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 above-mentioned in violation of plaintiff's in this case ineffectual..
5. That unless defendants are barred, restrained, enjoined, and prohibited from entering or harvesting the lands or
working therein through ex-parte injunction, the plaintiffs will suffer injustice, damages and irreparable injury to their
great prejudice..
6. That the plaintiffs are offering a bond in their application for ex-parte injunction in the amount of P2,000, subject to
the approval of this Hon. Court, which bond is attached hereto marked as Annex A and made an integral part of this
complaint..
7. That on or about June 26, 1945, the defendants, through force, destroyed and took away the madre-cacao fencer,
and barbed wires built on the northwestern portion of the land designated as parcel No. (b) of this complaint to the
damage and prejudice of the plaintiffs in the amount of at least P200..
Wherefore, it is respectfully prayed:.
(a) That the accompanying bond in the amount of P2,000 be approved;
(b) That a writ of preliminary injunction be issued ex-parte immediately restraining, enjoining and prohibiting the
defendants, their agents, servants, representatives, attorneys, and, (or) other persons acting for and in their behalf,
from entering in, interfering with and/or in any wise taking any participation in the harvest of the lands belonging to the
plaintiffs; or in any wise working the lands above-described;
(c) That judgment be rendered, after due hearing, declaring the preliminary injunction final;.
(d) That the defendants be condemned jointly and severally to pay the plaintiffs the sum of P200 as damages; and.
(e) That plaintiffs be given such other and further relief just and equitable with costs of suit to the defendants.

The defendants filed an opposition dated August 8, 1945, to the issuance of the writ of preliminary injunction prayed
for in the above-quoted complaint, on the ground that they are owners of the lands and have been in actual
possession thereof since the year 1925; and their answer to the complaint filed on August 14, 1945, they reiterate that
they are the owners and were then in actual possession of said property, and that the plaintiffs have never been in
possession thereof.
The hearing of the petition for preliminary injunction was held on August 9, 1945, at which evidence was introduced by
both parties. After the hearing, Judge Rilloraza, then presiding over the Court of First Instance of Laguna, denied the
petition on the ground that the defendants were in actual possession of said lands. A motion for reconsideration was
filed by plaintiffs on August 20, 1945, but said motion had not yet, up to the hearing of the present case, been decided
either by Judge Rilloraza, who was assigned to another court, or by the respondent judge.
The plaintiffs (respondents) filed on September 4, 1945, a reply to defendants' answer in which, among others, they
reiterate their allegation in the complaint that they are possessors in good faith of the properties in question.
And on December 17, plaintiffs filed an urgent petition ex-parte praying that plaintiffs' motion for reconsideration of the
order denying their petition for preliminary injunction be granted and or for the appointment of a receiver of the
properties described in the complaint, on the ground that (a) the plaintiffs have an interest in the properties in question,
and the fruits thereof were in danger of being lost unless a receiver was appointed; and that (b) the appointment of a
receiver was the most 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 the status quo of the things
subject of the action or the relation between the parties, in order to protect the rights of the plaintiff respecting the
subject of the action during the pendency of the suit. Because, otherwise or if no preliminary prohibition injunction
were issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the
court to restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the
plaintiff. But, as this court has repeatedly held, a writ of preliminary injunction should not be granted to take the
property out of the 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.
Moran, C. J., Ozaeta, Jaranilla, De Joya, Pablo, Perfecto, Hilado, and Bengzon, JJ., concur.

G.R. No. L-48756 September 11, 1982

K.O. GLASS CONSTRUCTION CO., INC., petitioner,
vs.
THE HONORABLE MANUEL VALENZUELA, Judge of the Court of First Instance of Rizal, and ANTONIO D. PINZON,
respondents.
Guillermo E. Aragones for petitioner.
Ruben V. Lopez for respondent Antonio D. Pinzon.

CONCEPCION, JR., J.:

Petition for certiorari to annul and set aside the writ of preliminary attachment issued by the respondent Judge in Civil
Case No. 5902-P of the Court of First Instance of Rizal, entitled: Antonio D. Pinzon plaintiff, versus K.O. Glass
Construction Co., Inc., and Kenneth O. Glass, defendants, and for the release of the amount of P37,190.00, which
had been deposited with the Clerk of Court, to the petitioner.
On October 6, 1977, an action was instituted in the Court of First Instance of Rizal by Antonio D. Pinzon to recover
from Kenneth O. Glass the sum of P37,190.00, alleged to be the agreed rentals of his truck, as well as the value of
spare parts which have not been returned to him upon termination of the lease. In his verified complaint, the plaintiff
asked for an attachment against the property of the defendant consisting of collectibles and payables with the
Philippine Geothermal, Inc., on the grounds that the defendant is a foreigner; that he has sufficient cause of action
against the said defendant; and that there is no sufficient security for his claim against the defendant in the event a
judgment is rendered in his favor. 1
Finding the petition to be sufficient in form and substance, the respondent Judge ordered the issuance of a writ of
attachment against the properties of the defendant upon the plaintiff's filing of a bond in the amount of P37,190.00. 2
Thereupon, on November 22, 1977, the defendant Kenneth O. Glass moved to quash the writ of attachment on the
grounds that there is no cause of action against him since the transactions or claims of the plaintiff were entered into
by and between the plaintiff and the K.O. Glass Construction Co., Inc., a corporation duly organized and existing
under Philippine laws; that there is no ground for the issuance of the writ of preliminary attachment as defendant
Kenneth O. Glass never intended to leave the Philippines, and even if he does, plaintiff can not be prejudiced thereby
because his claims are against a corporation which has sufficient funds and property to satisfy his claim; and that the
money being garnished belongs to the K.O. Glass Corporation Co., Inc. and not to defendant Kenneth O. Glass. 3
By reason thereof, Pinzon amended his complaint to include K.O. Glass Construction Co., Inc. as co-defendant of
Kenneth O. Glass. 4
On January 26, 1978, the defendants therein filed a supplementary motion to discharge and/or dissolve the writ of
preliminary attachment upon the ground that the affidavit filed in support of the motion for preliminary attachment was
not sufficient or wanting in law for the reason that: (1) the affidavit did not state that the amount of plaintiff's claim was
above all legal set-offs or counterclaims, as required by Sec. 3, Rule 57 of the Revised Rules of Court; (2) the affidavit
did not state that there is no other sufficient security for the claim sought to be recovered by the action as also
required by said Sec. 3; and (3) the affidavit did not specify any of the grounds enumerated in Sec. 1 of Rule 57, 5 but,
the respondent Judge denied the motion and ordered the Philippine Geothermal, Inc. to deliver and deposit with the
Clerk of Court the amount of P37,190.00 immediately upon receipt of the order which amount shall remain so
deposited to await the judgment to be rendered in the case. 6
On June 19, 1978, the defendants therein filed a bond in the amount of P37,190.00 and asked the court for the
release of the same amount deposited with the Clerk of Court, 7 but, the respondent Judge did not order the release
of the money deposited. 8
Hence, the present recourse. As prayed for, the Court issued a temporary restraining order, restraining the respondent
Judge from further proceeding with the trial of the case. 9
We find merit in the petition. The respondent Judge gravely abused his discretion in issuing the writ of preliminary
attachment and in not ordering the release of the money which had been deposited with the Clerk of Court for the
following reasons:

First, there was no ground for the issuance of the writ of preliminary attachment. Section 1, Rule 57 of the Revised
Rules of Court, which enumerates the grounds for the issuance of a writ of preliminary attachment, reads, as follows:
Sec. 1. Grounds upon which attachment may issue. A plaintiff or any proper party may, at the commencement of
the action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction of
any judgment that may be recovered in the following cases:
(a) In an action for the recovery of money or damages on a cause of action arising from contract, express or implied,
against a party who is about to depart from the Philippines with intent to defraud his creditor;
(b)
In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a
public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his
employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty;
(c) In an action to recover the possession of personal property unjustly detained, when the property, or any part
thereof, has been concealed, removed, or disposed of to prevent its being found or taken by the applicant or an
officer;
(d) In an action against the party who has been guilty of a fraud in contracting the debt or incurring the obligation upon
which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of
which the action is brought;
(e)
In an action against a party who has removed or disposed of his property, or is about to do so, with intent to
defraud his creditors;
(f) In an action against a party who resides out of the Philippines, or on whom summons may be served by publication.
In ordering the issuance of the controversial writ of preliminary attachment, the respondent Judge said and We quote:
The plaintiff filed a complaint for a sum of money with prayer for Writ of Preliminary Attachment dated September 14,
1977, alleging that the defendant who is a foreigner may, at any time, depart from the Philippines with intent to defraud
his creditors including the plaintiff herein; that there is no sufficient security for the claim sought to be enforced by this
action; that the amount due the plaintiff is as much as the sum for which an order of attachment is sought to be
granted; and that defendant has sufficient leviable assets in the Philippines consisting of collectibles and payables due
from Philippine Geothermal, Inc., which may be disposed of at any time, by defendant if no Writ of Preliminary
Attachment may be issued. Finding said motion and petition to be sufficient in form and substance. 10
Pinzon however, did not allege that the defendant Kenneth O. Glass "is a foreigner (who) may, at any time, depart
from the Philippines with intent to defraud his creditors including the plaintiff." He merely stated that the defendant
Kenneth O. Glass is a foreigner. The pertinent portion of the complaint reads, as follows:
15.
Plaintiff hereby avers under oath that defendant is a foreigner and that said defendant has a valid and just
obligation to plaintiff in the total sum of P32,290.00 arising out from his failure to pay (i) service charges for the hauling
of construction materials; (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the
missing/destroyed spare parts of said leased unit; hence, a sufficient cause of action exists against said defendant.
Plaintiff also avers under oath that there is no sufficient security for his claim against the defendant in the event a
judgment be rendered in favor of the plaintiff. however, defendant has sufficient assets in the Philippines in the form of
collectible and payables due from the Philippine Geothermal, Inc. with office address at Citibank Center, Paseo de
Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be disposed of by defendants and
would render ineffectual the reliefs prayed for by plaintiff in this Complaint. 11
In his Amended Complaint, Pinzon alleged the following:
15.
Plaintiff hereby avers under oath that defendant GLASS is an American citizen who controls most, if not all,
the affairs of defendant CORPORATION. Defendants CORPORATION and GLASS have a valid and just obligation to
plaintiff in the total sum of P32,290.00 arising out for their failure to pay (i) service charges for hauling of construction
materials, (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed spare
parts of said leased unit: hence, a sufficient cause of action exist against said defendants. Plaintiff also avers under
oath that there is no sufficient security for his claim against the defendants in the event a judgment be rendered in
favor of the plaintiff. however, defendant CORPORATION has sufficient assets in the Philippines in the form of
collectibles and payables due from the Philippine Geothermal., Inc. with office address at Citibank Center, Paseo de
Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be disposed of by defendants and
would render ineffectual the reliefs prayed for by plaintiff in this Complaint. 12

There being no showing, much less an allegation, that the defendants are about to depart from the Philippines with
intent to defraud their creditor, or that they are non-resident aliens, the attachment of their properties is not justified.
Second, the affidavit submitted by Pinzon does not comply with the Rules. Under the Rules, an affidavit for attachment
must state that (a) sufficient cause of action exists, (b) the case is one of those mentioned in Section I (a) of Rule 57;
(c) there is no other sufficient security 'or the claim sought to be enforced by the action, and (d) the amount due to the
applicant for attachment or the value of the property the possession of which he is entitled to recover, is as much as
the sum for which the order is granted above all legal counterclaims. Section 3, Rule 57 of the Revised Rules of Court
reads. as follows:
Section 3. Affidavit and bond required.An order of attachment shall be granted only when it is made to appear by the
affidavit of the applicant, or of some person who personally knows the facts, that a sufficient cause of action exists that
the case is one of those mentioned in Section 1 hereof; that there is no other sufficient security for the claim sought to
be enforced by the action, and that the amount due to the applicant, or the value of the property the possession of
which he is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The
affidavit, and the bond required by the next succeeding section, must be duly filed with the clerk or judge of the court
before the order issues.
In his affidavit, Pinzon stated the following:
I, ANTONIO D. PINZON Filipino, of legal age, married and with residence and postal address at 1422 A. Mabini Street,
Ermita, Manila, subscribing under oath, depose and states that.
1.
On October 6,1977,I filed with the Court of First Instance of Rizal, Pasay City Branch, a case against Kenneth
O. Glass entitled 'ANTONIO D. PINZON vs. KENNETH O. GLASS', docketed as Civil Case No. 5902-P;
2.

My Complaint against Kenneth O. Glass is based on several causes of action, namely:

(i)
On February 15, 1977, we mutually agreed that I undertake to haul his construction materials from Manila to
his construction project in Bulalo, Bay, Laguna and vice-versa, for a consideration of P50.00 per hour;
(ii) Also, on June 18, 1977, we entered into a separate agreement whereby my Isuzu cargo truck will be leased to him
for a consideration of P4,000.00 a month payable on the 15th day of each month;
(iii) On September 7, 1977, after making use of my Isuzu truck, he surrendered the same without paying the monthly
rentals for the leased Isuzu truck and the peso equivalent of the spare parts that were either destroyed or
misappropriated by him;
3.
As of today, October 11, 1977, Mr. Kenneth 0. Glass still owes me the total sum of P32,290.00 representing
his obligation arising from the hauling of his construction materials, monthly rentals for the lease Isuzu truck and the
peso equivalent of the spare parts that were either destroyed or misappropriated by him;
4.
I am executing this Affidavit to attest to the truthfulness of the foregoing and in compliance with the provisions
of Rule 57 of the Revised Rules of Court. 13
While Pinzon may have stated in his affidavit that a sufficient cause of action exists against the defendant Kenneth O.
Glass, he did not state therein that "the case is one of those mentioned in Section 1 hereof; that there is no other
sufficient security for the claim sought to be enforced by the action; and that the amount due to the applicant is as
much as the sum for which the order granted above all legal counter-claims." It has been held that the failure to allege
in the affidavit the requisites prescribed for the issuance of a writ of preliminary attachment, renders the writ of
preliminary attachment issued against the property of the defendant fatally defective, and the judge issuing it is
deemed to have acted in excess of his jurisdiction. 14
Finally, it appears that the petitioner has filed a counterbond in the amount of P37,190.00 to answer for any judgment
that may be rendered against the defendant. Upon receipt of the counter-bond the respondent Judge should have
discharged the attachment pursuant to Section 12, Rule 57 of the Revised Rules of Court which reads, as follows:
Section 12.
Discharge of attachment upon giving counterbond.At any time after an order of attachment has
been granted, the party whose property has been attached, or the person appearing on his behalf, may upon
reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the
action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after
hearing, order the discharge of the attachment if a cash deposit is made or a counterbond executed to the attaching
creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made, in an
amount equal to the value of the property attached as determined by the judge, to secure the payment of any

judgment that the attaching creditor may recover in the action. Upon the filing of such counter-bond, copy thereof shall
forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance with
the provisions of this section the property attached, or the proceeds of any sale thereof, shall be delivered to the party
making the deposit or giving the counter-bond, or the person appearing on his behalf, the deposit or counter-bond
aforesaid standing in the place of the property so released. Should such counter-bond for any reason be found to be,
or become, insufficient, and the party furnishing the same fail to file an additional counter-bond the attaching creditor
may apply for a new order of attachment.
The filing of the counter-bond will serve the purpose of preserving the defendant's property and at the same time give
the plaintiff security for any judgment that may be obtained against the defendant. 15
WHEREFORE, the petition is GRANTED and the writ prayed for is issued. The orders issued by the respondent Judge
on October 11, 19719, January 26, 1978, and February 3, 1978 in Civil Case No. 5902-P of the Court of First Instance
of Rizal, insofar as they relate to the issuance of the writ of preliminary attachment, should be as they are hereby
ANNULLED and SET ASIDE and the respondents are hereby ordered to forthwith release the garnished amount of
P37,190.00 to the petitioner. The temporary restraining order, heretofore issued, is hereby lifted and set aside. Costs
against the private respondent Antonio D. Pinzon.
SO ORDERED.

G.R. No. L-894

July 30, 1947

LUIS F. GENERAL, petitioner,

vs.
JOSE R. DE VENECIA, Judge of First Instance of Camarines Sur, and PETRA VDA. DE RUEDAS, also representing
Ernesto, Armando and Gracia (minors), respondents.
Cea, Blancaflor and Cea for petitioner.
Jose M. Peas for respondents Ruedas.
No appearance for the respondent judge.
BENGZON, J.:
Petition for certiorari to annul the order of the Court of First Instance of Camarines Sur denying the motion to dismiss
the complaint, and to vacate the attachment issued, in civil case No. 364 therein entitled, "Ruedas vs. Luis F.
General."
That complaint was filed on June 4, 1946, to recover the value of a promissory note, worded as follows:
For value received, I promise to pay Mr. Gregorio Ruedas the amount of four thousand pesos (P4,000), in Philippine
currency within six (6) months after peace has been declared and government established in the Philippines.
Naga, Camarines Sur, September 25, 1944.
(Sgd.) LUIS F. GENERAL
It prayed additionally for preliminary attachment of defendant's property, upon the allegation that the latter was about
to dispose of his assets to defraud creditors. Two days later, the writ of attachment was issued upon the filing of a
suitable bond.
Having been served with summons, the defendant therein, Luis F. General, submitted, on June 11, 1946, a motion
praying for dismissal of the complaint and dissolution of the attachment. He claimed it was premature, in view of the
provisions of the debt moratorium orders of the President of the Philippines (Executive Orders Nos. 25 and 32 of
1945). Denial of this motion and of the subsequent plea for reconsideration, prompted the institution of this special civil
action, which we find to be meritorious, for the reason that the attachment was improvidently permitted, the debt being
within the terms of the decree of moratorium (Executive Order No. 32).
It is our view that, upon objection by the debtor, no court may now proceed to hear a complaint that seeks to compel
payment of a monetary obligation coming within the purview of the moratorium. And the issuance of a writ of
attachment upon such complaint may not, of course, be allowed. Such levy is necessarily one step in the enforcement
of the obligation, enforcement which, as stated in the order, is suspended temporarily, pending action by the
Government.
But the case for petitioner is stronger when we reflect that his promise is to pay P4,000 "within six months after peace
has been declared." It being a matter of contemporary history that the peace treaty between the United States and
Japan has not even been drafted, and that no competent official has formally declared the advent of peace (see
Raquiza vs. Bardford, 75 Phil., 50), it is obvious that the six-month period has not begun; and Luis F. General has at
present and in June, 1946, no demandable duty to make payment to plaintiffs, independently of the moratorium
directive.
On the question of validity of the attachment, "the general rule is that, unless the statute expressly so provides, the
remedy by attachment is not available in respect to a demand which is not due and payable, and if an attachment is
issued upon such a demand without statutory authority it is void." (7 C.J.S., p. 204.)
It must be observed that under our rules governing the matter the person seeking a preliminary attachment must show
that "a sufficient cause of action exists" and that the amount due him is as much as the sum for which the order of
attachment is granted" (sec. 3, Rule 59). Inasmuch as the commitment of Luis F. General has not as yet become
demandable, there existed no cause of action against him, and the complaint should have been dismissed and the
attachment lifted. (Orbeta vs. Sotto, 58 Phil., 505.)
And although it is the general principle that certiorari is not available to correct judicial errors that could be
straightened out in an appeal, we have adopted the course that where an attachment has been wrongly levied the writ
may be applied for, because the remedy by appeal is either unavailable or inadequate. (Leung Ben vs. O'Brien, 38
Phil., 182; Director of Commerce and Industry vs. Concepcion, 43 Phil., 384; Orbeta vs. Sotto, supra.)

Wherefore, the writ of attachment is quashed and the complaint is dismissed. Costs for petitioner. So ordered.

10

G.R. No. L-67715

July 11, 1986

WILLIAM ALAIN MIAILHE and THE HON. FELIX V. BARBERS, in his capacity as Presiding Judge, RTC of Manila,
Branch XXXIII, petitioners-appellants,
vs.
ELAINE M. DE LENCQUESAING and HERVE DE LENCQUESAING, respondents-appellees.
PARAS, J.:
This petition is an appeal by certiorari from the Decision of the Intermediate Appellate Court in AC-G.R. SP. No. 01914
which declared null-and void, the Order of the Hon. Judge Felix V. Barbers, issued in Civil Case No. 83-16829, dated
April 14, 1983, granting petitioner's application for the issuance of a writ of preliminary attachment and the Order dated
September 13, 1983 denying respondent's motion to lift said attachment.
The pertinent facts that gave rise to the instant petition are as follows: Petitioner William Alain Miailhe, his sisters
Monique Miailhe Sichere, Elaine Miailhe de Lencquesaing and their mother, Madame Victoria D. Miailhe are coowners of several registered real properties located in Metro Manila. By common consent of the said co-owners,
petitioner William Alain has been administering said properties since 1960. As Madame Victoria D. Miailhe, her
daughter Monique and son William Alain (herein petitioner) failed to secure an out-of court partition thereof due to the
unwillingness or opposition of respondent Elaine, they filed in the Court of First Instance of Manila (now Regional Trial
Court) an action for Partition, which was docketed as Civil Case No. 105774 and assigned to Branch . . . thereof,
presided over by Judge Pedro Ramirez. Among the issues presented in the partition case was the matter of
petitioner's account as administrator of the properties sought to be partitioned. But while the said administrator's
account was still being examined, respondent Elaine filed a motion praying that the sum of P203,167.36 which
allegedly appeared as a cash balance in her favor as of December 31, 1982, be ordered delivered to her by petitioner
William Alain. Against the opposition of petitioner and the other co-owners, Judge Pedro Ramirez granted the motion
in his Order dated December 19, 1983 which order is now the subject of a certiorari proceeding in the Intermediate
Appellate Court under AC-G.R. No. SP-03070.
Meanwhile however, and more specifically on February 28, 1983, respondent Elaine filed a criminal complaint for
estafa against petitioner William Alain, with the office of the City Fiscal of Manila, alleging in her supporting affidavit
that on the face of the very account submitted by him as Administrator, he had misappropriated considerable amounts,
which should have been turned over to her as her share in the net rentals of the common properties. Two days after
filing the complaint, respondent flew back to Paris, the City of her residence. Likewise, a few days after the filing of the
criminal complaint, an extensive news item about it appeared prominently in the Bulletin Today, March 4, 1983 issue,
stating substantially that Alain Miailhe, a consul of the Philippines in the Republic of France, had been charged with
Estafa of several million pesos by his own sister with the office of the City Fiscal of Manila.
On April 12, 1983, petitioner Alain filed a verified complaint against respondent Elaine, for Damages in the amount of
P2,000,000.00 and attorney's fees of P250,000.00 allegedly sustained by him by reason of the filing by respondent
(then defendant) of a criminal complaint for estafa, solely for the purpose of embarrassing petitioner (then plaintiff) and
besmirching his honor and reputation as a private person and as an Honorary Consul of the Republic of the
Philippine's in the City of Bordeaux, France. Petitioner further charged respondent with having caused the publication
in the March 4, 1983 issue of the Bulletin Today, of a libelous news item. In his verified complaint, petitioner prayed for
the issuance of a writ of preliminary attachment of the properties of respondent consisting of 1/6 undivided interests in
certain real properties in the City of Manila on the ground that "respondent-defendant is a non-resident of the
Philippines", pursuant to paragraph (f), Section 1, Rule 57, in relation to Section 17, Rule 14 of the Revised Rules of
Court.
This case for Damages was docketed as Civil Case No. 83-16829 of the Regional Trial Court of Manila, Branch XXXIII
presided over by the Honorable Felix V. Barbers.
On April 14, 1983, Judge Barbers granted petitioner's application for preliminary attachment upon a bond to be filed by
petitioner in the amount of P2,000,000.00. Petitioner filed said bond and upon its approval, the Writ of Preliminary
Attachment was issued on April 18, 1983 which was served on the Deputy Clerk of Court of Branch XXX before whom
the action for Partition was pending.
On May 17, 1983, respondent thru counsel filed a motion to lift or dissolve the writ of attachment on the ground that
the complaint did not comply with the provisions of Sec. 3 of Rule 57, Rules of Court and that petitioner's claim was for
unliquidated damages. The motion to lift attachment having been denied, respondent filed with the Intermediate
Appellate Court a special action for certiorari under AC-G.R. SP No. 01914 alleging that Judge Barbers had acted with
grave abuse of discretion in the premises. On April 4, 1984, the IAC issued its now assailed Decision declaring null
and void the aforesaid Writ of preliminary attachment. Petitioner filed a motion for the reconsideration of the Decision

11

but it was denied hence, this present petition which was given due course in the Resolution of this Court dated
February 6, 1985.
We find the petition meritless. The most important issue raised by petitioner is whether or not the Intermediate
Appellate Court erred in construing Section 1 par. (f) Rule 57 of the Rules of Court to be applicable only in case the
claim of the plaintiff is for liquidated damages (and therefore not where he seeks to recover unliquidated damages
arising from a crime or tort).
In its now assailed decision, the IAC stated
We find, therefore, and so hold that respondent court had exceeded its jurisdiction in issuing the writ of attachment on
a claim based on an action for damages arising from delict and quasi delict the amount of which is uncertain and had
not been reduced to judgment just because the defendant is not a resident of the Philippines. Because of the
uncertainty of the amount of plaintiff's claim it cannot be said that said claim is over and above all legal counterclaims
that defendant may have against plaintiff, one of the indispensable requirements for the issuance of a writ of
attachment which should be stated in the affidavit of applicant as required in Sec. 3 of Rule 57 or alleged in the
verified complaint of plaintiff. The attachment issued in the case was therefore null and void.
We agree.
Section 1 of Rule 57 of the Rules of Court provides
SEC. 1. Grounds upon which attachment may issue. A plaintiff or any proper party may, at the commencement of the
action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction of any
judgment that may be recovered in the following cases:
(a)
In an action for the recovery of money or damages on a cause of action arising fromcontract, express or
implied, against a party who is about to depart from the Philippines with intent to defraud his creditors;
(b)
In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a
public officer, or an officer of a corporation or an attorney, factor, broker, agent, or clerk, in the course of his
employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty;
(c)
In an action to recover the possession of personal property unjustly detained, when the property, or any part
thereof, has been concealed. removed, or disposed of to prevent its being found or taken by the applicant or an
officer;
(d)
In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation
upon which the action is brought, or in concealing or disposing of the property for the taking, detention or conversion
of which the action is brought;
(e)
In an action against a party who has removed or disposed of his property, or is about to do so, with intent to
defraud his creditors;
(f)
In an action against a party who resides out of the Philippines, or on whom summons may be served by
publication. (emphasis supplied)
While it is true that from the aforequoted provision attachment may issue "in an action against a party who resides out
of the Philippines, " irrespective of the nature of the action or suit, and while it is also true that in the case of Cu
Unjieng, et al vs. Albert, 58 Phil. 495, it was held that "each of the six grounds treated ante is independent of the
others," still it is imperative that the amount sought be liquidated.
In view of the foregoing, the Decision appealed from is hereby AFFIRMED.
SO ORDERED.

12

G.R. NO. 123638

June 15, 2005

INSULAR SAVINGS BANK, Petitioner,

vs.
COURT OF APPEALS, JUDGE OMAR U. AMIN, in his capacity as Presiding Judge of Branch 135 of the Regional
Trial Court of Makati, and FAR EAST BANK AND TRUST COMPANY, Respondents.
DECISION
GARCIA, J.:
Thru this appeal via a petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Insular Savings
Bank seeks to set aside the D E C I S I O N1 dated October 9, 1995 of the Court of Appeals in CA-G.R. SP No. 34876
and its resolution dated January 24, 1996,2 denying petitioners motion for reconsideration.
The assailed decision of October 9, 1995 cleared the Regional Trial Court (RTC) at Makati, Branch 135, of committing,
as petitioner alleged, grave abuse of discretion in denying petitioners motion to discharge attachment by counterbond in Civil Case No. 92-145, while the equally assailed resolution of January 24, 1996 denied petitioners motion for
reconsideration.
The undisputed facts are summarized in the appellate courts decision3 under review, as follows:
"On December 11, 1991, respondent Bank [Far East Bank and Trust Company] instituted Arbitration Case No. 91-069
against petitioner [Insular Savings Bank] before the Arbitration Committee of the Philippine Clearing House
Corporation [PCHC]. The dispute between the parties involved three [unfunded] checks with a total value of
P25,200,000.00. The checks were drawn against respondent Bank and were presented by petitioner for clearing. As
respondent Bank returned the checks beyond the reglementary period, [but after petitioners account with PCHC was
credited with the amount of P25,200,000.00] petitioner refused to refund the money to respondent Bank. While the
dispute was pending arbitration, on January 17, 1992, respondent Bank instituted Civil Case No. 92-145 in the
Regional Trial Court of Makati and prayed for the issuance of a writ of preliminary attachment. On January 22, 1992,
Branch 133 of the Regional Trial Court of Makati issued an Order granting the application for preliminary attachment
upon posting by respondent Bank of an attachment bond in the amount of P6,000,000.00. On January 27, 1992,
Branch 133 of the Regional Trial Court of Makati issued a writ of preliminary attachment for the amount of
P25,200,000.00. During the hearing on February 11, 1992 before the Arbitration Committee of the Philippine Clearing
House Corporation, petitioner and respondent Bank agreed to temporarily divide between them the disputed amount
of P25,200,000.00 while the dispute has not yet been resolved. As a result, the sum of P12,600,000.00 is in the
possession of respondent Bank. On March 9, 1994, petitioner filed a motion to discharge attachment by counter-bond
in the amount of P12,600,000.00. On June 13, 1994, respondent Judge issued the first assailed order denying the
motion. On June 27, 1994, petitioner filed a motion for reconsideration which was denied in the second assailed order
dated July 20, 1994" (Emphasis and words in bracket added).
From the order denying its motion to discharge attachment by counter-bond, petitioner went to the Court of Appeals on
a petition for certiorari thereat docketed as CA-G.R. SP No. 34876, ascribing on the trial court the commission of
grave abuse of discretion amounting to lack of jurisdiction.
While acknowledging that "[R]espondent Judge may have erred in his Order of June 13, 1994 that the counter-bond
should be in the amount of P27,237,700.00", in that he erroneously factored in, in arriving at such amount,
unliquidated claim items, such as actual and exemplary damages, legal interest, attorneys fees and expenses of
litigation, the CA, in the herein assailed decision dated October 9, 1995, nonetheless denied due course to and
dismissed the petition. For, according to the appellate court, the RTCs order may be defended by, among others, the
provision of Section 12 of Rule 57 of the Rules of Court, infra. The CA added that, assuming that the RTC erred on the
matter of computing the amount of the discharging counter-bond, its error does not amount to grave abuse of
discretion.
With its motion for reconsideration having been similarly denied, petitioner is now with us, faulting the appellate court,
as follows:
"I. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE PRINCIPAL AMOUNT CLAIMED BY
RESPONDENT BANK SHOULD BE THE BASIS FOR COMPUTING THE AMOUNT OF THE COUNTER-BOND, FOR
THE PRELIMINARY ATTACHMENT WAS ISSUED FOR THE SAID AMOUNT ONLY.
"II. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE ARGUMENT THAT THE AMOUNT OF THE
COUNTER-BOND SHOULD BE BASED ON THE VALUE OF THE PROPERTY ATTACHED CANNOT BE RAISED
FOR THE FIRST TIME IN THE COURT OF APPEALS.

13

"III. THE COURT OF APPEALS ERRED IN RULING THAT THE AMOUNT OF THE COUNTER-BOND SHOULD BE
BASED ON THE VALUE OF THE PROPERTY ATTACHED EVEN IF IT WILL RESULT IN MAKING THE AMOUNT OF
THE COUNTER-BOND EXCEED THE AMOUNT FOR WHICH PRELIMINARY ATTACHMENT WAS ISSUED."
Simply put, the issue is whether or not the CA erred in not ruling that the trial court committed grave abuse of
discretion in denying petitioners motion to discharge attachment by counter-bond in the amount of P12,600,000.00.
Says the trial court in its Order of June 13, 1994:
"xxx (T)he counter-bond posted by [petitioner] Insular Savings Bank should include the unsecured portion of
[respondents] claim of P12,600,000.00 as agreed by means of arbitration between [respondent] and [petitioner];
Actual damages at 25% percent per annum of unsecured amount of claim from October 21, 1991 in the amount of
P7,827,500.00; Legal interest of 12% percent per annum from October 21, 1991 in the amount of P3,805,200.00;
Exemplary damages in the amount of P2,000,000.00; and attorneys fees and expenses of litigation in the amount of
P1,000,000.00 with a total amount of P27,237,700.00 (Adlawan vs. Tomol, 184 SCRA 31 (1990)".
Petitioner, on the other hand, argues that the starting point in computing the amount of counter-bond is the amount of
the respondents demand or claim only, in this case P25,200,000.00, excluding contingent expenses and unliquidated
amount of damages. And since there was a mutual agreement between the parties to temporarily, but equally, divide
between themselves the said amount pending and subject to the final outcome of the arbitration, the amount of
P12,600,000.00 should, so petitioner argues, be the basis for computing the amount of the counter-bond.
The Court rules for the petitioner.
The then pertinent provision of Rule 57 (Preliminary Attachment) of the Rules of Court under which the appellate court
issued its assailed decision and resolution, provides as follows:
"SEC. 12. Discharge of attachment upon giving counter-bond. At any time after an order of attachment has been
granted, the party whose property has been attached, . . . may upon reasonable notice to the applicant, apply to the
judge who granted the order or to the judge of the court which the action is pending, for an order discharging the
attachment wholly or in part on the security given. The judge shall, after hearing, order the discharge of the attachment
if a cash deposit is made, or a counter-bond executed to the attaching creditor is filed, on behalf of the adverse party,
with the clerk or judge of the court where the application is made in an amount equal to the value of the property
attached as determined by the judge, to secure the payment of any judgment that the attaching creditor may recover
in the action. x x x . Should such counter-bond for any reason be found to be, or become insufficient, and the party
furnishing the same fail to file an additional counter-bond, the attaching party may apply for a new order of
attachment"4 (Emphasis supplied).4
As may be noted, the amount of the counter-attachment bond is, under the terms of the aforequoted Section 12, to be
measured against the value of the attached property, as determined by the judge to secure the payment of any
judgment that the attaching creditor may recover in the action. Albeit not explicitly stated in the same section and
without necessarily diminishing the sound discretion of the issuing judge on matters of bond approval, there can be no
serious objection, in turn, to the proposition that the attached property - and logically the counter-bond necessary to
discharge the lien on such property - should as much as possible correspond in value to, or approximately match the
attaching creditors principal claim. Else, excessive attachment, which ought to be avoided at all times, shall ensue. As
we held in Asuncion vs. Court of Appeals:5
"We, however, find the counter-attachment bond in the amount of P301,935.41 required of the private respondent by
the trial court as rather excessive under the circumstances. Considering that the principal amounts claimed by the
petitioner . . . total only P185,685.00, and that he had posted a bond of only P80,000.00 for the issuance of the writ of
preliminary attachment, we deem it reasonable to lower the amount of the counter-attachment bond to be posted by
the private respondent . . . to the sum of P185,685.00."
The following excerpts from Herrera, REMEDIAL LAW, Vol. VII, 1997 ed., p. 61, citing retired Justice Jose Y. Feria,
drive home the same point articulated in Asuncion:
"The sheriff is required to attach only so much of the property of the party against whom the order is issued as may be
sufficient to satisfy the applicants demand, the amount of which is stated in the order, unless a deposit is made or a
counter-bond is given equal to said amount. However, if the value of the property to be attached is less than the
amount of the demand, the amount of the applicants bond may be equal to the value of said property, and the amount
of the adverse partys deposit or counter-bond may be equal to the applicants bond. The writ of preliminary
attachment is issued upon approval of the requisite bond". (Emphasis supplied).1avvphi1.net

14

Turning to the case at bar, the records show that the principal claim of respondent, as plaintiff a quo, is in the amount
of P25,200,000.00,6 representing the three (3) unfunded checks drawn against, and presented for clearing to,
respondent bank. Jurisprudence teaches that a writ of attachment cannot be issued for moral and exemplary
damages, and other unliquidated or contingent claim.7
The order of attachment dated January 22, 1992 fixed the bond to be posted by respondent, as applicant, at
P6,000,000.00. The writ of attachment issued on January 27, 1992, in turn, expressly indicated that petitioner is justly
indebted to respondent in the amount of P25,200,000.00.8 On February 11, 1992, before the Arbitration Committee of
the Philippine Clearing House Corporation, petitioner and respondent, however, agreed to equally divide between
themselves, albeit on a temporary basis, the disputed amount of P25,200,000.00, subject to the outcome of the
arbitration proceedings. Thus, the release by petitioner of the amount of P12,600,000.00 to respondent. On March 7,
1994, petitioner filed a motion to discharge attachment by counter-bond in the amount of P12,600,000.009 which, to
petitioner, is the extent that respondent may actually be prejudiced in the event its basic complaint for recovery of
money against petitioner prospers.
As things stood, therefore, respondents principal claim against petitioner immediately prior to the filing of the motion to
discharge attachment has effectively been pruned down to P12,600,000.00. The trial court was fully aware of this
reality. Accordingly, it should have allowed a total discharge of the attachment on a counter-bond based on the
reduced claim of respondent. If a portion of the claim is already secured, we see no justifiable reason why such
portion should still be subject of counter-bond. It may be that a counter-bond is intended to secure the payment of any
judgment that the attaching party may recover in the main action. Simple common sense, if not consideration of fair
play, however, dictates that a part of a possible judgment that has veritably been preemptively satisfied or secured
need not be covered by the counter-bond.
With the view we take of this case, the trial court, in requiring petitioner to post a counter-bond in the amount of
P27,237,700.00,
obviously glossed over one certain fundamental. We refer to the fact that the attachment respondent applied for and
the corresponding writ issued was only for the amount of P25.2 Million. Respondent, it bears to stress, did not pray for
attachment on its other claims, contingent and unliquidated as they were. Then, too, the attaching writ rightly excluded
such claims. While the records do not indicate, let alone provide a clear answer as to the actual value of the property
levied upon, it may reasonably be assumed that it is equal to respondents principal claim. Be that as it may, it was
simply unjust for the trial court to base the amount of the counter-bond on a figure beyond the P25,200,000.00
threshold, as later reduced to P12,600,200.00.
The trial court, therefore, committed grave abuse of discretion when it denied petitioners motion to discharge
attachment by counter-bond in the amount of P12,600,000.00, an amount more than double the attachment bond
required of, and given by, respondent. As a necessary consequence, the Court of Appeals committed reversible error
when it dismissed petitioners recourse thereto in CA-G.R. SP No. 34876.
It bears to stress, as a final consideration, that the certiorari proceedings before the appellate court and the denial of
the motion to discharge attachment subject of such proceedings, transpired under the old rules on preliminary
attachment which has since been revised.10 And unlike the former Section 12 of Rule 57 of the Rules of Court where
the value of the property attached shall be the defining measure in the computation of the discharging counterattachment bond, the present less stringent Section 12 of Rule 57 provides that the court shall order the discharge of
attachment if the movant "makes a cash deposit, or files a counter-bond . . . in an amount equal to that fixed by the
court in the order of attachment, exclusive of costs." Not being in the nature of a penal statute, the Rules of Court
cannot be given retroactive effect.11
This disposition should be taken in the light of then Section 12, Rule 57 of the Rules of Court.
WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution of the Courts of
Appeals are hereby REVERSED and SET ASIDE, along with the orders dated June 13, 1994 and July 20, 1994 of the
Regional Trial Court at Makati, Branch 135, in Civil Case No. 92-145 insofar they denied petitioners motion to
discharge attachment by counter-bond in the amount of P12,600,000.00, and a new one entered GRANTING such
motion upon the reposting of the same counter-bond.
SO ORDERED.

15

G.R. No. L-43772

June 15, 1935

ISIDRO TAN (alias Tan Lit), petitioner,

vs.
FRANCISCO ZANDUETA, Judge of First Instances of Manila, the DIRECTOR OF PRISON AND TIU CHAY (alias Tan
Kia), respondents.
Laurel, Del Rosario and Sabido for petitioner.
Palma and Guevara for respondents.
DIAZ, J.:
Isidro Tan (alias Tan Lit), who is at present confined in Bilibid Prison, prays that he be released from confinement
alleging that he is deprived of his liberty by virtue of an illegal order entered in civil case No. 47826 of the Court of First
Instance of Manila, by the respondent judge, Francisco Zandueta. The order referred to was issued by the said
respondent on May 17, 1935, the dispositive part of which reads:
The court finds the defendant in contempt of court and order that, pending the deposit by him of the amount of
P12,000 above-mentioned in the order of May 6, 1935, or the filing of a bond in the aforesaid amount, he will not be
released.
The facts alleged in the pleadings may be briefly stated as follows: In case No. 47826 of the Court of First Instance of
Manila, the respondent Tiu Chay (alias Tan Kia), as plaintiff, obtained a writ of preliminary attachment against the
petitioner Isidro Tan (alias Tan Lit) upon the filing of a bond in the amount of P5,000. The respondent judge issued said
writ on February 26, 1935, authorizing the attachment of the properties of the defendant Isidro Tan (alias Tan Lit) to the
amount of P22,500. Upon motion of said defendant, the respondent judge issued an order on April 1, 1935, lifting the
writ of attachment conditioned on the filing of a counter bond in the amount of P5,000. After sundry proceedings
brought about by a motion of reconsideration presented by the defendant, asking that the writ referred to be lifted, the
respondent judge issued another order, dated April 20, confirmatory of that of the 1st of said month, by virtue of which
the defendant put up the required counter bond, and immediately thereafter, that is, on the same day, April 20, 1935,
withdrew from the Philippine National Bank an amount of money of which P22,000 had been attached under the
aforesaid order of February 26, 1935. On the third day, that is, on April 23, 1935, the respondent Tiu Chay (alias Tan
Kia) asked that Isidro Tan (alias Tan Lit) be required to put up another counter bond in the amount of P22,500 instead
of P5,000 already filed. The respondent judge, passing on said motion, already Isidro Tan (alias Tan Lit), on May 2,
1935, to file an additional counter bond in the amount of P10,000 only, giving him ten days to do so. Four days
thereafter, that is, on May 6, 1935, the respondent judge entered another order requiring Isidro Tan (alias Tan Lit), to
put up a counter bond of P17,000 instead of P15,000, or in default thereof, to deposit anew in the Philippine National
Bank P17,000 of the amount withdrawn therefrom days before. For failure to file either the counter bond in the amount
of P10,000 or that in the amount of P17,000 to which it was later raised, the respondent judge required Isidro Tan
(alias Tan Lit) to appear before him and show cause, if any, why he should not be punished for contempt of court.
Believing, however, that Isidro Tan (alias Tan Lit) was not given sufficient time to comply with the order of May 2 and 6,
1935, the respondent judge granted him another day to comply therewith, but reducing this time the counter bond
required of him to P12,000 only, with an option to deposit in the bank said amount in case of failure to put up the
counter bond as reduced. As the petitioner, notwithstanding these facilities, neither filed any additional counter bond
nor made the deposit required of him, the respondent judge ordered his arrest on May 17, 1935, and on the same day,
after hearing his explanations which the said judge considered unsatisfactory, he was sent to jail there to remain until
he should deposit the amount required of him or file the aforementioned counter bond.
The petitioner argues that under the provisions of section 440 of Act No. 190, after filing the counter bond of P5,000
required of him by the court in its order of April 20, 1935, he was authorized and had a perfect right to withdraw from
the Philippine National Bank the amount of his deposit which was attached by virtue of the orders of February 26 and
April 20, 1935. In truth, when he withdrew the aforesaid amount, there was still no order preventing or restraining him
from doing so, and requiring him to file an additional counter bound, because the order which imposed upon him that
obligation was issued very much later, that is, on May 2, 1935, or twelve days after the said withdrawal.
A reading of the aforesaid section of law readily shows, that when the property release from an attachment cannot be
returned by the party who secured its release upon the filing of a bond, the bond takes the place of said property, that
is, answers therefor, because the law on the points is couched in the following language: "the obligation aforesaid
standing in place of the property so released."
Moreover, the provision of said section, to the effect that the defendant and surety will, on demand, pay to the plaintiff
the full value of the property released, proceeds on the assumption that a judgment has been rendered in favor of the
plaintiff; and the case at bar, in connection with the present status of case No. 47826 of the Court of First Instance of
Manila, is not such as to fall under said provision of law, because up to the present no judgment has been rendered

16

against the defendant, that is, the petitioner Isidro Tan (alias Tan Lit), the question of whether or not the respondent Tiu
Chay (alias Tan Kia) is entitled to the amount claimed by him as plaintiff in the said case, being still pending resolution.
Respondents' contention that the respondent judge proceeded according to law in requiring an additional counter
bond of P12,000 and in later ordering the confinement of the petitioner pending the filing of said bond or the deposit of
an equal amount with the bank, because he had not lost jurisdiction over the property released pursuant to the
provisions of section 440 of Act No. 90, is not only without merit but also untenable. From the moment the said
respondent authorized the petitioner to put up the counter bond of P5,000 and from the moment the said petitioner
filed said counter bond in order to be able to withdraw his deposit in the Philippine National Bank, it can be said that
the respondent lost jurisdiction over the said property, although he retained jurisdiction to resolve the principal
question whether or not the respondent Tiu Chay (alias Tan Kia) was entitled to the relief prayed for in his complaint,
because he permitted and the law likewise permits that the counter bond of the petitioner stand and answer for the
said property.
In view of the foregoing, we are of the opinion, and so hold, that the petitioner is in fact deprived of his liberty by virtue
of an illegal order; wherefore, we order his immediate release, with the costs taxes against the respondent Tiu Chay
(alias Tan Kia). So ordered.

17

G.R. No. L-23237

November 14, 1925

WALTER E. OLSEN & CO., plaintiff-appellee,

vs.
WALTER E. OLSEN, defendant-appellant.
Ross, Lawrence and Selph and Antonio T. Carrascoso, Jr., for appellant.
Gibbs and McDonough for appellee.

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

18

of P100 per share for himself and Marker. A few days afterwards he began to sell the ordinary shares of the
corporation for P430 each. The defendant-appellant attempted to justify his conduct, alleging that the withdrawal of the
funds of the corporation for his personal use was made in his current account with said corporation, in whose treasury
he deposited his own money and the certificates of title of his shares, as well as of his estate, and that at the first
meeting of the stockholders, which took place on February 1, 1919, a statement of his account with a debit balance
was submitted and approved.
Having, as he had, absolute and almost exclusive control over the function of the corporation and its funds by virtue of
his triple capacity as president, treasurer and general manager, the defendant-appellant should have been more
scrupulous in the application of the funds of said corporation to his own use. As a trustee of said corporation, it was his
duty to see by all legal means possible that the interests of the stockholders were protected, and should not abuse the
extraordinary opportunity which his triple position offered him to dispose of the funds of the corporation. Ordinary
delicacy required that in the disposition of the funds of the corporation for his personal use, he should be very careful,
so as to do it in such a way as would be compatible with the interest of the stockholders and his fiduciary character.
And let it not also be said that he did every thing openly and with the security of his shares of stock, because as he
could dispose of the funds of the corporation so he could dispose of his won shares and with greater freedom. And let
it not also be said that other officers of the corporation, such as the vice-president, the secretary and other chiefs and
employees, were doing the same thing, because that does not show but that his bad example had spread among his
subordinates and all believed themselves with the same right as their chief to dispose of the funds of the corporation
for their personal use, although it were merely by way of loan, without any security of whatever kind of course. The
approval of his account at the first meeting of the stockholders cannot be considered as a justification of his conduct,
nor does it remove every suspicion of bad faith, because the corporation was constituted exclusively by the defendantappellant himself and his cospeculator, Marker, and nothing else could be expected from it. As to the debt he owed to
the corporation, Walter E. Olsen was in effect a lender and a borrower at the same time. The conduct of the
defendant-appellant in connection with the funds of the corporation he represented was more than an irregularity; and
while it is not sufficiently serious to constitute a criminal fraud, it is undoubtedly a fraud of a civil character, because it
is an abuse of confidence to the damage of the corporation and its stockholders, and constitutes one of the grounds
enumerated in section 424, in connection with section 412, of the Code of Civil Procedure for the issuance of a
preliminary attachment, and the order of the Court of First Instance of Manila, denying the motion for the annulment of
the injunction in question, is in accordance with law. lawph!1.net
As to the counterclaim set up by the defendant-appellant, we have nothing to add to the considerations of the trial
court which we make ours.
For the foregoing, and no error having been found in the judgment appealed from, the same is hereby affirmed, with
the costs against the defendant-appellant. So ordered.

19

G.R. No. L-31163

November 6, 1929

URBANO SANTOS, plaintiff-appellee,

vs.
JOSE C. BERNABE, ET AL., defendants.
PABLO TIONGSON and THE PROVINCIAL SHERIFF OF BULACAN, appellants.
Arcadio Ejercito and Guevara, Francisco and Recto for appellants.
Eusebio Orense And Nicolas Belmonte for appellee.

VILLA-REAL, J.:
This appeal was taken by the defendants Pablo Tiongson and the Provincial Sheriff of Bulacan from the judgment of
the Court of First of said province, wherein said defendant Pablo Tiongson was ordered to pay the plaintiff Urbano
Santos the value of 778 cavans and 38 kilos of palay, at the rate of P3 per cavan, without special pronouncement as
to costs.
In support of their appeal, the appellants assign the following alleged errors committed by the lower court in its
judgment, to wit:
1. The court erred in holding that it has been proved that in the cavans of palay attached by the herein defendant
Pablo Tiongson from the defendant Jose C. Bernabe were included those claimed by the plaintiff in this cause.
2. The court erred in ordering the defendant Pablo Tiongson to pay the plaintiff the value of 778 cavans and 38 kilos of
palay, the refund of which is claimed by said plaintiff.
3. The court erred in denying the defendants' motion for a new trial.1awphil.net
The following facts were conclusively proved at the trial:
On March 20, 1928, there were deposited in Jose C. Bernabe's warehouse by the plaintiff Urbano Santos 778 cavans
and 38 kilos of palay and by Pablo Tiongson 1,026 cavans and 9 kilos of the same grain.
On said date, March 20, 1928, Pablo Tiongson filed with the Court of First Instance of Bulacan a complaint against
Jose C. Bernabe, to recover from the latter the 1,026 cavans and 9 kilos of palay deposited in the defendant's
warehouse. At the same time, the application of Pablo Tiongson for a writ of attachment was granted, and the
attachable property of Jose C. Bernabe, including 924 cavans and 31 1/2 kilos of palay found by the sheriff in his
warehouse, were attached, sold at public auction, and the proceeds thereof delivered to said defendant Pablo
Tiongson, who obtained judgment in said case.
The herein plaintiff, Urbano Santos, intervened in the attachment of the palay, but upon Pablo Tiongson's filing the
proper bond, the sheriff proceeded with the attachment, giving rise to the present complaint.
It does not appear that the sacks of palay of Urbano Santos and those of Pablo Tiongson, deposited in Jose C.
Bernabe's warehouse, bore any marks or signs, nor were they separated one from the other.
The plaintiff-appellee Urbano Santos contends that Pablo Tiongson cannot claim the 924 cavans and 31 kilos of
palay attached by the defendant sheriff as part of those deposited by him in Jose C. Bernabe's warehouse, because,
in asking for the attachment thereof, he impliedly acknowledged that the same belonged to Jose C. Bernabe and not
to him.
In the complaint filed by Pablo Tiongson against Jose C. Bernabe, civil case No. 3665 of the Court of First Instance of
Bulacan, it is alleged that said plaintiff deposited in the defendant's warehouse 1,026 cavans and 9 kilos of palay, the
return of which, or the value thereof, at the rate of P3 per cavan was claimed therein. Upon filing said complaint, the
plaintiff applied for a preliminary writ of attachment of the defendant's property, which was accordingly issued, and the
defendant's property, including the 924 cavans and 31 kilos of palay found by the sheriff in his warehouse, were
attached.
It will be seen that the action brought by Pablo Tiongson against Jose C. Bernabe is that provided in section 262 of the
Code of Civil Procedure for the delivery of personal property. Although it is true that the plaintiff and his attorney did
not follow strictly the procedure provided in said section for claiming the delivery of said personal property
nevertheless, the procedure followed by him may be construed as equivalent thereto, considering the provisions of

20

section 2 of the Code of Civil Procedure of the effect that "the provisions of this Code, and the proceedings under it,
shall be liberally construed, in order to promote its object and assist the parties in obtaining speedy justice."
Liberally construing, therefore, the above cited provisions of section 262 of the Code of Civil Procedure, the writ of
attachment applied for by Pablo Tiongson against the property of Jose C. Bernabe may be construed as a claim for
the delivery of the sacks of palay deposited by the former with the latter.
The 778 cavans and 38 kilos of palay belonging to the plaintiff Urbano Santos, having been mixed with the 1,026
cavans and 9 kilos of palay belonging to the defendant Pablo Tiongson in Jose C. Bernabe's warehouse; the sheriff
having found only 924 cavans and 31 1/2 kilos of palay in said warehouse at the time of the attachment thereof; and
there being no means of separating form said 924 cavans and 31 1/2 of palay belonging to Urbano Santos and those
belonging to Pablo Tiongson, the following rule prescribed in article 381 of the Civil Code for cases of this nature, is
applicable:
Art. 381. If, by the will of their owners, two things of identical or dissimilar nature are mixed, or if the mixture occurs
accidentally, if in the latter case the things cannot be separated without injury, each owner shall acquire a right in the
mixture proportionate to the part belonging to him, according to the value of the things mixed or commingled.
The number of kilos in a cavan not having been determined, we will take the proportion only of the 924 cavans of
palay which were attached and sold, thereby giving Urbano Santos, who deposited 778 cavans, 398.49 thereof, and
Pablo Tiongson, who deposited 1,026 cavans, 525.51, or the value thereof at the rate of P3 per cavan.
Wherefore, the judgment appealed from is hereby modified, and Pablo Tiongson is hereby ordered to pay the plaintiff
Urbano Santos the value of 398.49 cavans of palay at the rate of P3 a cavan, without special pronouncement as to
costs. So ordered.

21

G.R. No. 101163

January 11, 1993

STATE INVESTMENT HOUSE, INC., petitioner,

vs.
COURT OF APPEALS and NORA B. MOULIC, respondents.
Escober, Alon & Associates for petitioner.
Martin D. Pantaleon for private respondents.

BELLOSILLO, J.:
The liability to a holder in due course of the drawer of checks issued to another merely as security, and the right of a
real estate mortgagee after extrajudicial foreclosure to recover the balance of the obligation, are the issues in this
Petition for Review of the Decision of respondent Court of Appeals.
Private respondent Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on
commission, two (2) post-dated Equitable Banking Corporation checks in the amount of Fifty Thousand Pesos
(P50,000.00) each, one dated 30 August 1979 and the other, 30 September 1979. Thereafter, the payee negotiated
the checks to petitioner State Investment House. Inc. (STATE).
MOULIC failed to sell the pieces of jewelry, so she returned them to the payee before maturity of the checks. The
checks, however, could no longer be retrieved as they had already been negotiated. Consequently, before their
maturity dates, MOULIC withdrew her funds from the drawee bank.
Upon presentment for payment, the checks were dishonored for insufficiency of funds. On 20 December 1979, STATE
allegedly notified MOULIC of the dishonor of the checks and requested that it be paid in cash instead, although
MOULIC avers that no such notice was given her.
On 6 October 1983, STATE sued to recover the value of the checks plus attorney's fees and expenses of litigation.
In her Answer, MOULIC contends that she incurred no obligation on the checks because the jewelry was never sold
and the checks were negotiated without her knowledge and consent. She also instituted a Third-Party Complaint
against Corazon Victoriano, who later assumed full responsibility for the checks.
On 26 May 1988, the trial court dismissed the Complaint as well as the Third-Party Complaint, and ordered STATE to
pay MOULIC P3,000.00 for attorney's fees.
STATE elevated the order of dismissal to the Court of Appeals, but the appellate court affirmed the trial court on the
ground that the Notice of Dishonor to MOULIC was made beyond the period prescribed by the Negotiable Instruments
Law and that even if STATE did serve such notice on MOULIC within the reglementary period it would be of no
consequence as the checks should never have been presented for payment. The sale of the jewelry was never
effected; the checks, therefore, ceased to serve their purpose as security for the jewelry.
We are not persuaded.
The negotiability of the checks is not in dispute. Indubitably, they were negotiable. After all, at the pre-trial, the parties
agreed to limit the issue to whether or not STATE was a holder of the checks in due course. 1
In this regard, Sec. 52 of the Negotiable Instruments Law provides
Sec. 52. What constitutes a holder in due course. A holder in due course is a holder who has taken the instrument
under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it
before it was overdue, and without notice that it was previously dishonored, if such was the fact; (c) That he took it in
good faith and for value; (d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument
or defect in the title of the person negotiating it.
Culled from the foregoing, a prima facie presumption exists that the holder of a negotiable instrument is a holder in
due course. 2 Consequently, the burden of proving that STATE is not a holder in due course lies in the person who
disputes the presumption. In this regard, MOULIC failed.

22

The evidence clearly shows that: (a) on their faces the post-dated checks were complete and regular: (b) petitioner
bought these checks from the payee, Corazon Victoriano, before their due dates; 3 (c) petitioner took these checks in
good faith and for value, albeit at a discounted price; and, (d) petitioner was never informed nor made aware that
these checks were merely issued to payee as security and not for value.
Consequently, STATE is indeed a holder in due course. As such, it holds the instruments free from any defect of title of
prior parties, and from defenses available to prior parties among themselves; STATE may, therefore, enforce full
payment of the checks. 4
MOULIC cannot set up against STATE the defense that there was failure or absence of consideration. MOULIC can
only invoke this defense against STATE if it was privy to the purpose for which they were issued and therefore is not a
holder in due course.
That the post-dated checks were merely issued as security is not a ground for the discharge of the instrument as
against a holder in due course. For the only grounds are those outlined in Sec. 119 of the Negotiable Instruments Law:
Sec. 119.
Instrument; how discharged. A negotiable instrument is discharged: (a) By payment in due course
by or on behalf of the principal debtor; (b) By payment in due course by the party accommodated, where the
instrument is made or accepted for his accommodation; (c) By the intentional cancellation thereof by the holder; (d) By
any other act which will discharge a simple contract for the payment of money; (e) When the principal debtor becomes
the holder of the instrument at or after maturity in his own right.
Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the discharge of the instrument.
But, the intentional cancellation contemplated under paragraph (c) is that cancellation effected by destroying the
instrument either by tearing it up, 5 burning it, 6 or writing the word "cancelled" on the instrument. The act of
destroying the instrument must also be made by the holder of the instrument intentionally. Since MOULIC failed to get
back possession of the post-dated checks, the intentional cancellation of the said checks is altogether impossible.
On the other hand, the acts which will discharge a simple contract for the payment of money under paragraph (d) are
determined by other existing legislations since Sec. 119 does not specify what these acts are, e.g., Art. 1231 of the
Civil Code 7 which enumerates the modes of extinguishing obligations. Again, none of the modes outlined therein is
applicable in the instant case as Sec. 119 contemplates of a situation where the holder of the instrument is the creditor
while its drawer is the debtor. In the present action, the payee, Corazon Victoriano, was no longer MOULIC's creditor
at the time the jewelry was returned.
Correspondingly, MOULIC may not unilaterally discharge herself from her liability by the mere expediency of
withdrawing her funds from the drawee bank. She is thus liable as she has no legal basis to excuse herself from
liability on her checks to a holder in due course.
Moreover, the fact that STATE failed to give Notice of Dishonor to MOULIC is of no moment. The need for such notice
is not absolute; there are exceptions under Sec. 114 of the Negotiable Instruments Law:
Sec. 114. When notice need not be given to drawer. Notice of dishonor is not required to be given to the drawer in
the following cases: (a) Where the drawer and the drawee are the same person; (b) When the drawee is a fictitious
person or a person not having capacity to contract; (c) When the drawer is the person to whom the instrument is
presented for payment: (d) Where the drawer has no right to expect or require that the drawee or acceptor will honor
the instrument; (e) Where the drawer had countermanded payment.
Indeed, MOULIC'S actuations leave much to be desired. She did not retrieve the checks when she returned the
jewelry. She simply withdrew her funds from her drawee bank and transferred them to another to protect herself. After
withdrawing her funds, she could not have expected her checks to be honored. In other words, she was responsible
for the dishonor of her checks, hence, there was no need to serve her Notice of Dishonor, which is simply bringing to
the knowledge of the drawer or indorser of the instrument, either verbally or by writing, the fact that a specified
instrument, upon proper proceedings taken, has not been accepted or has not been paid, and that the party notified is
expected to pay it. 8
In addition, the Negotiable Instruments Law was enacted for the purpose of facilitating, not hindering or hampering
transactions in commercial paper. Thus, the said statute should not be tampered with haphazardly or lightly. Nor
should it be brushed aside in order to meet the necessities in a single case. 9
The drawing and negotiation of a check have certain effects aside from the transfer of title or the incurring of liability in
regard to the instrument by the transferor. The holder who takes the negotiated paper makes a contract with the
parties on the face of the instrument. There is an implied representation that funds or credit are available for the
payment of the instrument in the bank upon which it is drawn. 10 Consequently, the withdrawal of the money from the

23

drawee bank to avoid liability on the checks cannot prejudice the rights of holders in due course. In the instant case,
such withdrawal renders the drawer, Nora B. Moulic, liable to STATE, a holder in due course of the checks.
Under the facts of this case, STATE could not expect payment as MOULIC left no funds with the drawee bank to meet
her obligation on the checks, 11 so that Notice of Dishonor would be futile.
The Court of Appeals also held that allowing recovery on the checks would constitute unjust enrichment on the part of
STATE Investment House, Inc. This is error.
The record shows that Mr. Romelito Caoili, an Account Assistant, testified that the obligation of Corazon Victoriano and
her husband at the time their property mortgaged to STATE was extrajudicially foreclosed amounted to P1.9 million;
the bid price at public auction was only P1 million. 12 Thus, the value of the property foreclosed was not even enough
to pay the debt in full.
Where the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of mortgage, the
mortgagee is entitled to claim the deficiency from the debtor. 13 The step thus taken by the mortgagee-bank in
resorting to an extra-judicial foreclosure was merely to find a proceeding for the sale of the property and its action
cannot be taken to mean a waiver of its right to demand payment for the whole debt. 14 For, while Act 3135, as
amended, does not discuss the mortgagee's right to recover such deficiency, it does not contain any provision either,
expressly or impliedly, prohibiting recovery. In this jurisdiction, when the legislature intends to foreclose the right of a
creditor to sue for any deficiency resulting from foreclosure of a security given to guarantee an obligation, it so
expressly provides. For instance, with respect to pledges, Art. 2115 of the Civil Code 15 does not allow the creditor to
recover the deficiency from the sale of the thing pledged. Likewise, in the case of a chattel mortgage, or a thing sold
on installment basis, in the event of foreclosure, the vendor "shall have no further action against the purchaser to
recover any unpaid balance of the price. Any agreement to the contrary will be void". 16
It is clear then that in the absence of a similar provision in Act No. 3135, as amended, it cannot be concluded that the
creditor loses his right recognized by the Rules of Court to take action for the recovery of any unpaid balance on the
principal obligation simply because he has chosen to extrajudicially foreclose the real estate mortgage pursuant to a
Special Power of Attorney given him by the mortgagor in the contract of mortgage. 17
The filing of the Complaint and the Third-Party Complaint to enforce the checks against MOULIC and the
VICTORIANO spouses, respectively, is just another means of recovering the unpaid balance of the debt of the
VICTORIANOs.
In fine, MOULIC, as drawer, is liable for the value of the checks she issued to the holder in due course, STATE,
without prejudice to any action for recompense she may pursue against the VICTORIANOs as Third-Party Defendants
who had already been declared as in default.
WHEREFORE, the petition is GRANTED. The decision appealed from is REVERSED and a new one entered
declaring private respondent NORA B. MOULIC liable to petitioner STATE INVESTMENT HOUSE, INC., for the value
of EBC Checks Nos. 30089658 and 30089660 in the total amount of P100,000.00, P3,000.00 as attorney's fees, and
the costs of suit, without prejudice to any action for recompense she may pursue against the VICTORIANOs as ThirdParty Defendants.
Costs against private respondent.
SO ORDERED.

24

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

25

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

26

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.

27

G.R. No. L-29280

August 11, 1988

PEOPLE'S BANK AND TRUST COMPANY, plaintiff-appellee,

vs.
SYVEL'S INCORPORATED, ANTONIO Y. SYYAP and ANGEL Y SYYAP, defendants-appellants.
Araneta, Mendoza & Papa for plaintiff-appellee.
Quasha, Asperilia, Zafra, Tayag & Ancheta for defendants-appellants.

PARAS, J.:
This is an appeal from the decision dated May 16, 1968 rendered by the Court of First Instance of Manila, Branch XII
in Civil Case No. 68095, the decretal portion of which states:
IN VIEW OF THE FOREGOING, judgment is rendered sentencing all the defendants to pay the plaintiff jointly and
severally the sum of P601,633.01 with interest thereon at the rate of 11% per annum from June 17, 1967, until the
whole amount is paid, plus 10% of the total amount due for attorney's fees and the costs of suit. Should the
defendants fail to pay the same to the plaintiff, then it is ordered that all the effects, materials and stocks covered by
the chattel mortgages be sold at public auction in conformity with the Provisions of Sec. 14 of the Chattel Mortgage
Law, and the proceeds thereof applied to satisfy the judgment herein rendered. The counterclaim of the defendants,
upon the evidence presented and in the light of the authorities above cited, is dismissed for lack of merit.
SO ORDERED
(pp. 89-90, Record on Appeal; p. 15, Rollo)
The facts of the case based on the statement of facts, made by the trial court in its decision as cited in the briefs of
both parties are as follows:
This is an action for foreclosure of chattel mortgage executed in favor of the plaintiff by the defendant Syvel's
Incorporated on its stocks of goods, personal properties and other materials owned by it and located at its stores or
warehouses at No. 406, Escolta, Manila; Nos. 764-766 Rizal Avenue, Manila; Nos. 10-11 Cartimar Avenue, Pasay
City; No. 886 Nicanor Reyes, Sr. (formerly Morayta), Manila; as evidenced by Annex"A."The chattel mortgage was
duly registered in the corresponding registry of deeds of Manila and Pasay City. The chattel mortgage was in
connection with a credit commercial line in the amount of P900,000.00 granted the said defendant corporation, the
expiry date of which was May 20, 1966. On May 20, 1965, defendants Antonio V. Syyap and Angel Y. Syyap executed
an undertaking in favor of the plaintiff whereby they both agreed to guarantee absolutely and unconditionally and
without the benefit of excussion the full and prompt payment of any indebtedness to be incurred on account of the said
credit line. Against the credit line granted the defendant Syvel's Incorporated the latter drew advances in the form of
promissory notes which are attached to the complaint as Annexes "C" to "l." In view of the failure of the defendant
corporation to make payment in accordance with the terms and conditions agreed upon in the Commercial Credit
Agreement the plaintiff started to foreclose extrajudicially the chattel mortgage. However, because of an attempt to
have the matter settled, the extra-judicial foreclosure was not pushed thru. As no payment had been paid, this case
was even tually filed in this Court.
On petition of the plaintiff based on the affidavits executed by Mr. Leopoldo R. Rivera, Assistant Vice President of the
plaintiff bank and Atty. Eduardo J. Berenguer on January 12, 1967, to the effect, among others, that the defendants
are disposing of their properties with intent to defraud their creditors, particularly the plaintiff herein, a preliminary writ
of attachment was issued. As a consequence of the issuance of the writ of attachment, the defendants, in their answer
to the complaint set up a compulsory counterclaim for damages.
After the filing of this case in this court and during its pendency defendant Antonio v. Syyap proposed to have the case
settled amicably and to that end a conference was held in which Mr. Antonio de las Alas, Jr., Vice President of the
Bank, plaintiff, defendant Antonio V. Syyap and Atty. Mendoza were present. Mr. Syyap requested that the plaintiff
dismiss this case because he did not want to have the goodwill of Syvel's Incorporated impaired, and offered to
execute a real estate mortgage on his real property located in Bacoor, Cavite. Mr. De las Alas consented, and so the
Real Estate Mortgage, marked as Exhibit A, was executed by the defendant Antonio V. Syyap and his wife Margarita
Bengco Syyap on June 22, 1967. In that deed of mortgage, defendant Syyap admitted that as of June 16, 1967, the
indebtedness of Syvel's Incorporated was P601,633.01, the breakdown of which is as follows: P568,577.76 as
principal and P33,055.25 as interest. Complying with the promise of the plaintiff thru its Vice President to ask for the
dismissal of this case, a motion to dismiss this case without prejudice was prepared, Exhibit C, but the defendants did

28

not want to agree if the dismissal would mean also the dismissal of their counterclaim Against the plaintiff. Hence, trial
proceeded.
As regards the liabilities of the defendants, there is no dispute that a credit line to the maximum amount of
P900,000.00 was granted to the defendant corporation on the guaranty of the merchandise or stocks in goods of the
said corporation which were covered by chattel mortgage duly registered as required by law. There is likewise no
dispute that the defendants Syyap guaranteed absolutely and unconditionally and without the benefit of excussion the
full and prompt payment of any indebtedness incurred by the defendant corporation under the credit line granted it by
the plaintiff. As of June 16, 1967, its indebtedness was in the total amount of P601,633.01. This was admitted by
defendant Antonio V. Syyap in the deed of real estate mortgage executed by him. No part of the amount has been
paid by either of the defendants. Hence their liabilities cannot be questioned. (pp. 3-6, Brief for Appellee; p. 26, Rollo)
In their brief, appellants assign the following errors:
I
The lower court erred in not holding that the obligation secured by the Chattel Mortgage sought to be foreclosed in the
above-entitled case was novated by the subsequent execution between appellee and appellant Antonio V, Syyap of a
real estate mortgage as additional collateral to the obligation secured by said chattel mortgage.
II
The lower court erred in not dismissing the above-entitled case and in finding appellants liable under the complaint.
III
The lower court erred in not holding that the writ of preliminary attachment is devoid of any legal and factual basis
whatsoever.
IV
The lower court erred in dismissing appellants'counterclaim and in not holding appellee liable to appellants for the
consequent damages arising out of a wrongful attachment. (pp. 1-2, Brief for the Appellants, p. 25, Rollo)
Appellants admit that they are indebted to the appellee bank in the amount of P601,633.01, breakdown of which is as
follows: P568,577.76 as principal and P33,055.25 as interest. After the filing of the case and during its pendency,
defendant Antonio V. Syyap proposed to have the case amicably settled and for that purpose a conference was held in
which Mr. Antonio de las Alas, Jr., Vice President of plaintiff People's Bank and Trust Company, defendant Antonio V.
Syyap and Atty. Mendoza were present. Mr. Syyap requested that the plaintiff dismiss this case as he did not want to
have the goodwill of Syvel's Incorporated impaired, and offered to execute a real estate mortgage on his real property
located in Bacoor, Cavite. Mr. de las Alas consented, and so the Real Estate Mortgage (Exhibit "A") was executed by
defendant Antonio Syyap and his wife Margarita Bengco Syyap on June 22, 1967. Defendants did not agree with
plaintiffs motion to dismiss which included the dismissal of their counterclaim and filed instead their own motion to
dismiss (Record on Appeal, pp. 68-72) on the ground that by the execution of said real estate mortgage, the obligation
secured by the chattel mortgage subject of this case was novated, and therefore, appellee's cause of action thereon
was extinguished.
In an Order dated September 23, 1967, the motion was denied for not being well founded (record on Appeal, p. 78).
Appellants contention is without merit.
Novation takes place when the object or principal condition of an obligation is changed or altered. It is elementary that
novation is never presumed; it must be explicitly stated or there must be manifest incompatibility between the old and
the new obligations in every aspect (Goni v. CA, 144 SCRA 223 [1986]; National Power Corp. v. Dayrit, 125 SCRA 849
[1983]).
In the case at bar, there is nothing in the Real Estate Mortgage which supports appellants'submission. The contract on
its face does not show the existence of an explicit novation nor incompatibility on every point between the "old and the
"new" agreements as the second contract evidently indicates that the same was executed as new additional security
to the chattel mortgage previously entered into by the parties.
Moreover, records show that in the real estate mortgage, appellants agreed that the chattel mortgage "shall remain in
full force and shall not be impaired by this (real estate) mortgage."

29

The pertinent provision of the contract is quoted as follows:

That the chattel mortgage executed by Syvel's Inc. (Doc. No. 439, Book No. I, Series of 1965, Notary Public Jose C.
Merris, Manila); real estate mortgage executed by Angel V. Syyap and Rita V. Syyap (Doc. No. 441, Page No. 90,
Book No. I, Series of 1965, Notary Public Jose C. Merris, Manila) shall remain in full force and shall not be impaired by
this mortgage (par. 5, Exhibit"A," Emphasis ours).
It is clear, therefore, that a novation was not intended. The real estate mortgage was evidently taken as additional
security for the performance of the contract (Bank of P.I. v. Herrige, 47 Phil. 57).
In the determination of the legality of the writ of attachment by the Court of First Instance of Manila, it is a well
established rule that the grant or denial of a writ of attachment rests upon the sound discretion of the court. Records
are bereft of any evidence that grave abuse of discretion was committed by respondent judge in the issuance of the
writ of attachment.
Appellants contend that the affidavits of Messrs. Rivera and Berenguer on which the lower court based the issuance of
the writ of preliminary attachment relied on the reports of credit investigators sent to the field and not on the personal
knowledge of the affiants. Such contention deserves scant consideration. Evidence adduced during the trial strongly
shows that the witnesses have personal knowledge of the facts stated in their affidavits in support of the application for
the writ. They testified that Syvel's Inc. had disposed of all the articles covered by the chattel mortgage but had not
remitted the proceeds to appellee bank; that the Syvel's Stores at the Escolta, Rizal Avenue and Morayta Street were
no longer operated by appellants and that the latter were disposing of their properties to defraud appellee bank. Such
testimonies and circumstances were given full credit by the trial court in its decision (Brief for Appellee, p. 14). Hence,
the attachment sought on the ground of actual removal of property is justified where there is physical removal thereof
by the debtor, as shown by the records (McTaggert v. Putnam Corset Co., 8 N.Y. S 800 cited in Moran, Comments on
the Rules of Court, 1970 Ed., Vol. 3, p. 7).
Besides, the actuations of appellants were clearly seen by the witnesses who "saw a Fiat Bantam Car-Fiat Car, a
small car and about three or four persons hurrying; they were carrying goods coming from the back portion of this
store of Syvels at the Escolta, between 5:30 and 6:00 o'clock in the evening." (Record on Appeal, pp. 45-46).
Therefore, "the act of debtor (appellant) in taking his stock of goods from the rear of his store at night, is sufficient to
support an attachment upon the ground of the fraudulent concealment of property for the purpose of delaying and
defrauding creditors." (4 Am. Jur., 841 cited in Francisco, Revised Rules of Court, Second Edition, 1985, p. 24).
In any case, intent to defraud may be and usually is inferred from the facts and circumstances of the case; it can rarely
be proved by direct evidence. It may be gleaned also from the statements and conduct of the debtor, and in this
connection, the principle may be applied that every person is presumed to intend the natural consequences of his acts
(Francisco, Revised Rules of Court, supra, pp. 24-25), In fact the trial court is impressed "that not only has the plaintiff
acted in perfect good faith but also on facts sufficient in themselves to convince an ordinary man that the defendants
were obviously trying to spirit away a port;.on of the stocks of Syvel's Incorporated in order to render ineffectual at
least partially anyjudgment that may be rendered in favor of the plaintiff." (Decision; Civil Case No. 68095; Record on
Appeal, pp. 88-89).
Appellants having failed to adduce evidence of bad faith or malice on the part of appellee in the procurement of the
writ of preliminary attachment, the claim of the former for damages is evidently negated. In fact, the allegations in the
appellee's complaint more than justify the issuance of the writ of attachment.
PREMISES CONSIDERED, this appeal is DISMISSED for lack of merit and the judgment appealed from is
AFFIRMED.
SO ORDERED.

30

G.R. Nos. 65957-58

July 5, 1994

ELEAZAR V. ADLAWAN and ELENA S. ADLAWAN, petitioners,

vs.
Hon. Judge RAMON AM. TORRES, as Presiding Judge of Branch 6, Regional Trial Court Cebu City, ABOITIZ &
COMPANY, INC. and THE PROVINCIAL SHERIFFS OF CEBU, DAVAO, RIZAL and METRO MANILA, Respectively,
respondents.
Pablo P. Garcia for petitioners.
Isaias P. Dicdican and Sylva G. Aguirre-Paderanga for Aboitiz & Co., Inc.

QUIASON, J.:
This is a petitioner for certiorari and mandamus with preliminary injunction or restraining order to nullify: (1) the Order
dated September 14, 1983 of respondent Judge Ramon Am. Torres of the Regional Trial Court, Branch 6, Cebu City,
in Civil Case No. CEB-1185 and the Order dated September 26, 1983 of Judge Emilio A. Jacinto of Branch 23 of the
same court in Civil Case No. CEB-1186, which granted the motion for the issuance of writs of preliminary attachment
for the seizure of the property of petitioners by respondent Provincial Sheriffs; and (2) the Order dated December 12,
1983 of respondent Judge Ramon Am. Torres in the consolidated cases, Civil Case No. CEB-1185 and Civil Case No.
CEB-1186.
I
In a complaint dated April 24, 1982 filed with the Court of First Instance of Cebu, now Regional Trial Court, (Civil Case
No. R-21761), respondent Aboitiz and Company, Inc. (Aboitiz) sought to collect from petitioners a sum of money
representing payments for: (1) the unpaid amortizations of a loan; (2) technical and managerial services rendered; and
(3) the unpaid installments of the equipment provided by respondent Aboitiz to petitioners (Rollo, p. 37).
Acting on the ex parte application for attachment, the Executive Judge of the Court of First Instance of Cebu, issued
on May 14, 1982, an order directing the issuance of the writ of preliminary attachment against the property of
petitioners upon the filing by respondent Aboitiz of an attachment bond.
Subsequently, the case was raffled to Branch 11 of the Court of First Instance of Cebu, which issued a writ of
attachment addressed to the Provincial Sheriffs of Cebu and the City Sheriff of Davao City. It was the Sheriff of Davao
City who enforced the writ of attachment, resulting in the seizure of heavy construction equipment, motor vehicle
spare parts, and other personal property with the aggregate value of P15,000,000.00. The said court also granted the
motion of respondent Aboitiz to take possession and custody of the attached property of petitioners and ordered the
Provincial Sheriff of Davao to deliver the property to respondent Aboitiz.
Petitioners moved for a bill of particulars and to set aside the ex parte writ of attachment. Finding merit in the motion to
set aside the writ, Branch 11 ordered on July 6, 1982 the lifting of the writ and, consequently, the discharge of the
property levied upon.
Respondent Aboitiz filed an urgent ex parte motion, praying for the stay of the July 6, 1982 Order for a period of 15
days for it to be able to appeal the order. The motion was favorably acted upon.
However, on July 13, 1982, respondent Aboitiz filed a notice of dismissal of its complaint in accordance with Section 1,
Rule 17 of the Revised Rules of Court. Consequently, Branch 11 issued an order confirming the notice of dismissal,
emphasizing that all orders of the court issued prior to the filing of said notice of dismissal had been rendered functus
oficio, and considering all pending incidents in the case as moot and academic.
Petitioner Eleazar Adlawan filed a motion praying that the July 6, 1982 Order be implemented and enforced. On
December 20, however, Branch 11 denied the motion on account of the filing by respondent Aboitiz before Branch 16
of the Court of First Instance of Cebu in Lapu-lapu City of an action for delivery of personal property (Civil Case No.
619-L), and the filing by petitioner Eleazar Adlawan before Branch 10 of the same court of an action for damages in
connection with the seizure of his property under the writ of attachment.
In the replevin suit, Branch 16 ordered the seizure and delivery of the property described in the complaint. Said
property were later delivered by the provincial sheriff to respondent Aboitiz. Alleging that while his office was situated
in Cebu City, Adlawan was a resident of Minglanilla, and therefore, the Lapu-lapu City court should not entertain the
action for replevin. Petitioner Eleazar Adlawan filed an omnibus motion praying for the reconsideration and dissolution

31

of the writ of seizure, the retrieval of the property seized, and the dismissal of the complaint. He also averred that the
property seized were in custodia legis by virtue of the writ of attachment issued by Branch 11. His omnibus motion was
denied. Subsequently, he filed a motion for reconsideration which was not granted.
The denial of his omnibus motion led petitioner Eleazar Adlawan to file a petition for certiorari and mandamus in the
Supreme Court (G.R. No. 63225). The Third Division of this Court ruled on April 3, 1990 that since attachment is an
ancillary remedy, the withdrawal of the complaint left it with no leg to stand on. Thus, the Court disposed of the case
as follows:
WHEREFORE, in view of the foregoing, this Court rules that the attached properties left in the custody of private
respondent Aboitiz and Company, Inc. be returned to petitioner Eleazar V. Adlawan without prejudice to the outcome
of the cases filed by both parties (Rollo, p. 324).
Respondent Aboitiz filed a motion for reconsideration of the decision, contending that the replevin case was distinct
and separate from the case where the writ of attachment was issued. It argued that the writ of replevin, therefore,
remained in force as the Third Division of the Supreme Court had not found it illegal. The motion was, however, denied
with finality in the Resolution of July 11, 1990.
Undaunted, respondent Aboitiz filed a second motion for reconsideration with a prayer that the dispositive portion of
the decision be clarified. It asserted that because the writ of preliminary attachment was different from the writ of
replevin, we should rule that the property subject of the latter writ should remain in custodia legis of the court issuing
the said writ.
In the Resolution dated September 10, 1990, the Third Division stated that "the properties to be returned to petitioner
are only those held by private respondent (Aboitiz) by virtue of the writ of attachment which has been declared nonexistent." Accordingly, the dispositive portion of the April 3, 1990 decision of the Third Division of this Court was
modified to read as follows:
WHEREFORE, in view of the foregoing, this Court rules that the properties in the custody of the private respondent
Aboitiz & Company by virtue of the writ of attachment issued in Civil Case No. R-21761 be returned to the petitioner,
but properties in the custody of the private respondent by virtue of the writ of replevin issued in Civil Case No. 619-L
be continued in custodia legis of said court pending litigation therein.
The Decision in G.R. No. 63225 having become final and executory, entry of judgment was made on November 15,
1990. This should have terminated the controversy between petitioners and respondent Aboitiz insofar as the
Supreme Court was concerned, but that was not to be. On September 9, 1983 respondent Aboitiz filed against
petitioners two complaints for collection of sums of money with prayers for the issuance of writs of attachment in the
Regional Trail Court, Branch 23, Cebu City, docketed as Civil Cases Nos. CEB-1185 and CEB-1186. The complaint in
Civil Case No. CEB-1185 alleged that petitioner Eleazar Adlawan (defendant therein) was awarded a contract for the
construction of the Tago Diversion Works for the Tago River Irrigation Project by the National Irrigation Administration
and that respondent Aboitiz (plaintiff therein) loaned him money and equipment, which indebtedness as of June 30,
1983 totaled P13,430,259.14. Paragraph 16 of the complaint states:
16.
That, in view of the enormous liabilities which the defendants have with the plaintiff, defendants executed a
real estate mortgage covering eleven (11) parcels of land in favor of Philippine Commercial and Industrial Bank (PCIB)
to secure a P1,000,000.00 loan with said bank and was able to remove, conceal and dispose of their properties,
obviously to defraud the plaintiff, . . . (Rollo, pp. 65-66).
The complaint in Civil Case No. CEB-1186 alleged that petitioner Eleazar Adlawan (defendant therein) was awarded a
contract for the construction of the Lasang River Irrigation Project by the National Irrigation Administration and that
respondent Aboitiz (plaintiff therein) loaned him money and equipment, which indebtedness as of June 30, 1983
totalled P5,370,672.08. Paragraph 15 of the complaint is similarly worded as paragraph 16 of the complaint in Civil
Case No. CEB-1185.
Civil Case No. CEB-1185 was raffled to the Regional Trial Court, Branch 6, presided by respondent Judge Ramon Am.
Torres. On September 14, 1983, respondent Judge ordered the issuance of a writ of attachment upon respondent
Aboitiz' filing of a bond of P5,000,000.00. Similarly, in Civil Case No. CEB-1186, which was raffled to Branch 23,
presiding Judge Emilio A. Jacinto ordered the issuance of a writ of attachment upon the filing of a bond of
P2,500,000.00. Accordingly, in Civil Case No. CEB-1185, the Acting Provincial Sheriff of Cebu issued separate writs
dated September 26, 1983 addressed to the Sheriffs of Cebu, Davao and Metro Manila. No writ of preliminary
attachment was, however, issued in Civil Case No. CEB-1186.
Petitioners then filed in Civil Cases Nos. CEB-1185 and CEB-1186 urgent motions to hold in abeyance the
enforcement of the writs of attachments. They alleged in the main that since their property had been previously

32

attached and said attachment was being questioned before the Supreme Court in G.R. No. 63225, the filing of the two
cases, as well as the issuance of the writs of attachment, constituted undue interference with the processes of this
court in the then pending petition involving the same property.
Upon motion of respondent Aboitiz, Branch 23 issued on October 13, 1983, an order directing the transfer to Branch 6
of Civil Case No. CEB-1186 for consolidation with Civil Case No. CEB-1185.
Meanwhile, in its comment on petitioners' motion to withhold the enforcement of the writs of attachment, respondent
Aboitiz alleged that the voluntary dismissal of Civil Case No. R-21761 under Section 1, Rule 17 of the Revised Rules
of Court was without prejudice to the institution of another action based on the same subject matter. It averred that the
issuance of the writ of attachment was justified because petitioners were intending to defraud respondent Aboitiz by
mortgaging 11 parcels of land to the Philippine Commercial and Industrial Bank (PCIB) in consideration of the loan of
P1,100,000.00, thereby making PCIB a preferred creditor to the prejudice of respondent Aboitiz, which had an
exposure amounting to P13,430,259.14.
Petitioners then filed a rejoinder to said comment, contending that since the property subject of the writ of attachment
have earlier been attached or replevied, the same property were under custodia legis and therefore could not be the
subject of other writs of attachment.
On December 12, 1983, respondent Judge issued an order finding no merit in petitioners' motion for reconsideration
and directing the sheriffs of Cebu, Davao and Metro Manila "to proceed with the enforcement and implementation of
the writs of preliminary attachment." Respondent Judge ruled that the writs of attachment were issued on the basis of
the supporting affidavits alleging that petitioner had removed or disposed of their property with intent to defraud
respondent Aboitiz (Rollo, pp. 109-113).
On December 15, petitioners filed an ex parte motion praying: (1) that the December 12, 1983 Order be set for
hearing; (2) that they be given 15 days within which to either file a motion for reconsideration or elevate the matter to
this Court or the then Intermediate Appellate Court; and (3) that within the same 15-day period the implementation or
enforcement of the writs of attachment be held in abeyance.
On the same day, respondent Judge issued an order holding in abeyance the enforcement of the writs of preliminary
attachment in order to afford petitioners an opportunity to seek their other remedies (Rollo, p. 116).
On December 27, petitioners filed the instant petition for certiorari and mandamus. They alleged that respondent
Judge gravely abused his discretion in ordering the issuance of the writs of preliminary attachment inasmuch as the
real estate mortgage executed by them in favor of PCIB did not constitute fraudulent removal, concealment or
disposition of property. They argued that granting the mortgage constituted removal or disposition of property, it was
not per se a ground for attachment lacking proof of intent to defraud the creditors of the defendant.
Petitioners contended that in Civil Case No. 21761, Branch 11 had ruled that the loan for which the mortgage was
executed was contracted in good faith, as it was necessary for them to continue their business operations even after
respondent Aboitiz had stopped giving them financial aid.
Petitioners also contended that respondent Judge exceeded his jurisdiction when he issued the Order of December
12, 1983, without first hearing the parties on the motion for attachment and the motion to dissolve the attachment.
Moreover, they argued that respondent Judge gravely abused his discretion in proceeding with the case,
notwithstanding that his attention had been called with regard to the pendency of G.R. No. 63225 in this Court.
As prayed for by petitioners, we issued a temporary restraining order on January 6, 1984 "enjoining the respondents
from enforcing or implementing the writs of preliminary attachment against the property of petitioners, all dated
September 26, 1983 and issued in Civil Cases Nos. CEB 1185 and 1186" (Rollo, p. 118).
II
The resolution of this case centers on the issue of the legality of the writ of attachment issued by respondent Judge in
the consolidated cases for collection of sums of money.
The affidavit submitted by respondent Aboitiz in support of its prayer for the writ of attachment does not meet the
requirements of Rule 57 of the Revised Rules of Court regarding the allegations on impending fraudulent removal,
concealment and disposition of defendant's property. As held in Carpio v. Macadaeg, 9 SCRA 552 (1963), to justify a
preliminary attachment, the removal or disposal must have been made with intent to defraud defendant's creditors.
Proof of fraud is mandated by paragraphs (d) and (e) of Section 1, Rule 57 of the Revised Rules of Court on the
grounds upon which attachment may issue. Thus, the factual basis on defendant's intent to defraud must be clearly

33

alleged in the affidavit in support of the prayer for the writ of attachment if not so specifically alleged in the verified
complaint. The affidavit submitted by respondent Aboitiz states:
REPUBLIC OF THE PHILIPPINES
CITY OF CEBU ...............) S.S.
I, ROMAN S. RONQUILLO, of legal age, married and a resident of Cebu City, after being sworn in accordance with
law, hereby depose and say:
That I am the Vice-President of the plaintiff corporation in the above-entitled case;
That a sufficient cause of action exists against the defendants named therein because the said defendants are
indebted to the plaintiffs in the amount of P13,430,259.14 exclusive of interests thereon and damages claimed;
That the defendants have removed or disposed of their properties with intent to defraud the plaintiff, their creditor,
because on May 27, 1982 they executed a real estate mortgage in favor of Philippine Commercial and Industrial Bank
(PCIB) covering eleven (11) of their fifteen (15) parcels of land in Cebu to secure a P1,000,000.00 loan with the same
bank;
That this action is one of those specifically mentioned in Section 1, Rule 57 of the Rules of Court, whereby a writ
preliminary attachment may lawfully issue because the action therein is one against parties who have removed or
disposed of their properties with intent to defraud their creditor, plaintiff herein;
That there is no sufficient security for the claims sought to be enforced by the present action;
That the total amount due to the plaintiff in the above-entitled case is P13,430,259.14, excluding interests and claim
for damages and is as much the sum for which an order of attachment is herein sought to be granted; above all legal
counter-claims on the part of the defendants.
IN VIEW WHEREOF, I hereunto set my hand this 24th day of August 1983 at Cebu City, Philippines.
(Sgd.)
RAMON S. RONQUILLO
Affiant
(Rollo, pp. 171-172)
It is evident from said affidavit that the prayer for attachment rests on the mortgage by petitioners of 11 parcels of land
in Cebu, which encumbrance respondent Aboitiz considered as fraudulent concealment of property to its prejudice.
We find, however, that there is no factual allegation which may constitute as a valid basis for the contention that the
mortgage was in fraud of respondent Aboitiz. As this Court said in Jardine-Manila Finance, Inc. v. Court of Appeals,
171 SCRA 636 (1989), "[T]he general rule is that the affidavit is the foundation of the writ, and if none be filed or one
be filed which wholly fails to set out some facts required by law to be stated therein, there is no jurisdiction and the
proceedings are null and void."
Bare allegation that an encumbrance of a property is in fraud of the creditor does not suffice. Factual bases for such
conclusion must be clearly averred.
The execution of a mortgage in favor of another creditor is not conceived by the Rules as one of the means of
fraudulently disposing of one's property. By mortgaging a piece of property, a debtor merely subjects it to a lien but
ownership thereof is not parted with.
Furthermore, the inability to pay one's creditors is not necessarily synonymous with fraudulent intent not to honor an
obligation (Insular Bank of Asia & America, Inc. v. Court of Appeals, 190 SCRA 629 [1990]).
Consequently, when petitioners filed a motion for the reconsideration of the order directing the issuance of the writ of
attachment, respondent Judge should have considered it as a motion for the discharge of the attachment and should
have conducted a hearing or required submission of counter-affidavits from the petitioners, if only to gather facts in
support of the allegation of fraud (Jopillo, Jr. v. Court of Appeals, 167 SCRA 247 [1988]). This is what Section 13 of
Rule 57 mandates.
This procedure should be followed because, as the Court has time and again said, attachment is a harsh,
extraordinary and summary remedy and the rules governing its issuance must be construed strictly against the
applicant. Verily, a writ of attachment can only be granted on concrete and specific grounds and not on general

34

averments quoting perfunctorily the words of the Rules (D.P. Lub Oil Marketing Center, Inc. v. Nicolas, 191 SCRA 423
[1990]).
The judge before whom the application is made exercises full discretion in considering the supporting evidence
proffered by the applicant. One overriding consideration is that a writ of attachment is substantially a writ of execution
except that it emanates at the beginning, instead of at the termination of the suit (Santos v. Aquino, Jr., 205 SCRA 127
[1992]; Tay Chun Suy v. Court of Appeals, 212 SCRA 713 [1992]).
We need not discuss the issue of whether or not Civil Cases Nos. CEB-1185 and CEB-1186 constituted undue
interference with the proceedings in G.R. No. 63225 in view of the entry of judgment in the latter case.
WHEREFORE, the petition is GRANTED and the Temporary Restraining Order issued on January 6, 1984 is made
PERMANENT. Respondent Judge or whoever is the presiding judge of the Regional Trial Court, Branch 6, Cebu City,
is DIRECTED to PROCEED with the resolution of Civil Cases Nos. CEB-1185 and CEB-1186 with deliberate dispatch.
SO ORDERED.

