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:.
xxx

xxx

xxx

3. That parcel No. (a) described above is now an unplanted rice land and parcel No. (b)
described in the complaint is a coconut land, both under the possession of the plaintiffs..
4. That the defendants, without any legal right whatsoever and in connivance with each
other, through the use of force, stealth, threats and intimidation, intend or are intending to
enter and work or harvest whatever existing fruits may now be found in the lands abovementioned in violation of plaintiff's in this case ineffectual..
5. That unless defendants are barred, restrained, enjoined, and prohibited from entering or
harvesting the lands or working therein through ex-parte injunction, the plaintiffs will suffer
injustice, damages and irreparable injury to their great prejudice..
6. That the plaintiffs are offering a bond in their application for ex-parte injunction in the
amount of P2,000, subject to the approval of this Hon. Court, which bond is attached hereto
marked as Annex A and made an integral part of this complaint..
7. That on or about June 26, 1945, the defendants, through force, destroyed and took away
the madre-cacao fencer, and barbed wires built on the northwestern portion of the land
designated as parcel No. (b) of this complaint to the damage and prejudice of the plaintiffs in
the amount of at least P200..

Wherefore, it is respectfully prayed:.

(a) That the accompanying bond in the amount of P2,000 be approved;
(b) That a writ of preliminary injunction be issued ex-parte immediately restraining, enjoining
and prohibiting the defendants, their agents, servants, representatives, attorneys, and, (or)
other persons acting for and in their behalf, from entering in, interfering with and/or in any
wise taking any participation in the harvest of the lands belonging to the plaintiffs; or in any
wise working the lands above-described;
(c) That judgment be rendered, after due hearing, declaring the preliminary injunction final;.
(d) That the defendants be condemned jointly and severally to pay the plaintiffs the sum of
P200 as damages; and.
(e) That plaintiffs be given such other and further relief just and equitable with costs of suit to
the defendants.
The defendants filed an opposition dated August 8, 1945, to the issuance of the writ of preliminary
injunction prayed for in the above-quoted complaint, on the ground that they are owners of the lands
and have been in actual possession thereof since the year 1925; and their answer to the complaint
filed on August 14, 1945, they reiterate that they are the owners and were then in actual possession
of said property, and that the plaintiffs have never been in possession thereof.
The hearing of the petition for preliminary injunction was held on August 9, 1945, at which evidence
was introduced by both parties. After the hearing, Judge Rilloraza, then presiding over the Court of
First Instance of Laguna, denied the petition on the ground that the defendants were in actual
possession of said lands. A motion for reconsideration was filed by plaintiffs on August 20, 1945, but
said motion had not yet, up to the hearing of the present case, been decided either by Judge
Rilloraza, who was assigned to another court, or by the respondent judge.
The plaintiffs (respondents) filed on September 4, 1945, a reply to defendants' answer in which,
among others, they reiterate their allegation in the complaint that they are possessors in good faith
of the properties in question.
And on December 17, plaintiffs filed an urgent petition ex-parte praying that plaintiffs' motion for
reconsideration of the order denying their petition for preliminary injunction be granted and or for the
appointment of a receiver of the properties described in the complaint, on the ground that (a) the
plaintiffs have an interest in the properties in question, and the fruits thereof were in danger of being
lost unless a receiver was appointed; and that (b) the appointment of a receiver was the most
convenient and feasible means of preserving, administering and or disposing of the properties in
litigation which included their fruits. Respondents Judge Roldan, on the same date, December 17,
1945, decided that the court would consider the motion for reconsideration in due time, and granted
the petition for appointment of and appointed a receiver in the case.
The question to be determined in the present special civil action of certiorari is, whether or not the
respondent judge acted in excess of his jurisdiction or with grave abuse of discretion in issuing the
order appointing a receiver in the case No. 7951 of the Court of First Instance of Laguna; for it is
evident that there is no appeal or any other plain, speedy, and adequate remedy in the ordinary
course of the law against the said order, which is an incidental or interlocutory one.

It is a truism in legal procedure that what determines the nature of an action filed in the courts are
the facts alleged in the complaint as constituting the cause of the action. The facts averred as a
defense in the defendant's answer do not and can not determine or change the nature of the
plaintiff's action. The theory adopted by the plaintiff in his complaint is one thing, and that of the
defendant in his answer is another. The plaintiff has to establish or prove his theory or cause of
action in order to obtain the remedy he prays for; and the defendant his theory, if necessary, in order
to defeat the claim or action of the plaintiff..
According to the complaint filed in the said case No. 7951, the plaintiff's action is one of ordinary
injunction, for the plaintiffs allege that they are the owners of the lands therein described, and were
in actual possession thereof, and that "the defendants without any legal right whatever and in
connivance with each other, through the use of force, stealth, threat and intimidation, intend or are
intending to enter and work or harvest whatever existing fruits may be found in the lands above
mentioned in violation of plaintiffs' proprietary rights thereto;" and prays "that the defendants, their
agents, servants, representatives, and other persons acting for or in their behalf, be restrained,
enjoined and prohibited from entering in, interfering with, or in any way taking any participation in the
harvest of the lands above describe belonging to the plaintiffs."
That this is the nature of plaintiffs' action corroborated by the fact that they petitioned in the same
complaint for a preliminary prohibitory injunction, which was denied by the court in its order dated
August 17, 1945, and that the plaintiffs, in their motion for reconsideration of said order filed on
August 20 of the same year, and in their urgent petition dated December 17, moving the court to
grant said motion for reconsideration, reiterated that they were actual possessors of the land in
question.
The fact that plaintiffs, in their reply dated September 4, after reiterating their allegation or claim that
they are the owners in fee simple and possessors in good faith of the properties in question, pray
that they be declared the owners in fee simple, has not changed the nature of the action alleged in
the complaint or added a new cause of action thereto; because the allegations in plaintiffs' reply
were in answer to defendants' defenses, and the nature of plaintiffs' cause of action, as set forth in
their complaint, was not and could not be amended or changed by the reply, which plaintiffs had the
right to present as a matter of course. A plaintiff can not, after defendant's answer, amend his
complaint by changing the cause of action or adding a new one without previously obtaining leave of
court (section 2, Rule 17)..
Respondents' contention in paragraph I of their answer that the action filed by them against
petitioners in the case No. 7951 of the Court of First Instance of Laguna is not only for injunction, but
also to quiet title over the two parcels of land described in the complaint, is untenable for the reasons
stated in the previous paragraph. Besides, an equitable action to quiet title, in order to prevent
harrassment by continued assertion of adverse title, or to protect the plaintiff's legal title and
possession, may be filed in courts of equity (and our courts are also of equity), only where no other
remedy at law exists or where the legal remedy invokable would not afford adequate remedy (32
Cyc., 1306, 1307). In the present case wherein plaintiffs alleged that they are the owners and were
in actual possession of the lands described in the complaint and their fruits, the action of injunction
filed by them is the proper and adequate remedy in law, for a judgment in favor of plaintiffs would
quiet their title to said lands..
The provisional remedies denominated attachment, preliminary injunction, receivership, and delivery
of personal property, provided in Rules 59, 60, 61, and 62 of the Rules of Court, respectively, are
remedies to which parties litigant may resort for the preservation or protection of their rights or
interest, and for no other purpose, during the pendency of the principal action. If an action, by its
nature, does not require such protection or preservation, said remedies can not be applied for and

granted. To each kind of action or actions a proper provisional remedy is provided for by law. The
Rules of Court clearly specify the case in which they may be properly granted. .
Attachment may be issued only in the case or actions specifically stated in section 1, Rule 59, in
order that the defendant may not dispose of his property attached, and thus secure the satisfaction
of any judgment that may be recovered by plaintiff from defendant. For that reason a property
subject of litigation between the parties, or claimed by plaintiff as his, can not be attached upon
motion of the same plaintiff..
The special remedy of preliminary prohibitory injunction lies when the plaintiff's principal action is an
ordinary action of injunction, that is, when the relief demanded in the plaintiff's complaint consists in
restraining the commission or continuance of the act complained of, either perpetually or for a limited
period, and the other conditions required by section 3 of Rule 60 are present. The purpose of this
provisional remedy is to preserve thestatus quo of the things subject of the action or the relation
between the parties, in order to protect the rights of the plaintiff respecting the subject of the action
during the pendency of the suit. Because, otherwise or if no preliminary prohibition injunction were
issued, the defendant may, before final judgment, do or continue the doing of the act which the
plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards
granting the relief sought by the plaintiff. But, as this court has repeatedly held, a writ of preliminary
injunction should not be granted to take the property out of the possession of one party to place it in
the hands of another whose title has not been clearly established..
A receiver may be appointed to take charge of personal or real property which is the subject of an
ordinary civil action, when it appears that the party applying for the appointment of a receiver has an
interest in the property or fund which is the subject of the action or litigation, and that such property
or fund is in danger of being lost, removed or materially injured unless a receiver is appointed to
guard and preserve it (section 1 [b], Rule 61); or when it appears that the appointment of a receiver
is the most convenient and feasible means of preserving, administering or disposing of the property
in litigation (section 1 [e] of said Rule). The property or fund must, therefore be in litigation according
to the allegations of the complaint, and the object of appointing a receiver is to secure and preserve
the property or thing in controversy pending the litigation. Of course, if it is not in litigation and is in
actual possession of the plaintiff, the latter can not apply for and obtain the appointment of a receiver
thereof, for there would be no reason for such appointment.
Delivery of personal property as a provisional remedy consists in the delivery, by order of the court,
of a personal property by the defendant to the plaintiff, who shall give a bond to assure the return
thereof or the payment of damages to the defendant in the plaintiff's action to recover possession of
the same property fails, in order to protect the plaintiff's right of possession of said property, or
prevent the defendant from damaging, destroying or disposing of the same during the pendency of
the suit.
Undoubtedly, according to law, the provisional remedy proper to plaintiffs' action of injunction is a
preliminary prohibitory injunction, if plaintiff's theory, as set forth in the complaint, that he is the
owner and in actual possession of the premises is correct. But as the lower court found at the
hearing of the said petition for preliminary injunction that the defendants were in possession of the
lands, the lower court acted in accordance with law in denying the petition, although their motion for
reconsideration, which was still pending at the time the petition in the present case was heard in this
court, plaintiffs insist that they are in actual possession of the lands and, therefore, of the fruits
thereof.
From the foregoing it appears evident that the respondent judge acted in excess of his jurisdiction in
appointing a receiver in case No. 7951 of the Court of First Instance of Laguna. Appointment of a

receiver is not proper or does not lie in an action of injunction such as the one filed by the plaintiff.
The petition for appointment of a receiver filed by the plaintiffs (Exhibit I of the petition) is based on
the ground that it is the most convenient and feasible means of preserving, administering and
disposing of the properties in litigation; and according to plaintiffs' theory or allegations in their
complaint, neither the lands nor the palay harvested therein, are in litigation. The litigation or issue
raised by plaintiffs in their complaint is not the ownership or possession of the lands and their fruits.
It is whether or not defendants intend or were intending to enter or work or harvest whatever existing
fruits could then be found in the lands described in the complaint, alleged to be the exclusive
property and in the actual possession of the plaintiffs. It is a matter not only of law but of plain
common sense that a plaintiff will not and legally can not ask for the appointment or receiver of
property which he alleges to belong to him and to be actually in his possession. For the owner and
possessor of a property is more interested than persons in preserving and administering it.
Besides, even if the plaintiffs had amended their complaint and alleged that the lands and palay
harvested therein are being claimed by the defendants, and consequently the ownership and
possession thereof were in litigation, it appearing that the defendants (now petitioners) were in
possession of the lands and had planted the crop or palay harvested therein, as alleged in
paragraph 6 (a) and (b) of the petition filed in this court and not denied by the respondent in
paragraph 2 of his answer, the respondent judge would have acted in excess of his jurisdiction or
with a grave abuse of discretion in appointing a receiver thereof. Because relief by way of
receivership is equitable in nature, and a court of equity will not ordinarily appoint a receiver where
the rights of the parties depend on the determination of adverse claims of legal title to real property
and one party is in possession (53 C. J., p. 26). The present case falls within this rule..
In the case of Mendoza vs. Arellano and B. de Arellano, this court said:
Appointments of receivers of real estate in cases of this kind lie largely in the sound
discretion of the court, and where the effect of such an appointment is to take real estate out
of the possession of the defendant before the final adjudication of the rights of the parties,
the appointment should be made only in extreme cases and on a clear showing of necessity
therefor in order to save the plaintiff from grave and irremediable loss or damage. (34 Cyc.,
51, and cases there cited.) No such showing has been made in this case as would justify us
in interfering with the exercise by trial judge of his discretion in denying the application for
receiver. (36 Phil., 59, 63, 64.).
Although the petition is silent on the matter, as the respondents in their answer allege that the Court
of First Instance of Laguna has appointed a receiver in another case No. 7989 of said court,
instituted by the respondents Relova against Roberto Calo and his brothers and sisters, children of
Sofia de Oca and Tranquilino Calo (petitioner in this case), and submitted copy of the complaint filed
by the plaintiffs (now respondents) in case No. 7989 (Exhibit 9 of the respondents' answer), we may
properly express and do hereby express here our opinion, in order to avoid multiplicity of suits, that
as the cause of action alleged in the in the complaint filed by the respondents Relova in the other
case is substantially the same as the cause of action averred in the complaint filed in the present
case, the order of the Court of First Instance of Laguna appointing a receiver in said case No. 7989
was issued in excess of its jurisdiction, and is therefore null and void.
In view of all the foregoing, we hold that the respondent Judge Arsenio C. Roldan of the Court of
First Instance of Laguna has exceeded his jurisdiction in appointing a receiver in the present case,
and therefore the order of said respondent judge appointing the receiver, as well as all other orders
and proceedings of the court presided over by said judge in connection with the receivership, are
null and void.

As to the petitioners' petition that respondents Relova be punished for contempt of court for having
disobeyed the injunction issued by this court against the respondents requiring them to desist and
refrain from enforcing the order of receivership and entering the palay therein, it appearing from the
evidence in the record that the palay was harvested by the receiver and not by said respondents, the
petition for contempt of court is denied. So ordered, with costs against the respondents.
G.R. No. 185734, July 03, 2013
ALFREDO C. LIM, JR., Petitioner, v. SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO,Respondents.
RESOLUTION
PERLAS-BERNABE, J.:

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 4 of
the Regional Trial Court of Quezon City, Branch 223 (RTC), which lifted the writ of preliminary attachment
issued in favor of petitioner Alfredo C. Lim, Jr. (Lim, Jr.).
The Facts
On August 22, 2005, Lim, Jr. filed a complaint 5 for sum of money with prayer for the issuance of a writ of
preliminary attachment before the RTC, seeking to recover from respondents-spouses Tito S. Lazaro and
Carmen T. Lazaro (Sps. Lazaro) the sum of P2,160,000.00, which represented the amounts stated in several
dishonored checks issued by the latter to the former, as well as interests, attorneys fees, and costs. The
RTC granted the writ of preliminary attachment application6 and upon the posting of the required
P2,160,000.00 bond,7 issued the corresponding writ on October 14, 2005.8 In this accord, three (3) parcels
of land situated in Bulacan, covered by Transfer Certificates of Title (TCT) Nos. T-64940, T-64939, and T86369 (subject TCTs), registered in the names of Sps. Lazaro, were levied upon. 9
In their Answer with Counterclaim,10 Sps. Lazaro averred, among others, that Lim, Jr. had no cause of action
against them since: (a) Colim Merchandise (Colim), and not Lim, Jr., was the payee of the fifteen (15)
Metrobank checks; and (b) the PNB and Real Bank checks were not drawn by them, but by Virgilio Arcinas
and Elizabeth Ramos, respectively. While they admit their indebtedness to Colim, Sps. Lazaro alleged that
the same had already been substantially reduced on account of previous payments which were apparently
misapplied. In this regard, they sought for an accounting and reconciliation of records to determine the
actual amount due. They likewise argued that no fraud should be imputed against them as the aforesaid
checks issued to Colim were merely intended as a form of collateral. 11 Hinged on the same grounds, Sps.
Lazaro equally opposed the issuance of a writ of preliminary attachment. 12
Nonetheless, on September 22, 2006, the parties entered into a Compromise Agreement 13 whereby Sps.
Lazaro agreed to pay Lim, Jr. the amount of P2,351,064.80 on an installment basis, following a schedule of
payments covering the period from September 2006 until October 2013, under the following terms, among
others: (a) that should the financial condition of Sps. Lazaro improve, the monthly installments shall be
increased in order to hasten the full payment of the entire obligation; 14and (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 15and
January 5, 2007 Amended Decision.16
Subsequently, Sps. Lazaro filed an Omnibus Motion,17 seeking to lift the writ of preliminary attachment
annotated on the subject TCTs, which the RTC granted on March 29, 2007. 18 It ruled that a writ of
preliminary attachment is a mere provisional or ancillary remedy, resorted to by a litigant to protect and
preserve certain rights and interests pending final judgment. Considering that the case had already been
considered closed and terminated by the rendition of the January 5, 2007 Amended Decision on the basis of
the September 22, 2006 compromise agreement, the writ of preliminary attachment should be lifted and

quashed. Consequently, it ordered the Registry of Deeds of Bulacan to cancel the writs annotation on the
subject TCTs.
Lim, Jr. filed a motion for reconsideration19 which was, however, denied on July 26, 2007,20prompting him to
file a petition for certiorari21 before the CA.
The CA Ruling
On July 10, 2008, the CA rendered the assailed decision, 22 finding no grave abuse of discretion on the RTCs
part. It observed that a writ of preliminary attachment may only be issued at the commencement of the
action or at any time before entry of judgment. Thus, since the principal cause of action had already been
declared closed and terminated by the RTC, the provisional or ancillary remedy of preliminary attachment
would have no leg to stand on, necessitating its discharge. 23
Aggrieved, Lim, Jr. moved for reconsideration24 which was likewise denied by the CA in its December 18,
2008 Resolution.25
Hence, the instant petition.
The Issue Before the Court
The sole issue in this case is whether or not the writ of preliminary attachment was properly lifted.
The Courts Ruling
The petition is meritorious.
By its nature, preliminary attachment, under Rule 57 of the Rules of Court (Rule 57), is an ancillary remedy
applied for not for its own sake but to enable the attaching party to realize upon the relief sought and
expected to be granted in the main or principal action; it is a measure auxiliary or incidental to the main
action. As such, it is available during its pendency which may be resorted to by a litigant to preserve and
protect certain rights and interests during the interim, awaiting the ultimate effects of a final judgment in
the case.26 In addition, attachment is also availed of in order to acquire jurisdiction over the action by actual
or constructive seizure of the property in those instances where personal or substituted service of summons
on the defendant cannot be effected.27
In this relation, while the provisions of Rule 57 are silent on the length of time within which an attachment
lien shall continue to subsist after the rendition of a final judgment, jurisprudence dictates that the said
lien continues until the debt is paid, or the sale is had under execution issued on the judgment or
until the judgment is satisfied, or the attachment discharged or vacated in the same manner
provided by law.28
Applying these principles, the Court finds that the discharge of the writ of preliminary attachment against
the properties of Sps. Lazaro was improper.
Records indicate that while the parties have entered into a compromise agreement which had already been
approved by the RTC in its January 5, 2007 Amended Decision, the obligations thereunder have yet to be
fully complied with particularly, the payment of the total compromise amount of P2,351,064.80. Hence,
given that the foregoing debt remains unpaid, the attachment of Sps. Lazaros properties should have
continued to subsist.
In Chemphil Export & Import Corporation v. CA,29 the Court pronounced that a writ of attachment is not
extinguished by the execution of a compromise agreement between the parties, viz:
cralavvonline lawlibrary

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.
xxxx
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.
xxxx
If we were to rule otherwise, we would in effect create a back door by which a debtor can easily escape his
creditors. Consequently, we would be faced with an anomalous situation where a debtor, in order to buy time
to dispose of his properties, would enter into a compromise agreement he has no intention of honoring in
the first place. The purpose of the provisional remedy of attachment would thus be lost. It would become, in
analogy, a declawed and toothless tiger. (Emphasis and underscoring supplied; citations omitted)
In fine, the Court holds that the writ of preliminary attachment subject of this case should be restored and
its annotation revived in the subject TCTs, re-vesting unto Lim, Jr. his preferential lien over the properties
covered by the same as it were before the cancellation of the said writ. Lest it be misunderstood, the lien or
security obtained by an attachment even before judgment, is in the nature of a vested interest which affords
specific security for the satisfaction of the debt put in suit. 30 Verily, the lifting of the attachment lien would
be tantamount to an abdication of Lim, Jr.s rights over Sps. Lazaros properties which the Court, absent any
justifiable ground therefor, cannot allow.
WHEREFORE, the petition is GRANTED. The July 10, 2008 Decision and the December 18, 2008 Resolution
of the Court of Appeals in CA-G.R. SP No. 100270 are REVERSED and SET ASIDE, and the March 29, 2007
Order of the Regional Trial Court of Quezon City, Branch 223 is NULLIFIED. Accordingly, the trial court is
directed to RESTORE the attachment lien over Transfer Certificates of Title Nos. T-64940, T-64939, and T86369, in favor of petitioner Alfredo C. Lim, Jr.
SO ORDERED.

G.R. No. 48080, De Borja v. Platon

and De Borja, 73 Phil. 659
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

August 31, 1942

G.R. No. 48080

JOSE DE BORJA, petitioner,
vs.
SERVILLANO PLATON and FRANCISCO DE BORJA, respondents.

Vicente J. Francisco for petitioner.

E. V. Filamor for respondents.
No appearance for respondent judge
BOCOBO, J.:
Petitioner seeks the setting aside of an order of preliminary attachment issued on November 6, 1940,
and reiterated on January 13, 1941, by the respondent Judge of the Court of First Instance against
petitioner's properties.

On August 12, 1936, petitioner brought a civil action in the Court of First Instance of Rizal against
Hermogena Romero, Francisco de Borja, Josefa Tangco and Crisanto de Borja to annul a second sale by
Francisco de Borja to Hermogena Romero, of a large estate known as the Hacienda Jalajala, and to
recover damages in the amount of P25,000. On August 29, 1936, Francisco de Borja and his wife Josefa
Tangco filed an answer with three counterclaims, and on September 29, 1936, they presented two
more counterclaims. Trial began September 30, 1936. Under date of August 4, 1937, defendants
Francisco de Borja, Josefa Tangco and Crisanto de Borja submitted their amended answer, consisting of
a general denial, special defenses, and five counterclaims and cross-complaints. In these causes for
counter-claim and cross-complaint, it was alleged that plaintiff, being a son of defendants Francisco de
Borja and Josefa Tangco, had been entrusted with the administration of the extensive interests of his
parents, but had been unfaithful to his trust. Said defendants, therefore, prayed, inter alia, that the
spouses Borja and Tangco be declared owners of the Hacienda Jalajala in question; that plaintiff be
required to render an accounting of the products of said hacienda that he had received and to pay said
spouses at least P100,000 illegally retained by him; that plaintiff be ordered to account for the proceed
of rice and bran and to pay at least P700,000 unlawfully retained by him; that plaintiff be made to
deliver P20,000 which he had collected from a debtor of said spouses; that plaintiff be likewise ordered
to pay another sum of P9,034 collected by him from the same debtor; and that plaintiff be required to
turn over to defendants Francisco de Borja and Josefa Tangco the amount of P40,000 collected by him
as indemnity of an insurance policy on property belonging to said spouses.
On July 27, 1940, Francisco de Borja and his wife filed their petition for preliminary attachment to cover
their third, fourth, and fifth, grounds for cross-complaint, involving a total of P69,035. In said motion,
the defendants Borja and wife stated that they did not include the first and second causes for crosscomplaint because the visible property of plaintiff that could then be attached was only worth about
P2,000. On August 21, 1940, plaintiff presented an amended answer setting up a counterclaim against
defendants Borja and wife in the sum of P99,175.46.

The order for preliminary attachment is questioned upon several grounds, among which are: (1) that
no writ of attachment can be issued in favor of a defendant who presents a counterclaim; (2) and the
defendants' affidavit was fatally defective.

On the first point, we believe a writ of preliminary attachment may be issued in favor of a defendant
who sets up a counterclaim. For the purpose of the protection afforded by such attachment, it is
immaterial whether the defendants Borja and wife simply presented a counterclaim or brought a
separate civil action against Jose de Borja, plaintiff in the previous case and petitioner herein. To lay
down a subtle distinction would be to sanction that formalism and that technicality which are
discountenanced by the modern laws of procedure for the sake of speedy and substantial justice. In
the present case we see no reason why the order of the trial court should be disturbed, this question
being a matter within its discretion and we find no grave abuse of that discretion.

As to be the second objection of petitioner, his counsel strenuously advances the theory that the
affidavit attached to the petition for a writ of preliminary attachment was fatally defective because it
failed to allege that "the amount due to the plaintiff is as much as the sum for which the order is
granted above all legal counterclaims" as required in section 426, Code of Civil Procedure and section
3, Rule 59, Rules of Court. Petitioner contends that his counterclaim against that of Francisco de Borja
and wife being P99,175.46 whereas the latter's counterclaim totalled only P69,035, the omission of the
allegation referred to is a serious defect. The trial court found, however, that the counterclaim of
Francisco de Borja and wife exceed those of the petitioner Jose de Borja. It should be borne in mind
that the aggregate counterclaims of Francisco de Borja and wife amounted to P869,000, which exceeds
petitioner's counterclaim by P769,000 in round figures. Moreover, as the trial court had before it the
evidence adduce by both sides, the petition for a writ of preliminary attachment having been filed four
years after the trial had begun, we presume that the lower court, having in mind such evidence,
ordered the attachment accordingly.
The order appealed from is hereby affirmed, with costs against the petitioner. So ordered.

SECOND DIVISION

PROFESSIONAL VIDEO, INC.,

G.R. No. 155504

Petitioner,
Present:

QUISUMBING, J., Chairperson,

YNARES-SANTIAGO,
**
CHICO-NAZARIO,
***
LEONARDO-DE CASTRO, and
BRION, JJ.

- versus -

TECHNICAL EDUCATION AND

SKILLS
DEVELOPMENT
AUTHORITY,
Respondent.
Promulgated:

June 26, 2009

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

DECISION

BRION, J.:

We resolve the petition filed by Professional Video, Inc. (PROVI)[1] to

annul and set aside the Decision [2] of the Court of Appeals (CA) in CA-G.R.
SP No. 67599, and its subsequent Order denying PROVIs motion for
reconsideration.[3] The assailed CA decision nullified:
a.

the Order[4] dated July 16, 2001 of the Regional Trial Court
(RTC), Pasig City, in Civil Case No. 68527, directing the
attachment/garnishment of the properties of respondent
Technical
Education
and
Skills Development
Authority

(TESDA) amounting to
Thirty Five Million Pesos (P35,000,000.00); and
b.

the RTCs August 24, 2001 Order[5] denying respondent

TESDAs motion to discharge/quash writ of attachment.

THE FACTUAL BACKGROUND

PROVI is an entity engaged in the sale of high technology equipment,

information technology products and broadcast devices, including the
supply of plastic card printing and security facilities.

TESDA is an instrumentality of the government established under

Republic Act (R.A.) No. 7796 (the TESDA Act of 1994) and attached to the

Department of Labor and Employment (DOLE) to develop and establish a

national system of skills standardization, testing, and certification in the
country.[6] To fulfill this mandate, it sought to issue security-printed
certification and/or identification polyvinyl (PVC) cards to trainees who have
passed the certification process.

TESDAs Pre-Qualification Bids Award Committee (PBAC) conducted

two (2) public biddings on June 25, 1999 and July 22, 1999 for the printing
and encoding of PVC cards. A failure of bidding resulted in both instances
since only two (2) bidders PROVI and Sirex Phils. Corp. submitted
proposals.

Due to the failed bidding, the PBAC recommended that TESDA enter
into a negotiated contract with PROVI. On December 29, 1999, TESDA and
PROVI signed and executed their Contract Agreement Project: PVC ID
Card Issuance (the Contract Agreement) for the provision of goods and
services in the printing and encoding of PVC cards. [7] Under this Contract
Agreement, PROVI was to provide TESDA with the system and equipment
compliant with the specifications defined in the Technical Proposal. In
return, TESDA would pay PROVI the amount of Thirty-Nine Million Four
Hundred and Seventy-Five Thousand Pesos (P39,475,000) within fifteen
(15) days after TESDAs acceptance of the contracted goods and services.

On August 24, 2000, TESDA and PROVI executed an Addendum to

the Contract Agreement Project: PVC ID Card Issuance (Addendum),
[8]
whose terms bound PROVI to deliver one hundred percent (100%) of the
enumerated supplies to TESDA consisting of five hundred thousand
(500,000) pieces of security foil; five (5) pieces of security die with TESDA
seal; five hundred thousand (500,000) pieces of pre-printed and
customized identification cards; one hundred thousand (100,000) pieces of
scannable answer sheets; and five hundred thousand (500,000)

customized TESDA holographic laminate. In addition, PROVI would install

and maintain the following equipment: one (1) unit of Micropoise, two (2)
units of card printer, three (3) units of flatbed scanner, one (1) unit of OMR
scanner, one (1) unit of Server, and seven (7) units of personal computer.

TESDA in turn undertook to pay PROVI thirty percent (30%) of the

total cost of the supplies within thirty (30) days after receipt and acceptance
of the contracted supplies, with the balance payable within thirty (30) days
after the initial payment.

According to PROVI, it delivered the following items to TESDA on the

dates indicated:

Date

Particulars

Amount

26 April 2000

48,500 pre-printed cards

P 2,764,500.00

07 June 2000

330,000 pre-printed cards

18,810,000.00

07 August 2000

121,500 pre-printed cards

6,925,500.00

26 April 2000

100,000 scannable answer sheets

06 June 2000

5 Micro-Poise customized die

13 June 2000

35 boxes @ 15,000 imp/box

600,000.00
375,000.00

10,000,000.00

Custom hologram Foil

Total

P 39,475,000.00

PROVI further alleged that out of TESDAs liability of P39,475,000.00,

TESDA paid PROVI only P3,739,500.00, leaving an outstanding balance
of P35,735,500.00, as evidenced by PROVIs Statement of Account.
[9]
Despite the two demand letters dated March 8 and April 27, 2001 that
PROVI sent TESDA,[10] the outstanding balance remained unpaid.

On July 11, 2001, PROVI filed with the RTC a complaint for sum of
money with damages against TESDA. PROVI additionally prayed for the
issuance of a writ of preliminary attachment/garnishment against TESDA.
The case was docketed as Civil Case No. 68527. In an Order dated July
16, 2001, the RTC granted PROVIs prayer and issued a writ of preliminary
attachment against the properties of TESDA not exempt from execution in
the amount of P35,000,000.00.[11]

TESDA responded on July 24, 2001 by filing a Motion to

Discharge/Quash the Writ of Attachment, arguing mainly that public funds
cannot be the subject of garnishment. [12] The RTC denied TESDAs motion,
and subsequently ordered the manager of the Land Bank of
the Philippines to produce TESDAs bank statement for the garnishment of
the covered amount.[13]

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

The CA set aside the RTCs orders after finding that: (a) TESDAs
funds are public in nature and, therefore, exempt from garnishment;
and (b) TESDAs purchase of the PVC cards was a necessary incident of
its governmental function; consequently, it ruled that there was no legal
basis for the issuance of a writ of preliminary attachment/garnishment.
[15]
The CA subsequently denied PROVIs motion for reconsideration;
[16]
hence, the present petition.

THE PETITION

The petition submits to this Court the single issue of whether or not
the writ of attachment against TESDA and its funds, to cover PROVIs claim
against TESDA, is valid. The issue involves a pure question of law and
requires us to determine whether the CA was correct in ruling that the RTC
gravely abused its discretion in issuing a writ of attachment against
TESDA.

PROVI argues that the CA should have dismissed TESDAs petition

for certiorari as the RTC did not commit any grave abuse of discretion
when it issued the Orders dated July 16, 2001 and August 24, 2001.
According to PROVI, the RTC correctly found that when TESDA entered
into a purely commercial contract with PROVI, TESDA went to the level of
an ordinary private citizen and could no longer use the defense of state
immunity from suit. PROVI further contends that it has alleged sufficient
ultimate facts in the affidavit it submitted to support its application for a writ
of preliminary attachment. Lastly, PROVI maintains that sufficient basis
existed for the RTCs grant of the writ of preliminary attachment, since
TESDA fraudulently misapplied or embezzled the money earmarked for the
payment of the contracted supplies and services, as evidenced by the
Certification as to Availability of Funds.

TESDA claims that it entered the Contract Agreement and Addendum

in the performance of its governmental function to develop and establish a
national system of skills standardization, testing, and certification; in the
performance of this governmental function, TESDA is immune from suit.
Even assuming that it had impliedly consented to be sued by entering into
a contract with PROVI, TESDA posits that the RTC still did not have the
power to garnish or attach its funds since these are public funds. Lastly,
TESDA points out that PROVI failed to comply with the elements for the
valid issuance of a writ of preliminary attachment, as set forth in Section 1,
Rule 57 of the 1997 Rules of Civil Procedure.

