PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. THE COURT OF APPEALS, HON.

PEDRO T. SANTIAGO, as Judge, RTC of Quezon City Branch 101, FALCON GARMENTS
CORPORATION, QUALITY LABELS, INC., ROBERT SY doing business under the name
and style Jobert Printing Services; EUGENIO POA, MAGIN TABUSO, MAKILITO
MAHINAY, EFREN CACHERO, CESAR M. TORIO and EFREN C. GUMBAC,respondents.
DECISION
MELO, J.:
Assailed and sought to be set aside in the instant petition is the decision of respondent Court of
Appeals promulgated on September 13, 1996 dismissing herein petitioner Philippine Bank of
Communications petition for certiorari impugning an order granting the motion for the issuance of a
writ of execution pending appeal issued by the Regional Trial Court of the National Capital Judicial
Region (Branch 101, Quezon City), in Civil Case No. Q-95-22625, entitled Falcon Garments
Corporation, et al. vs. Philippine Bank of Communications.
The antecedent facts of the case as gathered from the record are as follows:
Sometime in 1989, private respondent Falcon Garments Corporation (Falcon) opened Current
Account No. 25-00640-7 at BMA Quezon City Branch of petitioner Philippine Bank of Communications
(PBCom). Subsequently, on November 27, 1992, private respondent Falcon obtained a loan from
petitioner in the principal sum of Four Million Seven Hundred Thousand Pesos (P4,700,000.00) with
interest at 17% per annum and penalty at 12% per annum in case of default. Falcon failed to pay its
loan on due date and went in default in December, 1993.
On February 9, 1995, Falcon filed a complaint with the Regional Trial Court of Quezon City against
PBCom which was docketed as Civil Case No. Q-95-22625 and raffled to Branch 78, presided over by
Judge Percival Mandap-Lopez. The complaint prayed for the restoration to Falcons current account of
alleged unauthorized withdrawals totalling P12, 729,092.78 which were made from 1990 to 1992, plus
interest, damages, and attorneys fees.
In its answer, PBCom denied liability and interposed a compulsory counterclaim in the sum of
P4,700,000.00, plus the stipulated interest and penalty, damages, and attorneys fees.
On January 2, 1996, the trial court rendered a decision against PBCom the dispositive portion of
which reads:
WHEREFORE, defendant is ordered to restore immediately to plaintiffs Current Account No. 25-006407
the sum of P12,729,092.78, plus interest at the rate of 12% per annum to commence from the date of
the filing of the complaint until the said amount is fully restored and operate the said account in
accordance with the instructions of plaintiff, acting through its board of directors. And to pay plaintiffs
the following sums:

a.

P 500,000.00 as exemplary damages;

b.

P 500,000.00 as attorneys fees; and

c.

P 200,000.00 as litigation expenses.

Plaintiff FALCON is ordered to pay defendant its loan at P 4,700,000.00 plus interest at the rate of 12%
per annum to commence from the date of filing of the complaint. All other claims and counterclaims
are dismissed for lack of merit.
Petitioner PBCom seasonably filed a notice of appeal, while private respondent Falcon filed a
Motion for Execution Pending Appeal dated February 7, 1996. However, before Branch 78 could
resolve said motion, Judge Lopez inhibited himself and the case was re-raffled to Branch 101, presided
over Judge Pedro T. Santiago.
Private respondent Falcon filed an Ex-Parte Manifestation and Motion dated May 7, 1996, claiming
that with its strained relations with PBCom, it was no longer practicable to bank with petitioner, and
prayed that the money judgement be not restored to its current account but instead be directly paid to
it (Rollo, p. 132).
On the very same day of the filing of the motion, Judge Santiago granted the same and
authorized the issuance of a writ of execution pending appeal. The dispositive portion of said order
provides:
WHEREFORE, premises considered, finding merit and justification in plaintiffs motion, the Court hereby
grants its motion for execution pending appeal hereby ordering defendant Bank to immediately pay
the plaintiff the sum of P12,729,092.78 with 12% per annum and plaintiffs obligation to defendant
Bank be likewise paid by plaintiff in the amount of P4,700,000.00 with interest also at 12% per annum,
as well as the other damages stated in the decision of Branch 78 dated January 2, 1996, upon a
plaintiffs bond of P5,000,000.00 conditioned to answer for whatever damages which defendants may
suffer by virtue of this Order.
The writ was issued on May 14, 1996, and on May 16, 1996, the writ was served upon PBCom
which sought the intercession of the Court of Appeals (CA-G.R. SP No. 40636). On June 4, 1996, a writ
of preliminary injunction was issued by the Court of Appeals restraining its implementation.
On September 13, 1996, the Court of Appeals eventually upheld the validity of the writ of
execution pending appeal and forthwith dissolved the writ of preliminary injunction.
On the same day, private respondent Falcon obtained an alias writ of execution which served
upon petitioner on the same afternoon.
On September 16, 1996, the present petition was filed, with prayer for a temporary restraining
order, preliminary writ of injunction and mandatory injunction alleging that:

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN AFFIRMING THE
ORDER OF JUDGE PEDRO SANTIAGO GRANTING THE ISSUANCE OF A WRIT OF EXECUTION PENDING
APPEAL CONSIDERING THAT GOOD REASONS DO NOT EXIST FOR THE ISSUANCE OF A WRIT OF
EXECUTION PENDING APPEAL UNDER SECTION 2, RULE 39 OF RULES OF COURT.

as the Court of Appeals, to issue the writ of certiorari and failure to do so would constitute grave abuse
of discretion on its part.
It is in this regard that we find that the Court of Appeals committed grave abuse of discretion in
sustaining the trial court.

Petitioner further avers that:

3.01 The privelege respondents in this case ILLEGALLY and UNLAWFULLY implemented a
writ of execution pending appeal on 13 September 1996 using an expired writ, and
an Order of the Court of Appeal subject of this petition which was promulgated only
at 10 a.m. of 13 September 1996. On that day, herein petitioner has not receive
copy of said decision which is not yet final.
3.02 PBCom and counsel became aware of the questioned Decision of the Court of Appeals
when PBCom Ayala Branch, Makati City, called up and told them that private
respondents with about 30 people, brandished the questioned writ and decision
enabling private respondents to coerced, forced and intimidated the personnel of the
said petitioners branch resulting in the unlawful taking of about P1.7 million
3.03 Private respondents have foisted to petitioner and counsel that they (private
respondents) will again go to PBComs other branches to get in full balance of the
money judgement which is still on appeal.
(Rollo, pp. 92-93.)
Upon the above representation of petitioner duly verified by its counsel, Atty. Daniel Y. Laogan, of
Laogan Silva Baeza & Llantino Law Offices, we issued a temporary restraining order at the same time
requiring private respondents to comment.
On November 11, 1996, the Court issued a resolution, which among other things, noticed
petitioner urgent manifestation and motion dated September 17, 1996, praying that (a) counsel for
private respondent be required to explain why they claimed in their ex parte motio for issuance of an
alias writ of execution pending appeal before respondent RTC that the Court of Appeals had already
dissolved the injunction one hour before the promulgation of the Court of Appeals decision in CA-G.R.
SP No. 40636; (b) to require Judge Pedro T. Santiago of RTC Branch 101, Quezon City, to explain why he
issued the order dated September 13, 1993 granting the alias writ of execution pending appeal prior to
the courts receipt of its official copy of said decision dissolving the injunction and even before the
finality of the same.
Judge Santiago submitted his explanation on December 11,1996 which the Court noted on
January 17, 1997.