35

G.R. No. L-37682

November 26, 1932

CLAUDE NEON LIGHTS, FEDERAL INC., U. S. A., petitioner,

vs.
PHILIPPINE ADVERTISING CORPORATION and FRANCISCO SANTAMARIA, Judge of First Instance of Manila,
respondents.
Gibbs & McDonough for petitioner.
Courtney Whitney for respondents.

BUTTE, J.:
This case is to be determined upon the petition for writ of certiorari and the demurrer thereto filed by the respondents.
The petition sets up two causes of action: one attacking the validity of a writ of attachment issued by the respondent
judge on the petition and affidavit of the respondent Philippine Advertising Corporation, on April 6, 1932; the second,
attacking the validity of the order of the respondent judge issued the same day on the petition of the respondent
Philippine Advertising Corporation, appointing a receiver of the property which was seized by the sheriff under said
writ of attachment.
On April 5, 1932, the respondent Philippine Advertising Corporation filed suit against the petitioner in the Court of First
Instance of Manila, claiming P300,000 as damages for alleged breach of the agency contract existing between the
said respondent and the petitioner. At the same time, said respondent filed in said court an application for writ of
attachment duly verified in which it is stated that the defendant (petitioner herein) is a foreign corporation having its
principal place of business in the City of Washington, District of Columbia. It is not alleged in said application that the
defendant, Claude Neon Lights, Inc. (the petitioner herein) was about to depart from the Philippine Islands with intent
to defraud its creditors or that it was insolvent or had removed or disposed of its property or was about to do so with
intent to defraud its creditors. The only statutory ground relied upon in the court below and in this court for the
issuance of the writ of attachment against the petitioner is paragraph 2 of section 424 of the Code of Civil Procedure,
which provides that plaintiff may have the property of the defendant attached "in an action against a defendant not
residing in the Philippine Islands".
On April 6, 1932, the respondent judge issued the writ of attachment as prayed for, and the sheriff has attached all the
properties of the petitioner in the Philippine Islands. On the same date, on the ex parte petition and nomination of the
respondent, the respondent judge appointed Manuel C. Grey receiver of said properties of the petitioner, fixing his
bond at P3,000.
Motions to dissolve said writ of attachment and receivership were fled in the court below, supported by affidavits of the
attorney in fact for the petitioner in which it is recited, among other things, that the petitioner is not indebted to the
respondent in any sum whatever nor has it in any way breached any contracts with the respondent or at any time
interfered in the management of its business in the Philippine Islands as carried on by its agent, the respondent, and it
has faithfully complied with every condition of said contract; that the attachment of the machinery and plants of the
petitioner, as well as its other assets, is highly prejudicial to it as it is unable to proceed with its business in the
Philippine Islands and irreparable loss will result to it unless such attachment be raised; that the filing of said suit was
malicious, without foundation, and intended only to injure the petitioner and to depreciate the value of its holdings in
the Philippine Islands. It does not appear that any answer was made to said motion in which said allegations were
denied or that any refuting evidence was offered.
On June 20 1932, the court denied said motions to vacate the attachment and receivership, declaring that the writ of
attachment conforms to section 424 of the Code of Civil Procedure.
The petitioner for certiorari prays that the writ of attachment issued by the respondent judge on April 6, 1932, as well
as the order of the same date, appointing Manuel C. Grey receiver of the property of the petitioner, be annulled.
The sufficiency of the application for the writ of attachment assailed by the petitioner upon several grounds but we
shall confine ourselves to the consideration of the question whether or not paragraph 2 of section 424 of the Code of
Civil Procedure is applicable to this petitioner.
The petitioner is a corporation duly organized under the laws of the District of Columbia; it had complied with all the
requirements of the Philippine laws and the was duly licensed to do business in the Philippine Islands on the date said
writ of attachment was issues. The petitioner was actively engaged in doing business in the Philippine Islands and had
considerable property therein, which consisted to its manufacturing plant, machinery, merchandise and a large income
under valuable contracts, all of which property was in the possession and under the control and management of the

36

respondent Philippine Advertising Corporation, as the agent of the petitioner, on the date said attachment was levied.
Considered from a practical and economic viewpoint, its position in the business community was indistinguishable
from that of a domestic corporation.
Section 242 of the Code of Civil Procedure under which the petitioner's property was attached, reads as follows:
Attachment. A plaintiff may, at the commencement of his action, or at any time afterwards, have the property of the
defendant attached as security for the satisfaction of any judgment that may be recovered, unless the defendant gives
security to pay such judgment, in the manner hereinafter provided, in the following cases.
1. In all the cases mentioned in section four hundred and twelve, providing for the arrest of a defendant. But the
plaintiff must make an election as to whether he will ask for an order of arrest or an order of attachment; he shall not
be entitled to both orders;
2. In an action against a defendant not residing in the Philippine Islands.
It may be observed at the outset that the words of section 424, supra, taken in their literal sense seem to refer to a
physical defendant who is capable of being "arrested" or who is "not residing in the Philippine Islands". It is only by a
fiction that it can be held that a corporation is "not residing in the Philippine Islands". A corporation has no home or
residence in the sense in which those terms are applied to natural persons. For practical purposes, a corporation is
sometimes said, in a metaphorical sense, to be "a resident" of a certain state or a "citizen" of a certain country, which
is usually the state or country by which or under the laws of which it was created. But that fiction or analogy between
corporations and natural persons by no means extends so far that it can be said that every statute applicable to
natural persons is applicable to corporations. Indeed, within the same jurisdiction a corporation has been held to be a
"citizen" of the state of its creation for the purpose of determining the jurisdiction of the Federal courts (Wisconsin vs.
Pelican Insurance Co., 127 U. S., 265) but not a "citizen" within the meaning of section 2 of article 4 of the Constitution
of the United States which provides that the citizens of each state shall be entitled to all the privileges and immunities
of citizens of the several states (Paul vs. Virginia, 8 Wall., 169).
The question arises whether this petitioner, a foreign corporation, shall, in a metaphorical sense, be deemed as "not
residing in the Philippine Islands" in the sense in which that expression would apply to a natural person.
Having regard to the reason for the statute which is the protection of the creditors of a non-resident, we are of the
opinion that there is not the same reason for subjecting a duly licensed foreign corporation to the attachment of its
property by a plaintiff under section 424, paragraph 2, as may exist in the case of a natural person not residing in the
Philippine Islands. The law does not require the latter, as it does the former, to appoint a resident agent for service of
process; nor to prove to the satisfaction of the Government before he does business here, as the foreign corporation
must prove, that he "is solvent and in sound financial condition" (section 68, Act No. 1459, as amended, the
Corporation Law), or to produce evidence of "fair dealing" (ibid.). He pays no license fee nor is his business subject at
any time to investigation by the Secretary of Finance and the Governor-General; nor is his right to continue to do
business revocable by the Government (Cf. section 71, Act No. 1459 of the Corporation Law). His books and papers
are not liable to examination "at any time" by the Attorney-General, the Insular Auditor, the Insular Treasurer, "or any
other officer of the Government" on the order of the Governor-General (section 54, ibid.). He is not, like a foreign
corporation "bound by all laws, rules and regulations applicable to domestic corporations" . . . (section 73, ibid.), which
are designed to protect creditors and the public. He can evade service of summons and other legal process, the
foreign corporation never. (Section 72, ibid.)
Corporations, as a rule, are less mobile than individuals. This is a specially true of foreign corporations that are
carrying on business by proper authority in these Islands. They possess, as a rule, great capital which is seeking
lucrative and more or less permanent investment in young and developing countries like our Philippines. Some of
them came here as far back as the Spanish regime and are still important factors in our financial and industrial life.
They are anything but "fly-by-night" concerns. The latter, we believe, are effectually excluded from our Islands both by
our laws and by our geographical and economic situation.
If, as we believe, section 424, paragraph 2, should not be held applicable to foreign corporations duly licensed to do
business in the Philippine Islands both because the language and the reason of the statute limit it to natural persons,
we sustain and reinforce the provisions of section 71 of the Corporation Law, Act No. 1459, which provides in
substance that if the Secretary of Finance or the Secretary of Commerce and Communications and the GovernorGeneral find a duly licensed foreign corporation to be insolvent or that its continuance in business will involve probable
loss to its creditors, they may revoke its license and "the Attorney-General shall take such proceedings as may be
proper to protect creditors and the public". Section 71, supra, contemplates that the proceedings instituted by the
Attorney-General shall effect the protection of all creditors and the public equally. Obviously, the benefit of that section
will be minimized, if not entirely defeated, if a creditor or a few creditors can obtain privileged liens by writs of

37

attachment based on the sole allegation, which is easily and safely made, that the corporation is "not residing in the
Philippine Islands". (Cf. Kuenzle & Streiff vs. Villanueva, 41 Phil., 611.)lawphil.net
Paragraph 2 of section 424, supra does not apply to a domestic corporation. Our laws and jurisprudence indicate a
purpose to assimilate foreign corporations, duly licensed to do business here, to the status of domestic corporations.
(Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil., 70, 76; Yu Cong Eng vs.
Trinidad, 47 Phil., 385, 411.) We think it would be entirely out of line with this policy should we make a discrimination
against a foreign corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment
when it has complied not only with every requirement of law made especially of foreign corporations, but in addition
with every requirement of law made of domestic corporations. (Section 73, supra.)
It is true that the majority of the states in the American Union hold the contrary rule. But our situation is obviously very
dissimilar from that of a state in the American Union. There forty-eight states and the central government, all creating
corporations which do a tremendous interstate business, are contiguous and separated by imaginary lines. A higher
degree of protection against irresponsible corporations may be more necessary there than here. We have no
interstate business. Only the central government grants charters to corporations. But even in the American Union
there is a minority rule which we regard as the better reasoned and the better suited to our conditions, both
geographical and economical, and more nearly in harmony with the policy of our law both under the Spanish regime
and since the American occupation. This minority rule is supported by the following authorities: Brand vs. Auto Service
Co. (New Jersey, 1907), 67 Atl., 19, 20; Mellor vs. Edward V. Hartford, Inc. (New Jersey, 1929), 146 Atl., 206; Charles
Friend & Co. vs. Gold Smith & Co. (Illinois, 1923), 138 N. E., 185; Fullilove vs. Central State Bank (Louisiana, 1926),
107 So., 590.
In the present instance, a particularly monstrous result has followed as s consequence of the granting of the writ
attaching all of the property of the petitioner on the sole allegation that it "is not residing in the Philippine Islands". As
the petitioner's business was a going concern, which the sheriff, who levied the writ, obviously could not manage, it
became necessary on the same day for the court to appoint a receiver. This receiver, as the demurrer admits, "was
and is an employee working under the president of the respondent Philippine Advertising Corporation, so that to all
intents and purposes, all the property of the petitioner in the Philippine Islands was seized and delivered into the
hands of the respondent Philippine Advertising Corporation."
The prayer of the petitioner is granted. The order and writ of attachment complained of are annulled and set aside and
the court below is directed to vacate the order appointing Manuel C. Grey receiver of the property of the petitioner and
to require said Manuel C. Grey to submit his final report at the earliest practicable date. Costs in both instances to be
borne by the respondent, Philippine Advertising Corporation. So ordered.

38

G.R. Nos. 79926-27

October 17, 1991

STATE INVESTMENT HOUSE, INC. and STATE FINANCING CENTER, INC., petitioners,
vs.
CITIBANK, N.A., BANK OF AMERICA, NT & SA, HONGKONG & SHANGHAI BANKING CORPORATION, and the
COURT OF APPEALS, respondents.
Roco, Bunag, Kapunan & Migallos for petitioners.
Agcaoili & Associates for Citibank, N.A, and Bank of America NT & SA.
Belo, Abiera & Associates for Hongkong & Shanghai Banking Corp.

NARVASA, J.:p
The chief question in the appeal at bar is whether or not foreign banks licensed to do business in the Philippines, may
be considered "residents of the Philippine Islands" within the meaning of Section 20 of the Insolvency Law (Act No.
1956, as amended, eff. May 20, 1909) reading in part as follows: 1
An adjudication of insolvency may be made on the petition of three or more creditors, residents of the Philippine
Islands, whose credits or demands accrued in the Philippine Islands, and the amount of which credits or demands are
in the aggregate not less than one thousand pesos: Provided, that none of said creditors has become a creditor by
assignment, however made, within thirty days prior to the filing of said petition. Such petition must be filed in the Court
of First Instance of the province or city in which the debtor resides or has his principal place of business, and must be
verified by at least three (3) of the petitioners. . . .
The foreign banks involved in the controversy are Bank of America NT and SA, Citibank N.A. and Hongkong and
Shanghai Banking Corporation. On December 11, 1981, they jointly filed with the Court of First Instance of Rizal a
petition for involuntary insolvency of Consolidated Mines, Inc. (CMI), which they amended four days later. 2 The case
was docketed as Sp. Proc. No. 9263 and assigned to Branch 28 of the Court.
The petition for involuntary insolvency alleged:
1)
that CMI had obtained loans from the three petitioning banks, and that as of November/December, 1981, its
outstanding obligations were as follows:
a)

In favor of Bank of America (BA) P15,297,367.67

(as of December 10, 1981)

US$ 4,175,831.88

(b)

US$ 4,920,548.85

In favor of Citibank

(as of December 10, 1981)

c)

In favor of Hongkong & Shanghai Bank US$ 5,389,434.12

(as of November 30, 1981);

P6,233,969.24

2)
that in November, 1981, State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI) had
separately instituted actions for collection of sums of money and damages in the Court of First Instance of Rizal
against CMI, docketed respectively as Civil Cases Numbered 43588 and 43677; and that on application of said
plaintiffs, writs of preliminary attachment had been issued which were executed on "the royalty/profit sharing payments
due CMI from Benguet Consolidated Mining, Inc;" and
3)

that CMI had "committed specific acts of insolvency as provided in Section 20 of the Insolvency Law, to wit:

xxx

xxx

xxx

5.
that he (CMI) has suffered his (CMI's) property to remain under attachment or legal process for three days for
the purpose of hindering or delaying or defrauding his (CMI's) creditors;
xxx

xxx

xxx

39

11.
that being a merchant or tradesman he (CMI) has generally defaulted in the payment of his (CMI's) current
obligations for a period of thirty days; . . .
The petition was opposed by State Investment House, Inc. (SIHI) and State Financing Center, Inc. (SFCI). 3 It claimed
that:
1)
the three petitioner banks had come to court with unclean hands in that they filed the petition for insolvency
alleging the CMI was defrauding its creditors, and they wished all creditors to share in its assets although a few
days earlier, they had "received for the account of CMI substantial payments aggregating P10,800,000.00;"
2)
the Court had no jurisdiction because the alleged acts of insolvency were false: the writs of attachment
against CMI had remained in force because there were "just, valid and lawful grounds for the(ir) issuance," and CMI
was not a "merchant or tradesman" nor had it "generally defaulted in the payment of (its) obligations for a period of
thirty days . . . ;"
3)
the Court had no jurisdiction to take cognizance of the petition for insolvency because petitioners are not
resident creditors of CMI in contemplation of the Insolvency Law; and
4)

the Court has no power to set aside the attachment issued in favor of intervenors-oppositors SIHI and SFCI.

CMI filed its Answer to the petition for insolvency, asserting in the main that it was not insolvent, 4 and later filed a
"Motion to Dismiss Based on Affirmative Defense of Petitioner's Lack of Capacity to Sue," echoing the theory of SIHI
and SFCI that the petitioner banks are not "Philippine residents." 5 Resolution on the motion was "deferred until after
hearing of the case on the merits" it appearing to the Court that the grounds therefor did not appear to be indubitable.
6
SIHI and SFCI filed their own Answer-in-Intervention, 7 and served on the three petitioner banks requests for
admission of certain facts in accordance with Rule 26 of the Rules of Court, 8 receiving a response only from
Hongkong & Shanghai Bank. 9
SIHI and SFCI then filed a Motion for Summary Judgment dated May 23, 1983 "on the ground that, based on the
pleadings and admissions on record, the trial court had no jurisdiction to adjudicate CMI insolvent since the petitioners
(respondent foreign banks) are not "resident creditors" of CMI as required under the Insolvency Law." 10 Oppositions
to the motion were filed, 11 to which a reply was submitted. 12
The Regional Trial Court 13 found merit in the motion for summary judgment. By Order dated October 10, 1983, it
rendered "summary judgment dismissing the . . . petition for lack of jurisdiction over the subject matter, with costs
against petitioners." 14 It ruled that on the basis of the "facts on record, as shown in the pleadings, motions and
admissions of the parties, an insolvency court could "not acquire jurisdiction to adjudicate the debtor as insolvent if the
creditors petitioning for adjudication of insolvency are not "residents" of the Philippines" citing a decision of the
California Supreme Court which it declared "squarely applicable especially considering that one of the sources of our
Insolvency Law is the Insolvency Act of California of 1895 . . . " And it declared that since petitioners had been merely
licensed to do business in the Philippines, they could not be deemed residents thereof.
The three foreign banks sought to take an appeal from the Order of October 10, 1983. They filed a notice of appeal
and a record on appeal. 15 SIHI and SFCI moved to dismiss their appeal claiming it was attempted out of time. The
Trial Court denied the motion.
SIHI and SFCI filed with this Court a petition for certiorari and prohibition (G.R. NO. 66449), impugning that denial.
The Court dismissed the petition and instead required the three banks to file a petition for review in accordance with
Rule 45 of the Rules of Court. 16 This the banks did (their petition was docketed as G.R. No. 66804). However, by
Resolution dated May 16, 1984, the court referred the petition for review to the Intermediate Appellate Court, where it
was docketed as AC SP-03674. 17
In the meantime, the Trial Court approved on May 3, 1985 the banks' record on appeal and transmitted it to this Court,
where it was recorded as UDK-6866. As might have been expected, this Court required the banks to file a petition for
review under Rule 45, but they asked to be excused from doing so since they had already filed such a petition, which
had been referred to the Intermediate Appellate Court and was there pending as AC-G.R. No. SP 03674, supra. This
Court then also referred UDK-6866 to the Intermediate Appellate Court where it was docketed as AC-G.R. No. CV
07830.

40

Both referred cases, AC-G.R. No. SP 03674 and AC-G.R. No. CV 07830, were consolidated by Resolution of the
Court of Appeals dated April 9, 1986, and Decision thereon was promulgated on July 14, 1987 by the Fifteenth
Division of said Court. 18
The Appellate Court reversed the Trial Court's Order of October 10, 1983 and remanded the case to it for further
proceedings. It ruled:
1)
that the purpose of the Insolvency Law was "to convert the assets of the bankrupt in cash for distribution
among creditors, and then to relieve the honest debtor from the weight of oppressive indebtedness and permit him to
start life anew, free from the obligations and responsibilities consequent upon business misfortunes;" 19 and that it
was "crystal clear" that the law was "designed not only for the benefit of the creditors but more importantly for the
benefit of the debtor himself," the object being "to provide not only for the suspension of payments and the protection
of creditors but also the discharge of insolvent honest debtors to enable them to have a fresh start;"
2)
that the Trial Court had placed "a very strained and restrictive interpretation of the term "resident," as to
exclude foreign banks which have been operating in this country since the early part of the century," and "the better
approach . . . would have been to harmonize the provisions . . . (of the Insolvency Law) with similar provisions of other
succeeding laws, like the Corporation Code of the Philippines, the General Banking Act, the Offshore Banking Law
and the National Internal Revenue Code in connection with or related to their doing business in the Philippines;"
3)
that in light of said statutes, the three banks "are in truth and in fact considered as "residents" of the
Philippines for purposes of doing business in the Philippines and even for taxation matters;"
4)
that the banks had "complied with all the laws, rules and regulations (for doing business in the country) and
have been doing business in the Philippines for many years now;" that the authority granted to them by the Securities
and Exchange Commission upon orders of the Monetary Board "covers not only transacting banking business . . . but
likewise maintaining suits "for recovery of any debt, claims or demand whatsoever," and that their petition for
involuntary insolvency was "nothing more than a suit aimed at recovering a debt granted by them to Consolidated
Mines, Inc., or at least a portion thereof;"
4)
that to deprive the foreign banks of their right to proceed against their debtors through insolvency proceedings
would "contravene the basic standards of equity and fair play, . . . would discourage their operations in economic
development projects that create not only jobs for our people but also opportunities for advancement as a nation;" and
5)
that the terms "residence" and "domicile" do not mean the same thing, and that as regards a corporation, it is
generally deemed an "inhabitant" of the state under whose law it is incorporated, and has a "residence" wherever it
conducts its ordinary business, and may have its legal "domicile" in one place and "residence" in another.
SIHI and SFCI moved for reconsideration and then, when rebuffed, took an appeal to this Court. Here, they argue that
the Appellate Court's judgment should be reversed because it failed to declare that
1)
the failure of the three foreign banks to allege under oath in their petition for involuntary insolvency that they
are Philippine residents, wishing only to "be considered Philippine residents," is fatal to their cause;
2)
also fatal to their cause is their failure to prove, much less allege, that under the domiciliary laws of the foreign
banks, a Philippine corporation is allowed the reciprocal right to petition for a debtor's involuntary insolvency;
3)

in fact and in law, the three banks are not Philippine residents because:

a)
corporations have domicile and residence only in the state of their incorporation or in the place designated by
law, although for limited and exclusive purposes, other states may consider them as residents;
b)

juridical persons may not have residence separate from their domicile;

4)
laws;

actually, the non-resident status of the banks within the context of the Insolvency Law is confirmed by other

5)

the license granted to the banks to do business in the Philippines does not make them residents;

6)
no substantive law explicitly grants foreign banks the power to petition for the adjudication of the Philippine
corporation as a bankrupt;

41

7)
the Monetary Board can not appoint a conservator or receiver for a foreign bank or orders its liquidation
having only the power to revoke its license, subject to such proceedings as the Solicitor General may thereafter deem
proper to protect its creditors;
8)
the foreign banks are not denied the right to collect their credits against Philippine debtors, only the right to
"petition for the harsh remedy of involuntary insolvency" not being conceded to them;
9)
said banks have come to court with unclean hands, their filing of the petition for involuntary insolvency being
an attempt to defeat validly acquired rights of domestic corporations.
The concept of a foreign corporation under Section 123 of the Corporation Code is of "one formed, organized or
existing under laws other than those of the Philippines and . . . (which) laws allow Filipino citizens and corporations to
do business . . . ." There is no question that the three banks are foreign corporations in this sence, with principal
offices situated outside of the Philippines. There is no question either that said banks have been licensed to do
business in this country and have in fact been doing business here for many years, through branch offices or
agencies, including "foreign currency deposit units;" in fact, one of them, Hongkong & Shanghai Bank has been doing
business in the Philippines since as early as 1875.
The issue is whether these Philippine branches or units may be considered "residents of the Philippine Islands" as
that term is used in Section 20 of the Insolvency Law, supra, 20 or residents of the state under the laws of which they
were respectively incorporated. The answer cannot be found in the Insolvency Law itself, which contains no definition
of the term, resident, or any clear indication of its meaning. There are however other statutes, albeit of subsequent
enactment and effectivity, from which enlightening notions of the term may be derived.
The National Internal Revenue Code declares that the term "'resident foreign corporation' applies to a foreign
corporation engaged in trade or business within the Philippines," as distinguished from a " "non-resident foreign
corporation" . . . (which is one) not engaged in trade or business within the Philippines." 21
The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries, affiliation, extension
offices or any other units of corporation or juridical person organized under the laws of any foreign country operating in
the Philippines shall be considered residents of the Philippines." 22
The General Banking Act, Republic Act No. 337, places "branches and agencies in the Philippines of foreign banks . . .
(which are) called Philippine branches," in the same category as "commercial banks, savings associations, mortgage
banks, development banks, rural banks, stock savings and loan associations" (which have been formed and organized
under Philippine laws), making no distinction between the former and the later in so far, as the terms "banking
institutions" and "bank" are used in the Act, 23 declaring on the contrary that in "all matters not specifically covered by
special provisions applicable only to foreign banks, or their branches and agencies in the Philippines, said foreign
banks or their branches and agencies lawfully doing business in the Philippines "shall be bound by all laws, rules, and
regulations applicable to domestic banking corporations of the same class, except such laws, rules and regulations as
provided for the creation, formation, organization, or dissolution of corporations or as fix the relation, liabilities,
responsibilities, or duties of members, stockholders or officers or corporations." 24
This Court itself has already had occasion to hold 25 that a foreign corporation licitly doing business in the Philippines,
which is a defendant in a civil suit, may not be considered a non-resident within the scope of the legal provision
authorizing attachment against a defendant not residing in the Philippine Islands;" 26 in other words, a preliminary
attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign corporation
authorized to do business in the Philippines and is consequently and necessarily, "a party who resides out of the
Philippines." Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who
resides out of the country, then, logically, it must be considered a party who does reside in the Philippines, who is a
resident of the country. Be this as it may, this Court pointed out that:
. . . Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business
here, to the status of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser
& Co., 46 Phil. 70, 76; Yu; Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be entirely out of line with this
policy should we make a discrimination against a foreign corporation, like the petitioner, and subject its property to the
harsh writ of seizure by attachment when it has complied not only with every requirement of law made specially of
foreign corporations, but in addition with every requirement of law made of domestic corporations. . . . .
Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the status of
domestic corporations," subsumes their being found and operating as corporations, hence, residing, in the country.
The same principle is recognized in American law: that the "residence of a corporation, if it can be said to have a
residence, is necessarily where it exercises corporate functions . . . ;" that it is .considered as dwelling "in the place

42

where its business is done . . . ," as being "located where its franchises are exercised . . . ," and as being "present
where it is engaged in the prosecution of the corporate enterprise;" that a "foreign corporation licensed to do business
in a state is a resident of any country where it maintains an office or agent for transaction of its usual and customary
business for venue purposes;" and that the "necessary element in its signification is locality of existence." 27 Courts
have held that "a domestic corporation is regarded as having a residence within the state at any place where it is
engaged in the particulars of the corporate enterprise, and not only at its chief place or home office;" 28 that "a
corporation may be domiciled in one state and resident in another; its legal domicil in the state of its creation presents
no impediment to its residence in a real and practical sense in the state of its business activities." 29
The foregoing propositions are in accord with the dictionary concept of residence as applied to juridical persons, a
term which appears to comprehend permanent as well as temporary residence.
The Court cannot thus accept the petitioners' theory that corporations may not have a residence (i.e., the place where
they operate and transact business) separate from their domicile (i.e., the state of their formation or organization), and
that they may be considered by other states as residents only for limited and exclusive purposes. Of course, as
petitioners correctly aver, it is not really the grant of a license to a foreign corporation to do business in this country
that makes it a resident; the license merely gives legitimacy to its doing business here. What effectively makes such a
foreign corporation a resident corporation in the Philippines is its actually being in the Philippines and licitly doing
business here, "locality of existence" being, to repeat, the "necessary element in . . . (the) signification" of the term,
resident corporation.
Neither can the Court accept the theory that the omission by the banks in their petition for involuntary insolvency of an
explicit and categorical statement that they are "residents of the Philippine Islands," is fatal to their cause. In truth, in
light of the concept of resident foreign corporations just expounded, when they alleged in that petition that they are
foreign banking corporations, licensed to do business in the Philippines, and actually doing business in this Country
through branch offices or agencies, they were in effect stating that they are resident foreign corporations in the
Philippines.
There is, of course, as petitioners argue, no substantive law explicitly granting foreign banks the power to petition for
the adjudication of a Philippine corporation as a bankrupt. This is inconsequential, for neither is there any legal
provision expressly giving domestic banks the same power, although their capacity to petition for insolvency can
scarcely be disputed and is not in truth disputed by petitioners. The law plainly grants to a juridical person, whether it
be a bank or not or it be a foreign or domestic corporation, as to natural persons as well, such a power to petition for
the adjudication of bankruptcy of any person, natural or juridical, provided that it is a resident corporation and joins at
least two other residents in presenting the petition to the Bankruptcy Court.
The petitioners next argue that "Philippine law is emphatic that only foreign corporations whose own laws give
Philippine nationals reciprocal rights may do business in the Philippines." As basis for the argument they invoke
Section 123 of the Corporation Code which, however, does not formulate the proposition in the same way. Section 123
does not say, as petitioners assert, that it is required that the laws under which foreign corporations are formed "give
Philippine nationals, reciprocal rights." What it does say is that the laws of the country or state under which a foreign
corporation is "formed, organized or existing . . . allow Filipino citizens and corporations to do business in its own
country or state," which is not quite the same thing. Now, it seems to the Court that there can be no serious debate
about the fact that the laws of the countries under which the three (3) respondent banks were formed or organized
(Hongkong and the United States) do "allow Filipino citizens and corporations to do business" in their own territory and
jurisdiction. It also seems to the Court quite apparent that the Insolvency Law contains no requirement that the laws of
the state under which a foreign corporation has been formed or organized should grant reciprocal rights to Philippine
citizens to apply for involuntary insolvency of a resident or citizen thereof. The petitioners' point is thus not well taken
and need not be belabored.
That the Monetary Board can not appoint a conservator or receiver for a foreign bank or order its liquidation having
only the power to revoke its license, subject to such proceedings as the Solicitor General may thereafter deem proper
to protect its creditors, which is another point that petitioners seek to make, is of no moment. It has no logical
connection to the matter of whether or not the foreign bank may properly ask for a judicial declaration of the
involuntary insolvency of a domestic corporation, which is the issue at hand. The fact is, in any event, that the law is
not lacking in sanctions against foreign banks or powerless to protect the latter's creditors.
The petitioners contend, too, that the respondent banks have come to court with unclean hands, their filing of the
petition for involuntary insolvency being an attempt to defeat validly acquired rights of domestic corporations. The
Court wishes to simply point out that the effects of the institution of bankruptcy proceedings on all the creditors of the
alleged bankrupt are clearly spelled out by the law, and will be observed by the Insolvency Court regardless of
whatever motives apart from the desire to share in the assets of the insolvent in satisfying its credits that the
party instituting the proceedings might have.

43

Still another argument put forth by the petitioners is that the three banks' failure to incorporate their branches in the
Philippines into new banks in accordance with said Section 68 of the General Banking Act connotes an intention on
their part to continue as residents of their respective states of incorporation and not to be regarded as residents of the
Philippines. The argument is based on an incomplete and inaccurate quotation of the cited Section. What Section 68
required of a "foreign bank presently having branches and agencies in the Philippines, . . . within one year from the
effectivity" of the General Banking Act, was to comply with any of three (3) options, not merely with one sole
requirement. These three (3) options are the following:
1)
(that singled out and quoted by the petitioners, i.e.:) "incorporate its branch or branches into a new bank in
accordance with Philippine laws . . . ; or
2) "assign capital permanently to the local branch with the concurrent maintenance of a 'net due to' head office
account which shall include all net amounts due to other branches outside the Philippines in an amount which when
added to the assigned capital shall at all times be not less than the minimum amount of capital accounts required for
domestic commercial banks under section twenty-two of this Act;" or
3)
"maintain a "net due to" head office account which shall include all net amounts due to other branches outside
the Philippines, in an amount which shall not be less than the minimum amount of capital accounts required for
domestic commercial banks under section twenty-two of this Act."
The less said about this argument then, the better.
The petitioners allege that three days before respondent banks filed their petition for involuntary insolvency against
CMI, they received from the latter substantial payments on account in the aggregate amount of P6,010,800.00, with
the result that they were "preferred in the distribution of CMI's assets thereby defrauding other creditors of CMI." Non
sequitur. It is in any case a circumstance that the Bankruptcy Court may well take into consideration in determining the
manner and proportion by which the assets of the insolvent company shall be distributed among its creditors; but it
should not be considered a ground for giving the petition for insolvency short shrift. Moreover, the payment adverted to
does not appear to be all that large. The total liabilities of CMI to the three respondent banks as of December, 1981
was P21,531,336.91, and US$14,485,814.85. Converted into Philippine currency at the rate of P7.899 to the dollar,
the average rate of exchange during December, 1981, 30 the dollar account would be P114,423,451.50. Thus, the
aggregate liabilities of CMI to the banks, expressed in Philippine currency, was P135,954,788.41 as of December,
1981, and therefore the payment to them of P6,010,800.00 constituted only some 4.42% of the total indebtedness.
WHEREFORE, the petition is DENIED and the challenged Decision of the Court of Appeals is AFFIRMED in toto, with
costs against the petitioners.
SO ORDERED.

44

G.R. No. L-825

July 20, 1948

ROMAN MABANAG, plaintiff-appellant,

vs.
JOSEPH M. GALLEMORE, defendant-appellee.
Santiago Catane for appellant.
No appearance for appellee.
TUASON, J.:
This case, here on appeal from an order dismissal by the Court of First Instance of Occidental Misamis, raises the
question of the court's jurisdiction. More specifically, the question is whether the action is in personam or one in rem.
The trial court opined that it is the first and that it "has no authority nor jurisdiction to render judgment against the
herein defendant, Joseph M. Gallemore for being a non-resident.
The purpose of the action is to recover P735.18, an amount said to have been paid by the plaintiff to the defendant for
two parcels of land whose sale was afterward annulled. The defendant is said to be residing in Los Angeles,
California, U. S. A. He has no property in the Philippine except an alleged debt owing him by a resident of the
municipality of Occidental Misamis. This debt, upon petition of the plaintiff, after the filing of the complaint and before
the suit was dismissed, was attached to the extent of plaintiff's claim for the payment of which the action was brought.
But the attachment was dissolved in the same order dismissing the case.
It was Atty. Valeriano S. Kaamino who has amicus curi filed the motion to dismiss and to set aside the attachment.
There is no appearance before this Court to oppose the appeal.
Section 2, Rule 5, of the Rules of Court provides:
If any of the defendants does not reside and is not found in the Philippines, and the action effects the personal status
of the plaintiff, or any property of the defendant located in the Philippines, the action may be commenced and tried in
the province where the plaintiff resides or the property, or any portion thereof, is situated or found.
The Philippine leading cases in which this Rule, or its counterpart in the former Code of Civil Procedure, section 377
and 395, were cited and applied, are Banco Espaol-Filipino vs. Palanca, 37 Phil. 921, and Slade Perkins vs. Dizon,
40 Off. Gaz., [3d Suppl.], No. 7, p. 216. The gist of this Court's ruling in these cases, in so far as it is relevant to the
present issues, is given in I Moran's Comments on the Rules of Court, 2d Ed., 105:
As a general rule, when the defendant is not residing and is not found in the Philippines, the Philippine courts cannot
try any case against him because of the impossibility of acquiring jurisdiction over his person, unless he voluntarily
appears in court. But, when the action affects the personal status of the plaintiff residing in the Philippines, or is
intended to seize or dispose of any property, real or personal, of the defendant, located in the Philippines, it may be
validly tried by the Philippine courts, for then, they have jurisdiction over the res, i.e., the personal status of the plaintiff
or the property of the defendant, and their jurisdiction over the person of the non-resident defendant is not essential.
Venue in such cases may be laid in the province where the plaintiff whose personal status is in question resides, or
where the property of the defendant or a part thereof involved in the litigation is located.
Literally this Court said:
Jurisdiction over the property which is the subject of litigation may result either from a seizure of the property under
legal process, whereby it is brought into the actual custody of the law, or it may result from the institution of legal
proceedings wherein, under special provisions of law, the power of the court over the property is recognized and made
effective. In the latter case the property, though at all times within the potential power of the court, may never be taken
into actual custody at all. An illustration of the jurisdiction acquired by actual seizure is found in attachment
proceedings, where the property is seized at the beginning of the action, or some subsequent stage of its progress,
and held to abide the final event of the litigation. An illustration of what we term potential jurisdiction over the res, is
found in the proceeding to register the title of land under our system for the registration of land. Here the court, without
taking actual physical control over the property assumes, at the instance of some person claiming to be owner, to
exercise a jurisdiction in rem over the property and to adjudicate the title in favor of the petitioner against all the world.
(Banco Espaol-Filipino vs. Palanca, supra, 927-928.).
In an ordinary attachment proceeding, if the defendant is not personally served, the preliminary seizure is to be
considered necessary in order to confer jurisdiction upon the court. In this case the lien on the property is acquired by
the seizure; and the purpose of the proceeding is to subject the property to that lien. If a lien already exists, whether
created by mortgage, contract, or statute, the preliminary seizure is not necessary; and the court proceeds to enforce

45

such lien in the manner provided by law precisely as though the property had been seized upon attachment. (Roller
vs. Holly, 176 U.S., 398, 405; 44 Law. ed., 520.) It results that the mere circumstance that in an attachment the
property may be seized at the inception of the proceedings, while in the foreclosure suit it is not taken into legal
custody until the time comes for the sale, does not materially affect the fundamental principle involved in both cases,
which is that the court is here exercising a jurisdiction over the property in a proceeding directed essentially in rem.
(Id., 929-930.).
When, however, the action relates to property located in the Philippines, the Philippine courts may validly try the case,
upon the principles that a "State, through its tribunals, may subject property situated within its limit owned by nonresidents to the payment of the demand of its own citizens against them; and the exercise of this jurisdiction in no
respect infringes upon the sovereignty of the State were the owners are domiciled. Every State owes protection to its
own citizens; and, when non-residents deal with them, it is a legitimate and just exercise of authority to hold any
appropriate any property owned by such non-residents to satisfy the claims of its citizens. It is in virtue of the State's
jurisdiction over the property of the non-resident situated within its limits that its tribunals can inquire into the nonresident's obligations to its own citizens, and the inquiry can then be carried only to the extent necessary to control
disposition of the property. If the non-resident has no property in the State, there is nothing upon which the tribunals
can adjudicate. (Slade Perkins vs. Dizon, 40 Off. Gaz. [3d Supplement], No. 7, p. 216.).
A fuller statement of the principle whereunder attachment or garnishment of property of a non-resident defendant
confers jurisdiction on the court in an otherwise personal action, appears in two well known and authoritative works:
The main action in an attachment or garnishment suit is in rem until jurisdiction of the defendant is secured.
Thereafter, it is in personam and also in rem, unless jurisdiction of the res is lost as by dissolution of the attachment. If
jurisdiction of the defendant is acquired but jurisdiction of the res is lost, it is then purely in personam. . . a proceeding
against property without jurisdiction of the person of the defendant is in substance a proceeding in rem; and where
there is jurisdiction of the defendant, but the proceedings against the property continues, that proceedings is none the
less necessarily in rem, although in form there is but a single proceeding. (4 Am. Jur., 556-557.)
As the remedy is administered in some states, the theory of an attachment, whether it is by process against or to
subject the property or effects of a resident or non-resident of the state, is that it partakes essentially of the nature and
character of the proceeding in personam and not of a proceeding in rem. And if the defendant appears the action
proceeds in accordance with the practice governing proceedings in personam. But were the defendant fails to appear
in the action, the proceeding is to be considered as one in the nature of a proceeding in rem. And where the court acts
directly on the property, the title thereof being charged by the court without the intervention of the party, the proceeding
unquestionably is one in rem in the fullest meaning of the term.
In attachment proceedings against a non-resident defendant where personal service on him is lacking, it is elementary
that the court must obtain jurisdiction of the property of the defendant. If no steps have been taken to acquire
jurisdiction of the defendant's person, and he has not appeared and answered or otherwise submitted himself to the
jurisdiction of the court, the court is without jurisdiction to render judgment until there has been a lawful seizure of
property owned by him within the jurisdiction of the court. (2 R. C. L., 800-804.).
Tested by the foregoing decisions and authorities, the Court has acquired jurisdiction of the case at bar by virtue of the
attachment of the defendant's credit. Those authorities and decisions, so plain and comprehensive as to make any
discussion unnecessary, are in agreement that though no jurisdiction is obtained over the debtor's person, the case
may proceed to judgment if there is property in the custody of the court that can be applied to its satisfaction.
It is our judgment that the court below erred in dismissing the case and dissolving the attachment; and it is ordered
that, upon petition of the plaintiff, it issue a new writ of attachment and then proceed to trial. The costs of this appeal
will be charged to defendant and appellee.

46

G.R. No. 115678

February 23, 2001

PHILIPPINES BANK OF COMMUNICATIONS, petitioner,

vs.
HON. COURT OF APPEALS and BERNARDINO VILLANUEVA, respondents.
x ---------------------------------------- x
G.R. No. 119723

February 23, 2001

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

vs.
HON. COURT OF APPEALS and FILIPINAS TEXTILE MILLS, INC., respondents.
YNARES-SANTIAGO, J.:
Before us are consolidated petitions for review both filed by Philippine Bank of Communications; one against the May
24, 1994 Decision of respondent Court of Appeals in CA-G.R. SP No. 328631 and the other against its March 31,
1995 Decision in CA-G.R. SP No. 32762.2 Both Decisions set aside and nullified the August 11, 1993 Order3 of the
Regional Trial Court of Manila, Branch 7, granting the issuance of a writ of preliminary attachment in Civil Case No.
91-56711.
The case commenced with the filing by petitioner, on April 8, 1991, of a Complaint against private respondent
Bernardino Villanueva, private respondent Filipinas Textile Mills and one Sochi Villanueva (now deceased) before the
Regional Trial Court of Manila. In the said Complaint, petitioner sought the payment of P2,244,926.30 representing the
proceeds or value of various textile goods, the purchase of which was covered by irrevocable letters of credit and trust
receipts executed by petitioner with private respondent Filipinas Textile Mills as obligor; which, in turn, were covered
by surety agreements executed by private respondent Bernardino Villanueva and Sochi Villanueva. In their Answer,
private respondents admitted the existence of the surety agreements and trust receipts but countered that they had
already made payments on the amount demanded and that the interest and other charges imposed by petitioner were
onerous.
On May 31, 1993, petitioner filed a Motion for Attachment,4 contending that violation of the trust receipts law
constitutes estafa, thus providing ground for the issuance of a writ of preliminary attachment; specifically under
paragraphs "b" and "d," Section 1, Rule 57 of the Revised Rules of Court. Petitioner further claimed that attachment
was necessary since private respondents were disposing of their properties to its detriment as a creditor. Finally,
petitioner offered to post a bond for the issuance of such writ of attachment.
The Motion was duly opposed by private respondents and, after the filing of a Reply thereto by petitioner, the lower
court issued its August 11, 1993 Order for the issuance of a writ of preliminary attachment, conditioned upon the filing
of an attachment bond. Following the denial of the Motion for Reconsideration filed by private respondent Filipinas
Textile Mills, both private respondents filed separate petitions for certiorari before respondent Court assailing the order
granting the writ of preliminary attachment.1wphi1.nt
Both petitions were granted, albeit on different grounds. In CA-G.R. SP No. 32762, respondent Court of Appeals ruled
that the lower court was guilty of grave abuse of discretion in not conducting a hearing on the application for a writ of
preliminary attachment and not requiring petitioner to substantiate its allegations of fraud, embezzlement or
misappropriation. On the other hand, in CA-G.R. SP No. 32863, respondent Court of Appeals found that the grounds
cited by petitioner in its Motion do not provide sufficient basis for the issuance of a writ of preliminary attachment, they
being mere general averments. Respondent Court of appeals held that neither embezzlement, misappropriation nor
incipient fraud may be presumed; they must be established in order for a writ of preliminary attachment to issue.
Hence, the instant consolidated5 petitions charging that respondent Court of Appeals erred in
"1. Holding that there was no sufficient basis for the issuance of the writ of preliminary attachment in spite of the
allegations of fraud, embezzlement and misappropriation of the proceeds or goods entrusted to the private
respondents;
2. Disregarding the fact that the failure of FTMI and Villanueva to remit the proceeds or return the goods entrusted, in
violation of private respondents' fiduciary duty as entrustee, constitute embezzlement or misappropriation which is a
valid ground for the issuance of a writ of preliminary attachment."6
We find no merit in the instant petitions.

47

To begin with, we are in accord with respondent Court of Appeals in CA-G.R. SP No. 32863 that the Motion for
Attachment filed by petitioner and its supporting affidavit did not sufficiently establish the grounds relied upon in
applying for the writ of preliminary attachment.
The Motion for Attachment of petitioner states that
1. The instant case is based on the failure of defendants as entrustee to pay or remit the proceeds of the goods
entrusted by plaintiff to defendant as evidenced by the trust receipts (Annexes "B", "C" and "D" of the complaint), nor
to return the goods entrusted thereto, in violation of their fiduciary duty as agent or entrustee;
2. Under Section 13 of P.D. 115, as amended, violation of the trust receipt law constitute(s) estafa (fraud and/or deceit)
punishable under Article 315 par. 1[b] of the Revised Penal Code;
3. On account of the foregoing, there exist(s) valid ground for the issuance of a writ of preliminary attachment under
Section 1 of Rule 57 of the Revised Rules of Court particularly under sub-paragraphs "b" and "d", i.e. for
embezzlement or fraudulent misapplication or conversion of money (proceeds) or property (goods entrusted) by an
agent (entrustee) in violation of his fiduciary duty as such, and against a party who has been guilty of fraud in
contracting or incurring the debt or obligation;
4. The issuance of a writ of preliminary attachment is likewise urgently necessary as there exist(s) no sufficient
security for the satisfaction of any judgment that may be rendered against the defendants as the latter appears to
have disposed of their properties to the detriment of the creditors like the herein plaintiff;
5. Herein plaintiff is willing to post a bond in the amount fixed by this Honorable Court as a condition to the issuance of
a writ of preliminary attachment against the properties of the defendants.
Section 1 (b) and (d), Rule 57 of the then controlling Revised Rules of Court, provides, to wit
SECTION 1. Grounds upon which attachment may issue. A plaintiff or any proper party may, at the commencement
of the action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction
of any judgment that may be recovered in the following cases:
xxx

xxx

xxx

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

xxx

xxx

(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;
xxx

xxx

xxx

While the Motion refers to the transaction complained of as involving trust receipts, the violation of the terms of which
is qualified by law as constituting estafa, it does not follow that a writ of attachment can and should automatically
issue. Petitioner cannot merely cite Section 1(b) and (d), Rule 57, of the Revised Rules of Court, as mere reproduction
of the rules, without more, cannot serve as good ground for issuing a writ of attachment. An order of attachment
cannot be issued on a general averment, such as one ceremoniously quoting from a pertinent rule.7
The supporting Affidavit is even less instructive. It merely states, as follows
I, DOMINGO S. AURE, of legal age, married, with address at No. 214-216 Juan Luna Street, Binondo, Manila, after
having been sworn in accordance with law, do hereby depose and say, THAT:
1.
I am the Assistant Manager for Central Collection Units Acquired Assets Section of the plaintiff, Philippine Bank
of Communications, and as such I have caused the preparation of the above motion for issuance of a writ of
preliminary attachment;
2.

I have read and understood its contents which are true and correct of my own knowledge;

3.

There exist(s) sufficient cause of action against the defendants in the instant case;

48

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

49

nature. If all the requisites for the granting of the writ are not present, then the court which issues it acts in excess of
its jurisdiction.12
WHEREFORE, for the foregoing reasons, the instant petitions are DENIED. The decision of the Court of Appeals in
CA-G.R. SP No. 32863 and CA-G.R. SP No. 32762 are AFFIRMED. No pronouncement as to costs.1wphi1.nt
SO ORDERED.

50

G.R. No. 175587

September 21, 2007

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner,

vs.
JOSEPH ANTHONY M. ALEJANDRO, Respondent.
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the May 31, 2006 Decision1 of the Court of Appeals in CA-G.R. CV No. 78200 affirming
the August 30, 2000 Decision2 of the Regional Trial Court of Makati, which granted respondent Joseph Anthony M.
Alejandros claim for damages arising from petitioner Philippine Commercial International Banks (PCIB) invalid
garnishment of respondents deposits.
On October 23, 1997, petitioner filed against respondent a complaint3 for sum of money with prayer for the issuance
of a writ of preliminary attachment. Said complaint alleged that on September 10, 1997, respondent, a resident of
Hong Kong, executed in favor of petitioner a promissory note obligating himself to pay P249,828,588.90 plus interest.
In view of the fluctuations in the foreign exchange rates which resulted in the insufficiency of the deposits assigned by
respondent as security for the loan, petitioner requested the latter to put up additional security for the loan.
Respondent, however, sought a reconsideration of said request pointing out petitioners alleged mishandling of his
account due to its failure to carry out his instruction to close his account as early as April 1997, when the prevailing
rate of exchange of the US Dollar to Japanese yen was US$1.00:JPY127.50.4 It appears that the amount of
P249,828,588.90 was the consolidated amount of a series of yen loans granted by petitioner to respondent during the
months of February and April 1997.5
In praying for the issuance of a writ of preliminary attachment under Section 1 paragraphs (e) and (f) of Rule 57 of the
Rules of Court, petitioner alleged that (1) respondent fraudulently withdrew his unassigned deposits notwithstanding
his verbal promise to PCIB Assistant Vice President Corazon B. Nepomuceno not to withdraw the same prior to their
assignment as security for the loan; and (2) that respondent is not a resident of the Philippines. The application for the
issuance of a writ was supported with the affidavit of Nepomuceno.6
On October 24, 1997, the trial court granted the application and issued the writ ex parte7 after petitioner posted a
bond in the amount of P18,798,734.69, issued by Prudential Guarantee & Assurance Inc., under Bond No. HO-4676497. On the same date, the bank deposits of respondent with Rizal Commercial Banking Corporation (RCBC) were
garnished. On October 27, 1997, respondent, through counsel, filed a manifestation informing the court that he is
voluntarily submitting to its jurisdiction.8
Subsequently, respondent filed a motion to quash9 the writ contending that the withdrawal of his unassigned deposits
was not fraudulent as it was approved by petitioner. He also alleged that petitioner knew that he maintains a
permanent residence at Calle Victoria, Ciudad Regina, Batasan Hills, Quezon City, and an office address in Makati
City at the Law Firm Romulo Mabanta Buenaventura Sayoc & De los Angeles, 10 where he is a partner. In both
addresses, petitioner regularly communicated with him through its representatives. Respondent added that he is the
managing partner of the Hong Kong branch of said Law Firm; that his stay in Hong Kong is only temporary; and that
he frequently travels back to the Philippines.
On December 24, 1997, the trial court issued an order quashing the writ and holding that the withdrawal of
respondents unassigned deposits was not intended to defraud petitioner. It also found that the representatives of
petitioner personally transacted with respondent through his home address in Quezon City and/or his office in Makati
City. It thus concluded that petitioner misrepresented and suppressed the facts regarding respondents residence
considering that it has personal and official knowledge that for purposes of service of summons, respondents
residence and office addresses are located in the Philippines. The dispositive portion of the courts decision is as
follows:
WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby GRANTED, and the ORDER of 24
October 1997 is hereby RECONSIDERED and SET ASIDE and the WRIT OF attachment of the same is hereby
DISCHARGED.
SO ORDERED.11
With the denial12 of petitioners motion for reconsideration, it elevated the case to the Court of Appeals (CA-G.R. SP
No. 50748) via a petition for certiorari. On May 10, 1999, the petition was dismissed for failure to prove that the trial
court abused its discretion in issuing the aforesaid order.13 Petitioner filed a motion for reconsideration but was
denied on October 28, 1999.14 On petition with this Court, the case was dismissed for late filing in a minute resolution

51

(G.R. No. 140605) dated January 19, 2000.15 Petitioner filed a motion for reconsideration but was likewise denied
with finality on March 6, 2000.16
Meanwhile, on May 20, 1998, respondent filed a claim for damages in the amount of P25 Million17 on the attachment
bond (posted by Prudential Guarantee & Assurance, Inc., under JCL(4) No. 01081, Bond No. HO-46764-97) on
account of the wrongful garnishment of his deposits. He presented evidence showing that his P150,000.00 RCBC
check payable to his counsel as attorneys fees, was dishonored by reason of the garnishment of his deposits. He also
testified that he is a graduate of the Ateneo de Manila University in 1982 with a double degree of Economics and
Management Engineering and of the University of the Philippines in 1987 with the degree of Bachelor of Laws.
Respondent likewise presented witnesses to prove that he is a well known lawyer in the business community both in
the Philippines and in Hong Kong.18 For its part, the lone witness presented by petitioner was Nepomuceno who
claimed that she acted in good faith in alleging that respondent is a resident of Hong Kong.19
On August 30, 2000, the trial court awarded damages to respondent in the amount of P25 Million without specifying
the basis thereof, thus:
WHEREFORE, premises above considered, and defendant having duly established his claim in the amount of
P25,000,000.00, judgment is hereby rendered ordering Prudential Guarantee & [Assurance] Co., which is solidarily
liable with plaintiff to pay defendant the full amount of bond under Prudential Guarantee & Assurance, Inc. JCL(4) No.
01081, [Bond No. HO-46764-97], dated 24 October 1997 in the amount of P18,798,734.69. And, considering that the
amount of the bond is insufficient to fully satisfy the award for damages, plaintiff is hereby ordered to pay defendant
the amount of P6,201,265.31.
SO ORDERED.20
The trial court denied petitioners motion for reconsideration on October 24, 2000.21
Petitioner elevated the case to the Court of Appeals which affirmed the findings of the trial court. It held that in claiming
that respondent was not a resident of the Philippines, petitioner cannot be said to have been in good faith considering
that its knowledge of respondents Philippine residence and office address goes into the very issue of the trial courts
jurisdiction which would have been defective had respondent not voluntarily appeared before it.
The Court of Appeals, however, reduced the amount of damages awarded to petitioner and specified their basis. The
dispositive portion of the decision of the Court of Appeals states:
WHEREFORE, the appeal is PARTIALLY GRANTED and the decision appealed from is hereby MODIFIED. The
award of damages in the amount of P25,000,000.00 is deleted. In lieu thereof, Prudential Guarantee & [Assurance,
Inc.], which is solidarily liable with appellant [herein petitioner], is ORDERED to pay appellee [herein respondent]
P2,000,000.00 as nominal damages; P5,000,000.00 as moral damages; and P1,000,000.00 as attorneys fees, to be
satisfied against the attachment bond under Prudential Guarantee & Assurance, Inc. JCL (4) No. 01081.
SO ORDERED.22
Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals denied petitioners motion for
reconsideration but granted that of respondents by ordering petitioner to pay additional P5Million as exemplary
damages.23
Hence, the instant petition.
At the outset, it must be noted that the ruling of the trial court that petitioner is not entitled to a writ of attachment
because respondent is a resident of the Philippines and that his act of withdrawing his deposits with petitioner was
without intent to defraud, can no longer be passed upon by this Court. More importantly, the conclusions of the court
that petitioner bank misrepresented that respondent was residing out of the Philippines and suppressed the fact that
respondent has a permanent residence in Metro Manila where he may be served with summons, are now beyond the
power of this Court to review having been the subject of a final and executory order. Said findings were sustained by
the Court of Appeals in CA-G.R. SP No. 50784 and by this Court in G.R. No. 140605. The rule on conclusiveness of
judgment, which obtains under the premises, precludes the relitigation of a particular fact or issue in another action
between the same parties even if based on a different claim or cause of action. The judgment in the prior action
operates as estoppel as to those matters in issue or points controverted, upon the determination of which the finding
or judgment was rendered. The previous judgment is conclusive in the second case, as to those matters actually and
directly controverted and determined.24 Hence, the issues of misrepresentation by petitioner and the residence of
respondent for purposes of service of summons can no longer be questioned by petitioner in this case.

52

The core issue for resolution is whether petitioner bank is liable for damages for the improper issuance of the writ of
attachment against respondent.
We rule in the affirmative.
Notwithstanding the final judgment that petitioner is guilty of misrepresentation and suppression of a material fact, the
latter contends that it acted in good faith. Petitioner also contends that even if respondent is considered a resident of
the Philippines, attachment is still proper under Section 1, paragraph (f), Rule 57 of the Rules of Court since he
(respondent) is a resident who is temporarily out of the Philippines upon whom service of summons may be effected
by publication.
Petitioners contentions are without merit.
While the final order of the trial court which quashed the writ did not categorically use the word "bad faith" in
characterizing the representations of petitioner, the tenor of said order evidently considers the latter to have acted in
bad faith by resorting to a deliberate strategy to mislead the court. Thus
In the hearings of the motion, and oral arguments of counsels before the Court, it appears that plaintiff BANK through
its contracting officers Vice President Corazon B. Nepomuceno and Executive Vice President Jose Ramon F. Revilla,
personally transacted with defendant mainly through defendants permanent residence in METRO-MANILA, either in
defendants home address in Quezon City or his main business address at the Romulo Mabanta Buenaventura Sayoc
& Delos Angeles in MAKATI and while at times follow ups were made through defendants temporary home and
business addresses in Hongkong. It is therefore clear that plaintiff could not deny their personal and official knowledge
that defendants permanent and official residence for purposes of service of summons is in the Philippines. In fact, this
finding is further confirmed by the letter of Mr. JOHN GOKONGWEI, JR. Chairman, Executive Committee of plaintiff
BANK, in his letter dated 6 October 1997 on the subject loan to defendant of the same law firm was addressed to the
ROMULO LAW FIRM in MAKATI.
[Anent the] second ground of attachment x x x [t]he Court finds that the amount withdrawn was not part of defendants
peso deposits assigned with the bank to secure the loan and as proof that the withdrawal was not intended to defraud
plaintiff as creditor is that plaintiff approved and allowed said withdrawals. It is even noted that when the Court granted
the prayer for attachment it was mainly on the first ground under Section 1(f) of Rule 57 of the 1997 Rules of Civil
Procedure, that defendant resides out of the Philippines.
On the above findings, it is obvious that plaintiff already knew from the beginning the deficiency of its second ground
for attachment [i.e.,] disposing properties with intent to defraud his creditors, and therefore plaintiff had to resort to this
misrepresentation that defendant was residing out of the Philippines and suppressed the fact that defendants
permanent residence is in METRO MANILA where he could be served with summons.
On the above findings, and mainly on the misrepresentations made by plaintiff on the grounds for the issuance of the
attachment in the verified complaint, the Court concludes that defendant has duly proven its grounds in the MOTION
and that plaintiff is not entitled to the attachment.25
Petitioner is therefore barred by the principle of conclusiveness of judgment from again invoking good faith in the
application for the issuance of the writ. Similarly, in the case of Hanil Development Co., Ltd. v. Court of Appeals,26 the
Court debunked the claim of good faith by a party who maliciously sought the issuance of a writ of attachment, the bad
faith of said party having been previously determined in a final decision which voided the assailed writ. Thus
Apropos the Application for Judgment on the Attachment Bond, Escobar claims in its petition that the award of
attorneys fees and injunction bond premium in favor of Hanil is [contrary] to law and jurisprudence. It contends that no
malice or bad faith may be imputed to it in procuring the writ.
Escobars protestation is now too late in the day. The question of the illegality of the attachment and Escobars bad
faith in obtaining it has long been settled in one of the earlier incidents of this case. The Court of Appeals, in its
decision rendered on February 3, 1983 in C.A.-G.R. No. SP-14512, voided the challenged writ, having been issued
with grave abuse of discretion. Escobars bad faith in procuring the writ cannot be doubted. Its Petition for the
Issuance of Preliminary Attachment made such damning allegations that: Hanil was already able to secure a complete
release of its final collection from the MPWH; it has moved out some of its heavy equipments for unknown destination,
and it may leave the country anytime. Worse, its Ex Parte Motion to Resolve Petition alleged that "after personal
verification by (Escobar) of (Hanils) equipment in Cagayan de Oro City, it appears that the equipments were no longer
existing from their compound." All these allegations of Escobar were found to be totally baseless and untrue.
Even assuming that the trial court did not make a categorical pronouncement of misrepresentation and suppression of
material facts on the part of petitioner, the factual backdrop of this case does not support petitioners claim of good

53

faith. The facts and circumstances omitted are highly material and relevant to the grant or denial of writ of attachment
applied for.
Finally, there is no merit in petitioners contention that respondent can be considered a resident who is temporarily out
of the Philippines upon whom service of summons may be effected by publication, and therefore qualifies as among
those against whom a writ of attachment may be issued under Section 1, paragraph (f), Rule 57 of the Rules of Court
which provides:
(f) In an action against a party x x x on whom summons may be served by publication.
In so arguing, petitioner attempts to give the impression that although it erroneously invoked the ground that
respondent does not reside in the Philippines, it should not be made to pay damages because it is in fact entitled to a
writ of attachment had it invoked the proper ground under Rule 57. However, even on this alternative ground,
petitioner is still not entitled to the issuance of a writ of attachment.
The circumstances under which a writ of preliminary attachment may be issued are set forth in Section 1, Rule 57 of
the Rules of Court, to wit:
SEC. 1. Grounds upon which attachment may issue. At the commencement of the action or at any time before
entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for
the satisfaction of any judgment that may be recovered in the following cases:
(a) In an action for the recovery of a specified amount of money or damages, other than moral and exemplary, on a
cause of action arising from law, contract, quasi-contract, delict or quasi-delict against a party who is about to depart
from the Philippines with intent to defraud his creditors;
(b) In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public
officer, or an officer of a corporation or an attorney, factor, broker, agent, or clerk, in the course of his employment as
such, or by any other person in a fiduciary capacity, or for a willful violation of duty;
(c) In an action to recover the possession of personal property unjustly or fraudulently taken, detained, or converted,
when the property, or any part thereof, has been concealed, removed, or disposed of to prevent its being found or
taken by the applicant or an authorized person;
(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon
which the action is brought, or in the performance thereof;
(e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to
defraud his creditors;
(f) In an action against a party who resides out of the Philippines, or on whom summons may be served by publication.
The purposes of preliminary attachment are: (1) to seize the property of the debtor in advance of final judgment and to
hold it for purposes of satisfying said judgment, as in the grounds stated in paragraphs (a) to (e) of Section 1, Rule 57
of the Rules of Court; or (2) to acquire jurisdiction over the action by actual or constructive seizure of the property in
those instances where personal or substituted service of summons on the defendant cannot be effected, as in
paragraph (f) of the same provision.27
Corollarily, in actions in personam, such as the instant case for collection of sum of money,28 summons must be
served by personal or substituted service, otherwise the court will not acquire jurisdiction over the defendant. In case
the defendant does not reside and is not found in the Philippines (and hence personal and substituted service cannot
be effected), the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is to convert the
action into a proceeding in rem or quasi in rem by attaching the property of the defendant.29 Thus, in order to acquire
jurisdiction in actions in personam where defendant resides out of and is not found in the Philippines, it becomes a
matter of course for the court to convert the action into a proceeding in rem or quasi in rem by attaching the
defendants property. The service of summons in this case (which may be by publication coupled with the sending by
registered mail of the copy of the summons and the court order to the last known address of the defendant), is no
longer for the purpose of acquiring jurisdiction but for compliance with the requirements of due process.30
However, where the defendant is a resident who is temporarily out of the Philippines, attachment of his/her property in
an action in personam, is not always necessary in order for the court to acquire jurisdiction to hear the case.
Section 16, Rule 14 of the Rules of Court reads:

54

Sec. 16. Residents temporarily out of the Philippines. When an action is commenced against a defendant who
ordinarily resides within the Philippines, but who is temporarily out of it, service may, by leave of court, be also effected
out of the Philippines, as under the preceding section.
The preceding section referred to in the above provision is Section 15 which provides for extraterritorial service (a)
personal service out of the Philippines, (b) publication coupled with the sending by registered mail of the copy of the
summons and the court order to the last known address of the defendant; or (c) in any other manner which the court
may deem sufficient.
In Montalban v. Maximo,31 however, the Court held that substituted service of summons (under the present Section 7,
Rule 14 of the Rules of Court) is the normal mode of service of summons that will confer jurisdiction on the court over
the person of residents temporarily out of the Philippines. Meaning, service of summons may be effected by (a)
leaving copies of the summons at the defendants residence with some person of suitable discretion residing therein,
or (b) by leaving copies at the defendants office or regular place of business with some competent person in charge
thereof.32 Hence, the court may acquire jurisdiction over an action in personam by mere substituted service without
need of attaching the property of the defendant.
The rationale in providing for substituted service as the normal mode of service for residents temporarily out of the
Philippines, was expounded in Montalban v. Maximo,33 in this wise:
A man temporarily absent from this country leaves a definite place of residence, a dwelling where he lives, a local
base, so to speak, to which any inquiry about him may be directed and where he is bound to return. Where one
temporarily absents himself, he leaves his affairs in the hands of one who may be reasonably expected to act in his
place and stead; to do all that is necessary to protect his interests; and to communicate with him from time to time any
incident of importance that may affect him or his business or his affairs. It is usual for such a man to leave at his home
or with his business associates information as to where he may be contacted in the event a question that affects him
crops up.
Thus, in actions in personam against residents temporarily out of the Philippines, the court need not always attach the
defendants property in order to have authority to try the case. Where the plaintiff seeks to attach the defendants
property and to resort to the concomitant service of summons by publication, the same must be with prior leave,
precisely because, if the sole purpose of the attachment is for the court to acquire jurisdiction, the latter must
determine whether from the allegations in the complaint, substituted service (to persons of suitable discretion at the
defendants residence or to a competent person in charge of his office or regular place of business) will suffice, or
whether there is a need to attach the property of the defendant and resort to service of summons by publication in
order for the court to acquire jurisdiction over the case and to comply with the requirements of due process.
In the instant case, it must be stressed that the writ was issued by the trial court mainly on the representation of
petitioner that respondent is not a resident of the Philippines.34 Obviously, the trial courts issuance of the writ was for
the sole purpose of acquiring jurisdiction to hear and decide the case. Had the allegations in the complaint disclosed
that respondent has a residence in Quezon City and an office in Makati City, the trial court, if only for the purpose of
acquiring jurisdiction, could have served summons by substituted service on the said addresses, instead of attaching
the property of the defendant. The rules on the application of a writ of attachment must be strictly construed in favor of
the defendant. For attachment is harsh, extraordinary, and summary in nature; it is a rigorous remedy which exposes
the debtor to humiliation and annoyance.35 It should be resorted to only when necessary and as a last remedy.
It is clear from the foregoing that even on the allegation that respondent is a resident temporarily out of the
Philippines, petitioner is still not entitled to a writ of attachment because the trial court could acquire jurisdiction over
the case by substituted service instead of attaching the property of the defendant. The misrepresentation of petitioner
that respondent does not reside in the Philippines and its omission of his local addresses was thus a deliberate move
to ensure that the application for the writ will be granted.
In light of the foregoing, the Court of Appeals properly sustained the finding of the trial court that petitioner is liable for
damages for the wrongful issuance of a writ of attachment against respondent.
Anent the actual damages, the Court of Appeals is correct in not awarding the same inasmuch as the respondent
failed to establish the amount garnished by petitioner. It is a well settled rule that one who has been injured by a
wrongful attachment can recover damages for the actual loss resulting therefrom. But for such losses to be
recoverable, they must constitute actual damages duly established by competent proofs, which are, however, wanting
in the present case.36
Nevertheless, nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the
defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss
suffered by him. Its award is thus not for the purpose of indemnification for a loss but for the recognition and

55

vindication of a right. Indeed, nominal damages are damages in name only and not in fact.37 They are recoverable
where some injury has been done but the pecuniary value of the damage is not shown by evidence and are thus
subject to the discretion of the court according to the circumstances of the case.38
In this case, the award of nominal damages is proper considering that the right of respondent to use his money has
been violated by its garnishment. The amount of nominal damages must, however, be reduced from P2 million to
P50,000.00 considering the short period of 2 months during which the writ was in effect as well as the lack of evidence
as to the amount garnished.1wphi1
Likewise, the award of attorneys fees is proper when a party is compelled to incur expenses to lift a wrongfully issued
writ of attachment. The basis of the award thereof is also the amount of money garnished, and the length of time
respondents have been deprived of the use of their money by reason of the wrongful attachment.39 It may also be
based upon (1) the amount and the character of the services rendered; (2) the labor, time and trouble involved; (3) the
nature and importance of the litigation and business in which the services were rendered; (4) the responsibility
imposed; (5) the amount of money and the value of the property affected by the controversy or involved in the
employment; (6) the skill and the experience called for in the performance of the services; (7) the professional
character and the social standing of the attorney; (8) the results secured, it being a recognized rule that an attorney
may properly charge a much larger fee when it is contingent than when it is not.40
All the aforementioned weighed, and considering the short period of time it took to have the writ lifted, the favorable
decisions of the courts below, the absence of evidence as to the professional character and the social standing of the
attorney handling the case and the amount garnished, the award of attorneys fees should be fixed not at P1 Million,
but only at P200,000.00.
The courts below correctly awarded moral damages on account of petitioners misrepresentation and bad faith;
however, we find the award in the amount of P5 Million excessive. Moral damages are to be fixed upon the discretion
of the court taking into consideration the educational, social and financial standing of the parties.41 Moral damages
are not intended to enrich a complainant at the expense of a defendant.42 They are awarded only to enable the
injured party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has
undergone, by reason of petitioners culpable action. Moral damages must be commensurate with the loss or injury
suffered. Hence, the award of moral damages is reduced to P500,000.00.
Considering petitioners bad faith in securing the writ of attachment, we sustain the award of exemplary damages by
way of example or correction for public good. This should deter parties in litigations from resorting to baseless and
preposterous allegations to obtain writs of attachments. While as a general rule, the liability on the attachment bond is
limited to actual (or in some cases, temperate or nominal) damages, exemplary damages may be recovered where
the attachment was established to be maliciously sued out.43 Nevertheless, the award of exemplary damages in this
case should be reduced from P5M to P500,000.00.
Finally, contrary to the claim of petitioner, the instant case for damages by reason of the invalid issuance of the writ,
survives the dismissal of the main case for sum of money. Suffice it to state that the claim for damages arising from
such wrongful attachment may arise and be decided separately from the merits of the main action.44
WHEREFORE, the petition is PARTIALLY GRANTED. The May 31, 2006 Decision of the Court of Appeals in CA-G.R.
CV No. 78200 is AFFIRMED with MODIFICATIONS. As modified, petitioner Philippine Commercial International Bank
is ordered to pay respondent Joseph Anthony M. Alejandro the following amounts: P50,000.00 as nominal damages,
P200,000.00 as attorneys fees; and P500,000.00 as moral damages, and P500,000.00 as exemplary damages, to be
satisfied against the attachment bond issued by Prudential Guarantee & Assurance Inc.,45 under JCL (4) No. 01081,
Bond No. HO-46764-97.
No pronouncement as to costs.
SO ORDERED.

56

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 Resolution2 denying
the motion for reconsideration thereof.
The facts are undisputed. Petitioner Alejandro Ng Wee, a valued client of Westmont Bank (now United Overseas
Bank), made several money placements totaling P210,595,991.62 with the bank's affiliate, Westmont Investment
Corporation (Wincorp), a domestic entity engaged in the business of an investment house with the authority and
license to extend credit.3
Sometime in February 2000, petitioner received disturbing news on Wincorp's financial condition prompting him to
inquire about and investigate the company's operations and transactions with its borrowers. He then discovered that
the company extended a loan equal to his total money placement to a corporation [Power Merge] with a subscribed
capital of 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.9 The writ
was, consequently, issued on November 6, 2000.10
Arguing that the writ was improperly issued and that the bond furnished was grossly insufficient, respondent, on
December 22, 2000, moved for the discharge of the attachment.11 The other defendants likewise filed similar
motions.12 On October 23, 2001, the RTC, in an Omnibus Order,13 denied all the motions for the discharge of the
attachment. The defendants, including respondent herein, filed their respective motions for reconsideration14 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 UEMMARA Philippines Corporation (UEM-MARA), assailed the same via certiorari under Rule 65 before the CA [docketed
as CA-G.R. SP No. 74610]. The appellate court, however, denied the certiorari petition on August 21, 2003,16 and the
motion for reconsideration thereof on March 16, 2004.17 In a petition for review on certiorari before this Court, in G.R.
No. 162928, we denied the petition and affirmed the CA rulings on May 19, 2004 for Virata's and UEM-MARA's failure
to sufficiently show that the appellate court committed any reversible error.18 We subsequently denied the petition
with finality on August 23, 2004.19
On September 30, 2004, respondent filed before the trial court another Motion to Discharge Attachment,20 re-pleading
the grounds he raised in his first motion but raising the following additional grounds: (1) that he was not present in
Wincorp's board meetings approving the questionable transactions;21 and (2) that he could not have connived with
Wincorp and the other defendants because he and Pearlbank Securities, Inc., in which he is a major stockholder, filed
cases against the company as they were also victimized by its fraudulent schemes.22

57

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 CAG.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:

58

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.

59

SO ORDERED.

60

G.R. No. 84034 December 22, 1988

ALBERTO SIEVERT, petitioner,
vs.
COURT OF APPEALS, HON. JUDGE ARTEMON D. LUNA and AURELIO CAMPOSANO, respondents.
King & Adorio Law Offices for petitioner.
Moises C. Kallos for private respondent.

FELICIANO, J.:
On 18 May 1988 petitioner Alberto Sievert a citizen and resident of the Philippines received by mail a Petition for
Issuance of a Preliminary Attachment filed with the Regional Trial Court of Manila Branch 32 in Civil Case No. 8844346. Petitioner had not previously received any summons and any copy of a complaint against him in Civil Case No.
88-44346.
On the day set for hearing of the Petition for a Preliminary Writ of Attachment, petitioner's counsel went before the trial
court and entered a special appearance for the limited purpose of objecting to the jurisdiction of the court. He
simultaneously filed a written objection to the jurisdiction of the trial court to hear or act upon the Petition for Issuance
of a Preliminary Writ of Attachment. In this written objection, petitioner prayed for denial of that Petition for lack of
jurisdiction over the person of the petitioner (defendant therein) upon the ground that since no summons had been
served upon him in the main case, no jurisdiction over the person of the petitioner had been acquired by the trial court.
The trial court denied the petitioner's objection and issued in open court an order which, in relevant part, read as
follows:
Under Section 1, Rule 57, Rules of Court, it is clear that a plaintiff or any proper party may "... at the commencement
of the action or at any time thereafter, have the property of the adverse party attached as the security for the
satisfaction of any judgment ..." This rule would overrule the contention that this Court has no jurisdiction to act on the
application, although if counsel for defendant so desire, she is given five (5) days from today within which to submit
her further position why the writ should not be issued, upon the receipt of which or expiration of the period, the
pending incident shall be considered submitted for resolution. (Underscoring in the original) 1
Thereupon, on the same day, petitioner filed a Petition for certiorari with the Court of Appeals. On 13 July 1988, the
respondent appellate court rendered a decision, notable principally for its brevity, dismissing the Petition. The relevant
portion of the Court of Appeals' decision is quoted below:
The grounds raised in this petition state that the court a quo had not acquired jurisdiction over defendant (now
petitioner) since no summons had been served on him, and that respondent Judge had committed a grave abuse of
discretion in issuing the questioned order without jurisdiction.
In short, the issue presented to us is whether respondent Judge may issue a writ of preliminary attachment against
petitioner before summons is served on the latter.
We rule for respondent Judge.
Under Sec. 1, Rule 57, it is clear that, at the commencement of the action, a party may have the property of the
adverse party attached as security. The resolution of this issue depends, therefore, on what is meant by
"Commencement of the action." Moran, citing American jurisprudence on this point, stated thus: "Commencement of
action. Action is commenced by filing of the complaint, even though summons is not issued until a later date."
(Comment on the Rules of Court, Vol. I, p. 150, 1979). Thus, a writ of preliminary attachment may issue upon filing of
the complaint even before issuance of the summons.
WHEREFORE, for lack of merit, the petition is hereby denied and, accordingly, dismissed. (Emphasis supplied) 2
The petitioner is now before this Court on a Petition for Review on Certiorari, assailing the above-quoted decision of
the Court of Appeals. The petitioner assigns two (2) errors:
1.
The proceedings taken and the order issued on plaintiffs petition for attachment prior to the service of
summons on the defendant were contrary to law and jurisprudence and violated the defendant's right to due process.

61

2.
The Court of Appeals committed a grave abuse of discretion amounting to lack of jurisdiction in ruling that a
writ of preliminary attachment may issue upon filing of the complaint even prior to issuance of the summons. 3
The two (2) assignments of error relate to the single issue which we perceive to be at stake here, that is, whether a
court which has not acquired jurisdiction over the person of the defendant in the main case, may bind such defendant
or his property by issuing a writ of preliminary attachment.
Both the trial court and the Court of Appeals held that the defendant may be bound by a writ of preliminary attachment
even before summons together with a copy of the complaint in the main case has been validly served upon him.
We are unable to agree with the respondent courts.
There is no question that a writ of preliminary attachment may be applied for a plaintiff "at the commencement of the
action or at any time thereafter" in the cases enumerated in Section 1 of Rule 57 of the Revised Rules of Court. The
issue posed in this case, however, is not to be resolved by determining when an action may be regarded as having
been commenced, a point in time which, in any case, is not necessarily fixed and Identical regardless of the specific
purpose for which the deter. nation is to be made. The critical time which must be Identified is, rather, when the trial
court acquires authority under law to act coercively against the defendant or his property in a proceeding in
attachment. We believe and so hold that critical time is the time of the vesting of jurisdiction in the court over the
person of the defendant in the main case.
Attachment is an ancillary remedy. It is not sought for its own sake but rather to enable the attaching party to realize
upon relief sought and expected to be granted in the main or principal action . 4 A court which has not acquired
jurisdiction over the person of defendant, cannot bind that defendant whether in the main case or in any ancillary
proceeding such as attachment proceedings. The service of a petition for preliminary attachment without the prior or
simultaneous service of summons and a copy of the complaint in the main case and that is what happened in this
case does not of course confer jurisdiction upon the issuing court over the person of the defendant.
Ordinarily, the prayer in a petition for a writ of preliminary attachment is embodied or incorporated in the main
complaint itself as one of the forms of relief sought in such complaint. Thus, valid service of summons and a copy of
the complaint will in such case vest jurisdiction in the court over the defendant both for purposes of the main case and
for purposes of the ancillary remedy of attachment. In such case, notice of the main case is at the same time notice of
the auxiliary proceeding in attachment. Where, however, the petition for a writ of preliminary attachment is embodied
in a discrete pleading, such petition must be served either simultaneously with service of summons and a copy of the
main complaint, or after jurisdiction over the defendant has already been acquired by such service of summons.
Notice of the separate attachment petition is not notice of the main action. Put a little differently, jurisdiction whether
ratione personae or ratione materiae in an attachment proceeding is ancillary to jurisdiction ratione personae or
ratione materiae in the main action against the defendant. If a court has no jurisdiction over the subject matter or over
the person of the defendant in the principal action, it simply has no jurisdiction to issue a writ of preliminary attachment
against the defendant or his property.
It is basic that the requirements of the Rules of Court for issuance of preliminary attachment must be strictly and
faithfully complied with in view of the nature of this provisional remedy. In Salas v. Adil, 5 this Court described
preliminary attachment as
a rigorous remedy which exposes the debtor to humiliation and annoyance, such [that] it should not be abused as to
cause unnecessary prejudice. It is, therefore; the duty of the court, before issuing the writ, to ensure that all the
requisites of the law have been complied with; otherwise the judge acts in excess of his jurisdiction and the writ so
issued shall be null and void. (Emphasis supplied ) 6
The above words apply with greater force in respect of that most fundamental of requisites, the jurisdiction of the court
issuing attachment over the person of the defendant.
In the case at bar, the want of jurisdiction of the trial court to proceed in the main case against the defendant is quite
clear. It is not disputed that neither service of summons with a copy of the complaint nor voluntary appearance of
petitioner Sievert was had in this case. Yet, the trial court proceeded to hear the petition for issuance of the writ. This is
reversible error and must be corrected on certiorari.
WHEREFORE, the Petition for Review on certiorari is GRANTED due course and the Order of the trial court dated 20
May 1988 and the Decision of the Court of Appeals dated 13 July 1988 are hereby SET ASIDE and ANNULLED. No
pronouncement as to costs.
SO ORDERED.

62

G.R. No. 93262 December 29, 1991

DAVAO LIGHT & POWER CO., INC., petitioner,
vs.
THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLAND TOURIST INN, and TEODORICO
ADARNA, respondents.
Breva & Breva Law Offices for petitioner.
Goc-Ong & Associates for private respondents.

NARVASA, J.:p
Subject of the appellate proceedings at bar is the decision of the Court of Appeals in CA-G.R. Sp. No. 1967 entitled
"Queensland Hotel, Inc., etc. and Adarna v. Davao Light & Power Co., Inc.," promulgated on May 4, 1990. 1 That
decision nullified and set aside the writ of preliminary attachment issued by the Regional Trial Court of Davao City 2 in
Civil Case No. 19513-89 on application of the plaintiff (Davao Light & Power Co.), before the service of summons on
the defendants (herein respondents Queensland Co., Inc. and Adarna).
Following is the chronology of the undisputed material facts culled from the Appellate Tribunal's judgment of May 4,
1990.
1.
On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light) filed a verified complaint for
recovery of a sum of money and damages against Queensland Hotel, etc. and Teodorico Adarna (docketed as Civil
Case No. 19513-89). The complaint contained an ex parte application for a writ of preliminary attachment.
2.
On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by raffle, issued an Order granting
the ex parte application and fixing the attachment bond at P4,600,513.37.
3.

On May 11, 1989 the attachment bond having been submitted by Davao Light, the writ of attachment issued.

4.
On May 12, 1989, the summons and a copy of the complaint, as well as the writ of attachment and a copy of
the attachment bond, were served on defendants Queensland and Adarna; and pursuant to the writ, the sheriff seized
properties belonging to the latter.
5.
On September 6, 1989, defendants Queensland and Adarna filed a motion to discharge the attachment for
lack of jurisdiction to issue the same because at the time the order of attachment was promulgated (May 3, 1989) and
the attachment writ issued (May 11, 1989), the Trial Court had not yet acquired jurisdiction over the cause and over
the persons of the defendants.
6.

On September 14, 1989, Davao Light filed an opposition to the motion to discharge attachment.

7.

On September 19, 1989, the Trial Court issued an Order denying the motion to discharge.

This Order of September 19, 1989 was successfully challenged by Queensland and Adarna in a special civil action of
certiorari instituted by them in the Court of Appeals. The Order was, as aforestated, annulled by the Court of Appeals
in its Decision of May 4, 1990. The Appellate Court's decision closed with the following disposition:
. . . the Orders dated May 3, 1989 granting the issuance of a writ of preliminary attachment, dated September 19,
1989 denying the motion to discharge attachment; dated November 7, 1989 denying petitioner's motion for
reconsideration; as well as all other orders emanating therefrom, specially the Writ of Attachment dated May 11, 1989
and Notice of Levy on Preliminary Attachment dated May 11, 1989, are hereby declared null and void and the
attachment hereby ordered DISCHARGED.
The Appellate Tribunal declared that
. . . While it is true that a prayer for the issuance of a writ of preliminary attachment may be included m the complaint,
as is usually done, it is likewise true that the Court does not acquire jurisdiction over the person of the defendant until
he is duly summoned or voluntarily appears, and adding the phrase that it be issued "ex parte" does not confer said
jurisdiction before actual summons had been made, nor retroact jurisdiction upon summons being made. . . .

63

It went on to say, citing Sievert v. Court of Appeals, 3 that "in a proceedings in attachment," the "critical time which
must be identified is . . . when the trial court acquires authority under law to act coercively against the defendant or his
property . . .;" and that "the critical time is the of the vesting of jurisdiction in the court over the person of the defendant
in the main case."
Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Light seeks in the present appellate
proceedings.
The question is whether or not a writ of preliminary attachment may issue ex parte against a defendant before
acquisition of jurisdiction of the latter's person by service of summons or his voluntary submission to the Court's
authority.
The Court rules that the question must be answered in the affirmative and that consequently, the petition for review will
have to be granted.
It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of
the plaintiff has been vested in the court, but before the acquisition of jurisdiction over the person of the defendant
(either by service of summons or his voluntary submission to the court's authority), nothing can be validly done by the
plaintiff or the court. It is wrong to assume that the validity of acts done during this period should be defendant on, or
held in suspension until, the actual obtention of jurisdiction over the defendant's person. The obtention by the court of
jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person
of the plaintiff or over the subject-matter or nature of the action, or the res or object hereof.
An action or proceeding is commenced by the filing of the complaint or other initiatory pleading. 4 By that act, the
jurisdiction of the court over the subject matter or nature of the action or proceeding is invoked or called into activity; 5
and it is thus that the court acquires jurisdiction over said subject matter or nature of the action. 6 And it is by that selfsame act of the plaintiff (or petitioner) of filing the complaint (or other appropriate pleading) by which he signifies his
submission to the court's power and authority that jurisdiction is acquired by the court over his person. 7 On the
other hand, jurisdiction over the person of the defendant is obtained, as above stated, by the service of summons or
other coercive process upon him or by his voluntary submission to the authority of the court. 8
The events that follow the filing of the complaint as a matter of routine are well known. After the complaint is filed,
summons issues to the defendant, the summons is then transmitted to the sheriff, and finally, service of the summons
is effected on the defendant in any of the ways authorized by the Rules of Court. There is thus ordinarily some
appreciable interval of time between the day of the filing of the complaint and the day of service of summons of the
defendant. During this period, different acts may be done by the plaintiff or by the Court, which are unquestionable
validity and propriety. Among these, for example, are the appointment of a guardian ad litem, 9 the grant of authority to
the plaintiff to prosecute the suit as a pauper litigant, 10 the amendment of the complaint by the plaintiff as a matter of
right without leave of court, 11 authorization by the Court of service of summons by publication, 12 the dismissal of the
action by the plaintiff on mere notice. 13
This, too, is true with regard to the provisional remedies of preliminary attachment, preliminary injunction, receivership
or replevin. 14 They may be validly and properly applied for and granted even before the defendant is summoned or is
heard from.
A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of
which a plaintiff or other party may, at the commencement of the action or at any time thereafter, have the property of
the adverse party taken into the custody of the court as security for the satisfaction of any judgment that may be
recovered. 15 It is a remedy which is purely statutory in respect of which the law requires a strict construction of the
provisions granting it. 16 Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before
acquisition of jurisdiction over the person of the defendant.
Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time thereafter." 17
The phase, "at the commencement of the action," obviously refers to the date of the filing of the complaint which, as
above pointed out, is the date that marks "the commencement of the action;" 18 and the reference plainly is to a time
before summons is served on the defendant, or even before summons issues. What the rule is saying quite clearly is
that after an action is properly commenced by the filing of the complaint and the payment of all requisite docket and
other fees the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent
requisites laid down by law, and that he may do so at any time, either before or after service of summons on the
defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper
party to incorporate the application for attachment in the complaint or other appropriate pleading (counter-claim, crossclaim, third-party claim) and for the Trial Court to issue the writ ex-parte at the commencement of the action if it finds
the application otherwise sufficient in form and substance.