THE COURTS RULING

We find, as the CA did, that the RTCs questioned order involved

a gross misreading of the law and jurisprudence amounting to action
in excess of its jurisdiction. Hence, we resolve to DENY PROVIs
petition for lack of merit.

TESDA is an instrumentality
of the government undertaking
governmental functions.

R.A. No. 7796 created the Technical Education and Skills

Development Authority or TESDA under the declared policy of the State to
provide relevant, accessible, high quality and efficient technical education

and skills development in support of the development of high quality

Filipino middle-level manpower responsive to and in accordance with
Philippine development goals and priorities. [17] TESDA replaced and
absorbed the National Manpower and Youth Council, the Bureau of
Technical and Vocational Education and the personnel and functions
pertaining to technical-vocational education in the regional offices of the
Department of Education, Culture and Sports and the apprenticeship
program of the Bureau of Local Employment of the DOLE. [18] Thus, TESDA
is an unincorporated instrumentality of the government operating under its
own charter.

Among others, TESDA is empowered to: approve trade skills

standards and trade tests as established and conducted by private
industries; establish and administer a system of accreditation of both public
and private institutions; establish, develop and support the institutions'
trainors' training and/or programs; exact reasonable fees and charges for
such tests and trainings conducted, and retain such earnings for its own
use, subject to guidelines promulgated by the Authority; and perform such
other duties and functions necessary to carry out the provisions of the Act,
consistent with the purposes of the creation of TESDA. [19]

Within TESDAs structure, as provided by R.A. No. 7769, is a Skills

Standards and Certification Office expressly tasked, among others, to
develop and establish a national system of skills standardization, testing
and certification in the country; and to conduct research and development
on various occupational areas in order to recommend policies, rules and
regulations for effective and efficient skills standardization, testing and
certification system in the country.[20] The law likewise mandates that
[T]here shall be national occupational skills standards to be established by
TESDA-accredited industry committees. The TESDA shall develop and
implement a certification and accreditation program in which private groups
and trade associations are accredited to conduct approved trade tests, and

the local government units to promote such trade testing activities in their
respective areas in accordance with the guidelines to be set by the TESDA.
The Secretary of Labor and Employment shall determine the occupational
trades for mandatory certification. All certificates relating to the national
trade skills testing and certification system shall be issued by the TESDA
through its Secretariat.[21]

All these measures are undertaken pursuant to the constitutional

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

Under these terms, both constitutional and statutory, we do not

believe that the role and status of TESDA can seriously be contested: it is
an unincorporated instrumentality of the government, directly attached to
the DOLE through the participation of the Secretary of Labor as its
Chairman, for the performance of governmental functions i.e., the
handling of formal and non-formal education and training, and skills
development. As an unincorporated instrumentality operating under a
specific charter, it is equipped with both express and implied powers, [25] and
all State immunities fully apply to it.[26]

TESDA, as an agency of the

State, cannot be sued without
its consent.

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

The proscribed suit that the state immunity principle covers takes on
various forms, namely: a suit against the Republic by name; a suit against
an unincorporated government agency; a suit against a government
agency covered by a charter with respect to the agencys performance of
governmental functions; and a suit that on its face is against a government
officer, but where the ultimate liability will fall on the government. In the
present case, the writ of attachment was issued against a government
agency covered by its own charter. As discussed above, TESDA performs
governmental functions, and the issuance of certifications is a task within
its function of developing and establishing a system of skills
standardization, testing, and certification in the country. From the
perspective of this function, the core reason for the existence of state
immunity applies i.e., the public policy reason that the performance of
governmental function cannot be hindered or delayed by suits, nor can
these suits control the use and disposition of the means for the
performance of governmental functions. In Providence Washington
Insurance Co. v. Republic of the Philippines,[31] we said:
[A] continued adherence to the doctrine of non-suability is not to be deplored for as against the
inconvenience that may be caused private parties, the loss of governmental efficiency and the

obstacle to the performance of its multifarious functions are far greater if such a fundamental
principle were abandoned and the availability of judicial remedy were not thus restricted. With the
well known propensity on the part of our people to go to court, at the least provocation, the loss of
time and energy required to defend against law suits, in the absence of such a basic principle that
constitutes such an effective obstacle, could very well be imagined.

PROVI argues that TESDA can be sued because it has effectively

waived its immunity when it entered into a contract with PROVI for a
commercial purpose. According to PROVI, since the purpose of its contract
with TESDA is to provide identification PVC cards with security seal which
TESDA will thereafter sell to TESDA trainees, TESDA thereby engages in
commercial transactions not incidental to its governmental functions.

TESDAs response to this position is to point out that it is not

engaged in business, and there is nothing in the records to show that its
purchase of the PVC cards from PROVI is for a business purpose. While
TESDA admits that it will charge the trainees with a fee for the PVC cards,
it claims that this fee is only to recover their costs and is not intended for
profit.

We agree with TESDA. As the appellate court found, the PVC cards
purchased by TESDA from PROVI are meant to properly identify the
trainees who passed TESDAs National Skills Certification Program the
program that immediately serves TESDAs mandated function of
developing and establishing a national system of skills standardization,
testing, and certification in the country.[32] Aside from the express mention of
this function in R.A. No. 7796, the details of this function are provided
under DOLE Administrative Order No. 157, S. 1992, as supplemented by
Department Order Nos. 3 thru 3-F, S. 1994 and Department Order No. 13,
S. 1994.[33]

Admittedly, the certification and classification of trainees may be

undertaken in ways other than the issuance of identification cards, as the
RTC stated in its assailed Order.[34] How the mandated certification is to be
done, however, lies within the discretion of TESDA as an incident of its
mandated function, and is a properly delegated authority that this Court
cannot inquire into, unless its exercise is attended by grave abuse of
discretion.

That TESDA sells the PVC cards to its trainees for a fee does not
characterize the transaction as industrial or business; the sale, expressly
authorized by the TESDA Act,[35] cannot be considered separately from
TESDAs general governmental functions, as they are undertaken in the
discharge of these functions. Along this line of reasoning, we held
in Mobil Philippines v. Customs Arrastre Services:[36]
Now, the fact that a non-corporate government entity performs a function proprietary in nature does
not necessarily result in its being suable. If said non-governmental function is undertaken as an
incident to its governmental function, there is no waiver thereby of the sovereign immunity from suit
extended to such government entity.

TESDAs funds are public in

character, hence exempt from
attachment or garnishment.

Even assuming that TESDA entered into a proprietary contract with

PROVI and thereby gave its implied consent to be sued, TESDAs funds
are still public in nature and, thus, cannot be the valid subject of a writ of
garnishment or attachment. Under Section 33 of the TESDA Act, the
TESDA budget for the implementation of the Act shall be included in the
annual General Appropriation Act; hence, TESDA funds, being sourced

from the Treasury, are moneys belonging to the government, or any of its
departments, in the hands of public officials. [37] We specifically spoke of the
limits in dealing with this fund in Republic v. Villasor[38] when we said:
This fundamental postulate underlying the 1935 Constitution is now made explicit in the
revised charter. It is therein expressly provided, The State may not be sued without its consent. A
corollary, both dictated by logic and sound sense, from such a basic concept, is that public funds
cannot be the object of garnishment proceedings even if the consent to be sued had been
previously granted and the state liability adjudged. Thus in the recent case of Commissioner of
Public Highways vs. San Diego, such a well-settled doctrine was restated in the opinion of Justice
Teehankee:
The universal rule that where the State gives its consent to be sued by private
parties either by general or special law, it may limit claimant's action 'only up to
the completion of proceedings anterior to the stage of execution' and that the
power of the Courts ends when the judgment is rendered, since government
funds and properties may not be seized under writs of execution or garnishment
to satisfy such judgments, is based on obvious considerations of public
policy. Disbursements of public funds must be covered by the
corresponding appropriation as required by law. The functions and public
services rendered by the State cannot be allowed to be paralyzed or
disrupted by the diversion of public funds from their legitimate and specific
objects, as appropriated by law. [Emphasis supplied.]

We reiterated this doctrine in Traders Royal Bank v. Intermediate

Appellate Court,[39] where we said:
The NMPCs implied consent to be sued notwithstanding, the trial court did not have the
power to garnish NMPC deposits to answer for any eventual judgment against it. Being public
funds, the deposits are not within the reach of any garnishment or attachment
proceedings. [Emphasis supplied.]

As pointed out by TESDA in its Memorandum, [40] the garnished funds

constitute TESDAs lifeblood in government parlance, its MOOE [41]
whose withholding via a writ of attachment, even on a temporary basis,
would paralyze TESDAs functions and services. As well, these funds also
include TESDAs Personal Services funds from which salaries of TESDA
personnel are sourced. Again and for obvious reasons, the release of
these funds cannot be delayed.

PROVI has not shown that it is

entitled
to
the
writ
of
attachment.

Even without the benefit of any immunity from suit, the attachment of
TESDA funds should not have been granted, as PROVI failed to prove that
TESDA fraudulently misapplied or converted funds allocated under the
Certificate as to Availability of Funds. Section 1, Rule 57 of the Rules of
Court sets forth the grounds for issuance of a writ of preliminary
attachment, as follows:

SECTION 1. Grounds upon which attachment may issue. A plaintiff or

any proper party may, at the commencement of the action or at any time
thereafter, have the property of the adverse party attached as security for
the satisfaction of any judgment that may be recovered in the following
cases:

(a)
In an action for recovery of a specified amount of money or
damages, other than moral and exemplary, on a cause of action arising
from law, contract, quasi-contract, delict or quasi-delict against a party
who is about to depart from the Philippines with intent to defraud his
creditors;

(b)
In an action for money or property embezzled or
fraudulently misapplied or converted to his use by a public officer, or
an officer of a corporation, or an attorney, factor, broker, agent or
clerk, in the course of his employment as such, or by any other
person in a fiduciary capacity, or for a willful violation of duty;

(c)
In an action to recover the possession of property unjustly or
fraudulently taken, detained or converted, when the property or any part
thereof, has been concealed, removed or disposed of to prevent its being
found or taken by the applicant or an authorized person;

(d)
In an action against a party who has been guilty of fraud in
contracting the debt or incurring the obligation upon which the
action is brought, or in concealing or disposing of the property for
the taking, detention or conversion of which the action is brought;

(e)
In an action against a party who has removed or disposed of
his property, or is about to do so, with intent to defraud his creditors;

(f)
In an action against a party who does not reside and is not
found in the Philippines, or on whom summons may be served by
publication. [Emphasis supplied.]

Jurisprudence teaches us that the rule on the issuance of a writ of

attachment must be construed strictly in favor of the defendant.
Attachment, a harsh remedy, must be issued only on concrete and specific
grounds and not on general averments merely quoting the words of the
pertinent rules.[42] Thus, the applicants affidavit must contain statements
clearly showing that the ground relied upon for the attachment exists.

Section 1(b), Rule 57 of the Rules of Court, that PROVI relied

upon, applies only where money or property has been embezzled or
converted by a public officer, an officer of a corporation, or some other
person who took advantage of his fiduciary position or who willfully violated
his duty.

PROVI, in this case, never entrusted any money or property to

TESDA. While the Contract Agreement is supported by a Certificate as to
Availability of Funds (Certificate) issued by the Chief of TESDAs

Accounting Division, this Certificate does not automatically confer

ownership over the funds to PROVI. Absent any actual disbursement,
these funds form part of TESDAs public funds, and TESDAs failure to pay
PROVI the amount stated in the Certificate cannot be construed as an act
of fraudulent misapplication or embezzlement. In this regard, Section 86 of
Presidential Decree No. 1445 (The Accounting Code) provides:
Section 86. Certificate showing appropriation to meet contract. Except
in a case of a contract for personal service, for supplies for current
consumption or to be carried in stock not exceeding the estimated
consumption for three months, or banking transactions of governmentowned or controlled banks, no contract involving the expenditure of public
funds by any government agency shall be entered into or authorized
unless the proper accounting official or the agency concerned shall have
certified to the officer entering into the obligation that funds have been
duly appropriated for the purpose and that the amount necessary to cover
the proposed contract for the current fiscal year is available for
expenditure on account thereof, subject to verification by the auditor
concerned. The certification signed by the proper accounting official and
the auditor who verified it, shall be attached to and become an integral
part of the proposed contract, and the sum so certified shall not
thereafter be available for expenditure for any other purpose until the
obligation of the government agency concerned under the contract
is fully extinguished. [Emphasis supplied.]

By law, therefore, the amount stated in the Certification should be intact

and remains devoted to its purpose since its original appropriation. PROVI
can rebut the presumption that necessarily arises from the cited provision
only by evidence to the contrary. No such evidence has been adduced.

Section 1 (d), Rule 57 of the Rules of Court applies where a party

is guilty of fraud in contracting a debt or incurring an obligation, or in
concealing or disposing of the property for the taking, detention or
conversion of which the action is brought. In Wee v. Tankiansee,[43] we held
that for a writ of attachment to issue under this Rule, the applicant must
sufficiently show the factual circumstances of the alleged fraud because
fraudulent intent cannot be inferred from the debtors mere non-payment of
the debt or failure to comply with his obligation. The affidavit, being the
foundation of the writ, must contain particulars showing how the imputed

fraud was committed for the court to decide whether or not to issue the writ.
To reiterate, a writ of attachment can only be granted on concrete and
specific grounds and not on general averments merely quoting the words of
the rules.[44]
The affidavit filed by PROVI through Elmer Ramiro, its President and
Chief Executive Officer, only contained a general allegation that TESDA
had fraudulent misapplied or converted the amount of P10,975,000.00 that
was allotted to it. Clearly, we cannot infer any finding of fraud from PROVIs
vague assertion, and the CA correctly ruled that the lower court acted with
grave abuse of discretion in granting the writ of attachment despite want of
any valid ground for its issuance.

For all these reasons, we support the appellate courts conclusion

that no valid ground exists to support the grant of the writ of attachment
against TESDA. The CAs annulment and setting aside of the Orders of the
RTC were therefore fully in order.

WHEREFORE, premises considered, we hereby DENY the petition

filed by petitioner Professional Video, Inc., and AFFIRM the Court of
Appeals Decision datedJuly 23, 2002, and Resolution of September 27,
2002, in CA-G.R. SP No. 67599. Costs against the petitioner.

SO ORDERED.
G.R. No. 104405 May 13, 1993
LIBERTY INSURANCE CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, HON. NAPOLEON K. FLOJO, Presiding Judge of
Branch II, RTC Manila; ATILLA ARKIN, the CITY SHERIFF OF MANILA, the REGISTER OF
DEEDS OF MANILA and the REGISTER OF DEEDS OF MAKATI, METRO MANILA, respondents.

Cochico, Lopez, Delgado , Aquino & De la Merced for petitioner.

Edgar Dennis A. Padernal for private respondent.