When Judge Santiago resolved the first ex parte manifestation and motion, the applicable
provision was Section 2, Rule 39 of the former Rules of Court which provided
Sec. 2. Execution pending appeal On motion of the prevailing party with to notice to the
adverse party, the court may, in is discretion, order the 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
therein.
The prevailing doctrine an principle then which continues to be the same as provided in
Paragraph 2, Section 2, of Rule 39 of the 1997 Rules of Civil Procedure is that discretionary execution
is permissible only when good reasons exist for immediately executing the judgment before finality or
pending appeal or even before the expiration of the time to appeal.
Good reasons consist of compelling circumstances justifying the immediate execution lest
judgment becomes illusory, or the prevailing party may after the lapse of time become unable to enjoy
it, considering the tactics of the adverse party who may apparently have no case except to delay. A
long line of jurisprudence indicates what constitute good reasons as contemplated by the Rules, the
following being merely representative of the same:
1. When in an intestate proceeding which has been pending for almost 29 years, one group of
heirs has not yet received the inheritance due them when the others have already received theirs,
or are about to do so (Borja vs. Encarnacion, 89 Phil. 239 (1951);
2. The advanced age of the prevailing party (Borja vs. Court of Appeals, 196 SCRA 847
[1991]; De Leon vs. Soriano, supra);
3. When the defeated party is in imminent danger of insolvency (Hacienda Navarro vs. Sabrador,
65 Phil. 536 [1938]; Lao vs. Mencias, 21 SCRA 1021 [1967]; Santos vs. Mojica, 26 SCRA 607
[1969];City of Manila vs. Court of Appeals, 72 SCRA 98 [1976]; De los Reyes vs. Capulong, 122
SCRA 631 [1983]; PVTA vs. Lucero, 125 SCRA 337 [1983]);
4. When the appeal is dilatory and the losing party intends to encumber and/or dispose of the
property subject of the case during the pendency of the appeal in order to defraud or deprive the
plaintiff of proprietary rights an defeat the ends of justice (Home Insurance Company vs. Court
of Appeals, 184 SCRA 318 [1990]); and

With the filing of the memoranda of the parties, the petition is now ripe for resolution.
The pith of the matter before us is the existence of good reasons which would justify execution
pending appeal. In the absence of such good reasons, it is incumbent upon the reviewing court, such

5. Deterioration of commodities subject to litigation (Federation of United Namarco Distributors,

Inc. vs. National Marketing Corp., 4 SCRA 867 [1962]).

The supposed good reasons relied upon by Judge Santiago to justify the discretionary execution
pending appeal are spelled out in the May 7, 1996 Order, reading in relevant part as follows
This Court has given serious thoughts on the restrictive application of Section 2, Rule 39 of
the Rules of Court. Attached to the Reply to the Opposition filed by plaintiffs, are two
public documents. As annex A, the original carbon copies of the summons and complaint in
the case entitled Solid Bank Corporation vs. Falcon Garment Corporation et al., in Civil Case
No. 96-76567, a case for collection of sum of money and replevin (hereafter, referred to as
Complaint). And as Annex B, the original copy of a police blotter of the Center Police District
Command, Police Station No. 2, Baler St., Quezon City (hereafter referred to as police
blotter). It is observed the complaint filed by Solidbank against Falcon supports the material
allegations of plaintiffs in the hearing as reproduced above and as also quoted by defendant
in its opposition. The threats of impending criminal and civil cases alleged by plaintiffs are
now proven and established to be real. The complaint shows that Falcon is now being sued
for non-payment of its loan with Solidbank. The checks issued by Falcon to Solidbank,
forming part as Annexes D, E, F, G, H, and I of the complaint, bounced for being drawn
against insufficient funds. Annexes J, J-1, J-2, J-3, and J-4 also for the complaint, are written
with demands which carry the threat of criminal action for violation of Batas Pambansa Blg.
22 against Falcon Garment Corporation and/or its officers by Solidbank on February 14,
1996, seized the machineries, office and factory equipments of Falcon. The police blotter
even enumerates these machines and office equipments. With the seizure of plaintiffs
instruments in the operation of its business, the filing of collection cases against it, the
threat of criminal prosecution against its officers, the imminent threat to its industrial peace,
it is not remote that plaintiffs survival hangs on the balance. There is truth therefore to
plaintiffs claim that its only hope for survival and arresting threats of civil and criminal
cases, is the immediate execution of the judgment. This Court, also takes into
consideration, that plaintiffs ownership over the funds sought to be reinstated to Current
Account No. 25-00640-7, is not in dispute. All the circumstances enumerated by plaintiffs
under par. 3 of its motion combined with the facts established by the complaint of Solidbank
against Falcon and the police blotter, viewed from the above quoted opposition of
defendant, to the mind of this Court, constitute a sufficient evidence of good reason in
support of plaintiffs subject motion. Further and significantly taking into consideration
plaintiffs readiness to pay defendants counterclaim of P4,700,000.00 by deducting the
same from the principal account.
(Rollo pp. 40-41.)
The above stated order quotes the following transcribed testimony of Magin Tabuso, witness for
private respondents, thus

ANSWER:
It has great effect on the corporation as a whole, because as our credit today we have
an amount of P12,000,000.00 plus and one of the prominent creditors of PBCom and
also Solid Bank.
Q Do you have complete list of those creditors which you mentioned you have not paid as
a result of the unauthorized withdrawal or transfer of your account?
A Yes, we were not able to pay them as a result of those unauthorized withdrawals.
Q There are list of your creditors in paragraph 5.3 of your complaint, are they the same
creditors you are talking about?
A Yes, sir.
Q Inasmuch as you said that these creditors were not paid, what particular action were
undertaken by these creditors against your company?
A Our credit lines from the banks and from the other creditors were closed, sir.
Q What else?
A And we were not able to serve orders of valued customers because were not able to
meet the production due to financial difficulties.
Q Your claims of alleged illegal transfer of withdrawals, does this affect also the industrial
peace of your company?
A Yes, sir. There was a growing threat in the industrial peace of our company.
Q How many employees are holding your staff?
A We have about 200 workers, sir.
Q What particular threat are you talking about?

ATTY. MAHINAY: (on direct examination)

QUESTION:
Now, as an overall effect of the unauthorized withdrawal or transfer of account of your
corporation, can you tell what is its effect insofar as the operation of your corporation
is concerned?

A Usually these workers are dependent from our production and so they started to feel
restless and insecure sometimes and they feel demoralized, at times which led us to
attack, it paralyzes the whole operations.
(Rollo, pp. 39-40.)