64

In Toledo v. Burgos, 19 this Court ruled that a hearing on a motion or application for preliminary attachment is not
generally necessary unless otherwise directed by the Trial Court in its discretion. 20 And in Filinvest Credit
Corporation v. Relova, 21 the Court declared that "(n)othing in the Rules of Court makes notice and hearing
indispensable and mandatory requisites for the issuance of a writ of attachment." The only pre-requisite is that the
Court be satisfied, upon consideration of "the affidavit of the applicant or of some other person who personally knows
the facts, that a sufficient cause of action exists, that the case is one of those mentioned in Section 1 . . . (Rule 57),
that there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to
the applicant, or the value of the property the possession of which he is entitled to recover, is as much as the sum for
which the order (of attachment) is granted above all legal counterclaims." 22 If the court be so satisfied, the "order of
attachment shall be granted," 23 and the writ shall issue upon the applicant's posting of "a bond executed to the
adverse party in an amount to be fixed by the judge, not exceeding the plaintiffs claim, conditioned that the latter will
pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the
attachment, if the court shall finally adjudge that the applicant was not entitled thereto." 24
In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18, 1989, 25 this Court had
occasion to emphasize the postulate that no hearing is required on an application for preliminary attachment, with
notice to the defendant, for the reason that this "would defeat the objective of the remedy . . . (since the) time which
such a hearing would take, could be enough to enable the defendant to abscond or dispose of his property before a
writ of attachment issues." As observed by a former member of this Court, 26 such a procedure would warn
absconding debtors-defendants of the commencement of the suit against them and the probable seizure of their
properties, and thus give them the advantage of time to hide their assets, leaving the creditor-plaintiff holding the
proverbial empty bag; it would place the creditor-applicant in danger of losing any security for a favorable judgment
and thus give him only an illusory victory.
Withal, ample modes of recourse against a preliminary attachment are secured by law to the defendant. The relative
ease with which a preliminary attachment may be obtained is matched and paralleled by the relative facility with which
the attachment may legitimately be prevented or frustrated. These modes of recourse against preliminary attachments
granted by Rule 57 were discussed at some length by the separate opinion in Mindanao Savings & Loans Asso. Inc. v.
CA., supra.
That separate opinion stressed that there are two (2) ways of discharging an attachment: first, by the posting of a
counterbond; and second, by a showing of its improper or irregular issuance.
1.0.
The submission of a counterbond is an efficacious mode of lifting an attachment already enforced against
property, or even of preventing its enforcement altogether.
1.1.
When property has already been seized under attachment, the attachment may be discharged upon
counterbond in accordance with Section 12 of Rule 57.
Sec. 12.
Discharge of attachment upon giving counterbond. At any time after an order of attachment has
been granted, the party whose property has been attached or the person appearing in his behalf, may, upon
reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the
action is pending, for an order discharging the attachment wholly or in part on the security given . . . in an amount
equal to the value of the property attached as determined by the judge to secure the payment of any judgment that the
attaching creditor may recover in the action. . . .
1.2.
But even before actual levy on property, seizure under attachment may be prevented also upon counterbond.
The defendant need not wait until his property is seized before seeking the discharge of the attachment by a
counterbond. This is made possible by Section 5 of Rule 57.
Sec. 5. Manner of attaching property. The officer executing the order shall without delay attach, to await judgment
and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt
from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a
deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the
applicant, in an amount sufficient to satisfy such demand besides costs, or in an amount equal to the value of the
property which is about to be attached, to secure payment to the applicant of any judgment which he may recover in
the action. . . . (Emphasis supplied)
2.0.
Aside from the filing of a counterbond, a preliminary attachment may also be lifted or discharged on the
ground that it has been irregularly or improperly issued, in accordance with Section 13 of Rule 57. Like the first, this
second mode of lifting an attachment may be resorted to even before any property has been levied on. Indeed, it may
be availed of after property has been released from a levy on attachment, as is made clear by said Section 13, viz.:

65

Sec. 13.
Discharge of attachment for improper or irregular issuance. The party whose property has been
attached may also, at any time either BEFORE or AFTER the release of the attached property, or before any
attachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who
granted the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment
on the ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the
party whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counteraffidavits or other evidence in addition to that on which the attachment was made. . . . (Emphasis supplied)
This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987), The attachment debtor cannot be
deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of
discharging the attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of
discharging the attachment writ maliciously sought out by the attaching creditor instead of the other way, which, in
most instances . . . would require presentation of evidence in a fullblown trial on the merits, and cannot easily be
settled in a pending incident of the case." 27
It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings & Loans Asso. Inc. v.
C.A., supra., 28 to wit:
(a)

When an attachment may not be dissolved by a showing of its irregular or improper issuance:

. . . (W)hen the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of
action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own use by a
public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his
employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty." (Sec. 1 [b], Rule
57), or "an action against a party who has been guilty of fraud m contracting the debt or incurring the obligation upon
which the action is brought" (Sec. 1 [d], Rule 57), the defendant is not allowed to file a motion to dissolve the
attachment under Section 13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiff's
application and affidavits on which the writ was based and consequently that the writ based thereon had been
improperly or irregularly issued (SEE Benitez v. I.A.C., 154 SCRA 41) the reason being that the hearing on such a
motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the merits of
the action would be ventilated at a mere hearing of a motion, instead of at the regular trial. Therefore, when the writ of
attachment is of this nature, the only way it can be dissolved is by a counterbond (G.B. Inc. v. Sanchez, 98 Phil. 886).
(b)

Effect of the dissolution of a preliminary attachment on the plaintiffs attachment bond:

. . . The dissolution of the preliminary attachment upon security given, or a showing of its irregular or improper
issuance, does not of course operate to discharge the sureties on plaintiff's own attachment bond. The reason is
simple. That bond is "executed to the adverse party, . . . conditioned that the . . . (applicant) will pay all the costs which
may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court
shall finally adjudge that the applicant was not entitled thereto" (SEC. 4, Rule 57). Hence, until that determination is
made, as to the applicant's entitlement to the attachment, his bond must stand and cannot be with-drawn.
With respect to the other provisional remedies, i.e., preliminary injunction (Rule 58), receivership (Rule 59), replevin or
delivery of personal property (Rule 60), the rule is the same: they may also issue ex parte. 29
It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the
person of defendant, as above indicated issuance of summons, order of attachment and writ of attachment (and/or
appointments of guardian ad litem, or grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or
amendment of the complaint by the plaintiff as a matter of right without leave of court 30 and however valid and
proper they might otherwise be, these do not and cannot bind and affect the defendant until and unless jurisdiction
over his person is eventually obtained by the court, either by service on him of summons or other coercive process or
his voluntary submission to the court's authority. Hence, when the sheriff or other proper officer commences
implementation of the writ of attachment, it is essential that he serve on the defendant not only a copy of the
applicant's affidavit and attachment bond, and of the order of attachment, as explicity required by Section 5 of Rule 57,
but also the summons addressed to said defendant as well as a copy of the complaint and order for appointment of
guardian ad litem, if any, as also explicity directed by Section 3, Rule 14 of the Rules of Court. Service of all such
documents is indispensable not only for the acquisition of jurisdiction over the person of the defendant, but also upon
considerations of fairness, to apprise the defendant of the complaint against him, of the issuance of a writ of
preliminary attachment and the grounds therefor and thus accord him the opportunity to prevent attachment of his
property by the posting of a counterbond in an amount equal to the plaintiff's claim in the complaint pursuant to
Section 5 (or Section 12), Rule 57, or dissolving it by causing dismissal of the complaint itself on any of the grounds
set forth in Rule 16, or demonstrating the insufficiency of the applicant's affidavit or bond in accordance with Section
13, Rule 57.

66

It was on account of the failure to comply with this fundamental requirement of service of summons and the other
documents above indicated that writs of attachment issued by the Trial Court ex parte were struck down by this
Court's Third Division in two (2) cases, namely: Sievert v. Court of Appeals, 31 and BAC Manufacturing and Sales
Corporation v. Court of Appeals, et al. 32 In contrast to the case at bar where the summons and a copy of the
complaint, as well as the order and writ of attachment and the attachment bond were served on the defendant in
Sievert, levy on attachment was attempted notwithstanding that only the petition for issuance of the writ of preliminary
attachment was served on the defendant, without any prior or accompanying summons and copy of the complaint;
and in BAC Manufacturing and Sales Corporation, neither the summons nor the order granting the preliminary
attachment or the writ of attachment itself was served on the defendant "before or at the time the levy was made."
For the guidance of all concerned, the Court reiterates and reaffirms the proposition that writs of attachment may
properly issue ex parte provided that the Court is satisfied that the relevant requisites therefor have been fulfilled by
the applicant, although it may, in its discretion, require prior hearing on the application with notice to the defendant; but
that levy on property pursuant to the writ thus issued may not be validly effected unless preceded, or
contemporaneously accompanied, by service on the defendant of summons, a copy of the complaint (and of the
appointment of guardian ad litem, if any), the application for attachment (if not incorporated in but submitted
separately from the complaint), the order of attachment, and the plaintiff's attachment bond.
WHEREFORE, the petition is GRANTED; the challenged decision of the Court of Appeals is hereby REVERSED, and
the order and writ of attachment issued by Hon. Milagros C. Nartatez, Presiding Judge of Branch 8, Regional Trial
Court of Davao City in Civil Case No. 19513-89 against Queensland Hotel or Motel or Queensland Tourist Inn and
Teodorico Adarna are hereby REINSTATED. Costs against private respondents.
SO ORDERED.

67

G.R. No. 102448

August 5, 1992

RICARDO CUARTERO, petitioner,

vs.
COURT OF APPEALS, ROBERTO EVANGELISTA and FELICIA EVANGELISTA, respondents.
Abesamis, Medialdea & Abesamis for petitioner.
Eufemio Law Offices for private respondent.

GUTIERREZ, JR., J.:

This is a petition for review on certiorari seeking to annul the decision of the Court of Appeals promulgated on June
27, 1991 as well as the subsequent resolution dated October 22, 1991 denying the motion for reconsideration in CAG.R. SP No. 23199 entitled "Spouses Roberto and Felicia Evangelista v. Honorable Cezar C. Peralejo, Presiding
Judge Regional Trial Court of Quezon City, Branch 98, and Ricardo Cuartero," which nullified the orders of the trial
court dated August 24, 1990 and October 4, 1990 and cancelled the writ of preliminary attachment issued on
September 19, 1990.
Following are the series of events giving rise to the present controversy.
On August 20, 1990, petitioner Ricardo Cuartero filed a complaint before the Regional Trial Court of Quezon City
against the private respondents, Evangelista spouses, for a sum of money plus damages with a prayer for the
issuance of a writ of preliminary attachment. The complaint was docketed as Civil Case No. Q-90-6471.
On August 24, 1990, the lower court issued an order granting ex-parte the petitioner's prayer for the issuance of a writ
of preliminary attachment.
On September 19, 1990, the writ of preliminary attachment was issued pursuant to the trial court's order dated August
24, 1990. On the same day, the summons for the spouses Evangelista was likewise prepared.
The following day, that is, on September 20, 1990, a copy of the writ of preliminary attachment, the order dated August
24, 1990, the summons and the complaint were all simultaneously served upon the private respondents at their
residence. Immediately thereafter, Deputy Sheriff Ernesto L. Sula levied, attached and pulled out the properties in
compliance with the court's directive to attach all the properties of private respondents not exempt from execution, or
so much thereof as may be sufficient to satisfy the petitioner's principal claim in the amount of P2,171,794.91.
Subsequently, the spouses Evangelista filed motion to set aside the order dated August 24, 1990 and discharge the
writ of preliminary attachment for having been irregularly and improperly issued. On October 4, 1990, the lower court
denied the motion for lack of merit.
Private respondents, then, filed a special civil action for certiorari with the Court of Appeals questioning the orders of
the lower court dated August 24, 1990 and October 4, 1990 with a prayer for a restraining order or writ of preliminary
injunction to enjoin the judge from taking further proceedings below.
In a Resolution dated October 31, 1990, the Court of Appeals resolved not to grant the prayer for restraining order or
writ of preliminary injunction, there being no clear showing that the spouses Evangelista were entitled thereto.
On June 27, 1991, the Court of Appeals granted the petition for certiorari and rendered the questioned decision. The
motion for reconsideration filed by herein petitioner Cuartero was denied for lack of merit in a resolution dated October
22, 1991. Hence, the present recourse to this Court.
The petitioner raises the following assignment of errors:
I
THE COURT OF APPEALS ERRED AND COMMITTED A GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK
OF JURISDICTION WHEN IT HELD THAT THE REGIONAL TRIAL COURT DID NOT ACQUIRE JURISDICTION
OVER RESPONDENT SPOUSES.
II

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THE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT HELD THAT
THE REGIONAL TRIAL COURT COULD NOT VALIDLY ISSUE THE SUBJECT WRIT OF PRELIMINARY
ATTACHMENT WHICH IS AN ANCILLARY REMEDY. (Rollo, p. 13)
The Court of Appeals' decision is grounded on its finding that the trial court did not acquire any jurisdiction over the
person of the defendants (private respondents herein). It declared that:
. . . the want of jurisdiction of the trial court to proceed in the main case as well as the ancillary remedy of attachment
is quite clear. It is not disputed that neither service of summons with a copy of the complaint nor voluntary appearance
of petitioners was had in this case before the trial court issued the assailed order dated August 24, 1990, as well as
the writ of preliminary attachment dated September 19, 1990. This is reversible error and must be corrected on
certiorari. (Rollo, p. 24)
The appellate tribunal relied on the case of Sievert v. Court of Appeals, 168 SCRA 692 (1988) in arriving at the
foregoing conclusion. It stated that:
Valid service of summons and a copy of the complaint vest jurisdiction in the court over the defendant both for the
purpose of the main case and for purposes of the ancillary remedy of attachment and a court which has not acquired
jurisdiction over the person of defendant, cannot bind the defendant whether in the main case or in any ancillary
proceeding such as attachment proceedings (Sievert v. Court of Appeals, 168 SCRA 692). (Rollo, p. 24)
The private respondents, in their comment, adopted and reiterated the aforementioned ruling of the Court of Appeals.
They added that aside from the want of jurisdiction, no proper ground also existed for the issuance of the writ of
preliminary attachment. They stress that the fraud in contracting the debt or incurring the obligation upon which the
action is brought which comprises a ground for attachment must have already been intended at the inception of the
contract. According to them, there was no intent to defraud the petitioner when the postdated checks were issued
inasmuch as the latter was aware that the same were not yet funded and that they were issued only for purposes of
creating an evidence to prove a pre-existing obligation.
Another point which the private respondents raised in their comment is the alleged violation of their constitutionally
guaranteed right to due process when the writ was issued without notice and hearing.
In the later case of Davao Light and Power Co., Inc. v. Court of Appeals, G.R. No. 93262, November 29, 1991, we had
occasion to deal with certain misconceptions which may have arisen from our Sievert ruling. The question which was
resolved in the Davao Light case is whether or not a writ of preliminary attachment may issue ex-parte against a
defendant before the court acquires jurisdiction over the latter's person by service of summons or his voluntary
submission to the court's authority. The Court answered in the affirmative. This should have clarified the matter but
apparently another ruling is necessary.
A writ of preliminary attachment is defined as a provisional remedy issued upon order of the court where an action is
pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by the
sheriff as security for the satisfaction of whatever judgment might be secured in said action by the attaching creditor
against the defendant (Adlawan v. Tomol, 184 SCRA 31 [1990] citing Virata v. Aquino, 53 SCRA 30-31 [1973]).
Under section 3, Rule 57 of the Rules of Court, the only requisites for the issuance of the writ are the affidavit and
bond of the applicant. As has been expressly ruled in BF Homes, Inc. v. Court of Appeals, 190 SCRA 262 (1990),
citing Mindanao Savings and Loan Association, Inc. v. Court of Appeals, 172 SCRA 480 (1989), no notice to the
adverse party or hearing of the application is required inasmuch as the time which the hearing will take could be
enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues. In such a
case, a hearing would render nugatory the purpose of this provisional remedy. The ruling remains good law. There is,
thus, no merit in the private respondents' claim of violation of their constitutionally guaranteed right to due process.
The writ of preliminary attachment can be applied for and granted at the commencement of the action or at any time
thereafter (Section 1, Rule 57, Rules of Court). In Davao Light and Power, Co., Inc. v. Court of Appeals, supra, the
phrase "at the commencement of the action" is interpreted as referring to the date of the filing of the complaint which is
a time before summons is served on the defendant or even before summons issues. The Court added that
. . . after an action is properly commenced by filing of the complaint and the payment of all requisite docket and
other fees the plaintiff may apply and obtain a writ of preliminary attachment upon the fulfillment of the pertinent
requisites laid down by law, and that he may do so at any time, either before or after service of summons on the
defendant. And this, indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other
proper party to incorporate the application for attachment in the complaint or other appropriate pleading (counterclaim, cross-claim, third-party-claim) and for the Trial Court to issue the writ ex-parte at the commencement of the
action if it finds the application otherwise sufficient in form and substance.

69

The Court also pointed out that:

. . . It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person
of the plaintiff has been vested in the Court, but before acquisition of jurisdiction over the person of the defendant
(either by service of summons or his voluntary submission to the Court's authority), nothing can be validly done by the
plaintiff or the Court. It is wrong to assume that the validity of acts done during the period should be dependent on, or
held in suspension until, the actual obtention of jurisdiction over the defendants person. The obtention by the court of
jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person
of the plaintiff or over the subject matter or nature of the action, or the res or object thereof.
It is clear from our pronouncements that a writ of preliminary attachment may issue even before summons is served
upon the defendant. However, we have likewise ruled that the writ cannot bind and affect the defendant. However, we
have likewise ruled that the writ cannot bind and affect the defendant until jurisdiction over his person is eventually
obtained. Therefore, it is required that when the proper officer commences implementation of the writ of attachment,
service of summons should be simultaneously made.
It must be emphasized that the grant of the provisional remedy of attachment practically involves three stages: first,
the court issues the order granting the application; second, the writ of attachment issues pursuant to the order
granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over
the person of the defendant should first be obtained. However, once the implementation commences, it is required
that the court must have acquired jurisdiction over the defendant for without such jurisdiction, the court has no power
and authority to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant.
In Sievert v. Court of Appeals, supra, cited by the Court of Appeals in its questioned decision, the writ of attachment
issued ex-parte was struck down because when the writ of attachment was being implemented, no jurisdiction over
the person of the defendant had as yet been obtained. The court had failed to serve the summons to the defendant.
The circumstances in Sievert are different from those in the case at bar. When the writ of attachment was served on
the spouses Evangelista, the summons and copy of the complaint were also simultaneously served.
It is appropriate to reiterate this Court's exposition in the Davao Light and Power case cited earlier, to wit:
. . . writs of attachment may properly issue ex-parte provided that the Court is satisfied that the relevant requisites
therefore have been fulfilled by the applicant, although it may, in its discretion, require prior hearing on the application
with notice to the defendant, but that levy on property pursuant to the writ thus issued may not be validly effected
unless preceded, or contemporaneously accompanied by service on the defendant of summons, a copy of the
complaint (and of the appointment of guardian ad litem, if any), the application for attachment (if not incorporated in
but submitted separately from the complaint), the order of attachment, and the plaintiff's attachment bond.
The question as to whether a proper ground existed for the issuance of the writ is a question of fact the determination
of which can only be had in appropriate proceedings conducted for the purpose (Peroxide Philippines Corporation V.
Court of Appeals, 199 SCRA 882 [1991]). It must be noted that the spouses Evangelista's motion to discharge the writ
of preliminary attachment was denied by the lower court for lack of merit. There is no showing that there was an abuse
of discretion on the part of the lower court in denying the motion.
Moreover, an attachment may not be dissolved by a showing of its irregular or improper issuance if it is upon a ground
which is at the same time the applicant's cause of action in the main case since an anomalous situation would result if
the issues of the main case would be ventilated and resolved in a mere hearing of a motion (Davao Light and Power
Co., Inc. v. Court of Appeals, supra, The Consolidated Bank and Trust Corp. (Solidbank) v. Court of Appeals, 197
SCRA 663 [1991]).
In the present case, one of the allegations in petitioner's complaint below is that the defendant spouses induced the
plaintiff to grant the loan by issuing postdated checks to cover the installment payments and a separate set of
postdated cheeks for payment of the stipulated interest (Annex "B"). The issue of fraud, then, is clearly within the
competence of the lower court in the main action.
WHEREFORE, premises considered, the Court hereby GRANTS the petition. The challenged decision of the Court of
Appeals is REVERSED, and the order and writ of attachment issued by Hon. Cezar C. Peralejo, Presiding Judge of
Branch 98, Regional Trial Court of Quezon City against spouses Evangelista are hereby REINSTATED. No
pronouncement as to costs.
SO ORDERED.

70

G.R. No. L-46009

May 14, 1979

RICARDO T. SALAS and MARIA SALAS, petitioners,

vs.
HON. MIDPANTAO L. ADIL, as Judge of Branch II, Court of First Instance of Iloilo, ROSITA BEDRO and BENITA YU,
respondents.
Castro Law Office for petitioners.
Tirso Espelete and Fortunato A. Padilla for private respondents.

ANTONIO, J.:
Certiorari to nullify the Order of Attachment of May 13, 1977, as well as the Writ of Attachment dated May 16, 1977,
issued by respondent Judge in Civil Case No. 10770 of the Court of First Instance of Iloilo, entitled "Rosita Bedro and
Benita Yu v. Spouses Ricardo T. Salas and Maria Salas, et al.
On September 10, 1976, respondents Rosita Bedro and Benita Yu filed the afore-mentioned civil action with the Court
of First Instance of Iloilo against herein petitioners Ricardo T. Salas and Maria Salas, the Philippine Commercial &
Industrial Bank, in its capacity as Administrator of the Testate Estate of the deceased Charles Newton Hodges, and
Avelina A. Magno, in her capacity as Administratrix of the Testate Estate of the deceased Linnie Jane Hodge to annul
the deed of sale of Lot No. 5 executed by administrators of the Hodges Estate in favor of the Spouses Ricardo T.
Salas and Maria Salas and for damages. The action for annulment was predicated upon the averment that Lot No. 5,
being a subdivision road, is intend for public use and cannot be sold or disposed of by the Hodges Estate. The claim
for damages was based on the assertion that after defendant spouses purchased Lots Nos. 2 and 3, they also
purchased Lot No. 5 and thereafter "erected wooden posts, laid and plastered at the door of the house on Lot No. 3,
with braces of hardwood, lumber and plywood nailed to the post", thereby preventing Rosita Bedro and Benita Yu from
using the road on the afore-mentioned lot, Lot No. 5, and that as a result of such obstruction, private respondents
Rosita Bedro and Benita Yu sustained actual damages in the amount of P114,000.00, plus the sum of Pl,000.00 as
damages daily from June 30, 1976 due to the stoppage in the construction of their commercial buildings on Lot No. 3,
and moral damages in the amount of P200,000.00.
In their answer to the complaint, the Salas spouses, after specifically denying the material allegations in the complaint,
stated that Lot No. 5 had been registered in the name of the C. N. Hodges as their exclusive private property and was
never subjected to any servitude or easement of right of way in favor of any person; that any occupants of Lots Nos. 2
and 3 have direct access to Bonifacio Drive, a National Highway, hence, Lot No. 5 is neither needed nor required for
the egress or ingress of the occupants thereof; and that private respondents, as a matter of fact, since 1964 had
excluded and separated completely their property (Lots Nos. 2 and 3) from Lot No. 5 by building a concrete wall on
the boundary thereon without providing any gate as entrance or exit towards Lot No. 5; and that private respondents
have no personality to question the validity of the deed of sale over Lot No. 5 since they were not parties to the same
and the sale was duly approved by the probate court.
In a motion dated May 12, 1977, private respondents filed a Motion for Attachment, alleging, among others, that the
case was "for annulment of a deed of sale and recovery of damages" and that the defendants have removed or
disposed of their properties or are about to do so with intent to defraud their creditors especially the plaintiffs in this
case.
On May 13, 1977, respondent Judge issued ex-parte a Writ of Attachment "against the properties of the defendants
particularly Lots Nos. 1 and 4 of Psc-2157 less the building standing thereon upon the plaintiffs filing a bond in the
amount of P200,000.00 subject to the approval of this Court." After a surety bond in the amount of P200,000.00,
executed on May 11, 1977 by the Central Surety and Insurance Company as surety was filed, the writ itself was
issued by respondent Judge on May 16, 1977, directing the Sheriff to attach the properties above-mentioned. On May
17, 1977, the Deputy Sheriff of Iloilo levied upon the aforesaid properties of petitioners.
Contending that respondent Judge gravely abused his discretion in issuing the said Writ of Attachment, petitioners
filed the present petition.
In certiorari proceedings, the cardinal rule is that the court must be given the opportunity to correct itself, Thus, for the
special civil action of certiorari to prosper, there must be no appeal nor any plain, speedy and adequate remedy in the
ordinary course of law. Petitioners, therefore, must exhaust all available remedies in the lower court before filing a
petition for certiorari, otherwise the petition shall be held to be premature.

71

In the instant case, it appears that petitioners have adequate remedy under the law. They could have filed an
application with the court a quo for the discharge of the attachment for improper or irregular issuance under section
13, Rule 57, of the Revised Rules of Court, which provides the following
SEC. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached
may also, at any time either before or after the release of the attached property, or before any attachment shall have
been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who Salas vs. Adil granted
the order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the
ground that the same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party
whose property has been attached, but not otherwise, the attaching creditor may oppose the same by counteraffidavits or other evidence in addition to that on which the attachment was made. After hearing, the judge shall order
the discharge of the attachment if it appears that it was improperly or irregularly issued and the defect is not cured
forthwith.
Considering that petitioners have not availed of this remedy, the instant petition is premature.
We deem it necessary, however, for the guidance of respondent Court and of the parties, to stress herein the nature of
attachment as an extraordinary provisional remedy.
A preliminary attachment is a rigorous remedy, which exposes the debtor to humiliation and annoyance, such it should
not be abused as to cause unnecessary prejudice. It is, therefore, the duty of the court, before issuing the writ, to
ensure that all the requisites of the law have been complied with; otherwise the judge acts in excess of his jurisdiction
and the so issued shall be null and void . 1
In Carpio v. Macadaeg, 2 this Court said:
Respondent Judge should not have issued the two writs of preliminary attachment (Annexes C and C-1) on Abaya's
simple allegation that the petitioner was about to dispose of his property, thereby leaving no security for the
satisfaction of any judgment. Mere removal or disposal of property, by itself, is not ground for issuance of preliminary
attachment, notwithstanding absence of any security for the satisfaction of any judgment against the defendant. The
removal or disposal, to justify preliminary attachment, must have been made with intent to defraud defendant's
creditors.
Respondent Judge in fact corrected himself. Acting on petitioner's motion to discharge attachment and apparently
believing the correctness of the grounds alleged therein, he set aside the orders of attachment (Order of March 11,
1960, Annex F)
But reversing himself again, he set aside his order of March 11, 1960 (Annex K, dated March 29, 1960). This he did
apparently on Abaya's contention that petitioner was about to remove or dispose of his property in order to defraud his
creditors, as examples of which disposals he pointed to the alleged sale of the horses and of petitioner's office
furniture. ... These averments of fraudulent disposals were controverted by petitioner who ... reiterated the defenses
against preliminary attachment which he had previously enumerated in his petition to discharge the two orders of
attachment. Thus the question of fraudulent disposal was put in issue; and respondent Judge, before issuing the pre
attachment anew, should have given the parties opportunity to prove their respective claims or, at the very least
should have provided petitioner with the chance to show that he had not been disposing of his property in fraud of
creditors. (citing National Coconut Corporation v. Pecson L-4296, Feb. 25, 1952, Villongco v. Panlilio, 6214, Nov. 20,
1953).
And in Garcia v. Reyes, 3 considering the allegation that the debtors were removing or disposing of some of their
properties with intent to defraud their creditors, 'this Court said that "(a)ll in all due process would seem to require that
both parties further ventilate their respective contentions in a hearing that could indeed reveal the truth. Fairness
would be served thereby, the demand of reason satisfied."
Considering the gravity of the allegation that herein petitioners have removed or disposed of their properties or are
about to do so with intent to defraud their creditors, and further considering that the affidavit in support of the pre
attachment merely states such ground in general terms, without specific allegations of lances to show the reason why
plaintiffs believe that defendants are disposing of their properties in fraud of creditors, it was incumbent upon
respondent Judge to give notice to petitioners and to allow wherein evidence is them to present their position at a to
be received. Moreover, it appears from the records that private respondents are claiming unliquidated damages,
including moral damages, from petitioners. The authorities agree that the writ of attachment is not available 'm a suit
for damages where the amount claimed is contingent or unliquidated.
We think, however, that a rule sufficient for the determination of this case has been suggested and acted upon, and
that the remedy does not exist where unliquidated damages were demanded. ... In Warwick v. Chase, 23 Md 161, it is

72

said: 'It is necessary that the standard for ascertaining the amount of damages claimed should not only appear, but
that it should be fixed and certain, and in no degree dependent on facts either speculative or Uncertain ... The general
rule is, that unliquidated damages, ... cannot be recovered by attachment, unless the contract affords a certain
measure or standard for ascertaining the amount of the damages ... 4
Further.
The statute authorizing the issuance of the writ of garnishment and that relating to the issuance of the writ of
attachment ... have not been construed as authorizing the writs to be issued when the plaintiff's suit is technically an
action for debt. Neither of the writs may be issued when the suit is for damages for tort, but they may be issued when
the plaintiff's claim arises out of contract either express or implied, and the demand is liquidated, that is, the amount of
the claim is not contingent, is capable of being definitely ascertained by the usual means of evidence, and does not
rest in the discretion of the jury. 5
WHEREFORE, the instant petition is hereby DENIED, in order to enable petitioners to move before respondent Court
for the discharge of the attachment on the ground of its improper and irregular issuance, pursuant to section 13, Rule
57, of the Revised Rules of Court, and for the aforesaid Court to act thereon in accordance with the foregoing.

73

G.R. No. 40054

September 14, 1933

LA GRANJA, INC., petitioner,

vs.
FELIX SAMSON, Judge of First Instance of Cagayan, CHUA BIAN, CHUA YU LEE and CHUA KI, respondents.
Miguel P. Pio for petitioner.
The Respondent Judge in his own behalf.
No appearance for other respondents.
VILLA-REAL, J.:
In this original petition for mandamus filed by the corporate entity, La Granja, Inc., against Felix Samson, as Judge of
the Court of First Instance of Cagayan, Chua Bian, Chua Yu Lee and Chua Ki, the petitioner herein, for the reasons
stated in its petition, prays that a writ of mandamus be issued against the respondent Judge compelling him to issue a
writ of attachment against the properties of the other respondents herein, who are defendants in civil case No. 1888 of
the Court of First Instance of Cagayan. The pertinent facts necessary for the solution of the questions raised in the
present case are as follows:
On July 5, 1932, the petitioner herein, La Granja, Inc., filed a complaint in the Court of First Instance of Cagayan,
against Chua Bian, Chua Yu Lee and Chua Ki, for the recovery of the sum of P2,418.18 with interest thereon at the
rate of 12 per cent per annum, which case was docketed as civil case No. 1888. The plaintiff at the same time, also
prayed for the issuance of an order of attachment against the aforementioned defendants' property and accompanied
said complaint with an affidavit of the manager of the aforesaid petitioner, La Granja, Inc., wherein it was alleged
among other essential things, that the said defendants have disposed or are disposing of their properties in favor of
the Asiatic Petroleum Co., with intent to defraud their creditors. The respondent judge, wishing to ascertain or
convince himself of the truth of the alleged disposal, required the petitioner herein to present evidence to substantiate
its allegation, before granting its petition. Inasmuch as the petitioner refused to comply with the court's requirement,
alleging as its ground that was not obliged to do so, the respondent judge dismissed said petition for an order of
attachment.
The only question to decide in the present case is whether or not the mere filing of an affidavit executed in due form is
sufficient to compel a judge to issue an order of attachment.
Section 426 of the Code of Civil procedure provides the following:
SEC. 426.
Granting order of attachment. A judge or justice of the peace shall grant an order of attachment
when it is made to appear to the judge or justice of the peace by the affidavit of the plaintiff, or of some other person
who knows the facts, that a sufficient cause of action exists, and that the case is one of those mentioned in section
four hundred and twenty-four, and that there is no other sufficient security for the claim sought to be enforced by the
action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as the sum for
which the order is granted.
It will be seen that the legal provision just cited orders the granting of a writ of attachment when it has been made to
appear by affidavit that the facts mentioned by law as sufficient to warrant the issuance thereof, exist. Although the law
requires nothing more than the affidavit as a means of establishing the existence of such facts, nevertheless, such
affidavit must be sufficient to convince the court of their existence, the court being justified in rejecting the affidavit if it
does not serve this purpose and in denying the petition for an order of attachment. The affidavit filed by the petitioner,
La Granja, Inc., must not have satisfied the respondent judge inasmuch as he desired to ascertain or convince himself
of the truth of the facts alleged therein by requiring evidence to substantiate them. The sufficiency or insufficiency of
an affidavit depends upon the amount of credit given it by the judge, and its acceptance or rejection, upon his sound
discretion.
Hence, the respondent judge, in requiring the presentation of evidence to establish the truth of the allegation of the
affidavit that the defendants had disposed or were disposing of their property to defraud their creditors, has done
nothing more than exercise his sound discretion in determining the sufficiency of the affidavit.
In view of the foregoing considerations, we are of the opinion and so hold that the mere filing of an affidavit executed
in due form is not sufficient to compel a judge to issue an order of attachment, but it is necessary that by such affidavit
it be made to appear to the court that there exists sufficient cause for the issuance thereof, the determination of such
sufficiency being discretionary on the part of the court.
Wherefore, the petition for a writ of mandamus is hereby denied and the same is dismissed, with costs against the
petitioner. So ordered.

74

75

G.R. No. L-45720

December 29, 1937

VENTURA GUZMAN, petitioner,

vs.
ALFREDO CATOLICO and SIMEON RAMOS, Judge of First Instance of Isabela, respondents.
Arnaldo J. Guzman for the petitioner.
Alfredo Catolico in his own behalf.
No appearance for respondent Judge.

VILLA-REAL, J.:
This is a petition filed by Ventura Guzman, praying this court, after proper proceedings, to render judgment declaring
illegal and void and setting aside the writ of preliminary attachment issued by the respondent judge, Honorable
Simeon Ramos, as judge of the Court of First Instance of Isabela, and ordering the dissolution thereof.
The pertinent facts necessary for the resolution of the legal question raised in the present case are as follows:
On March 8, 1937, the respondent Alfredo Catolico brought an action against the herein petitioner Ventura Guzman in
the Court of First Instance of Isabela, for the recovery from the latter of the amount of his fees for services rendered by
him as attorney, praying, at the same time, for the issuance of a writ of preliminary attachment against all of the
properties adjudicated to said petitioner in special proceedings No. 179 of said court. As grounds for the issuance of
said writ of preliminary attachment, he alleged: "That the herein defendant is trying to sell and dispose of the
properties adjudicated to him, with intention to defraud his creditors, particularly the herein plaintiff, thereby rendering
illusory the judgment that may be rendered against him, inasmuch as he has no other properties outside the same to
answer for the fees the court may fix in favor of the plaintiff, this case being one of those mentioned by the Code of
Civil Procedure warranting the issuance of a writ of preliminary attachment" (paragraph 8 of the complaint there
appears the following affidavits: "I, Alfredo Catolico, of age, married and resident of Tuguegarao, Cagayan, after being
duly sworn, declare: That I am the same plaintiff in this case; that I have prepared and read the same (complaint) and
that all the allegations thereof are certain and true, to the best of knowledge and belief."
In view of the said complaint and affidavit, the respondent judge, on March 10, 1937, issued an order granting the
petition and ordering the issuance of a writ of preliminary attachment, after the filing of the corresponding bond by the
plaintiff.
On April 15, 1937, said defendant Ventura Guzman filed a motion for the cancellation of said writ of preliminary
attachment on the ground that it had been improperly, irregularly and illegally issued, there being no allegation, either
in the complaint or in the affidavit solemnizing it, that there is no other sufficient security for the claim sought to be
enforced by the action; that the amount due to the plaintiff, above the legal set-off and counterclaim, is as much as the
sum of which the preliminary attachment has been granted, and that the affidavit of the plaintiff is base in mere
information and belief.
Said motion was denied by the respondent judge in an order of July 10, 1937.
The only question to be decided in this case is whether or not the requisites prescribed by law for the issuance of a
writ of preliminary attachment have been complied with.
Section 426 of the Code of the Civil Procedure provides that "A judge or justice of the peace shall grant an order of
attachment when it is made to appear to the judge or justice of the peace by the affidavit of the plaintiff, or of some
other person who knows the facts, that a sufficient cause of action exists, and that the case is one of those mentioned
in section four hundred and twenty-four, and that there is no other sufficient security for the claim sought to be
enforced by the action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as
the sum for which the order is granted."
The petitioner, in attacking the legality and validity of the writ of preliminary attachment, which is the subject matter of
this petition, relies on the alleged lack of an allegation in the complaint or in the affidavit to the effect "that there is no
sufficient security for the claim sought to be enforced by the action and that the amount alleged to be due to the
plaintiff above all legal set-offs and counterclaims is as much as the sum for which the writ has been granted", and on
the fact that the affidavit is based on mere information and belief of the plaintiff.

76

With respect to the last requisites just stated above, the affidavit is not defective because in it the therein plaintiff and
herein respondent Alfredo Catolico states "that all the allegations thereof are certain and true, to the best of my
knowledge and belief", and not that they are so according to his information and belief.
As to the other two requisites, there is no allegation, either in the complaint or in affidavit solemnizing it, to the effect
that there is no other sufficient security for the claim which the plaintiff seeks to enforce by his action, and that the
amount due him from the defendant, above all legal set-offs and counterclaims, is as much as the sum for which the
writ of preliminary attachment has been granted. Now then, does the omission of these two requisites constitute a
defect preventing a judge of the Court of First Instance from issuing a writ of preliminary attachment?lawphil.net
Attachment is a juridical institution which has for its purpose to secure the outcome of the trial, that is, the satisfaction
of the pecuniary obligation really contracted by a person or believed to have been contracted by him, either by virtue
of a civil obligation emanating from contract or law, or by virtue of some crime or misdemeanor that he might have
committed, and the writ issued, granting it, is executed by attaching and safely keeping all the movable property of the
defendant, or so much thereof as may be sufficient to satisfy the plaintiff's demands (sec. 428, Act No. 190), or by
filing a copy of said writ with the register of deeds for the province in which the real property is situated, whether
standing upon the records in the name of the defendant or not appearing at all upon the record, which constitutes a
limitation of ownership or the right to enjoy or dispose of a thing without further limitations than those established by
law (art. 348, Civil Code), since the owner of the property attached cannot dispose of the same free of all liens and
encumbrances. The law authorizing the issuance of a writ of preliminary attachment should, therefore, be construed
strictly in favor of the judge should require that all the requisites prescribed by law be complied with, without which a
judge acquires no jurisdiction to issue the writ. If he does so in spite of noncompliance with said requisites, he acts in
excess of his jurisdiction and with the writ so issued by him will be null and void.
The jurisdiction of attachment proceedings being a special one, it cannot be legitimately exercised unless the
attaching creditor pursues substantially the essential requirements of the statute, and the court can act only under the
special power limited by the statute and according to the forms of procedures it prescribes. . . . (6 C. J., 88, paragraph
121.)
Where the statutes requires the affidavit to show that defendant is indebted to plaintiff in an amount specified, or that
the latter is entitled to recover such an amount, over and above all legal payments, set-offs, or counterclaims,
compliance with this requirement is essential to confer jurisdiction to issue the writ. (6 C. J., 132,
paragraph 201.)
An affidavit is fatally defective where it fails to comply, at least substantially, with a statutory requirement that is shall
state that the indebtedness for which the action is brought has not been secured by any mortgage or lien upon real or
personal property, or any pledge of personal property, or, if so secured, that the security has become valueless. . . . (6
C. J., 146, paragraph 231.)
For the foregoing consideration, this court is of the opinion and so holds that failure to allege in a complaint or in the
affidavit solemnizing it, or in a separate one, the requisites prescribed by section 426 of the Code of Civil Procedure
for the issuance of a writ of preliminary attachment that there is no other sufficient security for the claim sought to be
enforced by the action, and that the amount due to the plaintiff above all legal set-offs or counterclaims is as much as
the sum for which the order is sought, renders a writ of preliminary attachments issued against the property of a
defendant fatally defective, and the judge issuing it acts in excess of his jurisdiction.
Wherefore, the writ of certiorari applied for is granted, and the writ of preliminary attachment issued by the respondent
judge in civil case No. 1460 of the Court of First Instance of Isabela, wherein the herein respondent Alfredo Catolico is
plaintiff and the herein petitioner Ventura Guzman is defendant, is declared null and void, with costs to respondent
Alfredo Catolico. So ordered.

77

G.R. No. 55272 April 10, 1989

JARDINE-MANILA FINANCE, INC., petitioner,
vs.
COURT OF APPEALS, IMPACT CORPORATION, RICARDO DE LEON and EDUARDO DE LEON, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Ramon Quisumbing, Jr. & Associates for private respondents.

FERNAN, C.J.:
This is a petition for review on certiorari seeking to reverse and set aside: (a) the August 29, 1980 decision of the
Court of Appeals 1 in Special Proceedings CA-G.R. No. SP-09972-R entitled "Impact Corporation, et al. v. Hon.
Buenaventura Guerrero, etc., et al." annulling the order and the writ of attachment issued by the Court of First
Instance of Rizal in Civil Case No. 34617 entitled "Jardine-Manila Finance, Inc. v. Impact Corporation, et al." 2 and (b)
the Resolution dated October 7, 1980 denying herein petitioners motion for reconsideration. 3
On September 28, 1979, petitioner Jardine-Manila Finance, Inc. (JARDINE) filed a complaint in the then Court of First
Instance (CFI) of Rizal, docketed as Civil Case No. 34617, against private respondents Impact Corporation (IMPACT),
Ricardo de Leon and Eduardo de Leon, to collect various sums of money allegedly due from therein defendant
IMPACT under a credit accomodation by way of a discounting line agreement. 4 Herein private respondents Ricardo
de Leon and Eduardo de Leon were included as defendants by virtue of their undertaking covered by a Surety
Agreement under which they bound themselves jointly and severally with defendant IMPACT to pay herein petitioner
all of IMPACT's obligations under the aforesaid agreement. 5
It was alleged that in April and May 1979, IMPACT assigned its receivables to JARDINE on the condition that IMPACT
was to collect them on their due dates from their issuers and remit the collected amounts to JARDINE and/or
repurchase the assigned receivables; 6 but despite the fact that IMPACT had collected the amounts due on said
receivables, it failed or refused to turn over the amounts so collected to JARDINE.
JARDINE thus demanded payment of P 1,000,212.64, the total amount due under said various deeds of assignment,
plus interest of P 16,614.64 as of September 6, 1979 and 25 % of the aforesaid amount as attorney's fees, exemplary
damages and other expenses of litigation.
Likewise contained in said complaint is petitioner's application for a writ of preliminary attachment against private
respondents. The allegations in support of said petition for a writ of preliminary attachment are quoted in full:
Special Allegations for Preliminary Attachment
A.

The foregoing allegations are hereby repleaded and made integral parts hereof.

B.
The defendant corporation at the time of the execution of the aforesaid deeds of assignment had reservation
not to remit to plaintiff the proceeds of the receivables assigned to plaintiff as confirmed by their refusal to remit the
same to plaintiff although the issuers of the receivables assigned to plaintiff had already paid to defendant corporation
their obligations on said receivables to the latter.
C.
Defendants Ricardo de Leon and Eduardo de Leon who are likewise officers of defendant corporation in order
to elicit plaintiffs approval to enter into said deeds of assignment with defendant corporation, executed the aforesaid
surety agreement (Annex L), likewise, with reservation in their minds not to honor their obligations under the same as
what they actually did when they refused to pay the obligations of defendant corporation to plaintiff pursuant to the
provisions of said surety agreement. (Annex L)
D.
Defendant corporation, Ricardo de Leon and Eduardo de Leon have no visible other sufficient security for the
claim sought to be enforced by this action of plaintiff other than their real and personal properties which are located in
Metro Manila and in the province of Rizal, Province of Nueva Ecija or elsewhere. (Emphasis supplied)
E.
Plaintiffs action against defendant corporation is based upon documents and therefrom a sufficient cause of
action exists.
F.
Plaintiff is willing to post a bond in an amount to be fixed by the Honorable Court, not exceeding plaintiffs
claim which will be conditioned to the effect that plaintiff will pay all the costs which may be adjudged to the adverse

78

party and all damages which they may sustain by reason of attachment, if the Honorable Court should finally adjudge
that the applicant plaintiff is not entitled thereto.7
On the basis of the foregoing allegations, the lower court granted JARDINE's petition for the issuance of a writ of
preliminary attachment on October 16, 1979. 8
On October 19, 1979, therein defendants filed a motion to set aside the writ of preliminary attachment. They also
submitted to the court a quo a memorandum in support of their motion to dissolve the attachment contending that the
grounds alleged by the plaintiff in its application for a writ of attachment are not among the grounds specified under
Section 1 of Rule 57; that the defendants have other sufficient security; that there was no affidavit of merit to support
the application for attachment as required by Section 3 of Rule 57 and that the verification of the complaint was
defective as it did not state that the amount due to the plaintiff above all legal set-ups or counterclaims is as much as
the sum for which the order is sought. 9
JARDINE opposed the motion arguing that the mental reservation of defendants at the time of the execution of the
deeds of assignment constituted fraud; that such fraud was further confirmed by the fact that defendants actually
failed to remit the proceeds of the collection of receivables assigned by them; that defendants failed to disclose to the
plaintiff the fact that they had already collected the receivables assigned by them; that the amounts collected by
defendant corporation were received by defendants in trust for plaintiff and defendant corporation appropriated for
itself said collection. 10
On November 7, 1979, the trial court denied defendant's motion to annul the writ of preliminary attachment.
Thereupon, defendant Impact Corporation went to the appellate court on a petition for certiorari seeking to annul said
writ. 11
The findings of the Court of Appeals are as follows:
To our mind there is no question that the allegations of the complaint proper which were repleaded and made integral
part of the application for preliminary attachment (paragraph A) made out a case of conversion or misappropriation of
property held in trust which is the subject of the complaint for the allegations stated that IMPACT had assigned to
JARDINE certain receivables with the understanding that it was to collect the same from the issuers of said
receivables and deliver the amounts collected to JARDINE, but in spite of the fact that IMPACT had actually collected
said amounts, it failed to turn over said receivables to JARDINE. There was, therefore, in the allegations of said
complaint true conversion of the amounts received by defendant in trust for plaintiff. Defendants in their motion to
discharge the attachment and the memorandum filed by them in support of said motion had in effect, admitted the
conversion of the amounts collected by defendant IMPACT, but justified the use of said amounts to meet its
operational expenses to prevent a complete shutdown of its operations.
While we find that the grounds alleged by plaintiff, the herein private respondent, to support its application for
preliminary attachment are among those enumerated in Section 1 of Rule 57 as grounds upon which an attachment
may be issued, we are constrained nonetheless to rule against the regularity or legality of the attachment issued by
respondent Court because there was no allegation made by plaintiff in its application for the issuance of a writ of
attachment to the effect 'that there is no sufficient security for the claim sought to be enforced, by the action, and the
amount due to the applicant or the value of the property on the basis of which is entitled to recover, is as much as the
sum for which the order is granted above all legal counterclaims, a requirement for the granting of an order of
attachment under Section 3 of Rule 57. 12
Thus, on August 29, 1980, the Court of Appeals annulled the assailed writ of attachment for having been issued
improperly and irregularly, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, the petition to annul the order and the writ of attachment issued by respondent Court
is hereby GRANTED and judgment is rendered declaring said order and writ of attachment null and void for having
been issued improperly and regularly. The restraining order issued by this Court on November 9, 1979 restraining
respondents from enforcing the writ of attachment issued by respondent Judge on October 16, 1979 is hereby made
PERMANENT. With costs against private respondents. 13
Hence this recourse.
Reduced to bare essentials, the records show that in the exercise of its discretion, the lower court found justification in
the issuance of the attachment. On the other hand, the Court of Appeals while in accord with the lower court that a
sufficient cause of action exists for petitioner and that the ground for its application for attachment is one of those
mentioned in Section 1, Rule 57 of the Rules of Court, found the issuance of the attachment irregular or illegal in the
absence of the following allegations in the application for attachment: (1) that "there is no sufficient security for the
claim sought to be enforced by the action; and (2) that the amount due to the applicant or the value of the property on

79

the basis of which he is entitled to recover, is as much as the sum for which the order is granted above all legal
counterclaims."
Ultimately, the issue therefore, is whether or not non-compliance with the formal requirements invalidate the writ of
attachment.
On both counts, petitioner admits not having used the exact words of the Rules in making the requisite allegations, but
nonetheless it alleged that it presented ultimate and specific facts, first-in showing that there is indeed no other
sufficient security for the claim sought to be enforced as shown in paragraph D of the Complaint earlier quoted; and
second-while it did not specifically state that the sum due is above all legal counterclaims, such conclusion of fact is
no longer necessary in the face of actual proof in the answer which did not carry any counterclaim. In fine, petitioner
stresses that mere forms must not be given more weight than substance. 14
In excusing the deficiencies of its application for a writ of preliminary attachment, petitioner relies heavily on the case
of De Borja v. Platon, 15 where this Court sustained the writ of attachment issued by the lower court in favor of the
defendants based on the counterclaim of the latter despite the lack of allegations in the affidavit attached to the
petition for the issuance of the writ of attachment that the amount due the counterclaim was as much as the sum for
which the order is granted above all legal counterclaims.
It will be noted however, that the trial court found that the counterclaim of the defendants exceeded the claims of the
plaintiff. Thus, this Court held that "as the trial court had before it the evidence adduced by both sides, the petition for
a writ of preliminary attachment having been filed four years after the trial court had begun, we presume that the lower
court having in mind such evidence, ordered the attachment accordingly." 16
In sharp contrast, in the case at bar, where the records undeniably reveal that: (1) the complaint was filed on
September 28, 1979; 17 (2) the writ of preliminary attachment was issued on October 16, 1979; 18 (3) the motion to
annul preliminary attachment dated October 19, 1979 was filed on the same day; 19 (4) the answer of defendant
IMPACT dated October 30, 1979 20 was received by the RTC Pasig only on November 5, 1979, 21 it is evident that
the questioned writ was issued ex parte; and at a time when the Court a quo had yet no basis for concluding that the
amount due to petitioner is as much as the sum for which the order is granted above all legal counterclaims.
It is therefore, readily apparent that the conclusions in the De Borja case cannot be applied to the case at bar. In fact
even petitioner's plea for liberality as it vigorously invokes the doctrine on said case which refused "to sanction that
formalism and that technicality which are discountenanced by the modern laws of procedure" is an obvious misreading
of the ruling of this Court which states:
On the first point, we believe a writ of preliminary attachment may be issued in favor of a defendant who sets up a
counterclaim. For the purpose of the protection afforded by such attachment, it is immaterial whether the defendants
Borja and wife simply presented a counterclaim or brought a separate civil action against Jose de Borja, plaintiff in the
previous case and petitioner herein. To lay down a subtle distinction would be to sanction that formalism and that
technicality which are discountenanced by the modern laws of procedure for the sake of speedy and substantial
justice. . . . 22
as a liberal approach to the required allegations in the application for a writ of preliminary attachment when what this
Court actually allowed was the presentation of a counterclaim by the defendant instead of a separate civil action in
compliance with one of the basic requirements for the issuance of said writ.
The authority to issue an attachment, like the jurisdiction of the court over such proceedings rests on express statutory
provisions and unless there is authority in the statute, there is no power to issue the writ, and such authority as the
statute confers must be strictly construed.23 In fact, "(E)ven where liberal construction is the rule, the statute or the
right to attachment thereby granted may not be extended by judicial interpretation beyond the meaning conveyed by
the words of the statute." 24 Petitioner's application for a writ of preliminary attachment must therefore be scrutinized
and assessed by the requisites and conditions specifically prescribed by law for the issuance of such writ.
Section 3, Rule 57 of the Revised Rules of Court governs the issuance of a writ of attachment, to wit:
Sec. 3. Affidavit and bond required.-An order of attachment shall be granted only when it is made to appear by the
affidavit of the applicant or some other person who personally knows of the facts, that a sufficient cause of action
exists, that the case is one of those mentioned in section 1 hereof, that there is no sufficient security for the claim
sought to be enforced by the action, and that the amount due to applicant or the value of the property the possession
of which he is entitled to recover is as much as the sum for which the order is granted above all legal counterclaims.
The stringent conditions for the issuance of the writ have been echoed in all subsequent cases, even as late as K.O.
Glass Construction Co. Inc. vs. Valenzuela, 25 wherein the writ of preliminary attachment issued was annulled and set

80

aside on the findings that while the plaintiff "may have stated in his affidavit that a sufficient cause of action exists
against the defendant Kenneth O. Glass, he did not state therein that the case is one of those mentioned in Section 1
hereof; that there is no other sufficient security for the claim sought to be enforced by the action; and that the amount
due to the applicant is as much as the sum for which the order is granted above all legal counterclaims."
More specifically, it has been held that the failure to allege in the affidavit the requisites prescribed for the issuance of
the writ of preliminary attachment, renders the writ of preliminary attachment issued against the property of the
defendant fatally defective, and the judge issuing it is deemed to have acted in excess of his jurisdiction. 26 In fact, in
such cases, the defect cannot even be cured by amendment. 27
Since the attachment is a harsh and rigorous remedy which exposes the debtor to humiliation and annoyance, the rule
authorizing its issuance must be strictly construed in favor of defendant. It is the duty of the court before issuing the
writ to ensure that all the requisites of the law have been complied with. 28 Otherwise, a judge acquires no jurisdiction
to issue the writ.
The general rule is that the affidavit is the foundation of the writ, and if none be filed or one be filed which wholly fails
to set out some facts required by law to be stated therein, there is no jurisdiction and the proceedings are null and
void. Thus, while not unmindful of the fact that the property seized under the writ and brought into court is what the
court finally exercises jurisdiction over, the court cannot subscribe to the proposition that the steps pointed out by
statutes to obtain such writ are inconsequential, and in no sense jurisdictional. 29
Considering that petitioner's application for the subject writ of preliminary attachment did not fully comply with the
requisites prescribed by law, said writ is, as it is hereby declared null and void and of no effect whatsoever.
This conclusion renders a discussion of petitioner's other argument unnecessary.
WHEREFORE, the decision of the Court of Appeals dated August 29, 1980 is hereby AFFIRMED. Costs against
petitioner.
SO ORDERED.

81

G.R. No. L-61754

August 17, 1989

ROBERTO TING, and DOLORES TING, petitioners,

vs.
HON. AUGUSTO E. VILLARIN, FELICIANO GERVACIO, FERDINAND J. GUERRERO, and CONSOLIDATED BANK
& TRUST COMPANY, respondents.
Santos, Valmonte & Associates for petitioners.

SARMIENTO, J.:
On September 17, 1981, private respondent Consolidated Bank and Trust Company (hereinafter "Consolidated Bank")
filed a complaint 1 for a sum of money with prayer for a writ of preliminary attachment against Perlon Textile Mills and
its directors.
Roberto Ting, a director, was impleaded with his wife Dolores Lim Ting. The complaint recites that the wife was
impleaded as a party defendant in order to bind their conjugal partnership of gains which allegedly benefitted from the
transactions subject of the complaint. The, spouses Ting are the present petitioners.
Consolidated Bank actually sued on two (2) causes of action. The first was targeted at recovering on several
promissory notes the amount of P2,972,955.51, allegedly obtained for the defendant corporation by its duly authorized
officers Lu Cheng Peng, Teng See, and Roberto Ting. These officers allegedly signed the promissory notes in their
personal and official capacities thereby binding themselves jointly and severally to Consolidated Bank for the payment
of the promissory notes.
The second cause of action dwells on several violations of trust receipt agreements which the defendant corporation
executed in favor of Consolidated Bank. The defendant corporation's faithful compliance with the trust receipt
agreements appears to have been secured by the continuing guaranty of defendants Liu Suy Lin Angelo Leonar, and
Lu Cheng Peng.
In support of the application for preliminary attachment, Consolidated Bank averred the ground of "fraud in contracting
an obligation" thus
16.
Defendants are guilty of fraud in contracting their obligations more specifically illustrated by their violation of
the trust receipt agreement which is a ground defined under Sec. 1, Rule 57 of the Rules of Court for the issuance of a
writ of preliminary attachment. 2
On September 23, 1981, acting on the application for a writ of attachment by Consolidated Bank, the respondent
judge issued the orders under question, to wit:
xxx

xxx

xxx

We, therefore, command you [Deputy Sheriffs Feliciano Gervacio and Ferdinand J. Guerrero] that you attach the
estate, real and personal, of the said defendants Perlon Textile Mills, Inc., Lu Cheng Peng and Spouse; Teng See @
Teng Tik Hua and Spouse; Spouses Roberto Ting and Dolores Lim Ting; Angelo Leonor and Spouse, Liu Suy Lin and
Spouse, and Yap Chi and Spouse, within your province to the value of said demands, and costs of suit, and that you
keep safely the same according to the Rules of Court, unless the defendant gives security to pay such judgment as
may be recovered in this action in the manner provided for by the Rules of Court; and that you return immediately this
order after executing the same with a full statement of your proceedings and a complete inventory of the properties
attached. 3
On March 3, 1982, acting on the petitioners' Motion to Quash Attachment, the respondent judge issued a second
order, to wit:
xxx

xxx

xxx

Acting on defendants Roberto and Dolores Ting's motion to quasi attachment and plaintiffs' opposition thereto, it
appearing from plaintiffs' allegations that the alleged fraud was effected through the collective action of the
defendants, the court finds the motion to be without sufficient merit. 4
xxx

xxx

xxx

82

On July 19, 1982, acting on the petitioners' motion for reconsideration, the respondent judge issued the last disputed
order the dispositive portion of which states:
xxx

xxx

xxx

WHEREFORE, under the circumstances, and finding no sufficient justification for the reconsideration of the order of
March 3, 1982, the motion for reconsideration is hereby DENIED. 5
xxx

xxx

xxx

The petitioners came to this Court via a petition for certiorari. They are questioning the writ of preliminary attachment
principally on the ground that the application therefor hinges on "fraud in contracting" the trust receipt agreements
under the second cause of action.
On the other hand, the petitioners are impleaded in the complaint merely under the first cause of action. Moreover, the
petitioners challenge the writ of preliminary attachment issued because, in effect, it pierced the veil of corporate fiction.
The petitioners explain that the corporation alone should be held liable for the violation of the trust receipt agreements.
Finally, the petitioners ask that the writ of preliminary attachment be struck down by this Court because it authorized
an attachment over the petitioners' conjugal partnership property.
We agree with the petitioners.
The complaint did not provide for a sufficient basis for the issuance of a writ of preliminary attachment. It is not enough
for the complaint to ritualistic ally cite, as here, that the defendants are "guilty of fraud in contracting an obligation." An
order of attachment cannot be issued on a general averment, such as one ceremoniously quoting from a pertinent
rule. 6 The need for a recitation of factual circumstances that support the application becomes more compelling here
considering that the ground relied upon is "fraud in contracting an obligation." The complaint utterly failed to even give
a hint about what constituted the fraud and how it was perpetrated. Fraud cannot be presumed. 7
The respondent judge thus failed in this duty to ensure that, before issuing the writ of preliminary attachment, all the
requisites of the law have been complied with. He acted in excess of his jurisdiction and the writ he so issued is thus
null and void. 8
What is more, the respondent judge plainly ignored that, as correctly pointed out by the petitioners, the application for
preliminary attachment rests on "fraud in contracting" the trust receipt agreements. The complaint itself, save for the
unwarranted sweeping reference to "defendants," alleged that only Consolidated Bank, as principals, and Liu Suy Lin
Angelo Leonar, and Lu Cheng Peng, as guarantors, were privy to the trust receipt agreements under the second
cause of action. Petitioner Roberto Ting's involvement is limited only to the promissory notes under the first cause of
action. The complaint thus relevantly alleges
FIRST CAUSE OF ACTION
7.
On March 15, 1979, defendant corporation, through its duly authorized officers Lu Cheng Peng, Tang See and
Roberto Ting obtained from plaintiff loan accommodations in the amount of P2,972,955.51 and as evidence thereof,
the aforementioned defendants in their personal and official capacities executed promissory notes undertaking therein
jointly and severally with the corporation to pay plaintiff the above-mentioned amount with interest ....
SECOND CAUSE OF ACTION
8.
On different occasions in 1978-1979, defendants applied to plaintiff for the opening of numerous letters of
credit to finance its purchase of goods from various suppliers.
xxx

xxx

xxx

ALLEGATIONS COMMON TO ALL CAUSES OF ACTION

12.
In order to secure the credit accommodations obtained and all those that the defendant Perlon Textile Mills,
Inc. may thereafter obtain from plaintiff, defendants Liu Suy Lin Angelo Leonar and Lu Cheng Peng executed a
continuing guaranty ... . 9
The sweeping nature of the attachment order probably stemmed from the respondent judge's failure to detect that the
two (2) causes of action had been misproperly joined. Joinder of causes of action is, among others, subject to the

83

rules on joinder of parties. 10 And the rule on joinder of parties is enunciated in Sec. 6, Rule 3, Revised Rules of
Court, thus
Sec. 6. Permissive joinder of parties. All persons ... against whom any right to relief in respect to or arising out of
the same transaction or series transactions is alleged to exist, whether jointly, severally, or in the alternative, may,
except as otherwise provided in these rules ... be joined as defendants in one complaint, where any question of law or
fact common to all such ... defendants may arise in the action ... .
Here, the two causes of action arose from different transactions. There was no "series of transactions" to speak of. But
above all, the complaint can conceivably affect adversely petitioner Roberto Ting under the first cause of action only
but not in the second cause of action. 11
That the attachment ordered by the respondent judge called for the sheriffs to "attach the estate, real and personal
of ... Spouses Roberto Ting and Dolores Lim Ting" (Order of September 23, 1981) likewise gives cause for this Court
to strike it down for being null and void. The attached property of the spouses Ting are conjugal, the same cannot be
validly brought under the painful process of attachment because:
(a)

First, the wife Dolores was impleaded merely because of the fact that she is the spouse of Roberto;

(b)
Second, the conjugal partnership cannot possibly be benefitted (again, here, Consolidated Bank's allegation
that the act of the husband redounded to the benefit of the conjugal partnership is mere "book form" when the
husband binds himself, as guarantor, because this act does not conserve or augment conjugal funds but instead
threatens to dissipate them 12 by unnecessary and unwarranted risks to the partnership's financial stability. When the
husband assumes the obligation of a guarantor, the presumption that he acts, as administrator, for the benefit of the
conjugal partnership, is lost.
WHEREFORE, the petition is hereby GRANTED. The questioned Orders, dated September 23, 1981, March 3, 1982,
and July 19,1982, of the respondent judge, and the levy on attachment made by the deputy sheriffs against the parcel
of land covered by TCT No. T-7232 and registered in the names of the petitioners, are declared NULL AND VOID.
Costs against the private respondent.
SO ORDERED.

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G.R. No. 38316

September 27, 1933

GUILLERMO A. CU UNJIENG and MARIANO CU UNJIENG, petitioners,

vs.
MARIANO A. ALBERT and LEONARD S. GODDARD, both acting as Judge of First Instance of Manila, and
NATIONAL CITY BANK OF NEW YORK, respondents.
Duran, Lim and Tuason and Gibbs and McDonough for petitioners.
Ross, Lawrence and Selph for respondents.
HULL, J.:
Original petition for certiorari. Respondent National City Bank of New York brought suit in the Court of First Instance of
Manila against the petitioners herein for a sum of money. In the complaint it was alleged that the defendants, as the
result of a conspiracy and combination and with the intent to defraud plaintiff, prepared and fabricated by means of
forgery a large number of warehouse receipts and corporate share certificates, and fraudulently obtained from the
National City Bank loans and cash advances on the said forged and fraudulent warehouse receipts and corporate
share certificates.
At the time of the filing of the complaint a writ of attachment against the properties of the motion herein was issued,
and upon the denial of a motion to discharge the attachment, these proceedings were brought.
During the hearing, on the motion to discharge the attachment, plaintiff, with leave of court, amended his complaint
and at the time filed an amended affidavit for attachment. There was no objection as to the sufficiency of the original
affidavit, nor is there any valid to the action of the trial court in permitting an amendment to the original complaint.
We have held in the companion case, Cu Unjieng and Cu Unjieng vs. Goddard and Hongkong & Shanghai Banking
Corporation, G.R. No. 38284,1 that a defective affidavit for attachment could not be amended, but we see no objection
to permitting the amendment of an affidavit of attachment that is not defective, even though a new and additional
ground of attachment is alleged. (6 C.J., 158; sec. 110, Code of Civil Procedure.)
The main contention of petitioners herein is that the writ should be discharged, as the cause of action is ex delicto and
is therefore not within the provisions of section 412 of the Code of Civil Procedure, which by section 424 of the said
Code, authorities the issuance of a writ of attachment. Sections 424 and 412 read as follows:
SEC. 424. Attachment. A plaintiff may, at the commencement of his action, or at any time afterwards, have the
property of the defendant attached as security for the satisfaction of any judgment that may be recovered, unless the
defendant gives security to pay such judgment, in the manner hereinafter provided, in the following cases;
1.
In all cases mentioned in section four hundred and twelve, providing for the arrest of a defendant. But the
plaintiff must make an election as to whether he will ask for an order of arrest or an order of attachment; he shall not
be entitled to both orders;
2.

In an action against a defendant not residing in the Philippine Islands.

SEC. 412.

Arrest. A defendant may be arrested in the following cases:

1.
In an action for the recovery of money or damages on a cause of action arising upon contract, express or
implied, when the defendant is about to depart from the Philippine Islands, with intent to defraud his creditors;
2.
In an action for money or property embezzled or fraudulently misapplied or converted to his own used by a
public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his
employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty;
3.
In an action to recover the possession of personal property unjustly detained, when the property, or any part
thereof, has been concealed, removed, or disposed of, to prevent its being found or taken by the officer;
4.
When the defendant 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;
5.
When the defendant has removed or disposed of his property, or is about to do so, with intent to defraud his
creditors.

85

The respondents herein contend that the writ was properly issued under the fourth paragraph of section 412, and that
the limiting clause in paragraph 1 that the action must arise "upon contract, express or implied", applies only to that
paragraph and not to the entire section.
Both sides have submitted voluminous briefs with a wealth of citations from other jurisdictions. As attachments are
purely statutory, other decisions are of little value unless based on similar statutes.
The exact question presented is one of first impression in this jurisdiction, and our attention has not been called to any
case where a statute similar to what we have here has been judicially interpreted. If the statute is read in its entirely, it
will at once be seen that if an attachment can be had only from a contract, express or implied, sections [paragraphs]
2,3, and 4 are of no value, because under all the cases therein mentioned by legal fiction an implied or quasi contract
could be inferred. It is also argued that due to the mentioning of the number of actions in section [paragraph] 2 that are
properly ex delicto, all other actions ex delicto are necessarily excepted from section 412. But this does not
necessarily follow. If the statute is read with care, it will be seen that section [paragraph] 2 authorizes attachment in a
limited filed of embezzlements or estafa, section [paragraph] 4 is also limited to certain specified causes of action in
which fraud is the important element. Even reading sections [paragraphs] 2 and 4 as separate and distinct from the
rest of the section, there is a large number of obligations ex delicto for which an attachment is not authorized.
We believe therefore that the statute should be read as written, and to limit paragraphs 2 and 4 to causes of action
arising upon contract, express or implied, would do violence to the obvious legislative intent. As the complaint and
affidavit for attachment clearly show that the action is brought on an allegation of guilt of fraud in contracting the debt
or incurring the obligation for which redress is sought, the attachment is authorized under section 412.
Writ denied. Costs against petitioners. So ordered.

86

G.R. No. 179922

December 16, 2008

JUAN DE DIOS CARLOS, petitioner,

vs.
FELICIDAD SANDOVAL, also known as FELICIDAD S. VDA. DE CARLOS or FELICIDAD SANDOVAL CARLOS or
FELICIDAD SANDOVAL VDA. DE CARLOS, and TEOFILO CARLOS II, respondents.
DECISION

REYES, R.T., J.:

ONLY a spouse can initiate an action to sever the marital bond for marriages solemnized during the effectivity of the
Family Code, except cases commenced prior to March 15, 2003. The nullity and annulment of a marriage cannot be
declared in a judgment on the pleadings, summary judgment, or confession of judgment.
We pronounce these principles as We review on certiorari the Decision[1] of the Court of Appeals (CA) which reversed
and set aside the summary judgment[2] of the Regional Trial Court (RTC) in an action for declaration of nullity of
marriage, status of a child, recovery of property, reconveyance, sum of money, and damages.
The Facts
The events that led to the institution of the instant suit are unveiled as follows:
Spouses Felix B. Carlos and Felipa Elemia died intestate. They left six parcels of land to their compulsory heirs,
Teofilo Carlos and petitioner Juan De Dios Carlos. The lots are particularly described as follows:
Parcel No. 1
Lot No. 162 of the MUNTINLUPA ESTATE SUBDIVISION, Case No. 6137 of the Court of Land Registration.
Exemption from the provisions of Article 567 of the Civil Code is specifically reserved.
Area: 1 hectare, 06 ares, 07 centares.

Parcel No. 2
A parcel of land (Lot No. 159-B), being a portion of Lot 159, situated in the Bo. of Alabang, Municipality of Muntinlupa,
Province of Rizal, x x x containing an area of Thirteen Thousand Four Hundred Forty One (13,441) square meters.

Parcel No. 3
A parcel of land (Lot 159-B-2 of the subd. plan [LRC] Psd-325903, approved as a non-subd. project), being a portion
of Lot 159-B [LRC] Psd- Alabang, Mun. of Muntinlupa, Metro Manila, Island of Luzon. Bounded on the NE, points 2 to
4 by Lot 155, Muntinlupa Estate; on the SE, point 4 to 5 by Lot 159-B-5; on the S, points 5 to 1 by Lot 159-B-3; on the
W, points 1 to 2 by Lot 159-B-1 (Road widening) all of the subd. plan, containing an area of ONE HUNDRED THIRTY
(130) SQ. METERS, more or less.

PARCEL No. 4
A parcel of land (Lot 28-C of the subd. plan Psd-13-007090, being a portion of Lot 28, Muntinlupa Estate, L.R.C. Rec.
No. 6137), situated in the Bo. of Alabang, Mun. of Muntinlupa, Metro Manila. Bounded on the NE, along lines 1-2 by
Lot 27, Muntinlupa Estate; on the East & SE, along lines 2 to 6 by Mangangata River; and on the West., along line 6-1,
by Lot 28-B of the subd. plan x x x containing an area of ONE THUSAND AND SEVENTY-SIX (1,076) SQUARE
METERS.

87

PARCEL No. 5
PARCELA DE TERRENO No. 50, Manzana No. 18, de la subd. de Solocan. Linda por el NW, con la parcela 49; por el
NE, con la parcela 36; por el SE, con la parcela 51; y por el SW, con la calle Dos Castillas. Partiendo de un punto
marcado 1 en el plano, el cual se halla a S. gds. 01'W, 72.50 mts. Desde el punto 1 de esta manzana, que es un
mojon de concreto de la Ciudad de Manila, situado on el esquina E. que forman las Calles Laong Laan y Dos.
Castillas, continiendo un extension superficial de CIENTO CINCUENTA (150) METROS CUADRADOS.

PARCEL No. 6
PARCELA DE TERRENO No. 51, Manzana No. 18, de la subd. De Solocon. Linda por el NW, con la parcela 50; por el
NE, con la parcela 37; por el SE, con la parcela 52; por el SW, con la Calle Dos Castillas. Partiendo de un punto
Marcado 1 en el plano, el cual se halla at S. 43 gds. 01'E, 82.50 mts. Desde el punto 1 de esta manzana, que es un
mojon de concreto de la Ciudad de Manila, situado on el esquina E. que forman las Calles Laong Laan y Dos.
Castillas, continiendo una extension superficial de CIENTO CINCUENTA (150) METROS CUADRADOS.[3]
During the lifetime of Felix Carlos, he agreed to transfer his estate to Teofilo. The agreement was made in order to
avoid the payment of inheritance taxes. Teofilo, in turn, undertook to deliver and turn over the share of the other legal
heir, petitioner Juan De Dios Carlos.
Eventually, the first three (3) parcels of land were transferred and registered in the name of Teofilo. These three (3)
lots are now covered by Transfer Certificate of Title (TCT) No. 234824 issued by the Registry of Deeds of Makati City;
TCT No. 139061 issued by the Registry of Deeds of Makati City; and TCT No. 139058 issued by the Registry of
Deeds of Makati City.
Parcel No. 4 was registered in the name of petitioner. The lot is now covered by TCT No. 160401 issued by the
Registry of Deeds of Makati City.
On May 13, 1992, Teofilo died intestate. He was survived by respondents Felicidad and their son, Teofilo Carlos II
(Teofilo II). Upon Teofilos death, Parcel Nos. 5 & 6 were registered in the name of respondent Felicidad and corespondent, Teofilo II. The said two (2) parcels of land are covered by TCT Nos. 219877 and 210878, respectively,
issued by the Registry of Deeds of Manila.
In 1994, petitioner instituted a suit against respondents before the RTC in Muntinlupa City, docketed as Civil Case No.
94-1964. In the said case, the parties submitted and caused the approval of a partial compromise agreement. Under
the compromise, the parties acknowledged their respective shares in the proceeds from the sale of a portion of the
first parcel of land. This includes the remaining 6,691-square-meter portion of said land.
On September 17, 1994, the parties executed a deed of extrajudicial partition, dividing the remaining land of the first
parcel between them.
Meanwhile, in a separate case entitled Rillo v. Carlos,[4] 2,331 square meters of the second parcel of land were
adjudicated in favor of plaintiffs Rillo. The remaining 10,000-square meter portion was later divided between petitioner
and respondents.
The division was incorporated in a supplemental compromise agreement executed on August 17, 1994, with respect
to Civil Case No. 94-1964. The parties submitted the supplemental compromise agreement, which was approved
accordingly.
Petitioner and respondents entered into two more contracts in August 1994. Under the contracts, the parties equally
divided between them the third and fourth parcels of land.
In August 1995, petitioner commenced an action, docketed as Civil Case No. 95-135, against respondents before the
court a quo with the following causes of action: (a) declaration of nullity of marriage; (b) status of a child; (c) recovery
of property; (d) reconveyance; and (e) sum of money and damages. The complaint was raffled to Branch 256 of the
RTC in Muntinlupa.
In his complaint, petitioner asserted that the marriage between his late brother Teofilo and respondent Felicidad was a
nullity in view of the absence of the required marriage license. He likewise maintained that his deceased brother was
neither the natural nor the adoptive father of respondent Teofilo Carlos II.
Petitioner likewise sought the avoidance of the contracts he entered into with respondent Felicidad with respect to the
subject real properties. He also prayed for the cancellation of the certificates of title issued in the name of

88

respondents. He argued that the properties covered by such certificates of title, including the sums received by
respondents as proceeds, should be reconveyed to him.
Finally, petitioner claimed indemnification as and by way of moral and exemplary damages, attorneys fees, litigation
expenses, and costs of suit.
On October 16, 1995, respondents submitted their answer. They denied the material averments of petitioners
complaint. Respondents contended that the dearth of details regarding the requisite marriage license did not invalidate
Felicidads marriage to Teofilo. Respondents declared that Teofilo II was the illegitimate child of the deceased Teofilo
Carlos with another woman.
On the grounds of lack of cause of action and lack of jurisdiction over the subject matter, respondents prayed for the
dismissal of the case before the trial court. They also asked that their counterclaims for moral and exemplary
damages, as well as attorneys fees, be granted.
But before the parties could even proceed to pre-trial, respondents moved for summary judgment. Attached to the
motion was the affidavit of the justice of the peace who solemnized the marriage. Respondents also submitted the
Certificate of Live Birth of respondent Teofilo II. In the certificate, the late Teofilo Carlos and respondent Felicidad were
designated as parents.
On January 5, 1996, petitioner opposed the motion for summary judgment on the ground of irregularity of the contract
evidencing the marriage. In the same breath, petitioner lodged his own motion for summary judgment. Petitioner
presented a certification from the Local Civil Registrar of Calumpit, Bulacan, certifying that there is no record of birth of
respondent Teofilo II.
Petitioner also incorporated in the counter-motion for summary judgment the testimony of respondent Felicidad in
another case. Said testimony was made in Civil Case No. 89-2384, entitled Carlos v. Gorospe, before the RTC Branch
255, Las Pias. In her testimony, respondent Felicidad narrated that co-respondent Teofilo II is her child with Teofilo.[5]
Subsequently, the Office of the City Prosecutor of Muntinlupa submitted to the trial court its report and manifestation,
discounting the possibility of collusion between the parties.
RTC and CA Dispositions
On April 8, 1996, the RTC rendered judgment, disposing as follows:
WHEREFORE, premises considered, defendants (respondents) Motion for Summary Judgment is hereby denied.
Plaintiffs (petitioners) Counter-Motion for Summary Judgment is hereby granted and summary judgment is hereby
rendered in favor of plaintiff as follows:
1. Declaring the marriage between defendant Felicidad Sandoval and Teofilo Carlos solemnized at Silang, Cavite on
May 14, 1962, evidenced by the Marriage Certificate submitted in this case, null and void ab initio for lack of the
requisite marriage license;
2. Declaring that the defendant minor, Teofilo S. Carlos II, is not the natural, illegitimate, or legally adopted child of the
late Teofilo E. Carlos;
3. Ordering defendant Sandoval to pay and restitute to plaintiff the sum of P18,924,800.00 together with the interest
thereon at the legal rate from date of filing of the instant complaint until fully paid;
4. Declaring plaintiff as the sole and exclusive owner of the parcel of land, less the portion adjudicated to plaintiffs in
Civil Case No. 11975, covered by TCT No. 139061 of the Register of Deeds of Makati City, and ordering said Register
of Deeds to cancel said title and to issue another title in the sole name of plaintiff herein;
5. Declaring the Contract, Annex K of complaint, between plaintiff and defendant Sandoval null and void, and ordering
the Register of Deeds of Makati City to cancel TCT No. 139058 in the name of Teofilo Carlos, and to issue another title
in the sole name of plaintiff herein;
6. Declaring the Contract, Annex M of the complaint, between plaintiff and defendant Sandoval null and void;
7. Ordering the cancellation of TCT No. 210877 in the names of defendant Sandoval and defendant minor Teofilo S.
Carlos II and ordering the Register of Deeds of Manila to issue another title in the exclusive name of plaintiff herein;

89

8. Ordering the cancellation of TCT No. 210878 in the name of defendant Sandoval and defendant Minor Teofilo S.
Carlos II and ordering the Register of Deeds of Manila to issue another title in the sole name of plaintiff herein.
Let this case be set for hearing for the reception of plaintiffs evidence on his claim for moral damages, exemplary
damages, attorneys fees, appearance fees, and litigation expenses on June 7, 1996 at 1:30 o'clock in the afternoon.
SO ORDERED.[6]
Dissatisfied, respondents appealed to the CA. In the appeal, respondents argued, inter alia, that the trial court acted
without or in excess of jurisdiction in rendering summary judgment annulling the marriage of Teofilo, Sr. and Felicidad
and in declaring Teofilo II as not an illegitimate child of Teofilo, Sr.
On October 15, 2002, the CA reversed and set aside the RTC ruling, disposing as follows:
WHEREFORE, the summary judgment appealed from is REVERSED and SET ASIDE and in lieu thereof, a new one
is entered REMANDING the case to the court of origin for further proceedings.
SO ORDERED.[7]
The CA opined:
We find the rendition of the herein appealed summary judgment by the court a quo contrary to law and public policy as
ensconced in the aforesaid safeguards. The fact that it was appellants who first sought summary judgment from the
trial court, did not justify the grant thereof in favor of appellee. Not being an action to recover upon a claim or to obtain
a declaratory relief, the rule on summary judgment apply (sic) to an action to annul a marriage. The mere fact that no
genuine issue was presented and the desire to expedite the disposition of the case cannot justify a misinterpretation of
the rule. The first paragraph of Article 88 and 101 of the Civil Code expressly prohibit the rendition of decree of
annulment of a marriage upon a stipulation of facts or a confession of judgment. Yet, the affidavits annexed to the
petition for summary judgment practically amount to these methods explicitly proscribed by the law.
We are not unmindful of appellees argument that the foregoing safeguards have traditionally been applied to prevent
collusion of spouses in the matter of dissolution of marriages and that the death of Teofilo Carlos on May 13, 1992 had
effectively dissolved the marriage herein impugned. The fact, however, that appellees own brother and appellant
Felicidad Sandoval lived together as husband and wife for thirty years and that the annulment of their marriage is the
very means by which the latter is sought to be deprived of her participation in the estate left by the former call for a
closer and more thorough inquiry into the circumstances surrounding the case. Rather that the summary nature by
which the court a quo resolved the issues in the case, the rule is to the effect that the material facts alleged in the
complaint for annulment of marriage should always be proved. Section 1, Rule 19 of the Revised Rules of Court
provides:
Section 1. Judgment on the pleadings. Where an answer fails to tender an issue, or otherwise admits the material
allegations of the adverse party's pleading, the court may, on motion of that party, direct judgment on such pleading.
But in actions for annulment of marriage or for legal separation, the material facts alleged in the complaint shall always
be proved. (Underscoring supplied)
Moreover, even if We were to sustain the applicability of the rules on summary judgment to the case at bench, Our
perusal of the record shows that the finding of the court a quo for appellee would still not be warranted. While it may
be readily conceded that a valid marriage license is among the formal requisites of marriage, the absence of which
renders the marriage void ab initio pursuant to Article 80(3) in relation to Article 58 of the Civil Code the failure to
reflect the serial number of the marriage license on the marriage contract evidencing the marriage between Teofilo
Carlos and appellant Felicidad Sandoval, although irregular, is not as fatal as appellee represents it to be. Aside from
the dearth of evidence to the contrary, appellant Felicidad Sandovals affirmation of the existence of said marriage
license is corroborated by the following statement in the affidavit executed by Godofredo Fojas, then Justice of the
Peace who officiated the impugned marriage, to wit:
That as far as I could remember, there was a marriage license issued at Silang, Cavite on May 14, 1962 as basis of
the said marriage contract executed by Teofilo Carlos and Felicidad Sandoval, but the number of said marriage license
was inadvertently not placed in the marriage contract for the reason that it was the Office Clerk who filled up the
blanks in the Marriage Contract who in turn, may have overlooked the same.
Rather than the inferences merely drawn by the trial court, We are of the considered view that the veracity and
credibility of the foregoing statement as well as the motivations underlying the same should be properly threshed out
in a trial of the case on the merits.

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If the non-presentation of the marriage contract the primary evidence of marriage is not proof that a marriage did not
take place, neither should appellants non-presentation of the subject marriage license be taken as proof that the same
was not procured. The burden of proof to show the nullity of the marriage, it must be emphasized, rests upon the
plaintiff and any doubt should be resolved in favor of the validity of the marriage.
Considering that the burden of proof also rests on the party who disputes the legitimacy of a particular party, the same
may be said of the trial courts rejection of the relationship between appellant Teofilo Carlos II and his putative father on
the basis of the inconsistencies in appellant Felicidad Sandovals statements. Although it had effectively disavowed
appellants prior claims regarding the legitimacy of appellant Teofilo Carlos II, the averment in the answer that he is the
illegitimate son of appellees brother, to Our mind, did not altogether foreclose the possibility of the said appellants
illegitimate filiation, his right to prove the same or, for that matter, his entitlement to inheritance rights as such.
Without trial on the merits having been conducted in the case, We find appellees bare allegation that appellant Teofilo
Carlos II was merely purchased from an indigent couple by appellant Felicidad Sandoval, on the whole, insufficient to
support what could well be a minors total forfeiture of the rights arising from his putative filiation. Inconsistent though it
may be to her previous statements, appellant Felicidad Sandovals declaration regarding the illegitimate filiation of
Teofilo Carlos II is more credible when considered in the light of the fact that, during the last eight years of his life,
Teofilo Carlos allowed said appellant the use of his name and the shelter of his household. The least that the trial court
could have done in the premises was to conduct a trial on the merits in order to be able to thoroughly resolve the
issues pertaining to the filiation of appellant Teofilo Carlos II.[8]
On November 22, 2006, petitioner moved for reconsideration and for the inhibition of the ponente, Justice Rebecca De
Guia-Salvador. The CA denied the twin motions.
Issues
In this petition under Rule 45, petitioner hoists the following issues:
1. That, in reversing and setting aside the Summary Judgment under the Decision, Annex A hereof, and in denying
petitioners Motion for reconsideration under the Resolution, Annex F hereof, with respect to the nullity of the impugned
marriage, petitioner respectfully submits that the Court of Appeals committed a grave reversible error in applying
Articles 88 and 101 of the Civil Code, despite the fact that the circumstances of this case are different from that
contemplated and intended by law, or has otherwise decided a question of substance not theretofore decided by the
Supreme Court, or has decided it in a manner probably not in accord with law or with the applicable decisions of this
Honorable Court;
2. That in setting aside and reversing the Summary Judgment and, in lieu thereof, entering another remanding the
case to the court of origin for further proceedings, petitioner most respectfully submits that the Court of Appeals
committed a serious reversible error in applying Section 1, Rule 19 (now Section 1, Rule 34) of the Rules of Court
providing for judgment on the pleadings, instead of Rule 35 governing Summary Judgments;
3. That in reversing and setting aside the Summary Judgment and, in lieu thereof, entering another remanding the
case to the court of origin for further proceedings, petitioner most respectfully submits that the Court of Appeals
committed grave abuse of discretion, disregarded judicial admissions, made findings on ground of speculations,
surmises, and conjectures, or otherwise committed misapplications of the laws and misapprehension of the facts.[9]
(Underscoring supplied)
Essentially, the Court is tasked to resolve whether a marriage may be declared void ab initio through a judgment on
the pleadings or a summary judgment and without the benefit of a trial. But there are other procedural issues,
including the capacity of one who is not a spouse in bringing the action for nullity of marriage.
Our Ruling
I. The grounds for declaration of absolute nullity of marriage must be proved. Neither judgment on the pleadings nor
summary judgment is allowed. So is confession of judgment disallowed.
Petitioner faults the CA in applying Section 1, Rule 19[10] of the Revised Rules of Court, which provides:
SECTION 1. Judgment on the pleadings. Where an answer fails to tender an issue, or otherwise admits the material
allegations of the adverse partys pleading, the court may, on motion of that party, direct judgment on such pleading.
But in actions for annulment of marriage or for legal separation, the material facts alleged in the complaint shall always
be proved.

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He argues that the CA should have applied Rule 35 of the Rules of Court governing summary judgment, instead of the
rule on judgment on the pleadings.
Petitioner is misguided. The CA did not limit its finding solely within the provisions of the Rule on judgment on the
pleadings. In disagreeing with the trial court, the CA likewise considered the provisions on summary judgments, to wit:
Moreover, even if We are to sustain the applicability of the rules on summary judgment to the case at bench, Our
perusal of the record shows that the finding of the court a quo for appellee would still not be warranted. x x x[11]
But whether it is based on judgment on the pleadings or summary judgment, the CA was correct in reversing the
summary judgment rendered by the trial court. Both the rules on judgment on the pleadings and summary judgments
have no place in cases of declaration of absolute nullity of marriage and even in annulment of marriage.
With the advent of A.M. No. 02-11-10-SC, known as Rule on Declaration of Absolute Nullity of Void Marriages and
Annulment of Voidable Marriages, the question on the application of summary judgments or even judgment on the
pleadings in cases of nullity or annulment of marriage has been stamped with clarity. The significant principle laid
down by the said Rule, which took effect on March 15, 2003[12] is found in Section 17, viz.:
SEC. 17. Trial. (1) The presiding judge shall personally conduct the trial of the case. No delegation of evidence to a
commissioner shall be allowed except as to matters involving property relations of the spouses.
(2) The grounds for declaration of absolute nullity or annulment of marriage must be proved. No judgment on the
pleadings, summary judgment, or confession of judgment shall be allowed. (Underscoring supplied)
Likewise instructive is the Courts pronouncement in Republic v. Sandiganbayan.[13] In that case, We excluded actions
for nullity or annulment of marriage from the application of summary judgments.