BIDIN, J.:
This is a petition for review on certiorari seeking to set aside and to declare null and void the
decision dated September 17, 1991 of the respondent Court of Appeals dismissing petitioner's
petition for review and its resolution dated February 7, 1992 denying petitioner's Motion for
Reconsideration.
On May 4, 1988 Jose H. Imperial Organizations, Pty., thru Atty. Jose H. Imperial entered into an
agreement with Coca-Cola Bottlers Philippines to promote two concerts featuring a group known as
"Earth, Wind and Fire" on June 12 and 13, 1988 with Coca-Cola sponsoring the concerts and the
former promoting the same.
To ensure compliance with the terms of the agreement, Coca-Cola required Imperial Organizations
to put up a performance bond. Petitioner Liberty Insurance, upon application of Imperial
Organization put up the performance bond in the amount of Three Million Pesos (P3,000,000.00),
the principal condition of which was to "fully and faithfully guarantee the terms and conditions" of the
agreement dated May 24, 1988 entered into between Coca-Cola and Imperial Organizations. More
particularly, the bond was to guarantee the return to Coca-Cola of "whatever portion of the cash
sponsorship and cash advances to be made by Coca-Cola to finance the holding of the concerts on
the dates aforesaid . . . ." (Rollo, pp. 37)
In turn, and as a condition for the issuance of said performance bond, petitioner required Imperial
Organizations, Jose H. Imperial, Atilla Arkin, and Carmen Madlangbayan to execute an indemnity
agreement in its favor to indemnify it for any and all damages including attorney's fees which the
petitioner may incur by reason of the issuance of the bond.
It appears that while the concerts took place, Imperial Organizations and private respondents failed
to comply with their obligations to Coca Cola, as a result of which petitioner became liable upon its
performance bond paying Coca-Cola Three Million Pesos. Petitioner, demanded reimbursement
from Imperial, Arkin And Madlangbayan based on their indemnity bond but to no avail.
On August 7, 1988 petitioner filed with the Regional Trial Court, National Capital Region, Branch 2,
Manila a complaint for damages with application for the issuance of a writ of preliminary attachment
against private respondents.
On September 20, 1988, the Trial Court thru the Hon. Rosario A. de Leon, issued an order allowing
the issuance of the writ, stating that.:
. . . There could have been fraud committed by the defendants Arkin and
Madlangbayan in promising to give as security or collateral to their Indemnity
Agreement, which caused the plaintiff to release the security bond, when as it turned
out, the Transfer Certificate of Title of a parcel of land supposedly issued by the
Register of Deeds of Rizal turned out to be fake, as the true land title number was
issued over a different parcel of land issued in the name of a person other than
defendant Madlangbayan, while defendant Atilla Arkin delivered an official receipt in

the name of a third party but which vehicle was allegedly sold to him free from lien
and encumbrance, when it turned out that the car was heavily mortgaged to a third
party, . . . .
The conclusion of fraud is inevitable in view of the above circumstances, for any (sic)
rate fraud is a state of mind that maybe inferred from the circumstances extant in the
case (Republic vs. Gonzales, 13 SCRA 633).
In addition to the fact that these representations/promises of Arkin and
Madlangbayan were made prior to the release of the bond (the bond by then had
already been executed), it can still be said that this fraud existed when the obligation
was contracted in line with Sec. 1, par (d), Rule 57, which reads: An attachment may
issue in an action against a party who has been guilty of fraud in contracting or
incurring the obligation upon which the action is brought.
A debt is fraudulently contracted if at the time of contracting it, the debtor entertained
an intention not to pay, or an intention not to keep a collateral agreement regarding
the disposition of a property purchased on credit. (Francisco, Rules of Court, Second
[1985] Edition, p. 21) . . . (Rollo, pp. 38-39)
On May 10, 1989 respondent Arkin filed a motion to Quash/ Recall Writ of Attachment. On October
19, 1989, the trial court, this time presided by respondent judge Napoleon K. Flojo, denied the
motion, reasoning out as follows:
Defendant Atilla Arkin posits that no ground existed for the issuance of the
preliminary attachment because he was not guilty of fraud in incurring the obligation
under the indemnity agreement.
The Court granted the prayer for a writ of preliminary attachment after a finding of
fraud from the evidence adduced by the parties. This conclusion was supported by
substantial evidence. There is no cogent reason from the arguments posed by the
movant to warrant and/or recall of the writ.
Furthermore, the complaint invokes another ground for the grant of the writ and that
is, "in an action against a party who has removed be (sic) disposed of his property, or
is about to do so, with the intent to defraud his creditors," . . ., evidenced by three
conveyances or disposals of properties by defendant Atilla Arkin though made before
the institution of the action, is a circumstance tending to show fraudulent conveyance
with intent to defraud his creditors. Especially so, when the payment of herein claim
which the action is brought is not secured by any mortgage or pledge of real (sic)
personal property and plaintiff had no other sufficient security for the enforcement of
the claim. (Rollo, p. 58; emphasis supplied).
After more than a year, or on December 14, 1990, Arkin filed a Motion for Reconsideration of the
aforementioned order of denial.
On March 6, 1991, respondent judge reversed his earlier ruling and instead issued two orders, (1)
granting Arkin's Motion for Reconsideration and directing the lifting of the writ of preliminary
attachment earlier issued, and (2) ordering the deputy sheriff assigned to said court to immediately
discharge or lift said writ. The first order, among other things, states:

xxx xxx xxx

The Court, presided at the time by Judge Rosalio De Leon, found that the defendant
has been guilty of fraud in inveigling the plaintiff to issue the surety bond by offering
false collaterals. The ground relied upon by the Court to issue the attachment was
based on Section 1 (d) of Rule 57 of the Rules of Court , which states:
"Sec. 1. Grounds upon which attachment may issue. A plaintiff or
any party may, at the commencement of the action or at anytime
thereafter, have the property of the adverse party attached as
security for the satisfaction of any judgment that may be recovered in
the following cases:
xxx xxx xxx
(d) In action (sic) against a party who has been guilty of fraud in
contracting the obligation upon which the action is brought, . . . ."
To constitute a ground for attachment, fraud should be committed prior to or
simultaneous with the birth of the obligation sued upon, which in this case is the May
30, 1988 surety bond.
xxx xxx xxx
A close examination of the evidence on record shows that the delivery of the fake
collaterals were made to Eduardo Cunanan on June 1, 1988, or two (2) days after
the issuance by the plaintiff of the surety bond. Thus, the offering of the fake Transfer
Certificate of Title and encumbered Mercedes Benz car was not prior to or
simultaneous with the execution of the Surety Bond. Such being the case, the offer of
the collaterals were not the cause which induced the plaintiff to issue the surety
bond. It is therefore clear that the issuance of the surety bond on May 30, 1988 was
not based on the alleged fraud of the defendant Arkin offering the fake collaterals.
xxx xxx xxx
With regards (sic) to the allegations that the defendant Arkin has removed or
disposed of his property, with intent to defraud his creditors, suffice it to say that
(when) the law authorizes the issuance of a writ preliminary attachment (it) should be
construed in favor of the defendant and before issuing an Order to that effect, the
judge should require that all the requisites prescribed by law be complied (with),
without which a judge acquires no jurisdiction to issue the writ.
xxx xxx xxx
Furthermore, allegations that debtors were removing or disposing some of the
properties with intent to defraud creditors must be specific.
xxx xxx xxx
In the present case the plaintiff did not prove the intent of defendant Arkin to defraud
creditors. Aside From the fact that the alleged dispositions were made long prior to

the filing of the case, the alleged dispositions were made of conjugal partnership
property which were then the subjects of partition between Arkin and his estranged
wife. . . . (Rollo, pp. 42-43).
Aggrieved, petitioner filed a special civil action for certiorari with respondent Court of Appeals to set
aside the above orders of respondent judge.
Respondent court dismissed the petition on the ground that the filing of the said petition was
premature considering that there was yet a remedy available in the ordinary course of law, i.e., filing
a motion for reconsideration of the challenged orders. Hence, this petition with the following
assignment of errors:
I. A MOTION FOR RECONSIDERATION IS NOT ALWAYS A CONDITION
PRECEDENT TO THE FILING OF A SPECIAL CIVIL ACTION FOR CERTIORARI,
AS THERE IS NO APPEAL OR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN
THE ORDINARY COURSE OF LAW AVAILABLE TO HEREIN PETITIONER;
II. RESPONDENT HONORABLE COURT OF APPEALS ERRED IN UPHOLDING
THE DISSOLUTION OF THE WRIT OF PRELIMINARY ATTACHMENT ON THE
BASIS OF SECTION 13, RULE 57, OF THE RULES OF THE COURT SUPPORTED
(SIC) BY ANY EVIDENCE;
III. RESPONDENT COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW
IN CONCLUDING THAT HEREIN PETITIONER FAILED TO RAISE AS AN ISSUE
THE DELAYED FILING OF PRIVATE RESPONDENT'S MOTION FOR
RECONSIDERATION DATED DECEMBER 14, 1990, IN PETITIONER'S
OPPOSITION THERETO.
IV. THE APPREHENSION OF THE HEREIN PETITIONER REGARDING THE
PROPENSITY OF PRIVATE RESPONDENT TO DISPOSE OF HIS PROPERTIES IN
FRAUD OF HIS CREDITORS TURNED OUT TO BE TRUE AND CORRECT. (Rollo,
pp. 24-26, 30).
In brief, the questions posited by the instant petition may be consolidated into two issues, namely:
1) Whether or not the writ of preliminary attachment in question was properly or regularly issued and
2) Whether or not petitioner's failure to file a motion for reconsideration of the questioned orders of
the court a quo bars the filing of a special civil action for certiorari before the respondent court.
In an action against a party who has been guilty of fraud in contracting the debt or incurring the
obligation upon which the action is brought, Section 1 (d) of Rule 57 authorizes the plaintiff or any
proper party to have the property of the adverse party attached as security for the satisfaction of any
judgment that may be recovered therein. Thus:
Rule 57, Sec. 1. Grounds upon which attachment may
issue.
(d): In an action against a party who has been guilty of a fraud of contracting the debt
or incurring the obligation upon which the action is brought, or in concealing or
disposing of the property for the taking, detention or conversion of which the action is
brought;

To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or
incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the
agreement and must have been the reason which induced the other party into giving consent which
he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of
the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is
fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention
not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence
but may be inferred from the circumstances attendant in each case (Republic v. Gonzales, 13 SCRA
633 [1965]).
Here, it has been established that all the collaterals given by the respondent Arkin as security for the
bond were either fraudulent or heavily encumbered. Records show that Transfer Certificate of Title
No. 300011 supposedly issued by the Register of Deeds of Rizal covering a parcel of land with an
area of 25,750 square meters located at Muntinlupa, Las Pias, M.M. and registered in the name of
Carmen Madlangbayan, used as one of the collaterals, turned out to be fake and spurious as the
genuine TCT No. 300011 of the Office of the Register of Deeds of Rizal covers a parcel of land
located in
Angono, Rizal with an area of 514 square meters registered in the name of persons other than
respondents Imperial, Arkin, and Madlangbayan. Likewise, the supposed lien-free motor vehicle
offered as collateral turned out to be heavily mortgaged and was even disposed of without informing
petitioner. Furthermore, it has also been proven that subsequent to the issuance of the May 30, 1988
surety bond, respondent Arkin started disposing of his other properties. Prior to the filing of the
complaint, respondent not only had sold the motor vehicle given as collateral but that his two other
condominium units were also alienated in favor of a company of which respondent Arkin is the
president. All these circumstances unerringly point to the devious scheme of respondent Arkin to
defraud petitioner.
It is therefore clear that fraud was present when private respondent, among others, entered into an
indemnity agreement with petitioner. The actuations of respondent Arkin indubitably lead to the
conclusion that he never entertained the idea of fulfilling his obligations under the agreement and
was bent on defrauding petitioner from the very beginning.
Under the circumstances, we perceive no impropriety or irregularity in the issuance of the writ of
attachment especially so where petitioner has fully complied with the requirements for the issuance
thereof.
On the contrary, what we see as having been attended by irregularity is the assailed order of
respondent judge lifting the writ of attachment based on grounds which are contradicted by the
evidence on record. It is a fact that respondent Arkin gave fake land titles as collaterals and even
disposed of real properties in his obvious attempt to defraud petitioner. And yet, respondent judge
concluded that petitioner's allegation that respondent Arkin's fraudulent alienation of his properties
has no foundation in fact. This is plain absurdity. As respondent judge himself noted in his earlier
order denying respondent Arkin's motion to quash writ of attachment, the latter's three (3)
conveyances, "though made before the institution of the action, is a circumstance tending to show
fraudulent conveyance with intent to defraud his creditors. Especially so, when the payment of
herein claim upon which the action is brought is not secured by any mortgage or pledge of real (or)
personal property and plaintiff had no other sufficient security for the enforcement of the claim"
(Rollo, p. 58). Such being the case, respondent Arkin's claim that the writ of attachment has been
irregularly issued should not have merited serious consideration by respondent judge.
Be that as it may, the instant case being "an action against a party who has been guilty of fraud in
contracting the obligation upon which the action is brought", respondent Arkin is not allowed to file a

motion to dissolve the attachment on the ground that the writ has been improperly or irregularly
issued. As we held in Mindanao Savings and Loan Assoc. vs. Court of Appeals (172 SCRA 480
[1989]):
. . ., when the preliminary attachment is issued upon a ground which is at the same
time the applicant's cause of action: e.g., . . . an action against a party who has been
guilty of fraud in contracting the debt or incurring the obligation upon which the action
is brought, the defendant is not allowed to file a motion to dissolve the attachment
under Section 13 of Rule 57 by offering to show the falsity of the factual averments in
the plaintiff's application and affidavits on which the writ was based and consequently
that the writ based therein had been improperly, or irregularly, issued the reason
being that the hearing on such motion for dissolution of the writ would be tantamount
to a trial on the merits. In other words, the merits of the action would be ventilated at
a mere hearing of a motion, instead of the regular trial. Therefore, when the writ of
attachment is of this nature, the only way it can be dissolved is by a counterbond.
Petitioner next contends that motion for reconsideration need not at all times be resorted to before a
special civil action for certiorari may be instituted before respondent court.
Ordinarily, certiorari will not lie unless an inferior court, through a motion for reconsideration, had
been given an opportunity to correct the imputed errors. However, this rule admits of exceptions
such as 1) when the issue raised is one purely, of law; 2) where public interest is involved; 3) in
cases of urgency (Quirino vs. Grospe, 169 SCRA 702 [1989]); or 4) where special circumstances
warrant immediate or more direct action (People vs. Dacudao, 170 SCRA 489 [1989]).
In the case at bar, petitioner's failure to file a motion for reconsideration in the trial court before
commencingcertiorari proceedings in the Court of Appeals is not fatal considering the existence of
special circumstances that warrant immediate and more direct action (Saldaa vs. CA, 190 SCRA
396 [1990]).
The indecent haste with which respondent Arkin had been disposing of his properties demonstrates
the imperative need for a more adequate relief requiring an immediate and more direct action. There
was an urgency which caused the present case to fall under one of the exceptions thereby allowing
petitioner to file a petition forcertiorari without the need of first filing a motion for reconsideration.
Filing a motion for reconsideration would have served no useful purpose nor can it be considered a
plain, speedy and adequate remedy since the order directing the sheriff to discharge or lift the writ of
attachment was issued on the same day the order granting the quashal was made. It would not have
automatically forestalled Arkin from further disposing of his properties. It is rather disturbing how
respondent judge, after ruling in his order of October 19, 1989, denying respondent's motion to
quash, that the trial court's finding of fraud in incurring the obligation under the indemnity agreement
was supported by substantial evidence, would, in his order of March 6, 1991 granting the motion for
reconsideration, based on the same substantial evidence supporting a finding of fraud, later reverse
himself and declare that "the plaintiff (petitioner herein) did not prove the intent of defendant Arkin to
defraud creditors."
Through the order for the "immediate" lifting of the writ, respondent Judge, in one swift stroke,
completely subverted the valid order of attachment issued after a finding of fraud, which finding he
himself has declared as supported by substantial evidence. We hold that respondent judge in issuing
the contested orders has acted capriciously, whimsically and arbitrarily and with grave abuse of
discretion amounting to lack or in excess of jurisdiction correctible by the special writ of certiorari.

WHEREFORE, the petition is GRANTED. The assailed order of respondent judge dated March 6,
1991 is SET ASIDE and the order dated October 19, 1989 is hereby REINSTATED. Costs against
private respondent.
SO ORDERED.

G.R. No. 23237, Walter E. Olsen &

Co. v. Olsen, 48 Phil. 238
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

November 14, 1925

G.R. No. 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.

VILLA-REAL, J.:

This is an appeal taken by the defendant from a judgment of the Court of First Instance of Manila,
sentencing him to pay plaintiff corporation the sum of P66,207.62 with legal interest thereon at the
rate of 6 per cent per annum from February 1, 1923, the date of the filing of the complaint, until full
payment and the costs, and dismissing the cross-complaint and counterclaim set up by him.

As ground of his appeal, the defendant assigns four errors as committed by the trial court, to wit: (1)
The holding that the defendant-appellant contracted fraudulently the debt which the plaintiff-appellee
seeks to recover in its complaint; (2) its failure to set aside the writ of preliminary attachment issued

by it ex parte; (3) the fact of it not having absolved the defendant from the complaint of the plaintiff
corporation and of not having given judgment for the defendant and against the plaintiff for the
amount of his counterclaim, after deducing the debt due from him to the plaintiff corporation in the
sum of P66,207.62; and (4) its action in denying the motion for new trial of the defendant.

As the first two supposed errors are intimately connected with each other, we will discuss them jointly.

The first question that arises is whether or not an order denying a motion for the annulment of a
preliminary attachment may be reviewed through an appeal.

The preliminary attachment is an auxiliary remedy the granting of which lies within the sound
discretion of the judge taking cognizance of the principal case upon whose existence it depends. The
order of the judge denying a motion for the annulment of a writ of preliminary attachment, being of an
incidental or interlocutory and auxiliary character, cannot be the subject of an appeal independently
from the principal case, because our procedural law now in force authorizes an appeal only from a final
judgement which gives an end to the litigation. (Section 143, Act No. 190: 3 C. J., 549 par. 389.) This
lack of ordinary remedy through an appeal does not mean, however, that any excess a lower court
may commit in the exercise of its jurisdiction is without remedy; because there are the especial
remedies, such as certiorari, for the purpose. (Leung Ben vs. O'Brien, 38 Phil., 182.)

