaintiff could not rely on the provisions of article 1865 of the Code, because he was not a "third person" in the sense in which these words are used in that article. Clauses 1 and 2 of article 1922 of the Civil Code are as follows: 1922. With regard to the specified personal property of the debtor, the following are preferred: 1. Credits for the construction, repair, preservation, or for the amount of the sale of personal property which may be in the possession of the debtor to the extent of the value of the same. 2. Those secured by a pledge which may be in the possession of the creditor, with regard to the thing pledged and to the extent of its value. Clause 1 of article 1926 of the Civil Code is as follows: 1926. Credits which enjoy preference with regard to certain personal property, exclude all the other to the extent of the value of the personal property to which the preference refers. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
277 of 501
When two or more, creditors claim preference with regard to certain personal property, the following rules shall be observed as to priority of payment: 1. Credits secured by a pledge exclude all other to the extent of the value of the thing given in pledge. Article 1865 of the Civil Code is as follows: A pledge shall not be effective against a third person, when evidence of its date does not appear in a public instrument. Under these provisions of the Code there can be no doubt that had the date of the contract of pledge been evidenced by a public document, the preferential right of the pledgee would have been superior to and excluded all and any preferential rights of the vendor. We so held in Macke and Macke vs. Rubert (11 Phil., 480). The pledge contract (Exhibit 1) is before us, however, and it is admitted that the date is not evidenced by a public instrument. It cannot therefore be permitted to prejudice the rights of the vendor of the tobacco if he is a "third person: in the sense in which that term is used in the above-cited article 1865 of the code. It cannot be doubted that with relation to the pledgor and the pledgee the original vendor of the goods was a third person. The words are not susceptible of any possible explanation which would exclude him. He had no privity with either of the parties to the pledge contract. He had no knowledge of the execution of that contract. He did not participate in it in any way whatever. His rights so far as they affected the pledged property, were adverse to both pledgor and pledgee. In a word he was as to them a third person. It necessarily follows that since the execution of the pledge in favor of the defendant bank without the date of execution being evidenced by a public instrument could have no effect as again the plaintiff, he was strictly within his rights in asserting his claims as a preferred creditor and in levying an attachment against the tobacco; and the defendant bank could not lawfully assert any right as a pledgee or preferred creditor which adversely affected the rights of the plaintiff in the premises. To these conclusions a number of objections have been raised, none of which, however, will bear close inspection. It is said that even though the date of the defendant bank's pledge is not evidenced in a public document, still the delivery of the tobacco into the possession of the bank defeated the right of the plaintiff to a preference. This contention is based on the provision of article 1922 which limits the preference for the purchase price of goods sold to the time during which they continue in the possession of the purchaser. To this contention there are two sufficient answers. First. While the contract of pledge and the delivery of the tobacco undoubtedly created a valid pledge as between the pledgor and the pledgee, so that the pledgor himself could not disturb the possession of the pledgee; still, with relation to third person, the possession of the bank must be deemed to be that of the purchaser of the tobacco, since under the provisions of article 1865 of the Code, the execution of the pledge could not affect the right of third person. As to third persons the pledge and the pledged property must be treated as if the pledge never had been executed. Second. Even if it were true that the plaintiff had lost his statutory right of preference as a result of the execution of the pledge and the delivery of possession to the bank, still he had a perfect right to levy an attachment on the tobacco pending his action to recover the amount of the pledgor's indebtedness, unless the execution of the pledge had the effect of depriving him of that right. But it is very clear that under the express provisions of article 1865 of the code no such effect could be given the pledge. Much is made in the brief of the appellant of the fact that one of the allegations of the answer set forth that at the date of the issuance of the attachment the defendant bank was in the absolute and exclusive possession PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
278 of 501
of the tobacco in question; and that the truth of this allegation was admitted in the agreed statement of facts. The defendant's answer contains a series of allegations setting forth the precise nature and character of the possession of the tobacco by the bank, and of all the circumstances under the by virtue of which the bank came into possession; and there is attached to the answer, as an exhibit a copy of the pledge contract itself. We have shown that accepting these allegations as true, the possession of the bank was not absolute and exclusive in the sense that it could in any wise affect the right of another credit of the common debtor, a "third person" with relation to the pledge contract, to levy an attachment upon the tobacco. We must conclude therefore that the stipulation as to the truth of the allegation of the answer that the possession of the tobacco by the bank was "absolute and exclusive" was intended only to mean that it was "absolute and exclusive" so far as the pledgor himself was concerned; or else that the stipulation as to the truth of the allegations of the answer did not include this averment as to the "absolute and exclusive" possession of the tobacco by the bank it being merely a conclusion of law, based upon the other allegations of facts alleged by the pleader. A general admission of the truth of the allegations set forth in a pleading is not an admission of the truth of an impossible conclusion of fact drawn from other facts set out in the pleading, nor of a wrong conclusion of law based on the allegations of fact well pleaded, nor of the truth of a general averment of facts contradicted by more specific averments. Thus, if a pleader alleges that two pesos were borrowed on one day and two more borrowed on another making five Pin all, a stipulation of the truth of the allegations in the pleading does not amount to an admission by the opposing party that twice two make five. Again if a pleader alleges that one hundred pesos were loaned without interest for one year and had not been paid, and that the borrower is indebted to the lender in the sum of one hundred and ten pesos, that being the amount of the capital together with interest for the year for which the money was loaned, a stipulation as to the truth of the allegation set forth in the pleadings is not an admission of the truth of the conclusion of law as to the interest due by the borrower. These elementary principles have been quite fully developed in a great variety of cases arising on demurrers, and sufficiently dispose of the attempt of counsel to fix the attention of the court upon this single averment of the answer, apart from the context and to the exclusion of the specific allegations of fact, the truth of which, as stipulated by the parties, cannot be questioned. (Cf. 144 U.S., 75 1 ; 97 Ala., 491 2 ; 31 Cyc., 333-337; 6 Encyc. Pl. & Pr., 334-338.) One other contention of counsel for the appellant remains to be considered. It is that on which his fourth assignment of error is based. Counsel insist that "assuming that article 1865 is applicable to the transaction in question, the court erred in holding that the plaintiff did not waive any defect in the private instrument of pledge by expressly admitting its genuineness and the correctness of its date by stipulation, and by failure to object to its introduction in evidence." This contention rests on a misconception of the real purpose and object of the provisions of article 1865 of the code. This article is not a mere rule of adjective law, prescribing the mode whereby proof may be made of the date of a contract of pledge. It is a rule of substantive law, prescribing a condition without which the execution of a pledge contract cannot affect third person adversely. The plaintiff in this action does not question the truth of the bank's allegations that the pledge contract was executed on the day on which it purports on its face to have been signed and delivered. There is no suggestion of bad faith or sharp practice on the part of either the pledgor or pledgee in the execution of the pledge. Under the circumstances plaintiff had no reason to object to the introduction of evidence which tended direct to establish his claim that although the pledge had been executed as alleged by the defendant bank, it could not affect his rights on the premises. On the contrary he must have welcomed the introduction of this evidence, which conclusively established the very point upon which his whole case necessarily turns. Plaintiff stands strictly on the rule of substantive law laid down in this article of the code which declared that this rights, as a "third person," cannot be adversely affected by a pledge the date of which is not evidenced in a public document. His right so to do cannot be successfully challenged; and indeed we PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
279 of 501
are inclined to think that the equities of the case, as far as they appear from the record, are with the vendor of a large quantity of tobacco, in his effort to recover the unpaid purchase price, rather than the creditor, who succeeded in having the debtor who had failed to pay the purchase price of this tobacco, bought on credit, turn it over to him by way of a pledge to secure the payment of a preexisting debt. What has been said would seem to dispose of all the contentions of the appellant; but at the risk of extending this opinion to an undue length, we here insert the comment of a learned Spanish commentator (Manresa) on the provisions of article 1865 of the code, because he seems to have anticipated every contention of appellant in this case, and the citation demonstrates quite conclusively that the plaintiff is entitled to rely on his rights in the premises as a "third person," who cannot be adversely affected by the execution of a pledge in the manner and form in which the pledge to the defendant bank was made. Article 1865. A pledge will not be valid against a third party if the certainty of the date is not expressed in a public instrument. This article, the precept of which did not exist in our old law, answers the necessity for not disturbing the relationship or the status of the ownership of things with hidden or simulated contract of pledge, in the same way and for the identical reasons that were taken into account by the mortgage law in order to suppress the implied and legal mortgages which produced so much instability in real property. Considering the effects of a contract of pledge, it is easily understood that, without this warranty demanded by law, the case may happen wherein a debtor in bad faith from the moment that he sees his movable property in danger of execution may attempt to withdraw the same from the action of justice and the reach of his creditors by simulating, through criminal confabulations, anterior and fraudulent alterations in his possession by means of feigned contract of this nature; and, with the object of avoiding or preventing such abuses, almost all the foreign writers advise that for the effectiveness of the pledge, it be demanded as a precise condition that in every case the contract be executed in a public writing, for, otherwise, the determination of its date will be rendered difficult and its proof more so, even in cases in which it is executed before witnesses, due to the difficulty to be encountered in seeking those before whom it was executed. Our code has not gone so far, for it does not demand in express terms that in all cases the pledge be constituted or formalized in a public writing, nor even in private document, but only that the certainty of the date be expressed in the first of the said class of instruments in order that it may be valid against a third party; and, in default of any express provision of law, in the cases where no agreement requiring the execution in a public writing exists, it should be subjected to the general rule, especially to that established in the last paragraph of article 1280, according to which all contracts not included in the foregoing cases of the said article should be made in writing even though it be private, whenever the amount of the prestation of one or of the two contracting parties exceeds 1,500 pesetas. The pledge, therefore, can be constituted in whatever form, as all other contracts, and the one formalized in that way will be valid and will produce its natural and legal consequences in the juridical order with respect to the contracting parties and to their assigns; but it will not have effect with respect to a third party if the certainty of the date is not evidenced in a public writing, by which means the legislator has tried to render impossible the existence of the fraudulent confabulations which we have hereinbefore indicated as otherwise possible. That is to say, what the law wishes in the precept that we are examining is to impose the existence, not only of an efficacious and authentic means of proof of the constitution of a pledge, but also of a security of its certainty and the reality of the pledge in order to avoid frauds and damages to the creditors, arising from the bad faith of the debtor; something like the inscription of the mortgage in the Registry PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
280 of 501
of Property, as has been said by an author, although with less warranties than this one. Some authors criticise the limitations in the wording of the article insofar as it does not demand an identical expression respecting the other essential circumstances of the contract, they upholding the necessity or at lest the convenience of expressing in the public instrument principally the debt for the security of which the pledge is constituted, the date of debt, the designation of the thing pledged, the period during which the accessory obligation is contracted form, with all the other stipulations which constitute the essence of the contract. But his should not be imposed by the law but by the private interest which is the only one affected, and for the same reason, a like determination should be demanded in all contracts. The only thing in this case that could interest or concern the legislator would be to prevent or to make impossible any simulation or fraud, supposing the existence of fraudulent pledged to be to the prejudice of third parties and to that end, it is sufficient that the date of its constitution be evidenced with all certainty in a public instrument. Any thing else would amount to an attempt against the principle of liberty with which contract of the modern legislation are inspired, placing obstacles to it by demanding the execution in every case of a public writing, a thing which though it constitutes a worthy and just aspiration, yet, ca not take precedence over the will and the freedom of the contracting parties. Hence, any one who may wish to constitute a pledge in a private document or verbally, if the prestations of the parties do not exceed 1,500 pesetas, can validly make it; but the contract celebrated will not prejudice a third party while the requisite of the execution of a public instrument referred to in the article is not complied with. There exists another reason which justifies the precept we are discussing. In fact, from the contract of pledge arises the preference established in No. 2 of article 1922, respecting the credits guaranteed by the thing pledged which is in the possession of the creditor, up to the amount of its value, which preference may be opposed against third parties; and, in order that the latter may not be prejudiced, it is necessary that the date of the contract be expressed in a true, indubitable and authentic manner and that it be certain to the end that even the bare possibility of fraud and of collusion between the creditor keeping the pledge and the debtor owner thereof may be excluded. What has been said necessitates the entry of judgment affirming the judgment entered in the court below, with the costs of this instance against the appellant. Let judgment be entered accordingly. So ordered.
Consolidated Bank and Trust Corporation v. IAC, 150 S 591 SECOND DIVISION G.R. No. 73976 May 29, 1987 THE CONSOLIDATED BANK and TRUST CORPORATION (SOLIDBANK), petitioner, vs. HON. INTERMEDIATE APPELLATE COURT, GOLDEN STAR INDUSTRIAL CORPORATION, NICOS INDUSTRIAL CORPORATION and THE PROVINCIAL SHERIFF OF BULACAN, respondents. C.M. Delos Reyes and Associates for petitioner. Magtanggol C. Gunigundo and Fajardo Law office for respondents.
GUTIERREZ, JR., J.: The basic issue for resolution in this petition for review of the December 13, 1985 decision of the Intermediate Appellate Court, now the Court of Appeals, as well as the resolution of March 13, 1986 denying the motion for reconsideration, is whether or not an attaching creditor acquires the right of redemption of a debtor over the attached properties of the latter which are subsequently extrajudicially foreclosed by third parties. Briefly, the facts are as follows: Originally, petitioner Consolidated Bank and Trust Corporation (SOLIDBANK) loaned private respondent NICOS Industrial Corporation (NICOS) sums of money in the total amount of FOUR MILLION SEVENTY SIX THOUSAND FIVE HUNDRED EIGHTEEN AND 64/100 PESOS (P4,076,518.64). Subsequently, NICOS failed to pay back the loan prompting SOLIDBANK to file a collection case before the Court of First Instance of Manila, Branch XXIX. The case was docketed as Civil Case No. 82-11611. On August 30, 1982, the court in the aforecited case issued an order of attachment " ... upon the rights, interests and participation of which defendants NICOS Industrial Corporation ... may have in Transfer Certificate of Title No. T-210581 (T-32.505 M) and Transfer Certificate of Title No. T-10580 (T-32.504 M) (Annexes "B", "B-1", "B-2" and "B-3" of petition). On September 1, 1982, pursuant to the writ of attachment issued by the Court and upon petitioner's posting of sufficient bond, the Sheriff of Manila levied and attached the two real properties described by the foregoing order of attachment, including the buildings and other improvements thereon. Afterwards, the Sheriff sent separate Notices of Levy Upon Realty to the Registrar of Deeds of Malolos, Bulacan, dated September 1, 1982 requesting him "to make the proper annotation in the books of your office" by virtue of the order of attachment dated August 30,1982 issued by the Manila Court in Civil Case No. 82-11611. Accordingly, on September 7, 1982, the Registrar of Deeds of Malolos, Bulacan, pursuant to the request of the Manila Sheriff, inscribed and annotated the Notices of Levy Upon Real Property at the back of Transfer Certificates of Title Nos. T-210581 (T-32.505 M) and T-210580 (T-32.504 M). Pursuant to the foregoing ng inscription and annotations, guards were deputized by the Manila Sheriff to secure the premises of the two attached realties. A year later, however, on July 11, 1983, the attached properties which had been mortgaged by NICOS to the United Coconut Planters Bank (UCPB) on March 11, 1982, were extrajudicially foreclosed by the latter. As the highest bidder therein, a certificate of sale was issued to it by the Sheriff of Bulacan over the subject realties including the buildings and improvements thereon. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
282 of 501
Surprisingly, two transactions occurred soon thereafter, both on August 29, 1983. First, UCPB sold all of its rights, interests, and participation over the properties in question to a certain Manuel Go; Second, Manuel Go sold all the rights he acquired from UCPB over the same lots on that very same day to private respondent Golden Star Industrial Corporation (GOLDEN STAR). Barely a month later, on October 5, 1983, respondent NICOS, though fully aware that it still had the right to redeem the auctioned properties within the one year period of redemption from July 11, 1983, suddenly executed a document entitled "Waiver of Right of Redemption" in favor of respondent GOLDEN STAR. On September 15, 1983, GOLDEN STAR filed a petition for the issuance of a writ of possession over the subject realties before the Regional Trial Court, Branch VI of Malolos, Bulacan. On November 4, 1983, the Malolos Court granted GOLDEN STAR's petition for a writ of possession and issued the writ. In accordance with these orders, armed men of GOLDEN STAR forcibly took over the possession of the properties in dispute from the guards deputized by the Sheriff of Manila to secure the premises. Thus on November 21, 1983, petitioner SOLIDBANK, on the strength of its prior attachment over the lands in question filed with the Malolos court an omnibus motion to annul the writ of possession issued to GOLDEN STAR and to punish for contempt of court the persons who implemented the writ of possession with the use of force and intimidation. The respondents NICOS and GOLDEN STAR, filed oppositions to the foregoing omnibus motion, the former on the basis of the waiver of its right of redemption to GOLDEN STAR, and the latter on its alleged ignorance that the lands in question were under custodia legis, having been attached by the Sheriff of Manila. On June 9, 1984, the Malolos Court issued an order denying the omnibus motion, the decretal portion of which is as follows: WHEREFORE, the Omnibus Motion of movant Consolidated Bank and Trust Corporation to annul the writ of possession issued by this Court in favor of Golden Star Industrial Corporation and to cite for contempt those who fraudulently secured and unlawfully implemented the writ of possession is hereby DENIED for lack of merit. (p. 8 of the Brief for the Complainant-Oppositor-Appellant in AC-G.R. CV No. 04398 [p.118, Rollo]) The petitioner SOLIDBANK forthwith interposed an appeal before the Intermediate Appellate Court arguing inter alia that the properties were under custodia legis, hence the extrajudicial foreclosure and the writ of possession were null and void, and that the right of NICOS to redeem the auctioned properties had been acquired by SOLIDBANK. On December 13, 1985, the Intermediate Appellate Court rendered its assailed decision "finding no merit in this appeal and affirming in toto the appealed order of June 9, 1984, ruling that "the properties in issue ... were not in custodia legis at the time of the extrajudicial foreclosure." The petitioner moved for reconsideration, arguing that its writ of attachment over the properties in question was duly registered in the Register of Deeds of Malolos, Bulacan, and that the right to redeem said properties should be retained or given back to SOLIDBANK as attaching creditor. On March 13, 1986, the Intermediate Appellate Court promulgated its resolution denying the motion for reconsideration for lack of merit. Hence this petition for review, on the grounds that respondent appellate court decided the case contrary to law and applicable decisions of the Supreme Court, and has departed from the accepted and usual course of judicial proceedings as to call for an exercise of the power of supervision of this Court. The fundamental question herein, which is determinative of the other issues, is whether or not the subject properties were under custodia legis by virtue of PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
283 of 501
the prior annotation of a writ of attachment in petitioner's favor at the time the properties were extrajudicially foreclosed. We rule in the affirmative on the following grounds: First of all, the records show (specifically Annexes "B," "B-1" to "B-3" of the petition) that on September 1, 1982, the Sheriff of Branch XXIX of the Court of First Instance of Manila, sent separate Notices of Levy Upon Realty to the Registrar of Deeds of Malolos Bulacan, requesting him "to make the proper annotation in the books of your office," "by virtue of an order of attachment issued in Civil Case No. 82-11611 dated August 30, 1982, ... upon the rights, interests, and participation of which defendant NICOS Industrial Corporation in this case may have in ... ."Transfer Certificate of Title No. T-210581 (T-32.505 M) and Transfer Certificate of Title No. T-210580 (T-32,505 M). Secondly, and more significant, the records clearly show (page 4, Annex "D" of petition) that the Registrar of Deeds of Malolos, Bulacan, on September 7, 1982, inscribed and annotated the foregoing Notices of Levy at the back of Transfer Certificate of Title Nos. 210580 and 210581, to wit: TRANSFER CERTIFICATE OF TITLE No. T-210580 (T-32.504 M) Entry No. 79524 (M): Kind; NOTICE OF LEVY UPON REALTY, Executed in favor of the CONSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK);-Plaintiff; Conditions: Notice is hereby given that by virtue of an Order of Attachment issued by the C.F.I. of Manila, Branch XXIX, in Civil Case No. 82-11611, all the rights, interest and participation of NICOS INDUSTRIAL CORPORATION-Defendant over the herein described lot is hereby levied upon attached.; Date of Instrument: September 1, 1982; Date of Inscription: September 7, 1982 at 2:35. Meycauayan, Bulacan. (SGD.) VIOLETA R. LINCALLO GARCIA TRANSFER CERTIFICATE OF TITLE No. T-210581 (T-32.505 M) Entry No. 79524 (M); Kind: NOTICE OF LEVY UPON REALTY, Executed in favor of THE CONSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK) Plaintiff; Conditions: Notice is hereby given that by virtue of an Order of Attachment issued by the C.F.I. of Manila, Branch XXIX, in Civil Case No. 82-11611, all the rights, interest and participation of NICOS INDUSTRIAL CORPORATION Defendants over the herein described lot is hereby levied upon attached.; Date of Instrument; September 1, 1982; Date of Inscription: September 7, 1982 at 2:35. Meycauayan, Bulacan. ) Based on the foregoing evidence on record, the conclusion is clear that the disputed real properties were under custodia legis by virtue of a valid attachment at the time the same were extrajudicially foreclosed by a third party mortgagee. The rule is well settled that when a writ of attachment has been levied on real property or any interest therein belonging to the judgment debtor, the levy thus effected creates a lien which nothing can destroy but its dissolution (Chua Pua Hermanos v. Register of Deeds of Batangas, 50 Phil. 670; Government, et. al. v. Mercado, 67 Phil. 409). The foregoing conclusion has two necessary consequences. Firstly, it follows that the writ of possession issued by the Malolos court in favor of respondent GOLDEN STAR is nun and void ab initio because it PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
284 of 501
interfered with the jurisdiction of a co-ordinate and co-equal court (See De Leon v. Salvador, 36 SCRA 567): While property or money is in custodia legis, the officer holding it is the mere hand of the court, his possession is the possession of the court, and to interfere with it is to invade the jurisdiction of the court itself (Gende v. Fleming, 371 N.E. 2d. 191; Bishop v. Atlantic Smokeless Coal Co., 88F. Supp. 27, 7 CJS 320). Of equal importance is the fact that the transactions on which respondent GOLDEN STAR's right to a writ of possession are based are highly irregular and questionable, to say the least, considering the following circumstances: On July 11, 1983, the Sheriff of Bulacan executed a certificate of sale over the two lots in question in favor of UCPB. On August 29, 1983, or about a month and a half later, UCPB sold its rights, interests and participation over the lands to Manuel Go. On that very same day, August 29, 1983, Manuel Go sold the same properties to respondent GOLDEN STAR. On October 5, 1983, respondent NICOS which had a one year right of redemption over the lands in question executed a "Waiver of Right of Redemption in favor of respondent GOLDEN STAR." The attempts to bring the disputed properties out of the petitioner's reach, inspite of the attachment, are plain and apparent. Based on the foregoing facts, we find that respondents NICOS and GOLDEN STAR conspired to defeat petitioner's lien on the attached properties and to deny the latter its right of redemption. It appears that in issuing the writ of possession, the Malolos court relied on copies of documents (which did not show the memorandum of encumbrance) submitted to it by GOLDEN STAR. It was thus led into the error of ruling that the petitioner's attachment was not properly annotated. Secondly, it likewise follows that the petitioner has acquired by operation of law the right of redemption over the foreclosed properties pursuant to Sec. 6 of Act No. 3135, to wit: In all such cases in which an extrajudicial sale is made ... any person having a lien on the property subsequent to the mortgage ... may redeem the same at any time within the term of one year from and after the date of sale. It has been held that "an attaching creditor may succeed to the incidental rights to which the debtor was entitled by reason of his ownership of the property, as for example, a right to redeem from a prior mortgage" (Lyon v. Stanford, 5 Conn. 541, 7 SJS 505). The fact that respondent NICOS executed a waiver of right of redemption in favor of respondent GOLDEN STAR on October 5, 1983 is of no moment as by that time it had no more right which it may waive in favor of another, Finally, GOLDEN STAR argues that even if the attachment in issue was duly registered and the petitioner has a right of redemption, the certificate of sale of the lands in question was registered on September 6, 1983. It claims that the period to redeem therefore lapsed on September 6, 1984 without the petitioner bank ever exercising any right of redemption. This argument is untenable. Well settled is the rule that the pendency of an action tolls the term of the right of redemption. Specifically, tills Court in Ong Chua v. Carr, (53 Phil. 975, 983) categorically ruled that: xxx xxx xxx ... Neither was it error on the part of the court to hold that the pendency of the action tolled the term for the right of redemption; that is an old and well established rule. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
285 of 501
This was reiterated in Fernandez v. Suplido (96 Phil. 541, 543), as follows: xxx xxx xxx ... As pointed out in Ong Chua v. Carr, 53 Phil. 975, the pendency of an action brought in good faith and relating to the validity of a sale with pacto de retro tolls the term for the right of redemption. ... Not only that. It has been held that "under a statute limiting the time for redemption ... the right of redemption continues after perfection of an appeal ... until the decision of the appeal (Philadelphia Mortgage Co. v. Gustus, 75 N.W. 1107). In the case at bar, the petitioner commenced the instant action by way of an omnibus motion before the Bulacan Court on November 21, 1983 or barely two months after the certificate of sale was registered on September 6, 1983, well within the one year period of redemption. WHEREFORE, IN VIEW OF THE FOREGOING, the petition is granted and judgment is hereby rendered: 1) declaring as valid and binding the levy and attachment by the Manila Sheriff on the two realties in question including the buildings and improvements thereon; 2) declaring that petitioner has acquired the right of redemption over the aforesaid properties which it may exercise within one year from notice of entry of judgment in this case; and 3) declaring as null and void (a) the order of the Bulacan Court dated November 4, 1983 granting the writ of possession to respondent GOLDEN STAR, (b) its order of June 9, 1984 denying the petitioner's omnibus motion, and (c) the Waiver of Right of Redemption executed by respondent NICOS in favor of respondent GOLDEN STAR. SO ORDERED.
BF Homes v. CA, 190 S 262 FIRST DIVISION G.R. No. 76879 October 3, 1990 BF HOMES, INCORPORATED, petitioner, vs. COURT OF APPEALS, ROSALINDA R. ROA and VICENTE MENDOZA, respondents. G.R.No. 77143 October 3, 1990 ROSALINDA ROA and VICENTE MENDOZA, petitioners, vs. COURT OF APPEALS and BF HOMES, INCORPORATED, respondents. Espinosa, Cabrera & Associates for Rosalinda Roa, et al. Balgos & Perez for BF Homes, Inc.
CRUZ, J.: Involved here are two petitions for review assailing the decision of the Court of Appeals in CA-G.R. No. Sp 05411, entitledBF Homes, Inc. v. Judge Tutaan, et al., dated June 6, 1986, as amended on October 22, 1986. BF Homes, Inc. is a domestic corporation previously engaged in the business of developing and selling residential lots and houses and other related realty matters. On July 19, 1984, BF contracted a loan from Rosalinda R. Roa and Vicente Mendoza in the amount of P250,000.00 with interest at the rate of 33% per annum payable after 32 days. The obligation was embodied in a promissory note and secured by two post-dated checks issued by BF in favor of the lenders. On September 25, 1984, BF filed a Petition for Rehabilitation and for a Declaration in a State of Suspension of Payments under Sec. 5(d) of P.D. No. 902-A with a prayer that upon the filing of the petition and in the meantime, all claims against it for any and all accounts or indebtedness be suspended, but allowing petitioner to continue with its normal operations. It also asked for the approval of the proposed rehabilitation plan. On October 17, 1984, Roa and Mendoza filed a complaint against BF with the Regional Trial Court of Quezon City, docketed as Civil Case No. Q-43104, for the recovery of the loan of P250,000.00, with interest and attorney's fees. The complaint also prayed for the issuance of a writ of preliminary attachment against the properties of BF. October 22, 1984, the trial court issued the writ against properties of BF sufficient to satisfy the principal claim in the amount of P257,333.33. In a motion dated October 25, 1984, BF moved for the dismissal of the case for lack of jurisdiction, or at least for its suspension in view of the pendency of SEC Case No. 002693. it also asked for the lifting of the writ of preliminary attachment. The trial court denied the motion to dismiss on November 20, 1984, and the motion for reconsideration on January 11, 1985. Citing the case of DMRC Enterprises v. Este del Sol Mountain Reserves, Inc., 1 the trial court held it had jurisdiction because what was involved was not an intra-corporate or partnership dispute but merely a determination of the rights of the parties arising out of the contract of loan. On February 13, 1985, BF filed with the Intermediate Appellate Court (now Court of Appeals) an original action for certiorariwith prayer for a writ of preliminary injunction against the regional trial court, Roa and Mendoza. On February 14, 1985, the Court of Appeals issued an order temporarily restraining proceedings in Civil Case No. Q-43104. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
287 of 501
On March 18, 1985, the SEC, finding an urgent need to rehabilitate BF issued an order creating a management committee and suspending all actions for claims against BF pending before any court, tribunal or board. On June 6, 1986, the Court of Appeals rendered a decision dismissing the complaint in Civil Case No. Q-43104 and declaring the writ of preliminary attachment null and void. But upon a motion for reconsideration filed by Roa and Mendoza, the decision was set aside and a new one was entered upholding the jurisdiction of the regional trial court over the case. At the same time, however, it suspended the proceedings therein until after the management committee shall have been impleaded as party defendant. The dissolution of the writ of preliminary attachment was maintained. Both parties filed separate motions for reconsideration, BF took exception to the amended decision insofar as it directed the continuation of proceedings in Civil Case No. Q-43104 until after the management committee shall have been impleaded. Roa and Mendoza faulted the Court of Appeals for ordering BF to be substituted by the management committee and for dissolving the writ of preliminary attachment without the filing of the necessary counter-bond by the defendant. In a resolution dated December 22, 1986, the Court of Appeals denied both motions for reconsideration, noting that the proceedings in the civil case could not remain suspended forever. The purpose of the suspension, it said, was to enable the management committee to substitute BF as party defendant and prosecute the defense to conclusion. Substitution was necessary to prevent collusion between the previous management and creditors it might seek to favor, to the prejudice of its other creditors. In sustaining the dissolution of the writ of preliminary attachment, the respondent court said that Roa and Mendoza were secured in the satisfaction of any judgment they might obtain against BF since all the properties of the latter were already in the custody of the management committee. Their motions for reconsideration having been denied, both parties filed their respective petitions for review before this Court. In G.R. No. 76879, entitled "BF Homes, Inc. v. Court of Appeals, Rosalinda R. Roa and Vicente Mendoza," the petitioner contends that the respondent court committed an error and violated Sec. 5(d) of P.D. No. 902-A when it authorized continuation of proceedings in Civil Case No. Q-43104 after the management committee created by the SEC shall have been impleaded. In G.R. No. 77143, entitled "Rosalinda R. Roa and Vicente Mendoza v. Court of Appeals and BF Homes, Inc.," the petitioners seek a review on the grounds that the management committee was not a proper party and should not have been ordered substituted as party defendant in the regional trial court and that the writ of preliminary attachment should not have been dissolved. These two petitions were ordered consolidated in the resolution of this Court dated August 17, 1987. On February 2, 1988, the SEC issued an order approving the proposed revised rehabilitation plan and dissolving the management committee earlier created. Atty. Florencio Orendain was appointed rehabilitation receiver. Now to the merits. The parties in both cases are agreed that the proceedings in the civil case for the recovery of a sum of money should be suspended. BF originally maintained that the action should be resumed only until after SEC Case No. 002693 shall have been adjudicated on the merits but now agrees with Roa and Mendoza, in line with the "assessment" of the Solicitor General, that the action should be suspended pending the outcome of the rehabilitation proceedings. The pertinent provision of law dealing with the suspension of actions for claims against the corporation is Sec. 6(c) of P.D. 902-A, as amended, which reads: Sec. 6. n order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
288 of 501
(c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court, and in such other cases whenever necessary in order to preserve the rights of parties-litigants and/or protect the interest of the investing public and creditors: Provided, however, That the Commission may, in appropriate cases, appoint a rehabilitation receiver of corporations, partnerships or other associations not supervised or regulated by other government agencies who shall have, in addition to the powers of a regular receiver under the provisions of the Rules of Court, such functions and powers as are provided for in the succeeding paragraph (d) hereof: Provided, further, That the Commission may appoint a rehabilitation receiver of corporations, partnership or other associations supervised or regulated by other government agencies, such as banks and insurance companies, upon request of the government agency concerned: Provided, finally, That upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnership, or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. (As amended by P.D. Nos. 1653, 1758 and 1799; Emphasis supplied.) As will be noted, the duration of the suspension is not indicated in the law itself. And neither is it specified in the SEC order creating the management committee. The Court feels that the respondent court erred in ordering the resumption of the civil proceeding after the management committee shall have been impleaded as party defendant. The explanation that the only purpose of suspending the civil action was to enable the management committee to substitute BF as party defendant is not acceptable. The view of the respondent court is that the continuation of the action is necessary for the purpose of determining the extent of the liability of BF to Roa and Mendoza. The flaw in this theory is that even if such liability is determined, it still cannot be enforced by the trial court as long as BF is under receivership. 2 Moreover, it disregards the possibility that such determination would not be necessary at all should the rehabilitation receiver favorably consider and fully acknowledge the claims made by Roa and Mendoza. Under Sec. 6(d) of P.D. No. 902-A, the management committee or rehabilitation receiver is empowered to take custody and control of all existing assets and properties of such corporations under management; to evaluate the existing assets and liabilities, earnings and operations of such corporations; to determine the best way to salvage and protect the interest of investors and creditors; to study, review and evaluate the feasibility of continuing operations and restructure and rehabilitate such entities if determined to be feasible by the SEC. In light of these powers, the reason for suspending actions for claims against the corporation should not be difficult to discover. It is not really to enable the management committee or the rehabilitation receiver to substitute the defendant in any pending action against it before any court, tribunal, board or body. Obviously, the real justification is to enable the management committee or rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the "rescue" of the debtor company. To allow such other action to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation instead of being directed toward its restructuring and rehabilitation. In BF Homes, Inc. v. Hon. Fernando P. Agdamag et al., 3 the Court of Appeals held: It must be emphasized that the suspension is only for a temporary period to prevent the irreversible collapse of the corporation and give the management committee or receiver PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
289 of 501
the absolute tranquility to study the viability of the corporation. During this period, the law creates a wall around the corporation against all claims. In Alemar's Sibal & Sons, Inc. v. Hon. Jesus M. Elbinias, et al., 4 this Court, explaining the legal consequences of a receivership, said: . . . When a corporation threatened by bankruptcy is taken over by a receiver, all the creditors should stand on an equal footing. Not anyone of them should be given any preference by paying one or some of them ahead of the others. This is precisely the reason for the suspension of all pending claims against the corporation under receivership. Instead of creditors vexing the courts with suits against the distressed firm, they are directed to file their claims with the receiver who is a duly appointed officer of the SEC. (Emphasis supplied) Consequently, we feel that the trial court cannot at this point determine the extent of BF's liability, if any, to Roa and Mendoza. This is true whether it is retained as party defendant or substituted by the management committee (or the rehabilitation receiver) as directed by the respondent court. What Roa and Mendoza should do now is file their claims with the rehabilitation receiver and submit to him such evidence as they would otherwise have to adduce before the trial court to prove such claims. As the revised rehabilitation plan approved by the SEC is expected to be implemented within ten years, the proceedings in the Regional Trial Court of Quezon City should be suspended during that period, to begin from February 2, 1988, the date of its approval. This is without prejudice to the authority of the SEC to extend the period when warranted and even to order the liquidation of BF if the plan is found to be no longer feasible. On the other hand, on a more positive note, the SEC can also find within that period that BF has been sufficiently revived and able to resume its normal business operations without further need of rehabilitation. Coming now to the writ of preliminary attachment, we find that it must stand despite the suspension of the proceedings in the Regional Trial Court of Quezon City. The writ was issued prior to the creation of the management committee and so should not be regarded as an undue advantage of Mendoza and Roa over the other creditors of BF. In its amended decision and the resolution ordering the discharge of the writ of preliminary attachment, the respondent court did not rule on whether the issuance of the writ was improper or irregular. It simply said that the writ was no longer proper or necessary at that time because the properties of BF were in the hands of the receiver. We do not think so. The appointment of a rehabilitation receiver who took control and custody of BF has not necessarily secured the claims of Roa and Mendoza. In the event that the receivership is terminated with such claims not having been satisfied, the creditors may also find themselves without security therefor in the civil action because of the dissolution of the attachment. This should not be permitted. Having previously obtained the issuance of the writ in good faith, they should not be deprived of its protection if the rehabilitation plan does not succeed and the civil action is resumed. It is settled that: If there is an attachment or sequestration of the goods or estate of the defendant in an action which is removed to a bankruptcy court, such an attachment or sequestration will continue in existence and hold the goods or estate to answer the final judgment or decree in the same manner as they would have been held to answer the final judgment or decree rendered by the Court from which the action was removed, unless the attachment or sequestration is invalidated under applicable law. (28 USCS No. 1479 [a].) 5
As we ruled in Government of the Philippine Islands v. Mercado: 6
Attachment is in the nature of a proceeding in rem. It is against the particular property. The attaching creditor thereby acquires specific lien upon the attached property which ripens into a judgment against the res when the order of sale is made. Such a proceeding is in effect a finding that the property attached is an indebted thing and a virtual condemnation of it to pay the owner's debt. The law does not provide the length of time an attachment lien shall continue after the rendition of judgment, and it must therefore necessarily continue until the debt is paid, or sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in some manner provided by law. It has been held that the hen obtained by attachment stands upon as high equitable grounds as a mortgage lien: The lien or security obtained by an attachment even before judgment, is a fixed and positive security, a specific lien, and, although whether it will ever be made available to the creditor depends on contingencies, its existence is in no way contingent, conditioned or inchoate. It is a vested interest, an actual and substantial security, affording specific security for satisfaction of the debt put in suit, which constitutes a cloud on the legal title, and is as specific as if created by virtue of a voluntary act of the debtor and stands upon as high equitable grounds as a mortgage. (7 Corpus Juris Secundum, 433, and authorities therein cited.) Under the Rules of Court, a writ of attachment may be dissolved only upon the filing of a counter-bond or upon proof of its improper or irregular issuance. Neither ground has been established in the case at bar to warrant the discharge of the writ. No counter-bond has been given. As for the contention that the writ was improperly issued for lack of notice to BF on the application for the writ, it suffices to cite Mindanao Savings & Loan Association, Inc. v. Court of Appeals, where we held: 7
The only requisites for the issuance of a writ of preliminary attachment under Section 3, Rule 57 of the Rules of Court are the affidavit and bond of the applicant. SEC. 3. Affidavit and bond required. An order of attachment shall be granted only when it is made to appear by the affidavit of the applicant, or 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 the applicant, or the value of the property the possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The affidavit, and the bond required by the next succeeding section must be duly filed with the clerk or judge of the court before the order issues. No notice to the adverse party or hearing of the application is required. As a matter of fact a hearing would defeat the purpose of this provisional remedy. The time which such a hearing would take, could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues. Nevertheless, while no hearing is required by the Rules of Court for the issuance of an attachment (Belisle Investment & Finance Co., Inc. v. State Investment PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
291 of 501
House, Inc., 72927, June 30, 1987; Filinvest Credit Corp. v. Relova, 117 SCRA 420), a motion to quash the writ may not be granted without "reasonable notice to the applicant" and only "after hearing" (Secs. 12 and 13, Rule 57, Rules of Court). In sum, the Court holds that the substitution of the management committee/rehabilitation receiver in Civil Case No. Q-43104 in the Regional Trial Court of Quezon City is not necessary because the proceedings therein shall be suspended anyway pending implementation of the revised rehabilitation plan, during which the writ of preliminary attachment shall remain in force. WHEREFORE, the decision of the respondent court is SET ASIDE and judgment is rendered as follows: (1) In G.R. No. 76879, the petition is GRANTED. The proceedings in Civil Case No. Q-43104 shall remain suspended for a period of ten (10) years from February 2, 1988, unless extended or shortened by the SEC as circumstances may warrant; and (2) In G.R.No.77143, the petition is GRANTED insofar as it seeks restoration of the writ of preliminary attachment, issued on October 22, 1984, which is hereby reinstated. SO ORDERED.
Republic v. Saludares, 327 S 449 SECOND DIVISION G.R. No. 111174 March 9, 2000 REPUBLIC OF THE PHILIPPINES, petitioner, vs. HON. BERNARDO V. SALUDARES, Presiding Judge, RTC, Br. 28, Lianga, Surigao del Sur, and HUNG MING KUK, respondents. QUISUMBING, J.: This special civil action for certiorari assails the decision 1 of the Regional Trial Court of Lianga, Surigao del Sur, Branch 28, dated March 19, 1993. At issue is the jurisdiction of the trial court over properties owned by Lianga Bay Logging Company, Inc. (LBLC), but allegedly sequestered by the Presidential Commission on Good Government (PCGG). The facts on record show that on April 2, 1986, the PCGG issued a writ of sequestration, 2 which reads: IN THE MATTER OF THE SEQUESTRATION OF LIANGA BAY LOGGING x - - - - - - - - - - - - - - - - - - - - - - - x TO: MR. ARISTIDES M. ESCOSORA Baganga, Davao Oriental WRIT OF SEQUESTRATION By virtue of the power vested unto this Commission and by authority of the President of the Philippines, LIANGA BAY LOGGING, with offices at 2nd Floor, Emerald Building, Emerald Ave., Ortigas Office Bldg. Complex, Pasig, Metro Manila is hereby sequestered. Mr. Aristides Escosora is hereby appointed Fiscal Agent of this Commission and as such, he is hereby ordered to: 1. To implement this sequestration order with a minimum disruption of business activities. 2. To preserve and safeguard, as well as prevent the removal concealment of records and the disposition and dissipation of assets, funds and resources. 3. To prevent undue removal or withdrawal of funds, until further orders to the Commission. 4. To report to the Commission on Good Government within five (5) days. Further, you are authorized to request the Commission for security support from the Military/Police authorities only if necessary. x x x x x x x x x FOR THE COMMISSION: Originally Signed MARY CONCEPCION BAUTISTA Commissioner The writ of sequestration was based on the ground that the shares of stocks in LBLC owned by Peter A. Sabido formed part of "illegally acquired wealth." On July 27, 1987, the Republic of the Philippines through the PCGG and the Office of the Solicitor General filed before the Sandiganbayan a complaint 3 for reconveyance, reversion, accounting, restitution and damages against, among others, Peter A. Sabido. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
293 of 501
On August 12, 1991, Sabido filed a Motion to Lift the Writs of Sequestration before the Sandiganbayan. On November 29, 1991, the Sandiganbayan granted the motion, disposing as follows: WHEREFORE, the "Motion (to Lift Writs of Sequestration)" dated August 12, 1991, is granted. Accordingly, the Writs of Sequestration issued against the Philippine Integrated Meat Corporation on March 17, 1986, and Lianga Bay Logging Company, Inc. on April 2, 1986, are declared to have been deemed automatically lifted upon the lapse of six months from the ratification of the 1987 Constitution on February 2, 1987, without prejudice to the continuation of the proceedings against PIMECO and Lianga. . . . (emphasis supplied) x x x x x x x x x SO ORDERED. 4
On December 11, 1991, PCGG filed a motion for reconsideration of the decision of Sandiganbayan praying for the nullification of the order which lifted the writ of sequestration of LBLC. In the meantime, on February 11, 1993, private respondent Hung Ming Kuk filed a complaint 5 for sum of money against LBLC, with a prayer for a writ of preliminary attachment, with the Regional Trial Court, Branch 28, of Lianga, Surigao del Sur. The PCGG was not impleaded by Hung Ming Kuk as party- defendant nor was the sequestration case referred to the RTC's proceedings. Thus, the Republic of the Philippines filed a special civil action 6 for certiorari under Rule 65, dated March 29, 1993, with the Supreme Court. This petition, docketed as G.R. No. 109314, was later on consolidated with other similar cases. Meantime, on February 15, 1993, the Sandiganbayan denied the motion for reconsideration of PCGG, dated December 11, 1991. On February 17, 1993, the trial court granted the writ of preliminary attachment in favor of Hung Ming Kuk. Thereafter, Hung Ming Kuk filed a motion to declare LBLC in default for failure to file responsive pleadings pursuant to Sec. 1, Rule 18 of the Rules of Court. The RTC of Lianga, acting on the motion of Hung Ming Kuk, issued an order dated March 4, 1993, declaring LBLC as in default. Consequently, on March 19, 1993, the RTC rendered judgment by default, and decreed thus: WHEREFORE, premised on the foregoing evidences and findings, this court hereby renders judgment in favor of the plaintiff, and ordering the defendant-Corporation to pay, as follows: 1. To pay plaintiff the principal amount of the accrued unpaid obligation in the total amount of P18,031,563.78, with interests at 14% per annum reckoned from July 1992 to February 1993 in the computed total of P1,250,666.66, the same to continue until said obligation is fully paid; 2. To pay plaintiff moral and exemplary damages in the total amount of P150,000.00, plus Appearance Fee for the counsel in the sum of P5,000.00; 3. To pay plaintiff the total amount of P4,857,195.45 for Sheriff's Expenses, Attached Properties Guards' Fees, Filing Fees, Litigation Expenses, and Attorneys Fees computed at 25% of the principal obligation, or P4,507,890.95, or a total amount of P4,857,195.45; 4. To pay the costs of the suit. IT IS SO ORDERED. 7
On August 11, 1993, petitioner filed this special civil action under Rule 65 of the Rules of Court, raising the sole issue as follows: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
294 of 501
WHETHER, THE TRIAL COURT FAULTED IN DECIDING THE CLAIM OF PRIVATE RESPONDENT WHICH INVOLVED THE PROPERTIES OF LIANGA BAY LOGGING CO. INC. In the meantime, on January 23, 1995, the Supreme Court en banc issued its decision in the consolidated cases ofRepublic vs. Sandiganbayan (First Division), 240 SCRA 376 (1995). The decision included the nullification of the resolution of the Sandiganbayan that lifted the writ of sequestration of LBLC properties in G.R. No. 109314. Hence, the Court effectively confirmed the validity of the writ of sequestration over said properties. Peter A. Sabido's motion for reconsideration was denied. Finally, an entry of judgment was issued on April 22, 1997, in G.R. No. 109314. Petitioner contends that the RTC of Lianga has no jurisdiction over the subject matter of the case inasmuch as the same are under sequestration by the PCGG. Citing Baseco vs. PCGG, 150 SCRA 181 (1987), petitioner asserts that the sequestered assets have been placed under custodia legis of the PCGG pending the final determination by the Sandiganbayan that said assets are in fact ill- gotten. Hence, the RTC has no jurisdiction to order the attachment of said sequestered properties. Private respondent, however avers that his original complaint was for a sum of money. It was a demand for payment of a valid obligation owed to him by LBLC. He adds that it would be unfair and unjust to declare the entire RTC proceedings regarding his claim for sum of money null and void. Private respondent further claims that the attachment order of the trial court was issued after the Sandiganbayan had lifted the writ of sequestration against LBLC. But petitioner asserts that this order of the Sandiganbayan was reversed by the Supreme Court in a banc decision 8 dated January 23, 1995, resolving several consolidated cases for which G.R. No. 109314 was included. Petitioner stresses that said reversal had become final and executory on April 22, 1997. In PAGCOR vs. CA, 275 SCRA 433-434 (1997), involving ownership by Philippine Casino Operators Corporation (PCOC) over several gaming and office equipment during the time that PCOC was under a sequestration by PCGG, the Court ruled: We disagree with the RTC and the CA on the issue of jurisdiction. While there can be no dispute that PCOC was sequestered, the fact of sequestration alone did not automatically oust the RTC of jurisdiction to decide upon the question of ownership of the subject gaming and office equipment. The PCGG must be a party to the suit in order that the Sandiganbayan's exclusive jurisdiction may be correctly invoked. This is deducible from no less than E.O. No. 14, the "Pea" and "Nepomuceno" cases relied upon by both subordinate courts. Note that in Section 2 of E.O. No. 14 which provides: Sec. 2. The Presidential Commission on Good Government shall file all such cases, whether civil or criminal, with the Sandiganbayan, which shall have exclusive and original jurisdiction thereof. it speaks of the PCGG as party-plaintiff. On the other hand, the PCGG was impleaded as co-defendant in both the "Pea" and "Nepomuceno" cases. But here, the PCGG does not appear in either capacity, as the complaint is solely between PAGCOR and respondents PCOC and Marcelo. The "Pea" and "Nepomuceno" cases which recognize the independence of the PCGG and the Sandiganbayan in sequestration cases, therefore, cannot be invoked in the instant case so as to divest the RTC of its jurisdiction, under Section 19 of B.P. Blg. 129, over PAGCOR's action for recovery of personal property. In the case at bar, the claim of private respondent Hung Ming Kuk is for a sum of money arising from a debt incurred by LBLC. Under a contract, private respondent had extended cash advances and supplied LBLC hardware materials, auto spare parts, and rendered services, for cutting and hauling logs. The total claim amounts to P18,031,563.78. Following Section 19 of B.P. Blg. 129, as amended by R.A. No. 7691 on March 25, 1994, the complaint falls within the jurisdiction of the Regional Trial Court, viz: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
295 of 501
Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction: x x x x x x x x x (8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the above-mentioned items exceeds Two hundred thousand pesos (P200,000). Petitioner relies, however, on the case of PCGG vs. Pea, 159 SCRA 556 (1988) and asserts that the controversy of LBLC or a sequestered company falls within the exclusive jurisdiction of the Sandiganbayan and not of the trial court. In the Pea case, the trial court issued a temporary restraining order which prevented PCGG from enforcing the memorandum of then PCGG Commissioner Mary Concepcion Bautista. Her memorandum denied complainant's authority to sign and manage the funds of the sequestered company. The Supreme Court ruled that the trial court had no jurisdiction over PCGG being a co-equal body, and therefore, the regional trial courts may not interfere with and restrain the PCGG or set aside the orders and actions of its Commissioner. In contrast, the case now before us concerns receivables of the private respondent arising out of a legitimate business contract to supply goods and services in favor of LBLC. When a collection suit was filed against LBLC by its supplier, Hung Ming Kuk, evidently PCGG could not be the proper party to defend against such claim. More so, because when PCGG had not taken over the LBLC's business operations. We note that PCGG is not an owner but a conservator. It can exercise only powers of administration over property sequestered, frozen or provisionally taken over. Even resort to the provisional remedies should entail the least possible interference with business operations or activities so that, in the event that the accusation that the business enterprise is "ill-gotten" be not proven, it may be returned to its rightful owner as far as possible in the same condition as it was at the time of sequestration. 9
The holding in Pea which confers exclusive jurisdiction on the Sandiganbayan in sequestration cases cannot also be relied upon by petitioner in this case. We hold that the Regional Trial Court has jurisdiction over the complaint for payment of money allegedly averred by LBLC to private respondent. We now move to the ancillary issue of whether or not the provisional remedy of attachment issued by the trial court in favor of the private respondent is valid. It bears recalling that when the Sandiganbayan ordered that the writ of sequestration be lifted, PCGG filed a special civil action for certiorari to contest that order. The Supreme Court ruled in favor of PCGG when it granted the latter's petition to declare the lifting of the writ of sequestration by the Sandiganbayan null and void. The Court's en banc resolution pertinently reads: WHEREFORE, judgment is hereby rendered: A. NULLIFYING AND SETTING ASIDE: x x x x x x x x x 17) in G.R. No. 109314, its impugned Resolutions 10 dated November 29, 1991 and February 16, 1993. In the same en banc Resolution, the Court observed: II. Provisional Remedies in Pursuance of Policy Special adjective tools or devices were provided by the Revolutionary Government for the recovery of that "ill-gotten wealth." These took the form of provisional remedies akin to preliminary attachment (Rule PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
296 of 501
57), writ of seizure of personalty (Rule 60) and receivership (Rule 59). They were (a) sequestration and (b) freeze orders, as regards "unearthed instance of "ill-gotten wealth"; and (c) provisional takeover, as regards "business enterprises and properties taken over by the government of the Marcos Administration or by entities or persons close to former President Marcos." A. Executive Orders Re Sequestration, Freezing and Takeover These special remedies were prescribed and defined in Executive Orders Numbered 1 and 2, promulgated by President Corazon C. Aquino in March, 1986. Their validity and propriety were sustained by this Court on May 27, 1987, against claims that they were unconstitutional as being bills of attainder, or as violative of the right against self-incrimination and the guaranty against unreasonable searches and seizures. In the same case, the Court also set the parameters for and restrictions on the proper exercise of the remedies. In BASECO vs. PCGG, 150 SCRA 181, 182 (1987), sequestration is defined as the process, which may be employed as a conservatory writ whenever the right of the property is involved, to preserve, pending litigation, specific property subject to conflicting claims of ownership or liens and privileges. 11
The Court also noted the relationship between attachment and receivership, on one hand, and sequestration, freeze order and provisional takeover on the other. The latter there are ancillary remedies in prosecuting the ill-gotten wealth of the previous Marcos regime. The Court observed that sequestration, freezing and provisional takeover are akin to the provisional remedy of preliminary attachment or receivership.1wphi1 By an order of attachment, a sheriff seizes property of a defendant in a civil suit so that it may stand as security for the satisfaction of any judgment that may be obtained, and not disposed of, or dissipated, or lost intentionally, or otherwise, pending the action. 12 When a writ of attachment has been levied on real property or any interest therein belonging to the judgment debtor, the levy creates a lien which nothing can destroy but its dissolution. 13 This well- settled rule is likewise applicable to a writ of sequestration. Attachment is in the nature of a proceeding in rem. It is against a particular property of a debtor. The attaching creditor thereby acquires a specific lien upon the attached property which ripens into a judgment against the res when the order of sale is made. Such a proceeding is in effect a finding that the property attached is an indebted thing and results in its virtual condemnation to pay for the owner's debt. The law does not provide the length of time during which an attachment lien shall continue after the rendition of the judgment, and it must therefore continue until the debt is paid, or sale is had under execution issued in the judgment, or until the judgment is satisfied, or the statement discharged or vacated in some manner provided by law. 14
In our view, the disputed properties of LBLC were already under custodia legis by virtue of a valid writ of sequestration 15 issued by the PCGG on April 2, 1986, when respondent Judge Saludares issued the assailed writ of attachment in favor of private respondent Hung Ming Kuk. At that time the writ of sequestration issued by PCGG against LBLC was subsisting. Said writ of the PCGG could not be interfered with by the RTC of Lianga, because the PCGG is a coordinate and co-equal body. The PCGG had acquired by operation of law the right of redemption over the property until after the final determination of the case or until its dissolution. WHEREFORE, the instant petition is partially GRANTED. The default Order issued by the public respondent dated March 19, 1993, is AFFIRMED, but should be held in abeyance until the sequestration case involving LBLC before the Sandiganbayan is determined. The Order of Attachment issued by the public respondent is declared NULL and VOID. No pronouncement as to costs.1wphi1.nt SO ORDERED.
The Manila Remnant v. CA, 231 S 281 (See under Section 8 page 257) Insular Savings Bank v. CA, June 15, 2005 (See under Section 1 page 19) KO Glass v. Valenzuela, 116 S 563 (See under Section 1 page 9) Calderon v. IAC, 155 S 531 (See under Section 4 page 134) PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
298 of 501
Security Pacific Assurance Corp. v. Tria-Infante, 468 S 526 SECOND DIVISION G.R. No. 144740 August 31, 2005 SECURITY PACIFIC ASSURANCE CORPORATION, Petitioners, vs. THE HON. AMELIA TRIA-INFANTE, In her official capacity as Presiding Judge, Regional Trial Court, Branch 9, Manila; THE PEOPLE OF THE PHILIPPINES, represented by Spouses REYNALDO and ZENAIDA ANZURES; and REYNALDO R. BUAZON, In his official capacity as Sheriff IV, Regional Trial Court, Branch 9, Manila, Respondents. D E C I S I O N CHICO-NAZARIO, J.: Before Us is a petition for review on certiorari, assailing the Decision 1 and Resolution 2 of the Court of Appeals in CA-G.R. SP No. 58147, dated 16 June 2000 and 22 August 2000, respectively. The said Decision and Resolution declared that there was no grave abuse of discretion on the part of respondent Judge in issuing the assailed order dated 31 March 2000, which was the subject in CA-G.R. SP No. 58147. THE FACTS The factual milieu of the instant case can be traced from this Courts decision in G.R. No. 106214 promulgated on 05 September 1997. On 26 August 1988, Reynaldo Anzures instituted a complaint against Teresita Villaluz (Villaluz) for violation of Batas Pambansa Blg. 22. The criminal information was brought before the Regional Trial Court, City of Manila, and raffled off to Branch 9, then presided over by Judge Edilberto G. Sandoval, docketed as Criminal Case No. 89-69257. An Ex-Parte Motion for Preliminary Attachment 3 dated 06 March 1989 was filed by Reynaldo Anzures praying that pending the hearing on the merits of the case, a Writ of Preliminary Attachment be issued ordering the sheriff to attach the properties of Villaluz in accordance with the Rules. On 03 July 1989, the trial court issued an Order 4 for the issuance of a writ of preliminary attachment "upon complainants posting of a bond which is hereby fixed at P2,123,400.00 and the Courts approval of the same under the condition prescribed by Sec. 4 of Rule 57 of the Rules of Court." An attachment bond 5 was thereafter posted by Reynaldo Anzures and approved by the court. Thereafter, the sheriff attached certain properties of Villaluz, which were duly annotated on the corresponding certificates of title. On 25 May 1990, the trial court rendered a Decision 6 on the case acquitting Villaluz of the crime charged, but held her civilly liable. The dispositive portion of the said decision is reproduced hereunder: WHEREFORE, premises considered, judgment is hereby rendered ACQUITTING the accused TERESITA E. VILLALUZ with cost de oficio. As to the civil aspect of the case however, accused is ordered to pay complainant Reynaldo Anzures the sum of TWO MILLION ONE HUNDRED TWENTY THREE THOUSAND FOUR HUNDRED (P2,123,400.00) PESOS with legal rate of interest from December 18, 1987 until fully paid, the sum of P50,000.00 as attorneys fees and the cost of suit. 7
Villaluz interposed an appeal with the Court of Appeals, and on 30 April 1992, the latter rendered its Decision, 8 the dispositive portion of which partly reads: WHEREFORE, in CA-G.R. CV No. 28780, the Decision of the Regional Trial Court of Manila, Branch 9, dated May 25, 1990, as to the civil aspect of Criminal Case No. 89-69257, is hereby AFFIRMED, in all respects. The case was elevated to the Supreme Court (G.R. No. 106214), and during its pendency, Villaluz posted a counter-bond in the amount of P2,500,000.00 issued by petitioner Security Pacific Assurance Corporation. 9 Villaluz, on the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
299 of 501
same date 10 of the counter-bond, filed an Urgent Motion to Discharge Attachment. 11
On 05 September 1997, we promulgated our decision in G.R. No. 106214, affirming in toto the decision of the Court of Appeals. In view of the finality of this Courts decision in G.R. No. 106214, the private complainant moved for execution of judgment before the trial court. 12
On 07 May 1999, the trial court, now presided over by respondent Judge, issued a Writ of Execution. 13
Sheriff Reynaldo R. Buazon tried to serve the writ of execution upon Villaluz, but the latter no longer resided in her given address. This being the case, the sheriff sent a Notice of Garnishment upon petitioner at its office in Makati City, by virtue of the counter-bond posted by Villaluz with said insurance corporation in the amount of P2,500,000.00. As reported by the sheriff, petitioner refused to assume its obligation on the counter-bond it posted for the discharge of the attachment made by Villaluz. 14
Reynaldo Anzures, through the private prosecutor, filed a Motion to Proceed with Garnishment, 15 which was opposed by petitioner 16 contending that it should not be held liable on the counter-attachment bond. The trial court, in its Order dated 31 March 2000, 17 granted the Motion to Proceed with Garnishment. The sheriff issued a Follow-Up of Garnishment 18 addressed to the President/General Manager of petitioner dated 03 April 2000. On 07 April 2000, petitioner filed a Petition for Certiorari with Preliminary Injunction and/or Temporary Restraining Order 19 with the Court of Appeals, seeking the nullification of the trial courts order dated 31 March 2000 granting the motion to proceed with garnishment. Villaluz was also named as petitioner. The petitioners contended that the respondent Judge, in issuing the order dated 31 March 2000, and the sheriff committed grave abuse of discretion and grave errors of law in proceeding against the petitioner corporation on its counter-attachment bond, despite the fact that said bond was not approved by the Supreme Court, and that the condition by which said bond was issued did not happen. 20
On 16 June 2000, the Court of Appeals rendered a Decision, 21 the dispositive portion of which reads: WHEREFORE, premises considered, the Court finds no grave abuse of discretion on the part of respondent judge in issuing the assailed order. Hence, the petition is dismissed. A Motion for Reconsideration 22 was filed by petitioner, but was denied for lack of merit by the Court of Appeals in its Resolution 23 dated 22 August 2000. Undeterred, petitioner filed the instant petition under Rule 45 of the 1997 Rules of Civil Procedure, with Urgent Application for a Writ of Preliminary Injunction and/or Temporary Restraining Order. 24
On 13 December 2000, this Court issued a Resolution 25 requiring the private respondents to file their Comment to the Petition, which they did. Petitioner was required to file its Reply 26 thereafter. Meanwhile, on 17 January 2001, petitioner and the spouses Reynaldo and Zenaida Anzures executed a Memorandum of Understanding (MOU). 27 In it, it was stipulated that as of said date, the total amount garnished from petitioner had amounted to P1,541,063.85, and so the remaining amount still sought to be executed was P958,936.15. 28 Petitioner tendered and paid the amount of P300,000.00 upon signing of the MOU, and the balance of P658,936.15 was to be paid in installment at P100,000.00 at the end of each month from February 2001 up to July 2001. At the end of August 2001, the amount of P58,936.00 would have to be paid. This would make the aggregate amount paid to the private respondentsP2,500,000.00. 29 There was, however, a proviso in the MOU which states that "this contract shall not be construed as a waiver or abandonment of the appellate review pending before the Supreme Court and that it will be subject to all such interim orders and final outcome of said case." PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
300 of 501
On 13 August 2001, the instant petition was given due course, and the parties were obliged to submit their respective Memoranda. 30
ISSUES The petitioner raises the following issues for the resolution of this Court: Main Issue - WHETHER OR NOT THE COURT OF Appeals committed reversible error in affirming the 31 march 2000 order of public respondent judge which allowed execution on the counter-bond issued by the petitioner. Corollary Issues (1) WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED THAT THE ATTACHMENT ON THE PROPERTY OF VILLALUZ WAS DISCHARGED WITHOUT NEED OF COURT APPROVAL OF THE COUNTER-BOND POSTED; and (2) WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED THAT THE ATTACHMENT ON THE PROPERTY OF VILLALUZ WAS DISCHARGED BY THE MERE ACT OF POSTING THE COUNTER-BOND. THE COURTS RULING Petitioner seeks to escape liability by contending, in the main, that the writ of attachment which was earlier issued against the real properties of Villaluz was not discharged. Since the writ was not discharged, then its liability did not accrue. The alleged failure of this Court in G.R. No. 106214 to approve the counter-bond and to cause the discharge of the attachment against Villaluz prevented the happening of a condition upon which the counter-bonds issuance was premised, such that petitioner should not be held liable thereon. 31
Petitioner further asserts that the agreement between it and Villaluz is not a suretyship agreement in the sense that petitioner has become an additional debtor in relation to private respondents. It is merely waiving its right of excussion 32 that would ordinarily apply to counter-bond guarantors as originally contemplated in Section 12, Rule 57 of the 1997 Rules. In their Comment, 33 the private respondents assert that the filing of the counter-bond by Villaluz had already ipso factodischarged the attachment on the properties and made the petitioner liable on the bond. Upon acceptance of the premium, there was already an express contract for surety between Villaluz and petitioner in the amount of P2,500,000.00 to answer for any adverse judgment/decision against Villaluz. Petitioner filed a Reply 34 dated 09 May 2001 to private respondents Comment, admitting the binding effect of the bond as between the parties thereto. What it did not subscribe to was the theory that the attachment was ipso facto or automatically discharged by the mere filing of the bond in court. Such theory, according to petitioner, has no foundation. Without an order of discharge of attachment and approval of the bond, petitioner submits that its stipulated liability on said bond, premised on their occurrence, could not possibly arise, for to hold otherwise would be to trample upon the statutorily guaranteed right of the parties to contractual autonomy. Based on the circumstances present in this case, we find no compelling reason to reverse the ruling of the Court of Appeals. Over the years, in a number of cases, we have made certain pronouncements about counter-bonds. In Tijam v. Sibonghanoy, 35 as reiterated in Vanguard Assurance Corp. v. Court of Appeals, 36 we held: . . . [A]fter the judgment for the plaintiff has become executory and the execution is returned unsatisfied, as in this case, the liability of the bond automatically attaches and, in failure of the surety to satisfy the judgment against the defendant despite demand therefore, writ of execution may issue against the surety to enforce the obligation of the bond. In Luzon Steel Coporation v. Sia, et al.: 37
. . . [C]ounterbonds posted to obtain the lifting of a writ of attachment is due to these bonds being security for the payment of any judgment that the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
301 of 501
attaching party may obtain; they are thus mere replacements of the property formerly attached, and just as the latter may be levied upon after final judgment in the case in order to realize the amount adjudged, so is the liability of the countersureties ascertainable after the judgment has become final. . . . In Imperial Insurance, Inc. v. De Los Angeles, 38 we ruled: . . . Section 17, Rule 57 of the Rules of Court cannot be construed that an "execution against the debtor be first returned unsatisfied even if the bond were a solidary one, for a procedural may not amend the substantive law expressed in the Civil Code, and further would nullify the express stipulation of the parties that the suretys obligation should be solidary with that of the defendant. In Philippine British Assurance Co., Inc. v. Intermediate Appellate Court, 39 we further held that "the counterbond is intended to secure the payment of any judgment that the attaching creditor may recover in the action." Petitioner does not deny that the contract between it and Villaluz is one of surety. However, it points out that the kind of surety agreement between them is one that merely waives its right of excussion. This cannot be so. The counter-bond itself states that the parties jointly and severally bind themselves to secure the payment of any judgment that the plaintiff may recover against the defendant in the action. A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. 40
Suretyship is a contractual relation resulting from an agreement whereby one person, the surety, engages to be answerable for the debt, default or miscarriage of another, known as the principal. The suretys obligation is not an original and direct one for the performance of his own act, but merely accessory or collateral to the obligation contracted by the principal. Nevertheless, although the contract of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor or promise of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal. The surety therefore becomes liable for the debt or duty of another although he possesses no direct or personal interest over the obligations nor does he receive any benefit therefrom. 41
In view of the nature and purpose of a surety agreement, petitioner, thus, is barred from disclaiming liability. Petitioners argument that the mere filing of a counter-bond in this case cannot automatically discharge the attachment without first an order of discharge and approval of the bond, is lame. Under the Rules, there are two (2) ways to secure the discharge of an attachment. First, the party whose property has been attached or a person appearing on his behalf may post a security. Second, said party may show that the order of attachment was improperly or irregularly issued. 42 The first applies in the instant case. Section 12, Rule 57, 43 provides: SEC. 12. Discharge of attachment upon giving counter-bond. After a writ of attachment has been enforced, the party whose property has been attached, or the person appearing on his behalf, may move for the discharge of the attachment wholly or in part on the security given. The court shall, after due notice and hearing, order the discharge of the attachment if the movant makes a cash deposit, or files a counter-bond executed to the attaching party with the clerk of the court where the application is made, in an amount equal to that fixed by the court in the order of attachment, exclusive of costs. But if the attachment is sought to be discharged with respect to a particular property, the counter-bond shall be equal to the value of that property as determined by the court. In either case, the cash deposit or the counter-bond shall secure the payment of any judgment that the attaching party may recover in the action. A notice of the deposit shall forthwith be served on the attaching party. Upon the discharge of an attachment in accordance with the provisions of this section, the property attached, or the proceeds of any sale thereof, shall be delivered to the party making the deposit or giving the counter-bond, or to the person appearing on his behalf, the deposit or counter-bond aforesaid standing in place of the property so released. Should such counter-bond for any reason be found to be or become insufficient, and the party furnishing the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
302 of 501
same fail to file an additional counter-bond, the attaching party may apply for a new order of attachment. It should be noted that in G.R. No. 106214, per our Resolution dated 15 January 1997, 44 we permitted Villaluz to file a counter-attachment bond. On 17 February 1997, 45 we required the private respondents to comment on the sufficiency of the counter-bond posted by Villaluz. It is quite palpable that the necessary steps in the discharge of an attachment upon giving counter-bond have been taken. To require a specific order for the discharge of the attachment when this Court, in our decision in G.R. No. 106214, had already declared that the petitioner is solidarily bound with Villaluz would be mere surplusage. Thus: During the pendency of this petition, a counter-attachment bond was filed by petitioner Villaluz before this Court to discharge the attachment earlier issued by the trial court. Said bond amounting to P2.5 million was furnished by Security Pacific Assurance, Corp. which agreed to bind itself "jointly and severally" with petitioner for "any judgment" that may be recovered by private respondent against the former. 46
We are not unmindful of our ruling in the case of Belisle Investment and Finance Co., Inc. v. State Investment House, Inc., 47 where we held: . . . [T]he Court of Appeals correctly ruled that the mere posting of a counterbond does not automatically discharge the writ of attachment. It is only after hearing and after the judge has ordered the discharge of the attachment if a cash deposit is made or a counterbond is executed to the attaching creditor is filed, that the writ of attachment is properly discharged under Section 12, Rule 57 of the Rules of Court. The ruling in Belisle, at first glance, would suggest an error in the assailed ruling of the Court of Appeals because there was no specific resolution discharging the attachment and approving the counter-bond. As above- explained, however, consideration of our decision in G.R. No. 106214 in its entirety will readily show that this Court has virtually discharged the attachment after all the parties therein have been heard on the matter. On this score, we hew to the pertinent ratiocination of the Court of Appeals as regards the heretofore cited provision of Section 12, Rule 57 of the 1997 Rules of Civil Procedure, on the discharge of attachment upon giving counter-bond: . . . The filing of the counter-attachment bond by petitioner Villaluz has discharged the attachment on the properties and made the petitioner corporation liable on the counter-attachment bond. This can be gleaned from the "DEFENDANTS BOND FOR THE DISSOLUTION OF ATTACHMENT", which states that Security Pacific Assurance Corporation, as surety, in consideration of the dissolution of the said attachment jointly and severally, binds itself with petitioner Villaluz for any judgment that may be recovered by private respondent Anzures against petitioner Villaluz. The contract of surety is only between petitioner Villaluz and petitioner corporation. The petitioner corporation cannot escape liability by stating that a court approval is needed before it can be made liable. This defense can only be availed by petitioner corporation against petitioner Villaluz but not against third persons who are not parties to the contract of surety. The petitioners hold themselves out as jointly and severally liable without any conditions in the counter-attachment bond.The petitioner corporation cannot impose requisites before it can be made liable when the law clearly does not require such requisites to be fulfilled. 48 (Emphases supplied.) Verily, a judgment must be read in its entirety, and it must be construed as a whole so as to bring all of its parts into harmony as far as this can be done by fair and reasonable interpretation and so as to give effect to every word and part, if possible, and to effectuate the intention and purpose of the Court, consistent with the provisions of the organic law. 49
Insurance companies are prone to invent excuses to avoid their just obligation. 50 It seems that this statement very well fits the instant case. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
303 of 501
WHEREFORE, in view of all the foregoing, the Decision and Resolution of the Court of Appeals dated 16 June 2000 and 22 August 2000, respectively, are both AFFIRMED. Costs against petitioner. SO ORDERED.
Jopillo, Jr. v. CA, 167 S 247 FIRST DIVISION G.R. No. 76026 November 9, 1988 PORFIRIO JOPILLO, JR., petitioner, vs. HON. COURT OF APPEALS, HON. BALTAZAR R. DIZON, ARSENIO C. DE GUZMAN and RAYMOND LIM,respondents. Cruz Law Office for petitioner. Eduardo L. Advincula for private respondent.