Prescinding from the foregoing discussion, save for annulment of marriage or declaration of its nullity or for legal
separation, summary judgment is applicable to all kinds of actions.[14] (Underscoring supplied)
By issuing said summary judgment, the trial court has divested the State of its lawful right and duty to intervene in the
case. The participation of the State is not terminated by the declaration of the public prosecutor that no collusion exists
between the parties. The State should have been given the opportunity to present controverting evidence before the
judgment was rendered.[15]
Both the Civil Code and the Family Code ordain that the court should order the prosecuting attorney to appear and
intervene for the State. It is at this stage when the public prosecutor sees to it that there is no suppression of
evidence. Concomitantly, even if there is no suppression of evidence, the public prosecutor has to make sure that the
evidence to be presented or laid down before the court is not fabricated.
To further bolster its role towards the preservation of marriage, the Rule on Declaration of Absolute Nullity of Void
Marriages reiterates the duty of the public prosecutor, viz.:
SEC. 13. Effect of failure to appear at the pre-trial. (a) x x x
(b) x x x If there is no collusion, the court shall require the public prosecutor to intervene for the State during the trial
on the merits to prevent suppression or fabrication of evidence. (Underscoring supplied)
Truly, only the active participation of the public prosecutor or the Solicitor General will ensure that the interest of the
State is represented and protected in proceedings for declaration of nullity of marriages by preventing the fabrication
or suppression of evidence.[16]
II. A petition for declaration of absolute nullity of void marriage may be filed solely by the husband or wife. Exceptions:
(1) Nullity of marriage cases commenced before the effectivity of A.M. No. 02-11-10-SC; and (2) Marriages celebrated
during the effectivity of the Civil Code.
Under the Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable Marriages, the petition
for declaration of absolute nullity of marriage may not be filed by any party outside of the marriage. The Rule made it
exclusively a right of the spouses by stating:
SEC. 2. Petition for declaration of absolute nullity of void marriages.

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(a) Who may file. A petition for declaration of absolute nullity of void marriage may be filed solely by the husband or
the wife. (Underscoring supplied)
Section 2(a) of the Rule makes it the sole right of the husband or the wife to file a petition for declaration of absolute
nullity of void marriage. The rationale of the Rule is enlightening, viz.:
Only an aggrieved or injured spouse may file a petition for annulment of voidable marriages or declaration of absolute
nullity of void marriages. Such petition cannot be filed by compulsory or intestate heirs of the spouses or by the State.
The Committee is of the belief that they do not have a legal right to file the petition. Compulsory or intestate heirs have
only inchoate rights prior to the death of their predecessor, and, hence, can only question the validity of the marriage
of the spouses upon the death of a spouse in a proceeding for the settlement of the estate of the deceased spouse
filed in the regular courts. On the other hand, the concern of the State is to preserve marriage and not to seek its
dissolution.[17] (Underscoring supplied)
The new Rule recognizes that the husband and the wife are the sole architects of a healthy, loving, peaceful marriage.
They are the only ones who can decide when and how to build the foundations of marriage. The spouses alone are
the engineers of their marital life. They are simultaneously the directors and actors of their matrimonial true-to-life play.
Hence, they alone can and should decide when to take a cut, but only in accordance with the grounds allowed by law.
The innovation incorporated in A.M. No. 02-11-10-SC sets forth a demarcation line between marriages covered by the
Family Code and those solemnized under the Civil Code. The Rule extends only to marriages entered into during the
effectivity of the Family Code which took effect on August 3, 1988.[18]
The advent of the Rule on Declaration of Absolute Nullity of Void Marriages marks the beginning of the end of the right
of the heirs of the deceased spouse to bring a nullity of marriage case against the surviving spouse. But the Rule
never intended to deprive the compulsory or intestate heirs of their successional rights.
While A.M. No. 02-11-10-SC declares that a petition for declaration of absolute nullity of marriage may be filed solely
by the husband or the wife, it does not mean that the compulsory or intestate heirs are without any recourse under the
law. They can still protect their successional right, for, as stated in the Rationale of the Rules on Annulment of Voidable
Marriages and Declaration of Absolute Nullity of Void Marriages, compulsory or intestate heirs can still question the
validity of the marriage of the spouses, not in a proceeding for declaration of nullity but upon the death of a spouse in
a proceeding for the settlement of the estate of the deceased spouse filed in the regular courts.[19]
It is emphasized, however, that the Rule does not apply to cases already commenced before March 15, 2003 although
the marriage involved is within the coverage of the Family Code. This is so, as the new Rule which became effective
on March 15, 2003[20] is prospective in its application. Thus, the Court held in Enrico v. Heirs of Sps. Medinaceli,[21]
viz.:
As has been emphasized, A.M. No. 02-11-10-SC covers marriages under the Family Code of the Philippines, and is
prospective in its application.[22] (Underscoring supplied)
Petitioner commenced the nullity of marriage case against respondent Felicidad in 1995. The marriage in controversy
was celebrated on May 14, 1962. Which law would govern depends upon when the marriage took place.[23]
The marriage having been solemnized prior to the effectivity of the Family Code, the applicable law is the Civil Code
which was the law in effect at the time of its celebration.[24] But the Civil Code is silent as to who may bring an action
to declare the marriage void. Does this mean that any person can bring an action for the declaration of nullity of
marriage?
We respond in the negative. The absence of a provision in the Civil Code cannot be construed as a license for any
person to institute a nullity of marriage case. Such person must appear to be the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit.[25] Elsewise stated, plaintiff must be
the real party-in-interest. For it is basic in procedural law that every action must be prosecuted and defended in the
name of the real party-in-interest.[26]
Interest within the meaning of the rule means material interest or an interest in issue to be affected by the decree or
judgment of the case, as distinguished from mere curiosity about the question involved or a mere incidental interest.
One having no material interest to protect cannot invoke the jurisdiction of the court as plaintiff in an action. When
plaintiff is not the real party-in-interest, the case is dismissible on the ground of lack of cause of action.[27]
Illuminating on this point is Amor-Catalan v. Court of Appeals,[28] where the Court held:

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True, under the New Civil Code which is the law in force at the time the respondents were married, or even in the
Family Code, there is no specific provision as to who can file a petition to declare the nullity of marriage; however, only
a party who can demonstrate proper interest can file the same. A petition to declare the nullity of marriage, like any
other actions, must be prosecuted or defended in the name of the real party-in-interest and must be based on a cause
of action. Thus, in Nial v. Badayog, the Court held that the children have the personality to file the petition to declare
the nullity of marriage of their deceased father to their stepmother as it affects their successional rights.
xxxx
In fine, petitioners personality to file the petition to declare the nullity of marriage cannot be ascertained because of the
absence of the divorce decree and the foreign law allowing it. Hence, a remand of the case to the trial court for
reception of additional evidence is necessary to determine whether respondent Orlando was granted a divorce decree
and whether the foreign law which granted the same allows or restricts remarriage. If it is proved that a valid divorce
decree was obtained and the same did not allow respondent Orlandos remarriage, then the trial court should declare
respondents marriage as bigamous and void ab initio but reduced the amount of moral damages from P300,000.00 to
P50,000.00 and exemplary damages from P200,000.00 to P25,000.00. On the contrary, if it is proved that a valid
divorce decree was obtained which allowed Orlando to remarry, then the trial court must dismiss the instant petition to
declare nullity of marriage on the ground that petitioner Felicitas Amor-Catalan lacks legal personality to file the same.
[29] (Underscoring supplied)
III. The case must be remanded to determine whether or not petitioner is a real-party-in-interest to seek the
declaration of nullity of the marriage in controversy.
In the case at bench, the records reveal that when Teofilo died intestate in 1992, his only surviving compulsory heirs
are respondent Felicidad and their son, Teofilo II. Under the law on succession, successional rights are transmitted
from the moment of death of the decedent and the compulsory heirs are called to succeed by operation of law.[30]
Upon Teofilos death in 1992, all his property, rights and obligations to the extent of the value of the inheritance are
transmitted to his compulsory heirs. These heirs were respondents Felicidad and Teofilo II, as the surviving spouse
and child, respectively.
Article 887 of the Civil Code outlined who are compulsory heirs, to wit:
(1) Legitimate children and descendants, with respect to their legitimate parents and ascendants;
(2) In default of the foregoing, legitimate parents and ascendants, with respect to their legitimate children and
descendants;
(3) The widow or widower;
(4) Acknowledged natural children, and natural children by legal fiction;
(5) Other illegitimate children referred to in Article 287 of the Civil Code.[31]
Clearly, a brother is not among those considered as compulsory heirs. But although a collateral relative, such as a
brother, does not fall within the ambit of a compulsory heir, he still has a right to succeed to the estate. Articles 1001
and 1003 of the New Civil Code provide:
ART. 1001. Should brothers and sisters or their children survive with the widow or widower, the latter shall be entitled
to one-half of the inheritance and the brothers and sisters or their children to the other half.
ART. 1003. If there are no descendants, ascendants, illegitimate children, or a surviving spouse, the collateral relatives
shall succeed to the entire estate of the deceased in accordance with the following articles. (Underscoring supplied)
Indeed, only the presence of descendants, ascendants or illegitimate children excludes collateral relatives from
succeeding to the estate of the decedent. The presence of legitimate, illegitimate, or adopted child or children of the
deceased precludes succession by collateral relatives.[32] Conversely, if there are no descendants, ascendants,
illegitimate children, or a surviving spouse, the collateral relatives shall succeed to the entire estate of the decedent.
[33]

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If respondent Teofilo II is declared and finally proven not to be the legitimate, illegitimate, or adopted son of Teofilo,
petitioner would then have a personality to seek the nullity of marriage of his deceased brother with respondent
Felicidad. This is so, considering that collateral relatives, like a brother and sister, acquire successional right over the
estate if the decedent dies without issue and without ascendants in the direct line.
The records reveal that Teofilo was predeceased by his parents. He had no other siblings but petitioner. Thus, if
Teofilo II is finally found and proven to be not a legitimate, illegitimate, or adopted son of Teofilo, petitioner succeeds to
the other half of the estate of his brother, the first half being allotted to the widow pursuant to Article 1001 of the New
Civil Code. This makes petitioner a real-party-interest to seek the declaration of absolute nullity of marriage of his
deceased brother with respondent Felicidad. If the subject marriage is found to be void ab initio, petitioner succeeds to
the entire estate.
It bears stressing, however, that the legal personality of petitioner to bring the nullity of marriage case is contingent
upon the final declaration that Teofilo II is not a legitimate, adopted, or illegitimate son of Teofilo.
If Teofilo II is proven to be a legitimate, illegitimate, or legally adopted son of Teofilo, then petitioner has no legal
personality to ask for the nullity of marriage of his deceased brother and respondent Felicidad. This is based on the
ground that he has no successional right to be protected, hence, does not have proper interest. For although the
marriage in controversy may be found to be void from the beginning, still, petitioner would not inherit. This is because
the presence of descendant, illegitimate,[34] or even an adopted child[35] excludes the collateral relatives from
inheriting from the decedent.
Thus, the Court finds that a remand of the case for trial on the merits to determine the validity or nullity of the subject
marriage is called for. But the RTC is strictly instructed to dismiss the nullity of marriage case for lack of cause of
action if it is proven by evidence that Teofilo II is a legitimate, illegitimate, or legally adopted son of Teofilo Carlos, the
deceased brother of petitioner.
IV. Remand of the case regarding the question of filiation of respondent Teofilo II is proper and in order. There is a
need to vacate the disposition of the trial court as to the other causes of action before it.
Petitioner did not assign as error or interpose as issue the ruling of the CA on the remand of the case concerning the
filiation of respondent Teofilo II. This notwithstanding, We should not leave the matter hanging in limbo.
This Court has the authority to review matters not specifically raised or assigned as error by the parties, if their
consideration is necessary in arriving at a just resolution of the case.[36]
We agree with the CA that without trial on the merits having been conducted in the case, petitioners bare allegation
that respondent Teofilo II was adopted from an indigent couple is insufficient to support a total forfeiture of rights
arising from his putative filiation. However, We are not inclined to support its pronouncement that the declaration of
respondent Felicidad as to the illegitimate filiation of respondent Teofilo II is more credible. For the guidance of the
appellate court, such declaration of respondent Felicidad should not be afforded credence. We remind the CA of the
guaranty provided by Article 167 of the Family Code to protect the status of legitimacy of a child, to wit:
ARTICLE 167. The child shall be considered legitimate although the mother may have declared against its legitimacy
or may have been sentenced as an adulteress. (Underscoring supplied)
It is stressed that Felicidads declaration against the legitimate status of Teofilo II is the very act that is proscribed by
Article 167 of the Family Code. The language of the law is unmistakable. An assertion by the mother against the
legitimacy of her child cannot affect the legitimacy of a child born or conceived within a valid marriage.[37]
Finally, the disposition of the trial court in favor of petitioner for causes of action concerning reconveyance, recovery of
property, and sum of money must be vacated. This has to be so, as said disposition was made on the basis of its
finding that the marriage in controversy was null and void ab initio.
WHEREFORE, the appealed Decision is MODIFIED as follows:
1. The case is REMANDED to the Regional Trial Court in regard to the action on the status and filiation of respondent
Teofilo Carlos II and the validity or nullity of marriage between respondent Felicidad Sandoval and the late Teofilo
Carlos;
2. If Teofilo Carlos II is proven to be the legitimate, or illegitimate, or legally adopted son of the late Teofilo Carlos, the
RTC is strictly INSTRUCTED to DISMISS the action for nullity of marriage for lack of cause of action;
3. The disposition of the RTC in Nos. 1 to 8 of the fallo of its decision is VACATED AND SET ASIDE.

95

The Regional Trial Court is ORDERED to conduct trial on the merits with dispatch and to give this case priority in its
calendar.
No costs.
SO ORDERED.

96

G.R. No. 89606 August 30, 1990

AGUSTIN SALGADO, petitioner,
vs.
THE HON. COURT OF APPEALS, (Fourteenth Division) and HON. ANTONIO SOLANO, in his capacity as Presiding
Judge of the RTC-Quezon City (Branch 86) and FRANCISCO LUKBAN, respondents.
Ernesto L. Pineda for petitioner.
Lukban, Vega, Lozada & Associates for private respondent.

MEDIALDEA, J.:
This petition for review on certiorari seeks to set aside the decision of the Court of Appeals in CA-G.R. SP No. 15493
entitled, "Agustin Salgado v. Hon. Antonio P. Solano, et al.," which affirmed the Order dated December 22, 1987 of the
Regional Trial Court of Quezon City (Branch 86) sustaining its previous order dated November 18, 1987 directing the
issuance of a writ of execution to enforce the civil liability of herein petitioner in Criminal Case No. 0-33798.
The facts are as follows:
Petitioner was charged with the crime of serious physical injuries in Criminal Case No. 0-33798 entitled, "People of the
Philippines v. Agustin Salgado," before the Regional Trial Court of Quezon City (Branch 86). After trial, judgment was
rendered on October 16, 1986 finding him guilty beyond reasonable doubt of the crime charged. The dispositive
portion of the decision, states:
WHEREFORE, the court finds the accused AGUSTIN P. SALGADO, JR., guilty beyond reasonable doubt of the crime
of serious physical injuries, defined and penalized under paragraph 3 Article 263 of the Revised Penal Code, and
appreciating in his favor the following mitigating circumstances:
1)

voluntary surrender; and

2)
No intention to commit so grave a wrong hereby sentence (sic) said accused to suffer imprisonment for a
period of four (4) months and twenty (20) days, with the accessories provided for by law, and to indemnify the victim,
Francisco Lukban, Jr., in the sum of P126,633.50 as actual or compensatory damages, and the sum of P50,000.00 as
damages for the incapacity of Francisco Lukban to pursue and engage in his poultry business.
SO ORDERED. (p. 19, Rollo)
On October 17, 1986, petitioner filed an application for probation with the trial court. The application was granted in an
Order dated April 15, 1987. The order contained, among others, the following condition:
xxx

xxx

xxx

4. Indemnify the victim FRANCISCO LUKBAN, JR., in a monthly installment of P2,000.00 (TWO THOUSAND PESOS)
every month during the entire period of his probation. (p. 15, Rollo)
For the months of May, June, July, August, September and October, 1987, petitioner complied with the above
condition by paying in checks the said sum of P2,000.00 monthly, through the City Probation Officer, Perla Diaz
Alonzo. Private respondent Francisco Lukban, Jr. voluntarily accepted the checks and subsequently encashed them
(p. 19, Rollo).
On September 19, 1987, private respondent Francisco Lukban, Jr. filed a motion for the issuance of a writ of execution
for the enforcement of the civil liability adjudged in his favor in the criminal case. The motion was opposed by the
petitioner.
On November 18, 1987, the trial court issued an order granting the motion for issuance of a writ of execution. A motion
for reconsideration was filed by petitioner but it was denied on December 22, 1987. After the denial of his motion for
reconsideration, the petitioner filed directly with this Court a petition for review of the trial court's order granting the
motion for issuance of a writ of execution. We referred the petition to the Court of Appeals in a resolution dated April
13, 1988 (p. 18, Rollo).

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On March 16, 1989, respondent Court of Appeals rendered a decision affirming the order of the trial court granting the
motion for the issuance of a writ of execution. A motion for reconsideration was filed by petitioner but respondent Court
of Appeals denied the motion in a resolution dated August 3, 1989 (pp. 9-10, Rollo).
The petitioner went to this Court via a petition for review which was filed on September 26, 1989 and raised the
following assignment of errors:
ASSIGNMENT OF ERRORS
1.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE ORDER DATED APRIL 15, 1987 HAS NOT
MODIFIED THE DECISION OF OCTOBER 16, 1986 AS FAR AS THE CIVIL ASPECT IS CONCERNED.
2.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE CONDITION IN THE PROBATION ORDER
MODIFYING OR ALTERING THE CIVIL LIABILITY OF THE OFFENDER IS UNAUTHORIZED AND NOT
SANCTIONED BY LAW. (p. 10, Rollo)
In its decision affirming the order of the trial court granting private respondent's motion for the issuance of a writ of
execution, respondent Court of Appeals advanced three (3) reasons: 1) that the decision dated October 16, 1986 had
become final and executory and the judge who rendered the decision cannot lawfully alter or modify it; 2) that it is
clear that the probation law provides only for the suspension of sentence imposed on the accused; that it has
absolutely no beating on his civil liability and that none of the conditions listed under Section 10 of the Probation Law
relates to civil liability; and 3) that private respondent is not estopped because he had nothing to do with the filing and
the granting of the probation.
There is no question that the decision of October 16, 1986 in Criminal Case No. Q-33798 finding petitioner guilty
beyond reasonable doubt of the crime of serious physical injuries had become final and executory because the filing
by respondent of an application for probation is deemed a waiver of his right to appeal (See Section 4 of P.D. 968).
Likewise, the judgment finding petitioner liable to private respondent for P126,633.50 as actual damages and
P50,000.00 as consequential damages had also become final because no appeal was taken therefrom. Hence, it is
beyond the power of the trial court to alter or modify. In the case of Samson v. Hon. Montejo, L-18605, October 31,
1963, 9 SCRA 419, 422-423 cited by respondent appellate court, it was held:
. . . , once a decision becomes final, even the court which rendered it cannot lawfully alter or modify the same (Rili, et
al. v. Chunaco, et al., G.R. No. L-6630, Feb. 29, 1956), especially, considering the fact that, as in the instant case, the
alteration or modification is material and substantial (Ablaza v. Sycip, et al., L-12125, Nov. 23, 1960). In the case of
Behn, Meyer & Co., v. J. Mcmicking et al., 11 Phil. 276, (cited by respondents), it was held that "where a final judgment
of an executory character had been rendered in a suit the mission of the court is limited to the execution and
enforcement of the said final judgment in all of its parts and in accordance with its express orders." The judgment in
question is clear, and with the amended writ of execution, the liability of petitioner is greatly augmented, without the
benefit of proper proceeding. (Emphasis ours)
We do not believe, however, that the order dated April 15, 1987 granting the application for probation and imposing
some conditions therein altered or modified the decision dated October 16, 1986. The April 15, 1987 Order of the trial
court granting the application for probation and providing as one of the conditions therein that petitioner indemnify
private respondent P2,000.00 monthly during the period of probation did not increase or decrease the civil liability
adjudged against petitioner but merely provided for the manner of payment by the accused of his civil liability during
the period of probation.
It is the submission of private respondent that in the case of Budlong v. Apalisok, No. 60151, June 24, 1983, 122
SCRA 935. We already ruled that "(T)he 'conviction and sentence' clause of the statutory definition clearly signifies
that probation affects only the criminal aspect of the case."
The pronouncement in Apalisok that "probation affects only the criminal aspect of the case" should not be given a
literal meaning. Interpreting the phrase within the context of that case, it means that although the execution of
sentence is suspended by the grant of probation, it does not follow that the civil liability of the offender, if any, is
extinguished. This can be inferred from a reading of the text of the Apalisok case where the issue that was involved
therein was whether a grant of probation carries with it the extinction of the civil liability of the offender. The reason for
ruling that the grant of probation does not extinguish the civil liability of the offender is clear, "(T)he extinction or
survival of civil liability are governed by Chapter III, Title V, Book I of the Revised Penal Code where under Article 113
thereof provides that: '. . . , the offender shall continue to be obliged to satisfy the civil liability resulting from the crime
committed by him, notwithstanding the fact that he has served his sentence consisting of deprivation of liberty or other
lights, or has not been required to serve the same by reason of amnesty, pardon, commutation of sentence, or any
other reason.'" In the instant case, the issue is not the survival or extinction of the civil liability of a probationer but,

98

whether or not the trial court may impose as a condition of probation the manner in which a probationer may settle his
civil liability against the offended party during the period of probation.
Respondent appellate court ruled that Section 10 of the Probation Law enumerates thirteen (13) conditions of
probation not one of which relates to the civil liability of the offender (p. 22, Rollo).
Section 4 of Presidential Decree No. 968 (Probation Law of 1976) provides:
Sec. 4. Grant of Probation. Subject to the provisions of this Decree, the court may, after it shall have convicted and
sentenced a defendant but before he begins to serve his sentence and upon his application, suspend the execution of
said sentence and place the defendant on probation for such period and upon such terms and conditions as it may
deem best.
In the case of Florentino L. Baclayon v. Hon. Pacito G. Mutia, et al., G.R. No. 59298, April 30, 1984, 129 SCRA 148,
We ruled that the conditions listed under Section 10 of the Probation Law are not exclusive. Courts are allowed to
impose practically any term it chooses, the only limitation being that it does not jeopardize the constitutional rights of
the accused. Courts may impose conditions with the end that these conditions would help the probationer develop into
a law-abiding individual. Thus,
The conditions which trial courts may impose on a probationer may be classified into general or mandatory and
special or discretionary. The mandatory conditions, enumerated in Section 10 of the Probation Law, require that
probationer should a) present himself to the probation officer designated to undertake his supervision at such place as
may be specified in the order within 72 hours from receipt of said order, and b) report to the probation officer at least
once a month at such time and place as specified by said officer. Special or discretionary conditions are those
additional conditions, listed in the same Section 10 of the Probation Law, which the courts may additionally impose on
the probationer towards his correction and rehabilitation outside of prison. The enumeration, however, is not inclusive.
Probation statutes are liberal in character and enable courts to designate practically any term it chooses as long as
the probationer's constitutional rights are not jeopardized. There are innumerable conditions which may be relevant to
the rehabilitation of the probationer when viewed in their specific individual context. It should, however, be borne in
mind that the special or discretionary conditions of probation should be realistic, purposive and geared to help the
probationer develop into a law-abiding and self-respecting individual. Conditions should be interpreted with flexibility in
their application, and each case should be judged on its own merits on the basis of the problems, needs and
capacity of the probationer. . . . .
The primary consideration in granting probation is the reformation of the probationer. That is why, under the law, a post
sentence investigation, which is mandatory, has to be conducted before a person can be granted probation to help the
court in determining whether the ends of justice and the best interest of the public as well as the defendant will be
served by the granting of the probation (Alvin Lee Koenig, Post Sentence Investigation, Its Importance and Utility, IBP
Journal, Special Issue on Probation, Vol. 5, No. 5, pp. 381-387). In the case of People v. Lippner, 219 Cal. 395, 26 p.
2d, 457, 458 (1933), among those which has to be ascertained is the financial condition and capacity of the offender to
meet his obligations:
. . . there can be no real reformation of a wrong-doer unless there is at least a willingness on his part to right the wrong
committed, and the effect of such an act upon the individual is of inestimable value, and to a large extent, determines
whether there has been any real reformation. To be clearly consonant with such a purpose, the post sentence
investigation must include a financial examination of the offender's capability in order to work out a system of payment
which can effectively accomplish reimbursement without interfering with the defendant's family and other financial
responsibilities, according to U.S. Model Penal Code of the American Law Institute. . . . (Sec. 301.1 Comments
(Tentative Draft No. 2, 1954; Also 2 U.S. Dept. of Justice, Attorney General's Survey of Release Procedures 38 (1939)
cited in The Period and Conditions of Probation by Sergio F. Go, IBP Journal Special Issue on Probation, Vol. 5, No. 5,
pp. 406-420). (Emphasis ours)
The trial court is given the discretion to impose conditions in the order granting probation "as it may deem best." As
already stated, it is not only limited to those listed under Section 10 of the Probation Law. Thus, under Section 26,
paragraph (d) of the Rules on Probation Methods and Procedures, among the conditions which may be imposed in the
order granting probation is:
Sec. 26. Other conditions of Probation. The Probation Order may also require the probationer in appropriate cases, to:
xxx

xxx

xxx

(d)

comply with a program of payment of civil liability to the victim or his heirs . . . .

99

However, this is not to say that the manner by which the probationer should satisfy the payment of his civil liability in a
criminal case during the probation period may be demanded at will by him. It is necessary that the condition which
provides for a program of payment of his civil liability will address the offender's needs and capacity. Such need may
be ascertained from the findings and recommendations in the post-sentence investigation report submitted by the
Probation Officer after investigation of the financial capacity of the offender and that such condition is to the end that
the interest of the state and the reformation of the probationer is best served.
In the instant case, in the absence of any showing to the contrary, it is presumed that when the trial court issued the
order of April 15, 1987, the condition that the petitioner has to pay private respondent P2,000.00 a month for the
satisfaction of the civil liability adjudged against him was recommended by the probation officer who prepared the
post-sentence investigation and that such condition is, in the judgment of the trial court, "deemed best" under the
circumstances.
Counting from April 15, 1987, the date of issuance of the order granting probation which under the law is also the date
of its effectivity (Sec. 11, P.D. 968), the probation period must have lapsed by now. Hence, the order for petitioner to
indemnify the private respondent in the amount of P2,000.00 monthly during the period of probation must have also
lapsed. If such were the case, there would therefore, be no more obstacle for the private respondent to enforce the
execution of the balance of the civil liability of the petitioner. However, the records are bereft of allegations to this
effect.
ACCORDINGLY, the petition is GRANTED. The decision dated March 16, 1989 of respondent Court of Appeals
affirming the order of the trial court granting the motion for the issuance of a writ of execution as well as the resolution
dated August 3, 1989 of the same court are hereby REVERSED and SET ASIDE.
SO ORDERED.
Separate Opinions

CRUZ, J., concurring:

I concur in the result, the issue having become moot and academic. At the same time, however, I must express my
reservation on the holding that the condition imposed on the probation was a valid requirement and within the sound
discretion of the trial court. I am not certain that the award of civil damages, having become final and executory, could
still be amended by the trial court by providing for its payment in installments during the period of probation. It seems
to me that the said award was already a vested property right of the victim and that it could be enforced by him
immediately and in full as in ordinary money judgments where there is no indication of a different mode and period of
payment. There is none in the decision in question. That decision was never appealed. Consequently, I submit that the
trial judge had no authority to in effect defer the immediate enforcement of the civil award of P176,633.50 by requiring
the probationer to pay it at the rate of only P2,000.00 a month, a paltry amount, indeed, considering the total
obligation. The fact that the victim accepted the payments did not validate the condition, which was void ab initio as far
as he was concerned. At any time he saw fit, he could have disregarded that condition as an invalid amendment of the
decision and demanded the immediate issuance of a writ of execution for the full amount of the civil award. I believe
that was his vested right.
Separate Opinions
CRUZ, J., concurring:
I concur in the result, the issue having become moot and academic. At the same time, however, I must express my
reservation on the holding that the condition imposed on the probation was a valid requirement and within the sound
discretion of the trial court. I am not certain that the award of civil damages, having become final and executory, could
still be amended by the trial court by providing for its payment in installments during the period of probation. It seems
to me that the said award was already a vested property right of the victim and that it could be enforced by him
immediately and in full as in ordinary money judgments where there is no indication of a different mode and period of
payment. There is none in the decision in question. That decision was never appealed. Consequently, I submit that the
trial judge had no authority to in effect defer the immediate enforcement of the civil award of P176,633.50 by requiring
the probationer to pay it at the rate of only P2,000.00 a month, a paltry amount, indeed, considering the total
obligation. The fact that the victim accepted the payments did not validate the condition, which was void ab initio as far
as he was concerned. At any time he saw fit, he could have disregarded that condition as an invalid amendment of the
decision and demanded the immediate issuance of a writ of execution for the full amount of the civil award. I believe
that was his vested right.

100

101

G.R. No. 167741

July 12, 2007

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
MAJ. GEN. CARLOS FLORES GARCIA, CLARITA DEPAKAKIBO GARCIA, IAN CARL DEPAKAKIBO GARCIA, JUAN
PAULO DEPAKAKIBO GARCIA, TIMOTHY DEPAKAKIBO GARCIA and THE SANDIGANBAYAN (FOURTH
DIVISION), Respondents.
DECISION
CORONA, J.:
This petition for certiorari[1] assails the January 14, 2005 and March 2, 2005 resolutions[2] of the Fourth Division of
the Sandiganbayan in Civil Case No. 0193 entitled Republic of the Philippines v. Maj. Gen. Carlos Flores Garcia,
Clarita Depakakibo Garcia, Ian Carl Depakakibo Garcia, Juan Paulo Depakakibo Garcia and Timothy Mark
Depakakibo Garcia.
Civil Case No. 0193 was a petition for forfeiture of unlawfully acquired properties, with a verified urgent ex-parte
application for the issuance of a writ of preliminary attachment, filed by the Republic of the Philippines against Maj.
Gen. Carlos F. Garcia, his wife[3] and children[4] in the Sandiganbayan on October 27, 2004. In praying for the
issuance of a writ of preliminary attachment, the Republic maintained that, as a sovereign political entity, it was
exempt from filing the required attachment bond.
On October 29, 2004, the Sandiganbayan issued a resolution ordering the issuance of a writ of preliminary attachment
against the properties of the Garcias upon the filing by the Republic of a P1 million attachment bond.[5] On November
2, 2004, the Republic posted the required attachment bond to avoid any delay in the issuance of the writ as well as to
promptly protect and secure its claim.
On December 7, 2004, the Republic filed a motion for partial reconsideration of the October 29, 2004 resolution
claiming that it was exempt from filing an attachment bond and praying for the release thereof.
In a resolution dated January 14, 2005, the Sandiganbayan ruled that there was nothing in the Rules of Court that
exempted the Republic from filing an attachment bond. It reexamined Tolentino v. Carlos[6] which was invoked by the
Republic to justify its claimed exemption. That case was decided under the old Code of Civil Procedure enacted more
than a century ago.
The Sandiganbayan denied the Republics motion. Reconsideration was also denied in a resolution dated March 2,
2005.
As already stated, these two resolutions (January 14, 2005 and March 2, 2005) are the subject of the present petition.
Did the Sandiganbayan commit grave abuse of discretion when it rejected the Republics claim of exemption from the
filing of an attachment bond? Yes.
Sections 3 and 4, Rule 57 of the Rules of Court provide:
Sec. 3. Affidavit and bond required. An order of attachment shall be granted only when it appears by the affidavit of the
applicant, or of some other person who personally knows the facts, that a sufficient cause of action exists, that the
case is one of those mentioned in section 1 hereof, that there is no other sufficient security for the claim sought to be
enforced by the action, and that the amount due to applicant, or the value of the property the possession of which he
is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The affidavit,
and the bond required by the next succeeding section, must be duly filed with the court before the order issues.
Sec. 4. Condition of applicants bond. The party applying for the order must thereafter give a bond executed to the
adverse party in the amount fixed by the court in its order granting the issuance of the writ, conditioned that the latter
will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of
the attachment, if the court shall finally adjudge that the applicant was not entitled thereto. (emphasis supplied)

Under these provisions, before a writ of attachment may issue, a bond must first be filed to answer for all costs which
may be adjudged to the adverse party and for the damages he may sustain by reason of the attachment. However,
this rule does not cover the State. In Tolentino,[7] this Court declared that the State as represented by the government
is exempt from filing an attachment bond on the theory that it is always solvent.

102

2. Section 427 of the Code of Civil Procedure provides that before the issuance of a writ of attachment, the applicant
therefor or any person in his name, should file a bond in favor of the defendant for an amount not less than P400 nor
more than the amount of the claim, answerable for damages in case it is shown that the attachment was obtained
illegally or without sufficient cause; but in the case at bar the one who applied for and obtained the attachment is the
Commonwealth of the Philippines, as plaintiff, and under the theory that the State is always solvent it was not bound to
post the required bond and the respondent judge did not exceed his jurisdiction in exempting it from such requirement.
x x x[8] (emphasis supplied)

In other words, the issuance of a writ of preliminary attachment is conditioned on the filing of a bond unless the
applicant is the State. Where the State is the applicant, the filing of the attachment bond is excused.[9]
The attachment bond is contingent on and answerable for all costs which may be adjudged to the adverse party and
all damages which he may sustain by reason of the attachment should the court finally rule that the applicant is not
entitled to the writ of attachment. Thus, it is a security for the payment of the costs and damages to which the adverse
party may be entitled in case there is a subsequent finding that the applicant is not entitled to the writ. The Republic of
the Philippines need not give this security as it is presumed to be always solvent and able to meet its obligations.
The Sandiganbayan thus erred when it disregarded the foregoing presumption and instead ruled that the Republic
should file an attachment bond. The error was not simply an error of judgment but grave abuse of discretion.
There is grave abuse of discretion when an act is done contrary to the Constitution, the law or jurisprudence.[10] Here,
the Sandiganbayans January 14, 2005 resolution was clearly contrary to Tolentino.
Worse, the Sandiganbayan transgressed the Constitution and arrogated upon itself a power that it did not by law
possess. All courts must take their bearings from the decisions and rulings of this Court. Tolentino has not been
superseded or reversed. Thus, it is existing jurisprudence and continues to form an important part of our legal system.
[11] Surprisingly, the Sandiganbayan declared that Tolentino need(ed) to be carefully reexamined in the light of the
changes that the rule on attachment ha(d) undergone through the years.[12] According to the court a quo:
[Tolentino] was decided by the Supreme Court employing the old Code of Civil Procedure (Act No. 190) which was
enacted by the Philippine Commission on August 7, 1901 or more than a century ago.
That was then, this is now. The provisions of the old Code of Civil Procedure governing attachment have been
substantially modified in the subsequent Rules of Court. In fact, Rule 57 of the present 1997 Rules of Civil Procedure
is an expanded modification of the provisions of the old Code of Civil Procedure governing attachment. Unlike the old
Code of Civil Procedure, the present 1997 Rules of Civil Procedure is noticeably explicit in its requirement that the
party applying for an order of attachment should file a bond.
On this, Article VIII, Section 4(3) of the Constitution provides:
(3) Cases or matters heard by a division shall be decided or resolved with the concurrence of majority of the Members
who actually took part in the deliberations on the issues in the case and voted thereon, and in no case without the
concurrence of at least three of such Members. When the required number is not obtained, the case shall be decided
en banc; Provided, that no doctrine or principle of law laid down by the court in a decision rendered en banc or in
division may be modified or reversed except by the court sitting en banc. (emphasis supplied)

The Constitution mandates that only this Court sitting en banc may modify or reverse a doctrine or principle of law laid
down by the Court in a decision rendered en banc or in division. Any court, the Sandiganbayan included, which
renders a decision in violation of this constitutional precept exceeds its jurisdiction.
Therefore, the Sandiganbayan could not have validly reexamined, much less reversed, Tolentino. By doing something
it could not validly do, the Sandiganbayan acted ultra vires and committed grave abuse of discretion.
The fact was, the revisions of the Rules of Court on attachment, particularly those pertaining to the filing of an
attachment bond, did not quash Tolentino.
Tolentino applied Sec. 247 of Act No. 190 which provided:
Sec. 247. Obligation for damages in case of attachment. Before the order is made, the party applying for it, or some
person on his behalf, must execute to the defendant an obligation in an amount to be fixed by the judge, or justice of

103

the peace, and with sufficient surety to be approved by him, which obligation shall be for a sum not less than two
hundred dollars, and not exceeding the amount claimed by the plaintiff, that the plaintiff will pay all the costs which
may be adjudged to the defendant, and all damages which he may sustain by reason of the attachment, if the same
shall finally be adjudged to have been wrongful or without sufficient cause. (emphasis supplied)

Contrary to the pronouncement of the Sandiganbayan, Section 247 of Act No. 190 explicitly required the execution of
an attachment bond before a writ of preliminary attachment could be issued.
The relevant provisions of Act No. 190 on attachment were later substantially adopted as Sections 3[13] and 4, Rule
59 of the 1940 Rules of Court.
Sec. 3. Order issued only when affidavit and bond filed. An order of attachment shall be granted only when it is made
to appear by the affidavit of the plaintiff, or of some other person who personally knows the facts, that the case is one
of those mentioned in section 1 hereof, that there is no other sufficient security for the claim sought to be enforced by
the action, and that the amount due to the plaintiff, or the value of the property which he is entitled to recover
possession of, is as much as the sum for which the order is granted above all legal counterclaims; which affidavit, and
the bond required by the next succeeding section, must be duly filed with the clerk or judge of the court before the
order issues. (emphasis supplied)
Sec. 4. Bond required from plaintiff. The party applying for the order must give a bond executed to the defendant in an
amount to be fixed by the judge, not exceeding the plaintiffs claim, that the plaintiff will pay all the costs which may be
adjudged to the defendant and all damages which he may sustain by reason of the attachment, if the court shall finally
adjudge that the plaintiff was not entitled thereto.

And with the promulgation of the 1964 Rules of Court, the rules on attachment were renumbered as Rule 57,
remaining substantially the same:
Sec. 3. Affidavit and bond required. An order of attachment shall be granted only when it appears by the affidavit of the
applicant, or of some other person who personally knows the facts, that a sufficient cause of action exists, that the
case is one of those mentioned in section 1 hereof, that there is no other sufficient security for the claim sought to be
enforced by the action, and that the amount due to applicant, or the value of the property the possession of which he
is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The affidavit,
and the bond required by the next succeeding section, must be duly filed with the clerk or judge of the court before the
order issues. (emphasis supplied)
Sec. 4. Condition of applicants bond. The party applying for the order must thereafter give a bond executed to the
adverse party in an amount to be fixed by the judge, not exceeding the applicants claim, conditioned that the latter will
pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the
attachment, if the court shall finally adjudge that the applicant was not entitled thereto.
Clearly, the filing of an attachment bond before the issuance of a writ of preliminary attachment was expressly required
under the relevant provisions of both the 1940 and 1964 Rules of Court.
Commentaries on Sections 3 and 4 of the 1964 Rules of Court uniformly cited Tolentino. They stated that the
government is exempt from filing an attachment bond[14] and that the State need not file an attachment bond.[15]
Where the Republic of the Philippines as a party to an action asks for a writ of attachment against the properties of a
defendant, it need not furnish a bond. This is so because the State is presumed to be solvent.[16]
When plaintiff is the Republic of the Philippines, it need not file a bond when it applies for a preliminary attachment.
This is on the premise that the State is solvent.[17]
And then again, we note the significant fact that Sections 3 and 4, Rule 57 of the 1964 Rules of Court were
substantially incorporated as Sections 3 and 4, Rule 57 of the present (1997) Rules of Court.[18] There is thus no
reason why the Republic should be made to file an attachment bond.
In fact, in Spouses Badillo v. Hon. Tayag,[19] a fairly recent case, this Court declared that, when the State litigates, it is
not required to put up a bond for damages or even an appeal bond because it is presumed to be solvent. In other
words, the State is not required to file a bond because it is capable of paying its obligations.[20]
The pronouncement in Spouses Badillo applies in this case even if Spouses Badillo involved the filing of a
supersedeas bond. The pronouncement that the State is not required to put up a bond for damages or even an appeal
bond is general enough to encompass attachment bonds. Moreover, the purpose of an attachment bond (to answer
for all costs and damages which the adverse party may sustain by reason of the attachment if the court finally rules
that the applicant is not entitled to the writ) and a supersedeas bond (to answer for damages to the winning party in
case the appeal is found frivolous) is essentially the same.

104

In filing forfeiture cases against erring public officials and employees, the Office of the Ombudsman performs the
States sovereign functions of enforcing laws, guarding and protecting the integrity of the public service and addressing
the problem of corruption in the bureaucracy.
The filing of an application for the issuance of a writ of preliminary attachment is a necessary incident in forfeiture
cases. It is needed to protect the interest of the government and to prevent the removal, concealment and disposition
of properties in the hands of unscrupulous public officers. Otherwise, even if the government subsequently wins the
case, it will be left holding an empty bag.
Accordingly, the petition is hereby GRANTED. The January 14, 2005 and March 2, 2005 resolutions of the
Sandiganbayan are REVERSED and SET ASIDE. The Republic of the Philippines is declared exempt from the
payment or filing of an attachment bond for the issuance of a writ of preliminary attachment issued in Civil Case No.
0193. The Sandiganbayan is hereby ordered to release the P1,000,000 bond posted by the Republic of the Philippines
to the Office of the Ombudsman.
SO ORDERED.

105

A.M. No. RTJ-93-1008 November 14, 1994

TERESITA P. ARELLANO, petitioner,
vs.
JUDGE NAPOLEON R. FLOJO, FELINO BANGALAN, Clerk of Court III, HERMINIO DEL CASTILLO, RTC-OCC.;
LUCINO JOVE, Deputy Sheriff, respondents.
Wilfredo O. Paraiso for petitioner.
Tumaru, Guerrero & Tumaru Law Offices for respondents Judge Bangalan and Sheriff Jove.
RESOLUTION
MELO, J.:
Teresita P. Arellano, defendant in Civil Case No. 11-1041 then pending before Branch 6 of the Regional Trial Court of
the Second Judicial Region and stationed in Aparri, Cagayan, filed a verified complaint for neglect of duty, misconduct,
bias, and partiality against
(a)
Judge Napoleon R. Flojo, then Presiding Judge of the aforementioned Branch 6, now assigned as Presiding
Judge of Branch 2 of the Regional Trial Court of Manila, for having irregularly issued an order dated January 21, 1986
for the issuance of a writ of attachment in the said case on the same date despite the lack of legal basis therefor.
(b)
Felino Bangalan, then Acting Clerk of Court III, of the Aparri RTC (now Presiding Judge, MTC, Branch 1,
Aparri, Cagayan) for issuing the writ of attachment in the said case despite the failure of the plaintiffs to post the
required attachment bond of P100,000.00 and for deliberately delaying the issuance of service of summons to the
defendant in that although the case was filed on January 21, 1986, the defendant (complainant herein) was served
summons only on May 13, 1986 or four (4) months thereafter, and that she was not even furnished a copy of the
Order authorizing the issuance of a writ of attachment, the so-called attachment bond, as well as the writ of
attachment itself.
(c)
Herminio del Castillo, Branch Clerk of Court of the Aparri RTC for deliberately delaying the issuance of service
of summons on the defendant.
(d)
Luciano Jove, Deputy Sheriff, Aparri, Cagayan for seizing a vehicle not owned by the defendant and
entrusting the custody thereof to Sheriff Guards Rodolfo Auringan and Dioniso Co., Jr., instead of personally keeping it
under his custody, resulting in the said vehicle being cannibalized to the damage and prejudice of the complainant and
the heirs of the late Ruperto Arellano.
The complaint against Clerk of Court Herminio del Castillo was dismissed for lack of merit by the Court in its
Resolution dated June 28, 1993, as he did not appear to have had any participation in the issuance and service of
summons on the defendant in the aforementioned civil case (pp. 42-43, Rollo.)
With respect to Judge Napoleon R. Flojo, inasmuch as the charges against him were mere reiterations of the charges
filed by the same complainant in A.M. Case No. RTJ-86-52 which had been earlier dismissed for lack of merit by the
Court en banc on March 24, 1987, the instant complaint against him was likewise dismissed in the resolution of the
Court dated November 8, 1993
(p. 83, Rollo).
Thereafter, the case was referred to Justice Ramon A. Barcelona of the Court of Appeals, for investigation, report, and
recommendation in regard to the remaining respondents.
Justice Barcelona finds Judge Bangalan (then Clerk of Court III) guilty of negligence for (1) having issued the writ of
attachment on January 21, 1986 in spite of the applicants' failure to post an acceptable bond as required under
Section 4, Rule 57 of the Rules of Court for what appears in the record is only a promissory note in the form of an
affidavit executed by Victor Suguitan, Andres Langaman, and Mariano Retreta; having caused the implementation
through Sheriff Jove, of the said writ of attachment on January 23, 1986, knowingly fully well that no summons had as
yet been issued and served as of said date upon defendant therein in violation of Section 5, Rule 57 of the Rules of
Court and Section 3, Rule 14 of the same rules.
As for Sheriff Jove, Justice Barcelona found that in serving the writ of attachment, the sheriff did not serve the same
on the defendant but on somebody whom he suspected only as holding the property of the complainant. He failed to
verify the ownership of the cargo truck he attached. To compound the sheriff's failure to exercise diligence in the

106

execution of the writ of attachment, he surrendered the custody of the property to the two alleged guards instead of
depositing the same in a bonded warehouse.
Finding both Judge Bangalan and Sheriff Jove remiss in the performance of their duties, Justice Barcelona
recommends that they each be suspended for one (1) month (not chargeable to their accumulated leave) without pay.
However, this Court is of the opinion and thus hereby holds that a fine of P5,000.00 each for Judge Bangalan and
Sheriff Jove is the commensurate penalty for the irregularity that attended the civil case below. In this respect, we
agree with the factual findings and analysis of the Office of the Court Administrator, thus:
Indeed, he issued the Writ of Attachment although the plaintiffs have not yet posted the required attachment bond. It is
explicitly stated in his Comment that what was filed was merely an undertaking. The fact that the "Undertaking" was
subscribed by the branch clerk of court does not necessarily follow that it carried the imprimatur of the presiding judge
thereof. As a lawyer, respondent Bangalan, who is now a Judge should have known the glaring distinctions between a
plain undertaking and a real attachment bond. The difference between the two is not that hard to discern. As ruled by
Judge Ernesto A. Talamayan in his order of April 23, 1993 (Rollo, pp. 18-19), no bond can be confiscated to answer for
the damages sustained by defendants. He discovered that only a promissory note in the form of an affidavit executed
by the bondsmen denominated as an attachment bond appears on the record. Had respondent Bangalan carefully
examined the undertaking filed before he issued the writ of attachment, such a situation could have been obviated.
Where a statute authorizing attachment requires, as a condition to the issuance of the writ, that a bond shall be given
by plaintiff to indemnify defendant for any loss or injury resulting from the attachment in case it proves to be wrongful,
a failure to give such bond is fatal, and an attachment issued without the necessary bond is invalid (7 C.J.S. 326).
However, we do not find that the delay in the issuance and service of summons was deliberately done to prejudice the
defendant. Bad faith cannot be inferred by the mere fact of delay considering that it was issued by the Office of the
Clerk of Court and not by the branch clerk to whom the case was already assigned.
For seizing a vehicle which is not owned by the defendant, respondent Sheriff Jove may be held administratively
liable. Although his actuation may not have been tainted with bad faith or malice, he failed to exercise due prudence in
attaching the truck. He should have verified first if the truck he seized was owned by the judgment debtor, especially in
this case where it was found in the possession of a person other than its real owner. Consequently, the writ of
attachment was ordered dissolved in the Decision of Judge Tumacder dated August 9, 1989 (Rollo, pp. 25 to 41) as
the property attached does not belong to the judgment debtor but to her father, Ruperto Arellano. A sheriff incurs
liability if he wrongfully levies upon the property of a third person (47 Am Jr 857). A sheriff has no authority to attach
the property of any person under execution except that of the judgment debtor. If he does so, the writ of execution
affords him no justification, for the action is not in obedience to the mandate of the writ (Codesal and Ocampo vs.
Ascue, 38 Phil. 902). The sheriff maybe liable for enforcing execution on property belonging to a third party (Sec. 17,
Rule 39, Rules of Court). However, he cannot be faulted for entrusting the custody thereof to the sheriff guards
considering that he can not physically keep the cargo truck under his custody. His stand is sustained by the Court in its
Order of October 10, 1989 (Rollo, pp. 110 to 111), holding the two (2) sheriff guards liable for the cannibalism of the
truck.
(pp. 132-133. Rollo)
WHEREFORE, premises considered, Judge Felino Bangalan and Sheriff Lucinio Jove are hereby each fined the
amount of FIVE THOUSAND PESOS (P5,000.00), with the severe warning that a repetition of the same or similar acts
in the future will be dealt with more severely.
SO ORDERED.

107

G.R. No. 74696 November 11, 1987

JOSE D. CALDERON, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, GEORGE SCHULZE, GEORGE SCHULZE, JR., ANTONIO C. AMOR,
MANUEL A. MOZO, and VICTOR M. NALUZ, respondents.
G. R. No. 73916 November 11, 1987
FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC., petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, GEORGE SCHULZE, ANTONIO C. AMOR, MANUEL A. MOZO and
VICTOR M. NALUZ, respondents.

PARAS, J.:
For review on certiorari is respondent appellate Court's decision 1 in AC-G.R. No. 01420, which affirmed the Regional
Trial Court's decision 2 appealed from holding the plaintiff Jose D. Calderon (petitioner herein) and his bondsman the
Integrated Bonding and Insurance Company, Inc., jointly and severally liable to pay defendants (private respondents
herein), damages caused by the filing by Calderon of the allegedly unwarranted suit and the wrongful and malicious
attachment of private respondents' properties.
The facts of the case are briefly as follows:
On November 2, 1976, petitioner Calderon purchased from the private respondents the following: the Luzon
Brokerage Corporation (LBC for brevity) and its five (5) affiliate companies, namely, Luzon Air Freight, Inc., Luzon Port
Terminals Services, Inc., Luzon (GS) Warehousing Corporation, GS Industrial Management Corporation, and GS
Luzon Trucking Corporation. Twenty one (21) days thereafter or on November 23, 1976, the Bureau of Customs
suspended the operations of LBC for failure to pay the amount of P1,475,840.00 representing customs taxes and
duties incurred prior to the execution of the sale. In order to lift the suspension Calderon paid the sum of P606,430.00
to the Bureau of Customs.
On October 27, 1977, Calderon filed a complaint against private respondents to recover said amount of
P1,475,840.00, with damages by reason of breach of warranty. In the same complaint, the petitioner prayed for a
preliminary attachment, alleging: that private respondents had deliberately and willfully concealed from his knowledge
such staggering liability of the LBC for the purpose of misleading him into buying the six aforesaid companies; and
that private respondent Schulze is about to depart from the Philippines in order to defraud his creditors.
To support the petition for preliminary attachment, the petitioner posted a surety bond of P1,475,840.00. On October
28, 1977, the trial court issued a writ of preliminary attachment, whereupon properties of the private respondents were
attached and their bank deposits were garnished.
On November 10, 1977, petitioner Calderon filed an amended complaint, alleging that while the liabilities of LBC are
reflected in its books, the aforesaid amount was fraudulently withdrawn and misappropriated by private respondent
Schulze. (pp. 7-18, Rollo)
On the other hand, private respondents claimed: that the amount of P1,475,840.00 due to the Bureau of Customs
represents the duties and taxes payable out of the advanced payments made by LBC's client, Philippine Refining
Company (PRC, for brevity) in August, September and October, 1976, and in the first and second weeks of November
1976, after Calderon himself had taken control of the management of LBC (Exhibit A); that these deposit payments
were properly recorded in the books of the corporation and existing as part of the corporate funds; that from the first
week of June, 1976 up to October 30, 1976, private respondent Schulze fully disclose and explained to Calderon that
these customer's advanced deposit payments (including those of the PRC) are to be paid to the Bureau of Customs
when their corresponding customs taxes and duties become due; that during this phase of the negotiation, Calderon
and his representatives inspected and studied the corporate books and records at will and learned the daily operations
and management of LBC; that the petitioner did not pay out of his own pocket but out of the LBC funds the said
amount of P606,430,30 demanded by the Bureau of Customs, as evidenced by a manager's check No. FEBTC 25092
(Exhibits 9, 10, 11 & 38) and another facility negotiated with the Insular Bank of Asia and America (Exhibit K-2); and
that private respondents are setting up a counterclaim for actual, moral and exemplary damages as well as attorney's
fees, as a consequence of the filing of the baseless suit and the wrongful and malicious attachment of their properties,
(pp. 217-221, Rollo)

108

On November 17, 1977, private respondents filed a counterbond, whereupon the trial court issued an order directing
the sheriff to return all real and personal properties already levied upon and to lift the notices of garnishment issued in
connection with the said attachment (Annex B, p. 42, Rollo).
After trial, the trial court dismissed the complaint, holding Calderon and his surety First integrated Bonding and
Insurance Co., Inc., jointly and severally liable to pay the damages prayed for by the private respondents.
Said decision was affirmed on appeal, although slightly modified in the sense that the award of moral and exemplary
damages in favor of private respondents Schulze and Amor was reduced. The dispositive portion of the judgment of
affirmance and modification reads:
WHEREFORE, the judgment of the lower court is modified as follows:
To defendant-appellee George Schulze:
P650,000.00 as moral damages and
P200,000.00 as exemplary damages.
To defendant-appellee Antonio C. Amor:
P150,000.00 as moral damages and
P30,000.00 as exemplary damages,
An other dispositions in the judgment appealed from, including the dismissal of the amended complainant are hereby
affirmed in toto.
SO ORDERED.
In his petition, petitioner Calderon asserts, among other things, that the court below erred:
I
IN HOLDING THAT THE PETITIONER FAILED TO ESTABLISH HIS CLAIMS.
II
IN HOLDING THAT THE PRELIMINARY ATTACHMENT HAD BEEN WRONGFULLY AND MALICIOUSLY SUED OUT.
III
IN HOLDING THAT THE PETITIONER IS LIABLE NOT ONLY FOR ACTUAL DAMAGES BUT MORAL AND EXEXEMPLARY DAMAGES AS WELL.
On the other hand, petitioner Insurance Company raises the following issues:
I
WHETHER OR NOT THE PETITIONER SURETY IS LIABLE FOR DAMAGES ON ITS CONTRACTED SURETYSHIP
NOTWITHSTANDING THE DISSOLUTION OF THE WRIT OF PRELIMINARY ATTACHMENT, AS A CON.
SEQUENCE OF THE FILING OF THE DEFENDANT'S COUNTER- BOND, WHEREBY LEVIED PROPERTIES
WERE ORDERED BY THE COURT RETURNED TO PRIVATE RESPONDENTS AND THE NOTICES OF
GARNISHMENT ISSUED IN CONNECTION THEREWITH ORDERED LIFTED.
II
WHETHER OR NOT THE SUBSEQUENT FILING BY PRIVATE RESPONDENTS OF A COUNTER-BOND TO
DISCHARGE THE WRIT OF PRELIMINARY ATTACHMENT CONSTITUTE A WAIVER ON ANY DEFECT IN THE
ISSUANCE OF THE ATTACHMENT WRIT.
III
WHETHER OR NOT A SURETY IS A GUARANTOR OF THE EXISTENCE OF A GOOD CAUSE OF ACTION IN THE
COMPLAINT.
The petition is devoid of merit.

109

Whether or not the amount of P1,475,840.00 was duly disclosed as an outstanding liability of LBC or was
misappropriated by private respondent Schulze is purely a factual issue. That Calderon was clearly in bad faith when
he asked for the attachment is indicated by the fact that he failed to appear in court to support his charge of
misappropriation by Schulze, and in effect, preventing his being cross-examined, no document on the charges was
presented by him.
What the Appellate Court found in this regard need not be further elaborated upon. The Appellate Court ruled:
... The record shows that appellant Calderon failed to produce any evidence in support of his sworn charge that
appellee Schulze had deliberately and willfully concealed the liabilities of Luzon Brokerage Corporation. Neither did
appellant Calderon prove his sworn charges that appellee Schulze had maliciously and fraudulently withdrawn and
misappropriated the amount of Pl,475,840.00 and that an the defendants had maliciously and fraudulently concealed
and withheld from him this alleged liability of Luzon Brokerage Corporation in breach of the contract-warranty that said
corporation had no obligations or liabilities except those appearing in the books and records of the said corporation.
Indeed, appellant Calderon never appeared in the trial court to substantiate the charges in his verified complaints and
in his affidavit to support his petition for the issuance of a writ of attachment. He distanced himself from the appellees
and avoided cross-examination regarding his sworn allegations. ...
... But even though appellant Calderon failed to prove his serious charges of fraud, malice and bad faith, the appellees
took it upon themselves to show that they did not conceal or withhold from appellant's knowledge the deposits made
by Philippine Refining Co., Inc. with Luzon Brokerage Corporation and that they did not withdraw and misappropriate
the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation.
The books and records of Luzon Brokerage Corporation on which the Financial Statement of Luzon Brokerage
Corporation, as of October 31, 1976 was prepared by the auditing firm retained by appellant Calderon himself (Exhibit
1), disclose that the liabilities of Luzon Brokerage Corporation in the total amount of P4,574,498.32 appear under the
heading 'Customers Deposit' (Exhibit 1-A) this amount includes the deposit of Philippine Refining Co., Inc. in the sum
of Pl,475,840.00.
But appellant Calderon contends that this financial statement was dated February 4, 1977 (see Exhibit 1-C). There is
nothing commendable in this argument because the bases of the financial statement were the books, records and
documents of Luzon Brokerage Corporation for the period ending October 31, 1976, which were all turned over to and
examined by appellant Calderon and his executive, legal and financial staffs. There is also no merit in the contention
of appellant Calderon that the appellees have tampered the books of Luzon Brokerage Corporation because there is
no proof to back this charge, let alone the fact that appellant Calderon did not even present the said books to support
his charge.
As stated above, the amount of customers' deposits in the sum of P4,574,498.32 includes the deposits of Philippine
Refining Co., Inc. (Exhibits 46-A, 46-B, 46-C, 46-D, 46-E, 46-F, 46-G, 46-H, 46-1, 46-J, t.s.n. July 23, 1980, pp. 12-13,
14-15). The amounts deposited by Philippine Refining Co., Inc. on various dates with Luzon Brokerage Corporation
made before the execution of the sale were all entered in three other corporate books of Luzon Brokerage Corporation
namely, the Cash Receipts Register (Exhibits 39-A-1 to 39-K-1 and 39-A-1-B to 39-K-1-B), the Journal Vouchers
(Exhibits 42 to 46 and 42-A to 43- A), and the Customer's Deposit Ledger (Exhibit 46-A to 46-J) ... .
Thus, the claim of appellant Calderon that the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage
Corporation of P406,430.00 on August 24, 1976 (Exhibit N P53,640.00 on October 13, 1976 (Exhibit 0), P406,430.00
on September 8, 1976 (Exhibit P P199,508.00 on September 24, 1976 (Exhibit Q P52,738.00 on October 22, 1976
(Exhibit R and P264,436.00 on October 7, 1976 (Exhibit S) were not entered in the books of Luzon Brokerage
Corporation, is completely without merit. ... (pp. 85-87, Rollo)
It is evident from the foregoing that the attachment was maliciously sued out and that as already pointed out Schulze
was not in bad faith.
While as a general rule, the liability on the attachment bond is limited to actual damages, moral and exemplary
damages may be recovered where the attachment was alleged to be maliciously sued out and established to be so.
(Lazatin vs. Twano et al,
L-12736, July 31, 1961).
In the instant case, the issues of wrongful and malicious suing out of the writ of preliminary attachment were joined not
only in private respondents' motion to discharge the attachment but also in their answer to the amended complaint (p.
38, Rollo). The trial court observed that the books and records of Luzon Brokerage Corporation disclose that the
liabilities of the said corporation in the total amount of P4,574,498.32 appear under the heading "Customs Deposit"
(Exhibit 1-A) and this amount includes the deposit of Philippine Refining Co., Inc. in the sum of P1,475,840.00 (p. 26,

110

Rollo). On the other hand, plaintiff never appeared in court, and failed to produce any evidence to substantiate his
charges (p. 26, Rollo).
Well settled is the rule that the factual findings of the trial court are entitled to great weight and respect on appeal,
especially when established by unrebutted testimonial and documentary evidence, as in this case.
Anent the petition of the surety, We say the following:
Specifically, petitioner surety contends that the dissolution of the attachment extinguishes its obligation under the
bond, for the basis of its liability, which is wrongful attachment, no longer exists, the attachment bond having been
rendered void and ineffective, by virtue of Section 12, Rule 57 of the Rules of Court. (p. 5, Petition)
While Section 12, Rule 57 of the Rules of Court provides that upon the filing of a counterbond, the attachment is
discharged or dissolved, nowhere is it provided that the attachment bond is rendered void and ineffective upon the
filing of counterbond.
The liability of the attachment bond is defined in Section 4, Rule 57 of the Rules of Court, as follows:
Sec. 4. Condition of applicant's bond. The party applying for the order must give a bond executed to the adverse party
in an amount to be fixed by the judge, not exceeding the applicant's claim, conditioned that the latter will pay all the
costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the
attachment, if the court shall finally adjudge that the applicant was not entitled thereto.
It is clear from the above provision that the responsibility of the surety arises "if the court shall finally adjudge that the
plaintiff was not entitled thereto." In Rocco vs. Meads, 96 Phil. Reports 884, we held that the liability attaches if the
plaintiff is not entitled to the attachment because the requirements entitling him to the writ are wanting, or if the plaintiff
has no right to the attachment because the facts stated in his affidavit, or some of them, are untrue. It is, therefore,
evident that upon the dismissal of an attachment wrongfully issued, the surety is liable for damages as a direct result
of said attachment.
Equally untenable is the Surety's contention that by filing a counterbond, private respondents waived any defect or
flaw in the issuance of the attachment writ, for they could have sought, without need of filing any counterbond, the
discharge of the attachment if the same was improperly or irregularly issued, as provided in Section 13, Rule 57 of the
Rules of Court.
Whether the attachment was discharged by either of the two (2) ways indicated in the law, i.e., by filing a counterbond
or by showing that the order of attachment was improperly or irregularly issued, the liability of the surety on the
attachment bond subsists because the final reckoning is when "the Court shall finally adjudge that the attaching
creditor was not entitled" to the issuance of the attachment writ in the first place.
The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply
availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the filing of a
counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor
instead of the other way, which, in most instances like in the present case, would require presentation of evidence in a
full-blown trial on the merits and cannot easily be settled in a pending incident of the case.
We believe, however, that in the light of the factual situation in this case, the damages awarded by the Intermediate
Appellate Court are rather excessive. They must be reduced.
WHEREFORE, the judgment of said Appellate Court is hereby modified as follows: Both petitioner Calderon and
petitioner First Integrated Bonding and Insurance Company, Inc. are hereby ordered to give jointly and severally:
1.

Respondent George Schulze, P250,000.00 as moral damages and P50,000.00 as exemplary damages; and

2.

Respondent Antonio C. Amor, P50,000.00 as moral damages and P10,000.00 as exemplary damages.

The rest of the judgment of the Intermediate Appellate Court is hereby AFFIRMED.
SO ORDERED.

111

G.R. No. L-39596

March 23, 1934

"CONSULTA" No. 1013 OF THE REGISTER OF DEEDS OF TAYABAS. GOTAUCO & CO., applicant-appellant,
vs.
THE REGISTER OF DEEDS OF TAYABAS, oppositor-appellee.
Godofredo Reyes for appellant.
Office of the Solicitor-General Hilado for appellee.
BUTTE, J.:
This is an appeal from a judgment of the Fourth Branch of the Court of First Instance of Manila in a consulta submitted
by the register of deeds of Tayabas.
Our decision upon this appeal has been facilitated because both the appellant and the appellee, the latter being
represented by the Solicitor-General, agreed that the judgment should be reversed.
On August 12, 1932, when Exhibits A and B were presented to the register, by which a levy of execution against the
judgment debtor, Rafael Vilar was made on fifteen contracts of land described in Exhibit B and registered in the name
of Florentino Vilar, the register properly denied the inscription of said levy of execution because the title to the lands
was in the name of Florentino Vilar and no evidence was submitted that Rafael Vilar had any present or possible
future interest in the land. On September 17, 1932, there was presented to him a copy of a petition filed in the Court of
First Instance of the province, entitled, "Intestado del Finado Florentino Vilar", from which he could properly infer that
Florentino Vilar was dead and that the judgment debtor Rafael Vilar is one of the heirs of the deceased Florentino
Vilar. Although the value of the participation of Rafael Vilar in the estate of Florentino Vilar was indeterminable before
the final liquidation of the estate, nevertheless, the right of participation in the estate and the lands thereof may be
attached and sold. The real test was laid down by this court in the case of Reyes vs. Grey (21 Phil., 73, 76), namely:
Does the judgment debtor hold such a beneficial interest in the property that he can sell or otherwise dispose of it for
value? Nothing appears in this record to indicate that Rafael Vilar being sui juris could not dispose of his interest or
share as heir in the estate of Florentina Vilar. Having this right, he could by a conveyance defeat pro tanto the
provisions of section 450 of the Code of Civil Procedure and thus deprive the judgment creditor of the benefit of a
lawful execution. (See also Consulta No. 441 de los Abogados de Smith, Bell & Co., 48 Phil., 656, 664, 665.)
On October 12, 1932, with the knowledge which he them had, the register should have accepted and inscribed Exhibit
A, B and D.
The judgment in this consulta is reversed without special pronouncement as to costs.1vvphi1.ne+

112

SECOND DIVISION

G.R. No. 107303

February 21, 1994

EMMANUEL C. OATE and ECON HOLDINGS CORPORATION, petitioners,

vs.
HON. ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE
ASSURANCE COMPANY OF CANADA, respondents.
G.R. No. 107491

February 21, 1994

BRUNNER DEVELOPMENT CORPORATION, petitioner,

vs.
HON. ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE
ASSURANCE COMPANY OF CANADA, respondents.
Florante A. Bautista for petitioner in G.R. No. 107303.
Andin & Andin Law Offices for Brunner Development Corporation.
Quasha, Asperilla, Ancheta, Pena & Nolasco for Sun Life Assurance Company of Canada.

NOCON, J.:
These are separate petitions for certiorari with a prayer for temporary restraining order filed by Emmanuel C. Oate
and Econ Holdings Corporation (in G.R. No. 107303), and Brunner Development Corporation (in G.R. No. 107491),
both of which assail several orders issued by respondent Judge Zues C. Abrogar in Civil Case No. 91-3506.
The pertinent facts are as follows: On December 23, 1991, respondent Sun Life Assurance Company of Canada (Sun
Life, for brevity) filed a complaint for a sum of money with a prayer for the immediate issuance of a writ of attachment
against petitioners, and Noel L. Dio, which was docketed as Civil Case No. 91-3506 and raffled to Branch 150 of the
RTC Makati, presided over by respondent Judge. The following day, December 24, 1991, respondent Judge issued an
order granting the issuance of a writ of attachment, and the writ was actually issued on December 27, 1991.
On January 3, 1992, upon Sun Life's ex-parte motion, the trial court amended the writ of attachment to reflect the
alleged amount of the indebtedness. That same day, Deputy Sheriff Arturo C. Flores, accompanied by a
representative of Sun Life, attempted to serve summons and a copy of the amended writ of attachment upon
petitioners at their known office address at 108 Aguirre St., Makati but was not able to do so since there was no
responsible officer to receive the same. 1 Nonetheless, Sheriff Flores proceeded, over a period of several days, to
serve notices of garnishment upon several commercial banks and financial institutions, and levied on attachment a
condominium unit and a real property belonging to petitioner Oate.
Summons was eventually served upon petitioners on January 9, 1992, while defendant Dio was served with
summons on January 16, 1992.
On January 21, 1992, petitioners filed an "Urgent Motion to Discharge/Dissolve Writ of Attachment." That same day,
Sun Life filed an ex-parte motion to examine the books of accounts and ledgers of petitioner Brunner Development
Corporation (Brunner, for brevity) at the Urban Bank, Legaspi Village Branch, and to obtain copies thereof, which
motion was granted by respondent Judge. The examination of said account took place on January 23, 1992.
Petitioners filed a motion to nullify the proceedings taken thereat since they were not present.
On January 30, 1992, petitioners and their co-defendants filed a memorandum in support of the motion to discharge
attachment. Also on that same day, Sun Life filed another motion for examination of bank accounts, this time seeking
the examination of Account No. 0041-0277-03 with the Bank of Philippine Islands (BPI) which, incidentally,
petitioners claim not to be owned by them and the records of Philippine National Bank (PNB) with regard to checks
payable to Brunner. Sun Life asked the court to order both banks to comply with the notice of garnishment.
On February 6, 1992, respondent Judge issued an order (1) denying petitioners' and the co-defendants' motion to
discharge the amended writ of attachment, (2) approving Sun Life's additional attachment, (3) granting Sun Life's
motion to examine the BPI account, and (4) denying petitioners' motion to nullify the proceedings of January 23, 1992.

113

On March 12, 1992, petitioners filed a motion for reconsideration of the February 6, 1992 order. On September 6,
1992, respondent Judge denied the motion for reconsideration.
Hence, the instant petitions. Petitioners' basic argument is that respondent Judge had acted with grave abuse of
discretion amounting to lack or in excess of jurisdiction in (1) issuing ex parte the original and amended writs of
preliminary attachment and the corresponding notices of garnishment and levy on attachment since the trial court had
not yet acquired jurisdiction over them; and (2) allowing the examination of the bank records though no notice was
given to them.
We find both petitions unmeritorious.
Petitioners initially argue that respondent Judge erred in granting Sun Life's prayer for a writ of preliminary attachment
on the ground that the trial court had not acquired jurisdiction over them. This argument is clearly unavailing since it is
well-settled that a writ of preliminary attachment may be validly applied for and granted even before the defendant is
summoned or is heard from. 2 The rationale behind this rule was stated by the Court in this wise:
A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of
which a plaintiff or other proper party may, at the commencement of the action or any time thereafter, have the
property of the adverse party taken into the custody of the court as security for the satisfaction of any judgment that
may be recovered. It is a remedy which is purely statutory in respect of which the law requires a strict construction of
the provisions granting it. Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before
acquisition of jurisdiction over the person of the defendant.
Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time thereafter." The
phrase "at the commencement of the action," obviously refers to the date of the filing of the complaint which, as
abovepointed out, its the date that marks "the commencement of the action;" and the reference plainly is to a time
before summons is served on the defendant or even before summons issues. What the rule is saying quite clearly is
that after an action is properly
commenced by the filing of the complaint and the payment of all requisite docket and other fees the plaintiff may
apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid down by law, and
that he may do so at any time, either before or after service of summons on the defendant. And this indeed, has been
the immemorial practice sanctioned by the courts: for the plaintiff or other proper party to incorporate the application
for attachment in the complaint or other appropriate pleading (counterclaim, cross-claim, third-party claim) and for the
Trial Court to issue the writ ex-parte at the commencement of the action if it finds the application otherwise sufficient in
form and substance. 3
Petitioners then contended that the writ should have been discharged since the ground on which it was issued
fraud in contracting the obligation was not present. This cannot be considered a ground for lifting the writ since this
delves into the very complaint of the Sun Life. As this Court stated in Cuatro v. Court of Appeals: 4
Moreover, an attachment may not be dissolved by a showing of its irregular or improper issuance if it is upon a ground
which is at the same time the applicant's cause of action in the main case since an anomalous situation would result if
the issues of the main case would be ventilated and resolved in a mere hearing of the motion (Davao Light and Power
Co., Inc. vs. Court of Appeals, supra, The Consolidated Bank and Trust Corp. (Solidbank) vs. Court of Appeals, 197
SCRA 663 [1991]).
In the present case, one of the allegation in petitioner's complaint below is that the defendant spouses induced the
plaintiff to grant the loan by issuing postdated checks to cover the installment payments and a separate set of
postdated checks for payment of the stipulated interest (Annex "B"). The issue of fraud, then, is clearly within the
competence of the lower court in the main action. 5
The fact that a criminal complaint for estafa filed by Sun Life against the petitioners was dismissed by the Provincial
Prosecutor of Rizal for Makati on April 21, 1992 and was upheld by the Provincial Prosecutor on July 13, 1992 is of no
moment since the same can be indicative only of the absence of criminal liability, but not of civil liability. Besides, Sun
Life had elevated the case for review to the Department of Justice, where the case is presently pending.
Finally, petitioners argue that the enforcement of the writ was invalid since it undisputedly preceded the actual service
of summons by six days at most. Petitioners cite the decisions in Sievert vs. Court of Appeals, et al. 6 and BAC
Manufacturing and Sales Corp. vs. Court of Appeals, et al., 7 wherein this Court held that enforcement of the writ of
attachment can not bind the defendant in view of the failure of the trial court to acquire jurisdiction over the defendant
through either summons or his voluntary appearance.

114

We do not agree entirely with petitioners. True, this Court had held in a recent decision that the enforcement of writ of
attachment may not validly be effected until and unless proceeded or contemporaneously accompanied by service of
summons. 8
But we must distinguish the case at bar from the Sievert and BAC Manufacturing cases. In those two cases, summons
was never served upon the defendants. The plaintiffs therein did not even attempt to cause service of summons upon
the defendants, right up to the time the cases went up to this Court. This is not true in the case at bar. The records
reveal that Sheriff Flores and Sun Life did attempt a contemporaneous service of both summons and the writ of
attachment on January 3, 1992, but we stymied by the absence of a responsible officer in petitioners' offices. Note is
taken of the fact that petitioners Oate and Econ Holdings admitted in their answer 9 that the offices of both Brunner
Development Corporation and Econ Holdings were located at the same address and that petitioner Oate is the
President of Econ Holdings while petitioner Dio is the President of Brunner Development Corporation as well as a
stockholder and director of Econ Holdings.
Thus, an exception to the established rule on the enforcement of the writ of attachment can be made where a previous
attempt to serve the summons and the writ of attachment failed due to factors beyond the control of either the plaintiff
or the process server, provided that such service is effected within a reasonable period thereafter.
Several reasons can be given for the exception. First, there is a possibility that a defendant, having been alerted of
plaintiffs action by the attempted service of summons and the writ of attachment, would put his properties beyond the
reach of the plaintiff while the latter is trying to serve the summons and the writ anew. By the time the plaintiff may
have caused the service of summons and the writ, there might not be any property of the defendant left to attach.
Second, the court eventually acquired jurisdiction over the petitioners six days later. To nullify the notices of
garnishment issued prior thereto would again open the possibility that petitioners would transfer the garnished monies
while Sun Life applied for new notices of garnishment.
Third, the ease by which a writ of attachment can be obtained is counter-balanced by the ease by which the same can
be discharged: the defendant can either make a cash deposit or post a counter-bond equivalent to the value of the
property attached. 10 The petitioners herein tried to have the writ of attachment discharged by posting a counter-bond,
the same was denied by respondent Judge on the ground that the amount of the counter-bond was less than that of
Sun Life's bond.
II.
Petitioners' second ground assail the acts of respondent Judge in allowing the examination of Urban Banks' records
and in ordering that the examination of the bank records of BPI and PNB as invalid since no notice of said
examinations were ever given them. Sun Life grounded its requests for the examination of the bank accounts on
Section 10, Rule 57 of the Rules of Court, which provided, to wit:
Sec. 10.
Examination of party whose property is attached and persons indebted to him or controlling his
property; delivery of property to officer. Any person owing debts to the party whose property is attached or having in
his possession or under his control any credit or other personal property belonging to such party, may be required to
attend before the court in which the action is pending, or before a commissioner appointed by the court and be
examined on oath respecting the same. The party whose property is attached may also be required to attend for the
purpose of giving information respecting his property, and may be examined on oath. The court may, after such
examination, order personal property capable of manual delivery belonging to him, in the possession of the person so
required to attend before the court, to be delivered to the clerk or court, sheriff, or other proper officer on such terms
as may be just, having reference to any lien thereon or claim against the same, to await the judgment in the action.
It is clear from the foregoing provision that notice need only be given to the garnishee, but the person who is holding
property or credits belonging to the defendant. The provision does not require that notice be furnished the defendant
himself, except when there is a need to examine said defendant "for the purpose of giving information respecting his
property.
Furthermore, Section 10 Rule 57 is not incompatible with Republic Act No. 1405, as amended, "An Act Prohibiting
Disclosure or Inquiry Into, Deposits With Any Banking Institution and Providing Penalty Therefore," for Section 2
therefore provides an exception "in cases where the money deposited or invested is the subject matter of the
litigation."
The examination of the bank records is not a fishing expedition, but rather a method by which Sun Life could trace the
proceeds of the check it paid to petitioners.

115

WHEREFORE, the instant petitions are hereby DISMISSED. The temporary restraining order issued on June 28, 1993
is hereby lifted.
SO ORDERED.

116

G.R. No. 107303

February 23, 1995

EMMANUEL C. OATE and ECON HOLDINGS CORPORATION, petitioners,

vs.
HON. ZEUS C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE
ASSURANCE COMPANY OF CANADA, respondents.
BRUNNER DEVELOPMENT CORPORATION, petitioner,
vs.
HON. ZEUS C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial Court of Makati, and SUN LIFE
ASSURANCE COMPANY OF CANADA, respondents.
RESOLUTION

MENDOZA, J.:
These are motions separately filed by petitioners, seeking reconsideration of the decision of the Second Division
holding that although the levy on attachment of petitioners' properties had been made before the trial court acquired
jurisdiction over them, the subsequent service of summons on them cured the invalidity of the attachment.
The motions were referred to the Court en banc in view of the fact that in another decision rendered by the Third
Division on the same question, it was held that the subsequent acquisition of jurisdiction over the person of a
defendant does not render valid the previous attachment of his property. 1 The Court en banc accepted the referral
and now issues this resolution.
Petitioners maintain that, in accordance with prior decisions of this Court, the attachment of their properties was void
because the trial court had not at that time acquired jurisdiction over them and that the subsequent service of
summons on them did not cure the invalidity of the levy. They further contend that the examination of the books and
ledgers of the Bank of the Philippine Islands (BPI), the Philippine National Bank (PNB) and the Urban Bank was a
"fishing expedition" which the trial court should not have authorized because petitioner Emmanuel C. Oate, whose
accounts were examined, was not a signatory to any of the documents evidencing the transaction between Sun Life
Assurance of Canada (Sun Life) and Brunner Development Corporation (Brunner).
On the other hand private respondent Sun Life stresses the fact that the trial court eventually acquired jurisdiction over
petitioners and contends that this cured the invalidity of the attachment of petitioners' properties. With respect to the
second contention of petitioners, private respondent argues that the examination of petitioner Oate's bank account
was justified because it was he who signed checks transferring huge amounts from Brunner's account in the Urban
Bank to the PNB and the BPI.
I
At the outset, it should be stated that the Court does not in the least doubt the validity of the writ of attachment issued
in these cases. The fact that a criminal complaint for estafa which Sun Life had filed against petitioner Oate and Noel
L. Dio, president of Brunner, was dismissed by the Office of the Provincial Prosecutor is immaterial to the resolution
of the motions for reconsideration. In the first place, the dismissal, although later affirmed by the Department of
Justice, is pending reconsideration. In the second place, since the issue in the case below is precisely whether
petitioners were guilty of fraud in contracting their obligation, resolution of the question must await the trial of the main
case.
However, we find petitioners' contention respecting the validity of the attachment of their properties to be well taken.
We hold that the attachment of petitioners' properties prior to the acquisition of jurisdiction by the respondent court is
void and that the subsequent service of summons on petitioners did not cure the invalidity of such attachment. The
records show that before the summons and the complaint were served on petitioners Oate and Econ Holdings
Corporation (Econ) on January 9, 1992, Deputy Sheriff Arturo C. Flores had already served on January 3, 1992
notices of garnishment on the PNB Head office 2 and on all its Metro Manila branches and an A.B capital. 3 In addition
he made other levies before the service of summons on petitioners, to wit:
On January 6, 1992, he served notices of garnishment on the Urban Bank Head Office and all its Metro Manila
branches, 4 and on the BPI. 5
On the same day, he levied on attachment Oate's condominium unit at the Amorsolo Apartments Condominium
Project, covered by Condominium Certificate of Title No. S-1758. 6

117

 On January 7, 1992, he served notice of garnishment on the Union Bank of the Philippines. 7
On January 8, 1992, he attached Oate's lot, consisting of 1,256 square meters, at the Ayala-Alabang Subdivision,
Alabang, Muntinlupa, covered by TCT No. 112673. 8
First. The Deputy Sheriff claims that he had tried to serve the summons with a copy of the complaint on petitioners on
January 3, 1992 but that there was no one in the offices of petitioners on whom he could make a service. This is
denied by petitioners who claim that their office was always open and that Adeliza M. Jaranilla, Econ's Chief
Accountant who eventually received summons on behalf of Oate and Econ, was present that day. Whatever the truth
is, the fact is that no other attempt was made by the sheriff to serve the summons except on January 9, 1992, in the
case of Oate and Econ, and on January 16, 1992, in the case of Dio. Meantime, he made several levies, which
indicates a predisposition to serve the writ of attachment in anticipation of the eventual acquisition by the court of
jurisdiction over petitioners.
Second. Private respondent invokes the ruling in Davao Light & Power Co. v. Court of Appeals 9 in support of its
contention that the subsequent acquisition of jurisdiction by the court cured the defect in the proceedings for
attachment. It cites the following portion of the decision in Davao Light and Power, written by Justice, now Chief
Justice, Narvasa:
It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the
person of the defendant, as above indicated issuance of summons, order of attachment and writ of attachment
(and/or appointment of guardian ad litem, or grant of authority to the plaintiff to prosecute the suit as a pauper litigant,
or amendment of the complaint by the plaintiff as a matter of right without leave of court and however valid and
proper they might otherwise be, these do not and cannot bind and affect the defendant until and unless jurisdiction
over his person is eventually obtained by the court, either by service on him of summons or other coercive process or
his voluntary submission to the court's authority. Hence, when the sheriff or other proper officer commences
implementation of the writ of attachment, it is essential that he serve on the defendant not only a copy of the
applicant's affidavit and attachment bond, and of the order of attachment, as explicitly required by Section 5 of Rule
57, but also the summons addressed to said defendant as well as a copy of the complaint and order for appointment
of guardian ad litem, if any, as also explicitly directed by Section 3, Rule 14 of the Rules of
Court. 10
It is clear from the above excerpt, however, that while the petition for a writ of preliminary attachment may be granted
and the writ itself issued before the defendant is summoned, the writ of attachment cannot be implemented until
jurisdiction over the person of the defendant is obtained. As this Court explained, "levy on property pursuant to the writ
thus issued may not be validly effected unless preceded, or contemporaneously accompanied, by service on the
defendant of summons, a copy of the complaint (and of the appointment of guardian ad litem, if any), the application
for attachment (if not incorporated in but submitted separately from the complaint), the order of attachment, and the
plaintiff's attachment bond." 11
Further clarification on this point was made in Cuartero v. Court of Appeals, 12 in which it was held:
It must be emphasized that the grant of the provisional remedy of attachment practically involves three stages; first,
the court issues the order granting the application; second, the writ of attachment issues pursuant to the order
granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over
the person of the defendant should first be obtained. However, once the implementation commences, it is required
that the court must have acquired jurisdiction over the defendant for without such jurisdiction, the court has no power
and authority to act in any manner against the defendant. Any order issuing from the Court will not bind the defendant.
Private respondent argues that the case of Cuartero itself provides for an exception as shown in the statement that
"the court [in issuing the writ of preliminary attachment] cannot bind and affect the defendant until jurisdiction is
eventually obtained" and that since petitioners were subsequently served with summons, no question can be raised
against the validity of the attachment of petitioners' properties before such service.
The statement in question has been taken out of context. The full statement reads:
It is clear from our pronouncements that a writ of preliminary attachment may issue even before summons is served
upon the defendant. However, we have likewise ruled that the writ cannot bind and affect the defendant until
jurisdiction over his person is eventually obtained. Therefore, it is required that when proper officer commences
implementation of the writ of attachment service of summons should be simultaneously made. 13
Indeed, as this Court through its First Division has ruled on facts similar to those in these cases, the attachment of
properties before the service of summons on the defendant is invalid, even though the court later acquires jurisdiction

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over the defendant. 14 At the very least, then, the writ of attachment must be served simultaneously with the service of
summons before the writ may be enforced. As the properties of the petitioners were attached by the sheriff before he
had served the summons on them, the levies made must be considered void.
Third. Nor can the attachment of petitioners' properties before the service of summons on them was made be justified
an the ground that unless the writ was then enforced, petitioners would be alerted and might dispose of their
properties before summons could be served on them.
The Rules of Court do not require that issuance of the writ be kept a secret until it can be enforced. Otherwise in no
case may the service of summons on the defendant precede the levy on attachment. To the contrary, Rule 57, 13
allows the defendant to move to discharge the attachment even before any attachment is actually levied upon, thus
negating any inference that before its enforcement, the issuance of the writ must be kept secret. Rule 57,
13 provides:
Sec. 13.
Discharge of attachment for improper or irregular issuance. The party whose property has been
attached may also, at any time either before or after the release of the attached property, or before any attachment
shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the
order, or to the judge of the court in which the action is pending, for an order to discharge the attachment on the
ground that the same was improperly or irregularly issued. . . . (Emphasis added).
As this Court pointed out in Davao Light and Power, 15 the lifting of an attachment "may be resorted to even before
any property has been levied on."
It is indeed true that proceedings for the issuance of a writ of attachment are generally ex parte. In Mindanao Savings
and Loans Ass'n v. Court of Appeals 16 it was held that no hearing is required for the issuance of a writ of attachment
because this "would defeat the objective of the remedy [because] the time which such hearing would take could be
enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues." It is not,
however, notice to defendant that is sought to be avoided but the "time which such hearing would take" because of the
possibility that defendant may delay the hearing to be able to dispose of his properties. On the contrary there may in
fact be a need for a hearing before the writ is issued as where the issue of fraudulent disposal of property is raised. 17
It is not true that there should be no hearing lest a defendant learns of the application for attachment and he remove's
his properties before the writ can be enforced.
On the other hand, to authorize the attachment of property even before jurisdiction over the person of the defendant is
acquired through the service of summons or his voluntary appearance could lead to abuse. It is entirely possible that
the defendant may not know of the filing of a case against him and consequently may not be able to take steps to
protect his interests.
Nor may sheriff's failure to abide by the law be excused on the pretext that after all the court later acquired jurisdiction
over petitioners. More important than the need for insuring success in the enforcement of the writ is the need for
affirming a principle by insisting on that "most fundamental of all requisites the jurisdiction of the court issuing
attachment over the person of the defendant." 18 It may be that the same result would follow from requiring that a new
writ be served all over again. The symbolic significance of such an act, however, is that it would affirm our commitment
to the rule of law. 19
II
We likewise find petitioners' second contention to be meritorious. The records show that, on January 21, 1992,
respondent judge ordered the examination of the books of accounts and ledgers of Brunner at the Urban Bank,
Legaspi Village branch, and on January 30, 199 the records of account of petitioner Oate at the BPI, even as he
ordered the PNB to produce the records regarding certain checks deposited in it.
First. Sun Life defends these court orders on the ground that the money paid by it to Brunner was subsequently
withdrawn from the Urban Bank after it had been deposited by Brunner and then transferred to BPI and to the
unnamed account in the petitioner Oate's account in the BPI and to the unnamed account in the PNB.
The issue before the trial court, however, concerns the nature of the transaction between petitioner Brunner and Sun
Life. In its complaint, Sun Life alleges that Oate, in his personal capacity and as president of Econ, offered to sell to
Sun Life P46,990,000.00 worth of treasury bills owned by Econ and Brunner at the discounted price of
P39,526,500.82; that on November 27, 1991, Sun Life paid the price by means of a check payable to Brunner; that
Brunner, through its president Noel L. Dio, issued to it a receipt with undertaking to deliver the treasury bills to Sun
Life; and that on December 4, 1991, Brunner and Dio delivered instead a promissory note, dated November 27,
1991, in which it was made to appear that the transaction was a money placement instead of sale of treasury bills.

