Provisional Remedies Cases - Rule 57

PROVISIONAL REMEDIES
Rule 57: Preliminary Attachment

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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

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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

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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

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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

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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,

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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

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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:

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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.

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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

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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


11 of 501

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

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

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.


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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.)

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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.

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.

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
public officer, or an officer of a corporation or an attorney,
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;

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.

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

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


21 of 501

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,

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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.


23 of 501

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

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.


25 of 501

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.

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.

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

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.

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.

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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

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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.

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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

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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.

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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.

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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

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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

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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.

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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.

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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.

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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

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(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

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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)

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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]).

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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.

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Claude Neon Lights v. Phil Advertising, 57 Phil. 607 (Case not Found)


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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

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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

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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

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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.

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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

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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

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.


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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

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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.).

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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.

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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.

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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

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(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

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.


60 of 501

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:

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


62 of 501

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.

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

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
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,

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

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.

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No pronouncement as to costs.
SO ORDERED.

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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


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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

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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
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

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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.

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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

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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

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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;

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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.

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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
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.

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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

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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.
SO ORDERED.

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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:

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. . . 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

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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-

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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
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

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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
public officer, or an officer of a corporation, or an attorney,
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

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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.


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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

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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.

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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

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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.


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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

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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
also, at any time either before or after the release of the
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)

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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.


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La Granja v. Samson, 58 Phil. 378

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.

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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.


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Section 3

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.

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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

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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.


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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.

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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

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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

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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

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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.

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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

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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

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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

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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.


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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,

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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.

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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

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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

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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

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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.


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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


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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.

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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

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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

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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

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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


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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

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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

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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

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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

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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

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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:

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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.

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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

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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.


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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

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:

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(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
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
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

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.

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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).

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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

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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.


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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

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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

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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.

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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.

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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.


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Section 5

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.

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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
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

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
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

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.

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.


144 of 501

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
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.

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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

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:

147 of 501

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.

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.

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.
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

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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:

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

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:

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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

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.

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

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
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

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.

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.
SO ORDERED.


159 of 501

Section 6

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

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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:

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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

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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

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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.


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Section 7

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

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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

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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.


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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.

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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.
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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;

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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)

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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.

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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

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.

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.


175 of 501

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

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).

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:

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

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,

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.


181 of 501

Du v. Stronghold Insurance, 433 S 43

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

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


183 of 501

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

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:

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.

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

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

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 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.


189 of 501

Walker v. McMicking, 14 Phil. 668

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.

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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

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

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.

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.

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
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

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


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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.

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.

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.

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


200 of 501

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.

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

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.


203 of 501

Sebastian v. Valino, 224 S 256
FIRST DIVISION

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.

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.

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.


206 of 501

Villareal v. Rarama, 247 S 493
SECOND DIVISION

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.

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:

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

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.


210 of 501

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.

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.


212 of 501

Elipe v. Fabre, 241 S 249
SECOND DIVISION

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.

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

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.


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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.

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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.


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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.

218 of 501

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

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


220 of 501

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


221 of 501

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

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

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]).

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

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.
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.
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

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

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

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

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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

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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

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

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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.

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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.

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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.


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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

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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

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."

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(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.


239 of 501

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


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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

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

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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 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


243 of 501

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

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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.


245 of 501

Section 8

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,

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;

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

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

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 .


250 of 501

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

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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.

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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

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to judge for itself whether or not the order for the advance
execution of a judgment is valid.
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.]

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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

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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

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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.


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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.

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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.

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.

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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.

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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.


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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

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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]).

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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

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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
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.


266 of 501

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

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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

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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

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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.


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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.

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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
judgment debtor not exempt from execution . . .
Real property, stocks, shares, debts, credits, and other
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:

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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

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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.


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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.

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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

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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.

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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

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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

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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

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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.


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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.

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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

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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

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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.

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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.


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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.

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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

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(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

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


290 of 501

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

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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.


292 of 501

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.

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:

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:

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

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.


297 of 501

Section 12

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)

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

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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
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."