The trial court concluded that the foregoing statements presented during the hearing of the
motion for execution pending appeal constitute good reasons for the discretionary execution. The
Court of Appeals agreed, but this Court is of a different persuasion and view.
The reasons relied upon are not compelling and thus can not constitute good reasons.
It is significant to stress that private respondent Falcon is a juridical entity and not a natural
person. Even assuming that it was indeed in financial distress and on the verge of facing civil or even
criminal suits, the immediate execution of a judgment in its favor pending appeal cannot be justified as
Falcons situation may not be likened to a case of a natural person who may be ill or may be of
advanced age. Even the danger of extinction of the corporation will not per se justify a discretionary
execution unless there are showings of other good reasons, such as for instance, impending insolvency
of the adverse party or the appeal being patently dilatory. But even as to the latter reason, it was
noted in Aquino vs. Santiago (161 SCRA 570 [1988]), that it is not for the trial judge to determine the
merit of a decision he rendered as this is the role of the appellate court. Hence, it is not within
competence of the trial court, in resolving a motion for execution pending appeal, to rule that the
appeal is patently dilatory and rely on the same as its bases for finding good reason to grant the
motion. Only an appellate court can appreciate the dilatory intent of an appeal as an additional good
reason in upholding an order for execution pending appeal which may have been issued by the trial
court for other good reasons, or in case where the motion for execution pending appeal is filed with the
appellate court in accordance with Section 2, paragraph (a), Rule 39 of the 1997 Rules of Court.
What is worse, only one case was actually filed against Falcon and this is the complaint for
collection filed by Solidbank. The other case are impending, so it is said. Other than said Solidbank
case, Falcons survival as a body corporate can not be threatened by anticipated litigation. This
notwithstanding, and even assuming that there was a serious threat to Falcons continued corporate
existence, we hold that it is not tantamount nor even similar to an impending death of a natural
person. The material existence of a juridical person is not on the same plain as that of human life. The
survival of a juridical personality is clearly outweighed by the long standing general policy of enforcing
only final and executory judgments.
In the recent case of David vs. Court of Appeals (G. R. No. 126556, July 28, 1997), we reiterated
our pronouncement in Roxas vs. Court of Appeals (157 SCRA 370 [1988]) that -Execution pending appeal in accordance with Section 2, of Rule 39 is, of course, the
exception. Normally, execution of a judgment should not be had until and unless it has become final
and executory -- i.e., the right to appeal has been renounced or waived, the period for appeal has
lapsed without an appeal having been taken, or appeal having been taken, the appeal has been
resolved and the records of the case have been returned to the court of origin -- in which case,
execution shall issue as a matter of right.
On the other hand, when the period of appeal has not expired, execution of the judgment
should not be allowed, save only if there be good reasons therefor, in the courts
discretion. As provided in Section 2 Rule 39 of the x x Rules x x, the existence of good
reasons is what confers discretionary power on a Court x x to issue a writ of execution must
constitute superior circumstances demanding urgency which will outweigh the injury or
damages should the losing party secure a reversal of the judgment.

Additionally, we cannot help observing that the May 7, 1996 order of execution issued by Judge
Santiago deliberately modified and failed to conform to the dispositive portion of the January 2, 1996
decision rendered by Judge Percival Mandap-Lopez, which is the decision Judge Santiagos order
intended to execute, and that this variance was upon express motion to Falcon (See: prayer of
Falcons Ex parte Manifestation & Motion, Annex 2-Comment, pp. 130-132, rollo.)
The January 2, 1996 decision ordered petitioner to restore immediately to plaintiffs Current
Account No. 25-00640-7 the sum of P12,729,092.78, plus interest at the rate of 12% per annum to
commence from the date of the filing of the complaint until the said amount is fully restored, and to
operate the said account in accordance with the instructions of plaintiffs, acting through its board of
directors. In contrast, the May 7, 1996 order directed petitioner to immediately pay the sum
of P12,729,092.78, plus interest and other damages.
At first glance the order to restore private respondents current account in the aforementioned
amount and the order to immediately pay the same amount directly to private respondent may seem
to be same, for, after all, upon restoring the said amount, what may prevent the depositor from
withdrawing the entire amount?
However, after more careful and deliberate consideration, one will notice a whale of distinction
between the two aforementioned orders. For one thing, if petitioner PBCom were ordered to credit the
money judgment to Falcons current account with its BMA Quezon City Branch and to operate said
account in accordance with the instructions of the board of directors of Falcon, once credited, release
of any amount from said account may be done only upon proper resolution of private respondent
Falcons board of directors. On the other hand, the order dated May 7, 1996 directed the immediate
payment to Falcon of the corresponding money judgment which may thus be used or misused with or
without proper instructions of Falcons board of directors.
Besides, the harassment complained of by the petitioner bank would not have happened had
respondent trial court issued a writ which faithfully conformed to the judgment sought to be
enforced. If Falcons current account were merely credited in accord with the judgment, a simple and
orderly banking procedure may just have taken place. In fact, it would have been absolutely
unnecessary to deputize anybody, other that the sheriff of the trial court concerned, to enforce the writ
ordering petitioner bank to restore the current account of private respondent.
It is well-settled general principle that a writ of execution must conform substantially to every
essential particular of he judgment promulgated. Execution which is not in harmony with the judgment
is bereft of validity. It must conform particularly to that ordained or decreed in the dispositive portion
of the decision (GSIS vs. Court of Appeals, 218 SCRA 233 [1993]). An order of execution which varies
the tenor of the judgment or exceeds the terms thereof is a nullity (Foremost Farms, Inc. vs. Dept. of
Labor and Employment, 251 SCRA 123 [1995];Gamboas Inc. vs. Court of Appeals, 72 SCRA 131
[1976]; Villoria vs. Piccio, 95 Phil. 802 [1954]).
Falcon has ignored and has remained silent in regard to PBComs charge of harassment and
irregular resort to armed policeman and civilians with acetylene torches in the enforcement of the writ
of execution pending appeal, thus lending credence to PBComs complaint. However, it also appears
that petitioner PBCom does not intend to pursue the administrative aspect of these alleged
irregularities, its prayer in the petition being completely silent on these points. Nevertheless, we find

necessary to exhort both private respondent and its counsel, as well as public respondent sheriffs not
to resort to such forms of harassment by using the strong arms of the law to the prejudice of any
party. Barbaric acts such as those complained of have no place in a civilized society. It is even more
abhorrent when such acts are with the participation or at the very least the acceptance of a member of
the bar who, under his oath, has sworn to uphold the rule of law.
WHEREFORE, premises considered, the instant petition is GRANTED. The decision of the Court
of Appeals dated September 13, 1996 in CA-G.R. SP No. 40636 is hereby ANNULLED and SET
ASIDE. The order of the Regional Trial Court of the National Capital Judicial Region, Branch 101,
stationed at Quezon City, dated May 7, 1996 in Civil Case No. Q-95-22625 is likewise ANNULLED and
SET ASIDE. Accordingly, the trial court is hereby ORDERED to determine the exact amount taken by
private respondent by virtue of the writ or writs of execution issued pursuant to the annulled order
dated May 7, 1996, which amount private respondent is hereby ORDERED to return to petitioner
Philippine Bank of Communications. No special pronouncement is made as to costs.
SO ORDERED.