GANCAYCO, J.: By this petition the Court is asked to resolve the question of whether or not a motion to discharge a writ of attachment should be granted upon presentation of evidence by the party whose property has been attached to show that the attachment is improper or irregular. On October 18, 1985, private respondent Raymond Lim filed a complaint for the collection of a sum of money in the amount of about P100,000.00 with a prayer for preliminary attachment in the Regional Trial Court of Pasay City. It is alleged in the complaint that petitioner was, among others, guilty of fraud in contracting the obligation in that from the very beginning he had no intention to pay the same and that he is disposing of the scrap materials subject of their agreement to defraud private respondent. On October 21, 1985, the trial court granted ex-parte the prayer for a writ of preliminary attachment having found sufficient cause therefor based on the verified complaint and the affidavit of merit executed by private respondent. The court, however, required the private respondent to file a bond in the amount of P100,000.00. Pursuant to the said order respondent sheriff Arsenio de Guzman attached a Chevrolet truck owned by petitioner. On October 25, 1985, petitioner filed an urgent motion to discharge the writ of attachment in accordance with Section 13, Rule 57 of the Rules of Court alleging therein that the issuance of the writ was irregular and improper. At the hearing of the motion, petitioner testified that their agreement was for simple loans which have been fully paid by way of off-set when he delivered scrap materials to private respondent on various occasions. In support thereof, petitioner presented receipts purportedly signed by the secretary of private respondent accepting deliveries of the scrap materials. 1
The trial court denied petitioner's motion in an order dated November 6, 1985. The trial court held that the writ of attachment is within the context of the law and instead required Petitioner to put up a counterbond in the amount equal to the value of the property attached to discharge the writ of attachment pursuant to Section 12 of Rule 57 of the Rules of Court. Petitioner filed a motion for reconsideration of said order asking that the writ be discharged in accordance with Section 13 of Rule 57. It is alleged in the said motion that through his testimony and documentary evidence, he had established that the allegations in the affidavit of private respondent are not true and thus there is no cause of action to justify the issuance of a writ of attachment. The lower court denied the motion in an order dated November 26, 1985. Hence, the petitioner filed a petition for certiorari with prayer for the issuance of a restraining order or the writ of preliminary injunction in the then Intermediate Appellate Court. On June 20, 1986, the appellate court denied due course to the petition and vacated the restraining order it earlier issued with costs against petitioner. 2
Petitioner now comes to this Court by way of this petition for review assigning the following errors on the part of the respondent court: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
305 of 501
FIRST ERROR THE RESPONDENT COURT OF APPEALS COMMITTED AN ERROR OF LAW IN RULING THAT THE PETITION FOR certiorari FILED BEFORE IT BY THE PETITIONER DID NOT PRESENT ANY JURISDICTIONAL ISSUE. SECOND ERROR THE RESPONDENT COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING (BY IMPLICATION) THAT RESPONDENT JUDGE DID NOT COMMIT GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION. THIRD ERROR THE RESPONDENT COURT OF APPEALS COMMITTED AN ERROR OF LAW FOR HAVING ERRONEOUSLY APPLIED IN APPROPRIATE AUTHORITIES AND JURISPRUDENCE IN RESOLVING THE PETITION FOR CERTIORARI. (Page 12, Rollo) The petition is devoid of merit. Petitioner argues that the respondent judge committed a grave abuse of discretion amounting to lack of jurisdiction when he refused to order the discharge of the Writ of attachment. He also contends that having established by evidence that he had paid in full the obligation sued upon, the private respondent has no cause of action much less a ground to obtain a writ of attachment against him. Citing National Coconut Corporation vs. Pecson, 3 petitioner alleges that the attachment may be considered as improperly or irregularly issued when the facts alleged in the private respondent's affidavit have been shown to be untrue by petitioner. He contends that it is incumbent upon private respondent to prove the facts in issue either by affidavit or deposition or some form of evidence. 4
In denying due course to the petition, the appellate court made the following disqualification: The petition does not present any jurisdictional issue, hence, the remedy of certiorari is unavailable. Generally, when a court has jurisdiction over the subject matter and of the person, decisions upon all questions pertinent to the cause are decisions within its jurisdiction and however irregular or erroneous they may be, they cannot be corrected by certiorari. (Napa vs. Weissenhagen, 29 Phil. 182; Gala vs. Cui and Rodriguez, 25 Phil. 522; Matute v. Macadael and Medel, J- 9325, May 30, 1956; NAWASA v. Municipality of Libmauan, 20 SCRA 337). And as the respondent court had jurisdiction to issue the writ of attachment its errors, if any, committed in the appreciation of the probative value of the facts stated in the petition for the writ and/ or in the motion to discharge the attachment, does (sic) not affect its jurisdiction but merely the exercise of such jurisdiction. (Galang v. Endencia, 73 Phil. 399) In the instant case, respondent Judge having acted within the law, there can be no capricious and whimsical exercise of judgment equivalent to lack of jurisdiction. Furthermore, a perusal of the records shows that in order to resolve the issue as to whether petitioner's evidence proves the falsity of private respondent's allegations, respondent Court would have to go into the merits of the case aside from the evidence introduced in support of the motion to discharge the attachment. More particularly, the respondent Court would have to resolve whether the alleged receipts of deliveries are really genuine, that two (2) truckloads of scrap materials worth P30,000.00 was actually delivered and whether the amount of P100,000.00 covered by the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
306 of 501
"Agreement" was a loan or advance payment for scrap iron that petitioner promised to deliver. The merits of the action in which a writ of preliminary attachment has been issued are not triable on a motion for dissolution of the attachment, otherwise an applicant for the dissolution could force a trial of the merits of the case in motion (4 Am. Jur. Sec. 635, 934).<re||an1w> Accordingly, while it is competent for the Court to decide whether the affidavits submitted show the existence of a cause of action against the defendant, this gives no general right to a trial on such motion of the merits of such cause. (4 Am. Jur. 933, 934) Moreover, in this instant petition, since petitioner (defendant in the lower court) has not yet answered the complaint and the principal action is not ready for trial, respondent Court cannot resolve the issue on the merits of the case. This, respondent Court: would have to do to rule on the sufficiency of petitioners evidence or falsity of the allegations contained in private respondent's affidavit for attachment. Thus, it has been held: ...considering that the grounds invoked by the petitioner for the issuance of the writ of attachment form the very basis of the complaint .... a trial on the merits after answer shall have been filed by respondent, was necessary. In We case the hearing of the "Motion to Discharge" was held before the issues have been joined, and the order of the, respondent Judge discharging the attachment would have the effect of or prejudging the main action ... (G.B. Inc. vs. Sanchez 98 Phil. 886) We agree. Section 13, Rule 57 of the Rules of Court provides: SEC. 13. Discharge of a attachmnet for improper or irregular issuance.The party whose property has been may also, at any tame either before or after the release of the-attached property, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other evidence in addition to that on which the attachment was made. After hearing, the judge shall order the discharge of the attachment if it appears that it was improperly or irregularly issued and the defect is not cured forthwith. (Emphasis supplied.) A motion to discharge a writ of attachment on the ground that the same was improperly or irregularly issued may be established by the affidavits submitted by the party whose property has been attached or such other evidence presented at the hearing of the motion. The attaching creditor may oppose the same by counter-affidavits or other evidence in addition to that with which the attachment was made. If the movant establishes that the facts stated in the plaintiffs affidavit or some of them, are shown to be false or untrue, the writ of attachment may be considered as improperly or irregularly issued. 5 The determination of the existence of said grounds to discharge a writ of attachment rests in the sound discretion of the lower court. In the present case, although the evidence submitted by petitioner tended to show payment of the obligation subject of the complaint, it appears that the genuineness of the alleged receipt of the scrap materials which petitioner claims to have delivered to private respondent to offset his obligation is in PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
307 of 501
issue. Besides, the nature of the agreement and the actual deliveries made of the scrap materials, among others, are factual issues that must be resolved at the trial on the merits and not at the hearing of the motion to discharge the writ of attachment. If the private respondent did not present any counter- affidavit or evidence to counteract what has been adduced by petitioner at the hearing of the motion, it must be because private respondent believed that it was not necessary. As it is, the trial court was apparently not persuaded by the evidence presented by petitioner so it ordered that the writ of attachment be maintained and directed that if petitioner wants a discharge of the writ, he must put up a bond in accordance with Section 12, Rule 57 of the Rules which provides SEC. 12. Discharge of attachment upon giving counterbond. At any time after an order of attachment has been granted, the party whose property has been attached, or the person appearing on his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing, order the, discharge of the attachment if a cash deposit is made, or a counterbond executed to the attaching creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made, in an amount equal to the value of the property attached as determined by the judge, to secure the payment of any judgment that the attaching creditor may recover in the action. Upon the filing of such counter-bond, copy thereof shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance with the provisions of this section the property attached, or the proceeds of any sale thereof, shall be delivered to the party making the deposit or giving the counter-bond, or the person appearing on his behalf, the deposit or counter-bond aforesaid standing in place of the property so released. Should such counter-bond for any reason be found to be, or become, insufficient, and the party furnishing the same fail to file an additional counter-bond, the attaching creditor may apply for a new order of attachment. However, petitioner insists that the attachment should, he discharged in accordance with Section 13 of Rule 57 and refuses to put up a counterbond as suggested by the court a quo. As correctly ruled by the respondent appellate court, even assuming that the trial court committed an error in denying the motion to discharge the writ of attachment the error (if it is an error at all) is an error in judgment which cannot be corrected through the extraordinary remedy of certiorari but by an ordinary appeal at the proper time. Finally, the findings of the trial court an to whether or not the writ of attachment had been improperly or irregularly issued based on the evidence submitted at the hearing may not be disturbed on appeal unless there is a showing that it committed a grave abuse of discretion in its exercise. This petitioner failed to establish. WHEREFORE, the petition is DISMISSED for lack of merit without pronouncement as to costs. SO ORDERED.
Mindanao Savings Loan v. CA, 172 S 480 FIRST DIVISION G.R. No. 84481 April 18, 1989 MINDANAO SAVINGS & LOAN ASSOCIATION, INC. (formerly Davao Savings & Loan Association) & FRANCISCO VILLAMOR, petitioners, vs. HON. COURT OF APPEALS, POLY R. MERCADO, and JUAN P. MERCADO, respondents. Villarica, Tiongco & Caboverde Law Office for petitioners. A B C Law Offices for private respondents.
GRIO-AQUINO, J.: On September 10, 1986, private respondents filed in the Regional Trial Court of Davao City, a complaint against defendants D.S. Homes, Inc., and its directors, Laurentino G. Cuevas, Saturnino R. Petalcorin, Engr. Uldarico D. Dumdum, Aurora P. De Leon, Ramon D. Basa, Francisco D. Villamor, Richard F. Magallanes, Geronimo S. Palermo Felicisima V. Ramos and Eugenio M. De los Santos (hereinafter referred to as D.S. Homes, et al.) for "Rescission of Contract and Damages" with a prayer for the issuance of a writ of preliminary attachment, docketed as Civil Case No. 18263. On September 28, 1986, Judge Dinopol issued an order granting ex parte the application for a writ of preliminary attachment. On September 22, 1986, the private respondents amended their complaint and on October 10, 1986, filed a second amended complaint impleading as additional defendants herein petitioners Davao Savings & Loan Association, Inc. and its president, Francisco Villamor, but dropping Eugenio M. De los Santos. On November 5, 1986, Judge Dinopol issued ex parte an amended order of attachment against all the defendants named in the second amended complaint, including the petitioners but excluding Eugenio C. de los Santos. D. S. Homes. Inc., et al. and the Davao Savings & Loan Association (later renamed Mindanao Savings & Loan Association, Inc. or "MSLA") and Francisco Villamor filed separate motions to quash the writ of attachment. When their motions were denied by the Court, D.S. Homes, Inc., et al. offered a counterbond in the amount of Pl,752,861.41 per certificate issued by the Land Bank of the Philippines, a banking partner of petitioner MSLA The lower court accepted the Land Bank Certificate of . Deposit for Pl,752,861.41 as counterbond and lifted the writ of preliminary attachment on June 5, 1987 (Annex V) On July 29, 1987, MSLA and Villamor filed in the Court of Appeals a petition for certiorari (Annex A) to annul the order of attachment and the denial of their motion to quash the same (CA-G.R. SP No. 12467). The petitioners alleged that the trial court acted in excess of its jurisdiction in issuing the ex parte orders of preliminary attachment and in denying their motion to quash the writ of attachment, D.S. Homes, Inc., et al. did not join them. On May 5, 1988, the Court of Appeals dismissed the petition for certiorari and remanded the records of Civil Case No. 18263 to the Regional Trial Court of Davao City, Branch 13, for expeditious proceedings. It held: Objections against the writ may no longer be invoked once a counterbond is filed for its lifting or dissolution. The grounds invoked for the issuance of the writ form the core of the complaint and it is right away obvious that a trial on the merits was necessary. The merits of a main action are not triable in a motion to discharge an attachment otherwise an applicant for dissolution could force a trial on the merits PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
309 of 501
on his motion (4 Am. Jur., Sec. 635, 934, cited in G.G. Inc. vs. Sanchez, et al., 98 Phil. 886, 890, 891). (Annex B, p. 185, Rollo.) Dissatisfied, the petitioners appealed to this Court. A careful consideration of the petition for review fails to yield any novel legal questions for this Court to resolve. The only requisites for the issuance of a writ of preliminary attachment under Section 3, Rule 57 of the Rules of Court are the affidavit and bond of the applicant. SEC. 3. Affidavit and bond required . An order of attachment shall be granted only when it is made to appear by the affidavit of the applicant, or 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 the applicant, or the value of the. property the possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The affidavit, and the bond required by the next succeeding section must be duly filed with the clerk or judge of the court before the order issues. No notice to the adverse party or hearing of the application is required. As a matter of fact a hearing would defeat the purpose of this provisional remedy. The time which such a hearing would take, could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues. Nevertheless, while no hearing is required by the Rules of Court for the issuance of an attachment (Belisle Investment & Finance Co., Inc. vs. State Investment House, Inc., 72927, June 30, 1987; Filinvest Credit Corp. vs. Relova, 11 7 SCRA 420), a motion to quash the writ may not be granted without "reasonable notice to the applicant" and only "after hearing" (Secs. 12 and 13, Rule 57, Rules of Court). The Court of Appeals did not err in holding that objections to the impropriety or irregularity of the writ of attachment "may no longer be invoked once a counterbond is filed," when the ground for the issuance of the writ forms the core of the complaint. Indeed, after the defendant has obtained the discharge of the writ of attachment by filing a counterbond under Section 12, Rule 57 of the Rules of Court, he may not file another motion under Section 13, Rule 57 to quash the writ for impropriety or irregularity in issuing it. The reason is simple. The writ had already been quashed by filing a counterbond, hence, another motion to quash it would be pointless. Moreover, as the Court of Appeals correctly observed, when the ground for the issuance of the writ is also the core of the complaint, the question of whether the plaintiff was entitled to the writ can only be determined after, not before, a full-blown trial on the merits of the case. This accords with our ruling G.B. Inc. vs. Sanchez, 98 Phil. 886 that: "The merits of a main action are not triable in a motion to discharge an attachment, otherwise an applicant for the dissolution could force a trial on the merits of the case on this motion." May the defendant, after procuring the dissolution of the attachment by filing a counterbond, ask for the cancellation of the counterbond on the ground that the order of attachment was improperly issued? That question was answered by this Court when it ruled in Uy Kimpang vs. Javier, 65 Phil. 170, that "the obligors in the bond are absolutely liable for the amount of any judgment that the plaintiff may recover in the action without reference to the question of whether the attachment was rightfully or wrongfully issued." The liability of the surety on the counterbond subsists until the Court shall have finally absolved the defendant from the plaintiff s claims. Only then may the counterbond be released. The same rule applies to the plaintiffs attachment bond. "The liability of the surety on the bond subsists because the final reckoning is when the Court shall finally adjudge that the attaching PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
310 of 501
creditor was not entitled to the issuance of the attachment writ," (Calderon vs. Intermediate Appellate Court, 155 SCRA 531.) WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. SP No. 12467, the petition for review is denied for lack of merit with costs against the petitioners. SO ORDERED. Cruz, Gancayco and Medialdea, JJ., concur.
Separate Opinions
NARVASA, J.: Concurring And Dissenting Opinion I agree that the decision of the Court of Appeals subject of the appeal in this case should be affirmed. I write this separate opinion simply to stress certain principles relative to the discharge of preliminary attachments so that our own decision or that thereby affirmed be not applied to juridical situations beyond their intendment, which may well result from the statement that "after the defendant has obtained the discharge of the writ of attachment by filing a counterbond under Section 12, Rule 57 of the Rules of Court, he may not file another motion under Section 13, Rule 57 to quash the writ for impropriety or irregularity in issuing it." Rule 57 specifies in clear terms the modes by which a preliminary attachment may be discharged at the instance of the party against whom it has been issued. The first is by the submission of a counterbond or security. The second is by a demonstration of the attachment's improper or irregular issuance. 1.0. The discharge of an attachment on security given is governed by Section 12 of the Rule. SEC 12. Discharge of attachment upon giving counterbond. At any time after an order of attachment has been granted, the party whose property has been attached, or the person appearing in his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given .. in an amount equal to the value of the property attached as determined by the judge to secure the payment of any judgment that the attaching creditor may recover in the action. .. . This mode of dissolution presents no apparent difficulty. It applies when there has already been a seizure of property by the sheriff. All that is entailed is the presentation of a motion to the proper court, seeking approval of a cash or surety bond in an amount equivalent to the value of the property seized and the lifting of the attachment on the basis thereof. The counter-bond stands, according to the cited section, "in place of the property so released." 1.1. But a party need not wait until his property has been seized before seeking its dissolution upon security. In fact he may prevent the seizure of his property under attachment by giving security in an amount sufficient to satisfy the claims against him. The relevant provision of the Rule is Section 5. 1
SEC. 5. Manner of attaching property . The officer executing the order shall without delay attach, to await judgment and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the applicant, in an amount sufficient to satisfy such demand besides costs or in an amount equal to the value of the property which is about to be attached, to secure payment to the applicant of any judgment which he may recover in the action. .. . PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
311 of 501
2.0. The second way of lifting a preliminary attachment is by proving its irregular or improper issuance, under Section 13 of Rule 57. Like the first, this second mode may be availed of even before any property has been actually attached. It may even be resorted to after the property has already been released from the levy on attachment, as the pertinent provision makes clear. 2
SEC. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached may also, at any time either before or after the release of the attached properly, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other evidence in addition to that on which the attachment was made. .. . As pointed out in Calderon v. I.A.C. 155 SCRA 531 (1987), "The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor instead of the other way, which, in most instances .. would require presentation of evidence in a fullblown trial on the merits and cannot easily be settled in a pending incident of the case." 3.0. However, when the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty," 3 or "an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought, 4 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 thereon had been improperly or irregularly issued 5 the reason being that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counter-bond. 6
4.0. The dissolution of the preliminary attachment upon security given, or a showing of its irregular or improper issuance, does not of course operate to discharge the sureties on plaintiffs own attachment bond. The reason is simple. That bond is 'executed to the adverse party, .. conditioned that the .. (applicant) will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto." 7 Hence, until that determination is made, as to the applicant's entitlement to the attachment, his bond must stand and cannot be withdrawn.
Separate Opinions NARVASA, J.: Concurring And Dissenting Opinion I agree that the decision of the Court of Appeals subject of the appeal in this case should be affirmed. I write this separate opinion simply to stress certain principles relative to the discharge of preliminary attachments so that our own decision or that thereby affirmed be not applied to juridical situations beyond their intendment, which may well result from the statement that "after the defendant has obtained the discharge of the writ of attachment by filing a counterbond under Section 12, Rule 57 of the Rules of Court, he may not file PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
312 of 501
another motion under Section 13, Rule 57 to quash the writ for impropriety or irregularity in issuing it." Rule 57 specifies in clear terms the modes by which a preliminary attachment may be discharged at the instance of the party against whom it has been issued. The first is by the submission of a counterbond or security. The second is by a demonstration of the attachment's improper or irregular issuance. 1.0. The discharge of an attachment on security given is governed by Section 12 of the Rule. SEC 12. Discharge of attachment upon giving counterbond. At any time after an order of attachment has been granted, the party whose property has been attached, or the person appearing in his behalf, may, upon reasonable notice to the applicant, apply to the judge e who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given .. in an amount equal to the value of the property attached as determined by the judge to secure the payment of any judgment that the attaching creditor may recover in the action. .. . This mode of dissolution presents no apparent difficulty. It applies when there has already been a seizure of property by the sheriff. All that is entailed is the presentation of a motion to the proper court, seeking approval of a cash or surety bond in an amount equivalent to the value of the property seized and the lifting of the attachment on the basis thereof. The counter- bond stands, according to the cited section, "in place of the property so released." 1.1. But a party need not wait until his property has been seized before seeking its dissolution upon security. In fact he may prevent the seizure of his property under attachment by giving security in an amount sufficient to satisfy the claims against him. The relevant provision of the Rule is Section 5. 1
SEC. 5. Manner of attaching property. The officer executing the order shall without delay attach, to await judgment and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the applicant, in an amount sufficient to satisfy such demand besides costs or in an amount equal to the value of the property which is about to be attached, to secure payment to the applicant of any judgment which he may recover in the action. .. . 2.0. The second way of lifting a preliminary attachment is by proving its irregular or improper issuance, under Section 13 of Rule 57. Like the first, this second mode may be availed of even before any property has been actually attached. It may even be resorted to after the property has already been released from the levy on attachment, as the pertinent provision makes clear. 2
SEC. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached may also, at any time either before or after the release of the attached properly, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other evidence in addition to that on which the attachment was made. .. . As pointed out in Calderon v. I.A.C. 155 SCRA 531 (1987), "The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
313 of 501
attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor instead of the other way, which, in most instances .. would require presentation of evidence in a fullblown trial on the merits and cannot easily be settled in a pending incident of the case." 3.0. However, when the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty," 3 or "an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought, 4 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 basedand consequently that the writ based thereon had been improperly or irregularly issued 5 the reason being that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counter-bond. 6
4.0. The dissolution of the preliminary attachment upon security given, or a showing of its irregular or improper issuance, does not of course operate to discharge the sureties on plaintiffs own attachment bond. The reason is simple. That bond is 'executed to the adverse party, .. conditioned that the .. (applicant) will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto." 7 Hence, until that determination is made, as to the applicant's entitlement to the attachment, his bond must stand and cannot be withdrawn.
Benitez v. IAC, 154 S 41 SECOND DIVISION G.R. No. 71535 September 15, 1987 HELENA Z. T. BENITEZ, petitioner-appellee, vs. THE INTERMEDIATE APPELLATE COURT, ROSARIO R. VELOSO, in her capacity as Judge of the Regional Trial Court, National Capital Judicial Region, Branch 133, et al., respondents-appellants.
YAP, J.: This is a petition for review on certiorari of the decision of respondent Intermediate Appellate Court dated July 25, 1985, affirming the questioned orders of the Regional Trial Court of Makati, to wit: (a) the order dated December 11, 1984, granting the private respondents' petition for a writ of attachment ex-parte; (b) the order dated January 31, 1985, denying petitioner's urgent motion to discharge attachment; and (c) the order dated April 24, 1985, denying petitioner's motion for reconsideration. The records show that on December 6, 1984, private respondent Casa Filipina Development Corporation (Casa Filipina for brevity) filed a complaint against herein petitioner Helena T. Benitez for recission of contract, plus damages, with a prayer for preliminary attachment. The complaint alleged that sometime on April 16, 1983, the plaintiff Casa Filipina, a real estate corporation, represented by Renato P. Dragon, and defendant Benitez (the petitioner herein), entered into a verbal contract whereby Benitez allegedly agreed to undertake to purchase/convey land for Casa Filipina in the total value of One Million Pesos (P1,000,000.00) within the period of four (4) months from receipt of the total amount. On the same date, Casa Filipina tendered a check payment in the amount of Five Hundred Thousand Pesos (P500,000.00) in the name of Benitez. On August 26, 1983, to complete the amount of One Million Pesos as allegedly agreed upon, Casa Filipina issued again another check in the amount of Five Hundred Thousand Pesos (P500,000.00). Both checks were deposited and credited in petitioner's bank account. The four-month period allegedly elapsed without Benitez having purchased nor conveyed any real estate in the total value of One Million Pesos (P1,000,000.00) in favor of Casa Filipina, but instead Benitez converted the entrusted money for her own personal use in violation of her fiduciary relationship with plaintiff and that despite repeated demands for the refund or return of the aforementioned amount, Benitez chose to ignore the same. Praying for a writ of preliminary attachment, Casa Filipina submitted with its complaint, the affidavit of one Nestor P. Borromeo, the corporate secretary and acting treasurer of the corporation. The writ of attachment was granted by respondent court exparte in an order dated December 11, 1985. On December 27, 1984, the Clerk of Court issued a writ of preliminary attachment, by virtue of which the respondent Sheriff served notices of garnishment to the Philippine Women's University, Taft Avenue, Manila, the Unlad Development Resources Corporation and Bank of the Philippine Islands, Unlad Condominium, Taft Avenue, Manila, thereby garnishing the deposits, shares of stocks, salaries and other personal property of the petitioner. Likewise on January 30, 1984, petitioner was advised by the Acting Register of Deeds of Quezon City that a notice of levy was filed with the Registrar's Office affecting two parcels of prime land at Mariposa Street, with an aggregate area of 4,304 square meters which are owned by and registered in the name of the petitioner. Earlier on January 21, 1985, Benitez filed an answer with counterclaim and opposition to the petition for issuance of a writ of preliminary attachment. On the same date, Benitez also filed an Urgent Motion to Discharge Writ of Preliminary Attachment under Section 13, Rule 57 of the Rules of Court, on the ground that the same was improperly or irregularly issued. Benitez alleged that sometime in March 1983, Mr. Renato Dragon, acting for himself and Casa Filipina agreed to buy ten (10) hectares of petitioner's land in Dasmarinas, PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
315 of 501
Cavite, for a price of P15.00 per square meter or for a total consideration of One Million Five Hundred Thousand Pesos (P1,500,000.00); that it was agreed upon by the parties that it is only upon full payment of the amount of P1,500,000.00 that delivery of the ten-hectare property of the petitioner will be made; that Casa Filipina was not able to comply with the obligation to pay the balance of P500,000.00 despite repeated demands and instead filed the present action for recission. In support of its urgent motion to discharge the writ of preliminary attachment, petitioner attached thereto the affidavit of her technical assistant and attorney-in-fact by the name of Virginia Real, who alleged. among other things, that she knows for a fact that the transaction between Benitez and Dragon for Casa Filipina, was one of purchase and sale; that a copy of TCT No. 9833 covering the land to be purchased was furnished the office of Mr. Dragon on February 28, 1984; that petitioner is willing and able to execute a deed of absolute sale in favor of Casa Filipina upon full payment of the balance of P500,000.00. The said motion was set for hearing on January 25, 1985 but the private respondent and its counsel failed to appear despite notice. Consequently, the motion was deemed submitted for resolution. On January 31, 1985, respondent Court denied petitioner's motion to discharge writ of preliminary attachment. The said order reads: Considering defendant's motion to quash and/or lift the writ of preliminary attachment issued by this Court upon properties of defendant on the ground that the same was predicated upon false and untrue allegations, the Court believes and so rules that the issue cannot be determined without adducing evidence at the same time going into the merits of the case which in the opinion of the Court could not be done at this stage of the proceedings. Considering that the writ of preliminary attachment was issued after having satisfied the requirements of the rules, the same may not be lifted or discharged without the defendant filing a counterbond. WHEREFORE, the motion to lift and/or discharge the writ of preliminary attachment is hereby denied. SO ORDERED. On February 5, 1985, despite the lower court's denial of petitioner's motion to discharge preliminary attachment, the private respondent filed a belated opposition to the said motion, to which the petitioner filed a reply a February 18, 1985. On March 14, 1985, petitioner discovered that her motion to discharge preliminary attachment was denied. Hence, on March 20, 1985, petitioner filed a motion for reconsideration which was likewise denied by respondent judge on April 24, 1985, Whereupon, a petition for certiorari, mandamus and prohibition was filed by the petitioner before respondent Intermediate Appellate Court, which, as stated earlier, was dismissed for I acknowledge of merit. Hence, this petition. On January 8, 1986, the Court gave due course to the petition and required the parties to submit their memoranda. Petitioner poses the following questions for resolution, to wit: 1. Whether a counter-attachment bond is necessary and indispensable under the circumstances before the subject writ of preliminary attachment may be recalled, quashed and/or discharged? 2. Whether or not the issue on the propriety of the issuance of the subject writ may be resolved without going into the merits of the principal action? We find the petition meritorious. The attachment was granted by the lower court ex-parte under Section 1 (b), Rule 57, Rules of Court, upon the allegation of respondent Casa Filipina, that petitioner Helena Benitez, the defendant, had violated their alleged fiduciary relationship and had unlawfully converted the amount of P1,000,000.00 for her PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
316 of 501
own use. Petitioner promptly filed an urgent motion to discharge writ of preliminary attachment for improper or irregular issuance, supported by the affidavit of Virginia Real, who alleged that there was no fiduciary relationship between the plaintiff and defendant inasmuch as the transaction between them was one of sale of real property. Thus, in effect, the petitioner claims that the private respondent's allegation of fraud was false, that hence there was no ground for the attachment, and that consequently, the attachment order was improperly or irregularly issued. In Villongco, et al. vs. Hon. Panlilio, et al., 1 we held that the affidavit supporting the petition for the issuance of the preliminary attachment may have been sufficient to justify the issuance of the preliminary writ, but it cannot be considered as proof of the allegations contained in the affidavit, which are mere conclusions of law, not statement of facts. Petitioner in the instant case having squarely controverted the private respondent's allegation of fraud, it was incumbent on the latter to prove its allegation. The burden of proving that there indeed was fraud lies with the party making such allegation. This finds support in Section 1, Rule 131 of the Rules of Court which provides: "Each party must prove his own affirmation allegations. . . . The burden of proof lies on the party who would be defeated if no evidence were given on either side." In this jurisdiction, fraud is never presumed. 2
The petitioner's Urgent Motion to Discharge Writ of Preliminary Attachment was filed under Section 13, Rule 57. The last sentence of said provision indicates that a hearing must be conducted by the judge for the purpose of determining whether or not there really was a defect in the issuance of the attachment. It appears from the records that no hearing was conducted by the lower court. Indeed, when the case was called for hearing, the plaintiff (private respondent herein), failed to appear and the petitioner's motion was considered submitted for resolution. Private respondent has alleged in its memorandum that petitioner did not file an affidavit in support of her Urgent Motion to Discharge Attachment, as required under Section 13 of Rule 57, hence, it was not necessary or imperative that a hearing be held. The Court finds private respondent's allegation to be irresponsible, for attached to petitioner's motion was the supporting affidavit of Virginia L. Real, the technical assistant of petitioner Benitez. In her affidavit, she stated that she had personal knowledge of the transaction between respondent Casa Filipina and petitioner Benitez; that Mr. Renato Dragon, for himself and/or Casa Filipina, agreed to buy a portion consisting of 10 hectares of a parcel of land belonging to Benitez in Dasmarinas, Cavite, for the total price of P1,500,000.00 of which private respondent made a downpayment of P500,000.00 on April 16, 1983; and a second payment of P500,000.00 on August 27, 1983; that private respondent having failed to pay the balance of P500,000.00, the deed of sale could not be executed in favor of private respondent. The record amply supports petitioner's version, as against the private respondent's allegation that Benitez had acted as agent in receiving the money and converted the same for her own use in violation of the fiduciary relationship existing between her and private respondent. Private respondent acknowledged the receipt of a xerox copy of TCT No. 9833 covering petitioner's land in Dasmarinas, Cavite, 3 and the check voucher issued by private respondent on April 16, 1983 showed that the check for P500,000.00 was for "Payment for downpayment of lot to be purchased" 4 and the check voucher dated August 27, 1983 for P500,000.00 was for "Second payment for lot to be purchased." 5
It was grave abuse of discretion on the part of respondent Judge Rosario Veloso to deny petitioner's Urgent Motion to Discharge Writ of Preliminary Attachment, without conducting a hearing and requiring the plaintiff to substantiate its allegation of fraud. Neither can respondent Judge avoid deciding the issue raised in petitioner's urgent motion by ruling that "the issue cannot be determined without adducing evidence at the same time going into the merits of the case." Having issued the writ of preliminary attachment ex parte, it was incumbent on the respondent court, upon proper challenge of its order, to determine whether or not the same was improvidently issued. A preliminary attachment is a rigorous remedy which exposes the debtor to humiliation and annoyance, such that it should not be abused to cause unnecessary prejudice and, if wrongfully issued on the basis of false allegation, should at once be corrected. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
317 of 501
We agree with petitioner that a writ of attachment may be discharged pursuant to Section 13, Rule 57, without the necessity of filing a cash deposit or counterbond. The provisions of the aforesaid section grants an aggrieved party relief from baseless and unjustifiable attachments procured, among others, upon false allegations, without having to file any cash deposit or counterbond. WHEREFORE, in view of the foregoing, the appealed decision is hereby reversed and the ex parte writ of preliminary attachment issued by the respondent Regional Trial Court on December 11, 1984 is ANNULLED and SET ASIDE. Costs against private respondent. SO ORDERED.
Davao Light v. CA, 204 S 343 (See under Section 2 page 79) Cuartero v. CA, 212 S 260 (See under Section 2 page 85)
Uy Kimpang v. Javier, 65 Phil 170 (1937) EN BANC DECISION December 16, 1937 G.R. No. L-43461 J. UY KIMPANG & CO., plaintiff-appellant, vs. VICENTE JAVIER, ET AL., defendants; JUAN AUTAJAY and SEVERINO MAGBANUA, sureties-appellees. Engracio Padilla and Manuel Laserna and Vickers, Ohnick, Opisso and Velilla for appellant. Tobias Fornier for appellee Autajay. , J.: By virtue of a writ of execution issued by the Court of First Instance of Antique on August 8, 1933 to enforce the payment to the plaintiff of the sum of P6,678.84 plus interest and costs, which the defendants Vicente Javier, Ramon Majandog, Zenon Javier, Paz Javier with her husband Hugo Mabaquiao and Ramon Maza, in case G. R. No. 36414 1 (civil case No. 1253 of the Court of First Instance of Antique), were sentenced by this court to pay, the sheriff of the aforesaid province levied upon the seven parcels of land belonging to the defendant Ramona Majandog and enumerated in the return of said sheriff of September 9, 1933 for the purpose of selling, as he in fact later sold, them at public auction to the highest bidder who was found in the person of Uy Cay Ju, manager of the plaintiff entity, for the sum of only P1,730. In view of the fact that this sum was not sufficient to cover the full value of the judgment and that the defendants failed to deliver to the sheriff the properties which were released from the attachment by the virtue of the obligation which, on December 29, 1925 and the approval of the court, they executed jointly with their sureties Severino Magbanua and Juan Autajay, the plaintiff in its motion of January 23, 1934 moved the court to again order the execution of the aforesaid judgement, but this time against the properties of two sureties. The surety Juan Autajay objected to the plaintiffs motion on the grounds: (1) That the attachment of the properties of the defendants was null and void because it does not appear that they were served with a copy of the writ ordering the same; (2) that said attachment was not inscribed in the registry of properties; (3) that he (Autajay) was released from his obligation as surety because his undertaking had been cancelled when the court, in its order of February 15, 1930, permitted him to withdraw therefrom; (4)that the undertaking should in any event be enforced exclusively against the other surety (Severino Magbanua) inasmuch as he did not withdraw therefrom. After passing upon the question raised by Juan Autajay, the lower court, in its order of July 18, 1934, denied the plaintiffs motion for the following reasons: (a) That in view of the amount in litigation (P9,352), the justice of the peace of the capital of antique, even in the absence of the Judge of First Instance of said province, had no power to issue the writ of attachment in question; (b) That the issuance of the said writ by the clerk was illegal, because only the justices and the judges of First Instance may issue such writs, and their power cannot in any case be delegated to the clerk; (c) That there was no valid attachment because, aside from the fact that the basic writ was not signed by any judge, the obligation executed by the plaintiff was not approved by the court; and (d) that, in violation of the provisions of section 440 of Act No. 190, the discharge of the attachment levied upon the properties of the defendants was not ordered. The plaintiff duly appealed from the order denying his motion and now contends that the lower court erred: 1. In holding that the justice of the peace of the capital of Antique could not issue the writ of attachment because the amount sued for was in excess of that provided by law in the cases in which justice of the peace of the provincial capitals may order an attachment; 2. In holding that the writ of attachment was illegal because it was issued by the clerk and not by the judge, and that the order authorizing the clerk to PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
319 of 501
issue the same was likewise illegal because it conferred powers which under the law could not be delegated; 3. In holding that the properties of the defendants were not validly attached, because the writ of attachment was not signed by the judge; 4. In holding that the obligation executed by the plaintiff was not valid, because it was not approved by the court; 5. In holding that the counterobligation executed by Juan Autajay and Severino Magbanua is without any legal effect; 6. In holding that the plaintiff has no right to enforce the counterobligation signed by Juan Autajay and Severino Magbanua, and in denying its motion for the enforcement thereof; and 7. In not granting its motion for reconsideration and in denying its motion for new trial. The background necessary to a better grasp of the facts of the case may be briefly stated as follows: On December 20, 1925 the plaintiff filed in the Court of First Instance of Antique a verified complaint in which it alleged among other things that the defendant were indebted to it in the sum of P9,352 plus interest from May, 1918, at the rate of 12 per cent per annum; that the defendants were disposing or about to dispose of their properties with intent to defraud their creditors and the plaintiff; that in order to secure plaintiffs rights, it was necessary to attach the properties of said defendants, unless they were willing to execute an obligation as guaranty for their solvency; and that to obtain such remedy, it was ready to execute the requisite obligation. Four days later, or on December 24, 1925, the plaintiff filed a motion in which, after reiterating the allegations of its complaint, it was prayed that a writ of attachment be issued against the defendant. The justice of the peace of the capital of Antique, acting in the place of the Judge of the Court of First Instance of said province, ruled favorably on the plaintiffs motion and stated the following in his order of December 24, 1925. Wherefore the court, being of the opinion that the plaintiff entity is entitled thereto, hereby orders the clerk of court to issue a writ of attachment against the properties of the said defendants upon the execution by the plaintiff of an obligation in the sum of P9,500 which will respond for the damages recoverable by the defendants in case the court decides this case in their favor. So ordered. San Jose, Antique, P.I., December 24, 1925. (Sgd.) DELFIN HOFILEA Justice of the Peace of the Capital of San Jose, Antique, acting in the Seventeenth District. After the plaintiff had executed the obligation in the sum of P9,500 as required in this order, issued on December 29,1925 the writ of attachment in question, notwithstanding the fact that the aforesaid obligation was not yet approved. The provincial sheriff, upon receipt of the writ, attached the properties belonging to defendants and enumerated in the sheriffs return, the assessed value of which was noted at the bottom of said return. On the same day, December 29, 1925, the defendants executed a counterobligation in the sum of P9,500 with a view to dissolving the attachment levied upon their properties. Said counterbond, which was approved on the same date by the justice of the peace who issued the order of attachment, was signed by all the defendant and their sureties Juan Autajay and Severino Magbanua who bound themselves jointly and severally thereunder. On March 29, Juan Autajay prayed that he be permitted to withdraw from his obligation as surety of the defendant. In view, however, of the opposition registered by the plaintiff in which it was alleged that the purpose of Juan Autajay was merely to evade the performance of an obligation voluntarily contracted and to defeat the judgment which might be entered in plaintiffs favor, the trial court denied the motion in its order of April 17, 1926 the dispositive part of which reads as follows: The court, after hearing the arguments of both parties, sustains the demurrer, admits the amended complaint, and denies the motion of Juan Autajay, unless the defendant Vicente Javier should execute a new obligation within the period of thirty days. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
320 of 501
Two other similar motions were filed by Autajay and by the surety Magbanua on November 21 and December 17, 1927, but they were not acted upon by the court for lack of prosecution. On January 31, 1930, Autajay filed another motion, the plaintiff objected; but the trial court granted the same under the conditions expressed in the order of February 15, 1930 to wit: Considering the motion of the surety Juan Autajay and the statement of the Attorney Hon. Segundo C. Moscoso in representation of the defendants Vicente Javier and other the withdrawal of the movant Juan Autajay is hereby granted and said defendants are given sixty days within which to submit to the court for approval another obligation in substitution for the one to be rendered ineffective by the withdrawal of the surety Juan Autajay. The fact, however, remains that the defendant did not execute the new obligation required in the foregoing order. I. The question raised under the first error alleged to have been resolve by this court in an analogous case wherein it was held that the justice of the peace of the capital acting in the absence of the Justice of First Instance has the power to issue an order of attachment in spite of the fact that the amount litigated is in excess of that fixed by law for his ordinary jurisdiction. (Wise & Co. vs. Larion, 45 Phil. 314.) Section 1, paragraph 4, of act No. 2131 which was in force on December 24, 1925, the date of the attachment, provides that the justice of the peace in the capitals of provinces organized under the Provincial Government Act, in the absence of the judge of the province, may exercise within the province like interlocutory jurisdiction as that of the said judge, including the appointment of receivers and the issuance of all other orders which are final and do not involve, as the attachment under consideration, a decision of the case on its merits. The defendants failed to prove that the Judge of the Court of First Instance of Antique was then holding sessions in said province; and, in the absence of proof to the contrary, the legal presumption being that official duty has been regularly performed (sec. 334, No. 14, Act No. 190), it much be held that said judge was absence from his district on December 24, 1925. It must follow that the justice of the peace of the capital acted in full conformity with the law in issuing the aforesaid order. II. There is no doubt that, under the provisions of sections 425, 426 and 427 of Act No. 190, only the justice, judges of First Instance, and justices of the peace or municipal judges may issue an order of attachment when prayed for, provided the legal requisites are present. In the case at bar all the requirements of the law were complied with. Inasmuch as the order of December 24, 1925 under which the questioned writ of attachment was issued, was entered by a competent judge, it cannot be alleged that said writ was a mere capricious act of the clerk. On the contrary, it may and should be inferred that the writ was issue in strict compliance with a perfectly valid order given to him. The law does not provide or state that the writs of attachment must be issued by the very justice or judge who is to authorize it; it simply determines the judicial authority who shall have the power to grant an attachment. Even supposing that the writ in dispute is defective because it was not signed by the judge who authorized its issuance, it is now too late to raise the question after the same was accepted and believed to be valid not only by the defendants but by their sureties. It is noteworthy that in their counterobligation they made it understood that they were aware of the issuance of a writ of attachment against the defendants; that the properties of the latter had been attached by the sheriff; that all wanted or at least prayed that said attachment be discharged; and that they offered to execute, as in fact they immediately did execute, the counterobligation required. The general rule is that irregularities and defects in attachment or garnishment proceedings which render the attachment merely voidable and not void, are deemed to be waived unless promptly taken advantage of by appropriate mode of raising objection thereto. (4 Am. Jur., par., 616, p. 923.) In case of Hammond vs. Starr (79 Cal., 556, 559; 21 Pac., 971), it was held that: Irregularities in affidavit and undertaking or in proceedings to procure attachment, if waived in attachment suit, cannot be taken advantage of by sureties in collateral proceedings on undertaking given to secure release of attachment. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
321 of 501
In the case of Moffitt vs. Garrett, the supreme Court of Oklahoma (100 Pac. Rep., 533), construing two legal provisions of said State, 4404 and 4376 (4851 and 4821), which are analogous to section 440 of Act No. 190, and adhering to the decisions of the court of Iowa, New York, Illinois, Wisconsin, Michigan, Minnesota, Texas, Washington, Rhode Island, California, Oregon, North Dakota and South Dakota, held that: The court in these states have held that the execution of a bond under and in accordance with these statutes estops the defendant from controverting the attachment, and renders the obligors in the bond absolutely liable for the amount of any judgment the plaintiff recovers in the action, without reference to the question whether the attachment was rightfully or wrongfully sued out. And concluded that: The obligors in the bond are precluded and estopped from traversing the truth of the allegations of the affidavit, or setting up that the defendant in attachment was not the owner of the property levied on. What has been stated also disposes of the contention advanced by the sureties-appellees to the effect that the defendants were not given a copy of the order of attachment, which is an essential requisite prescribed by section 429 of Act No. 190. The Inference must be drawn that they were notified of said order; otherwise, they would not have stated in their counterobligation that: The defendant having prayed for the discharge of the attachment levied upon his properties in an action pending in the Court of First Instance of the Province of Antique, Philippines Island, in which J. Uy Kimpang & Co. is plaintiff and Vicente Javier and Others, defendant, . . . . The other contention that the plaintiffs motion praying for the issuance of a attachment was not sworn to as required by law, is likewise disposed of. It was unnecessary that the same should be under oath because it was merely a repetition or renewal of what was already prayed for in the complaint which was verified. In order not to nullify the purposes of the law, technicalities should be disregarded, especially when, as in the case under advisement, there was substantial compliance therewith. On the other hand, the law enjoins that the provisions of the Code of Civil Procedure shall be liberally construed in order to promote its object and assist the parties in obtaining speedy justice, bearing in mind, in construing and applying them, their spirit and purpose, rather than their strict letter (sec. 2, Act No. 190, Garcia vs. Ambler and Sweeney, 4 Phil. 81). The conditions of the counterobligation executed by the defendants and the sureties-appellees are as follows: Should the judgment be favorable to the plaintiff, the defendant, upon being required, shall redeliver to the officer of the court the property discharge from the attachment, in order that it may be applied to the payment of the judgment, and in case of failure to do so , the defendant and his sureties, when required, shall pay to the plaintiff the full value of attached property. (Page 16, Bill of Exceptions.) It must be remembered that the defendants and the sureties-appellees not only failed to object to the procedure followed by the clerk but, as already stated, executed the counterobligation required by law for discharge of the attachment levied upon the properties of the defendant, and that Autajay and Magbanua were the ones who signed the counterobligation as sureties and submitted the same to the justice of the peace of the capital for approval. It must also be remembered that in all the motions which they subsequently filed in these proceedings, the said sureties confined themselves to the request that they be permitted to withdraw from their obligation for the reason that it was against their interest to continue being sureties of the defendants. Under these circumstances, we believe we should adhere to the rule that: All objections to the writ will be waived by moving to set aside the attachment on other grounds and failing to make the objections before bond for the release of the property. (6 C.J., par. 346, p. 190.) because, After issue made and trial begun upon the merits of a case, it is too late for an objection of the petition or attachment for want of verification. (Id.) For the reasons given, we hold that the trial court committed the second error assigned by the appellant. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
322 of 501
III. The question whether or not there was valid attachment is impliedly resolved in the discussion of the appellants second assignment of error. The omission referred to by the trial court could be supplied and was not in any wise capital, because, as already said, the writ signed by the clerk was issued by him in compliance with the order entered on December 24, 1925 by the justice of the peace of the capital who was authorized by law (Act No. 2131) to do so in the absence of the Judge of First Instance of the District. IV Inasmuch as both the defendants and the sureties-appellees, by executing the counterobligation required by law for the discharge of the attachment, had accepted the obligation filed by the plaintiff with the justice of the peace of the capital for the issuance of the writ of attachment against the defendants, it is now too late and futile to allege that the said obligation is invalid for lack of approval by the judge. They are estopped from doing so by their own acts, inasmuch as their failure to question the said obligation at the proper time constitutes a waiver of their right. One who has any objection to the sufficiency or validity of an obligation in attachment proceedings, should record the same before executing the counterobligation required for the discharge of the attachment; otherwise, it will be understood that he does not question, or that he renounces his right to question, the sufficiency or validity of the said obligation. V. There is no importance in the fact that it does not appear in the record that the court had dissolved, after the approval of the aforesaid counterobligation, the attachment levied upon the properties of the defendants. It must be assumed that the court discharged it by virtue of the said counterobligation; otherwise, the reason for approving it cannot be explained, and said approval would have no finality. In the case of Rosenthal (123 Cal., 240), where a similar question was involved, the court said: Where the goods were in fact released as a consequence of the bond being given, and the undertaking for the released of the attached property recited that it was given pursuant to an order of the court requiring it to be given, and the officer accepted the bond and surrendered the property, it must be presumed that an order discharging the attachment was made . . . and that the officer regularly performed his duty in releasing the goods. VI and VII. Inasmuch as the trial court committed the preceding five errors, it must follow that it also committed errors 6 and 7 which are a necessary consequence thereof. The counterobligation executed by the sureties- appellees is enforceable under the provisions of section 440 of Act No. 190 (Bautista vs. Joaquin, 46 Phil. 885), because, when the defendants were required to deliver to the sheriff the properties released from the attachment, they could not do so, as at least three of said properties (Exhs. A, B and E of the opposition of the appellee Juan Autajay, dated June 11, 1934) were sold after their release, and the appellees failed to proved that the defendants had other properties susceptible of attachment and execution. It is superfluous to state that there is no basis for the contention of the appellee Juan Autajay that he was released from his obligation as surety of the defendants, because he was never so released in view of the failure of the defendants to execute the new obligation required by the order of February 15, 1930 which has hereinbefore been referred to. Wherefore, the order of July 18, 1934 is set aside and the lower court is ordered to issue another writ of execution against the properties of the sureties- appellees, to the extent of the value of their obligation of December 29, 1925, with a view to satisfying the unpaid portion of the judgment rendered in civil case No. 1253 of the Court of First Instance of Antique, without prejudice to the right of the said sureties to recover from the defendants the amount that may be paid by virtue of the execution herein ordered. The costs will be assessed against the appellees. So ordered.
Filinvest Credit v. Relova, 117 S 420 SECOND DIVISION G.R. No. L-50378 September 30, 1982 FILINVEST CREDIT CORPORATION, petitioner, vs. THE HONORABLE JUDGE BENJAMIN RELOVA (In his capacity as Presiding Judge of the Court of First Instance of Manila, Branch XI) and ERNESTO SALAZAR, respondents. Labaquis, Loyola & Angara Law Offices for petitioner. Cecilio D. Ignacio for respondents.
GUERRERO, J.: This is a special civil action for certiorari, with prayer for restraining order or preliminary injunction, filed by petitioner Filinvest Credit Corporation seeking to annul the Orders issued by respondent Judge dated February 2, 1979 and April 4, 1979 in Civil Case No. 109900. As shown by the records, the antecedents of the instant Petition are as follows: On August 2, 1977, Filinvest Credit Corporation (hereinafter referred to as FILINVEST) filed a complaint in the lower court against defendants Rallye Motor Co., Inc. (hereinafter referred to as RALLYE) and Emesto Salazar for the collection of a sum of money with damages and preliminary writ of attachment. From the allegations of the complaint, 1 it appears that in payment of a motor vehicle described as: "One (1) Unit MAZDA DIESEL SCHOOL BUS, Model: E4100, Serial No.: EXC43P-02356, Motor No.: Y-13676," Salazar executed a promissory note dated May 5, 1977 in favor of RALLYE for the amount of P99,828.00. To secure the note, Salazar also executed in favor of RALLYE a deed of chattel mortgage over the above described motor vehicle. On May 7, 1977, RALLYE, for valuable consideration, assigned all its rights, title and interest to the aforementioned note and mortgage to FILINVEST. Thereafter, FILINVEST came to know that RALLYE had not delivered the motor vehicle subject of the chattel mortgage to Salazar, "as the said vehicle (had) been the subject of a sales agreement between the codefendants." Salazar defaulted in complying with the terms and conditions of the aforesaid promissory note and chattel mortgage. RALLYE, as assignor who guaranteed the validity of the obligation, also failed and refused to pay FILINVEST despite demand. According to FILINVEST, the defendants intentionally, fraudulently and with malice concealed from it the fact that there was no vehicle delivered under the documents negotiated and assigned to it, otherwise, it would not have accepted the negotiation and assignment of the rights and interest covered by the promissory note and chattel mortgage. Praying for a writ of preliminary attachment, FILINVEST submitted with its complaint the affidavit of one Gil Mananghaya, pertinent portions of which read thus: That he is the Collection Manager, Automotive Division of Filinvest Credit Corporation; That in the performance of his duties, he came to know of the account of Ernesto Salazar, which is covered by a Promissory Note and secured by a Chattel Mortgage, which documents together with all the rights and interest thereto were assigned by Rallye Motor Co., Inc.; That for failure to pay a stipulated installment, and the fact that the principal debtor, Ernesto Salazar, and the assignor, Rallye Motor Co., Inc. concealed the fact that there was really no motor vehicle mortgaged under the terms of the Promissory Note and the Chattel Mortgage, the entire amount of the obligation stated in the Promissory Note becomes due and demandable, which Ernesto Salazar and Rallye Motor Co., Inc. failed and refused to pay, so much so that a sufficient cause of action really exists for Filinvest Credit Corporation to PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
324 of 501
institute the corresponding complaint against said person and entity; That the case is one of those mentioned in Section 1, Rule 57 of his Rules of Court, particularly an action against parties who have been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought; That there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to the applicant Filinvest Credit Corporation is as much as the sum for which the order is granted above all legal counterclaims; That this affidavit is executed for the purpose of securing a writ of attachment from the court. 2
The specific provision adverted to in the above Affidavit is Section 1(d) of Rule 57 which includes "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" as one of the cases in which 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." Judge Jorge R. Coquia (now Justice of the Court of Appeals), then presiding Judge of the lower court, granted the prayer for a writ of attachment in an Order dated August 17, 1977 stating that: Finding the complaint sufficient in form and substance, and in view of the sworn statement of Gil Mananghaya, Collection Manager of the plaintiff that defendants have committed fraud in securing the obligation and are now avoiding payment of the same, let a writ of attachment issue upon the plaintiff's filing of a bond in the sum of P97,000.00. In the meantime, let summons issue on the defendants. 3
More than a year later, in an Urgent Motion dated December 11, 1978, 4 defendant Salazar prayed that the writ of preliminary attachment issued ex parte and implemented solely against his property be recalled and/or quashed. He argued that when he signed the promissory note and chattel mortgage on May 5, 1977 in favor of RALLYE, FILINVEST was hot vet his creditor or obligee, therefore, he could not be said to have committed fraud when he contracted the obligation on May 5, 1977. Salazar added that as the motor vehicle which was the object of the chattel mortgage and the consideration for the promissory note had admittedly not been delivered to him by RALLYE, his repudiation of the loan and mortgage is more justifiable. FILINVEST filed an Opposition, but on February 2, 1979, the court a quo, this time presided over by herein respondent Judge, ordered the dissolution and setting aside of the writ of preliminary attachment issued on August 17, 1977 and the return to defendant Salazar of all his properties attached by the Sheriff by virtue of the said writ. In this Order, respondent Judge explained that: When the incident was called for hearing, the Court announced that, as a matter of procedure, when a motion to quash a writ of preliminary attachment is filed, it is incumbent upon the plaintiff to prove the truth of the allegations which were the basis for the issuance of said writ. In this hearing, counsel for the plaintiff manifested that he was not going to present evidence in support of the allegation of fraud. He maintained that it should be the defendant who should prove the truth of his allegation in the motion to dissolve the said writ. The Court disagrees. 5
FILINVEST filed a Motion for Reconsideration of the above Order, and was subsequently allowed to adduce evidence to prove that Salazar committed fraud as alleged in the affidavit of Gil Mananghaya earlier quoted. This notwithstanding, respondent Judge denied the Motion in an Order dated April 4, 1979 reasoning thus: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
325 of 501
The plaintiff's evidence show that the defendant Rallye Motor assigned to the former defendant Salazar's promissory note and chattel mortgage by virtue of which plaintiff discounted the note. Defendant Salazar refused to pay the plaintiff for the reason that Rallye Motor has not delivered to Salazar the motor vehicle which he bought from Rallye. It is the position of plaintiff that defendant Salazar was in conspiracy with Rallye Motor in defrauding plaintiff. Ernesto Salazar, on his part complained that he was himself defrauded, because while he signed a promissory note and chattel mortgage over the motor vehicle which he bought from Rallye Motor, Rallye Motor did not deliver to him the personal property he bought; that the address and existence of Rallye Motor can no longer be found. While it is true that the plaintiff may have been defrauded in this transaction, it having paid Rallye Motor the amount of the promissory note, there is no evidence that Ernesto Salazar had connived or in any way conspired with Rallye Motor in the assignment of the promissory note to the plaintiff, because of which the plaintiff paid Rallye Motor the amount of the promissory note. Defendant Ernesto Salazar was himself a victim of fraud. Rallye Motor was the only party which committed it. 6
From the above order denying reconsideration and ordering the sheriff to return to Salazar the personal property attached by virtue of the writ of preliminary attachment issued on August 17, 1977, FILINVEST filed the instant Petition on April 19, 1979. On July 16, 1979, petitioner FILINVEST also filed an Urgent Petition for Restraining Order 7 alleging, among others, that pending this certiorari proceeding in this court, private respondent Salazar filed a Motion for Contempt of Court in the court below directed against FILINVEST and four other persons allegedly for their failure to obey the Order of respondent Judge dated April 4, 1979, which Order is the subject of this Petition. On July 23, 1979, this Court issued a temporary restraining order "enjoining respondent Judge or any person or persons acting in his behalf from hearing private respondent's motion for contempt in Civil Case No. 109900, entitled, 'Filinvest Credit Corporation, Plaintiff, versus The Rallye Motor Co., Inc., et al., Defendants' of the Court of First Instance of Manila, Branch XI. " 8
Petitioner FILINVEST in its MEMORANDUM contends that respondent Judge erred: (1) In dissolving the writ of preliminary attachment already enforced by the Sheriff of Manila without Salazar's posting a counter-replevin bond as required by Rule 57, Section 12; and (2) In finding that there was no fraud on the part of Salazar, despite evidence in abundance to show the fraud perpetrated by Salazar at the very inception of the contract. It is urged in petitioner's first assignment of error that the writ of preliminary attachment having been validly and properly issued by the lower court on August 17, 1977, the same may only be dissolved, quashed or recalled by the posting of a counter-replevin bond under Section 12, Rule 57 of the Revised Rules of Court which provides that: Section 12. Discharge of Attachment upon, gluing counterbond.At any time after an order of attachment has been granted, the party whose property has been attached, or the person appearing on his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court, in which the action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge of the attachment if a cash deposit is made, or a 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
326 of 501
judge, to secure the payment of any judgment that the attaching creditor may recover in the action. ... Citing the above provision, petitioner contends that the court below should not have issued the Orders dated February 2, 1979 and April 4, 1979 for failure of private respondent Salazar to make a cash deposit or to file a counter-bond. On the other hand, private respondent counters that the subject writ of preliminary attachment was improperly or irregularly issued in the first place, in that it was issued ex parte without notice to him and without hearing. We do not agree with the contention of private respondent. 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 of Blue Green Waters, Inc. vs. Hon. Sundiam and Tan 9 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, 10 a writ of attachment may be issued ex parte. Sections 3 and 4, Rule 57, merely require that an applicant for an order of attachment file an affidavit and a bond: the affidavit to be executed by the applicant himself or some other person who personally knows the facts and to show that (1) there is a sufficient cause of action, (2) the case is one of those mentioned in Section 1 of Rule 57, (3) there is no other sufficient security for the claim sought to be enforced, and (4) the amount claimed in the action is as much as the sum for which the order is granted above all legal counterclaims; and the bond to be "executed to the adverse party in an amount fixed by the judge, not exceeding the applicant's claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto." We agree, however, with private respondents contention that a writ of attachment may be discharged without the necessity of filing the cash deposit or counter-bond required by Section 12, Rule 57, cited by petitioner. The following provision of the same Rule allows it: Sec. 13. Discharge of attachment for improper or irregular issuance.The party whose property has been attached may also, at any time either before or after the release of the attached property, or before any attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order todischarge the attachment on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other evidence in addition to that on which the attachment was made. After hearing, the judge shall order the discharge of the attachment if it appears that it was improperly or irregularly issued and the defect is not cured forthwith."(Emphasis supplied) The foregoing provision grants an aggrieved party relief from baseless and unjustifiable attachments procured, among others, upon false allegations, without having to file any cash deposit or counter-bond. In the instant case the order of attachment was granted upon the allegation of petitioner, as plaintiff in the court below, that private respondent RALLYE, the defendants, had committed "fraud in contracting the debt or incurring the obligation upon which the action is brought," covered by Section i(d), Rule 57, earlier quoted. Subsequent to the issuance of the attachment order on August 17, 1977, private respondent filed in the lower court an "Urgent Motion for the Recall and Quashal of the Writ of Preliminary Attachment on (his property)" dated December 11, 1978 11 precisely upon the assertion that there was "absolutely no fraud on (his) part" in contracting the obligation sued upon by petitioner. Private respondent was in effect claiming that petitioner's allegation of fraud was false, that hence there was no ground for attachment, and that therefore the attachment order was "improperly or irregularly issued." This Court was held that "(i)f the grounds upon which the attachment was issued were not PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
327 of 501
true ..., the defendant has his remedy by immediately presenting a motion for the dissolution of the same. 12 We find that private respondent's abovementioned Urgent Motion was filed under option 13, Rule 57. The last sentence of the said provision, however, indicates that a hearing must be conducted by the judge for the purpose of determining whether or not there reality was a defect in the issuance of the attachment. The question is: At this hearing, on whom does the burden of proof lie? Under the circumstances of the present case, We sustain the ruling of the court a quo in its questioned Order dated February 2, 1979 that it should be the plaintiff (attaching creditor), who should prove his allegation of fraud. This pronouncement finds support in the first sentence of Section 1, Rule 131, which states that: "Each party must prove his own affirmative allegations." The last part of the same provision also provides that: "The burden of proof lies on the party who would be defeated if no evidence were given on either side." It must be brne in mind that in this jurisdiction, fraud is never presumed. FRAUS EST IdIOS ET NON PRAESUMENDA. 13 Indeed, private transactions are presumed to have been fair and regular. 14 Likewise, written contracts such as the documents executed by the parties in the instant case, are presumed to have been entered into for a sufficient consideration. 15
In a similar case of Villongco, et al., vs. Hon. Panlilio, et al., 16 a writ of preliminary attachment was issued ex parte in a case for damages on the strength of the affidavit of therein petitioners to the effect that therein respondents had concealed, removed or disposed of their properties, credits or accounts collectible to defraud their creditors. Subsequently, the lower court dissolved the writ of attachment. This was questioned in a certiorari proceeding wherein this Court held, inter alia, that: The affidavit supporting the petition for the issuance of the preliminary attachment may have been sufficient to justify the issuance of the preliminary writ, but it cannot be considered as proof of the allegations contained in the affidavit. The reason is obvious. The allegations are mere conclusions of law, not statement of facts. No acts of the defendants are ever mentioned in the affidavit to show or prove the supposed concealment to defraud creditors. Said allegations are affirmative allegations, which plaintiffs had the obligation to prove ... 17
It appears from the records that both herein private parties did in fact adduce evidence to support their respective claims. 18 Attached to the instant Petition as its Annex "H" 19 is a Memorandum filed by herein petitioner FILINVEST in the court below on March 20, 1979. After private respondent filed his Comment to the Petition, 20 petitioner filed a Reply 21 ,attaching another copy of the aforesaid Memorandum as Annex "A" 22 In this case on February 28, 1979 and March 1, 1979, the plaintiff (FILINVEST) presented in evidence documentary exhibits "marked Exhibit A, A- I, B, B-1, B-2, B-3, B-4, C, C-1, D, E, F, G and G-1. The Memorandum goes on to state that FILINVEST presented as its witness defendant Salazar himself who testified that he signed Exhibits A, B, C, D, E and G; that he is a holder of a master's degree in Business Administration and is himself a very careful and prudent person; that he does not sign post-dated documents; that he does not sign contracts which do not reflect the truth or which are irregular on their face, that he intended to purchase a school bus from Rallye Motors Co., Inc. from whom he had already acquired one unit; that he had been dealing with Abel Sahagun, manager of RALLYE, whom he had known for a long time that he intended to purchase the school bus on installment basis so he applied for financing with the FILINVEST; that he knew his application was approved; that with his experience as a business executive, he knew that under a financing arrangement, upon approval of his application, when he signed Exhibits A, B, C, D, E and G, the financing company (FILINVEST) would release the proceeds of the loan to RALLYE and that he would be obligated to pay the installments to FILINVEST; that he signed Exhibits A, B and C simultaneously; that it was his wife who was always transacting business with RALLYE and Abel Sahagun. 23
Without disputing the above summary of evidence, private respondent Salazar states in his Comment that "the same evidence proferred by (petitioner's) counsel was adopted by (private respondent) Ernesto Salazar during the proceedings. 24
According to the court a quo in its assailed order of April 4, 1979, Emesto Salazar "was himself defrauded because while he signed the promissory note and the chattel mortgage over the vehicle which he bought from Rallye Motors, RALLYE did not deliver to him the personal property he bought." And since no fraud was committed by Salazar, the court accordingly ordered the sheriff to return to Salazar the properties attached by virtue of the writ of preliminary attachment issued on August 17, 1977. We do not agree. Considering the claim of respondent Salazar that Rallye Motors did not deliver the motor vehicle to him, it follows that the Invoice, Exhibit "C", for the motor vehicle and the Receipt, Exhibit "G", for its delivery and both signed by Salazar, Exhibits "C-1 " and "G-1", were fictitious. It also follows that the Promissory Note, Exhibit "A", to pay the price of the undelivered vehicle was without consideration and therefore fake; the Chattel Mortgage, Exhibit "B", over the non-existent vehicle was likewise a fraud; the registration of the vehicle in the name of Salazar was a falsity and the assignment of the promissory note by RALLYE with the conforme of respondent Salazar in favor of petitioner over the undelivered motor vehicle was fraudulent and a falsification. Respondent Salazar, knowing that no motor vehicle was delivered to him by RALLYE, executed and committed all the above acts as shown the exhibits enumerated above. He agreed and consented to the assignment by RALLYE of the fictitious promissory note and the fraudulent chattel mortgage, affixing his signature thereto, in favor of petitioner FILINVEST who, in the ordinary course of business, relied on the regularity and validity of the transaction. Respondent had previously applied for financing assistance from petitioner FILINVEST as shown in Exhibits "E " and "E-1 " and his application was approved, thus he negotiated for the acquisition of the motor vehicle in question from Rallye Motors. Since he claimed that the motor vehicle was not delivered to him, then he was duty-bound to reveal that to FILINVEST, it being material in inducing the latter to accept the assignment of the promissory note and the chattel mortgage. More than that, good faith as well as commercial usages or customs require the disclosure of facts and circumstances which go into the very object and consideration of the contractual obligation. We rule that the failure of respondent Salazar to disclose the material fact of non-delivery of the motor vehicle, there being a duty on his part to reveal them, constitutes fraud. (Article 1339, New Civil Code). We hold that the court a quo committed grave abuse of discretion in dissolving and setting aside the writ of preliminary attachment issued on August 17, 1977. WHEREFORE, IN VIEW OF THE FOREGOING, the appealed Orders of the lower court dated February 2, 1979 and April 4, 1979 are hereby REVERSED and SET ASIDE. The temporary restraining order issued by Us on July 23, 1979 is hereby made permanent. No costs. Petition granted. SO ORDERED.
Miranda v. CA, 178 S 702 FIRST DIVISION G.R. No. 80030 October 26, 1989 ROGELIO A. MIRANDA, petitioner, vs. THE COURT OF APPEALS and SPOUSES ORLANDO A. RAYOS and MERCEDES T. RAYOS, respondents. Francisco E. Antonio for petitioner. Orlando A. Rayos for himself and for and in behalf of co-private respondent Mercedes T. Rayos.
CRUZ, J.: Challenged in this case is the decision of the Court of Appeals affirming the order of the trial court lifting a writ of attachment previously issued by it under Rule 57, Section 1 (d) of the Rules of Court. This provision authorizes the issuance of such writ: 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. The writ was issued in connection with a complaint for damages filed by the petitioner against the private respondents on January 2,1987. This was docketed as Civil Case No. 15639 in the Regional Trial Court of Makati, Branch 143, presided by Judge Socorro Tirona Liwag. The writ was later discharged by her on the finding that the private respondent could not be faulted with fraud under the aforecited provision of the Rules. In his complaint, the petitioner alleged that the spouses Orlando and Mercedes Rayos sold him a parcel of land on December 26,1985, for the sum of P250,000.00 under a Deed of Sale with Assumption of Mortgage prepared by Orlando Rayos, who is a lawyer. It is not denied that Miranda directly paid Rayos the sum of P150,000. 00 and thereafter also paid the first three quarterly amortizations in the total amount of P87,864.94 to the Philippine Savings Bank as the mortgagee on the loan contracted by Rayos. Miranda claims that the bank at first refused to accept his third quarterly payment but relented when he showed it the contract he had entered into with Rayos. However, when he offered to make the fourth and last payment on December 24,1986, the bank refused to accept it, informing him that Rayos had already made the payment and had asked it not to deliver the Torrens certificate of the mortgaged land to Miranda. This certificate was subsequently recovered by Rayos, who had since then refused to surrender it to him or to refund him the total amount of P267,088.61 which he said he had paid on their contract. On the basis of these allegations, the trial judge issued the writ of attachment Miranda had also prayed for. Rayos then filed a motion to discharge the attachment, claiming there was no proof that he had committed fraud in contracting the debt or incurring the obligation on which the complaint was based. After considering the arguments of the parties, Judge Liwag granted the motion in her order dated March 5, 1987, 1 which she subsequently affirmed in her order dated March 18, 1987 . 2 Miranda then went on certiorari to the respondent court, 3 which dismissed his petition for lack of merit in its decision dated September 9, 1987. 4
We affirm. The petitioner insists that there was a valid ground for the issuance of the writ of attachment because the Deed of Sale with Assumption of Mortgage prepared by Rayos was attended at the inception with fraud that brought it under the provision of Rule 57, Section 1(d) of the Rules of Court. That fraud consisted of the deception employed by Rayos in inveigling him to enter into the contract of sale without cautioning him that his assumption of mortgage might be disapproved by the Philippine Savings Bank. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
330 of 501
The Court cannot accept this contention in the light of the evidence of record. If at all and on this we do not rule categorically as the matter is yet to be litigated in the court a quo the fraud might have been committed by Rayos afterthe conclusion of the contract. However, such fraud is not covered by the aforesaid rule, let alone the fact that it has yet to be established. What is clear at this time is that Rayos cannot be said to have deluded Miranda into entering into the contract by taking advantage of his position as a lawyer and withholding necessary information from Miranda. Miranda insists he did not know any better as a layman. He complains that Rayos did not warn him that the assumption of mortgage would have to be approved by the Philippine Savings Bank and that their transaction would be nullified without such approval. He stresses that had he been properly warned, he would not have invested an initial payment of P150,000.00 and later made the three amortization payments of P87,864.94, not to mention the last quarterly payment he also remitted to the Bank. The private respondent's position is that he had in fact informed Miranda that the assumption of mortgage was subject to the approval of the mortgagee bank and that he had sent the petitioner the appropriate forms to accomplish. Miranda, for his part, maintains that such form was merely an application for individual loans and did not constitute the sufficient advise or warning that Rayos should have given him. On this point, the respondent court correctly affirmed the following findings of the trial court: The plaintiff, in his Comment on Compliance dated March 13, 1987 argued as follows: The "Application for Loan" form sent by defendant Orlando Rayos to plaintiff has no relevance and materiality to the assumption of defendant Rayos' loan account with defendant Philippine Savings Bank. That application form of PSB accomplished by plaintiff is strictly for individual loan application filed by plaintiff for P100,000.00 for himself. It does not constitute in any manner a "warning" or an "instruction" to plaintiff that it was incumbent upon plaintiff to get an express approval by the bank (PSB) for his assumption of Rayos' mortgage,... if by sending that application form of PSB to plaintiff, defendant Orlando Rayos wanted to inform plaintiff about the necessity to get or obtain the express approval of the assumption of mortgage from PSB, why did he not say in clear terms to the plaintiff? The Court finds this argument untenable. The Loan Application Form sent by defendant Rayos was actually filled up and signed by the plaintiff and his wife dated March 4, 1986. In said loan application, the amount of the loan appears as P100,000.00, the same amount as the mortgage to be assumed, the security offered also appears as TCT No. 100156 the same property bought by the plaintiff from the defendants with assumption of the mortgage in favor of the Philippine Savings Bank (See Deed of Sale with Assumption of Mortgage, par. 2(6), Annex "D", Complaint). How can the plaintiff now say that the Application for Loan form sent by the defendant to plaintiff "has no relevance and materiality to the assumption of the defendant Rayos' loan account with defendant Philippine Savings Bank." It appears from the Loan Application and the General Information Sheet in connection with said Loan Application which the plaintiff and his wife also signed that the plaintiff and his wife are both degree holders and the plaintiff is the Acting Municipal Treasurer of the Municipality of Las Pinas. There is every reason to believe, therefore, that they understood what the Loan Application Form given to them by the defendant was for and there was no necessity for the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
331 of 501
defendant to state "in clear terms" that there was a need to apply to the bank in order for them to assume the mortgage. The above findings are entirely logical and belie the petitioner's pretensions that he was completely duped as if he were a babe in arms. Being a layman did not excuse him from knowledge of the basic principles involved in this case of which he feigns total ignorance. Moreover, the evidence shows that he was in fact informed of the need for the approval of the assumption of mortgage and actually sought to secure such approval although unsuccessfully. This shows that no fraud was imposed on him by Rayos when they entered into the Deed of Sale with Assumption of Mortgage, which also means that there was really no ground for the issuance of the writ of attachment. As the writ of attachment was improperly granted, it was only fitting that it be discharged by the trial court in rectification of its initial error. Hence, there was no need at all for the private respondent to post a counterbond. Finally, we also agree with the respondent court that the order lifting the attachment being merely interlocutory, it should not have been questioned on certiorari. This extraordinary remedy is available only when there is a clear showing of a grave abuse of discretion amounting to lack of jurisdiction, and there is no such showing here. WHEREFORE, the petition is DENIED with costs against the petitioner. It is so ordered.
Adlawan v. Torres, 233 S 645 (see under Section 1 page 39)
Peroxide Philippines Corp. v. CA, 199 S 882 SECOND DIVISION G.R. No. 92813 July 31, 1991 PEROXIDE PHILIPPINES CORPORATION, EASTMAN CHEMICAL INDUSTRIES, INC., EDMUNDO O. MAPUA and ROSE U. MAPUA, petitioners, vs. HON. COURT OF APPEALS and BANK OF THE PHILIPPINE, ISLANDS, respondents. Antonio P. Barredo for petitioners. Padilla Law Office for private respondent.