While it is true that an order denying a motion for the annulment of a preliminary attachment is not
subject to review through an appeal independently from the principal case, it not consisting a final
order, yet when the writ of preliminary attachment becomes final by virtue of a final judgment
rendered in the principal case, said writ is subject to review jointly with the judgment rendered in the
principal case through an ordinary appeal. The appellate court has the power to revoke or confirm said
order, in like manner as a judgment on the merits; because it is a ruling to which an exception may be
taken, and therefore is subject to review in an appeal by bill of exceptions. (Secs. 141-143, Act No.
190.) The fact that section 441 of the Code of Civil Procedure does not provide any remedy against the
granting or denial of a motion for the annulment of a writ of preliminary attachment, except in case of
excess of jurisdiction, does not confer upon said order a final and irrevocable character, taking it out
from the general provisions as to appeal and review, for a special provision is necessary for that
purpose.

Having arrived at the conclusion that an order denying a motion for the annulment of a preliminary
attachment may be reviewed in an appeal taken from a final judgment rendered in the principal case,
in which said order was entered as an auxiliary remedy, we will now turn to consider the question
whether or not the trial court committed error in denying the motion for the annulment of the
preliminary attachment levied upon the property of the defendant-appellant.

It is admitted by the defendant-appellant that he is indebted to the plaintiff-appellee corporation in the

sum of P66,207.62, but denies that he has contracted said debt fraudulently.

The evidence shows that the defendant-appellant was president-treasurer and general manager of the
plaintiff-appellee corporation and exercised direct and almost exclusive supervision over its function,
funds and books of account until about the month of August, 1921. During that time he has been
taking money of the corporation without being duly authorized to do so either by the board of directors
or by the by-laws, the money taken by him having amounted to the considerable sum of P66,207.62.
Of this sum, P19,000 was invested in the purchase of the house and lot now under attachment in this
case, and P50,000 in the purchase of 500 shares of stock of Prising at the price of P100 per share for
himself and Marker. A few days afterwards he began to sell the ordinary shares of the corporation for
P430 each. The defendant-appellant attempted to justify his conduct, alleging that the withdrawal of
the funds of the corporation for his personal use was made in his current account with said
corporation, in whose treasury he deposited his own money and the certificates of title of his shares,
as well as of his estate, and that at the first meeting of the stockholders, which took place on February
1, 1919, a statement of his account with a debit balance was submitted and approved.

Having, as he had, absolute and almost exclusive control over the function of the corporation and its
funds by virtue of his triple capacity as president, treasurer and general manager, the defendantappellant 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 defendantappellant 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.

G.R. No. 171124

February 13, 2008

ALEJANDRO NG WEE, petitioner,

vs.
MANUEL TANKIANSEE, respondent.
DECISION
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 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 90130 and its
January 6, 2006 Resolution2denying 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 only P37.5M. 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
Affidavit8 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.9The writ was, consequently, issued on November 6,
2000.10
Arguing that the writ was improperly issued and that the bond furnished was grossly insufficient,
respondent, on December 22, 2000, moved for the discharge of the attachment. 11 The other
defendants likewise filed similar motions.12 On October 23, 2001, the RTC, in an Omnibus
Order,13 denied all the motions for the discharge of the attachment. The defendants, including
respondent herein, filed their respective motions for reconsideration 14 but the trial court denied the
same on October 14, 2002.15
Incidentally, while respondent opted not to question anymore the said orders, his co-defendants,
Virata and UEM-MARA Philippines Corporation (UEM-MARA), assailed the same via certiorari under
Rule 65 before the CA [docketed as CA-G.R. SP No. 74610]. The appellate court, however, denied
the certiorari petition on August 21, 2003,16 and the motion for reconsideration thereof on March 16,
2004.17 In a petition for review on certioraribefore 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 Decision25 reversing and setting aside the aforementioned orders of the trial court and lifting
the November 6, 2000 Writ of Preliminary Attachment26 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 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:
xxxx
(d) In an action against a party who has been guilty of a fraud in contracting the debt or
incurring the obligation upon which the action is brought, or in the performance thereof.
For a writ of attachment to issue under this rule, the applicant must sufficiently show the factual
circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor's
mere non-payment of the debt or failure to comply with his obligation. 30 The applicant must then be
able to demonstrate that the debtor has intended to defraud the creditor.31 In Liberty Insurance
Corporation v. Court of Appeals,32 we explained as follows:
To sustain an attachment on this ground, it must be shown that the debtor in contracting the
debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the
execution of the agreement and must have been the reason which induced the other party
into giving consent which he would not have otherwise given. To constitute a ground for
attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon
contracting the obligation sued upon. A debt is fraudulently contracted if at the time of
contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case.
Fraud is a state of mind and need not be proved by direct evidence but may be inferred from
the circumstances attendant in each case.33
In the instant case, petitioner's October 12, 2000 Affidavit34 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 give a hint about what constituted the fraud
and how it was perpetrated38 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.

FIRST DIVISION

[G.R. No. 123358. February 1, 2000]

FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU, petitioners, vs.

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

Subsequently, petitioners filed a Motion for Reconsideration as well as an Omnibus Motion for
Leave to file Amended Answer and/or to delete Francis C. Yu as party-defendant.
[2]

[3]

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

[5]

[6]

[7]

Hence, the instant Petition.

It is evident that the questioned writ of attachment was anchored upon Section 1(d), Rule 57 of
the Revised Rules of Court, to wit "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:
xxx

xxx

x x x.

(d) In an action against a party who has been guilty of a fraud in contracting the
debt or incurring the obligation upon which the action is brought, or in concealing
or disposing of the property for the taking, detention or conversion of which the
action is brought;
xxx

xxx

x x x."

Petitioners, however, insist that the writ of preliminary attachment was irregularly issued
inasmuch as there was no evidence of fraud in incurring the obligations sued upon.
In support of their stand, petitioners alleged that private respondent's principal witness admitted
that it was the Department of Public Works and Highways (DPWH) that induced it to deliver
materials and cash for the Tandang Sora Commonwealth Flyover project, to wit COURT: Now . . . as of January 5, 1993 you delivered to him (referring to
defendant FCY corporation) in cash and in kind amounting to Fifteen Million
Pesos (P15,000,000.00), now why did you keep on delivering cash and materials
to him if you were not paid a single centavo?
A
Because of every need for the project, and the Public Works official
assured me that I will be given a new project after the Tandang Sora will be
finished.
Q

Who is this public official that promised you?

A
Director Pendosa, Teodoro Encarnacion and Secretary de Jesus your
Honor. (TSN, 6 July 1993, pp. 47-48)
xxx

xxx

xxx

Q
What about these officials of the Department of Public Highways, what
would they do to project their sub alleged project?
A

Secretary de Jesus is no longer connected there, your Honor.

At the time?

At that time, he resigned.

Before he resigned.

A
He gave me assurance that they will soon give assurance, they will soon
give me another project . . . (TSN, 6 July 1993, p. 55)
[8]

A cursory reading of the above-cited testimony, however, readily shows that said reassurance
from the DPWH officials came, not at the inception of the obligation or contract, but during its
performance. On the other hand, the fraud of which petitioners are accused of and which was the
basis for the issuance of the questioned attachment, is fraud alleged to have been committed
upon contracting the obligation sued upon. Thus, petitioners argument that "the inducement was
the mouth-watering temptation of a DPWH promise of a 'new project after the Tandang Sora
Flyover project will be finished"' is clearly off-tangent as such inducement, if any, came not at
the inception of the obligation.
Similarly, petitioners' arguments that it was private respondent who admittedly prepared the
letter embodying the alleged joint venture agreement and had petitioner Francis Yu sign it must
fail. The written agreement referred to was signed by petitioner Francis Yu only on January 5,
1993, long after the project had commenced. Thus, It was only a written confirmation of an
arrangement that had already been existing and operational. Similarly then, such written
confirmation did not occur at the inception of the obligation sued upon.
[9]

In Liberty Insurance Corporation vs. Court of Appeals, this Court, discussing Section 1(d),
Rule 57, cautioned as follows -[10]

To sustain an attachment on this ground, it must be shown that the debtor in

contracting the debt or incurring the obligation intended to defraud the
creditor. The fraud must relate to the execution of the agreement and must have
been the reason which induced the other party into giving consent which he would
not have otherwise given. To constitute a ground for attachment in Section 1 (d),
Rule 57 of the Rules of Court, fraud should be committed upon contracting the
obligation sued upon. A debt is fraudulently contracted if at the time of
contracting it the debtor has a preconceived plan or intention not to pay, as it is in
this case. Fraud is a state of mind and need not be proved by direct evidence but
may be inferred from the circumstances attendant in each case. (Republic
v. Gonzales, 13 SCRA 633).
From the foregoing, therefore, the alleged inducement by the DPWH officials upon private
respondent as well as the circumstances surrounding the execution of the joint venture
agreement, both appear immaterial as they were not committed upon contracting the obligation
sued upon but occurred long after the obligation has been established.

The fact that petitioners have paid a substantial amount of money to private respondent cannot
save the day for them either. As per their own accounting, such payments were for accounts
payable for labor supplied, construction materials and cash advances. It is not denied that no
payment of profits has been given to private respondent, which is precisely what it is suing for.
[11]

Finally, considering that the writ of preliminary attachment has been issued on account of
allegations of fraud in contracting the obligation upon which the action is brought petitioners'
efforts to have the writ of preliminary attachment dissolved on the ground that it was improperly
or irregularly issued is in vain. Indeed, in Liberty Insurance Corporation, supra, which
cited Mindanao Savings and Loan Assoc. vs. Court of Appeals (172 SCRA 480), we ruled "x x x, when the preliminary attachment is issued upon a ground which is at the
same time the applicant's cause of action: e.g., x x x an action against a party who
has been guilty of fraud in contracting the debt or incurring the obligation upon
which the action is brought, the defendant is not allowed to file a motion to
dissolve the attachment under Section 13 of Rule 57 by offering to show the
falsity of the factual averments in the plaintiffs application and affidavits on
which the writ was based and consequently that the writ based therein had been
improperly or irregularly issued - the reason being that the hearing on such
motion for dissolution of the writ would be tantamount to a trial on the merits. In
other words, the merits of the action would be ventilated at a mere hearing of a
motion; instead of the regular trial. Therefore, when the writ of attachment is of
this nature, the only way it can be dissolved is by a counterbond."
We now come to the issue of whether or not petitioner Francis Yu should remain as partydefendant. Petitioners argue that since the transactions were corporation to corporation only,
petitioner Francis Yu should be dropped as party-defendant considering the hornbook law that
corporate personality is a shield against personal liability of its officers. We agree that petitioner
Francis Yu cannot be made liable in his individual capacity if he indeed entered into and signed
the contract in his official capacity as President, in the absence of stipulation to that effect, due to
the personality of the corporation being separate and distinct from the persons composing it.
However, while we agree that petitioner Francis Yu cannot be held solidarily liable with
petitioner corporation merely because he is the President thereof and was involved in the
transactions with private corporation, we also note that there exists instances when corporate
officers may be held personally liable for corporate acts. Such exceptions were outlined
in Tramat Mercantile, Inc. vs. Court of Appeals, as follows -[12]

[13]

"Personal liability of a corporate director, trustee or officer along (although not

necessarily) with the corporation may so validly attach, as a rule, only when 1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith
or gross negligence in directing its affairs, or (c) for conflict of interest, resulting
in damages to the corporation, its stockholders or other persons;

2. He consents to the issuance of watered down stocks or who, having knowledge

thereof, does not forthwith file with the corporate secretary his written objection
thereto;
3. He agrees to hold himself personally and solidarily liable with the corporation;
or
4. He is made, by a specific provision of law, to personally answer for his
corporate action."
The attendance of these circumstances, however, cannot be determined at this stage and should
properly be threshed out during the trial on the merits. Stated differently, whether or not
petitioner Francis Yu should be held personally and solidarily liable with petitioner corporation is
a matter that should be left to the trial court's discretion, dependent as it is on evidence during
trial.
WHEREFORE, in view of the foregoing, the instant Petition is hereby DISMISSED. No
pronouncement as to costs.
SO ORDERED.

METRO, INC. and

SPOUSES FREDERICK JUAN
and LIZA JUAN,
Petitioners,

- versus -

G.R. No. 171741

Present:
CARPIO, J., Chairperson,
LEONARDO-DE CASTRO,*
BRION,
DEL CASTILLO, and
ABAD, JJ.

LARAS GIFTS AND

DECORS, INC.,
LUIS VILLAFUERTE, JR.
and LARA MARIA R.
Promulgated:
VILLAFUERTE,
Respondents.
November 27, 2009
x---------------------------------- ----------------x
DECISION

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 toP27 Million to satisfy the applicants
demand exclusive of costs, upon posting by the Plaintiffs of a Bond
for Preliminary Attachment in the amount of twenty five million pesos
(P25,000,000.00), subject to the approval of this Court.
SO ORDERED.[7]
On 26 June 2003, petitioners filed a motion to discharge the writ of
attachment. Petitioners argued that the writ of attachment should be discharged on
the following grounds: (1) that the 2001 agreement was not a valid contract
because it did not show that there was a meeting of the minds between the parties;
(2) assuming that the 2001 agreement was a valid contract, the same was
inadmissible because respondents failed to authenticate it in accordance with the
Rules on Electronic Evidence; (3) that respondents failed to substantiate their
allegations of fraud with specific acts or deeds showing how petitioners defrauded
them; and (4) that respondents failed to establish that the unpaid commissions were
already due and demandable.
After considering the arguments of the parties, the trial court
granted petitioners motion and lifted the writ of attachment. The 12 August 2003
Order[8] of the trial court provides:
Premises considered, after having taken a second hard look at
the Order dated June 23, 2003 granting plaintiffs application for the
issuance of a writ of preliminary attachment, the Court holds that the
issuance of a writ of preliminary attachment in this case is not
justified.

WHEREFORE, the writ of preliminary attachment issued in the instant case is hereby
ordered immediately discharged and/or lifted.
SO ORDERED.[9]

Respondents filed a motion for reconsideration. In its 10 September 2003

Order, the trial court denied the motion.
Respondents filed a petition for certiorari before the Court of
Appeals. Respondents alleged that the trial court gravely abused its discretion
when it ordered the discharge of the writ of attachment without requiring
petitioners to post a counter-bond.
In its 29 September 2004 Decision, the Court of Appeals granted
respondents petition. The 29 September 2004 Decision provides:
WHEREFORE, finding merit in the petition, We GRANT the
same. The assailed Orders are hereby ANNULLED and SET
ASIDE. However, the issued Writ of Preliminary Attachment may be
ordered discharged upon the filing by the private respondents of the
proper counter-bond pursuant to Section 12, Rule 57 of the Rules of
Civil Procedure.
SO ORDERED.[10]
Petitioners filed a motion for reconsideration. In its 2 March 2006
Resolution, the Court of Appeals denied the motion.
Hence, this petition.
The 12 August 2003 Order of the Trial Court
According to the trial court, respondents failed to sufficiently show that
petitioners were guilty of fraud either in incurring the obligation upon which the
action was brought, or in the performance thereof. The trial court found no proof
that petitioners were motivated by malice in entering into the 2001 agreement. The
trial court also declared that petitioners failure to fully comply with their

obligation, absent other facts or circumstances to indicate evil intent, does not
automatically amount to fraud. Consequently, the trial court ordered the discharge
of the writ of attachment for lack of evidence of fraud.
The 29 September 2004 Decision of the Court of Appeals
According to the Court Appeals, the trial court gravely abused its discretion
when it ordered the discharge of the writ of attachment without requiring
petitioners to post a counter-bond. The Court of Appeals said that when the writ
of attachment is issued upon a ground which is at the same time also the
applicants cause of action, courts are precluded from hearing the motion for
dissolution of the writ when such hearing would necessarily force a trial on the
merits of a case on a mere motion. [11] The Court of Appeals pointed out that, in this
case, fraud was not only alleged as the ground for the issuance of the writ of
attachment, but was actually the core of respondents complaint. The Court of
Appeals declared that the only way that the writ of attachment can be discharged is
by posting a counter-bond in accordance with Section 12,[12] Rule 57 of the Rules of
Court.
The Issue
Petitioners raise the question of whether the writ of attachment issued by the
trial court was improperly issued such that it may be discharged without the filing
of a counter-bond.