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Thus the issue is whether the money paid to Brunner was the consideration for the sale of treasury bills, as Sun Life
claims, or whether it was money intended for placement, as petitioners allege. Petitioners do not deny receipt of
P39,526,500.82 from Sun Life. Hence, whether the transaction is considered a sale or money placement does not
make the money the "subject matter of litigation" within the meaning of 2 of Republic Act No. 1405 which prohibits
the disclosure or inquiry into bank deposits except "in cases where the money deposited or invested is the subject
matter of litigation." Nor will it matter whether the money was "swindled" as Sun Life contends.
Second. The examination of bank books and records cannot be justified under Rule 57, 10. This provision states:
Sec. 10.
Examination of party whose property is attached and persons indebted to him or controlling his
property; delivery of property to officer. Any person owing debts to the party whose property is attached or having in
his possession or under his control any credit or other personal property belonging to such party, may be required to
attend before the court in which the action is pending, or before a commissioner appointed by the court, and be
examined on oath respecting the same. The party whose property is attached may also be required to attend for the
purpose of giving information respecting his property, and may be examined on oath. The court may, after such
examination, order personal property capable of manual delivery belonging to him, in the possession of the person so
required to attend before the court, to be delivered to the clerk of the court, sheriff, or other proper officer on such
terms as may be just, having reference to any lien thereon or claims against the same, to await the judgment in the
action.
Since, as already stated, the attachment of petitioners' properties was invalid, the examination ordered in connection
with such attachment must likewise be considered invalid. Under Rule 57, 10, as quoted above, such examination is
only proper where the property of the person examined has been validly attached.
WHEREFORE, the decision dated February 21, 1994 is RECONSIDERED and SET ASIDE and another one is
rendered GRANTING the petitions for certiorari and SETTING ASIDE the orders dated February 26, 1992 and
September 9, 1992, insofar as they authorize the attachment of petitioners' properties and the examination of bank
books and records pertaining to their accounts, and ORDERING respondent Judge Zeus C. Abrogar
(1)
forthwith to issue an alias writ of attachment upon the same bond furnished by respondent Sun Life Assurance
Company of Canada;
(2)
direct the sheriff to lift the levy under the original writ of attachment and simultaneously levy on the same
properties pursuant to the alias writ so issued; and
(3)
take such steps as may be necessary to insure that there will be no intervening period between the lifting of
the original attachment and the subsequent levy under the alias writ.
Petitioners may file the necessary counterbond to prevent subsequent levy or to dissolve the attachment after such
levy.
SO ORDERED.

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G.R. No. 106989

May 10, 1994

H.B. ZACHRY COMPANY INTERNATIONAL, petitioner,

vs.
HON. COURT OF and VINNEL-BELVOIR CORPORATION, respondents.
G.R. No. 107124

May 10, 1994

VINNEL-BELVOIR CORPORATION, petitioner,

vs.
THE COURT OF APPEALS and H.B. ZACHRY COMPANY INTERNATIONAL, respondents.
Quisumbing, Torres & Evangelista for H.B. Zachry Co.
Feria, Feria, Lustu & La O' for Vinnel Belvoir Corp.

DAVIDE, JR., J.:

Challenged in these petitions for review, which were ordered consolidated on 9 December 1992, 1 is the decision of
the Court of Appeals in CA-G.R. SP No. 24174, 2 promulgated on 1 July 1992, the dispositive portion of which reads:
WHEREFORE, premises considered, this Petition for Certiorari and Prohibition is hereby granted in so far as it prayed
for the dissolution of the writ of preliminary attachment inasmuch as it was issued prior to the service of summons and
a copy of the complaint on petitioner. The writ of preliminary attachment issued by respondent Court on March 21,
1990 is hereby ordered lifted and dissolved as having been issued in grave abuse of discretion by respondent Court.
With respect to the issue of whether or not parties should submit the instant dispute [to] arbitration, We hereby order
public respondent to conduct a hearing for the determination of the proper interpretation of the provisions of the
Subcontract Agreement.
No pronouncement as to costs. 3
and its 2 September 1992 Resolution 4 which denied the motion for partial reconsideration of H.B. Zachry Company
International (hereinafter Zachry) and the motion for reconsideration of Vinnel-Belvoir Corporation (hereinafter VBC).
The pleadings of the parties and the challenged decision disclose the following material facts:
On 17 July 1987, VBC entered into a written Subcontract Agreement 5 with Zachry, a foreign corporation. The latter
had been engaged by the United States Navy to design and construct 264 Family Housing Units at the US Naval Base
at Subic, Zambales. Under the agreement, specifically under Section 3 on Payment, VBC was to perform all the
construction work on the housing project and would be paid "for the performance of the work the sum of Six Million
Four Hundred Sixty-eight Thousand U.S. Dollars (U.S. $6,468,000.00), subject to additions and deductions for
changes as hereinafter provided." This "lump sum price is based on CONTRACTOR'S proposal, dated 21 May 1987
(including drawings), submitted to OWNER for Alternate Design-Apartments." It was also provided "that substantial
differences between the proposal and the final drawings and Specification approved by the OWNER may be grounds
for an equitable adjustment in price and/or time of performance if requested by either party in accordance with Section
6 [on] Changes." 6 Section 27 of the agreement reads:
Section 27.

DISPUTES PROCEDURE

A.
In case of any dispute, except those that are specifically provided for in this SUBCONTRACT, between the
SUBCONTRACTOR and the CONTRACTOR, the SUBCONTRACTOR agrees to be bound to the CONTRACTOR to
the same extent that the CONTRACTOR is bound to the OWNER by the terms of the GENERAL CONTRACT and by
any and all decisions or determinations made thereunder by the party or boards so authorized in the GENERAL
CONTRACT. The SUBCONTRACTOR, on items or issues relating or attributable to the SUBCONTRACTOR, also
agrees to be bound to the CONTRACTOR to the same extent that the CONTRACTOR is bound to the OWNER by the
final decision of a court of competent jurisdiction, whether or not the SUBCONTRACTOR is a party to such
proceeding. If such a dispute is prosecuted or defended by the CONTRACTOR against the OWNER under the terms
of the GENERAL CONTRACT or in court action, the SUBCONTRACTOR agrees to furnish all documents, statements,
witnesses and other information required by the CONTRACTOR for such purpose. It is expressly understood that as

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to any and all work done and agreed to be done by the CONTRACTOR and as to any and all materials, equipment or
services furnished or agreed to be furnished by the SUBCONTRACTOR, and as to any and all damages incurred by
the SUBCONTRACTOR in connection with this SUBCONTRACT, the CONTRACTOR shall not be liable to the
SUBCONTRACTOR to any greater extent than the OWNER is liable to and pays the CONTRACTOR for the use and
benefit of the SUBCONTRACTOR for such claims, except those claims arising from acts of the CONTRACTOR. No
dispute shall interfere with the progress of the WORK and the SUBCONTRACTOR agrees to proceed with his WORK
as directed, despite any disputes it may have with the CONTRACTOR, the OWNER, or other parties.
B.
If at any time any controversy should arise between the CONTRACTOR and the SUBCONTRACTOR, with
respect to any matter or thing involved in, related to or arising out of this SUBCONTRACT, which controversy is not
controlled or determined by subparagraph 27.A. above or other provisions in this SUBCONTRACT, then said
controversy shall be decided as follows:
1.
The SUBCONTRACTOR shall be conclusively bound and abide by the CONTRACTOR'S written decision
respecting said controversy, unless the SUBCONTRACTOR shall commence arbitration proceedings as hereinafter
provided within thirty (30) days following receipt of such written decision.
2.
If the SUBCONTRACTOR decides to appeal from the written decision of the CONTRACTOR, then the
controversy shall be decided by arbitration in accordance with the then current rules of the Construction Industry
Arbitration Rules of the American Arbitration Association, and the arbitration decision shall be final and binding on both
parties; provided, however, that proceedings before the American Arbitration Association shall be commenced by the
SUBCONTRACTOR not later than thirty (30) days following the CONTRACTOR'S written decision pursuant to
subparagraph 27.B.1 above. If the SUBCONTRACTOR does not file a demand for arbitration with the American
Arbitration Association and CONTRACTOR within this thirty (30) day period, then the CONTRACTOR'S written
decision is final and binding.
3.

This agreement to arbitrate shall be specifically enforceable. 7

When VBC had almost completed the project, Zachry complained of the quality of work, making it a reason for its
decision to take over the management of the project, which paragraph c, Section 7 of the Subcontract Agreement
authorized. However, prior to such take-over, the parties executed on 18 December 1989 a Supplemental Agreement,
8 pertinent portions of which read as follows:
2.
All funds for progress as computed by the schedule of prices under the subcontract will be retained by
ZACHRY to insure sufficiency of funds to finish the lump sum project as scoped by the subcontract. However, one
month after the date of this agreement, when ZACHRY shall have determined the cost to complete the subcontract,
ZACHRY shall as appropriate, release to VBC the corresponding portion of the amounts retained.
xxx

xxx

xxx

7.
All costs incurred by ZACHRY chargeable to VBC under the subcontract from the date of the takeover to
complete the scope of the subcontract will be to the account of VBC and/or its sureties. Zachry will advise both VBC
and its sureties on a periodic basis as to progress and accumulated costs.
xxx

xxx

xxx

9.
VBC will be invited to participate in negotiations with the Navy in Change Orders concerning its scope of work.
VBC will accept as final, without recourse against ZACHRY the Navy's decision regarding its interest in these Change
Orders or modifications.
In accordance with the above conditions, VBC submitted to Zachry on 10 January 1990 a detailed computation of the
cost to complete the subcontract on the housing project. According to VBC's computation, there remains a balance of
$1,103,000.00 due in its favor as of 18 January 1990. This amount includes the sum of $200,000.00 allegedly withheld
by Zachry and the labor escalation adjustment granted earlier by the US Navy in the amount of $282,000.00 due VBC.
Zachry, however, not only refused to acknowledge the indebtedness but continually failed to submit to VBC a
statement of accumulated costs, as a result of which VBC was prevented from checking the accuracy of the said
costs. On 2 March 1990, VBC wrote Zachry a letter demanding compliance with its obligations. 9 Zachry still failed to
do so. VBC made representations to pursue its claim, including a formal claim with the Officer-in-Charge of
Construction, NAVFAC Contracts, Southwest Pacific, 10 which also failed.
Hence, on 20 March 1990, VBC filed a Complaint 11 with the Regional Trial Court (RTC) of Makati against Zachry for
the collection of the payments due it with a prayer for a writ of preliminary attachment over Zachry's bank account in
Subic Base and over the remaining thirty-one undelivered housing units which were to be turned over to the US Navy
by Zachry on 30 March 1990. The case was docketed as Civil Case No. 90-772 and was raffled to Branch 142 of the

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said court presided over by Judge Salvador P. de Guzman, Jr. Paragraph 2 of the Complaint alleges that defendant
Zachry "is a foreign corporation with address at 527 Longwood Street, San Antonio, Texas, U.S.A. and has some of its
officers working at U.S. Naval Base, Subic Bay, Zambales where it may be served with summons."
On 21 March 1990, the trial court issued an order granting the application for the issuance of the writ of preliminary
attachment and fixing the attachment bond at P24,266,000.00. 12 VBC put up the required bond and on 26 March
1990, the trial court issued the writ of attachment, 13 which was served, together with the summons, a copy of the
complaint with annexes, the bond, and a copy of the order of attachment, on 27 March 1990 in the manner described
in the Sheriff's Partial Return 14 of 29 March 1990:
upon defendant H.B. Zachry Company (International) at its field office in U.S. Naval Base, Subic Bay, Zambales thru
Ruby Apostol who acknowledged receipt thereof. Mr. James M. Cupit, defendant's authorized officer was in their
Manila office at the time of service.
The return further states:
That on March 28, 1990, the undersigned sheriff went to the office of defendant H. B. Zachry Company (International)
at c/o A.M. Oreta & Co. at 5th Floor, Ermita Building, Arquiza corner Alhambra streets, Ermita, Manila to serve the
Court's processes but was informed by Atty. Felix Lobiro of A.M. Oreta & Co., that defendant H.B. Zachry Company
has its own office at Room 600, 6th Floor of the same building (Ermita Building). However, said defendant's office was
closed and defendant company (ZACHRY) only holds office during Mondays and Tuesdays of the week as per
information gathered from the adjacent office.
On 27 March 1990, VBC filed an Amended Complaint 15 in Civil Case No. 90-772 to implead as additional defendants
the US Navy Treasury Office-Subic Naval Base and Captain A.L. Wynn, an officer of the US Navy, against whom VBC
prayed for a restraining order or preliminary injunction to restrain the latter from preparing the treasury warrant checks
to be paid to Zachry and the former from signing the said checks and to restrain both from making any further
payments to Zachry. It also amended paragraph 2 on the status and circumstances of Zachry as follows:
2.
Defendant, H.B. Zachry Co. (International) . . . is a foreign corporation with address at 527 Longwood Street,
San Antonio, Texas, U.S.A. and may be served with summons and all other legal processes at the following
addresses: a) H.B. Zachry Company (International), U.S. Naval Base, Subic Bay, Zambales; and b) H.B. Zachry
Company (International) c/o A.M. Oreta & Co., 5th Floor Ermita Building, Arquiza corner Alhambra Streets, Ermita,
Manila, through its authorized officer James C. Cupit. 16
On 6 April 1990, Zachry filed a motion to dismiss the complaint 17 on the ground of lack of jurisdiction over its person
because the summons was not validly served on it. It alleges that it is a foreign corporation duly licensed on 13
November 1989 by the Securities and Exchange Commission to do business in the Philippines 18 and, pursuant to
Section 128 of the Corporation Code of the Philippines, had appointed Atty. Lucas Nunag 19 as its resident agent on
whom any summons and legal processes against it may be served. Atty. Nunag's address is at the 10th Floor, Shell
House, 156 Valero St., Makati, Metro Manila.
Summons and a copy of the Amended Complaint were served on 24 April 1990 on Zachry through Atty. Nunag as
shown in the sheriff's return dated 24 April 1990. 20
On 26 April 1990, VBC filed a Manifestation 21 to inform the court of the above service of summons on Zachry which it
claimed rendered moot and academic the motion to dismiss.
On 24 May 1990, Zachry filed an Omnibus Motion 22 (a) to dismiss the complaint for lack of jurisdiction over its
person since the subsequent service of summons did not cure the jurisdictional defect it earlier pointed out and, in the
alternative, to dismiss the case or suspend the proceedings therein for failure of the plaintiff to submit the controversy
in question to arbitration as provided for in its contract with Zachry; and (b) to dissolve the writ of attachment of 26
March 1990 "for having been issued without jurisdiction, having been issued prior to the service of summons." The
arbitration provision referred to is Section 27.B of the Subcontract Agreement quoted earlier. In support of its
alternative prayer for the suspension of proceedings, it cited Section 7 of R.A. No. 876, otherwise known as the
Arbitration Act which provides:
Sec. 7. Stay of Civil Action If any suit or proceeding be brought upon an issue, arising out of an agreement
providing for the arbitration thereof, the Court in which such suit or proceeding is pending, upon being satisfied that
the issue involved in such suit or proceeding is referable to arbitration, shall stay the action or proceeding until an
arbitration has been had in accordance with the terms of the agreement. . . .
This provision is almost identical with Section 3 of the United States Arbitration Act.

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As to the invalidity of the writ of attachment, Zachry avails of the decision in Sievert vs. Court of Appeals 23 wherein
this Court said:
Attachment is an ancillary remedy. It is not sought for its own sake but rather to enable the attaching party to realize
upon relief sought and expected to be granted in the main or principal action. A court which has not acquired
jurisdiction over the person of the defendant, cannot bind that defendant whether in the main case or in any ancillary
proceeding such as attachment proceedings. The service of a petition for preliminary attachment without the prior or
simultaneous service of summons and a copy of the complaint in the main case and that is what happened in this
casedoes not of course confer jurisdiction upon the issuing court over the person of the defendant. 24
VBC opposed the Omnibus Motion. Pleadings related to the Omnibus Motion were subsequently filed. 25
In its Order of 19 September 1990, 26 the trial court resolved the Omnibus Motion and the related incidents by
declaring that "the merits of the case can only [be] reached after due presentation of evidence." Hence, it denied the
motion and directed the defendants to file their answer within the period provided by law.
On 8 October 1990, Zachry filed a motion for the reconsideration 27 of the above order assailing the court's inaction
on the second and third issues raised in its Omnibus Motion, viz., the necessity of arbitration and the invalidity of the
writ of attachment. VBC opposed the motion. 28 On 9 January 1991, the court issued an order denying the motion for
reconsideration by ruling that the writ of preliminary attachment was regularly issued and that the violations of the
Subcontract Agreement can be "tranced [sic] only after the case is heard on the merits."
Dissatisfied with the denial, Zachry filed with the Court of Appeals on 14 February 1991 a petition for certiorari and
prohibition, 29 which was docketed as CA-G.R. SP No. 24174. Zachry contends therein that:
1.
The proceedings before respondent trial court should be suspended, pending submission of the dispute to
arbitration pursuant to Section 27-B of the Subcontract Agreement;
2.
Alternatively, the complaint should be dismissed, pending arbitration pursuant to Section 27-B of the
Subcontract Agreement;
3.
As a third alternative, the complaint should be dismissed, because the dispute has been resolved with finality
under Section 27-B of the Subcontract Agreement; and
4.
The writ of preliminary attachment should be dissolved, as having been outside, or in excess of respondent
court's jurisdiction, having been issued prior to the service of summons on petitioner.
It then prays that (a) the orders of the trial court of 19 September 1990 and 9 January 1991 be annulled for having
been issued without or in excess of jurisdiction or with grave abuse of discretion; and (b) the trial court be directed to
immediately suspend the proceedings in Civil Case No. 90-772 pending arbitration proceedings in accordance with
the terms of Section 27.B of the Subcontract Agreement or, alternatively, to dismiss the amended complaint and
dissolve the writ of attachment. It also prays for the issuance of a temporary restraining order and a writ of preliminary
injunction to restrain the trial court from proceeding further in Civil Case No. 90-772.
On 18 February 1991, the Court of Appeals issued a temporary restraining order. 30
On 1 July 1991, the Court of Appeals promulgated the challenged decision 31 dissolving the writ of preliminary
attachment issued by the trial court and ordering it to conduct a hearing to determine the proper interpretation of the
provisions of the Subcontract Agreement. As to the writ of attachment, the Court of Appeals held that summons was
served on Zachry only on 24 April 1990; hence, applying Sievert vs. Court of Appeals, 32 the trial court "had no
authority yet to act coercively against the defendant" when it issued the writ of attachment on 21 March 1990. As to
arbitration, it ruled:
We are of the reasoned opinion that unlike in the factual situation in the cases cited by petitioner, the contract involved
in the case at bar is, with respect to its arbitration clause, vogue [sic] and uncertain. Section 27.B which is the
provision upon which petitioner anchors its claims is ambiguous in its terminology when it states that "if at anytime any
controversy should arise between the contractor and the subcontractor . . . which controversy is not controlled or
determined by Section 27.A above or other provision of this subcontract . . . ." This provision states that only when a
controversy arises between the contractor and the subcontractor which is not covered by Section 27.A or any
provision of the Subcontract Agreement will the parties submit to arbitration. As to what controversies fall under
Section 27.B, it is not clear from a mere perusal of the provisions. It is therefore not correct for petitioner to say that
any and all dispute arising between the contracting parties should be resolved by arbitration prior to a filing of a suit in
court. 33

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VBC and Zachry filed a motion for reconsideration and a partial motion for reconsideration, respectively. 34 The former
urged the Court of Appeals to consider the decision of this Court of 29 November 1991 in Davao Light & Power Co.
vs. Court of Appeals 35 wherein this Court ruled that a writ of preliminary attachment may be issued ex-parte prior to
the service of summons and a copy of the complaint on the defendants. On the other hand, Zachry insists that "[t]here
is nothing 'vague' or 'ambiguous about' " the provision on dispute procedures set forth in Subsections 27.B.1 to 27.B.3
of the Subcontract Agreement.
In its Resolution of 2 September 1992, 36 the Court of Appeals denied the above motions of the parties.
Hence, these petitions which were given due course in this Court's Resolution of 8 March 1993. 37
In G.R. No. 106989, petitioner Zachry reiterates all the issues it raised before the Court of Appeals, except that
regarding the validity of the writ of attachment which was decided in its favor.
In G.R. No. 107124, petitioner VBC raises the following issues:
A.
WHETHER THE ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT PRIOR TO THE SERVICE OF
THE SUMMONS AND A COPY OF THE AMENDED COMPLAINT ON THE RESPONDENT IS VALID.
B.
WHETHER RESORT TO ARBITRATION PRIOR TO FILING A SUIT IN COURT IS REQUIRED BY THE
SUBCONTRACT AGREEMENT UNDER THE FACTS OBTAINING IN THE PRESENT CASES.
As to the first issue, VBC takes refuge in the ruling in Davao Light & Power Co. vs. Court of Appeals 38 and argues
that the issuance of the writ of attachment on 21 March 1990, although before the service of the summons, was valid.
Its issuance and implementation are two different and separate things; the first is not affected by any defect in the
implementation which may be corrected. Moreover, assuming arguendo that the initial service of summons was
defective, it was cured by the numerous pleadings thereafter filed. Finally, whatever doubts existed on the
effectiveness of the implementation of the writ was erased by its re-service on the resident agent of Zachry.
As to the issue on arbitration, VBC maintains that arbitration is not required under the facts obtaining in the present
case because the applicable provision of the Subcontract Agreement is Section 3 on Payment and not Section 27.B
on Arbitration. Zachry's fraudulent actuations and gross violation of the Subcontract Agreement render prior resort to
arbitration futile and useless. The preliminary attachment, which was essential to secure the interest of the petitioner,
could not have been obtained through arbitration proceedings.
Zachry, in its Comment, 39 contends that pursuant to the Sievert and Davao Light rulings, the issuance of the writ of
attachment before the service of summons on Zachry's resident agent was invalid and that the various pleadings filed
by the parties did not cure its invalidity. It argues that the arbitration procedure is set forth in Section 27.B of the
Subcontract Agreement. It further maintains that pursuant to General Insurance vs. Union Insurance, 40 the alleged
fraudulent actuations which relate to the merits of the case may be properly addressed to the arbitrators and that there
is no merit to the claim that arbitration would be useless since the arbitration proceeding would be presided over by an
independent and competent arbitral tribunal.
The issues in these petitions are properly defined by VBC in G.R. No. 107124.
We find for petitioner VBC.
It was error for the Court of Appeals to declare, on the ground of grave abuse of discretion, the nullity of the writ of
attachment issued by the trial court on 21 March 1990. In the first place, the writ was in fact issued only on 26 March
1990 and served, together with the summons, copy of the complaint, the Order of 21 March 1990, and the bond, on 27
March 1990 on Zachry at its field office in Subic Bay, Zambales, through one Ruby Apostol. What the Court of Appeals
referred to as having been issued on 21 March 1990 is the order granting the application for the issuance of a writ of
preliminary attachment upon the posting of a bond of P24,266,000.00. 41 In the second place, even granting
arguendo that the Court of Appeals had indeed in mind the 26 March 1990 writ of attachment, its issuance, as well as
the issuance of the 21 March 1990 Order, did not suffer from any procedural or jurisdictional defect; the trial court
could validly issue both.
However, the writ of attachment cannot be validly enforced through the levy of Zachry's property before the court had
acquired jurisdiction over Zachry's person either through its voluntary appearance or the valid service of summons
upon it. 42 To put it in another way, a distinction should be made between the issuance and the enforcement of the
writ. The trial court has unlimited power to issue the writ upon the commencement of the action even before it acquires
jurisdiction over the person of the defendant, but enforcement thereof can only be validly done after it shall have
acquired such jurisdiction. This is the rule enunciated in Davao Light & Power Co. vs. Court of
Appeals. 43 In that case, this Court stated:

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The question is whether or not a writ of preliminary attachment may issue ex parte against a defendant before
acquisition of jurisdiction of the latter's person by service of summons or his voluntary submission to the Court's
authority.
The Court rules that the question must be answered in the affirmative and that consequently, the petition for review will
have to be granted.
It is incorrect to theorize that after an action or proceeding has been commenced and jurisdiction over the person of
the plaintiff has been vested in the court, but before the acquisition of jurisdiction over the person of the defendant
(either by service of summons or his voluntary submission to the court's authority), nothing can be validly done by the
plaintiff or the court. It is wrong to assume that the validity of acts done during this period should be dependent on, or
held in suspension until, the actual obtention of jurisdiction over the defendant's person. The obtention by the court of
jurisdiction over the person of the defendant is one thing; quite another is the acquisition of jurisdiction over the person
of the plaintiff or over the subject-matter or nature of the action, or the res or object thereof. 44
xxx

xxx

xxx

A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional remedy in virtue of
which a plaintiff or other proper party may, at the commencement of the action or at any time thereafter, have the
property of the adverse party taken into the custody of the court as security for the satisfaction of any judgment that
may be recovered. It is a remedy which is purely statutory in respect of which the law requires a strict construction of
the provisions granting it. Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before
acquisition of jurisdiction over the person of the defendant.
Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at any time thereafter." The
phrase "at the commencement of the action," obviously refers to the date of the filing of the complaint which, as
above pointed out, is the date that marks "the commencement of the action;" and the reference plainly is to a time
before summons is served on the defendant, or even before summons issues. What the rule is saying quite clearly is
that after an action is properly commenced by the filing of the complaint and the payment of all requisite docket and
other fees the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinent
requisites laid down by law, and that he may do so at any time, either before or after service of summons on the
defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper
party to incorporate the application for attachment in the complaint or other appropriate pleading (counterclaim, crossclaim, third-party claim) and for the Trial Court to issue the writ ex-parte at the commencement of the action if it finds
the application otherwise sufficient in form and substance. 45
xxx

xxx

xxx

It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the
person of the defendant, as above indicated issuance of summons, order of attachment and writ of attachment
(and/or appointment of guardian ad litem, or grant of authority to the plaintiff to prosecute the suit as a pauper litigant,
or amendment of the complaint by the plaintiff as a matter of right without leave of court) and however valid and
proper they might otherwise be, these do not and cannot bind and affect the defendant until and unless jurisdiction
over his person is eventually obtained by the court, either by service on him of summons or other coercive process or
his voluntary submission to the court's authority. Hence, when the sheriff or other proper officer commences
implementation of the writ of attachment, it is essential that he serve on the defendant not only a copy of the
applicant's affidavit and attachment bond, and of the order of attachment, as explicitly required by Section 5 of Rule
57, but also the summons addressed to said defendant as well as a copy of the complaint and order for appointment
of guardian ad litem, if any, as also explicitly directed by Section 3, Rule 14 of the Rules of Court. Service of all such
documents is indispensable not only for the acquisition of jurisdiction over the person of the defendant, but also upon
considerations of fairness, to apprise the defendant of the complaint against him, of the issuance of a writ of
preliminary attachment and the grounds therefor and thus accord him the opportunity to prevent attachment of his
property by the posting of a counterbond in an amount equal to the plaintiff's claim in the complaint pursuant to
Section 5 (or Section 12), Rule 57, or dissolving it by causing dismissal of the complaint itself on any of the grounds
set forth in Rule 16, or demonstrating the insufficiency of the applicant's affidavit or bond in accordance with Section
13, Rule 57. 46
xxx

xxx

xxx

For the guidance of all concerned, the Court reiterates and reaffirms the proposition that writs of attachment may
properly issue ex parte provided that the Court is satisfied that the relevant requisites therefor have been fulfilled by
the applicant, although it may, in its discretion, require prior hearing on the application with notice to the defendant; but
that levy on property pursuant to the writ thus issued may not be validly effected unless preceded, or

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contemporaneously accompanied, by service on the defendant of summons, a copy of the complaint (and of the
appointment of guardian ad litem, if any), the application for attachment (if not incorporated in but submitted
separately from the complaint), the order of attachment, and the plaintiff's attachment bond. 47
We reiterated the rule laid down in Davao Light in the subsequent case of Cuartero vs. Court of Appeals 48 wherein
we stated:
It must be emphasized that the grant of the provisional remedy of attachment practically involves three stages: first,
the court issues the order granting the application; second, the writ of attachment issues pursuant to the order
granting the writ; and third, the writ is implemented. For the initial two stages, it is not necessary that jurisdiction over
the person of the defendant should first be obtained. However, once the implementation commences, it is required
that the court must have acquired jurisdiction over the person of the defendant for without such jurisdiction, the court
has no power and authority to act in any manner against the defendant. Any order issuing from the Court will not bind
the defendant.
The validity then of the order granting the application for a writ of preliminary attachment on 21 March 1990 and of the
issuance of the writ of preliminary attachment on 26 March 1990 is beyond dispute. However, the enforcement of the
preliminary attachment on 27 March 1990, although simultaneous with the service of the summons and a copy of the
complaint, did not bind Zachry because the service of the summons was not validly made. When a foreign corporation
has designated a person to receive service of summons pursuant to the Corporation Code, that designation is
exclusive and service of summons on any other person is inefficacious. 49 The valid service of summons and a copy
of the amended complaint was only made upon it on 24 April 1990, and it was only then that the trial court acquired
jurisdiction over Zachry's person. Accordingly, the levy on attachment made by the sheriff on 27 April 1990 was invalid.
However, the writ of preliminary attachment may be validly served anew.
As to the second issue of arbitration, we find that although the order of the trial court denying the motion to dismiss did
not clearly state so, it is evident that the trial court perceived the ground of the motion to be not indubitable; hence, it
could defer its resolution thereon until the trial of the case. In deciding a motion to dismiss, Section 3, Rule 16 of the
Rules of Court grants the court four options: (1) to deny the motion, (2) to grant the motion, (3) to allow amendment of
pleadings, or (4) to defer the hearing and determination of the motion until the trial, if the ground alleged therein does
not appear to be indubitable. Under the fourth option, the court is under no obligation to immediately hold a hearing on
the motion; it is vested with discretion to defer such hearing and the determination of the motion until the trial of the
case. 50 The lack of indubitability of the ground involved in Zachry's motion to dismiss is confirmed by the Court of
Appeals when it declared:
Section 27. B which is the provision upon which petitioner [Zachry] anchors its claim is ambiguous in its terminology
when it states that "if at any time any controversy should arise between the contractor and the subcontractor . . . which
controversy is not controlled or determined by Section 27.A above or other provisions of this subcontract' . . . . This
provision states that only when a controversy arises between the contractor and subcontractor which is not covered by
Section 27.A or any provision of the Subcontract will the parties submit to arbitration. As to what controversies fall
under Section 27.B, it is not clear from a mere perusal of the provisions.
Indeed, the parties could not even agree on what controversies fall within Section 27.B, and, perhaps, rightly so
because the said Section 27.B excludes controversies controlled or determined by Section 27.A and other provisions
of the Subcontract Agreement, which are themselves unclear. For that reason, VBC insists that its cause of action in
Civil Case No. 90-772 is based on Section 3 of the Subcontract Agreement. It may further be emphasized that VBC's
complaint was precipitated by Zachry's refusal to comply with the Supplemental Agreement. Evidently, Section 3 of the
Subcontract Agreement and the Supplemental Agreement are excluded by Section 27.B. The trial court was,
therefore, correct in denying Zachry's motion to dismiss.
However, we cannot give our assent to the Court of Appeals' order directing the trial court to conduct a hearing for the
determination of the proper interpretation of the provisions of the Subcontract Agreement. It would re-open the motion
to dismiss which, upon the trial court's exercise of its discretion, was properly denied for lack of indubitability of the
ground invoked and thereby unduly interfere with the trial court's discretion. The proper interpretation could only be
done by the trial court after presentation of evidence during trial on the merits pursuant to the tenor of its order
denying the motion to dismiss. If the trial court should find that, indeed, arbitration is in order, then it could apply
Section 7 of R.A. No. 876 which reads as follows:
Sec. 7. Stay of civil action. If any suit or proceeding be brought upon an issue arising out of an agreement
providing for the arbitration thereof, the court in which such suit or proceeding is pending, upon being satisfied that the
issue involved in such suit or proceeding is referable to arbitration, shall stay the action or proceeding until an
arbitration has been had in accordance with the terms of the agreement: Provided, That the applicant for the stay is
not in default in proceeding with such arbitration.

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WHEREFORE, the petition in G.R. No. 107124 is GRANTED while that in G.R. No. 106989 is DENIED for lack of
merit. The challenged Decision of 1 July 1992 and Resolution of 2 September 1992 are hereby SET ASIDE. The
orders of Branch 142 of the Regional Trial Court of Makati in Civil Case No. 90-772 of 19 September 1990 denying the
motion to dismiss and of 8 October 1990 denying the motion to reconsider the former are REINSTATED. However, the
service of the writ of preliminary attachment on 26 March 1990 is hereby declared invalid. The writ may, nevertheless,
be served anew.
No pronouncement as to costs.
SO ORDERED.

128

G.R. No. 179245

July 23, 2008

RASH C. ROQUE, Petitioner,

vs.
COURT OF APPEALS, CIVIL SERVICE COMMISSION, THE HON. SECRETARY JOSE D. LINA, DEPARTMENT OF
INTERIOR AND LOCAL GOVERNMENT (DILG), Respondents.
DECISION
PER CURIAM:
This is a petition for review on certiorari1 of the Decision of the Court of Appeals in CA-G.R. SP No. 93349
promulgated on May 29, 2007, and its Resolution promulgated on August 9, 2007. The Decision of the Court of
Appeals affirmed the Resolutions of the Civil Service Commission (CSC) dated July 20, 2004 and December 13, 2005,
dismissing petitioner Rash C. Roque from the public service for grave misconduct.
This case arose from an alleged anomaly in the procurement of various supplies, materials or equipment for the
Fourth Quarter of Calendar Year (CY) 2002 of the Bureau of Fire Protection-National Capital Region (BFP-NCR).
On December 16, 2002, the BFP-NCR Prequalifications, Bids and Awards Committee (PBAC) issued several
resolutions supposedly pursuant to a sealed canvass bidding, recommending the award and contract to deliver
various supplies, materials and equipment to the purported winning bidders. Petitioner Roque, as the Regional
Director of the BFP-NCR, approved the awards and issued the corresponding Notices of Award to the following
bidders:
1. Rakish General Merchandise for P420,000 worth of battery solution and for P475,900.15 worth of barricade tapes;
2. Mitoni Business Ventures for P473,661.82 worth of computer units and spare parts and for P477,989.28 worth of
various office supplies;
3. Rich River Commercial for P478,282.91 worth of Good Year tires;
4. Lubhag Enterprises for P208,707.25 worth of various electrical supplies and for P405,235.98 worth of janitorial
supplies;
5. A. Rouge Printing Corporation for P459,798.55 worth of computer units and accessories; and
6. Miralles Trading for P473,695.04 worth of computer supplies.2
Chief Inspector Rolando Biazon of the Logistics Section issued the corresponding Purchase Orders to the suppliers
after he inspected and accepted the delivery of supplies. The checks in payments for these supplies were signed by
petitioner and the Chief of Finance Service Unit, Danilo dela Pea, and were given to the suppliers who, in turn,
negotiated said checks with the Land Bank of the Philippines, Cubao Branch, on December 27, 2002, January 3, 2003
and January 6, 2003.
On January 2, 2003, complainants Supt. Ariel A. Barayuga, District Fire Marshal; Supt. Ramon O. Giron, Chief of
Administrative Branch; and Ruben U. Pascua, Regional Supply Accountable Officer, who are all officers of the BFPNCR, reported to Fire Chief Francisco Senot that there was an anomaly in the purchase of supplies for the fourth
quarter of CY 2002.
The complainants alleged that the BFP-NCR Regional Office received an Advice Sub-Allotment and a Notice of
Transfer of Cash Allocation from the BFP Central Office only sometime in the second week of December 2002, but by
December 27, 2002, the bidding was completed and the purported winning bidders were able to encash their checks
in payment of their products.
They further alleged that SFO2 Cabungcal, OIC Regional Supply Accountable Officer, was authorized to sign the
documents relative to the procurement of supplies for the fourth quarter of CY 2002, in lieu of complainant Pascua.
Moreover, complainants were intrigued by the fact that the fourth quarter operational support fund was released to
BFP-NCR ahead of the third quarter operational fund, which remained unliquidated.
Lastly, complainants alleged that petitioner authorized Biazon to pay in advance the funds for minor maintenance of
fire trucks in the amount of more or less P750,000.

129

Fire Chief Senot immediately acted on the complaint and issued an order creating an investigation and inventory team
to inspect the BFP-NCR stockroom where the supplies were stored. Upon learning about the Order, petitioner
requested that the ocular inspection be held in abeyance until verification of Pascuas motive in filing the complaint
against him. Petitioner alleged that Pascua had a personal grudge against him because he discovered Pascuas gross
deficits in gasoline, diesel and other petroleum products.
On January 5, 2003, the team proceeded to inspect the stockroom, but Biazon refused to open it allegedly upon
petitioners instruction. However, when no team member was around, Biazon surreptitiously tried to open the
stockroom using the keys in his possession. In order to preserve the contents of the stockroom, a monitoring team
from the Central Office was detailed to watch the stockroom around the clock.
On January 21, 2003, Department of Interior and Local Government (DILG) Undersecretary Marius Corpus instructed
Senior Superintendent Romero, Chief of Internal Affairs Services, to open the stockroom despite Biazons refusal.
Eventually, the stockroom was opened with the help of Cabungcal.
After an inventory, the team discovered that twelve (12) computer units were delivered to the BFP-NCR which were
reportedly inspected and accepted by Biazon on December 23, 2002. Biazon explained that payments were made
prior to delivery of the items and he submitted the corresponding delivery receipts to the team. It was discovered that
the delivered units were withdrawn several days after the delivery.
On January 22, 2003, Sr. Supt. Romero sent a radio message directing all district, city, and municipal fire marshals
under petitioners supervision to submit on or before January 23, 2003 the list of supplies, materials and equipment
received by their respective offices for the fourth quarter of CY 2002, indicating the respective dates of delivery. On
January 23, 2003, Fire Chief Senot relayed the radio message to the Office of the Regional Fire Marshal with a note
that the same was for strict compliance.
On the other hand, petitioner issued a memorandum canceling the directives on the list of inventory sent to
him.1awphil He also issued another memorandum directing his staff and the district, city, and municipal fire marshals
under his supervision to hold in abeyance compliance with the radio messages. He further issued a memorandum
directing complainant Giron to refrain from further issuing any memorandum or radio message without his approval.
He sought the courts intercession by filing a petition for prohibition with a prayer for the issuance of a temporary
restraining order to stop Sr. Supt. Romero from further conducting an investigation.
On January 27, 2003, DILG Secretary Jose D. Lina, Jr. issued Department Order No. 2003-59 relieving petitioner as
Regional Fire Marshal/Assistant Regional Director (RFM/ARD) and placing him on "DS" at Headquarters Service
Support Unit, BFP-National Office, in the exigency of the service.
On February 12, 2003, the team reported the result of the investigation finding, thus:
1. No actual bidding transpired in the procurement of the supplies.
2. Petitioner merely directed the members of the PBAC to sign the resolutions and the abstracts of Canvass/Bid.
3. The Commission on Audit was not notified of the supposed bidding.
4. Petitioner entered into contract with the suppliers wherein the supplies were overpriced by more or less
P1,067,025.50 to the prejudice of the government.
5. The electrical supplies, barricade tapes and computer parts which were reported to have been paid and delivered
were not in the stockroom.
The team recommended that petitioner and other BFP officials involved in the anomaly be charged with grave
misconduct for violation of the rules on procurement of supplies, for deliberate disobedience to the lawful order of
higher authorities and for suppression of evidence.
On February 14, 2003, DILG Secretary Lina issued Department Order No. 2003-146 creating a committee to conduct
a preliminary investigation of the case against petitioner, Danilo D. Mayuga, Ester P. Adordionicio, Danilo V. Pinion,
Marco M. Manaois, Rolando G. Biazon, Willie G. Cabungcal, Efren P. Guardiano, Danilo C. dela Pea, Fennimore V.
Jaudian, Sixto C. Bautista and Edgardo P. Antonio, who are all employees of the BFP-NCR.
The committee directed the respondents to submit their counter-affidavits within 15 days from receipt of notice.
In his counter-affidavit, petitioner denied the allegations against him and elected the conduct of a formal investigation.
He alleged that it was presumed that the members of the PBAC regularly performed their duties relative to the conduct

130

of a public bidding, such as the issuance of a resolution recommending the award of contracts to the successful
bidders. As head of BFP-NCR, he had the authority to award the contracts to the winning bidders pursuant to the
PBAC resolution. He stated that the allegation that the supplies were overpriced was based on suspicion, surmise and
conjecture. He justified his approval of the payment of the supplies on the basis of supporting certifications of proper
authorities and stated that even though the signature of the accountant did not appear on some checks, the
accountants signature on all other papers sufficed. He denied that there was suppression of evidence, that he refused
to allow the team to open the stockroom and that he instructed Biazon not to open it.
DILG Secretary Lina found a prima facie case against petitioner. On June 30, 2003, petitioner was charged with grave
misconduct in that he:
1. Caused the procurement of supplies, materials and equipment intended for the BFP, NCR for the Fourth Quarter
(2002) in violation of law and rules on procurement;
2. Made it appear that a sealed bidding was conducted when there was none;
3. Directed the members of the PBAC to sign resolutions and abstract of bids in his office;
4. Failed to notify the COA of the alleged opening of the bids;
5. Signed the Notice of Awards;
6. Approved the payment of supplies, materials and equipment when he knew that there was no Certification of Supply
Availability Inquiry and Certification of Availability of Funds issued by the Regional Accountant and that the items were
not yet fully delivered;
7. Disobeyed orders of superiors and countermanded the same; and
8. Suppressed evidence.3
Petitioner was directed to submit his Answer within ten days from receipt of the Order, but he did not file an Answer.
On November 24, 2003, the committee issued an order setting the case for preliminary hearing on December 2, 2003.
The order was received by petitioners counsel on November 25, 2003, but neither petitioner nor his counsel appeared
on the date set. The preliminary hearing was reset to December 9, 2003. The Order was received by petitioners
counsel on December 3, 2003, but again neither petitioner nor his counsel appeared. Hence, petitioner was declared
to have waived his right to present evidence.
On December 11, 2003, the counsel for complainant filed a motion for early resolution of petitioners case.
On January 21, 2004, Secretary Lina issued a decision finding petitioner guilty of grave misconduct for all the acts he
was charged to have committed, and dismissing him from the service. Petitioners motion for reconsideration was
denied.
Petitioner appealed DILG Secretary Linas decision to the CSC. On July 20, 2005, the CSC issued Resolution No.
050947 finding petitioner guilty of grave misconduct for approving the payment of supplies without a certification from
the Accountant that funds were available and for disobeying and/or countermanding the lawful orders of his superiors.
The dispositive portion of Resolution No. 050947 reads:
WHEREFORE, the appeal of Rash C. Roque is hereby DISMISSED. Accordingly, the Decision of Department of the
Interior and Local Government Secretary Jose D. Lina dated January 21, 2004 finding Roque GUILTY of Grave
Misconduct with a penalty of dismissal from the service is AFFIRMED. Roque is also imposed the accessory penalties
of perpetual disqualification from re-entering the government service, forfeiture of retirement benefits and cancellation
of Civil Service eligibility pursuant to the Uniform Rules on Administrative Cases in the Civil Service.
Let a copy of this Resolution be forwarded to the Office of the Ombudsman for its appropriate action and the GSIS for
the implementation of the accessory penalty of forfeiture of retirement benefits.4
Petitioners motion for reconsideration was denied by the CSC in Resolution No. 051850 dated December 13, 2005.
Petitioner filed a petition for review of the CSC decision before the Court of Appeals. On May 29, 2007, the Court of
Appeals rendered a decision, the dispositive portion of which reads:

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WHEREFORE, premises considered, the instant petition is DISMISSED and the assailed Resolution Nos. 05-0947
and 05-1850 dated July 20, 2004 and December 13, 2005, respectively, of public respondent commission are
AFFIRMED.5
Petitioners motion for reconsideration was denied for lack of merit by the Court of Appeals in a Resolution dated
August 9, 2007.
Hence, this petition.
The issues are:
1. Whether or not the Court of Appeals erred in sustaining the Decision of the Civil Service Commission as petitioners
constitutional right to due process of law was allegedly violated.
2. Whether or not petitioner committed grave misconduct warranting his dismissal from the service.
Petitioner contends that the Decision of the DILG Secretary did not take into consideration his counter-affidavit which
should have been adopted as his Answer; hence, the decision of the DILG, which was upheld by the CSC and the
Court of Appeals, dismissing him from the service is null and void for depriving him of his constitutional right to due
process of law.
Petitioner also alleges that the Decision of the DILG Secretary was based on the documents attached to the charge,
and there is no showing that they were identified, much less formally offered in evidence. Hence, they cannot be
considered competent evidence to support a valid decision.
Petitioner further argues that considering the gravity of the penalty which is dismissal from the service of one who has
rendered faithful service to the government for decades, the decision should have been immediately set aside if only
to afford him a full opportunity to properly defend himself. However, the CSC simply adopted the dismissal order of the
DILG Secretary, and the Court of Appeals affirmed the decision of the CSC.
The arguments of petitioner lack merit.
As a rule, the uniform finding of fact of the CSC and the Court of Appeals is conclusive upon this Court. Our task in an
appeal by petition for review on certiorari as a jurisdictional matter, is limited to reviewing errors of law that might have
been committed by the Court of Appeals.6
The Court agrees with the finding of the Court of Appeals that petitioner was not denied due process of law, thus:
. . . [P]etitioner cannot successfully invoke denial of due process since he was given the opportunity to be heard. The
facts obtaining in the case at bar sufficiently show that petitioner was given ample opportunity to be heard. The then
Secretary Lina ordered petitioner to file his answer [to] the formal charge within ten (10) days from receipt thereof and
to state whether he elects to have a formal investigation. Further, petitioner was advised that he may avail of the
assistance of the counsel of his choice and was apprised that his failure to submit an answer would be construed as a
waiver thereof. Petitioner opted not to file his answer on the ground that the formal charge did not allege new matters
and to re-submit his counter-affidavit in the complaint, BFP-NCR 4th Quarter Anomalies Transaction would only be
repetitious and redundant. When the case was set for preliminary conferences, on December 2, 2003 and December
9, 2003, neither petitioner nor his counsel appeared despite receipt of notices.
Obviously, petitioner was not denied of due process. In administrative proceedings, the filing of charges and giving
reasonable opportunity for the person so charged to answer the accusation against him constitute the minimum
requirements of due process. The opportunity to defend his interests in due course was given to petitioner but [he]
failed to do so; hence, petitioner has no reason to complain for it is this opportunity to be heard that makes up the
essence of due process.
The non-submission of [an] answer by the petitioner to the formal charge does not mean the he [was] denied due
process. It bears stressing that the Investigative Committee accepted the counter-affidavit of petitioner to the
complaint albeit the same was belatedly filed. The acceptance is in accord with the basic rule of administrative law that
technical rules of procedure are liberally applied to administrative agencies exercising quasi-judicial functions. As
such, the counter-affidavit formed part of the records of the case which can be considered by the deciding authority.
A perusal of the rollo of the case shows that the committee has indeed considered the counter-affidavit but
unfortunately the committee found that the allegations therein were not enough to controvert the factual matters found
by the committee that led to the administrative charge for grave misconduct. There is no doubt Secretary Joey Lina
considered the counter-affidavit. This can be gleaned from his decision to wit:

132

After evaluating the xxx Fact Finding Report which has remained uncontroverted, together with the other pertinent
documents attached to the records of the case, this Office finds Respondent Roque culpable of the administrative
offense of Grave Misconduct xxx.
In affirming the decision of Secretary Joey Lina, public respondent commission likewise took into consideration the
counter-affidavit, but again, public respondent commission found that the contentions of petitioner failed to controvert
the fact finding report of the committee. On our part, the counter-affidavit is pure denial. The Supreme Court in a litany
of cases has ruled that denial, if unsubstantiated by clear and convincing evidence is a self-serving assertion that
deserves no weight in law.7
The Court of Appeals also correctly sustained the CSCs Decision finding petitioner guilty of grave misconduct for
violating the procedure for the procurement of supplies, and for approving the Disbursement Vouchers without the
certification from the Accountant. The CSC Decision stated:
. . . [T]he Commission finds Roque guilty of Grave Misconduct for approving the payment of supplies without a
Certification from the Accountant that funds are available. As provided in the Local Government Code of 1991, the
General Appropriations Act and other pertinent laws and rules, the procurement of supplies is dependent on the
availability of funds evidenced by the issuance of an Advice of Sub-Allotment and Notice of Transfer of Cash Allocation
by the Central Finance Office of the agency to the procuring unit. Upon the establishment of fund availability, the basic
procedures for the procurement of supplies are, as follows:
1) Preparation of Purchase Request. The Head of Office needing the supplies prepares a Purchase Request certifying
the necessity of the purchase for official use and specifying the project where the supplies are to be used. Every
Purchase Request must be accompanied by a certificate signed by the local Budget Officer, the local Accountant, and
the local Treasurer showing that an appropriation therefor exists, that the estimated amount of such expenditure has
been obligated, and that the funds are available for the purpose, respectively.
2) Approval of the Purchase Request. The Head of Office or department concerned who has administrative control of
the appropriation against which the proposed expenditure is chargeable approves the Purchase Request.
3) Endorsement of the PBAC for bidding. The PBAC advertises the invitation to bid and the notice or prequalification,
conducts the opening of bids, prepares the Abstract of Bids, conducts the evaluation of bids, undertakes postqualification proceedings, and recommends to the Head of Office the award of contracts to the successful bidder. The
Head of Office issues the Notice of Award.
4) Preparation of Certificate of Availability of Funds. The Chief Accountant certifies that funds have been duly
appropriated/allotted for the purpose of entering into a contract involving expenditures of public funds and that the
amount necessary to cover the proposed contract for the current fiscal year is available.
5) Preparation of Purchase Order. The Head of Office approves the Purchase Order which is a document evidencing a
transaction for the purchase of supplies.
6) Delivery of Purchase Order. The Purchase Order is delivered to the supplier within a reasonable time after its
approval.
7) Delivery of Items. The supplier delivers the supplies in accordance with the specifications, terms and conditions
provided in the Purchase Order.
8) Inspection of Items. The inspector inspects and verifies the purchases made by the agency for conformity with the
specifications in the order.
9) Preparation of Certificate of Acceptance. Acceptance of deliveries may be made only if the supplies and materials
delivered conform to the standards and specification stated in the contract.
10) Preparation of the Voucher. The Budget Officer, the Accountant and the Treasurer certify that all documents are
complete and proper. The Head of Office approves the Disbursement Voucher for the release of check for payment.
As can be gleaned from the foregoing procedures, the participation of the Head of Office consists in the approval of
the Purchase Request, Purchase Order, and the Disbursement Voucher and in the award of the contract to the
successful bidder. As Head of the Regional Office, Roque has authority to approve and sign the Notice of Award
based on the PBAC Resolution and the Disbursement Voucher upon certification of the Budget officer, the Accountant
and that Treasurer that all supporting documents are complete and proper.

133

Roque claims good faith since his approval of the Disbursement Vouchers, though without the signature of the
Accountant, is supported by papers bearing the signature of the Accountant. This is devoid of merit. The authority of
the Head of Office to approve the Disbursement Voucher is dependent on the certifications of the Budget Officer, the
Accountant and the Treasurer on the principle that it would be improbable for the Head of Office to check all the details
and conduct physical inspection and verification of all papers considering the voluminous paperwork attendant to his
office. Without the certification, the Head of Office is duty-bound to inspect the voluminous records to verify the
contents of the documents needing his approval. It needs emphasis that the approval of the Disbursement Voucher
means the release of public funds, as in this case, for payment of the supplies to the supplier. In the instant case,
Roque approved the Disbursement Vouchers despite the lack of the Accountants certification. He failed to perform his
duty of ascertaining whether it is proper for him to approve the Disbursement Vouchers before he approves the same.
This is not a mere oversight which the Commission may easily disregard. His act constitutes Grave Misconduct which
warrants his dismissal from the service.8
Misconduct is "a transgression of some established and definite rule of action, more particularly, unlawful behavior or
gross negligence by a public officer."9 The misconduct is grave if it involves any of the additional elements of
corruption, willful intent to violate the law or to disregard established rules, which must be established by substantial
evidence.10 Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.11
The Court agrees with the Court of Appeals that there is substantial evidence that petitioners act constituted grave
misconduct, as petitioner voluntarily disregarded established rules in the procurement of supplies. The Court of
Appeals found, thus:
. . . [T]here is no showing that petitioner conducted verifications on the supporting papers of the Disbursement
Vouchers. Instead, he claimed that he was in good faith in approving them as the supporting papers bore the
signature of the Accountant. . . This Court is of the opinion that the approval of more than one disbursement voucher
without the necessary certification of the accountant casts doubt on the claim of petitioner that he was in good faith. . .
Unmistakably, the intent to violate the law or flagrant disregard of established rule is manifest in the matter under
consideration. It could have been different if only one disbursement voucher is involved.12
As regards petitioners acts of disobeying and/or countermanding the lawful orders of his superiors, the Court agrees
with the Court of Appeals that such acts can be classified as gross insubordination punishable with suspension for six
months and one day to one year for the first offense, and dismissal for the second offense.
In fine, the Court of Appeals correctly found petitioner guilty of grave misconduct for manifest intent to disregard
established rules in the procurement of supplies. Under Sec. 22, Rule IV of the Omnibus Civil Service Rules and
Regulations, grave misconduct is classified as a grave offense and penalized with dismissal for the first offense. The
penalty of dismissal carries with it forfeiture of retirement benefits excluding leave credits,13 and disqualification from
reemployment in the government service. Despite dismissal from the service, petitioner, as a government employee, is
entitled to the leave credits that he has earned during the period of his employment.14
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 93349 promulgated on May 29, 2007 and its
Resolution promulgated on August 9, 2007 are hereby AFFIRMED.
No costs.
SO ORDERED.

134

G.R. No. L-13281

August 31, 1960

SIARI VALLEY ESTATES, INC., petitioner,

vs.
FILEMON LUCASAN, ET AL., respondents.
Orendain and Sarmiento for petitioner.
Barrios, Lucasan and Lucasan for respondents.
BAUTISTA ANGELO, J.:
On January 30, 1952, the Court of First Instance of Zamboanga del Norte rendered decision ordering Filemon
Lucasan to deliver to the Siari Valley Estates, Inc. the cattle inside the former's pasture or pay its value amounting to
P40,000.00 and damages in another sum of P40,000.00, This decision was affirmed in toto by the Supreme Court,
and when the same became final and executory, a writ of execution was issued. In carrying out this writ, the sheriff
proceeded to levy on certain parcels of lands belonging to defendant. These lands were sold by the sheriff at public
auction to the corporation as the highest bidder on January 14, 1956. The judgment debtor having failed to redeem the
land within the period of one year, on January 26, 1957, the sheriff issued in favor of the purchaser the final certificate
of sale, copy of which was registered in the Office of the Register of Deeds of Zamboanga. On February 16, 1957,
upon petition of the corporation, a writ of possession was issued directing the sheriff to place said corporation in
possession thereof. Notwithstanding said writ, however, the corporation failed to take possession of the lands, hence it
filed a motion reiterating its petition that it be placed in their possession.
This time judgment debtor Filemon Lucasan filed an opposition alleging that he was in possession of one of the
parcels of land sold at public auction on which he has erected a house and which he has extra judicially constituted as
a family home, the rest being in possession of third parties. On April 30, 1957, the court, overruling the opposition,
issued an order directing the sheriff to place the corporation in possession of the lands sold to it. On August 7, 1957,
debtor Lucasan filed a motion for reconsideration which was denied, the court reiterating its previous order with little
amendment, but on August 23, 1957 issued another order allowing the corporation to take possession of all lands
sold, with the exception of parcel 1 on which the family home was constituted, holding that the levy and sale made by
the sheriff with regard to said parcel were not made in accordance with law and so are null and void. Having failed to
have this last order reconsidered, the corporation interposed the present petition for certiorari.
It appears that parcel 1 is a registered land covered by Certificate of Title No. OCT-2492, Patent No. 50967, duly
registered in the Office of the Register of Deeds of Zamboanga del Norte in the name of Filemon Lucasan. On this
land stands a big house of mixed materials which is asserted in the amount of P23,270.00 as evidenced by Tax
Declaration No. 7653. It also 37 3 appears that Filemon Lucasan and his wife constituted this house and the lot on
which stands into a family home, the pertinent document having been registered in the office of the register of deeds
on June 21, 1955. In opposing the petition of the corporation for a writ of possession insofar as this property is
concerned, Lucasan contended that said lot and house having been constituted as a family home are beyond the
reach of judicial execution. He contended that the levy made by the sheriff on said property is legally ineffective
because it was not effected in accordance with what is prescribed in Section 14, Rule 39, in relation to Section 7, Rule
59, of the Rules of Court.
There is merit in this contention. The evidence shows that when this property was levied on execution by the sheriff to
satisfy the judgment rendered against Filemon Lucasan in favor of petitioner corporation the notice of levy merely
described the property as unregistered land and the same was registered under Act 3344 in the office of the register of
deeds. It also appears that in the notice of sale the property was merely described according to the boundaries and
area appearing in the tax declaration and not according to what appears in the certificate of title. On the other hand,
the rule provides that real property shall "be levied on in like manner and with like effect as under an order of
attachment" (Section 14, Rule 39), and the provision regarding attachment of real property postulates that the
attachment shall be made "by filing with the register of deeds a copy of the order, together with the description of the
property attached, and a notice that it is attached, and by leaving a copy of said order, description, and notice with the
occupant of the property, if any there be," and that "Where the property has been brought under the operation of the
Land Registration Act, the notice shall contain a reference to the number of the certificate of title and the volume and
page in the registration book where the certificate is registered" (Section 7 [a], Rule 59).
These provisions should be strictly construed if their purpose has to be accomplished. The requirement that the notice
of levy should contain a reference to the number of the certificate of title and the volume and page in the registration
book where the certificate is registered is made in order that the debtor as well as a third person may be properly
informed of the particular land or property that is under the custody of the court. This can only be accomplished by
making a reference to the certificate of title covering the property. The situation differs if the land is unregistered in
which case it is enough that the notice be registered under Act 3344. This conclusion finds support in the following
authorities:

135

An attachment levied on real estate not duly recorded in the registry of property is not an encumbrance on the
attached property, nor can such attachment, unrecorded in the registry, serve as a ground for decreeing the annulment
of the sale of the property, at the request of another creditor. (Gonzales Diez vs. Delgado and Imperial, 37 Phil., 389)
... In conformity with the provisions of section 71 of the Land Registration Act, the sheriff of the City of Manila filed a
notice of the levy with the register of deeds, which notice was entered in the primary entry book of the register's office,
but was afterwards, on May 20, 1920, returned to the sheriff with the information that the property was registered in
the name of Buenaventura Dizon, having been conveyed to the latter by the defendant in execution, Celerino Arellano,
and that, therefore, no memorandum of the notice had been entered upon the outstanding certificate of title. It may be
noted that the notice contained no "reference to the number of the certificate of title of the land to be effected and the
volume and page in the registry book where the certificate is registered, and that t that extent, the notice did not meet
the requirements of said section 71. (De Ocampo vs. Treasurer of the Philippine Islands, 50 Phil., 140, 141; Emphasis
supplied).
Since the notice of levy made by the sheriff as regards parcel number 1 which is a registered land contains no
reference to the number of its certificate of title and the volume and page in the registry book where the title is
registered, it follows that said notice is legally ineffective and as such did not have the effect of binding the property for
purposes of execution. Consequently, the sale carried out by virtue of said levy is also invalid and of no legal effect.
The second issue raised is: Is the family home extra judicially established by respondent on the lot and house in
question exempt from execution?
Respondent sustains the affirmative considering that the money judgment rendered against him was appealed to the
Supreme Court in which event, he contends, the same could not be considered as a debt at the time the family home
was constituted for it was still inchoate and as such cannot come under the provisions of Article 243 (2) of the new
Civil Code.
The article above referred to provides that "The family home extra judicially formed shall be exempt from execution"
except "for debts incurred before the declaration was recorded in the Registry of Property." What if the meaning of the
word debt used in this article? Does it refer to a debt that is undisputed, or may it also refer to any pecuniary obligation
even if the same has not yet been finally determined? In other words, can a judgment for a sum of money be
considered a debt within the meaning of this provision even if said judgment is still pending appeal?
We are inclined to uphold the affirmative considering the real purpose of the law. The reason why a family home
constituted after a debt had been incurred is not exempt from execution is to protect the creditor against a debtor who
may act in bad faith by resorting to such declaration just to defeat the claim against him. If the purpose is to protect the
creditor from fraud it would be immaterial if the debt incurred be undisputed or inchoate, for a debtor acting in good
faith would prefer to wait until his case is definitely decided before constituting the family home. Indeed, it may result,
as in this case, that the Supreme Court may affirm the judgment of the lower court. If the contention of respondent be
sustained a debtor may be allowed to circumvent this provision of the law to the prejudice of the creditor. This the
Court cannot countenance. Hence, we are persuaded to conclude that the money judgment in question comes within
the purview of the word debt used in Article 243 (2) of the new Civil Code.
WHEREFORE, the order appealed from is hereby affirmed, without prejudice of the part of petitioner to file a new
petition for execution following strictly the requirements of the rule on the matter. No pronouncement as to costs.

136

G.R. No. L-34657

October 23, 1979

ERLINDA RAVANERA and husband OSCAR RAVANERA, petitioners,

vs.
FELIPE I. IMPERIAL, respondent.
Borja & Naval for petitioners.
Abonal & Abonal for respondent.

DE CASTRO, J.:
Appeal by certiorari taken by petitioners from (a) the decision of the Court of Appeals in CA-G.R. No. SP-00080,
entitled "Felipe I. Imperial, petitioner versus Hon. Delfin Vir. Sunga, Judge, Court of First Instance of Camarines Sur,
Erlinda Ravanera and husband Oscar Ravanera, respondents" promulgated on November 16, 1971 setting aside the
orders dated March 18, 1971 and March 30, 1971 issued by the Court of First Instance of Camarines Sur in Civil Case
No. 5292, entitled "The Roman Catholic Archbishop of Caceres, plaintiff, versus Felipe I. Imperial, defendant," and
from (b) the former's resolution of January 10, 1972 denying petitioners' motion for reconsideration.
The facts found by the Court of Appeals are as follows:
It appears that on October 17, 1961 the Roman Catholic Archbishop of Caceres filed an action for Rescission of
Contract and Recovery of Possession against the herein petitioner before the respondent court. Said case was
decided by the respondent court in favor of the plaintiff on January 28, 1966.
On February 17, 1966 pending approval of the Record on Appeal, plaintiff Archbishop of Nueva Caceres filed a Motion
for Execution of the decision or to order defendant to file supersedeas bond and to deposit the amount of P500.00
every month as rentals.
On May 6, 1966 the respondent Court granted the motion for execution pending appeal and at the same time ordered
that to stay the execution, the defendant put up a supersedeas bond in the amount of P40,000.00 for the rents due as
of February, 1966, for the amount of moral damages, and for the expenses of suit and to deposit the amount of
P500.00 as monthly rental of the property. This order became the subject of a Special Civil Action for certiorari and
prohibition before the Supreme Court and by reason of the pendency of said special civil action the order of execution
was not enforced by the plaintiff.
On December 10, 1966, the record on appeal was approved and the appealed case is now docketed as CA-G.R. No.
39115-R, in this Court.
On May 22, 1968, the Supreme Court dismissed the petition for certiorari on the ground that the order of execution
being incidental to the appeal, the same should be addressed to the Court of Appeals. So on June 21, 1968, the
plaintiff filed another motion for execution. On July 16, 1968 the respondent Court ordered the issuance of a writ of
execution, but the petitioner was given fifteen (15) days from receipt of the order to put up the P40,000.00
supersedeas bond and to deposit the monthly rental of P500.00 in order to stay the execution.
Inspite of his receipt of the order on July 23, 1968, petitioner failed to post the required supersedeas bond and to
deposit the P500.00 monthly rental. Thus, on November 20, 1968, the plaintiff Archbishop filed a motion for the
issuance of a writ of execution. On December 20, 1968 the respondent Court granted the motion for execution
requiring however the plaintiff to put up a bond in the amount of P20,000.00 to answer for any judgment that may be
awarded to petitioners should the decision be reversed on appeal.
The plaintiff Archbishop posted the required bond of P20,000.00 and on February 14, 1969 a writ of execution was
issued. Said writ was not enforced upon instance of the counsel for plaintiff as an amicable settlement was proposed
and after the 60 days period had lapsed the Sheriff made a return of the writ stating therein:
This is to certify that this writ was not acted upon at the instance of counsel for the plaintiff for the reason that amicable
settlement between parties was proposed.
Upon request of counsel for the plaintiff let this writ be returned and an alias writ be issued for the proposed amicable
settlement abovestated failed to materialize.
Naga City, Philippines, July 14,1969.

137

SGD. MAURO B. FAJARDO

Ex Oficio City Sheriff
Pursuant to this return, the Clerk of Court of the respondent Court, issued an alias writ of execution on August 24,
1969. On September 24, 1969 the Sheriff issued a notice of Levy by which certain properties of the petitioner were
attached or levied upon. On September 25, 1969 the alias writ was personally served by the Sheriff upon the
petitioner. On October 7, 1969, the Sheriff issued a Notice of Public Auction sale of the properties levied upon which
was published in the "Bicol Star" a weekly newspaper of general circulation on October 11, 18 and 25, 1969. Private
respondent alleges that copies of the Notice of Levy and the Notice of Sale were sent by Registered Mail which
according to the certificate of the Postmaster was received on October 15, 1969. Receipt of the Notice of Levy is
denied by petitioner.
On November 7, 1969 the public auction sale was held, and the respondent Erlinda Ravanera being the highest
bidder a Provisional Deed of Sale was issued in her favor. Within the one-year period of redemption, the petitioner
redeemed some of the properties bought at auction sale, but he failed to redeem some others on account of which at
the end of the redemption period or on December 8, 1970 the Sheriff executed a Definite Deed of Sale of said
unredeemed properties in the name of respondent Erlinda Ravanera. She likewise paid the arrears in real estate taxes
of said properties, redeemed a mortgage on one of them and caused the property to be declared in her name.
On February 9, 1971 respondent Erlinda Ravanera filed a motion for a writ of possession of the properties covered by
the Definite Deed of Sale, to which motion petitioner filed his opposition alleging that the notice of levy was null and
void and hence the provisional as well as the definite deed of sale were likewise void, and that respondent Ravanera
had no personality in the case, she not being a party thereto.
On March 18, 1971, the respondent Court issued an order granting the motion for a writ of possession and on March
27, 1971 the petitioner filed a motion for reconsideration on the ground that there was no formal hearing and reception
of evidence on the motion and that the order did not state the finding of facts which could be the basis for the grant of
the motion. On March 30, 1971 the respondent Court issued an order denying the motion for reconsideration,
however, it suspended the effectivity of the writ of possession to April 25, 1971. Hence this petition.
The petitioner attacks the order of March 15, 1971 granting the motion for a writ of possession on the following
grounds:
1.
That the writ of execution issued by the Court on December 30, 1968 is void defendant having on December
10, 1966 perfected his appeal;
2.
That the Alias writ of Execution issued by the Deputy Provincial Sheriff is void there having been no order
corning from the Court granting such issuance of an Alias Writ;
3.

Notice of Levy Null and Void;

4.

That Erlinda Ravanera has no personality to file Motion for Writ of Possession;

5.

That there was no formal hearing or reception of evidence from the parties;

6.

That there is a pending appeal before the Court of Appeals under G.R. No. 39-115-R;

7.
That order issuing the Writ of Possession did not state findings of facts as basis for the order or issuance of
the writ;
8.
That the price for which the properties have been bidded is grossly inadequate and is therefore
unconscionable amounting to lack of consideration.
From the facts recited in the complaint, the answer as well as the decision of the respondent court appears that the
main case partakes more of the nature of an unlawful detainer and damages case rather than one for recission of
contract as it is admitted by the parties that the contract of lease had already expired and there is no showing that the
same had been expressive or impliedly renewed. Hence there was actually no contract to be rescinded and
subsequent orders of the respondent court reveal that it considered the case as one for ejectment and damages. 1
On November 16, 1971, the Court of Appeals rendered a decision setting aside the orders dated March 18, 1971 and
March 30, 1971 issued by the Court of First Instance of Camarines Sur and making the preliminary injunction
previously issued permanent. 2

138

Petitioners filed a motion for reconsideration of the decision which was denied by the Court of Appeals in its resolution
of January 10, 1972. 3
From the above-mentioned decision and resolution, petitioners seek in this petition to correct errors committed by the
Court of Appeals as follows:
1.
The Court of Appeals erred in annulling the Notice of Levy merely because it did not comply with some of the
formal requirements of the Rules of Court which were not shown to have prejudiced any substantial rights of the
respondent Imperial;
2.
The Court of Appeals erred in applying to one unregistered parcel of land and the one unregistered residential
house described in the Notice of Levy the formal requirements of the Rules of Court which are applicable only to
registered properties;
3.
The Court of Appeals erred in requiring service upon respondent Imperial of the Notice of Levy before the
publication of the Notice of Public Auction Sale considering that the Rules of Court does not so require;
4.
That the Court of Appeals erred in not applying to the case at bar the presumption of regularity in the official
acts and proceedings of the Sheriff, particularly in the matter of leaving with the occupant of the land, copy of the
Notice of Levy, considering that there is no evidence to the contrary;
5.
The Court of Appeals erred in not applying against respondent Imperial the principle of estoppel or waiver of
whatever procedural defects there were in the Levy when he repurchased part of the properties levied upon by the
Sheriff but failed to repurchase properties which are now in question herein;
6.
That the Court of Appeals erred in not considering against respondent Imperial undisputed facts which show
bad faith and intent to delay the proceedings and to thwart a fair administration of justice,
7.
The Court of Appeals erred in not considering in favor of the petitioners undisputed facts showing that they
were innocent purchasers for value, and therefore, should not be made to suffer the prejudice caused by the alleged
invalidity or ineffectiveness of the levy. (pp. 9-1 0, Rollo)
The main issue raised before Us in this petition is whether or not there was a valid levy upon the properties of
respondent Felipe I. Imperial.
The Court of Appeals annulled the levy and all the proceedings subsequent thereto on two grounds, to wit: 1) The
occupants or possessors of the properties levied upon were not furnished with a notice of levy and as Section 7 of
Rule 57, paragraph (a) makes this a requirement for the validity of the levy, non-compliance therewith has made the
levy ineffective, and 2) The Notice of levy made by the sheriff did not contain the volume and the page in the Registry
where the certificates registered. 4
Anent the first ground, the Court of Appeals, in support thereof, cited the case of Philippine Surety vs. Zabal 5 wherein
this Court held:
In the case at bar, no notice of the levy was given to the occupant of the land. There was, therefore, no valid levy on
the land, and its registration in the registry of deeds and annotation in the title were invalid and ineffective. The fact
that the person in whose name the land was registered was duly notified of the attachment does not cure the defect,
because personal service of the copy of the writ, description of the property and notice to the owner, who is not the
occupant, does not constitute compliance with the statute.
The evident purpose of the law in imposing these requirements is to make the levy public and notorious, to prevent
liens from attaching secretly and by surreptitious entries and endorsements, and to enable the affected party to inquire
into the date and circumstances surrounding the creation of the encumbrance, as well as to give him ample
opportunity to file timely claims to the property levied upon.
The ruling relied upon by the Court of Appeals has already been modified by the case of Pamintuan vs. Muoz, 22
SCRA 1109 wherein tills Court briefly stated:
Petitioners finally argue that they had not been served a notice of the levy nor a notice of the sale as required by the
Rules. The sheriffs return, however shows that the notice of levy had been registered with the Register of Deeds
pursuant to Rule 57, Section 7 in connection with Rule 39, Section 15 of the Rules, and that the notice of sale had
been sent by registered mil on December 28, 1964, to petitioners. Even assuming then that petitioners were not
served a copy of the notice of levy, yet We have already ruled in Philippine Bank of Commerce vs. Macaraeg, L-

139

14174, October 31, 1960, that this defect is cured by service of notice of sate upon the judgment debtors prior to the
sale, which was done here. The levy was validly effected then.
It appears in this case that the notice of levy was registered with the Register of Deeds on September 29, 1969. From
a certification of the Postmaster at Naga City, it also appears that registered letter No. 13681 containing the notice of
levy and the notice of auction sale addressed to respondent Felipe Imperial was delivered on October 15, 1969 to
Pelaguia Comba, member of the household of the addressee. Respondent Imperial was, therefore, notified by
registered mail of the levy and the auction sale long before November 3, 1969, the date of the auction sale. What is
required is that the judgment debtor must be notified of the auction sale before the actual date of sale which was done
in the case at bar. 6
It cannot be gainsaid that if it were only to afford an opportunity to respondent Imperial to avoid the auction sale, he
had ample opportunity to file his objection to such sale because the auction sale took place on November 3, 1969. The
respondent had nineteen days after he received the notice of levy and the notice of auction sale on October 15, 1969
and thirty-nine (39) days from September 25, 1969 when he was served personally by the Sheriff a copy of the writ of
execution to avoid the sale had he wanted to. Moreover, he had exactly one year from November 27, 1969 when the
provisional Deed of Sale executed in favor of the petitioner was registered with the Register of Deeds to redeem the
property.
Regarding the second ground, We are constrained to make a distinction for the levy of property registered under Act
496 (Land Registration Act) and the property not brought under the operation of said Act.
The Court of Appeals concluded in its Resolution dated January 10, 1972 that the requirements of Section 7 of Rule
57 do not make distinction whether the property is under the operation of the Land Registration Act or not. Petitioners
contend otherwise and such contention is not without merit, under the provisions of Section 15 (Paragraph 2) of Rule
39 and Section 7 (Paragraph a) of Rule 57, which are pertinent.
Section 15 (Paragraph 2) of Rule 39 expressly provides:
xxx

xxx

xxx

Real property, stocks, shares, debts, credits and other personal property, or any interest in either real or personal
property, may be levied on in like manner and with like effect as under a writ of attachment.
Section 7 (paragraph a) of Rule 57 also provides the following:
Attachment of real and personal property, recording thereof.- Properties shall be attached by the officer executing the
order in the following manner:
(a)
... Where the property had been brought under the operation of the Land Registration Act, the nonce shall
contain a reference to the number of the certificate of title and the volume and page in the registration book where the
certificate is registered. The registrar must index attachments filed under this paragraph in the names both of the
plaintiff and of the defendants.
Section 7 (paragraph a) of Rule 57 is so explicit that only as to property which has been brought under the operation
of the Land Registration Act should the notice of levy contain the volume and page in the registration book where the
certificate is registered, impliedly, the requirement does not apply to property not registered under the said Act. It is
enough that the notice of levy upon unregistered land be registered under Act 3344, as was done in this case.
In the case of Siari Valley Estates vs. Lucasan, 7 which clearly applies to this case, it was held by this Court:
The requirement that the notice of levy should contain a reference to the number of the certificate of title and the
volume and page in the registration book where the certificate is registered is made in order that the debtor as well as
a third person may be properly informed of the particular land or property that is under the custody of the court. This
can only be accomplished by making a reference to the certificate of title covering the property. The situation differs if
the land is unregistered, in which case it is enough that the notice be registered under Act 3344. This conclusion finds
support in the following authorities:
An attachment levied on real estate not only recorded in the registry of property is not an encumbrance on the
attached property, nor can such attachment, unrecorded in the registry, serve as a ground for decreeing the annulment
of the sale of the property, at the request of another creditor.(Gonzalez Diez v. Delgado and Imperial, 37 Phil. 389)
... In conformity with the provisions of Section 71 of the Land Registration Act, the sheriff of the City of Manila filed a
notice of the levy with the register of deeds, which notice was entered in the primary entry book of the register's office,

140

but was afterwards, on May 20, 1920, returned to the sheriff with the information that the property was registered in
the name of Buenaventura Dizon, having been conveyed to the latter by the defendant in execution, Celerino Arellano,
and that, therefore, no memorandum of the notice had been entered upon the outstanding certificate of title. It may be
noted that the notice contained no reference to the number of the certificate of title of the land to be effected, and the
volume and page in the registry book where the certificate is registered, and that to that extent the notice did not meet
the requirements of said section 71. (De Ocampo v. Treasurer of the Philippine Islands, 50 Phil. 140, 141; Emphasis
supplied.)
The properties which were acquired by the petitioners as the highest bidders in the auction sale on November 3, 1969
are as follows:
1.
257;

A parcel of land located at Naga City registered under Act 496 and covered by Transfer Certificate of Title No.

2.
A two-storey residential house located at Naga City not registered under Act 496 but covered by Tax
Declaration No. 14276; and
3.
A parcel of residential land located at Naga City not registered under Act 496 but covered by Tax Declaration
No. 8732. (Annex J to Petition, pages 39 and 40, Rollo.)
From the records of the case, the notice of levy made by the sheriff as regards the registered land contains reference
to the number of its certificate of title but not to the volume and page in the registry book where the title is registered.
Nevertheless from what was stated in the case of Siari Valley Estate vs. Lucasan, supra, it would seem that the
purpose of the requirement of Section 7(a), Rule 39 of the Revised Rules of Court is substantially complied with. This
is more so where as in this case, there appears in the notice of levy the following certification:
It is hereby certified that this instrument has been duly registered proper memorandum hereof made on transfer
Certificate of Title No. 257 & 258 and on its owner's duplicate Reg. Book No. 3; File No. 1-248.
Naga City, Sept. 29, 1969.
Reference to the number of the certificate of title of every registered land in the notice of levy, together with the
technical description thereof, would certainly suffice to inform the debtor, as well as third persons what particular land
or property is brought to the custody of the court, as is the purpose of the aforecited provision of the Rules of Court.
Incidentally, no third person appears, to be interested in the matter now before this Court. From the fact that
respondent Imperial was able to exercise his right of redemption with reference to three registered parcels of land, it
can be easily deduced that insofar as respondent Imperial is concerned, the purpose of the requirement of reference
having to be made to the number of the certificate of title, and also the volume and page in the registration book where
the certificate is registered, has been fully served or attained.
It may also be pertinent to note that in the Siari Valley case, heavily relied upon by the respondent court in voiding the
notice of levy in the instant case, the land involved which was actually registered with OCT No. 2492 was described in
the notice of levy as unregistered land, which was thus a misleading information.
We, therefore, find no substantial defect in the notice of levy on all the properties levied upon and sold to petitioners in
the auction sale, that should be a basis, as the respondent court deemed it to be, for annulling the sale made pursuant
to the levy.
Respondent Imperial also brands the levy as irregular for failure of the occupants of the attached or levied properties
to be left with copy of the order, notice of levy and description of the properties. The finding of facts of the respondent
Court of Appeals which was quoted in full above, fails to disclose the existence of occupants of the properties levied
upon other than the owner, respondent Imperial. It was incumbent on said respondent to prove by evidence duly
submitted to the Court a fact that would tend to support his claim that the levy is void or otherwise illegal. The levy
being an official act of a government functionary its regularity is presumed.
The alleged inadequacy of the purchase price of the properties sold in the execution sale is no ground to assail the
validity of the sale, for the judgment debtor has the right to redeem the property, and the smaller the price, the easier
is it for him to buy back the property. 8
Respondent Imperial goes back to the issuance of the order of execution on December 30, 1968 to show that the
order is invalid because it was issued after he has perfected his appeal on December 10, 1966 (p. 22, Respondent's
Brief). What the Court of Appeals, however, stated in its decision is that "on February 17, 1966, pending approval of
the Record on Appeals, plaintiff Archbishops of Nueva Caceres filed a Motion for Execution of the decision or to order
defendant to file supersedeas bond and to deposit the amount of P500.00 every month as rentals," and that on May 6,

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1966, the respondent court (CFI of Camarines Sur) granted the motion for execution pending appeal. This order was
brought up by respondent Imperial to the Supreme Court on certiorari as a special civil action, resulting in the stay of
the enforcement of the order of the execution. The special civil action, however, was dismissed on May 22,1968, by
the Supreme Court, and the dismissal merely reactivated the order of execution pending appeal issued on May
6,1966.
Clearly, the original order of execution pending appeal was perfectly valid, and the issuance of alias writ when the
original writ was not acted upon at the instance of the plaintiff for the reason that amicable settlement between the
parties was proposed but failed to materialize, did not affect the validity of either the original or alias writ of execution.
Accordingly, We rule that contrary to the contention of respondent Imperial (see pages 22-23, Brief for the
Respondent), the writ of execution that gave rise to the levy of the properties in question and their sale in a public
auction is valid and regular in all respects. 'That the alias writ of execution was issued by the Clerk of Court and not by
the judge is no ground for holding invalid said alias writ, considering that the Clerk of Court is not without authority to
issue ordinary writs and processes, under the seal of the Court (Session 4, Rule 136, Revised Rules of Court).
In any event, respondent Imperial as judgment debtor is in estoppel by his failure to seasonably make an objection to
the allegedly defective notice of levy and notice of sale before the actual sale, or before redeeming some of his
properties despite the supposed defect of the notice of levy. He should have interposed objection to the levy and the
sale from the very beginning, from October 15, 1969 when he received notice of levy and notice of sale. A waiver on
his part to question the validity of the auction sale may also be said to arise from his failure to pay the arrears in real
estate taxes, or to redeem the mortgage of one of the properties sold at public auction, during the period of
redemption. These are omissions which are clearly an indication of acquiescence in the sale, or his awareness that
the execution sale was valid and legally unassailable. To allow him to turn back on his manifest conformity to the levy
and sale on execution of his properties, after petitioners have bought the property as the highest bidder during the
auction sale, would be patently unjust to the said petitioners, who had every reason to rely on the presumed regularity
of the proceedings as official acts of both the judge and his own court officer, the sheriff.
WHEREFORE the decision appealed from is hereby reversed. The notice of levy and the sale of the properties in
question, both registered and unregistered in favor of the petitioners are hereby declared valid. No pronouncement as
to cost.
SO ORDERED.

142

G.R.NO. L-36249

March 29, 1985

ANIANO OBAA, petitioner,

vs.
THE COURT OF APPEALS AND ANICETO SANDOVAL, respondents.
MELENCIO-HERRERA, J.:

Petitioner seeks a review of the Decision of respondent Appellate Court (in CA-G.R. No. 44345-R) ordering him in an
action for Replevin to return to Aniceto SANDOVAL, private respondent herein, 170 cavans of rice or to pay its value in
the amount of P37.25 per cavan, with legal interest from the filing of the Complaint until fully paid.
SANDOVAL is the owner and manager of the "Sandoval and Sons Rice Mill" located in Rosales, Pangasinan. He is
engaged in the buying and selling of palay.
On November 21, 1964, SANDOVAL was approached by a certain Chan Lin who offered to purchase from him 170
cavans of clean rice (wagwag variety) at the price of P37.26 per cavan, delivery to be made the following day at
petitioner's store in San Fernando, La Union, with payment to be made thereat by Chan Lin to SANDOVAL's
representative. SANDOVAL accepted the offer as he knew petitioner and had had previous transactions with him.
As agreed, the 170 cavans of rice were transported the following day on a truck belonging to SANDOVAL to
petitioner's store in San Fernando, La Union. Chan Lin accompanied the shipment. Upon arrival thereat, the goods
were unloaded but when the truck driver attempted to collect the purchase price from Chan Lin, the latter was
nowhere to be found. The driver tried to collect from petitioner, but the latter refused stating that he had purchase the
goods from Chan Lin at P33.00 per cavan and that the price therefore had already been paid to Chan Lin.
Further demands having been met with refusal, SANDOVAL, as plaintiff, filed suit for replevin against petitioner, then
the defendant, before the Municipal Court of San Fernando, La Union, which ordered petitioner-defendant to pay to
SANDOVAL one-half () of the cost of the rice or P2,805.00.
On appeal by petitioner-defendant to the then Court of First Instance of La Union, the parties agreed to adopt
SANDOVAL's testimony before the Municipal Court. After trial de novo, judgment was rendered dismissing the
complaint against petitioner-defendant.
On appeal to respondent Appellate Court, SANDOVAL obtained a reversal in his favor, as follows:
WHEREFORE, the appealed decision is hereby set aside and another one entered ordering defendant-appellee to
return the one hundred and seventy cavans of rice to plaintiff- appellant or to pay its value in the amount of P 37.25
per cavan, with legal interest from the filing of the complaint until fully paid and with costs against the appellee. 1
Before us, petitioner-defendant takes issue with the following Appellate Court findings:
From the evidence presented by the parties, it is evident that this is a simple case of swindling perpetuated by Chan
Lin at the expense of the plaintiff and the defendant. The act of Chan Lin in purchasing plaintiff's rice at the price of P
37.25 per cavan and thereafter offering the same goods to defendant at a much lower price is an indication that it was
never his intention to comply with his obligation to plaintiff. It is clear that Chan Lin's only purpose in entering into said
contract with plaintiff was to acquire the physical possession of the goods and then to pass them on to defendant on
the pretext that he is the owner thereof. Premises considered, therefore, Chan Lin cannot be considered as the owner
of the goods at the time the same was said to have been sold to the defendant-appellee. Considering that defendant
acquired the 170 cavans of rice from a person who is not the owner thereof, it is therefore clear that he acquired no
greater right than his predecessor-in-interest.
Finally, on principle of equity, it is but proper that plaintiff-appellant be allowed to recover the one-hundred and seventy
cavans of rice or its value. Being the undisputed owner of the above mentioned goods, the appellant cannot be
deprived of its ownership without the corresponding payment. 2
We agree with petitioner-defendant that there was a perfected sale. Article 1475 of the Civil Code lays down the
general rule that there is perfection when there is consent upon the subject matter and price, even if neither is
delivered.
The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price.

143

xxx

xxx

xxx

Ownership of the rice, too, was transferred to the vendee, Chan Lin, upon its delivery to him at San Fernando, La
Union, the place stipulated 3 and pursuant to Articles 1477 and 1496 of the same Code:
Art. 1477.
The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive
delivery thereof.
Art. 1496.
The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in
any of the ways specified in Articles 1497 to 1501, or in any manner signifying an agreement that the possession is
transferred from the vendor to the vendee.
At the very least, Chan Lin had a rescissible title to the goods for the non-payment of the purchase price, but which
had not been rescinded at the time of the sale to petitioner.
However, from petitioner-defendant's own testimony before the Court of First Instance, he admits that three days after
the delivery, he was repaid the sum of P5,600.00 by Chan Lin, who was then accompanied by SANDOVAL's driver,
and that he had delivered the rice back to them. On rebuttal, however, the driver denied that the rice had ever been
returned. 4 The driver's version is the more credible, for, as SANDOVAL's counsel had manifested in open Court, if
return of the rice had been effected, they would have withdrawn the complaint. 5 Following is the admission made by
petitioner-defendant:
Q

After the third day ... when that request for you to hold the rice was already overdue, what happened?

A
me.

This is what happened. Chan Lin and the driver with the same truck that they used to unload the rice, came to

What day was that?

That was I think, Thursday, about 4:30 P.M.

Do you know the date?

November 26, I think.

What did they do when this driver and Mr. Chan Lin came back?

They told me that they wanted the rice back and give my money back.

Did they give you your money back?

Yes.

How much?

They gave me P5.600.

COURT:
Q

They gave you that amount?

Yes, sir.

ATTY. GUALBERTO:
Q

Did they tell you why they were getting back the rice and giving you back your money?

A
Yes. The complete rice, and Vallo (SANDOVAL's driver) told me, he wanted to return the rice to the ricemill,
that is what Vallo and the Chinese agreed with Aniceto Sandoval.
Q

Did the Chinese tell you that he made agreement with Sandoval to get back the rice?

A Yes.

144

COURT:
Q

Did you receive the money?

Yes , sir 6

Having been repaid the purchases price by Chan Lin , the sale, as between them, had been voluntarily rescinded, and
petitioner-defendant was thereby divested of any claim to the rice. Technically, therefore, he should return the rice to
Chan Lin, but since even the latter, again from petitioner-defendant's own testimony above-quoted, was ready to
return the rice to SANDOVAL, and the latter's driver denies that the rice had been returned by petitioner-defendant
cannot be allowed to unjustly enrich himself at the expense of another by holding on to property no longer belonging
to him. 7 In law and in equity, therefore, SANDOVAL is entitled to recover the rice, or the value theref since hewas not
paid the price therefor.
WHEREFORE, albeit on a different premise, the judgment under review is hereby AFFIRMED. Costs against
petitioner.
SO ORDERED.