REGALADO, J.:p Assailed in this petition for review on certiorari are the decision 1 of respondent Court of Appeals, promulgated on September 4, 1989 in CA-G. R. SP No. 15672, granting the petition for certiorari filed by private respondent, and its resolution 2 of March 29, 1990 denying petitioners' motion for reconsideration. On December 6, 1982, herein private respondent Bank of the Philippine Islands (BPI) sued herein petitioners Peroxide Philippines Corporation (Peroxide), Eastman Chemical Industries, Inc. (Eastman), and the spouses Edmund O. Mapua and Rose U. Mapua (Mapuas) in Civil Case No. 48849 of the then Court of First Instance of Pasig, Metro Manila for the collection of an indebtedness of Peroxide wherein Eastman and the Mapuas bound themselves to be solidarily liable. Upon the filing of said action, the trial court, then presided over by Judge Gregorio G. Pineda, ordered the issuance of a writ of preliminary attachment which was actually done on January 7, 1983 after BPI filed an attachment bond in the amount of P32,700,000.00. Petitioners' properties were accordingly attached by the sheriff. On January 11, 1983, Eastman and the Mapuas moved to lift the attachment, which motion was set for hearing on January 14, 1983. On said date and on motion of BPI, it was granted up to January 17, 1983 to file a written opposition to the motion to lift the writ of attachment. BPI also filed a motion to set for hearing the said motion to lift attachment and its opposition thereto. However, on January 17, 1983, Judge Pineda issued two (2) orders, the first, denying BPI's motion for a hearing, and, the second, lifting the writ of attachment as prayed for by Eastman and the Mapuas. BPI filed a motion for reconsideration but, consequent to the then judiciary reorganization, the case was re-raffled and assigned to the sala of Judge Pastor Reyes. On November 28, 1983, Judge Reyes issued an order with an explicit finding that the attachment against the properties of Eastman and the Mapuas was proper on the ground that they had disposed of their properties in fraud of BPI. It also directed the sheriff to implement the writ of attachment upon the finality of said order. After a motion for partial reconsideration by BPI and some exchanges between the parties, on December 17, 1984 the trial court, this time with Judge Eficio B. Acosta presiding, issued an order granting BPI's motion for partial reconsideration by finding, inter alia, that "(c)onsidering the lapse of more than a year since the Order of November 28, 1983 and the nature and purpose of attachment, the writ of attachment revived in the Order of November 28, 1983 and hereby re-affirmed may be executed and implemented immediately," and directing the sheriff to execute said writ which "is hereby declared immediately executory." 3
Contending that said order of December 17, 1984 was rendered with grave abuse of discretion amounting to lack of jurisdiction, petitioners sought the annulment thereof in a petition for certiorari and prohibition in AC-G.R. SP No. 05043 of the Intermediate Appellate Court, wherein a temporary PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
333 of 501
restraining order was issued. This restraining order was lifted when said court rendered its decision in said case on March 14, 1986 4 dismissing the petition and holding, among others, that: We find nothing wrong with the attachment of the properties of PEROXIDE. Even were We to assume that the original petition for attachment was defective for failure to specify the particular transactions involved in the alleged "alienation" of PEROXIDE's properties, the fact is that the defect, if any, was cured by the other pleadings (like the opposition or virtual amendment) filed by BANK With such amendment, the specific properties concerned were distinctly enumerated. 5
Petitioners then sought the review of said decision by this Court in G.R. No. 74558, but no temporary restraining order was granted therein. In the meantime, on May 29, 1986, Judge Acosta issued an order 6 suspending the writ of preliminary attachment in the aforesaid Civil Case No. 48849 pursuant to an ex parte motion filed by herein petitioners. Thereafter, in its resolution dated October 27, 1986, this Court denied the aforesaid petition for review on certiorari"considering that the writ of preliminary attachment issued was in accordance with law and applicable jurisprudence." 7 Petitioners' motion for reconsideration was denied with finality in our resolution of October 6, 1987. 8
Dissatisfied, petitioners again filed an urgent motion for clarification submitting that the Court failed to pass upon two issues, namely: (1) whether Eastman and the Mapuas were sureties or mere guarantors of Peroxide, and (2) whether Rose U. Mapua was bound by the "Continuing Guarantee" executed by her husband, Edmund O. Mapua. Acting upon said motion, on November 10, 1987 the Court resolved to deny the same for the reason, among others, that the clarification sought regarding the propriety of the attachment of the properties of Eastman and the Mapuas involves questions of fact. 9
On July 30, 1987, BPI filed a motion to order Bataan Pulp and Paper Mills, Inc. (Bataan), jointly and severally with petitioners, to deliver to the sheriff the cash dividends declared on the garnished shares of stock of said petitioners with said paper company, and to cite for contempt the officers of Bataan for releasing and/or paying the dividends to petitioners in disregard of the notice of garnishment. In an exhaustive order dated December 16, 1987, 10 the trial court, now presided over by Judge Fernando L. Gerona, Jr. and wherein Civil Case No. 48849 was then pending, addressing all the issues raised by the parties, granted BPI's motion for delivery of the dividends. Judge Gerona sustained the position of BPI that dividends are but incidents or mere fruits of the shares of stock and as such the attachment of the stock necessarily included the dividends declared thereon if they were declared subsequent to the notice of garnishment. He further held that the preliminary attachment, being a provisional remedy, must necessarily become effective immediately upon the issuance thereof and must continue to be effective even during the pendency of an appeal from a judgment of the court which issued the said provisional remedy and will only cease to have effect when the judgment is satisfied or the attachment is discharged or vacated in some manner provided by law. The motion to cite the officers of Bataan was, however, denied. Petitioners moved for reconsideration but the same was denied for the reason that the order of May 29, 1986 of Judge Acosta was based on an ex parte motion without reasonable notice, hence a patent nullity for lack of due process. Accordingly, the aforesaid order of December 16, 1987 held that the writ of attachment continued to be effective. 11
Petitioners thereafter filed a second motion for reconsideration which, however, remained pending and unresolved when Judge Gerona inhibited himself from further sitting in the case. Said case was then re-raffled to the sala of Judge Jainal D. Rasul who required the parties to re-summarize their respective positions upon the issue of the attachment. Then, resolving the pending incidents before it, the court a quo issued the disputed order of August 23, 1988, which states,inter alia that: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
334 of 501
THIS Court thru Judge Gerona had arrived at the correct conclusion that the contempt charge against the Officers of the Garnishee Corporation cannot be sustained, for the reason that they relied on the Order of the Court thru Judge Acosta under date of May 29, 1986 suspending the Writ of Attachment and since said order was not then set aside, there was no order or writ violated by said officers. It follows a fortiori that the release of the cash dividends was valid, legal and not contemptuous. Consequently, there is no reason to justify or deserve the return of cash dividends prayed for by the plaintiff. Besides, the propriety of the attachment of the properties of the defendant Eastman Chemical Industries, Inc., and defendant Mapua Spouses should still be determined by this Court as a question of fact, pursuant to the Supreme Court resolution dated November 23, 1987. Meanwhile, it is only fair that the properties of the Eastman Chemical Industries, Inc. and the defendants Mapua spouses should not, pending such proper determination, be attached as to give life and meaning to the Supreme Court resolution of November 23, 1987. SO ORDERED. 12
BPI moved for the reconsideration of said order. Thereafter, it learned that Bataan had again declared a cash dividend on its shares payable on or before September 30, 1988. Furthermore, Bataan informed BPI that it would be releasing to Eastman and Edmund O. Mapua the cash dividends on their shares on September 23, 1988 on the strength of the order of the trial court of August 23, 1988. Consequently, BPI filed an urgent ex parte motion on September 19, 1988 for the suspension of the effects of the trial court's order of August 23, 1988 in view of the pending motion for reconsideration it had filed against said order. In an order likewise dated September 19, 1988, the trial court denied BPI's motion for suspension of the order of August 23, 1988. 13
BPI then filed a petition for certiorari in respondent court, docketed therein as CA-G.R. SP No. 15672, invoking the following grounds: 1. The trial court acted with grave abuse of discretion in denying BPI's urgent ex parte motion to suspend the order of August 23, 1988; 2. The order of September 19, 1988 renders moot and academic BPI's pending motion for reconsideration; 3. The lower court erroneously held that the writ of attachment secured by BPI had ceased to be valid and effective or had been suspended by virtue of its orders of January 17, 1983 and May 29, 1986; 4. The trial court committed grave abuse of discretion when it nullified the writ of attachment as against Eastman and the Mapuas; 5. There is no inconsistency between the resolution of the Supreme Court dated October 27, 1986 and its subsequent resolution of November 10, 1987; 6. The attachment can validly issue against the conjugal properties of the Mapuas; and 7. The trial court disregarded the clear and unequivocal records of the case when it issued its order of August 23, 1988. 14
Ruling on these issues, respondent Court of Appeals declared: WHEREFORE, the petition for certiorari is hereby GRANTED. Judgment is hereby rendered as follows: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
335 of 501
(a) Declaring the writ of preliminary attachment against the defendants Eastman Chemical Industries, Inc. and the spouses, Edmund and Rose Mapua valid and enforceable from the beginning, without prejudice to determining the solidary liability of said defendants with defendant Peroxide Philippines Corporation; (b) Setting aside the Order of August 23, 1988 insofar as it decreed that the cash dividends declared or the garnished shares of stocks (sic) of the defendants with Bataan Pulp and Paper Mills, Inc. are not subject to attachment; (c) Ordering the defendants and the Bataan Pulp and Paper Mills, Inc., jointly and severally, to deliver to the sheriff the cash dividends as may hereafter be declared and paid on the garnished shares of stock; (d) Setting aside the Order of September 19, 1988. With costs against private respondents. SO ORDERED. 15
Their motion for reconsideration having been denied, petitioners are once again before us on this spin-off facet of the same case, contending that respondent court has departed from the accepted and usual course of judicial proceedings. 1. As correctly formulated by respondent court, the threshold issue is the validity of the attachment of the properties of Eastman and the Mapuas, from which arises the correlative question of whether or not the disputed cash dividends on the garnished shares of stock are likewise subject thereto. Necessarily involved is the matter of the continuing validity of the writ or whether or not the same was validly lifted and suspended by the lower court's orders dated January 17, 1983 and May 29, 1986, respectively. BPI asserts that the discharge is illegal and void because the order lifting the same is violative of Section 13, Rule 57 of the Rules of Court which requires, among others, a prior hearing before the judge may order the discharge of the attachment upon proof adduced therein of the impropriety or irregularity in the issuance of the writ and the defect is not cured forthwith. We may mention in this regard that if the petition for the discharge of the writ violates the requirements of the law, the trial judge does not acquire jurisdiction to act thereon. 16
It is true that petitioner's motion to discharge was set for hearing with notice to BPI but it is likewise true that counsel for the latter asked for an opportunity to file a written opposition and for a hearing to which he asked that petitioner Edmund O. Mapua be subpoenaed. Said counsel was allowed to file a written opposition which he seasonably did, but Judge Pineda denied both the requested subpoena and hearing and, instead, granted the discharge of the attachment. These are the bases for BPI's complaint that it was denied due process. 17
Now, it is undeniable that when the attachment is challenged for having been illegally or improperly issued, there must be a hearing with the burden of proof to sustain the writ being on the attaching creditor. 18 That hearing embraces not only the right to present evidence but also a reasonable opportunity to know the claims of the opposing parties and meet them. The right to submit arguments implies that opportunity, otherwise the right would be a barren one. It means a fair and open hearing. 19 And, as provided by the aforecited Section 13 of Rule 57, the attaching creditor should be allowed to oppose the application for the discharge of the attachment by counter- affidavit or other evidence, in addition to that on which the attachment was made. Respondent court was, therefore, correct in holding that, on the above-stated premises, the attachment of the properties of Eastman and the Mapuas remained valid from its issuance since the judgment had not been satisfied, nor has the writ been validly discharged either by the filing of a counterbond or for improper or irregular issuance. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
336 of 501
We likewise affirm the findings and conclusion of respondent court that the order of Judge Acosta, dated May 29, 1986, suspending the writ of attachment was in essence a lifting of said writ which order, having likewise been issued ex parteand without notice and hearing in disregard of Section 13 of Rule 57, could not have resulted in the discharge of the attachment. Said attachment continued unaffected by the so-called order or suspension and could not have been deemed inefficacious until and only by reason of its supposed restoration in the order of December 16, 1987 of Judge Gerona. Under the facts of this case, the ex parte discharge or suspension of the attachment is a disservice to the orderly administration of justice and nullifies the underlying role and purpose of preliminary attachment in preserving the rights of the parties pendente lite as an ancillary remedy. We, therefore, sustain the position of BPI that the Court of Appeals, in its judgment presently under challenge, did not err in upholding the continuing and uninterrupted validity and enforceability of the writ of preliminary attachment issued in Civil Case No. 48849 since the order of discharge and, later, the order of suspension of the trial court were void and could not have created the operational lacuna in its effectivity as claimed by petitioners. Further, the cancellation of the annotations regarding the levy on attachment of petitioners' properties, procured by the sheriff pursuant to the aforesaid invalid orders, is likewise a nullity and another levy thereon is not required. We observe, however, that the records do not disclose the lifting of the levy on the Bataan shares of Eastman and the Mapuas and on their real properties in Caloocan City. 2. Petitioners next call attention to the fact that when the order of Judge Acosta of December 17, 1984, which directed the immediate execution and implementation of the writ of attachment, was brought on a petition for certiorari and prohibition to the Intermediate Appellate Court in AC-G.R. SP No. 05043, said court issued a temporary restraining order. They allege that although the restraining order was lifted by said appellate court in its decision in the case on March 14, 1986, the same was reinstated by the court "until further orders" in its order of April 24, 1986 in connection with petitioners' motion for reconsideration therein. On May 14, 1986, respondent court denied the motion for reconsideration but, so petitioners insist, "without, however, stating that it was lifting its restraining order." When the case went on review to this Court in G.R. No. 74558, no mention was made regarding said restraining order. Hence, petitioners assert, the said restraining order had not been lifted, in effect arguing that the writ of attachment cannot be implemented as a consequence. This misleading argument is confuted by the records in AC-G.R. SP No. 05043. In its aforesaid resolution of April 24, 1986, the appellate court stated that "(a)s of this date, April 23, 1986, the motion for reconsideration could not be considered in view of the absence of the comment of the private respondents." Hence, the court directed that "(i)n order to maintain the status quo of the parties, . . . the restraining order issued by us on December 28, 1984 is hereby revived and made effective until further orders." 20
Thereafter, finding no merit in the motion for reconsideration, the court denied the same, declaring that "(w)ith this resolution, we find no need in resolving the Urgent Motion to Reconsider and set aside Resolution of April 24, 1985 (sic, 1986) filed by the private respondent BPI and the other incidents still pending resolution." 21
All incidents in AC-G.R. SP No. 05043 having been disposed of, it follows that the temporary restraining order which had been expressly lifted in the decision therein, and which was merely temporarily reinstated for purposes of the motion for reconsideration that was ultimately denied, was also necessarily lifted. Parenthetically, said temporary restraining order, not having been supplanted by a writ of preliminary injunction, could not have had an effectivity of more than twenty (20) days, 22 and this limitation applies to temporary restraining orders issued by the Court of Appeals. 23
3. We reject petitioners' theory that the preliminary attachment is not applicable to Eastman and the Mapuas. The writ was issued in Civil Case No. 48849 against the properties of all the petitioners herein. Eastman and the Mapuas moved for the discharge of the attachment on the ground that they were not disposing of their properties in fraud of creditors, but they did not raise the issue of their liabilities as being allegedly those of mere guarantors. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
337 of 501
They did so only when this Court resolved on October 27, 1986 that the writ of preliminary attachment was issued in accordance with law and applicable jurisprudence. 24
Also, what was considered in AC-G.R. SP No. 05043 and thereafter in G.R. No. 74558 was the matter of the validity of the attachment against Eastman and the Mapuas, considering that, even before the proceedings had reached the Intermediate Appellate Court in AC-G.R. SP No. 05043, BPI no longer had any attachment against Peroxide whose only remaining asset in Bulacan had been levied upon and acquired by its other creditors when Judge Pineda lifted the attachment obtained by BPI. Petitioners seek to capitalize on a passage in the decision in AC-G.R. SP No. 05043, hereinbefore quoted, where the appellate court stated that "(w)e find nothing wrong with the attachment of the properties of PEROXIDE," without mentioning Eastman and the Mapuas. This was clearly in the nature of peccata minuta, a plain case of harmless oversight, since the properties referred to in the decision as having been alienated in fraud of BPI were properties of Eastman and the Mapuas, not of Peroxide. In fact, as pointed out by private respondent, petitioners' own motion for reconsideration of March 24, 1986 filed in said case specifically adverted to that prefatory statement as being equivocal, with the following observation: "Actually no properties of Peroxide had been attached. What were attached were properties of Eastman and Rose Mapua." 25 Private respondent further invites attention to the petition for certiorari in G.R. No. 74558, against the decision in AC-G.R. SP No. 05043, wherein, assailing the aforequoted statement therein, petitioners aver: As can be seen the paragraph begins with the holding that there is nothing wrong with the attachment of properties of Peroxide. This holding on its face is limited only to the upholding of attachment against the properties of petitioner Peroxide. And yet the alienations mentioned in the subsequent sentences do not refer to dispositions of properties of Peroxide and by Peroxide. A cursory glance of records will show that they refer to dispositions alleged to have been fraudulently made by Eastman Chemical Industries, Inc. and Edmund Mapua. Relating this point to the dispositive portion which in effect sustains the attachment issued by the trial court not only against Peroxide, but also against Eastman and Mapua spouses. 26
4. As earlier narrated, this Court denied the petition for review on certiorari in G.R. No. 74558, and when petitioners persisted in seeking a clarification as to the nature of the liability of Eastman and the Mapuas, the Court denied the same on the ground that the clarification sought involves questions of fact. As observed by respondent Court of Appeals, the aforesaid ruling was erroneously construed by the lower court when it declared that the properties of Eastman and the Mapuas should not, pending proper determination, be attached. In doing so, the court below virtually lifted or discharged the attachment even before its propriety had been determined. We sustain respondent court's ratiocination in its decision under review that when petitioners sought clarification from us regarding the propriety of the attachment on the properties of Eastman and the Mapuas, and we said that this involves a question of fact, what this means is that the court a quo should determine the propriety or regularity thereof, and such determination can only be had in appropriate proceedings conducted for that purpose. However, until such attachment has been found to be improper and irregular, the attachment is valid and subsisting. Thus, as correctly posited by BPI, before the determination of the liability of Eastman and the Mapuas after trial on the merits, the writ of preliminary attachment may properly issue. Even assuming that when Eastman and the Mapuas asked for the lifting of the attachment they presented evidence that they were guarantors and not sureties of Peroxide, the trial court could not have admitted such evidence or ruled upon that issue since the same could be entertained only after a full-blown trial and not before then. 27 Otherwise, we would have the procedural absurdity wherein the trial court would be forced to decide in advance and preempt in an auxiliary proceeding an issue which can and should be determined only in a trial on the merits. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
338 of 501
The proceeding in the issuance of a writ of preliminary attachment, as a mere provisional remedy, is ancillary to an action commenced at or before the time when the attachment is sued out. Accordingly the attachment does not affect the decision of the case on the merits, the right to recover judgment on the alleged indebtedness and the right to attach the property of the debtor being entirely separate and distinct. As a rule, the judgment in the main action neither changes the nature nor determines the validity of the attachment. 28 At any rate, whether said petitioners are guarantors or sureties, there exists a valid cause of action against them and their properties were properly attached on the basis of that indubitable circumstance. 5. Petitioners bewail the fact that respondent court allegedly handled the certiorari case, CA-G.R. SP No. 15672 now on appeal before us, as if it were a petition for review on certiorari by passing upon what they submit should be considered as errors of judgment and not errors of jurisdiction. From the foregoing disquisition, however, it is readily apparent that the petition in said case faults the orders of the trial court as tainted with grave abuse of discretion equivalent to a jurisdictional flaw. The errors assigned necessarily involved a discussion of erroneous conclusions and/or lack of factual bases much beyond the pale of mere errors of judgment or misperception of evidence, and dwelt on the improvident issuance of orders clearly arbitrary and oppressive for being in defiance of the rules and devoid of justifying factual moorings. We cannot, therefore, share the sentiments and stance of petitioners on this score. Neither do we subscribe to petitioners' charge that respondent court injudiciously gave due course to the aforesaid petition for certiorari without requiring the prior filing and resolution of a motion for the reconsideration of the questioned orders of the trial court. There are, admittedly, settled exceptions to that requisite and which obtain in the present case. A motion for reconsideration was correctly dispensed with by respondent court since the questions raised in the certiorari proceeding had been duly raised and passed upon by the lower court. 29 Also, under the circumstances therein, a motion for reconsideration would serve no practical purpose since the trial judge had already had the opportunity to consider and pass upon the questions elevated on certiorari to respondent court. 30
FOR ALL THE FOREGOING CONSIDERATIONS, the petition at bar is DENIED and the judgment of respondent Court of Appeals is hereby AFFIRMED. SO ORDERED.
Uy v. CA, 191 S SECOND DIVISION G.R. No. 83897 November 9, 1990 ESTEBAN B. UY JR. and NILO S. CABANG, petitioners, vs. THE HONORABLE COURT OF APPEALS, WILSON TING, and YU HON. respondents. E.P. Mallari & Associates for petitioners. Elpidio G. Navarro for private respondents.
PARAS, J.: This is a petition for review on certiorari seeking to reverse the decision ** which dismissed CA-G.R. No. SP-05659 forcertiorari and Prohibition with Preliminary Injunction and/or Restraining Order filed by petitioner seeking to annul and set aside the two Orders dated August 24, 1982 and October 10, 1983 issued by the then Court of First Instance of Rizal Branch LII *** (now Regional Trial Court of Quezon City Branch XCLVll ****) in Civil Case No. Q-35128, granting a writ of preliminary attachment and directing the sheriff assigned therein to attach the properties of defendants Uy and Cabang (herein petitioners); and denying defendants' motion to dismiss. The antecedent facts of the case as found by the Court of Appeals are as follows: On March 24, 1982, Esteban B. Uy, Jr. (herein petitioner) filed a complaint against Sy Yuk Tat for sum of money, damages, with preliminary attachment, docketed as Civil Case No. Q- 34782 ("the first case" for short) in the then Court of First Instance of Rizal, Branch LII, Quezon City (the case was later assigned to the Regional Trial Court of Quezon City, Branch XCVII now presided over by respondent Judge). On the same day, upon plaintiff filing a bond of P232,780.00 said court issued a writ of preliminary attachment and appointed Deputy Sheriff Nilo S. Cabang (co-petitioner herein) as Special Sheriff to implement the writ. On April 6, 1982, the same court issued a break-open order upon motion filed by petitioner Uy. On the following day, April 7, 1982, petitioner Cabang began to implement the writ of preliminary attachment as the Special Sheriff on the case. On April 19, 1982, petitioner Cabang filed a Partial Sheriffs Return, stating, inter alia: xxx xxx xxx That in the afternoon of April 12, 1982, the undersigned together with Atty. Lupino Lazaro, plaintiff's counsel and the members of the same team proceeded to No. 65 Speaker Perez St., Quezon City, and effected a physical and actual count of the items and merchandise pointed to by the Ting family as having been taken from the Mansion Emporium and nearby bodega which are as follows: a) 329 boxes of "GE" Flat Iron, each box containing 6 pcs. each; b) 229 boxes of Magnetic Blank Tapes with 48 pcs. each; PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
340 of 501
c) 239 boxes of floor polishers marked "Sanyo" d) 54 boxes of floor polishers marked "Ronson" xxx xxx xxx On April 12, 1982, a third party claim was filed by Wilson Ting and Yu Hon (private respondents herein) in the same Civil Case No. Q-34782, addressed to petitioner Cabang asserting ownership over the properties attached at No. 65 Speaker Perez St., Quezon City (other than those attached at No. 296 Palanca St., Manila). The third party claim specifically enumerated the properties, as reflected in the Partial Sheriffs Return dated April 1 3, 1 982, belonging to the plaintiffs (private respondents herein). On the same day that petitioner Cabang filed his Partial Sheriffs Return (April 19, 1982) the third party claimants and Yu filed a motion to dissolve the aforementioned writ of preliminary attachment in the same Civil Case No. Q-34782; alleging among others, that being the absolute owners of the personal properties listed in their third party claim which were illegally seized from them they were willing to file a counterbond for the return thereof; which motion was opposed by plaintiff Uy. On April 29, 1982, then CFI Judge Jose P. Castro rendered judgment by default in said Civil Case No. Q-34782 in favor of plaintiff Uy. Meanwhile, on May 5, 1982, third party claimants Wilson Ting and Yu Hon filed a complaint for Damages with application for preliminary injunction against Esteban Uy and Nilo Cabang (co-petitioners herein) in the then Court of First Instance of Rizal, Branch 52, Quezon City ('the court a quo' for short) which case was docketed as Civil Case No. Q- 35128 ('the second case' for short). The complaint alleged inter alia that the plaintiffs are the owners of the personal properties reflected in the Partial Sheriffs Return dated April 13, 1983 which have been attached and seized by defendant Cabang. In this second civil case, the court a quo (then presided over by CFI Judge Concepcion B. Buencamino) issued an order on May 5, 1982, stating among other things, the following: Considering that it will take time before this Court could act upon said prayers for the issuance of a Writ of Preliminary Injunction, the parties are hereby ordered to maintain the STATUS QUO in this case with respect to the properties attached and subject of this action alleged to belong to the plaintiffs" (Rollo, p. 133) Meanwhile, in the first case, where a judgment by default had been rendered, the first court issued an order striking off from the records all pleadings filed by the third party claimants. With respect to the case in the court a quo, defendants Uy and Cabang filed their answer with counterclaim. Meanwhile, in the first case, plaintiff Uy on June 7, 1982, filed an ex-parte motion for writ of execution which was granted the following day, June 8, 1982. On the same day (June 7, 1982) that plaintiff Uy filed his exparte motion for writ of execution he and Cabang filed a motion to PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
341 of 501
quash or dissolve status quo order in the case a quo as defendants therein on the ground that the court "has no jurisdiction to interfere with properties under custodia legis on orders of a court of co-equal and co-ordinate jurisdiction" and that plaintiffs' complaint is not for recovery of properties in question. On June 24, 1982, plaintiff Uy in the first case filed his ex parte motion to authorize Sheriff to sell the attached properties enumerated in Sheriff Cabang's partial return filed on April 19, 1982, on the ground that the properties under custodia legis were perishable especially those taken from No. 65 Speaker Perez, Quezon City. Subsequently, on July 2, 1982, in the case a quo the court denied defendants', Uy and Cabang, motion to quash or dissolve the status quo order. Meanwhile, the first case on July 12, 1982, Cabang filed another partial sheriffs return this time stating among others that the judgment in that case had been partially satisfied, and that in the public auction sale held on July 6, 1982, certain personal properties had been sold to plaintiff Esteban Uy, Jr., the winning bidder for P15,000.00 while the other properties were sold in the amount of P200,000.00 in cash with Bernabe Ortiz of No. 97 Industrial Avenue, Northern Hill, Malabon Manila as the highest bidder. Back to the case a quo, on August 23, 1982, plaintiffs Ting and Yu Hon filed a motion for preliminary attachment alleging this ground: "In the case at bar, which, is one 'to recover possession of personal properties unjustly detained, ... the property... has been ... removed ... (and) disposed of to prevent its being found or taken by the applicant or an officer" and/or said defendants are guilty of fraud in disposing of the property for the taking, (or) detention ... of which the action is brought (Sec. 1(c) and (d), Rule 57, Rules of Court) Acting on such motion the court a quo, on August 24, 1 982, issued the disputed order granting the writ of preliminary attachment prayed for by the plaintiffs (Wilson Ting and Yu Hon), stating that: Let a writ of preliminary attachment issue upon the plaintiffs putting up a bond in the amount of P1,430,070.00, which shall be furnished to each of the defendants with copies of the verified application therewith, and the sheriff assigned to this court, Danilo Del Mundo, shall forthwith attach such properties of the defendants not exempt from execution, sufficient to satisfy the applicants' demand. (Rollo, p. 247) On August 31, 1982, in the same case a quo, defendant Uy filed an urgent motion to quash and/or dissolve preliminary attachment which motion was opposed by plaintiffs Ting and Yu Hon. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
342 of 501
About half a year later, on February 21, 1982, in the case a quo, defendant Uy filed a motion for preliminary hearing on affirmative defenses as motion to dismiss. Following an exchange of subsequent papers between the parties, the court a quo issued the other disputed order which denied defendant Uy's motion to dismiss on October 10, 1983. The motion to quash was also denied by the court a quo on December 9, 1983. Defendant Uy filed a motion for reconsideration on both Orders. Finally, on February 15, 1985, respondent Judge issued two Orders denying both motions for reconsideration. (CA decision, Rollo, p. 109- 122) Thereafter, petitioners Esteban Uy, Jr. and Nilo Cabang filed with the Court of Appeals a petition for Certiorari and Prohibition with prayer for a Writ of Preliminary Injunction or a Restraining Order to annul and set aside the two orders issued by the then CFI of Rizal Branch 52. In its decision, the Court of Appeals dismissed the petition, the dispositive portion of which reads: WHEREFORE, finding respondent Judge not to have committed a grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the order dated August 24, 1982, denying petitioners' motion to quash the writ of preliminary attachment, and the order dated October 10, 1983, denying petitioners' motion to dismiss the complaint a quo, we hereby deny the instant petition, and therefore dismiss the same. No pronouncement as to cost. (Rollo, pp. 132-133) Hence, the instant petition. In the resolution of October 16, 1989, the Court gave due course to the petition and required both parties to submit simultaneous memoranda within thirty days from notice (Rollo, p. 190). Private respondents filed their memorandum on December 6, 1989 (Ibid., p. 192) while petitioners filed their memorandum on January 5, 1990 (Ibid., p. 208) The main issue in this case is whether or not properties levied and seized by virtue of a writ of attachment and later by a writ of execution, were under custodia legis and therefore not subject to the jurisdiction of another co- equal court where a third party claimant claimed ownership of the same properties. The issue has long been laid to rest in the case of Manila Herald Publishing Co. Inc. v. Ramos (88 Phil. 94 [1951]) where the Court filed that while it is true that property in custody of the law may not be interfered with, without the permission of the proper court, this rule is confined to cases where the property belongs to the defendant or one in which the defendant has proprietary interests. But when the Sheriff, acting beyond the bounds of his office seizes a stranger's property, the rule does not apply and interference with his custody is not interference with another court's order of attachment. Under the circumstances, this Court categorically stated: It has been seen that a separate action by the third party who claims to be the owner of the property attached is appropriate. If this is so, it must be admitted that the judge trying such action may render judgment ordering the sheriff or whoever has in possession of the attached property to deliver it to the plaintiff claimant or desist from seizing it. It follows further that the court may make an interlocutory order, upon the filing of such bond as may be necessary, to release the property pending final adjudication of the title. Jurisdiction over an action includes jurisdiction on interlocutory matter incidental to the cause and deemed necessary to preserve the subject matter of the suit or protect PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
343 of 501
the parties' interests. This is self-evident. (Manila Herald Publishing Co. Inc. v. Ramos, supra). The foregoing ruling was reiterated in the later case of Traders Royal Bank v. IAC (133 SCRA 141 [1984]) and even more recently in the case of Escovilla v. C.A. G.R. No. 84497, November 6, 1989, where this Court stressed: The power of the court in the execution of judgments extends only over properties unquestionably belonging to the judgment debtor. The levy by the sheriff of a property by virtue of a writ of attachment may be considered as made under the authority of the court only when the property levied upon belongs to the defendant. If he attaches properties other than those of the defendant, he acts beyond the limits of this authority. The court issuing a writ of execution is supposed to enforce its authority only over properties of the judgment debtor. Should a third party appear to claim the property levied upon by the sheriff, the procedure laid down by the Rules is that such claim should be the subject of a separate and independent action. Neither can petitioner complain that they were denied their day in court when the Regional Trial Court issued a writ of preliminary attachment without hearing as it is well settled that its issuance may be made by the court ex parte. As clearly explained by this Court, no grave abuse of discretion can be ascribed to respondent Judge in the issuance of a writ of attachment without notice to petitioners as there is nothing in the Rules of Court which makes notice and hearing indispensable and mandatory requisites in its issuance. (Filinvest Credit Corp. v. Relova, 117 SCRA 420 [1982]; Belisle Investment & Finance Co. Inc. v. State Investment House, Inc. 151 SCRA 631 [1987]; Toledo v. Burgos, 168 SCRA 513 [1988]). In addition, petitioner's motion to quash or discharge the questioned attachment in the court a quo is in effect a motion for reconsideration which cured any defect of absence of notice. (Dormitorio v. Fernandez, 72 SCRA 388 [1976]). Estoppel is likewise unavailing in the case at bar by the mere fact that private respondent Ting (complainant in the court a quo) pointed the items and merchandise taken from the Mansion House and nearby Bodega which were levied and hauled by Special Sheriff Cabang, where in the report of said Sheriff made earlier on April 6, 1982, he stated that on the same occasion referred to in his Partial Return, private respondents denied Sy Yuk Tat's ownership over the goods in question. (Rollo, pp. 203-204). In like manner, the sale of the disputed properties at the public auction, in satisfaction of a judgment of a co-equal court does not render the case moot and academic. The undeviating ruling of this Court in such cases is that attachment and sale of properties belonging to a third person is void because such properties cannot be attached and sold at public auction for the purpose of enforcing a judgment against the judgment debtor. (Orosco v. Nepomuceno, 57 Phil. 1007 [1932-33]). The other issues in this case deserve scant consideration. On the issue of the expiration of the restraining order, there is no argument that the life span of the status quo order automatically expires on the 20th day and no judicial declaration to that effect is necessary (Paras v. Roura, 163 SCRA 1 [1988]). But such fact is of no consequence in so far as the propriety of the questioned attachment is concerned. As found by the Court of Appeals, the grounds invoked by respondents for said attachment did not depend at all upon the continuing efficacy of the restraining order. As to petitioner's contention that the complaint filed by private respondent in the lower court is merely seeking an ancillary remedy of injunction which is not a cause of action itself, the Court of Appeals correctly observed that the object of private respondents' complaint is injunction although the ancillary remedy of preliminary injunction was also prayed for during the pendency of the proceeding. Finally, the non-joinder of the husband of private respondent, Yu Hon as well as her failure to verify the complaint does not warrant dismissal of the complaint for they are mere formal requirements which could be immediately PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
344 of 501
cured without prejudice to the rights of the petitioners. This Court frowns on the resort to technicalities to defeat substantial justice. Thus, the Court states that the rules of procedure are intended to promote not to defeat substantial justice, and therefore, they should not be applied in a very rigid and technical sense. (Angel v. Inopiquez, G.R. 66712, January 13, 1989). Again on another occasion where an appeal should have been dismissed for non-compliance with the Rules, the Court relaxed the rigid interpretation of the Rules holding that a straight-jacket application will do more injustice. (Pan-Am Airways v. Espiritu, 69 SCRA 45 [1976]). PREMISES CONSIDERED, the petition is hereby DENIED and the assailed decision of the Court of Appeals is hereby AFFIRMED. SO ORDERED.
Manila Herald Publishing v. Ramos, 88 Phil. 94 EN BANC DECISION January 18, 1951 G.R. No. L-4268 MANILA HERALD PUBLISHING CO., INC., doing business under the name of Evening Herald Publishing Co., Inc., and Printers, Inc., petitioner, vs. SIMEON RAMOS, Judge of the Court of First Instance of Manila, MACARIO A. OFILADA, Sheriff of City of Manila, ANTONIO QUIRINO and ALTO SURETY AND INSURANCE CO., INC., respondents. Edmundo M. Reyes and Antonio Barredo for petitioners. Bausa and Ampil for respondents. , J.: This is a petition for certiorari with preliminary injunction arising upon the following antecedents: Respondent Antonio Quirino filed a libel suit, docketed as civil case No. 11531, against Aproniano G. Borres, Pedro Padilla and Loreto Pastor, editor, managing editor and reporter, respectively, of the Daily Record, a daily newspaper published in Manila, asking damages aggregating P90,000. With the filing of this suit, the plaintiff secureda writ of preliminary attachment upon putting up a P50,000 bond, and the Sheriff of the City of Manila levied an attachment upon certain office and printing equipment found in the premises of the Daily Record. Thereafter the Manila Herald Publishing Co. Inc. and Printers, Inc., filed with the sheriff separate third-party claims, alleging that they were the owners of the property attached. Whereupon, the sheriff required of Quirino a counter bound of P41,500 to meet the claim of the Manila Herald Publishing Co., Inc., and another bond of P59,500 to meet the claim of Printers, Inc. These amounts, upon Quirinos motion filed under Section 13, Rule 59, of the Rules of Court, were reduced by the court to P11,000 and P10,000 respectively. Unsuccessful in their attempt to quash the attachment, on October 7, 1950, the Manila Herald Publishing Co., Inc. and Printers, Inc. commenced a joint suit against the sheriff, Quirino and Alto Surety and Insurance Co. Inc., in which the former sought (1) to enjoin the defendants from proceeding with the attachment of the properties above mentioned and (2) P45,000 damages. This suit was docketed as civil case No. 12263. Whereas case No. 11531 was being handled by Judge Sanchez or pending in the branch of the Court presided by him, case No. 12263 fell in the branch of Judge Pecson. On the same date, in virtue of anex parte motion in case No. 12263 by the Manila Herald Publishing Co. Inc., and Printers, Inc., Judge Pecson issued a writ of preliminary injunction to the sheriff directing him to desist from proceeding with the attachment of the said properties. After the issuance of that preliminary injunction, Antonio Quirino filed an ex parte petition for its dissolution, and Judge Simeon Ramos, to whom case No. 12263 had in the meanwhile been transferred, granted the petition on a bond of P21,000. However Judge Ramos soon set aside the order just mentioned on a motion for reconsideration by the Manila Herald Publishing Co. Inc. and Printer, Inc. and set the matter for hearing for October 14, then continued to October 16. Upon the conclusion of that hearing, Judge Ramos required the parties to submit memoranda on the question whether the subject matter of civil case No. 12263 should be ventilated in an independent action or by means of a complaint in intervention in civil case No. 11531. Memoranda having been filed, His Honor declared that the suit, in case No. 12263, was unnecessary, superfluous and illegal and so dismissed the same. He held that what Manila Herald Publishing Co., Inc., and Printers, Inc., should do was intervene in Case No. 11531. The questions that emerge from these facts and the arguments are: Did Judge Ramos have authority to dismiss case No. 12263 at the stage when it was thrown out of court? Should the Manila Herald Publishing Co., Inc., and Printers, Inc., come as intervernors into the case for libel instead of bringing PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
346 of 501
an independent action? And did Judge Pecson or Judge Ramos have jurisdiction in case No. 12263 to quash the attachment levied in case No. 11531? In case No. 12263, it should be recalled, neither a motion to dismiss nor an answer had been made when the decision under consideration was handed down. The matter then before the court was a motion seeking a provisional or collateral remedy, connected with and incidental to the principal action. It was a motion to dissolve the preliminary injunction granted by Judge Pecson restraining the sheriff from proceeding with the attachment in case No. 11531. The question of dismissal was suggested by Judge Ramos on a ground perceived by His Honor. To all intents and purposes, the dismissal was decreed by the court on its own initiative. Section 1 Rule 8 enumerates the grounds upon which an action may be dismissed, and it specifically ordains that a motion to this end be filed. In the light of this express requirement we do not believe that the court had power to dismiss the case without the requisite motion duly presented. The fact that the parties filed memoranda upon the courts indication or order in which they discussed the proposition that the action was unnecessary and was improperly brought outside and independently of the case for libel did not supply deficiency. Rule 30 of the Rules of Court provides for the cases in which an action may be dismissed, and the inclusion of those therein provided excludes any other, under the familiar maxim, inclusio unius est exclusio alterius. The only instance in which, according to said Rules, the court may dismiss upon the courts own motion an action is, when the plaintiff fails to appear at the time of the trial or to prosecute his action for an unreasonable length of time or to comply with the Rules or any order of the court. The Rules of Court are devised as a matter of necessity, intended to be observed with diligence by the courts as well as by the parties for the orderly conduct of litigation and judicial business. In general, it is compliance with these rules which gives the court jurisdiction to act. We are the opinion that the court acted with grave abuse of discretion if not in excess of its jurisdiction in dismissing the case without any formal motion to dismiss. The foregoing conclusions should suffice to dispose of this proceeding for certiorari, but the parties have discussed the second question and we propose to rule upon it if only to put out of the way a probable cause for future controversy and consequent delay in the disposal of the main cause. Section 14 of rule 59, which treats of the steps to betaken when property attached is claimed by the other person than that defendant or his agent, contains the proviso that Nothing herein contained shall prevent such third person from vindicating his claim to the property by any proper action. What is proper action? Section 1 of Rule 2 defines action as an ordinary suit in court of justice, by which one party prosecutes another for the enforcement or protection of a right, or the prevention or redress of a wrong, while section 2, entitled Commencement of Action, says that civil action may be commenced by filing a complaint with the court. Action has acquired a well-define, technical meaning, and it is in this restricted sense that the word action is used in the above rule. In employing the word commencement the rule clearly indicates an action which originates an entire proceeding and puts in motion the instruments of the court calling for summons, answer, etc, and not any intermediary step taken in the course of the proceeding whether by the parties themselves or by a stranger. It would be strange indeed if the framers of the Rules of Court or the Legislature should have employed the term proper action instead of intervention or equivalent expression if the intention had been just that. It was all the easier, simplier and the more natural to say intervention if that had been the purpose, since the asserted right of the third-party claimant necessarily grows out of the pending suit, the suit in which the order of attachment was issued. The most liberal view that can be taken in favor of the respondents position is that intervention as a means of protecting the third-party claimants right is not exclusive but cumulative and suppletory to the right to bring a new, independent suit. It is significant that there are courts which go so far as to take the view that even where the statute expressly grants the right of intervention is such cases as this, the statute does not extend to owners of property attached, for, under this view, it is considered that the ownership is not one of the essential questions to be determined in the litigation between PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
347 of 501
plaintiff and defendant; that whether the property belongs to defendant or claimant, if determined, is considered as shedding no light upon the question in controversy, namely, that defendant is indebted to plaintiff. (See 7 C. J. S., 545 and footnote No. 89 where extracts from the decision in Lewis vs. Lewis, 10 N. W., 586, a leading case, are printed.) Separate action was indeed said to be the correct and only procedure contemplated by Act No. 190, intervention addition to, but not in substitution of, the old process. The new Rules adopted section 121 of Act No. 190 and added thereto Rule 24 (a) of the Federal Rules of Procedure. Combined, the two modes of redress are now section 1 of Rule 13,1 the last clause of which is the newly added provision. The result is that, whereas, under the old procedure, the third person could not intervene, he having no interest in the debt (or damages) sued upon by the plaintiff, under the present Rules, a third person claiming to be the owner of such property may, not only file a third-party claim with the sheriff, but also intervene in the action to ask that the writ of attachment be quashed. (I Morans Comments on the Rules of Court, 3rd Ed., 238, 239.) Yet, the right to inetervene, unlike the right to bring a new action, is not absolute but left to the sound discretion of the court to allow. This qualification makes intervention less preferable to an independent action from the standpoint of the claimants, at least. Because availability of intervention depends upon the court in which Case No. 11531 is pending, there would be assurance for the herein petitioners that they would be permitted to come into that case. Little reflection should disabuse the mind from the assumption that an independent action creates a multiplicity of suits. There can be no multiplicity of suits when the parties in the suit where the attachment was levied are different from the parties in the new action, and so are the issues in the two cases entirely different. In the circumstances, separate action might, indeed, be the more convenient of the two competing modes of redress, in that intervention is more likely to inject confusion into the issues between the parties in the case for debt or damages with which the third-party claimant has nothing to do and thereby retard instead of facilitate the prompt dispatch of the controversy which is underlying objective of the rules of pleading and practice. That is why intervention is subject to the courts discretion. The same reasons which impelled us to decide the second question, just discussed, urge us to take cognizance of and express an opinion on the third. The objection that at once suggests itself entertaining in Case No. 12263 the motion to discharge the preliminary attachment levied in case No. 11531 is that by so doing one judge would intefere with another judges actuations. The objection is superficial and will not bear analysis. It has been seen that a separate action by the third party who claims to be the owner of the property attached is appropriate. If this is so, it must be admitted that the judge trying such action may render judgment ordering the sheriff of whoever has in possession the attached property to deliver it to the plaintiff- claimant or desist from seizing it. It follows further that the court may make an interlocutory order, upon the filing of such bond as may be necessary, to release the property pending final adjudication of the title. Jurisdiction over an action includes jurisdiction over a interlocutory matter incidental to the cause and deemed necessary to preserve the subject matter of the suit or protect the parties interests. This is self-evident. The fault with the respondents argument is that it assumes that the Sheriff is holding the property in question by order of the court handling the case for libel. In reality this is true only to limited extent. That court did not direct the sheriff to attach the particular property in dispute. The order was for the sheriff to attach Borres, Padillas and Pastors property. He was not supposed to touch any property other than that of these defendants, and if he did, he acted beyond the limits of his authority and upon his personal responsibility. It is true of course that property in custody of the law can not be interferred with without the permission of the proper court, and property legally attached is property in custodia legis. But for the reason just stated, this rule is confined to cases where the property belongs to the defendant or one in which the defendant has proprietary interest. When the sheriff acting beyond the bounds of his office seizes a strangers property, the rule does not apply and interference with his custody is not interference with another courts order of attachment. It may be argued that the third-party claim may be unfounded; but so may it be meritorious, for the matter. Speculations are however beside the point. The PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
348 of 501
title is the very issue in the case for the recovery of property or the dissolution of the attachment, and pending final decision, the court may enter any interlocutory order calculated to preserve the property in litigation and protect the parties rights and interests. None of what has been said is to be construed as implying that the setting aside of the attachment prayed for by the plaintiffs in Case No. 12263 should be granted. The preceding discussion is intended merely to point out that the court has jurisdiction to act in the premises, not the way the jurisdiction should be exercised. The granting or denial, as the case may be, of the prayer for the dissolution of the attachment would be a proper subject of a new proceeding if the party adversely affected should be dissatisfied. The petition for certiorari is granted with costs against the respondents except the respondent Judge. Moran, C.J., Paras, Feria, Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo and Bautista Angelo, JJ., concur. Footnotes 1 SECTION 1. When proper. A person may, at any period of a trial, be permitted by the court, in its discretion, to intervene in an action, if he has legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or when he is so situated as to be adversely affected by a distribution of other disposition of property in the custody of the court or of an officer thereof.
Traders Royal Bank v. IAC, 133 S 141 SECOND DIVISION G.R. No. L-66321 October 31 1984 TRADERS ROYAL BANK, petitioner, vs. THE HON INTERMEDIATE APPELATE COURT, HON., JESUS R. DE VEGA, AS PRESIDING JUDGE OF THE RETIONAL TRIA COURT, THIRD JUDICIAL REGION, BRANCH IX, MALOLOS, Bulacan, LA TONDEA, INC., VICTORINO P. EVANGELISTA IN HIS CAPACITY AS Ex-Officio Provincial Sheriff of Bulacan, and/or any and all his deputies, respondents.
ESCOLIN, J.:+.wph!1 The issue posed for resolution in this petition involves the authority of a Regional Trial Court to issue, at the instance of a third-party claimant, an injunction enjoining the sale of property previously levied upon by the sheriff pursuant to a writ of attachment issued by another Regional Trial Court. The antecedent facts, undisputed by the parties, are set forth in the decision of the respondent Intermediate Appellate Court thus: t.hqw Sometime on March 18, 1983 herein petitioner Traders Royal Bank instituted a suit against the Remco Alcohol Distillery, Inc. REMCO before the Regional Trial Court, Branch CX, Pasay City, in Civil Case No. 9894-P, for the recovery of the sum of Two Million Three Hundred Eighty Two Thousand Two Hundred Fifty Eight & 71/100 Pesos (P2,382,258.71) obtaining therein a writ of pre attachment directed against the assets and properties of Remco Alcohol Distillery, Inc. Pursuant to said writ of attachment issued in Civil Case No. 9894-P, Deputy Sheriff Edilberto Santiago levied among others about 4,600 barrels of aged or rectified alcohol found within the premises of said Remco Distillery Inc. A third party claim was filed with the Deputy Sheriff by herein respondent La Tondea, Inc. on April 1, 1982 claiming ownership over said attached property (Complaint, p. 17, Rollo). On May 12, 1982, private respondent La Tondea, Inc. filed a complaint-in- intervention in said Civil Case No. 9894, alleging among others, that 'it had made advances to Remco Distillery Inc. which totalled P3M and which remains outstanding as of date' and that the 'attached properties are owned by La Tondea, Inc.' (Annex '3' to petitioner's Motion to Dismiss dated July 27, 1983 Annex "C" to the petition). Subsequently, private respondent La Tondea, Inc., without the foregoing complaint-in- intervention having been passed upon by the Regional Trial Court, Branch CX, (Pasay City), filed in Civil Case No. 9894-P a "Motion to Withdraw" dated October 8, 1983, praying that it be allowed to withdraw alcohol and molasses from the Remco Distillery Plant (Annex 4 to Petitioner's Motion to Dismiss-Annex C, Petition) and which motion was granted per order of the Pasay Court dated January 27, 1983, authorizing respondent La Tondea, Inc. to withdraw alcohol and molasses from the Remco Distillery Plant at Calumpit, Bulacan (Annex "I" to Reply to Plaintiff's Opposition dated August 2, 1983 Annex E to the Petition). The foregoing order dated January 27, 1983 was however reconsidered by the Pasay Court by virtue of its order dated February 18, 1983 (Annex A Petition, p. 15) declaring that the alcohol "which has not been withdrawn remains in the ownership of defendant Remco Alcohol Distillery Corporation" and which order likewise denied La Tondea's motion to intervene. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
350 of 501
A motion for reconsideration of the foregoing order of February 18, 1983 was filed by respondent La Tondea, Inc., on March 8, 1983 reiterating its request for leave to withdraw alcohol from the Remco Distillery Plant, and praying further that the "portion of the order dated February 18, 1983" declaring Remco to be the owner of subject alcohol, "be reconsidered and striken off said order". This motion has not been resolved (p. 4, Petition) up to July 18, 1983 when a manifestation that it was withdrawing its motion for reconsideration was filed by respondent La Tondea Inc. On July 19, 1983, private respondent La Tondea Inc. instituted before the Regional Trial Court, Branch IX, Malolos, Bulacan presided over by Respondent Judge, Civil Case No. 7003-M, in which it asserted its claim of ownership over the properties attached in Civil Case No. 9894-P, and likewise prayed for the issuance of a writ of Preliminary Mandatory and Prohibitory Injunction (Annex B,id ). A Motion to Dismiss and/or Opposition to the application for a writ of Preliminary Injunction by herein respondent La Tondea Inc. was filed by petitioner on July 27, 1983 (Annex C, p. 42, Id.) This was followed by respondent La Tondea's opposition to petitioner's Motion to Dismiss on August 1, 1983 (Annex D, p. 67, Id.). A reply on the part of petitioner was made on the foregoing opposition on August 3, 1983 (p. 92, Id.). Hearings were held on respondent La Tondea's application for injunctive relief and on petitioner's motion to dismiss on August 8, 19 & 23, 1983 (p. 5, Id.). Thereafter, the parties filed their respective memoranda (Annex F, p. 104; Annex G, p. 113, Rollo). Subsequently, the questioned order dated September 28, 1983 was issued by the respondent Judge declaring respondent La Tondea Inc. to be the owner of the disputed alcohol, and granting the latter's application for injunctive relief (Annex H-1, Id.). On October 6, 1983, respondent Sheriff Victorino Evangelista issued on Edilberto A. Santiago Deputy Sheriff of Pasay City the corresponding writ of preliminary injunction (Annex N, p. 127, Id.). This was followed by an order issued by the Pasay Court dated October 11, 1983 in Civil Case No. 9894-P requiring Deputy Sheriff Edilberto A. Santiago to enforce the writ of preliminary attachment previously issued by said court, by preventing respondent sheriff and respondent La Tondea, Inc. from withdrawing or removing the disputed alcohol from the Remco ageing warehouse at Calumpit, Bulacan, and requiring the aforenamed respondents to explain and show cause why they should not be cited for contempt for withdrawing or removing said attached alcohol belonging to Remco, from the latter's ageing warehouse at Calumpit, Bulacan (Annex F, p. 141, Petition). Thereafter, petitioner Traders Royal Bank filed with the Intermediate Appellate Court a petition for certiorari and prohibition, with application for a writ of preliminary injunction, to annul and set aside the Order dated September 28, 1983 of the respondent Regional Trial Court of Malolos, Bulacan, Branch IX, issued in Civil Case No. 7003-M; to dissolve the writ of preliminary injunction dated October 6, 1983 issued pursuant to said order; to prohibit respondent Judge from taking cognizance of and assuming jurisdiction over Civil Case No. 7003-M, and to compel private respondent La Tondea, Inc., and Ex- Oficio Provincial Sheriff of Bulacan to return the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
351 of 501
disputed alcohol to their original location at Remco's ageing warehouse at Calumpit, Bulacan. In its decision, the Intermediate Appellate Court dismissed the petition for lack of legal and factual basis, holding that the respondent Judge did not abuse his discretion in issuing the Order of September 28, 1983 and the writ of preliminary injunction dated October 3, 1983. citing the decision in Detective and Protective Bureau vs. Cloribel (26 SCRA 255). Petitioner moved for reconsideration, but the respondent court denied the same in its resolution dated February 2, 1984. Hence, this petition. Petitioner contends that respondent Judge of the Regional T- trial Court of Bulacan acted without jurisdiction in entertaining Civil Case No. 7003-M, in authorizing the issuance of a writ of preliminary mandatory and prohibitory injunction, which enjoined the sheriff of Pasay City from interferring with La Tondea's right to enter and withdraw the barrels of alcohol and molasses from Remco's ageing warehouse and from conducting the sale thereof, said merchandise having been previously levied upon pursuant to the attachment writ issued by the Regional Trial Court of Pasay City in Civil Case No. 9894-P. It is submitted that such order of the Bulacan Court constitutes undue and illegal interference with the exercise by the Pasay Court of its coordinate and co-equal authority on matters properly brought before it. We find the petition devoid of merit. There is no question that the action filed by private respondent La Tondea, Inc., as third-party claimant, before the Regional Trial Court of Bulacan in Civil Case No. 7003-M wherein it claimed ownership over the property levied upon by Pasay City Deputy Sheriff Edilberto Santiago is sanctioned by Section 14, Rule 57 of the Rules of Court. Thus t.hqw If property taken be claimed by any person other than the party against whom attachment had been issued or his agent, and such person makes an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serves such affidavit upon the officer while the latter has possession of the property, and a copy thereof upon the attaching creditor, the officer shall not be bound to keep the property under the attachment, unless the attaching creditor or his agent, on demand of said officer, secures aim against such claim by a bond in a sum not greater than the value of the property attached. In case of disagreement as to such value, the same shall be decided by the court issuing the writ of attachment. The officer shall not be liable for damages, for the taking or keeping of such property, to any such third- party claimant, unless such a claim is so made and the action upon the bond brought within one hundred and twenty (120) days from the date of the filing of said bond. But nothing herein contained shall prevent such third person from vindicating his claim to the property by proper action ... The foregoing rule explicitly sets forth the remedy that may be availed of by a person who claims to be the owner of property levied upon by attachment, viz: to lodge a third- party claim with the sheriff, and if the attaching creditor posts an indemnity bond in favor of the sheriff, to file a separate and independent action to vindicate his claim (Abiera vs. Court of Appeals, 45 SCRA 314). And this precisely was the remedy resorted to by private respondent La Tondea when it filed the vindicatory action before the Bulacan Court. The case before us does not really present an issue of first impression. In Manila Herald Publishing Co., Inc. vs. Ramos, 1this Court resolved a similar question in this wise: t.hqw The objection that at once suggests itself to entertaining in Case No. 12263 the motion to discharge the preliminary attachment levied in Case No. 11531 is that by so doing one judge would interfere with another judge's actuations. The objection is superficial and will not bear analysis. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
352 of 501
It has been seen that a separate action by the third party who claims to be the owner of the property attached is appropriate. If this is so, it must be admitted that the judge trying such action may render judgment ordering the sheriff of whoever has in possession the attached property to deliver it to the plaintiff-claimant or desist from seizing it. It follows further that the court may make an interlocutory order, upon the filing of such bond as may be necessary, to release the property pending final adjudication of the title. Jurisdiction over an action includes jurisdiction over an interlocutory matter incidental to the cause and deemed necessary to preserve the subject matter of the suit or protect the parties' interests. This is self-evident. xxx xxx xxx It is true of course that property in custody of the law can not be interfered without the permission of the proper court, and property legally attached is property in custodia legis. But for the reason just stated, this rule is confined to cases where the property belongs to the defendant or one in which the defendant has proprietary interest. When the sheriff acting beyond the bounds of his office seizes a stranger's property, the rule does not apply and interference with his custody is not interference with another court's order of attachment. It may be argued that the third-party claim may be unfounded; but so may it be meritorious, for that matter. Speculations are however beside the point. The title is the very issue in the case for the recovery of property or the dissolution of the attachment, and pending final decision, the court may enter any interlocutory order calculated to preserve the property in litigation and protect the parties' rights and interests. Generally, the rule that no court has the power to interfere by injunction with the judgments or decrees of a concurrent or coordinate jurisdiction having equal power to grant the injunctive relief sought by injunction, is applied in cases where no third-party claimant is involved, in order to prevent one court from nullifying the judgment or process of another court of the same rank or category, a power which devolves upon the proper appellate court . 2 The purpose of the rule is to avoid conflict of power between different courts of coordinate jurisdiction and to bring about a harmonious and smooth functioning of their proceedings. It is further argued that since private respondent La Tondea, Inc., had voluntarily submitted itself to the jurisdiction of the Pasay Court by filing a motion to intervene in Civil Case No. 9894-P, the denial or dismissal thereof constitutes a bar to the present action filed before the Bulacan Court. We cannot sustain the petitioner's view. Suffice it to state that intervention as a means of protecting the third-party claimant's right in an attachment proceeding is not exclusive but cumulative and suppletory to the right to bring an independent suit. 3 The denial or dismissal of a third-party claim to property levied upon cannot operate to bar a subsequent independent action by the claimant to establish his right to the property even if he failed to appeal from the order denying his original third-party claim. 4
WHEREFORE, the instant petition is hereby dismissed and the decision of the Intermediate Appellate Court in AC-G.R. No. SP-01860 is affirmed, with costs against petitioner Traders Royal Bank. SO ORDERED.1wph1.t
Ching v. CA, 423 S 356 SECOND DIVISION G.R. No. 124642 February 23, 2004 ALFREDO CHING and ENCARNACION CHING, petitioners vs. THE HON. COURT OF APPEALS and ALLIED BANKING CORPORATION, respondents. D E C I S I O N CALLEJO, SR., J.: This petition for review, under Rule 45 of the Revised Rules of Court, assails the Decision 1 of the Court of Appeals (CA) dated November 27, 1995 in CA- G.R. SP No. 33585, as well as the Resolution 2 on April 2, 1996 denying the petitioners motion for reconsideration. The impugned decision granted the private respondents petition for certiorari and set aside the Orders of the trial court dated December 15, 1993 3 and February 17, 1994 4 nullifying the attachment of 100,000 shares of stocks of the Citycorp Investment Philippines under the name of petitioner Alfredo Ching. The following facts are undisputed: On September 26, 1978, the Philippine Blooming Mills Company, Inc. (PBMCI) obtained a loan of P9,000,000.00 from the Allied Banking Corporation (ABC). By virtue of this loan, the PBMCI, through its Executive Vice-President Alfredo Ching, executed a promissory note for the said amount promising to pay on December 22, 1978 at an interest rate of 14% per annum. 5 As added security for the said loan, on September 28, 1978, Alfredo Ching, together with Emilio Taedo and Chung Kiat Hua, executed a continuing guaranty with the ABC binding themselves to jointly and severally guarantee the payment of all the PBMCI obligations owing the ABC to the extent of P38,000,000.00. 6 The loan was subsequently renewed on various dates, the last renewal having been made on December 4, 1980. 7
Earlier, on December 28, 1979, the ABC extended another loan to the PBMCI in the amount of P13,000,000.00 payable in eighteen months at 16% interest per annum. As in the previous loan, the PBMCI, through Alfredo Ching, executed a promissory note to evidence the loan maturing on June 29, 1981. 8 This was renewed once for a period of one month. 9
The PBMCI defaulted in the payment of all its loans. Hence, on August 21, 1981, the ABC filed a complaint for sum of money with prayer for a writ of preliminary attachment against the PBMCI to collect the P12,612,972.88 exclusive of interests, penalties and other bank charges. Impleaded as co- defendants in the complaint were Alfredo Ching, Emilio Taedo and Chung Kiat Hua in their capacity as sureties of the PBMCI. The case was docketed as Civil Case No. 142729 in the Regional Trial Court of Manila, Branch XVIII. 10 In its application for a writ of preliminary attachment, the ABC averred that the "defendants are guilty of fraud in incurring the obligations upon which the present action is brought 11 in that they falsely represented themselves to be in a financial position to pay their obligation upon maturity thereof." 12 Its supporting affidavit stated, inter alia, that the "[d]efendants have removed or disposed of their properties, or [are] ABOUT to do so, with intent to defraud their creditors." 13
On August 26, 1981, after an ex-parte hearing, the trial court issued an Order denying the ABCs application for a writ of preliminary attachment. The trial court decreed that the grounds alleged in the application and that of its supporting affidavit "are all conclusions of fact and of law" which do not warrant the issuance of the writ prayed for. 14 On motion for reconsideration, however, the trial court, in an Order dated September 14, 1981, reconsidered its previous order and granted the ABCs application for a writ of preliminary attachment on a bond of P12,700,000. The order, in relevant part, stated: With respect to the second ground relied upon for the grant of the writ of preliminary attachment ex-parte, which is the alleged disposal of properties by PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
354 of 501
the defendants with intent to defraud creditors as provided in Sec. 1(e) of Rule 57 of the Rules of Court, the affidavits can only barely justify the issuance of said writ as against the defendant Alfredo Ching who has allegedly bound himself jointly and severally to pay plaintiff the defendant corporations obligation to the plaintiff as a surety thereof. WHEREFORE, let a writ of preliminary attachment issue as against the defendant Alfredo Ching requiring the sheriff of this Court to attach all the properties of said Alfredo Ching not exceeding P12,612,972.82 in value, which are within the jurisdiction of this Court and not exempt from execution upon, the filing by plaintiff of a bond duly approved by this Court in the sum of Twelve Million Seven Hundred Thousand Pesos (P12,700,000.00) executed in favor of the defendant Alfredo Ching to secure the payment by plaintiff to him of all the costs which may be adjudged in his favor and all damages he may sustain by reason of the attachment if the court shall finally adjudge that the plaintiff was not entitled thereto. SO ORDERED. 15
Upon the ABCs posting of the requisite bond, the trial court issued a writ of preliminary attachment. Subsequently, summonses were served on the defendants, 16 save Chung Kiat Hua who could not be found. Meanwhile, on April 1, 1982, the PBMCI and Alfredo Ching jointly filed a petition for suspension of payments with the Securities and Exchange Commission (SEC), docketed as SEC Case No. 2250, at the same time seeking the PBMCIs rehabilitation. 17
On July 9, 1982, the SEC issued an Order placing the PBMCIs business, including its assets and liabilities, under rehabilitation receivership, and ordered that "all actions for claims listed in Schedule "A" of the petition pending before any court or tribunal are hereby suspended in whatever stage the same may be until further orders from the Commission." 18 The ABC was among the PBMCIs creditors named in the said schedule. Subsequently, on January 31, 1983, the PBMCI and Alfredo Ching jointly filed a Motion to Dismiss and/or motion to suspend the proceedings in Civil Case No. 142729 invoking the PBMCIs pending application for suspension of payments (which Ching co-signed) and over which the SEC had already assumed jurisdiction. 19 On February 4, 1983, the ABC filed its Opposition thereto. 20
In the meantime, on July 26, 1983, the deputy sheriff of the trial court levied on attachment the 100,000 common shares of Citycorp stocks in the name of Alfredo Ching. 21
Thereafter, in an Order dated September 16, 1983, the trial court partially granted the aforementioned motion by suspending the proceedings only with respect to the PBMCI. It denied Chings motion to dismiss the complaint/or suspend the proceedings and pointed out that P.D. No. 1758 only concerns the activities of corporations, partnerships and associations and was never intended to regulate and/or control activities of individuals. Thus, it directed the individual defendants to file their answers. 22
Instead of filing an answer, Ching filed on January 14, 1984 a Motion to Suspend Proceedings on the same ground of the pendency of SEC Case No. 2250. This motion met the opposition from the ABC. 23
On January 20, 1984, Taedo filed his Answer with counterclaim and cross- claim. 24 Ching eventually filed his Answer on July 12, 1984. 25
On October 25, 1984, long after submitting their answers, Ching filed an Omnibus Motion, 26 again praying for the dismissal of the complaint or suspension of the proceedings on the ground of the July 9, 1982 Injunctive Order issued in SEC Case No. 2250. He averred that as a surety of the PBMCI, he must also necessarily benefit from the defenses of his principal. The ABC opposed Chings omnibus motion. Emilio Y. Taedo, thereafter, filed his own Omnibus Motion 27 praying for the dismissal of the complaint, arguing that the ABC had "abandoned and waived" its right to proceed against the continuing guaranty by its act of resorting to preliminary attachment. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
355 of 501
On December 17, 1986, the ABC filed a Motion to Reduce the amount of his preliminary attachment bond fromP12,700,000 to P6,350,000. 28 Alfredo Ching opposed the motion, 29 but on April 2, 1987, the court issued an Order setting the incident for further hearing on May 28, 1987 at 8:30 a.m. for the parties to adduce evidence on the actual value of the properties of Alfredo Ching levied on by the sheriff. 30
On March 2, 1988, the trial court issued an Order granting the motion of the ABC and rendered the attachment bond ofP6,350,000. 31
On November 16, 1993, Encarnacion T. Ching, assisted by her husband Alfredo Ching, filed a Motion to Set Aside the levy on attachment. She alleged inter alia that the 100,000 shares of stocks levied on by the sheriff were acquired by her and her husband during their marriage out of conjugal funds after the Citycorp Investment Philippines was established in 1974. Furthermore, the indebtedness covered by the continuing guaranty/comprehensive suretyship contract executed by petitioner Alfredo Ching for the account of PBMCI did not redound to the benefit of the conjugal partnership. She, likewise, alleged that being the wife of Alfredo Ching, she was a third-party claimant entitled to file a motion for the release of the properties. 32 She attached therewith a copy of her marriage contract with Alfredo Ching. 33
The ABC filed a comment on the motion to quash preliminary attachment and/or motion to expunge records, contending that: 2.1 The supposed movant, Encarnacion T. Ching, is not a party to this present case; thus, she has no personality to file any motion before this Honorable Court; 2.2 Said supposed movant did not file any Motion for Intervention pursuant to Section 2, Rule 12 of the Rules of Court; 2.3 Said Motion cannot even be construed to be in the nature of a Third-Party Claim conformably with Sec. 14, Rule 57 of the Rules of Court. 3. Furthermore, assuming in gracia argumenti that the supposed movant has the required personality, her Motion cannot be acted upon by this Honorable Court as the above-entitled case is still in the archives and the proceedings thereon still remains suspended. And there is no previous Motion to revive the same. 34
The ABC also alleged that the motion was barred by prescription or by laches because the shares of stocks were in custodia legis. During the hearing of the motion, Encarnacion T. Ching adduced in evidence her marriage contract to Alfredo Ching to prove that they were married on January 8, 1960; 35 the articles of incorporation of Citycorp Investment Philippines dated May 14, 1979; 36 and, the General Information Sheet of the corporation showing that petitioner Alfredo Ching was a member of the Board of Directors of the said corporation and was one of its top twenty stockholders. On December 10, 1993, the Spouses Ching filed their Reply/Opposition to the motion to expunge records. Acting on the aforementioned motion, the trial court issued on December 15, 1993 an Order 37 lifting the writ of preliminary attachment on the shares of stocks and ordering the sheriff to return the said stocks to the petitioners. The dispositive portion reads: WHEREFORE, the instant Motion to Quash Preliminary Attachment, dated November 9, 1993, is hereby granted. Let the writ of preliminary attachment subject matter of said motion, be quashed and lifted with respect to the attached 100,000 common shares of stock of Citycorp Investment Philippines in the name of the defendant Alfredo Ching, the said shares of stock to be returned to him and his movant-spouse by Deputy Sheriff Apolonio A. Golfo who effected the levy thereon on July 26, 1983, or by whoever may be presently in possession thereof. SO ORDERED. 38
The plaintiff Allied Banking Corporation filed a motion for the reconsideration of the order but denied the same on February 17, 1994. The petitioner bank forthwith filed a petition for certiorari with the CA, docketed as CA-G.R. SP No. 33585, for the nullification of the said order of the court, contending that: 1. The respondent Judge exceeded his authority thereby acted without jurisdiction in taking cognizance of, and granting a "Motion" filed by a complete stranger to the case. 2. The respondent Judge committed a grave abuse of discretion in lifting the writ of preliminary attachment without any basis in fact and in law, and contrary to established jurisprudence on the matter. 39
On November 27, 1995, the CA rendered judgment granting the petition and setting aside the assailed orders of the trial court, thus: WHEREFORE, premises considered, the petition is GRANTED, hereby setting aside the questioned orders (dated December 15, 1993 and February 17, 1994) for being null and void. SO ORDERED. 40
The CA sustained the contention of the private respondent and set aside the assailed orders. According to the CA, the RTC deprived the private respondent of its right to file a bond under Section 14, Rule 57 of the Rules of Court. The petitioner Encarnacion T. Ching was not a party in the trial court; hence, she had no right of action to have the levy annulled with a motion for that purpose. Her remedy in such case was to file a separate action against the private respondent to nullify the levy on the 100,000 Citycorp shares of stocks. The court stated that even assuming that Encarnacion T. Ching had the right to file the said motion, the same was barred by laches. Citing Wong v. Intermediate Appellate Court, 41 the CA ruled that the presumption in Article 160 of the New Civil Code shall not apply where, as in this case, the petitioner-spouses failed to prove the source of the money used to acquire the shares of stock. It held that the levied shares of stocks belonged to Alfredo Ching, as evidenced by the fact that the said shares were registered in the corporate books of Citycorp solely under his name. Thus, according to the appellate court, the RTC committed a grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders. The petitioners motion for reconsideration was denied by the CA in a Resolution dated April 2, 1996. The petitioner-spouses filed the instant petition for review on certiorari, asserting that the RTC did not commit any grave abuse of discretion amounting to excess or lack of jurisdiction in issuing the assailed orders in their favor; hence, the CA erred in reversing the same. They aver that the source of funds in the acquisition of the levied shares of stocks is not the controlling factor when invoking the presumption of the conjugal nature of stocks under Art. 160, 42 and that such presumption subsists even if the property is registered only in the name of one of the spouses, in this case, petitioner Alfredo Ching. 43 According to the petitioners, the suretyship obligation was not contracted in the pursuit of the petitioner-husbands profession or business. 44 And, contrary to the ruling of the CA, where conjugal assets are attached in a collection suit on an obligation contracted by the husband, the wife should exhaust her motion to quash in the main case and not file a separate suit. 45 Furthermore, the petitioners contend that under Art. 125 of the Family Code, the petitioner-husbands gratuitous suretyship is null and void ab initio, 46 and that the share of one of the spouses in the conjugal partnership remains inchoate until the dissolution and liquidation of the partnership. 47
In its comment on the petition, the private respondent asserts that the CA correctly granted its petition for certiorari nullifying the assailed order. It contends that the CA correctly relied on the ruling of this Court in Wong v. Intermediate Appellate Court. Citing Cobb-Perez v. Lantin and G-Tractors, Inc. v. Court of Appeals, the private respondent alleges that the continuing guaranty and suretyship executed by petitioner Alfredo Ching in pursuit of his profession or business. Furthermore, according to the private respondent, the right of the petitioner-wife to a share in the conjugal partnership property is merely inchoate before the dissolution of the partnership; as such, she had no PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
357 of 501
right to file the said motion to quash the levy on attachment of the shares of stocks. The issues for resolution are as follows: (a) whether the petitioner-wife has the right to file the motion to quash the levy on attachment on the 100,000 shares of stocks in the Citycorp Investment Philippines; (b) whether or not the RTC committed a grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders. On the first issue, we agree with the petitioners that the petitioner-wife had the right to file the said motion, although she was not a party in Civil Case No. 142729. 48
In Ong v. Tating, 49 we held that the sheriff may attach only those properties of the defendant against whom a writ of attachment has been issued by the court. When the sheriff erroneously levies on attachment and seizes the property of a third person in which the said defendant holds no right or interest, the superior authority of the court which has authorized the execution may be invoked by the aggrieved third person in the same case. Upon application of the third person, the court shall order a summary hearing for the purpose of determining whether the sheriff has acted rightly or wrongly in the performance of his duties in the execution of the writ of attachment, more specifically if he has indeed levied on attachment and taken hold of property not belonging to the plaintiff. If so, the court may then order the sheriff to release the property from the erroneous levy and to return the same to the third person. In resolving the motion of the third party, the court does not and cannot pass upon the question of the title to the property with any character of finality. It can treat the matter only insofar as may be necessary to decide if the sheriff has acted correctly or not. If the claimants proof does not persuade the court of the validity of the title, or right of possession thereto, the claim will be denied by the court. The aggrieved third party may also avail himself of the remedy of "terceria" by executing an affidavit of his title or right of possession over the property levied on attachment and serving the same to the office making the levy and the adverse party. Such party may also file an action to nullify the levy with damages resulting from the unlawful levy and seizure, which should be a totally separate and distinct action from the former case. The above-mentioned remedies are cumulative and any one of them may be resorted to by one third- party claimant without availing of the other remedies. 50
In this case, the petitioner-wife filed her motion to set aside the levy on attachment of the 100,000 shares of stocks in the name of petitioner-husband claiming that the said shares of stocks were conjugal in nature; hence, not liable for the account of her husband under his continuing guaranty and suretyship agreement with the PBMCI. The petitioner-wife had the right to file the motion for said relief. On the second issue, we find and so hold that the CA erred in setting aside and reversing the orders of the RTC. The private respondent, the petitioner in the CA, was burdened to prove that the RTC committed a grave abuse of its discretion amounting to excess or lack of jurisdiction. The tribunal acts without jurisdiction if it does not have the legal purpose to determine the case; there is excess of jurisdiction where the tribunal, being clothed with the power to determine the case, oversteps its authority as determined by law. There is grave abuse of discretion where the tribunal acts in a capricious, whimsical, arbitrary or despotic manner in the exercise of its judgment and is equivalent to lack of jurisdiction. 51
It was incumbent upon the private respondent to adduce a sufficiently strong demonstration that the RTC acted whimsically in total disregard of evidence material to, and even decide of, the controversy before certiorari will lie. A special civil action for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of judgment. When a court exercises its jurisdiction, an error committed while so engaged does not deprive it of its jurisdiction being exercised when the error is committed. 52
After a comprehensive review of the records of the RTC and of the CA, we find and so hold that the RTC did not commit any grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders. Article 160 of the New Civil Code provides that all the properties acquired during the marriage are presumed to belong to the conjugal partnership, PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
358 of 501
unless it be proved that it pertains exclusively to the husband, or to the wife. In Tan v. Court of Appeals, 53 we held that it is not even necessary to prove that the properties were acquired with funds of the partnership. As long as the properties were acquired by the parties during the marriage, they are presumed to be conjugal in nature. In fact, even when the manner in which the properties were acquired does not appear, the presumption will still apply, and the properties will still be considered conjugal. The presumption of the conjugal nature of the properties acquired during the marriage subsists in the absence of clear, satisfactory and convincing evidence to overcome the same. 54
In this case, the evidence adduced by the petitioners in the RTC is that the 100,000 shares of stocks in the Citycorp Investment Philippines were issued to and registered in its corporate books in the name of the petitioner-husband when the said corporation was incorporated on May 14, 1979. This was done during the subsistence of the marriage of the petitioner-spouses. The shares of stocks are, thus, presumed to be the conjugal partnership property of the petitioners. The private respondent failed to adduce evidence that the petitioner-husband acquired the stocks with his exclusive money. 55 The barefaced fact that the shares of stocks were registered in the corporate books of Citycorp Investment Philippines solely in the name of the petitioner- husband does not constitute proof that the petitioner-husband, not the conjugal partnership, owned the same. 56 The private respondents reliance on the rulings of this Court in Maramba v. Lozano 57 and Associated Insurance & Surety Co., Inc. v. Banzon 58 is misplaced. In the Maramba case, we held that where there is no showing as to when the property was acquired, the fact that the title is in the wifes name alone is determinative of the ownership of the property. The principle was reiterated in the Associated Insurance case where the uncontroverted evidence showed that the shares of stocks were acquired during the marriage of the petitioners. Instead of fortifying the contention of the respondents, the ruling of this Court in Wong v. Intermediate Appellate Court 59 buttresses the case for the petitioners. In that case, we ruled that he who claims that property acquired by the spouses during their marriage is not conjugal partnership property but belongs to one of them as his personal property is burdened to prove the source of the money utilized to purchase the same. In this case, the private respondent claimed that the petitioner-husband acquired the shares of stocks from the Citycorp Investment Philippines in his own name as the owner thereof. It was, thus, the burden of the private respondent to prove that the source of the money utilized in the acquisition of the shares of stocks was that of the petitioner-husband alone. As held by the trial court, the private respondent failed to adduce evidence to prove this assertion. The CA, likewise, erred in holding that by executing a continuing guaranty and suretyship agreement with the private respondent for the payment of the PBMCI loans, the petitioner-husband was in the exercise of his profession, pursuing a legitimate business. The appellate court erred in concluding that the conjugal partnership is liable for the said account of PBMCI under Article 161(1) of the New Civil Code. Article 161(1) of the New Civil Code (now Article 121[2 and 3] 60 of the Family Code of the Philippines) provides: Art. 161. The conjugal partnership shall be liable for: (1) All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those contracted by the wife, also for the same purpose, in the cases where she may legally bind the partnership. The petitioner-husband signed the continuing guaranty and suretyship agreement as security for the payment of the loan obtained by the PBMCI from the private respondent in the amount of P38,000,000. In Ayala Investment and Development Corp. v. Court of Appeals, 61 this Court ruled "that the signing as surety is certainly not an exercise of an industry or profession. It is not embarking in a business. No matter how often an executive acted on or was persuaded to act as surety for his own employer, this should not be taken to mean that he thereby embarked in the business of suretyship or guaranty." For the conjugal partnership to be liable for a liability that should appertain to the husband alone, there must be a showing that some advantages accrued to the spouses. Certainly, to make a conjugal partnership responsible for a PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
359 of 501
liability that should appertain alone to one of the spouses is to frustrate the objective of the New Civil Code to show the utmost concern for the solidarity and well being of the family as a unit. The husband, therefore, is denied the power to assume unnecessary and unwarranted risks to the financial stability of the conjugal partnership. 62
In this case, the private respondent failed to prove that the conjugal partnership of the petitioners was benefited by the petitioner-husbands act of executing a continuing guaranty and suretyship agreement with the private respondent for and in behalf of PBMCI. The contract of loan was between the private respondent and the PBMCI, solely for the benefit of the latter. No presumption can be inferred from the fact that when the petitioner-husband entered into an accommodation agreement or a contract of surety, the conjugal partnership would thereby be benefited. The private respondent was burdened to establish that such benefit redounded to the conjugal partnership. 63
It could be argued that the petitioner-husband was a member of the Board of Directors of PBMCI and was one of its top twenty stockholders, and that the shares of stocks of the petitioner-husband and his family would appreciate if the PBMCI could be rehabilitated through the loans obtained; that the petitioner-husbands career would be enhanced should PBMCI survive because of the infusion of fresh capital. However, these are not the benefits contemplated by Article 161 of the New Civil Code. The benefits must be those directly resulting from the loan. They cannot merely be a by-product or a spin- off of the loan itself. 64
This is different from the situation where the husband borrows money or receives services to be used for his own business or profession. In the Ayala case, we ruled that it is such a contract that is one within the term "obligation for the benefit of the conjugal partnership." Thus: (A) If the husband himself is the principal obligor in the contract, i.e., he directly received the money and services to be used in or for his own business or his own profession, that contract falls within the term " obligations for the benefit of the conjugal partnership." Here, no actual benefit may be proved. It is enough that the benefit to the family is apparent at the time of the signing of the contract. From the very nature of the contract of loan or services, the family stands to benefit from the loan facility or services to be rendered to the business or profession of the husband. It is immaterial, if in the end, his business or profession fails or does not succeed. Simply stated, where the husband contracts obligations on behalf of the family business, the law presumes, and rightly so, that such obligation will redound to the benefit of the conjugal partnership. 65
The Court held in the same case that the rulings of the Court in Cobb-Perez and G-Tractors, Inc. are not controlling because the husband, in those cases, contracted the obligation for his own business. In this case, the petitioner- husband acted merely as a surety for the loan contracted by the PBMCI from the private respondent. IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and Resolution of the Court of Appeals are SET ASIDE AND REVERSED. The assailed orders of the RTC are AFFIRMED. SO ORDERED.