The Ruling of the Court

The petition has no merit.
Petitioners contend that the writ of attachment was improperly issued because
respondents amended complaint failed to allege specific acts or circumstances
constitutive of fraud. Petitioners insist that the improperly issued writ of
attachment may be discharged without the necessity of filing a counterbond. 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 counterbond. 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.
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
Orders (POs) they will receive from their US buyers;

b. That defendants will sell

thru plaintiffs for their US buyer;

exclusively

the Purchase

and

only

xxx

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.
xxx
20. Defendants are guilty of fraud committed both at the inception of the
agreement and in the performance of the obligation. Through machinations and
schemes, defendants successfully enticed plaintiffs to enter into the 2001
Agreement. In order to secure plaintiffs full trust in them and lure plaintiffs to
endorse more POs and increase the volume of the orders, defendants during the
early part, remitted to plaintiffs shares under the Agreement.
21. However, soon thereafter, just when the orders increased and the amount involved
likewise increased, defendants suddenly, without any justifiable reasons and in pure bad faith and
fraud, abandoned their contractual obligations to remit to plaintiffs their shares. And worse,
defendants transacted directly with plaintiffs foreign buyer to the latters exclusion and
damage. Clearly, defendants planned everything from the beginning, employed ploy and
machinations to defraud plaintiffs, and consequently take from them a valuable client.

22. Defendants are likewise guilty of fraud by violating the trust and confidence
reposed upon them by plaintiffs. Defendants received the proceeds of plaintiffs LCs with
the clear obligation of remitting 15% thereof to the plaintiffs. Their refusal and failure to
remit the said amount despite demand constitutes a breach of trust amounting to malice
and fraud.[17] (Emphasis and underscoring in the original) (Boldfacing and italicization
supplied)

We rule that respondents allegation that petitioners undertook to sell

exclusively and only through JRP/LGD for Target Stores Corporation but that
petitioners transacted directly with respondents foreign buyer is sufficient
allegation of fraud to support their application for a writ of preliminary
attachment. Since the writ of preliminary attachment was properly issued, the only
way it can be dissolved is by filing a counter-bond in accordance with Section 12,
Rule 57 of the Rules of Court.
Moreover, the reliance of the Court of Appeals in the cases of Chuidian v.
Sandiganbayan,[18] FCY Construction Group, Inc. v. Court of Appeals,
[19]
and Liberty Insurance Corporation v. Court of Appeals[20] is proper. The rule
that when the writ of attachment is issued upon a ground which is at the same
time the applicants cause of action, the only other way the writ can be lifted or
dissolved is by a counter-bond[21] is applicable in this case. It is clear that in
respondents amended complaint of fraud is not only alleged as a ground for the
issuance of the writ of preliminary attachment, but it is also the core of
respondents complaint. The fear of the Court of Appeals that petitioners could
force a trial on the merits of the case on the strength of a mere motion to dissolve
the attachment has a basis.
WHEREFORE, we DENY the petition. We AFFIRM the
29
September 2004 Decision and 2 March 2006 Resolution of the Court of Appeals in
CA-G.R. SP No. 79475.
SO ORDERED.
REPUBLIC OF
THEPHILIPPINES,

G.R. No. 164800

Present:

Petitioner,
- versus -

YNARES-SANTIAGO,
Chairperson,
*
CARPIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

ESTATE OF ALFONSO LIM, SR.,

ALFONSO LIM, JR.,TEODORO
Q. PENA, FERDINAND E.
MARCOS (now deceased and
Represented by his
Estate/Heirs), IMELDA R.
MARCOS, TAGGAT
INDUSTRIES, INC., PAMPLONA
REDWOOD VENEER, INC.,
SOUTHERN PLYWOOD,
Promulgated:
WESTERN CAGAYAN LUMBER,
ACME PLYWOOD, VETERAN
July 22, 2009
WOODWORK, INC., SIERRA
MADRE WOOD INDUSTRIES,
INC., and TROPICAL
PHILIPPINES WOOD
INDUSTRIES, INC.,
Respondent.
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
In this Petition for Certiorari under Rule 65, the Republic of the
Philippines assails and seeks to nullify the Resolution [1] dated March 28,
2003 of the Sandiganbayan, as effectively reiterated in another resolution
of June 18, 2004, which denied petitioners motion for the issuance of a writ
of preliminary attachment in Civil Case No. 0030, entitledRepublic v.
Alfonso Lim, et al.,[2] a suit to recover ill-gotten or unexplained wealth.
The Facts

On October 2, 1991, in Civil Case No. 0030, the Republic,

represented by the Presidential Commission on Good Government
(PCGG), filed before the Sandiganbayan, Second Division, an Amended
Complaint for reconveyance, reversion, accounting, restitution, and
damages. In it, the Republic averred that Alfonso Lim, Sr.
(now deceased) and Alfonso Lim, Jr., acting by themselves and/or in
unlawful collusion with Ferdinand E. Marcos and Imelda R. Marcos, and
taking undue advantage of their relationship, influence, and connection with
the latter, embarked upon devices and stratagems to unjustly enrich
themselves at the expense of the Republic and the Filipino people. Among
other acts, the Lims were alleged to have:
(a)

actively solicited and obtained, upon the personal behest of [the Marcoses], with the
active collaboration of Teodoro Q. Pea, who was then Minister of Natural Resources,
additional timber concession in favor of Taggat Industries, Inc. (TAGGAT) and Pamplona
Redwood Veneer, Inc. (PAMPLONA), corporations beneficially held and controlled by
Alfonso Lim and Alfonso Lim, Jr., which, in addition to other areas already awarded to
TAGGAT and PAMPLONA, resulted in their concession holdings in excess of the
allowable limits prescribed under Section 11, Article XIV of the 1973 Constitution;

(b)

actively solicited and obtained, upon the personal behest of [the Marcoses], a
management contract in favor of TAGGAT to operate and manage the logging
concessions of Veterans Woodwork, Inc. (VETERANS), Sierra Madre Wood Industries,
Inc. (SIERRA MADRE), and Tropical Philippines Wood Industries, Inc. (TROPICAL) over
and above the objections of VETERANS;

(c)

obtained a permit to cut down a certain number of Narra and Amaciga trees, and, on the
very same day, was likewise given an authorization by Ferdinand E. Marcos to export the
same, in violation of existing ban against cutting and export of the aforesaid trees;
obtained, in favor of PAMPLONA, a syndicated loan in the amount of millions of US
dollars from a consortium of international banks, secured by the guarantee of the National
Investment and Development Corporation (NIDC), a subsidiary of the Philippine National
Bank; and in view of the default by PAMPLONA in the payment of its principal and/or
interest amortizations, the loan was converted, under the debt rescheduling arrangement
between Republic and its foreign creditor banks, into a public sector obligation of
Republic, to the grave and irreparable damage of the Republic and the Filipino people.

(d)

The Republic also alleged that the foregoing acts, singly or

collectively, constituted grave and gross abuse of official position and
authority, flagrant breach of public trust and fiduciary obligations, brazen
abuse of right and power, unjust enrichment, and violation of the
Constitution and laws of the Republic to the grave and irreparable damage
to it and its citizens.

As its main prayer, the Republic asked for the reconveyance of all
funds and property impressed with constructive trust in favor of the
Republic and the Filipino people, as well as funds and other property
acquired with [respondents] abuse of right and power and through unjust
enrichment, including but not limited to the properties listed in Annex A of
the Complaint together with the accruing income or increment from date of
acquisition until final judgment.
The properties listed in the said Annex A [3] consistbesides the
Lims assets sequestered in accordance wth Executive Order Nos. 1 and 2,
Series of 1986of the assets and other properties of Lim, Sr., as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

a parcel of land with TCT No. 2981 (Lot A), located at Barrio Birinayan, Talisay,
Batangas;
a parcel of raw land with TCT No. 11750 (Lot 8-C-53) located at Muzon, San Isidro, Angono,
Rizal;
a parcel of raw land with TCT No. 11749 (Lot 8-C-51) located at Muzon, San Isidro,
Angono. Rizal;
a parcel of land with TCT No. 11728 (Lot 8-C-9) located at Muzon, San Isidro, Angono,
Rizal;
a parcel of land with TCT No. 11732 (Lot 8-C-17) located at Muzon, San Isidro, Angono,
Rizal;
a parcel of agricultural land with TCT No. 11728 (Lot 8-C-9) located at Muzon, San
Isidro, Angono, Rizal;
a parcel of agricultural land with TCT No. 11727 (Lot 8-C-7) located at Muzon, San
Isidro, Angono, Rizal;
a parcel of residential land with TCT No. 315 located at Maharlika, Tagaytay City;
a parcel of agricultural/residential land with TCT No. 157570 located at Berinayan,
Laurel, Batangas;
a parcel of land and building in the name of SIERRA MADRE as reported by Task Force
SEAFRONT, Nov. 20, 1986;
a parcel of land and building in the name of PAMPLONA as reported by Task Force
SEAFRONT, November 20, 1986;
Contigous [13] parcels of land located at Claveria, Cagayan in the name of TAGGAT
Industries, Inc. as reported by Task Force SEAFRONT, November 7, 1987:
xxxx

13.
14.
15.
16.

a parcel of agricultural land in the name of TAGGAT with OCT No. O-1108 (S) Lot No.
1195;
a parcel of commercial land in the name of TAGGAT with TCT No. 78732 located
at Romualdez Street, Paco, Manila;
buildings and improvements in the name of TAGGAT erected on OCT No. 0-1104, 011017, 0-1109;
buildings in the name of TAGGAT erected on TCT No. 78732; Paco, Manila.

[OTHER PROPERTIES]
A.

Shares of Stocks in:

1. Taggat Industries, Inc. (TAGGAT)
2. Pamplona Redwood Veneer, Inc.
(PAMPLONA)

1350, Romualdez Street, Paco, Manila

1350, Romualdez Street, Paco, Manila

3. Sierra Madre Wood Industries, Inc.

(SIERRA MADRE)
4.
Veterans
Woodworks,
Inc.
(VETERANS)
5. Southern Plywood Corporation
(SPC)
6. Western Cagayan Lumber (WCL)
B.

79 Doa Hemady corner 13th St., New

Manila, Quezon City
79 Doa Hemady corner 13th St., New
Manila, Quezon City
5th Floor Jardine Davies Bldg., 222 Sen. J.
Puyat Avenue, Makati, Metro Manila
Jardine Davies Building, 222 Sen. J. Puyat
Avenue, Makati, Metro Manila

Property, Plant and Equipment

xxxx

C.

Aircraft [2 units]
xxxx

D.

Current Assets [as reported]

E.

xxxx
Investments and Other Assets

1.
2.
3.

Due from affiliated companies, TAGGAT, as reported

Investment in Stocks, TAGGAT, as reported
Deferred Charges and Other Assets, TAGGAT, as reported

F.

Bank Accounts

1.

PAMPLONA Accounts
a.
The Consolidated Bank and Trust Co.
b.
Equitable Banking Corporation

2.

TAGGAT Acccounts
a. The Consolidated Bank and Trust Co,
b. Philippine National Bank
c. Equitable Banking Corporation
d. Philippine Banking Corporation
e. Allied Banking Corporation

G.

Other

1.

Frozen Bank Accounts and Other Assets of Alfonso Lim, Sr., Alfonso Lim, Jr.
and Lawrence Lim

Meanwhile, Lim, Sr. passed away. On June 22, 1998, his estate filed
a motion to lift the sequestration[4] over certain real properties[5] contending
that the PCGG impleaded him owing to his alleged association with former
Pres. Marcos. The estate would add, however, that Lim, Sr. secured title
over almost all of his real properties thus sequestered way back in 1948,
long before the Marcoses came to power.
To the motion to lift, the Republic interposed an opposition,
alleging that the sequestered lots and titles stand as security for the

satisfaction of any judgment the Republic may obtain against the estate
of Lim, Sr., his family, or his group of companies.
By Resolution[6] dated March 17, 2001, the Sandiganbayan lifted the
sequestration order in question on the strength of the following pertinent
premises, to wit:
The sequestration of some of the real properties of movant-defendant [estate of Lim, Sr.]
is a remedial measure resorted to in order to preserve these properties along with others alleged to
have taken illegally x x x, and in order to prevent the same from disappearance, destruction, loss
or dissipation and /or to foil acts that may render moot and academic the efforts to recover the
aforesaid alleged ill-gotten wealth. However, the pertinent provisions of Executive Order Nos. 1, 2
and 14 are explicit in saying that the properties that are supposed to be sequestered are those x x
x amassed during the regime of the deposed President Ferdinand E. Marcos and not before or later
thereto. x x x

In time, the Republic sought but was later denied reconsideration of

the sequestration-lifting resolution of the Sandiganbayan. [7]
Meanwhile, after presenting its evidence in the main case, the
Republic filed its Formal Offer of Evidence dated October 8, 2001.
[8]
On December 5, 2001, the Sandiganbayan issued a terse order admitting
all the documentary exhibits of the Republic consisting of Exhibits
A to G, inclusive of their submarkings.[9]
The following incidents/events then transpired:
(1) Sometime in January 2002, the estate of Lim, Sr., Ruthie Lim, and
two
others,
as
defendants a
quo, filed
a
Demurrer
to
[10]
Evidence dated January 14, 2002, on the ground of either irrelevancy or
immateriality of the Republics evidence. As argued, the same evidence did
not prove or disprove that the demurring defendants, on their own or in
concert with the Marcoses, amassed ill-gotten wealth. Lim, Jr. later filed a
Manifestation[11] adopting the demurrer to evidence of the estate of Lim,
Sr., et al.
(2)

On July 4, 2002, the Sandiganbayan denied the Republics motion

for reconsideration of the graft courts resolution lifting the sequestration
order.[12]

(3) In an obvious bid to counter the effects of the lifting of the

sequestration, the Republic, on September 9, 2002, filed a Motion for the
Issuance of a Writ of Preliminary Attachment [13] against respondents in the
amount of its claim. The Republic alleged that respondent Lims were
guilty of fraud in incurring various legal obligations which the present action
has been brought, by taking undue advantage of their relationship,
influence and connection with the [Marcoses] to unjustly enriched
themselves to the prejudice of the Republic.
Except for one, all the other respondents belonging to the Lim group
filed their respective comment or opposition to the Republics motion for a
writ of attachment.
(4) On March 28, 2003, the Sandiganbayan, stating that bare
allegations of the commission of fraud by respondents in incurring the
aforesaid obligations are not sufficient for the granting of the writ of
preliminary attachment, denied, via a Resolution,[14] the corresponding
motion.
In due time, the Republic interposed a motion seeking
reconsideration of the Sandiganbayans March 28, 2003 denial action.[15]
(5) By Resolution dated July 17, 2003, the Sandiganbayan denied
respondents demurrer to evidence.[16]
Forthwith, the estate of Lim, Sr., Taggat Industries, Inc. (TAGGAT),
and Pamplona Redwood Veneer, Inc. (PAMPLONA), followed later by Lim,
Jr., respectfully moved for reconsideration of the July 17, 2003 Resolution.
(6) On June 18, 2004, the Sandiganbayan resolved to affirm the
denial of the respondents demurrer to evidence. It also denied in its March
28, 2003 resolution the Republics motion for the issuance of a writ of
preliminary attachment.[17]
Hence, this recourse is before us.

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

Nature of Preliminary Attachment

Attachment is an ancillary remedy applied for not for its own sake but
to enable the attaching party to realize upon relief sought and expected to
be granted in the main or principal action; [19] it is a measure auxiliary or
incidental to the main action. As such, it is available during the pendency of
the action which may be resorted to by a litigant to preserve and protect
certain rights and interests therein pending rendition, and for purposes of
the ultimate effects, of a final judgment in the case. As a corollary
proposition, an order granting an application for a writ of preliminary
attachment cannot, owing to the incidental or auxiliary nature of such order,
be the subject of an appeal independently of the main action. [20]
The instant case is one of those mentioned in Sec. 1, Rule 57 of the Rules,
specifically the sections paragraph d, wherein a writ of preliminary
attachment may be issued. It provides:
SECTION 1. Grounds upon which attachment may issue.A plaintiff or
any proper party may, at the commencement of the action or at any time
thereafter, have the property of the adverse party attached as security for the
satisfaction of any judgment that may be recovered in the following cases:

xxxx

(d) In an action against a party who has been guilty of fraud in contracting
the debt or incurring the obligation upon which the action is brought, or in
concealing or disposing of the property for the taking, detention or conversion of
which the action is brought;

For a writ of attachment to issue under the above-quoted rule, the

applicant must sufficiently show the factual circumstances of the alleged
fraud.