Foremost also issued to respondent several Philippine peso promissory notes 7 covering various loans in
the aggregate amount of Php28,900,000.00, including Promissory Note No. 0051-97-03688 (Exhibit
"H") for PhpP16,500,000.00, at an interest rate of 14.5% per annum, due on February 9, 1998. 8
All the foregoing promissory notes are secured by two Continuing Guaranty/ Comprehensive Surety
Agreements (CG/CSA) executed in the personal capacities of spouses Henry and Ma. Julie Ann (Spouses
Tanchan) and Henry's brother, herein petitioner Santiago Tanchan (Santiago), 9for himself and as
attorney-in-fact of his wife and co-petitioner Rufina Tanchan (Rufina) under a Special Power of Attorney,
dated April 30, 1993, which grants Santiago authority to:
x x x borrow and/or contract debts and obligations involving, affecting or creating a charge or
liability on, or which may involve, affect or create a liability on the Property and/or my interest
therein, whether or not such debt/s or obligation/s contracted or to be contracted will benefit
me or the family, and to sign, execute and deliver in my name to or in favor of any party,
under such terms and conditions as my attorney-in-fact may deem necessary, appropriate or
convenient, any and all documents instruments or contract/s (including without limitations,
promissory notes, loan agreements, assignments, surety or guaranty undertakings, security
agreements) involving, affecting or creating a charge or liability on the Property." 10

Narvasa, C.J., (Chairman), Romero, Francisco and Panganiban, JJ., concur.

The liability of the sureties under both CG/CSAs is limited to Php150,000,000.00. 11

G.R. No. 164510

November 25, 2005

SPOUSES SANTIAGO and RUFINA TANCHAN, petitioners

vs.
ALLIED BANKING CORPORATION, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
By way of Petition for Review under Rule 45 of the Rules of Court, spouses Santiago and Rufina Tanchan
(petitioners) seek the modification of the June 15, 2004 Decision 1of the Court of Appeals (CA) which
affirmed the August 3, 2001 Decision2 and August 8, 2002 Order3 of Branch 137, Regional Trial Court
(RTC), Makati in Civil Case No. 98-2468.4
The relevant facts are of record.
For value received, Cebu Foremost Construction, Inc. (Foremost), through its Chairman and President
Henry Tanchan (Henry) and his spouse, Vice-President and Treasurer Ma. Julie Ann Tanchan (Ma. Julie
Ann) executed and delivered to Allied Banking Corporation (respondent) seven US$ promissory
notes,5 including Promissory Note No. 0051-97-036966 (Exhibit "G") for US$379,000.00, at 9.50%
interest rate per annum, due on February 9, 1998.

Exhibit "G" and all the Philippine peso promissory notes, including Exhibit "H", are secured not only by
the two CG/CSAs but also by a Real Estate Mortgage executed on February 14, 1997 by Henry, for
himself and as the legal guardian of the minors Henry Paul L. Tanchan and Don Henry L. Tanchan; his
wife Ma. Julie Ann; and Spouses Pablo and Milagros Lim, over real properties registered in their names
under Transfer Certificates of Title No. 115804, No. 111149, No. 110672 and No. 3815, all located in
Cebu City.12
In separate final demand letters, both dated May 14, 1998, respondent sought from Foremost payment
of US$1,054,000.00, as the outstanding principal balance, exclusive of interest and charges, of its
obligations under the seven US$ promissory notes,and PhP28,900,000.00 under its Philippine peso
promissory notes.13 Separate demands for payment were also made upon Spouses Tanchan 14and the
petitioners15 as sureties.
In a letter dated April 6, 1998, Foremost offered to cede to respondent, by way of dacion en pago, the
mortgaged real properties in full payment of its loan obligations. 16
On August 3, 1998, respondent instituted the extra-judicial foreclosure of the real estate mortgage to
satisfy its claim against Foremost in the aggregate "amount of Php55,578,826.77, inclusive of interest,
other charges and attorney's fees, equivalent to 10% of the total amount due as of May 3, 1998, plus
the costs and expenses of foreclosure."17At the public auction sale, respondent's bid of only
Php37,745,283.67 for all the mortgaged properties, including the buildings and improvements
thereon,18 was adjudged the sole and highest bid.
On October 13, 1998, respondent filed with the RTC a Complaint for Collection of Sum of Money with
Petition for Issuance of Writ of Preliminary Injunction against Foremost, Spouses Tanchan and herein
petitioners (collectively referred to as Foremost, et al.), praying that they be ordered to pay, jointly and
severally, the following amounts:19

Promissory Note

Amount

In support of its application for issuance of a writ of preliminary attachment, respondent submitted an
Affidavit executed by Elmer Elumbaring (Elumbaring), Branch Cashier/Loans Supervisor, Cebu,
Jakosalem Branch, stating that:

0051-96-09495

US$ 80,000.00 plus interest at the rate of 11.4% per annum from December 29,
1997 until fully paid and a penalty charge on the unpaid interest at the rate of 1%
per month reckoned from December 29, 1997 until fully paid and a penalty charge
on the unpaid principal reckoned from May 28, 1998 until fully paid.

0051-96-17617

US$110,000.00 plus interest at the rate of 11.4% per annum and a penalty charge
at the rate of 1% per month, all reckoned from December 29, 1997 until fully paid.

0051-96-19008

US$250,000.00 plus interest at the rate of 11.4% per annum and a penalty charge
at the rate of 1% per month all reckoned from November 30, 1997 until fully paid.

0051-96-24801

0051-96-00603

0051-97-02444

0051-97-03696
(Exhibit "G")

0051-97-03688
(Exhibit "H")

4. Defendants [Foremost, et al.] committed fraud in contracting the obligations upon which
the action is brought in that: a) to induce plaintiff [respondent] to grant the credit
accommodation they represented to the plaintiff [respondent] that they were in a financial
position to pay their obligations on maturity date in consideration of which plaintiff
[respondent] granted the credit accommodations. It turned out, however, that they were not
in such financial position when they failed to pay their obligations on maturity date; b) they
falsely represented that the proceeds of the Loan would be used as additional working capital
in consideration of which, plaintiff [respondent] granted the loans but when defendants
[Foremost, et al.] received the said proceeds, they diverted the same to a purpose other than
that for which they were intended as shown by the fact that defendants [Foremost, et al.]
were not able to fully pay the obligations at its maturity date;
5. There is no security whatsoever for the claim plaintiff [respondent] seeks to enforce by this
action, and only by the issuance of a writ of preliminary attachment can its interest be
protected.20