Tayabas Land v. Sharruf, 41 Phil. 382 (See under Section 7 page 235) Bilag-Rivera v. Flora, July 6, 1995 FIRST DIVISION
A.M. P-94-1008 July 6, 1995 FLORENTINA BILAG-RIVERA, petitioner, vs. CRISANTO FLORA, respondent.
PADILLA, J.: In an affidavit-complaint 1 filed with the Office of the Court Administrator, complainant Florentina Bilag-Rivera charged respondent Crisanto Flora, deputy sheriff, RTC of Baguio City, with grave misconduct and dishonesty, when he released a motor vehicle subject of a writ of attachment to a representative of the plaintiff in a civil case, without authority from the court which issued the writ, thereby enabling said plaintiff to sell the motor vehicle to a third person, to the damage and prejudice of complainant who claims ownership over said motor vehicle. On 5 August 1990, Elsie V. Tacay bought an Isuzu Jitney on installment basis from Panda Automotive Corporation (PANDA), Dagupan City, represented by Charlie Q. Carlos, for the amount of P256,000.00. On 17 March 1992, when the installment payments reached P145,000.00, Tacay demanded for the execution of a Deed of Absolute Sale which she obtained from PANDA on the same date. On 23 March 1992, Tacay registered the vehicle in her name with the Land Transportation Office (LTO) in Lingayen. On 10 May 1992, Tacay tendered a check for P100,000.00 to cover part of the P120,000.00 balance still due PANDA. Upon presentment by PANDA with the drawee bank, the check for P100,000.00 was dishonored as the same was allegedly forged. When confronted by PANDA about the check's dishonor, Tacay promised to pay the balance of P120,000.00 on or before 23 June 1992. On 8 July 1992, however, Tacay sold the Isuzu jitney to complainant Florentina Bilag-Rivera for the amount of P250,000.00, covered by an Absolute Deed of Sale. 2 Hence, possession of the vehicle and its LTO registration papers were turned over to complainant. It appears that Tacay failed to fulfill her promise to pay the P120,000 balance on the vehicle due PANDA Corporation, prompting the latter to verify the whereabouts of the said vehicle. PANDA later learned of the deed of sale between Tacay and complainant and obtained information that the alleged deed of sale was not registered or even annotated on the Certificate of Registration of the motor vehicle. In September 1992, with Tacay still in default on her outstanding obligation to Panda Corporation, the latter, thru its manager Charlie Carlos, filed a complaint for specific performance, replevin, and damages with the RTC of Dagupan City, Branch 40 [docketed as Civil Case No. D-10205] with prayer for the issuance of a writ of preliminary attachment against Elsie Tacay, with complainant (Rivera) impleaded as co-defendant. On 18 September 1992, the, RTC of Dagupan issued a writ of preliminary attachment against Tacay and complainant. Since the subject motor vehicle was believed to be in the City of Baguio, the writ was addressed to the RTC, City Sheriff, Baguio City. Complainant alleges that being a buyer in good faith, she should not have been impleaded in the complaint of Panda Corporation. Instead of proceeding against the principal defendant Elsie V. Tacay, the respondent Deputy Sheriff PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
361 of 501
proceeded to attach the subject motor vehicle in complainant's possession. At that time, respondent Sheriff was accompanied by Charlie Carlos, PANDA's Manager. Respondent issued to the complainant a handwritten receipt on the same day (18 September 1992) which indicated that he took possession of the vehicle pursuant to the writ of attachment. 3
Complainant requested the City Sheriff of the RTC, Baguio City to hold the vehicle for a few days as she would prepare the amount of P20,000.00 as counterbond to discharge the attachment. Since there was no bonded warehouse in the City of Baguio, the office of the City Sheriff requested complainant to pay P1,000.00 to justify their holding on to said vehicle until she could post the counterbond. Complainant paid the amount of P1,000.00 and was duly receipted for said payment. 4
On 23 December 1992, however, the RTC of Dagupan City issued an order in Civil Case No. D-10285 for the issuance of an alias writ of attachment as prayed for by Panda Motors. The writ was again addressed to the office of the City Sheriff, RTC of Baguio City with an order to attach the same motor vehicle in possession of complainant. Respondent received thealias writ on 23 February 1993. The alias writ was not served immediately by respondent because the whereabouts of the said vehicle could not be ascertained. It was only on 15 March 1993 when Charlie Carlos, the manager of Panda Motors, came personally to the office of respondent and informed him; that the vehicle to be attached was in the possession of Carlos Camiwet, a cousin of complainant. Forthwith, respondent together with Charlie Carlos, proceeded to the residence of Carlos Camiwet and served the aliaswrit of attachment on the latter with an attachment bond of P120,000.00. Complainant avers that this time, respondent sheriff did not issue any receipt to cover for his re-possession of the said vehicle. Worse, complainant maintains that at the time of the levy, various tools worth P50,000.00, which were not integral to the motor vehicle, were also taken by respondent sheriff. The following day, complainant accompanied by her lawyer, went to the office of respondent to inquire about the motor vehicle and to request for a receipt. According to complainant, respondent told her not to worry and that the issuance of a receipt was no longer necessary because the vehicle and its tools were being kept in a safe place. Complainant then informed respondent that she would be posting a counterbond as soon as she had the money. Complainant further alleges that on several occasions, she came to the office of respondent to inspect the vehicle but respondent did not allow her to see the vehicle nor was she informed of its whereabouts. Respondent, however, gave complainant repeated assurances that the vehicle was being kept in a safe place. On 17 May 1993, complainant attended the hearing in Civil Case No.D-10285 to argue her Motion to Dismiss and Motion to Quash the Writ of Preliminary Attachment. To her surprise, she was informed by the lawyer of Panda Corporation that a certain Elsie Tacay had voluntarily surrendered the vehicle together with its documents to Panda Corporation and that Panda's manager, Charlie Carlos, had already sold the vehicle to a person named Leonardo Sarmiento for P175,000.00. Complainant manifested before the court that the subject motor vehicle was in custodia legis and that the above-mentioned transactions were anomalous and contrary to law. Thereafter, the court directed complainant's lawyer to investigate the matter and to report his findings to the court. Complainant's lawyer then sent a letter of inquiry to the Clerk of Court of Baguio City, asking why respondent did not issue a receipt when he executed the alias writ of attachment; why there was no sheriff's return on the writ of attachment filed in court; why the vehicle was no longer seen again after 15 March 1993; and whether it was true that Elsie Tacay took the vehicle together with the tools from respondent and returned it to Panda Corporation. 5 Complainant also sent a letter of inquiry to the LTO office in Lingayen to check on the current registration of the said vehicle. 6
Meanwhile, the Clerk of Court and the Ex-Officio Sheriff of RTC, Baguio issued a memo to respondent requiring him to explain the proceedings he conducted in enforcing the alias writ of attachment in Civil Case No. D-10285. In his compliance dated 18 June 1993, respondent stated that he: . . . served and took the subject vehicle into "custodia legis", and a receipt was duly issued. The receipt not however received nor signed by the defendants as they refused to do so, thereafter, said motor vehicle was surrendered to the Plaintiff in the above-captioned case for safekeeping and custody for the reason that this office has no bonded warehouse to keep the said motor vehicle. An acknowledgment receipt was duly signed by the manager of said Plaintiff (Panda Motors) in the person of Mr. Charlie Marcos. 7 (Emphases supplied) In addition, respondent denied the existence of the tools when he levied the alias writ of attachment on the said vehicle. In respondent's return of the alias writ of attachment dated 7 June 1993, he similarly stated that: xxx xxx xxx On March 15, 1993, the said (alias) writ of attachment was enforced together with the manager of Panda Corporation, Mr. Charlie Carlos from Mrs. Florentina Rivera, but refused to acknowledge the receipt of the said motor vehicle for the reason that she will just file(d) the necessary counterbond. And on the said date said motor vehicle was taken by the plaintiff thru Mr. Charlie Carlos for safekeeping and custody for the reason that this officer has no bonded warehouse to place the said motor vehicle. 8
On 10 June 1993, complainant's lawyer received a reply from the LTO in Lingayen with certified photocopies of the vehicle's registration indicating that on 1 April 1993, Elsie V. Tacay re-sold the subject vehicle for P175,000.00 to Charlie Carlos 9 and that on 10 April 1993, Charlie Carlos sold the same unit for P175,000.00 to Leonardo Sarmiento of Bautista, Pangasinan 10 and that the same had been registered in Sarmiento's name for LTO registration year 1993- 1994. Complainant now argues that the foregoing facts and circumstances clearly demonstrate that respondent sheriff adopted an irregular procedure and entered into an anomalous transaction in not issuing a receipt to complainant when he served the alias writ of attachment and on the very same day turned over possession of the vehicle to the attaching creditor which simply issued an acknowledgment receipt for the vehicle, instead of securing the permission of the trial court, knowing fully well that the vehicle was in custodia legis. Compared to the service of the first writ of attachment when respondent requested the amount of P1,000.00 from complainant as storage fees for the vehicle, respondent in serving the alias writ of attachment in effect made Charlie Carlos his agent when he turned over the said vehicle to the latter for alleged "safekeeping and custody." In his comment 11 filed with this Court, respondent contends that the Office of the City Sheriff of Baguio has no bonded warehouse to store the vehicle for the disposition of the (trial) court, hence, the vehicle was turned over to the attaching-creditor's representative, Charlie Carlos, who immediately asked respondent that the motor vehicle be kept in his custody for which Carlos signed a receipt 12 acknowledging that the vehicle was under custody of the Court but shall be temporarily deposited in the company's (Panda's) premises (in Dagupan City). Respondent explains that after the due enforcement of the alias writ of attachment, he awaited for further disposition of the same by the trial court, and for all intents and purposes, his (ministerial) function had been fully served. Thus, he no longer had any knowledge, consent nor participation with respect to the subsequent deed of sale between Elsie Tacay and Charlie PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
363 of 501
Carlos 13 and between Charlie Carlos and Leonardo Sarmiento 14 . Neither did he receive nor enjoy any benefit in any form out of these transactions. In a resolution dated 27 July 1994, this Court, as recommended by the Office of the Court Administrator, referred this case to Executive Judge Clarence J. Villanueva of the Regional Trial Court of Baguio City, Branch 7 for investigation, report and recommendation within sixty (60) days from receipt of the records. In a six (6) page report dated 15 November 1994, Judge Villanueva made the following findings and recommendations: . . . there is clear evidence on record that respondent sheriff Crisanto Flora was remiss of [sic] his duties as an officer of the court in releasing the subject motor vehicle to Charlie Carlos, a representative of the plaintiff in the case where the writ of attachment emanated, without seeking an order or permission from the court concerned. It was incumbent of Sheriff Flora to take into his custody the motor vehicle subject of attachment and protect it. A sheriff who takes possession of the property under a writ of attachment is duty bound to protect the property from damage or loss and to exercise ordinary and reasonable care for the preservation of the property (Adm. Matter p. 128, 81 SCRA 599). The fact that respondent Flora failed to immediately make a return of his proceedings on the second writ of attachment is something to consider. He enforced the second writ of attachment on March 15, 1993 but he waited until June 18, 1993 to do so at the direction of the Clerk of Court Atty. Delilah Gonzales-Muoz as contained in the memorandum issued to respondent (see Exh. "B" page 45 record; see also Exhs. "C" and "C-1"). While it is true that there are no bonded warehouse(s) where sheriffs could deposit attached properties for safe keeping, herein respondent is not exempt from exercising reasonable diligence in performing his duties as an officer of the court. The least that he could have done is to ask permission for the concerned court to allow him to turn over the subject vehicle to Charlie Carlos. This he failed to do. 15
The Court agrees with the findings of Judge Villanueva and concludes that while the evidence may be insufficient to prove that respondent conspired with Charlie Carlos and Elsie Tacay in eventually alienating the vehicle to a third person, his particular zeal and precipitate decision to give possession of the vehicle to a party litigant (plaintiff) and treat the same as "in custodia legis" effectively destroys the presumption of regularity in the performance of his official duties. As deputy sheriff, respondent could not be unaware of Rule 57, section 6 of the rules of Court which provides that: Immediately after executing the order of the officer must make a return thereon to the clerk or judge of the court from which the order issued, with a full statement of his proceeding under the order and a complete inventory of the property attached, together with any counter-bond given by the party against whom attachment is issued, and serve a copy of any such counter-bond on the applicant or his lawyer. Section (7) (c) of the same Rule also mandates that: Properties shall be attached by the officer executing the order in the following manner: xxx xxx xxx (c) Personal property capable of manual delivery, by taking and safely keeping it in his capacity, after issuing the corresponding receipt therefor. Chapter VIII (e) (4) of the Manual for Clerks of Court similarly states that: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
364 of 501
All sheriffs and deputy sheriffs shall submit a report to the judge concerned on the action taken on all writs and processes assigned to them within (10) days from receipt of said process or writ. Said report shall form part of the records. Respondent could not evade the positive duty of serving the attaching creditor's affidavit, bond, and the order of attachment on complainant's representative (Camiwet) by now alleging that it was the fault of complainant and her representative in refusing to sign the receipt that he allegedly issued on 15 March 1993. The records of the investigation reveal otherwise-that complainant could not have signed the acknowledgment receipt because she was not present when the vehicle was attached. In the same vein, her cousin Camiwet refused to sign the receipt because, as he testified, the same was misleading as he was being forced to sign a receipt which indicated that complainant and Elsie Tacay surrendered the vehicle to respondent by virtue of the said alias writ of attachment. The Court is more inclined to believe the testimony of Camiwet during the investigation to the effect that he only surrendered the vehicle to respondent because he was repeatedly assured by respondent that everything was all right and that Charlie Carlos was really after Elsie Tacay, that as soon as Mr. Carlos returned to Dagupan, he (Camiwet) or complainant could retrieve the vehicle in his (respondent's) possession. 16
Respondent himself virtually admitted his nonfeasance when he testified that it had been their practice to give possession of properties subject of writs of attachment to party litigants because they have no bonded warehouse in their jurisdiction. However, he could not explain why, in this particular case, in the first writ of attachment, he even demanded P1,000.00 from complainant for alleged storage fees while complainant bought time to find the amount for her counterbond, and yet, in the execution of the alias writ, he usurped the court's function and released the vehicle to the custody of Mr. Carlos. Equally reprehensible is his attempt to cover up his misdeed by concealing it from complainant when the latter confronted him thereafter in his office. 17
Thus, the return he executed more than two (2) months after the enforcement of the alias writ was more of an afterthought rather than the fulfillment of a positive duty, because by then he had been ordered by the clerk of court to explain his proceedings under the alias writ of attachment. Time and again, the Court has reiterated the rule that the conduct of every employee of the judiciary must be at all time characterized with propriety and decorum and above all else, it must be above and beyond suspicion. 18 In the case at bench, respondent cannot successfully defend his negligent omission to secure a court order before disposing of the property by simply alleging that a party litigant had agreed to be his agent. In the same vein, a sheriff or deputy sheriff cannot act as special deputy sheriff of any party litigant. The Court takes notice that on 18 July 1994, the RTC of Dagupan City rendered a decision in Civil Case No. D-102805 awarding damages 19 in favor of complainant Rivera. Said decision became final and executory as Panda and Elsie Tacay did not interpose any appeal therefrom. This circumstance adds more credence to complainant's claim that she would not have been defrauded in the first place had respondent sheriff performed his duty in accordance with the rules instead of unduly accommodating the request of a party litigant. In his report, Judge Villanueva recommends that respondent be suspended for six (6) months without pay. The Court considers said penalty to be too harsh in the absence of direct evidence showing that respondent has pecuniarily received any financial gain from the anomalous transactions. But for his failure to exercise reasonable diligence in the performance of his duties as an officer of the court, the Court hereby imposes a fine of P5,000 on respondent Flora with STERN WARNING that any repetition of the same act in the future will be dealt with more severely. Let a copy of this decision be entered in respondent's personal record. SO ORDERED.
PNB v. Vasquez, 71 Phil. 433 Caveat! Im not sure if this is the right case. EN BANC G.R. No. L-47578 April 8, 1941 PHILIPPINE NATIONAL BANK, plaintiff-appellant, vs. ESTEBAN I. VAZQUEZ, defendant-appellee. Ramon Diokno for appellant. Zoilo Hilario for appellee. LAUREL, J.: Plaintiff appeals to this court from a decision of the Court of First Instance of Occidental Negros, promulgated January 18, 1938, the dispositive part reading: Wherefore, the court hereby renders judgment in favor of the plaintiff and against the defendant, reviving the judgment in the aforesaid civil case No. 4031 of this same court, but deducting from the amount thereof the sum of P5,250.13, the deduction to be computed as of the date the judgment in said civil case had become final and executory. It appears that on or about the 27th day of May, 1925, Esteban I. Vazquez succeeded in negotiating with the Philippine National Bank a loan for P24,000, on the 1925-26 sugar-cane harvest of his hacienda. "Mandalagan"; that the money advanced him by the plaintiff bank totalled P19,521.09, at an agreed 9 per cent interest per annum and a mortgage executed on his sugar-cane harvest; that additional guaranty was put up by one Cristeta Ibaez; and that after liquidation of the debt as of March 31, 1927, the following was the result: Total advances against 1925-26 crop loan P19,521.09 Total proceeds of sugar sales 7,636.59 Deficit (principal) 11,884.50 Interest at 9 per cent to March 31, 1927 7,984.97 Total deficit to March 31, 1937 19,869.47 Daily interest on P11,884.50 at 9 per cent 2.97 (Bill of Exceptions, pp. 9-10.) Subsequently, in an action filed by the bank for the recovery of the total amount due and owing, defendant Vazquez was ordered by the court to settle his obligation in full. (Civil Case No. 4031, Court of First Instance of Occidental Negros.) No appeal was interposed by any of the parties to the decision of October 31, 1931, and the same became final and executory. But the said judgment not having years enforced by writ of execution and the period of five years having elapsed, the plaintiff bank, on July 22, 1937, filed a complaint (Bill of Executions, pp. 2-6) for the August 12, 1937, filed his answer and set up the following counterclaim: Que, como se puede ver en el expediente de la causa civil No. 4031 mencionada en el parrafo II de la demanda, a peticion del demandante, previa fianza prestada por el mismo actor y en virtud de ordenes judiciales, fueron embargados preventivamente del demandado 500 picos de azucar de la propiedad de este, y vendidos por el Sheriff Provincial de Negros Occidental a razon de P10.75 cada uno, habiendose tambien ordenado por el mismo Hon. Juzgado, a peticion igualmente del demandante, el deposito en el Banco Nacional Filipino del producto neto de dicha venta montante a P5,250.13, cantidad que debe ser descontada de la suma de P19,869.47 expresada en el parrafo IV de la demanda, con la consiguiente reduccion de los PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
366 of 501
intereses referidos en dicho mismo parrafo IV, por no haberse levantado ni anulado nunca dicho embargo y por haberse dictado contra el demandado sentencia condenatoria, que ha sido firme, en dicho asunto civil No. 4031. The plaintiff's appeal is limited to the portion of the decision which orders the deduction of the sum mentioned therein from the amount adjudicated to the plaintiff. In the aforementioned civil case No. 4031, the plaintiff bank prayed for and obtained an order of preliminary attachment, by virtue of which 500 piculs of sugar belonging to the defendant Vazquez was levied upon by the sheriff and sold at public auction at the rate of P10.75 per picul, the proceeds therefrom amounting to P5,250.13. This amount was deposited with the plaintiff bank, upon its own petition, in the name of one Andres Covacha personally, then a deputy of the Provincial Sheriff of Occidental Negros. On August 14, 1928, a deposit of P5,250.13, was made in the name of the Provincial Sheriff of Occidental Negros with the bank, by virtue of another petition of the plaintiff approved by the court to transfer the deposit in the name of the provincial sheriff proper. It appears, however, that the Provincial Sheriff made other deposits on this current account, and that he has been making withdrawals therefrom until it was closed on January 6, 1932. The plaintiff Bank contends that the amount of P5,250.13 should not have been deducted from the judgment awarded to it, for the reason that the defendant, despite the attachment, is still the owner of the 500 piculs of sugar and of its proceeds after the public auction sale, and loss or misappropriation thereof should be for his account. The reason invoked is not applicable here. As correctly observed by the trial judge, "once the decision in the aforesaid civil case had become final, the proceed of the sugar attached in connection therewith should be considered as partial satisfaction of the amount of the judgment." "Personal property may have levied upon under attachment and left in the possession of the sheriff or other officer levying the writ to secure the payment of such judgment as may be recovered in the action. Where execution issues, it is the duty of such officer to apply towards its satisfaction the property so attached and left in his hands; but he may have embezzled or otherwise misappropriated it, or allowed it to be lost by his negligence. When such is the case, we think the better opinion is, that it must, as between the plaintiff and defendant, and persons claiming under defendant, be treated as though it had been levied upon under execution as well as under attachment, and therefore as satisfying the judgment to the extent of its value." (Freeman on Judgments, pp. 2366-2367, citing Yourt v. Hopkins, 24 Ill. 326 and Kenrickv. Ruff, 71 Mo. 570.) And whether or not the Provincial Sheriff was negligent in the performance of his official duties by not turning the money over the plaintiff, is a question which could only be determined in a separate case and hence, immaterial in the present controversy. It should be observed that affirmative acts of the plaintiff Bank have resulted in the attachment and subsequent sale of the property of the defendant. It seems fair that plaintiff having put defendant's property into the hands of the sheriff, the loss should fall on him and not on defendant. When a sheriff takes property or goods in execution or by attachment, he becomes the bailee for the benefit of all parties interested, and certainly for the party who set him in motion. After obtaining the judgment, plaintiff at once was entitled to have the proceeds of the sale applied to the satisfaction of his judgment and it was the duty of the sheriff to pay the proceeds over. The money collected or paid the sheriff on the sale of the goods or property may be regarded just like money in the hands of a sheriff collected on execution. If the sheriff collects money from a judgment debtor, and then fails to pay it over, the debtor cannot be compelled to pay it again. We find defendant Esteban I. Vazquez liable to the plaintiff Philippine National Bank for the principal sum of P19,869.47, with interest on the sum of P11,884.50 at 9 per cent per annum from April 1, 1927, but deducting the sum of P5,250.13, the deduction to be computed as of the date the judgment in civil case No. 4031 had become final and executory. The appealed decision is therefore affirmed, with costs against the appellant. So ordered.
PAL v. CA, 181 S 557 EN BANC G.R. No. L-49188 January 30, 1990 PHILIPPINE AIRLINES, INC., petitioner, vs. HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instance of Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First Instance, Manila, and AMELIA TAN, respondents.
GUTIERREZ, JR., J.: Behind the simple issue of validity of an alias writ of execution in this case is a more fundamental question. Should the Court allow a too literal interpretation of the Rules with an open invitation to knavery to prevail over a more discerning and just approach? Should we not apply the ancient rule of statutory construction that laws are to be interpreted by the spirit which vivifies and not by the letter which killeth? This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No. 07695 entitled "Philippine Airlines, Inc. v. Hon. Judge Ricardo D. Galano, et al.", dismissing the petition for certiorari against the order of the Court of First Instance of Manila which issued an alias writ of execution against the petitioner. The petition involving the alias writ of execution had its beginnings on November 8, 1967, when respondent Amelia Tan, under the name and style of Able Printing Press commenced a complaint for damages before the Court of First Instance of Manila. The case was docketed as Civil Case No. 71307, entitled Amelia Tan, et al. v. Philippine Airlines, Inc. After trial, the Court of First Instance of Manila, Branch 13, then presided over by the late Judge Jesus P. Morfe rendered judgment on June 29, 1972, in favor of private respondent Amelia Tan and against petitioner Philippine Airlines, Inc. (PAL) as follows: WHEREFORE, judgment is hereby rendered, ordering the defendant Philippine Air Lines: 1. On the first cause of action, to pay to the plaintiff the amount of P75,000.00 as actual damages, with legal interest thereon from plaintiffs extra-judicial demand made by the letter of July 20, 1967; 2. On the third cause of action, to pay to the plaintiff the amount of P18,200.00, representing the unrealized profit of 10% included in the contract price of P200,000.00 plus legal interest thereon from July 20,1967; 3. On the fourth cause of action, to pay to the plaintiff the amount of P20,000.00 as and for moral damages, with legal interest thereon from July 20, 1 967; 4. On the sixth cause of action, to pay to the plaintiff the amount of P5,000.00 damages as and for attorney's fee. Plaintiffs second and fifth causes of action, and defendant's counterclaim, are dismissed. With costs against the defendant. (CA Rollo, p. 18) On July 28, 1972, the petitioner filed its appeal with the Court of Appeals. The case was docketed as CA-G.R. No. 51079-R. On February 3, 1977, the appellate court rendered its decision, the dispositive portion of which reads: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
368 of 501
IN VIEW WHEREOF, with the modification that PAL is condemned to pay plaintiff the sum of P25,000.00 as damages and P5,000.00 as attorney's fee, judgment is affirmed, with costs. (CA Rollo, p. 29) Notice of judgment was sent by the Court of Appeals to the trial court and on dates subsequent thereto, a motion for reconsideration was filed by respondent Amelia Tan, duly opposed by petitioner PAL. On May 23,1977, the Court of Appeals rendered its resolution denying the respondent's motion for reconsideration for lack of merit. No further appeal having been taken by the parties, the judgment became final and executory and on May 31, 1977, judgment was correspondingly entered in the case. The case was remanded to the trial court for execution and on September 2,1977, respondent Amelia Tan filed a motion praying for the issuance of a writ of execution of the judgment rendered by the Court of Appeals. On October 11, 1977, the trial court, presided over by Judge Galano, issued its order of execution with the corresponding writ in favor of the respondent. The writ was duly referred to Deputy Sheriff Emilio Z. Reyes of Branch 13 of the Court of First Instance of Manila for enforcement. Four months later, on February 11, 1978, respondent Amelia Tan moved for the issuance of an alias writ of execution stating that the judgment rendered by the lower court, and affirmed with modification by the Court of Appeals, remained unsatisfied. On March 1, 1978, the petitioner filed an opposition to the motion for the issuance of an alias writ of execution stating that it had already fully paid its obligation to plaintiff through the deputy sheriff of the respondent court, Emilio Z. Reyes, as evidenced by cash vouchers properly signed and receipted by said Emilio Z. Reyes. On March 3,1978, the Court of Appeals denied the issuance of the alias writ for being premature, ordering the executing sheriff Emilio Z. Reyes to appear with his return and explain the reason for his failure to surrender the amounts paid to him by petitioner PAL. However, the order could not be served upon Deputy Sheriff Reyes who had absconded or disappeared. On March 28, 1978, motion for the issuance of a partial alias writ of execution was filed by respondent Amelia Tan. On April 19, 1978, respondent Amelia Tan filed a motion to withdraw "Motion for Partial Alias Writ of Execution" with Substitute Motion for Alias Writ of Execution. On May 1, 1978, the respondent Judge issued an order which reads: As prayed for by counsel for the plaintiff, the Motion to Withdraw 'Motion for Partial Alias Writ of Execution with Substitute Motion for Alias Writ of Execution is hereby granted, and the motion for partial alias writ of execution is considered withdrawn. Let an Alias Writ of Execution issue against the defendant for the fall satisfaction of the judgment rendered. Deputy Sheriff Jaime K. del Rosario is hereby appointed Special Sheriff for the enforcement thereof. (CA Rollo, p. 34) On May 18, 1978, the petitioner received a copy of the first alias writ of execution issued on the same day directing Special Sheriff Jaime K. del Rosario to levy on execution in the sum of P25,000.00 with legal interest thereon from July 20,1967 when respondent Amelia Tan made an extra-judicial demand through a letter. Levy was also ordered for the further sum of P5,000.00 awarded as attorney's fees. On May 23, 1978, the petitioner filed an urgent motion to quash the alias writ of execution stating that no return of the writ had as yet been made by Deputy Sheriff Emilio Z. Reyes and that the judgment debt had already been fully satisfied by the petitioner as evidenced by the cash vouchers signed and receipted by the server of the writ of execution, Deputy Sheriff Emilio Z. Reyes. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
369 of 501
On May 26,1978, the respondent Jaime K. del Rosario served a notice of garnishment on the depository bank of petitioner, Far East Bank and Trust Company, Rosario Branch, Binondo, Manila, through its manager and garnished the petitioner's deposit in the said bank in the total amount of P64,408.00 as of May 16, 1978. Hence, this petition for certiorari filed by the Philippine Airlines, Inc., on the grounds that: I AN ALIAS WRIT OF EXECUTION CANNOT BE ISSUED WITHOUT PRIOR RETURN OF THE ORIGINAL WRIT BY THE IMPLEMENTING OFFICER. II PAYMENT OF JUDGMENT TO THE IMPLEMENTING OFFICER AS DIRECTED IN THE WRIT OF EXECUTION CONSTITUTES SATISFACTION OF JUDGMENT. III INTEREST IS NOT PAYABLE WHEN THE DECISION IS SILENT AS TO THE PAYMENT THEREOF. IV SECTION 5, RULE 39, PARTICULARLY REFERS TO LEVY OF PROPERTY OF JUDGMENT DEBTOR AND DISPOSAL OR SALE THEREOF TO SATISFY JUDGMENT. Can an alias writ of execution be issued without a prior return of the original writ by the implementing officer? We rule in the affirmative and we quote the respondent court's decision with approval: The issuance of the questioned alias writ of execution under the circumstances here obtaining is justified because even with the absence of a Sheriffs return on the original writ, the unalterable fact remains that such a return is incapable of being obtained (sic) because the officer who is to make the said return has absconded and cannot be brought to the Court despite the earlier order of the court for him to appear for this purpose. (Order of Feb. 21, 1978, Annex C, Petition). Obviously, taking cognizance of this circumstance, the order of May 11, 1978 directing the issuance of an alias writ was therefore issued. (Annex D. Petition). The need for such a return as a condition precedent for the issuance of an alias writ was justifiably dispensed with by the court below and its action in this regard meets with our concurrence. A contrary view will produce an abhorent situation whereby the mischief of an erring officer of the court could be utilized to impede indefinitely the undisputed and awarded rights which a prevailing party rightfully deserves to obtain and with dispatch. The final judgment in this case should not indeed be permitted to become illusory or incapable of execution for an indefinite and over extended period, as had already transpired. (Rollo, pp. 35-36) Judicium non debet esse illusorium; suum effectum habere debet (A judgment ought not to be illusory it ought to have its proper effect). Indeed, technicality cannot be countenanced to defeat the execution of a judgment for execution is the fruit and end of the suit and is very aptly called the life of the law (Ipekdjian Merchandising Co. v. Court of Tax Appeals, 8 SCRA 59 [1963]; Commissioner of Internal Revenue v. Visayan Electric Co., 19 SCRA 697, 698 [1967]). A judgment cannot be rendered nugatory by the unreasonable application of a strict rule of procedure. Vested rights were never intended to rest on the requirement of a return, the office of which is merely to inform the court and the parties, of any and all actions taken under the writ of execution. Where such information can be established in some other manner, the absence of an executing officer's return will not preclude a PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
370 of 501
judgment from being treated as discharged or being executed through an alias writ of execution as the case may be. More so, as in the case at bar. Where the return cannot be expected to be forthcoming, to require the same would be to compel the enforcement of rights under a judgment to rest on an impossibility, thereby allowing the total avoidance of judgment debts. So long as a judgment is not satisfied, a plaintiff is entitled to other writs of execution (Government of the Philippines v. Echaus and Gonzales, 71 Phil. 318). It is a well known legal maxim that he who cannot prosecute his judgment with effect, sues his case vainly. More important in the determination of the propriety of the trial court's issuance of an alias writ of execution is the issue of satisfaction of judgment. Under the peculiar circumstances surrounding this case, did the payment made to the absconding sheriff by check in his name operate to satisfy the judgment debt? The Court rules that the plaintiff who has won her case should not be adjudged as having sued in vain. To decide otherwise would not only give her an empty but a pyrrhic victory. It should be emphasized that under the initial judgment, Amelia Tan was found to have been wronged by PAL. She filed her complaint in 1967. After ten (10) years of protracted litigation in the Court of First Instance and the Court of Appeals, Ms. Tan won her case. It is now 1990. Almost twenty-two (22) years later, Ms. Tan has not seen a centavo of what the courts have solemnly declared as rightfully hers. Through absolutely no fault of her own, Ms. Tan has been deprived of what, technically, she should have been paid from the start, before 1967, without need of her going to court to enforce her rights. And all because PAL did not issue the checks intended for her, in her name. Under the peculiar circumstances of this case, the payment to the absconding sheriff by check in his name did not operate as a satisfaction of the judgment debt. In general, a payment, in order to be effective to discharge an obligation, must be made to the proper person. Article 1240 of the Civil Code provides: Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. (Emphasis supplied) Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the particular payment (Ulen v. Knecttle 50 Wyo 94, 58 [2d] 446, 111 ALR 65). Payment made to one having apparent authority to receive the money will, as a rule, be treated as though actual authority had been given for its receipt. Likewise, if payment is made to one who by law is authorized to act for the creditor, it will work a discharge (Hendry v. Benlisa 37 Fla. 609, 20 SO 800,34 LRA 283). The receipt of money due on ajudgment by an officer authorized by law to accept it will, therefore, satisfy the debt (See 40 Am Jm 729, 25; Hendry v. Benlisa supra; Seattle v. Stirrat 55 Wash. 104 p. 834,24 LRA [NS] 1275). The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a person so authorized is deemed payment to the creditor. Under ordinary circumstances, payment by the judgment debtor in the case at bar, to the sheriff should be valid payment to extinguish the judgment debt. There are circumstances in this case, however, which compel a different conclusion. The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in checks. The checks were not payable to Amelia Tan or Able Printing Press but to the absconding sheriff. Did such payments extinguish the judgment debt? PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
371 of 501
Article 1249 of the Civil Code provides: The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. In the meantime, the action derived from the original obligation shall be held in abeyance. In the absence of an agreement, either express or implied, payment means the discharge of a debt or obligation in money (US v. Robertson, 5 Pet. [US] 641, 8 L. ed. 257) and unless the parties so agree, a debtor has no rights, except at his own peril, to substitute something in lieu of cash as medium of payment of his debt (Anderson v. Gill, 79 Md.. 312, 29 A 527, 25 LRA 200,47 Am. St. Rep. 402). Consequently, unless authorized to do so by law or by consent of the obligee a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. Strictly speaking, the acceptance by the sheriff of the petitioner's checks, in the case at bar, does not, per se, operate as a discharge of the judgment debt. Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment (See. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan Landon Co. v. American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager's check or ordinary cheek, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized (Art. 1249, Civil Code, par. 3). If bouncing checks had been issued in the name of Amelia Tan and not the Sheriff's, there would have been no payment. After dishonor of the checks, Ms. Tan could have run after other properties of PAL. The theory is that she has received no value for what had been awarded her. Because the checks were drawn in the name of Emilio Z. Reyes, neither has she received anything. The same rule should apply. It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment in full legal contemplation. The reasoning is logical but is it valid and proper? Logic has its limits in decision making. We should not follow rulings to their logical extremes if in doing so we arrive at unjust or absurd results. In the first place, PAL did not pay in cash. It paid in cheeks. And second, payment in cash always carries with it certain cautions. Nobody hands over big amounts of cash in a careless and inane manner. Mature thought is given to the possibility of the cash being lost, of the bearer being waylaid or running off with what he is carrying for another. Payment in checks is precisely intended to avoid the possibility of the money going to the wrong party. The situation is entirely different where a Sheriff seizes a car, a tractor, or a piece of land. Logic often has to give way to experience and to reality. Having paid with checks, PAL should have done so properly. Payment in money or cash to the implementing officer may be deemed absolute payment of the judgment debt but the Court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge amounts of cash or legal tender to sheriffs and other executing officers. Payment in cash would result in damage or interminable litigations each time a sheriff with huge amounts of cash in his hands decides to abscond. As a protective measure, therefore, the courts encourage the practice of payments by cheek provided adequate controls are instituted to prevent wrongful payment and illegal withdrawal or disbursement of funds. If particularly big amounts are involved, escrow arrangements with a bank and carefully supervised by the court would be the safer procedure. Actual transfer PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
372 of 501
of funds takes place within the safety of bank premises. These practices are perfectly legal. The object is always the safe and incorrupt execution of the judgment. It is, indeed, out of the ordinary that checks intended for a particular payee are made out in the name of another. Making the checks payable to the judgment creditor would have prevented the encashment or the taking of undue advantage by the sheriff, or any person into whose hands the checks may have fallen, whether wrongfully or in behalf of the creditor. The issuance of the checks in the name of the sheriff clearly made possible the misappropriation of the funds that were withdrawn. As explained and held by the respondent court: ... [K]nowing as it does that the intended payment was for the private party respondent Amelia Tan, the petitioner corporation, utilizing the services of its personnel who are or should be knowledgeable about the accepted procedures and resulting consequences of the checks drawn, nevertheless, in this instance, without prudence, departed from what is generally observed and done, and placed as payee in the checks the name of the errant Sheriff and not the name of the rightful payee. Petitioner thereby created a situation which permitted the said Sheriff to personally encash said checks and misappropriate the proceeds thereof to his exclusive personal benefit. For the prejudice that resulted, the petitioner himself must bear the fault. The judicial guideline which we take note of states as follows: As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss. (Blondeau, et al. v. Nano, et al., L-41377, July 26, 1935, 61 Phil. 625) Having failed to employ the proper safeguards to protect itself, the judgment debtor whose act made possible the loss had but itself to blame. The attention of this Court has been called to the bad practice of a number of executing officers, of requiring checks in satisfaction of judgment debts to be made out in their own names. If a sheriff directs a judgment debtor to issue the checks in the sheriff's name, claiming he must get his commission or fees, the debtor must report the sheriff immediately to the court which ordered the execution or to the Supreme Court for appropriate disciplinary action. Fees, commissions, and salaries are paid through regular channels. This improper procedure also allows such officers, who have sixty (60) days within which to make a return, to treat the moneys as their personal finds and to deposit the same in their private accounts to earn sixty (60) days interest, before said finds are turned over to the court or judgment creditor (See Balgos v. Velasco, 108 SCRA 525 [1981]). Quite as easily, such officers could put up the defense that said checks had been issued to them in their private or personal capacity. Without a receipt evidencing payment of the judgment debt, the misappropriation of finds by such officers becomes clean and complete. The practice is ingenious but evil as it unjustly enriches court personnel at the expense of litigants and the proper administration of justice. The temptation could be far greater, as proved to be in this case of the absconding sheriff. The correct and prudent thing for the petitioner was to have issued the checks in the intended payee's name. The pernicious effects of issuing checks in the name of a person other than the intended payee, without the latter's agreement or consent, are as many as the ways that an artful mind could concoct to get around the safeguards provided by the law on negotiable instruments. An angry litigant who loses a case, as a rule, would not want the winning party to get what he won in the judgment. He would think of ways to delay the winning party's getting what has been adjudged in his favor. We cannot condone that practice especially in cases where the courts and their officers are involved. We rule against the petitioner. Anent the applicability of Section 15, Rule 39, as follows: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
373 of 501
Section 15. Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the property, real and personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution, or on a sufficient amount of such property, if they be sufficient, and selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment. ... the respondent court held: We are obliged to rule that the judgment debt cannot be considered satisfied and therefore the orders of the respondent judge granting the alias writ of execution may not be pronounced as a nullity. xxx xxx xxx It is clear and manifest that after levy or garnishment, for a judgment to be executed there is the requisite of payment by the officer to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment and none such payment had been concededly made yet by the absconding Sheriff to the private respondent Amelia Tan. The ultimate and essential step to complete the execution of the judgment not having been performed by the City Sheriff, the judgment debt legally and factually remains unsatisfied. Strictly speaking execution cannot be equated with satisfaction of a judgment. Under unusual circumstances as those obtaining in this petition, the distinction comes out clearly. Execution is the process which carries into effect a decree or judgment (Painter v. Berglund, 31 Cal. App. 2d. 63, 87 P 2d 360, 363; Miller v. London, 294 Mass 300, 1 NE 2d 198, 200; Black's Law Dictionary), whereas the satisfaction of a judgment is the payment of the amount of the writ, or a lawful tender thereof, or the conversion by sale of the debtor's property into an amount equal to that due, and, it may be done otherwise than upon an execution (Section 47, Rule 39). Levy and delivery by an execution officer are not prerequisites to the satisfaction of a judgment when the same has already been realized in fact (Section 47, Rule 39). Execution is for the sheriff to accomplish while satisfaction of the judgment is for the creditor to achieve. Section 15, Rule 39 merely provides the sheriff with his duties as executing officer including delivery of the proceeds of his levy on the debtor's property to satisfy the judgment debt. It is but to stress that the implementing officer's duty should not stop at his receipt of payments but must continue until payment is delivered to the obligor or creditor. Finally, we find no error in the respondent court's pronouncement on the inclusion of interests to be recovered under the alias writ of execution. This logically follows from our ruling that PAL is liable for both the lost checks and interest. The respondent court's decision in CA-G.R. No. 51079-R does not totally supersede the trial court's judgment in Civil Case No. 71307. It merely modified the same as to the principal amount awarded as actual damages. WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The judgment of the respondent Court of Appeals is AFFIRMED and the trial court's issuance of the alias writ of execution against the petitioner is upheld without prejudice to any action it should take against the errant sheriff Emilio Z. Reyes. The Court Administrator is ordered to follow up the actions taken against Emilio Z. Reyes. SO ORDERED. Fernan, C.J., Cruz, Paras, Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.
NARVASA, J., dissenting: The execution of final judgments and orders is a function of the sheriff, an officer of the court whose authority is by and large statutorily determined to meet the particular exigencies arising from or connected with the performance of the multifarious duties of the office. It is the acknowledgment of the many dimensions of this authority, defined by statute and chiselled by practice, which compels me to disagree with the decision reached by the majority. A consideration of the wide latitude of discretion allowed the sheriff as the officer of the court most directly involved with the implementation and execution of final judgments and orders persuades me that PAL's payment to the sheriff of its judgment debt to Amelia Tan, though made by check issued in said officer's name, lawfully satisfied said obligation and foreclosed further recourse therefor against PAL, notwithstanding the sheriffs failure to deliver to Tan the proceeds of the check. It is a matter of history that the judiciary .. is an inherit or of the Anglo-American tradition. While the common law as such .. "is not in force" in this jurisdiction, "to breathe the breath of life into many of the institutions, introduced [here] under American sovereignty, recourse must be had to the rules, principles and doctrines of the common law under whose protecting aegis the prototypes of these institutions had their birth" A sheriff is "an officer of great antiquity," and was also called the shire reeve. A shire in English law is a Saxon word signifying a division later called a county. A reeve is an ancient English officer of justice inferior in rank to an alderman .. appointed to process, keep the King's peace, and put the laws in execution. From a very remote period in English constitutional history .. the shire had another officer, namely the shire reeve or as we say, the sheriff. .. The Sheriff was the special representative of the legal or central authority, and as such usually nominated by the King. .. Since the earliest times, both in England and the United States, a sheriff has continued his status as an adjunct of the court .. . As it was there, so it has been in the Philippines from the time of the organization of the judiciary .. . (J. Fernando's concurring opinion in Bagatsing v. Herrera, 65 SCRA 434) One of a sheriff s principal functions is to execute final judgments and orders. The Rules of Court require the writs of execution to issue to him, directing him to enforce such judgments and orders in the manner therein provided (Rule 39). The mode of enforcement varies according to the nature of the judgment to be carried out: whether it be against property of the judgment debtor in his hands or in the hands of a third person i e. money judgment), or for the sale of property, real or personal (i.e. foreclosure of mortgage) or the delivery thereof, etc. (sec. 8, Rule 39). Under sec. 15 of the same Rule, the sheriff is empowered to levy on so much of the judgment debtor's property as may be sufficient to enforce the money judgment and sell these properties at public auction after due notice to satisfy the adjudged amount. It is the sheriff who, after the auction sale, conveys to the purchaser the property thus sold (secs. 25, 26, 27, Rule 39), and pays the judgment creditor so much of the proceeds as will satisfy the judgment. When the property sold by him on execution is an immovable which consequently gives rise to a light of redemption on the part of the judgment debtor and others (secs. 29, 30, Rule 39), it is to him (or to the purchaser or redemptioner that the payments may be made by those declared by law as entitled to redeem (sec. 31, Rule 39); and in this situation, it becomes his duty to accept payment and execute the certificate of redemption (Enage v. Vda. y Hijos de Escano, 38 Phil. 657, cited in Moran, Comments on the Rules of Court, 1979 ed., vol. 2, pp. 326-327). It is also to the sheriff that "written notice of any redemption must be given and a duplicate filed with the registrar of deeds of the province, and if any assessments or taxes are paid by the redemptioner or if he has or acquires any lien other than that upon which the redemption was made, notice thereof must in like manner be given to the officer and filed with the registrar of PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
375 of 501
deeds," the effect of failure to file such notice being that redemption may be made without paying such assessments, taxes, or liens (sec. 30, Rule 39). The sheriff may likewise be appointed a receiver of the property of the judgment debtor where the appointment of the receiver is deemed necessary for the execution of the judgment (sec. 32, Rule 39). At any time before the sale of property on execution, the judgment debtor may prevent the sale by paying the sheriff the amount required by the execution and the costs that have been incurred therein (sec. 20, Rule 39). The sheriff is also authorized to receive payments on account of the judgment debt tendered by "a person indebted to the judgment debtor," and his "receipt shall be a sufficient discharge for the amount so paid or directed to be credited by the judgment creditor on the execution" (sec. 41, Rule 39). Now, obviously, the sheriff s sale extinguishes the liability of the judgment debtor either in fun, if the price paid by the highest bidder is equal to, or more than the amount of the judgment or pro tanto if the price fetched at the sale be less. Such extinction is not in any way dependent upon the judgment creditor's receiving the amount realized, so that the conversion or embezzlement of the proceeds of the sale by the sheriff does not revive the judgment debt or render the judgment creditor liable anew therefor. So, also, the taking by the sheriff of, say, personal property from the judgment debtor for delivery to the judgment creditor, in fulfillment of the verdict against him, extinguishes the debtor's liability; and the conversion of said property by the sheriff, does not make said debtor responsible for replacing the property or paying the value thereof. In the instances where the Rules allow or direct payments to be made to the sheriff, the payments may be made by check, but it goes without saying that if the sheriff so desires, he may require payment to be made in lawful money. If he accepts the check, he places himself in a position where he would be liable to the judgment creditor if any damages are suffered by the latter as a result of the medium in which payment was made (Javellana v. Mirasol, et al., 40 Phil. 761). The validity of the payment made by the judgment debtor, however, is in no wise affected and the latter is discharged from his obligation to the judgment creditor as of the moment the check issued to the sheriff is encashed and the proceeds are received by Id. office. The issuance of the check to a person authorized to receive it (Art. 1240, Civil Code; See. 46 of the Code of Civil Procedure; Enage v. Vda y Hijos de Escano, 38 Phil. 657, cited in Javellana v. Mirasol, 40 Phil. 761) operates to release the judgment debtor from any further obligations on the judgment. The sheriff is an adjunct of the court; a court functionary whose competence involves both discretion and personal liability (concurring opinion of J. Fernando, citing Uy Piaoco v. Osmena, 9 Phil. 299, in Bagatsing v. Herrera, 65 SCRA 434). Being an officer of the court and acting within the scope of his authorized functions, the sheriff s receipt of the checks in payment of the judgment execution, may be deemed, in legal contemplation, as received by the court itself (Lara v. Bayona, 10 May 1955, No. L- 10919). That the sheriff functions as a conduit of the court is further underscored by the fact that one of the requisites for appointment to the office is the execution of a bond, "conditioned (upon) the faithful performance of his (the appointee's) duties .. for the delivery or payment to Government, or the person entitled thereto, of all properties or sums of money that shall officially come into his hands" (sec. 330, Revised Administrative Code). There is no question that the checks came into the sheriffs possession in his official capacity. The court may require of the judgment debtor, in complying with the judgment, no further burden than his vigilance in ensuring that the person he is paying money or delivering property to is a person authorized by the court to receive it. Beyond this, further expectations become unreasonable. To my mind, a proposal that would make the judgment debtor unqualifiedly the insurer of the judgment creditor's entitlement to the judgment amount which is really what this case is all about begs the question. That the checks were made out in the sheriffs name (a practice, by the way, of long and common acceptance) is of little consequence if juxtaposed with the extent of the authority explicitly granted him by law as the officer entrusted PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
376 of 501
with the power to execute and implement court judgments. The sheriffs requirement that the checks in payment of the judgment debt be issued in his name was simply an assertion of that authority; and PAL's compliance cannot in the premises be faulted merely because of the sheriffs subsequent malfeasance in absconding with the payment instead of turning it over to the judgment creditor. If payment had been in cash, no question about its validity or of the authority and duty of the sheriff to accept it in settlement of PAL's judgment obligation would even have arisen. Simply because it was made by checks issued in the sheriff s name does not warrant reaching any different conclusion. As payment to the court discharges the judgment debtor from his responsibility on the judgment, so too must payment to the person designated by such court and authorized to act in its behalf, operate to produce the same effect. It is unfortunate and deserving of commiseration that Amelia Tan was deprived of what was adjudged to her when the sheriff misappropriated the payment made to him by PAL in dereliction of his sworn duties. But I submit that her remedy lies, not here and in reviving liability under a judgment already lawfully satisfied, but elsewhere. ACCORDINGLY, I vote to grant the petition. Melencio-Herrera, Gancayco, J., concurs.
FELICIANO, J., dissenting: I concur in the able dissenting opinions of Narvasa and Padilla, JJ. and would merely wish to add a few footnotes to their lucid opinions. 1. Narvasa, J. has demonstrated in detail that a sheriff is authorized by the Rules of Court and our case law to receive either legal tender or checks from the judgment debtor in satisfaction of the judgment debt. In addition, Padilla, J. has underscored the obligation of the sheriff, imposed upon him by the nature of his office and the law, to turn over such legal tender, checks and proceeds of execution sales to the judgment creditor. The failure of a sheriff to effect such turnover and his conversion of the funds (or goods) held by him to his own uses, do not have the effect of frustrating payment by and consequent discharge of the judgment debtor. To hold otherwise would be to throw the risk of the sheriff faithfully performing his duty as a public officer upon those members of the general public who are compelled to deal with him. It seems to me that a judgment debtor who turns over funds or property to the sheriff can not reasonably be made an insurer of the honesty and integrity of the sheriff and that the risk of the sheriff carrying out his duties honestly and faithfully is properly lodged in the State itself The sheriff, like all other officers of the court, is appointed and paid and controlled and disciplined by the Government, more specifically by this Court. The public surely has a duty to report possible wrongdoing by a sheriff or similar officer to the proper authorities and, if necessary, to testify in the appropriate judicial and administrative disciplinary proceedings. But to make the individual members of the general community insurers of the honest performance of duty of a sheriff, or other officer of the court, over whom they have no control, is not only deeply unfair to the former. It is also a confession of comprehensive failure and comes too close to an abdication of duty on the part of the Court itself. This Court should have no part in that. 2. I also feel compelled to comment on the majority opinion written by Gutierrez, J. with all his customary and special way with words. My learned and eloquent brother in the Court PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
377 of 501
apparently accepts the proposition that payment by a judgment debtor of cash to a sheriff produces the legal effects of payment, the sheriff being authorized to accept such payment. Thus, in page 10 of his ponencia, Gutierrez, J. writes: The receipt of money due on a judgment by an officer authorized by law to accept it will satisfy the debt. (Citations omitted) The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a person so authorized is deemed payment to the creditor. Under ordinary circumstances, payment by the judgment debtor in the case at bar, to the sheriff would be valid payment to extinguish the judgment debt. Shortly thereafter, however, Gutierrez, J. backs off from the above position and strongly implies that payment in cash to the sheriff is sheer imprudence on the part of the judgment debtor and that therefore, should the sheriff abscond with the cash, the judgment debtor has not validly discharged the judgment debt: It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment in full legal contemplation. The reasoning is logical but is it valid and proper? In the first place, PAL did not pay in cash. It paid in checks. And second, payment in cash always carries with it certain cautions. Nobody hands over big amounts of cash in a careless and inane manner. Mature thought is given to the possibility of the cash being lost, of the bearer being waylaid or running off with what he is carrying for another. Payment in checks is precisely intended to avoid the possibility of the money going to the wrong party.... Payment in money or cash to the implementing officer may be deemed absolute payment of the judgment debt but the court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge amounts of cash or legal tender to sheriffs and other executing officers. ... (Emphasis in the original) (Majority opinion, pp. 12-13) There is no dispute with the suggestion apparently made that maximum safety is secured where the judgment debtor delivers to the sheriff not cash but a check made out, not in the name of the sheriff, but in the judgment creditor's name. The fundamental point that must be made, however, is that under our law only cash is legal tender and that the sheriff can be compelled to accept only cash and not checks, even if made out to the name of the judgment creditor. 1 The sheriff could have quite lawfully required PAL to deliver to him only cash, i.e., Philippine currency. If the sheriff had done so, and if PAL had complied with such a requirement, as it would have had to, one would have to agree that legal payment must be deemed to have been effected. It requires no particularly acute mind to note that a dishonest sheriff could easily convert the money and abscond. The fact that the sheriff in the instant case required, not cash to be delivered to him, but rather a check made out in his name, does not change the legal situation. PAL did not thereby become negligent; it did not make the loss anymore possible or probable than if it had instead delivered plain cash to the sheriffs. It seems to me that the majority opinion's real premise is the unspoken one that the judgment debtor should bear the risk of the fragility of the sheriff s virtue until the money or property parted with by the judgment debtor actually reaches the hands of the judgment creditor. This brings me back to my earlier point that risk is most appropriately borne not by the judgment debtor, nor indeed by the judgment creditor, but by the State itself. The Court requires all sheriffs to post good and adequate fidelity bonds before entering upon the performance of their duties and, presumably, to maintain such bonds in force and effect throughout their stay in office. 2 The judgment creditor, in circumstances like those of the instant case, could be allowed to execute upon the absconding sheriff s bond. 3
I believe the Petition should be granted and I vote accordingly.
PADILLA, J., Dissenting Opinion From the facts that appear to be undisputed, I reach a conclusion different from that of the majority. Sheriff Emilio Z. Reyes, the trial court's authorized sheriff, armed with a writ of execution to enforce a final money judgment against the petitioner Philippine Airlines (PAL) in favor of private respondent Amelia Tan, proceeded to petitioner PAL's office to implement the writ. There is no question that Sheriff Reyes, in enforcing the writ of execution, was acting with full authority as an officer of the law and not in his personal capacity. Stated differently, PAL had every right to assume that, as an officer of the law, Sheriff Reyes would perform his duties as enjoined by law. It would be grossly unfair to now charge PAL with advanced or constructive notice that Mr. Reyes would abscond and not deliver to the judgment creditor the proceeds of the writ of execution. If a judgment debtor cannot rely on and trust an officer of the law, as the Sheriff, whom else can he trust? Pursued to its logical extreme, if PAL had delivered to Sheriff Reyes the amount of the judgment in CASH, i.e. Philippine currency, with the corresponding receipt signed by Sheriff Reyes, this would have been payment by PAL in full legal contemplation, because under Article 1240 of the Civil Code, "payment shall be made to the person in whose favor the obligation has been constituted or his successor in interest or any person authorized to receive it." And said payment if made by PAL in cash, i.e., Philippine currency, to Sheriff Reyes would have satisfied PAL's judgment obligation, as payment is a legally recognized mode for extinguishing one's obligation. (Article 1231, Civil Code). Under Sec. 15, Rule 39, Rules of Court which provides that- Sec. 15. Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the property, real and personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution, or on a sufficient amount of such property, if there be sufficient, and selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment. ... .(emphasis supplied) it would be the duty of Sheriff Reyes to pay to the judgment creditor the proceeds of the execution i.e., the cash received from PAL (under the above assumption). But, the duty of the sheriff to pay the cash to the judgment creditor would be a matter separate the distinct from the fact that PAL would have satisfied its judgment obligation to Amelia Tan, the judgment creditor, by delivering the cash amount due under the judgment to Sheriff Reyes. Did the situation change by PAL's delivery of its two (2) checks totalling P30,000.00 drawn against its bank account, payable to Sheriff Reyes, for account of the judgment rendered against PAL? I do not think so, because when Sheriff Reyes encashed the checks, the encashment was in fact a payment by PAL to Amelia Tan through Sheriff Reyes, an officer of the law authorized to receive payment, and such payment discharged PAL'S obligation under the executed judgment. If the PAL cheeks in question had not been encashed by Sheriff Reyes, there would be no payment by PAL and, consequently no discharge or satisfaction of its judgment obligation. But the checks had been encashed by Sheriff Reyes giving rise to a situation as if PAL had paid Sheriff Reyes in cash, i.e., Philippine currency. This, we repeat, is payment, in legal contemplation, on the part of PAL and this payment legally discharged PAL from its judgment obligation to the judgment creditor. To be sure, the same encashment by Sheriff Reyes of PAL's checks delivered to him in his official capacity as Sheriff, imposed an obligation on Sheriff Reyes to pay and deliver the proceeds of the encashment to Amelia Tan who is deemed to have acquired a cause of action against Sheriff Reyes for his failure to deliver to her the proceeds of the encashment. As held: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
379 of 501
Payment of a judgment, to operate as a release or satisfaction, even pro tanto must be made to the plaintiff or to some person authorized by him, or by law, to receive it. The payment of money to the sheriff having an execution satisfies it, and, if the plaintiff fails to receive it, his only remedy is against the officer (Henderson v. Planters' and Merchants Bank, 59 SO 493, 178 Ala. 420). Payment of an execution satisfies it without regard to whether the officer pays it over to the creditor or misapplies it (340, 33 C.J.S. 644, citing Elliot v. Higgins, 83 N.C. 459). If defendant consents to the Sheriff s misapplication of the money, however, defendant is estopped to claim that the debt is satisfied (340, 33 C.J.S. 644, citing Heptinstall v. Medlin 83 N.C. 16). The above rulings find even more cogent application in the case at bar because, as contended by petitioner PAL (not denied by private respondent), when Sheriff Reyes served the writ of execution on PAL, he (Reyes) was accompanied by private respondent's counsel. Prudence dictated that when PAL delivered to Sheriff Reyes the two (2) questioned checks (payable to Sheriff Reyes), private respondent's counsel should have insisted on their immediate encashment by the Sheriff with the drawee bank in order to promptly get hold of the amount belonging to his client, the judgment creditor. ACCORDINGLY, I vote to grant the petition and to quash the court a quo's alias writ of execution. Melencio-Herrera, Gancayco, Sarmiento, Cortes, JJ., concurs.
Separate Opinions
NARVASA, J., dissenting: The execution of final judgments and orders is a function of the sheriff, an officer of the court whose authority is by and large statutorily determined to meet the particular exigencies arising from or connected with the performance of the multifarious duties of the office. It is the acknowledgment of the many dimensions of this authority, defined by statute and chiselled by practice, which compels me to disagree with the decision reached by the majority. A consideration of the wide latitude of discretion allowed the sheriff as the officer of the court most directly involved with the implementation and execution of final judgments and orders persuades me that PAL's payment to the sheriff of its judgment debt to Amelia Tan, though made by check issued in said officer's name, lawfully satisfied said obligation and foreclosed further recourse therefor against PAL, notwithstanding the sheriffs failure to deliver to Tan the proceeds of the check. It is a matter of history that the judiciary .. is an inherit or of the Anglo-American tradition. While the common law as such .. "is not in force" in this jurisdiction, "to breathe the breath of life into many of the institutions, introduced [here] under American sovereignty, recourse must be had to the rules, principles and doctrines of the common law under whose protecting aegis the prototypes of these institutions had their birth" A sheriff is "an officer of great antiquity," and was also called the shire reeve. A shire in English law is a Saxon word signifying a division later called a county. A reeve is an ancient English officer of justice inferior in rank to an alderman .. appointed to process, keep the King's peace, and put the laws in execution. From a very remote period in English constitutional history .. the shire had another officer, namely the shire reeve or as we say, the sheriff. .. The Sheriff was the special representative of the legal or central authority, and as such usually nominated by the King. .. Since the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
380 of 501
earliest times, both in England and the United States, a sheriff has continued his status as an adjunct of the court .. . As it was there, so it has been in the Philippines from the time of the organization of the judiciary .. . (J. Fernando's concurring opinion in Bagatsing v. Herrera, 65 SCRA 434) One of a sheriff s principal functions is to execute final judgments and orders. The Rules of Court require the writs of execution to issue to him, directing him to enforce such judgments and orders in the manner therein provided (Rule 39). The mode of enforcement varies according to the nature of the judgment to be carried out: whether it be against property of the judgment debtor in his hands or in the hands of a third person i e. money judgment), or for the sale of property, real or personal (i.e. foreclosure of mortgage) or the delivery thereof, etc. (sec. 8, Rule 39). Under sec. 15 of the same Rule, the sheriff is empowered to levy on so much of the judgment debtor's property as may be sufficient to enforce the money judgment and sell these properties at public auction after due notice to satisfy the adjudged amount. It is the sheriff who, after the auction sale, conveys to the purchaser the property thus sold (secs. 25, 26, 27, Rule 39), and pays the judgment creditor so much of the proceeds as will satisfy the judgment. When the property sold by him on execution is an immovable which consequently gives rise to a light of redemption on the part of the judgment debtor and others (secs. 29, 30, Rule 39), it is to him (or to the purchaser or redemptioner that the payments may be made by those declared by law as entitled to redeem (sec. 31, Rule 39); and in this situation, it becomes his duty to accept payment and execute the certificate of redemption (Enage v. Vda. y Hijos de Escano, 38 Phil. 657, cited in Moran, Comments on the Rules of Court, 1979 ed., vol. 2, pp. 326-327). It is also to the sheriff that "written notice of any redemption must be given and a duplicate filed with the registrar of deeds of the province, and if any assessments or taxes are paid by the redemptioner or if he has or acquires any lien other than that upon which the redemption was made, notice thereof must in like manner be given to the officer and filed with the registrar of deeds," the effect of failure to file such notice being that redemption may be made without paying such assessments, taxes, or liens (sec. 30, Rule 39). The sheriff may likewise be appointed a receiver of the property of the judgment debtor where the appointment of the receiver is deemed necessary for the execution of the judgment (sec. 32, Rule 39). At any time before the sale of property on execution, the judgment debtor may prevent the sale by paying the sheriff the amount required by the execution and the costs that have been incurred therein (sec. 20, Rule 39). The sheriff is also authorized to receive payments on account of the judgment debt tendered by "a person indebted to the judgment debtor," and his "receipt shall be a sufficient discharge for the amount so paid or directed to be credited by the judgment creditor on the execution" (sec. 41, Rule 39). Now, obviously, the sheriff s sale extinguishes the liability of the judgment debtor either in fun, if the price paid by the highest bidder is equal to, or more than the amount of the judgment or pro tanto if the price fetched at the sale be less. Such extinction is not in any way dependent upon the judgment creditor's receiving the amount realized, so that the conversion or embezzlement of the proceeds of the sale by the sheriff does not revive the judgment debt or render the judgment creditor liable anew therefor. So, also, the taking by the sheriff of, say, personal property from the judgment debtor for delivery to the judgment creditor, in fulfillment of the verdict against him, extinguishes the debtor's liability; and the conversion of said property by the sheriff, does not make said debtor responsible for replacing the property or paying the value thereof. In the instances where the Rules allow or direct payments to be made to the sheriff, the payments may be made by check, but it goes without saying that if the sheriff so desires, he may require payment to be made in lawful money. If he accepts the check, he places himself in a position where he would be liable to the judgment creditor if any damages are suffered by the latter as a result of the medium in which payment was made (Javellana v. Mirasol, et al., 40 Phil. 761). The validity of the payment made by the judgment debtor, however, is in no wise affected and the latter is discharged from his obligation to the judgment creditor as of the moment the check issued to the sheriff is encashed PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
381 of 501
and the proceeds are received by Id. office. The issuance of the check to a person authorized to receive it (Art. 1240, Civil Code; See. 46 of the Code of Civil Procedure; Enage v. Vda y Hijos de Escano, 38 Phil. 657, cited in Javellana v. Mirasol, 40 Phil. 761) operates to release the judgment debtor from any further obligations on the judgment. The sheriff is an adjunct of the court; a court functionary whose competence involves both discretion and personal liability (concurring opinion of J. Fernando, citing Uy Piaoco v. Osmena, 9 Phil. 299, in Bagatsing v. Herrera, 65 SCRA 434). Being an officer of the court and acting within the scope of his authorized functions, the sheriff s receipt of the checks in payment of the judgment execution, may be deemed, in legal contemplation, as received by the court itself (Lara v. Bayona, 10 May 1955, No. L- 10919). That the sheriff functions as a conduit of the court is further underscored by the fact that one of the requisites for appointment to the office is the execution of a bond, "conditioned (upon) the faithful performance of his (the appointee's) duties .. for the delivery or payment to Government, or the person entitled thereto, of all properties or sums of money that shall officially come into his hands" (sec. 330, Revised Administrative Code). There is no question that the checks came into the sheriffs possession in his official capacity. The court may require of the judgment debtor, in complying with the judgment, no further burden than his vigilance in ensuring that the person he is paying money or delivering property to is a person authorized by the court to receive it. Beyond this, further expectations become unreasonable. To my mind, a proposal that would make the judgment debtor unqualifiedly the insurer of the judgment creditor's entitlement to the judgment amount which is really what this case is all about-begs the question. That the checks were made out in the sheriffs name (a practice, by the way, of long and common acceptance) is of little consequence if juxtaposed with the extent of the authority explicitly granted him by law as the officer entrusted with the power to execute and implement court judgments. The sheriffs requirement that the checks in payment of the judgment debt be issued in his name was simply an assertion of that authority; and PAL's compliance cannot in the premises be faulted merely because of the sheriffs subsequent malfeasance in absconding with the payment instead of turning it over to the judgment creditor. If payment had been in cash, no question about its validity or of the authority and duty of the sheriff to accept it in settlement of PAL's judgment obligation would even have arisen. Simply because it was made by checks issued in the sheriff s name does not warrant reaching any different conclusion. As payment to the court discharges the judgment debtor from his responsibility on the judgment, so too must payment to the person designated by such court and authorized to act in its behalf, operate to produce the same effect. It is unfortunate and deserving of commiseration that Amelia Tan was deprived of what was adjudged to her when the sheriff misappropriated the payment made to him by PAL in dereliction of his sworn duties. But I submit that her remedy lies, not here and in reviving liability under a judgment already lawfully satisfied, but elsewhere. ACCORDINGLY, I vote to grant the petition. Melencio-Herrera, Gancayco, J., concurs.
FELICIANO, J., dissenting: I concur in the able dissenting opinions of Narvasa and Padilla, JJ. and would merely wish to add a few footnotes to their lucid opinions. 1. Narvasa, J. has demonstrated in detail that a sheriff is authorized by the Rules of Court and our case law to receive either legal tender or checks from the judgment debtor in satisfaction of the judgment debt. In addition, Padilla, J. has underscored the obligation of the sheriff, imposed upon him PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
382 of 501
by the nature of his office and the law, to turn over such legal tender, checks and proceeds of execution sales to the judgment creditor. The failure of a sheriff to effect such turnover and his conversion of the funds (or goods) held by him to his own uses, do not have the effect of frustrating payment by and consequent discharge of the judgment debtor. To hold otherwise would be to throw the risk of the sheriff faithfully performing his duty as a public officer upon those members of the general public who are compelled to deal with him. It seems to me that a judgment debtor who turns over funds or property to the sheriff can not reasonably be made an insurer of the honesty and integrity of the sheriff and that the risk of the sheriff carrying out his duties honestly and faithfully is properly lodged in the State itself The sheriff, like all other officers of the court, is appointed and paid and controlled and disciplined by the Government, more specifically by this Court. The public surely has a duty to report possible wrongdoing by a sheriff or similar officer to the proper authorities and, if necessary, to testify in the appropriate judicial and administrative disciplinary proceedings. But to make the individual members of the general community insurers of the honest performance of duty of a sheriff, or other officer of the court, over whom they have no control, is not only deeply unfair to the former. It is also a confession of comprehensive failure and comes too close to an abdication of duty on the part of the Court itself. This Court should have no part in that. 2. I also feel compelled to comment on the majority opinion written by Gutierrez, J. with all his customary and special way with words. My learned and eloquent brother in the Court apparently accepts the proposition that payment by a judgment debtor of cash to a sheriff produces the legal effects of payment, the sheriff being authorized to accept such payment. Thus, in page 10 of his ponencia, Gutierrez, J. writes: The receipt of money due on a judgment by an officer authorized by law to accept it will satisfy the debt. (Citations omitted) The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a person so authorized is deemed payment to the creditor. Under ordinary circumstances, payment by the judgment debtor in the case at bar, to the sheriff would be valid payment to extinguish the judgment debt. Shortly thereafter, however, Gutierrez, J. backs off from the above position and strongly implies that payment in cash to the sheriff is sheer imprudence on the part of the judgment debtor and that therefore, should the sheriff abscond with the cash, the judgment debtor has not validly discharged the judgment debt: It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment in full legal contemplation. The reasoning is logical but is it valid and proper? In the first place, PAL did not pay in cash. It paid in checks. And second, payment in cash always carries with it certain cautions. Nobody hands over big amounts of cash in a careless and inane manner. Mature thought is given to the possibility of the cash being lost, of the bearer being waylaid or running off with what he is carrying for another. Payment in checks is precisely intended to avoid the possibility of the money going to the wrong party.... PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
383 of 501
Payment in money or cash to the implementing officer may be deemed absolute payment of the judgment debt but the court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge amounts of cash or legal tender to sheriffs and other executing officers. ... (Emphasis in the original) (Majority opinion, pp. 12-13) There is no dispute with the suggestion apparently made that maximum safety is secured where the judgment debtor delivers to the sheriff not cash but a check made out, not in the name of the sheriff, but in the judgment creditor's name. The fundamental point that must be made, however, is that under our law only cash is legal tender and that the sheriff can be compelled to accept only cash and not checks, even if made out to the name of the judgment creditor. 1 The sheriff could have quite lawfully required PAL to deliver to him only cash, i.e., Philippine currency. If the sheriff had done so, and if PAL had complied with such a requirement, as it would have had to, one would have to agree that legal payment must be deemed to have been effected. It requires no particularly acute mind to note that a dishonest sheriff could easily convert the money and abscond. The fact that the sheriff in the instant case required, not cash to be delivered to him, but rather a check made out in his name, does not change the legal situation. PAL did not thereby become negligent; it did not make the loss anymore possible or probable than if it had instead delivered plain cash to the sheriffs. It seems to me that the majority opinion's real premise is the unspoken one that the judgment debtor should bear the risk of the fragility of the sheriff s virtue until the money or property parted with by the judgment debtor actually reaches the hands of the judgment creditor. This brings me back to my earlier point that risk is most appropriately borne not by the judgment debtor, nor indeed by the judgment creditor, but by the State itself. The Court requires all sheriffs to post good and adequate fidelity bonds before entering upon the performance of their duties and, presumably, to maintain such bonds in force and effect throughout their stay in office. 2 The judgment creditor, in circumstances like those of the instant case, could be allowed to execute upon the absconding sheriff s bond. 3
I believe the Petition should be granted and I vote accordingly.
PADILLA, J., Dissenting Opinion From the facts that appear to be undisputed, I reach a conclusion different from that of the majority. Sheriff Emilio Z. Reyes, the trial court's authorized sheriff, armed with a writ of execution to enforce a final money judgment against the petitioner Philippine Airlines (PAL) in favor of private respondent Amelia Tan, proceeded to petitioner PAL's office to implement the writ. There is no question that Sheriff Reyes, in enforcing the writ of execution, was acting with full authority as an officer of the law and not in his personal capacity. Stated differently, PAL had every right to assume that, as an officer of the law, Sheriff Reyes would perform his duties as enjoined by law. It would be grossly unfair to now charge PAL with advanced or constructive notice that Mr. Reyes would abscond and not deliver to the judgment creditor the proceeds of the writ of execution. If a judgment debtor cannot rely on and trust an officer of the law, as the Sheriff, whom else can he trust? Pursued to its logical extreme, if PAL had delivered to Sheriff Reyes the amount of the judgment in CASH, i.e. Philippine currency, with the corresponding receipt signed by Sheriff Reyes, this would have been payment by PAL in full legal contemplation, because under Article 1240 of the Civil Code, "payment shall be made to the person in whose favor the obligation has been constituted or his successor in interest or any person authorized to receive it." And said payment if made by PAL in cash, i.e., Philippine currency, to Sheriff Reyes would have satisfied PAL's judgment obligation, as payment is a legally recognized mode for extinguishing one's obligation. (Article 1231, Civil Code). Under Sec. 15, Rule 39, Rules of Court which provides that- Sec. 15. Execution of money judgments.-The officer must enforce an execution of a money judgment by levying on all PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
384 of 501
the property, real and personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution, or on a sufficient amount of such property, if there be sufficient, and selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment. ... .(emphasis supplied) it would be the duty of Sheriff Reyes to pay to the judgment creditor the proceeds of the execution i.e., the cash received from PAL (under the above assumption). But, the duty of the sheriff to pay the cash to the judgment creditor would be a matter separate the distinct from the fact that PAL would have satisfied its judgment obligation to Amelia Tan, the judgment creditor, by delivering the cash amount due under the judgment to Sheriff Reyes. Did the situation change by PAL's delivery of its two (2) checks totalling P30,000.00 drawn against its bank account, payable to Sheriff Reyes, for account of the judgment rendered against PAL? I do not think so, because when Sheriff Reyes encashed the checks, the encashment was in fact a payment by PAL to Amelia Tan through Sheriff Reyes, an officer of the law authorized to receive payment, and such payment discharged PAL'S obligation under the executed judgment. If the PAL cheeks in question had not been encashed by Sheriff Reyes, there would be no payment by PAL and, consequently no discharge or satisfaction of its judgment obligation. But the checks had been encashed by Sheriff Reyes giving rise to a situation as if PAL had paid Sheriff Reyes in cash, i.e., Philippine currency. This, we repeat, is payment, in legal contemplation, on the part of PAL and this payment legally discharged PAL from its judgment obligation to the judgment creditor. To be sure, the same encashment by Sheriff Reyes of PAL's checks delivered to him in his official capacity as Sheriff, imposed an obligation on Sheriff Reyes to pay and deliver the proceeds of the encashment to Amelia Tan who is deemed to have acquired a cause of action against Sheriff Reyes for his failure to deliver to her the proceeds of the encashment. As held: Payment of a judgment, to operate as a release or satisfaction, even pro tanto must be made to the plaintiff or to some person authorized by him, or by law, to receive it. The payment of money to the sheriff having an execution satisfies it, and, if the plaintiff fails to receive it, his only remedy is against the officer (Henderson v. Planters' and Merchants Bank, 59 SO 493, 178 Ala. 420). Payment of an execution satisfies it without regard to whether the officer pays it over to the creditor or misapplies it (340, 33 C.J.S. 644, citing Elliot v. Higgins, 83 N.C. 459). If defendant consents to the Sheriff s misapplication of the money, however, defendant is estopped to claim that the debt is satisfied (340, 33 C.J.S. 644, citing Heptinstall v. Medlin 83 N.C. 16). The above rulings find even more cogent application in the case at bar because, as contended by petitioner PAL (not denied by private respondent), when Sheriff Reyes served the writ of execution on PAL, he (Reyes) was accompanied by private respondent's counsel. Prudence dictated that when PAL delivered to Sheriff Reyes the two (2) questioned checks (payable to Sheriff Reyes), private respondent's counsel should have insisted on their immediate encashment by the Sheriff with the drawee bank in order to promptly get hold of the amount belonging to his client, the judgment creditor. ACCORDINGLY, I vote to grant the petition and to quash the court a quo's alias writ of execution.