Fraud may be defined as the voluntary execution of a wrongful act, or

a willful omission, knowing and intending the effects which naturally and
necessarily arise from such act or omission.[21] In its general sense, fraud is
deemed to comprise anything calculated to deceive, including all acts and
omissions and concealment involving a breach of legal or equitable duty,
trust, or confidence justly reposed, resulting in damage to another, or by
which an undue and unconscientious advantage is taken of another.
[22]
Fraud is also described as embracing all multifarious means which
human ingenuity can device, and which are resorted to by one individual to
secure an advantage over another by false suggestions or by suppression
of truth and includes all surprise, trick, cunning, dissembling, and any unfair
way by which another is cheated.[23] Fraudulent, on the other hand,
connotes intentionally wrongful, dishonest, or unfair.[24]
In the case at bar, the Republic has, to us, sufficiently discharged the
burden of demonstrating the commission of fraud committed by
respondents Lims as a conditionsine qua non for the issuance of a writ of
preliminary attachment. The main supporting proving document is the
Republics Exhibit B which the Sandiganbayan unqualifiedly admitted in
evidence. And the fraud or fraudulent scheme principally came in the form
of Lim, Sr. holding and/or operating logging concessions which far
exceeded the allowable area prescribed under the 1973 Constitution.
A cursory evaluation of the Republics Exhibit Bthe Decision
dated November 20, 1986 of then Minister Ernesto M. Maceda of the
Ministry Natural Resources (MNR) [25] in an unnumbered MNR case
entitled IN RE: VIOLATIONS OF VETERANS WOODWORKS, INC. AND
ALFONSO LIM, SR. AND TAGGAT INDUSTRIES, INC., canceling the
logging concessions[26] enjoyed by the Lim Groupyields the following
undisputed relevant data:
(1) Lim, Sr., through the seven (7) respondent corporations, had been
holding/operating/managing several timber concessions with a total area of

533,880 hectares, more or less, which was far in excess of the 100,000
hectares allowed in the 1973 Constitution; [27]
(2) Since a wide expanse of forest lands were in between the
different Lim concessions, the Lims had effectively access to a total of
633,880 hectares of forests; and
(3) Other violation of the constitutional prohibition applies also to
three (3) corporations (Acme Plywood Co., Inc., Western Cagayan Lumber
Co., Inc., and Southern Plywood Corporation).
As is made abundantly clear in the aforesaid Maceda decision, the
MNR revoked or canceled the concessions or timber license agreements
(TLAs) of Lim, Sr. on the principal ground that the timber award was made
in utter violation of the Constitutional limitations on the granting of logging
concessions.[28] The same decision also indicated that Lim,
Sr.s influence, power and strong connection with the past [i.e., Marcos]
dispensation[29] explained his receipt of special privileges and concessions
unfettered by constitutional constraints. So influential was Lim, Sr. that he
and TAGGAT and sister companies received certain timber-related benefits
without the knowledge, let alone approval, of MNR. [30] Lim, Sr. doubtless
utilized to the hilt his closeness to the Marcoses to amass what may prima
facie be considered as illegal wealth.
Scheme to Circumvent Constitutional Prohibition
Sec. 11 of Article XIV of the governing 1973 Constitution states
that no private corporation or association may hold by lease,
concession, license, or permit, timber or forest lands and other
timber or forest resources in excess of one hundred thousand
hectares. Complementing this provision was Chapter I, No. 3(e) of
Forestry Administrative Order (FAO) No. 11 prohibiting any individual,
corporation, partnership, or association from acquiring a timber license
or license agreement covering an area in excess of 100,000
hectares. Likewise, Chapter I, No. 3(d) of FAO No. 11 states that no
individual corporation, partnership, or association who is already a

holder of an ordinary timber license or license agreement nor any

member of the family, incorporator, director, stockholder, or member of
such individual, corporation, partnership, or association shall be allowed
to acquire a new timber license or license agreement or any interest or
participation in it.
The constitutional and statutory limitations on allowable area
leases and concessions were obviously meant to prevent the
concentration of large tracts of public land in the hands of a single
individual. But as the Office of the Solicitor General aptly observed,
citing the Maceda decision: For one Filipino out of 55 million to own,
operate or in one form [or] another be financially interested in more
than 600,000 hectares out of a total forest land of 14 million
hectares is certainly unfair, unacceptable and unconstitutional by
any standard.[31]
Lim, Sr., as earlier stated, had been holding/operating/managing
several timber concessions through the seven (7) logging companies for an
aggregate area of 533,880 hectares, as follows:
Name of Corporation
(1) Taggat Industries, Inc.
(2) Pamplona Redwood Veneer Co., Inc.
(3) Southern Plywood Corp. (one share)
(4) Western Cagayan Lumber Co., Inc. (one share)
(5) Acme Plywood & Veneer Co,, Inc. (one share)
(6) Veterans Woodworks, Inc.
(7) Sierra Madre Wood Ind., Inc.

TLA No.
071
074
321
073
075
345
TOTAL

Concession Area
107,845 has.
118,315 has
71,300 has.
69,675 has.
84,525 has.
63,179 has.
19,050 has.
533,880 has.

The Maceda decision stressed that Lim, Sr. had one share each in
the three corporations, namely: (1) Acme Plywood and Veneer Co., Inc.
(ACME); (2) Western Cagayan Lumber Co., Inc. (WESTERN); and (3)
Southern Plywood Corporation (SPC). These corporations, the decision
added, likewise violated the Constitution considering that Lim, Sr. had
control over them as owner-founder. To cover the constitutional violation,
Lim, Jr. was used as a front and made to appear as President of the
mentioned three corporations.[32]

There can be no quibbling that MNR correctly revoked/canceled all

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

sufficiency of the whole evidence to sustain a verdict. [34] In passing upon

the sufficiency of the evidence raised in a demurrer, the court is merely
required to ascertain whether there is competent or sufficient proof to
sustain the indictment or to support a verdict of guilt. [35] And when the court
denies the demurrer, the defendant has to present countervailing evidence
against the evidence adduced by the plaintiff. [36]
In the case at bar, when the Sandiganbayan denied respondents
demurrer to evidence, it in effect ruled that the evidence presented by the
prosecution is, absent a countervailing evidence, prima facie sufficient to
support an adverse verdict against them for amassing illegal wealth. The
Sandiganbayan, in its underlying resolution of July 17, 2003 denying the
demurrer, wrote:
The Demurrer is denied.
To support the charges, plaintiff introduced, among others, Exhibit B, a decision dated
November 20, 1986 by then DENR Secretary Ernesto Maceda which, after hearing, revoked or
cancelled the respective Timber License Agreements (TLAs) of defendants Alfonso Lim, Sr., Taggat
Industries, Inc., Pamplona Redwood Veneer, [etc.] after an investigation found that the same
entities held timber concessions in excess of what was allowed by the Constitution. The same
decision likewise made certain findings of facts that x x x Lim, Sr. enjoyed close association with
former President Ferdinand E. Marcos as a consequence of which the latter granted x x x Lim, Sr.
special privileges and concessions in gross violation of the Constitution. In addition, Exhibit
E indicates that x x x Taggat Industries, chiefly owned by defendant Lim Sr., using his close
association with then President Marcos, acquired and controlled three (3) other logging firms,
namely Veteran Woodworks, Inc., Tropical Philippine Wood Industries, Inc., and Sierra Madre
Wood Industries, Inc. x x x. This resulted to the acquisition of defendant Lim Sr. of excessive
number of timber concessions.

Given the circumstances, this Court cannot simply brush aside the
foregoing considering that what the defendants-movants proffer are mere blanket
denial of the charges. In demurrer to evidence, the party demurring challenges the
sufficiency of the whole evidence to sustain a verdict. The court, in passing upon
the sufficiency of the evidence raised in a demurrer, is merely required to
ascertain whether there is competent or sufficient evidence to sustain the
indictment. Applying the said ruling in the instant case, there exists prima facie
evidence on record x x x to support or sustain the charges against the defendantsmovants. There is therefore a further need on the part of the defendants-movants
to submit the proof to the contrary other than their mere simple disclaimer.[37]

Sandiganbayan Did Not Consider

Evidence in Denying Attachment

Given the foregoing pronouncement from the Sandiganbayan, the
Court is completely at a loss to understand the graft courts denial of the
Republics plea for the ancillary remedy of preliminary attachment. The
wrongful actthe fraud perpetuated by Lim Sr. and/or his corporations on
the Republicis written over or easily deducible from the adverted Maceda
decision and Exhibit E. While fraud cannot be presumed, it need not be
proved by direct evidence and it can well be inferred from attendant
circumstances.[38] Withal, we cannot but agree with the Republics
contention that the Sandiganbayans denial of its motion for a writ of
preliminary attachment constitutes grave and patent abuse of discretion
amounting to lack or excess of jurisdiction.
A scrutiny of the above-quoted July 17, 2003 Resolution readily
shows that the Sandiganbayan indeed considered the evidence presented
and offered by the Republic, specifically Exhibits B and E which
convincingly show the finding that respondents acts were tainted with fraud
in the acquisition of the logging concessions due to their close association
with the Marcoses.
It is incongruous, therefore, for the Sandiganbayan to deny the writ of
preliminary attachment when the pieces of evidence on record which it
used and based its findings and conclusions in denying the demurrer to
evidence were the same ones which demonstrate the propriety of the writ
of preliminary attachment. Clearly, the Republic has complied with and
satisfied the legal obligation to show the specific acts constitutive of the
alleged fraud committed by respondents. The denial of the prayed writ,
thus, evidently constitutes grave abuse of discretion on the part of
Sandiganbayan. After all, attachment is a mere provisional remedy to
ensure the safety and preservation of the thing attached until the plaintiff
can, by appropriate proceedings, obtain a judgment and have such
property applied to its satisfaction. [39] Indeed, the properties of
respondents sought to be subjected to the ancillary writ of preliminary
attachment are not only in danger of being lost but should be placed

under custodia legis to answer for any liabilities that may be adjudged
against them in the instant case.
WHEREFORE, the Sandiganbayan Resolutions dated March 28,
2003 and
June
18,
2004
are
hereby REVERSED and SET
nd
ASIDE. Accordingly,
the
2 Division
of
Sandiganbayan
is
hereby DIRECTED to ISSUE the Writ of Preliminary Attachment prayed for
by the Republic. No costs.
SO ORDERED.
FIRST DIVISION
FOUNDATION SPECIALISTS,
INC.,
Petitioner,

G.R. No. 170674

Present:

- versus -

PUNO, C.J., Chairperson,

CARPIO,
CORONA,
LEONARDO-DE CASTRO and
BERSAMIN, JJ.

BETONVAL READY CONCRETE,

INC. and STRONGHOLD
INSURANCE CO., INC.,
Respondents.

Promulgated:
August 24, 2009

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

DECISION
CORONA, J.:

On separate dates, petitioner Foundation Specialists, Inc. (FSI) and

respondent Betonval Ready Concrete, Inc. (Betonval) executed three
contracts[1] for the delivery of ready mixed concrete by Betonval to FSI. The
basic stipulations were: (a) for FSI to supply the cement to be made into
ready mixed concrete; (b) for FSI to pay Betonval within seven days after
presentation of the invoices plus 30% interest p.a. in case of overdue
payments and (c) a credit limit of P600,000 for FSI.
Betonval delivered the ready mixed concrete pursuant to the
contracts but FSI failed to pay its outstanding balances starting January
1992. As an accommodation to FSI, Betonval extended the seven day
credit period to 45 days.[2]

On September 1, 1992, Betonval demanded from FSI its balance

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

Thereafter, FSI paid Betonval according to the terms of its proposed

schedule of payments. It was able to reduce its debt to P1,114,203.34 as of
July 1993, inclusive of the 24% annual interest computed from the due date
of the invoices.[6] Nevertheless, it failed to fully settle its obligation.

Betonval thereafter filed an action for sum of money and damages in

the Regional Trial Court (RTC).[7] It also applied for the issuance of a writ of
preliminary attachment alleging that FSI employed fraud when it contracted
with Betonval and that it was disposing of its assets in fraud of its creditors.

FSI denied Betonvals allegations and moved for the dismissal of the
complaint. The amount claimed was allegedly not due and demandable
because they were still reconciling their respective records. FSI also filed a
counterclaim and prayed for actual damages, alleging that its other projects
were delayed when Betonval attached its properties and garnished its bank
accounts. It likewise prayed for moral and exemplary damages and
attorneys fees.

The RTC issued a writ of preliminary attachment and approved

the P500,000 bond of respondent Stronghold Insurance Co., Inc.
(Stronghold). FSI filed a counterbond ofP500,000 thereby discharging the
writ of preliminary attachment, except with respect to FSIs excavator,

crawler crane and Isuzu pick-up truck, which remained in custodia legis.
[8]

An additional counterbond of P350,000 lifted the garnishment of FSIs

receivables from the Department of Public Works and Highways.

On January 29, 1999, the RTC ruled for Betonval. [9] However, it
awarded P200,000 compensatory damages to FSI on the ground that the
attachment of its properties was improper.[10]

FSI and Stronghold separately filed motions for reconsideration while

Betonval filed a motion for clarification and reconsideration. In an order
dated May 19, 1999, the RTC denied the motions for reconsideration of
Betonval and Stronghold. However, the January 29, 1999 decision was
modified in that the award of actual or compensatory damages to FSI was
increased to P1.5 million.[11]
All parties appealed to the Court of Appeals (CA). However, only the
respective appeals of Betonval and Stronghold were given due course
because FSIs appeal was dismissed for nonpayment of the appellate
docket fees.[12]

In its appeal, Betonval assailed the award of actual damages as well

as the imposition of legal interest at only 12%, instead of 24% as agreed
on. Stronghold, on the other hand, averred that the attachment was proper.

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

FSIs motion for reconsideration was denied.[14]

In this petition for review on certiorari,[15] FSI prays for the following:
(a)

decrease the rate of imposable interest on the P1,114,203.34

award to Betonval, from 12% to 6% p.a. from date of judicial
demand or filing of the complaint until the full amount is paid;

(b)

deduct [from the award to Betonval] the cost or value of

unused cement based on [its] invoice stating 1,307.45 bags
computed at the prevailing price;

(c)

award actual and compensatory damages at P3,242,771.29;

(d)

hold Betonval and Stronghold jointly and severally liable to pay

such actual and compensatory damages;

(e)

hold Betonval liable for whatever Stronghold may be held

liable under the attachment bond and

(f)

affirm in toto the rest of the order.[16]

The petition has no merit.

BETONVALS COMPLAINT
WAS NOT PREMATURE

FSI argues that Betonvals complaint was prematurely filed. There

was allegedly a need to reconcile accounts, particularly with respect to the
value of the unused cement supplied by FSI, totaling 2,801.2 bags [17] which
supposedly should have been deducted from FSIs outstanding obligation.
FSIs repeated requests for reconciliation of accounts were allegedly not
heeded by Betonvals representatives.

FSIs contention is untenable. It neither alleged any discrepancies in

nor objected to the accounts within a reasonable time. [18] As held by the
RTC, FSI was deemed to have admitted the truth and correctness of the
entries in the invoices since:

[N]o attempts were made to reconcile [FSIs] own record with [Betonval] until after the filing
of the complaint, inspite of claims in [FSIs] Answer about its significance, and despite having
had plenty of opportunity to do so from the time of receipt of the invoices or demand letters
from [Betonval]. [FSIs] excuse that it was impractical to reconcile accounts during the
middle of transactions is defeated by the absence of any showing on record that a formal
request to reconcile was issued to [Betonval] despite the completion of deliveries or [FSIs]
discovery of the alleged discrepancies, as well as its failure to initiate any meeting with
[Betonval], including one which the parties were directed to hold for that purpose by the
Court. Since [FSI] failed to prove the correctness of its entries against those in [Betonvals]
invoices, its record is self-serving. xxx (emphasis supplied)

In view of FSIs failure to dispute this finding of the RTC because of

its failure to perfect its appeal, FSI is now estopped from raising this issue.
There is no cogent reason to depart from the RTCs finding.

Undaunted, FSI retracts. Instead of claiming the balance of the

unused cement as reflected in its records, it now bases its claim on
the invoices of Betonval. FSI relies on the RTCs statement in the May
19, 1999 order:
Still it can claim the cost of the balance of unused cement based on [Betonvals] invoices,
notwithstanding its admission of the obligation in the letter, as it neither expressed nor implied any
intent to waive that claim by said admission.

FSI contends that this declaration has become final and executory
and must be implemented in the name of substantial justice. Betonval,
however, avers that that the issue on the alleged unused cement was never
raised as an affirmative defense in its answer or in its motion for
reconsideration to the January 29, 1999 decision. Neither was this issue
raised in the CA. Hence, FSI must not be allowed to broach it for the first
time in this Court. Betonval is correct.

It is well-settled that issues not raised in the trial court may not be
raised for the first time on appeal. Furthermore, defenses and objections
not pleaded either in a motion to dismiss or in the answer are deemed
waived.[19]

More importantly, the portion of a decision that becomes the subject

of an execution is that ordained or decreed in the dispositive portion. [20] In
this case, there was no award in favor of FSI of the value of the balance of
the unused cement as reflected in the invoices.