The application for writ of preliminary attachment was granted by the RTC in an Order dated November
3, 1998, to wit:
US$115,000.00 plus interest at the rate of 11.4% per annum and a penalty charge
at the rate of 1% per month all reckoned from December 29, 1997 until fully paid.
WHEREFORE, finding plaintiff's [respondent's] application for the issuance of a writ of
preliminary attachment sufficient in form and substance, and the ground set forth therein
being among those allowed by the Rules (Rule 57, Sec. 1 [e]), let a Writ of Preliminary
Attachment issue against the properties of defendants Cebu Foremost Construction,
US$75,000.00 plus interest at the rate of 11.4% per annum and a penalty charge at
Incorporated, Santiago Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan and Ma. Julie Ann T.
the rate of 1% per month all reckoned from December 29, 1997 until fully paid.
Tanchan, upon plaintiff's [respondent's] filing of a bond in the amount of FIFTY-FOUR MILLION
(P54,000,000.00) PESOS, conditioned to answer for whatever damage that the said
defendants [Foremost, et al.] may suffer by reason of the issuance of said writ should the
Court finally adjudge that plaintiff [respondent] was not entitled thereto.
US$45,000.00 plus interest at the rate of 11.4% per annum and a penalty charge at
the rate of 1% per month all reckoned from December 29, 1997 until fully paid.
SO ORDERED.21
Thus, armed with a writ of attachment,22 the sheriff levied several parcels of land registered in the
US$379,000.00 plus interest at the rate of 11.4% per annum reckoned from name of Foremost, et al.23
January 8, 1998 until fully paid and a penalty charge at the rate of 1% per month
from February 9, 1998 until fully paid.
In their Amended Answer with Counterclaim,24 Foremost, et al. acknowledged the authenticity and due
execution of the promissory notes but denied liability for the amounts alleged in the Complaint, the
computation of which they dispute due to the arbitrariness of the imposition of new interest rates.
PhpP7,466,795.67 plus interest at the rate of 20% per annum and a penaltyThey impugned the cause of action of respondent to collect the amount due under Exhibit "G" and
Exhibit "H" in view of the bank's prior extra-judicial foreclosure of the securities thereon, which
charge at the rate of 3% per month from August 10, 1998. (Emphasis supplied)
recourse bars collection of the amounts due on the same promissory notes. 25

Respondent also prayed for payment of attorney's fees equivalent to 25% of the total amount due,
expenses and costs of suit,

Foremost, et al. questioned the inclusion of Rufina as a party-defendant even when she was not bound
by the CG/CSAs which her husband Santiago signed in excess of his authority under the special power
of attorney to contract loans for the family but not to guarantee loans obtained by third persons. 26

The issuance of the writ of preliminary attachment was likewise objected to by Foremost on the ground
that it contracted the loans in good faith but was prevented from paying the same only because of the
economic crisis that beset the country. On the part of Spouses Tanchan and herein petitioners, they
claim that they had no personal participation or influence in the loan transactions except to ensure its
payment; hence, they could not have practiced fraud upon respondent because they did not personally
contract the loans with it.27 Thus, each sought payment of Php100,000,000.00 as moral damages for
the emotional and mental vexation visited upon them by respondent in causing the unwarranted
preliminary attachment of their properties.28
At the pre-trial, respondent submitted an Amended Pre-trial Brief where it admitted that Foremost's
Exhibit "G" and Exhibit "H" were among those secured by the real estate mortgage 29that it
earlierforeclosed, but the proceeds of the foreclosure sale satisfied only part of the amounts due on
said promissory notes and left a deficiency which is now the subject of their complaint. 30
The RTC issued a Pre-trial Order which limited the issues to be resolved to the following:
1. Does the [respondent] have a cause of action with respect to the promissory notes marked
as [Exhibits] G31 and H32?
2. Is [petitioner] Rufina C. Tanchan liable on the basis of the Continuing
Guaranty/Comprehensive Surety Agreements because of her authority from [sic] Santiago
Tanchan, Jr. was limited to borrow money only for the benefit of the family?
3. Is the unilateral increase of the interest rate of [respondent] valid?
4. What is the amount and nature of the damages that should be adjudged against the losing
party in favor of the prevailing party?33
As directed by the RTC in its Pre-trial Order, both parties presented affidavits in lieu of direct
examination of their witnesses.
For respondent, Fresnido Bandilla (Bandilla), Manager, Legal Department, testified that the obligations
of Foremost which were secured by the real estate mortgage had amounted to Php61,155,339.36 as of
the date of the foreclosure sale, and that with respondent's bid of only Php37,745,283.67 being
adjudged the lone and highest bid, there remained an unpaid balance of
Php23,415,115.69.34 Elumbaring corroborated Bandilla's testimony. 35
On the other hand, Henry averred that even in the wake of the Asian financial crisis, Foremost
struggled to meet interest payments on its loan obligations with respondent, but the point came when
there were no more construction jobs to be had, and Foremost was constrained to default on its
obligations.36
Santiago testified that he and his spouse could not have defrauded respondent because they did not
directly contract the loans with it but merely acted as sureties. Thus, the issuance of the writ of
attachment against their properties was arbitrary, and brought upon them social humiliation and
emotional torment.37

After the parties submitted their respective memoranda,38the RTC rendered its August 31, 2001
Decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering defendants Cebu Foremost Construction,
Inc., Santiago Tanchan, Jr., Rufina C. Tanchan, Henry Tanchan and Ma. Julie Ann Tanchan,
solidarily, [to] pay plaintiff Allied Banking Corporation the following amounts: (1) US
$80,000.00, plus 8.75 % interest per annum from 7 June 1996 to 6 May 1997, 9.5% interest
per annum from 7 May 1997 until fully paid, and 1% penalty per month on the amount due
from maturity date and until fully paid; (2) US $110,00.00, plus 8.75% interest per annum
from 24 September to 29 May 1997, 9.5% interest per annum from 30 May 1997 until fully
paid, and 1% penalty per month on the amount due from maturity date until fully paid; (3) US
$570,000.00, plus 8.75% interest per annum from 8 October 1996 to 29 May 1997, 9.5%
interest per annum from 30 May 1997 until fully paid, and 1% penalty per month on the
amount due from maturity date until fully paid; (4) US $115,000.00 plus 9.5% interest per
month from 12 December 1996 until fully paid, and 1% penalty per month on the amount due
from maturity date until fully paid; (5) US $75,000.00, plus 9.5% interest per annum from 7
January 1997 until fully paid, and 1% penalty per month on the amount due from maturity
date until fully paid; (7) US $379,000.00, plus 9.5% interest per annum from 12 February 1997
to 8 December 1997, 11.4% interest per annum from 9 December 1997 until fully paid, and
1% penalty per month on the amount due from maturity date until fully paid;
(8) P7,582,945.85, plus 28.5% interest per annum, and 3% penalty per month, from the
foreclosure sale on 10 August 1998 until fully paid; (9) attorney's fees equivalent to 10% of
the amount due plaintiff. However, the liability of defendants' Santiago Tanchan, Jr., Rufina C.
Tanchan, Henry Tanchan and Ma. Julie Ann T. Tanchan is limited toP150,00,000.00 only.
Defendants' counterclaims are dismissed for lack of sufficient merit.
SO ORDERED.39
Foremost, et al. filed a Motion for Partial Reconsideration of Decision on the ground that respondent
failed to state a cause of action for the payment of any deficiency account under Exhibit "G" and
Exhibit "H". Its Complaint does not contain any allegation regarding a deficiency account; nor even an
allusion to the foreclosure sale conducted in partial satisfaction of said promissory notes. Although in
its Amended Pre-trial Brief, respondent mentioned that a deficiency account remained after the
foreclosure of the real estate mortgage, such statement did not have the effect of amending the
Complaint itself. Neither did the testimonies of Bandilla and Elumbaring about a deficiency account
take the place of a specific allegation of such cause of action in the Complaint. Thus, in the absence of
an allegation in the Complaint of a cause of action for the payment of a deficiency account, the RTC
had no factual or legal basis to grant such claim.40
Spouses Tanchan and herein petitioners also filed a Motion to Lift the Writ of Preliminary Attachment. 41
The RTC denied the Motion to Lift the Writ of Attachment in an Order 42 dated September 25, 2001, and
the Motion for Partial Reconsideration, in an Order 43dated August 8, 2002.
Foremost, et al. appealedto the CA under the following assignment of errors:

1. The lower court erred in not holding that having opted to extra-judicially foreclose the real
estate mortgage which was executed to secure the promissory notes marked as Exhibits "G"
and "H", the [respondent] is barred from filing an action for collection of the same;
2. The lower court erred in not holding that Rufina Tanchan did not authorize her husband,
Santiago J. Tanchan, Jr. to sign the Continuing Guaranty/ Comprehensive Surety Agreement
marked as Exhibit "I"; and
3. The lower court erred in not lifting the writ of preliminary attachment and granting the
claim for damages of the individual defendants by virtue of the wrongful issuance of the writ
of preliminary attachment.44
The CA dismissed the appeal in the June 15, 2004 Decision assailed herein.
Only petitioners took the present recourse to raise the following issues:
I. Whether or not the petitioners as mere sureties of the loans obtained by Cebu Foremost
Construction, Inc. were guilty of fraud in incurring the obligations so that a writ of preliminary
attachment may be issued against them?
II. Whether or not the respondent may claim for deficiency judgment on its seventh and eight
causes of action, not having alleged in its complaint that said loans were secured by a real
estate mortgage and after the foreclosure there was a deficiency as in fact in its complaint,
the respondent sought full recovery of the promissory notes subject of its seventh and eighth
cause of action?
III. Whether or not the lower court and the Court of Appeals erred in not awarding petitioners
damages for the wrongful issuance of a writ of preliminary attachment against them? 45
Being interrelated, the first and third issues will be resolved jointly.
The issues involve the validity of the writ of preliminary attachment as against the
properties of petitioners only, but not as against the properties of Foremost and Spouses
Tanchan, neither of whom appealed before the Court. The discussion that follows,
therefore, shall pertain only to the effect of the writ on petitioners.
One of the grounds cited by the CA in refusing to discharge the writ of attachment is that "it is now too
late for [petitioners] to question the validity of the writ" because they waited three long years to have
it lifted or discharged.46
Under Section 13, Rule 57 of the Rules of Court, a party whose property has been ordered attached
may file a motion "with the court in which the action is pending" for the discharge of the attachment
on the ground that it has been improperly issued or enforced. In addition, said party may file, under
Section 20, Rule 57, a claim for damages on account of improper attachment within the following
periods:

Sec. 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.47(Emphasis supplied)
Records reveal that the RTC issued the writ of preliminary attachment on November 3, 1998, 48 and as
early as March 23, 1999, in their Amended Answer with Counterclaim, petitioners already sought the
discharge of the writ.49 Moreover, after the RTC rendered its Decision on August 3, 2001 but before
appeal therefrom was perfected, petitioners filed on August 23, 2001 a Motion to Lift the Writ of
Preliminary Attachment, reiterating their objection to the writ and seeking payment of damages for its
wrongful issuance.50
Clearly, petitioners' opposition to the writ was timely.
The question now is whether petitioner has a valid reason to have the writ discharged and to claim
damages.
It should be borne in mind that the questioned writ of preliminary attachment was issued by the RTC
under Section 1(d), Rule 57 of the Rules of Court, to wit Sec. 1. Grounds upon which attachment may issue. - A plaintiff or any proper party may, at
the commencement of the action or at any time thereafter, have the property of the adverse
party attached as security for the satisfaction of any judgment that may be recovered in the
following cases:
(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;
and on the basis solely of respondent's allegations in its Complaint "that defendants [Foremost, et al.]
failed to pay their obligations on maturity dates, with the amount of US$1,054,000.00 and
Php7,466795.69 remaining unpaid; that defendants are disposing/concealing their properties with
intent to defraud the plaintiff and/or are guilty of fraud in the performance of their obligations; and that
there is no security whatsoever for the claim sought to be enforced." 51
Petitioners argue that the foregoing allegations are not sufficient to justify issuance of the writ,
especially in the absence of findings that they, as sureties, participated in specific fraudulent acts in
the execution and performance of the loan agreements with respondent. 52

In refusing to lift the writ, the RTC held that the lack of a specific factual finding of fraud in its decision
is not among the grounds provided under Sections 12 and 13, Rule 57 of the Rules of Court for the
discharge of the writ.53 The CA agreed for the reason that the RTC's affirmative action on the complaint
filed by respondent signifies its agreement with the allegations found therein that Foremost, et al.,
including herein petitioners, committed fraudulent acts in procuring loans from respondent. 54
Both courts are in error.
The present case fits perfectly into the mold of Allied Banking Corporation v. South Pacific Sugar
Corporation,55where a writ of preliminary attachment issued in favor of Allied Banking Corporation was
discharged by the lower courts for lack of evidence of fraud. In sustaining the discharge of the writ, the
Court held:
Moreover, even a cursory examination of the bank's complaint will reveal that it cited no
factual circumstance to show fraud on the part of respondents. The complaint only had a
general statement in the Prayer for the Issuance of a Writ of Preliminary Attachment,
reproduced in the attached affidavit of petitioner's witness Go who stated as follows:
4. Defendants committed fraud in contracting the obligations upon which the present
action is based and in the performance thereof. Among others, defendants induced
plaintiff to grant the subject loans to defendant corporation by willfully and
deliberately misrepresenting that, one, the proceeds of the loans would be used as
additional working capital and, two, they would be in a financial position to pay, and
would most certainly pay, the loan obligations on their maturity dates. In truth,
defendants had no intention of honoring their commitments as shown by the fact
that upon their receipt of the proceeds of the loans, they diverted the same to
illegitimate purposes and then brazenly ignored and resisted plaintiff's lawful
demands for them to settle their past due loan obligations
Such general averment will not suffice to support the issuance of the writ of
preliminary attachment. It is necessary to recite in what particular manner an
applicant for the writ of attachment was defrauded x x x.
Likewise, written contracts are presumed to have been entered into voluntarily and for a
sufficient consideration. Section 1, Rule 131 of the Rules of Court instructs that each party
must prove his own affirmative allegations. To repeat, in this jurisdiction, fraud is never
presumed. Moreover, written contracts such as the documents executed by the parties in the
present case, are presumed to have been entered into for a sufficient consideration. (Citations
omitted)
In the aforecited case -- as in the present case -- the bank presented the testimony of its account
officer who processed the loan application, but the Court discarded her testimony for it did not detail
how the corporation induced or deceived the bank into granting the loans. 56
Also apropos is Ng Wee v. Tankiansee57 where the appellate court was questioned for discharging a writ
of preliminary attachment to the extent that it affected the properties of respondent Tankiansee, a
corporate officer of Wincorp, both defendants in the complaint for damages which petitioner Ng Wee
had filed with the trial court. In holding that the appellate court correctly spared respondent Tankiansee
from the writ of preliminary attachment, the Court cited the following basis:

In the instant case, petitioner's October 12, 2000 Affidavit 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, 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. 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 x x x. 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. (Emphasis
supplied)
Indeed, a writ of preliminary attachment is too harsh a provisional remedy to
be issued based on mere abstractions of fraud.58 Rather, the rules require that for the writ to issue,
there must be a recitation of clear and concrete factual circumstances manifesting that the debtor
practiced fraud upon the creditor at the time of the execution of their agreement in that said debtor
had a pre-conceived plan or intention not to pay the creditor. 59Being a state of mind, fraud cannot be
merely inferred from a bare allegation of non-payment of debt or non-performance of obligation. 60
As shown in Ng Wee, the requirement becomes all the more stringent when the application for
preliminary attachment is directed against a defendant officer of a defendant corporation, for it will not
be inferred from the affiliation of one to the other that the officer participated in or facilitated in any
fraudulent practice attributed to the corporation. There must be evidence clear and convincing that the
officer committed a fraud or connived with the corporation to commit a fraud; only then may the
properties of said officer, along with those of the corporation, be held under a writ of preliminary
attachment.
There is every reason to extend the foregoing rule, by analogy, to a mere surety of the defendant. A
surety's involvement is marginal to the principal agreement between the defendant and the plaintiff;
hence, in order for the surety to be subject to a proceeding for issuance of a writ of preliminary
attachment, it must be shown that said surety participated in or facilitated the fraudulent practice of
the defendant, such as by offering a security solely to induce the plaintiff to enter into the agreement
with the defendant.

There is neither allegation nor innuendo in the Complaint of respondent or the Affidavit of Elumbaring
that petitioners as sureties or officers of Foremost participated in or facilitated the commission of fraud
by Foremost, et al. against respondent. In fact, there is no mention of petitioners, much less a recital of
their role or influence in the execution of the loan agreements. The RTC cited an allegation that
petitioners are disposing/concealing their properties with intent to defraud respondent, but there is no
hint of such scheme in the five paragraphs of the Complaint61 or in the four corners of the Affidavit of
Elumbaring.62 All that is alleged is that Foremost obtained loans from respondent but failed to pay the
same, but as the Court has repeatedly held, no fraud can be inferred from a mere failure to pay a
loan.63
In fine, there was no factual basis for the issuance of a writ of preliminary attachment against the
properties of petitioners. The immediate dissolution of the writ is called for.
In so ruling, however, the Court does not go so far as to grant petitioners' claim for moral damages. A
wrongful attachment may give rise to liability for moral damages but evidence must be adduced not
only of the torment and humiliation brought upon the defendant by the attaching party but also of the
latter's bad faith or malice in causing the wrongful attachment,64 such as evidence that the latter
deliberately made false statements in its application for attachment. 65Absent such evidence of malice,
the attaching party cannot be held liable for moral damages. 66
In the present case, petitioners cite the allegations made by respondent in its application for
attachment as evidence of bad faith. However, the allegations in question contain nothing but the
stark truth that Foremost obtained loans and that it failed to pay. The Court fails to see any malice in
such bare allegations as would make respondent liable to petitioners for moral damages.
To recapitulate, the Court partly dissolves the writ of preliminary attachment for having wrongfully
issued against the properties of petitioners who were not shown to have committed fraud in the
execution of the loan agreements between Foremost and respondent, but declines to award moral
damages to petitioners in the absence of evidence that respondent acted with malice in causing the
wrongful issuance of the writ.
The second issue involves that portion of the August 3, 2001 RTC Decision awarding respondent "(7)
US $379,000.00, plus 9.5% interest per annum from 12 February 1997 to 8 December 1997, 11.4%
interest per annum from 9 December 1997 until fully paid, and 1% penalty per month on the amount
due from maturity date until fully paid" under Promissory Note No. 0051-97-03696, and
"(8)P7,582,945.85, plus 28.5% interest per annum, and 3% penalty per month, from the foreclosure
sale on 10 August 1998 until fully paid" under Promissory Note No. 0051-97-03688.
Petitioners argue that respondent is barred from claiming any amount under the Promissory Notes,
Exhibits "G" and "H", because it had already elected to foreclose on the mortgage security, and it
failed to allege in its pleadings that a deficiency remained after the public auction sale of the securities
and that what it is seeking is the payment of such deficiency.67
There is no question that a mortgage creditor has a single cause of action against a mortgagor debtor,
which is to recover the debt; but it has the option of either filing a personal action for collection of sum
of money or instituting a real action to foreclose on the mortgage security. 68An election of the first bars
recourse to the second; otherwise, there would be multiplicity of suits in which the debtor would be
tossed from one venue to another, depending on the location of the mortgaged properties and the
residence of the parties.69On the other hand, a creditor who elects to foreclose on the mortgage may

yet file an independent civil action for recovery of whatever deficiency may remain in the outstanding
obligation of the debtor, after deducting the price obtained in the sale of the mortgaged properties at
public auction.70 The complaint, though, must specifically allege that what is being sought is the
recovery of the deficiency,71 or that in the pre-trial, such claim be raised as an issue.72
Contrary to petitioners' argument, it is clear from the allegations in the Complaint that what
respondent sought was the payment of the deficiency amount under the subject promissory notes. In
particular, while the Promissory Note, Exhibit "H", is for the amount of Php16,500,000.00, what
respondent sought to recover was only Php7,582,945.85, consistent with the fact that part of said
promissory note has been satisfied from the proceeds of the extra-judicial foreclosure. While the exact
phrase "deficiency account" is not employed in the Complaint, the intention of respondent to recover
the same is borne out by its allegations.
More importantly, in the Pre-trial Order issued by the RTC, the right of respondent to recover the
deficiency account under the subject promissory notes was raised as a specific issue.
WHEREFORE, the petition is PARTLY GRANTED. The June 15, 2004 Decisionof the Court of Appeals
is MODIFIED to the effect that the November 3, 1998 Writ of Preliminary Attachment
isLIFTED and DISSOLVED insofar as it affects the properties of petitioners Spouses Santiago and
Rufina Tanchan.
No costs.
SO ORDERED.

LIM JR. VS. LAZARO

Assailed in this petition for review on certiorari1

are the July 10, 2008 Decision2 and December

18, 2008 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 100270, affirming the March
29, 2007 Order" of the Regional Trial Court of Quezon City, Branch 223 (RTC), which lifted the
writ of preliminary attachment issued in favor of petitioner Alfredo C. Lim, Jr. (Lim, Jr.).