Luzon Steel v. Sia, 28 S 58 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-26449 May 15, 1969 LUZON STEEL CORPORATION, represented by TOMAS AQUINO CU, plaintiff-appellant, vs. JOSE O. SIA, defendant, TIMES SURETY & INSURANCE CO. INC., surety-appellee. German A. Sipin for plaintiff-appellant. Galicano S. Calapatia for surety-appellee. REYES, J.B.L., J.: Direct appeal from two orders, dated 19 May and 5 June 1965, issued by the Court of First Instance of Manila (Judge Francisco Arca presiding), in its Civil Case No. 54913, entitled Luzon Steel Corporation, plaintiff vs. Metal Manufacturing of the Philippines, Inc., and Jose O. Sia, defendants, whereby the court aforesaid quashed a writ of execution issued against the Times Surety & Insurance Co., Inc., and cancelled the undertaking of said surety company. The essential and uncontroverted facts of the case may be summarized as follows: Luzon Steel Corporation has sued Metal Manufacturing of the Philippines and Jose O. Sia, the former's manager, for breach of contract and damages. It obtained a writ of preliminary attachment of the properties of the defendants, but the attachment was lifted upon a P25,000.00 counterbond executed by the defendant Sia, as principal, and the Times Surety & Insurance Co., Inc. (hereinafter designated as the surety), as solidary guarantor, in the following terms: WHEREFORE, we JOSE O. SIA, as principal and the TIMES SURETY & INSURANCE CO., INC., as Surety, in consideration of the dissolution of attachment, hereby jointly and severally bind ourselves in the sum of Twenty Five Thousand Pesos (P25,000.00), Philippine Currency, to answer for the payment to the plaintiff of any judgment it may recover in the action in accordance with Section 12, Rule 59, of the Rules of Court. (pp. 32, 45, Rec. on Appeal.) Issues having been joined, plaintiff and defendant (without intervention of the surety) entered into a compromise whereby defendant Sia agreed to settle the plaintiff's claim in the following manner: 1. That the defendant shall settle with the Plaintiff the amount of TWENTY FIVE THOUSAND (P25,000.00) PESOS, in the following manner: FIVE HUNDRED (P500.00) PESOS, monthly for the first six (6) months to be paid at the end of every month and to commence in January, 1965, and within one month after paying the last installment of P500.00, the balance of P22,000.00 shall be paid in lump sum, without interest. It is understood that failure of the Defendant to pay one or any installment will make the whole obligation immediately due and demandable and that a writ of execution will be issued immediately against Defendants bond.lawphi1.et The compromise was submitted to the court and the latter approved it, rendered judgment in conformity therewith, and directed the parties to comply with the same (Record on Appeal, page 22). PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
386 of 501
Defendant having failed to comply, plaintiff moved for and obtained a writ of execution against defendant and the joint and several counterbond. The surety, however, moved to quash the writ of execution against it, averring that it was not a party to the compromise, and that the writ was issued without giving the surety notice and hearing. The court, overruling the plaintiff's opposition, set aside the writ of execution, and later cancelled the counterbond, and denied the motion for reconsideration. Hence this appeal. 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. Squarely on the point, and rebutting the appellee's apprehension that the compromise could be the result of a collusion between the parties to injure the surety, is our decision in Anzures vs. Alto Surety & Insurance Co., Inc., et al., 92 Phil. 742, where this Court, through former Chief Justice Paras, ruled as follows: Under section 12, Rule 59, of the Rules of Court, the bond filed, as in this case, for the discharge of an attachment is "to secure the payment to the plaintiff of any judgment he may recover in the action," and stands "in place of the property so released". It follows that the order of cancellation issued by the respondent judge is erroneous. Indeed, judgment had already been rendered by the Court of First Instance of Manila in civil case No. 11748, sentencing Benjamin Aguilar to pay the sum of P3,500.00 to the petitioner; and it is not pretended that said judgment is a nullity. There is no point in the contention of the respondent Surety Company that the compromise was entered into without its knowledge and consent, thus becoming as to it essentially fraudulent. The Surety is not a party to civil case No. 11748 and, therefore, need not be served with notice of the petition for judgment. As against the conjecture of said respondent that the parties may easily connive by means of a compromise to prejudice it, there is also the likelihood that the same end may be attained by parties acting in bad faith through a simulated trial. At any rate, it is within the power of the Surety Company to protect itself against a risk of the kind. Wherefore, the order of the respondent Judge cancelling the bond in question is set aside. So ordered with costs against the respondent Alto Surety & Insurance Co., Inc. The lower court and the appellee herein appear to have relied on doctrines of this Court concerning the liability of sureties in bonds filed by a plaintiff for the issuance of writs of attachment, without discriminating between such bonds and those filed by a defendant for the lifting of writs of attachment already issued and levied. This confusion is hardly excusable considering that this Court has already called attention to the difference between these kinds of bonds. Thus, in Cajefe vs. Judge Fernandez, et al., L- 15709, 19 October 1960, this Court pointed out that The diverse rule in section 17 of Rule 59 for counterbonds posted to obtain the lifting of a writ of attachment is due to these bonds being security for the payment of any judgment that the attaching PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
387 of 501
party may obtain; they are thus mere replacements of the property formerly attached, and just as the latter may be levied upon after final judgment in the case in order to realize the amount adjudged, so is the liability of the countersureties ascertainable after the judgment has become final. This situation does not obtain in the case of injunction counterbonds, since the sureties in the latter case merely undertake "to pay all damages that the plaintiff may suffer by reason of the continuance ... of the acts complained of" (Rule 60, section 6) and not to secure payment of the judgment recovered. 1
It was, therefore, error on the part of the court below to have ordered the surety bond cancelled, on the theory that the parties' compromise discharged the obligation of the surety. As declared by us in Mercado vs. 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 P912.04, to secure payment of the amount that said plaintiff be adjudged to recover from the defendants, 2
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. But the surety in the present case insists (and the court below so ruled) that the execution issued against it was invalid because the writ issued against its principal, Jose O. Sia, et al., defendants below, had not been returned unsatisfied; and the surety invoked in its favor Section 17 of Rule 57 of the Revised Rules of Court (old Rule 59), couched in the following terms: SEC. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be returned unsatisfied in whole or in part, the surety or sureties on any counterbond 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 to the judgment creditor upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action. The surety's contention is untenable. The counterbond contemplated in the rule is evidently an ordinary guaranty where the sureties assume a subsidiary liability. This is not the case here, because the surety in the present case bound itself "jointly and severally" (in solidum) with the defendant; and it is prescribed in Article 2059, paragraph 2, of the Civil Code of the Philippines that excusion (previous exhaustion of the property of the debtor) shall not take place "if he (the guarantor) has bound himself solidarily with the debtor". The rule heretofore quoted cannot be construed as requiring that an execution against the debtor be first returned unsatisfied even if the bond were a solidary one; for a procedural rule may not amend the substantive law expressed in the Civil Code, and further would nullify the express stipulation of the parties that the surety's obligation should be solidary with that of the defendant. A second reason against the stand of the surety and of the court below is that even if the surety's undertaking were not solidary with that of the principal debtor, still he may not demand exhaustion of the property of the latter, unless he can point out sufficient leviable property of the debtor within Philippine territory. There is no record that the appellee surety has done so. Says Article 2060 of the Civil Code of the Philippines: ART. 2060. In order that the guarantor may make use of the benefit of excussion, he must set it up against the creditor upon the latter's demand for payment from him, and point out to the creditor available property of the debtor within Philippine territory, sufficient to cover the amount of the debt. A third reason against the thesis of appellee is that, under the rule and its own terms, the counter-bond is only conditioned upon the rendition of the judgment. Payment under the bond is not made to depend upon the delivery or availability of the property previously attached, as it was under Section 440 of the old Code of Civil Procedure. Where under the rule and the bond the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
388 of 501
undertaking is to pay the judgment, the liability of the surety or sureties attaches upon the rendition of the judgment, and the issue of an execution and its return nulla bona is not, and should not be, a condition to the right to resort to the bond. 3
It is true that under Section 17 recovery from the surety or sureties should be "after notice and summary hearing in the same action". But this requirement has been substantially complied with from the time the surety was allowed to move for the quashal of the writ of execution and for the cancellation of their obligation. WHEREFORE, the orders appealed from are reversed, and the court of origin is ordered to proceed with the execution against the surety appellee, Times Surety & Insurance Co., Inc. Costs against said appellee. Dizon, Makalintal, Zaldivar, Sanchez, Fernando, Capistrano and Barredo, JJ., concur. Teehankee, J., took no part. Concepcion, C.J., and Castro, J., are on leave.
Phil. British Assurance Co. v. IAC, 150 S 520 Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 72005 May 29, 1987 PHILIPPINE BRITISH ASSURANCE CO., INC., petitioner, vs. HONORABLE INTERMEDIATE APPELLATE COURT; SYCWIN COATING & WIRES, INC., and DOMINADOR CACPAL, CHIEF DEPUTY SHERRIF OF MANILA, respondents.
GANCAYCO, J.: This is a Petition for Review on certiorari of the Resolution dated September 12, 1985 of the Intermediate Appellate Court in AC-G.R. No. CR- 05409 1 granting private respondent's motion for execution pending appeal and ordering the issuance of the corresponding writ of execution on the counterbond to lift attachment filed by petitioner. The focal issue that emerges is whether an order of execution pending appeal of a judgment maybe enforced on the said bond. In the Resolution of September 25, 1985 2 this Court as prayed for, without necessarily giving due course to the petition, issued a temporary restraining order enjoining the respondents from enforcing the order complaint of. The records disclose that private respondent Sycwin Coating & Wires, Inc., filed a complaint for collection of a sum of money against Varian Industrial Corporation before the Regional Trial Court of Quezon City. During the pendency of the suit, private respondent succeeded in attaching some of the properties of Varian Industrial Corporation upon the posting of a supersedeas bond. 3 The latter in turn posted a counterbond in the sum of P1,400, 000.00 4 thru petitioner Philippine British Assurance Co., Inc., so the attached properties were released. On December 28, 1984, the trial court rendered a Decision, the dispositive portion of which reads: WHEREFORE, plaintiff's Motion for Summary Judgment is hereby GRANTED, and judgment is rendered in favor of the plaintiff and against the defendant Varian Industrial Corporation, and the latter is hereby ordered: 1. To pay plaintiff the amount of P1,401,468.00, the principal obligation with 12% interest per annum from the date of default until fully paid; 2. To pay plaintiff 5% of the principal obligation as liquidated damages; 3. To pay plaintiff P30,000.00 as exemplary damages; 4. To pay plaintiff 15% of P1,401,468.00, the principal obligation, as and for attorney's fees; and 5. To pay the costs of suit. Accordingly, the counterclaim of the defendant is hereby DISMISSED for lack of merit. SO ORDERED. 5
Varian Industrial Corporation appealed the decision to the respondent Court. Sycwin then filed a petition for execution pending appeal against the properties of Varian in respondent Court. Varian was required to file its comment but none was filed. In the Resolution of July 5, 1985, respondent PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
390 of 501
Court ordered the execution pending appeal as prayed for. 6 However, the writ of execution was returned unsatisfied as Varian failed to deliver the previously attached personal properties upon demand. In a Petition dated August 13, 1985 filed with respondent Court Sycwin prayed that the surety (herein petitioner) be ordered to pay the value of its bond. 7 In compliance with the Resolution of August 23, 1985 of the respondent Court herein petitioner filed its comment. 8 In the Resolution of September 12, 1985, 9 the respondent Court granted the petition. Hence this action. It is the submission of private respondent Sycwin that without a previous motion for reconsideration of the questioned resolution, certiorari would not lie. While as a general rule a motion for reconsideration has been considered a condition sine qua non for the granting of a writ of certiorari, this rule does not apply when special circumstances warrant immediate or more direct action. 10 It has been held further that a motion for reconsideration may be dispensed with in cases like this where execution had been ordered and the need for relief was extremely urgent. 11 The counterbond provides: WHEREAS, in the above-entitled case pending in the Regional Trial Court, National Capital Judicial Region, Branch LXXXV, Quezon City, an order of Attachment was issued against abovenamed Defendant; WHEREAS, the Defendant, for the purpose of lifting and/or dissolving the order of attachment issued against them in the above-en-titled case, have offered to file a counterbond in the sum of PESOS ONE MILLION FOUR HUNDRED THOUSAND ONLY (P1,400,000.00), Philippine Currency, as provided for in Section 5, Rule 57 of the Revised Rules of Court. NOW, THEREFORE, we, VARIAN INDUSTRIAL CORPORATION, as Principal and the PHILIPPINE BRITISH ASSURANCE COMPANY, INC., a corporation duly organized and existing under and by virtue of the laws of the Philippines, as Surety, in consideration of the above and of the lifting or dissolution of the order of attachment, hereby jointly and severally, bind ourselves in favor of the above Plaintiff in the sum of PESOS ONE MILLION FOUR HUNDRED THOUSAND ONLY (P1,400,000.00), Philippine Currency, under the condition that in case the Plaintiff recovers judgment in the action, and Defendant will, on demand, re-deliver the attached property so released to the Officer of the Court and the same shall be applied to the payment of the judgment, or in default thereof, the defendant and Surety will, on demand, pay to the Plaintiff the full value of the property released. EXECUTED at Manila, Philippines, this 28th day of June, 1984. 12 Sections 5, 12, and 17 of Rule 57 of the Revised Rules of Court also provide: SEC. 5. Manner of attaching property. The officer executing the order shall without delay attach, to await judgment and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the applicant, in an amount sufficient to satisfy such demand besides costs, or in an amount equal to the value of the property which is about to be attached, to secure payment to the applicant of any judgement ment which he may recover in the action. The officer shall also forthwith serve a copy of the applicant's affidavit and bond, and of the order of attachment, on the adverse party, if he be found within the province. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
391 of 501
SEC. 12. Discharge of attachment upon giving counterbond. At any time after an order of attachment has been granted, the party whose property has been attached, or the person appearing on his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge of the attachment if a cash deposit is made, or a 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. Upon the filing of such counter-bond, copy thereof shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance with the provisions of this section the property attached, or the proceeds of any sale thereof, shall be delivered to the party making the deposit or giving the counterbond aforesaid standing in place of the property so released. Should such counterbond for any reason be found to be, or become, insufficient, and the party furnishing the same fail to file an additional counterbond, the attaching creditor may apply for a new order of attachment. SEC. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be returned unsatisfied in whole or in part, 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 to the judgement creditor upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action. (Emphasis supplied.) Under Sections 5 and 12, Rule 57 above reproduced it is provided that the counterbond is intended to secure the payment of "any judgment" that the attaching creditor may recover in the action. Under Section 17 of same rule it provides that when "the execution be returned unsatisfied in whole or in part" it is only then that "payment of thejudgment shall become charged on such counterbond." The counterbond was issued in accordance with the provisions of Section 5, Rule 57 of the Rules of Court as provided in the second paragraph aforecited which is deemed reproduced as part of the counterbond. In the third paragraph it is also stipulated that the counterbond is to be "applied for the payment of the judgment." Neither the rules nor the provisions of the counterbond limited its application to a final and executory judgment. Indeed, it is specified that it applies to the payment of any judgment that maybe recovered by plaintiff. Thus, the only logical conclusion is that an execution of any judgment including one pending appeal if returned unsatisfied maybe charged against such a counterbond. It is well recognized rule that where the law does not distinguish, courts should not distinguish. Ubi lex non distinguish nec nos distinguere debemos. 13 "The rule, founded on logic, is a corollary of the principle that general words and phrases in a statute should ordinarily be accorded their natural and general significance. 14 The rule requires that a general term or phrase should not be reduced into parts and one part distinguished from the other so as to justify its exclusion from the operation of the law. 15 In other words, there should be no distinction in the application of a statute where none is indicated.16 For courts are not authorized to distinguish where the law makes no distinction. They should instead administer the law not as they think it ought to be but as they find it and without regard to consequences. 17 A corollary of the principle is the rule that where the law does not make any exception, courts may not except something therefrom, unless there is compelling reason apparent in the law to justify it.18 Thus where a statute grants a person against whom possession of "any land" is unlawfully withheld the right to bring an action for unlawful detainer, this Court held that the phrase "any land" includes all kinds of land, whether agricultural, residential, PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
392 of 501
or mineral.19 Since the law in this case does not make any distinction nor intended to make any exception, when it speaks of "any judgment" which maybe charged against the counterbond, it should be interpreted to refer not only to a final and executory judgment in the case but also a judgment pending appeal. All that is required is that the conditions provided for by law are complied with, as outlined in the case of Towers Assurance Corporation v. Ororama Supermart, 20
Under Section 17, in order that the judgment creditor might recover from the surety on the counterbond, it is necessary (1) that the execution be first issued against the principal debtor and that such execution was returned unsatisfied in whole or in part; (2) that the creditor make a demand upon the surety for the satisfaction of the judgment, and (3) that the surety be given notice and a summary hearing on the same action as to his liability for the judgment under his counterbond. The rule therefore, is that the counterbond to lift attachment that is issued in accordance with the provisions of Section 5, Rule 57, of the Rules of Court, shall be charged with the payment of any judgment that is returned unsatisfied. It covers not only a final and executory judgement but also the execution of a judgment pending appeal. WHEREFORE, the petition is hereby DISMISSED for lack of merit and the restraining order issued on September 25, 1985 is hereby dissolved with costs against petitioner. SO ORDERED.
The Imperial Insurance v. de los Angeles, 111 S 25 FIRST DIVISION G.R. No. L-28030 January 18, 1982 THE IMPERIAL INSURANCE, INC., petitioner, vs. HON. WALFRIDO DE LOS ANGELES, Judge of the Court of First Instance of Rizal, Quezon City Branch IV, ROSA V. REYES, PEDRO V. REYES and CONSOLACION V. REYES, respondents.
FERNANDEZ, J.: This is a petition for certiorari to review the decision of the Court of Appeals in CA-G.R. No. 38824-R promulgated on July 19, 1967 entitled "The Imperial Insurance, Inc., petitioner vs. Hon. Walfrido de los Angeles, Judge of the Court of First Instance of Rizal, Branch IV, Quezon City, et al, respondents," the dispositive part of which reads: WHEREFORE, the instant petition is dismissed and the writ of preliminary injunction issued by the Court on January 31, 1967, is hereby dissolved, with costs against petitioner. SO ORDERED. 1
As found by the Court of Appeals, the uncontroverted facts are: It appears that herein private respondent Rosa V. Reyes is the plaintiff in Civil Case N. Q-8213 of the Court of First Instance of Rizal, Branch IV, Quezon City, entitled, 'Rosa V. Reyes vs, Felicisimo V. Reyes, etc.,' where she obtained a writ of preliminary attachment and, accordingly, levied upon all the properties of the defendant, Felicisimo V. Reyes, in said case. The other two herein private respondents, namely, Pedro V. Reyes and Consolacion V. Reyes, are the plaintiffs in Civil Case No. Q-5214 of the same court entitled, 'Pedro V. Reyes, etc.,' and likewise, obtained a writ of preliminary attachment and, accordingly, levied upon all the properties of the defendant, Felicisimo V. Reyes, in said case. For the dissolution of the attachments referred to above, the herein petitioner, The Imperial Insurance, Inc., as surety, and Felicisimo V. Reyes, as principal, posted a 'defendant's bond for dissolution of attachment' in the amount of P60,000.00 in Civil Case No. Q-5213 and another bond of the same nature in the amount of P40,000.00 in Civil Case No. Q-5214. Civil Cases Nos. Q-5213 and 5214 were jointly tried and the decision therein rendered was in favor of the plaintiffs. This decision was affirmed by this Court on appeal in cases CA- G.R. NOS. 33783-R and 33784-R. The decision of this Court, having become final, the records of the cases were remanded to the Court of First Instance of Rizal, Quezon City Branch, for execution of judgment. Accordingly, on June 24, 1966, the Court below, presided by the herein respondent Judge, Hon. Walfrido de los Angeles, issued the writs of execution of judgment in said cases. However, on August 20, 1966, the Provincial Sheriff of Bulacan returned the writs of execution' unsatisfied in whole or in part'. On September 9, 1966, private respondents filed a 'motion for recovery on the surety bonds'. Thereafter, said private respondents, thru counsel, sent a letter of demand upon petitioner asking the latter to pay them the accounts on the counter-bonds. On September 24, 1966, petitioner filed its 'opposition' to the private respondents "Motion for recovery PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
394 of 501
on the surety bonds'. Respondent Judge, in his order, dated November 10, 1966, rendered judgment against the counter- bonds. On November 15, 1966, private respondents filed an ex parte motion for writ of execution' without serving copy thereof on petitioner. In the meantime, on or about November 23 1966, petitioner filed a 'motion for reconsideration' of the order, dated November 10, 1966. This motion was, however, denied by the respondent Judge on January 9, 1967. On or about January 11, 1967, petitioner filed its 'notice of intention to appeal' from the final orders of the respondent Judge, dated November 10, 1966 and January 9. 1967. On January 19, 1967, the respondent Judge issued an order granting the issuance of the writ of execution against the bonds riled by the petitioner (Exhibit J, petition). 2
On January 25, 1967, the petitioner filed a petition for certiorari with prayer for for preliminary injunction with the Court of Appeals to restrain the enforcement of the writ of execution. 3
The petition was given due course and on January 30, 1967 a writ of preliminary injunction was issued. 4 After the parties had submitted their respective pleadings and memoranda in lieu of oral argument, the Court of Appeals rendered the decision now under review. The defendant, Felicisimo V. Reyes, in the abovementioned cases died during the pendency of the trial. He was duly substituted by his surviving spouse, Emilia T. David, an administratrix of his intestate estate. 5
The petitioner assigns as errors allegedly committed by the Court of Appeals the following: I THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE RESPONDENT JUDGE COULD LEGALLY ISSUE THE WRIT OF EXECUTION AGAINST THE PETITIONER AS SURETY IN A COUNTERBOND (BOND TO DISSOLVE ATTACHMENT) ON THE BASIS OF AN EX-PARTE MOTION FOR EXECUTION WHICH WAS NEITHER SERVED UPON THE SURETY NOR SET FOR HEARING. II THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE PLAINTIFF WHO OBTAINED A JUDGMENT AGAINST THE DEFENDANT MAY LEGALLY CHOOSE 'TO GO DIRECTLY' AFTER THE SURETY IN A COUNTERBOND WITHOUT PRIOR EXHAUSTION OF THE DEFENDANTS PROPERTIES. III THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE 'JUDGMENT' RENDERED AGAINST THE MENTIONED COUNTERBONDS IS A 'FINAL ORDER' IN THE CONTEMPLATION OF SECTION 2, RULE 41 OF THE REVISED RULES OF COURT AND, THEREFORE, APPEALABLE. IV THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT IN THE ABSENCE OF AN EXPRESS PROVISION OF THE REVISED RULES OF COURT, THE PROCEDURE FOLLOWED BY THE SHERIFF IN THE EXECUTION OF THE JUDGMENT ON THE 'SURVIVING CLAIMS', WHEN THE DEFENDANT DIED DURING THE PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
395 of 501
PENDENCY OF THE TRIAL OF HIS CASE AND BEFORE JUDGMENT WAS DULY SUBSTITUTED BY THE COURT APPOINTED ADMINISTRATRIX OF HIS ESTATE, SHOULD HAVE BEEN THE SAME AS THE PROCEDURE SET OUT IN SECTION (f), RULE 57 RESPECTING THE EXECUTION OF A WRIT OF PRELIMINARY ATTACHMENT OF PROPERTIES IN CUSTODIALEGIS. 6
Anent the first error, the petitioner contends that the Court of Appeals erred in holding that the respondent judge could legally issue the writ of execution against the petitioner as surety in a counterbond (bond to dissolve attachment) on the basis of an ex parte motion for execution which was allegedly never served upon the surety nor set for hearing. This contention is devoid of merit. The counterbonds filed to lift the writs of attachment executed by the herein petitioner, The Imperial Insurance, Inc., for and in behalf of the deceased defendant Felicisimo V. Reyes in favor of the plaintiffs, private respondents herein Rosa V. Reyes and Consolacion V. Reyes in Civil Case No. Q-5214 docketed with the Court of First Instance of Rizal, Branch IV, Quezon City, are clearly the bonds contemplated under Sec. 17, Rule 57 of the Rules of Court which provides: Sec. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be returned unsatisfied in whole or in part, the surety or sureties on any counterbond 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 to the judgment creditor upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action. This section allows the counterbond filed to lift an attachment to be charged only after notice and summary hearing in the same action. The records show that the notice and hearing requirement was substantially complied with in the instant case. Prior to the filing of the ex parte motion for a writ of execution, the respondents filed a motion for recovery on the surety bonds where the petitioner was duly notified and the said motion was heard on September 24, 1966. 7 Moreover, on November 23, 1966 the petitioner filed a motion for reconsideration of the order dated November 10, 1966 rendering judgment against the petitioner on its counter-bonds in the amount of P60,000.00 in Civil Case No. Q-5213 and P40,000.00 in Civil Case No. Q-5214. 8 The respondent judge set the hearing of the ex parte motion for writ of execution together with the motion for reconsideration of the order dated November 10, 1966 on December 17, 1966 at 8:30 o'clock in the morning. 9 The petitioner received the notice of the said hearing on December 9, 1966 as evidenced by Registry Return Receipt No. 40122. 10 On January 9, 1967, the respondent Judge issued an order denying the motion for reconsideration dated November 23, 1966 for lack of merit. 11 in an order dated January 19, 1967, the motion for writ of execution was granted by the respondent judge. 12
It is thus clear from indubitable documents on record that the requirements of notice and hearing had been satisfactorily complied with by the respondents. The first error assigned is overruled. The petitioner asserts that the Court of Appeals gravely erred in holding that the plaintiff who obtained judgment against the defendant may legally choose "to go directly" after the surety in a counterbond without prior exhaustion of the defendant's properties. This contention is likewise not meritorious. Although the counterbond contemplated in the aforequoted Sec. 17, Rule 57, of the Rules of Court is an ordinary guaranty where the sureties assume a subsidiary liability, the rule cannot apply to a counterbond where the surety bound itself "jointly and severally" (in solidum) with the defendant as in the present case. The counterbond executed by the deceased defendant Felicisimo V. Reyes, as principal, and the petitioner, The Imperial Insurance, Inc., as solidary quarantor to lift the attachment in Civil Case No. Q-5213 is in the following terms: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
396 of 501
WHEREFORE, WE, FELICISIMO V. REYES, of legal age, Filipino, and with postal address at San Jose, San Miguel, Bulacan and/or 1480 Batangas Street, Sta. Cruz, Manila, as PRINCIPAL and THE IMPERIAL INSURANCE, INC., a corporation duly organized and existing under 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 SIXTY THOUSAND PESOS ONLY (P60,000.00), Philippine Currency, under the condition that in case the plaintiff recovers judgment in the action, the defendant shall pay the sum of SIXTY THOUSAND PESOS (P60,000.00), Philippine Currency, being the amount release for attachment, to be applied to the payment of the judgment, or in default thereof, the Surety will, on demand, pay to the plaintiff said amount of SIXTY THOUSAND PESOS ONLY (P60,000.00), Philippine Currency. (Capitalizations supplied). Manila, Philippines, June 30,1960. 13
The counterbond executed by the same parties in Civil Case No. Q-5214, likewise states. WHEREFORE, we, FELICISIMO V. REYES, of legal age, Filipino, and with postal address at San Jose, San Miguel, Bulacan, and/or 1480 Batangas Street, Sta. Cruz, Manila, as PRINCIPAL and THE IMPERIAL INSURANCE, INC., a corporation duly organized and existing under 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 THOUSAND PESOS ONLY (P40,000.00), Philippine Currency, under the condition that in case the plaintiff recover judgment in the action the defendant shall pay the sum of FORTY THOUSAND PESOS ONLY (P40,000.00), Philippine Currency, being the amount released for attachment, to be applied to the payment of the judgment, or in default thereof, the Surety will, on demand, pay to the plaintiffs said amount of FORTY THOUSAND PESOS ONLY (P40,000.00), Philippine Currency. (Emphasis supplied). Manila, Philippines, June 30th, 1960. 14
Clearly, the petitioner, the Imperial Insurance, Inc., had bound itself solidarily with the principal, the deceased defendant Felicisimo V. Reyes. In accordance with Article 2059, par. 2 of the Civil Code of the Philippines, 15 excussion (previous exhaustion of the property of the debtor) shall not take place "if he (the guarantor) has bound himself solidarily with the debtor." Section 17, Rule 57 of the Rules of Court cannot be construed that an "execution against the debtor be first returned unsatisfied even if the bond were a solidary one, for a procedural rule may not amend the substantive law expressed in the Civil Code, and further would nullify the express stipulation of the parties that the surety's obligation should be solidary with that of the defendant." 16
Hence the petitioner cannot escape liability on its counter-bonds based on the second error assigned. As regards the third error, the petitioner submits that the Court of Appeals erred in not holding that the order dated November 10, 1966 rendering judgment against the counter-bonds, as well as the order dated January 9, 1967, denying the motion for reconsideration thereof, and the order of the writ of execution dated January 19, 1967 are final and appealable in accordance with Sec. 2, Rule 41 of the Rec. Rules of Court. This submission is also without merit. To recover against the petitioner surety on its counter-bonds it is not necessary to file a separate action. Recovery and execution may be had in the same Civil Cases Nos. Q-5213 and Q-5214, as sanctioned by Sec. 17, Rule 57, of the Revised Rules of Court. The decision in Civil Cases Nos. Q-5213 and Q-5214, having become final, the respondent judo issued the writs of execution in said cases. On August 20, PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
397 of 501
1966, the Provincial Sheriff of Bulacan returned the writs of execution "unsatisfied in whole or in part." 17
Sec. 12, Rule 57 of the Revised Rules of Court 18 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"; and that upon filing the counterbond "the property attached shall be delivered to the party making the deposit or giving the counterbond or the person appearing in his behalf, the deposit or counterbond standing in place of the property so released." The counter-bonds merely stand in place of the properties so released. They are mere replacements of the properties formerly attached, and just as the latter may be levied upon after final judgment in the case in order to realize the amount adjudged so is the liability of the counter sureties ascertainable after the judgment has become final. 19
The judgment having been rendered against the defendant, Felicisimo V. Reyes, the counter-bonds given by him and the surety, The Imperial Insurance, Inc., under Sec. 12, Rule 57 are made liable after execution was returned unsatisfied. Under the said rule, a demand shall be made upon the surety to pay the plaintiff the amount due on the judgment, and if no payment is so made, the amount may be recovered from such surety after notice and hearing in the same action. A separate action against the sureties is not necessary. 20
In the present case, the demand upon the petitioner surety was made with due notice and hearing thereon when the private respondents filed the motion for recovery on the surety bonds dated September 9, 1966 and to which the petitioner filed their opposition dated September 24, 1966. 21
Therefore, all the requisites under Sec. 17, Rule 57, being present, namely: (1) the writ of execution must be returned unsatisfied, in whole or in part; (2) the plaintiff must demand the amount due under the judgment from the surety or sureties, and (3) notice and hearing of such demand although in a summary manner, complied with, the liability of the petitioner automatically attaches. In effect, the order dated November 10, 1966 rendering judgment against the counter-bonds was a superfluity. The respondent judge could have issued immediately a writ of execution against the petitioner surety upon demand. As correctly held by the Court of Appeals: In fact, respondent Judge could have even issued a writ of execution against petitioner on its bond immediately after its failure to satisfy the judgment against the defendant upon demand, since liability on the bond automatically attaches after the writ of execution against the defendant was returned unsatisfied as held in the case of Tijan vs. Sibonghanoy, CA- G.R. No. 23669-R, December 11, 1927. 22
Moreover, the finality and non-appealability of the order dated November 10, 1966 is made certain and absolute with the issuance of the order of execution dated January 19, 1967 23 upon the filing of the ex parte motion for writ of execution 24 of which the petitioner was duly notified by the respondent Judge and which was duly heard. 25 The general rule is that an order of execution is not appealable, otherwise a case would never end. The two exceptions 26 to this rule are: (1) where the order of execution varies the tenor of the judgment; and (2) when the terms of the judgment are not very clear, and there is room for interpretation. The case at bar does not fall under either exception. There is no showing that the order of execution varies the tenor of the judgment in Civil Cases Nos. Q-5213 and Q-5214, nor of the order dated November 10, 1966, but is in fact, in consonance therewith and the terms of the judgment are clear and definite, therefore, the general rule of non-appealability applies. It is no longer necessary to discuss the fourth error assigned because of this Court's finding that the liability expressly assumed by the petitioner on the counter-bonds is solidary with the principal debtor, the deceased defendant, Felicisimo V. Reyes. As a solidary guarantor, the petitioner, the Imperial Insurance, Inc., is liable to pay the amount due on such counter-bonds should the creditors, private respondents herein, choose to go directly after it. 27
Under the law and under their own terms, the counter-bonds are only conditioned upon the rendition of the judgment. As held by this Court in the aforecited case of Luzon Steel Corporation vs. Sia 28 "where under the rule and the bond the undertaking is to pay the judgment, the liability of the surety or sureties attaches upon the rendition of the judgment, and the issue of an execution and its return nulla bona is not, and should not be a condition to the right to resort to the bond." Thus, it matters not whether the Provincial Sheriff of Bulacan, in making the return of the writ of execution served or did not serve a copy thereof with notice of attachment on the administratrix of the intestate estate of Felicisimo V. Reyes and filed a copy of said writ with the office of the clerk of court with notice in accordance with See. 7 (f), Rule 57 of the Revised Rules of Court. The petitioner surety as solidary obligor is liable just the same. WHEREFORE, the decision of the Court of Appeals promulgated on July 19,1967 in CA-G.R. NO. 38824-R is affirmed and the order of the respondent judge dated January 19, 1967 and all writs or orders issued in consequence or in pursuance thereof are also affirmed. The court of origin is hereby ordered to proceed with the execution against the petitioner surety, the Imperial Insurance Inc., with costs against said petitioner. SO ORDERED. Teehankee (Chairman), Makasiar, Guerrero, Melenc
Vadil v. de Venecia, 9 S 374 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-16113 October 31, 1963 VICTOR VADIL, JOAQUIN VADIL, VICENTE VADIL, ESTEBAN VADIL, EUGENIO VADIL and JUAN GALIBOSO,petitioners, vs. HON. JOSE R. DE VENECIA, Judge of the Court of First Instance of NUEVA VIZCAYA, MIGUEL M. GUEVARA, Provincial Sheriff Ex-Oficio for Nueva Vizcaya, and PABLO ESPAOLA ESTATE, INC.,respondents. Primicias and Del Castillo for petitioners. F. S. Galutera for respondents. REGALA, J.: This is a petition for certiorari to review the order dated August 5, 1959 of the Court of First Instance of Nueva Vizcaya, directing the execution of petitioners' bond. On April 13, 1953, Pablo Espaola Estate, Inc. filed in the Court of First Instance of Nueva Vizcaya an action against Raymundo Guinsatao for the recovery of the sum of P9,360. It applied for a writ of preliminary attachment on the ground that Guinsatao had removed or was about to remove his properties with intent to defraud his creditors. Guinsatao denied the allegations of the complaint and expressed willingness to file a counterbond to discharge the writ of preliminary attachment applied for by Pablo Espaola Estate, Inc. Whereupon, the court ordered him "to file a counterbond within 5 days from the receipt of this order, in the amount of P9,360.00 to secure the payment to the plaintiff of any judgment he may recover in the present case." Guinsatao filed a bond entitled "Defendant's Bond" which reads: Whereas, in an action now pending in the Court of First Instance of the Province of Nueva Vizcaya, First Judicial District, wherein PABLO ESPAOLA ESTATE, INC., is plaintiff, and RAYMUNDO GUINSATAO defendant, the above-named plaintiff has applied for an order of a Writ of Preliminary Attachment against RAYMUNDO GUINSATAO. And whereas, the Law allows the plaintiff certain securities: Know all men by these presents: That RAYMUNDO GUINSATAO of Mabasa, Dupax, Nueva Vizcaya as principal and ESTEBAN VADIL, EUGENIO VADIL, JUAN GALIBOSO, JOAQUIN VADIL, VICTOR VADIL and VICENTE VADIL all of Mabasa, Dupax, Nueva Vizcaya as sureties, are hereby held and in the sum of NINE THOUSAND THREE HUNDRED SIXTY (P9,360.000) PESOS, for which payment well and truly to be made we bind ourselves, our heirs, and legal representatives jointly and severally, firmly by these presents. The condition of this obligation is as follows: To pay all the costs which may be awarded to the defendant, and all damages that the defendant may suffer by reason of the Writ of Preliminary Attachment should it be finally adjudged that the same was done without legitimate cause. Then this obligation shall be null and void, otherwise of full force and virtue. (Sgd.) JOAQUIN VADIL (Sgd.) RAYMUNDO GUINSATAO PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
400 of 501
(Sgd.) VICTOR VADIL (Sgd.) ESTEBAN VADIL (Sgd.) VICENTE VADIL (Sgd.) EUGENIO VADIL (Sgd.) JUAN GALIBOSO The case was then tried, after which the trial court rendered judgment ordering Guinsatao to pay respondent Pablo Espaola Estate, Inc. the sum of P9,360 plus legal interest. After the decision became final, execution followed but Guinsatao had no sufficient property. And so, on motion of Pablo Espaola Estate, Inc., the lower court ordered the execution of the bond. Hence, this petition. While this case was pending in this Court, petitioner Joaquin Vadil moved for the dismissal of the case as him on the ground that he had not engaged the services of Attorneys Primicias & Del Castillo. While joining the motion to dismiss the case as to Joaquin Vadil, Atty. Teodoro Regino of the law firm of Primicias & Del Castillo denied Joaquin's allegation and asked that Joaquin Vadil be cited for contempt for allegedly telling falsehood. As prayed for by Joaquin Vadil, this case is dismiss as to him. There is no ground in the motion to cite Joaquin Vadil for contempt. We now come to the merits of this case. Petition contend that they are not liable to the plaintiff in the trial court because their undertaking under the bond was to pay "all the costs which may be awarded to the defendant, and 23 all damages that the defendant may suffer by reason of the Writ of Preliminary Attachment should it be finally adjudicated that the same was done without legitimate cause" rather than to pay the judgment that plaintiff might recover. This is a case where, instead of a bond conditioned the payment to the plaintiff of any judgment which may recover in an action, as the trial court directed, the bond filed provides that the sureties will pay ... all the costs which may be awarded to the defendant, and all damages that the defendant may suffer by reason the Writ of Preliminary Attachment should it be finally a judged that the same was done without legitimate cause. thus raising doubt as to whether the petitioners, as sureties, understood the import of the order of the court. This doubt, as to whether petitioners understood the court order, is further shown by the fact that under Section 2 of Rule 59 of the Rules of Court, the issuance an order of attachment may be prevented if the defend "makes deposit or gives bond ... in an amount sufficient to satisfy such demand, besides costs, or in an amount equal to the value of the property which is to be attached. Now, if, as alleged in the motion of Pablo Espaola Estate Inc., only P150 was realized from the sale of Guinsatao's property, it is not likely that petitioners would agree to stand surety for P9,360 for the defendant, whose properties (worth only P150) stood in imminent danger of attachment. We are inclined to resolve the doubt in favor of petitioners. As this Court held in People v. De la Cruz, 49 O.G. No. 8, 3389, sureties are favorites of the law. Assuming an obligation without any thought of material gain, except in some instances, all presumptions are indulged in their favor. And in Pacific Tobacco Co. v. Lorenzana, et al., G.R. No. L-8088, October 31, 1957, this Court said in amplification: ... The rationale of this doctrine is reasonable; an accommodation surety acts without motive of pecuniary gain and, hence, should be protected against unjust pecuniary impoverishment by imposing on the principal duties akin to those of a fiduciary. This cannot be said of compensated corporate surety which is a business association organized for the purpose of assuming classified risks in large numbers, for profit and on an impersonal basis, through the medium of standardized written contractual forms drawn by its own representatives with the primary aim of protecting its own interests (See Stearn's The Law of Suretyship, 4th ed. 402-403). We hold therefore that petitioners are not liable to Pablo Espaola Estate, Inc. on their bond. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
401 of 501
Another reason in support of the conclusion reached herein is that actually there was no writ of attachment issued by the Court. It is to be noted that the obligation to be assumed by the bondsmen is premised upon the issuance of such a writ. We feel it unnecessary to pass upon the other assignments of error. WHEREFORE, the petition is granted; the writ of preliminary injunction is made permanent and the order dated August 5, 1959 and the writ of execution dated September 4, 1959 are hereby set aside, without pronouncement as to costs.
Zaragoza v. Fidelino, 163 S 443 FIRST DIVISION G.R. No. L-29723 July 14, 1988 ANTONIO ZARAGOZA, plaintiff-appellee, vs. MARIA ANGELA FIDELINO and/or "JOHN DOE," defendants MABINI INSURANCE & FIDELITY CO., INC.,surety-appellant.
NARVASA, J.: Involved in this appeal is no more than the procedure to hold a surety hable upon a counter-bond posted by it for the release of an automobile seized from a defendant in a replevin action under a writ issued by the Trial Court at the plaintiffs instance. The suit for the replevy of the car was brought by Antonio Zaragoza in the Court of First Instance at Quezon City 1 against Ma. Angela Fidelino and/or John Doe. His complaint alleged that the car had been sold to Fidelino but the latter had failed to pay the price in the manner stipulated in their agreement. The car was taken from Fidelino's possession by the sheriff on the strength of a writ of delivery 2 but was promptly returned to her on orders of the Court when a surety bond for the car's releases 3 was posted in her behalf "by Mabini Insurance & Fidelity Co., Inc. The action resulted in a judgment 4 for the plaintiff the dispositive part of which reads as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter to pay to the plaintiff the sum of P19,417.46, representing the balance of the purchase price of the car sold including interest thereon, collection charges, notarial fees and sheriffs fees and expenses in conn with the recovery of the vehicle sold; to pay liquidated damage in the amount of P6,471.84 equivalent to 33 1/3 % of the balance outstanding and to pay the costs of this suit. Within the reglementary period for taking an appeal, Zaragoza moved for the amendment of the decision so as to include the surety, Mabini Insurance & Fidelity Co., Inc., as a party solidarily liable with the defendant for the payment of the sums awarded in the judgment. 5 Despite having been duly furnished with copies of the motion and the notice of hearing, neither Fidelino nor the surety company filed any opposition to the motion, nor did either of them appear at the hearing thereof. 6 The Trial Court deemed the motion meritorious and granted it. Its Order of April 16, 1968 7 decreed the following: WHEREFORE, the motion is hereby granted, and the dispositive portion of the decision in this case is hereby amended to read as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering defendant Maria Angela Fidelino and her surety, the Mabini Insurance & Fidelity Co., Inc., to pay jointly and severally to the plaintiff the sum of P19,417.46, representing the balance of the purchase price of the car sold, including interests thereon, collection charges, notarial fees and sheriffs fees and expenses in connection with the recovery of the vehicle sold, liquidated damages in the amount of P6,471.84 equivalent to 33 1/3% of the balance outstanding and to pay the costs of this suit. No motion for reconsideration was filed or appeal taken by the defendant Fidelino as regards either the original or the amended decision. It was the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
403 of 501
surety which presented a motion for reconsideration, and upon its denial, appealed to this Court. 8 It ascribes to the Court a quo, as might be expected, reversible error in amending the judgment in the manner just described. It argues that the Lower Court never acquired jurisdiction over it since no summons was ever served on it, its filing of a counter-bond not being equivalent to voluntary submission to the Court's jurisdiction; Zaragoza failed to make a proper application with notice before finality of the decision as provided by Section 20, Rule 57 of the Rules of Court; and when the order amending the judgment was promulgated, the judgment had already become final, the running of the period of appeal not having been suspended by Zaragoza's motion to amend decision, 9 and so, the Court no longer had authority to amend it on April 16, 1968. The appellant surety deposits quite correctly, that the situation at bar is governed by Section 10, Rule 60, in relation to Section 20, Rule 57, of the Rules of Court. Section 10, Rule 60, provides as follows: SEC. 10. Judgment to include recovery against sureties. The amount, if any, to be awarded to either party upon any bond filed by the other in accordance with the provisions of this rule, shag be claimed, ascertained, and granted under the same procedure as prescribed in section 20 of Rule 57. And Section 20, Rule 57 reads as follows: SEC. 20. Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party against whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof xxx xxx xxx 10
It would seem at first blush that Section 20, Rule 57 above quoted is not relevant. Its title and first sentence speak [1] of an illegal attachment, and [2] of a judgment "in favor of the party against whom (said illegal) attachment was issued." In the case at bar, the writ of delivery was not illegal; and the judgment was for, not against, the party in whose favor the writ of delivery was issued. In other words, it would appear that for Section 20, Rule 57 to apply to the instant action," 11 the judgment should have been "in favor of" defendant Fidelino (the party "against whom"the writ of delivery was issued). This however was not the case. The judgment was in fact against, NOT in favor of Fidelino. It thus sums indeed that the first sentence of Section 20 precludes recovery of damages by a party against whom an attachment is issued and enforced if the judgment be adverse to him. This is not however correct. Although a party be adjudged liable to another, ff it be established that the attachment issued at the latter's instance was wrongful and the former had suffered injury thereby, recovery for damages may be had by the party thus prejudiced by the wrongful attachment, even if the judgment be adverse to him. Slight reflection will show the validity of this proposition. For it is entirely possible for a plaintiff to have a meritorious cause of action against a defendant but have no proper ground for a preliminary attachment. In such a case, if the plaintiff nevertheless applies for and somehow succeeds in obtaining an attachment, but is subsequently declared by final judgment as not entitled thereto, and the defendant shows that he has suffered damages by reason of the attachment, there can be no gainsaying that indemnification is justly due the latter. So has this Court already had occasion to rule, inBaron v. David, 51 Phil. 1, and Javellana v. D.O. Plaza Enterprises, 32 SCRA 26]. Be all this as it may, the second and third sentences of Section 20, Rule 57, in relation to Section 10, Rule 60, are unquestionably relevant to the matter of the surety's liability upon a counter-bond for the discharge of a writ of delivery PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
404 of 501
in a replevin suit. 12 Under Section 10, Rule 60 (which makes reference "to either party upon any bond filed by the other in accordance with the provisions of this rule" [60]), the surety's liability for damages upon its counter-bond should "W claimed, ascertained, and granted under the same procedure as prescribed in section 20 of Rule 57; 13 and andd section 20 pertinently decrees that '(s)uch damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment .. (which means that the (application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof." Stated otherwise, to hold a surety on a counter-bond liable, what is entailed is (1) the filing of an application therefor with the Court having jurisdiction of the action; (2) the presentation thereof before the judgment becomes executory (or before the trial or before appeal is perfected); (3) the statement in said application of the facts showing the applicant's right to damages and the amount thereof, (4) the giving of due notice of the application to the attaching creditor and his surety or sureties; and (5) the holding of a proper hearing at which the attaching creditor and the sureties may be heard on the application. These requisites apply not only in cases of seizure or delivery under Rule 60, but also in cases of preliminary injunctions under Rule 58, 14 and receiverships under Rule 59. 15
It should be stressed, however, that enforcement of a surety's liability on a counter-bond given for the release of property seized under a writ of preliminary attachment is governed, not by said Section 20, but by another specifically and specially dealing with the matter; Section 17 of Rule 57, which reads as follows: SEC. 17. When execution returned unsatiated, recovery had upon bond. If the execution be returned unsatisfied in whole or in part, 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 to the judgment creditor upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action." The record shows that the appellant surety company bound itself "jointly and severally" with the defendant Fidelino"in the sum of PESOS FORTY EIGHT THOUSAND ONLY (P48,000.00), Philippine Currency, which is double the value of the property stated in the affidavit of the plaintiff, for the delivery thereof if such delivery is adjudged, or for the payment of such sum to him as may be recovered against the defendant and the costs of the action. 16
This being so, the appellant surety's liability attached upon the promulgation of the verdict against Fidelino. All that was necessary to enforce the judgment against it was, as aforestated, an application therefor with the Court, with due notice to the surety, and a proper hearing, i.e., that it be formally notified that it was in truth being made responsible for its co-principal's adjudicated prestation (in this case, the payment of the balance of the purchase price of the automobile which could no longer be found and therefore could not be ordered returned), 17 and an opportunity, at a hearing called for the purpose, to show to the Court why it should not be adjudged so responsible. A separate action was not necessary; it was in fact proscribed. 18 And again, the record shows substantial compliance with these basic requirements, obviously imposed in deference to due process. Appellant surety undoubtedly received copy of Zaragoza's Motion to Amend Decision. 19 That motion made clear its purposethat the decision "be amended, or an appropriate order be issued, to include .. (the surety) as a party jointly and severally liable with the defendant to the extent of the sums awarded in the decision to be paid to plaintiff'-as well as the basis thereof-the counter-bond filed by it by the explicit terms of which it bound itself "jointly and severally (with the defendant) .. for the payment of such sum to him (plaintiff) as may be recovered against the defendant and the cost of the action." The motion contained, at the foot thereof, a "notice that on Saturday, March 23, 1968, at 8:30 a.m., or as soon thereafter as the matter may be heard, the .. (plaintiffs counsel would) submit the foregoing motion for the consideration of the Court." And likewise indubitable is the fact that, as the Court a quo has observed, "neither .. Fidelinos counsel nor the surety company PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
405 of 501
filed any opposition to said motion, nor did they appear in the hearing of the motion on March 23, 1968 .. (for which reason) the motion was deemed submitted for resolution." 20 The surety's omission to appear at the hearing despite notice of course constituted a waiver of the right to be heard on the matter. The surety's theory that never having been served with summons, it never came under the Lower Court's jurisdiction, is untenable. The terms of the counter-bond voluntarily filed by it in defendant's behalf leave no doubt of its assent to be bound by the Court's adjudgment of the defendant's liability, i.e., its acceptance of the Court's jurisdiction. For in that counterbond, it implicitly prayed for affirmative relief; the release of the seized car, in consideration of which it explicitly bound itself solidarily with said defendant to answer for the delivery of the car subject of the action "if such delivery is adjudged," i.e., commanded by the Court's judgment, or "for the payment of such sum as may be recovered against the defendant and the costs of the action," the reference to a possible future judgment against the defendant, and necessarily against itself, being certain and unmistakable. The filing of that bond was clearly an act of voluntary submission to the Court's authority, which is one of the modes for the acquisition of jurisdiction over a party. 21
The same theory as that espoused by appellant surety in this case was, in substance, passed upon and declared to be without merit in a 1962 decision of this Court, Dee v. Masloff. 22 There, a surety on a counter-bond given to release property from receivership, also sought to avoid liability by asserting that it was not a party to the case, had never been made a party, and had not been notified of the trial. The Court overruled the contention, and upheld the propriety of the amendment of the judgment which ordered the appellant surety company to pay to the extent of its bond and jointly and severally with defendant the judgment obligation. The Court ruled that since such "amended judgment .. (had been) rendered after the appellant surety company as party jointly and severally liable with the defendant .. for the damages already awarded to the appellees, to which the appellant surety company filed its "Opposition" and "Rejoinder" to the "Reply to Opposition filed by the appellees, without putting in issue the reasonableness of the amount awarded for damages but confining itself to the defense in avoidance of liability on its bond that it was not a party to the case and never made a party therein and was not notified of the trial of the case, and that the appellees were guilty of laches, the requirement of hearing was fully satisfied or complied with; .. (in any case,) appellant surety company never prayed for an opportunity to present evidence in its behalf." The appellant surety's last argument that by the time the Court amended its decision, the decision had already become final, and therefore unalterable, is also untenable. The motion for amendment of the decision was unquestionably in the nature of a motion for reconsideration under Section 1 (c), Rule 37 of the Rules of Court which, having been filed within "the period for perfecting an appeal," had the effect of interrupting said period of appeal. 23
WHEREFORE, judgment is hereby rendered AFFIRMING in toto the Decision of the Court a quo dated February 12, 1968, as amended by the Order of April 16, 1968. Costs against the appellant surety. Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., c
Dizon v. Valdez, 23 S 200 EN BANC G.R. No. L-23920 April 25, 1968 RAMON R. DIZON, plaintiff-appellant, vs. LORENZO J. VALDES, VALLESON, INC., and AUGUSTO J. VALDES, defendants-appellees. Jose Agbulos for plaintiff-appellant. Felix Law Office for defendants-appellees. SANCHEZ, J.: The case before us is an incident in a suit for a sum of money (Civil Case Q- 2618, Court of First Instance of Rizal, Quezon City Branch), entitled "Ramon R. Dizon, Plaintiff, vs. Lorenzo J. Valdes, Valleson, Inc., and Augusto J. Valdes, Defendants." Judgment was, on December 2, 1960, there rendered directing defendants Valleson, Inc. and Augusto J. Valdes (Lorenzo J. Valdes excluded) "to pay jointly and severally to the plaintiff the amount of P6,260.00 with interest at the rate of 12% per annum from September 1, 1954 until fully paid and to pay attorney's fees in the amount of P600.00 with costs." The counterclaim of defendants Lorenzo J. Valdes and Valleson, Inc. was dismissed. On January 11, 1961, Valleson, Inc. filed its notice of appeal. Its appeal was perfected on February 11, 1961. Meanwhile, on January 10, 1961, one day before Valleson's notice of appeal, plaintiff petitioned for and the trial court directed the issuance of a writ of preliminary attachment against the properties, real and personal, of defendants Augusto J. Valdes and Valleson, Inc. upon an P11,730-bond. On January 11, said bond having been filed, the corresponding writ was issued. Pursuant thereto, garnishment notices were served by the Manila Sheriff on one Restituto Sibal and the Philippine Guaranty Co. On February 9, 1961, the judgment debtors moved to dissolve the writ of attachment, upon an P11,730-counterbond subscribed by the Capital Insurance & Surety Co., Inc. The following day, February 10, 1961, the trial court dissolved the writ. On February 24, 1961, plaintiff registered a motion to admit its "Claim for Damages" attached thereto. Plaintiff's claim was that the dissolution of the attachment "put out of the reach of the plaintiff the properties and assets which may be held to answer for the adjudged claim"; and that, by reason thereof, "plaintiff suffered and will suffer damages in the amount of P11,730.00 plus the corresponding 12% interest thereon and attorney's fees and costs." He then prayed that "defendants and the Capital Insurance & Surety Co., Inc. be ordered to pay the plaintiff, jointly and severally, the amount of P11,730.00 plus interests, expenses, and attorney's fees." On March 1, 1961, the surety, Capitol Insurance & Surety Co., Inc., opposed. Assertion was made that pursuant to the Rules of Court (then, Section 17, Rule 59; now Section 17, Rule 57), the surety on any counter-bond shall only become charged and bound to pay plaintiff upon demand, the amount due under the judgment; and that such amount may be recovered from the surety after notice and summary hearing in the same action only if execution be returned unsatisfied in whole or in part. On April 25, 1961, at the hearing fixed by the court, plaintiff presented evidence on the merits of its claim for damages, in the absence of defendants and surety, who made no appearance thereat. The trial court, in its order of May 16, 1961, ruled that plaintiff's claim for damages was premature, since the main case was then still pending appeal. Plaintiff's motion for reconsideration, filed on July 10, 1961, was thwarted by the court below on September 16, 1961.1wph1.t PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
407 of 501
Under the environmental facts, can plaintiff's claim for damages on defendants' counter-bond prosper? The answer must be in the negative. 1. By the terms of the counter-bond itself, 1 liability thereunder attaches only "in case the plaintiff recovers judgment in the action." Indeed, by Section 12 of Rule 59 of the old Rules, 2 the law in force at the time the counterbond was executed, the statutory counter-bond was made "to secure the payment to the plaintiff of any judgment he may recover in the action." Complementary to this legal precept is Section 17 of the same Rule 59 of the old Rules 3 which should be deemed as read into the bond viz: Sec. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be returned unsatisfied in whole or in part, the surety or sureties on any bond given pursuant to the provisions of this rule to secure the payment of the judgment shall become finally charged on such bond, and bound to pay to the plaintiff upon demand the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action. Since at the time the claim for damages was registered, the case was still pending appeal, it is quite obvious that the motion for the claim for damages was premature. And the lower court thus correctly ruled out plaintiff's motion. For, Section 17 contemplates of proceedings on execution after judgment. And, it is only thereafter that liability upon the surety's bond may be determined. The key term in Section 17 is the phrase "[i]f the execution be returned unsatisfied in whole or in part." Until such proceeding shall have taken place and unless unsatisfied liability under the judgment still exists, no action upon the counter-bond may be taken against the surety. 4
2. We do not follow plaintiff when he says that what controls here is Section 20 of Rule 57 (then Rule 59). By its very terms, 5 this obviously refers to the recovery of damages by a party against whom attachment was issued. This is a remedy available to the defendants here, not the plaintiff. It is therefore not to be doubted that, upon the applicable rules, the counter- bond does not answer for damages on account of the lifting of the attachment, but for the payment of the amount due under the judgment that may be recovered by an attaching creditor. 6
3. Nor is importance to be attached to plaintiff's argument that the dissolution of the attachments put out of his reach the properties and assets answerable for his claim. The counter-bond, it should be emphasized, precisely stands "in place of the properties so released." 7 Thus, the release of such property cannot really "prejudice the rights of the attaching party." 8
We accordingly affirm the lower court's order of May 16, 1961 under review. Costs against plaintiff-appellant. So ordered.
Pioneer Insurance v. Camilon, 116 S 190 SECOND DIVISION G.R. No. L-42447 August 30, 1982 PIONEER INSURANCE AND SURETY CORPORATION, petitioner, vs. HON. SERAFIN E. CAMILON, in his capacity as Judge of the Court of First Instance of Rizal, Branch VIII; THE CITY SHERIFF OF MANILA; and STEEL DISTRIBUTORS, INC., respondents. Jose T.M. Mayo for petitioner. Eugenio T. Estavillo for respondents. R E S O L U T I O N & BARREDO, J.:1wph1.t It appearing from the allegations of the petition and the comment of respondents, that, as reiterated in their respective memoranda, (1) in Civil Case No. 9205 of the Court of First Instance of Rizal, entitled Steel Distributors, Inc. vs. Co Ban Ling & Sons, et al. a judgment was rendered on August 24, 1968, worded as follows: 1wph1.t WHEREFORE, judgment is hereby rendered ordering the defendants Co Ban Ling and Sons, Co Chin Leng and the Pioneer Insurance and Surety Corporation, to pay, jointly and severally, the plaintiff, Steel Distributors, Inc. the sum of P35,760.00 with interest of 12% per annum from March 31, 1966, the date of the filing of the complaint, until fully paid, the further sum of P3,000.00 as attorney's fees, and the costs of this suit. In the event that the properties of the defendants Co Ban Ling and Sons, Co Chin Leng and the Pioneer Insurance and Surety Corporation are not sufficient to satisfy the judgment, defendant Co Chin Tong and Macario Co Ling are hereby ordered to pay, jointly with the other partners, the balance of the obligation to the plaintiff The counterclaim filed by the defendants is hereby dismissed. (Pp. 14-15, Record.) and upon appeal to the Court of Appeals, the appellate court decided thus: 1wph1.t WHEREFORE, except with the modification that the liability of appellant Co Chin Leng in the questioned transaction at bar is only joint, or pro rata and subsidiary, the decision under review is hereby affirmed in all other respects, at appellants costs. (Page 23, Record.) (2) upon motion of the judgment creditors, the respondent judge ordered the issuance of a writ of execution wherein petitioner herein was included as object also thereof; (3) a motion to quash the said writ of execution insofar as petitioner is concerned was denied by respondent judge this wise: 1wph1.t There is no merit in the Motion to Quash Writ of Execution filed by Pioneer Insurance and Surety Corporation since under the decision affirmed by the Court of Appeals its liability was adjudged to be jointly and severally with defendant Co Ban Ling & Sons Co. On the other hand, non-inclusion of the other defendants in the writ is of no consequence at this stage since their liability is not primary but will accrue only in the event the judgment cannot be satisfied by defendant partnership and Pioneer Insurance and Surety Corporation. In view thereof, the Motion to Quash is denied. SO ORDERED. (Page 31, Record.) PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
409 of 501
and, the Court being of the view that the rule of excussion claimed by petitioner under Section 17 of Rule 17, which petitioner invokes considering it was only the bondsman to secure the lifting of the writ of preliminary attachment, is not applicable in the instant case where there is already a final and executory judgment sentencing the bondsman as joint and solidarily liable, as in the case of Luzon Steel Corporation vs. Sia, 28 SCRA, 58-63, the Court resolved to DISMISS the petition, without prejudice to petitioner recovering from its co-judgment debtor whatever it has to pay under the writ of execution herein questioned. The restraining order issued by this Court on January 22, 1976 is hereby lifted effective immediately.
UPPC v. Acropolis, January 25, 2012 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. 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
412 of 501
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. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
413 of 501
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 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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
414 of 501
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 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
415 of 501
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. 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.
Calderon v. IAC, 155 S 531 (See under Section 4 page 134) Pioneer Insurance and Surety Corp. v. Hontanosas, 78 S 447 FIRST DIVISION G.R. No. L-35951 August 31, 1977 PIONEER INSURANCE & SURETY CORP. AND HADJI ESMAYATEN LUCMAN, petitioners-appellants, vs. THE HON. AGAPITO HONTANOSAS, JUDGE OF THE COURT OF FIRST INSTANCE OF CEBU, BRANCH XI AND THE SPOUSES BEN UY RODRIGUEZ, respondents-appellees. Eriberto D. Ignacio for appellant. Francisco E.F. Remotigue & Hilario G. Davide, Jr. for private respondent.
GUERRERO, J: We reverse the decision of the Court of Appeals 1 promulgated, on October 30, 1972 in CA-G.R. No. 00951-R entitled "Pioneer Insurance & Surety Corp., et al., petitioners, vs. Hon Judge Agapito Hontanosas, et al., respondents," which decision had denied for lack of merit the petition filed therein for certiorari. prohibition and/or mandamus with preliminary injunction seeking to nullify the order of default of February 29, 1972 and the decision of March 9, 1972 in Civil Case No. R-12069, entitled "Ben Rodriguez, et al. vs. Allied Overseas Commercial Co., et al." issued by the respondent Presiding Judge of the Court of First Instance of Cebu. The case commenced on October 12, 1970 when Allied Overseas Commercial Co., Ltd., a foreign corporation domiciled in Hongkong, filed in the Court of First Instance of Manila a complaint against the respondent-appellee Ben Uy Rodriguez for the collection of a sum of money arising out of a transaction between them in the amount of P450,533.00, the agreed peso equivalent of the HK$418,279.60 balance unpaid. Plaintiff therein having prayed for the issuance of a writ of preliminary attachment, the game was granted by the Court against Rodriguez upon the filing by said plaintiff of a bond in the amount of P450,000.00, which petitioner-appellant Pioneer Insurance & Surety Corp. duly posted. The corresponding levy in attachment was made by annotation on the properties of Rodriguez which consisted of 4 pieces of lots; notices of garnishment on different Cebu banks turned out negative, while personal properties found at the Rodriguez residence, although attached, were, however, not removed therefrom. A motion to dismiss the complaint was thereupon filed by Rodriguez, followed by an application for damages against the bond, praying that he be permitted to present evidence of damages he sustained by reason of the wrongful attachment, and to enforce said claim against the surety on its bond, alleging further that otherwise his claim against the bond will forever be barred as said claim cannot be the subject of an independent civil action under Sec. 20, Rule 57 of the Rules of Court. The court iii its order of December 22, 1970 dismissed the complaint on the ground of improper venue since defendant Rodriguez was a resident of Cebu, and lifted the writ of preliminary attachment setting. the hearing on the claim for damages against the bond on January 14, 1971. With the intention of filing a separate civil action in the Court t T of Firs instance of Cebu, respondent-appellee Rodriguez withdrew his claim for damages against Pioneer Insurance and Surety Corp., which motion for withdrawal was granted by the Court Thereafter, the respondents-appellees Rodriguez spouses filed a complaint for damages on February 15, 1971 against Pioneer Insurance & Surety Corp. and Allied Overseas (the Hongkong-based corporation), docketed as Civil Case No. R-12069, Court of First Instance of PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
417 of 501
Cebu presided by respondent judge lion Agapito Hontanosas, the complaint praying that Rodriguez be declared as not in any manner indebted to the defendant Allied Overseas Commercial Co. and that Pioneer Insurance & Surety Corp. be held liable for damages, attorneys foes and expenses of litigation by reason of the and malicious attachment issued by the Manila Court. Defendant Pioneer Insurance and Surety Corp. filed its manner to the complaint (Civil Case No. R-12069) alleging affirmative and special defenses. With respect to the other defendant Allied Overseas Commercial Co., summons was (coursed thru the Philippine Consulate General in Honkong which turned it down as it had no authority to serve the process under the Rules of Court. On April 27, 1971, defendant Pioneer Insurance & Surety Corp. filed a motion for a preliminary hearing of its affirmative defenses of lack of cause of action and bar by prior judgment and/or abandonment, which are grounds for a motion to dismiss. This was denied by the respondent Judge in his Order dated May 15, 1971, so also was the motion for reconsideration per its Order of June 2, 1971. On May 5, 1971, the case was called for pre-trial. Plaintiffs with counsel attended; defendant Pioneer Insurance & Surety Corp. thru counsel was present The other defendant, Allied Overseas Commercial Co was not yet summoned, hence absent. The parties manifested failure to settle the case amicably, thus the Court set the trial of the case on the merits for June 11, 1971. A petition for certiorari and prohibition was then filed by Pioneer Insurance and Surety Corp. on August 3, 1971 in the Court of Appeals, CA-G.R. No. 00369-R (Record on Appeal, p. 133) with prayer to enjoin a hearing scheduled on August 7, 1971, alleging that respondent Judge committed grave abuse of discretion amounting to lack and/or excess of jurisdiction in lending the motion for preliminary hearing. The Court of Appeals In its Resolution dated August 7, 1971 distributed this petition for certiorari. Record on Appeal, pp. 133-137) An amended complaint was now submitted to ad admitted by the Court on August 14, 1971 by impleading left petitioner-appellant Hadji Esmayaten Lucman as additional, defendant., making allegations tending show confabulation between the new defendant, and the foreign-based corporation to collect a non-existing debt. To the amended complaint, Pioneer Insurance & Surety Corp filed its answer. Lucman having been impleaded as assignee defendant Allied Overseas Commercial filed a motion to dismiss on the ground of auter action pendant, that is an action pending in the Court of First Instance of Rizal, Civil Case No. 14351 between the same parties with the same allegation and defences of counterclaims. On November 25, 1971, respondent Judge denied the motion to dismiss, whereupon Lucman filed his answer to the amended complaint. Upon an ex parte motion of Rodriguez, the Court declared Lucman in default in its Order of January 10, 1972 and thereafter promulgated a decision dated January 28, 1972 against Lucman only, ordering him to pay damage,- in the amount of P150,000.00; declaring that Rodriguez was no in any manner indebted to Lucman or to Allied Overseas Commercial Co and that the Metropolitan Bank & Trust Co. (Cebu Branch) Check No. CB2169 (xerox copy marked Exhibit M issued iv Rodriguez to pay the indebtedness was a forgery. Lucman moved on February 11, 1972 to set aside the order of default and to admit the answer earlier filed by him to the amended complaint. On February 21. 1972, respondent Judge set aside the order of default against Lucman including the decision against him, the dispositive portion of which order reads as follows: WHEREFORE, the Order of Default dated January 10, 1972 as well as the decision (Re: Hadji Esmayaten Lucman) dated January 28, 1972, are hereby reconsidered and set aside. Let the hearing of this case on the merits be scheduled as previously set for February 28, 1972 at 8:30 o'clock in the morning. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
418 of 501
The parties thru their respective counsels are to be immediately notified of this order. The Clerk of Court is directed to notify defendant Hadji Esmayaten Lucman thru counsel Atty. Eriberto D. Ignacio At Rm. 414, Madrigal Bldg., Escolta, Manila by telegram. SO ORDERED. Cebu City, Philippines, February 21, 1972. (SGD.) AGAPITO HONTANOSAS JUDGE (Record on Appeal, pp. 297-298) Forthwith, the clerk of court sent the telegram notices in the following wise: YOUR MOTION SET ASIDE ORDER, DEFAULT AND DECLARE PROCEEDINGS NULL AND VOID RE CIVIL CASE BEN RODGIGUEZ ET AL VERSUS HADJI ESMAYATEN LUCMAN GRANTED STOP PRETRIAL SHALL PROCEED AS PREVIOUSLY SCHEDULED FEBRARY 28 1972 MORNING (Record on Appeal, p. 298) Counsel for the petitioners received the telegram notices on February 21, 1972; and on February 23, 1972 counsel filed an urgent motion for postponement of the pre-trial, claiming that he was not aware of any such pre-trial having been previously set for February 28, 1972 in the morning, as indeed no such pre-trial can as yet be set as the issues with respect to the amended complaint are not yet fully joined since plaintiffs have not answered the compulsory conterclaims separately set up by the defendants in said summons to theforeign corporations Allied Overseas Commercial Co. Ltd. of Hongkong, nor have plaintiffs asked that said foreign corporation be dropped from the amended complaint; that counsel has a hearing in Manila of a criminal case which is of intransferable character, and prayed that the pre-trial be set at some other date in March preferably either March 22 or 23, 1972 at 9:00 a.m. which were the only free dates for the month of March 1972 in the calendar of the counsel. (Record on Appeal, pp. 301-303) Apparently, the above urgent motion for postponement although sent through registered airmail special delivery and received by the Dispatching Section of the Post Office of Cebu on February 28, 1972 (Resolution, Court of Appeals, Recrod on Appeal, pp. 365-366) was not received by the Court for on February 28, 1972 when the case was called, an order was issued by the Court postponing the pre-trial of the case to March 20, 1972 in ivew of the absence of the defendants and counsel notwithstanding notices of hearing and telegrams sent to them, on the condition that should defendants be found that as to plaintiffs will be allowed to present their evidence and the defendants will be declared in default for failure to appear at the pre-trial. (Record on Appeal, pp. 304-305) Upon verification from the radio Communications of the Philippines that the telegrams mentioned above were delivered and received by the addresses on February 21, 1972, the Court on February 29, 1972 declared the defendants in default and allowed the plaintiffs to present their evidence in support of their complaint before the Clerk of Court. (Record on Appeal, pp. 306-307). The evidence was thereupon presented and on March 9, 1977 the respondent Judge promulgated his Decision declaring that the plaintiff Rodriguez is not in any manner indebted to defendant Lucman or to Allied Overseas Commercial Co., declaring the personal check of the plaintiff to be a forgery; that the attachment of the properties of plaintiff in the Manila case was wrongfu; amd malicious, and ordering defendant Pioneer Insurance and Surety Co. to pay P350,000.00 as moral damages, P50,000.00 as exemplary damages and P50,000.00 for expenses of litigation in Manila. Defendant Lucman was also ordered to pay plaintiffs the sum of P50,000,00 as exemplary damages and P30,000.00 as attorney's fees. Within 30 days reglementary period to perfect the appeal, defendants Pioneer Insurance & Surety Corp. and Hadji Esmayaten Lucman filed the Notice of Appeal and the Original record on Appeal, the latter ordered corrected and amended but finally approved by the Court on July 31, 1972. Meanwhile, petitioner's filed on April 4, 1972 before the Court of Appeals a petition for certiorari, prohibition and/or mandamus with preliminary injunction CA-G.R. No. 00951-R) seeking to nullify the order of default of PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
419 of 501
February 29, 1972 and the Decision of March 9, 1972 of respondent Judge, to command said Judge to elevate the records of the case for review and to prohibit him from enforcing his decision and from taking further action in the case, No. 12069. On April 13, 1972, the Court of Appeals promulgated its resolution dismissing the petition aforestated and ruled among others as follows: Furthermore, petitioners instant remedy is not proper because of their own admission that appeal is available from the decision of respondent Judge (Discussion, pp. 12-13 of their Petition). This is shown by the handwriting at the upper right hand corner of Annex R (Decision) when they received the decision on March 25, 1972 and the period to appeal will expire on April 24, 1972. We are not, therefore, convinced that the remedy of appeal is inadequate, considering that whatever errors respondent Judge might have committed can be assigned as specific errors on appeal. It has been consistently held that certiorari is not available where the remedy of appeal is present . eal, p. 373) On a motion for reconsideration, the Court of Appeals reconsidered the resolution cited above, and issued another resolution dated July 25, 1972 giving due course to the petition and required the respondents to answer the petition (not a motion to dismiss), and among others, stated, to wit: Upon this fact alone, we believe as petitioners contend that although appeal is available, such remedy is not sufficiently speedy and adequate to cure the defects in the proceedings therein or to remedy the disadvantageous position of Petitioners because, since they were deprived of raising any issue or defense that they have in the respondent court by reason of the order of default, they cannot raise said issues or defenses for the first time on appeal. 8) The petition having been given due course, the respondents herein answered the same, and on October 30, 1972, the Court of Appeals rendered its Decision denying the petition for lack of merit, and held among others, thus Finally we are not also convinced that the remedy of appeal is inadequate under the circumstances obtaining in the principal cue Whatever errors respondent Judge might have committed in his order or judgment may be assigned as specific errors in their appeal. This Court can review any all such errors of fact and law in the appeal. (Rollo, p. 138) Petitioners filed a motion for reconsideration which was denied, hence this appeal by certiorari from the decision of the Court of Appeals and is now before Us being assailed and faulted on three principal issues: 1. the illegality of th order of the default and the decision arising therefrom; 2. the inadequacy of the remedy of appeal; and 3. the lack of jurisdiction of the Court in the principal case. The petitioner's main thrust in this legal attack is directed to the other dated February 29, 1972 declaring defendants (now the petitioners) in default at the second pre-trial hearing and allowing the plaintiffs (the present private respondents) to present evidence ex parte before the Clerk of Court, which evidence uncotradicted and unrebutted was lifted almost en toto as the basis of the decision granting damages so enormous and so huge in amount as to exceed the bounds of reason and fairness. The procedure for the pre-trial of a case is laid down by Rule 20, Revised Rules of court, which provides, to wit: Sec. 1. Pre-trial mandatory. In any action, after the last pleading has been filed, the ourt shall direct the parties and their attorneys to appear before it for a conference to consider': (a) The possibility of an amicable settlement or of a submission to arbitration; PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
420 of 501
(b) The simplification of the issues; (c) The necessity or desirability of amendments to the pleadings; (d) The possibility of obtaining stipulations or admissions of facts and of documents to avoid unnecessary proofs; (e) The limitation of the number of witnesses; (f) The advisability of a preliminary reference of isues to a commissioner, (g) Such other matters as may aid in the prompt disposition of the action. Sec. 2. Failure to appear at pre-trial conference. A party who fails to appear at a pre-trial conference may be non- suited or considered as in default. Sec. 3. Allows the ocurt to render judgment on the pleading or summary judgment as justice require. Sec. 4 directs that a reocrd of the pre-trial results be made; and Sec. 5 requires the court to prepare a pre-trial calendar of cases for consideration as above provided, and that upon the submission of the last pleading in a particular case, it shall be the duty of the clerk of court to place case in the pre-trial calendar. Unquestionably, the present Rules make pre-trial mandatory. And the reason for making pre-trial mandatory is that pre-trial conferences bring the parteis together, thus making possible an amicable settlement or doing away with at least the non-essentials of a case from the beginning. (Borja vs. Roxas, 73 Phil. 647). Philippine jurisprudence has laid down the legal doctrine that while it is true that it is mandatory for the parties and their attorneys to appear before the trial court for a pre-trial conference to to consider inter alia the possibility of an amicable settlement, the rule wa sby no means intended as an implacable bludgeon but as a tool to assist the trial court in the orderly and expeditious conduct of trial. The rule is addressed to the sound discretion of the trial court (Rice and Corn Administration vs. Ong Ante, et. al., G.R. No. L-30558, Oct. 4, 1971). Both client and counsel must appear at the pre-trial. this is mandatory. Failure of the client to appear is a ground for dismissal. (American Ins. Co. vs. Republic 1967D Phil. 63; Home Ins. Co. vs. United States Lines Co., 1967D Phil. 401, cited in Saulog vs. Custombuilt Manufacturing Corp. No. L-29612, Nov. 15, 1968; Taroma v. Sayo, L-37296, Oct. 30, 1975 (67 SCRA 508). In the case of Insurance Co. of the North America vs. Republic, et. al., G.R. No.L-26794, Nov. 15, 1967, 21 SCRA 887, the Supreme Court, speaking thru Justice Bengzon, held that Sec. 1, Rule 20 of the Rules requries the court to hold a pre-trial before the case is heard and since in this case, a pre-trial has already been had, the fact that an amended complaint was later filed, did not necessitate another pre-trial. it would have been impractical, useless and time- consuming to call another pre-trial. Under the rules of pleading and practice, the answer ordinarily is the last pleading, but when the defendant's answer contrains a counterclaim, plaintiff's answer to it is the last pleading. When the defendant's answer has a cross- claim, the answer or the cross-defendant to it sit he last pleading. Where the plaintiff's answer to a counterclaim contains a counterclaim constains a counter-claim agains the opposing party or a cross-claim against a co- defendant, the answer of the opposing party to the counterclaim or the answer of the co-defendant to the cross-claim is the last pleading. And where the plaintiff files a reply alleging facts in denial or avoidance of new matter by way of defense in the answer, such reply constitutes the last pleading. (Francisco, the Revised Rules of Court, Vo. II, pp. 2-3). The above citations and authorites are the ground rules upon which the conflictings claims of the opposing partie's may be resolved and decided. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
421 of 501
First, the legality of the order of default dated February 29, 1971 and the decision dated March 9, 1972. there is spread out in the Record on Appeal, pp. 92-93 that on May 5, 1971, a pre-trial. was conducted by the court between the plaintiff Ben Uy Rodriguez spouses and the defendant Pioneer Insurance & Surety Corp. The record or results of said pre-trial is found in the ordr of the court dated May 5, 1971, which states: When this case was called for pre-trial today, the plaintiffs and their counsel, Atty. Hilario Davide Jr. appeared. On the other hand, the defendant Pioneer Insurance & Surety Corp. represented by its counsel, Atty. Amando Ignacio also appeared. When asked by the court if there is any possibility of settling this case amicably, the counsel for the defendant answered in the negative. Both counsels agreed that the only issue to the resolved bu the Court is whether the bonding company is laible or not, and if so, how much? Atty. Hilario Davide, Jr. caused the markings of the following exhibit. Exhibit "A-pre-trial", the finanacial report of Ben Rodriguez as of December 31, 1969; and Exhibit "B-pre-trial", the affidavit of handwriting expert Perfecto Espina, and thereafter he reserved his right to mark additinal exhibits during the trial on the merits. The counsel for the defendant also reserved his right to object to the Exhibits of the plaintiffs and mark his exhibits during the trial on the merits of the case. Both counsels are given ten (10) days from today within which to file their simulatteneous memoranda or authorities in support of the motion for preliminary hearing and its objection thereto. and thereafter his incident will be resolved by the Court. Following agreement of the partiesm, the trial on the the merits of this case is set for June 11, 1971 at 8:30 o'clock in the moring. The parties thru their respective counsels are notified in open court of this order. SO ORDERED. Cebu City, Philippines, May 5, 1971. SGD.) AGAPITO HONTANOSAS J U D G E ( R e c o r d
o n
A p p e PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
422 of 501
a l ,
p .