THE APPLICABLE INTEREST

RATE IS 24% P.A.

There is no dispute that FSI and Betonval stipulated the payment of a

30% p.a. interest in case of overdue payments. There is likewise no doubt
that FSI failed to pay Betonval on time.

FSI acknowledged its indebtedness to Betonval in the principal

amount of P1,114,203.34. However, FSI opposed the CAs imposition of a
24% p.a. interest on the award to Betonval allegedly because: (a) the grant
to FSI of a 45-day credit extension novated the contracts insofar as FSIs
obligation to pay any interest was concerned; (b) Betonval waived its right
to enforce the payment of the 30% p.a. interest when it granted FSI a new
credit term and (c) Betonvals prayer for a 24% p.a. interest instead of 30%,
resulted in a situation where, in effect, no interest rate was supposedly
stipulated, thus necessitating the imposition only of the legal interest rate of
6% p.a. from judicial demand.
FSIs contentions have no merit.

Novation is one of the modes of extinguishing an obligation. [21] It is

done by the substitution or change of the obligation by a subsequent one
which extinguishes the first, either by changing the object or principal
conditions, or by substituting the person of the debtor, or by subrogating a
third person in the rights of the creditor.[22] Novation may:

[E]ither be extinctive or modificatory, much being dependent on the nature of the change and the
intention of the parties. Extinctive novation is never presumed; there must be an express
intention to novate; in cases where it is implied, the acts of the parties must clearly
demonstrate their intent to dissolve the old obligation as the moving consideration for the
emergence of the new one. Implied novation necessitates that the incompatibility between the old
and new obligation be total on every point such that the old obligation is completely superceded by
the new one. The test of incompatibility is whether they can stand together, each one having an
independent existence; if they cannot and are irreconcilable, the subsequent obligation would also
extinguish the first.

An extinctive novation would thus have the twin effects of, first, extinguishing an existing
obligation and, second, creating a new one in its stead. This kind of novation presupposes a
confluence of four essential requisites: (1) a previous valid obligation, (2) an agreement of all
parties concerned to a new contract, (3) the extinguishment of the old obligation, and (4) the birth of
a valid new obligation. Novation is merely modificatory where the change brought about by any
subsequent agreement is merely incidental to the main obligation (e.g., a change in interest rates
or an extension of time to pay; in this instance, the new agreement will not have the effect of
extinguishing the first but would merely supplement it or supplant some but not all of its provisions.)
[23]

The obligation to pay a sum of money is not novated by an

instrument that expressly recognizes the old, changes only the terms of
payment, adds other obligations not incompatible with the old ones or the
new contract merely supplements the old one.[24]

The grant by Betonval to FSI of a 45-day credit extension did not

novate the contracts so as to extinguish the latter. There was no
incompatibility between them. There was no intention by the parties to
supersede the obligations under the contracts. In fact, the intention of the
45-day credit extension was precisely to revive the old obligation after the
original period expired with the obligation unfulfilled. The grant of a 45-day
credit period merely modified the contracts by extending the period within
which FSI was allowed to settle its obligation. Since the contracts remained
the source of FSIs obligation to Betonval, the stipulation to pay 30% p.a.
interest likewise remained.

Obviously, the extension given to FSI was triggered by its own

request, to help it through its financial difficulties. FSI would now want to
take advantage of that generous accommodation by claiming that its
liability for interest was extinguished by its creditors benevolence.

Neither did Betonval waive the stipulated interest rate of 30% p.a., as
FSI erroneously claims. A waiver is a voluntary and intentional
relinquishment or abandonment of a known legal right or privilege. [25] A
waiver must be couched in clear and unequivocal terms which leave no
doubt as to the intention of a party to give up a right or benefit which legally

pertains to him.[26] FSI did not adduce proof that a valid waiver was made
by Betonval. FSIs claim is therefore baseless.

Parties are bound by the express stipulations of their contract as well

as by what is required by the nature of the obligation in keeping with good
faith, usage and law.[27]Corollarily, if parties to a contract expressly provide
for a particular rate of interest, then that interest shall be applied. [28]

It is clear that Betonval and FSI agreed on the payment of interest. It

is beyond comprehension how Betonvals prayer for a 24% interest on
FSIs balance could have resulted in a situation as if no interest rate had
been agreed upon. Besides, FSIs proposed schedule of payments
(September 3, 1992),[29] referring to Betonvals statement of account,
[30]

contained computations of FSIs arrears and billings with 24% p.a.

interest.

There can be no other conclusion but that Betonval had reduced the
imposable interest rate from 30% to 24% p.a. and this reduced interest rate
was accepted, albeit impliedly, by FSI when it proposed a new schedule of
payments and, in fact, actually made payments to Betonval with 24% p.a.
interest. By its own actions, therefore, FSI is estopped from questioning the
imposable rate of interest.

We likewise hold that the imposition of a 12% p.a. interest on the

award to Betonval (in addition to the 24% p.a. interest) in the assailed
judgment is proper. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal interest shall be 12%
p.a. from such finality until its satisfaction, this interim period being deemed
to be by then an equivalent to a forbearance of credit. [31]

THERE WAS IMPROPER

ATTACHMENT OF FSIS
PROPERTIES

Betonvals application for the issuance of the writ of preliminary

attachment was based on Section 1(d) and (e), Rule 57 of the Rules of
Court.[32] However, the CA affirmed the RTCs factual findings that there
was improper attachment of FSIs properties. In debunking FSIs claim for
actual damages, respondents insist that the attachment was proper and
that Betonval was able to sufficiently prove the existence of the grounds for
attachment. However, these are factual matters that have been duly
passed upon by the RTC and the CA and which are inappropriate in a
petition for review.
Moreover, we agree with the RTC and the CA that FSIs properties
were improperly attached. Betonval was not able to sufficiently show the
factual circumstances of the alleged fraud because fraudulent intent cannot

be inferred from FSIs mere nonpayment of the debt or failure to comply

with its obligation. In Ng Wee v. Tankiansee,[33] we held that the applicant
must be able to demonstrate that the debtor intended to defraud the
creditor. Furthermore:
The fraud must relate to the execution of the agreement and must have been the reason
which induced the other party into giving consent which he would not have otherwise given. To
constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be
committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time
of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case.
Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the
circumstances attendant in each case.[34]

In other words, mere failure to pay its debt is, of and by itself, not
enough to justify an attachment of the debtors properties. A fraudulent
intention not to pay (or not to comply with the obligation) must be present.

PETITIONER IS NOT ENTITLED

TO THE AMOUNT OF ACTUAL
DAMAGES PRAYED FOR

In its bid for a bigger award for actual damages it allegedly suffered
from the wrongful attachment of its properties, FSI enumerates the standby
costs of equipment[35] and manpower standby costs[36] it allegedly lost. We
cannot grant FSIs prayer. FSI did not pursue its appeal to the CA as shown
by its failure to pay the appellate docket fees. It is well-settled that a party
who does not appeal from the decision may not obtain any affirmative relief
from the appellate court other than what he has obtained from the lower
court whose decision is brought up on appeal. [37]

WHEREFORE, the petition is hereby DENIED.

Costs against petitioner.
SO ORDERED.
G.R. No. L-35990 June 17, 1981
ABOITIZ & COMPANY, INC., HONORABLE VICENTE N. CUSI JR., Judge of the Court of First
Instance of Davao, and the PROVINCIAL SHERIFF OF DAVAO DEL SUR, petitioners,
vs.
COTABATO BUS COMPANY, INC., respondent.

DE CASTRO, J.:
The instant petition stemmed from Civil Case No. 7329 of the Court of First Instance of Davao
(Branch 1) in which a writ of preliminary attachment was issued ex-parte by the Court on the
strength of an affidavit of merit attached to the verified complaint filed by petitioner herein, Aboitiz &
Co., Inc., on November 2, 1971, as plaintiff in said case, for the collection of money in the sum of P
155,739.41, which defendant therein, the respondent in the instant case, Cotabato Bus Co., owed
the said petitioner.
By virtue of the writ of preliminary attachment, the provincial sheriff attached personal properties of
the defendant bus company consisting of some buses, machinery and equipment. The ground for
the issuance of the writ is, as alleged in the complaint and the affidavit of merit executed by the
Assistant Manager of petitioner, that the defendant "has removed or disposed of its properties or
assets, or is about to do so, with intent to defraud its creditors."
Respondent company filed in the lower court an "Urgent Motion to Dissolve or Quash Writ of
Attachment" to which was attached an affidavit executed by its Assistant Manager, Baldovino
Lagbao, alleging among other things that "the Cotabato Bus Company has not been selling or
disposing of its properties, neither does it intend to do so, much less to defraud its creditors; that
also the Cotabato Bus Company, Inc. has been acquiring and buying more assets". An opposition
and a supplemental opposition were filed to the urgent motion. The lower court denied the motion
stating in its Order that "the testimony of Baldovino Lagbao, witness for the defendant, corroborates
the facts in the plaintiff's affidavit instead of disproving or showing them to be untrue."
A motion for reconsideration was filed by the defendant bus company but the lower court denied it.
Hence, the defendant went to the Court of Appeals on a petition for certiorari alleging grave abuse of
discretion on the part of herein respondent Judge, Hon. Vicente R. Cusi Jr. On giving due course to
the petition, the Court of Appeals issued a restraining order restraining the trial court from enforcing
further the writ of attachment and from proceeding with the hearing of Civil Case No. 7329. In its
decision promulgated on October 3, 1971, the Court of Appeals declared "null and void the order/writ
of attachment dated November 3, 1971 and the orders of December 2, 1971, as well as that of

December 11, 1971, ordered the release of the attached properties, and made the restraining order
originally issued permanent.
The present recourse is an appeal by certiorari from the decision of the Court of Appeals reversing
the assailed orders of the Court of First Instance of Davao, (Branch I), petitioner assigning against
the lower court the following errors:
ERROR I
THE COURT OF APPEALS ERRED IN HASTILY AND PERFUNCTORILY
RENDERING, ON OCTOBER 3, 1971, A DECISION WITHOUT CONSIDERING
MOST OF THE EVIDENCE SUCH THAT
l) EVEN AN IMPORTANT FACT, ESTABLISHED BY DOCUMENTARY EVIDENCE
AND NOT DENIED BY RESPONDENT, IS MENTIONED ONLY AS A "CLAIM" OF
PETITIONER COMPANY;
2) THE DECISION CONTAINS NO DISCUSSION AND APPRECIATION OF THE
FACTS AS PROVED, ASSEMBLED AND PRESENTED BY PETITIONER
COMPANY SHOWING IN THEIR TOTALITY THAT RESPONDENT HAS
REMOVED, DIVERTED OR DISPOSED OF ITS BANK DEPOSITS, INCOME AND
OTHER LIQUID ASSETS WITH INTENT TO DEFRAUD ITS CREDITORS,
ESPECIALLY ITS UNSECURED SUPPLIERS;
3) THE DECISION IGNORES THE SIGNIFICANCE OF THE REFUSAL OF
RESPONDENT TO PERMIT, UNDER REP. ACT NO. 1405, THE METROPOLITAN
BANK & TRUST CO. TO BRING, IN COMPLIANCE WITH A subpoena DUCES
TECUM TO THE TRIAL COURT ALL THE RECORDS OF RESPONDENT'S
DEPOSITS AND WITHDRAWALS UNDER ITS CURRENT AND SAVINGS
ACCOUNTS (NOW NIL) FOR EXAMINATION BY PETITIONER COMPANY FOR
THE PURPOSE OF SHOWING DIRECTLY THE REMOVAL, DIVERSION OR
DISPOSAL OF RESPONDENT'S DEPOSITS AND INCOME WITH INTENT TO
DEFRAUD ITS CREDITORS.
ERROR II
THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE FACTS THAT
RESPONDENT'S BANK DEPOSITS ARE NIL AS PROOF WHICH - TOGETHER
WITH RESPONDENT'S ADMISSION OF AN INCOME OF FROM P10,000.00 to P
14,000.00 A DAY AND THE EVIDENCE THAT IT CANNOT PRODUCE P 634.00
WITHOUT USING A PERSONAL CHECK OF ITS PRESIDENT AND MAJORITY
STOCKHOLDER, AND OTHER EVIDENCE SHOWS THE REMOVAL OR
CHANNELING OF ITS INCOME TO THE LATTER.
ERROR III
THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE RESCUE AND
REMOVAL BY RESPONDENT OF FIVE ATTACHED BUSES, DURING THE
DEPENDENCY OF ITS MOTION TO DISSOLVE THE ATTACHMENT IN THE, TRIAL
COURT, AS A FURTHER ACT OF REMOVAL OF PROPERTIES BY RESPONDENT

WITH INTENT TO DEFRAUD PETITIONER COMPANY, FOR WHOSE BENEFIT

SAID BUSES HAD BEEN ATTACHED.
The questions raised are mainly, if not solely, factual revolving on whether respondent bus company
has in fact removed its properties, or is about to do so, in fraud of its creditors. This being so, the
findings of the Court of Appeals on said issues of facts are generally considered conclusive and final,
and should no longer be disturbed. However, We gave due course to the petition because it raises
also a legal question of whether the writ of attachment was properly issued upon a showing that
defendant is on the verge of insolvency and may no longer satisfy its just debts without issuing the
writ. This may be inferred from the emphasis laid by petitioner on the fact that even for the measly
amount of P 634.00 payment thereof was made with a personal check of the respondent company's
president and majority stockholder, and its debts to several creditors, including secured ones like the
DBP, have remained unpaid, despite its supposed daily income of an average of P 12,000.00, as
declared by its assistant manager, Baldovino Lagbao. 1
Going forthwith to this question of whether insolvency, which petitioners in effect claims to have been
proven by the evidence, particularly by company's bank account which has been reduced to nil, may
be a ground for the issuance of a writ of attachment, the respondent Court of Appeals correctly took
its position in the negative on the strength of the explicit ruling of this Court in Max Chamorro & Co.
vs. Philippine Ready Mix Concrete Company, Inc. and Hon. Manuel P. Barcelona. 2
Petitioner, however, disclaims any intention of advancing the theory that insolvency is a ground for
the issuance of a writ of attachment , 3 and insists that its evidence -is intended to prove his assertion
that respondent company has disposed, or is about to dispose, of its properties, in fraud of its creditors.
Aside from the reference petitioner had made to respondent company's "nil" bank account, as if to show
removal of company's funds, petitioner also cited the alleged non-payment of its other creditors, including
secured creditors like the DBP to which all its buses have been mortgaged, despite its daily income
averaging P12,000.00, and the rescue and removal of five attached buses.
It is an undisputed fact that, as averred by petitioner itself, the several buses attached are nearly
junks. However, upon permission by the sheriff, five of them were repaired, but they were substituted
with five buses which were also in the same condition as the five repaired ones before the repair.
This cannot be the removal intended as ground for the issuance of a writ of attachment under
section 1 (e), Rule 57, of the Rules of Court. The repair of the five buses was evidently motivated by
a desire to serve the interest of the riding public, clearly not to defraud its creditors, as there is no
showing that they were not put on the run after their repairs, as was the obvious purpose of their
substitution to be placed in running condition.
Moreover, as the buses were mortgaged to the DBP, their removal or disposal as alleged by
petitioner to provide the basis for its prayer for the issuance of a writ of attachment should be very
remote, if not nil. If removal of the buses had in fact been committed, which seems to exist only in
petitioner's apprehensive imagination, the DBP should not have failed to take proper court action,
both civil and criminal, which apparently has not been done.
The dwindling of respondent's bank account despite its daily income of from P10,000.00 to
P14,000.00 is easily explained by its having to meet heavy operating expenses, which include
salaries and wages of employees and workers. If, indeed the income of the company were
sufficiently profitable, it should not allow its buses to fall into disuse by lack of repairs. It should also
maintain a good credit standing with its suppliers of equipment, and other needs of the company to
keep its business a going concern. Petitioner is only one of the suppliers.

It is, indeed, extremely hard to remove the buses, machinery and other equipments which
respondent company have to own and keep to be able to engage and continue in the operation of its
transportation business. The sale or other form of disposition of any of this kind of property is not
difficult of detection or discovery, and strangely, petitioner, has adduced no proof of any sale or
transfer of any of them, which should have been easily obtainable.
In the main, therefore, We find that the respondent Court of Appeals has not committed any
reversible error, much less grave abuse of discretion, except that the restraining order issued by it
should not have included restraining the trial court from hearing the case, altogether. Accordingly, the
instant petition is hereby denied, but the trial court is hereby ordered to immediately proceed with the
hearing of Civil Case No. 7329 and decide it in accordance with the law and the evidence. No
special pronouncement as to costs.
SO ORDERED.