The Facts
On August 22, 2005, Lim, Jr. filed a complaint for sum of money with
prayer for the issuance of a writ of preliminary attachment before the RTC, seeking to
recover from respondents-spouses Tito S. Lazaro and Carmen T. Lazaro (Sps.
Lazaro) the sum of P2,160,000.00, which represented the amounts stated in several
dishonored checks issued by the latter to the former, as well as interests, attorneys
6
fees, and costs. The RTC granted the writ of preliminary attachment application and
7
upon the posting of the required P2,160,000.00 bond,
issued the corresponding

8
writ on October 14, 2005.
In this accord, three (3) parcels of land situated in
Bulacan, covered by Transfer Certificates of Title (TCT) Nos. T-64940, T-64939, and T9
86369 (subject TCTs), registered in the names of Sps. Lazaro, were levied upon.
10

In their Answer with Counterclaim,

Sps. Lazaro averred, among others, that
Lim, Jr. had no cause of action against them since: (a) Colim Merchandise (Colim), and not Lim,
Jr., was the payee of the fifteen (15) Metrobank checks; and (b) the PNB and Real Bank checks
were not drawn by them, but by Virgilio Arcinas and Elizabeth Ramos, respectively. While they
admit their indebtedness to Colim, Sps. Lazaro alleged that the same had already been
substantially reduced on account of previous payments which were apparently misapplied. In
this regard, they sought for an accounting and reconciliation of records to determine the actual
amount due. They likewise argued that no fraud should be imputed against them as the
11
aforesaid checks issued to Colim were merely intended as a form of collateral.
Hinged on the same grounds, Sps. Lazaro equally opposed the issuance of a writ of preliminary
12
attachment.
Nonetheless, on September 22, 2006, the parties entered into a Compromise
13
Agreement
whereby Sps. Lazaro agreed to pay Lim, Jr. the amount of P2,351,064.80 on an
installment basis, following a schedule of payments covering the period from September 2006
until October 2013, under the following terms, among others: (a) that should the financial
condition of Sps. Lazaro improve, the monthly installments shall be increased in order to
14
hasten the full payment of the entire obligation;
and (b) that Sps. Lazaros failure to pay
any installment due or the dishonor of any of the postdated checks delivered in payment
thereof shall make the whole obligation immediately due and demandable.
The aforesaid compromise agreement was approved by the RTC in its
October 31, 2006 Decision

15

and January 5, 2007 Amended Decision.

17
Subsequently, Sps. Lazaro filed an Omnibus Motion,
seeking to lift the writ of
preliminary attachment annotated on the subject TCTs, which the RTC granted on March 29,
18
2007.
It ruled that a writ of preliminary attachment is a mere provisional or ancillary
remedy, resorted to by a litigant to protect and preserve certain rights and interests pending
final judgment. Considering that the case had already been considered closed and terminated
by the rendition of the January 5, 2007 Amended Decision on the basis of the September
22, 2006 compromise agreement, the writ of preliminary
attachment should be lifted and quashed. Consequently, it ordered the Registry of Deeds of
Bulacan to cancel the writs annotation on the subject TCTs.
19
Lim, Jr. filed a motion for reconsideration
which was, however, denied on July
20
21
26, 2007,
prompting him to file a petition for certiorari
before the CA.

The CA
Ruling
22
On July 10, 2008, the CA rendered the assailed decision,
finding no grave abuse of
discretion on the RTCs part. It observed that a writ of preliminary attachment may only be
issued at the commencement of the action or at any time before entry of judgment. Thus,
since the principal cause of action had already been declared closed and terminated by the
RTC, the provisional or ancillary remedy of preliminary attachment would have no leg to stand
23
on, necessitating its discharge.
24
Aggrieved, Lim, Jr. moved for reconsideration
which was likewise denied by the CA
25
in its December 18, 2008 Resolution. Hence, the instant petition.
The Issue Before the Court
The sole issue in this case is whether or not the writ of preliminary attachment was
properly lifted.
The Courts
Ruling
The petition is meritorious.
By its nature, preliminary attachment, under Rule 57 of the Rules of Court (Rule 57), is
an ancillary remedy applied for not for its own sake but to enable the attaching party to realize
upon the relief sought and expected to be granted in the main or principal action; it is a
measure auxiliary or incidental to the main action. As such, it is available during its pendency
which may be resorted to by a litigant to preserve and protect certain rights and interests
26
during the interim, awaiting the ultimate effects of a final judgment in the case.
In
addition, attachment is also availed of in order to
acquire jurisdiction over the action by actual or constructive seizure of the property in those
instances where personal or substituted service of summons on the defendant cannot be
27
effected.
In this relation, while the provisions of Rule 57 are silent on the length of time within
which an attachment lien shall continue to subsist after the rendition of a final judgment,
jurisprudence dictates that the said lien continues until the debt is paid, or the sale is
had under execution issued on the judgment or until the judgment is satisfied,
or the attachment
discharged or vacated in the same manner provided by law.

28

Applying these principles, the Court finds that the discharge of the writ of
preliminary attachment against the properties of Sps. Lazaro was improper.

Records indicate that while the parties have entered into a compromise agreement
which had already been approved by the RTC in its January 5, 2007 Amended Decision, the
obligations thereunder have yet to be fully complied with particularly, the payment of the total
compromise amount of P2,351,064.80. Hence, given that the foregoing debt remains unpaid,
the attachment of Sps. Lazaros properties should have continued to subsist.
29
In Chemphil Export & Import Corporation v. CA,
the Court pronounced that a writ of
attachment is not extinguished by the execution of a compromise agreement between the
parties, viz:
Did the compromise agreement between Antonio Garcia and the
consortium discharge the latters attachment lien over the disputed shares?
CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon
the dismissal of the case, dies a natural death. Thus, when the consortium
entered into a compromise agreement, which resulted in the termination of
their case, the disputed shares were released from garnishment. We
disagree. To subscribe to CEICs contentions would be to totally disregard
the concept and purpose of a preliminary attachment.
The case at bench admits of peculiar character in the sense that it
involves a compromise agreement. Nonetheless, x x x. The parties to the
compromise agreement should not be deprived of the protection
provided by an attachment lien especially in an instance where one
reneges on his obligations under the agreement, as in the case at
bench, where Antonio Garcia failed to hold up his own end of the deal, so to
speak.

If we were to rule otherwise, we would in effect create a back door by

which a debtor can easily escape his creditors. Consequently, we would be
faced with an anomalous situation where a debtor, in order to buy time to
dispose of his properties, would enter into a compromise agreement he has
no intention of honoring in the first place. The purpose of the provisional
remedy of attachment would thus be lost. It would become, in analogy, a
declawed and toothless tiger. (Emphasis and underscoring supplied; citations
omitted)
In fine, the Court holds that the writ of preliminary attachment subject of this case
should be restored and its annotation revived in the subject TCTs, re-vesting unto Lim,
Jr. his preferential lien over the properties covered by the same as it were before the
cancellation of the said writ. Lest it be misunderstood, the lien or security obtained by an
attachment even before judgment, is in the nature of a vested interest which affords specific
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security for the satisfaction of the debt put in suit.
Verily, the lifting of the attachment lien
would be tantamount to an abdication of Lim, Jr.s rights
over Sps. Lazaros properties which the Court, absent any justifiable ground therefor, cannot
allow.
WHEREFORE, the petition is GRANTED. The July 10, 2008 Decision and the
December 18, 2008 Resolution of the Court of Appeals in
CA-G.R. SP No. 100270 are REVERSED and SET ASIDE, and the March
29, 2007 Order of the Regional Trial Court of Quezon City, Branch 223 is NULLIFIED.
Accordingly, the trial court is directed to RESTORE the attachment lien over Transfer
Certificates of Title Nos. T-64940, T-64939, and T-86369, in favor of petitioner Alfredo C. Lim, Jr