9 3 ) The defendant Pioneer Insurance & Surety Corp. having complied with the order of the Court to appear and attend this pre-trial, and had manifested its opposition to settling the case amicably, said party may no longer be compelled to attend a second pre-trial hearing, and neither may it be punished by the court by its orde declaring said defendant as in default. The mandatory character of a pre-trial nad the serious consequences confronting the parties in the event that each party fails to attend the same must impose a strict application of the Rule such that where we find no authority for the the Court to call another pre-trial hearing, as in fact there is none in said Rule, the conclusion is inescapable that the respondent Judge committed a grave and serious abuse of discretion and acted in excess of jurisdiction in declaring defedant Pioneer Insurance & Surety Corp. "as in default" for failure to attend the second pre-trial called by the Judge on February 29, 1972. In other words, there is nothing in the Rules that empowers or has called a first pre-trial duly attended by tha prties, and lacking such authority, the court perforce lack the autority to declare a failure to prosecute on the part of the plaintiff for failing to attend such second pre-trial; it also lack the authority to declare the defendant "as in default" by reason of the latter's failure to be present at the said second pre-trial. It serves no purpose for the court to call again another pre-trial where the parties had previously agreed to disagree, where the issues had been joined and where the court itself had been satisfied that a hearing on the merits is the next step to conduct as int he instant case where the court, after the pre-trial on May 5, 1971, set he trial of the case on its merits for June 11, 1971. Indeed, a second pre-trial is impractical, useless and time-consuming. We have not lost sight of the fact that when the first pre-trial was called and conducted, the party litigants were the Ben Uy Rodriguez spouses as plaintiffs, while Pioneer Insurance & Surety Corp. and Allied Overseas Commercial Co. (although not yet summoned) were the defendants, whereas at the time the second pre-trial was called, the original complaint had been amended to implead Hadji Esmayaten Lucman as additional defendant. The amendment of the complaint to implead Lucman did not, however, alter the impracticability, the uselessness and the absence of authority to call a second pretrial hearing since the amended complaint merely impleaded Lucman as the assignee of the original defendant Allied Overseas Commercial Co. and no additional cause of action was alleged; the prayer was the same and the amount of damages sought was the same as that in the original complaint. Second, the prematureness of the pre-trial called on February 28, 1972, assuming that there was need to have another pre-trial. The records (Record on Appeal, p. 293) show that the notice of the clerk of court setting the case for pre-trial on February 28, 1972 was issued and dated February 7, 1972. As of this date, February 7,1972, the complaint had been amended on August 27, 1971 by impleading the defendant Hadji Esmayaten Lucman who filed his answer on December 24, 1971, interposing therein a compulsory counterclaim. (Record on Appeal, pp. 239-240). Before this date of February 7, 1972, the court had already promulgated the Decision dated January 28, 1972 as against Lucman only. Likewise, as of February 7, 1972, defendant Pioneer Insurance & Surety Corp. had also filed its answer to the amended complaint, interposing too a compulsory counterclaim. But as of February 7, 1972, the plaintiffs have not yet filed their answer to the compulsory counterclaims of the defendants (which is necessarily the last pleading to be filed in order that the case is ready and ripe for the pre-trial). It was only on February 22, 1972 that plaintiffs made their reply to the answer, and their answer to the compulsory, counterclaim of defendant Lucman 'Record on Appeal, pp. 299- 301). PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
423 of 501
The records do not disclose any reply of the plaintiffs to the answer of Pioneer Insurance & Surety Corp., nor any answer to the compulsory counterclaim of the Corp. The above state of the case as far as the pleadings are concerned clearly and manifestly show that the case was not yet ready for pre-trial, that it was as yet premature because the last pleading had not yet been filed by the plaintiffs. Even the state of the pleadings as of February 21, 1972 when the telegrams were sent notifying the parties of the pre-trial for February 28, 1972 reveals the prematureness of calendaring the case pre-trial. As of February 21, 1972, the complaint was already amended to implead Lucman who submitted his answer with compulsory counterclaim. but plaintiffs had not yet filed their reply and their answer to the counterclaim, because the records indicate that the plaintiffs' answer to the counterclaim, because the records indicate that the plaintiffs' answer to the counterclaim is dated February 22, 1972. (Record on Appeal, pp. 299-301). And to the compulsory counterclaim of defendant Pioneer Insurance & Surety Corp., plaintiffs made no answer whatsoever. Third, the notices given by the clerk of court thru telegrams on February 21, 1972 notifying the parties of the pre-trial on February 28, 1972 were insufficient, in law and jurisprudence. We have careffully noted the telegraphic notices sent by the clerk of court and we find this omission which is fatal to the respondents' cause: no telegram was sent to the defendant Pioneer Insurance & Surety Corp. The telegram was sent to the counsel of this defendant, but none to the defendant itself. The Court had directed the clerk of court to send notice by telegram to the parties for the February 28 pre-trial. The clerk did send the telegram to Atty. Eriberto Ignacio, counsel for Pioneer Insurance & Surety Corp., but omitted and failed to send telegram to the party itself, the corporation, as required strictly by law. Notice to the counsel is not enough. We reiterate that this failure is a jurisdictional defect. Reading the order of the court dated february 29, it appears in black and white (Record on Appeal, pp. 306-307, Annex W, Rollo, p. 194) that only two telegraphic messages were sent by the clerk of court, thus (1) the message addressed to Atty. Eriberto Ignacio delivered to the given address at 3:45 P.M. the same day it was filed but the signature of he recipient was unreadable; (2) the other message addressed to Hadji Esmayaten Lucman per RCPI San Juan also delivered on the same day, February 21, 1972 and personally 4eceived by the addressee himself. This was the offficial advice received by the Court from the Radio Communications of the Philippines thru which the telegrams were wired. This is also confirmed by the Order of the Court dated April 11, 1972 denying the defendant's Urgent Motion for Reconsideration. The other states. Per advice from the Radio Communications of the Philippines, Inc. these two messages were received by the addressees, Atty. Eriberto Ignacio and Hadji Esmayaten Lucman on the same day it was filed, that is on February 21, 1972. (Record on Appeal, p. 357) Decidedly, there was no telegram sent to party defendant Pioneer Insurance & Surety Corp., informing it of the February 28 pre-trial hearng. The reason for requiring the presence of the party who must be notified is explained in the case of Home Insurance Co. vs. United Lines Co. (L-25593, November 15, 1967, 21 SCRA 863), where the Court, speaking thru Justice Bengzon, said that: A party who fails to appear at a pre-trial conference may be non-suited or considered as in default. This shows the purpose of the Rules to compel the parties to appear personally before the court to reach, if possible, a compromise. Accordingly the court is given the discretion to dismiss the case should plaintiff not appear at the pre-trial. Fourth, the denial of the motion for postponement was a grave abuse of discretion. We grant the court the discretion to postpone any hearing, pre-trial or on the merits of the case, but the exercise of discretion must be based on reasonable grounds. The motion (Record on Appeal, pp. 301-303) had alleged grounds which are meritorious and not frivolous nor intended for delay, which PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
424 of 501
are 1. no formal order of the court scheduling the February 28 pre-trial had been received; 2. pre-trial cannot be had as yet be set as the issues are not yet fully joined; 3. counsel has a hearing previously set in Manila in a criminal case which was of an intransferable character. We are also concede that counsel may not presume nor take for granted that his motion for postponement and the proposed setting to March 22 or 23, 1972 will be granted by the court but where the court had actually postponed the hearing on February 28, 1972 due to the absence of the defendants and their counsel, and scheduled the pre-trial to March 20, 1972 at 8:30 o'clock in the morning (Record on Appeal, pp. 304- 306), we find no reason nor fairness in the court's order of February 29, 1972 finding defendants as in default since the pre-trial was moved to a later date in March as prayed in the motion. The motion for postponement was received on February 28, 1972 at the Cebu Post Office, as shown in the postmarks on the envelope (photographed on p. 322, record on Appeal) but was not immediately delivered to the court although the envelope bore the words, "registered Air Mail/Special Delivery with Return Card." If the letter containing the moton was not yet delivered to the Court the next day, February 29, 1972 when the court made the order declaring defendants in default, this was clearly a postal neglect and omission to perform its duty, not attributable to defendants, The Court, in the exercise of wise discretion, could have restored their standing in court and given them an even chance to face their opponents. For refusing to set aside said order of default and the decision, we hold the Court of Appeals in reversible error therefor. The respondent Court of Appeals has ignored established rulings of the Supreme Court in Pineda vs. Court of Appeals, 67 SCRA 228, that a party may not be declared in default for future to attend the pre-trial where only his counsel was notified of the pre-trial schedule; in Sta. Maria, Jr. vs. Court of Appeals, 45 SCRA 596 that a pre-trial is unnecessary where the case could not be settled and that the fact that an amended complaint was later filed with leave of court did not, undue the circumstances, necessitate another pre-trial; and in Pineda vs. Court of Appeals, 67 SCRA 288 that Courys should be liberal in setting asiode default judgment. At this juncture, it is necessary to emphasize once more the pronouncement of this Court speaking through Justice Teehankee in Taroma vs. sayo, 67 SCRA 509, pp. 512-513, that: For the guidelines of the bench and bar, therefore, the Court in reaffirminf the ruling that notice of pre-trial must be served separately upon the party and his counsel of record, retates that while service of such notice to party may be made directly to the party, it is best that the trial courts uniformly serve such notice to party through or care of his counsel of the obligation of notifying the party of the date, time and palce of the pre-trial conference and assuring that the party either appear thereat or deliver to counsel a written authority to represent the party with power to compromise the case, with the warning that a party who fails to do so may be non- suited or declared in default. The second point at issue is whether the remedy of ordinary appeal in the case is palin, speedy and adequate such that the writ of certiorari will not lie. We have adverted to previously that the Court of Appeals in its extended Resolution dated July 25, 1972 ruled that although appeal was available, such remedy is not sufficiently speedy and adequate to cure the defects in the proceedings therein or to remedy the disadvantageous position of petitioners because, since they were deprived of raising any issue or defense that they have in the respondent court by reason of the order of default, they cannot raise said issue or defense for the first time on appeal. Yet, on October 30, 1972, the Court in its decision held that the remedy of appeal is not inadequate in that whatever errors respondent Judge might have committed in his order or judgment may be assigned as specific errors in their appeal before said tribunal, and that it can review any errors of fact and of law in the appeal. This conflicting stand of the Court of Appeals issuing from the same case is as difficult to resolve as it is to reconcile them. We have but to rule on them. hold one to be correct and dislodge the other as an error. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
425 of 501
On general principles, the writ of certiorari will lie where there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law. The existence of an appeal is a bar to writ of certiorari where such appeal is in itself a sufficient and adequate remedy, in that it will promptly relieve the petitioner from the injurious effects of the order or judgment complained of. (Silvestre v. Torres, 57 Philippines 885, 890; Pachoco v. Tumangday L-14500, May 25, 1960; Lopez et al. v. Alvendia, et al. L-20697, Dec. 24, 1964). Courts ordinarily do not deny the writ if the result would be to deprive a party of his substantial rights and leave him without remedy, and in those instances wherein the lower court has acted without jurisdiction over the subject matter, or where the order or judgment complained of is a patent nullity, courts have gone even as far as to disregard completely the question of petitioner's fault, the reason being, undoubtedly, that acts performed with absolute want of jurisdiction over the subject matter are void ab initio and cannot be validated by consent, express or implied, of the parties. (Moran, Comments on the Rules of Court, Vol. 3, 1970 ed., pp. 169-170). There are numerous cases where the Supreme Court has granted the writ notwithstanding the existence of an appeal. Thus, the Supreme Court to avoid future litigations, passed upon a petition for certiorari though the proper remedy was appeal. Writs have been granted despite the existence of the remedy of appeal where public welfare and the advancement of public policy so dictate, the broader interests of justice so require, or where the orders complained of were found to be completely null and void, or that the appeal was not considered the appropriate remedy. (Fernando v. Varquez, No. L- 26417, Jan. 30, 1970) As to what is an adequate remedy, it has been defined as "a remedy which is equally beneficial, speedy and sufficient, not merely a remedy which at some time in the future will bring about a revival of the judgment of the lower court complained of in the certiorari proceeding, but a remedy which will promptly relieve the petitioner from the injurious effects of that judgment and the acts of the inferior court or tribunal." (Silvestre v. Torres, 57 Phil. 885, 11 CJ., p. 113) Now to the case at bar, We find here a number of special facts and circumstances which addresses themselves to the wise discretion of this court with such force to induce Us to grant the writ in order to prevent a total or partial failure of justice, to redress or prevent the wrong done. We are satisfied that petitioners are cornered into a desperate position where they have been ordered to pay damages over and above the amount of the bond posted for the attachment of private respondents' properties as ordered by the decision of the court based on evidence presented ex parte by reason of the order of default, and more than that, plaintiff Rodriguez is relieved from civil liability on an inexplicable and unprecedented finding that the plaintiffs' check was a forgery, (when the check exhibited was only a xerox copy of the original, which original was in the records of the case filed in the court of First instance of Rizal, Civil Case No. 14499 entitled "Hadji Esmayaten Lucman vs. Benjamin Rodriguez, et al.," (Record on Appeal, pp. 49-55). Again, the conflicting notices as to the hearing ordered, pre-trial in one and on the merits in the other, is not the doing of the petitioners of their standing in court was in effect a failure of justice. Petitioners can no longer present their evidence to rebut the claim of damages, or reduce the unconscionable and excessive damages or question the release of plaintiff's debt, for the same may not be submitted nor raised for the first time on appeal. We, therefore, hold that the Court of Appeals erred in holding that the appeal is adequate. The court erred in ignoring the doctrine laid down in Omico v. Villegas, 63 SCRA 285, that appeal is not an adequate remedy where party is illegally declared in default. Petitioners assail the jurisdiction of the court of First Instance of Cebu in Civil Case No. 12069-R filed by the Rodriguez spouses, seeking damages for the alleged malicious and unlawful is2suance of the writ of preliminary attachment against the latter's properties granted by the Court of First Instance of Manila upon the posting of a security bond in the amount of P450,000.00 given by the petitioner Pioneer Insurance & Surety Corp. The petitioners contend that under See. 20, Rule 57 of the Revised Rules of Court, the claim for damages against a bond in an alleged wrongful attachment can only be prosecuted in the same court where the bond was filed and the attachment issued. Rule 57, Sec. 20 of the Revised Rules of Court provides, to wit: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
426 of 501
Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party against whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts shaking his right if damages and the amount thereof. xxx xxx xxx On the other hand, the private respondents argue that the above rule is not applicable to the case at bar, citing Moran, Vol. Rules of Court, 1963 pp. 51-52, to wit: ... the rule that a claim for damages arising from the issuance of a wit of attachment, injunction, receivership and replevin should be presented in the same action is not applicable where the principal case has been dismissed for lack of Jurisdiction and no claim for damages could therefore have beer presented in said case. The position of the petitioners is correct. The ruling in the case of Santos vs. Court of Appeals, et al., 95 Phil. 360 advanced by respondents to support their stand, is not controlling here, or We find that no claim for damages against the surety bond in support of a preliminary. attachment was ever presented or filed. The latest decisions of this Court in Ty Tion et al., vs. Marsman & Co., et al., L-17229, July 31, 1962, 5 SCRA 761 reiterating the rulings in Del Rosario vs. Nava, 50 O.G. 4189; Estioco vs. Hamada, L- 11079, May 21, 1958; Neva Espa;a vs. Montelibano, 58 Phil, 807; Tan Suyco vs. Javier, 21 Phil. 82; Raymundo vs. Carpio, 33 Phil. 894; Santos v. Moir,36 Phil. 350; lay down the proper and pertinent rule that the claim for damages against a bond in an aleged wrongful attachment can only be prosecuted in the same court where the bond was filed and the attachment issued. Moreover, the records show that private respondent Rodriguez filed an Application for Damages Against Bond dated December 3, 1970 (Record on Appeal, pp. 77-81) praying that Wherefore, it is respectfully prayed that in the event the motion to dismiss and the motion to discharge attachment were granted, the defendant be allowed to present evidence to prove damages sustained by him by reason of the attachment against the Pioneer Insurance & Surety Corp. in a hearing that may be conducted for the purpose with due notice to the plaintiff and the surety, and that after due notice and hearing judgment be rendered against the Pioneer Insurance and Surety Corp. for such amount of damages as may be proved and established for defendant. The defendant further prays for such other reliefs and remedies consistent with law, justice and equity. Cebu City, December 3, 1970. The Court of First Instance of Manila in its order dated Dcember 22, 1970, after dismissing the complaint and lifting the writ of preliminary attachment, ordered that the hearing of the application for damages against the bond be set aside on January 14, 1971 at 8:30 a.m. (Record on Appeal, pp. 82-86) In other words, defendant Rodriguez sought that judgment be rendered against the surety for such amount of damages as may be proved or established by him, and was granted by the court the opportunity to prove damages against the bond of the surety company. He even cited the very provision of the Revised Rules of Court, Rule 57, Sec. 20 to justify his application, and the cases supporting his application, for otherwise his claim will forever be barred. In effect, at this point in time, defendant Rodriguez PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
427 of 501
waived the lack of jurisdiction on his person, be seeking an affirmative relief from the court, which he cannot now complain before this Court. Thus, Francisco, in his Revised Rules of Court, Vol. 1, p. 130 citing 21 C.J.S. writes that: Objections to lack of jurisdiction of the person, and other objections to jurisdiction not based on the contention that there is an absolute want of jurisdiction of the subject matter, are waived by invoking the court's jurisdiction, as by a counterclaim, consent, or voluntary submission, to jurisdiction, or conduct amounting to a general appearance. In Soriano v. Palacio, 12 SCRA 557, this Court held that even if jurisdiction was not originally acquired by the Court over the defendant due to allegedly defective services of summons, still when the latter filed a motion for reconsideration of the judgment by default, he is considered to have submitted to said court's jurisdiction. We agree with the petitioners that the Court of Appeals erred in not dismissing the complaint with respect to the petitioner Pioneer Insurance & Surety Corp., over which respondent-appellee Judge had not acquired jurisdiction pursuant to Sec. 20, Rule 57 of the Revised Rules of the Court. IN VIEW OF THE FOREGOING, the judgment of the Court of Appeals is reversed and another one is entered declaring the order of default dated February 29, 1972 and the decision rendered by the respondent Judge on March 9, 1972 null and void, holding that the Court of First Instance of Cebu lacks jurisdiction to hear and determine the claim for damages arising from the alleged wrongful attachment issued by the Court of First Instance of Manila and ordering the dismissal of that case (Civil Case No. 12069 of the Court of First Instance of Cebu), as well as the pending of the judgment herein annuled in the Court of Appeals which has been rendered moot. Petition granted.
Stronghold Insurance v. CA, November 6, 1989 SECOND DIVISION G.R. No. 84979 November 6, 1989 STRONGHOLD INSURANCE CO. INC., petitioner, vs. HON. COURT OF APPEALS, HON. CLEMENTE M. SORIANO, Presiding Judge of Branch 3, Regional Trial Court of Manila, Sheriff JAIME K. DEL ROSARIO, Deputy Sheriff of Branch 3, Regional Trial Court of Manila, and JOSE OROSA, respondents. Santos, Gascon, Cuartero & Associates for petitioner. Aladdin F. Trinidad for respondent Orosa.
REGALADO, J.: In a complaint filed against private respondent Jose Orosa, dated November 13, 1984 and docketed as Civil Case No. 8428188 in Branch 3 of the Regional Trial Court of Manila, therein plaintiff FCP Credit Corporation prayed that a writ of replevin be issued against private respondent Jose Orosa ordering the seizure of the motor vehicle covered by a chattel mortgage executed in favor of said plaintiff. Upon the filing of an affidavit of merit 1 and a replevin bond put up by petitioner Stronghold Insurance Co., Inc. in the amount of P210,000.00, 2 a writ of replevin was issued by the court a quo. On March 25, 1988, judgment was rendered by the trial court 3 with the following dispositive portion: WHEREFORE, judgment is rendered for the defendant, and against the plaintiff: 1) Dismissing the complaint for lack of merit; 2) Declaring that the plaintiff was not entitled to the Writ of Replevin, issued on January 7, 1985, and is now liable to the defendant for actual damages under the Replevin bond it filed; 3) On defendant's counterclaim, ordering the plaintiff to pay the defendant the sum of P400,000.00 as moral damages; P100,000.00 as exemplary damages, and P50,000.00 as, and for, attorney's fees; 4) Ordering the plaintiff to return to the defendant the subject 1983 Ford Laser Sedan, with Motor or Serial No. SUNKBT 14584, or its equivalent, in kind or value, in cash as of this date and to pay the costs. Copy of the decision was received by private respondent on April 11, 1988 while petitioner received a copy thereof on April 13, 1988. On the following day, April 14, 1988, private respondent Orosa filed a motion for execution of the judgment pending appeal, alleging that the judgment in the case may be rendered ineffective because FCP Credit Corporation was already liquidating its business affairs. He expressed his willingness to file a bond for such purpose. 4 Petitioner opposed said motion through a "Motion for Partial Reconsideration of the Decision and Opposition to the Motion for Execution" 5 filed on April 26, 1988, on the following grounds, as summarized by the respondent court, to wit: 1. The petitioner was adjudged liable in the decision without the benefit of hearing in violation of Rule 57, Section 20 in relation to Section 10, Rule 60, Rules of Court; PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
429 of 501
2. The petitioner being not a party to the proceedings, judgment against it could not be rendered without violating the elementary rules of procedure; 3. The allegations in private respondent's motion for execution pending appeal are purely speculative, self-serving conclusions and without factual basis; 4. The exact liability of the bondsman is not specified. 6
An application for judgment on the bond was thereafter filed by private respondent Orosa on April 26, 1988, adopting by reference his motion for execution of judgment pending appeal and the findings of the trial court. 7 An opposition thereto was filed by petitioner on the contentions that the appeal had been perfected hence the trial court had already lost jurisdiction to hear therein defendant's motion; that the application for damages does not set forth the facts showing his right thereto and the amount thereof; and that the motion is fatally defective for lack of the requisite three (3) days notice. 8
The hearing on the application was scheduled on April 29, 1988, but the herein private respondent Orosa and his counsel failed to appear therein. Consequently, petitioner's counsel orally moved for the denial of said application for judgment on the bond, but the court below denied said motion and declared all incidents submitted for resolution. 9 In the meantime, action on therein plaintiff 's notice of appeal and motion to elevate the records to the Court of Appeals, which were earlier filed on April 14, 1988, was held in abeyance by the court. 10
In a special order dated June 3, 1988, the trial court ordered the issuance of a writ of execution pending appeal upon respondent Orosa's filing of a bond in the amount of P500,000.00. The special reasons cited by the court for said immediate execution are (1) "defendant's willingness to file a required bond to answer for damages in the case of reversal of the judgment" and (2) "the plaintiff is in imminent danger of insolvency or dissolution." 11 The motion for partial reconsideration of the decision and opposition to the motion for execution filed on April 26, 1988 by petitioner was likewise denied for lack of merit in another order on the same date. 12
Respondent Orosa's right to recover damages on the replevin bond and the liability of herein petitioner for said damages and for all the sums of money recovered in the case in the lower court by therein defendant against the plaintiff, jointly and severally with the plaintiff to the extent of the value of the bond, was held to be unquestionable in an order of the court a quo dated June 6, 1988. 13
The following day, June 7, 1988, the trial court issued what was designated as a "supplemental decision," which reads: Pursuant to the order of June 6, 1988 and Sec. 10, Rule 60 of the Rules of Court, and by way of supplement to the decision, dated March 25, 1988, judgment is hereby rendered, for the defendant, ordering the Surety, Stronghold Insurance Co., Inc., jointly and severally with the plaintiff, to return to the defendant, the 1983 Ford Laser 1.5 Sedan involved, or its equivalent in kind or in cash, as of the date of the said decision (March 25, 1988), to pay him the damages specified in the said decision, to the extent of the value of the replevin bond which is P210,000.00, with costs against the said Surety." 14
Respondent Deputy Sheriff Jaime Del Rosario, by virtue of the order of execution pending appeal, levied upon the properties of petitioner and garnished its funds with Far East Bank and United Coconut Planters Bank on June 17, 1988. A few days thereafter, on June 22, 1988, petitioner filed a petition for certiorari, with a prayer for preliminary injunction and/or restraining order, in respondent court where it was docketed as CA-G.R. SP No. 14938. Petitioner sought therein the annulment of the orders of the trial court dated June 3 and 6, 1988, the supplemental decision of June 7, 1988 and the writ of execution issued in Civil Case No. 84-28188. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
430 of 501
Significantly, even after the filing of the petition for certiorari with the appellate court, the trial court acted on several motions filed either before or after said petition was instituted. On the same day of the filing of said petition, an order was issued by the trial court supplementing its order of execution pending appeal dated June 3, 1988 by ordering private respondent Orosa to file an additional bond in the amount of P200,000.00. 15
An "Urgent Omnibus Motion for Reconsideration with Prayer for Restraining Order," dated June 24, 1988, was filed by the petitioner with the trial court, alleging that "there exists no good and valid reasons to justify execution pending appeal against SICI considering that it is very solvent and any final judgment against it would surely be satisfied." 16 The motion was denied for lack of merit on June 27, 1988. Likewise, the trial court denied on July 6, 1988 the motion of therein plaintiff, dated June 20, 1988, for the reconsideration of the special order of the court issued on June 3, 1988. 17
On July 11, 1988, upon an ex parte motion, the trial court directed the enforcement of the writ of execution pending appeal against therein plaintiff FCP Credit Corporation alone. 18 Later, on August 5, 1988, another order was issued this time directing its enforcement against petitioner. 19 Petitioner moved for the reconsideration of said order and in the hearing of said motion, its counsel adduced additional arguments in support thereof. The court was informed that its application for a writ of injunction was already submitted for resolution by the Court of Appeals. 20
Eventually, the application for a writ of injunction referred to by petitioner was granted by the Court of Appeals on August 26, 1988. Nevertheless, the same writ was lifted and set aside when the petition for certiorari was dismissed in a decision promulgated by respondent court on September 9, 1988 in CA-G.R. SP No. 14938. 21 No grave abuse of discretion was found to have been committed by the trial court in issuing the questioned orders. Hence, this petition to set aside and annul the aforesaid decision of respondent court. The rule is clear that where the judgment in an action is in favor of the party against whom the writ of replevin was issued, he may recover damages resulting therefrom and the replevin bond required under Section 2, Rule 60 of the Rules of Court may be held to answer for this purpose. The procedure to hold the surety liable upon the replevin bond is provided for under Section 10 of the same rule in relation to Section 20 of Rule 57. Compliance with the following requisites is essential: ... (1) the filing of an application therefor with the Court having jurisdiction of the action; (2) the presentation thereof before the judgement becomes executory (or before the trial or before appeal is perfected); (3) the statement in said application of the facts showing the applicant's right to damages and the amount thereof; (4) the giving of due notice of the application to the attaching creditor and his surety or sureties and (5) the holding of a proper hearing at which the attaching creditor and sureties may be heard on the application. These requisites apply not only in cases of seizure or delivery under Rule 60, but also in cases of preliminary injunctions under Rule 58, and receiverships under Rule 59. 22
To avoid multiplicity of suits, all incidents arising from the same controversy must be settled in the same court having jurisdiction of the main action. Thus, the application for damages must be filed in the court which took cognizance of the case, with due notice to the other parties. The timeliness of the application for judgment on the bond in this case, as well as the motion for immediate execution, is apparent because it was filed before the appeal was perfected. The fact that one of the parties had filed a notice of appeal does not perfect such appeal. An appeal is perfected upon the lapse of the last day for all parties to appeal. 23
It should also be noted that the filing of the application for judgment on the bond by private respondent Orosa was in the nature of a motion for reconsideration under Section l(c), Rule 37 of the Rules of Court, which consequently had the effect of interrupting the period to appeal. 24 This being PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
431 of 501
so, the order holding in abeyance plaintiff 's notice of appeal was not even necessary and was an apparent superfluity. Petitioner nevertheless claims that there was failure to hold a proper hearing. Such requirement, however, has been held to mean that "the hearing will be summary and will be limited to such new defenses, not previously set up by the principal, as the surety may allege and offer to prove. The oral proof of damages already adduced by the claimant may be reproduced without the necessity of retaking the testimony, but the surety should be given an opportunity to cross-examine the witness or witnesses if he so desires. 25 In the present case, as respondent court correctly pointed out, petitioner did not allege and offer to prove any new defense not previously set up by the principal. Furthermore, the grounds relied upon in its opposition to the application requires no hearing for their proper consideration by the court a quo, aside from the fact that the trial court adequately and particularly resolved them in its order of June 6, 1988. If petitioner really had additional defenses, if should have asked for the opportunity to present the same when the motion to dismiss the application for judgment on the bond was denied. This is also true with respect to the cross-examination of the witnesses which petitioner is now belatedly asking for.While there was no one to cross-examine during the hearing of the application for judgment on the bond because of private respondent's absence. Petitioner could have invoked and insisted on such right. Further, even if private respondent had appeared during the hearing, it could reasonably be expected that no witnesses would be presented since the application for judgment on the bond relied mainly on the same grounds that were already presented in court and were subject of the trial on the merits, or were at least already of record. To repeat, had petitioner been sincere in the stance that it now takes to create an issue, it should have demanded its right to cross- examine such witnesses as it was minded to. As it turned out, the opportunity to so demand was present but petitioner did not care to do so. Instead, it preferred to stick to its stand that the application should be denied for failure of respondent Orosa to appear during the hearing. The petitioner should, therefore, suffer the consequences of its inexplicable inaction and conscious omission. Independent of the foregoing considerations, neither does the petitioner have the right to question the "supplemental judgment" of the trial court. As already stated, the application for judgment on the bond was in the nature of a motion for reconsideration, hence the resolution thereof constitutes a final and appealable order. Appeal being the proper and then available remedy, the original action for certiorari does not lie and cannot substitute for the remedy of appeal that was thereafter lost. We cannot, however, sanction the execution pending appeal which was authorized in this case. The order for advance execution must be struck down for lack of the requisite good reasons therefor. It is already settled that the mere filing of a bond does not warrant execution pending appeal. To consider the mere filing of a bond a good reason would precisely make immediate execution of a judgment pending appeal routinary, the rule rather than the exception. 26
The alleged imminent danger of insolvency of plaintiff FCP Credit Corporation does not also constitute a good reason for immediate execution. In the aforecited Philippine National Bank case, we ruled that where there are two or more parties who are held to be solidarily or subsidiarily liable for the judgment account, the insolvency of one will not justify immediate execution where the others are capable of paying the obligation. The obligation of petitioner surety company and the plaintiff corporation in the case at bar is in solidum. Their agreement states that the principal and the surety therein jointly and severally bound themselves "in the sum of TWO HUNDRED TEN THOUSAND PESOS ONLY (P210,000.00) Philippine Currency for the prosecution of the action, for the return of the property to defendant, if the return thereof be adjudged, and for the payment ... of such sum as may in the cause be recovered against the plaintiff, and costs of the action." 27
IN VIEW OF THE FOREGOING, the order of the trial court, dated June 3, 1988, ordering the issuance of a writ of execution pending appeal, as well as the other orders for its implementation, are hereby ANNULLED and SET ASIDE. In all other respects, the decision of respondent Court of Appeals is AFFIRMED. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
432 of 501
SO ORDERED. Melencio-Herrera, (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.
Carlos v. Sandoval, 471 S 266 (See under Section 3 page 112)
Maningo v. IAC, 183 S 691 G.R. No. 73559-62 March 26, 1990 THE HEIRS OF THE LATE SANTIAGO MANINGO NAMELY: PIOGUITA C. VDA. DE MANINGO, JANNILDA C. MANINGO, MARY LOU C. MANINGO, and MINORS: SANTIAGO C. MANINGO JR., CORAZON C. MANINGO, CHRISTINE C. MANINGO, ENGELBERT C. MANINGO (ALL REPRESENTED IN THIS PETITION BY THEIR MOTHER, PIOGUITA C. VDS. DE MANINONGO), petitioners, vs. INTERMEDIATE APPELLATE COURT, NEVILLE V. LAMIS ENTERPRISES and NEVILLE V. LAMIS, respondents.
MEDIALDEA, J: This is a petition for review on certiorari seeking the reversal of the decision rendered by the Intermediate Appellate Court (now Court of Appeals) on November 18, 1985, dismissing the following cases: 1) AC G.R. SP No. 03725, entitled, "The Heirs of the late Santiago Maningo, et al. vs. Hon. Adolfo Alba, as Presiding Judge of RTC Davao, et al., 2) AC-G.R. SP No. 04480 entitled, Pioquita Vda. de Maningo as Administratrix of the Estate of Santiago Maningo vs. Judge Jose R. Nolasco of the RTC, Tagum, Davao, et al., 3) AC-G.R. SP No. 04517 entitled, "Paramount Insurance Corporation vs. Hon. Jose R. Nolasco, et I al., and 4) AC-G.R. SP No. 04377 entitled, "Pioquita Vda. de Maningo vs. Hon. Judge Adolfo Alba, et al." The antecedent facts in the aforestated cases as found by the I respondent appellate court are as follows: AC-G.R. SP No. 03725 On November 16, 1979, Neville Lamis Enterprises through its proprietor Neville Lamis, filed a complaint for specific performance with damages against Santiago Maningo before the Court of First Instance (now Regional Trial Court) of Pasig, Rizal, docketed as Civil Case No. 35199, to enforce a Memorandum Agreement entered into by them. During the pendency of the case, on December 8, 1979, Maningo instituted a complaint against Lamis for collection of a sum of money with preliminary attachment before the RTC-Tagum, Davao, docketed as Civil Case No. 1395. The following day, on December 9, 1980, the court issued a writ of preliminary attachment upon a bond of P100,000.00 issued by Paramount Insurance Corporation. As a consequence thereof, the Deputy Provincial Sheriff levied upon certain personal properties of Lamis. The latter filed an ex- parte manifestation with the Provincial Sheriff for the suspension of the levy on the ground that Civil Case No. 1395 was merely a duplicity of Civil Case No. 35199 which was pending in the CFI (now RTC) of Pasig. Lamis further moved for the dismissal of Civil Case No. 1395 based on lis pendens and for improper venue. The court denied the motion in an order dated April 2, 1981. Lamis went on certiorari to this Court in a petition filed on July 1, 1981 docketed as G.R. No. 57250. On October 30,1981, We rendered a decision granting the petition and ordering the dismissal of Civil Case No. 1395. Said decision became final on April 8, 1982. Four months later, on August 2, 1982, Lamis filed an urgent ex-parte motion in Civil Case No. 1395 for the confiscation of Maningo's attachment bond. The lower court, on October 18, 1982, issued an order setting for hearing the issue of damages. At the said hearing for the reception of evidence on damages suffered by Lamis, both the surety, Paramount Insurance Corp. and Maningo objected to the hearing. On December 22, 1 982, Maningo filed a petition for certiorari and prohibition with this Court, docketed as G.R. No. 62733, alleging the following: That Lamis failed to comply with Section 20, Rule 57, which provides that the application PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
434 of 501
for damages must be made before entry of judgment in the subject case; that Lamis filed his application for damages only after final judgment; that Lamis' claim for damages could not by law, exceed the attachment bond; and that in G.R. No. 57250, Lamis is not entitled to the possession of the tractor unit, which is one of properties attached. The petition was dismissed by this Court in a resolution dated February 28, 1983, for lack of merit. This became final on May 4, 1983. In view of the dismissal, Lamis filed a motion for the execution of this Court's resolution in G.R. No. 62733 and a motion in Civil Case No. 1395 to be allowed to present evidence for the confiscation of Maningo's attachment bond and for damages. However, on August 14, 1983, Santiago Maningo died intestate and his counsel moved for the dismissal of Case No. 1395 on the ground that the heirs are no longer interested in the prosecution of the case. The lower court, on December 28, 1983, denied the above motion and set the case for hearing. In the meantime, on March 6,1984, the court issued an order requiring the sheriffs to take into custody in favor of Lamis1 all attached properties still unreleased by Maningo. On March 13, 1984, the intestate proceedings of the late Santiago Maningo began in the RTC of Davao, docketed as Sp. Proc. 248. On May 24, 1984, the lower court issued two orders: 1) an order requiring the surety to pay Lamis the sum of P100,000.00 as the total claim for damages by reason of the unlawful attachment; and 2) another order for the issuance of a writ of execution against the surety. The hearing for the reception of evidence against the heirs was reset to another date. Hence, on July 10, 1984, the heirs of Manigno filed with the Intermediate Appellate Court, a petition for certiorari, mandamus, with preliminary injunction dockected was AC-G.R. SP No. 03725, seeking to set asice all the orders of th lower court. Upon dismissal thereof, the present petition was filed by the heirs of Santiago Manigno. AC-G.R. No. 04480 On December 11, 1981, the late Santiago Maningo filed with the Regional Trial Court of Tagum, Branch I, Davao City, a complaint for Foreclosure of Chattel Mortgage, interest, damages and attorney's fees with prayer for attachment against Neville Lamis Enterprises, Neville Lamis and others, docketed as Civil Case No. 147 (Santiago Maningo (deceased), as substituted by his heirs thru Special Administratrix, Mrs. Pioquita Vda. de Maningo v. Neville Y. Lamis Enterprises and Neville Lamis). The complaint was later amended to Replevin, damages and attorney's fees. On December 21, 1981, the court issued an order for the seizure of a bulldozer, upon a replevin bond of P340,000 by Paramount Insurance Corporation. On May 25,1982, Lamis moved for the dismissal of the aforesaid Civil Case No. 147 and to cite Maningo for contempt on the ground of litis pendencia or multiplicity of suits; that the said case is barred by the pendency of his Civil Case No. 35199 then pending with Regional Trial Court of Pasig and also by the prior judgment of this Court in G.R. No. 57250 dismissing Civil Case No. 1395 filed by Maningo. On July 2, 1982, Lamis filed with this Court a petition for certiorari and prohibition, docketed as G.R. No. 61419, to dismiss Civil Case No. 147 One and a half years later, on June 11, 1984, Lamis filed a motion in Civil Case No. 147 for the reception of evidence on the damages he sustained by reason of the issuance of the writ of replevin. Despite objections by the surety, Paramount Insurance Corporation, the lower court granted the said motion, and in an - order dated September 20, 1 984, it required the Estate of Maningo to pay to Lamis, compensatory damages by reason of the unlawful issuance of replevin. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
435 of 501
The Administratrix of Maningo's estate filed a petition for certiorari with preliminary injunction with this Court seeking the dismissal of Lamis' action for damages in the lower court. We, however, referred the case to the Intermediate Appellate Court for proper determination docketed as AC-G.R. SP No. 04480. SP-04377 In the meantime, in an order dated September 20, 1984, the Regional Trial Court in Civil Case No. 147 awarded Lamis, et al. the amount of P7,677,177.00 as compensatory damages by reason of the issuance of the writ of replevin. On September 21, 1984, writs of execution were issued by the court and the cash deposits of Santiago Maningo, now deceased, with the Philippine National Bank, Davao Branch and the Bank of the Philippine Islands, Davao Branch, were ordered garnished. On September 25,1984, Lamis filed an ex-parte application in Special Proceedings No. 248, for the release of Maningo estate's garnished deposits which was granted, and an order was issued directing the banks concerned to release to the sheriff the cash deposits of Maningo. Prior to the issuance of the above-stated order, however, the court had authorized the Special Administratrix of Maningo's estate to withdraw in cash from the Philippine National Bank, Davao Branch, the amounts of P654,963.03 and P90,829.45. On a motion for clarification, the court issued an order on September 26, 1984, setting aside its previous order allowing the special administratrix to withdraw the amount from the bank, and declared the branch manager and branch attorney of PNB in contempt of court. Aggrieved, Pioquita Vda. de Maningo, special administratrix SP-04517 On the other hand, on September 21, 1984, the surety, Paramount mount Insurance Corporation, appealed to the respondent appellate court from the order of the trial court making it liable for the sum of P340,000.00. On the same date, the trial court issued a writ of execution of Civil Case No. 147. The surety, Paramount Insurance Corporation, filed with this Court a petition for certiorari, prohibition with preliminary injunction against Judge Jose R. Nolasco of the Regional Trial Court of Tagum, Davao and against Lamis. We referred the case to the Intermediate Appellate Court (now Court of Appeals) on October 8, 1984. On November 18, 1985, the Intermediate Appellate Court (now Court of Appeals) rendered judgment on the above four cases, namely, SP-03725, SP-04480, SP-04517 and SP-04377, the dispositive portion of which states: WHEREFORE, premises considered, the petitions in SP- 03725, SP-04480 and SP-04517 are all dismissed with costs against the qqqw petitioners, while in SP-04377 including the PNB's intervention thereon, the petition is also dismissed insofar as the orders of Judge Adolfo Alba dated September 25 and 26,1984 in SP Proc. No. 248 are concerned. However, his (Judge Alba) orders dated September 29, 1984, October 1, 1984, October 2,1984 and October 3,1984 are hereby annulled and set aside. No costs. SO ORDERED.(p. 88, Rollo) Hence, the present petition, which was filed on February 19, 1986. We issued a temporary restraining order on February 20, 1986, against the implementation of the orders of the trial court on the award of damages, and the decision of the Intermediate Appellate Court (now Court of Appeals). For Us to consider is the following error assigned by petitioners: THE RESPONDENT HONORABLE INTERMEDIATE APPELLATE COURT, WITH ALL DUE RESPECT, HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AND/OR SANCTIONED SUCH DEPARTURE OF THE LOWER COURT WHEN IT AFFIRMED THE PROCEEDINGS CONDUCTED BY THE LOWER COURTS (RTC-TAGUM, DAVAO, BRANCH II IN CIVIL CASE NO. 1395 AND RTC-TAGUM, DAVAO BRANCH I IN SP. CIVIL CASE NO. 147), IN ALLOWING RESPONDENT LAMIS TO PRESENT EVIDENCE ON ALLEGED DAMAGES PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
436 of 501
SUSTAINED AND IN AWARDING DAMAGES, EVEN LONG AFTER THE ABOVEMENTIONED CASES HAS BEEN ORDERED DISMISSED BY THIS HONORABLE SUPREME COURT WITHOUT AWARD OF DAMAGES. (pp. 33-34, Rollo) Petitioners contend that Civil Case No. 1395 was ordered dismissed by Us in G.R. No. 57250 upon petition of private respondent Lamis; and that said decision became final on April 8, 1982 long before the latter applied for damages sustained by reason of the unlawful attachment. Anent Civil Case No. 1395, the respondent appellate court, in AC-G.R. SP No. 03725, made the following findings: Actually, this matter had already been threshed out by the deceased Santiago Maningo to the Supreme Court when (he) filed a petition for certiorari and prohibition on December 22, 1982 which was docketed therein as G.R. L-62733. Unfortunately, the Supreme Court, in a minute resolution dated February 28,1983 dismissed the aforesaid petition, (see p. 103, Annex L 03725) which resolution became final on May 4,1983. (p. 77, Rollo) We agree with the aforequoted findings of the appellate court. The principle of resjudicata is applicable herein. Its requisites are present in the instant case, namely: 1) the presence of a final former judgment; 2) the former judgment was rendered by a court having jurisdiction over the subject matter and the parties; 3) the former judgment is a judgment on the merits; and 4) there is between the first and second actions, Identity of parties, of subject matter and of cause of action (Pantranco North Express, Inc. v. NLRC, No. 64152, December 29, 1983, 126 SCRA 526). We find that Our Resolution in G.R. No. 62733 on February 28, 1983 is a bar to SP No. 03725 subject of this petition for review. G.R. No. 62733 is a petition for certiorari filed by Maningo, who is now succeeded by petitioners herein, questioning the order of the lower court granting the application for damages of Lamis in Civil Case No. 1395, and alleging: that Lamis failed to comply with Rule 57, Sec. 20 insofar as the application for damages must be made before entry of judgment in the subject case; and that Lamis made such application only after final judgment. These are the very same issues and contentions raised by the heirs in the present petition with respect to AC-G.R. SP No. 03725. It is worthy to note that G.R. No. 62733 was dismissed with finality by this Court on February 28, 1983 and entry of final judgment was made on May 4, 1983. While contained in a minute resolution, the dismissal was an adjudication on the merits of the case and constituted a bar to a relitigation of the issues raised therein under the rules of resjudicata (Commercial Union Assurance Company Limited v. Lepanto Consolidated Mining Company, L- 43342, October 30,1978,86 SCRA 79; Sy v. Tuvera, No. 76639, July 16, 1987, 152 SCRA 103). A final judgment on the merits is conclusive as to matters put in issue and actually determined by the court, when they are raised in again in a subsequent litigation between the same parties, even though it is irregular or erroneous. Hence, whether Our resolution in petition in G.R. No. 62733 is right or wrong, is of no importance; herein. As long as the judgment in that case had become final, the issues that were litigated therein cannot be reopened by the parties in this subsequent petition, whether erroneously decided or not. With respect to AC-G.R. SP No. 04480, petitioners allege that Civil Case No. 147 was also ordered dismissed on December 15, 1982 by this Court upon petition of private respondent Lamis in G.R. No. 61419; and that the said dismissal became final on March 3,1983 long before Lamis applied for damages sustained by reason of unlawful replevin. The respondent appellate court, on this matter, ruled, interalia: Thus, after the Supreme Court in a decision rendered on December 15, 1982 in G.R. L-61419, has ordered for (sic) the dismissal of Civil Case No. 147, the discharge of the writ of replevin issued in the aforesaid civil case is likewise necessarily included therein. Hence, the respondent judge has all the reason to order the return of the property subject of PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
437 of 501
the replevin order and to proceed in hearing and adjudicating whatever damages the defendants (Lamises) may have suffered by reasons thereof. (p. 79, Rollo) We find the latter portion of the ruling of the appellate court as aforequoted, incorrect. Section 1 0 of Rule 60 of the Rules of Court provides that in the recovery of damages against the bond posted by the applicant in replevin cases, the procedure shall follow that what is laid down in Section 20 of Rule 57, which reads: Sec. 20. Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party against who attachment was issued, he may recover upon the bond given or deposit made by the attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be filed before the tirial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages sustained during the pendency of the appeal by an application by, with notice to the party in whose favor the attachement was issued or his surety or sureties, before the judment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court. As may be gathered from Section 20, Rule 57, the claim for damages resulting from wrongful seizure of personalty property must be filed in the same action in which the writ attachment or the writ of replevin was issued; otherwise, it is bar' red (Tan Suyco v. Javier, 21 Phil. 82; Nueva-Espaa v. Montelibano, 58 Phil. 807). It may be presented, before trial in the answer by way of counterclaim (Medina v. Maderera del Norte de Catanduanes 51 Phil. 240). In the discretion of the court, it may also be made at any other time even after the rendition of final judgment if the court has still jurisdiction over the case (Visayan Surety & Insurance Corp. v. Pascual, 85 Phil. 779). Hence, if the application for damages is not made in compliance with the procedure laid down in the rules, even the surety on the bond is relieved from liability therefor. The remedy provided by law isexclusive and by failing to file a motion for the determination of 1 the damages on time and whilejudment is still under the control of the court, the claimant loses his right to damages (Santos v. Mair, 36 phil. 350; Japco v. The City of Manila, 48 Phil. 851; Cruz v. Manila Surety & Fidelity Co., Inc., et al., 92 Phil. 699). In the case at bar, there is no showing that respondent Lamis had timely filed his claim for damages arising from the wrongful issuance of the writ of replevin in Civil Case No. 147, or prior to dismissal on December 15, 1982, of the replevin case, upon Lamis' petition for certiorari. It was only years later on June 11, 1984 that Lamis applied for damages on the replevin bond, after the case had long been dismissed. The trial court no longer had jurisdiction and control over the case when it awarded damages after it was dismissed and thrown out of court in the certiorari case filed by Lamis himself. Thus, the judgment of the y trial court awarding damages against the estate of Maningo in the amount of P7,677,177.00 in the replevin case is null and void. Logically, the petitioners' surety, Paramount Insurance Corporation, should be released from its liability under the bond. Notwithstanding, Our dismissal of the latter's petitionseeking review on certiorari of the same decision of the respondent dent appellate court on July 2, 1986, upholding the award of damages to Lamis, We release said surety from liability based on the same principles We have pronounced in the foregoing discussion. ACCORDINGLY, the petition is hereby GRANTED in part, and the judgment of the Intermediate Appellate Court (now Court of Appeals) dated November 18, 1985 with respect to ACCUSED G.R. SP No. 04480, which upheld the award of damages by the trial court in Civil Case No. 147, is REVERSED and SET ASIDE. In all other respects, the petition is DENIED and the judgment of the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
438 of 501
respondent appellate court is AFFIRMED. The temporary restraining order issued on February 20, 1986, is lifted. SO ORDERED.
Santos v. CA, 95 Phil. 360 EN BANC DECISION June 30, 1954 G.R. No. L-6436 OFRECINO T. SANTOS, petitioner, vs. THE COURT OF APPEALS, ET AL., respondents. Amado A. Mundo for petitioner. Teodulo M. Cruz for respondent Philippine Reconstruction Corporation, Inc. Paras (Edgardo), J.: On May 20, 1950, Ofrecino T. Santos (hereinafter to be referred to as petitioner) filed in the Court of First Instance of Cotabato an action for the recovery of the sum of P1,628 against Teodulo M. Cruz and Valentin C. Garcia (Civil Case No. 241). The petitioner secured a writ of preliminary attachment which was levied upon a tractor which, though believed by the petitioner to belong to the defendants in Civil Case No. 241, in fact was owned by the Philippine Reconstruction Corporation Inc. (hereinafter to be referred to as respondent), which in due time filed a third party claim. The petitioner filed an amended complaint including the respondent as a defendant, but upon motion filed by Teodulo M. Cruz and Valentin C. Garcia, Civil Case No. 241 was dismissed by the Court of First Instance of Cotabato for lack of jurisdiction, the amount involved being less than P2,000. The petitioner filed a similar action in the Justice of the Peace Court of Buayan, Cotabato, against the respondent as sole defendant, wherein the petitioner was awarded the sum of P1,638.10, with interest and costs, but this decision is still the subject matter of a pending certiorari proceeding in the Court of First Instance of Cotabato instituted by the respondent. On May 9, 1951, the respondent filed in the Court of First Instance of Manila Civil Case No. 13778 against the petitioner, for damages resulting from the levy of its tractor under the writ of attachment issued in Civil Case No. 241. Paragraphs III and VII of the respondents complaint in Civil Case No. 13778 read as follows: III That on or about the month of September, 1950 and in connection with the execution of a preliminary writ of attachment secured by the herein defendant Ofrecino T. Santos in Civil Case No. 241 of the Court of First Instance of Cotabato entitled Ofrecino T. Santos, plaintiff vs. Teodulo M. Cruz and Valentin C. Garcia, defendants, the above-named defendants conspiring, confabulating and conniving with one another procured and caused to be attached a certain Caterpillar D-8 tractor of herein plaintiff who was not a party in said case and that defendants herein fully knowing that the said tractor does not belong to any of the defendants Teodulo M. Cruz and Valentin C. Garcia in said Civil Case No. 241 of the Court of First Instance of Cotabato; VII That due to the said wrongful and malicious attachment levied by the herein defendants on plaintiffs tractor and their subsequent refusal to release the same from attachment as above stated plaintiff was consequently forced to violate its contractual undertaking with a certain Mr. Tomas Gonzales as stated in the sworn third party claim so that it was compelled to pay a liquidated damages in the sum of Three Thousand Pesos (P3,000) aside from having lost a sure income from rent on said tractor in the sum of One Thousand Five Hundred Pesos (P1,500); The other necessary details are recited as follows in the decision of the Court of Appeals1 promulgated on October 30, 1952 in CA-G.R. No 9925-R, Ofrecino T. Santos, petitioner, vs. Philippine Reconstruction Corporation, Inc., and the Honorable Demetrio B. Encarnacion, Judge, Branch I, Court of First Instance of Manila, respondents: On June 10, 1951, petitioner (defendant in Civil Case No. 13778 of Manila) was duly summoned to answer the complaint filed in said Civil Case. A motion to dismiss, filed by defendants counsel, was received on June 23, 1951, in the Court of First Instance of Manila. On the other hand, counsel for plaintiff PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
440 of 501
Philippine Reconstruction Corporation (now respondent) filed on July 12, 1951, an ex-parte motion, praying that defendant Ofrecino T. Santos was declared in default on the ground that his motion to dismiss does not contain a notice for hearing as provided in Rule 26 of the Rules of Court, and therefore not a valid one. Copy of said order was received by defendants counsel on August 2, 1951. On August 26th, plaintiffs counsel moved that the aforesaid Civil Case No. 13778 be set for hearing. In his turn, counsel for defendant Ofrecino T. Santos filed on September 1st a petition praying that the order of default dated July 23rd be set aside; that his motion to dismiss be given due course, either by sustaining or denying the same; and that if denied, defendant be allowed to file his answer. By virtue of an order dated February 12, 1952, the case was set for hearing on February 28th, and on the following day decision was rendered in favor of the plaintiff and against the defendants, ordering the later to pay the sum of P4,500 with legal rate of interest from the date of the filing of the complaint and to further pay the sum of P1,000.00 as attorneys fees and costs of the suit. A copy of this decision was on March 7, 1952, sent by registered mail to Ofrecino T. Santos counsel who received the same in March 17th. Consequently, on April 5, 1952, defendant Ofrecino T. Santos, thru his counsel, moved for the reconsideration of the aforesaid decision, to which motion counsel for the plaintiff filed his opposition on April 20, 1952. On June 11, 1952, said motion for reconsideration was denied. Ofrecino T. Santos now comes before us as petitioner, alleging that the respondent court committed a grave abuse of discretion when, as defendant in the aforesaid Civil Case No. 13778, he was arbitrarily declared in default; and when it declared his motion to dismiss not a valid one. Petitioner further claims that the respondent court again committed a grave abuse of discretion when, instead of acting upon his petition (Annex A) for relief from the order of default, it set the case for hearing a proceeded to hear plaintiffs evidence and rendered a decision. It is also alleged by petitioner that the Court of First Instance of Manila acted without jurisdiction, the cause of action in Civil Case No. 13778 having arisen from a supposed wrongful attachment ordered by the Court of First Instance of Cotabato in Civil Case No. 241, and for that reason, that the latter court has exclusive jurisdiction to determine whether its legal processes are wrongful or not; and even granting that the Court of First Instance of Manila had proper jurisdiction, the particular cause of action in said Civil Case No. 13778 is banned by the decision of the Justice of the Peace Court of Buayan, Cotabato. From the decision of the Court of Appeals dismissing his petition for certiorari, the petitioner has interposed the present appeal by way of certiorari, assigning the following alleged errors: 1. The Court of Appeals erred in finding the motion to dismiss dated June 19, 1951 in Civil Case No. 13778 of Manila as no motion at all. 2. The Court of Appeals erred in sustaining the ruling of the Court of First Instance of Manila that Ofrecino T. Santos was in default in Civil Case No. 13778. 3. The Court of Appeals erred in finding that the petition for relief from order dated August 28, 1951 was impliedly overruled when the respondent court set Civil Case No. 13778 for hearing, received plaintiffs evidence and finally rendered decision therein. 4. The Court of Appeals erred in holding Ofrecino T. Santos under estoppel to raise the issue of jurisdiction. 5. The Court of Appeals erred in sustaining a decision that was null and void, emanating as it did from a court which had no jurisdiction to try Civil Case No. 13778. Without deciding whether the petitioners motion to dismiss filed in Civil Case No. 13778 was a mere scrap of paper for lack of notice of hearing, it is clear that he could and should have appealed from the decision on the merits rendered therein by the Court of First Instance of Manila, of which he was duly notified, raising in said appeal the propriety of the ruling of default against him, the failure of the trial court to expressly dispose of his petition for relief, and the principal question of jurisdiction. It is elementary that certiorari will not lie where the remedy of appeal is available. On the issue of jurisdiction, it is to be recalled that, when respondents tractor was levied upon, it was not a party in Civil Case No. 241, and although an amended complaint was filed, no new writ of attachment was issued so as to PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
441 of 501
cover respondents properties. It is also significant that Civil Case No. 241 was dismissed by the Court of First Instance of Cotabato for lack of jurisdiction. We have no hesitancy in declaring that the Court of First Instance of Manila correctly took cognizance of Civil Case No. 13778, because the respondent sought damages, not on the allegation that the writ of attachment was illegally or wrongfully issued by the Court of First Instance of Cotabato in Civil Case No. 241, but on theory that said writ was caused by the petitioner to be levied upon the tractor of the respondent which was not a party defendant. The filing of the amended complaint did not cure the defect, since the seizure continued to be in virtue of the original writ, none having been issued under the amended complaint. The petitioner is invoking the following pronouncement in our decision in Cruz vs. Manila Surety and Fidelity Co., Inc., et al., 49 O.G. (3) 964; 92 Phil. 699: The procedure for recovery of damages on account of the issuance of a writ of attachment, injunction, receivership, and replevin proceedings, as interpreted in the cases adverted to, requires that the claim for damages should be presented in the same action which gave rise to the special proceeding in order that it may be included in the final judgment of the case, and it cannot be the subject of a separate action. The philosophy of the ruling seems to be that the court that had acted on the special proceeding which occasioned the damages has the exclusive jurisdiction to assess them because of its control of the case. This ruling is sound and tends to avoid multiplicity of action. The citation is not controlling, for the reason that, apart from the circumstance that, as already stated, the respondent has never claimed that the writ of attachment was wrongfully issued in Civil Case No. 241, it appears that the latter case was dismissed for lack of jurisdiction, and no claim for damages could therefore properly have been presented in said case, because the Court of First Instance of Cotabato, thus lacking jurisdiction, was in fact prevented from rendering any final judgment therein which could include such damages. Avoidance of multiplicity of suite presupposes the competence of the court in the first or earlier case. Wherefore, the appealed decision is affirmed, and it is so ordered with costs againsts the petitioner. Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Labrador and Concepcion, JJ., concur. Footnotes 1 After the Court of First Instance of Manila rendered a decision in Civil Case No. 13778, sentencing the petitioner to pay to the defendant the sum of P4,500, with legal interest, attorneys fees in the sum of P1,000, and costs, the petitioner, instead of appealing, instituted in the Court of Appeals a special civil action for certiorari.
Aquino v. Socorro, 35 S 373 EN BANC G.R. No. L-23868 October 22, 1970 ZACARIAS C. AQUINO, petitioner, vs. FRANCISCO SOCORRO and COURT OF APPEALS, respondents. Tranquilino O. Calo, Jr. for petitioner. Alfaro and Associates for respondent Francisco Socorro.
CASTRO, J.:. On February 14, 1964 the Court of Appeals, upon petition of Francisco Socorro in CA-G.R. 33560-R, 1 issued a writ of preliminary injunction in his favor upon his posting a P1,000 bond. The writ of preliminary injunction, among others, restrained Zacarias Aquino "from entering, cutting, hauling, selling and/or exporting logs or other forest products from the forest area" subject of litigation. Aquino, however, filed a counterbond in the amount of P2,000, effecting the immediate dissolution of the writ. The Court of Appeals, on June 29, 1964, dismissed Socorro's petition re the main action, for lack of jurisdiction to entertain the same. Socorro subsequently appealed the decision of the appellate court to this Court. We affirmed the appellate court's decision in a resolution dated December 24, 1964 in case G.R. L-23608. On July 15, 1964, before the appellate court's decision dismissing Socorro's petition became final, Aquino filed with the appellate court his claim for damages in the amount of P199,000 on account of the wrongful issuance of the writ of preliminary injunction. The appellate court denied Aquino's claim, for want of bad faith and malice on the part of Socorro in filing his petition and securing the issuance of the writ of preliminary injunction. Aquino's subsequent motion for reconsideration was denied. Hence, the present petition for certiorari to review the resolution of the Court of Appeals denying his claim for damages. Aquino contends that the respondent appellate court erred in denying his claim for damages on the ground of want of bad faith and malice on the part of the respondent Socorro in filing the petition for certiorari re the main case and securing the issuance of the writ of preliminary injunction. He invokes the provisions of Section 9, Rule 58 in relation to Section 20, Rule 57, of the Rules of Court. Section 9, Rule 58 recites:. Judgement to include damages against party and surities. Upon the trial the amount of damages to be awarded to the plaintiff, or to the defendant, as the case may be, upon the bond of the other party, shall be claimed, ascertained, and awarded under the same procedure as prescribed in Section 20 of Rule 57. Section 20, Rule 57 reads:. Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party against whom attachment was issued, be may recover, upon the bond given or deposit made by the attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
443 of 501
If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages sustained during the pendency of the appeal by filing an application with notice to the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court. Aquino points out that the said provisions do not require a claimant who seeks to recover damages on account of the wrongful issuance of a writ of preliminary injunction, to prove bad faith and malice on the part of the party who obtained the issuance of the writ. To reinforce his contention, he invokes the provisions of Section 4 (b) of Rule 58 of the Rules of Court. This rule, Aquino avers, makes the party applying for an injunction liable for all damages sustained by the other party if the court finally decides the party applicant as not entitled thereto. He maintains that, in the case at bar, the dissolution of the writ of preliminary injunction by the respondent appellate court clearly demonstrates that the respondent Socorro was not entitled thereto. Socorro, on the other hand, plays for the dismissal of the present petition on the following grounds: (1) The petitioner "refused to prosecute his claim for damages ... in the main action then already on appeal to this Court;" (2) The petitioner "failed to state in his motion claiming for damages the facts upon which his rights thereto are based;" (3) The petitioner, if "suing on the bond ... has no more cause of action as the said bond had already been dissolved 2 upon motion by the petitioner Aquino;" and (4) The petitioner, if "suing beyond the bond ... failed to show, or there is no showing that the respondent Socorro," in filing his petition for certiorari and securing the issuance of the writ of preliminary injunction, "was motivated by malice or bad faith." The present case raises the question of whether Aquino's claim for damages on account of the improvident issuance by the respondent appellate court of the writ of preliminary injunction should be dismissed on the ground that he has failed to show or prove bad faith and malice on the part of the respondent Socorro in obtaining the issuance of the writ of preliminary injunction. In Pacis vs. The Commission on Elections, 3 this Court made an extensive discussion of the principles applicable to the recovery of damages caused through the improvident issuance of a writ of preliminary injunction. This Court said that "damages sustained as a result of a wrongfully obtained injunction may be recovered upon the injunction bond required to be filed with the court." The same provisions permitting the issuance of the writ of preliminary injunction require the filing of a bond before the grant of the writ. "The statutory undertaking of the bond is that it shall answer for all damages which the party to be restrained may sustain by reason of the injunction if the court should finally decide that the plaintiff was not entitled thereto. Malice or lack of good faith is not an element of recovery on the bond. This must be so, because to require malice as a prerequisite would make the filing of the bond a useless formality." Continuing, this Court said that "the dissolution of the injunction, even if the injunction was obtained in good faith, amounts to a determination that the injunction was wrongfully obtained and a right of action on the injunction bond immediately accrues." Thus, for the purpose of recovery upon the injunction bond, "the dissolution of the injunction because of the failure of petitioner's main cause of action" provides the "actionable wrong" for the purpose of recovery upon the bond. This Court also stressed, in the same case, that "there is nothing in the Rules of Court which allows recovery of damages other than upon the bond pledged by the party suing for an injunction. Section 9, Rule 58, limits recovery only upon the bond, and it specifically states that ... 'the amount of damages to be awarded to the plaintiff, or to the defendant, as the case may be, upon the bond of the other party, shall be claimed, ascertained, and awarded under the same procedure as prescribed in Section 20 of Rule 57.' " Under this provision, the party restrained, if he can recover anything, can recover only by reason of and upon the bond the only security and protection conceded to him by the rules. Consequently, the rule limits the amount of recovery in a suit on an PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
444 of 501
injunction bond to the sum thus fixed, the amount measuring the extent of the assumed liability. This Court also finds it necessary to restate the rule in Molina vs. Somes 4 that "an action for damages for the improper suing out of an injunction must be maintained upon the same principles which govern an action for the wrongful bringing of an action." This rule, however, applies only when the party restrained pursues his claim for damages not upon the injunction bond. In such a case where the party restrained sues not on the injunction bond, the rules accord him no relief by way of a claim for damages unless he can establish that the party applicant secured the issuance of the writ maliciously and without probable cause. This Court stated that "... when the process has been sued out maliciously there may be a right of action in favor of the defendant. But this right depends upon the law governing malicious prosecutions, and has no relation to the claim for damages urged by the defendant in this case. ..." 5
Additionally, this Court, citing Palmer vs. Foley (71 N.Y. 106, 108), said:. It seems that, without some security given before the granting of an injunction order, or without some order of the court or a judge, requiring some act on the part of the plaintiff, which is equivalent to the giving of security such as a deposit of money in court the defendant has no remedy for any damages which he may sustain from the issuing of the injunction, unless the conduct of the plaintiff has been such as to give ground for an action for malicious prosecution. In the case at bar, the record reveals that the petitioner Aquino, in the proceedings before the respondent appellate court filed a counterbond in the amount of P2,000 and opposed the injunction bond filed by the respondent Socorro on the ground of its insufficiency. In effect, those brought about the immediate dissolution of the writ of preliminary injunction. Thus Aquino pursues his claim for damages in the amount of P199,000 no longer upon the injunction bond in the amount of P1,000 filed by Socorro with the respondent appellate court. This being the case, applicable here is the holding in Molina vs. Somes, supra, that an application for damages on account of the improvident issuance of a preliminary injunction writ must be governed by the same principles applicable to an action for the wrongful bringing of action. Before the respondent's liability can attach, it must appear that he filed his petition for certiorari re the main action and obtained the issuance of the writ of preliminary injunction maliciously and without probable cause. These two essential requisites, malicious prosecution and lack of probable cause, are neither alleged nor proved in this case before us. Nothing in the record tends to establish the liability of the respondent Socorro. ACCORDINGLY, the present petition for certiorari is hereby denied. No cost. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
445 of 501
Hanil Development v. IAC, 144 S 557 SECOND DIVISION G.R. No. 71229 September 30, 1986 HANIL DEVELOPMENT CO., LTD., petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and M. R. ESCOBAR EXPLOSIVES ENGINEERS, INC., represented by its General Manager, MANUEL R. ESCOBAR, respondents. M.A. Aguinaldo & Associates for petitioner. Ponciano H. Gupit for private respondent.