145

G.R. No. 156580

June 14, 2004

LUZ DU, petitioner,

vs.
STRONGHOLD INSURANCE Promulgated: CO., INC., respondent.
DECISION
PANGANIBAN, J.:
Preference is given to a duly registered attachment over a subsequent notice of lis pendens, even if the beneficiary of
the notice acquired the subject property before the registration of the attachment. Under the torrens system, the
auction sale of an attached realty retroacts to the date the levy was registered.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the March 19, 2002
Decision2 and the December 5, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 50884. The CA
disposed as follows:
"Parenthetically, when the decision in Civil Case No. 90-1848 became final and executory, levy on execution issued
and the attached property sold at public auction, the latter retroacts to the date of the levy. Said the High Court:
In line with the same principle, it was held that where a preliminary attachment in favor of A was recorded on
November 11, 1932, and the private sale of the attached property in favor of B was executed on May 29, 1933, the
attachment lien has priority over the private sale, which means that the purchaser took the property subject to such
attachment lien and to all of its consequences, one of which is the subsequent sale on execution (Tambao v. Suy, 52
Phil. 237). The auction sale being a necessary sequel to the levy, it enjoys the same preference as the attachment lien
enjoys over the private sale. In other words, the auction sale retroacts to the date of the levy. [Were] the rule be
otherwise, the preference enjoyed by the levy of execution would be meaningless and illusory (Capistrano v. Phil. Nat.
Bank, 101 Phil. 1117). (Underscoring supplied)
"By and large, We find no reversible error in the appealed decision.
"IN VIEW OF ALL THE FOREGOING, the instant appeal is ordered DISMISSED. No pronouncement as to cost."4
The questioned Resolution, on the other hand, denied petitioners Motion for Reconsideration.
The Facts
The CA narrated the facts as follows:
"x x x Aurora Olarte de Leon was the registered owner of Lot No. 10-A (LRC Psd 336366) per Transfer Certificate of
Title No. 582/T-3. Sometime in January 1989, De Leon sold the property to Luz Du under a Conditional Deed of Sale
wherein said vendee paid a down payment of P75,000.00 leaving a balance of P95,000.00.
"Then again, on April 28, 1989, Aurora de Leon sold [the] same property to spouses Enrique and Rosita Caliwag
without prior notice to Luz Du. As a result, Transfer Certificate of Title No. 582/T-3 was cancelled and Transfer
Certificate of Title No. 2200 was issued in favor of the Caliwag spouses.
"Meanwhile, Stronghold Insurance Corp., Inc. x x x commenced Civil Case No. 90-1848 against spouses Rosita and
Enrique Caliwag et al., for allegedly defrauding Stronghold and misappropriating the companys fund by falsifying and
simulating purchases of documentary stamps. The action was accompanied by a prayer for a writ of preliminary
attachment duly annotated at the back of Transfer Certificate of Title No. 2200 on August 7, 1990.
"On her part, on December 21, 1990, Luz Du initiated Civil Case No. 60319 against Aurora de Leon and the spouses
Caliwag for the annulment of the sale by De Leon in favor of the Caliwags, anchored on the earlier mentioned Deed of
Conditional Sale.
"On January 3, 1991, Luz Du caused the annotation of a Notice Of Lis Pendens at the back of Transfer Certificate of
Title No. 2200.
"On February 11, 1991, the decision was handed down in Civil Case No. 90-1848 in favor of Stronghold, ordering the
spouses Caliwag jointly and severally to pay the plaintiff P8,691,681.60, among others. When the decision became

146

final and executory, on March 12, 1991, a notice of levy on execution was annotated on Transfer Certificate of Title No.
2200 and the attached property was sold in a public auction. On [August] 5, 1991,5 the certificate of sale and the final
Deed of Sale in favor of Stronghold were inscribed and annotated leading to the cancellation of Transfer Certificate of
Title No. 2200 and in lieu thereof, Transfer Certificate of Title No. 6444 was issued in the name of Stronghold.
"It came to pass that on August 5, 1992, Luz Du too was able to secure a favorable judgment in Civil Case No. 60319
and which became final and executory sometime in 1993, as well.
"Under the above historical backdrop, Luz Du commenced the present case (docketed as Civil Case No. 64645) to
cancel Transfer Certificate of Title No. 6444 in the name of Stronghold with damages claiming priority rights over the
property by virtue of her Notice Of Lis Pendens under Entry No. 13305 and inscribed on January 3, 1991, and the final
and executory decision in Civil Case No. 60319 she filed against spouses Enrique and Rosita Caliwag. According to
Luz Du, despite her said notice of lis pendens annotated, Stronghold still proceeded with the execution of the decision
in Civil Case No. 90-1848 against the subject lot and ultimately the issuance of Transfer Certificate of Title No. 6444 in
its (Strongholds) name."6
The trial court ruled that Stronghold had superior rights over the property because of the prior registration of the
latters notice of levy on attachment on Transfer Certificate of Title (TCT) No. 2200. For this reason, it found no basis
to nullify TCT No. 6444, which was issued in the name of respondent after the latter had purchased the property in a
public auction.
Ruling of the Court of Appeals
Sustaining the trial court in toto, the CA held that Strongholds notice of levy on attachment had been registered almost
five (5) months before petitioners notice of lis pendens. Hence, respondent enjoyed priority in time. Such registration,
the appellate court added, constituted constructive notice to petitioner and all third persons from the time of
Strongholds entry, as provided under the Land Registration Act -- now the Property Registration Decree.
The CA also held that respondent was a purchaser in good faith. The necessary sequels of execution and sale
retroacted to the time when Stronghold registered its notice of levy on attachment, at a time when there was nothing
on TCT No. 2200 that would show any defect in the title or any adverse claim over the property.
Hence, this Petition.7
Issues
Petitioner submits the following issues for our consideration:
"I.
"Whether a Notice of Levy on Attachment on the property is a superior lien over that of the unregistered right of a
buyer of a property in possession pursuant to a Deed of Conditional Sale.
"II.
"Whether the acquisition of the subject property by Respondent Stronghold was tainted with bad faith."8
The Courts Ruling
The Petition has no merit.
Main Issue:
Superiority of Rights
Petitioner submits that her unregistered right over the property by way of a prior conditional sale in 1989 enjoys
preference over the lien of Stronghold -- a lien that was created by the registration of respondents levy on attachment
in 1990. Maintaining that the ruling in Capistrano v. PNB was improperly applied by the Court of Appeals, petitioner
avers that unlike the circumstances in that case, the property herein had been sold to her before the levy. We do not
agree.
The preference given to a duly registered levy on attachment or execution over a prior unregistered sale is well-settled
in our jurisdiction. As early as Gomez v. Levy Hermanos,9 this Court has held that an attachment that is duly

147

annotated on a certificate of title is superior to the right of a prior but unregistered buyer. In that case, the Court
explained as follows:
"x x x. It is true that she bought the lots with pacto de retro but the fact of her purchase was not noted on the
certificates of title until long after the attachment and its inscription on the certificates. In the registry, therefore, the
attachment appeared in the nature of a real lien when Apolonia Gomez had her purchase recorded. The legal effect of
the notation of said lien was to subject and subordinate the right of Apolonia Gomez, as purchaser, to the lien. She
acquired the ownership of the said parcels only from the date of the recording of her title in the register, which took
place on November 21, 1932 (sec. 51 of Act No. 496; Liong-Wong-Shih vs. Sunico and Peterson, 8 Phil. 91; Tabigue
vs. Green, 11 Phil. 102; Buzon vs. Lucauco, 13 Phil. 354; and Worcester vs. Ocampo and Ocampo, 34 Phil. 646), and
the right of ownership which she inscribed was not an absolute but a limited right, subject to a prior registered lien, by
virtue of which Levy Hermanos, Inc. was entitled to the execution of the judgment credit over the lands in question, a
right which is preferred and superior to that of the plaintiff (sec, 51, Act No. 496 and decisions cited above). x x x"10
Indeed, the subsequent sale of the property to the attaching creditor must, of necessity, retroact to the date of the levy.
Otherwise, the preference created by the levy would be meaningless and illusory, as reiterated in Defensor v. Brillo:11
"x x x. The doctrine is well-settled that a levy on execution duly registered takes preference over a prior unregistered
sale; and that even if the prior sale is subsequently registered before the sale in execution but after the levy was duly
made, the validity of the execution sale should be maintained, because it retroacts to the date of the levy; otherwise,
the preference created by the levy would be meaningless and illusory.
"Even assuming, therefore, that the entry of appellants sales in the books of the Register of Deeds on November 5,
1949 operated to convey the lands to them even without the corresponding entry in the owners duplicate titles, the
levy on execution on the same lots in Civil Case No. 1182 on August 3, 1949, and their subsequent sale to appellee
Brillo (which retroacts to the date of the levy) still takes precedence over and must be preferred to appellants deeds of
sale which were registered only on November 5, 1949.
"This result is a necessary consequence of the fact that the properties herein involved were duly registered under Act
No. 496, and of the fundamental principle that registration is the operative act that conveys and binds lands covered
by Torrens titles (sections 50, 51, Act 496). Hence, if appellants became owners of the properties in question by virtue
of the recording of the conveyances in their favor, their title arose already subject to the levy in favor of the appellee,
which had been noted ahead in the records of the Register of Deeds."12 (Citations omitted, italics supplied)
The Court has steadfastly adhered to the governing principle set forth in Sections 51 and 52 of Presidential Decree
No. 1529:13
"SEC. 51. Conveyance and other dealings by registered owner. - An owner of registered land may convey, mortgage,
lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds,
mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other
voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or
bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Registry of
Deeds to make registration.
"The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned,
and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province
or the city where the land lies.
"SEC. 52. Constructive notice upon registration. - Every conveyance, mortgage, lease, lien, attachment, order,
judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the office of the Register
of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the
time of such registering, filing or entering."(Italics supplied)1avvphil.net
As the property in this case was covered by the torrens system, the registration of Strongholds attachment14 was the
operative act that gave validity to the transfer and created a lien upon the land in favor of respondent.15
Capistrano Ruling
Correctly Applied
The preference created by the levy on attachment is not diminished even by the subsequent registration of the prior
sale.16 That was the import of Capistrano v. PNB,17 which held that precedence should be given to a levy on
attachment or execution, whose registration was before that of the prior sale.

148

In Capistrano, the sale of the land in question -- though made as far back as 1946 -- was registered only in 1953, after
the property had already been subjected to a levy on execution by the Philippine National Bank. The present case is
not much different. The stipulation of facts shows that Stronghold had already registered its levy on attachment before
petitioner annotated her notice of lis pendens. As in Capistrano, she invokes the alleged superior right of a prior
unregistered buyer to overcome respondents lien.
If either the third-party claim or the subsequent registration of the prior sale was insufficient to defeat the previously
registered attachment lien, as ruled by the Court in Capistrano, it follows that a notice of lis pendens is likewise
insufficient for the same purpose. Such notice does not establish a lien or an encumbrance on the property affected.18
As the name suggests, a notice of lis pendens with respect to a disputed property is intended merely to inform third
persons that any of their transactions in connection therewith -- if entered into subsequent to the notation -- would be
subject to the result of the suit.
In view of the foregoing, the CA correctly applied Capistrano, as follows:
"x x x the rule now followed is that if the attachment or levy of execution, though posterior to the sale, is registered
before the sale is registered, it takes precedence over the latter.
"The rule is not altered by the fact that at the time of the execution sale the Philippine National Bank had information
that the land levied upon had already been deeded by the judgment debtor and his wife to Capistrano. The auction
sale being a necessary sequel to the levy, for this was effected precisely to carry out the sale, the purchase made by
the bank at said auction should enjoy the same legal priority that the levy had over the sale in favor of plaintiff. In other
words, the auction sale retroacts to the date of the levy. Were the rule otherwise, the preference enjoyed by the levy of
execution in a case like the present would be meaningless and illusory."19 (Citations omitted, italics supplied)
Second Issue:
Taking in Bad Faith
We now tackle the next question of petitioner: whether Stronghold was a purchaser in good faith. Suffice it to say that
when Stronghold registered its notice of attachment, it did not know that the land being attached had been sold to
petitioner. It had no such knowledge precisely because the sale, unlike the attachment, had not been registered. It is
settled that a person dealing with registered property may rely on the title and be charged with notice of only such
burdens and claims as are annotated thereon.20 This principle applies with more force to this case, absent any
allegation or proof that Stronghold had actual knowledge of the sale to petitioner before the registration of its
attachment.
Thus, the annotation of respondents notice of attachment was a registration in good faith, the kind that made its prior
right enforceable.21
Moreover, it is only after the notice of lis pendens is inscribed in the Office of the Register of Deeds that purchasers of
the property become bound by the judgment in the case. As Stronghold is deemed to have acquired the property -- not
at the time of actual purchase but at the time of the attachment -- it was an innocent purchaser for value and in good
faith.
WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against
petitioner.
SO ORDERED.

149

G.R. No. 133303

February 17, 2005

BERNARDO VALDEVIESO, petitioner,

vs.
CANDELARIO DAMALERIO AND AUREA C. DAMALERIO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to set aside the 25 September
1997 Decision and the 10 February 1998 Resolution of the Court of Appeals in CA-G.R. SP No. 43082 entitled,
"Candelario Damalerio and Aurea Damalerio v. Honorable Antonio S. Alano, et al."1
There is no dispute as to the following facts:
On 05 December 1995, Bernardo Valdevieso (petitioner) bought from spouses Lorenzo and Elenita Uy a parcel of land
consisting of 10,000 square meters, more or less, located at Bo. Tambler, General Santos City, and covered by
Transfer Certificate of Title (TCT) No. T-30586.2
The deed of sale was not registered, nor was the title of the land transferred to petitioner.3
On 07 December 1995, the said property was immediately declared by petitioner for taxation purposes as Tax
Declaration No. l6205 with the City Assessors Office.4
It came to pass that on 19 April 1996, spouses Candelario and Aurea Damalerio (respondents) filed with the Regional
Trial Court (RTC) of General Santos City, a complaint for a sum of money against spouses Lorenzo and Elenita Uy
docketed as Civil Case No. 5748 with application for the issuance of a Writ of Preliminary Attachment.5
On 23 April 1996, the trial court issued a Writ of Preliminary Attachment by virtue of which the property, then still in the
name of Lorenzo Uy but which had already been sold to petitioner, was levied. The levy was duly recorded in the
Register of Deeds of General Santos City and annotated upon TCT No. T-30586.6
On 06 June 1996, TCT No. T-30586 in the name of Lorenzo Uy was cancelled and, in lieu thereof, TCT No. T-74439
was issued in the name of petitioner.7 This new TCT carried with it the attachment in favor of respondents.
On 14 August 1996, petitioner filed a third-party claim in Civil Case No. 5748 to discharge or annul the attachment
levied on the property covered by TCT No. T-74439 on the ground that the said property belongs to him and no longer
to Lorenzo and Elenita Uy.8
In a resolution dated 21 October 1996, the trial court ruled for the petitioner.9 Citing Manliguez v. Court of Appeals10
and Santos v. Bayhon,11 it held that the levy of the property by virtue of attachment is lawful only when the levied
property indubitably belongs to the defendant. Applying the rulings in the cited cases, it opined that although
defendant Lorenzo Uy remained the registered owner of the property attached, yet the fact was that he was no longer
the owner thereof as it was already sold earlier to petitioner, hence, the writ of attachment was unlawful.1awphi1.nt
Respondents sought reconsideration thereof which was denied by the trial court in a resolution dated 03 January
1997.12
From the unfavorable resolution of the trial court in the third-party claim, respondents appealed to the Court of
Appeals. The appellate court reversed the resolution and by judgment promulgated on 25 September 1997, it declared
that an attachment or levy of execution, though posterior to the sale, but if registered before the sale is registered,
takes precedence over the sale.13 The writ of attachment in favor of the respondents, being recorded ahead of the
sale to petitioner, will therefore take precedence.
Petitioner moved for reconsideration but this was denied by the Court of Appeals in its Resolution of 10 February
1998.14
Hence, this Petition for Review on Certiorari.
The sole issue in this case is whether or not a registered writ of attachment on the land is a superior lien over that of
an earlier unregistered deed of sale.

150

Petitioner maintains that he has a superior right over the questioned property because when the same was attached
on 23 April 1996, this property was no longer owned by spouses Uy against whom attachment was issued as it was
already sold to petitioner on 05 December 1995. The ownership thereof was already transferred to petitioner pursuant
to Article 147715 in relation to Article 149816 of the Civil Code.
Dismissing the allegation that he slept on his rights by not immediately registering at least an adverse claim based on
his deed of sale, petitioner avers that he promptly worked out for the transfer of registration in his name. The slight
delay in the registration, he claims was not due to his fault but attributable to the process involved in the registration of
property such as the issuance of the Department of Agrarian Reform clearance which was effected only after
compliance with several requirements.1awphi1.nt
Considering the peculiar facts and circumstances obtaining in this case, petitioner submits it would be in accord with
justice and equity to declare him as having a superior right to the disputed property than the respondents.
Respondents maintain the contrary view. They aver that registration of a deed of sale is the operative act which binds
the land and creates a lien thereon. Before the registration of the deed, the property is not bound insofar as third
persons are concerned. Since the writ of attachment in favor of respondents was registered earlier than the deed of
sale to petitioner, respondents were of the belief that their registered writ of attachment on the subject property enjoys
preference and priority over petitioners earlier unregistered deed of sale over the same property. They also contend
that Articles 1477 and 1498 of the Civil Code as cited by petitioner are not applicable to the case because said
provisions apply only as between the parties to the deed of sale. These provisions do not apply to, nor bind, third
parties, like respondents, because what affects or binds third parties is the registration of the instrument in the
Register of Deeds. Furthermore, respondents argue that petitioner cannot invoke equity in his favor unless the
following conditions are met: (a) the absence of specific provision of a law on the matter; and (b) if the person who
invokes it is not guilty of delay. Both conditions have not been met, however, since there is a law on the subject matter,
i.e., Section 51 of Presidential Decree No. 1529, and that petitioner allegedly slept on his rights by not immediately
registering an adverse claim based on his deed of sale.
We agree with the respondents.
The law applicable to the facts of this case is Section 51 of P.D. No. 1529. Said Section provides:
Sec. 51. Conveyance and other dealings by registered owner. - An owner of registered land may convey, mortgage,
lease, charge, or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds,
mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other
voluntary instrument, except a will purporting to convey or affect registered land, shall take effect as a conveyance or
bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of
Deeds to make registration.
The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned,
and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province
or city where the land lies.
It is to be noted that though the subject land was deeded to petitioner as early as 05 December 1995, it was not until
06 June 1996 that the conveyance was registered, and, during that interregnum, the land was subjected to a levy on
attachment. It should also be observed that, at the time of the attachment of the property on 23 April 1996, the
spouses Uy were still the registered owners of said property. Under the cited law, the execution of the deed of sale in
favor of petitioner was not enough as a succeeding step had to be taken, which was the registration of the sale from
the spouses Uy to him. Insofar as third persons are concerned, what validly transfers or conveys a persons interest in
real property is the registration of the deed. Thus, when petitioner bought the property on 05 December 1995, it was,
at that point, no more than a private transaction between him and the spouses Uy. It needed to be registered before it
could bind third parties, including respondents. When the registration finally took place on 06 June 1996, it was
already too late because, by then, the levy in favor of respondents, pursuant to the preliminary attachment ordered by
the General Santos City RTC, had already been annotated on the title.
The settled rule is that levy on attachment, duly registered, takes preference over a prior unregistered sale.17 This
result is a necessary consequence of the fact that the property involved was duly covered by the Torrens system
which works under the fundamental principle that registration is the operative act which gives validity to the transfer or
creates a lien upon the land.18
The preference created by the levy on attachment is not diminished even by the subsequent registration of the prior
sale. This is so because an attachment is a proceeding in rem.19 It is against the particular property, enforceable
against the whole world. The attaching creditor acquires a specific lien on the attached property which nothing can
subsequently destroy except the very dissolution of the attachment or levy itself.20 Such a proceeding, in effect,

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means that the property attached is an indebted thing and a virtual condemnation of it to pay the owners debt.21 The
lien continues until the debt is paid, or sale is had under execution issued on the judgment, or until the judgment is
satisfied, or the attachment discharged or vacated in some manner provided by law.
Thus, in the registry, the attachment in favor of respondents appeared in the nature of a real lien when petitioner had
his purchase recorded. The effect of the notation of said lien was to subject and subordinate the right of petitioner, as
purchaser, to the lien. Petitioner acquired ownership of the land only from the date of the recording of his title in the
register, and the right of ownership which he inscribed was not absolute but a limited right, subject to a prior registered
lien of respondents, a right which is preferred and superior to that of petitioner.22
Anent petitioners reliance on the rulings laid down in Manliguez v. Court of Appeals and Santos v. Bayhon, we find the
same to be misplaced. These cases did not deal at all with the dilemma at hand, i.e. the question of whether or not a
registered writ of attachment on land is superior to that of an earlier unregistered deed of sale. In Santos, what was
involved were machinery and pieces of equipment which were executed upon pursuant to the favorable ruling of the
National Labor Relations Commission. A third party claimed that the machinery were already sold to her, but it does
not appear in the facts of the case if such sale was ever registered.l^vvphi1.net Manliguez is similar to Santos, except
that the former involved buildings and improvements on a piece of land. To stress, in both cited cases, the registration
of the sale, if any, of the subject properties was never in issue.1awphi1.nt
As to petitioners invocation of equity, we cannot, at this instance, yield to such principle in the presence of a law
clearly applicable to the case. We reiterate that this Court, while aware of its equity jurisdiction, is first and foremost, a
court of law.23 While equity might tilt on the side of one party, the same cannot be enforced so as to overrule positive
provisions of law in favor of the other.24 Equity cannot supplant or contravene the law.25 The rule must stand no
matter how harsh it may seem. Dura lex sed lex.
WHEREFORE, the appealed Decision of the Court of Appeals in CA-G.R. SP No. 43082 dated 25 September 1997,
and its Resolution dated 10 February 1998, are hereby AFFIRMED. No costs.
SO ORDERED.

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G.R. No. L-5534

December 23, 1909

HERBERT S. WALKER and W. J. ROHDE, plaintiffs-appellees,

vs.
JOSE McMICKING, defendant-appellant.
O'Brien and De Witt for appellant.
Roman Lacson for appellees.
JOHNSON, J.:
On the 5th day of February, 1909, the plaintiff commenced an action in the Court of First Instance of the city of Manila
to recover the possession of certain personal property mentioned in paragraph 1 of the complaint, or in default thereof
the sum of P1,500, its value, and costs. The defendant filed a general denial.
After hearing the evidence adduced during the trial of the cause, the lower court rendered a judgment adjudging to
Herbert S. Walker, the right to recover the articles mentioned in paragraph 1 of the complaint, of the defendant, or in
default, the sum of P539, with interest at the rate of 5 per cent per annum, from February 6, 1909.
From this judgment the defendant appealed and made the following assignments of error:
1.

The court erred in holding that the attachment of December 17, 1908, was null as to this defendant.

2.

The court erred in holding that the sale of June 16, 1908, was rescinded in a way affecting this defendant.

3.
The court erred in holding that the rescission does not involve a precedent condition to return the amounts
paid on account of the purchase price.
4.

The court erred in making an excessive valuation of the goods in question.

Under the first above assignment of error, the appellant contends that the lower court committed an error in holding
the attachment of the 17th of December, 1908, was null and void. The appellant relies upon Exhibit 1 (the writ of
attachment) for the purpose of showing that said attachment was valid. Exhibit 1 was not made a part of the record in
this court. We can not, therefore, examine it for the purpose of ascertaining just what its contents were. The lower
court, in discussing the validity of said attachment and its effect upon the present action, said:
The defendant is not sued in any official capacity, nor does he, in answer, or elsewhere, claim any such status. In fact
his answer is only a general denial. He offers in evidence, however, a writ of attachment (Exhibit 1) issued by one of
the judges of this court on December 16, 1908, on the back of which appears an indorsement to the effect that the
sheriff of Manila delivered a copy of the writ and affidavit upon the which the same was founded, to Arenas & Co. and
that said sheriff attached certain articles therein mentioned, some of which appear to be similar to those in
controversy, though the identity does not seem to be clearly established. The indorsement further recites that "the
goods are found deposited . . . in the possession of the same defendants according to a stipulation signed by both
parties which is attached to this writ." The attached stipulation recites that all the goods attached "shall remain in the
possession of the same defendants, relieving the sheriff of all responsibility as regards the care and custody thereof."
Plaintiff Rohde further testifies (p. 13) that he never heard of the attachment until about the 29th of January, that he
continued in possession from the time Arenas surrender to him and that the latter was permitted to enter only for the
purpose of preparing the articles for sale.
Section 428 of the Code of Civil Procedure requires: "The order of attachment shall be served by the officer of the
court by attaching, and safely keeping all the movable property of the defendant."
It will be seem from the recitals above quoted that the sheriff never claims to have taken into his "keeping" the articles
in controversy, but, on the contrary, left them with the attachment defendants, expressly relieving himself of all
responsibility. This is clearly not a compliance with the statute and did not effect a valid attachment. A mere verbal
declaration of seizure or service of writ is insufficient. (Hollister vs. Goodale, 21 Am. Dec., 674; Jones vs. Howard, 59
Am. St. Rep., 231; Miles vs. Brown, 38 N. Y. Supr. Ct., 400.) There must be actual assumption of control (4 Cyc., 484,
485.) This is not saying that a defendant may not be custodian; but the possession and responsibility must be the
sheriff's and not the defendant's. If as stated in defendant's brief, such an arrangement is an everyday occurrence in
attachment levies, here the vice of it can too soon be declared.
The facts presented by a preponderance of the evidence seem to be as follows:

153

The plaintiff, Walker, was the owner of a Filipino carriage factory. The building in which the factory was operated and
its contents were, on the 30th of June, 1908, sold to a partnership known as "Arenas & Co.," by plaintiff, Walker,
whose ownership, at the time of the sale, was not disputed by any of the parties to this action. The contract was
evidenced by a writing (Exhibit A), from which it appears that the said company was to pay for the said factory and its
contents the sum of P3,200, P600 of which was paid at the time of the sale (June 30, 1908) and the balance was to be
paid in three installments, due, respectively, P600 on the 15th of July, 1908, P1,000 due on the 15th of September,
1908, and P1,000 due on the 31st of December, 1908. The said company paid the installment due on the 15th of July,
1908, but failed to pay said installments due in September and December. Paragraph 4 of said contract (Exhibit A)
contains the following provision:
That, should the said firm of Arenas & Co. not pay me the amounts agreed to on the dates stated in the previous
paragraph or within the thirty days following any of said terms, the present sale shall be rescinded, and I, Herbert S.
Walker, shall be entitled to take possession of the building as well as of the business and all the goods constituting the
same.
The said company having failed to pay the second and third installments due respectively in September and
December, as above indicated, the plaintiff Walker, early in the month of January, 1909, by virtue of the said provision
of the contract, rescinded said sale and took possession of said factory with its contents. The factory was located upon
land belonging to the plaintiff Rohde. The said company had failed for some months to pay the rent for the land. The
plaintiff Rohde claimed that by virtue of the provisions of paragraph 7 of article 1922 of the Civil Code that he had a
preferred claim against the said factory and its contents for the payment of the rent. The plaintiff Rohde, acting for
himself and for the plaintiff Walker, took possession of said factory and its contents, on or about the first of January,
1909. Mr. Rohde testified that at the time he took possession of said factory, representing himself and the said Walker,
there was no one in possession of said property except the said Arenas & Co., and that Arenas & Co. turned said
property over to him without any objection whatever, in fact, that the delivery was made by mutual consent and
agreement.
It appears, however, that on or about the 16th of December, 1908, the defendant, acting as sheriff of the city of Manila,
levied an attachment upon the said factory and its contents, by virtue of a judgment theretofore rendered against the
said Arenas & Co. The record does not disclose fully just what was done in effecting said attachment. It appears,
however, by an indorsement upon said alleged writ of attachment, or perhaps by a stipulation between the parties (to
the attachment), that the goods attached "shall remain in the possession of the same defendants, relieving the sheriff
of all responsibility as regards the care and custody thereof."
The plaintiff Rohde testified that he had never heard of said attachment until about the 29th of January, 1909; that he
continued in possession from the time (about January 1) that Arenas & Co. surrendered possession to him, and that
Arenas & Co. was only permitted to enter the premises thereafter for the purpose of preparing the contents of said
factory for sale.
The evident theory of the defendant and appellant is that the attachment had the effect of defeating the right of the
plaintiffs in said factory and its contents. It appears in the record, that in some way the defendant obtained possession
of the articles mentioned in paragraph 1 of the complaint, and that some time early in the month of February, 1909,
they were sold for the sum of P191, and a few cents. It is not suggested in the record that the defendant, McMicking,
is sued as sheriff. The defendant does not pretend that what he did was done as sheriff. The plaintiff does not attempt
to recover of the defendant as sheriff. The pretension of the plaintiff is that the defendant, Jose McMicking, took
possession of certain personal property, and retains the possession of the same, which belongs to them. Even
admitting that the defendant did, by virtue of an attachment, as sheriff, pretend to take possession of the property in
question, the plaintiffs contend that the attachment was void for the reason that the defendant, as sheriff, did not
comply with the law in levying the said attachment.
The lower court, basing his conclusions upon the provisions of section 428 of the Code of Procedure in Civil Actions,
held that the attachment was null for the reason that the defendant did not comply with said section. Section 428
provides that The order of attachment shall be served by the officer of the court by attaching and safely keeping all the movable
property of the defendant in the Philippine Islands, or so much thereof as may be sufficient to satisfy the plaintiff's
demands, unless the defendants gives security by obligation to the plaintiff, with sufficient surety, to be approved by
the judge who granted the order of attachment, in an amount sufficient to satisfy such demands besides costs, . . . .
The property so attached shall be held to await final judgment in execution, unless released as provided in this section
or section four hundred and forty.
It will be noted, even admitting that the defendant is here sued as sheriff, and that his responsibility in this action is as
sheriff, that he did not comply with said section 428, in making said attachment. He did not attach and safely keep the
movable property attached. A verbal declaration of seizure of service of a writ of attachment is not sufficient. There

154

must be an actual taking of possession and placing the attached property under the control of the officer or someone
representing him. (Hollister vs. Goodale, 8 Conn., 332, 21 Am. Dec., 674; Jones vs. Howard, 99 Ga., 451, 59 Am. St.
Rep., 231.)
We believe that under said section 428 to constitute a valid levy of an attachment, the officer levying it must take
actual possession of the property attached as far as under the circumstances is practicable. He must put himself in
position to, and must assert and, in fact, enforce a dominion over the property adverse to and exclusive of the
attachment debtor, and such property must be in substantial presence and possession. (Corniff vs. Cook, 95 Ga., 61,
51 Am. St. Rep., 55, 61.) Of course, this does not mean that the attaching officer may not, under an arrangement
satisfactory to himself, put anyone in possession of the property for the purpose of guarding it, but he can not in this
way relieve himself from liability to the parties interested in said attachment.
We are of the opinion, and so hold, that the attachment was not properly made in accordance with the provisions of
the Code of the Procedure in Civil Actions. There is no pretension, however, in record, on the part of the defendant,
that he attached said property and held the same by virtue of such attachment. Even thought this defense had been
made by the defendant, which is only made by his attorney, it would be an admission of the principal facts alleged by
the plaintiffs in their complaint - to wit, that he had taken possession of personal property belonging to them. The
defense made by the defendant is new matter to which no reference whatever was made in the pleadings, and it is,
therefore, upon the whole, inadmissible. Facts not alleged in the pleadings but offered as evidence, which admit the
facts alleged, but tend to confess and avoid the facts alleged are not admissible in evidence. (Bliss on Code
Pleadings, 3d ed., 427, and cases cited.) For example: A sues B on a promissory note, setting up the necessary facts
in his petition. B answered by a general denial. B's real defense is prescription. B will not be permitted to prove
prescription for the reasons that (a) he denied the existence of the debt, and (b) by his evidence tending to show that
the said debt is prescribed, he thereby admits the existence of the debt, which is a confession of his liability. In other
words, the defense of prescriptions is a confession and an avoidance of the obligation.
Under the second assignment of error the appellant contends that the original sale of said factory and its contents had
not been rescinded by the plaintiffs herein in a manner which in any way affected the defendant. The fourth clause of
the contract of sale (Exhibit A) quoted above, gave the vendor of said factory and contents the right to rescind the sale
for a failure to pay any of the subsequent installments. The plaintiffs testified during the trial that the second
installment had not been paid, in accordance with the terms of the contract and that he, therefore, rescinded the
contract of sale, to which rescission, the said company (the purchaser) acceded and delivered to the plaintiff Walker
the said carriage factory and its contents. No allegation is made by the defendant that either the contract or the
rescission of the contract was corruptly made, or for the purpose of defrauding any of the creditors. Exhibit A was the
contract between the said company and the plaintiff Walker. It constituted that law covering the rights of the respective
parties to it. (Arts. 1254 and 1255, Civil Code.) The plaintiff Walker did all that was necessary for him to do to rescind
said contract.
Under the third assignment of error, the appellant insists that the contract could not be rescinded by Walker without
returning to Arenas & Co. the amount of money which Arenas & Co. had paid on said contract, and cities several
provisions of the Civil Code in support of his contention, especially article 1295. Arenas & Co. are not parties to this
action. Arenas & Co. have made no claim for the return of the money which they paid on said contract. If they have a
right to a return of the money which they paid on said contract upon a rescission by Walker, a question which we do
not now decide, they are the only ones which can insist upon it. No such claim is here made. It is not a right which the
defendant in this action can insist upon. This question is not involved in the present action for the reason that Arenas &
Co. make no such claim. They are not parties to this action.
Under the fourth assignment of error, the defendant insists or contends that the value allowed by the lower court for
the property in question was excessive. Upon an examination of the evidence brought to this court, relating to the
value of the property in question, we are of the opinion, and so hold, that the lower court committed no error in fixing
the value of said property at the sum of P539. The price obtained for property under a forced sale is not a fair criterion
for the purpose of ascertaining the true value of such property.
We have discussed at length assignments of error made by the appellant, but in our opinion the whole case may be
stated briefly as follows:
First. The defendant attached certain property under a writ of execution issued by one of the courts of the city of
Manila, which attachment, however, was levied upon the property in question. This attachment, however, was
rendered invalid and of no effect for the reason that the defendant did not maintain his control over the same, either
personally or by his representatives. The attachment became invalid the moment the sheriff lost either his actual or
constructive control over the property.
Second. The plaintiffs herein, innocently and in good faith and under a right, acquired possession of the property in
question.

155

Third. That subsequent to the acquisition of the possession by the plaintiffs, the defendant, in some way which does
not appear of record, acquired possession of the property in question, and admits that he subsequently sold it.
Fourth. The plaintiffs allege that the defendant is in possession of property belonging to them, and prays that the same
may be returned or its value. The defendant denies (general denial) that he has the possession of the property. The
evidence clearly shows that the defendant did take possession of property which was rightfully in possession of the
plaintiffs. He is therefore liable, either to return said property or its value.
For all of the foregoing reasons, we are of the opinion and so hold that the judgment of the lower court should be
affirmed, with costs. So ordered.

156

[A.M. No. P-96-1184. March 24, 1997]

NATIONAL BUREAU OF INVESTIGATION and SANTIAGO N. SALVADOR, complainants, vs. RODOLFO G. TULIAO,
Sheriff IV of the RTC of Cauayan, Isabela, Branch 20, respondent.
DECISION
PANGANIBAN, J.:
Sheriffs play an important role in the administration of justice. They form an integral part thereof because they are
called upon to serve court writs, execute all processes, and carry into effect the orders of the court with due care and
utmost diligence.[1] As agents of the law, high standards are expected of them. In the present case, respondent sheriff
failed to live up to these standards.
A complaint against Respondent Deputy Provincial Sheriff Rodolfo G. Tuliao of the Regional Trial Court of Cauayan,
Isabela , Branch 20 was filed by Santiago N. Salvador before the Tuguegarao Sub-Office (TUGSO) of the National
Bureau of Investigation (NBI).[2] An investigation was conducted by Agent-in-Charge Franklin Javier and Agent Raul
A. Ancheta. On November 24, 1994, complainant gave his statement[3] to Agent Paul Gino Rivera. Invoking his right
to remain silent, respondent sheriff refused to submit himself to custodial investigation before Agent Javier. Instead, he
submitted a Compliance[4] dated July 22, 1995 and an Answer[5] dated August 4, 1995.
After the investigation, Agents Javier and Ancheta recommended, inter alia, the filing of an administrative case with
the Office of the Court Administrator.[6] Atty. Gerarda G. Galang, Chief of the NBI Legal and Evaluation Division,
concurred with said recommendation.[7] On November 13, 1995, Director Mariano M. Mison of the NBI transmitted to
this Court a copy of the evaluation with the recommendation that appropriate action be taken against respondent.[8]
Hence, this administrative complaint now before us.
The Facts
Complainant Salvador bought a passenger jeep from Lito G. Ignacio to be paid in monthly installments of P7,000.00
with a down payment of P50,000.00. After remitting the down payment, complainant diligently paid all monthly
amortizations until March 1994 when, in the absence of Ignacio, the complainant was forced to pay to an unnamed
brother of the seller the amounts due for the months of April and May 1994. However, the brother failed to remit said
amount to the seller; thus, the latter filed with the Regional Trial Court of Cauayan, Isabela, Branch 20[9] a suit for
collection, docketed as Civil Case No. 20-757, entitled Pisces Motor Works, Represented by Lito D. Ignacio vs.
Santiago Salvador.
Subsequently, an order was issued by the RTC directing respondent sheriff to attach the passenger jeep.
Complainant, through counsel, filed a motion to discharge attachment upon filing of a counterbond for the release of
the vehicle in his favor. Due to some defects in the aforementioned motion, a second motion with counterbond was
filed. On July 13, 1994, the trial court issued an order, the decretal portion of which reads, to wit:[10]
WHEREFORE, and in view of the foregoing, the counterbond of the defendant, is hereby approved. The Sheriff is
hereby ordered to release to the defendant the attached vehicle bearing Motor No. 6D-57-51813 with Plate No. UV
BBR-127.
Respondent refused to comply with the said order. Instead, he released the passenger jeep to Ignacio after the latter
had executed a receipt therefor together with an undertaking that he would produce the jeep whenever required by the
court. Respondent justified such release by saying that the court had no storage building that would protect the jeep
from damage or loss.[11]
Despite the pendency of a motion for contempt[12] filed by complainant against respondent, the case was
dismissed[13] on August 31, 1994 because jurisdiction over the case had been transferred to the municipal trial court
as mandated by Republic Act No. 7691 which expanded said courts jurisdiction.
After receipt of respondents Comment dated April 20, 1996, the Court referred the case to the Office of the Court
Administrator for evaluation, report and recommendation. In a memorandum to the Chief Justice dated August 29,
1996, Acting Court Administrator Reynaldo L. Suarez recommended a finding of guilt and suspension of respondent
for six (6) months without pay.[14]
Issue
The main issue in this case is whether respondent sheriff is administratively liable for failing to release the property
under custodia legis to the complainant in accordance with the order of the regional trial court.

157

Respondent sheriff contends that his act of not taking into his official custody the attached property was not unlawful
but was in fact reasonable because the court had no facility for its storage. That it could no longer be returned to
complainants possession in accordance with the courts order was not his fault but that of the attaching creditor who
had violated his obligation to produce the same whenever required by the court. He offers to pay a fine in the
discretion of the Honorable Court as he has not benefited any pecuniary interest (sic).[15]
The Courts Ruling
Respondents contentions are without merit. We agree with the Court Administrator that respondent should be held
administratively liable.
First Issue: Manner of Attachment
This Court finds respondent sheriffs manner of attachment irregular and his reason therefor totally unacceptable.
Rule 57 of the Rules of Court provides:
Sec. 5. Manner of attaching property.-- The officer executing the order shall without delay attach, to await judgment
and execution in the action, all the properties of the party against whom the order is issued in the province, x x x.
xxx xxx xxx
Sec. 7. Attachment of real and personal property; recording thereof.--Properties shall be attached by the officer
executing the order in the following manner:
xxx xxx xxx
(c) Personal property capable of manual delivery, by taking and safely keeping it in his capacity, after issuing the
corresponding receipt therefor;
xxx xxx xxx
Clearly, respondents act of leaving the passenger jeep in the possession and control of the creditor did not satisfy the
foregoing requirements of the Rules; neither did it conform to the plainly worded RTC order. The note in the receipt
that imposed on Ignacio the obligation to produce the same whenever required by the court was no compliance either,
because it did not establish that the property was in respondent sheriffs substantial presence and possession.
Respondent fell short of his obligation to take and safely keep the attached property in his capacity. He cannot feign
ignorance of this duty as he himself correctly cited an early decision of this Court explaining a sheriffs duty in
attachment, as follows:[16]
x x x A verbal declaration of seizure or service of a writ of attachment is not sufficient. There must be an actual taking
of possession and placing of the attached property under the control of the officer or someone representing him.
(Hollister vs. Goodale, 8 Conn., 332, 21 Am. Dec., 674; Jones vs. Howard, 99 Ga., 451, 59 Am. St. Rep., 231.)
We believe that x x x to constitute a valid levy of an attachment, the officer levying it must take actual possession of
the property attached as far as x x x practicable (under the circumstances). He must put himself in (a) position to, and
must assert and, in fact, enforce a dominion over the property adverse to and exclusive of the attachment debtor, and
such property must be in his substantial presence and possession. (Corniff vs. Cook, 95 Ga., 61, 51 Am. St. Rep., 55,
61.) Of course, this does not mean that the attaching officer may not, under an arrangement satisfactory to himself,
put anyone in possession of the property for the purpose of guarding it, but he can not in this way relieve himself from
liability to the parties interested in said attachment.
That Ignacio was able to move the passenger jeep to an unknown location is further proof that respondent sheriff had
not taken and safely kept it in his substantial presence, possession and control.
His claim that the regional trial court did not have any storage facility to house said property is no justification. He
could have deposited it in a bonded warehouse.[17]
Contrary to respondent sheriffs contention, compelling the attaching creditor to release the property in question was
not in order, because the proper remedy provided by the Rules of Court was for the party whose property had been
attached to apply for the discharge of the attachment by filing a counterbond.[18] The effect of this remedy is the
delivery of possession of the attached property to the party giving the counterbond. The attaching creditor was not
authorized to have possession of the attached property, contrary to the insistence of respondent sheriff.

158

Second Issue: Liability of a Sheriff

A court employee should keep in mind that he is an integral part of that organ of the government that is involved in the
sacred task of administering justice. His conduct and behavior should perforce be circumscribed with the heavy
burden of responsibility and must at all times be characterized by propriety and decorum.[19]
Section 4(c) of Republic Act No. 6713 requires of every public official and employee justness and sincerity in the
discharge and execution of official duties. It exacts from him at all times respect for the rights of others and proscribes
him from dispensing or extending undue favors on account of his office.
The Court in Chan vs. Castillo held:[20]
Every officer or employee in the judiciary is duty bound to obey the orders and processes of the court without the least
delay (Pascual vs. Duncan, 216 SCRA 786 [1992]), x x x.
Leaving the attached property in the possession of the attaching creditor makes a farce of the attachment. This is not
compliance with the issuing courts order. When a writ is placed in the hands of a sheriff, it is his duty, in the absence of
any instructions to the contrary, to proceed with reasonable celerity and promptness to execute it according to its
mandate.[21] He is supposed to execute the order of the court strictly to the letter.[22] If he fails to comply, he is liable
to the person in whose favor the process or writ runs.[23]
Respondents pretense of having acted in utmost good faith for the preservation of the attached property is hardly
credible because there was no reason for his having acted thus. In sum, he is unable to satisfactorily explain why he
failed to take such movable in his control.
By acceding to the request of Ignacio, respondent sheriff actually extended an undue favor which prejudiced the
complainant as well as the orderly administration of justice. He exceeded his powers which were limited to the faithful
execution of the courts orders and service of its processes.[24] His prerogatives did not give him any discretion to
determine who among the parties was entitled to possession of the attached property.
That he exerted efforts in going to the creditors residence in Tuguegarao, Cagayan to obtain possession of the
attached property was an act of compliance with the writ of attachment. This action, belated as it was, did not mitigate
his liability. Much less did it exculpate him from penalty.
IN VIEW OF THE FOREGOING, respondent sheriff is hereby found administratively liable as charged and is
SUSPENDED for six (6) months without pay with a warning that the commission of the same or similar acts in the
future shall be dealt with more severely by this Court.
SO ORDERED.

159

A.M. No. MTJ-04-1518

January 15, 2004

Attys. VILMA HILDA D. VILLANUEVA-FABELLA and WILMAR T. ARUGAY, complainants,

vs.
Judge RALPH S. LEE and Sheriff JUSTINIANO C. DE LA CRUZ JR., both of the Metropolitan Trial Court, Branch 38,
Quezon City, respondents.
DECISION
PANGANIBAN, J.:
Once more, we remind members of the judicial branch judges and judicial personnel alike -- to be conscientious,
diligent and thorough in the performance of their functions. At all times they must observe the high standards of public
service required of them.
The Case and the Facts
In an administrative Complaint1 dated November 12, 2002, Attys. Vilma Hilda D. Villanueva-Fabella and Wilmar T.
Arugay charged Judge Ralph S. Lee of the Metropolitan Trial Court (MeTC) of Quezon City (Branch 38) with manifest
partiality, incompetence and gross ignorance of the law; and Sheriff Justiniano C. de la Cruz Jr. of the same MeTC,
with unjust, oppressive, irregular and excessive enforcement of a writ of attachment. The factual antecedents of the
matters are summarized by the Office of the Court Administrator (OCA) as follows:
"The complainants are counsels for the defendants in Civil Case No. [38]-28457 entitled Star Paper Corporation vs.
Society of St. Paul and Fr. Leonardo Eleazar for Sum of Money with Prayer for Preliminary Attachment. They narrated
that on 19 June 2002, their clients were served a copy of the complaint and a Writ of Attachment by Sheriff Dela Cruz
based on the plaintiffs allegation that the defendants contracted a debt in bad faith with no intention of paying the
same.
"On the aforementioned day, a printing machine was levied and delivered to the plaintiffs warehouse, although there
was an offer by the defendants to pay right there and then P223,457.75, the amount fixed in the order of attachment,
but the plaintiff denied the defendants plea not to attach the machine, saying that [it] had already set [its] mind on
attaching the same.
"Atty. Fabella, together with three (3) priests, asked the sheriff to levy on a less expensive machine but to no avail.
She then told the sheriff that he [would] unnecessarily levy on the machinery because a cash deposit to discharge the
attachment could be filed that same afternoon but he just dismissed the same, saying that it takes time before the
court could approve the counterbond.
"The complainants claim[ed] that Sheriff Dela Cruz violated x x x Rule 57, Section 7, 1997 Rules of Civil Procedure
which provide[d] that in the attachment of personal property capable of manual delivery, [the property should] be taken
and safely kept in the sheriffs custody. The machinery, according to complainants, [was] brought to [the] plaintiffs
warehouse in San Francisco del Monte, Quezon City. The foregoing show[ed] that the implementation of the writ of
attachment was marred by excessiveness, irregularity and oppressiveness.
xxx

xxx

xxx

"On 3 July 2002, Judge Lee granted the defendants Urgent Motion to Discharge Attachment filed 19 June 2002.
Thereafter, on 9 July 2002, an Urgent Ex-Parte Motion to Withdraw Cash Deposit was filed, without notice to the
defendants and despite failure of the plaintiff to set such litigious motion for hearing and contrary to existing laws and
jurisprudence. Judge Lee granted the same in his Order of 17 July 2002. Defendants only learned of the withdrawal
when they received a copy of the said Order.
"A Motion for reconsideration of the 17 July 2002 Order was filed on 30 August 2002. Defendants stressed that the
Motion to Withdraw Cash Deposit has no basis, shows no urgency, lacks notice and hearing, and is already a
prejudgment of the case even before the pre-trial stage which is tantamount to the taking of property without due
process of law.
"For failure of the plaintiff to appear at the pre-trial conference, the court granted the motion to declare the plaintiff as
non-suited as well as the prayer to allow the ex parte presentation of the defenses evidence on its counterclaim.
"The plaintiff then filed a Verified Motion for Reconsideration of the Order declaring it as non-suited[,] which was set for
hearing in the morning of 24 October 2002, the same day the aforementioned ex parte presentation of evidence was
supposed to commence.

160

"Judge Lee was not around in the morning so the hearing on the motion did not materialize with the ex-parte
presentation of evidence in the afternoon because the Clerk of Court refused to proceed for the reason that a motion
for reconsideration had been filed the day before. The Clerk of Court then conferred with the respondent Judge in his
chambers who produced a handwritten note granting the said motion. She explained to complainant Atty. Arugay that
she did not notice that Judge Lee had already issued the Order granting such motion[;] thus, the ex parte presentation
of evidence could not proceed.
"According to complainants, the Clerk of Court could not explain the irregularity in the granting of the plaintiffs Motion
for Reconsideration and the fact that the same was swiftly resolved[,] while the defendants similar motion [had] not
been resolved for more than two (2) months already."2
In his Comment3 dated January 9, 2003, respondent judge claimed that the Complaint was fatally defective, because
complainants did not have legal personality to file it; neither did they present affidavits, verified statements or any
authority to represent their clients. Further, the Complaint did not contain a certification of non-forum shopping, but
instead had a handwritten verification not sworn to or subscribed before an administering officer.
He likewise assailed complainants allegations as hearsay. As to what had allegedly transpired during the
implementation of the subject Writ of Attachment, he adopted the averments in respondent sheriffs Comment4
alleging the presumption of regularity in the discharge of official functions.
Respondent judge admitted that he had committed a procedural error when he released the counter-bond5 to the
plaintiff in the said civil case. However, when the defendants therein, through their Motion for Reconsideration, called
his attention to the mistake, he immediately ordered6 the return7 of the counter-bond to the custody of the Office of
the Clerk of Court. He cited jurisprudence to defend his acts and asserted his good faith and lack of malice. Moreover,
he averred that he had not delayed the resolution of the Motion. Finally, he urged the Court to dismiss the instant
Complaint outright for being instituted without basis and merely to harass him.
In his Comment,8 respondent sheriff claimed that after receiving the Writ of Preliminary Attachment, he sought its
implementation through the assistance of the clerk of court of the MTC-Makati, Sheriff Ernesto Adan, and the Makati
police. He allowed the parties in the civil case to negotiate for a settlement, but when the negotiations bogged down,
he attached a printing machine that was not in use at the time.
He denied that there was abuse in the levy, claiming that the machine was an old 1970 model. Moreover, he said that,
contrary to complainants allegation that the machine was valuable, no receipt to prove its true value was ever shown.
Respondent sheriff added that it was in his own belief and best judgment to temporarily place the delicate printing
machine in the warehouse of the plaintiff for safekeeping. The machine was eventually returned to the defendants by
virtue of the Order discharging the Writ. In fact, one of the complainants personally acknowledged receipt of the
machine.
As to the allegation that he was arrogant, respondent sheriff claimed that he waited for more than three hours before
exercising his ministerial function. Lastly, he adopted the averments in the Comment of respondent judge on other
events that had transpired during the pendency of the civil case, the subject of the instant Complaint.
Evaluation and Recommendation of the OCA
The OCA opined that the provisions cited by complainants -- those in Sections 12 and 18 of Rule 57 of the 1997 Rules
of Civil Procedure9 -- did not require the adverse party to be first notified and then heard before an attachment bond
may be released. Considering that the bond posted by the attaching creditor would answer for the damages and costs
the court may award the adverse party by reason of the attachment, the better practice was for the latter to be notified
and heard before the motion to discharge attachment could be resolved.
According to the OCA, the error was corrected when respondent judge, on Motion for Reconsideration, reversed
himself before the adverse party incurred any damage. The OCA emphasized that before the full disciplinary powers
of this Court could befall a judge, the erroneous act should have been committed with fraud, dishonesty, corruption,
malice or bad faith. It opined that such fact had not been clearly and convincingly shown in the instant case.10
The OCA found that respondent sheriff had erred when he deposited the plaintiffs levied property in the warehouse
and thereby lost actual or constructive possession thereof. The OCA said that this legal violation could not be justified
by the weight and the condition of the machine, which could have been deposited in a rented private warehouse
where it could have been guarded under his strict supervision.

161

Consequently, the OCA recommended that respondent judge "be REMINDED to be more circumspect in the
performance of his duties and to keep abreast with the law and jurisprudence"; and that respondent sheriff "be
SUSPENDED for one (1) month without pay for violation of Rule 57, Section 7(b) of the 1997 Rules of Civil Procedure
with a WARNING that a repetition of the same or similar act(s) shall be dealt with more severely in the future."11
The Courts Ruling
We agree with the findings and the recommendation of the OCA.
Administrative Liability
With respect to the charges against respondent judge, we find that his grant of the withdrawal of the cash deposit -- an
Order he later reversed by ruling that the deposit be returned to the clerk of court -- was a mere error of judgment, not
an act revealing gross ignorance of the law or procedure.
Attachment is a juridical institution intended to secure the outcome of a trial -- specifically, the satisfaction of a
pecuniary obligation.12 Such order is enforced through a writ that may be issued at the commencement of an
action,13 commanding the sheriff to attach property, rights, credits or effects of a defendant to satisfy the plaintiffs
demand.14 Hence, the property of a defendant, when taken, is put in custodia legis.15
In order to prevent the sheriff from levying an attachment on property, the defendant (also called the adverse party)
may make a deposit or give a counter-bond in an amount equal to that fixed in the order of attachment. Such deposit
or counter-bound is intended to secure the payment of any judgment that the plaintiff (also called the attaching party or
the applicant to the writ) may recover in the action.16 After a writ has been enforced, however, the adverse party may
still move for the discharge of the attachment, wholly or in part, by also making a deposit or giving a counter-bond to
secure the payment of any judgment17 the attaching party may recover in the action.18 The property attached shall
then be released and delivered to the adverse party; and the money deposited shall be applied under the direction of
the court to the satisfaction of any judgment that may be rendered in favor of the prevailing party.19
In the instant case, respondent judge had ordered20 the withdrawal of the cash deposit of the defendant and released
it in favor of the plaintiff, even before judgment was rendered. This action was clearly in violation of the Rules
mandating that after the discharge of an attachment, the money deposited shall stand in place of the property
released.21 However, the inadvertence22 of respondent judge was not gross enough to merit sanction.
First, he rectified himself within the period given for deciding motions. Section 15(1) of Article VIII of the Constitution
mandates all trial courts to resolve all matters filed within three months from date of submission.23 The Motion for
Reconsideration24 of the July 17, 2002 Order granting the withdrawal of the deposit was filed on August 30, 2002, and
submitted for resolution on September 5, 2002,25 the date of hearing.26 The Order27 granting this Motion was then
issued on November 4, 2002, well within the three-month period. The money was returned, and no prejudice was
suffered by any of the parties.
Second, respondent judge owned up to his mistake28 in his Comment. This is an admirable act. Under the Code of
Judicial Conduct, judges should be the embodiment of competence29 and should so behave at all times as to
promote public confidence in the integrity of the judiciary.30 They must be faithful to the law.31 That respondent judge
admitted his mistake shows his recognition of his fallibility and his openness to punishment, the imposition of which
restores public confidence in the judicial system. His July 17, 2002 Order was merely an honest mistake of judgment
-- an innocent error in the exercise of discretion -- but not a display of gross incompetence or unfaithfulness to the law.
We have already ruled that as long as the judgment remains unsatisfied, it would be erroneous to order the
cancellation of a bond filed for the discharge of a writ of attachment.32 In like manner, it would be erroneous to order
the withdrawal of a cash deposit before judgment is rendered. Be that as it may, "a [judge] may not be held
administratively accountable for every erroneous order x x x he renders."33 Otherwise, a judicial office would be
untenable,34 for "no one called upon to try the facts or interpret the law in the administration of justice can be
infallible."35 For liability to attach for ignorance of the law, the assailed order of a judge must not only be erroneous;
more important, it must be motivated by bad faith, dishonesty, hatred or some other similar motive.36 Certainly, mere
error of judgment is not a ground for disciplinary proceedings.37
Complainants alleged that respondent judge committed another violation of the Rules of Court when he granted38 the
plaintiffs Urgent Ex-Parte Motion to Withdraw Cash Deposit.39 The Rules mandate that, except for motions that the
court may act upon without prejudicing the rights of the adverse party, every written motion shall be set for hearing by
the applicant.40 The notice of hearing shall be addressed to the defendants therein and shall specify the time and
date of the hearing, which must not be later than ten (10) days after the filing of the motion.41 The motion and notice
shall be served at least three days before the date of hearing.42 Without proof of its service, the court cannot act upon
it.43

162

Indeed, the plaintiffs Motion to withdraw the cash deposit lacked notice of hearing and proof of service. Respondent
judge should not have acted upon it. However, because he had erroneously thought that the rights of the defendants
would not be prejudiced thereby, he took action. His poor judgment obviously resulted in his issuance of the erroneous
Order that granted the release of the deposit.
Similarly, the verified Motion for Reconsideration of the Order declaring plaintiff as non-suited and allowing the exparte presentation of evidence by the defense should have been heard in open court, not granted in chamber.
Respondent judge must have thought that this Motion, which had been filed by the plaintiff, required immediate action;
and so the former granted it by ordering -- through a handwritten note which we do not approve of -- the deferment of
the scheduled presentation.44 This Order should not have been issued, because the Motion had been filed only a day
before the scheduled hearing.45 The rules on notice of hearing and proof of service should have been observed by
both the plaintiffs counsel and respondent judge. Unfortunately, the latters poor judgment likewise prevailed, but still
fell short of gross ignorance of the law or procedure.
Specious is the argument of respondent judge that complainants have no legal personality to file the instant
Administrative Complaint against him. His contention that the allegations contained therein are hearsay46 also
deserves scant consideration. Rule 140 allows the institution of disciplinary proceedings against judges, not only upon
a verified complaint -- supported by affidavits of persons who have personal knowledge of the facts alleged therein or
by documents substantiating the allegations -- but even upon an anonymous one.47 Complainants herein have the
requisite personal knowledge and have, in fact, executed a joint Complaint-Affidavit and substantiated their allegations
with pertinent documents.
The verification48 in their Complaint, albeit handwritten after the jurat, is sufficient in form and substance.49 Such
verification is a clear affirmation that they are prepared to establish the truth of the facts pleaded.50 In fact, the lack of
it is "merely a formal defect that is neither jurisdictional nor fatal."51 This Court may order the correction of a pleading,
"if the attending circumstances are such that strict compliance with the rule may be dispensed with in order to serve
the ends of justice."52 The jurat that preceded the verification simply evidences the fact that the Affidavit was properly
made and sworn to before the officer certifying it.53 Furthermore, a certification against forum shopping is not needed
in this case; Rule 140 makes no such requirement.
We find that the charges against respondent sheriff have bases. Verily, he blatantly violated Section 7(b) of Rule 57 of
the Rules of Court when he deposited the machine in the warehouse of the plaintiff. In enforcing a writ of attachment,
a sheriff who takes personal property capable of manual delivery shall safely keep it in custody after issuing the
corresponding receipt therefor.54 Respondent sheriff failed to do so.
To constitute a valid levy of attachment, the officer levying it must have "actual possession of the property attached."55
"He must put himself in [a] position to, and must assert and, in fact, enforce a dominion over the property adverse to
and exclusive of the attachment debtor."56 To this rule we add that the officer cannot even deliver the property to the
attachment creditor, as the parties must await the judgment in the action. The levied property must be in the
"substantial presence and possession"57 of the levying officer, who "cannot act as special deputy sheriff of any party
litigant."58 The officer may put someone "in possession of the property for the purpose of guarding it," but the former
cannot be "relieve[d] x x x from liability to the parties interested in said attachment."59
Sheriffs are officers of the court60 who serve and execute writs addressed to them by the court, and who prepare and
submit returns of their proceedings.61 They also keep custody of attached properties.62 As officers of the court, they
must discharge their duties with "great care and diligence."63 They have to "perform faithfully and accurately what is
incumbent upon [them]"64 and show at all times a "high degree of professionalism in the performance of [their]
duties."65
The duty of sheriffs to execute a writ issued by a court is purely ministerial,66 not discretionary.67 Clearly, they must
keep the levied property safely in their custody, not in that of any of the parties. They exercise no discretion in this
regard, for attachment is harsh, extraordinary and summary in nature -- a "rigorous remedy which exposes the debtor
to humiliation and annoyance."68 Contrary to the claim of respondent sheriff, his unusual zeal and precipitate decision
to give possession of the machine to the plaintiff effectively destroys, the presumption of regularity in his performance
of official duties.69 "Any method of execution falling short of the requirement of the law deserves reproach and should
not be countenanced."70
In implementing the Writ, respondent sheriff cannot afford to err without adversely affecting the proper dispensation of
justice.711wphi1
"Sheriffs play an important role in the administration of justice. As agents of the law, high standards are expected of
them. x x x His conduct, at all times, must not only be characterized by propriety and decorum but must, and above all
else, be above suspicion."72

163

As a public officer who is a repository of public trust, respondent sheriff has the obligation to perform the duties of his
office "honestly, faithfully and to the best of his ability."73 He must be "circumspect and proper in his behavior."74
Reasonable skill and diligence he must use in the performance of official duties, especially when the rights of
individuals may be jeopardized by neglect.75
Sheriffs must always "hold inviolate and invigorate the tenet that a public office is a public trust."76 As court personnel,
their conduct must be beyond reproach and free from any suspicion that may taint the judiciary.77 In view of their
exalted position as keepers of public faith, court personnel are indeed saddled with a heavy burden of responsibility78
to the public. Hence, they must thoroughly avoid any impression of impropriety, misdeed or negligence in the
performance of official duties.79 We have held thus:
"x x x [T]his Court condemns and would never countenance such conduct, act or omission on the part of all those
involved in the administration of justice which would violate the norm of public accountability and diminish or even just
tend to diminish the faith of the people in the Judiciary."80
Once again we emphasize that "[a]t the grassroots of our judicial machinery, sheriffs x x x are indispensably in close
contact with the litigants, hence, their conduct should be geared towards maintaining the prestige and integrity of the
court, for the image of a court of justice is necessarily mirrored in the conduct, official or otherwise, of the men and
women who work thereat, from the judge to the least and lowest of its personnel;81 hence, it becomes the imperative
sacred duty of each and everyone in the court to maintain its good name and standing as a temple of justice."82
Dismissed for lack of basis, however, is the charge of excessive enforcement of a writ filed against respondent sheriff.
Applying Section 8 of Rule 140 of the Rules of Court, respondent judge is found wanting in the exercise of good
discretion only. His errors of judgment fall short of gross ignorance of the law or procedure, yet reflect poorly on his
esteemed position as a public officer in a court of justice. Judges must be conscientious, studious and thorough,83
observing utmost diligence in the performance of their judicial functions.84 They have to "exhibit more than just
cursory acquaintance with statutes and procedural rules."85 Moreover, they must require court personnel to observe
at all times high standards of public service and fidelity.86
Applying the Uniform Rules on Administrative Cases in the Civil Service,87 we find respondent sheriff guilty of simple
neglect of duty for violating Section 7(b) of Rule 57 of the Rules of Court. Simple neglect of duty is the "failure x x x to
give proper attention to a task expected"88 of an employee, thus signifying a "disregard of a duty resulting from
carelessness or indifference."89 Classified as a less grave offense, it is punishable by a suspension of one month and
one day to six months. Considering that the failure of respondent sheriff to fulfill his duty seems to be his first infraction
during his stint in the judiciary, the Court considers the recommended sanction appropriate.
WHEREFORE, the Court reiterates its REMINDER90 to Judge Ralph S. Lee of the Metropolitan Trial Court of Quezon
City (Branch 38) to evince due care in the exercise of his adjudicative functions. On the other hand, Sheriff Justiniano
C. de la Cruz Jr. of the same branch is found GUILTY of simple neglect of duty and is hereby SUSPENDED for one
month and one day without pay, with a warning that a repetition of the same or of a similar act in the future shall be
dealt with more severely.
SO ORDERED.

164

A.M. No. P-91-549

July 5, 1993

REYNALDO SEBASTIAN, complainant,

vs.
SHERIFF ALBERTO A. VALINO, respondent.
Bautista, Picaso, Buyco, Tan & Fider Law Offices for complainant.
Teresita G. Oledan for respondent.

QUIASON, J.:
Marblecraft, Inc., represented by its Assistant General Manager, Reynaldo Sebastian, charges Alberto A. Valino,
Senior Deputy Sheriff, Office of the Regional Sheriff, Pasig, Metro Manila, with (1) gross abuse of authority committed
in connection with the implementation of the writ issued by the Regional Trial Court, Makati, Metro Manila, in Civil
Case No. 89-3368, and (2) refusal to enforce the trial court's for the return of the seized items.
Complainant alleges that:
1.
On March 3, 1989, Private Development Corporation of the Philippines (PDCP) filed a replevin suit against
Marblecraft, Inc., in Civil Case No. 89-3368, in order to foreclose the chattels mortgaged by Marblecraft. On March 30,
1989, the Regional Trial Court, Makati, issued a writ of seizure directed against Marblecraft covering the chattels
sought to be replevied.
2.
The enforcement of the writ of seizure was delayed because of the writ of preliminary injunction enjoining
PDCP from proceeding with the foreclosure sale issued by the Regional Trial Court, Pasig, Metro Manila in Civil Case
No. 58006, It was only on October 31,1990, when the Regional Trial Court, Pasig, dissolved the writ of preliminary
injunction.
3.
On November 9, 1990, at around 10:37 A.M., respondent, accompanied by several policemen and PDCP
employees, went to the office of Marblecraft at Barrio Santolan, Pasig, to implement the writ of seizure. Respondent
and his companions forcibly opened the lockers and desk drawers of the employees of complainant and took their
personal belongings, as well as some office equipment issued to them. The employees filed with the Office of the
Provincial Prosecutor of Rizal two criminal complaints for robbery against respondent and his companions.
4.
Respondent only showed to complainant's counsel a copy of the writ but did not furnish him with a copy of the
application for the writ, the supporting affidavit and the bond.
5.
In the course of the implementation of the writ, which lasted for four days, several pieces of machinery and
equipment were destroyed or taken away by respondent.
6.
Respondent turned over the seized articles to the counsel of PDCP and allowed these items to be stored in
PDCP's warehouse in Taguig, Metro Manila.
7.
On November 14, 1990, complainant posted a counterbond. In an order issued on the same day, the Regional
Trial Court, Makati, approved the bond and directed the immediate return of the seized items. After denying PDCP's
motion to set aside the November 14 Order, the trial court reiterated the directive for the return of the seized items in
its November 26 Order. Respondent did not implement the orders.
8.
PDCP filed a motion for reconsideration of the November 26 Order, which was denied in an Order dated
December 11, 1990.
In his comment, respondent branded the administrative complaint against him as pure harassment filed by Marblecraft
after he had refused to defer the implementation of the writ of seizure. He said that if he did not implement the writ, he
would have been accused by PDCP of non-performance of his duties as a sheriff. He pointed out that the criminal
complaints for theft filed against him by the employees of complainant were dismissed by the Provincial Prosecutor of
Rizal.
The administrative complaint was referred to Judge Martin S. Villarama Jr. of the Regional Trial Court, Pasig, for
investigation, report and recommendation.

165

In his report, Judge Villarama, found respondent guilty of partiality when he immediately turned over the seized items
to PDCP, and of willful refusal to enforce the November 14, 26 and December 11, 1990 Orders of the Regional Trial
Court, Makati.
Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the
plaintiff. The sheriff must retain it in his custody for five days and shall return it to the defendant, If the latter, as in the
case, requires its return and files a counterbond (Sec. 4, Rule 60, Revised Rules of Court). In violation of said Rule,
respondent immediately turned over the seized articles to PDCP. His claim that the Office of the Regional Sheriff did
not have a place to store the seized items, cannot justify his violation of the Rule. As aptly noted by the Investigating
Judge, the articles could have been deposited in a bonded warehouse.
Respondent must serve on Marblecraft not only a copy of the order of seizure but also a copy of the application,
affidavit and bond (Sec. 4, Rule 60, Revised Rules of Court). Respondent did not furnish defendant with a copy of the
application, affidavit and bond. By his own admission, he only served it with a copy of the order of seizure (Rollo, p.
37).
The more serious infraction of respondent is his refusal to implement the order of the Regional Trial Court, Makati for
him to return to complainant the articles seized pursuant to the writ of seizure dated March 30, 1990.
The Order dated November 14, 1990 directed him "to immediately return to defendant all its properties seized and
taken from its premises pursuant to the writ of seizure of March 30, 1989, from receipt of this Order (sic)" (Rollo,
p. 42)
The Order dated November 26, 1990 directed him "to implement the Order of this Court dated November 14, 1990
and to immediately return to defendant all its properties seized and taken from its premises pursuant to the writ of
seizure dated March 30, 1989 from receipt of this Order (sic)" (Rollo,
p. 44).
The Order dated December 11, 1990 directed him "to implement the Order of this Court dated November 26, 1990,
within three (3) days from the receipt hereof, otherwise this Court will be constrained to appoint and deputize another
sheriff to implement the order dated November 26, 1990" (Rollo, p. 47).
The only action taken by respondent to implement the Order dated December 11, 1990 was to write a letter on
December 12, 1990, addressed to the counsel of PDCP, requesting the turnover of seized articles. As expected,
PDCP's counsel refused to part with the possession of the seized articles and to issue a letter of authorization to
withdraw the same from the warehouse. Instead of taking possession of the articles, respondent merely reported to
the Regional Trial Court that "[i]t is now clear that the undersigned cannot implement the Court order dated December
11, 1990 by reason of the refusal of PDCP to accept or to honor said Court order" (Rollo, p.48).
The petition for certiorari of PDCP to question the orders of the Regional Trial Court, Makati, was filed with the Court of
Appeals only on December 17, 1990. The Court of Appeals issued a temporary restraining order only on December
21, 1990. Respondent therefore had more than seven days within which to enforce the orders of the trial court if he
was minded to do so.
Respondent could have avoided getting into his present predicament had he not turned over the possession of the
seized goods prematurely to the PDCP.
The complainant cannot be blamed if it harbored the suspicion that respondent was beholden to PDCP. The zeal with
which respondent enforced the order of seizure in favor of PDCP was in sharp contrast with his inaction in enforcing
the three orders of the trial court directing him to return the seized items to complainant.
It is not for respondent to question the validity of the orders of the trial court. It is for him to execute them. As observed
by the Investigating Judge, "[t]here is therefore no excuse for respondent's wilfull refusal to implement the Order of the
Court" (Report and Recommendation, p. 10). Disobedience by court employees of orders of the court is not conducive
to the orderly administration of justice. The display of partially in favor of a party as against the other party erodes
public confidence in the integrity of the courts.
IN VIEW OF THE FOREGOING, the Court finds respondent guilty of serious misconduct and RESOLVED to impose
upon him the penalty of FOUR (4) MONTHS SUSPENSION without pay, the period of which should not be charged to
his accumulated leave, with a WARNING that a repetition of the same or of acts calling for disciplinary action will be
dealt with more severely. This resolution is IMMEDIATELY EXECUTORY, and respondent is hereby ordered to
forthwith desist from performing any further official functions appertaining to said office.
SO ORDERED.

166

167

A.M. No. P-94-1108

August 23, 1995

MARIANETTE VILLAREAL, complainant,

vs.
ROLANDO T. RARAMA, RESTITUTO MADRAZO, FIDEL CASUYON, and AGUINALDO DEL CAMPO, respondents.

REGALADO, J.:
The present administrative case arose from a sworn complaint 1 filed by Marianette Villareal against respondents
Rolando T. Rarama, Restituto Madrazo, Fidel Casuyon, and Aguinaldo del Campo who are all serving as Sheriff III in
Branches V, VII, II, and III, respectively, of the Municipal Trial Courts in cities (MTCC), Davao City, for allegedly
"conniving and confederating in maliciously serving a writ of execution intended for another person who is living in
another place." Pursuant to the First Indorsement of Deputy Court Administrator Reynaldo L. Suarez dated August 24,
1994, 2 the complaint was referred to respondent Sheriff Rolando T. Rarama, through Judge Roberto Q. Canete,
MTCC, Branch 5, Davao City, for comment. Subsequently, respondents submitted their joint counter-affidavit 3 to
which a reply 4 was filed by herein complainant. A rejoinder to complainant's reply 5 was also submitted by
respondents.
It appears that an action for collection of a sum of money was filed by the Cooperative Rural Bank of Davao City
against the spouses Marianette (herein complainant) and Roy Villareal, Lito Lacorda and Felimon Cangrejo before the
MTCC, Branch 5, of Davao City docketed as Civil Case No. 548-E-M. The records show that summons was served
upon respondent Cangrejo who, however, failed to file his answer, as a consequence of which he was declared in
default. On April 19, 1989, judgment 6 was rendered against him in favor of the plaintiff bank without prejudice to his
right to proceed against his co-debtors. On March 29, 1994, an alias writ of execution 7 was issued by the trial court
against Cangrejo.
According to complainant, at around 1:30 P.M. of April 25, 1994, respondent Rarama arrived at her house in Digos,
Davao del Sur, together with the other respondents and three employees of the Cooperative Rural Bank of Davao City,
Inc., including one Vic Belo who is a collector of the bank. Respondent Rarama introduced himself as a sheriff of
Davao City and informed her that they were going to attach her properties because she lost in a case. Complainant
denied having been charged in court, much more of having lost in a case, and that she did not owe anything to the
bank. When respondent Rarama persisted in getting her properties, she demanded and was shown the writ of
execution. She objected thereto, claiming that the same was not addressed to her but to Felimon Cangrejo and that
the writ was being served after more than five years from the date the decision was rendered. The reply given her was
that she is the principal borrower and the only one who is solvent.
Despite the pleas of complainant and a neighbor for the postponement of the implementation of the writ until she shall
have consulted her lawyer, respondents immediately proceeded to pull out from complainant's house the following
items, viz.: one VHS player, one Singer sewing machine, one Chinese cabinet, and another Chinese cabinet with
glass shelves. Allegedly, complainant was forced to sign an inventory receipt because she would otherwise not be
able to get back her things. She hastened to add that when she signed the receipt, the words "with my conformity"
were not written thereon.
The following day, complainant and her husband went to the bank to inquire about the status of her loan and she was
informed that, unless she settled her account, her properties would not be released. Complainant avers that because
of this she was constrained to pay the amount of P10,000.00 despite earlier representations made with the bank that
she had fully paid her loan to the bank collector. She further asserts that she was thereafter forced to write a
promissory note as dictated by the assistant manager of the bank, Gerry Alag, and the bank's lawyer, Atty. Herbert
Arteg. Eventually, after she presented the receipt of payment and the promissory note to respondent Rarama, the
attached properties were released to herein complainant.
On the other hand, respondent Rarama claims that on April 25, 1994, he went to Digos, together with Vic Belo and
Bading dela Fuente, employees of the bank, to coordinate with Provincial Sheriff Andres regarding the implementation
of the alias writ of execution issued in the aforementioned Civil Case No. 548-E-M. However, he was informed that he
would have to implement the writ on his own because the other sheriffs were not available. On their way out of the Hall
of Justice, they met respondents Madrazo, Casuyon and del Campo who, upon learning that Rarama's group was
going to Digos where they all lived, decided to join the group so they could get a free ride.
Upon the suggestion of Vic Belo, the bank collector, the group first went to the house of complainant purportedly to
ask for the exact address of Felimon Cangrejo against whom the writ was issued. When they reached the house of
complainant, respondent Rarama introduced himself and his other companions, and then inquired from the former

168

about the address of Cangrejo. When complainant asked why they were asking her, Rarama showed her the writ of
execution and the court decision. It was then that complainant stated that she was the principal defendant in the case.
Respondents further allege that complainant requested Rarama not to implement the writ against Cangrejo because
he was merely her co-maker who never benefited from the loan extended to her by the Rural Bank of Davao, after
which she offered to pay her obligations in monthly installments. Respondent Rarama did not agree to the proposal
since he was not authorized to enter into that compromise but, at the same time, he suggested that complainant
deposit some of her personal properties as security for the settlement of her obligation, and the latter allegedly
agreed. Much later, the properties hereinbefore mentioned were released to complainant by virtue of a letter from the
creditor bank.
In addition, respondents controvert the claims of complainant that they forcibly entered her house and took possession
of her personal properties without her consent. On the contrary, they insist that complainant deposited her personal
properties voluntarily and of her own free will. They likewise contend that it is not true that complainant has never been
charged in court for in fact there was a pending criminal case for violation of the law on bouncing checks, as well as a
civil case for collection of a sum of money, filed against her.
In her aforesaid reply to respondents' counter-affidavit, complainant maintains her original stand that she did not
voluntarily deposit her personal properties with respondents and declares as untrue respondents' claim that they
merely came to see her to ask for the address of Felimon Cangrejo.
On January 16, 1995, this Court issued a resolution, 8 as recommended by Deputy Court Administrator Reynaldo L.
Suarez, referring the case to Executive Judge Augusto B. Breva of the Regional Trial Court of Davao City for
investigation, report and recommendation within sixty (60) days from receipt of the records thereof.
Thereafter, Judge Breva submitted his report dated July 12, 1995, with the recommendation that respondent sheriff
Rolando T. Rarama be declared guilty of an administrative offense and that he be suspended for three months, with a
stern warning that a repetition of a similar offense will be dealt with more severely. He further recommended that the
three other respondents be exonerated.
We quote with approval the findings of the investigating judge regarding the propriety of the respective claims of the
parties and the culpability, or absence thereof, with respect to each of the respondents herein:
RATIONALIZATION: The defense of Sheriff Rarama that he along with the representatives of the plaintiff bank went
to the house of the complainant only to ask for the address of Felimon Cangrejo; that the four items taken by them
were offered as deposit by the complainant after requesting Rarama not to implement the alias writ against Cangrejo
as it was her loan and Cangrejo was only her co-maker; and that two days after, she got the items back upon making
a partial payment of P10,000.00 to said bank and promising in writing to pay the balance within sixty days cannot
be accepted as true in view of the followings points of the evidence:
(1)
The alias writ of execution (Exh. "5"), although directed against Felimon Cangrejo only, was actually served by
Sheriff Rarama on the complainant as evidenced by her signature at the bottom thereof along with the date "4-25-94"
(Exh. "5-A"), the date of the taking of the four items. Service of the writ on her was indicative of the intent to implement
it against her personal interests.
(2)
The RECEIPT (Exh. "6") issued by Rarama to the complainant, for the four items, positively shows that it was
prepared in advance. The opening paragraph is typewritten and reads: "Received from defendants MARIANETTE &
ROY VILLAREAL the personal properties mentioned and particularly described below, to wit:" Thus the fact that the
names "MARIANETTE & ROY VLLLAREAL" had already been typewritten beforehand is a further indication of said
intent, otherwise their names would have been handwritten like the descriptions of the four items appearing therein.
(3)
There is nothing in the RECEIPT showing that the items were only deposited. On the contrary, it contains a
typewritten paragraph which reads: "That the above-mentioned personal property/ies was/were levied and attached by
virtue of the Writ of Execution issued by Honorable ROBERTO Q. CANETE, Presiding Judge, MTCC, Branch 5,
Davao City, dated March 29, 1994".
(4)
The four items were not brought to the plaintiff bank (which would have been the case if they were merely
deposited by private arrangement) but to the MTCC which issued the alias writ and from which the complainant
recovered them after paying P10,000.00 to the bank.
(5)
Vic Belo the collector of the bank, when asked in the course of his testimony in this case why he did not
inquire before proceeding to Digos on April 25, 1994, (about) the address of Felimon Cangrejo from the NFA in Davao
City, where the latter had been employed answered ". . . my perception is that since Mrs. Villareal is the principal
borrower I focused more my attention on her" (TSN 6-7-95 p. 100).

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On the other hand, the testimony of the complainant cannot be entirely believed for the following reasons:
(a)
She claims to have already fully paid her loan account with the plaintiff bank but has not produced any receipt
to substantiate it other than the official receipt for the P10,000.00 she paid on April 27, 1994, two days after the
incident complained of in this case happened (Exh. "G").
(b)
In her affidavit in support of her administrative complaint she alleges that "I and my husband have never been
charged of (sic) any criminal and/or civil case in Davao City." But it turned out that she actually received the summons
issued in the same Civil Case No. 548-E-M on September 27, 1990 as evidenced by her signature thereon (Exh."2",
"2-A" & TSN 6-5-95 pp. 29-30). The decision rendered in that case against Cangrejo alone is dated April 19, 1989.
The alias writ directed against Cangrejo was issued on March 29, 1994, which was within the five-year period.
There appears to be no clear positive evidence that respondents Casuyon, Madrazo and del Campo really knew that
the alias writ was directed only against Cangrejo. And in her testimony the complainant for the most part only named
Sheriff Rarama, and named sheriff Casuyon only in the re-direct examination as the one who wrote down the
descriptions of the four items taken from her house, writing as the things were accordingly being pulled out "by the
other sheriffs" without naming them (TSN 6-5-95 pp. 46-47). She did not even identify them during the hearing, and
she got the names of Madrazo and del Campo only days later from the Court upon instruction of her adviser, then
Provincial Prosecutor Aves (same TSN p. 39). She did not particularize the participation of each of the respondents
except as to Rarama and the writing of the RECEIPT by Casuyon, referring to the respondents only as Rarama, or as
Rarama and the other sheriffs, or the sheriffs. But Rarama was not only with the other respondents sheriffs but with
two employees of the bank.
Hence, we believe that the evidence only warrants a finding of administrative accountability on the part of Rolando
Rarama.
While there is evidence to show that indeed complainant Marianette Villareal is the principal debtor while Felimon
Cangrejo is merely a co-maker, the fact remains that Cangrejo was the sole debtor adjuged liable for the loan obtained
from the Cooperative Rural Bank of Davao City, Inc. and the alias writ of execution was directed only against him.
Hence, respondent Rarama had no authority to implement the same against herein complainant considering that,
although she was named as a defendant in the collection case, there was no judgment against her as of the date of
the incident.
The sheriff, as an officer of the court upon whom the execution of a final judgment depends, must necessarily be
circumspect and proper in his behavior. Execution is the fruit and end of the suit and is the life of the law. 9 Thus,
when a writ is placed in the hands of a sheriff it is his duty, in the absence of any instructions to the contrary, to
proceed with reasonable celerity and promptness to execute it according to its mandate. He is to execute the
directives of the court therein strictly in accordance with the letter thereof and without any deviation therefrom.
Hence, a sheriff has no authority to levy on execution upon the property of any person other than that of the judgment
debtor. If he does so, the writ of execution affords him no justification, for such act is not in obedience to the mandate
of the writ. 10 As long as the sheriff confines his acts to the authority of the process, he is not liable, but all of his acts
which are not justified by the writ are without authority of law. This is so because if an execution against one man
would excuse the sheriff for taking the property of another, every citizen would be at his mercy and none could call his
estate his own. 11
Respondent Rarama's improvidence in enforcing a judgment against complainant who is not the judgment debtor in
the case calls for disciplinary action. Considering the ministerial nature of his duty in enforcing writs of execution, it is
incumbent upon him to ensure that only that part of a decision ordained or decreed in the dispositive portion should be
the subject of execution, no more and no less. That the title of the case specifically names complainant as one of the
defendants is of no moment as execution must conform to that which is directed in the dispositive portion and not what
appears in the title of the case. 12
We find the recommended penalty of three month's suspension proper and commensurate under the circumstances
obtaining in this case. However, the policy adopted by the Court, a fine equivalent to the salary of respondent for three
months should instead be imposed, but with some mitigation considering the nominal extent of the damages sustained
by complainant who, to a certain extent, also contributed in bringing about the situation which gave rise to the incident.
ACCORDINGLY, respondent Sheriff Rolando T. Rarama is hereby declared GUILTY of serious misconduct in the
enforcement of the alias writ of execution in Civil Case No. 548-E-M of the Municipal Trial Courts in Cities, Branch 5,
Davao City and he is hereby ordered to pay a FINE of ten thousand pesos (P10,000.00). He is further sternly warned
that the commission of the same or a similar offense hereafter will be punished with a more severe sanction.

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The complaint against respondents Restituto Madrazo, Fidel Casuyon and Aguinaldo del Campo is hereby
DISMISSED for lack of merit.
SO ORDERED.

171

A.M. No. MTJ-93-853

March 14, 1995

DOMINGO BALANTES, complainant,

vs.
JUDGE JULIAN OCAMPO III, Municipal Trial Court in Cities, Branch I, Naga City, respondent.
A.M. No. P-94-1013

March 14, 1995

DOMINGO BALANTES, complainant,

vs.
LILIA S. BUENA, Clerk of Court, MTCC, Naga City/Ex-officio Naga City Sheriff, respondent.
RESOLUTION

ROMERO, J.:
This resolution disposes of two related complaints of Domingo Balantes, one of which is against respondent Judge
Julian Ocampo III (A.M. No. MTJ93-853) 1 and the other against Clerk of Court Lilia S. Buena (A.M. No. P-94-1013). 2
Records show that complainant is the defendant in an ejectment case (Civil Case No. 8339) filed by plaintiff Roberto
Roco but which was decided by respondent judge against complainant. Complainant appealed the adverse decision to
the RTC, Branch 23, Naga City (docketed as RTC 88-1467). On motion of the plaintiff-appellee, the RTC, on October
23, 1989 issued a Writ of Execution and Demolition pending appeal, ordering the removal of one-half (1/2) portion of
complainant's residential house found to be built inside the titled property of the plaintiff. Subsequently, the decision on
appeal was affirmed by the same Regional Trial Court and the records of the case were remanded to respondent's
sala for execution of the judgment. On November 25, 1991, respondent Judge issued a writ ordering the demolition of
the remaining half portion of complainant's residential house found standing on a public property (legal easement).
Complainant filed a motion for reconsideration of the demolition order but the same was denied on December 5, 1991.
It further appears that on August 19, 1992, a second writ of demolition was issued by the respondent Judge, followed
by a third one dated February 3, 1993.
Complainant now alleges that respondent judge issued the orders granting plaintiff's motion for issuance of writ of
demolition with precipitate haste, hence, he was deprived of his right to oppose the same, that the effect of these writs
of demolition is to demolish complainant's entire house, notwithstanding that the appellate court's 3 writ of execution
and demolition issued pending appeal ordered the demolition only of the half portion of his house found standing on
plaintiff's land.
Respondent Judge Julian Ocampo III filed his comment on November 25, 1993 (A.M. No. MTJ-93-853, pp. 30-34). He
explained that after a series of appeals (to RTC, Court of Appeals and the Supreme Court), and the remand of records
to court a quo, he issued the questioned writs of demolition with respect to the remaining portion of complainant's
house situated inside the property which court a quo found to be owned by the plaintiff by right of accretion.
Respondent Judge argues that a writ of demolition, being merely incidental to the execution of a final judgment, is
immediately enforceable after hearing the arguments of both parties; that though the writ of demolition was issued on
the same day the court issued its order of August 19, 1992, the writ was implemented only on September 2, 1992; that
a motion for reconsideration was filed by herein complainant on August 29, 1992 to forestall its implementation but the
same was submitted for the court's consideration only on September 3, 1992 and by that time the writ had already
been implemented.
Respondent Judge further argues that the restraining order issued on September 2, 1992 cannot be complied with
because by the time it was received by the City Sheriff, the writ of demolition had already been effected and the
premises delivered to the plaintiff.
With respect to the complaint filed against respondent Clerk of Court, complainant alleges that she immediately
proceeded to implement the writs of demolition without giving him a chance to move for a reconsideration of the order
granting issuance thereof.
We find respondent judge to have grossly abused his authority in issuing the questioned writs of demolition.

172

A precise determination of the total land area encroached upon by complainant over subject property in Civil Case No.
8339 has been ordered by Judge Gregorio Manio, RTC, Branch 23, Naga City in the course of the appeal thereof.
Records show that previous to the issuance of the writ of execution and demolition pending appeal, said judge
ordered the deputy sheriff with the assistance of a geodetic engineer to determine the metes and bounds of the
plaintiff's property. The Sheriff's Return clearly showed that two (2) meters of plaintiff's property had been more or less
encroached upon by complainant's house while it occupied three (3) meters, more or less, of the legal easement
formed by accretion. The writ of demolition thus issued by the appellate court contained specifications in accordance
with such findings and was returned fully satisfied on January 20, 1990. Moreover, the decision of the RTC, Branch
23, Naga City which incorporated such findings was successively affirmed by the Court of Appeals and the Supreme
Court.
Respondent Judge, therefore, was fully aware of the previous delineation of the property of the plaintiff. Nevertheless,
when the records were remanded to him and upon motion of the plaintiff's counsel, he issued another writ of
demolition which sought to demolish the remaining portion of the defendant's house which, as already found by the
appellate court(s), was standing upon a public property.
The order of demolition dated November 20, 1991 which he issued, in fact, was the subject of a petition for certiorari
(SPL. Civil Action No. RTC 91-2467) before the same RTC, Branch 23, Naga City where Judge Gregorio A. Manio
declared said order of demolition and the writ issued pursuant thereto as null and void, having been issued with grave
abuse of discretion and enjoined respondent Judge from issuing any further writs of demolition in Civil Case No. 8339.
Despite this directive, respondent Judge exhibited a defiant attitude by issuing another writ of demolition dated August
19, 1992. Said order was the subject of another petition for certiorari/prohibition (SPL. Civil Action No. 92-2651)
wherein Judge Antonio N. Gerona of Branch 27, RTC, Naga City issued an order dated September 2, 1992 restraining
the implementation of the aforesaid writ of demolition by the sheriff of MTC, Naga City.
As regards the charge against respondent Clerk of Court and Ex-Officio Sheriff Lilia S. Buena, the same is dismissed,
it appearing from the certification she issued that the Temporary Restraining Order issued by the RTC, Branch 27,
Naga City was received by her on September 2, 1992 at 2:15 p.m., after the demolition had been completely effected
and the premises delivered to the plaintiff at 1:30 p.m. of same date. It appears that respondent Buena was not aware
of the existing TRO which she received within the hour after the demolition had taken place, thus rendering said
restraining order a fait accompli. The rule is that when a writ is placed in the hands of a sheriff, it is his duty, in the
absence of instructions, to proceed with reasonable celerity and promptness to execute it according to its mandate.
He may not apply his discretion as to whether to execute it or not. 4
WHEREFORE, in view of the foregoing, respondent Judge Julian Ocampo III, MTCC, Branch I, Naga City is hereby
ordered to pay a FINE of P5,000.00 with WARNING that a repetition of the same or similar infraction in the future will
merit a stiffer penalty. The complaint against respondent Clerk of Court and Ex-Officio Sheriff Lilia S. Buena is hereby
DISMISSED.
SO ORDERED.