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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

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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

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.

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.


304 of 501

Section 13

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:

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
ERROR OF LAW IN HOLDING (BY IMPLICATION) THAT
RESPONDENT JUDGE DID NOT COMMIT GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION.
THIRD ERROR
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

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.
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

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.
the party whose property has been attached, or the person
appearing on his behalf, may, upon reasonable notice to the
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.


308 of 501

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

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

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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.
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
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. .. .

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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

attached properly, or before any attachment shall have been
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

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.
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
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
an amount sufficient to satisfy such demand besides costs or
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

attached properly, or before any attachment shall have been
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

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.


314 of 501

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,

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

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.

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)


318 of 501

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

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.

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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.

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.

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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.


323 of 501

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

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:

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

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:
issuance.The party whose property has been attached may
todischarge the attachment on the ground that the same was
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

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


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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.


329 of 501

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.

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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

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)


332 of 501

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

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:

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:

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.

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.

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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.

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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.


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Section 14

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;

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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

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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.

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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
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)
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

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

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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.


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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

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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

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

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.


349 of 501

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.

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

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.
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.

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


353 of 501

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

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.

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


356 of 501

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

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,

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

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.


360 of 501

Section 15

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

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


362 of 501

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

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:

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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.


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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

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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.


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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

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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.

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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

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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?

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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

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:

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Section 15. Execution of money judgments. The officer must
the property, real and personal of every name and nature
sufficient amount of such property, if they be sufficient, and
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.


374 of 501

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
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

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

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

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
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


378 of 501

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
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:

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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

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

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

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
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....

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

384 of 501

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.


385 of 501

Section 17

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).

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

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

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.


389 of 501

Phil. British Assurance Co. v. IAC, 150 S 520
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
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

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
an amount sufficient to satisfy such demand besides costs, or
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.

391 of 501

SEC. 12. Discharge of attachment upon giving counterbond.
appearing on his behalf, may, upon reasonable notice to the
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
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,

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.


393 of 501

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

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

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:

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,

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


398 of 501

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


399 of 501

Vadil v. de Venecia, 9 S 374
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

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.

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.


402 of 501

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

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

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

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


406 of 501

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

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.


408 of 501

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.)

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.


410 of 501

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


411 of 501

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

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

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.

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

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

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.


416 of 501

Section 20

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

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.

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

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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;

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(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.

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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
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422 of 501

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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).

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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

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.

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:

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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

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.


428 of 501

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;

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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.

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

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.

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)


433 of 501

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

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.

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

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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

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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
be filed before the tirial or before appeal is perfected or before
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

438 of 501

respondent appellate court is AFFIRMED. The temporary restraining order
issued on February 20, 1986, is lifted.
SO ORDERED.


439 of 501

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

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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

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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.


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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:.
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
facts showing his right to damages and the amount thereof.

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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
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

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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.

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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

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.
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.

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:
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
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.
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.

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

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

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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.


451 of 501

BA Finance v. CA, 161 S 608
THIRD DIVISION

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).
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.

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

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

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;

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. . . 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.


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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

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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.
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

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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".

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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

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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.

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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).

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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

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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.


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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.

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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

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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

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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
facts showing his right to damages and the amount thereof.
the attachment was issued or his surety or sureties. before the
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

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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.


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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;

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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

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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

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.


473 of 501

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

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

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: . . .

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.


477 of 501

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.

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:

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

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."
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

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)

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

P139,720.30

483 of 501

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.

By:

_____________________
Payee
Checked and recommended by:
_______________________
Office Assistant
APPROVED BY:
_______________________
President"
28

(Emphasis supplied)

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:

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:

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

(Emphasis supplied)

486 of 501

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?

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.

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?

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

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.


491 of 501

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


492 of 501

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

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

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

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.


496 of 501

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.

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

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.

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:

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


501 of 501

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.

Provisional Remedies Cases - Rule 57

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PROVISIONAL REMEDIES

Rule 57: Preliminary Attachment

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