GUTIERREZ, JR., J.: This is a petition for certiorari, mandamus, and prohibition, with prayer for mandatory injunction and restraining order from the resolutions of the then Intermediate Appellate Court dated April 30, 1985 and June 20, 1985 in AC-G.R. No. 05055 entitled "Hanil Development Co., Ltd. v. M.R. Escobar Explosives Engineers, Inc., represented by its General Manager, Manuel R. Escobar." The present controversy has its origins in a complaint for recovery of a sum of money with damages filed by private respondent Escobar Explosives Engineers, Inc., against petitioner Hanil Development Co., Ltd., before the then Court of First Instance of Rizal, Branch XXXI, Pasig, Metro Manila. The petitioner is a foreign corporation organized under the laws of the Republic of Korea and doing business in the Philippines pursuant to the Corporation Code and the Foreign Investment Act. The complaint docketed as Civil Case No. 35966 sought to compel the petitioner to pay for the blasting services rendered by the private respondent in connection with the former's contract with the Ministry of Public Highways to construct the 200 Km. Oro-Butuan Road Project in Mindanao. The trial court, on April 16, 1983, rendered a decision in favor of the private respondent. The petitioner was ordered to pay the private respondent the sum of P1,341,727.40 corresponding to the value of the rocks blasted by the private respondent; ten percent (10%) of said amount as attorney's fees and costs. On May 6, 1982, the private respondent filed a petition for the issuance of a preliminary attachment. The motion was set for hearing. On May 13, 1982, the petitioner filed its notice of appeal and cash appeal bond with the trial court. On May 24, 1982, the trial court issued an order granting the petition for the issuance of preliminary attachment. On May 26, 1982, the private respondent moved for the appointment of Deputy Sheriff Felix Honoracion as special sheriff to serve the writ of attachment/garnishment. Consequently, the order dated May 24, 1982 and the writ of attachment dated May 27, 1982 were enforced by the respondents and the bank accounts of the petitioner were garnished and its equipment attached. The petitioner then filed a motion for reconsideration of the May 24, 1982 order. While this motion was pending, the private respondent filed another motion, this time an "Ex-Parte Motion to Deposit Cash" praying that an order be issued directing the Finance Manager of the National Power Corporation (NAPOCOR) to withdraw available funds of the petitioner from the NAPOCOR and deposit them with the clerk of court of the Court of First Instance of Rizal. This motion was granted in an order dated June 29, 1982. In view of this development, the petitioner filed with the then Intermediate Appellate Court a petition for certiorari with prayer for prohibition, injunction and preliminary restraining order challenging the orders dated May 24, 1982 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
446 of 501
and June 29, 1982 of the trial court. The case was docketed as CA-G.R. No. 14512. The appellate court temporarily restrained the enforcement of the challenged orders and after a hearing issued a preliminary injunction enjoining the implementation of said orders upon the filing of a P50,000.00 cash bond by the petitioner. In a decision dated February 3, 1983, the appellate court granted the petition and declared the challenged orders null and void, having been issued with grave abuse of discretion. While the above-mentioned petition was pending before the appellate court and despite the writ of injunction issued by it, other developments continued to unfold in the trial court. In an order dated August 23, 1982, the trial court disapproved the petitioner's amended record on appeal on the ground that it was "filed beyond the reglementary period and the extension granted." The appeal was dismissed. The petitioner filed a motion for reconsideration of the dismissal while the private respondent filed a motion for execution of judgment. On October 19, 1982, the trial court issued an order denying the petitioner's motion for reconsideration and at the same time granting the private respondent's motion for execution of judgment. The petitioner filed a petition for certiorari and mandamus with prayer for prohibition with the Intermediate Appellate Court assailing the trial court's orders dated August 23, 1982 and October 19, 1982. The case was docketed as AC-G.R. No. 15050. The appellate court granted the petition. The challenged orders were set aside and declared null and void. Hence, the petitioner's appeal in Civil Case No. 35966 was reinstated and the trial court was ordered to elevate the entire records of the case to the appellate court. A petition for review of the decision in AC-G.R. No. 15050 was filed by the private respondent before this Court, but was denied for lack of merit. After transmittal of the records, the appellate court on February 11, 1985, sent a notice to the petitioner to file appellant's brief within forty-five (45) days from receipt. The petitioner received the notice on February 25, 1985. On March 13, 1985, and within the reglementary period to file appellant's brief, the petitioner filed an "Application for Judgment against Attachment Bond" and "Motion to Defer Filing of Appellant's Brief" praying for a hearing before the appellate court so it could prove the damages it sustained as a result of the illegal writ of attachment issued by the trial court. It wanted a judgment against the attachment bond posted by the private respondent and its insurer Sanpiro Insurance Corporation to be included in the final decision in the main case, Civil Case No. 35966, now pending before the appellate court. Acting on the petitioner's motions, the appellate court issued a resolution directing the private respondent to comment on these motions. The private respondent filed its "Comment" with a "Motion to Dismiss Appeal" for the petitioner's alleged failure to file its appellant's brief. In a resolution dated April 30, 1985, the appellate court denied the petitioner's application for judgment against the attachment bond and the motion to defer filing of appellant's brief, granted the private respondent's motion to dismiss the appeal, and dismissed the appeal. The petitioner filed a motion for reconsideration but this was denied in a resolution dated June 20, 1985. Hence, this petition. In a resolution dated July 17, 1985, we issued a temporary restraining order to enjoin the respondents from proceeding with the execution of the decision in Civil Case No. 35966. The petitioner now asserts that the April 30, 1985 and June 20, 1985 resolutions were issued by the appellate court with grave abuse of discretion. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
447 of 501
The questioned April 30, 1985 minute resolution of the appellate court states: Acting upon (1) the application for judgment against attachment bond, etc. filed by counsel for defendant- appellant on March 13, 1985; (2) the comment thereto; (3) the motion to dismiss appeal filed by counsel for plaintiff- appellee on April 24, 1985; and the docket report dated April 25, 1985, the COURT RESOLVED: (a) to DENY the application for judgment against attachment bond and the motion to defer filing of appellant's brief; and (b) to GRANT the motion to dismiss appeal and to dismiss the instant appeal. The issues to be resolved in the instant petition are: (1) whether or not the petitioner's application for judgment against the attachment bond and its motion to defer filing of appellant's brief were correctly denied by the appellate court and (2) whether or not the same court rightly dismissed the petitioner's appeal. Anent the first issue, the petitioner contends that its application for judgment against the attachment bond was pursuant to Section 20, Rule 57 of the Revised Rules of Court. Section 20, Rule 57 of the Revised Rules of Court provides for the claim of damages on account of illegal attachment, to wit: Claim for damages on account of illegal attachment. If the judgment on the motion be in favor of the party against whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages sustained during the pendency of the appeal by filing an application with notice to the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court. In the instant case, the initial writ of attachment issued by the trial court in the main case Civil Case No. 35966 which is the subject of appeal was declared null and void by the appellate court in CA-G.R. No. 14512. This present writ of attachment was issued and subsequently enforced after the trial court's decision in Civil Case No. 35966 had been rendered and after the petitioner had already perfected its appeal. The petitioner, therefore, argues that the application for judgment against the attachment bond was properly lodged with the appellate court pursuant to Section 9, of the Judiciary Reorganization Act of 1980 (Batas Pambansa Blg. 129) which grants the Intermediate Appellate Court "power to try cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve factual issues ... ." It contends that it is only in the appellate court that these damages could well be ventilated because they occurred during the pendency of the appeal in AC-G.R. No. 15050. The petitioner's arguments are well-taken. The application for judgment against attachment bond was filed to prove the damages sustained by the petitioner as a result of the illegal writ of attachment issued by the trial court so that the judgment against the attachment bond posted by the private respondent and its insurer could be included in the final judgment of the main case. The assessment and award of such damages could not have been made in CA-G.R. No. 14512 as alleged by the private respondent because the question therein was whether or not the writ of attachment in Civil Case No. 35966 should have been issued. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
448 of 501
The object was to set aside the preliminary attachment immediately. It was a preventive measure. The private respondent, in its petition for writ of attachment filed with the trial court, posted an attachment bond issued by the Sanpiro Insurance Corporation in the amount of P1,341,727.40, the relevant portion of which reads: WHEREFORE, WE, M.R. ESCOBAR EXPLOSIVE ENGINEERS as PRINCIPAL, and the SANPIRO INSURANCE CORPORATION, a corporation duly organized and existing under and by virtue of the laws of the Philippines, as SURETY, in consideration of the above and of the levying of said attachment, hereby jointly and severally bind ourselves in the sum of PESOS: ONE MILLION THREE HUNDRED FORTY ONE THOUSAND SEVEN HUNDRED TWENTY SEVEN & 40/100 (P1,341,727.40), Philippine Currency, under the condition that we will pay all the costs which may be adjudged to said defendant/s and all damages which said defendant/s may sustain by reason of the attachment, if the Court shall finally adjudge that plaintiff/s was/were not entitled thereto. Contrary to the claim of the private respondent, this writ of attachment issued by the trial court was executed. The petitioner's equipment and bank accounts were garnished pursuant to the writ. In fact, the private respondent's opposition to the petitioner's motion for reconsideration of the trial court's order which issued the writ of attachment stated that the same should be denied for being moot and academic "because the writ of attachment and/or garnishment have already been executed." Considering that the writ of attachment was declared null and void, the petitioner had the right to ask for whatever damages it may have incurred as a result of its issuance pursuant to Section 20, Rule 57 of the Revised Rules of Court. Malayan Insurance Co., Inc. v. Salas (90 SCRA 252), lays down the procedure regarding claims for damages against an illegal attachment. It states: Under section 20, in order to recover damages on a replevin bond (or on a bond for preliminary attachment, injunction or receivership) it is necessary (1) that the defendant-claimant has secured a favorable judgment in the main action, meaning that the plaintiff has no cause of action and was not, therefore, entitled to the provisional remedy of replevin; (2) that the application for damages, showing claimant's right thereto and the amount thereof, be filed in the same action before trial or before appeal is perfected or before the judgment becomes executory; (3) that due notice be given to the other party and his surety or sureties, notice to the principal not being sufficient and (4) that there should be a proper hearing and the award for damages should be included in the final judgment (Luneta Motor Co. v. Menendez, 117 Phil. 970, 974; 3 Moran's Comments on the Rules of Court, 1970 Ed., pp. 54-56. See Cruz v. Manila Surety & Fidelity Co., Inc., 92 Phil. 699). xxx xxx xxx As may be gathered from section 20 of Rule 57, the application for damages against the surety must be filed (with notice to the surety) in the Court of First Instance before the trial or before appeal is perfected or before the judgment becomes executory. If an appeal is taken, the application must be filed in the appellate court but always before the judgment of that court becomes executory so that the award may be included in its judgment (Luneta Motor Co. v. Menendez, supra). But it is not always mandatory that the appellate court should include in its judgment the award of damages against the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
449 of 501
surety. Thus, it was held that where the application for damages against the surety is seasonably made in the appellate court, 'the latter must either proceed to hear and decide the application or refer 'it' to the trial court and allow it to hear and decide the same' (Rivera v. Talavera, 112 Phil. 209, 219). xxx xxx xxx Note that under the second paragraph of section 20, Rule 57 of the present Rules of Court, the damages suffered during the pendency of an appeal in a case where the writs of attachment, injunction and replevin or an order of receivership were issued should be claimed in the appellate court. xxx xxx xxx In the instant case, the application for judgment against the attachment bond was filed under the following circumstances: (1) the writ of attachment was issued by the trial court after it had rendered its decision and after the petitioner had already perfected its appeal; (2) the private respondent posted a surety bond to answer for any damages that may be adjudged to the petitioner if the writ is later found to be illegal; (3) the writ of attachment was declared illegal; and (4) the application for judgment against the attachment bond was made with notice to the insurer, Sanpiro Insurance Corporation. Applying the principles laid down in the Malayan case to the circumstances surrounding the application for judgment against attachment bond in this case, the appellate court committed grave abuse of discretion in denying the application for judgment against attachment bond. The appellate court's error in this case is more pronounced considering that under Section 9 of the Judiciary Reorganization Act of 1980 (Batas Pambansa Blg. 129) the Intermediate Appellate Court is now empowered to try cases and conduct hearings, receive evidence and perform acts necessary to resolve factual issues in cases falling within its original and appellate jurisdiction. Certainly, the amount of damages, if any, suffered by the petitioner as a result of the issuance of the illegal attachment during the pendency of the appeal is a factual issue. Moreover, the application for judgment against the bond seasonably filed by the petitioner in the appellate court would avoid multiplicity of suits. We have earlier ruled that "the explicit provision of Section 20 of Rule 57, Revised Rules of Court that the judgment against the surety should be included in the final judgment is to avoid additional proceedings. (Cruz v. Manila Surety & Fidelity Co., Inc. et al., 92 Phil. 699; (Japco v. City of Manila, 48 Phil. 851, 855 cited in Malayan insurance Corporation v. Salas, supra). Consequently, the appellate court also committed a grave abuse of discretion in denying the motion to defer filing of appellant's brief. The petitioner filed this motion for the purpose of first settling the issue on damages against the attachment bond so that such issue would be discussed and included in the appellant's brief and ultimately in the final judgment thereby avoiding multiplicity of suits. Needless to say, the appellate court should not have dismissed the petitioner's appeal. We take notice of the circumstances under which the appellate court dismissed the appeal. Granting that the petitioner's application for judgment against attachment bond was not meritorious, the appellate court's dismissal of the appeal would still be unwarranted. The record shows that in response to the petitioner's application for judgment against the attachment bond and motion to defer filing of the appellant's brief which was filed on March 13, 1985 and within the 45-day reglementary period to fife appellant's brief, the appellate court issued a resolution directing the private respondent to comment on the motion within ten (10) days from notice. Upon motion ' of the private respondent, the appellate court issued another resolution granting an extension of ten (10) days from April 13, 1985 to file comment on the said motions of the petitioner. The extension granted meant that the private respondent had until April 24, 1985 to file its comment. In addition to the comment, the private respondent filed on April 24, 1985 a PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
450 of 501
motion to dismiss appeal contending that the petitioner had not filed its appellant's brief within the 45-day reglementary period. Upon verification from its docket decision that no appellant's brief was filed as of April 25, 1985, the appellate court dismissed the appeal. Under these circumstances, the dismissal of the appeal by the appellate court due to the failure to file the appellant's brief within the 45-day reglementary period counted from February 25, 1985 to April 25, 1985 without allowing any interruption gave undue advantage to the private respondent. This is so, because the private respondent after having been given ten (10) days from receipt of notice to comment on the twin motions of the petitioner was again granted a ten-day extension or until April 24, 1985 to file its comment thereto. This, in effect, removed a substantial number of days from the 45-day period of the petitioner to file its brief, through no fault of its own. The procedure adopted by the appellate court in interpreting the 45-day reglementary period to file appellant's brief was unfair. When the appellate court issued the resolution requiring the private respondent to comment on the petitioner's application for judgment against the attachment bond and motion to defer appellant's brief the 45-day period should be deemed to have stopped, and the period to commence again after denial of the motions. The notice to "file appellant's brief within 45 days from receipt" was received by the petitioner on February 25, 1985. The petitioner filed the application for judgment against the attachment bond and motion to defer filing of appellant's brief on March 13, 1985. Thus, the petitioner filed its motions on the 16th day after receipt of the notice to file appellant's brief and within the 45-day reglementary period. On March 26, 1985, the appellate court issued its resolution directing the private respondent to file its comment on the motions of the petitioner. At this point, counting from February 25, 1985 to March 26, 1985, a total number of 29 days had lapsed. Hence, the petitioner still had 16 days within the 45-day reglementary period to file its appellant's brief in the event that its motions were denied. It is likewise the practise in the Court of Appeals, after granting an initial period of 45 days, to routinely grant a motion for extension of another 45 days for the filing of an appellant's brief. Considering the amount involved in this litigation and the nature of the defenses raised by the petitioner, the appellate court was unduly severe when it peremptorily dismissed the appeal. Therefore, we have to set aside the appellate court's action in simultaneously denying the application for judgment against the attachment bond and the motion to defer the filing of appellant's brief and in dismissing the appeal. Since the petitioner's two motions were denied on April 30, 1985, the petitioner still had 16 days from notice of the denial to file its appellant's brief. In short, the petitioner's 45-day period within which to file its appellant's brief had not yet lapsed when the appellate court dismissed the appeal. The brief could have been filed or a motion for extension of time requested. WHEREFORE, the instant petition is GRANTED. The questioned resolutions dated April 30, 1985 and June 20, 1985 of the then Intermediate Appellate Court are hereby REVERSED and SET ASIDE. The Court of Appeals is directed to conduct hearings on the application for judgment against attachment bond filed by the petitioner and to reinstate the appeal. The temporary restraining order dated July 17, 1985 is made PERMANENT. SO ORDERED.
G.R. No. 98275 November 13, 1992 BA FINANCE CORPORATION, petitioner, vs. HON. COURT OF APPEALS, REGIONAL TRIAL COURT OF ANGELES CITY, BRANCH LVI, CARLOS OCAMPO, INOCENCIO TURLA, SPOUSES MOISES AGAPITO and SOCORRO M. AGAPITO and NICOLAS CRUZ,respondents.
MELO, J.: The question of petitioner's responsibility for damages when on March 6, 1983, an accident occurred involving petitioner's Isuzu ten-wheeler truck then driven by an employee of Lino Castro is the thrust of the petition for review on certiorari now before Us considering that neither the driver nor Lino Castro appears to be connected with petitioner. On October 13, 1988, the disputed decision in the suit below was rendered by the court of origin in this manner: 1. Ordering Rock B.A. and Rogelio Villar y Amare jointly and severally to pay the plaintiffs as follows: a) To the plaintiff Carlos Ocampo P121,650.00; b) To the plaintiff Moises Ocampo P298,500.00 c) To the plaintiff Nicolas Cruz P154,740.00 d) To the plaintiff Inocencio Turla, Sr. 48,000.00 2. Dismissing the case against Lino Castro 3. Dismissing the third-party complaint against STRONGHOLD 4. Dismissing all the counterclaim of the defendants and third-party defendants. 5. Ordering ROCK to reimburse B.A. the total amount of P622,890.00 which the latter is adjudged to pay to the plaintiffs. (p. 46, Rollo) Respondent Court of Appeals affirmed the appealed disposition in toto through Justice Rasul, with Justices De Pano, Jr. and Imperial concurring, on practically the same grounds arrived at by the court a quo (p. 28, Rollo). Efforts exerted towards re-evaluation of the adverse were futile (p. 37, Rollo). Hence, the instant petition. The lower court ascertained after due trial that Rogelio Villar y Amare, the driver of the Isuzu truck, was at fault when the mishap occurred in as much as he was found guilty beyond reasonable doubt of reckless imprudence resulting in triple homicide with multiple physical injuries with damage to property in a decision rendered on February 16, 1984 by the Presiding Judge of Branch 6 of the Regional Trial Court stationed at Malolos, Bulacan. Petitioner was adjudged liable for damages in as much as the truck was registered in its name during the incident in question, following the doctrine laid down by this Court in Perez vs. Gutierrez (53 SCRA 149 [1973]) and Erezo, et al. vs. Jepte (102 Phil. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
452 of 501
103 [1957]). In the same breadth, Rock Component Philippines, Inc. was ordered to reimburse petitioner for any amount that the latter may be adjudged liable to pay herein private respondents as expressly stipulated in the contract of lease between petitioner and Rock Component Philippines, Inc. Moreover, the trial court applied Article 2194 of the new Civil Code on solidary accountability of join tortfeasors insofar as the liability of the driver, herein petitioner and Rock Component Philippines was concerned (pp. 6-7, Decision; pp. 44-45, Rollo). To the question of whether petitioner can be held responsible to the victim albeit the truck was leased to Rock Component Philippines when the incident occurred, the appellate court answered in the affirmative on the basis of the jurisprudential dogmas which, as aforesaid, were relied upon by the trial court although respondent court was quick to add the caveat embodied in the lease covenant between petitioner and Rock Component Philippines relative to the latter's duty to reimburse any amount which may be adjudged against petitioner (pp. 32-33, Rollo). Petitioner asseverates that it should not have been haled to court and ordered to respond for the damage in the manner arrived at by both the trial and appellate courts since paragraph 5 of the complaint lodged by the plaintiffs below would indicate that petitioner was not the employer of the negligent driver who was under the control an supervision of Lino Castro at the time of the accident, apart from the fact that the Isuzu truck was in the physical possession of Rock Component Philippines by virtue of the lease agreement. Aside from casting clouds of doubt on the propriety of invoking the Perez and Erezo doctrines, petitioner continue to persist with the idea that the pronouncements of this Court in Duavit vs. Court of Appeals (173 SCRA 490 [1989]) and Duquillo vs. Bayot (67 Phil 131 [1939]) dovetail with the factual and legal scenario of the case at hand. Furthermore, petitioner assumes, given the so-called hiatus on the basis for the award of damages as decreed by the lower and appellate courts, that Article 2180 of the new Civil Code on vicarious liability will divest petitioner of any responsibility absent as there is any employer-employee relationship between petitioner and the driver. Contrary to petitioner's expectations, the recourse instituted from the rebuffs it encountered may not constitute a sufficient foundation for reversal of the impugned judgment of respondent court. Petitioner is of the impression that the Perez and Erezo cases are inapplicable due to the variance of the generative facts in said cases as against those obtaining in the controversy at bar. A contrario, the lesson imparted by Justice Labrador in Erezo is still good law, thus: . . . In previous decisions, We already have held that the registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by passengers or third persons caused by the operation of said vehicle, even though the same had been transferred to a third person. (Montoya vs. Ignacio, 94 Phil., 182 50 Off. Gaz., 108; Roque vs. Malibay Transit, Inc., G.R. No. L-8561, November 18, 1955; Vda. de Medina vs. Cresencia, 99 Phil., 506, 52 Off. Gaz., [10], 4606.) The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presumed that the registered owner is the actual owner thereof, for it would be difficult with the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to prove who actual the owner is. How would the public or third persons know against whom to enforce their rights in case of subsequent transfer of the vehicles? We do not imply by this doctrine, however, that the registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to whom he had actually sold, assigned or conveyed the vehicle. Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily responsible to the public or to the third persons for injuries caused the latter while the vehicle is being driven on the highways or streets. The members of the Court are in PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
453 of 501
agreement that the defendant-appellant should be held liable to plaintiff-appellee for the injuries occasioned to the latter because of the negligence of the driver, even if the defendant- appellant was no longer an owner of the vehicle at the time of the damage because he had previously sold it to another. What is the legal basis for his (defendants-appellant's) liability? There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered owner in the Motor Vehicle Office. Should he not be allowed to prove the truth, that he had sold it to another and thus shift the responsibility for the injury to the real and the actual owner? The defendants hold the affirmative of this proposition; the trial court hold the negative. The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that the vehicle may be used or operated upon any public highway unless the same is properly registered. It has been stated that the system of licensing and the requirement that each machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of injury of pedestrians and other travelers from the careless management of automobiles, and to furnish a means of ascertaining the identity of persons violating the laws and ordinances, regulating the speed and operation of machines upon the highways (2 R. C. L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being properly registered from the current year, furnish the Motor Vehicle Office a report showing the name and address of each purchaser of motor vehicle during the previous month and the manufacturer's serial number and motor number. (Section 5[c], Act No. 3992, as amended.) Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway (section 5[a], Act No. 3992, as amended). the main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily obtained, in the interest of the determinations of persons responsible for damages or injuries caused on public highways. One of the principle purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of accident; and another is that the knowledge that means of detection are always available my act as a deterrent from lax observance of the law and of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape because of lack of means to discover him. The purpose of the statute is thwarted, and the displayed number becomes a "share and delusion," if courts would entertain such defenses as that PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
454 of 501
put forward by appellee in this case. No responsible person or corporation could be held liable for the most outrageous acts of negligence, if they should be allowed to pace a "middleman" between them and the public, and escape liability by the manner in which they recompense their servants. (King vs. Breham Automobile Co., Inc. 145 S. W. 278, 279.) With the above policy in mind, the question that defendant- appellant poses is: should not the registered owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility and lay the same on the person actually owning the vehicle? We hold with the trial court that the law does not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways is usually without means to discover or Identify the person actually causing the injury or damage. He has no means other then by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured person. The above policy and application of the law may appear quite harsh and would seem to conflict with truth and justice. We do not think it is so. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for the damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for relieving him of liability; said inconvenience is the price he pays for failure to comply with the registration that the law demands and requires. In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant. If the foregoing words of wisdom were applied in solving the circumstance whereof the vehicle had been alienated or sold to another, there certainly can be no serious exception against utilizing the same rationale to the antecedents of this case where the subject vehicle was merely leased by petitioner to Rock Component Philippines, Inc., with petitioner retaining ownership over the vehicle. Petitioner's reliance on the ruling of this Court in Duavit vs. Court of Appeals and in Duquillo vs. Bayot (supra) is legally unpalatable for the purpose of the present discourse. The vehicles adverted to in the two cases shared a common thread, so to speak, in that the jeep and the truck were driven in reckless fashion without the consent or knowledge of the respective owners. Cognizant of the inculpatory testimony spewed by defendant Sabiniano when he admitted that he took the jeep from the garage of defendant Dauvit without the consent or authority of the latter, Justice Gutierrez, Jr. in Duavit remarked; PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
455 of 501
. . . Herein petitioner does not deny ownership of the vehicle involved in the mishap but completely denies having employed the driver Sabiniano or even having authorized the latter to drive his jeep. The jeep was virtually stolen from the petitioner's garage. To hold, therefore, the petitioner liable for the accident caused by the negligence of Sabiniano who was neither his driver nor employee would be absurd as it would be like holding liable the owner of a stolen vehicle for an accident caused by the person who stole such vehicle. In this regard, we cannot ignore the many cases of vehicles forcibly taken from their owners at gunpoint or stolen from garages and parking areas and the instances of service station attendants or mechanics of auto repair shops using, without the owner's consent, vehicles entrusted to them for servicing or repair.(at p. 496.) In the Duquillo case, the defendant therein cannot, according to Justice Diaz, be held liable for anything because of circumstances which indicated that the truck was driven without the consent or knowledge of the owner thereof. Consequently, there is no need for Us to discuss the matter of imputed negligence because petitioner merely presumed, erroneously, however, that judgment was rendered against it on the basis of such doctrine embodied under Article 2180 of the new Civil Code. WHEREFORE, the petition is hereby DISMISSED and decision under review AFFIRMED without special pronouncement as to costs. SO ORDERED.
Malayan Insurance v. Salas, 90 S 252 SECOND DIVISION G.R. No. L-48820 May 25, 1979 MALAYAN INSURANCE CO., INC., petitioner, vs. HON. EMILIO V. SALAS, as Presiding Judge, Court of First Instance of Rizal, Branch I, Pasig, Metro Manila, ROSENDO FERNANDO and JOHN DOE, respondents. Angara, Abello, Concepcion, Regata & Cruz for petitioner. Lazaro, Abinoja & Associates for private respondents.
AQUINO, J.: This case is about the surety company's liability on its replevin bond which was not included in the final judgment against the principal in the bond. It is undisputed that in 1970 Makati Motor Sales, Inc., as vendor mortgagee, sued Rosendo Fernando for the recovery of four diesel trucks and the connection of the balance of his obligation plus damages (Civil Case No. 13874, Court of First Instance of Rizal, Pasig Branch 1). To obtain immediate possession of the trucks pending trial, Makati Motors Sales, Inc. posted a replevin bond executed by the Malayan Insurance Co., Inc. In that bond the surety bound itself to pay P362,775.92 "for the return of the property to the defendant, if the return thereof be adjudged, and for the payment of such sum as may in the cause be recovered against the plaintiff ". Pursuant to the order of the court, the sheriff seized the four trucks. Later, two of the trucks were returned to Fernando. After trial, or on March 2, 1973, the lower court rendered judgment ordering Makati Motor Sales, Inc. to return to Fernando the other two trucks and to pay him for the seizure of each of them, damages in the sum of three hundred pesos daily from September 25 and 26, 1970 (or six hundred pesos for the two trucks from the latter date) until their return to Fernando plus P26,000 as actual and moral damages. In turn, Fernando was ordered to pay Makati Motor Sales, Inc. the sum of P66,998.34, as the balance of the price of the two trucks, with twelve percent interest from February 28, 1969 until fully paid and the further sum of P15,730.20 as the cost of the repair with six percent interest from September 11, 1970 until fully paid. Makati Motor Sales, Inc. appealed to the Court of Appeals. It affirmed the lower court's judgment in its decision of March 1, 1977 in CA-G. R. No. 54196-R. Meanwhile, on May 11, 1973, or before the elevation of the record to the Court of Appeals, Fernando filed in the trial court an application for damages against the replevin bond. It was opposed by the surety on the ground that the trial court had lost jurisdiction over the case because of the perfection of the appeal. The trial court denied the application on June 28, 1973. On May 27, 1974 Fernando filed in the Court of Appeals his claim for damages against the replevin bond. He prayed that the same be included in the judgment. The surety, which was furnished with a copy of the claim, filed an opposition to it. The Court of Appeals did not act immediately on that claim but in its 1977 decision it observed that Fernando's motion or claim "was correct" and it ordered that his claim against Malayan Insurance Co., Inc. "be heard before the trial court". That decision affirming the lower court's judgment became final and executory on March 18, 1977. On April 6, 1977, or after the remand of the record to the trial court, Fernando filed a motion to set for hearing his application for damages against the surety on its replevin bond. The application was heard with notice to Makati Motor PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
457 of 501
Sales, Inc. and Malayan Insurance Co., Inc. Fernando submitted documentary evidence. On December 15, 1977 Malayan Insurance Co., Inc. moved to quash the proceeding regarding the claim for damages. It contended that the trial court has no jurisdiction to alter or modify the final judgment of the Court of Appeals. The trial court in its order of July 14, 1978 denied the motion to quash. It directed Malayan Insurance Co., Inc. to pay Fernando the damages which it had adjudged against Makati Motor Sales, Inc. The surety company appealed from that order to this Court pursuant to Republic Act No. 5440. Section 10, Rule 60 of the Rules of Court provides that in replevin cases, as in receivership and injunction cases, the damages "to be awarded to either party upon any bond filed by the other" "shall be claimed, ascertained, and granted" in accordance with section 20 of Rule 57 which reads: SEC. 20. Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party against whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages sustained during the pendency of the appeal by filing an application with notice to the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court. Under section 20, in order to recover damages on a replevin bond (or on a bond for preliminary attachment, injunction or receivership) it is necessary (1) that the defendant-claimant has secured a favorable judgment in the main action, meaning that the plaintiff has no cause of action and was not, therefore, entitled to the provisional remedy of replevin; (2) that the application for damages, showing claimant's right thereto and the amount thereof, be filed in the same action before trial or before appeal is perfected or before the judgment becomes executory; (3) that due notice be given to the other party and his surety or sureties, notice to the principal not being sufficient and (4) that there should be a proper hearing and the award for damages should be included in the final judgment (Luneta Motor Co. vs. Menendez 117 Phil. 970, 974; 3 Moran's Comments on the Rules of Court, 1970 Ed., pp. 54-56. See Cruz vs. Manila Surety & Fidelity Co., Inc., 92 Phil. 699). In this appeal, Malayan Insurance Co., Inc. contends that the trial court's judgment against it is not warranted under section 20 of Rule 57. It assails the trial court's competence to render judgment against the surety after the decision of the Court of Appeals against the surety's principal had become final and executory. We hold that the trial court has jurisdiction to pass upon Fernando's application for the recovery of damages on the surety's replevin bond. The reason is that Fernando seasonably filed his application for damages in the Court of Appeals. It was not his fault that the damages claimed by him against the surety were not included in the judgment of the Court of Appeals affirming the trial court's award of damages to Fernando payable by the principal in the replevin bond. The peculiar factual situation of this case makes it an exception to the settled rule that the surety's liability for damages should be included in the final judgment to prevent duplicity of suits or proceedings. As may be gathered from section 20 of Rule 57, the application for damages against the surety must be filed (with notice to the surety) in the Court of First PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
458 of 501
Instance before the trial or before appeal is perfected or before the judgment becomes executory. If an appeal is taken, the application must be filed in the appellate court but always before the judgment of that court becomes executory so that the award may be included in its judgment (Luneta Motor Co. vs. Menendez 117 Phil. 970, 976). But it is not always mandatory that the appellate court should include in its judgment the award of damages against the surety. Thus, it was held that where the application for damages against the surety is seasonably made in the appellate court, "the latter must either proceed to hear and decide the application or refer "it" to the trial court and allow it to hear and decide the same"(Rivera vs. Talavera, 112 Phil. 209, 219). We have stated earlier that in the instant case Fernando in 1974 made a timely claim in the Court of Appeals for an award of damages against Malayan Insurance Co., Inc. enforceable against its replevin bond. The surety was notified of that application. It registered an opposition to the claim. The Court of Appeals did not resolve the claim immediately but in its 1977 decision it directed the trial court to hear that claim. Obviously, the lower court has no choice but to implement that directive which is the law of the case (See Compagnie Franco Indochinoise vs. Deutsch, etc., 39 Phil. 474, 476). However, the trial court's implementation of that directive was incorrect. It set the claim for hearing but the surety assailed its jurisdiction and did not consider itself bound by the mandate of the appellate court. The merits of the claim for damages were not threshed out at the hearing because the surety stood pat on its contention that the trial court has no jurisdiction to allow the claim in view of the finality of the decision of the Court of Appeals. This Court has held that, if the surety was not given notice when the claim for damages against the principal in the replevin bond was heard, then as a matter of procedural due process the surety is entitled to be heard when the judgment for damages against the principal is sought to be enforced against the surety's replevin bond. The hearing win be summary and win be limited to such new defense, not previously set up by the principal, as the surety may allege and offer to prove. The oral proof of damages already adduced by the claimant may be reproduced without the necessity of retaking the testimony, but the surety should be given an opportunity to cross-examine the witness or witnesses if it so desires." That procedure would forestall the perpetration of fraud or collusion against the surety (Visayan Surety and Insurance Corporation vs. Pascual, 85 Phil. 779, 785-786). Inasmuch as in this case appellant Malayan Insurance Co., Inc. was not given the summary hearing during which it could contest the reality or reasonableness of Fernando's claim for damages, we have to set aside the trial court's order awarding damages against it and, in the interest of justice, give it another opportunity to be heard on the merits of Fernando's claim for damages. Before closing, it may be useful to make a review and synthesis of the copious jurisprudence on the surety's liability in attachment, injunction, replevin and receivership bonds. It was observed in one case that once upon a time the rulings on that point were in a muddled state. Section 20 of Rule 57 is a revised version of section 20, Rule 59 of the 1940 Rules of Court which earlier section 20 is a restatement of this Court's rulings under sections 170, 177, 223, 272 and 439 of the Code of Civil Procedure regarding the damages recoverable in case of the wrongful issuance of the writs of preliminary injunction, attachment, mandamus and replevin and the appointment of a receiver. Section 170 contains the provision that the damages suffered in connection with the issuance of a preliminary injunction shall be ascertained by the court trying the action (meaning the court where the action is pending) and shall be included in the final judgment "against the plaintiff and against the sureties". PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
459 of 501
As to damages in case of wrongful attachment, see section 439 of the Code of Civil Procedure and Belzunce vs. Fernandez, 10 Phil. 452. So, as held under the Code of Civil Procedure, if the preliminary injunction was issued by this Court, the specification of damages should be filed in this Court. The petitioner and his bondsmen should be served with copies of the specification (Somes vs. Crossfield, 9 Phil. 13 and Macatangay vs. Municipality of San Juan de Bocboc, 9 Phil. 19). On the other hand, under section 439 of the Code of Civil Procedure, the damages caused by a wrongful attachment may be adjudicated in a summary hearing but the better practice would be to claim the damages in the answer and to offer evidence in support thereof during the trial (Gasataya vs. Fallon 32 Phil. 245 and Raymundo vs. Carpio, 33 Phil. 395). Note that under the second paragraph of section 20, Rule 57 of the present Rules of Court, the damages suffered during the pendency of an appeal in a case where the writs of attachment, injunction and replevin or an order of receivership were issued should be claimed in the appellate court. There is an old ruling that the sureties in an injunction bond are bound by a judgment for damages against their principal even if the sureties were not heard at the time the claim for damages was tried. The reason for that ruling is that the sureties in an injunction bond "assume such a connection with the suit that they are included by a judgment in it in a suit at law upon the bond, so far as the same issues are involved; and that, upon the entry of a judgment against the principal, their liability is absolute" (Florentino vs. Domadag, 45 O.G. 4937, 81 Phil. 882). Also, it was held that if damages were awarded against the principal in a replevin bond without notice to the surety, that final judgment may be enforced against the surety after it has been given an opportunity to be heard as to the reality or reasonableness of the alleged damages. In such a case, the trial court must order the surety to show cause why the bond should not answer for the judgment for damages. The hearing is summary and the surety may cross-examine the witnesses presented by the defendant (Visayan Surety & Insurance Corporation vs. Pascual, 85 Phil 779). Insofar as those rulings in the Florentino and Visayan Surety cases allowed a claim for damages against the surety to be ventilated in a separate proceeding or after the finality of the judgment for damages against the principal in the bond, those rulings were jettisoned and abandoned in several subsequent cases because they are contrary to the explicit provision of section 20 of Rule 59, now Rule 57, that the judgment for damages against the surety should be included in the final judgment to avoid additional proceedings (Cruz vs. Manila Surety & Fidelity Co., Inc., 92 Phil. 699; Japco vs. City of Manila, 48 Phil. 851, 855). The damages are recoverable on the theory that an actionable wrong was committed by the losing party. The recovery is limited to the amount of the bond (Pacis vs. Commission on Elections, L-29026, August 22, 1969, 29 SCRA 24, 29). The usual procedure is to file an application for damages with due notice to the other party and his sureties. The other part may answer the application. Upon the issues thus being Joined, the matter will be tried and determined. A court order declaring the bond confiscated without adhering to that procedure is void ( Fabella vs. Tancinco 86 Phil. 543; Luzon Sureo Inc. Guerrero, L-20705, June 20, 1966. 17 SCRA 100). The claim for damages against the surety should be made it notice to the surety and before the judgment against the principal becomes executory. The liability of the surety should be included in the final judgment. That remedy is exclusive. If riot assailed of, the surety is released (Curilan vs. Court of Appeals, 105 Phil. 1160 and De la Rama vs. Villarosa, 118 Phil. 42-1. 430: Jesswani vs. Dialdas 91 Phil. 915: Estioco vs. Hamada, 103 Phil. 1145). Therefore, the prevailing settled rule is that a court has no jurisdiction to entertain any proceeding seeking to hold a surety upon its bond if such surety has not been given notice the claim for damages against the principal and the judgment holding the latter liable has already become executor (People's PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
460 of 501
Surety & Insurance Co., Inc. vs. Court of Appeals, L-21627. June 29, 1961, 20 SCRA 481). If the judgment awarding damages against the principal in a bond for the lifting of a preliminary injunction had already become executory, that claim cannot be pressed against the surety by setting it for hearing with notice to the surety. The failure to notify the surety of the claim for damages against the principal relieves the surety from any liability on his bond (Sy vs. Ceniza, 115 Phil. 396; Pacis vs. Commission on Elections, L-29026, August 22, 1969, 29 SCRA 24; Dee vs. Masloff, 116 Phil. 412). To entertain the belated claim against the surety after the judgment for damages against the principal has become executory would result in the alteration of that judgment. That should not be done (De Guia vs. Alto Surety & Insurance Co., Inc., 117 Phil. 434; Visayan Surety & Insurance Co., Inc. vs. De Aquino, 96 P1. 900; Port Motors, Inc. vs. Raposas and Alto Surety & Insurance Co., Inc., 100 Phil. 732; Gerardo vs. Plaridel Surety & Insurance Co., Inc., 100 Phil. 178; Luneta Motor Co. vs. Lopez, 105 Phil. 327; Curilan vs. Court of Appeals, 105 Phil. 1160; Riel vs. Lacson, 104 Phil. 1055). Moreover, the damages claimed by the defendant should be pleaded as a compulsory counterclaim in his answer. Hence, a separate action to claim those damages is unwarranted (Ty Tion and Yu vs. Marsman & Co. and Alpha Insurance & Surety Co., Inc., 115 Phil. 746, 749; Medina vs. Maderera del Norte de Catanduanes, Inc., 51 Phil. 240; Nueva-Espaa vs. Montelibano, 58 Phil. 807; Tan Suyco vs. Javier, 21 Phil. 82). It may be noted that in the Visayan Surety case, 85 Phil 779, Visayan Surety & Insurance Corporation filed a replevin bond for one Yu Sip who sued Victoria Pascual for the recovery of a truck. The trial court found that the writ of replevin was wrongfully procured, that Victoria Pascual was the lawful owner of the truck and that she suffered damages on account of its wrongful seizure by the sheriff at the instance of plaintiff Yu Sip. The trial court ordered Yu Sip to return the truck to Victoria Pascual or to pay its value of P2,300 in case of his inability to return it and, in either case, to pay thirty pesos daily from January 6, 1947 up to the date of the return of the truck or until its value was fully paid. The Court of Appeals affirmed that judgment. After the return of the record to the trial court, Victoria Pascual filed a "petition for execution of the surety bond" wherein she prayed for a writ of execution against the surety to satisfy the judgment out of its replevin bond. The surety opposed that petition. It contended that it was never notified by Victoria Pascual regarding her presentation of evidence covering the damages which she had suffered. The trial court granted the petition and ordered the issuance of a writ of execution against the surety. That order was assailed in a certiorari in this Court. It was held that the writ of execution should be set aside and that the surety should be given a chance to be heard in a summary proceeding. That proceeding was conducted after the judgment against Yu Sip, the principal in the replevin bond, had become final and executory. What was done in the Visayan Surety case, as recounted above, was not allowed in subsequent cases. Thus, inManila Underwriters Insurance Co., Inc. vs. Tan, 107 Phil. 911, the trial court rendered in 1954 a judgment dissolving the preliminary attachment and ordering the plaintiff to pay the defendant the damages which the latter suffered by reason of the wrongful attachment. The surety in the attachment bond was not notified of the hearing but it was furnished with a copy of the decision. In 1957 the Court of Appeals affirmed that judgment. After it became final, the defendant filed in the trial court against the surety a motion for execution winch the latter opposed. At the hearing of the motion, the defendant offered to reproduce the evidence which he had presented at the trial. The offer was accepted by the trial court. It issued the writ of execution against the surety. It was held that, because the surety was not notified of the hearing on the damages suffered by the defendant in the manner prescribed in section 20 of Rule 59, now Rule 57, it was not liable for damages under its attachment bond. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
461 of 501
The surety is notified so that he may cross-examine the witnesses testifying as to the damages and question the evidence presented by the claimant and interpose any appropriate defense (Riel vs. Lacson, 104 Phil. 1055; Liberty Construction Supply Co. vs. Pecson, 89 Phil. 50). So, if plaintiff's claim for damages resulting from the wrongful lifting of the writ of preliminary injunction was awarded in the main decision without notice to the surety and the decision had become executory, the failure to notify the surety on time relieves him from liability under the bond (Alliance Insurance & Surety Co., Inc. vs. Piccio, 105 Phil. 1192). The surety may be held liable only if before the judgment for damages against the principal becomes executory, an order is entered against him after a hearing with notice to him. After the judgment becomes executory, it is too late to file such claim for damages with notice to the surety (Abelow vs. Riva 105 Phil. 159; Visayan Surety & Insurance Corp. vs. Lacson, 96 Phil. 878). Where the Court of Appeals dismissed a mandamus action originally filed in that court and dissolved the preliminary injunction which it had issued and after entry of judgment was made the record was remanded to the trial court, it was error for the Court of Appeals to allow the respondent in that case to file a claim for damages against the principal and surety in the injunction bond. The claim should have been filed before the judgment of dismissal became final (Luzon Surety Co. Inc. vs. Court of Appeals, 108 Phil. 157). Section 20 of Rule 57 contemplates one judgment for damages against the principal and the surety in the injunction, replevin, attachment and receivership bonds. Since the judicial bondsman has no right to demand the exhaustion of the property of the principal debtor, there is no justification for entering separate judgments against them. The claim for damages against the surety should be made before entry of judgment (Del Rosario vs. Nava, 95 Phil. 637). In the Del Rosario case a judgment for damages was rendered against the principal in an attachment bond but there was no notice to the surety of the claim for damages. That judgment became final. After the execution against the principal was returned unsatisfied, the claimant filed a motion praying that the surety company be required to show cause why it should not answer for the judgment against the principal. It was held that, while the prevailing party may apply for an award of damages against the surety even after the award has already been obtained against the principal, nevertheless, in order that all awards for damages may be included in the final judgment, the application and notice to the surety must be made before the judgment against the principal becomes final and executory. In another case, it was held that as the winning party sought to hold the surety liable on its replevin bond almost a year after the judgment of the Court of Appeals became final, the trial court erred in enforcing its judgment against the surety. "The surety may only be held liable if, before judgment becomes final, an order against the surety is entered after a hearing with notice to the surety". The claim against the surety should be included in the final judgment. It is not sufficient that the surety be afforded an opportunity to oppose the writ of execution. (Plaridel Surety & Insurance Company vs. De los Angeles, L- 25550, July 31, 1968, 24 SCRA 487). After this Court's judgment dissolving a preliminary injunction had become final and executory, it would be too late to entertain in the trial court the defendant's application for damages allegedly caused by the injunction (Santos vs. Moir 36 Phil. 350). The defendant in a replevin case cannot file a separate action for damages due to the wrongful issuance of the writ. He should have claimed the damages as a counterclaim in the original replevin suit (Pascua vs. Sideco 24 Phil. 26, Ty Tion and Yu vs. Marsman & Co. and Alpha Ins. & Surety Co. Inc., 115 Phil. 746). A final judgment for damages against the principal in a replevin bond cannot be enforced against the surety company which was not notified of the claim for damages and was not afforded a chance to be heard (People's Surety and Ins. Co., Inc. vs. Aragon, 117 Phil, 257). PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
462 of 501
Where an injunction was dissolved and only attorney's fees and costs were adjudged against the principal, and the procedure for claiming damages against the surety was not followed, no recourse could be had against the injunction bond in case the writ of execution against the principal was not satisfied. Moreover, the attorney's fees and costs could be recovered from the principal even without the filing of the bond (People's Surety & Insurance Co., Inc. vs. Bayona, 103 Phil. 1109). Where after the dismissal of a petition for relief from the judgment of a municipal court, the Court of First Instance ordered ex parte the issuance of a writ of execution against the petitioner's injunction bond, that order is void because there was no formal claim for damages and there was no hearing with notice to the petitioner and his surety. The court should hold a hearing. (Luzon Surety Co., Inc. vs. Guerrero, L-20705, June 20, 1966, 17 SCRA 400). Where on June 11, 1959 an action to stop the foreclosure of a chattel mortgage was dismissed, without prejudice, for failure to prosecute and, before that dismissal became final, the defendant did not prove any damages resulting from the issuance of the preliminary injunction, defendant's motion of September 7, 1959 praying that judgment be rendered against the surety's bond could no longer be entertained. The claim for damages should have been made before entry of final judgment. It must be duly substantiated at the proper hearing with notice to the surety (Jao and Sia vs. Royal Financing Corporation, 114 Phil. 1152; Visayan Surety & Insurance Corp. vs. Lacson, 96 Phil. 878). If the case wherein the injunction was issued was dismissed for failure to prosecute and no damages were awarded to the defendant by reason of the issuance of the injunction, it was error for the trial court to issue a writ of execution against the surety since there was no claim nor evidence of damages suffered the defendant. The order of dismissal did not include in final of damages. (Vet Bros. and Co., Inc. vs. Movido 11 4 Phil, 211). The case of Vadil vs. De Venecia, 118 Phil. 1217, involves a queer situation. Plaintiff corporation in that case filed an action to recover a sum of money. It asked for a writ of attachment. Before any attachment could be issued, the defendant filed a counterbond. But this bond provided that the defendant and his sureties would pay "all damages that the defendant (sic) may suffer by reason of" the attachment. In other words, the defendant executed a bond in favor of himself. Judgment was rendered for the plaintiff. As the execution was returned unsatisfied, the trial court on plaintiff's motion ordered execution against defendant's bond. It was held that the execution was wrongfully issued. However, where an injunction was issued in a forcible entry case but on certiorari to the Court of First Instance, the justice of the peace court was held to be without jurisdiction to entertain the ejectment case, that ejectment suit is not considered dismissed and it may still be regarded as pending in the justice of the peace court for the purpose of allowing the defendant's claim for damages on the injunction bond (Cruz vs. Manila Surety & Fidelity Co., 92 Phil. 699). Section 10 of Rule 60 makes section 20 of Rule 57 applicable not only to the replevin bond but also to theredelivery bond posted by the defendant for the lifting of the order of seizure. The requisites for holding the surety liable on the replevin bond are also the requisites for holding the surety hable on the redelivery bond. So, if the surety on the redelivery bond was not notified of the plaintiff's claim for damages, the surety cannot be held liable on its redelivery bond for the damages adjudged against the principal. It is necessary that the surety be notified and that its liability be included in the final judgment against the principal (Luneta Motor Co. vs. Menendez 117 Phil. 970). The writ of execution issued against the counterbond for the dissolution of an injunction is void if it was issued without notice to the surety and after the judgment on the merits had become executory. The surety's liability should have been included in the final judgment (Cajefe vs. Fernandez, 109 Phil. 743). If the judgment awarding damages against the principals in the counterbonds filed for the lifting of the receivership was appealed to the Court of Appeals and the plaintiff-appellee filed in the trial court (not in the appellate court) his application for damages against the sureties in the counterbonds, the trial PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
463 of 501
court cannot hear the said application after the record is remanded to it because, by then, the decision of the appellate court had become final and the damages to be awarded against the sureties could no longer be included in that judgment. The application for damages against the sureties should have been filed in the Court of Appeals (Luneta Motor Co. vs. Menendez 117 Phil. 970, 976). The procedure in section 20 of Rule 57 should not be confounded with the procedure in section 17 of the same rule regarding the surety's liability on the counterbond for the lifting of the preliminary attachment. Under section 17, the surety may be held liable after notice and summary hearing conducted after the judgment had become executory and the execution was returned unsatisfied (Towers Assurance Corporation vs. Ororama Supermart, L-45848, November 9, 1977, 80 SCRA 262; Vanguard Assurance Corporation vs. Court of Appeals, L-25921, May 27, 1975, 64 SCRA 148). The case contemplated in section 17 of Rule 57 is different from the case envisaged in section 20 of that rule (Dizon vs. Valdes, L-23920, April 25, 1968, 23 SCRA 200; Visayan Surety & Insurance Corp. vs. De Aquino, 96 Phil. 900). Nor does section 20 of Rule 57 apply to cases where the surety bound himself to abide by the judgment against his principal and thereby renounced his right to be sued or cited, or where the surety guaranteed the return of certain goods and he did not raise the issue of lack of notice, or where the sureties bound themselves to pay the plaintiff a definite amount (Aguasin vs. Velasquez, 88 Phil. 357; Lawyers Cooperative Publishing Co. vs. Periquet, 71 Phil. 204; Mercado vs. Macapayag and Pineda, 69 Phil. 403 cited in Alliance Insurance case, 105 Phil. 1201). Note that a different rule also obtains with respect to the surety in the bond of an administrator or executor The nature of a surety's obligation on an administrator's bond, which makes him privy to the proceeding against his principal, is such that he is bound and concluded, in the absence of fraud or collusion, by a judgment against his principal, even though the surety was not a party to the proceedings (Laurente vs. Rizal Surety & Insurance Co., Inc., L- 21250, March 31, 1966, 16 SCRA 551, citing Philippine Trust Co. vs. Luzon Surety Co., Inc., 112 Phil. 44. See Cosme de Mendoza vs. Pacheco and Cordero, 64 Phil. 34). It should be underscored that in the instant case, although the surety's liability was not included in the final judgment, which became executory, nevertheless, there was a timely application for damages in the Court of Appeals which in its decision ordered the trial court to hear defendant-appellee Fernando's claim for damages against the surety. That feature of the case removes it from the coverage of the rule that the surety should be heard before the judgment becomes executory and that his liability should be included in the final judgment. WHEREFORE, we hold that the trial court has jurisdiction to comply with the directive of the Court of Appeals but we reverse and set aside its order of July 14, 1978, requiring petitioner-appellant Malayan Insurance Co., Inc. to pay the damages which it had adjudged against Makati Motor Sales, Inc. The trial court is required to hold a summary hearing wherein appellant surety should be given a chance to contest the reality or reasonableness of respondent-appellee Rosendo Fernando's claim for damages. After such hearing, or if the surety should waive it, the trial court should render the proper judgment. No costs. SO ORDERED.
Philippine Charter Insurance v. CA, 179 S 468 FIRST DIVISION G.R. No. 88379 November 15, 1989 PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, GATES LEARJET CORPORATION and GATES LEARJET EXPORT CORPORATION,respondents. T.J. Sumawang & Associates for petitioner. Quasha, Asperilla, Ancheta, Pea & Nolasco for private respondents.
NARVASA, J.: In December, 1981, Learjet Phil. Inc. commenced suit in the Regional Trial Court at Pasig against Gates Learjet Corporation and Gates Learjet Export Corporation. 1 On said plaintiffs application, and upon the posting of an attachment bond in its behalf by Philippine Charter Insurance Corporation (then known as Phil-Am Assurance Co., Inc.), the Court issued a writ of preliminary attachment directed against the defendants' properties. On the strength of the writ, the sheriff seized a twin engine airplane, a Learjet 35-A- 3799, belonging to the defendants. After due proceedings, judgment was rendered by the Trial Court in plaintiffs' favor, sentencing the defendants to pay US$2,250,000.00 as actual damages, P200,000.00 as moral damages, P100,000.00 as exemplary damages, as well as attorney's fees and costs. On appeal to the Court of Appeals by the defendants, 2 however, this judgment was reversed. The decision of the Appellate Tribunal, promulgated on December 10, 1986, disposed as follows: WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and Civil Case No. 43874 of the Regional Trial Court of Pasig is DISMISSED for lack of merit. For the wrongful attachment of Learjet aircraft 35A-44 owned by defendant-appellant Gates Learjet Corporation, plaintiff- appellee Learjet Philippines, Inc. is hereby ordered to pay to the former by way of actual damages the amount of $73,179- 36, P50,000.00 as exemplary damages, and the costs of the suit. On December 16, 1986 four days after notice of the judgment was served on the defendants, they filed with the Court of Appeals an "Urgent Petition to have Damages Awarded on Account of Illegal Attachment Executed Against Attachment Bond Issued by the T.J. Philippine American Assurance Co., Inc., Now Pan-Philippines General Insurance Corporation." The petition adverted to the attachment bond posted by the surety firm in the amount of P2,000,000.00, and asked that the "damages awarded defendants- appellants by reason of the wrongful attachment be enforced, after proper notice to plaintiff and its bondsman and hearing of ... (the) application, jointly and severally against both the plaintiff and the bonds-man-surety ... ." A copy of the petition was furnished the surety. The plaintiff, in its turn, filed a motion for reconsideration of the decision of December 10, 1986. By Resolution dated March 10, 1987, the Court of Appeals: 3 (1) denied the plaintiffs motion for reconsideration for lack of merit; and (2) NOTED "defendants-appellants' application or claim for damages against the surety" and RESOLVED "to refer the Said claim or application to the trial court and allow the latter to hear and decide the same pursuant to Section 20, Rule 57 of the Rules of Court." The plaintiff tried to have the Appellate Court's decision reviewed and reversed by us, but failed. 4 We denied its petition for review by resolution dated August 10, 1987; and entry of the resolution was made on February 26, 1988. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
465 of 501
On remand of the case to the Trial Court, the defendants filed an "Urgent Petition to Have Damages Awarded on Account of Illegal Attachment Executed Against Attachment Bond Issued by the Surety Philippine American Assurance Co., Inc., now Pan-Philippines General Insurance Corporation" dated December 16, 1986. The Court ordered execution of the judgment "against the plaintiff at Suite 10 Prescon Strata 100 Emerald Avenue, Pasig, Metro Manila" in accordance with the Rules. The writ issued on April 8, 1988. Evidently, the sheriff sought to enforce the writ also against the surety, "Philippine Charter Insurance Corporation ... (formerly Pan-Philippines General Insurance Corporation)." Said surety thereupon filed with the Trial Court an "Urgent Motion to Recall against Nullify Sheriffs Notice of Enforcement of Writ of Execution, and for Issuance of Restraining Order/Writ of Restraining Injunction." It contended that there was in truth no judgment against it "due to the wrongful attachment of ... (the defendants') Learjet Aircraft 35A-44," that since neither Section 20, Rule 57 of the Rules of Court nor the Resolution of the Court of Appeals of March 10, 1987 had been complied with, there existed no award of damages against it under its attachment bond, and enforcement of execution against said bond would be contrary to due process. The Trial Court forthwith restrained enforcement of the writ of execution against the surety and set the surety's motion for hearing in the morning of May 27, 1988. After receiving the parties' arguments, the Court promulgated an Order on June 14, 1988 overruling the movant surety's argument that it (the Court) had lost competence to hear and determine the application or damages against the attachment bond because the judgment of the Court of Appeals had become final and executory. The Court observed that: What is contemplated under Section 20, Rule 57, is that if no application for damages is made before the entry of the final judgment the surety on the bond is relieved from liability therefor. (Visayan Surety and Insurance Corporation v. Pascual [85 Phil. 779], citing Facundo vs. Tan and Facundo vs. Lim). In the case at bar, an application was made before the entry of final judgment ... . What was merely deferred was the hearing of said application before the trial court. In fact, said application was duly noted by the Honorable Court of Appeals in its resolution. Hence, an application for damages was filed in time. Considering the foregoing, and in order to determine the extent of the liability of both principal and surety on the attachment bond, a hearing is necessary. The Court also resolved to issue, upon a bond of Pl,000,000.00, a writ of preliminary injunction restraining the sheriffs from enforcing the writ of execution or otherwise executing the judgment against the surety "until the application for damages on the attachment bond is heard and decided;" and set the hearing on the matter on August 9, 1988. The surety moved for reconsideration, but its motion was denied by Order handed down on October 13, 1988. The surety then went to the Court of Appeals again, where it sought annulment of the Trial Court's Orders of June 14, 1988 and October 13, 1988. Its petition for certiorari, prohibition and preliminary injunction, filed on November 3, 1988, was docketed as CA-G.R. No. SP No. 15987. In it the surety argued that it had been denied its day in court when, without its being present at the trial, the defendants had "adduced evidence in support of ... (the) damages" eventually awarded by the Court of Appeals; that said defendants had "fatally failed to file an application for damages on account of the wrongful attachment," and consequently, the Court had "no more jurisdiction to set for hearing ... (the) urgent petition" (to have damages awarded on account of illegal attachment executed against attachment bond, etc.). The Appellate Court's verdict however again went against the surety. By Decision promulgated on March 8, 1 989, 5 the petition was "DENIED DUE COURSE." According to the Court, (1) the "general prayer" in the petition (to hold surety liable on its bond) dated December 16,1986 "for such further reliefs justified in the premises" was "broad enough to include and embrace an application or claim for whatever damages movants sustained during the pendency of the appeal, by reason of ... "the wrongful attachment ...", (2) such PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
466 of 501
a finding was consistent with "Supreme Court rulings' and the earlier "Resolution of March 10, 1987" noting "defendants-appellants' application or claim for damages against the surety" and referring it "to the, trial court ... pursuant to Section 20, Rule 57 of the Rules of Court;" and (3) "what must have been contemplated ... (in said application or claim for damages) were not the damages awarded in CA-G.R. CV No. 08585, 6 but the damages which applicants or claimants could have suffered during the pendency of said appeal, as a consequence of the wrongful attachment found by final judgment," for otherwise "there would have been no need for this Court to allow and, in effect, direct the trial court a quo 'to hear and decide' subject post-judgment petition in CA-G.R. CV No. 08585." The surety's motion for reconsideration dated March 28, 1989 was denied by Resolution dated May 17, 1989. The surety is once again before us, 7 this time praying for reversal of the Appellate Tribunal's aforesaid judgment of March 8, 1989. Once again it will fail, no merit being discerned in its petition for review on certiorari. By settled rule a writ of preliminary attachment may issue once the Court is satisfied, on consideration ex parte of the application and its supporting affidavits and documents, 8 or after healing, as the court may in its discretion consider proper, that any of the grounds specified by law exists, and an acceptable bond is given by the applicant 9
... executed to the adverse party in an amount ... fixed by the judge, not exceeding the applicant's claim, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto. The filing of the attachment bond by a surety undoubtedly connotes and operates as a voluntary submission by it to the Court's jurisdiction, and of course binds it to faithfully comply with its specific obligations under its bond. The surety does not, to be sure, become liable on its bond simply because judgment is subsequently rendered against the party who obtained the preliminary attachment. The surety becomes liable only when and if "the court shall finally adjudge that the applicant was not entitled to the attachment." This is so regardless of the nature and character of the judgment on the merits of the principal claims, counterclaims or cross-claims, etc. asserted by the parties against each other. Indeed, since an applicant's cause of action may be entirely different from the ground relied upon by him for a preliminary attachment, 10 it may well be that although the evidence warrants judgment in favor of said applicant, the proofs may nevertheless also establish that said applicant's proferred ground for attachment was inexistent or specious and hence, the writ should not have issued at all; i.e., he was not entitled thereto in the first place. In that event, the final verdict should logically award to the applicant the relief sought in his basic pleading, but at the same time sentence him usually on the basis of a counterclaim to pay damages caused to his adversary by the wronful attachment. 11
When the final judgment declares that the party at whose instance an attachment had issued was not entitled thereto, there is no question about the eminent propriety of condemning that party to the payment of all the damages that the wrongful attachment had caused to the party whose property had been seized under the attachment writ. But what of the surety's liability? The surety on an attachment bond, as already pointed out, assures that the applicant "will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto." 12 In other words the surety, by submitting its attachment bond, binds itself solidarily to make the same payments which its principal the party at whose instance the attachment issues may be condemned to make, to compensate for the damages resulting from the wrongful attachment, although unlike its principal, its liability is limited to the amount stated in its bond. The final adjudication "that the applicant was not entitled" to the attachment, standing alone, does not suffice to make the surety liable. It is necessary, in PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
467 of 501
addition, that the surety be accorded due process, i.e., that it be given an opportunity to be heard on the question of its solidarily liability for damages arising from wrongful attachment. This, by established rule and practice, is accorded to the surety at a summary hearing, scheduled after, judgment on presentation of an application to hold it answerable on its bond. Evidently, such a summary hearing is not rendered unnecessary or superfluous by the fact that the matter of damages was among the issues tried during the hearings on the merits, unless of course, the surety had previously been duly impleaded as a party, or otherwise earlier notified and given opportunity to be present and ventilate its side on the matter during the trial. The procedure for the rendition of a binding directive on the surety upon its solidarily liability for damages for wrongful attachment is indicated in Section 20, Rule 5'7 of the Rules of Court. The section reads as follows: Sec. 20. Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party against whom attachment was issued, he may recover upon the bond given or deposit made by the attaching creditor,, any damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages sustained during the pendency of the appeal by filing an application with notice to the party in whose favor the attachment was issued or his surety or sureties. before the judgment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court. Certain principles are derived from this provision of the Rules. A party against whom a writ of preliminary attachment issues may impugn the writ by alleging and proving inter alia that the applicant was not entitled thereto, i.e., that the asserted ground for attachment was inexistent, or the amount for which the writ was sought was excessive, etc., this, by appropriate motion. He may also claim damages on account of the wrongful attachment through an appropriate pleading, such as a counterclaim, or other form of application. What is important is that the "application must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof." In the case at bar, since the Trial Court's decision had gone against the defendants, and no irregularity had been adjudged as regards the preliminary attachment, the latter obviously had no occasion to apply for damages from wrongful attachment although they could have so applied therefor because, as already pointed out, it is entirely possible under the law that an applicant for preliminary attachment be adjudged entitled to relief on his basic claimand at the same time pronounced as not entitled to the attachment. As things turned out, the Trial Court's judgment was reversed by the Court of Appeals; the latter dismissed the complaint, declared the plaintiff not entitled to the attachment and sentenced it to pay to the defendants damages on account thereof And it was only at this time that the defendants could have presented and did actually present their petition to enforce the surety's liability on its bond. This petition, as aforestated, the Court of Appeals (a) noted and (b) referred to the Trial Court with instructions "to hear and decide ... pursuant to Section 20, Rule 57 of the Rules of Court." Under the circumstances, and in the light of the explicit provisions of said Section 20, Rule 57, there can be no debate about the seasonablenes of the defendants' application for damages and the correctness of the referral by the Court of Appeals of the application for damages to the Trial Court for hearing and determination. Under the circumstances, too, there can be no gainsaying the surety's full awareness of its undertakings under its bond: that, as the law puts it: "the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
468 of 501
plaintiff will pay all costs which may be adjudged to the defendant(s), and all damages which may be sustained by reason of the attachment, if the same shall finally be adjudged to have been wrongful and without cause," and that those damages plainly comprehended not only those sustained during the trial of the action but also those during the pendency of the appeal. This is the law, 13 and this is how the surety's liability should be understood. The surety's liability may be enforced whether the application for damages for wrongful attachment be submitted in the original proceedings before the Trial Court, or on appeal, so long as the judgment has not become executory. The surety's liability is not and cannot be limited to the damages caused by the improper attachment only during the pendency of the appeal. That would be absurb. The plain and patent intendment of the law is that the surety shall answer for all damages that the party may suffer as a result of the illicit attachment, for all the time that the attachment was in force; from levy to dissolution. The fact that the attachment was initially (and erroneously) deemed correct by the Trial Court, and it was only on appeal that it was pronounced improper, cannot restrict recovery on the bond only to such damages as might have been sustained during the appeal. The declaration by the appellate court that the applicant for attachment "was not entitled thereto," signifies that the attachment should not have issued in the first place, that somehow the Trial Court had been misled into issuing the writ although no proper ground existed therefor. The logical and inevitable conclusion is that the applicant for attachment and the surety on the attachment bond are solidarily liable for all the damages suffered by the party against whom the writ is enforced, except only that the surety's liability is limited to the amount set forth in its bond. The fact that the second paragraph of the rule speaks only of "damages sustained during the pendency of the appeal" is of no moment; it obviously proceeds from the assumption in the first paragraph that the award for the damages suffered during the pendency of the case in the trial court was in fact "included in the final judgment" (or applied for therein before the appeal was perfected or the judgment became executory); hence, it states that the damages additionally suffered thereafter, i.e., during the pendency of the appeal, should be claimed before the judgment of the appellate tribunal becomes executory. It however bears repeating that where, as in the case at bar, the judgment of the Trial Court has expressly or impliedly sustained the attachment and thus has given rise to no occasion to speak of, much less, file an application for damages for wrongful attachment, and it is only in the decision of the Court of Appeals that the attachment is declared wrongful and that the applicant "was not entitled thereto," the rule is, as it should be, that it is entirely proper at this time for the application for damages for such wrongful attachment to be filed i.e., for all the damages sustained thereby, during all the time that it was in force, not only during the pendency of the appeal. And the application must be filed "with notice to the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory." In such a situation, the appellate court may resolve the application itself or allow it "to be heard and decided by the trial court." WHEREFORE, the petition is DISMISSED for lack of merit, the costs against the petitioner. SO ORDERED.
Zaragoza v. Fidelino, 163 S 443 (See under Section 17 page 402) Zenith Insurance v. CA, 119 S 485 FIRST DIVISION
G.R. No. 85296 May 14, 1990 ZENITH INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS and LAWRENCE FERNANDEZ, respondents. Vicente R. Layawen for petitioner. Lawrence L. Fernandez & Associates for private respondent.
MEDIALDEA, J.: Assailed in this petition is the decision of the Court of Appeals in CA-G.R. C.V. No. 13498 entitled, "Lawrence L. Fernandez, plaintiff-appellee v. Zenith Insurance Corp., defendant-appellant" which affirmed in toto the decision of the Regional Trial Court of Cebu, Branch XX in Civil Case No. CEB-1215 and the denial of petitioner's Motion for Reconsideration. The antecedent facts are as follows: On January 25, 1983, private respondent Lawrence Fernandez insured his car for "own damage" under private car Policy No. 50459 with petitioner Zenith Insurance Corporation. On July 6, 1983, the car figured in an accident and suffered actual damages in the amount of P3,640.00. After allegedly being given a run around by Zenith for two (2) months, Fernandez filed a complaint with the Regional Trial Court of Cebu for sum of money and damages resulting from the refusal of Zenith to pay the amount claimed. The complaint was docketed as Civil Case No. CEB-1215. Aside from actual damages and interests, Fernandez also prayed for moral damages in the amount of P10,000.00, exemplary damages of P5,000.00, attorney's fees of P3,000.00 and litigation expenses of P3,000.00. On September 28, 1983, Zenith filed an answer alleging that it offered to pay the claim of Fernandez pursuant to the terms and conditions of the contract which, the private respondent rejected. After the issues had been joined, the pre-trial was scheduled on October 17, 1983 but the same was moved to November 4, 1983 upon petitioner's motion, allegedly to explore ways to settle the case although at an amount lower than private respondent's claim. On November 14, 1983, the trial court terminated the pre-trial. Subsequently, Fernandez presented his evidence. Petitioner Zenith, however, failed to present its evidence in view of its failure to appear in court, without justifiable reason, on the day scheduled for the purpose. The trial court issued an order on August 23, 1984 submitting the case for decision without Zenith's evidence (pp. 10-11, Rollo). Petitioner filed a petition for certiorari with the Court of Appeals assailing the order of the trial court submitting the case for decision without petitioner's evidence. The petition was docketed as C.A.-G.R. No. 04644. However, the petition was denied due course on April 29, 1986 (p. 56, Rollo). On June 4, 1986, a decision was rendered by the trial court in favor of private respondent Fernandez. The dispositive portion of the trial court's decision provides: WHEREFORE, defendant is hereby ordered to pay to the plaintiff: 1. The amount of P3,640.00 representing the damage incurred plus interest at the rate of twice the prevailing interest rates; 2. The amount of P20,000.00 by way of moral damages; PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
470 of 501
3. The amount of P20,000.00 by way of exemplary damages; 4. The amount of P5,000.00 as attorney's fees; 5. The amount of P3,000.00 as litigation expenses; and 6. Costs. (p. 9, Rollo) Upon motion of Fernandez and before the expiration of the period to appeal, the trial court, on June 20, 1986, ordered the execution of the decision pending appeal. The order was assailed by petitioner in a petition forcertiorari with the Court of Appeals on October 23, 1986 in C.A. G.R. No. 10420 but which petition was also dismissed on December 24, 1986 (p. 69, Rollo). On June 10, 1986, petitioner filed a notice of appeal before the trial court. The notice of appeal was granted in the same order granting private respondent's motion for execution pending appeal. The appeal to respondent court assigned the following errors: I. The lower court erred in denying defendant appellant to adduce evidence in its behalf. II. The lower court erred in ordering Zenith Insurance Corporation to pay the amount of P3,640.00 in its decision. III. The lower court erred in awarding moral damages, attorneys fees and exemplary damages, the worst is that, the court awarded damages more than what are prayed for in the complaint. (p. 12,Rollo) On August 17, 1988, the Court of Appeals rendered its decision affirming in toto the decision of the trial court. It also ruled that the matter of the trial court's denial of Fernandez's right to adduce evidence is a closed matter in view of its (CA) ruling in AC-G.R. 04644 wherein Zenith's petition questioning the trial court's order submitting the case for decision without Zenith's evidence, was dismissed. The Motion for Reconsideration of the decision of the Court of Appeals dated August 17, 1988 was denied on September 29, 1988, for lack of merit. Hence, the instant petition was filed by Zenith on October 18, 1988 on the allegation that respondent Court of Appeals' decision and resolution ran counter to applicable decisions of this Court and that they were rendered without or in excess of jurisdiction. The issues raised by petitioners in this petition are: a) The legal basis of respondent Court of Appeals in awarding moral damages, exemplary damages and attomey's fees in an amount more than that prayed for in the complaint. b) The award of actual damages of P3,460.00 instead of only P1,927.50 which was arrived at after deducting P250.00 and P274.00 as deductible franchise and 20% depreciation on parts as agreed upon in the contract of insurance. Petitioner contends that while the complaint of private respondent prayed for P10,000.00 moral damages, the lower court awarded twice the amount, or P20,000.00 without factual or legal basis; while private respondent prayed for P5,000.00 exemplary damages, the trial court awarded P20,000.00; and while private respondent prayed for P3,000.00 attorney's fees, the trial court awarded P5,000.00. The propriety of the award of moral damages, exemplary damages and attorney's fees is the main issue raised herein by petitioner. The award of damages in case of unreasonable delay in the payment of insurance claims is governed by the Philippine Insurance Code, which provides: Sec. 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
471 of 501
pay damages which shall consist of attomey's fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured, from the date following the time prescribed in section two hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment. It is clear that under the Insurance Code, in case of unreasonable delay in the payment of the proceeds of an insurance policy, the damages that may be awarded are: 1) attorney's fees; 2) other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment; 3) interest at twice the ceiling prescribed by the Monetary Board of the amount of the claim due the injured; and 4) the amount of the claim. As regards the award of moral and exemplary damages, the rules under the Civil Code of the Philippines shall govern. "The purpose of moral damages is essentially indemnity or reparation, not punishment or correction. Moral damages are emphatically not intended to enrich a complainant at the expense of a defendant, they are awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he has undergone by reason of the defendant's culpable action." (J. Cezar S. Sangco, Philippine Law on Torts and Damages, Revised Edition, p. 539) (See also R and B Surety & Insurance Co., Inc. v. IAC, G.R. No. 64515, June 22, 1984; 129 SCRA 745). While it is true that no proof of pecuniary loss is necessary in order that moral damages may be adjudicated, the assessment of which is left to the discretion of the court according to the circumstances of each case (Art. 2216, New Civil Code), it is equally true that in awarding moral damages in case of breach of contract, there must be a showing that the breach was wanton and deliberately injurious or the one responsible acted fraudently or in bad faith (Perez v. Court of Appeals, G.R. No. L-20238, January 30,1965; 13 SCRA 137; Solis v. Salvador, G.R. No. L-17022, August 14, 1965; 14 SCRA 887). In the instant case, there was a finding that private respondent was given a "run-around" for two months, which is the basis for the award of the damages granted under the Insurance Code for unreasonable delay in the payment of the claim. However, the act of petitioner of delaying payment for two months cannot be considered as so wanton or malevolent to justify an award of P20,000.00 as moral damages, taking into consideration also the fact that the actual damage on the car was only P3,460. In the pre-trial of the case, it was shown that there was no total disclaimer by respondent. The reason for petitioner's failure to indemnify private respondent within the two-month period was that the parties could not come to an agreement as regards the amount of the actual damage on the car. The amount of P10,000.00 prayed for by private respondent as moral damages is equitable. On the other hand, exemplary or corrective damages are imposed by way of example or correction for the public good (Art. 2229, New Civil Code of the Philippines). In the case of Noda v. Cruz-Arnaldo, G.R. No. 57322, June 22,1987; 151 SCRA 227, exemplary damages were not awarded as the insurance company had not acted in wanton, oppressive or malevolent manner. The same is true in the case at bar. The amount of P5,000.00 awarded as attomey's fees is justified under the circumstances of this case considering that there were other petitions filed and defended by private respondent in connection with this case. As regards the actual damages incurred by private respondent, the amount of P3,640.00 had been established before the trial court and affirmed by the appellate court. Respondent appellate court correctly ruled that the deductions of P250.00 and P274.00 as deductible franchise and 20% depreciation on parts, respectively claimed by petitioners as agreed upon in the contract, had no basis. Respondent court ruled: Under its second assigned error, defendant-appellant puts forward two arguments, both of which are entirely without merit. It is contented that the amount recoverable under the PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
472 of 501
insurance policy defendant-appellant issued over the car of plaintiff-appellee is subject to deductible franchise, and . . . . The policy (Exhibit G, pp. 4-9, Record), does not mntion any deductible franchise, . . . (p. 13, Rollo) Therefore, the award of moral damages is reduced to P10,000.00 and the award of exemplary damages is hereby deleted. The awards due to private respondent Fernandez are as follows: 1) P3,640.00 as actual claim plus interest of twice the ceiling prescribed by the Monetary Board computed from the time of submission of proof of loss; 2) P10,000.00 as moral damages; 3) P5,000.00 as attorney's fees; 4) P3,000.00 as litigation expenses; and 5) Costs. ACCORDINGLY, the appealed decision is MODIFIED as above stated. SO ORDERED.