173

A.M. No. P-94-1068

February 13, 1995

VICTOR ELIPE, complainant,

vs.
HONESTO FABRE, Deputy Sheriff, MTCC, Cagayan de Oro City, respondent
RESOLUTION

MENDOZA, J.:
This is an administrative complaint filed against respondent Honesto G. Fabre, charging him with nonfeasance and
incompetence in the performance of his duties as Deputy Sheriff of Branch 3 of the Municipal Trial Court in the Cities
(MTCC) at Cagayan de Oro City.
The complaint was referred to Judge Antonio A. Orcullo of MTCC, Branch 3, Cagayan de Oro City who, in a report
dated November 15, 1993, found the charges to be true and accordingly recommended that respondent be
reprimanded and given a stern warning that a repetition of the same acts would be dealt with more severely.
In its memorandum dated August 29, 1994, the Office of the Court Administrator concurs with the findings of the
investigating judge and recommends that respondent deputy sheriff be fined P1,000.00 and given a stern warning.
The record discloses that on June 19, 1992, the MTCC, Branch 3, at Cagayan de Oro issued a writ of execution for
the enforcement of a barangay agreement in Case No. 91-144 for collection of unpaid rentals and construction
materials amounting to P100,000.00. Complainant testified that on June 25, 1992, at nine o'clock in the morning,
respondent served the writ or judgment debtors Michael dela Cerna and his wife but the respondent was able to levy
only upon a dilapidated vehicle and an old piano. 1 Complainant stated that at ten o'clock in the evening of the same
day, the judgment debtors surreptitiously removed several pieces of furniture from the house which they rented. 2 On
June 26 and 30 and again on July 4, 11, 38 and 19, 1992, they removed appliances and other personal properties and
destroyed building fixtures on the property owned by complainant. 3 On these occasions, according to the
complainant, respondent did not make any effort to prevent the judgment debtors from removing leviable properties to
implement the writ, despite the fact that he had been told by complainant of the judgment debtors' activities.
Respondent Fabre denied the complainant's allegation. He claimed that he levied on several properties of the
judgment debtors, but unfortunately the bid price paid for them at the public auction was only P10,000.00. 4 He
justified his action in levying only on the personal properties which he found at the business establishment and in
desisting from enforcing the writ with respect to properties on the second floor of the residence of the judgment
debtors on two grounds: (1) the judgment debtors refused to let him in; and (2) he did not have any order from the
MTCC to force open the door which had been locked.
The records show that on July 10, 1992, respondent sold to the complainant, as the highest bidder at public auction,
personal properties of the judgment debtors for P10,000.00. On July 13, 1992, respondent levied on a parcel of land
owned by the judgment debtors which on August 14, 1992 was also sold to complainant for P15,006.00. 5 On
December 17, 1992, personal properties of the judgment debtors which had been levied upon were sold, also to the
complainant as the highest bidder, for P2,001.00. 6 The result is that the judgment debt of P100,000.00 was only
partially satisfied to the extent of P27,007.00.
In his memorandum report, Deputy Court Administrator Juanito A. Bernad found that, because of respondent's inaction
and lack of diligence in enforcing the writ of execution, the judgment debtors were able to cart away properties which
he could have levied upon execution. There is merit in the following observations contained in his memorandum:
Respondent Deputy Sheriff correctly argued that he was not directed by any Judge by court orders to stop the carting
away of properties or the demolition of the fixtures. But respondent Sheriff should understand that by virtue of the writ
of execution issued in favor of herein complainant, he (respondent Sheriff) was mandated to levy upon properties of
judgment debtor to satisfy an obligation amounting to P100,000.00. However, in disregard of this Order, respondent
Sheriff chose to levy the properties of the judgment debtor which amounted only to P27,000.00.
If indeed respondent Sheriff is dedicated in his work, respondent Sheriff could have chosen to stop the carting away of
the valuable properties of judgment debtor for the very purpose of levying it and for the purpose of complying with the
Order.

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If the arguments of respondent Sheriff will be sustained, all judgment debtors can easily circumvent the orders of the
court by carting away their properties thinking that sheriffs have no authority to stop them. This line of thinking and
reasoning will create chaos and instability in the administration of justice.
Furthermore, respondent Sheriff exhibited an utter disregard of what is incumbent upon him when he failed to inform
the complainant that in order to levy properties of the defendant on the second floor of the establishment, a special
order of the court is necessary to force or break-open the closed door in accordance with Section 14, Rule 39 of the
Rules of Court. The respondent Sheriff's duty was apparent but he did not comply with it as he should have. The
attack on the complainant's moral character was not necessary in this case, as it would not justify the nonperformance of his duties.
When a writ is placed in the hands of a sheriff, it is his duty, in the absence of instructions, to proceed with reasonable
celerity and promptness to execute it according to its mandate. He has no discretion whether to execute it or not
(Young vs. Momblan, A.M. No. P89-367, 9 January 1992, Second Division, Melencio-Herrera, J.).
Indeed, as clearly stated in the Manual for Clerks of Court, a sheriff, to whom a valid writ or process is delivered to be
levied upon a property within his jurisdiction, is liable to the person in whose favor the process or writ runs if he fails to
make a levy upon property owned by the judgment debtor within his jurisdiction and by reason thereof the judgment
creditor is injured. It is omission not dependent upon intentional wrong or negligent omission to seize property of
judgment debtor. 7
In Eduarte v. Ramos 8 we said:
Respondent ought to have known the correct procedure to be followed in order to ensure proper administration of
justice, especially in its concluding stage. He failed observe that degree of dedication to the duties and responsibilities
required of him as a sheriff. He is bound to discharge his duties with prudence, caution and attention which careful
men usually exercise in the management of their affairs. The sheriff, an officer of the court upon whom the execution
of a final judgment depends, must be circumspect and proper in his behavior. Execution is the fruit and end of the suit
and is the life of the law.
In the case at bar, it is not that respondent did not know what he should do, given the problem that he was confronted
with. In his answer 9 respondent tried to excuse himself from what was his duty, claiming that he did not force his way
into the second floor where the judgment debtors resided because a special court order was needed to enable him to
do this. Knowing this to be the case, it was his duty to see to it that such an order was secured from the court.
The fact is that he has shown himself to be less than energetic and zealous in the performance of his duty. His
lackadaisical attitude betrays his inefficiency and incompetence which in accordance with sec. 46(b)(8) of the Civil
Service Law is a ground for disciplinary action. 10
WHEREFORE, a FINE of P2,000.00 is hereby imposed on Deputy Sheriff Honesto G. Fabre, with a STERN
WARNING that a repetition of the same or of any act calling for disciplinary action will be dealt with more severely.
SO ORDERED.

175

G.R. No. L-60038

March 18, 1985

SUMMIT TRADING AND DEVELOPMENT CORPORATION, petitioner,

vs.
JUDGE HERMINIO A. AVENDANO, Court of First Instance of Laguna, Binan Branch I, SEGUNDO PILIPINIA and
EDGARDO MINDO, represented by ERNESTO PILIPINIA, respondents.

AQUINO, J.:
This case is about the summons intended for defendant Summit Trading and Development Corporation. As
background, it should be stated that Segundo Pilipinia and Edgardo Mindo in 1973 acquired under Land Authority
Administrative Order No. 4 two registered lots with a total area of 2 hectares located at Barrio San Vicente, San
Pedro, Laguna.
The titles of the lots contain the annotation that should Pilipinia and Mindo sell the same, they have the right to
redeem the lots within five years from the date of the sale (Exh. H and I).
Pilipinia and Mindo sold the lots for P16,000 and P12,000 to Gavino Ortega on February 14 and April 19, 1977. They
have retained possession of the lots which are ricelands. They became tenants thereof.
At the instance of Ortega, the said annotation was cancelled by Judge Avendao in his order of September 24, 1979
ostensibly because the lots would be converted into commercial, industrial or residential sites (Exh. M). That
conversion has not taken place. At present the two lots are still ricelands.
In a letter dated October 16, 1979, Ortega advised Ernesto Pilipinia (attorney-in-fact of Segundo and Mindo) that he
and his father would have the right of first refusal in case the lots were sold (Exh. E and O).
Ortega resold the two lots on November 14, 1979 for P16,000 and P11,000 to Summit Trading through its president,
Virgilio P. Balaguer (Exh. N and N-1).
On August 10, 1981, or within the five-year period, Pilipinia and Mindo filed a complaint against Ortega and Summit
Trading for the redemption or repurchase of the two lots. They deposited P100,000 with the Royal Savings and Loan
Association for that purpose.
Ortega was duly summoned. He failed to answer the complaint. He was declared in default. Summit Trading was also
declared in default. In his judgment by default dated October 29, 1981, Judge Avendano (the same judge who ordered
the cancellation of the annotation) gave plaintiffs Pilipinia and Mindo 15 days from notice within which to redeem the
lots for P16,000 and P12,000 and ordered Summit Trading to execute the corresponding deeds of sale and surrender
the Torrens titles. If it failed to do so, the clerk of court was directed to perform that task. The register of deeds was
ordered to issue new titles to Pilipinia and Mindo.
The default judgment was rendered on the assumption that Summit Trading was duly summoned through Marina
Saquilayan as secretary of Summit Trading. She received the summons on August 28, 1981. A copy of the judgment
was also served on her on November 13, 1981 (Exh. B, pp. 31-32, 64, Record).
Actually, Saquilayan received the summons as secretary of Balaguer, already mentioned as the president of Summit
Trading which purchased the lots from Ortega. Bonifacio Tiongson was the corporate secretary.
Nineteen days after Saquilayan received a copy of the decision, Summit Trading filed a motion for reconsideration on
the ground that the trial court did not acquire jurisdiction over it because summons was not served upon it in
accordance with Rule 14 of the Rules of Court which provides:
SEC. 13.
Service upon private domestic corporation or partnership.-If the defendant is a corporation organized
under the laws of the Philippines or a partnership duly registered, service may be made on the president, manager,
secretary, cashier, agent, or any of its directors.
It is true that Saquilayan is not among the persons mentioned in section 13. However, she, being under the control of
Summit Trading, has not explained what she has done with the summons and complaint. The logical assumption is
that she delivered it to her boss, the president of Summit Trading. As already stated, she received a copy of the
decision and Summit Trading became aware of it. Summit Trading's motion for reconsideration was denied.

176

While Summit Trading is technically correct in contending that there was no strict compliance with section 13, we
cannot close our eyes to the realities of the situation. Under the facts of this case, Saquilayan, being the secretary of
the president (whose contact with the outside world is normally through his secretary), may be regarded as an "agent"
within the meaning of section 13.(See Villa Rey Transit, Inc. vs. Far East Motor Corporation, L-31339, January 31,
1978, 81 SCRA 298; Filoil Marketing Corporation vs. Marine Development Corporation of the Phil., L-29636,
September 30, 1982, 117 SCRA 86.)
Hence summons was validly served upon Summit Trading. Its negligence in not answering the complaint was
inexcusable. In fact, up to this time, Summit Trading has not bothered to state its defenses to the action nor stated
whether it has a meritorious case warranting the setting aside of the default judgment.
The cases of Delta Motor Sales Corporation vs. Mangosing, L-41667, April 30,1976, 70 SCRA 598 and ATM Trucking
Inc. vs. Buencamino, G.R. No. 62445, August 31, 1983, 124 SCRA 434 are not in point because the summons in the
two cases was served upon mere clerks or employees of the corporations who cannot be relied upon to know what to
do with the legal papers served upon them.
In the instant case, service was made on the president's secretary who could have easily notified the president that an
action was filed against the corporation just as she had apprised him of the judgment in this case.
The instant petition for certiorari, treated as an appeal under Republic Act No. 5440, was filed out of time. Considered
as a special civil action under Rule 65 of the Rules of Court, it is baseless because the trial court had acquired
jurisdiction over Summit Trading. As already shown, summons was properly served on the president's secretary.
We are not saying that service on such a secretary is always proper. Generally, it is improper. The president himself
must be served personally with the summons if it is desired to effect the service on that particular officer. But, as
already stated, under the facts of this case, the president's secretary may be regarded as the "agent" within the
meaning of section 13 since service upon her of the judgment itself came to the notice of Summit Trading.
WHEREFORE, the petition is dismissed. The trial court's judgment is affirmed. Its implementation is now in order. The
restraining order is dissolved. Costs against the petitioner.
SO ORDERED.

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G.R. Nos. 112438-39

December 12, 1995

CHEMPHIL EXPORT & IMPORT CORPORATION (CEIC), petitioner,

vs.
THE HONORABLE COURT OF APPEALS JAIME Y. GONZALES, as Assignee of the Bank of the Philippine Islands
(BPI), RIZAL COMMERCIAL BANKING CORPORATION (RCBC), LAND BANK OF THE PHILIPPINES (LBP),
PHILIPPINE COMMERCIAL & INTERNATIONAL BANK (PCIB) and THE PHILIPPINE INVESTMENT SYSTEM
ORGANIZATION (PISO), respondents.
G.R. No. 113394

December 12, 1995

PHILIPPINE COMMERCIAL INDUSTRIAL BANK (AND ITS ASSIGNEE JAIME Y. GONZALES) petitioner,
vs.
HONORABLE COURT OR APPEALS and CHEMPHIL EXPORT AND IMPORT CORPORATION (CEIC), respondents.

KAPUNAN, J.:
Before us is a legal tug-of-war between the Chemphil Export and Import Corporation (hereinafter referred to as CEIC),
on one side, and the PISO and Jaime Gonzales as assignee of the Bank of the Philippine Islands (BPI), Rizal
Commercial Banking Corporation (RCBC), Land Bank of the Philippines (LBP) and Philippine Commercial
International Bank (PCIB), on the other (hereinafter referred to as the consortium), over 1,717,678 shares of stock
(hereinafter referred to as the "disputed shares") in the Chemical Industries of the Philippines (Chemphil/CIP).
Our task is to determine who is the rightful owner of the disputed shares.
Pursuant to our resolution dated 30 May 1994, the instant case is a consolidation of two petitions for review filed
before us as follows:
In G.R. Nos. 112438-39, CEIC seeks the reversal of the decision of the Court of Appeals (former Twelfth Division)
promulgated on 30 June 1993 and its resolution of 29 October 1993, denying petitioner's motion for reconsideration in
the consolidated cases entitled "Dynetics, Inc., et al. v. PISO, et al." (CA-G.R. No. 20467) and "Dynetics, Inc., et al. v.
PISO, et al.; CEIC, Intervenor-Appellee" (CA-G.R. CV No. 26511).
The dispositive portion of the assailed decision reads, thus:
WHEREFORE, this Court resolves in these consolidated cases as follows:
1.
The Orders of the Regional Trial Court, dated March 25, 1988, and May 20, 1988, subject of CA-G.R. CV No.
10467, are SET ASIDE and judgment is hereby rendered in favor of the consortium and against appellee Dynetics,
Inc., the amount of the judgment, to be determined by Regional Trial Court, taking into account the value of assets that
the consortium may have already recovered and shall have recovered in accordance with the other portions of this
decision.
2.
The Orders of the Regional Trial Court dated December 19, 1989 and March 5, 1990 are hereby REVERSED
and SET ASIDE and judgment is hereby rendered confirming the ownership of the consortium over the Chemphil
shares of stock, subject of CA-G.R. CV No. 26511, and the Order dated September 4, 1989, is reinstated.
No pronouncement as to costs.
SO ORDERED. 1
In G.R. No. 113394, PCIB and its assignee, Jaime Gonzales, ask for the annulment of the Court of Appeals' decision
(former Special Ninth Division) promulgated on 26 March 1993 in "PCIB v. Hon. Job B. Madayag & CEIC" (CA-G.R.
SP NO. 20474) dismissing the petition for certiorari, prohibition and mandamus filed by PCIB and of said court's
resolution dated 11 January 1994 denying their motion for reconsideration of its decision. 2
The antecedent facts leading to the aforementioned controversies are as follows:
On September 25, 1984, Dynetics, Inc. and Antonio M. Garcia filed a complaint for declaratory relief and/or injunction
against the PISO, BPI, LBP, PCIB and RCBC or the consortium with the Regional Trial Court of Makati, Branch 45
(Civil Case No. 8527), seeking judicial declaration, construction and interpretation of the validity of the surety
agreement that Dynetics and Garcia had entered into with the consortium and to perpetually enjoin the latter from

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claiming, collecting and enforcing any purported obligations which Dynetics and Garcia might have undertaken in said
agreement. 3
The consortium filed their respective answers with counterclaims alleging that the surety agreement in question was
valid and binding and that Dynetics and Garcia were liable under the terms of the said agreement. It likewise applied
for the issuance of a writ of preliminary attachment against Dynetics and Garcia. 4
Seven months later, or on 23 April 1985, Dynetics, Antonio Garcia and Matrix Management & Trading Corporation filed
a complaint for declaratory relief and/or injunction against the Security Bank & Trust Co. (SBTC case) before the
Regional Trial Court of Makati, Branch 135 docketed as Civil Case No. 10398. 5
On 2 July 1985, the trial court granted SBTC's prayer for the issuance of a writ of preliminary attachment and on 9 July
1985, a notice of garnishment covering Garcia's shares in CIP/Chemphil (including the disputed shares) was served
on Chemphil through its then President. The notice of garnishment was duly annotated in the stock and transfer books
of Chemphil on the same date. 6
On 6 September 1985, the writ of attachment in favor of SBTC was lifted. However, the same was reinstated on 30
October 1985. 7
In the meantime, on 12 July 1985, the Regional Trial Court in Civil Case No. 8527 (the consortium case) denied the
application of Dynetics and Garcia for preliminary injunction and instead granted the consortium's prayer for a
consolidated writ of preliminary attachment. Hence, on 19 July 1985, after the consortium had filed the required bond,
a writ of attachment was issued and various real and personal properties of Dynetics and Garcia were garnished,
including the disputed shares. 8 This garnishment, however, was not annotated in Chemphil's stock and transfer book.
On 8 September 1987, PCIB filed a motion to dismiss the complaint of Dynetics and Garcia for lack of interest to
prosecute and to submit its counterclaims for decision, adopting the evidence it had adduced at the hearing of its
application for preliminary attachment. 9
On 25 March 1988, the Regional Trial Court dismissed the complaint of Dynetics and Garcia in Civil Case No. 8527,
as well as the counterclaims of the consortium, thus:
Resolving defendant's, Philippine Commercial International Bank, MOTION TO DISMISS WITH MOTION TO SUBMIT
DEFENDANT PCIBANK's COUNTERCLAIM FOR DECISION, dated September 7, 1987:
(1)
The motion to dismiss is granted; and the instant case is hereby ordered dismissed pursuant to Sec. 3, Rule
17 of the Revised Rules of Court, plaintiff having failed to comply with the order dated July 16, 1987, and having not
taken further steps to prosecute the case; and
(2)
The motion to submit said defendant's counterclaim for decision is denied; there is no need; said counterclaim
is likewise dismissed under the authority of Dalman vs. City Court of Dipolog City, L-63194, January 21, 1985, wherein
the Supreme Court stated that if the civil case is dismissed, so also is the counterclaim filed therein. "A person cannot
eat his cake and have it at the same time" (p. 645, record, Vol. I). 10
The motions for reconsideration filed by the consortium were, likewise, denied by the trial court in its order dated 20
May 1988:
The Court could have stood pat on its order dated 25 March 1988, in regard to which the defendants-banks concerned
filed motions for reconsideration. However, inasmuch as plaintiffs commented on said motions that: "3). In any event,
so as not to unduly foreclose on the rights of the respective parties to refile and prosecute their respective causes of
action, plaintiffs manifest their conformity to the modification of this Honorable Court's order to indicate that the
dismissal of the complaint and the counterclaims is without prejudice." (p. 2, plaintiffs' COMMENT etc. dated May 20,
1988). The Court is inclined to so modify the said order.
WHEREFORE , the order issued on March 25, 1988, is hereby modified in the sense that the dismissal of the
complaint as well as of the counterclaims of defendants RCBC, LBP, PCIB and BPI shall be considered as without
prejudice (p. 675, record, Vol. I). 11
Unsatisfied with the aforementioned order, the consortium appealed to the Court of Appeals, docketed as CA-G.R. CV
No. 20467.
On 17 January 1989 during the pendency of consortium's appeal in CA-G.R. CV No. 20467, Antonio Garcia and the
consortium entered into a Compromise Agreement which the Court of Appeals approved on 22 May 1989 and became

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the basis of its judgment by compromise. Antonio Garcia was dropped as a party to the appeal leaving the consortium
to proceed solely against Dynetics, Inc. 12 On 27 June 1989, entry of judgment was made by the Clerk of Court. 13
Hereunder quoted are the salient portions of said compromise agreement:
xxx

xxx

xxx

3.
Defendants, in consideration of avoiding an extended litigation, having agreed to limit their claim against
plaintiff Antonio M. Garcia to a principal sum of P145 Million immediately demandable and to waive all other claims to
interest, penalties, attorney's fees and other charges. The aforesaid compromise amount of indebtedness of P145
Million shall earn interest of eighteen percent (18%) from the date of this Compromise.
4.

Plaintiff Antonio M. Garcia and herein defendants have no further claims against each other.

5.
This Compromise shall be without prejudice to such claims as the parties herein may have against plaintiff
Dynetics, Inc.
6.
Plaintiff Antonio M. Garcia shall have two (2) months from date of this Compromise within which to work for
the entry and participation of his other creditor, Security Bank and Trust Co., into this Compromise. Upon the
expiration of this period, without Security Bank and Trust Co. having joined, this Compromise shall be submitted to the
Court for its information and approval (pp. 27, 28-31, rollo, CA-G.R. CV No. 10467). 14
It appears that on 15 July 1988, Antonio Garcia under a Deed of Sale transferred to Ferro Chemicals, Inc. (FCI) the
disputed shares and other properties for P79,207,331.28. It was agreed upon that part of the purchase price shall be
paid by FCI directly to SBTC for whatever judgment credits that may be adjudged in the latter's favor and against
Antonio Garcia in the aforementioned SBTC case. 15
On 6 March 1989, FCI, through its President Antonio M. Garcia, issued a Bank of America Check No. 860114 in favor
of SBTC in the amount of P35,462,869.62. 16 SBTC refused to accept the check claiming that the amount was not
sufficient to discharge the debt. The check was thus consigned by Antonio Garcia and Dynetics with the Regional Trial
Court as payment of their judgment debt in the SBTC case. 17
On 26 June 1989, FCI assigned its 4,119,614 shares in Chemphil, which included the disputed shares, to petitioner
CEIC. The shares were registered and recorded in the corporate books of Chemphil in CEIC's name and the
corresponding stock certificates were issued to it. 18
Meanwhile, Antonio Garcia, in the consortium case, failed to comply with the terms of the compromise agreement he
entered into with the consortium on 17 January 1989. As a result, on 18 July 1989, the consortium filed a motion for
execution which was granted by the trial court on 11 August 1989. Among Garcia's properties that were levied upon on
execution were his 1,717,678 shares in Chemphil (the disputed shares) previously garnished on 19 July 1985. 19
On 22 August 1989, the consortium acquired the disputed shares of stock at the public auction sale conducted by the
sheriff for P85,000,000.00. 20 On same day, a Certificate of Sale covering the disputed shares was issued to it.
On 30 August 1989, 21 the consortium filed a motion (dated 29 August 1989) to order the corporate secretary of
Chemphil to enter in its stock and transfer books the sheriff's certificate of sale dated 22 August 1989, and to issue
new certificates of stock in the name of the banks concerned. The trial court granted said motion in its order dated 4
September 1989, thus:
For being legally proper, defendant's MOTION TO ORDER THE CORPORATE SECRETARY OF CHEMICAL
INDUSTRIES OF THE PHILS., INC. (CHEMPIL) TO ENTER IN THE STOCK AND TRANSFER BOOKS OF
CHEMPHIL THE SHERIFF'S CERTIFICATE OF SALE DATED AUGUST 22, 1989 AND TO ISSUE NEW
CERTIFICATES OF STOCK IN THE NAME OF THE DEFENDANT BANKS, dated August 29, 1989, is hereby granted.
WHEREFORE, the corporate secretary of the aforesaid corporation, or whoever is acting for and in his behalf, is
hereby ordered to (1) record and/or register the Certificate of Sale dated August 22, 1989 issued by Deputy Sheriff
Cristobal S. Jabson of this Court; (2) to cancel the certificates of stock of plaintiff Antonio M. Garcia and all those
which may have subsequently been issued in replacement and/or in substitution thereof; and (3) to issue in lieu of the
said shares new shares of stock in the name of the defendant Banks, namely, PCIB, BPI, RCBC, LBP and PISO bank
in such proportion as their respective claims would appear in this suit (p. 82, record, Vol. II). 22
On 26 September 1989, CEIC filed a motion to intervene (dated 25 September 1989) in the consortium case seeking
the recall of the abovementioned order on grounds that it is the rightful owner of the disputed shares. 23 It further

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alleged that the disputed shares were previously owned by Antonio M. Garcia but subsequently sold by him on 15 July
1988 to Ferro Chemicals, Inc. (FCI) which in turn assigned the same to CEIC in an agreement dated 26 June 1989.
On 27 September 1989, the trial court granted CEIC's motion allowing it to intervene, but limited only to the incidents
covered by the order dated 4 September 1989. In the same order, the trial court directed Chemphil's corporate
secretary to temporarily refrain from implementing the 4 September 1989
order. 24
On 2 October 1989, the consortium filed their opposition to CEIC's motion for intervention alleging that their
attachment lien over the disputed shares of stocks must prevail over the private sale in favor of the CEIC considering
that said shares of stock were garnished in the consortium's favor as early as 19 July 1985. 25
On 4 October 1989, the consortium filed their opposition to CEIC's motion to set aside the 4 September 1989 order
and moved to lift the 27 September 1989 order. 26
On 12 October 1989, the consortium filed a manifestation and motion to lift the 27 September 1989 order, to reinstate
the 4 September 1989 order and to direct CEIC to surrender the disputed stock certificates of Chemphil in its
possession within twenty-four (24) hours, failing in which the President, Corporate Secretary and stock and transfer
agent of Chemphil be directed to register the names of the banks making up the consortium as owners of said shares,
sign the new certificates of stocks evidencing their ownership over said shares and to immediately deliver the stock
certificates to them. 27
Resolving the foregoing motions, the trial court rendered an order dated 19 December 1989, the dispositive portion of
which reads as follows:
WHEREFORE, premises considered, the Urgent Motion dated September 25, 1989 filed by CEIC is hereby
GRANTED. Accordingly, the Order of September 4, 1989, is hereby SET ASIDE, and any and all acts of the Corporate
Secretary of CHEMPHIL and/or whoever is acting for and in his behalf, as may have already been done, carried out or
implemented pursuant to the Order of September 4, 1989, are hereby nullified.
PERFORCE, the CONSORTIUM'S Motions dated October 3, 1989 and October 11, 1989, are both hereby denied for
lack of merit.
The Cease and Desist Order dated September 27, 1989, is hereby AFFIRMED and made PERMANENT.
SO ORDERED. 28
In so ruling, the trial court ratiocinated in this wise:
xxx

xxx

xxx

After careful and assiduous consideration of the facts and applicable law and jurisprudence, the Court holds that
CEIC's Urgent Motion to Set Aside the Order of September 4, 1989 is impressed with merit. The CONSORTIUM has
admitted that the writ of attachment/garnishment issued on July 19, 1985 on the shares of stock belonging to plaintiff
Antonio M. Garcia was not annotated and registered in the stock and transfer books of CHEMPHIL. On the other
hand, the prior attachment issued in favor of SBTC on July 2, 1985 by Branch 135 of this Court in Civil Case No.
10398, against the same CHEMPHIL shares of Antonio M. Garcia, was duly registered and annotated in the stock and
transfer books of CHEMPHIL. The matter of non-recording of the Consortium's attachment in Chemphil's stock and
transfer book on the shares of Antonio M. Garcia assumes significance considering CEIC's position that FCI and later
CEIC acquired the CHEMPHIL shares of Antonio M. Garcia without knowledge of the attachment of the
CONSORTIUM. This is also important as CEIC claims that it has been subrogated to the rights of SBTC since CEIC's
predecessor-in-interest, the FCI, had paid SBTC the amount of P35,462,869.12 pursuant to the Deed of Sale and
Purchase of Shares of Stock executed by Antonio M. Garcia on July 15, 1988. By reason of such payment, sale with
the knowledge and consent of Antonio M. Garcia, FCI and CEIC, as party-in-interest to FCI, are subrogated by
operation of law to the rights of SBTC. The Court is not unaware of the citation in CEIC's reply that "as between two
(2) attaching creditors, the one whose claims was first registered on the books of the corporation enjoy priority."
(Samahang Magsasaka, Inc. vs. Chua Gan, 96 Phil. 974.)
The Court holds that a levy on the shares of corporate stock to be valid and binding on third persons, the notice of
attachment or garnishment must be registered and annotated in the stock and transfer books of the corporation, more
so when the shares of the corporation are listed and traded in the stock exchange, as in this case. As a matter of fact,
in the CONSORTIUM's motion of August 30, 1989, they specifically move to "order the Corporate Secretary of
CHEMPHIL to enter in the stock and transfer books of CHEMPHIL the Sheriff's Certificate of Sale dated August 22,
1989." This goes to show that, contrary to the arguments of the CONSORTIUM, in order that attachment, garnishment

181

and/or encumbrances affecting rights and ownership on shares of a corporation to be valid and binding, the same has
to be recorded in the stock and transfer books.
Since neither CEIC nor FCI had notice of the CONSORTIUM's attachment of July 19, 1985, CEIC's shares of stock in
CHEMPHIL, legally acquired from Antonio M. Garcia, cannot be levied upon in execution to satisfy his judgment debts.
At the time of the Sheriff's levy on execution, Antonio M. Garcia has no more in CHEMPHIL which could be levied
upon. 29
xxx

xxx

xxx

On 23 January 1990, the consortium and PCIB filed separate motions for reconsideration of the aforestated order
which were opposed by petitioner
CEIC. 30
On 5 March 1990, the trial court denied the motions for
reconsideration. 31
On 16 March 1990, the consortium appealed to the Court of Appeals (CA-G.R. No. 26511). In its Resolution dated 9
August 1990, the Court of Appeals consolidated CA-G.R. No. 26511 with CA-G.R. No. 20467. 32
The issues raised in the two cases, as formulated by the Court of Appeals, are as follows:
I
WHETHER OR NOT, UNDER THE PECULIAR CIRCUMSTANCES OF THE CASE, THE TRIAL COURT ERRED IN
DISMISSING THE COUNTERCLAIMS OF THE CONSORTIUM IN CIVIL CASE NO. 8527;
II
WHETHER OR NOT THE DISMISSAL OF CIVIL CASE NO. 8527 RESULTED IN THE DISCHARGE OF THE WRIT
OF ATTACHMENT ISSUED THEREIN EVEN AS THE CONSORTIUM APPEALED THE ORDER DISMISSING CIVIL
CASE NO. 8527;
III
WHETHER OR NOT THE JUDGMENT BASED ON COMPROMISE RENDERED BY THIS COURT ON MAY 22, 1989
HAD THE EFFECT OF DISCHARGING THE ATTACHMENTS ISSUED IN CIVIL CASE NO. 8527;
IV
WHETHER OR NOT THE ATTACHMENT OF SHARES OF STOCK, IN ORDER TO BIND THIRD PERSONS, MUST
BE RECORDED IN THE STOCK AND TRANSFER BOOK OF THE CORPORATION; AND
V
WHETHER OR NOT FERRO CHEMICALS, INC. (FCI), AND ITS SUCCESSOR-IN-INTEREST, CEIC, WERE
SUBROGATED TO THE RIGHTS OF SECURITY BANK & TRUST COMPANY (SBTC) IN A SEPARATE CIVIL
ACTION. (This issue appears to be material as SBTC is alleged to have obtained an earlier attachment over the same
Chemphil shares that the consortium seeks to recover in the case at bar). 33
On 6 April 1990, the PCIB separately filed with the Court of Appeals a petition for certiorari, prohibition and mandamus
with a prayer for the issuance of a writ of preliminary injunction (CA-G.R. No. SP-20474), likewise, assailing the very
same orders dated 19 December 1989 and 5 March 1990, subject of CA-G.R. No. 26511. 34
On 30 June 1993, the Court of Appeals (Twelfth Division) in CA-G.R. No. 26511 and CA-G.R. No. 20467 rendered a
decision reversing the orders of the trial court and confirming the ownership of the consortium over the disputed
shares. CEIC's motion for reconsideration was denied on 29 October 1993. 35
In ruling for the consortium, the Court of Appeals made the following ratiocination: 36
On the first issue, it ruled that the evidence offered by the consortium in support of its counterclaims, coupled with the
failure of Dynetics and Garcia to prosecute their case, was sufficient basis for the RTC to pass upon and determine
the consortium's counterclaims.

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The Court of Appeals found no application for the ruling in Dalman v. City Court of Dipolog, 134 SCRA 243 (1985) that
"a person cannot eat his cake and have it at the same time. If the civil case is dismissed, so also is the counterclaim
filed therein" because the factual background of the present action is different. In the instant case, both Dynetics and
Garcia and the consortium presented testimonial and documentary evidence which clearly should have supported a
judgment on the merits in favor of the consortium. As the consortium correctly argued, the net atrocious effect of the
Regional Trial Court's ruling is that it allows a situation where a party litigant is forced to plead and prove compulsory
counterclaims only to be denied those counterclaims on account of the adverse party's failure to prosecute his case.
Verily, the consortium had no alternative but to present its counterclaims in Civil Case No. 8527 since its counterclaims
are compulsory in nature.
On the second issue, the Court of Appeals opined that unless a writ of attachment is lifted by a special order
specifically providing for the discharge thereof, or unless a case has been finally dismissed against the party in whose
favor the attachment has been issued, the attachment lien subsists. When the consortium, therefore, took an appeal
from the Regional Trial Court's orders of March 25, 1988 and May 20, 1988, such appeal had the effect of preserving
the consortium's attachment liens secured at the inception of Civil Case No. 8527, invoking the rule in Olib v. Pastoral,
188 SCRA 692 (1988) that where the main action is appealed, the attachment issued in the said main case is also
considered appealed.
Anent the third issue, the compromise agreement between the consortium and Garcia dated 17 January 1989 did not
result in the abandonment of its attachment lien over his properties. Said agreement was approved by the Court of
Appeals in a Resolution dated 22 May 1989. The judgment based on the compromise agreement had the effect of
preserving the said attachment lien as security for the satisfaction of said judgment (citing BF Homes, Inc. v. CA, 190
SCRA 262, [1990]).
As to the fourth issue, the Court of Appeals agreed with the consortium's position that the attachment of shares of
stock in a corporation need not be recorded in the corporation's stock and transfer book in order to bind third persons.
Section 7(d), Rule 57 of the Rules of Court was complied with by the consortium (through the Sheriff of the trial court)
when the notice of garnishment over the Chemphil shares of Garcia was served on the president of Chemphil on July
19, 1985. Indeed, to bind third persons, no law requires that an attachment of shares of stock be recorded in the stock
and transfer book of a corporation. The statement attributed by the Regional Trial Court to the Supreme Court in
Samahang Magsasaka, Inc. vs. Gonzalo Chua Guan, G.R. No. L-7252, February 25, 1955 (unreported), to the effect
that "as between two attaching creditors, the one whose claim was registered first on the books of the corporation
enjoys priority," is an obiter dictum that does not modify the procedure laid down in Section 7(d), Rule 57 of the Rules
of Court.
Therefore, ruled the Court of Appeals, the attachment made over the Chemphil shares in the name of Garcia on July
19, 1985 was made in accordance with law and the lien created thereby remained valid and subsisting at the time
Garcia sold those shares to FCI (predecessor-in-interest of appellee CEIC) in 1988.
Anent the last issue, the Court of Appeals rejected CEIC's subrogation theory based on Art. 1302 (2) of the New Civil
Code stating that the obligation to SBTC was paid by Garcia himself and not by a third party (FCI).
The Court of Appeals further opined that while the check used to pay SBTC was a FCI corporate check, it was funds
of Garcia in FCI that was used to pay off SBTC. That the funds used to pay off SBTC were funds of Garcia has not
been refuted by FCI or CEIC. It is clear, therefore, that there was an attempt on the part of Garcia to use FCI and
CEIC as convenient vehicles to deny the consortium its right to make itself whole through an execution sale of the
Chemphil shares attached by the consortium at the inception of Civil Case No. 8527. The consortium, therefore, is
entitled to the issuance of the Chemphil shares of stock in its favor. The Regional Trial Court's order of September 4,
1989, should, therefore, be reinstated in toto.
Accordingly, the question of whether or not the attachment lien in favor of SBTC in the SBTC case is superior to the
attachment lien in favor of the consortium in Civil Case No. 8527 becomes immaterial with respect to the right of
intervenor-appellee CEIC. The said issue would have been relevant had CEIC established its subrogation to the rights
of SBTC.
On 26 March 1993, the Court of Appeals (Special Ninth Division) in CA-G.R. No. SP 20474 rendered a decision
denying due course to and dismissing PCIB's petition for certiorari on grounds that PCIB violated the rule against
forum-shopping and that no grave abuse of discretion was committed by respondent Regional Trial Court in issuing its
assailed orders dated 19 December 1989 and 5 March 1990. PCIB's motion for reconsideration was denied on 11
January 1994. 37
On 7 July 1993, the consortium, with the exception of PISO, assigned without recourse all its rights and interests in
the disputed shares to Jaime Gonzales. 38

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On 3 January 1994, CEIC filed the instant petition for review docketed as G.R. Nos. 112438-39 and assigned the
following errors:
I.
THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN SETTING ASIDE AND REVERSING THE
ORDERS OF THE REGIONAL TRIAL COURT DATED DECEMBER 5, 1989 AND MARCH 5, 1990 AND IN NOT
CONFIRMING PETITIONER'S OWNERSHIP OVER THE DISPUTED CHEMPHIL SHARES AGAINST THE
FRIVOLOUS AND UNFOUNDED CLAIMS OF THE CONSORTIUM.
II.
THE RESPONDENT COURT OF APPEALS GRAVELY ERRED:
(1)
In not holding that the Consortium's attachment over the disputed Chemphil shares did not vest any priority
right in its favor and cannot bind third parties since admittedly its attachment on 19 July 1985 was not recorded in the
stock and transfer books of Chemphil, and subordinate to the attachment of SBTC which SBTC registered and
annotated in the stock and transfer books of Chemphil on 2 July 1985, and that the Consortium's attachment failed to
comply with Sec. 7(d), Rule 57 of the Rules as evidenced by the notice of garnishment of the deputy sheriff of the trial
court dated 19 July 1985 (annex "D") which the sheriff served on a certain Thelly Ruiz who was neither President nor
managing agent of Chemphil;
(2)
In not applying the case law enunciated by this Honorable Supreme Court in Samahang Magsasaka, Inc. vs.
Gonzalo Chua Guan, 96 Phil. 974 that as between two attaching creditors, the one whose claim was registered first in
the books of the corporation enjoys priority, and which respondent Court erroneously characterized as mere obiter
dictum;
(3)
In not holding that the dismissal of the appeal of the Consortium from the order of the trial court dismissing its
counterclaim against Antonio M. Garcia and the finality of the compromise agreement which ended the litigation
between the Consortium and Antonio M. Garcia in the Dynetics case had ipso jure discharged the Consortium's
purported attachment over the disputed shares.
III.
THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT CEIC HAD BEEN
SUBROGATED TO THE RIGHTS OF SBTC SINCE CEIC'S PREDECESSOR IN INTEREST HAD PAID SBTC
PURSUANT TO THE DEED OF SALE AND PURCHASE OF STOCK EXECUTED BY ANTONIO M. GARCIA ON
JULY 15, 1988, AND THAT BY REASON OF SUCH PAYMENT, WITH THE CONSENT AND KNOWLEDGE OF
ANTONIO M. GARCIA, FCI AND CEIC, AS PARTY IN INTEREST TO FCI, WERE SUBROGATED BY OPERATION
OF LAW TO THE RIGHTS OF SBTC.
IV.
THE RESPONDENT COURT OF APPEALS GRAVELY ERRED AND MADE UNWARRANTED INFERENCES AND
CONCLUSIONS, WITHOUT ANY SUPPORTING EVIDENCE, THAT THERE WAS AN ATTEMPT ON THE PART OF
ANTONIO M. GARCIA TO USE FCI AND CEIC AS CONVENIENT VEHICLES TO DENY THE CONSORTIUM ITS
RIGHTS TO MAKE ITSELF WHOLE THROUGH AN EXECUTION OF THE CHEMPHIL SHARES PURPORTEDLY
ATTACHED BY THE CONSORTIUM ON 19 JULY 1985. 39
On 2 March 1994, PCIB filed its own petition for review docketed as G.R. No. 113394 wherein it raised the following
issues:
I.
RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN RENDERING THE DECISION
AND RESOLUTION IN QUESTION (ANNEXES A AND B) IN DEFIANCE OF LAW AND JURISPRUDENCE BY
FINDING RESPONDENT CEIC AS HAVING BEEN SUBROGATED TO THE RIGHTS OF SBTC BY THE PAYMENT
BY FCI OF GARCIA'S DEBTS TO THE LATTER DESPITE THE FACT THAT
A.
FCI PAID THE SBTC DEBT BY VIRTUE OF A CONTRACT BETWEEN FCI AND GARCIA, THUS, LEGAL
SUBROGATION DOES NOT ARISE;
B.
THE SBTC DEBT WAS PAID BY GARCIA HIMSELF AND NOT BY FCI, HENCE, SUBROGATION BY
PAYMENT COULD NOT HAVE OCCURRED;

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C.
FCI DID NOT ACQUIRE ANY RIGHT OVER THE DISPUTED SHARES AS SBTC HAD NOT YET LEVIED
UPON NOR BOUGHT THOSE SHARES ON EXECUTION. ACCORDINGLY, WHAT FCI ACQUIRED FROM SBTC
WAS SIMPLY A JUDGMENT CREDIT AND AN ATTACHMENT LIEN TO SECURE ITS SATISFACTION.
II.
RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN SUSTAINING THE ORDERS OF
THE TRIAL COURT DATED DECEMBER 19, 1989 AND MARCH 5, 1990 WHICH DENIED PETITIONER'S
OWNERSHIP OVER THE DISPUTED SHARES NOTWITHSTANDING PROVISIONS OF LAW AND EXTANT
JURISPRUDENCE ON THE MATTER THAT PETITIONER AND THE CONSORTIUM HAVE PREFERRED SENIOR
RIGHTS THEREOVER.
III.
RESPONDENT COURT OF APPEAL COMMITTED SERIOUS ERROR IN CONCLUDING THAT THE
DISMISSAL OF THE COMPLAINT AND THE COUNTERCLAIM IN CIVIL CASE NO. 8527 ALSO RESULTED IN THE
DISCHARGE OF THE WRIT OF ATTACHMENT DESPITE THE RULINGS OF THIS HONORABLE COURT IN BF
HOMES VS. COURT OF APPEALS, G.R. NOS. 76879 AND 77143, OCTOBER 3, 1990, 190 SCRA 262, AND IN OLIB
VS. PASTORAL, G.R. NO. 81120, AUGUST 20, 1990, 188 SCRA 692 TO THE CONTRARY.
IV.
RESPONDENT COURT OF APPEALS EXCEEDED ITS JURISDICTION IN RULING ON THE MERITS OF
THE MAIN CASE NOTWITHSTANDING THAT THOSE MATTERS WERE NOT ON APPEAL BEFORE IT.
V.
RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT PETITIONER IS
GUILTY OF FORUM SHOPPING DESPITE THE FACT THAT SC CIRCULAR NO. 28-91 WAS NOT YET IN FORCE
AND EFFECT AT THE TIME THE PETITION WAS FILED BEFORE RESPONDENT APPELLATE COURT, AND THAT
ITS COUNSEL AT THAT TIME HAD ADEQUATE BASIS TO BELIEVE THAT CERTIORARI AND NOT AN APPEAL OF
THE TRIAL COURT'S ORDERS WAS THE APPROPRIATE RELIEF. 40
As previously stated, the issue boils down to who is legally entitled to the disputed shares of Chemphil. We shall
resolve this controversy by examining the validity of the claims of each party and, thus, determine whose claim has
priority.
CEIC's claim
CEIC traces its claim over the disputed shares to the attachment lien obtained by SBTC on 2 July 1985 against
Antonio Garcia in Civil Case No. 10398. It avers that when FCI, CEIC's predecessor-in-interest, paid SBTC the due
obligations of Garcia to the said bank pursuant to the Deed of Absolute Sale and Purchase of Shares of Stock, 41 FCI,
and later CEIC, was subrogated to the rights of SBTC, particularly to the latter's aforementioned attachment lien over
the disputed shares.
CEIC argues that SBTC's attachment lien is superior as it was obtained on 2 July 1985, ahead of the consortium's
purported attachment on 19 July 1985. More importantly, said CEIC lien was duly recorded in the stock and transfer
books of Chemphil.
CEIC's subrogation theory is unavailing.
By definition, subrogation is "the transfer of all the rights of the creditor to a third person, who substitutes him in all his
rights. It may either be legal or conventional. Legal subrogation is that which takes place without agreement but by
operation of law because of certain acts; this is the subrogation referred to in article 1302. Conventional subrogation is
that which takes place by agreement of the parties . . ." 42
CEIC's theory is premised on Art. 1302 (2) of the Civil Code which states:
Art. 1302.

It is presumed that there is legal subrogation:

(1)

When a creditor pays another creditor who is preferred, even without the debtor's knowledge;

(2)

When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;

(3)
When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays,
without prejudice to the effects of confusion as to the latter's share. (Emphasis ours.)
Despite, however, its multitudinous arguments, CEIC presents an erroneous interpretation of the concept of
subrogation. An analysis of the situations involved would reveal the clear inapplicability of Art. 1302 (2).

185

Antonio Garcia sold the disputed shares to FCI for a consideration of P79,207,331.28. FCI, however, did not pay the
entire amount to Garcia as it was obligated to deliver part of the purchase price directly to SBTC pursuant to the
following stipulation in the Deed of Sale:
Manner of Payment
Payment of the Purchase Price shall be made in accordance with the following order of preference provided that in no
instance shall the total amount paid by the Buyer exceed the Purchase Price:
a.
Buyer shall pay directly to the Security Bank and Trust Co. the amount determined by the Supreme Court as
due and owing in favor of the said bank by the Seller.
The foregoing amount shall be paid within fifteen (15) days from the date the decision of the Supreme Court in the
case entitled "Antonio M. Garcia, et al. vs. Court of Appeals, et al." G.R. Nos. 82282-83 becomes final and executory.
43 (Emphasis ours.)
Hence, when FCI issued the BA check to SBTC in the amount of P35,462,869.62 to pay Garcia's indebtedness to the
said bank, it was in effect paying with Garcia's money, no longer with its own, because said amount was part of the
purchase price which FCI owed Garcia in payment for the sale of the disputed shares by the latter to the former. The
money "paid" by FCI to SBTC, thus properly belonged to Garcia. It is as if Garcia himself paid his own debt to SBTC
but through a third party FCI.
It is, therefore, of no consequence that what was used to pay SBTC was a corporate check of FCI. As we have earlier
stated, said check no longer represented FCI funds but Garcia's money, being as it was part of FCI's payment for the
acquisition of the disputed shares. The FCI check should not be taken at face value, the attendant circumstances must
also be considered.
The aforequoted contractual stipulation in the Deed of Sale dated 15 July 1988 between Antonio Garcia and FCI is
nothing more but an arrangement for the sake of convenience. Payment was to be effected in the aforesaid manner so
as to prevent money from changing hands needlessly. Besides, the very purpose of Garcia in selling the disputed
shares and his other properties was to "settle certain civil suits filed against him." 44
Since the money used to discharge Garcia's debt rightfully belonged to him, FCI cannot be considered a third party
payor under Art. 1302 (2). It was but a conduit, or as aptly categorized by respondents, merely an agent as defined in
Art. 1868 of the Civil Code:
Art. 1868.
By the contract of agency a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.
FCI was merely fulfilling its obligation under the aforementioned Deed of Sale.
Additionally, FCI is not a disinterested party as required by Art. 1302 (2) since the benefits of the extinguishment of the
obligation would redound to none other but itself. 45 Payment of the judgment debt to SBTC resulted in the discharge
of the attachment lien on the disputed shares purchased by FCI. The latter would then have a free and "clean" title to
said shares.
In sum, CEIC, for its failure to fulfill the requirements of Art. 1302 (2), was not subrogated to the rights of SBTC
against Antonio Garcia and did not acquire SBTC's attachment lien over the disputed shares which, in turn, had
already been lifted or discharged upon satisfaction by Garcia, through FCI, of his debt to the said bank. 46
The rule laid down in the case of Samahang Magsasaka, Inc. v. Chua Guan, 47 that as between two attaching
creditors the one whose claim was registered ahead on the books of the corporation enjoys priority, clearly has no
application in the case at bench. As we have amply discussed, since CEIC was not subrogated to SBTC's right as
attaching creditor, which right in turn, had already terminated after Garcia paid his debt to SBTC, it cannot, therefore,
be categorized as an attaching creditor in the present controversy. CEIC cannot resurrect and claim a right which no
longer exists. The issue in the instant case, then, is priority between an attaching creditor (the consortium) and a
purchaser (FCI/CEIC) of the disputed shares of stock and not between two attaching creditors the subject matter of
the aforestated Samahang Magsasaka case.
CEIC, likewise, argues that the consortium's attachment lien over the disputed Chemphil shares is null and void and
not binding on third parties due to the latter's failure to register said lien in the stock and transfer books of Chemphil as
mandated by the rule laid down by the Samahang Magsasaka v. Chua Guan. 48

186

The attachment lien acquired by the consortium is valid and effective. Both the Revised Rules of Court and the
Corporation Code do not require annotation in the corporation's stock and transfer books for the attachment of shares
of stock to be valid and binding on the corporation and third party.
Section 74 of the Corporation Code which enumerates the instances where registration in the stock and transfer
books of a corporation provides:
Sec. 74.

Books to be kept; stock transfer agent.

xxx

xxx

xxx

Stock corporations must also keep a book to be known as the stock and transfer book, in which must be kept a record
of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stock for
which subscription has been made, and the date of payment of any settlement; a statement of every alienation, sale or
transfer of stock made, the date thereof, and by and to whom made; and such other entries as the by-laws may
prescribe. The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock
transfer agent and shall be open for inspection by any director or stockholder of the corporation at reasonable hours
on business days. (Emphasis ours.)
xxx

xxx

xxx

Section 63 of the same Code states:

Sec. 63.
Certificate of stock and transfer of shares. The capital stock of stock corporations shall be divided
into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant
secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock
so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the
owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be
valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the
names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the
number of shares transferred.
No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the
corporation. (Emphasis ours.)
Are attachments of shares of stock included in the term "transfer" as provided in Sec. 63 of the Corporation Code? We
rule in the negative. As succinctly declared in the case of Monserrat v. Ceron, 49 "chattel mortgage over shares of
stock need not be registered in the corporation's stock and transfer book inasmuch as chattel mortgage over shares of
stock does not involve a "transfer of shares," and that only absolute transfers of shares of stock are required to be
recorded in the corporation's stock and transfer book in order to have "force and effect as against third persons."
xxx

xxx

xxx

The word "transferencia" (transfer) is defined by the "Diccionario de la Academia de la Lengua Castellana" as "accion
y efecto de transfeir" (the act and effect of transferring); and the verb "transferir", as "ceder or renunciar en otro el
derecho o dominio que se tiene sobre una cosa, haciendole dueno de ella" (to assign or waive the right in, or absolute
ownership of, a thing in favor of another, making him the owner thereof).
In the Law Dictionary of "Words and Phrases", third series, volume 7, p. 5867, the word "transfer" is defined as
follows:
"Transfer" means any act by which property of one person is vested in another, and "transfer of shares", as used in
Uniform Stock Transfer Act (Comp. St. Supp. 690), implies any means whereby one may be divested of and another
acquire ownership of stock. (Wallach vs. Stein [N.J.], 136 A., 209, 210.)
xxx

xxx

xxx

In the case of Noble vs. Ft. Smith Wholesale Grocery Co. (127 Pac., 14, 17; 34 Okl., 662; 46 L.R.A. [N.S.], 455), cited
in Words and Phrases, second series, vol. 4, p. 978, the following appears:
A "transfer" is the act by which the owner of a thing delivers it to another with the intent of passing the rights which he
has in it to the latter, and a chattel mortgage is not within the meaning of such term.
xxx

xxx

xxx. 50

187

Although the Monserrat case refers to a chattel mortgage over shares of stock, the same may be applied to the
attachment of the disputed shares of stock in the present controversy since an attachment does not constitute an
absolute conveyance of property but is primarily used as a means "to seize the debtor's property in order to secure the
debt or claim of the creditor in the event that a judgment is rendered." 51
Known commentators on the Corporation Code expound, thus:
xxx

xxx

xxx

Shares of stock being personal property, may be the subject matter of pledge and chattel mortgage. Such collateral
transfers are however not covered by the registration requirement of Section 63, since our Supreme Court has held
that such provision applies only to absolute transfers thus, the registration in the corporate books of pledges and
chattel mortgages of shares cannot have any legal effect. 52 (Emphasis ours.)
xxx

xxx

xxx

The requirement that the transfer shall be recorded in the books of the corporation to be valid as against third persons
has reference only to absolute transfers or absolute conveyance of the ownership or title to a share.
Consequently, the entry or notation on the books of the corporation of pledges and chattel mortgages on shares is not
necessary to their validity (although it is advisable to do so) since they do not involve absolute alienation of ownership
of stock (Monserrat vs. Ceron, 58 Phil. 469 [1933]; Chua Guan vs. Samahang Magsasaka, Inc., 62 Phil. 472 [1935].)
To affect third persons, it is enough that the date and description of the shares pledged appear in a public instrument.
(Art. 2096, Civil Code.) With respect to a chattel mortgage constituted on shares of stock, what is necessary is its
registration in the Chattel Mortgage Registry. (Act No. 1508 and Art. 2140, Civil Code.) 53
CEIC's reliance on the Samahang Magsasaka case is misplaced. Nowhere in the said decision was it categorically
stated that annotation of the attachment in the corporate books is mandatory for its validity and for the purpose of
giving notice to third persons.
The only basis, then, for petitioner CEIC's claim is the Deed of Sale under which it purchased the disputed shares. It
is, however, a settled rule that a purchaser of attached property acquires it subject to an attachment legally and validly
levied thereon. 54
Our corollary inquiry is whether or not the consortium has indeed a prior valid and existing attachment lien over the
disputed shares.
Jaime Gonzales' /Consortium's Claim
Is the consortium's attachment lien over the disputed shares valid?
CEIC vigorously argues that the consortium's writ of attachment over the disputed shares of Chemphil is null and void,
insisting as it does, that the notice of garnishment was not validly served on the designated officers on 19 July 1985.
To support its contention, CEIC presented the sheriff's notice of garnishment 55 dated 19 July 1985 which showed on
its face that said notice was received by one Thelly Ruiz who was neither the president nor managing agent of
Chemphil. It makes no difference, CEIC further avers, that Thelly Ruiz was the secretary of the President of Chemphil,
for under the above-quoted provision she is not among the officers so authorized or designated to be served with the
notice of garnishment.
We cannot subscribe to such a narrow view of the rule on proper service of writs of attachment.
A secretary's major function is to assist his or her superior. He/she is in effect an extension of the latter. Obviously, as
such, one of her duties is to receive letters and notices for and in behalf of her superior, as in the case at bench. The
notice of garnishment was addressed to and was actually received by Chemphil's president through his secretary who
formally received it for him. Thus, in one case, 56 we ruled that the secretary of the president may be considered an
"agent" of the corporation and held that service of summons on him is binding on the corporation.
Moreover, the service and receipt of the notice of garnishment on 19 July 1985 was duly acknowledged and confirmed
by the corporate secretary of Chemphil, Rolando Navarro and his successor Avelino Cruz through their respective
certifications dated 15 August 1989 57 and 21 August 1989. 58
We rule, therefore, that there was substantial compliance with Sec. 7(d), Rule 57 of the Rules of Court.

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Did the compromise agreement between Antonio Garcia and the consortium discharge the latter's attachment lien
over the disputed shares?
CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the dismissal of the case, dies a natural
death. Thus, when the consortium entered into a compromise agreement, 59 which resulted in the termination of their
case, the disputed shares were released from garnishment.
We disagree. To subscribe to CEIC's contentions would be to totally disregard the concept and purpose of a
preliminary attachment.
A writ of preliminary attachment is a provisional remedy issued upon order of the court where an action is pending to
be levied upon the property or properties of the defendant therein, the same to be held thereafter by the Sheriff as
security for the satisfaction of whatever judgment might be secured in said action by the attaching creditor against the
defendant. 60 (Emphasis ours.)
Attachment is a juridical institution which has for its purpose to secure the outcome of the trial, that is, the satisfaction
of the pecuniary obligation really contracted by a person or believed to have been contracted by him, either by virtue
of a civil obligation emanating from contract or from law, or by virtue of some crime or misdemeanor that he might
have committed, and the writ issued, granted it, is executed by attaching and safely keeping all the movable property
of the defendant, or so much thereof may be sufficient to satisfy the plaintiff's demands . . . 61 (Emphasis ours.)
The chief purpose of the remedy of attachment is to secure a contingent lien on defendant's property until plaintiff can,
by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction, or to make some
provision for unsecured debts in cases where the means of satisfaction thereof are liable to be removed beyond the
jurisdiction, or improperly disposed of or concealed, or otherwise placed beyond the reach of creditors. 62 (Emphasis
ours.)
We reiterate the rule laid down in BF Homes, Inc. v. CA 63 that an attachment lien continues until the debt is paid, or
sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or
vacated in the same manner provided by law. We expounded in said case that:
The appointment of a rehabilitation receiver who took control and custody of BF has not necessarily secured the
claims of Roa and Mendoza. In the event that the receivership is terminated with such claims not having been
satisfied, the creditors may also find themselves without security therefor in the civil action because of the dissolution
of the attachment. This should not be permitted. Having previously obtained the issuance of the writ in good faith, they
should not be deprived of its protection if the rehabilitation plan does not succeed and the civil action is resumed.
xxx

xxx

xxx

As we ruled in Government of the Philippine Islands v. Mercado:

Attachment is in the nature of a proceeding in rem. It is against the particular property. The attaching creditor thereby
acquires specific lien upon the attached property which ripens into a judgment against the res when the order of sale
is made. Such a proceeding is in effect a finding that the property attached is an indebted thing and a virtual
condemnation of it to pay the owner's debt. The law does not provide the length of time an attachment lien shall
continue after the rendition of judgment, and it must therefore necessarily continue until the debt is paid, or sale is had
under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in
some manner provided by law.
It has been held that the lien obtained by attachment stands upon as high equitable grounds as a mortgage lien:
The lien or security obtained by an attachment even before judgment, is a fixed and positive security, a specific lien,
and, although whether it will ever be made available to the creditor depends on contingencies, its existence is in no
way contingent, conditioned or inchoate. It is a vested interest, an actual and substantial security, affording specific
security for satisfaction of the debt put in suit, which constitutes a cloud on the legal title, and is as specific as if
created by virtue of a voluntary act of the debtor and stands upon as high equitable grounds as a mortgage. (Corpus
Juris Secundum, 433, and authorities therein cited.)
xxx

xxx

xxx

The case at bench admits of a peculiar character in the sense that it involves a compromise agreement. Nonetheless,
the rule established in the aforequoted cases still applies, even more so since the terms of the agreement have to be
complied with in full by the parties thereto. The parties to the compromise agreement should not be deprived of the

189

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.
Moreover, a violation of the terms and conditions of a compromise agreement entitles the aggrieved party to a writ of
execution.
In Abenojar & Tana v. CA, et al., 64 we held:
The non-fulfillment of the terms and conditions of a compromise agreement approved by the Court justifies execution
thereof and the issuance of the writ for said purpose is the Court's ministerial duty enforceable by mandamus.
Likewise we ruled in Canonizado v. Benitez: 65
A judicial compromise may be enforced by a writ of execution. If a party fails or refuses to abide by the compromise,
the other party may enforce the compromise or regard it as rescinded and insist upon his original demand.
If we were to rule otherwise, we would in effect create a back door by which a debtor can easily escape his creditors.
Consequently, we would be faced with an anomalous situation where a debtor, in order to buy time to dispose of his
properties, would enter into a compromise agreement he has no intention of honoring in the first place. The purpose of
the provisional remedy of attachment would thus be lost. It would become, in analogy, a declawed and toothless tiger.
From the foregoing, it is clear that the consortium and/or its assignee Jaime Gonzales have the better right over the
disputed shares. When CEIC purchased the disputed shares from Antonio Garcia on 15 July 1988, it took the shares
subject to the prior, valid and existing attachment lien in favor of and obtained by the consortium.
Forum Shopping in G.R. No. 113394
We uphold the decision of the Court of Appeals finding PCIB guilty of forum-shopping. 66
The Court of Appeals opined:
True it is, that petitioner PCIB was not a party to the appeal made by the four other banks belonging to the consortium,
but equally true is the rule that where the rights and liabilities of the parties appealing are so interwoven and
dependent on each other as to be inseparable, a reversal of the appealed decision as to those who appealed,
operates as a reversal to all and will inure to the benefit of those who did not join the appeal (Tropical Homes vs.
Fortun, 169 SCRA 80, p. 90, citing Alling vs. Wenzel, 133 111. 264-278; 4 C.J. 1206). Such principal, premised upon
communality of interest of the parties, is recognized in this jurisdiction (Director of Lands vs. Reyes, 69 SCRA 415).
The four other banks which were part of the consortium, filed their notice of appeal under date of March 16, 1990,
furnishing a copy thereof upon the lawyers of petitioner. The petition for certiorari in the present case was filed on April
10, 1990, long after the other members of the consortium had appealed from the assailed order of December 19,
1989.
We view with skepticism PCIB's contention that it did not join the consortium because it "honestly believed that
certiorari was the more efficacious and speedy relief available under the circumstances." 67 Rule 65 of the Revised
Rules of Court is not difficult to understand. Certiorari is available only if there is no appeal or other plain, speedy and
adequate remedy in the ordinary course of law. Hence, in instituting a separate petition for certiorari, PCIB has
deliberately resorted to forum-shopping.
PCIB cannot hide behind the subterfuge that Supreme Court Circular 28-91 was not yet in force when it filed the
certiorari proceedings in the Court of Appeals. The rule against forum-shopping has long been established. 68
Supreme Court Circular 28-91 merely formalized the prohibition and provided the appropriate penalties against
transgressors.
It alarms us to realize that we have to constantly repeat our warning against forum-shopping. We cannot overemphasize its ill-effects, one of which is aptly demonstrated in the case at bench where we are confronted with two
divisions of the Court of Appeals issuing contradictory decisions 69 one in favor of CEIC and the other in favor of the
consortium/Jaime Gonzales.
Forum-shopping or the act of a party against whom an adverse judgment has been rendered in one forum, of seeking
another (and possibly favorable) opinion in another forum (other than by appeal or the special civil action of certiorari),
or the institution of two (2) or more actions or proceedings grounded on the same cause on the supposition that one or
the other court would make a favorable disposition, 70 has been characterized as an act of malpractice that is
prohibited and condemned as trifling with the Courts and abusing their processes. It constitutes improper conduct

190

which tends to degrade the administration of justice. It has also been aptly described as deplorable because it adds to
the congestion of the already heavily burdened dockets of the
courts. 71
WHEREFORE, premises considered the appealed decision in G.R. Nos. 112438-39 is hereby AFFIRMED and the
appealed decision in G.R. No. 113394, insofar as it adjudged the CEIC the rightful owner of the disputed shares, is
hereby REVERSED. Moreover, for wantonly resorting to forum-shopping, PCIB is hereby REPRIMANDED and
WARNED that a repetition of the same or similar acts in the future shall be dealt with more severely.
SO ORDERED.

191

G.R. No. L-15499

February 9, 1921

THE TAYABAS LAND COMPANY, plaintiff-appellee,

vs.
SALOMON SHARRUF, CANUTO BARTOLOME, sheriff of Tayabas,
SALVADOR FARRE and FRANCISCO ALVAREZ, defendants.
SALOMON SHARRUF, appellant.
Crossfield and O'Brien for appellant.
Alfredo Chicote and Jose Arnaiz for appellee.
STREET, J.:
On December 10, 1914, one Salvador Farre recovered a joint and several judgment against Salomon M. Sharruf and
Farham M. Sharruf in the Court of First Instance of the city of Manila for the sum of P1,300, with legal interest from
September 5, 1914, and with costs. This judgment having remained unsatisfied, and execution was upon April 3,
1916, issued thereon at the instance of the plaintiff.
Meanwhile on March 27, 1915, Salomon M. Sharruf had himself recovered a judgment, also in the Court of First
Instance of the city of Manila, against the Tayabas Land Company and A.M. Ginainati, for the sum of P6,841.36, with
interest and costs; and as there seems to have been no visible property belonging to Salomon M. Sharruf and Farham
M. Sharruf subject to seizure by the sheriff to satisfy the execution in favor of Salvador Farre, it became important for
Farre to subject the judgment in favor of Salomon M. Sharruf against the Tayabas Land Company and A.M. Ginainati
to the payment of his own claim.
To this end process of garnishment (notification de embargo) was, on April 6, 1916, issued at the instance of Salvador
Farre in aid of his execution against the Sharrufs and was on the same or succeeding day duly served upon the
Tayabas Land Company. By this process the Tayabas Land Company was informed that levy had, by virtue of the
execution aforesaid, been made upon all the property of S. M. Sharruf in the possession of said Tayabas Land
Company and upon all debts owing by the latter to said Sharruf, and in particular upon all participation and interest of
S. M. Sharruf in the judgment rendered in his favor in the action prosecuted by him against the Tayabas Land
Company and others.
In pursuance of the levy thus effected upon the judgment in favor of Salomon M. Sharruf against the Tayabas Land
Company, the sheriff of the city of Manila, as in ordinary cases of levy upon chattels of real property, proceeded upon
April 15, 1916, to expose to sale all right, title, and interest of said Sharruf in the judgment aforesaid. At this sale
Salvador Farre, the execution creditor himself, became the purchaser of the judgment in question for the sum of P200;
but the Tayabas Land Company, with a legitimate view to its own protection, afterwards stepped in, and acting through
Mr. Francisco Alvarez, as attorney and intermediary, purchased from Farre, on October 6, 1917, the judgment of
Salomon M. Sharruf against itself, paying to Farre the full amount due him, to wit, the sum of P1,588.24.
At this point it should be stated that when levy of execution was made in the manner above stated, upon the judgment
in favor of Sharruf against the Tayabas Land Company and others, the time allowed by law for an appeal in that case
of the Supreme Court had not passed; and said cause was in fact subsequently appealed to the Supreme Court,
where final judgment was rendered, affirming the decision of the lower court, on February 15, 1918.1
It may also be stated that on April 4, 1916, Salomon M. Sharruf, by a public document, which was duly incorporated in
the record in his case against the Tayabas Land Company, et al., sold and transferred unto O'Brien & Company, a
corporation, his right, title, and interest in the judgment aforesaid to the extent necessary to satisfy a debt for P988.14,
owing to O'Brien & Company, for merchandise purchased from said entity by Sharruf; and upon the same date
Messrs. Crossfield & O'Brien, as attorneys, filed a memorandum of an attorney's lien in their favor to the extent of 25
per cent of the amount of the judgment. These transactions, as will be seen, had the result of reducing in a
considerable degree the apparent beneficial interest of Salomon M. Sharruf in the result of the litigation, but they do
not affect the fundamentals of the case.
As a consequence of the facts above narrated the Tayabas Land Company supposes that the judgment obtained by
Salomon M. Sharruf against it and A.M. Ginainati has been wholly satisfied, while Salomon M. Sharruf and those
interested under him claim that the execution sale of the judgment in question was void and that as a consequence
said judgment remains wholly unsatisfied. Proceeding upon this conception of the case, Messrs. Crossfield and
O'Brien, as attorneys for the plaintiff in that action, procured an execution to be issued on August 30, 1918, upon said
judgment for the entire amount of the recovery, including accrued interest and costs, less the sum of P13.21, which
had been secured in a garnishment proceeding against one of the local banks.

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Being thus menaced with the levy of an execution upon its property, the Tayabas Land Company instituted the present
action in the Court of First Instance of the city of Manila, Against Salomon M. Sharruf and others, including the sheriff
of the Province of Tayabas, to obtain an order restraining the threatened levy of execution and perpetually enjoining all
proceedings for the enforcement of the judgment against it. Upon hearing the cause the trial court, while recognizing
the validity of the claims of O'Brien & Company and of Crossfield and O'Brien, held that all other interest in said
judgment pertaining to Salomon M. Sharruf had passed by virtue of the execution sale to Salvador Farre and thence
by transfer through Francisco Alvarez to the Tayabas Land Company. As a consequence the court declared the
preliminary injunction perpetual. From said judgment Salomon M. Sharruf appealed to this court.
The principal question in the case relates to the validity of the proceedings whereby the judgment against the Tayabas
Land Company and A.M. Ginainati in favor of Salomon M. Sharruf was, on April 15, 1916, exposed to sale by the
sheriff under the execution issued in the action of Salvador Farre against the two Sharrufs; and we believe it will be
conducive to clarity in the discussion for us to proceed at once to consider the manner in which, under the provisions
of our Code of Civil Procedure, a judgment for a sum of money entered in favor of the plaintiff in one case can be
reached and applied to the payment of a judgment in another case against the party who occupies the position of
creditor in the former.
In the first place, we have no hesitancy in saying that a judgment for a sum of money, that is, the interest of the plaintiff
in such a judgment, is liable to execution. A judgment for a sum of money is, as to the party entitled to payment, a
credit; and as to the party who ought to pay the money, a debt. Furthermore, the interest of the creditor in such a
judgment is clearly property, though not capable of manual delivery. All of these elements of value "debts." "credits,"
and "all other property not capable of manual delivery" are expressly declared, in section 450 of the Code of Civil
Procedure, to be liable to execution. It will be noted, however, that under the section just cited, debts, credits, and
other property not capable of manual delivery are to be dealt with in a different manner from that prescribed in case of
the execution of tangible property; for while tangible property is proceeded with by seizure and sale under execution,
debts and credits are to be attached by the citation of the debtor. The provisions governing the execution of tangible
property are found in sections 453 to 457, inclusive, of the Code of Civil Procedure; while the provisions prescribing
the method of reaching debts and credits are found chiefly in the chapter relating to attachment, consisting principally
of sections 431 to 436, inclusive, of the Code of Civil Procedure.
The proceeding thus indicated as proper, in order to subject a debt or credit is known in American civil procedure as
the process of garnishment; and it may be truly said that garnishment is one of the simplest processes, and the least
involved in technicalities, of any proceeding known to the law. It consists in the citation of some stranger to the
litigation, who is debtor to one of the parties to the action. By this means such debtor stranger becomes a forced
intervenor; and the court, having acquired jurisdiction over his person by means of the citation, requires him to pay his
debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. It is merely a case of
involuntary novation by the substitution of one creditor for another. Upon principle the remedy is a species of
attachment or execution for reaching any property pertaining to a judgment debtor which may be found owing to such
debtor by a third person.
The situation involved supposes the existence of at least three persons, to wit, a judgment creditor, a judgment debtor,
and the garnishee, or person cited, who in turn is supposed to be indebted to the first debtor (i.e., judgment debtor).
To proceed a little further with the barest details of the process of garnishment, we note that a citation issues from the
court having jurisdiction of the principal litigations, notifying the garnishee that the property and credits of the judgment
debtor have been levied upon or attached in the hands of such garnishee, and enjoining him not to deliver, transfer, or
otherwise dispose of any effects or credits belonging to that person, and requiring him furthermore to make a
statement to the court of the property of the judgment debtor in his hands and of the debts owing by the garnishee to
such debtor.
In cases where indebtedness is admitted, as not infrequently occurs, the payment of the money by the garnishee to
the judgment creditor or into court, brings the proceeding to a close, so far as the garnishee is concerned; but if the
garnishee fails to answer, or does not admit the indebtedness, he may be required to attend before the court in which
the action is pending to be examined on oath respecting the same. Finally, if the liability of the garnishee is made
manifest, the officer of the court may, under paragraph No. 3 of section 436 of the Code of Civil Procedure, collect the
money and pay it to the person entitled.
The circumstances that garnishment has not been made the subject of independent treatment in our Code of Civil
Procedure and that the rules relating thereto are only brought out inferentially in connection with the subject of
attachment has undoubtedly contributed to obscure a matter which upon principle is simple enough. Additional light on
the subject may, however, be acquired by referring to sections 476, 481, and 486 of the Code of Civil Procedures,
which treat of supplementary proceedings. It will be found that those proceedings are identical in principle with the
proceeding for the citation of debtors explained in the chapter on attachment.

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Enough has now been said to show clearly that the action of the sheriff in exposing to public sale the judgment which
had been procured by Salomon M. Sharruf in the action against the Tayabas Land Company, et al., was wholly
unauthorized, and said sale must be considered void. The proper step would have been for the court to require the
Tayabas Land Company, after the judgment against it had become final, to pay into court, in the cause wherein
Salvador Farre was plaintiff, a sufficient amount of money to satisfy Farre's claim against Sharruf; and if the judgment
against the Tayabas Land Company had been permitted to go to the stage of execution, the proceeds in the hands of
the sheriff would have been applied, under the direction of the court, to the payment of Farre's claim before any part
would have been payable to Sharruf.
In dealing with the problems which have from time to time arisen in connection with garnishment proceedings, courts
have sometimes been perplexed over the matter of protecting the garnishee from the danger of having to pay his debt
twice; and it goes without saying that the procedure must be so adjusted as not to subject the garnishee to this risk.
Otherwise it is a fatal obstacle to the garnishment. No such difficulty would arise in a case like this, where the two
judgments are both of record in the same court, and where consequently that court has control over the process in
both cases.
Our conclusion that the sale of the judgment in question under process of execution was void is supported by the
decisions of the Supreme Court of California, construing the very section of the California Code of Civil Procedure
from which section 450 of the Code of Civil Procedure of the Philippine Islands was taken. Thus, in McBride vs. Fallon
(65 Cal., 301, 303), the Supreme Court of that State said:
After enumerating the kinds of property of a judgment debtor liable to execution, the Code provides that "shares and
interests in any corporation or company" and debts and credits . . . and all other property not capable of manual
delivery, may be attached on execution in like manner as upon writs of attachments.
"Debts and credits and property not capable of manual delivery must be attached in the mode pointed out by
subdivision 5, sec. 542." (Corresponding to section 431 of the Philippine Code of Civil Procedure.) "That is "by leaving
with the person owing the debt or having in possession or under his control such credits and other personal property"
or with his agent, a copy of the writ, and a notice that the debts owing by him to the defendant, or the credits and other
personal property' in his possession or under his control, belonging to the defendant are attached in pursuance of
such writ.
"The fact that a debt is evidenced by a judgment does not, in our opinion, make it anything more or less than a debt,
or more capable of manual delivery than it would be if not so evidenced. No provision is made for attaching or levying
on evidences of debt. It is the debt itself which may be attached by writ of attachment, or on execution in like manner
as upon writs of attachment." This we think to be the meaning of the Code, and the mode prescribed by it is
exclusively . . .
In order to avoid misunderstanding, we wish to say that we make no question as to the propriety of the proceedings up
to the time when the judgment in question was advertised and exposed to sale by the sheriff. The issuance of the
execution and the service of the garnishment were appropriate; and the garnishment was effective for the purpose of
preventing the garnishee, the Tayabas Land Company, from paying the judgment to Salomon M. Sharruf.
Moreover, the garnishment was effective for the purpose of conferring upon the Tayabas Land Company the right to
pay off the judgment which Farre had obtained against Sharruf. This right is not only recognized in section 481 of the
Code of Civil Procedure but also in subsection 3 of article 1210 of the Civil Code; and by satisfying Farre's claim,
regardless of the manner in which it was accomplished, the Tayabas Land Company absolved itself pro tanto from its
indebtedness to Sharruf. It results that, although the judgment against the Tayabas Land Company has not yet been
satisfied in full, said company is entitled to be credited with the sum of P1,588.24, said by it, through Francisco
Alvarez, to Farre on October 6, 1917, with interest.
In the view we take of the case it becomes unnecessary to consider at length the fact that Sharruf's judgment against
the Tayabas Land Company was appealed to the Supreme Court after the process of garnishment had been served
on the company. Suffice is to say that this circumstance would at most merely postpone the realization of the results
without defeating the garnishment.
Reflection upon this feature of the case, however, confirms the opinion that our lawmakers acted wisely in requiring
that debts and credits should be executed by means of the process of garnishment rather than by exposing them to
public sale. In the case before us a judgment for a large amount was sold for a merely nominal sum, and such would
generally be the case at a sale under similar conditions. This cannot fail to be highly prejudicial to the debtor who is
under immediate execution. The proceeding by garnishment, on the contrary, enables all parties to realize their rights
without unduly disturbing the position of any.

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The judgment must be reserved, and the defendants will be absolved from the complaint. It is so ordered, without
express pronouncement as to costs of either instance.

195

G.R. No. 130223

August 19, 2009

RURAL BANK OF STA. BARBARA [PANGASINAN], INC., Petitioner,

vs.
THE MANILA MISSION OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS, INC., Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision1
dated 29 July 1997 of the Court of Appeals in CA-G.R. SP No. 41042 affirming the Orders dated 9 October 1995 and
27 February 1996 of the Regional Trial Court (RTC), Branch 43, of Dagupan City, in Civil Case No. D-10583.
Spouses Tomas and Maria Soliven (spouses Soliven) were the registered owners, under Transfer Certificate of Title
(TCT) No. T-125213, of a parcel of land located in Barangay Maninding, Sta. Barbara, Pangasinan (subject property).
On 18 May 1992, the spouses Soliven sold the subject property to respondent Manila Mission of the Church of Jesus
Christ of Latter Day Saints, Inc. (Manila Mission). However, it was only on 28 April 1994 when TCT No. T-125213 in
the name of the spouses Soliven was cancelled, and TCT No. 195616 was issued in the name of respondent.
In the meantime, on 15 April 1993, petitioner Rural Bank of Sta. Barbara (Pangasinan), Inc. filed with the RTC a
Complaint against the spouses Soliven for a sum of money, docketed as Civil Case No. D-10583. The Complaint of
petitioner included a prayer for the issuance of a Writ of Preliminary Attachment.
In an Order dated 7 May 1993, the RTC ordered the issuance of the Writ of Attachment petitioner prayed for, to wit:
WHEREFORE, let a Writ of Attachment be issued against all the properties of [Spouses Soliven] not exempt from
execution or so much thereof as may be sufficient to satisfy the [herein petitioners] principal claim of P338,000.00
upon filing of [petitioners] bond in the amount of P100,000.00.2
Upon the filing by petitioner of the required bond, the RTC issued the Writ of Attachment on 21 May 1993. Acting on
the authority of said Writ, Sheriff Reynaldo C. Daray attached the subject property, which was then still covered by
TCT No. T-125213 in the name of the spouses Soliven. The Writ of Attachment was annotated on TCT No. T-125213
on 24 May 1993. Thus, when TCT No. T-125213 of the spouses Soliven was cancelled and TCT No. 195616 of
petitioner was issued on 28 April 1994, the annotation on the Writ of Attachment was carried from the former to the
latter.
While Civil Case No. D-10583 was still pending before the RTC, respondent executed an Affidavit claiming title and
ownership over the subject property, and requested the Ex-Officio Provincial and City Sheriff to release the said
property from attachment. The Sheriff, however, advised respondent to file a motion directly with the RTC.
On 16 March 1995, respondent filed with the RTC, in Civil Case No. D-10583, a Motion to Release Property from
Attachment, to which petitioner, in turn, filed an Opposition. After hearing, the RTC issued an Order on 9 October 1995
discharging the subject property from attachment. The RTC decreed in said Order:
WHEREFORE, the Court hereby directs the Ex-Officio Provincial Sheriff of Pangasinan and City Sheriff of Dagupan to
discharge and release the subject land from attachment and orders the notice of attachment on T.C.T. No. 195616 of
the Register of Deeds of Pangasinan be cancelled.3
Petitioner filed a Motion for Reconsideration of the 9 October 1995 Order of the RTC, arguing that it had a better right
over the subject property and that the filing by respondent with the RTC, in Civil Case No. D-10583, of a Motion to
Release Property from Attachment, was the improper remedy. In an Order dated 27 February 1996, the RTC denied
the Motion for Reconsideration of petitioner for lack of merit.
On 12 April 1997, petitioner filed a Petition for Certiorari with this Court, alleging that the RTC committed grave abuse
of discretion, amounting to lack or excess of jurisdiction, in canceling the Writ of Attachment and ordering the release
of the subject property. The Petition was docketed as G.R. No. 124343. In a Resolution dated 27 May 1997, this Court
referred the case to the Court of Appeals for appropriate action.
The Court of Appeals docketed the Petition for Certiorari as CA-G.R. SP No. 41042. On 29 July 1997, the Court of
Appeals issued the assailed Decision dismissing the Petition.
Hence, petitioner again comes before this Court via the present Petition for Review, contending that the Court of
Appeals erred in not finding grave abuse of discretion on the part of the RTC when the latter directed the release of

196

the subject property from attachment. Petitioner insists that it has a better right to the subject property considering
that: (1) the attachment of the subject property in favor of petitioner was made prior to the registration of the sale of
the same property to respondent; and (2) respondent availed itself of the wrong remedy in filing with the RTC, in Civil
Case No. D-10583, a Motion to Release Property from Attachment. We shall discuss ahead the second ground for the
instant Petition, a matter of procedure, since its outcome will determine whether we still need to address the first
ground, on the substantive rights of the parties to the subject property.
Propriety of the Motion to Release Property from Attachment
According to petitioner, the Motion to Release Property from Attachment filed by respondent before the RTC, in Civil
Case No. D-10583, is not the proper remedy under Section 14, Rule 57 of the Rules of Court,4 which provides:
SEC. 14. Proceedings where property claimed by third person.If the property attached is claimed by any person
other than the party against whom attachment had been issued or his agent, and such person makes an affidavit of
his title thereto, or right to the possession thereof, stating the grounds of such right or title, and serves such affidavit
upon the sheriff while the latter has possession of the attached property, and a copy thereof upon the attaching party,
the sheriff shall not be bound to keep the property under attachment, unless the attaching party or his agent, on
demand of the sheriff, shall file a bond approved by the court to indemnify the third-party claimant in a sum not less
than the value of the property levied upon. In case of disagreement as to such value, the same shall be decided by the
court issuing the writ of attachment. No claim for damages for the taking or keeping of the property may be enforced
against the bond unless the action therefor is filed within one hundred twenty (120) days from the date of the filing of
the bond.
The sheriff shall not be liable for damages for the taking or keeping of such property, to any such third-party claimant,
if such bond shall be filed. Nothing herein contained shall prevent such claimant or any third person from vindicating
his claim to the property, or prevent the attaching party from claiming damages against a third-party claimant who filed
a frivolous or plainly spurious claim, in the same or a separate action.
When the writ of attachment is issued in favor of the Republic of the Philippines, or any officer duly representing it, the
filing of such bond shall not be required, and in case the sheriff is sued for damages as a result of the attachment, he
shall be represented by the Solicitor General, and if held liable therefor, the actual damages adjudged by the court
shall be paid by the National Treasurer out of the funds to be appropriated for the purpose.
Petitioner argues that, pursuant to the aforequoted section, the remedy of a third person claiming to be the owner of
an attached property are limited to the following: (1) filing with the Sheriff a third-party claim, in the form of an affidavit,
per the first paragraph of Section 14; (2) intervening in the main action, with prior leave of court, per the second
paragraph of Section 14, which allows a third person to vindicate his/her claim to the attached property in the "same x
x x action"; and (3) filing a separate and independent action, per the second paragraph of Section 14, which allows a
third person to vindicate his/her claim to the attached property in a "separate action."
Respondent explains that it tried to pursue the first remedy, i.e., filing a third-party claim with the Sheriff. Respondent
did file an Affidavit of Title and Ownership with the Sheriff, but said officer advised respondent to file a motion directly
with the RTC in the main case. Respondent heeded the Sheriffs advice by filing with the RTC, in Civil Case No. D10583, a Motion to Release Property from Attachment. The Court of Appeals recognized and allowed said Motion,
construing the same as an invocation by respondent of the power of control and supervision of the RTC over its
officers, which includes the Sheriff.
We agree with the Court of Appeals on this score. The filing by respondent of the Motion to Release Property from
Attachment was made on the advice of the Sheriff upon whom respondent served its Affidavit of Title and Ownership.
Respondent should not be faulted for merely heeding the Sheriffs advice. Apparently, the Sheriff, instead of acting
upon the third-party claim of respondent on his own, would rather have some direction from the RTC. Indeed, the
Sheriff is an officer of the RTC and may be directed by the said court to allow the third-party claim of respondent.
Therefore, the filing of the Motion in question can be deemed as a mere continuation of the third-party claim of
respondent, in the form of its Affidavit of Title and Ownership, served upon the Sheriff, in accord with the first
paragraph of Section 14, Rule 57 of the Rules of Court.
Alternatively, we may also consider the Motion to Release Property from Attachment, filed by respondent before the
RTC, as a Motion for Intervention in Civil Case No. D-10583, pursuant to the second paragraph of Section 14, Rule
56, in relation to Rule 19 of the Rules of Court. Respondent, to vindicate its claim to the subject property, may
intervene in the same case, i.e., Civil Case No. D-10583, instituted by petitioner against the spouses Soliven, in which
the said property was attached. Respondent has the personality to intervene, as it "is so situated as to be adversely
affected by a distribution or other disposition of property in the custody of the court or of an officer thereof."5 The RTC,
in acting upon and granting the Motion to Release Property from Attachment in its Order dated 9 October 1995, is
deemed to have allowed respondent to intervene in Civil Case No. D-10583.

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Moreover, it may do petitioner well to remember that rules of procedure are merely tools designed to facilitate the
attainment of justice. They were conceived and promulgated to effectively aid the court in the dispensation of justice.
Courts are not slaves to or robots of technical rules, shorn of judicial discretion. In rendering justice, courts have
always been, as they ought to be, conscientiously guided by the norm that on the balance, technicalities take a
backseat to substantive rights, and not the other way around. Thus, if the application of the Rules would tend to
frustrate rather than promote justice, it is always within the power of the Court to suspend the rules, or except a
particular case from its operation.6 Hence, even if the Motion to Release Property from Attachment does not strictly
comply with Section 14, Rule 56 of the Rules of Court, the RTC may still allow and act upon said Motion to render
substantive justice.
This leads us to the substantive issue in this case, on which between the two transactions should be given priority: the
previous yet unregistered sale of the subject property by the spouses Soliven to respondent, or the subsequent but
duly annotated attachment of the same property by petitioner.
Previous yet unregistered sale versus subsequent but duly annotated attachment
Petitioner does not dispute the allegation of respondent that the subject property was sold by the spouses Soliven to
respondent on 18 May 1992, before petitioner instituted Civil Case No. D-10583 against the spouses Soliven on 15
April 1993; the RTC ordered the issuance of the Writ of Attachment on 7 May 1993; and the attachment of the subject
property pursuant to the Writ on 27 May 1993.
Neither did petitioner offer evidence to counter the following documents presented by respondent establishing the fact
of the sale of the subject property to the latter by the spouses Soliven: (1) the notarized Deed of Sale dated 18 May
1992; (2) BPI Managers Check No. 010685 dated 8 May 1992 in the sum of P42,500.00 to represent the tender of
payment of capital gains tax; (3) BIR Official Receipt No. 0431320 dated 18 May 1992 of BPI Check No. 010625 for
the payment of the sum of P8,5000.00; and (4) a letter dated 11 August 1992 of Manila Missions former counsel, Lim
Duran & Associates, to the Revenue District Officer, District 7, Bureau of Internal Revenue, relative to its request for
the "reconsideration/condonation" of the assessment of the capital gains tax on its purchase of the subject property.
Petitioner, however, invokes jurisprudence wherein this Court in a number of instances allegedly upheld a subsequent
but duly annotated attachment, as opposed to a previous yet unregistered sale of the same property. Petitioner
particularly calls our attention to the following paragraph in Ruiz, Sr. v. Court of Appeals7:
[I]n case of a conflict between a vendee and an attaching creditor, an attaching creditor who registers the order of
attachment and the sale of the property to him as the highest bidder acquires a valid title to the property, as against a
vendee who had previously bought the same property from the registered owner but who failed to register his deed of
sale. This is because registration is the operative act that binds or affects the land insofar as third persons are
concerned. It is upon registration that there is notice to the whole world.
In the more recent case Valdevieso v. Damalerio,8 we have expounded on our foregoing pronouncement in Ruiz.
On 5 December 1995, therein petitioner Bernardo Valdevieso (Valdevieso) bought a parcel of land from spouses
Lorenzo and Elenita Uy (spouses Uy), the registered owners thereof. On 19 April 1996, therein respondents, spouses
Candelario and Aurea Damalerio (spouses Damalario), filed a Complaint against the spouses Uy for a sum of money
before the RTC of General Santos City. On 23 April 1996, the RTC issued a Writ of Preliminary Attachment by virtue of
which the subject parcel of land was levied. The levy was duly recorded in the Register of Deeds, and annotated on
the TCT of the spouses Uy over the subject parcel of land. It was only on 6 June 1996 that the TCT in the name of the
spouses Uy was cancelled, and a new one issued in the name of Valdevieso. As in the case at bar, the annotation on
the attachment was carried over to Valdeviesos TCT. Valdevieso filed a third-party claim before the RTC seeking to
annul the attachment. In a resolution, the RTC ruled in Valdeviesos favor, but the Court of Appeals reversed said RTC
resolution. On appeal, we adjudged:
The sole issue in this case is whether or not a registered writ of attachment on the land is a superior lien over that of
an earlier unregistered deed of sale.
xxxx
The settled rule is that levy on attachment, duly registered, takes preference over a prior unregistered sale. This result
is a necessary consequence of the fact that the property involved was duly covered by the Torrens system which
works under the fundamental principle that registration is the operative act which gives validity to the transfer or
creates a lien upon the land.