Lazatin v. Twano, 2 S 842 EN BANC G.R. No. L-12736 July 31, 1961 FRANCISCO L. LAZATIN, plaintiff-appellant, vs. ANGEL C. TWAO and GREGORIO T. CASTRO, defendants-appellees. Leonardo Abola for plaintiff-appellant. Manuel O. Chan for defendants-appellees. PAREDES, J.: The case at bar had its genesis in Civil Case No. 213, CFI, Manila, entitled "Angel C. Twao and Gregorio T. Castro, plaintiffs, versus F. L. Lazatin, et al., defendants, Dionisio P. Tanglao, Intervenor," for the recovery of P35,000.00, plus interest, realized in connection with the purchase by them (plaintiffs and defendants) from the U.S. government, and the subsequent sale, of some 225 auto-trucks. After trial, the CFI of Manila dismissed the complaint as well as the intervention. The order of dismissal was taken to the Court of Appeals (CA-G.R. No. 4533-R), which, on November 3, 1950, rendered judgment reversing the said order and declaring that plaintiffs and defendants were co- owners in the business of buying and selling surplus auto-trucks, and ordered the defendants (one of them Lazatin) to pay to the plaintiff s therein, the sum of P10,000.00, with legal interest from the filing of the complaint. The said decision became final; it was executed, with the levy of the properties of defendant Lazatin and their subsequent sale at public auction, wherein the plaintiffs Twao and Castro were the purchasers. Before the expiration of the redemption period, on August 2, 1952, defendant Lazatin, deposited with the Sheriff of Pampanga the sum of P13,849.88, redemption price. On August 9, 1952, the same Francisco Lazatin, filed the present action, to recover from the same Twao and Castro the sum of P19,676.09, supposedly a balance of the proceeds of auto-trucks, sold directly to purchasers by said defendants. On the same date, plaintiff Lazatin, alleging that "there is no security whatsoever for the payment of the amount claimed in the complaint and that the defendant defendants are removing or are about to remove or dispose of their property with intent to defraud their creditors, particularly the plaintiff," secured a writ of attachment on the amount he deposited, and pursuant thereto, the Sheriff of Pampanga refused to deliver the sum of P13,849.88, which should have been paid to the herein defendants. On August 12, 1952, the herein defendants filed an Urgent Motion to Dissolve the Writ of Preliminary Attachment on the following grounds: 1. That the plaintiff has no cause of action because (a) the right of action, if any, has prescribed, and (b) the cause of action is barred by a prior judgment; and 2. That the allegations in the petition for the issuance of the writ and in the affidavit in support thereof are false. On September 10, 1952, the lower court, after due hearing, dissolved the writ. Subsequently, the defendants filed their answer and after the customary admissions and denials, interposed as special defenses, the same grounds averred in the motion to lift the writ and counterclaimed: 1. That the plaintiff herein has filed a clearly unfounded civil action against the herein defendants as a result of which the latter had suffered actual or compensatory damages by way of attorney's fees in the sum of P3,000.00 2. That as a result of the wrongful attachment and the false statements made by the plaintiffs, under oath, in support of his Ex-Parte Petition for the Writ, the herein defendants have suffered moral damages to the amount of P10,000.00 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
474 of 501
3. That the wrongful attachment against the properties and the sum of P13,849.88 had caused actual damages to the herein defendants, represented by the legal interest on such amount. On May 9, 1953, plaintiff Lazatin died and on March 10, 1954, Gil Gotiangco was appointed and qualified as administrator of plaintiff's estate. On the date set for hearing, the defendants herein were granted, a preliminary hearing on their special defenses (Sec. 5, Rule 8). The lower court on November 12, 1954, entered an order, dismissing the complaint on the ground that it was barred by a prior judgment and by the statute of limitations. At the same time, the Court set the case for hearing on defendants' counterclaim. On October 28, 1955, the trial court rendered judgment, ordering the estate of Lazatin to pay the defendants therein the following sums: (1) P3,000.00 for the fees of Attorney Manuel O. Chan; (2) P,500.00 for moral damages to each of the defendants; (3) Six percent (6%) interest on the amount of P13,849.88 from August 6, 1952 until said amount is actually delivered to and receipted by the defendants; and (4) To pay the costs. Judgment is also rendered against the Central Surety and Insurance Co., which is solidarily liable with the Estate of the deceased plaintiff Francisco L. Lazatin on its bond for the sum of P20,000.00, filed by said Company for the issuance on the writ of attachment for the amounts mentioned in Nos. (2) and (3) of the dispositive part of this decision. Upon appellant's request, the appeal was certified by the Court of Appeals to this Court, as the issues involved therein are purely legal in character. The law on damages is found on Title XVII of the Civil Code (Arts. 2195 to 2235). The rules governing damages laid down in other laws, and the principles of the general law on damages are adopted in so far as they are not in consistent with the Code (Arts. 2196 and 2198). Article 2197 mentions the kind of damages recoverable, among which are (1) actual or compensatory and (2) moral Article 2219 provides that moral damages may be recovered in the following and analogous cases . . . (3) malicious prosecution. There is an abundance of case holding that the action to recover damages from the attachment plaintiff, for the wrongful issuance and levy of an attachment (malicious attachment) is identical or is analogous to the ordinary action for malicious prosecution (Eastern v. Bank of Stockton, 66 Cal. 123, 56 Am. Rep. 77, 4 Pac. 1106; Robinson v. Kellum 6 Cal. 399; Grant v. Moore, 29 Cal. 644; King v. Montgomery 50 Cal. 115; Gonzales v. Cobliner 68 Cal 151, 8 Pac. 697; Asevado v. Orr 100 Cal. 293, 34 Pac. 777). It may logically be inferred, therefore, that in order hat moral damages may be recovered in connection with he writ of attachment under consideration, malice is an essential ingredient thereof. In Songco v. Sellner, 37 Phil. 154, where the evidence showed that defendant offered damages to his credit, as a result of writ of attachment wrongfully issued, the Court declared that such damages were remote and speculative and that there was no 'ending that the attachment was maliciously sued out. In Aboitiz v. Da Silva, 45 Phil. 883, the Court refused to grant damages for loss of reputation by reason of an improper attachment, on the ground that there was no evidence from which malice on the part of the plaintiff or loss of credit to the defendant, may be inferred or presumed. In Masterson v. Smith Navigation, 60 Phil. 366 ' damages to good name, allegedly suffered by the defendant as a result f a writ of attachment wrongfully issued, were disallowed in the ground that such damages were very problematical. In American jurisdictions where the principles of the general laws on damages in common law (adopted by Art. 198 of the new Civil Code), are in force, only actual or compensatory damages are recoverable for wrongful but not malicious attachment. An allowance may be made r injury to feeling if the attachment was sued out maliciously and without probable cause; but in the absence of his element there can be no recovery (6 C.J. 533- 534; 541). "The authorities are quite uniform in holding that, in the absence of malice, injuries to credit, reputation and business are too remote and speculative to be recovered" (Union Nat. Bank v. Cross, 100 Wis. 174, 75 NW 992). There is no PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
475 of 501
issue of malice, damages must be compensatory merely, and confined to the actual loss from deprivation of the property attached or injury to it, or in case of closing business, to the probable profits of the business, during the time of its stoppage (Holiday Bros. Cohen 34 Ark. 707). All of which go to show that the attachment defendant is not entitled to moral damages, unless it is alleged and established that the writ was maliciously sued out. This notwithstanding the defendants-appellees invoke the following rule, in support of their thesis. SEC. 4. Bond required from plaintiff. The party applying for the order must give a bond executed to the defendant in amount to be fixed by the judge, not exceeding the plaintiff claim that the plaintiff will pay all the costs which it 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. (Rule 59, R.C.) They claim that under the above section, malice and want of probable cause are not essential (II Moran's Rules of Court , 2nd Ed. pp. 19-20); that the language used therein is clear and its intent and purpose are obvious; its provision cannot be given a broader scope than what it imports; and the element of malice cannot be implied from the terms thereof. It is finally argued that as the attachment-plaintiff, according to the rule, should pay "all the damages" which the attachment defendant might sustain by reason of the attachment, if the court shall finally adjudge that the plaintiff was not entitled thereto, the ruling of the trial court that the appellant should pay the appellees moral damages, is correct. We do not share this view. It should be observed that Sec. 4 of Rule 59, does not prescribe the remedies available to the attachment defendant in case of a wrongful attachment, but merely provides an action for recovery upon the bond, based on the undertaking therein made and not upon the ability arising from a tortious act, like the malicious suing of an attachment. Under the first, where malice is not essential, the attachment defendant, is entitled to recover only the actual damages sustained by him by reason of the attachment. Under the second, where the attachment is maliciously sued out, the damages recoverable may include a compensation for every injury to his credit, business or feelings (Tyler v. Mahoney 168 NC 237, 84 SE 362; Pittsburg etc. C 73, 47 SE 234). And considering the fact that the rules of court are of older vintage than the new Civil Code, the matter of damages in the said rules should be encompassed within the framework Of the Civil Code (Art. 2196 Civil Code). It is quite true that said section 4 employs the expression "all damages", but this should be understood to refer to the damages resulting from the undertaking itself, the recovery of which is subject to "the principles of the general law on damages", earlier discussed. (Art. 2198, Civil Code, supra). A cursory perusal of the decision would show that the trial court did not make any express ruling that the writ of attachment was maliciously sued out by the plaintiff or any finding of facts or circumstances from which it may be necessarily inferred that the attachment was thus obtained. The decision does not make any finding that the defendants-appellees did in fact suffer mental anguish or injury to their credit or reputation. The decision simply states: "Coming now to the moral damages which defendants have suffered consisting of mental anguish, serious anxiety and besmirched reputation, it is believed that sing businessmen of good commercial standing and reputation, each of them should be awarded at least P2,500.00." Moreover the dissolution of the writ was due to a technicality No moral damages can be inferred from the mere act that the redemption price to which defendants were entitled, had been retained by the provincial sheriff for a period of 38 days. The trial court held that the present action was already investigated and adjudged in CA-G.R. To 4533-R and the right of action was barred by the state of limitations, and that since the writ of attachment was only a remedy adjunct to the main suit, plaintiff-appellant was not entitled to the writ. While the lower court declared that the defendants-appellees had an outstanding balance of P171,947.80, in the bank and that they were not disposing their property in fraud of creditors or of the plaintiff, as alleged in the petition for the issuance of the writ still the said court did not make any finding that the said petition was maliciously sued out. We are, therefore, the opinion that the defendants-appellants are not entitled to moral damages. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be covered, except: . . . PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
476 of 501
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff. x x x x x x x x x (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered." (Art. 2208, Civil Code). Defendants' counterclaim for the recovery of attorney's fees is based on paragraph 4 of the cited provision, for legal services rendered in defending the main suit. There is no showing in the decision appealed from that plaintiffs' action is "clearly unfounded". Plaintiffs-appellants' complaint was not dismissed because the facts alleged therein were found untrue, but on purely technical grounds; the special defenses of prescription of the action andres adjudicata. While it may be hard to believe that the plaintiff had labored under the impression that the matters involved in his complaint had not been adjudicated in the previous litigation between the same parties (Civil Case No. 213 CFI Manila), because plaintiff himself was a lawyer such error of judgment on his part would not justify the inference that the action was "clearly unfounded". As aptly observed by appellants' counsel, defenses as the one interposed by appellee in their counterclaim "raise questions of law not always of obvious and easy solution." While it may appear also that the move was a scheme to prevent the defendants-appellees from reaping the benefits of the final judgment rendered in their favor in said case CA- G.R. No. 5433-R, still one cannot nullify, without cause, the good and honest motive, which should be presumed, when a litigant goes to court for the determination of his alleged right. Withal, and considering the fact that defendants-appellant lees were drawn into this litigation by plaintiff-appellant and were compelled to hire an attorney to protect and defend them, and taking into account the work done by said attorney, as reflected in the record, throughout the proceedings, we deem it just and equitable to award at attorney's fees for defendants-appellees. The sum of P3,000.00 adjudicated by the trial court, is reasonable under the circumstances (par. 11 Art. 2208, Civil Code). It appears that plaintiffs-appellants have abandoned their appeal with respect to the payment of 6% interest in the amount of P13,849.88. Modified, with the elimination of moral damages, the decision appealed from is affirmed in all other respects. Costs against plaintiff-appellant. Bengzon, C.J., Padilla, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon, De Leon and Natividad, JJ., concur. Bautista Angelo, J., is on leave.
MC Engineering v. CA, 380 S 116 THIRD DIVISION G.R. No. 104047 April 3, 2002 MC ENGINEERING, INC., petitioner, vs. THE COURT OF APPEALS, GERENT BUILDERS, INC. and STRONGHOLD INSURANCE CO., INC., respondents. CARPIO, J.: The Case This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking the reversal of the decision of the Court of Appeals dated November 14, 1991 1 and its resolution dated February 5, 1992. 2 The Court of Appeals reversed the decision dated July 15, 1989 of the Regional Trial Court, Branch 85, 3 Quezon City, in Civil Case No. Q-44392 dismissing the Complaint for Sum of Money With Preliminary Attachment and Damages filed by respondent Gerent Builders, Inc. ("respondent Gerent" for brevity) against petitioner MC Engineering, Inc., ("petitioner" for brevity). The trial court ordered respondents Gerent and Stronghold Surety and Insurance Company ("respondent Surety" for brevity) to pay petitioner, jointly and severally, damages and attorneys fees. The Facts The undisputed facts in this case as found by the trial court and quoted by the Court of Appeals in its assailed decision are as follows: "x x x On October 29, 1984, Mc Engineering, Inc. and Surigao Coconut Development Corporation (Sucodeco, for short) signed a contract (Exh. B, also Exh. 5), for the restoration of the latters building, land improvement, electrical, and mechanical equipment located at Lipata, Surigao City, which was damaged by typhoon Nitang. The agreed consideration was P5,150,000.00 ** of which P2,500,000.00 *** was for the restoration of the damaged buildings and land improvement, while the P3,000,000.00 was for the restoration of the electrical and mechanical works. The next day, on October 30, 1984 defendant Mc Engineering and plaintiff Gerent Builders, Inc. entered into an agreement wherein defendant subcontracted to plaintiff the restoration of the buildings and land improvement phase of its contract with Sucodeco but defendant retained for itself the restoration of the electrical and mechanical works. The subcontracted work covered the restoration of the buildings and improvement for P1,665,000.00 (Exh. C, also Exh. 6). Two (2) months later, on December 3, 1984, Sucodeco and defendant Mc Engineering entered into an agreement amending provision No. VII, par 1 of their contract dated October 29, 1984, by increasing the price of the civil works from P2,250,000.00 to P3,104,851.51, or an increase of P854,851.51, with the express proviso that except for the amendment above specified, all the other provisions of the original contract shall remain the same (Exh. L). The civil work aspect consisting of the building restoration and land improvement from which plaintiff would get P1,665,000.00 was completed (TSN., p. 14, July 30, 1986) and the corresponding certificate of acceptance was executed (Exh. F), but the electrical works were cancelled (Tsn., p. 8, July 30, 1986; Tsn., p. 19, Feb. 11, 1987). On January 2, 1985, plaintiff received from defendant the amount of P1,339,720.00 **** as full payment of the sub-contract price, after deducting earlier payments made by defendant to plaintiff, as evidenced by the affidavit executed by plaintiffs president, Mr. Narciso C. Roque (Exh. 1), wherein the latter acknowledged complete satisfaction for such payment on the basis of the Statement of Account (Exh. 2, 2-a & 2-b) which plaintiff had earlier forwarded to defendant. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
478 of 501
Nevertheless, plaintiff is still claiming from defendant the sum of P632,590.13 as its share in the adjusted contract cost in the amount of P854,851.51, alleging that the sub-contract is subject to the readjustment provided for in Section VII of the agreement, and also the sum of P166,252.00 in payment for additional electrical and civil works outside the scope of the sub-contract." 4
Petitioner refused to pay respondent Gerent. Thus, on March 21, 1985, respondent Gerent filed the complaint against petitioner. On March 28, 1985, the trial court issued the corresponding writ of preliminary attachment upon the filing by respondent Gerent of a P632,590.13 bond issued by respondent Surety. 5 On April 24, 1985, petitioner moved to quash the writ on the ground that it was improperly issued. The trial court denied the motion. Petitioner assailed the denial in a petition for certiorari 6 filed with the Court of Appeals. In a resolution dated October 17, 1986, the Court of Appeals 7 rendered a decision granting the petition, as follows: "Wherefore, finding merit to the petition, the writ of attachment dated March 28, 1985, and the order dated August 14, 1985, denying the motion to quash writ of attachment should be as it is hereby declared null and void, and the execution made by respondent Deputy Sheriff Cristobal C. Florendo, under the writ of attachment issued should be as it is hereby nullified. The respondent Sheriff is hereby directed to restore ownership of the properties heretofore seized and attached to petitioner. No pronouncement as to costs." 8
On July 13, 1987, the trial court ordered the return of petitioners properties that deputy sheriff Cristobal C. Florendo attached and seized. The sheriff reported to the court that he never seized a single property of petitioner but merely conducted a "paper levy". On January 5, 1988, petitioner filed an application against the attachment bond to recover damages it suffered due to the wrongful issuance of the writ of attachment. Respondent Surety opposed the application. In its Answer, petitioner vigorously denied respondent Gerents causes of action. Petitioner counterclaimed for damages and attorneys fees due to the improper issuance of the writ of attachment. On July 15, 1989, after trial on the merits, the trial court rendered its decision, the dispositive portion of which reads: "WHEREFORE, judgment is hereby rendered against the plaintiff and in favor of the defendant, as follows: 1. Dismissing the instant case; 2. Ordering the plaintiff and Stronghold Surety And Insurance Company to pay defendant M.C. Engineering, Inc., jointly and severally, the sum of P70,000.00 as moral damages; P30,000.00 as exemplary damages; and P50,000.00 as attorneys fees, plus costs. SO ORDERED." 9
From the foregoing decision, respondents filed separate notices of appeal on September 5, 1989 and November 2, 1989, respectively. 10
The Court of Appeals rendered the assailed Decision on November 14, 1991. 11 On February 5, 1992, the Court of Appeals denied petitioners motion for reconsideration. 12
The Ruling of the Court of Appeals The Court of Appeals ruled respondent Gerents claim meritorious, declaring that Gerent is entitled to share 74% of the price increase in the civil works portion of the main contract. First, the Court of Appeals found that the price increase arose from a second detailed estimate of the costs of civil works allegedly submitted by respondent Gerent to petitioner. Thus, the Court of Appeals stated: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
479 of 501
"xxx. To obtain an adjustment in the contract price, it appears that plaintiff-appellant, as sub-contractor, submitted a second detailed estimate of the costs of civil works (Exh. D) to appellee which, after marking up the figures therein to reflect its share, attached the same to its letter of proposal for an increase in the contract price eventually submitted to SUCODECO. On the basis of the estimates, the latter agreed to increase the cost for the full restoration of its typhoon damaged buildings and land improvement (civil works) from P2,250,000.00 to P3,104,851.51 (Exh. L). Payment of this adjustment was made by SUCODECO on December 27, 1984 (Exh. N). It is from this increase of P854,851.51 that plaintiff-appellant sought to recover its share from the appellee." 13
"Appellee denies the submission of the second detailed estimates by plaintiff-appellant. It must be observed, however, that appellee is an electro-mechanical engineering firm which becomes an accredited civil contractor only for as long as it has civil engineers to do the civil works. Thus, in the SUCODECO project, appellee hired plaintiff- appellant, an undisputed civil contractor, to furnish civil engineering services. Taking into account the technical expertise required to draw up such a detailed estimate of civil works as Exh. D and the absence of proof that other civil contractors apart from plaintiff-appellant was ever engaged by appellee, it is undoubtedly plausible that plaintiff- appellant made the estimates which appellee submitted to SUCODECO, with the corresponding adjustments in the costs." 14
Second, the Court of Appeals noted that the price increase preceded the cancellation of petitioners electrical and mechanical works portion of the main contract. Petitioners president, Mario Cruel, testified that on December 3, 1984, Sucodeco approved the price increase for the civil works portion of the main contract. A week later, or on December 14, 1984, Sucodeco wrote to petitioner canceling the electrical and mechanical works portion of the main contract. 15 The Court of Appeals thus reasoned: "From the foregoing, it is apparent that the adjustment in the price of civil works preceded the cancellation of the electro-mechanical works. If it is indeed true that the adjustment was for the sole benefit of appellee for its preparatory expenses and lost profits, the increase would have been effected simultaneously with or after the cancellation of the electrical and mechanical works. The fact that the amendment in the contract was made before the cancellation could only mean that SUCODECO agreed to increase the cost of the civil works not to compensate appellee for the then still subsisting original agreement but as a result of the higher estimates submitted by the contractor and subcontractor on the expenses for the civil works." 16
Third, the Court of Appeals did not consider the absence of an itemized listing of material and labor costs relevant to respondent Gerents right to a share in the price increase. The Court of Appeals ruled that it is Sucodeco, the project owner, and not petitioner who can question the true value of the material and labor costs. Since Sucodeco did not raise any question, it must have agreed to the price increase even without the submission of the true value. Consequently, the Court of Appeals held that it was petitioners obligation to pay respondent Gerent its share of the price increase in accordance with the subcontract. 17
Fourth, the Court of Appeals found no evidence that petitioner spent substantial amounts on the electrical and mechanical portion of the main contract to justify petitioners claim to the entire price increase. The Court of Appeals rejected petitioners claim that the price increase was intended to compensate petitioner for the losses it suffered due to the cancellation of the electrical and mechanical portion of the main contract. The Court of Appeals stated that: "It is important to note that despite appellees posturing that it incurred expenses prior to the cancellation of its contract, thus entitling it to the whole adjustment price, the records are bereft of proof showing substantial amounts expended by appellee. To justify PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
480 of 501
its entitlement to the whole amount, it could have presented receipts reflecting purchases of materials, drawing plans of engineering designs, detailed estimates of electrical and mechanical works and testimonies of engineers allegedly mobilized to start the planning. As it is, the most that appellee could produce were three (3) purchase invoices totaling P110,000.00. xxx." 18
Fifth, the Court of Appeals found the quitclaim executed by respondent Gerent on January 2, 1985 vitiated with fraud since petitioner intentionally withheld from Gerent the information that on December 3, 1984 Sucodeco had already agreed to the price increase. The Court of Appeals ruled: "xxx. The mere fact that an affidavit or quitclaim was executed by Mr. Roque on behalf of his company does not preclude or estop plaintiff- appellant from recovering its just share for it appears that appellee intentionally withheld from Mr. Roque a vital information. Had he known, it is highly unlikely that he will sign the quitclaim. We are more apt to believe Mr. Roques protestations that he did not know about the adjustment. His testimony is straightforward, consistent and unwavering. Moreover, a prudent man engaged in the business of construction for decades and whose interests are amply protected by a written instrument will not be easily convinced to acquiesce to have appellee get P1.4M of the whole contractual price. Appellee apparently led Mr. Roque to believe that no adjustment was made to hide its big share in the contract. Considering the fraud employed against plaintiff-appellant, the quitclaim is not binding at all." 19
Thus, in the dispositive portion of the assailed decision the Court of Appeals decreed: "WHEREFORE, premises considered, judgment is hereby rendered setting aside the appealed decision of the lower court, and in lieu thereof defendant-appellee is ordered to pay plaintiff-appellant the sum of P632,590.13 representing the increased contract price in the sub-contract agreement, with the civil works by SUCODECO, and attorneys fees equivalent to 25% of P632,590.13. Plaintiff-appellant and the surety-appellant are hereby adjudged to solidarily pay appellee the sum of P5,000.00 as attorneys fees, in connection with the wrongful obtention of the writ of attachment. With costs against defendant-appellee. SO ORDERED." Hence, this petition. The Issues In its Memorandum, petitioner raises the following issues: 1. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AND GROSSLY ERRED IN HOLDING THAT RESPONDENT GERENT IS ENTITLED TO P632,590.13 OR 74% OF THE PRICE INCREASE IN THE CIVIL WORKS PORTION OF THE MAIN CONTRACT BETWEEN PETITIONER AND SUCODECO. 2. WHETHER OR NOT THE QUITCLAIM EXECUTED BY GERENT WAS VITIATED WITH FRAUD. 3. WHETHER OR NOT PETITIONER IS ENTITLED TO ACTUAL, MORAL, AND EXEMPLARY DAMAGES DUE TO THE WRONGFUL ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT. 4. WHETHER OR NOT THE AMOUNT OF P5,000.00 AS ATTORNEYS FEES IS SUFFICIENT. 5. WHETHER OR NOT RESPONDENT GERENT IS ENTITLED TO ATTORNEYS FEES IN THE AMOUNT EQUIVALENT TO TWENTY FIVE PERCENT (25%) OF P632,590.13. The Ruling of the Court PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
481 of 501
The Court finds for petitioner MC Engineering, Inc. The Quitclaim of Respondent Gerent We begin with the issue of whether the so-called quitclaim executed by respondent Gerent is valid. If the quitclaim is valid, then the quitclaim settles with finality all the claims of respondent Gerent, rendering its complaint against petitioner without any legal basis. If fraud vitiated the quitclaim, then it becomes necessary to determine if petitioner still owes respondent Gerent any amount under their subcontract. The quitclaim is embodied in the Affidavit executed on January 2, 1985 by respondent Gerents president, Narciso Roque. The Affidavit is not the usual quitclaim which expressly discharges and releases a party from any and all liabilities. The Affidavit does not contain such express language. However, the Affidavit expressly acknowledges receipt by Gerent of "full payment" of the subcontract price 20 from petitioner. The effect, nevertheless, is the same because a creditor who receives and acknowledges full payment from his debtor causes the extinguishment of his claim against the debtor. 21 Roque, however, now claims that had petitioner informed him of the price increase granted by Sucodeco on December 3, 1984, he would not have signed the Affidavit of January 2, 1985. The primary question to resolve is whether petitioner misled, deceived or coerced respondent Gerent into signing the Affidavit. We rule petitioner did not. The Court of Appeals erred in declaring that fraud vitiated the Affidavit. Fraud is never presumed but must be established by clear and convincing evidence. There is no evidence that petitioner misled, deceived or coerced respondent Gerents president into signing the Affidavit. A mere preponderance of evidence is not even adequate to prove fraud. Thus, in Maestrado vs. Court of Appeals, 22 the Court ruled that: "The deceit employed must be serious. It must be sufficient to impress or lead an ordinarily prudent person into error, taking into account the circumstances of each case. Silence or concealment, by itself, does not constitute fraud, unless there is a special duty to disclose certain facts. Moreover, the bare existence of confidential relation between the parties, standing alone, does not raise the presumption of fraud." 23 (Emphasis supplied) There was no proof of fraud presented by respondent Gerent other than its bare and unsubstantiated allegations. On the contrary, respondent Gerents president, Roque, admitted that he was fully aware and certain of the impending price increase. Thus, Roque testified: "Q: Is it really true that you knew that there will be an increase because you were discussing that already? A: I know that there will be an increase. Q: Because you were discussing it? A: Yes. I know that there will be an increase, that is why I am always inquiring from Mr. Cruel whether there was already an increase made and adjustment of the contract. Q: When was the increase being discussed? A: Even during the time of the initial start of the project it was already discussed. Q: What particular month? A: About November. Q: And the contract was signed by Mario Cruel and Sucodeco in October? October 29, 1984? A: Yes, sir." 24 (Emphasis supplied) PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
482 of 501
Despite his certainty that a price increase was imminent, Roque still signed the Affidavit without any reservation. Since respondent Gerent was fully aware of the impending price increase, it cannot claim that it was misled or deceived into signing the Affidavit. The non-disclosure by petitioner of the price increase did not mislead or deceive respondent Gerent because Roque fully knew that the price increase would in any event happen. Based on his own testimony, Roque voluntarily, willingly and freely signed the Affidavit without any compulsion or coercion from anyone. Thus, Roque testified: "Q: But you know before hand that what you signed is supposed to be an affidavit? A: Yes, sir. Q: Did you make any complaint to MC Engineering? A: No, sir. xxx. Q: When you signed that affidavit Exh. "1", did you not make any protests? A: No, I did not make any protest." 25
Petitioner was under no obligation to disclose to respondent Gerent, a subcontractor, any price increase in petitioners main contract with Sucodeco. Respondent Gerent is not a party to the main contract. The subcontract between petitioner and respondent Gerent does not require petitioner to disclose to Gerent any price increase in the main contract. The non-disclosure by petitioner of the price increase cannot constitute fraud or breach of any obligation on the part of petitioner. Moreover, the record shows that the P139,720.30 representing final and full payment of the subcontract price was paid by petitioner to respondent Gerent based on the statement of account Gerent itself prepared and submitted to petitioner. This can be gleaned from the testimony of Roque, to wit: "Q: You have submitted likewise a statement of account? A: Yes, sir. Q: And this statement of account is this Annex "1" of the Answer? A: Yes, sir. ATTY. AGUINALDO STATEMENT OF ACCOUNT CONTRACT AMOUNT P1,665,000.00 Less: Previous Payments:
October 30 - 50% downpayment - P832,500.00
December 4 2nd partial payments. - 400,000.00
December 13- 3rd partial payments. - 200,000.00
P1432,500.00
Deduction for cost of materials taken from Sucodeco. 92,779.70 1,525,279.70 BALANCE DUE & COLLECTIBLE
May we request that this statement of account be marked as Exh. "2". And the signature above the typewritten name Narciso Roque including the words submitted by, be marked as Exh. 2-A and the figure P139,720.30 be encircled and be marked as Exh. 2- B." 26
The Statement of Account signed and submitted by respondent Gerents president Roque to petitioner provides as follows: "January 2, 1985 MC ENGINEERING, INC. 98 Sgt. J. Catolos St., Cubao, Quezon City Subject: Breakdown for sub-contracted work at Sucodeco Proj. Submitted by: NARCISO C. ROQUE Chairman Conforme: __________________" 27 (Emphasis supplied) Again, nothing in the Statement of Account indicates any reservation relating to the impending price increase. Thus, respondent Gerent was paid what it actually believed, estimated and demanded should be its fair compensation for its subcontract work. The voucher issued by petitioner to respondent Gerent in full payment of the subcontract price states as follows: "MC ENGINEERING, INC. Quezon City CHECK VOUCHER NO. 21324 Date January 2, 1985 TO: GERENT BUILDERS INCORPORATED Full payment for subcontracted work at Sucodeco Project.................................. 139,720.30 Less: 3% of 15% withholding tax 628.74
P139,091.56 Amount paid by Check No. RCBC # 479476 P139,091.56 Received the sum of PESOS one hundred thirty nine thousand ninety one pesos & 56/100 only from MC ENGINEERING, INC. in full payment of account.
This voucher, stating that the amount of P139,091.56 was in "full payment" for the subcontract work, was signed by Roque at the same time he received the check payment for the same amount. Finally, the Affidavit that Roque signed provides as follows: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
484 of 501
"A F F I D A V I T I, NARCISO C. ROQUE, of legal age, Filipino, married with residence and postal address at No. 58 Lanzones Street, Quezon City, Metro Manila, Philippines, after being sworn to in accordance with law, do hereby depose and say: 1. That I am the CHAIRMAN/PRESIDENT of GERENT BUILDERS, INC.; 2. That my Company, GERENT BUILDERS, INC., has sub- contracted with MC ENGINEERING, INC. for the restoration works of building and land improvement of SUCODECO OIL HILLS, INC. located at Bo. Lipata, Surigao City; 3. That in the prosecution of restoration works and land improvement of SUCODECO OIL MILLS, INC. Buildings, GERENT BUILDERS, INC. had fully paid the wages of laborers, rentals of equipment and machineries used; and fully paid materials used in the fabrication, delivery and erection of same, and that no supplier, laborer, equipment and machinery owner has standing claim against my company; 4. That all taxes due in accordance with the project have been fully paid as of date; 5. That the ONE HUNDRED THIRTY NINE THOUSAND SEVEN HUNDRED TWENTY PESOS AND 30/100 (P139,720.30) ONLY, released on January 2, 1985 REPRESENTS FULL PAYMENT OF MY CONTRACT WITH MC ENGINEERING, INC.; (Emphasis supplied) 6. That this affidavit is being executed for purpose of collecting from MC ENGINEERING, INC.; 7. That affiant, further sayeth none. NARCISO C. ROQUE Affiant" 29
(Emphasis supplied) The inescapable conclusion is that the Affidavit was meant to be a total quitclaim by respondent Gerent, fully discharging petitioner from whatever amounts it may have owed Gerent under the subcontract. There is nothing in the Affidavit that reserves respondent Gerents right to collect a portion of any price increase in the main contract. On the other hand, the Affidavit is clear, unequivocal and absolute that respondent Gerent had received "full payment" under the subcontract. Respondent Gerent is now estopped from impugning the validity of the Affidavit simply because petitioner secured a higher price for the main contract. Thus, in Maestrado vs. Court of Appeals 30 we stated that: "The freedom to enter into contracts, such as the quitclaims, is protected by law and the courts are not quick to interfere with such freedom unless the contract is contrary to law, morals, good customs, public policy or public order. Quitclaims, being contracts of waiver, involve the relinquishment of rights, with knowledge of their existence and intent to relinquish them. xxx. Quitclaims being duly notarized and acknowledged before a notary public, deserve full credence and are valid and enforceable in the absence of overwhelming evidence to the contrary." In the instant case, the Affidavit is indisputably intended to document the fact that petitioner had fully paid respondent Gerent for the subcontract work. Roques signature thereon attests to the truth of the contents of the Affidavit. Thus, Roque again testified: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
485 of 501
"Q: But you read the contents of the affidavit? A: Yes, sir. Q: You understand the contents of the affidavit when you signed? A: Yes, sir." 31
The execution of the Affidavit by Roque, president of respondent Gerent, finally puts to rest all the claims of Gerent against petitioner under the subcontract. The very purpose of the Affidavit, just like a quitclaim, is precisely to finally settle all the claims of respondent Gerent, regardless of the merits of the claims. The Affidavit can be annulled only if it was procured through fraud. There is no convincing evidence to establish that fraud vitiated the Affidavit. The fact that petitioner received a windfall because of the price increase is not a reason to annul the Affidavit. Consequently, the Affidavit renders moot and academic all the other issues raised in this petition. Nevertheless, the Court will still painstakingly discuss and resolve the remaining issues raised by petitioner. The 74%-26% Sharing. The Court of Appeals upheld respondent Gerents theory that the subcontract provides for a 74%-26% sharing between Gerent and petitioner in any price increase for the civil woks portion of the main contract. Ruled the Court of Appeals: "The question left to be determined is the amount of appellants share in the adjusted price. The record reveals that out of the P2,250,000.00 originally earmarked for civil works, plaintiff-appellant, as sub- contractor, was awarded P1,665,000.00 which is 74% of the first amount. Moreover, in the second detailed estimate submitted by plaintiff-appellant to appellee, the total cost of P2,297,590.00 was charged for civil works. This amount was subsequently increased by appellee to P3,104,851.00 ***** when it submitted the estimates to SUCODECO. Again, the mark-up was 26% of plaintiff-appellants estimate. Under the circumstances, the parties had clearly intended to split the cost award to 74%-26% in plaintiff-appellants favor. This entitles plaintiff-appellant to the sum of P632,590.13 as its share in the adjusted price." 32
Again, we do not agree. A perusal of the subcontract reveals the following stipulations: "ARTICLE II SUB-CONTRACT PRICE 2.1. In consideration of the full and satisfactory performance of the works by the SUB-CONTRACTOR the CONTRACTOR shall pay the SUB-CONTRACTOR the Lump Sum amount of ONE MILLION SIX HUNDRED SIXTY FIVE THOUSAND (P1,665,000.00) PESOS. 2.2. The SUB-CONTRACT PRICE above is subject to section VIII of MAIN CONTRACT. By reason thereof, parties hereby declare and understand that the SUB-CONTRACT PRICE of P1.665 is subject to change and verification pending the final submission of the true value as maybe determined by evaluation and inspection by representatives of OWNER, CONTRACTOR and SUB- CONTRACTOR." 33 (Emphasis supplied) On the other hand, the main contract between petitioner and Sucodeco provides as follows: "VIII. SPECIAL SIDE AGREEMENT. It is hereby declared and understood that Contract Price of P5.25M is subject to changes and verification pending the final submission of the true value as maybe determined by evaluation and inspection by representatives of both parties, SURIGAO COCONUT DEVELOPMENT CORPORATION and MC ENGINEERING, INC." 34
The Court of Appeals was correct in holding that: "The above-cited stipulations are very clear and need no extraneous interpretation. The lump sum amount of P1,665,000.00 due to plaintiff-appellant in payment of the civil works subcontracted to it is subject to change depending on the true value to be submitted and evaluated by the parties to the contracts." 35 (Emphasis supplied) However, the Court of Appeals erred in upholding respondent Gerents claim that it was entitled to a 74% share in the price increase of the main contract. Respondent Gerent alleges that as a customary business practice petitioner and respondent Gerent agreed to a 74%-26% sharing in the main contract price for the civil works portion. The alleged 74%-26% sharing can be upheld only if such specific sharing was agreed upon in the subcontract, or if the subcontract is a joint venture. A textual examination of the terms of the subcontract shows no provision regarding any 74%-26% sharing between petitioner and respondent Gerent. Instead, the subcontract specifically provides for a fixed price for the civil works in the amount of P1,665,000.00, subject to change only upon submission of the "true value" of the work undertaken by the subcontractor. Neither is there any stipulation in the subcontract indicating a joint venture between petitioner and respondent Gerent. That the subcontract price corresponds to 74% of the main contract price cannot by itself be interpreted to mean that the parties agreed to a 74%-26% sharing of any price increase in petitioners main contract with Sucodeco. Roque, respondent Gerents president, testified that the 74%-26% arrangement was not incorporated in the subcontract and was a mere gentlemans agreement. This can be gleaned from the testimony of Roque, to wit: "Q: Mr. Witness, you mentioned under page 5 of the transcript when you gave your direct testimony that the agreement between you and the defendant was a joint venture, is that correct? A: Yes, sir. Q: Where is that agreement? A: It was a verbal agreement between us. Among contractors there is such a thing as gentlemans agreement. Q: Are you referring toyou mean to say that that agreement is not in writing? A: It is not in writing but it was verbally agreed between the defendant and myself. xxx. "Q: Why was that 74%-26% sharing not placed in the agreement with MC Engineering by your company? xxx. A: Prior to entering into our proposal we have already an agreement with Mr. Cruel that whatever contract we will get, the civil work will be awarded to me on subcontract wherein 26% will be for MC Engineering and 74% will be for us. Q: That is verbal agreement? A: Verbal prior to the execution of the subcontract agreement. Q: That was the verbal agreement prior to the execution and signing of the subcontract agreement? A: It was. xxx. "Q: This agreement, to reiterate your testimony for the alleged 74% and 26% sharing, this has never been reduced into writing? PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
487 of 501
A: It is not, sir." 36 (Emphasis supplied) The terms of the subcontract are clear and explicit. There is no need to read into them any alleged intention of the parties. If the true intention of the parties was a 74%-26% sharing in any price increase in the main contract, the parties could have easily incorporated such sharing in the subcontract, being a very important matter. They did not because that was not their agreement. Section 9, Rule 130 of the Revised Rules of Court provides that "[w]hen the terms of an agreement have been reduced to writing, it is to be considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement." Simply put, evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict, or defeat the operation of a valid contract. 37 While parol evidence is admissible to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in writing, unless there has been fraud or mistake. 38 It is basic that parties are bound by the terms of their contract which is the law between them. 39
Respondent Gerent claims that petitioner cannot be allowed to evade its lawful obligation arising from the subcontract, citing the well-known principle of law against unjust enrichment. Article 22 of the Civil Code provides that "[e]very person who through an act or performance by another, or by any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him." Two conditions must generally concur before the rule on unjust enrichment can apply, namely: (a) a person is unjustly benefited, and (b) such benefit is derived at anothers expense or damage. 40
Such a situation does not exist in this case. The benefit or profit derived by petitioner neither comes from respondent Gerent nor makes the Gerent any poorer. The profit derived by petitioner comes from Sucodeco by virtue of the main contract to which respondent Gerent is not a party. Respondent Gerents rights under the subcontract are not diminished in any way, and Gerent remains fully compensated according to the terms of its own subcontract. The profit derived by petitioner is neither unjust, nor made at the expense of respondent Gerent. That a main contractor is able to secure a price increase from the project owner does not automatically result in a corresponding price increase to the subcontractor in the absence of an agreement to the contrary. In this case, there is no stipulation in the subcontract that respondent Gerent will automatically receive 74% of whatever price increase petitioner may obtain in the civil works portion of the main contract. Neither has the subcontract been changed to reflect a higher subcontract price. In a subcontract transaction, the benefit of a main contractor is not unjust even if it does less work, and earns more profit, than the subcontractor. The subcontractor should be satisfied with its own profit, even though less than the main contractors, because that is what it bargained for and contracted with the main contractor. Article 22 of the Civil Code is not intended to insure that every party to a commercial transaction receives a profit corresponding to its effort and contribution. If a subcontractor knowingly agrees to receive a profit less than its proportionate contribution, that is its own lookout. The fact that a subcontractor accepts less does not make it dumb for that may be the only way to beat its competitors. The winning subcontractor cannot be allowed to later on demand a higher price after bagging the contract and beating competitors who asked for higher prices. Even if the subcontractor incurs a loss because of its low price, it cannot invoke Article 22 of the Civil Code to save it from financial loss. Article 22 is not a safety net against bad or overly bold business decisions. Under the foregoing circumstances, we hold that Gerent is not entitled to any share in the price increase in the main contract. Whatever price increase petitioner obtained in the main contract, whether for the civil works portion or otherwise, was solely for the benefit of petitioner. The First and Second Detailed Estimates There is no true valuation of the civil works. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
488 of 501
The main contract clearly provides that as a condition precedent for any upward or downward adjustment in the contract price, there must first be a true valuation of the materials and labor costs to be determined through evaluation and inspection by representatives of petitioner and Sucodeco. 41 A similar provision is found in the subcontract requiring, before any change in the subcontract price, for a true valuation to be determined by Sucodeco, petitioner and respondent Gerent. The records establish that respondent Gerent was responsible for making the estimates of the actual cost of the civil works which served as basis for the original price of the main contract. However, the Court of Appeals erred in finding that the price increase in the main contract was based on a second detailed estimate supplied by respondent Gerent. 42 The evidence adduced reveals that the parties did not undertake any true valuation of the cost of the civil works. The price increase could not have been based on a true valuation because no true valuation was ever made as required by the main contract and subcontract. There is no substantial evidence to support respondent Gerents assertion that the price increase was based on a second estimate that Gerent allegedly supplied petitioner. The true valuation of the works must be based on the true value or estimates of the actual materials and labor required for the work. An examination of the alleged second detailed estimate reveals nothing but a plain summary of computation. Not only is it undated but there is also nothing in the said estimate which indicates that it was indeed received, evaluated and marked-up by petitioner as claimed by respondent Gerent. Neither was it clearly established by convincing evidence that the same was the true and final valuation of the civil works pursuant to the terms of the subcontract and main contract. This is evident from the testimony of Roque, the president of respondent Gerent, to wit: "Q: So your conclusion is that based on the payment of SUCODECO to MC Engineering, you are now entitled to your claim of alleged 74%? A: Yes, sir. Q: And it is not based on the actual determination of the true value of the materials and labor spent and utilized in the project? A: In the same manner as MC Engineering.it is not based on the true value. Q: It is not based on the true value? A: Yes sir." 43 (Underscoring Supplied) Clearly, the price increase did not result from a true valuation of materials and labor, which is the only valid ground for any adjustment in the subcontract price. The second estimate is lower than the first estimate. A further perusal of the testimony of Narciso Roque clearly shows that the alleged second estimate, assuming it was agreed to by petitioner and Sucodeco, was actually even lower than the first estimate which was the basis of the original contract price for the civil works. Thus, respondent Gerents Roque testified as follows: "Q: Now, you made a second estimate? A: Yes, sir, I made a second estimate on November 5." xxx. "Q: How much was that? A: P2,297,590.00, for the restoration of the civil works and land development." xxx. "Q: How much again was the total of the first estimate? PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
489 of 501
A: In the first estimate the total Q: The breakdown first. A: For building is P2,257,351.20 and the land improvement is P247,361.40. Q: And this is the first estimate, am I correct? A: Yes, sir. Q: When was this made? A: That was October 15. Q: Then there was a second estimate? A: The second estimate is the final adjusted cost submitted to MC Engineering by Gerent Builders. The total for building and land improvement is P2,297,590.00." 44 (Underscoring supplied) If indeed the price increase in the main contract were based on the lower second estimate, then the actual price adjustment would have been downward and not upward. The fact that the main contract price went up from the original P2,250,000.00 to P3,104,851.51 shows that the price increase was not made on the basis of the second estimate. There was no itemized listing of material and labor costs. Moreover, the record is bereft of proof of an itemized listing of the costs of materials and labor to be used upon which respondent Gerent could have based its second estimate. This negates further respondent Gerents claim that the price increase was based on its second estimate. The inevitable conclusion is that the price increase in the civil works portion of the main contract was based on other factors and not on the alleged second estimate submitted by respondent Gerent. Third Issue: Award of actual, moral and exemplary damages. We come to the issue of whether or not petitioner is entitled to its counterclaim for actual, moral and exemplary damages due to the wrongful issuance of the writ of attachment. The Court of Appeals held that: "xxx. In the instant suit, appellee failed to establish bad faith and malice against plaintiff-appellant when it sought to attach the formers properties. The lower court itself in its decision did not make any express pronouncement as to the existence of malice and bad faith in the procurement of the writ of attachment. Instead the trial court concluded that as a result of such attachment, the defendants business operation and credit standing have been prejudiced and damaged and the defendant is entitled to recover moral and exemplary damages by reason of the irregular issuance of the writ of attachment. Such conclusions do not immediately warrant the award of moral damages. It is true that the attachment was wrongful. But in the absence of proof of bad faith or malice, plaintiff-appellants application cannot be said to be harassing or oppressing but merely an act done to assert and protect a legal right. (Emphasis supplied) The grant of exemplary damages is likewise improper. Since no moral damages is due to appellee and it appearing that no actual damages was awarded by the lower court, the grant of exemplary damages has no leg on which to stand (Art. 2234, Civil Code). If at all, the wrongful issuance of the writ of attachment, as ruled out by this Court, merely resulted in actual damages to appellee. But such is not automatically awarded for it is subject to proof. Appellees claim that it lost major contracts after a credit investigation revealed that its accounts were garnished is a bare allegation not merely unsupported by solid evidence but is also speculative. The alleged $35,000.00 PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
490 of 501
remittance refused by the Hongkong and Shanghai Bank does not inspire belief for failure of appellee to produce documentary proof to buttress its claim." 45
We agree with the Court of Appeals that the trial court erred in awarding moral and exemplary damages to petitioner. The mere fact that a complaint is dismissed for lack of legal basis will not justify an award of moral damages to the prevailing party. 46 Even the dismissal of a "clearly unfounded civil action or proceeding" will not entitle the winning party to moral damages. 47 For moral damages to be awarded, the case must fall within the instances enumerated in Article 2219, or under Article 2220, of the Civil Code. 48 Moreover, in the absence of fraud, malice, wanton recklessness or oppressiveness, exemplary damages cannot be awarded. 49
Fourth and Fifth Issues : Award of Attorneys Fees The last matter to be determined is the reasonableness of the attorneys fees awarded to both parties. The Court of Appeals held that: "xxx, the award of attorneys fees must vary. Considering the wrongful attachment made against appellees accounts, it is understandable that it incurred attorneys fees in procuring the discharge of the attachment for which reason the amount of P5,000.00 may reasonably be awarded. However, inasmuch as plaintiff-appellant was constrained to file this suit to protect its legal interest, and pursuant to the terms of the sub-contract, appellee is adjudged to pay appellant 25% of P632,590.13, the amount involved in this suit." 50
The award must be modified. The Court of Appeals was partly correct in holding that the award of attorneys fees to petitioner is justified considering that petitioner was constrained to engage the services of counsel at an agreed attorneys fees. To secure the lifting of the writ of attachment, petitioners counsel, Atty. Mario Aguinaldo testified that he was paid P1,250.00 on January 1985, P10,000.00 on April 10, 1985 and another P10,000.00 on June 30, 1985 for his legal services, totaling P21,500.00. 51 Accordingly, the award of P5,000.00 is hereby increased to P21,250.00. We deem it just and equitable that attorneys fees be awarded when a party is compelled to incur expenses to lift a wrongfully issued writ of attachment. 52
WHEREFORE, the petition is GRANTED and the assailed Decision of the Court of Appeals is SET ASIDE. The decision of the trial court is AFFIRMED WITH MODIFICATION. The complaint against petitioner is dismissed with prejudice. Respondents Gerent Builders, Inc. and Stronghold Surety and Insurance Company are ordered to pay petitioner MC Engineering, Inc., jointly and severally, the sum of P21,250.00 as attorneys fees. Costs against respondents. SO ORDERED.
DM Wenceslao v. Readycon Trading & Const. Corp., 433 S 251 SECOND DIVISION G.R. No. 154106 June 29, 2004 D.M. WENCESLAO and ASSOCIATES, INC., and/or DOMINADOR S. DAYRIT, petitioners, vs. READYCON TRADING AND CONSTRUCTION CORP., respondent. D E C I S I O N QUISUMBING, J.: This petition for review assails the decision 1 of the Court of Appeals, dated January 30, 2002, as well as its resolution 2 dated June 20, 2002 in CA-GR CV No. 49101, denying petitioners motion for reconsideration. The appellate court affirmed the decision 3 of the Regional Trial Court of Pasig City, Branch 165, in Civil Case No. 61159, ordering petitioners to pay the sum of P1,014,110.45 with interest rate of 12% per annum (compounded annually) from August 9, 1991, the date of filing of the complaint, until fully paid to Readycon Trading and Construction Corp., plus damages. Petitioner D.M. Wenceslao and Associates, Inc. (WENCESLAO, for brevity) is a domestic corporation, organized under and existing pursuant to Philippine laws, engaged in the construction business, primarily infrastructure, foundation works, and subdivision development. Its co-petitioner, Dominador Dayrit, is the vice-president of said company. 4 Respondent Readycon Trading and Construction Corporation (READYCON, for brevity) is likewise a corporate entity organized in accordance with Philippine laws. Its primary business is the manufacture and sale of asphalt materials. 5
The facts of this case are not in dispute. WENCESLAO had a contract with the Public Estates Authority (PEA) for the improvement of the main expressway in the R-1 Toll Project along the Coastal Road in Paraaque City. To fulfill its obligations to the PEA, WENCESLAO entered into a contract with READYCON on April 16, 1991. READYCON agreed to sell to WENCESLAO asphalt materials valued at P1,178,308.75. The contract bore the signature of co-petitioner Dominador Dayrit, as signatory officer for WENCESLAO in this agreement. Under the contract, WENCESLAO was bound to pay respondent a twenty percent (20%) downpayment, or P235,661.75, upon delivery of the materials contracted for. The balance of the contract price, amounting to P942,647, was to be paid within fifteen (15) days thereof. It was further stipulated by the parties that respondent was to furnish, deliver, lay, roll the asphalt, and if necessary, make the needed corrections on a prepared base at the jobsite. 6
On April 22, 1991, READYCON delivered the assorted asphalt materials worth P1,150,531.75. Accordingly, WENCESLAO paid the downpayment of P235,661.75 to READYCON. Thereafter, READYCON performed its obligation to lay and roll the asphalt materials on the jobsite. 7
Fifteen (15) days after performance of said work, READYCON demanded that WENCESLAO pay the balance of the contract price. WENCESLAO, however, ignored said demand. On May 30, 1991, the counsel for READYCON wrote a demand letter to WENCESLAO asking that it make good on the balance it owed. Again, WENCESLAO failed to heed the demand. It did not even bother to reply to the demand letter. 8
In view of this development, on July 19, 1991, READYCON filed a complaint with the Regional Trial Court of Pasig City for collection of a sum of money and damages, with prayer for writ of preliminary attachment against D.M. Wenceslao and/or Dominador Dayrit, docketed as Civil Case No. 61159. READYCON demanded payment ofP1,014,110.45 from petitioners herein with P914,870.75 as the balance of contract price, as well as payment ofP99,239.70, representing another unpaid account. 9
As READYCON timely posted the required bond of P1,150,000, its application for the writ of preliminary attachment was granted. On September 5, 1991, the RTC Sheriff attached certain assets of WENCESLAO, particularly, the following heavy equipments: One (1) asphalt paver, one (1) bulldozer, one (1) dozer and one (1) grader. 10
On September 16, 1991, WENCESLAO moved for the release of the attached equipments and posted its counter-bond. The trial court granted the motion and directed the RTC Sheriff to return the attached equipments. On September 25, 1991, the Sheriff released the attached heavy machineries to WENCESLAO. 11
In the proceedings below, WENCESLAO admitted that it owed READYCON P1,014,110.45 indeed. However, it alleged that their contract was not merely one of sale but also of service, namely, that respondent shall lay the asphalt in accordance with the specifications and standards imposed by and acceptable to the government. WENCESLAO also alleged that since the contract did not indicate this condition with respect to the period within which the balance must be paid, the contract failed to reflect the true intention of the parties. 12 It alleged READYCON agreed that the balance in the payments would be settled only after the government had accepted READYCONs work as to its quality in laying the asphalt. By way of counterclaim, WENCESLAO prayed for the payment of damages caused by the filing of READYCONs complaint and the issuance of the writ of attachment despite lack of cause. 13
On December 26, 1994, the RTC rendered judgment in this wise: WHEREFORE, judgment is hereby rendered ordering the defendant D.M. Wenceslao & Associates, Inc. to pay plaintiff as follows: 1. The amount of P1,014,110.45 with interest at the rate of 12% per annum (compounded annually) from August 9, 1991, date of filing of the complaint, until fully paid. 2. The amount of P35,000.00 as and for attorneys fees and expenses of litigation. 3. Costs of suit. The counterclaim of the defendants is dismissed for lack of merit. 14
Dissatisfied with the decision, the petitioners appealed to the Court of Appeals. The appellate court, however, affirmed in toto the decision of the lower court. 15
In denying the appeal, the appellate court found that contrary to WENCESLAOs assertion, malice and bad faith in obtaining a writ of attachment must be proved before a claim for damages on account of wrongful attachment will prosper, citing Philippine Commercial International Bank v. Intermediate Appellate Court, 196 SCRA 29 (1991). The CA stressed that the trial court found neither malice nor bad faith relative to the filing of the complaint and the obtaining of the writ of attachment. Also, according to the CA, petitioners did not adduce evidence to show that the attachment caused damage to the cited pieces of heavy equipment. 16
The appellate court also found that the trial court correctly interpreted the period for payment of the balance. It held that the text of the stipulation that the balance shall be paid within fifteen days is clear and unmistakable. Granting that the sales contract was not merely for supply and delivery but also for service, the balance was already due and demandable when demand was made on May 30, 1991, which was a month after READYCON performed its obligation. 17
Hence, the instant petition, wherein petitioners raise the following issues: 1. WHETHER OR NOT QUESTIONS OF FACTS ARE RAISED IN THE APPEAL BY CERTIORARI; 2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENT LIABLE FOR PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
493 of 501
COMPENSATORY DAMAGES FOR THE WRONGFUL ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT; 3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THE OBLIGATION [AS] NOT YET DUE AND DEMANDABLE. 18
We find proper for resolution two issues: (1) Is respondent READYCON liable to petitioner WENCESLAO for damages caused by the issuance and enforcement of the writ of preliminary attachment? (2) Was the obligation of WENCESLAO to pay READYCON already due and demandable as of May 30, 1991? On the first issue, petitioners rely mainly on Lazatin v. Twano and Castro, 112 Phil. 733 (1961), reiterated in MC Engineering v. Court of Appeals, 380 SCRA 116 (2002). In Lazatin, we held that actual or compensatory damages may be recovered for wrongful, though not malicious, attachment. Lazatin also held that attorneys fees may be recovered under Article 2208 of the Civil Code. 19 Petitioners contend that Lazatin applies in the instant case because the wrongful attachment of WENCESLAOs equipment resulted in a paralysis of its operations, causing it to sustain a loss of P100,000 per day in terms of accomplishment of work. Since the attachment lasted 19 days it suffered a total loss of P1.9 million. Aside from that, it had to spend P50,000 on the pullout of the equipment and another P100,000 to repair and restore them to their former working condition. 20
Respondent counters that inasmuch as a preliminary attachment is an available ancillary remedy under the rules, a penalty cannot be meted out for the enforcement of a right, such as in this case when it sought such relief. It stresses that the writ was legally issued by the RTC, upon a finding that READYCON sought the relief without malice or bad faith. Furthermore, WENCESLAO failed to show concrete and credible proof of the damages it suffered. The issuance of a writ and its enforcement entail a rigorous process where the court found that it was not attended by malice or bad faith. It cites Mindanao Savings and Loan Association v. Court of Appeals, 172 SCRA 480 (1989), to the effect where a counter-bond is filed, the right to question the irregularity and propriety of the writ of attachment must be deemed waived since the ground for the issuance of the writ forms the core of the complaint. 21
We find for the respondent on this issue. However, its reliance upon Mindanao Savings and Loan Association is misplaced. It is to be stressed that the posting of a counter-bond is not tantamount to a waiver of the right to damages arising from a wrongful attachment. This we have made clear in previous cases, e.g., Calderon v. Intermediate Appellate Court, 22 where we ruled that: Whether the attachment was discharged by either of the two (2) ways indicated in the law, i.e., by filing a counterbond or by showing that the order of attachment was improperly or irregularly issued, the liability of the surety on the attachment bond subsists because the final reckoning is when "the Court shall finally adjudge that the attaching creditor was not entitled" to the issuance of the attachment writ in the first place. The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching party creditor instead of the other way, which in most instances like in the present case, would require presentation of evidence in a fullblown trial on the merits and cannot easily be settled in a pending incident of the case. 23
The point in Mindanao Savings, alluded to by respondent, pertained to the propriety of questioning the writ of attachment by filing a motion to quash said writ, after a counter-bond had been posted by the movant. But nowhere in Mindanao Savings did we rule that filing a counter-bond is tantamount to a waiver of the right to seek damages on account of the impropriety or illegality of the writ. We note that the appellate court, citing Philippine Commercial & Industrial Bank, 196 SCRA 29 (1991), stressed that bad faith or malice must first be proven PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
494 of 501
as a condition sine qua non to the award of damages. The appellate court appears to have misread our ruling, for pertinently what this Court stated was as follows: The silence of the decision in GR No. 55381 on whether there was bad faith or malice on the part of the petitioner in securing the writ of attachment does not mean the absence thereof. Only the legality of the issuance of the writ of attachment was brought in issue in that case. Hence, this Court ruled on that issue without a pronouncement that procurement of the writ was attended by bad faith. Proof of bad faith or malice in obtaining a writ of attachment need be proved only in the claim for damages on account of the issuance of the writ. We affirm the finding of the respondent appellate court that malice and bad faith attended the application by PCIB of a writ of attachment. 24
Plainly, we laid no hard and fast rule that bad faith or malice must be proved to recover any form of damages. InPhilippine Commercial & Industrial Bank, we found bad faith and malice to be present, thereby warranting the award of moral and exemplary damages. But we denied the award of actual damages for want of evidence to show said damages. For the mere existence of malice and bad faith would not per se warrant the award of actual or compensatory damages. To grant such damages, sufficient proof thereon is required. Petitioners cite Lazatin and MC Engineering insofar as proof of bad faith and malice as prerequisite to the claim of actual damages is dispensed with. Otherwise stated, in the present case, proof of malice and bad faith are unnecessary because, just like in Lazatin and MC Engineering, what is involved here is the issue of actual and compensatory damages. Nonetheless, we find that petitioner is not entitled to an award of actual or compensatory damages. Unlike Lazatin and MC Engineering, wherein the respective complaints were dismissed for being unmeritorious, the writs of attachment were found to be wrongfully issued, in the present case, both the trial and the appellate courts held that the complaint had merit. Stated differently, the two courts found READYCON entitled to a writ of preliminary attachment as a provisional remedy by which the property of the defendant is taken into custody of the law as a security for the satisfaction of any judgment which the plaintiff may recover. 25
Rule 57, Section 4 of the 1997 Rules of Civil Procedure states that: SEC. 4. Condition of 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 (italics for emphasis). In this case, both the RTC and the Court of Appeals found no reason to rule that READYCON was not entitled to issuance of the writ. Neither do we find now that the writ is improper or illegal. If WENCESLAO suffered damages as a result, it is merely because it did not heed the demand letter of the respondent in the first place. WENCESLAO could have averted such damage if it immediately filed a counter-bond or a deposit in order to lift the writ at once. It did not, and must bear its own loss, if any, on that account. On the second issue, WENCESLAO admits that it indeed owed READYCON the amount being claimed by the latter. However, it contends that while the contract provided that the balance was payable within fifteen (15) days, said agreement did not specify when the period begins to run. Therefore, according to petitioner, the appellate court erred when it held the contract clear enough to be understood on its face. WENCESLAO insists that the balance of the purchase price was payable only "upon acceptance of the work by the government." In other words, the real intent of the parties was that it shall be due and demandable only fifteen days after acceptance by the government of the work. This is common practice, according to petitioner. Respondent argues that the stipulation in the sales contract is very clear that it should be paid within fifteen (15) days without any qualifications and conditions. When the terms of a contract are clear and readily understandable, there is no room for construction. Even so, the contention was mooted and PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
495 of 501
rendered academic when, a few days after institution of the complaint, the government accepted the work but WENCESLAO still failed to pay respondent. Under Article 1582 of the Civil Code, the buyer is obliged to pay the price of the thing sold at the time stipulated in the contract. Both the RTC and the appellate court found that the parties contract stated that the buyer shall pay the manufacturer the amount of P1,178,308.75 in the following manner: 20% downpayment - P235,661.75 Balance payable within fifteen (15) days P942,647.00 Following the rule on interpretation of contracts, no other evidence shall be admissible other than the original document itself, 26 except when a party puts in issue in his pleading the failure of the written agreement to express the true intent of the parties. 27 This was what the petitioners wanted done. However, to rule on whether the written agreement failed to express the true intent of the parties would entail having this Court reexamine the facts. The findings of the trial court as affirmed by the appellate court on this issue, however, bind us now. For in a petition for certiorari under Rule 45 of the 1997 Rules of Civil Procedure, this Court may not review the findings of fact all over again. Suffice it to say, however, that the findings by the RTC, then affirmed by the CA, that the extra condition being insisted upon by the petitioners is not found in the sales contract between the parties. Hence it cannot be used to qualify the reckoning of the period for payment. Besides, telling against petitioner WENCESLAO is its failure still to pay the unpaid account, despite the fact of the works acceptance by the government already. With submissions of the parties carefully considered, we find no reason to warrant a reversal of the decisions of the lower courts. But since Dominador Dayrit merely acted as representative of D.M. Wenceslao and Associates, Inc., in signing the contract, he could not be made personally liable for the corporations failure to comply with its obligation thereunder. Petitioner WENCESLAO is properly held liable to pay respondent the sum of P1,014,110.45 with interest rate of 12% per annum (compounded annually) from August 9, 1991, the date of filing of the complaint, until fully paid, plus damages. WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV No. 49101, affirming the judgment of the Regional Trial Court of Pasig City, Branch 165, in Civil Case No. 61159, are AFFIRMED. No pronouncement as to costs. SO ORDERED.
Sps Yu v. Ngo Yet Te, February 6, 2007 THIRD DIVISION G.R. No. 155868 February 6, 2007 SPOUSES GREGORIO and JOSEFA YU, Petitioners, vs. NGO YET TE, doing business under the name and style, ESSENTIAL MANUFACTURING, Respondent. D E C I S I O N AUSTRIA-MARTINEZ, J.: Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the March 21, 2001 Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 52246 2 and its October 14, 2002 Resolution. 3
The antecedent facts are not disputed. Spouses Gregorio and Josefa Yu (Spouses Yu) purchased from Ngo Yet Te (Te) bars of detergent soap worthP594,240.00, and issued to the latter three postdated checks 4 as payment of the purchase price. When Te presented the checks at maturity for encashment, said checks were returned dishonored and stamped "ACCOUNT CLOSED". 5 Te demanded 6 payment from Spouses Yu but the latter did not heed her demands. Acting through her son and attorney-in- fact, Charry Sy (Sy), Te filed with the Regional Trial Court (RTC), Branch 75, Valenzuela, Metro Manila, a Complaint, 7 docketed as Civil Case No. 4061-V-93, for Collection of Sum of Money and Damages with Prayer for Preliminary Attachment. In support of her prayer for preliminary attachment, Te attached to her Complaint an Affidavit executed by Sy that Spouses Yu were guilty of fraud in entering into the purchase agreement for they never intended to pay the contract price, and that, based on reliable information, they were about to move or dispose of their properties to defraud their creditors. 8
Upon Tes posting of an attachment bond, 9 the RTC issued an Order of Attachment/Levy 10 dated March 29, 1993 on the basis of which Sheriff Constancio Alimurung (Sheriff Alimurung) of RTC, Branch 19, Cebu City levied and attached Spouses Yus properties in Cebu City consisting of one parcel of land (known as Lot No. 11) 11 and four units of motor vehicle, specifically, a Toyota Ford Fierra, a jeep, a Canter delivery van, and a passenger bus. 12
On April 21, 1993, Spouses Yu filed an Answer 13 with counterclaim for damages arising from the wrongful attachment of their properties, specifically, actual damages amounting to P1,500.00 per day; moral damages,P1,000,000.00; and exemplary damages, P50,000.00. They also sought payment of P120,000.00 as attorneys fees and P80,000.00 as litigation expenses. 14 On the same date, Spouses Yu filed an Urgent Motion to Dissolve Writ of Preliminary Attachment. 15 They also filed a Claim Against Surety Bond 16 in which they demanded payment from Visayan Surety and Insurance Corporation (Visayan Surety), the surety which issued the attachment bond, of the sum of P594,240.00, representing the damages they allegedly sustained as a consequence of the wrongful attachment of their properties. While the RTC did not resolve the Claim Against Surety Bond, it issued an Order 17 dated May 3, 1993, discharging from attachment the Toyota Ford Fierra, jeep, and Canter delivery van on humanitarian grounds, but maintaining custody of Lot No. 11 and the passenger bus. Spouses Yu filed a Motion for Reconsideration 18 which the RTC denied. 19
Dissatisfied, they filed with the CA a Petition for Certiorari, 20 docketed as CA- G.R. SP No. 31230, in which a Decision 21 was rendered on September 14, 1993, lifting the RTC Order of Attachment on their remaining properties. It reads in part: In the case before Us, the complaint and the accompanying affidavit in support of the application for the writ only contains general averments. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
497 of 501
Neither pleading states in particular how the fraud was committed or the badges of fraud purportedly committed by the petitioners to establish that the latter never had an intention to pay the obligation; neither is there a statement of the particular acts committed to show that the petitioners are in fact disposing of their properties to defraud creditors. x x x. x x x x Moreover, at the hearing on the motion to discharge the order of attachment x x x petitioners presented evidence showing that private respondent has been extending multi-million peso credit facilities to the petitioners for the past seven years and that the latter have consistently settled their obligations. This was not denied by private respondent. Neither does the private respondent contest the petitioners allegations that they have been recently robbed of properties of substantial value, hence their inability to pay on time. By the respondent courts own pronouncements, it appears that the order of attachment was upheld because of the admitted financial reverses the petitioner is undergoing. This is reversible error. Insolvency is not a ground for attachment especially when defendant has not been shown to have committed any act intended to defraud its creditors x x x. For lack of factual basis to justify its issuance, the writ of preliminary attachment issued by the respondent court was improvidently issued and should be discharged. 22
From said CA Decision, Te filed a Motion for Reconsideration but to no avail. 23
Te filed with us a Petition for Review on Certiorari 24 but we denied the same in a Resolution dated June 8, 1994 for having been filed late and for failure to show that a reversible error was committed by the CA. 25 Entry of Judgment of our June 8, 1994 Resolution was made on July 22, 1994. 26 Thus, the finding of the CA in its September 14, 1993 Decision in CA-G.R. SP No. 31230 on the wrongfulness of the attachment/levy of the properties of Spouses Yu became conclusive and binding. However, on July 20, 1994, the RTC, apparently not informed of the SC Decision, rendered a Decision, the dispositive portion of which reads: WHEREFORE, premises considered, the Court finds that the plaintiff has established a valid civil cause of action against the defendants, and therefore, renders this judgment in favor of the plaintiff and against the defendants, and hereby orders the following: 1) Defendants are hereby ordered or directed to pay the plaintiff the sum of P549,404.00, with interest from the date of the filing of this case (March 3, 1993); 2) The Court, for reasons aforestated, hereby denies the grant of damages to the plaintiff; 3) The Court hereby adjudicates a reasonable attorneys fees and litigation expenses of P10,000.00 in favor of the plaintiff; 4) On the counterclaim, this Court declines to rule on this, considering that the question of the attachment which allegedly gave rise to the damages incurred by the defendants is being determined by the Supreme Court. SO ORDERED. 27 (Emphasis ours) Spouses Yu filed with the RTC a Motion for Reconsideration 28 questioning the disposition of their counterclaim. They also filed a Manifestation 29 informing the RTC of our June 8, 1994 Resolution in G.R. No. 114700. The RTC issued an Order dated August 9, 1994, which read: x x x x (2) With regard the counter claim filed by the defendants against the plaintiff for the alleged improvident issuance of this Court thru its former Presiding Judge (Honorable Emilio Leachon, Jr.), the same has PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
498 of 501
been ruled with definiteness by the Supreme Court that, indeed, the issuance by the Court of the writ of preliminary attachment appears to have been improvidently done, but nowhere in the decision of the Supreme Court and for that matter, the Court of Appeals decision which was in effect sustained by the High Court, contains any ruling or directive or imposition, of any damages to be paid by the plaintiff to the defendants, in other words, both the High Court and the CA, merely declared the previous issuance of the writ of attachment by this Court thru its former presiding judge to be improvidently issued, but it did not award any damages of any kind to the defendants, hence, unless the High Court or the CA rules on this, this Court coud not grant any damages by virtue of the improvident attachment made by this Court thru its former presiding judge, which was claimed by the defendants in their counter claim. (3) This Court hereby reiterates in toto its Decision in this case dated July 20, 1994. 30 (Emphasis ours) The RTC also issued an Order dated December 2, 1994, 31 denying the Motion for Reconsideration of Spouses Yu. 32
In the same December 2, 1994 Order, the RTC granted two motions filed by Te, a Motion to Correct and to Include Specific Amount for Interest and a Motion for Execution Pending Appeal. 33 The RTC also denied Spouses Yus Notice of Appeal 34 from the July 20, 1994 Decision and August 9, 1994 Order of the RTC. From said December 2, 1994 RTC Order, Spouses Yu filed another Notice of Appeal 35 which the RTC also denied in an Order 36 dated January 5, 1995. Spouses Yu filed with the CA a Petition 37 for Certiorari, Prohibition and Mandamus, docketed as CA-G.R. SP No. 36205, questioning the denial of their Notices of Appeal; and seeking the modification of the July 20, 1994 Decision and the issuance of a Writ of Execution. The CA granted the Petition in a Decision 38 dated June 22, 1995. Hence, Spouses Yu filed with the CA an appeal 39 docketed as CA-G.R. CV No. 52246, questioning only that portion of the July 20, 1994 Decision where the RTC declined to rule on their counterclaim for damages. 40 However, Spouses Yu did not dispute the specific monetary awards granted to respondent Te; and therefore, the same have become final and executory. Although in the herein assailed Decision 41 dated March 21, 2001, the CA affirmed in toto the RTC Decision, it nonetheless made a ruling on the counterclaim of Spouses Yu by declaring that the latter had failed to adduce sufficient evidence of their entitlement to damages. Spouses Yu filed a Motion for Reconsideration 42 but the CA denied it in the herein assailed Resolution 43 dated October 14, 2002. Spouses Yu filed the present Petition raising the following issues: I. Whether or not the appellate court erred in not holding that the writ of attachment was procured in bad faith, after it was established by final judgment that there was no true ground therefor. II. Whether or not the appellate court erred in refusing to award actual, moral and exemplary damages after it was established by final judgment that the writ of attachment was procured with no true ground for its issuance. 44
There is one preliminary matter to set straight before we resolve the foregoing issues. According to respondent Te, 45 regardless of the evidence presented by Spouses Yu, their counterclaim was correctly dismissed for failure to comply with the procedure laid down in Section 20 of Rule 57. Te contends that as Visayan Surety was not notified of the counterclaim, no judgment thereon could be validly rendered. Such argument is not only flawed, it is also specious. PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
499 of 501
As stated earlier, Spouses Yu filed a Claim Against Surety Bond on the same day they filed their Answer and Urgent Motion to Dissolve Writ of Preliminary Attachment. 46 Further, the records reveal that on June 18, 1993, Spouses Yu filed with the RTC a Motion to Give Notice to Surety. 47 The RTC granted the Motion in an Order 48 dated June 23, 1993. Accordingly, Visayan Surety was notified of the pre-trial conference to apprise it of a pending claim against its attachment bond. Visayan Surety received the notice on July 12, 1993 as shown by a registry return receipt attached to the records. 49
Moreover, even if it were true that Visayan Surety was left in the proceedings a quo, such omission is not fatal to the cause of Spouses Yu. In Malayan Insurance Company, Inc. v. Salas, 50 we held that "x x x if the surety was not given notice when the claim for damages against the principal in the replevin bond was heard, then as a matter of procedural due process the surety is entitled to be heard when the judgment for damages against the principal is sought to be enforced against the suretys replevin bond." 51 This remedy is applicable for the procedures governing claims for damages on an attachment bond and on a replevin bond are the same. 52
We now proceed to resolve the issues jointly. Spouses Yu contend that they are entitled to their counterclaim for damages as a matter of right in view of the finality of our June 8, 1994 Resolution in G.R. No. 114700 which affirmed the finding of the CA in its September 14, 1993 Decision in CA-G.R. SP No. 31230 that respondent Te had wrongfully caused the attachment of their properties. Citing Javellana v. D.O. Plaza Enterprises, Inc., 53 they argue that they should be awarded damages based solely on the CA finding that the attachment was illegal for it already suggests that Te acted with malice when she applied for attachment. And even if we were to assume that Te did not act with malice, still she should be held liable for the aggravation she inflicted when she applied for attachment even when she was clearly not entitled to it. 54
That is a rather limited understanding of Javellana. The counterclaim disputed therein was not for moral damages and therefore, there was no need to prove malice. As early as in Lazatin v. Twao, 55 we laid down the rule that where there is wrongful attachment, the attachment defendant may recover actual damages even without proof that the attachment plaintiff acted in bad faith in obtaining the attachment. However, if it is alleged and established that the attachment was not merely wrongful but also malicious, the attachment defendant may recover moral damages and exemplary damages as well. 56 Either way, the wrongfulness of the attachment does not warrant the automatic award of damages to the attachment defendant; the latter must first discharge the burden of proving the nature and extent of the loss or injury incurred by reason of the wrongful attachment. 57
In fine, the CA finding that the attachment of the properties of Spouses Yu was wrongful did not relieve Spouses Yu of the burden of proving the factual basis of their counterclaim for damages. To merit an award of actual damages arising from a wrongful attachment, the attachment defendant must prove, with the best evidence obtainable, the fact of loss or injury suffered and the amount thereof. 58 Such loss or injury must be of the kind which is not only capable of proof but must actually be proved with a reasonable degree of certainty. As to its amount, the same must be measurable based on specific facts, and not on guesswork or speculation. 59 In particular, if the claim for actual damages covers unrealized profits, the amount of unrealized profits must be estalished and supported by independent evidence of the mean income of the business undertaking interrupted by the illegal seizure. 60
Spouses Yu insist that the evidence they presented met the foregoing standards. They point to the lists of their daily net income from the operation of said passenger bus based on used ticket stubs 61 issued to their passengers. They also cite unused ticket stubs as proof of income foregone when the bus was wrongfully seized. 62 They further cite the unrebutted testimony of Josefa Yu that, in the day-to-day operation of their passenger bus, they use up at least three ticket stubs and earn a minimum daily income of P1,500.00. 63
In ruling that Spouses Yu failed to adduce sufficient evidence to support their counterclaim for actual damages, the CA stated, thus: PROVISIONAL REMEDIES Rule 57: Preliminary Attachment
500 of 501
In this case, the actual damages cannot be determined. Defendant-appellant Josefa Yu testified on supposed lost profits without clear and appreciable explanation. Despite her submission of the used and unused ticket stubs, there was no evidence on the daily net income, the routes plied by the bus and the average fares for each route. The submitted basis is too speculative and conjectural. No reports regarding the average actual profits and other evidence of profitability necessary to prove the amount of actual damages were presented. Thus, the Court a quodid not err in not awarding damages in favor of defendants-appellants. 64
We usually defer to the expertise of the CA, especially when it concurs with the factual findings of the RTC. 65 Indeed, findings of fact may be passed upon and reviewed by the Supreme Court in the following instances: (1) when the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) where there is a grave abuse of discretion in the appreciation of facts; (4) when judgment is based on a misapprehension of facts; (5) when the lower court, in making its findings, went beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6) when the factual findings of the CA are contrary to those of the trial court; (7) when the findings of fact are themselves conflicting; (8) when the findings of fact are conclusions made without a citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondents; (10) when the findings of fact of the lower court are premised on the supposed absence of evidence and are contradicted by the evidence on record. 66 However, the present case does not fall under any of the exceptions. We are in full accord with the CA that Spouses Yu failed to prove their counterclaim. Spouses Yus claim for unrealized income of P1,500.00 per day was based on their computation of their average daily income for the year 1992. Said computation in turn is based on the value of three ticket stubs sold over only five separate days in 1992. 67 By no stretch of the imagination can we consider ticket sales for five days sufficient evidence of the average daily income of the passenger bus, much less its mean income. Not even the unrebutted testimony of Josefa Yu can add credence to such evidence for the testimony itself lacks corroboration. 68
Besides, based on the August 29, 1994 Manifestation 69 filed by Sheriff Alimurung, it would appear that long before the passenger bus was placed under preliminary attachment in Civil Case No. 4061-V-93, the same had been previously attached by the Sheriff of Mandaue City in connection with another case and that it was placed in the Cebu Bonded Warehousing Corporation, Cebu City. Thus, Spouses Yu cannot complain that they were unreasonably deprived of the use of the passenger bus by reason of the subsequent wrongful attachment issued in Civil Case No. 4061-V-93. Nor can they also attribute to the wrongful attachment their failure to earn income or profit from the operation of the passenger bus. Moreover, petitioners did not present evidence as to the damages they suffered by reason of the wrongful attachment of Lot No. 11. Nonetheless, we recognize that Spouses Yu suffered some form of pecuniary loss when their properties were wrongfully seized, although the amount thereof cannot be definitively ascertained. Hence, an award of temperate or moderate damages in the amount of P50,000.00 is in order. 70
As to moral and exemplary damages, to merit an award thereof, it must be shown that the wrongful attachment was obtained by the attachment plaintiff with malice or bad faith, such as by appending a false affidavit to his application. 71
Spouses Yu argue that malice attended the issuance of the attachment bond as shown by the fact that Te deliberately appended to her application for preliminary attachment an Affidavit where Sy perjured himself by stating that they had no intention to pay their obligations even when he knew this to be untrue given that they had always paid their obligations; and by accusing them of disposing of their properties to defraud their creditors even when he knew this to be false, considering that the location of said properties was known to him. 72
The testimony of petitioner Josefa Yu herself negates their claim for moral and exemplary damages. On cross-examination she testified, thus: Q: Did you ever deposit any amount at that time to fund the check? A: We requested that it be replaced and staggered into smaller amounts. COURT: Did you fund it or not? Atty. Ferrer: The three checks involved? Atty. Florido: Already answered. She said that they were not able to fund it. Atty. Ferrer: And as a matter of fact, you went to the bank to close your account? A: We closed account with the bank because we transferred the account to another bank. Q: How much money did you transfer from that bank to which the three checks were drawn to this new bank? A: I dont know how much was there but we transferred already to the Solid Bank. Q: Who transferred? A: My daughter, sir. 73 (Emphasis ours) Based on the foregoing testimony, it is not difficult to understand why Te concluded that Spouses Yu never intended to pay their obligation for they had available funds in their bank but chose to transfer said funds instead of cover the checks they issued. Thus, we cannot attribute malice nor bad faith to Te in applying for the attachment writ. We cannot hold her liable for moral and exemplary damages. As a rule, attorneys fees cannot be awarded when moral and exemplary damages are not granted, the exception however is when a party incurred expenses to lift a wrongfully issued writ of attachment.1awphi1.net 74 Without a doubt, Spouses Yu waged a protracted legal battle to fight off the illegal attachment of their properties and pursue their claims for damages. It is only just and equitable that they be awarded reasonable attorneys fees in the amount ofP30,000.00. In sum, we affirm the dismissal of the counterclaim of petitioners Spouses Yu for actual, moral, and exemplary damages. However, we grant them temperate damages and attorneys fees. WHEREFORE, the petition is partly GRANTED. The March 21, 2001 Decision of the Court of Appeals isAFFIRMED with the MODIFICATION that petitioners counterclaim is PARTLY GRANTED. Gregorio Yu and Josefa Yu are awarded P50,000.00 temperate damages and P30,000.00 attorneys fees. No costs. SO ORDERED.