198

The preference created by the levy on attachment is not diminished even by the subsequent registration of the prior
sale. This is so because an attachment is a proceeding in rem. It is against the particular property, enforceable against
the whole world. The attaching creditor acquires a specific lien on the attached property which nothing can
subsequently destroy except the very dissolution of the attachment or levy itself. Such a proceeding, in effect, means
that the property attached is an indebted thing and a virtual condemnation of it to pay the owners debt. The lien
continues until the debt is paid, or sale is had under execution issued on the judgment, or until the judgment is
satisfied, or the attachment discharged or vacated in some manner provided by law.
Thus, in the registry, the attachment in favor of respondents appeared in the nature of a real lien when petitioner had
his purchase recorded. The effect of the notation of said lien was to subject and subordinate the right of petitioner, as
purchaser, to the lien. Petitioner acquired ownership of the land only from the date of the recording of his title in the
register, and the right of ownership which he inscribed was not absolute but a limited right, subject to a prior registered
lien of respondents, a right which is preferred and superior to that of petitioner.9
It is settled, therefore, that a duly registered levy on attachment takes preference over a prior unregistered sale.
Nonetheless, respondent argues that there is a special circumstance in the case at bar, which should be deemed a
constructive registration of the sale of the subject property in its favor, preceding the attachment of the same property
by petitioner.
Knowledge of previous yet unregistered sale
In Ruiz, the very case cited by petitioner, we made a qualification of the general rule that a duly annotated attachment
is superior to an unregistered prior sale. In fact, we resolved Ruiz in favor of the vendee in the unregistered prior sale,
because knowledge of the unregistered sale by the attaching creditor is deemed equivalent to registration. We
explained in Ruiz:
But where a party has knowledge of a prior existing interest which is unregistered at that time he acquired a right to
the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. Knowledge of
an unregistered sale is equivalent to registration. As held in Fernandez v. Court of Appeals [189 SCRA 780 (1990)],
Section 50 of Act No. 496 (now Sec. 51 of P.D. 1529), provides that the registration of the deed is the operative act to
bind or affect the land insofar as third persons are concerned. But where the party has knowledge of a prior existing
interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered
interest has the effect of registration as to him. The torrens system cannot be used as a shield for the commission of
fraud (Gustillo v. Maravilla, 48 Phil. 442). As far as private respondent Zenaida Angeles and her husband Justiniano
are concerned, the non-registration of the affidavit admitting their sale of a portion of 110 square meters of the subject
land to petitioners cannot be invoked as a defense because (K)nowledge of an unregistered sale is equivalent to
registration (Winkleman v. Veluz, 43 Phil. 604).
This knowledge of the conveyance to Honorato Hong can not be denied. The records disclose that after the sale,
private respondent was able to introduce improvements on the land such as a concrete two-door commercial building,
a concrete fence around the property, concrete floor of the whole area and G.I. roofing. Acts of ownership and
possession were exercised by the private respondent over the land. By these overt acts, it can not therefore be
gainsaid that petitioner was not aware that private respondent had a prior existing interest over the land.10
In the case at bar, respondent averred in its Motion to Release Property from Attachment that the construction of a
church edifice on the subject property was about to be finished at the time the Writ of Preliminary Attachment was
implemented on 24 May 1993, and that the construction of the church was actually completed by mid-1993.
Respondent asserts that since petitioner did not deny these allegations, much less adduce evidence to the contrary,
then the latter tacitly recognized the construction of the church.
Petitioner contends, on the other hand, that respondent failed to present evidence to prove the fact that a church had
already been constructed on the subject property by the time the said property was attached, thus, constituting notice
to petitioner of the claim or right of respondent to the same.lawph!1
Was there, at the time of the attachment, knowledge on the part of petitioner Rural Bank of the interest of respondent
Manila Mission on the subject property?
If the allegation of respondent Manila Mission anent the building of the chapel even before the issuance of the writ of
attachment is true, this case would be similar to Ruiz where the vendee of the subject property was able to introduce
improvements. However, respondent Manila Mission presented no evidence of the building of the chapel other than its
bare allegation thereof. More importantly, even assuming for the sake of argument that the chapel was indeed being
built at the time of the attachment of the property, we cannot simply apply Ruiz and conclude that this confirms

199

knowledge of a previous conveyance of the property at that time. In Ruiz, the attaching party was the wife of the
vendor of the subject property, whom she sued for support. It was thus very probable that she knew of the sale of the
property to the vendee therein, considering that the vendee had already introduced improvements thereon. In the case
at bar, there is no special relationship between petitioner Rural Bank and the spouses Soliven sufficient to charge the
former with an implied knowledge of the state of the latters properties. Unlike in the sale of real property, an attaching
creditor is not expected to inspect the property being attached, as it is the sheriff who does the actual act of attaching
the property.
Neither did respondent Manila Mission present any evidence of knowledge on the part of petitioner Rural Bank of the
prior existing interest of the former at the time of the attachment. Respondent Manila Mission merely argues that there
was a tacit recognition on the part of petitioner Rural Bank of the construction of the chapel when the latter did not
deny this allegation in its Opposition to the Motion to Discharge Property from Attachment.
The Motion, however, merely mentions the construction of the chapel and does not charge petitioner Rural Bank with
knowledge of the construction. There was, therefore, nothing to deny on the part of petitioner Rural Bank, as the mere
existence of such construction at that time would not affect the right of petitioner Rural Bank to its lien over the subject
property. Also, the mention in the Motion of the construction of the chapel would have the effect of being a notice of an
adverse third-party claim only at the time of such Motion. Since such notice, which was deemed in Ruiz as
constructive registration of the sale, was effected only after the attachment of the subject property, it could not affect
the validity of the attachment lien.
In sum, our decisions in Ruiz v. Court of Appeals and Valdevieso v. Damalerio oblige us to rule that the duly registered
levy on attachment by petitioner Rural Bank takes preference over the prior but then unregistered sale of respondent
Manila Mission. There was likewise no evidence of knowledge on the part of petitioner Rural Bank of any third-party
interest in the subject property at the time of the attachment. We are, therefore, constrained to grant the instant
Petition for Review and nullify the Orders of the RTC discharging the subject property from attachment.
Nevertheless, respondent Manila Mission would not be left without remedy. It could file a counter-bond pursuant to
Section 12, Rule 5711 of the Rules of Court in order to discharge the attachment. If respondent Manila Mission fails to
do the same and the property ends up being subjected to execution, respondent can redeem the property and seek
reimbursement from the spouses Soliven.
WHEREFORE, the instant Petition for Review on Certiorari is hereby GRANTED. The Decision dated 29 July 1997 of
the Court of Appeals in CA-G.R. SP No. 41042 affirming the Orders of the Regional Trial Court of Dagupan City dated
9 October 1995 and 27 February 1996 issued in Civil Case No. D-10583 is hereby REVERSED and SET ASIDE. No
pronouncement as to costs.
SO ORDERED.

200

G.R. No. L-34589

June 29, 1988

ENGINEERING CONSTRUCTION INCORPORATED, petitioner,

vs.
NATIONAL POWER CORPORATION and COURT OF APPEALS, respondents.
G.R. No. L-34656

June 29, 1988

MANILA ELECTRIC COMPANY, petitioner,

vs.
COURT OF APPEALS and NATIONAL POWER CORPORATION, respondents.

FERNAN, J.:
In these related petitions for review under Rule 45 of the Rules of Court, the Engineering Construction, Inc. [ECI] and
the Manila Electric Company [MERALCO] question the decision of the Court of Appeals in CA-G.R. No. 47528-R
which set aside the orders of the trial court directing execution pending appeal of a judgment for P1,108,985.31 in
damages in favor of ECI. Petitioners also question the resolution of said court holding them liable for restitution of the
garnished funds to the National Power Corporation [NPC].
On August 29, 1968, ECI filed a complaint for damages against the NPC in the then Court of First Instance of Manila,
Branch 15, alleging that it suffered damages to its facilities and equipment due to the inundation of its campsite in Ipo,
Norzagaray, Bulacan, as a direct result of the improper and careless opening by NPC of the spillway gates of Angat
Dam at the height of typhoon "Welming" on November 4,1967. 1
On December 23, 1970, the trial court found NPC guilty of gross negligence and rendered its judgment, thus:
WHEREFORE, judgment is rendered in favor of plaintiff and against defendant as follows:
1. Ordering defendant to pay plaintiff actual or compensatory damages in the amount of P675,785.31;
2. Ordering defendant to pay consequential damages in the amount of P233,200.00; *
3. Ordering defendant to pay plaintiff the amount of P50,000 as and by way of exemplary damages; and
4. Ordering defendant to pay plaintiff the amount of P50,000 as and for attorney's fees ... 2
NPC filed a notice of appeal from that decision but before it could perfect its appeal, ECI moved for and was granted
execution pending appeal upon posting a covering bond of P200,000 which it later increased to P1,109,000 to fully
answer for whatever damages NPC might incur by reason of the premature execution of the lower court's decision. 3
In granting said motion for the exceptional writ over the strong opposition of the NPC, the trial court adopted the
grounds adduced by movant ECI.
1. x x x.
2. That the substantial portion of the award of damages refers to the actual or compensatory damages incurred by
plaintiff, which are supported by voluminous documentary evidence, the genuineness and due execution of which
were admitted and further, no evidence whatever was presented to contest the same;
3. That this case has been pending for years, as the plaintiff and the Honorable Court were led to believe that the
matter in dispute would be settled amicably;
4. That an appeal by defendant would obviously be for purposes of delay;
5. That on appeal, the case would certainly drag on for many years, and in the meantime, the actual loss and
damages sustained by plaintiff, who because of such loss have become heavily obligated and financially distressed,
would remain uncompensated and unsatisfied
6. That also, plaintiff is willing and able to file a bond to answer for any damage which defendant may suffer as a result
of an execution pending appeal. 4

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Subsequently, Deputy Sheriff Restituto R. Quemada who was assigned to enforce the writ of execution, garnished in
favor of ECI all amounts due and payable to NPC which were then in possession of MERALCO and sufficient to cover
the judgment sum of P1,108,985.31. 5
Attempts to lift the order of execution having proved futile and the offer of a supersedeas bond having been rejected
by the lower court, NPC filed with the Appellate Court a petition for certiorari. 6
In its challenged decision of October 20, 1971, the Court of Appeals granted NPCs petition and nullified the execution
pending appeal of the judgment rendered by the trial court on December 28, 1970, as well as all issued writs and
processes in connection with the execution. One justice dissented. 7
On November 11, 1971, MERALCO sought from the Appellate Court a clarification and reconsideration of the
aforesaid decision on the ground, among others, that the decision was being used by NPC to compel MERALCO to
return the amount of P1,114,545.23 (inclusive of sheriff's fees) in two checks which it had already entrusted to the
deputy sheriff on February 23, 1971, who then indorsed and delivered the same to ECI. Whereupon, in its resolution of
January 7, 1972, the Appellate Court held the sheriff, MERALCO and ECI liable to restore to NPC the amount due to
NPC which MERALCO had earlier turned over to the sheriff for payment to ECI. 8
Their two motions for reconsideration having been denied, ECI and MERALCO filed separate petitions for review
before this Court: Nos. L-34589 and 34656, the very petitions before us for adjudication. In this connection, it must be
made clear that we are not concemed with the main appeal. For the present, we limit our discussion to the correctness
of the extraordinary writ of execution pending appeal and the ordered restitution of the garnished funds---two collateral
matters which have greatly exacerbated the existing dispute between the parties.
We shall deal first with the propriety of the execution pending appeal.
Section 2, Rule 39 of the Rules of Court provides:
Execution pending appeal. On motion of the prevailing party with notice to the adverse party the court may, in its
discretion, order execution to issue even before the expiration of the time to appeal, upon good reasons to be stated in
a special order. If a record on appeal is filed thereafter, the motion and the special order shall be included thereon.
While the rule gives the court the discretionary power to allow immediate execution, the following requisites must be
satisfied for its valid exercise:
(a)

There must be a motion by the prevailing party with notice to the adverse party;

(b)

There must be a good reasons for issuing the execution; and

(c)

The good reasons must be stated in a special order.

In its assailed decision, the Appellate Court, through Justice Salvador V. Esguerra, observe that NPC, as defendant in
the civil case for damages, was being ordered to pay the amount of P 1,108,985.31 pending appeal when practically
40% thereof was made up of awards of damages based on the court's sole and untrammeled discretion. Such amount
might greatly be reduced by the superior court, especially the items for consequential and exemplary damages and
attorney's fees which by themselves would amount to the "staggering" sum of P433,220.00
The Appellate Court noted the many instances when on review, the amounts for attorney's fees and exemplary and
moral damages were drastically cut or eliminated altogether in the absence of proof that the losing party acted with
malice, evident bad faith or in an oppressive manner.
Inasmuch as the list submitted by ECI of the estimated losses and damages to its tunnel project caused by the instant
flooding on November 4, 1967 was duly supported by vouchers presented in evidence, and considering that NPC, for
its part, failed to submit proofs to refute or contradict such documentary evidence, we are constrained to sustain the
order of execution pending appeal by the trial court but only as far as the award for actual or compensatory damages
is concemed. We are not prepared to disagree with the lower court on this point since it was not sufficiently shown that
it abused or exceeded its authority.
With respect to the consequential and exemplary damages as well as attorney's fees, however, we concur with the
Appellate Court in holding that the lower court had exceeded the limits of its discretion. Execution should have been
postponed until such time as the merits of the case have been finally determined in the regular appeal.
In the fairly recent case of RCPI, et al vs. Lantin Nos. L-59311 and 59320, January 31, 1985 , 134 SCRA 395, 400401, the Court said:

202

The execution of any award for moral and exemplary damages is dependent on the outcome of the main case. Unlike
actual damages for which the petitioners may clearly be held liable if they breach a specific contract and the amounts
of which are fixed and certain, liabilities with respect to moral and exemplary damages as well as the exact amounts
remain uncertain and indefinite pending resolution by the Intermediate Appellate Court and eventually the Supreme
Court. The existence of the factual bases of these types of damages and their casual relation to petitioners' act will
have to be determined in the light of the assignments or errors on appeal. It is possible that the petitioners, after all,
while liable for actual damages may not be liable for moral and exemplary damages. Or as in some cases elevated to
the Supreme Court, the awards may be reduced.
Indeed, as later events would show, the Appellate Court was proven right when it postulated that it is not beyond the
realm of probability that NPCs appeal from the lower court's judgment could result in the substantial reduction of the
consequential damages and attorney's fees and the deletion of exemplary damages.
We take judicial notice of the fact that on August 24, 1987, the Court of Appeals rendered a decision on the main
appeal. 9 It affirmed the trial court's conclusion that NPC was guilty of negligence but differred in the award of
damages. While it upheld the court a quo's award of P675,785.31 as actual damages, it reduced the consequential
damages from P333,200.00 to P19,200.00 and the attorney's fees from P50,000 to P30,000.00 The grant of P50,000
as exemplary damages was eliminated. Altogether, the award of damages was modified from P1,108,985.31 to
P724,985.31. From that decision, both the ECI and NPC filed their separate appeals to this Court. 10 Finally, on May
16, 1988, the Court promulgated its judgment affirming in all respects the Appellate Court's decision in CA-G.R. No.
49955-R, thus putting to rest the question of negligence and NPCs liability for damages.
The point that the Court wishes to emphasize is this: Courts look with disfavor upon any attempt to execute a
judgment which has not acquired a final character. Section 2, Rule 39, authorizing the premature execution of
judgments, being an exception to the general rule, must be restrictively construed. It would not be a sound rule to
allow indiscriminately the execution of a money judgment, even if there is a sufficient bond. "The reasons allowing
execution must constitute superior circumstances demanding urgency which will outweigh the injury or damages
should the losing party secure a reversal of the judgment."' 11
We come now to the second issue of whether petitioners, including the sheriff, are bound to restore to NPC the
judgment amount which has been delivered to ECI in compliance with the writ of garnishment.
In line with our pronouncement that we are sanctioning in this particular instance the execution pending appeal of
actual but not consequential and exemplary damages and attorney's fees which must necessarily depend on the final
resolution of the main cases, i.e., Nos. L-47379 and 47481, the direct consequence would be to authorize NPC to
proceed against the covering bond filed by ECI but only to the extent of the difference between the amount finally
adjudicated by this Court in the main cases [P724,985.31] and the amount originally decreed by the trial court relating
to the consequential and exemplary damages and attorney's fees [P1,108.985.31]. In other words, ECIs bond is held
answerable to NPC for P384,000.
But while partial restitution is warranted in favor of NPC, we find that the Appellate Court erred in not absolving
MERALCO, the garnishee, from its obligations to NPC with respect to the payment to ECI of P1,114,543.23, thus in
effect subjecting MERALCO to double liability. MERALCO should not have been faulted for its prompt obedience to a
writ of garnishment. Unless there are compelling reasons such as: a defect on the face of the writ or actual knowledge
on the part of the garnishee of lack of entitlement on the part of the garnisher, it is not incumbent upon the garnishee
to inquire or to judge for itself whether or not the order for the advance execution of a judgment is valid.
Section 8, Rule 57 of the Rules of Court provides,
Effect of attachment of debts and credits.-All persons having in their possession or under their control any credits or
other similar personal property belonging to the party against whom attachment is issued, or owing any debts to the
same, at the time of service upon them of a copy of the order of attachment and notice as provided in the last
preceding section, shall be liable to the applicant for the amount of such credits, debts or other property, until the
attachment be discharged, or any judgment recovered by him be satisfied, unless such property be delivered or
transferred, or such debts be paid, to the clerk, sheriff or other proper officer of the court issuing the attachment.
Garnishment is considered as a specie of attachment for reaching credits belonging to the judgment debtor and owing
to him from a stranger to the litigation. Under the above-cited rule, the garnishee [the third person] is obliged to deliver
the credits, etc. to the proper officer issuing the writ and "the law exempts from liability the person having in his
possession or under his control any credits or other personal property be, longing to the defendant, ..., if such property
be delivered or transferred, ..., to the clerk, sheriff, or other officer of the court in which the action is pending." 12

203

Applying the foregoing to the case at bar, MERALCO, as garnishee, after having been judicially compelled to pay the
amount of the judgment represented by funds in its possession belonging to the judgment debtor or NPC, should be
released from all responsibilities over such amount after delivery thereof to the sheriff. The reason for the rule is selfevident. To expose garnishees to risks for obeying court orders and processes would only undermine the
administration of justice.
WHEREFORE, the Court in disposing of the two side issues of execution pending appeal and petitioners' liability for
restitution, hereby MODIFIES the Court of Appeals' decision and resolution under review, and rules as follows:
[a]
NPC is authorized to proceed against the P1,109,000 bond filed by ECI to the extent of P384,000 which
corresponds to the difference between the awards for consequential and exemplary damages and attorney's fees
upheld by the Court in the main cases (Nos. L-47379 and 47481) and those decreed for the same items by the trial
court;
[b]
MERALCO is declared absolved from any and all responsibilities in connection with the amount of
P1,114,545.23 representing the NPC garnished funds and therefore relieved from the burden of restoring the same to
NPC.
SO ORDERED .

204

G.R. No. L-34548

November 29, 1988

RIZAL COMMERCIAL BANKING CORPORATION, petitioner,

vs.
THE HONORABLE PACIFICO P. DE CASTRO and PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION,
respondents
Meer, Meer & Meer for petitioner.
The Solicitor General for respondents.

CORTES, J.:
The crux of the instant controversy dwells on the liability of a bank for releasing its depositor's funds upon orders of
the court, pursuant to a writ of garnishment. If in compliance with the court order, the bank delivered the garnished
amount to the sheriff, who in turn delivered it to the judgment creditor, but subsequently, the order of the court directing
payment was set aside by the same judge, should the bank be held solidarily liable with the judgment creditor to its
depositor for reimbursement of the garnished funds? The Court does not think so.
In Civil Case No. Q-12785 of the Court of First Instance of Rizal, Quezon City Branch IX entitled "Badoc Planters, Inc.
versus Philippine Virginia Tobacco Administration, et al.," which was an action for recovery of unpaid tobacco
deliveries, an Order (Partial Judgment) was issued on January 15, 1970 by the Hon. Lourdes P. San Diego, then
Presiding Judge, ordering the defendants therein to pay jointly and severally, the plaintiff Badoc Planters, Inc.
(hereinafter referred to as "BADOC") within 48 hours the aggregate amount of P206,916.76, with legal interests
thereon.
On January 26,1970, BADOC filed an Urgent Ex-Parte Motion for a Writ of Execution of the said Partial Judgment
which was granted on the same day by the herein respondent judge who acted in place of the Hon. Judge San Diego
who had just been elevated as a Justice of the Court of Appeals. Accordingly, the Branch Clerk of Court on the very
same day, issued a Writ of Execution addressed to Special Sheriff Faustino Rigor, who then issued a Notice of
Garnishment addressed to the General Manager and/or Cashier of Rizal Commercial Banking Corporation
(hereinafter referred to as RCBC), the petitioner in this case, requesting a reply within five (5) days to said
garnishment as to any property which the Philippine Virginia Tobacco Administration (hereinafter referred to as
"PVTA") might have in the possession or control of petitioner or of any debts owing by the petitioner to said defendant.
Upon receipt of such Notice, RCBC notified PVTA thereof to enable the PVTA to take the necessary steps for the
protection of its own interest [Record on Appeal, p. 36]
Upon an Urgent Ex-Parte Motion dated January 27, 1970 filed by BADOC, the respondent Judge issued an Order
granting the Ex-Parte Motion and directing the herein petitioner "to deliver in check the amount garnished to Sheriff
Faustino Rigor and Sheriff Rigor in turn is ordered to cash the check and deliver the amount to the plaintiff's
representative and/or counsel on record." [Record on Appeal, p. 20; Rollo, p. 5.] In compliance with said Order,
petitioner delivered to Sheriff Rigor a certified check in the sum of P 206,916.76.
Respondent PVTA filed a Motion for Reconsideration dated February 26,1970 which was granted in an Order dated
April 6,1970, setting aside the Orders of Execution and of Payment and the Writ of Execution and ordering petitioner
and BADOC "to restore, jointly and severally, the account of PVTA with the said bank in the same condition and state it
was before the issuance of the aforesaid Orders by reimbursing the PVTA of the amount of P 206, 916.76 with
interests at the legal rate from January 27, 1970 until fully paid to the account of the PVTA This is without prejudice to
the right of plaintiff to move for the execution of the partial judgment pending appeal in case the motion for
reconsideration is denied and appeal is taken from the said partial judgment." [Record on Appeal, p. 58]
The Motion for Reconsideration of the said Order of April 6, 1970 filed by herein petitioner was denied in the Order of
respondent judge dated June 10, 1970 and on June 19, 1970, which was within the period for perfecting an appeal,
the herein petitioner filed a Notice of Appeal to the Court of Appeals from the said Orders.
This case was then certified by the Court of Appeals to this Honorable Court, involving as it does purely questions of
law.
The petitioner raises two principal queries in the instant case: 1) Whether or not PVTA funds are public funds not
subject to garnishment; and 2) Whether or not the respondent Judge correctly ordered the herein petitioner to
reimburse the amount paid to the Special Sheriff by virtue of the execution issued pursuant to the Order/Partial
Judgment dated January 15, 1970.

205

The record reveals that on February 2, 1970, private respondent PVTA filed a Motion for Reconsideration of the Order/
Partial Judgment of January 15, 1970. This was granted and the aforementioned Partial Judgment was set aside. The
case was set for hearings on November 4, 9 and 11, 1970 [Rollo, pp. 205-207.] However, in view of the failure of
plaintiff BADOC to appear on the said dates, the lower court ordered the dismissal of the case against PVTA for failure
to prosecute [Rollo, p. 208.]
It must be noted that the Order of respondent Judge dated April 6, 1970 directing the plaintiff to reimburse PVTA t e
amount of P206,916.76 with interests became final as to said plaintiff who failed to even file a motion for
reconsideration, much less to appeal from the said Order. Consequently, the order to restore the account of PVTA with
RCBC in the same condition and state it was before the issuance of the questioned orders must be upheld as to the
plaintiff, BADOC.
However, the questioned Order of April 6, 1970 must be set aside insofar as it ordered the petitioner RCBC, jointly and
severally with BADOC, to reimburse PVTA.
The petitioner merely obeyed a mandatory directive from the respondent Judge dated January 27, 1970, ordering
petitioner 94 "to deliver in check the amount garnished to Sheriff Faustino Rigor and Sheriff Rigor is in turn ordered to
cash the check and deliver the amount to the plaintiffs representative and/or counsel on record." [Record on Appeal, p.
20.]
PVTA however claims that the manner in which the bank complied with the Sheriffs Notice of Garnishment indicated
breach of trust and dereliction of duty on the part of the bank as custodian of government funds. It insistently urges
that the premature delivery of the garnished amount by RCBC to the special sheriff even in the absence of a demand
to deliver made by the latter, before the expiration of the five-day period given to reply to the Notice of Garnishment,
without any reply having been given thereto nor any prior authorization from its depositor, PVTA and even if the court's
order of January 27, 1970 did not require the bank to immediately deliver the garnished amount constitutes such lack
of prudence as to make it answerable jointly and severally with the plaintiff for the wrongful release of the money from
the deposit of the PVTA. The respondent Judge in his controverted Order sustained such contention and blamed
RCBC for the supposed "hasty release of the amount from the deposit of the PVTA without giving PVTA a chance to
take proper steps by informing it of the action being taken against its deposit, thereby observing with prudence the
five-day period given to it by the sheriff." [Rollo, p. 81.]
Such allegations must be rejected for lack of merit. In the first place, it should be pointed out that RCBC did not deliver
the amount on the strength solely of a Notice of Garnishment; rather, the release of the funds was made pursuant to
the aforesaid Order of January 27, 1970. While the Notice of Garnishment dated January 26, 1970 contained no
demand of payment as it was a mere request for petitioner to withold any funds of the PVTA then in its possession, the
Order of January 27, 1970 categorically required the delivery in check of the amount garnished to the special sheriff,
Faustino Rigor.
In the second place, the bank had already filed a reply to the Notice of Garnishment stating that it had in its custody
funds belonging to the PVTA, which, in fact was the basis of the plaintiff in filing a motion to secure delivery of the
garnished amount to the sheriff. [See Rollo, p. 93.]
Lastly, the bank, upon the receipt of the Notice of Garnishment, duly informed PVTA thereof to enable the latter to take
the necessary steps for the protection of its own interest [Record on Appeal, p. 36]
It is important to stress, at this juncture, that there was nothing irregular in the delivery of the funds of PVTA by check
to the sheriff, whose custody is equivalent to the custody of the court, he being a court officer. The order of the court
dated January 27, 1970 was composed of two parts, requiring: 1) RCBC to deliver in check the amount garnished to
the designated sheriff and 2) the sheriff in turn to cash the check and deliver the amount to the plaintiffs representative
and/or counsel on record. It must be noted that in delivering the garnished amount in check to the sheriff, the RCBC
did not thereby make any payment, for the law mandates that delivery of a check does not produce the effect of
payment until it has been cashed. [Article 1249, Civil Code.]
Moreover, by virtue of the order of garnishment, the same was placed in custodia legis and therefore, from that time
on, RCBC was holding the funds subject to the orders of the court a quo. That the sheriff, upon delivery of the check to
him by RCBC encashed it and turned over the proceeds thereof to the plaintiff was no longer the concern of RCBC as
the responsibility over the garnished funds passed to the court. Thus, no breach of trust or dereliction of duty can be
attributed to RCBC in delivering its depositor's funds pursuant to a court order which was merely in the exercise of its
power of control over such funds.
... The garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property
a lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia

206

legis, under the sole control of such court [De Leon v. Salvador, G.R. Nos. L-30871 and L-31603, December 28,1970,
36 SCRA 567, 574.]
The respondent judge however, censured the petitioner for having released the funds "simply on the strength of the
Order of the court which. far from ordering an immediate release of the amount involved, merely serves as a standing
authority to make the release at the proper time as prescribed by the rules." [Rollo, p. 81.]
This argument deserves no serious consideration. As stated earlier, the order directing the bank to deliver the amount
to the sheriff was distinct and separate from the order directing the sheriff to encash the said check. The bank had no
choice but to comply with the order demanding delivery of the garnished amount in check. The very tenor of the order
called for immediate compliance therewith. On the other hand, the bank cannot be held liable for the subsequent
encashment of the check as this was upon order of the court in the exercise of its power of control over the funds
placed in custodia legis by virtue of the garnishment.
In a recent decision [Engineering Construction Inc., v. National Power Corporation, G.R. No. L-34589, June 29, 1988]
penned by the now Chief Justice Marcelo Fernan, this Court absolved a garnishee from any liability for prompt
compliance with its order for the delivery of the garnished funds. The rationale behind such ruling deserves emphasis
in the present case:
But while partial restitution is warranted in favor of NPC, we find that the Appellate Court erred in not absolving
MERALCO, the garnishee, from its obligations to NPC with respect to the payment of ECI of P 1,114,543.23, thus in
effect subjecting MERALCO to double liability. MERALCO should not have been faulted for its prompt obedience to a
writ of garnishment. Unless there are compelling reasons such as: a defect on the face of the writ or actual knowledge
on the part of the garnishee of lack of entitlement on the part of the garnisher, it is not incumbent upon the garnishee
to inquire or to judge for itself whether or not the order for the advance execution of a judgment is valid.
Section 8, Rule 57 of the Rules of Court provides:
Effect of attachment of debts and credits.All persons having in their possession or under their control any credits or
other similar personal property belonging to the party against whom attachment is issued, or owing any debts to the
same, all the time of service upon them of a copy of the order of attachment and notice as provided in the last
preceding section, shall be liable to the applicant for the amount of such credits, debts or other property, until the
attachment be discharged, or any judgment recovered by him be satisfied, unless such property be delivered or
transferred, or such debts be paid, to the clerk, sheriff or other proper officer of the court issuing the attachment.
Garnishment is considered as a specie of attachment for reaching credits belonging to the judgment debtor and owing
to him from a stranger to the litigation. Under the above-cited rule, the garnishee [the third person] is obliged to deliver
the credits, etc. to the proper officer issuing the writ and "the law exempts from liability the person having in his
possession or under his control any credits or other personal property belonging to the defendant, ..., if such property
be delivered or transferred, ..., to the clerk, sheriff, or other officer of the court in which the action is pending. [3 Moran,
Comments on the Rules of Court 34 (1970 ed.)]
Applying the foregoing to the case at bar, MERALCO, as garnishee, after having been judicially compelled to pay the
amount of the judgment represented by funds in its possession belonging to the judgment debtor or NPC, should be
released from all responsibilities over such amount after delivery thereof to the sheriff. The reason for the rule is selfevident. To expose garnishees to risks for obeying court orders and processes would only undermine the
administration of justice. [Emphasis supplied.]
The aforequoted ruling thus bolsters RCBC's stand that its immediate compliance with the lower court's order should
not have been met with the harsh penalty of joint and several liability. Nor can its liability to reimburse PVTA of the
amount delivered in check be premised upon the subsequent declaration of nullity of the order of delivery. As correctly
pointed out by the petitioner:
xxx

xxx

xxx

That the respondent Judge, after his Order was enforced, saw fit to recall said Order and decree its nullity, should not
prejudice one who dutifully abided by it, the presumption being that judicial orders are valid and issued in the regular
performance of the duties of the Court" [Section 5(m) Rule 131, Revised Rules of Court]. This should operate with
greater force in relation to the herein petitioner which, not being a party in the case, was just called upon to perform an
act in accordance with a judicial flat. A contrary view will invite disrespect for the majesty of the law and induce
reluctance in complying with judicial orders out of fear that said orders might be subsequently invalidated and thereby
expose one to suffer some penalty or prejudice for obeying the same. And this is what will happen were the
controversial orders to be sustained. We need not underscore the danger of this as a precedent.

207

xxx

xxx

xxx

[ Brief for the Petitioner, Rollo, p. 212; Emphasis supplied.]

From the foregoing, it may be concluded that the charge of breach of trust and/or dereliction of duty as well as lack of
prudence in effecting the immediate payment of the garnished amount is totally unfounded. Upon receipt of the Notice
of Garnishment, RCBC duly informed PVTA thereof to enable the latter to take the necessary steps for its protection.
However, right on the very next day after its receipt of such notice, RCBC was already served with the Order requiring
delivery of the garnished amount. Confronted as it was with a mandatory directive, disobedience to which exposed it
to a contempt order, it had no choice but to comply.
The respondent Judge nevertheless held that the liability of RCBC for the reimbursement of the garnished amount is
predicated on the ruling of the Supreme Court in the case of Commissioner of Public Highways v. Hon. San Diego
[G.R. No. L-30098, February 18, 1970, 31 SCRA 616] which he found practically on all fours with the case at bar.
The Court disagrees.
The said case which reiterated the rule in Republic v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA 899] that
government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgment
is definitely distinguishable from the case at bar.
In the Commissioner of Public Highways case [supra], the bank which precipitately allowed the garnishment and
delivery of the funds failed to inform its depositor thereof, charged as it was with knowledge of the nullity of the writ of
execution and notice of garnishment against government funds. In the aforementioned case, the funds involved
belonged to the Bureau of Public Highways, which being an arm of the executive branch of the government, has no
personality of its own separate from the National Government. The funds involved were government funds covered by
the rule on exemption from execution.
This brings us to the first issue raised by the petitioner: Are the PVTA funds public funds exempt from garnishment?
The Court holds that they are not.
Republic Act No. 2265 created the PVTA as an ordinary corporation with all the attributes of a corporate entity subject
to the provisions of the Corporation Law. Hence, it possesses the power "to sue and be sued" and "to acquire and
hold such assets and incur such liabilities resulting directly from operations authorized by the provisions of this Act or
as essential to the proper conduct of such operations." [Section 3, Republic Act No. 2265.]
Among the specific powers vested in the PVTA are: 1) to buy Virginia tobacco grown in the Philippines for resale to
local bona fide tobacco manufacturers and leaf tobacco dealers [Section 4(b), R.A. No. 2265]; 2) to contracts of any
kind as may be necessary or incidental to the attainment of its purpose with any person, firm or corporation, with the
Government of the Philippines or with any foreign government, subject to existing laws [Section 4(h), R.A. No. 22651;
and 3) generally, to exercise all the powers of a corporation under the Corporation Law, insofar as they are not
inconsistent with the provisions of this Act [Section 4(k), R.A. No. 2265.]
From the foregoing, it is clear that PVTA has been endowed with a personality distinct and separate from the
government which owns and controls it. Accordingly, this Court has heretofore declared that the funds of the PVTA can
be garnished since "funds of public corporation which can sue and be sued were not exempt from garnishment"
[Philippine National Bank v. Pabalan, G.R. No. L-33112, June 15, 1978, 83 SCRA 595, 598.]
In National Shipyards and Steel Corp. v. CIR [G.R. No. L-17874, August 31, 1964, 8 SCRA 781], this Court held that
the allegation to the effect that the funds of the NASSCO are public funds of the government and that as such, the
same may not be garnished, attached or levied upon is untenable for, as a government-owned or controlled
corporation, it has a personality of its own, distinct and separate from that of the government. This court has likewise
ruled that other govemment-owned and controlled corporations like National Coal Company, the National Waterworks
and Sewerage Authority (NAWASA), the National Coconut Corporation (NACOCO) the National Rice and Corn
Corporation (NARIC) and the Price Stabilization Council (PRISCO) which possess attributes similar to those of the
PVTA are clothed with personalities of their own, separate and distinct from that of the government [National Coal
Company v. Collector of Internal Revenue, 46 Phil. 583 (1924); Bacani and Matoto v. National Coconut Corporation et
al., 100 Phil. 471 (1956); Reotan v. National Rice & Corn Corporation, G.R. No. L-16223, February 27, 1962, 4 SCRA
418.] The rationale in vesting it with a separate personality is not difficult to find. It is well-settled that when the
government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other
corporation [Manila Hotel Employees' Association v. Manila Hotel Co. and CIR, 73 Phil. 734 (1941).]
Accordingly, as emphatically expressed by this Court in a 1978 decision, "garnishment was the appropriate remedy for
the prevailing party which could proceed against the funds of a corporate entity even if owned or controlled by the

208

government" inasmuch as "by engaging in a particular business thru the instrumentality of a corporation, the
government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of
law governing private corporations" [Philippine National Bank v. CIR, G.R No. L-32667, January 31, 1978, 81 SCRA
314, 319.]
Furthermore, in the case of PVTA, the law has expressly allowed it funds to answer for various obligations, including
the one sought to be enforced by plaintiff BADOC in this case (i.e. for unpaid deliveries of tobacco). Republic Act No.
4155, which discounted the erstwhile support given by the Central Bank to PVTA, established in lieu thereof a
"Tobacco Fund" to be collected from the proceeds of fifty per centum of the tariff or taxes of imported leaf tobacco and
also fifty per centum of the specific taxes on locally manufactured Virginia type cigarettes.
Section 5 of Republic Act No. 4155 provides that this fund shall be expended for the support or payment of:
1.
Indebtedness of the Philippine Virginia Tobacco Administration and the former Agricultural Credit and
Cooperative Financing Administration to FACOMAS and farmers and planters regarding Virginia tobacco transactions
in previous years;
2.
Indebtedness of the Philippine Virginia Tobacco Administration and the former Agricultural Credit and
Cooperative Financing Administration to the Central Bank in gradual amounts regarding Virginia tobacco transactions
in previous years;
3.
Continuation of the Philippine Virginia Tobacco Administration support and subsidy operations including the
purchase of locally grown and produced Virginia leaf tobacco, at the present support and subsidy prices, its
procurement, redrying, handling, warehousing and disposal thereof, and the redrying plants trading within the purview
of their contracts;
4.
Operational, office and field expenses, and the establishment of the Tobacco Research and Grading Institute.
[Emphasis supplied.]
Inasmuch as the Tobacco Fund, a special fund, was by law, earmarked specifically to answer obligations incurred by
PVTA in connection with its proprietary and commercial operations authorized under the law, it follows that said funds
may be proceeded against by ordinary judicial processes such as execution and garnishment. If such funds cannot be
executed upon or garnished pursuant to a judgment sustaining the liability of the PVTA to answer for its obligations,
then the purpose of the law in creating the PVTA would be defeated. For it was declared to be a national policy, with
respect to the local Virginia tobacco industry, to encourage the production of local Virginia tobacco of the qualities
needed and in quantities marketable in both domestic and foreign markets, to establish this industry on an efficient
and economic basis, and to create a climate conducive to local cigarette manufacture of the qualities desired by the
consuming public, blending imported and native Virginia leaf tobacco to improve the quality of locally manufactured
cigarettes [Section 1, Republic Act No. 4155.]
The Commissioner of Public Highways case is thus distinguishable from the case at bar. In said case, the Philippine
National Bank (PNB) as custodian of funds belonging to the Bureau of Public Highways, an agency of the
government, was chargeable with knowledge of the exemption of such government funds from execution and
garnishment pursuant to the elementary precept that public funds cannot be disbursed without the appropriation
required by law. On the other hand, the same cannot hold true for RCBC as the funds entrusted to its custody, which
belong to a public corporation, are in the nature of private funds insofar as their susceptibility to garnishment is
concerned. Hence, RCBC cannot be charged with lack of prudence for immediately complying with the order to deliver
the garnished amount. Since the funds in its custody are precisely meant for the payment of lawfully-incurred
obligations, RCBC cannot rightfully resist a court order to enforce payment of such obligations. That such court order
subsequently turned out to have been erroneously issued should not operate to the detriment of one who complied
with its clear order.
Finally, it is contended that RCBC was bound to inquire into the legality and propriety of the Writ of Execution and
Notice of Garnishment issued against the funds of the PVTA deposited with said bank. But the bank was in no position
to question the legality of the garnishment since it was not even a party to the case. As correctly pointed out by the
petitioner, it had neither the personality nor the interest to assail or controvert the orders of respondent Judge. It had
no choice but to obey the same inasmuch as it had no standing at all to impugn the validity of the partial judgment
rendered in favor of the plaintiff or of the processes issued in execution of such judgment.
RCBC cannot therefore be compelled to make restitution solidarily with the plaintiff BADOC. Plaintiff BADOC alone
was responsible for the issuance of the Writ of Execution and Order of Payment and so, the plaintiff alone should bear
the consequences of a subsequent annulment of such court orders; hence, only the plaintiff can be ordered to restore
the account of the PVTA.

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WHEREFORE, the petition is hereby granted and the petitioner is ABSOLVED from any liability to respondent PVTA
for reimbursement of the funds garnished. The questioned Order of the respondent Judge ordering the petitioner,
jointly and severally with BADOC, to restore the account of PVTA are modified accordingly.
SO ORDERED.

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G.R. No. 107282

March 16, 1994

THE MANILA REMNANT CO., INC., petitioner,

vs.
HON. COURT OF APPEALS, AND SPS. OSCAR C. VENTANILLA AND CARMEN GLORIA DIAZ, respondents.
Tabalingcos & Associates Law Office for petitioner.
Oscar C. Ventanilla, Jr. and Augusto Garmaitan for private respondents.

CRUZ, J.:
The present petition is an offshoot of our decision in Manila Remnant Co., Inc., (MRCI) v. Court of Appeals,
promulgated on November 22, 1990.
That case involved parcels of land in Quezon City which were owned by petitioner MRCI and became the subject of its
agreement with A.U. Valencia and Co., Inc., (AUVCI) by virtue of which the latter was to act as the petitioner's agent in
the development and sale of the property. For a stipulated fee, AUVCI was to convert the lands into a subdivision,
manage the sale of the lots, execute contracts and issue official receipts to the lot buyers. At the time of the
agreement, the president of both MRCI and AUVCI was Artemio U. Valencia.
Pursuant to the above agreement, AUVCI executed two contracts to sell dated March 3, 1970, covering Lots 1 and 2,
Block 17, in favor of spouses Oscar C. Ventanilla and Carmen Gloria Diaz for the combined contract price of
P66,571.00, payable monthly in ten years. After ten days and without the knowledge of the Ventanilla couple,
Valencia, as president of MRCI, resold the same parcels to Carlos Crisostomo, one of his sales agents, without any
consideration. Upon orders of Valencia, the monthly payments of the Ventanillas were remitted to the MRCI as
payments of Crisostomo, for which receipts were issued in his name. The receipts were kept by Valencia without the
knowledge of the Ventanillas and Crisostomo. The Ventanillas continued paying their monthly installments.
On May 30, 1973, MRCI informed AUVCI that it was terminating their agreement because of discrepancies discovered
in the latter's collections and remittances. On June 6, 1973, Valencia was removed by the board of directors of MRCI
as its president.
On November 21, 1978, the Ventanilla spouses, having learned of the supposed sale of their lots to Crisostomo,
commenced an action for specific performance, annulment of deeds, and damages against Manila Remnant Co., Inc.,
A.U. Valencia and Co., Inc., and Carlos Crisostomo. It was docketed as Civil Case No. 26411 in the Court of First
Instance of Quezon City, Branch
7-B.
On November 17, 1980, the trial court rendered a decision declaring the contracts to sell in favor of the Ventanillas
valid and subsisting, and annulling the contract to sell in favor of Crisostomo. It ordered the MRCI to execute an
absolute deed of sale in favor of the Ventanillas, free from all liens and encumbrances. Damages and attorney's fees
in the total amount of P210,000.00 were also awarded to the Ventanillas for which the MRCI, AUVCI, and Crisostomo
were held solidarily liable.
The lower court ruled further that if for any reason the transfer of the lots could not be effected, the defendants would
be solidarily liable to the Ventanillas for reimbursement of the sum of P73,122.35, representing the amount paid for the
two lots, and legal interest thereon from March 1970, plus the decreed damages and attorney's fees. Valencia was
also held liable to MRCI for moral and exemplary damages and attorney's fees.
From this decision, separate appeals were filed by Valencia and MRCI. The appellate court, however, sustained the
trial court in toto.
MRCI then filed before this Court a petition for certiorari to review the portion of the decision of the Court of Appeals
upholding the solidary liability of MRCI, AUVCI and Carlos Crisostomo for the payment of moral and exemplary
damages and attorney's fees to the Ventanillas.
On November 22, 1990, this Court affirmed the decision by the Court of Appeals and declared the judgment of the trial
court immediately executory.
The Present Case

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On January 25, 1991, the spouses Ventanilla filed with the trial court a motion for the issuance of a writ of execution in
Civil Case No. 26411. The writ was issued on May 3, 1991, and served upon MRCI on May 9, 1991.
In a manifestation and motion filed by MRCI with the trial court on May 24, 1991, the petitioner alleged that the subject
properties could not be delivered to the Ventanillas because they had already been sold to Samuel Marquez on
February 7, 1990, while their petition was pending in this Court. Nevertheless, MRCI offered to reimburse the amount
paid by the respondents, including legal interest plus the aforestated damages. MRCI also prayed that its tender of
payment be accepted and all garnishments on their accounts lifted.
The Ventanillas accepted the amount of P210,000.00 as damages and attorney's fees but opposed the reimbursement
offered by MRCI in lieu of the execution of the absolute deed of sale. They contended that the alleged sale to Samuel
Marquez was void, fraudulent, and in contempt of court and that no claim of ownership over the properties in question
had ever been made by Marquez.
On July 19, 1991, Judge Elsie Ligot-Telan issued the following order:
To ensure that there is enough amount to cover the value of the lots involved if transfer thereof to plaintiff may no
longer be effected, pending litigation of said issue, the garnishment made by the Sheriff upon the bank account of
Manila Remnant may be lifted only upon the deposit to the Court of the amount of P500,000.00 in cash.
MRCI then filed a manifestation and motion for reconsideration praying that it be ordered to reimburse the Ventanillas
in the amount of P263,074.10 and that the garnishment of its bank deposit be lifted. This motion was denied by the
trial court in its order dated September 30, 1991. A second manifestation and motion filed by MRCI was denied on
December 18, 1991. The trial court also required MRCI to show cause why it should not be cited for contempt for
disobedience of its judgment.
These orders were questioned by MRCI in a petition for certiorari before the respondent court on the ground that they
were issued with grave abuse of discretion.
The Court of Appeals ruled that the contract to sell in favor of Marquez did not constitute a legal impediment to the
immediate execution of the judgment. Furthermore, the cash bond fixed by the trial court for the lifting of the
garnishment was fair and reasonable because the value of the lot in question had increased considerably. The
appellate court also set aside the show-cause order and held that the trial court should have proceeded under Section
10, Rule 39 of the Rules of Court and not Section 9 thereof. 1
In the petition now before us, it is submitted that the trial court and the Court of Appeals committed certain reversible
errors to the prejudice of MRCI.
The petitioner contends that the trial court may not enforce it garnishment order after the monetary judgment for
damages had already been satisfied and the amount for reimbursement had already been deposited with the sheriff.
Garnishment as a remedy is intended to secure the payment of a judgment debt when a well-founded belief exists that
the erring party will abscond or deliberately render the execution of the judgment nugatory. As there is no such
situation in this case, there is no need for a garnishment order.
It is also averred that the trial court gravely abused its discretion when it arbitrarily fixed the amount of the cash bond
for the lifting of the garnishment order at P500,000.00.
MRCI further maintains that the sale to Samuel Marquez was valid and constitutes a legal impediment to the
execution of the absolute deed of sale to the Ventanillas. At the time of the sale to Marquez, the issue of the validity of
the sale to the Ventanillas had not yet been resolved. Furthermore, there was no specific injunction against the
petitioner re-selling the property.
Lastly, the petitioner insists that Marquez was a buyer in good faith and had a right to rely on the recitals in the
certificate of title. The subject matter of the controversy having passed to an innocent purchaser for value, the
respondent court erred in ordering the execution of the absolute deed of sale in favor of the Ventanillas.
For their part, the respondents argue that the validity of the sale to them had already been established even while the
previous petition was still pending resolution. That petition only questioned the solidary liability of MRCI to the
Ventanillas. The portion of the decision ordering the MRCI to execute an absolute deed of sale in favor of the
Ventanillas became final and executory when the petitioner failed to appeal it to the Supreme Court. There was no
need then for an order enjoining the petitioner from re-selling the property in litigation.

212

They also point to the unusual lack of interest of Marquez in protecting and asserting his right to the disputed property,
a clear indication that the alleged sale to him was merely a ploy of the petitioner to evade the execution of the
absolute deed of sale in their favor.
The petition must fail.
The validity of the contract to sell in favor of the Ventanilla spouses is not disputed by the parties. Even in the previous
petition, the recognition of that contract was not assigned as error of either the trial court or appellate court. The fact
that the MRCI did not question the legality of the award for damages to the Ventanillas also shows that it even then
already acknowledged the validity of the contract to sell in favor of the private respondents.
On top of all this, there are other circumstances that cast suspicion on the validity, not to say the very existence, of the
contract with Marquez.
First, the contract to sell in favor of Marquez was entered into after the lapse of almost ten years from the rendition of
the judgment of the trial court upholding the sale to the Ventanillas.
Second, the petitioner did not invoke the contract with Marquez during the hearing on the motion for the issuance of
the writ of execution filed by the private respondents. It disclosed the contract only after the writ of execution had been
served upon it.
Third, in its manifestation and motion dated December 21, 1990, the petitioner said it was ready to deliver the titles to
the Ventanillas provided that their counterclaims against private respondents were paid or offset first. There was no
mention of the contract to sell with Marquez on February 7, 1990.
Fourth, Marquez has not intervened in any of these proceedings to assert and protect his rights to the subject property
as an alleged purchaser in good faith.
At any rate, even if it be assumed that the contract to sell in favor of Marquez is valid, it cannot prevail over the final
and executory judgment ordering MRCI to execute an absolute deed of sale in favor of the Ventanillas. No less
importantly, the records do not show that Marquez has already paid the supposed balance amounting to P616,000.00
of the original price of over P800,000.00. 2
The Court notes that the petitioner stands to benefit more from the supposed contract with Marquez than from the
contract with the Ventanillas with the agreed price of only P66,571.00. Even if it paid the P210,000.00 damages to the
private respondents as decreed by the trial court, the petitioner would still earn more profit if the Marquez contract
were to be sustained.
We come now to the order of the trial court requiring the posting of the sum of P500,000.00 for the lifting of its
garnishment order.
While the petitioners have readily complied with the order of the trial court for the payment of damages to the
Ventanillas, they have, however, refused to execute the absolute deed of sale. It was for the purpose of ensuring their
compliance with this portion of the judgment that the trial court issued the garnishment order which by its term could
be lifted only upon the filling of a cash bond of P500,000.00.
The petitioner questions the propriety of this order on the ground that it has already partially complied with the
judgment and that it has always expressed its willingness to reimburse the amount paid by the respondents. It says
that there is no need for a garnishment order because it is willing to reimburse the Ventanillas in lieu of execution of
the absolute deed of sale.
The alternative judgment of reimbursement is applicable only if the conveyance of the lots is not possible, but it has
not been shown that there is an obstacle to such conveyance. As the main obligation of the petitioner is to execute the
absolute deed of sale in favor of the Ventanillas, its unjustified refusal to do so warranted the issuance of the
garnishment order.
Garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a
stranger to the litigation. 3 It is an attachment by means of which the plaintiff seeks to subject to his claim property of
the defendant in the hands of a third person or money owed by such third person or garnishee to the defendant. 4 The
rules on attachment also apply to garnishment proceedings.
A garnishment order shall be lifted if it established that:

213

(a)
the party whose accounts have been garnished has posted a counterbond or has made the requisite cash
deposit; 5
(b)
the order was improperly or irregularly issued 6 as where there is no ground for garnishment 7 or the affidavit
and/or bond filed therefor are defective or insufficient; 8
(c)

the property attached is exempt from execution, hence exempt from preliminary attachment 9 or

(d)

the judgment is rendered against the attaching or garnishing creditor. 10

Partial execution of the judgment is not included in the above enumeration of the legal grounds for the discharge of a
garnishment order. Neither does the petitioner's willingness to reimburse render the garnishment order unnecessary.
As for the counterbond, the lower court did not err when it fixed the same at P500,000.00. As correctly pointed out by
the respondent court, that amount corresponds to the current fair market value of the property in litigation and was a
reasonable basis for determining the amount of the counterbond.
Regarding the refusal of the petitioner to execute the absolute deed of sale, Section 10 of Rule 39 of the Rules of
Court reads as follows:
Sec. 10.
Judgment for specific act; vesting title If a judgment directs a party to execute a conveyance of
land, or to deliver deeds or other documents, or to perform any other specific act, and the party fails to comply within
the time specified, the court may direct the act to be done at the cost of the disobedient party by some other person
appointed by the court and the act when so done shall have like effect as if done by the party. If real or personal
property is within the Philippines, the court in lieu of directing a conveyance thereof may enter judgment divesting the
title of any party and vesting it in others and such judgment shall have the force and effect of a conveyance executed
in due form of law.
Against the unjustified refusal of the petitioner to accept payment of the balance of the contract price, the remedy of
the respondents is consignation, conformably to the following provisions of the Civil Code:
Art. 1256.
If the creditor to whom tender of payment has been made refuses without just cause to accept it, the
debtor shall be released from responsibility by the consignation of the thing or sum due. . .
Art. 1258.
Consignation shall be made by depositing the things due at the disposal of the judicial authority,
before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in
other cases.
The consignation having been made, the interested parties shall also be notified thereof.
Art. 1260.
Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of
the obligation.
Accordingly, upon consignation by the Ventanillas of the sum due, the trial court may enter judgment canceling the title
of the petitioner over the property and transferring the same to the respondents. This judgment shall have the same
force and effect as conveyance duly executed in accordance with the requirements of the law.
In sum, we find that:
1.
No legal impediment exists to the execution, either by the petitioner or the trial court, of an absolute deed of
sale of the subject property in favor of the respondent Ventanillas; and
2.
The lower court did not abuse its discretion when it required the posting of a P500,000.00 cash bond for the
lifting of the garnishment order.
WHEREFORE, the petition is DENIED and the challenged decision of the Court of Appeals is AFFIRMED in toto, with
costs against the petitioner. It is so ordered.

214

G.R. No. 104133

April 18, 1995

SPOUSES EMILIO ABINUJAR and MILAGROS M. LANA, petitioners,

vs.
THE COURT OF APPEALS and SPOUSES SANTIAGO RAMIRO and FLORENTINA RAMIRO, respondents.

QUIASON, J.:
This is a petition for review on ceitiorari under Rule 45 of the Revised Rules of Court of the Decision dated December
27, 1991 and the Resolution dated February 11, 1992 of the Court of Appeals in CA-G.R. SP No. 24683.
I
On October 10, 1987, petitioners executed a Deed of Sale with Right to Repurchase in favor of private respondents,
involving a residential house located at No. 346 Algeciras St., Sampaloc, Manila. Due to serious financial and
business reverses, petitioners were not able to redeem the property within four months as agreed upon.
On October 24, 1989, private respondents filed a complaint for ejectment in the Metropolitan Trial Court of the City of
Manila, docketed as Civil Case No. 130352-CV against petitioners.
On December 27, 1989, the parties, assisted by their counsels, executed a compromise agreement. In an order dated
March 15, 1990, the Metropolitan Trial Court approved the compromise agreement. The order reproduced the
agreement as follows:
That defendants [petitioners herein] agree to pay plaintiffs [private respondents herein] in the amounts and on the
dates specifically indicated herein below:
a.
P50,000.00 on Jan. 31, 1990;
b.
10,000.00 on Feb. 28, 1990;
c.
10,000.00 on March 31, 1990;
d.
10,000.00 on April 30, 1990;
e.
10,000.00 on May 31, 1990;
f.
10,000.00 on June 30, 1990;
g.
10,000.00 on July 31,1990;
h.
10,000.00 on August 31, 1990;
i.
10,000.00 on September 30, 1990;

215

2.
That failure on the part of the defendants to pay three (3) consecutive payments, plaintiffs will be entitled to a
writ of execution, unless the parties agree to extend the period of entitlement to a writ of execution in writing to be
submitted and/or approved by this Honorable Court; . . . (Rollo, p. 53).
On April 15, 1990, private respondents filed a motion for execution on the ground that petitioners failed to pay the first
three installments stipulated in the compromise agreement, to wit: P50,000.00 on January 31, 1990; P10,000.00 on
February 28, 1990; and P10,000.00 on March 31, 1990.
On April 6, 1990, petitioners filed an "Urgent Ex-Parte Motion for Reconsideration and/or Correct Order of this Court"
calling attention to a typographical error in the Order dated March 15, 1990, and asking that the amount of P10.000.00
payable on September 30, 1990 be corrected and changed to the agreed amount of P50,000.
On April 25, 1990, the Metropolitan Trial Court issued an order granting the motion for correction of the typographical
error in the decision.
On August 17, 1990, petitioners filed a motion asking that the check payments previously deposited by them with the
court, be accepted and be given to respondents in compliance with their compromise agreement.
On August 23, 1990, respondents opposed petitioners' ex-parte motion and stated that they would not renew the
compromise agreement with petitioners.
The Metropolitan Trial Court denied private respondents' motion for execution dated April 15, 1990 and another similar
motion dated June 26, 1990.
On October 12, 1990, respondents filed a petition for mandamus with us (G.R. No. 95470). In a resolution dated
November 5, 1990, we referred the case to the Executive Judge of the Regional Trial Court, Manila. petitioners moved
to dismiss the petition for mandamus.
On March 14, 1991 the Regional Trial Court denied the motion to dismiss and issued the assailed resolution
commanding the Metropolitan Trial Court to issue a writ of execution of the decision approving the compromise
agreement in Civil Case No. 130352-CV.
In compliance with the said resolution, the Metropolitan Trial Court issued an order dated March 27, 1991 directing the
issuance of a writ of execution to enforce the compromise agreement entered into by the parties.
On April 11, 1991, a "Sheriffs' Notice to Voluntarily Vacate the Premises" was served on petitioner.
Petitioners then filed a petition for certiorari with a prayer for the issuance of a temporary restraining order and a writ
of injunction with the Court of Appeals (CA-G.R. SP No. 24683).
On December 27, 1991, the Court of Appeals dismissed the petition. Likewise, the said court denied the motion for
reconsideration filed by petitioner.
II
Petitioners contend that both the Regional Trial Court and Metropolitan Trial Court acted with grave abuse of
discretion, the former in issuing a resolution directing the Metropolitan Trial Court to issue a writ of execution against
petitioners herein, and the latter, in issuing said writ of execution.
III
A compromise agreement is a contract between the parties, which if not contrary to law, morals or public policy, is valid
and enforceable between them (Municipal Board of Cabanatuan City v. Samahang Magsasaka, Inc., 62 SCRA 435
[1975]). There are two kinds of compromise agreements, the judicial, which puts an end to a pending litigation, and the
extrajudicial, which is to avoid a litigation (Civil Code of the Philippines, Art. 2028; Caguioa, VI Commentaries and
Cases, on Civil Law 292 [1970]).
As a contract, a compromise agreement is perfected by mutual consent (Rovero v. Amparo, 91 Phil. 228 [1952]). A
judicial compromise, however, while binding between the parties upon its execution, is not executory until it is
approved by the court and reduced to a judgment.
Article 2037 of the Civil Code of the Philippines provides:

216

A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in
compliance with a judicial compromise.
The non-fulfillment of the terms and conditions of a compromise agreement approved by the court justifies execution
thereof and the issuance of the writ for said purpose is the court's ministerial duty enforceable by mandamus (Maceda,
Jr. v. Moreman Builders Co., Inc., 203 SCRA 293 [1991]).
In the compromise agreement, petitioners obligated themselves to pay private respondents the amount of P50,000.00
on January 31, 1990, P10,000.00 on February 28, 1990, and P10,000.00 on March 31, 1990.
Petitioners received a copy of the decision of the Metropolitan Trial Court approving the compromise agreement on
March 26, 1990. Clearly, there was a breach, for it was only on August 17, 1990 that petitioners attempted to pay by
means of nine postdated checks the amounts agreed upon. In effect, the first installment payment of P50,000.00 due
on January 31, 1990 was moved to August 31, 1990, the second installment of P10,000.00 due on February 28, 1990
was moved to September 30, 1990 and so forth, thereby making the last installment of P5,000.00 due on September
30, 1990 moved to April 30, 1991. This is tantamount to novating the original agreement entered into by the parties
without the consent of private respondents.
Inasmuch as a judicial compromise becomes binding between the parties upon its execution, petitioners should have
paid the installments falling due even before the approval thereof by the trial court. But assuming that a judicial
compromise is not perfected until it is approved by the court, still petitioner should have paid the compromise
agreement installments due on March 31, 1990, together with the installments due on January 31 and February 28,
1990 on or before March 31, 1990.
Petitioners also assail the validity of the issuance by the Deputy Sheriff of the notice to voluntarily vacate the premises
by way of enforcing the decision approving the compromise agreement. They maintain that their obligation is monetary
in nature and the applicable rule should have been Section 15, Rule 39 and not Section 13, Rule 39 of the Revised
Rules of Court.
Petitioners contention has merit.
When the parties entered into a compromise agreement, the original action for ejectment was set aside and the action
was changed to a monetary obligation.
A perusal of the compromise agreement signed by the parties and approved by the inferior court merely provided that
in case the defendants (petitioners herein) failed to pay three monthly installments, the plaintiffs (private respondents
herein) would be entitled to a writ of execution, without specifying what the subject of execution would be. Said
agreement did not state that petitioners would be evicted from the premises subject of the suit in case of any default in
complying with their obligation thereunder. This was the result of the careless drafting thereof for which only private
respondents were to be blamed.
A judgment is the foundation of a writ of execution which draws its vitality therefrom (Monaghon v. Monaghon, 25 Ohio
St. 325). An officer issuing a writ of execution is required to look to the judgment for his immediate authority (Sydnor v.
Roberts, 12 Tex. 598).
An execution must conform to and be warranted by the judgment on which it was issued (Francisco, The Revised
Rules of Court 641 [1966]; Kramer v. Montgomery, 206 Okla.190, 242 p. 2d 414 [1952]). There should not be a
substantial variance between the judgment and the writ of execution (Avery v. Lewis, 10 Vt. 332). Thus, an execution
is fatally defective if the judgment was for a sum of money and the writ of execution was for the sale of mortgaged
property (Bank of Philippine Islands v. Green, 48 Phil. 284 [1925]).
As petitioners' obligation under the compromise agreement as approved by the court was monetary in nature, private
respondents can avail only of the writ of execution provided in Section 15, Rule 39 of the Revised Rules of Court, and
not that provided in Section 13.
Section 15, Rule 39 provides:
Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the
property, real and personal of every name and nature whatsoever, and which may be disposed of for value, of the
judgment debtor not exempt from execution, or on a sufficient amount of such property, if there be sufficient, and
selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the
judgment. Any excess in the proceeds over the judgment and accruing costs must be delivered to the judgment
debtor, unless otherwise directed by the judgment or order of the court. When there is more property of the judgment

217

debtor than is sufficient to satisfy the judgment and accruing costs, within the view of the officer, he must levy only on
such part of the property as is amply sufficient to satisfy the judgment and costs.
Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal
property, may be levied on in like manner and with like effect as under a writ of attachment.
On the other hand, Section 13, Rule 39 provides:
How execution for the delivery or restitution of property enforced. The officer must enforce an execution for the
delivery or restitution of property by ousting therefrom the person against whom the judgment is rendered and placing
the judgment creditor in possession of such property, and by levying as hereinafter provided upon so much of the
property of the judgment debtor as will satisfy the amount of the judgment and costs included in the writ of execution.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the Sheriff is directed
to enforce the execution only of the money judgment in accordance with Section 15, Rule 39 of the Revised Rules of
Court.
SO ORDERED.

218

G.R. No. L-30982

January 31, 1930

THE PHILIPPINE NATIONAL BANK, plaintiff-appellant,

vs.
OLUTANGA LUMBER COMPANY, defendant-appellee.
Camus and Delgado for appellant.
Jose Erquiaga for defendant-appellee.
Araneta and Zaragoza for appellee Bank of the Philippine Islands.
VILLA-REAL, J.:
This appeal is taken by the Philippine National Bank from an order of the Court of First Instance of Manila, the
dispositive part of which is as follows:
The Philippine National Bank having appeared as an ordinary creditor in the involuntary insolvency of the Olutanga
Lumber Company, civil case No. 33048 of this court, claiming the sum attached by the sheriff, it thereby renounced its
preferred right acquired through garnishment issued in the present case; and for that reason, the motion of the Bank
of the Philippine Islands is hereby granted, and the sheriff of the City of Manila is hereby ordered to return to it the sum
deposited by virtue of the garnishment, after deducting therefrom his legal fees to which he has a perfect right
notwithstanding the result arrived at.
In support of its appeal, the appellant assigns the following alleged errors committed by the trial court in its judgment,
to wit:
1. The lower court erred in holding, in its said order of March 31, 1928, that appellant the Philippine National Bank had
waived its lien acquired by garnishment in the present case by joining as an unsecured creditor the petition for the
involuntary insolvency of the Olutanga Lumber Company.
2. The lower court erred in holding, in its said order of March 31, 1928, that the garnishment issued in the present
case referred only to P16,656.30, and in ordering the difference between said sum and the amount of P30,092.11
deposited with the sheriff of Manila to be returned to the Bank of the Philippine Islands after deducting the sheriff's
fees therefrom.
3. The lower court erred in denying the motion of the appellant of November 14, 1928.
The following facts are necessary and pertinent to resolve the questions raised in the present appeal:
In civil case entitled the Bank of the Philippine Islands, plaintiff and appellee, vs. Olutanga Lumber Company,
defendant and appellant, G. R. No. 27045,1 said plaintiff and appellee was ordered by this court to pay to the
aforesaid defendant and appellant a certain sum amounting to P31,242.11, Philippine currency. Upon the return of the
case to the Court of First Instance of Zamboanga, the corresponding writ of execution was issued, which was
complied with by the sheriff of said province by presenting it to the manager of the branch of the Bank of the Philippine
Islands in the City of Zamboanga, on January 10, 1928, but without levying execution on any property belonging to the
execution debtor. On the same date, the aforesaid sheriff addressed to the central office of said bank at Manila the
following telegram:
Execution Bank Philippine Islands versus Olutanga Lumber Company served today manager Zamboanga branch.
Please authorize him pay amount due defendant Olutanga Lumber plus sheriff fees otherwise levy will be made on
your Zamboaga office. LUIS PANAGUITON, Provincial Sheriff.
On the same date, January 10, 1928, before receiving the foregoing telegram, the central office of the Bank of the
Philippine Islands in Manila was notified by the sheriff of the City of Manila that all the credits and debts contracted by
it with the Olutanga Lumber Company, amounting to P16,656.30, plus the interest at the rate of 12 per cent per annum
from April 19, 1922 until fully paid, were levied upon in the name of the Philippine National Rank by virtue of a writ of
attachment issued in civil case No. 32936 of the Court of First Instance of Manila.
On the following day, January 11, 1928, the Bank of the Philippine Islands, in reply to said notice, addressed a letter to
the sheriff of the City of Manila, notifying the latter that, pursuant to his notice of attachment, it retained at the disposal
of said sheriff the aforesaid sum of P16,656.30, plus interest at the rate of 12 per cent per annum from April 19, 1922
until such date as may be designated.

219

On the same date, January 11, 1928, the sheriff of the City of Manila sent a letter to the Bank of the Philippine Islands
at Manila, requiring the latter to deliver to him the sum of P32,109,45, theretofore attached, belonging to the Olutanga
Lumber Company.
After the delivery to the sheriff of the City of Manila of the amount of the judgment in favor of the Olutanga Lumber
Company, rendered in civil case No. 1176 of the Court of First Instance of Zamboanga, G. R. No. 27045 of this court,
the Bank of the Philippine Islands notified the provincial sheriff of Zamboanga by telegram, on January 12, 1928, that
the amount of the judgment in favor of the Olutanga Lumber Company against said bank had been delivered to the
sheriff of the City of Manila, and that any question on that subject should be taken up with him.
On January 14, 1928, the provincial sheriff of Zamboanga sent a communication to the manager of the Bank of the
Philippine Islands in said city, notifying him that all the money he had in his possession or control, belonging to the
Bank of the Philippine Islands, was levied upon by virtue of an order of execution issued by the Court of First Instance
of Zamboanga in civil case No. 1176, entitled Bank of the Philippine Islands vs. Olutanga Lumber Company, G. R. No.
27045 of this court, copy of which order of execution was served upon him on January 10, 1928.
On January 14, 1928, the sheriff of the City of Manila sent a telegram to the sheriff of the Province of Zamboanga,
telling him that the amount of the judgment against the Bank of the Philippine Islands and in favor of the Olutanga
Lumber Company, which had been attached by virtue of two writs of attachment issued by the Philippine National
Bank and the Standard Oil company of New York against the Olutanga Lumber Company, had been deposited with
him by said Bank of the Philippine Islands.
Notwithstanding the fact that the provincial sheriff of Zamboanga had been duly informed of the levy made by the
sheriff of the City of Manila upon the funds of the Olutanga Lumber Company in possession of the herein appellee, the
Bank of the Philippine Islands, and of the delivery of said funds to said judicial officer of the City of Manila, he
attempted to collect from the branch of said Bank of the Philippine Islands at Zamboanga the amount of the judgment
in favor of the Olutanga Lumber Company, threatening to levy, and in fact did levy, an attachment against said branch.
In view of this act of the provincial sheriff of Zamboanga, the herein appellee, the Bank of the Philippine Islands, had
to file a petition for prohibition with this court against the Judge of the Court of First Instance of Zamboanga, the
provincial sheriff of said province and the Olutanga Lumber Company, docketed as G. R. No. 29043 of this court.
Upon hearing said petition, this court entered the following resolution on February 9, 1928:
Upon consideration of the petition filed in case G. R. No. 29043, Banco de las Islas Filipinas vs. J. Horilleno et al., and
of the answer interposed by the respondents in connection with the arguments adduced by both parties in their
memoranda and during the hearing of said case, and it appearing that the writ of execution complained of was issued
and served upon the petitioner before the latter received notice by the garnishment, and two days before he was
required by the sheriff of Manila to deliver the amount mentioned in the said garnishment proceedings, wherefore, the
respondent judge did not exceed its jurisdiction in issuing the aforesaid writ of execution, it is ordered that the petition
for a writ of prohibition be and is hereby denied, with costs against the petitioner. Mr. Justice Street took no part.
On February 10, 1928, the clerk of this court sent the following telegram to the provincial sheriff of Zamboanga:
Supreme Court denied writ of prohibition requested by Bank Philippine Islands to stop execution judgment in favor
Olutanga Lumber Company you may proceed with execution forthwith.
Upon receipt of the foregoing telegram, the provincial sheriff of Zamboanga sent the following letter to the manager of
the Bank of the Philippine Islands at Zamboanga:
SIR: With reference to the levy made by the undersigned on your office on January 14, 1928, in the sum of thirty-two
thousand pesos (P32,000), Philippine currency, to cover the amount claimed in the order of execution issued by the
Court of First Instance of Zamboanga in civil case No. 1176, "The Bank of the Philippine Islands vs. Olutanga Lumber
Company," and R. G. No. 27045, which levy has been suspended by order of the Honorable Supreme Court by virtue
of the writ of prohibition filed by the Bank of the Philippine Islands against the undersigned and others, I have the
honor to inform you that said writ of prohibition has been denied by the Supreme Court as per telegram received by
the undersigned, a copy of which is herewith inclosed.
In view thereof, and in pursuance of the order of execution above referred to, you are hereby ordered to deliver to the
undersigned, immediately upon your receipt hereof, the sum of thirty-one thousand five hundred ninety-six pesos and
eighty-three centavos (P31,596.83), Philippine currency, which is the amount recovered by the Olutanga Lumber
company in the Supreme Court including interests, costs and sheriff's fees.
Zamboanga, Zamboanga, February 11, 1928.
(Sgd.) LUIS PANAGUITON

220

Provincial Sheriff
In view of this urgent and peremptory demand of the provincial sheriff of Zamboanga, the manager of the Bank of the
Philippine Islands at Zamboanga had no other remedy than to deliver to the sheriff of Zamboanga the sum of
P31,596.83.
The only question necessary to be decided in this appeal is whether the funds placed by the Bank of the Philippine
Islands in possession of the sheriff of the City of Manila, which had been attached in the name of the Philippine
National Bank and against the Olutanga Lumber Company, had been released from said attachment when the
aforesaid Bank of the Philippine Islands, by judicial order, paid the judgment rendered by this court against the said
Bank of the Philippine Islands and in favor of the Olutanga Lumber Company.
We have seen that after the central office of the Bank of the Philippine Islands in the City of Manila had deposited with
the sheriff of the City of Manila the sum of P32,109.45, by virtue of a demand made upon it by the latter in compliance
with an order of attachment issued by the Court of First Instance of Manila in civil case No. 32936, wherein the
Philippine National Bank was and still is the plaintiff and the Olutanga Lumber Company was and still is the defendant,
which sum of P32,109.45 was the amount of the judgment rendered in civil case No. 1176 of the Court of First
Instance of Zamboanga, G. R. No. 27045 of this court, in favor of the Olutanga Lumber Company and against the
Bank of the Philippine Islands, said central office of the Bank of the Philippine Islands notified the provincial sheriff
of Zamboanga of said consignation; but the latter, notwithstanding the attachment of said amount by the sheriff of the
City of Manila, tried to collect from the branch office in Zamboanga of the Bank of the Philippine Islands the amount of
said judgment. Under the circumstances the Zamboanga branch had to resort to this court for a remedy to prevent
execution of said judgment. This court denied the remedy prayed for, and upon receipt of notice of said denial the
provincial sheriff of Zamboanga insisted in collecting from the Zamboanga branch of the Bank of the Philippine Islands
the amount of said judgment, which said bank had to pay. The general rule is that, where attached properties
belonging to the principal debtor are taken out of the hands of a person by legal process, after he had been notified of
the order of attachment, said person cannot be made to answer for the properties in a proceeding to carry out said
attachment (28 Corpus Juris, paragraph 362, page 264). In the present case, the fact that the funds attached in the
possession of the Bank of the Philippine Islands, belonging to the Olutanga Lumber Company, had been deposited
with the sheriff of the City of Manila by order of said officer, does not change the juridical situation of said funds as
attached in the possession of the Bank of the Philipine Islands, and, according to the above-quoted rule, the aforesaid
Bank of the Philippine Islands, having been judicially compelled to pay the amount of the judgment represented by
said funds to the Olutanga Lumber Company, after having employed all the legal means to avoid it, is released from all
responsibility to the Philippine National Bank in whose favor the writ of attachment was issued.
For the foregoing considerations, we are of the opinion, and so hold, that when a person has funds in his possession
belonging to a debtor, and said funds are attached by a creditor of the latter, said person is relieved from all
responsibility to said creditor if he is judicially compelled to deliver said funds to the aforesaid debtor.
Wherefore, the dispositive part of the order appealed from is affirmed in so far as it grants the motion of the Bank of
the Philippine Islands, and the sheriff of the City of Manila is hereby ordered to return to said bank the amount
deposited by virtue of the writ of attachment, after deducting his legal fees, with costs against the appellant. So
ordered.

221

G.R. No. L-60887

November 13, 1991

PERLA COMPANIA DE SEGUROS, INC., petitioner,

vs.
HON. JOSE R. RAMOLETE, PRIMITIVA Y. PALMES, HONORATO BORBON, SR., OFFICE OF THE PROVINCIAL
SHERIFF, PROVINCE OF CEBU, respondents.
Hector L. Fernandez for petitioner.
Domingo Quibranza and Vicente A. Quibranza for private respondents.

FELICIANO, J.:p
The present Petition for Certiorari seeks to annul: (a) the Order dated 6 August 1979 1 which ordered the Provincial
Sheriff to garnish the third-party liability insurance policy issued by petitioner Perla Compania de Seguros, Inc.
("Perla") in favor of Nelia Enriquez, judgment debtor in Civil Case No. R-15391; (b) the Order dated 24 October 1979 2
which denied the motion for reconsideration of the 6 August 1979 Order; and (c) the Order dated 8 April 1980 3 which
ordered the issuance of an alias writ of garnishment against petitioner.
In the afternoon of 1 June 1976, a Cimarron PUJ owned and registered in the name of Nelia Enriquez, and driven by
Cosme Casas, was travelling from Cebu City to Danao City. While passing through Liloan, Cebu, the Cimarron PUJ
collided with a private jeep owned by the late Calixto Palmes (husband of private respondent Primitiva Palmes) who
was then driving the private jeep. The impact of the collision was such that the private jeep was flung away to a
distance of about thirty (30) feet and then fell on its right side pinning down Calixto Palmes. He died as a result of
cardio-respiratory arrest due to a crushed chest. 4 The accident also caused physical injuries on the part of Adeudatus
Borbon who was then only two (2) years old.
On 25 June 1976, private respondents Primitiva Palmes (widow of Calixto Palmes) and Honorato Borbon, Sr. (father
of minor Adeudatus Borbon) filed a complaint 5 against Cosme Casas and Nelia Enriquez (assisted by her husband
Leonardo Enriquez) before the then Court of First Instance of Cebu, Branch 3, claiming actual, moral, nominal and
exemplary damages as a result of the accident.
The claim of private respondent Honorato Borbon, Sr., being distinct and separate from that of co-plaintiff Primitiva
Palmes, and the amount thereof falling properly within the jurisdiction of the inferior court, respondent Judge Jose R.
Ramolete ordered the Borbon claim excluded from the complaint, without prejudice to its being filed with the proper
inferior court.
On 4 April 1977, the Court of First Instance rendered a Decision 6 in favor of private respondent Primitiva Palmes,
ordering common carrier Nelia Enriquez to pay her P10,000.00 as moral damages, P12,000.00 as compensatory
damages for the death of Calixto Palmes, P3,000.00 as exemplary damages, P5,000.00 as actual damages, and
P1,000.00 as attorney's fees.
The judgment of the trial court became final and executory and a writ of execution was thereafter issued. The writ of
execution was, however, returned unsatisfied. Consequently, the judgment debtor Nelia Enriquez was summoned
before the trial court for examination on 23 July 1979. She declared under oath that the Cimarron PUJ registered in
her name was covered by a third-party liability insurance policy issued by petitioner Perla.
Thus, on 31 July 1979, private respondent Palmes filed a motion for garnishment 7 praying that an order of
garnishment be issued against the insurance policy issued by petitioner in favor of the judgment debtor. On 6 August
1979, respondent Judge issued an Order 8 directing the Provincial Sheriff or his deputy to garnish the third-party
liability insurance policy.
Petitioner then appeared before the trial court and moved for reconsideration of the 6 August 1979 Order and for
quashal of the writ of garnishment, 9 alleging that the writ was void on the ground that it (Perla) was not a party to the
case and that jurisdiction over its person had never been acquired by the trial court by service of summons or by any
process. The trial court denied petitioner's motion.10 An Order for issuance of an alias writ of garnishment was
subsequently issued on 8 April 1980. 11
More than two (2) years later, the present Petition for Certiorari and Prohibition was filed with this Court on 25 June
1982 alleging grave abuse of discretion on the part of respondent Judge Ramolete in ordering garnishment of the
third-party liability insurance contract issued by petitioner Perla in favor of the judgment debtor, Nelia Enriquez. The

222

Petition should have been dismissed forthwith for having been filed way out of time but, for reasons which do not
appear on the record, was nonetheless entertained.
In this Petition, petitioner Perla reiterates its contention that its insurance contract cannot be subjected to garnishment
or execution to satisfy the judgment in Civil Case No. R-15391 because petitioner was not a party to the case and the
trial court did not acquire jurisdiction over petitioner's person. Perla further argues that the writ of garnishment had
been issued solely on the basis of the testimony of the judgment debtor during the examination on 23 July 1979 to the
effect that the Cimarron PUJ was covered by a third-party liability insurance issued by Perla, without granting it the
opportunity to set up any defenses which it may have under the insurance contract; and that the proceedings taken
against petitioner are contrary to the procedure laid down in Economic Insurance Company, Inc. v. Torres, et al., 12
which held that under Rule 39, Section 45, the Court "may only authorize" the judgment creditor to institute an action
against a third person who holds property belonging to the judgment debtor.
We find no grave abuse of discretion or act in excess of or without jurisdiction on the part of respondent Judge
Ramolete in ordering the garnishment of the judgment debtor's third-party liability insurance.
Garnishment has been defined as a species of attachment for reaching any property or credits pertaining or payable
to a judgment debtor. 13 In legal contemplation, it is a forced novation by the substitution of creditors: 14 the judgment
debtor, who is the original creditor of the garnishee is, through service of the writ of garnishment, substituted by the
judgment creditor who thereby becomes creditor of the garnishee. Garnishment has also been described as a warning
to a person having in his possession property or credits of the judgment debtor, not to pay the money or deliver the
property to the latter, but rather to appear and answer the plaintiff's suit. 15
In order that the trial court may validly acquire jurisdiction to bind the person of the garnishee, it is not necessary that
summons be served upon him. The garnishee need not be impleaded as a party to the case. All that is necessary for
the trial court lawfully to bind the person of the garnishee or any person who has in his possession credits belonging to
the judgment debtor is service upon him of the writ of garnishment.
The Rules of Court themselves do not require that the garnishee be served with summons or impleaded in the case in
order to make him liable.
Rule 39, Section 15 provides:
Sec. 15.
Execution of money judgments. The officer must enforce an execution of a money judgment by
levying on all the property, real or personal of every name and nature whatsoever, and which may be disposed of for
value, of the judgment debtor not exempt from execution . . .
Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal
property, may be levied on in like manner and with like effect as under a writ of attachment. (Emphasis supplied).
Rule 57, Section 7(e) in turn reads:
Sec. 7. Attachment of real and personal property; recording thereof. Properties shall be attached by the officer
executing the order in the following manner:
xxx

xxx

xxx

(e)
Debts and credits, and other personal property not capable of manual delivery, by leaving with the person
owing such debts, or having his possession or under his control such credits or other personal property, or with his
agent, a copy of the order, and notice that the debts owing by him to the party against whom attachment is issued, and
the credits and other personal property in his possession, or under his control, belonging to said party, are attached in
pursuance of such order;
xxx

xxx

xxx

(Emphasis supplied)
Through service of the writ of garnishment, the garnishee becomes a "virtual party" to, or a "forced intervenor" in, the
case and the trial court thereby acquires jurisdiction to bind him to compliance with all orders and processes of the trial
court with a view to the complete satisfaction of the judgment of the court. In Bautista v. Barredo, 16 the Court, through
Mr. Justice Bautista Angelo, held:
While it is true that defendant Jose M. Barredo was not a party in Civil Case No. 1636 when it was instituted by
appellant against the Philippine Ready Mix Concrete Company, Inc., however, jurisdiction was acquired over him by

223

the court and he became a virtual party to the case when, after final judgment was rendered in said case against the
company, the sheriff served upon him a writ of garnishment in behalf of appellant. Thus, as held by this Court in the
case of Tayabas Land Company vs. Sharruf, 41 Phil. 382, the proceeding by garnishment is a species of attachment
for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. By means of
the citation, the stranger becomes a forced intervenor; and the court, having acquired jurisdiction over him by means
of the citation, requires him to pay his debt, not to his former creditor, but to the new creditor, who is creditor in the
main litigation. (Emphasis supplied).
In Rizal Commercial Banking Corporation v. De Castro, 17 the Court stressed that the asset or credit garnished is
thereupon subjected to a specific lien:
The garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property a
lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia legis,
under the sole control of such
court. 18 (Emphasis supplied)
In the present case, there can be no doubt, therefore, that the trial court actually acquired jurisdiction over petitioner
Perla when it was served with the writ of garnishment of the third-party liability insurance policy it had issued in favor
of judgment debtor Nelia Enriquez. Perla cannot successfully evade liability thereon by such a contention.
Every interest which the judgment debtor may have in property may be subjected to execution.19 In the instant case,
the judgment debtor Nelia Enriquez clearly had an interest in the proceeds of the third-party liability insurance
contract. In a third-party liability insurance contract, the insurer assumes the obligation of paying the injured third party
to whom the insured is liable. 20 The insurer becomes liable as soon as the liability of the insured to the injured third
person attaches. Prior payment by the insured to the injured third person is not necessary in order that the obligation
of the insurer may arise. From the moment that the insured became liable to the third person, the insured acquired an
interest in the insurance contract, which interest may be garnished like any other credit. 21
Petitioner also contends that in order that it may be held liable under the third-party liability insurance, a separate
action should have been commenced by private respondents to establish petitioner's liability. Petitioner invokes
Economic Insurance Company, Inc. vs. Torres, 22 which stated:
It is clear from Section 45, Rule 39 that if a persons alleged to have property of the judgment debtor or to be indebted
to him claims an interest in the property adverse to him or denies the debt, the court may only authorize the judgment
creditor to institute an action against such person for the recovery of such interest or debt. Said section does not
authorize the court to make a finding that the third person has in his possession property belonging to the judgment
debtor or is indebted to him and to order said third person to pay the amount to the judgment creditor.
It has been held that the only power of the court in proceedings supplemental to execution is to niake an order
authorizing the creditor to sue in the proper court to recover an indebtedness due to the judgment debtor. The court
has no jurisdiction to try summarily the question whether the third party served with notice of execution and levy is
indebted to defendant when such indebtedness is denied. To make an order in relation to property which the
garnishee claimed to own in his own right, requiring its application in satisfaction of judgment of another, would be to
deprive the garnishee of property upon summary proceeding and without due process of law. (Emphasis supplied)
But reliance by petitioner on the case of Economic Insurance Company, Inc. v. Torres (supra) is misplaced. The Court
there held that a separate action needs to be commenced when the garnishee "claims an interest in the property
adverse to him (judgment debtor) or denies the debt." In the instant case, petitioner Perla did not deny before the trial
court that it had indeed issued a third-party liability insurance policy in favor of the judgment debtor. Petitioner
moreover refrained from setting up any substantive defense which it might have against the insured-judgment debtor.
The only ground asserted by petitioner in its "Motion for Reconsideration of the Order dated August 6, 1979 and to
Quash Notice of Garnishment" was lack of jurisdiction of the trial court for failure to implead it in the case by serving it
with summons. Accordingly, Rule 39, Section 45 of the Rules of Court is not applicable in the instant case, and we see
no need to require a separate action against Perla: a writ of garnishment suffices to hold petitioner answerable to the
judgment creditor. If Perla had any substantive defenses against the judgment debtor, it is properly deemed to have
waived them by laches.
WHEREFORE, the Petition for Certiorari and Prohibition is hereby DISMISSED for having been filed out of time and
for lack of merit. The assailed Orders of the trial court are hereby AFFIRMED. Costs against petitioner. This Decision
is immediately executory.
SO ORDERED.

224

225

G.R. No. L-9802

February 5, 1916

TEC BI & CO., plaintiff-appelle,

vs.
THE CHARTERED BANK OF INDIA, AUSTRALIA & CHINA, defendant-appellant.
Gibbs, McDonough and Blanco for appellant.
Herrero and Masigan for appellee.
CARSON, J.:
The following statement of the facts upon which this case was submitted in the court below is taken literally from the
brief of counsel for the appellant:
This is an action to recover from the defendant bank the sum of P11,572.96, the amount of a judgment recovered by
the plaintiff against "La Urania Cigar Factory (Ltd.)," and for which the plaintiff seeks to hold the defendant liable by
virtue of an attempted levy of attachment upon certain leaf tobacco in the possession of the defendant bank under a
pledge executed by the said "La Urania Cigar Factory (Ltd.)." The Tobacco being pledged for an amount largely in
excess of its value, the bank refused to deliver it to the sheriff, and the pledge having become due, sold the tobacco
and applied the proceeds on account of the indebtedness, previous to the time when the plaintiff finally secured
judgment against "La Urania Cigar Factory (Ltd.)." and issued execution thereon.
The case was submitted upon a stipulation of facts as follows:
It is hereby agreed that all the facts contained in paragraphs 1, 2, 3, and 4 of the complaint are true, with the exception
of that part of the first five lines of paragraph 2, which alleges that the plaintiff had notice that some of the bales of
tobacco in leaf which were sold to the "La Urania Cigar Factory (Ltd.)," were attempted to be sold for the manifest
purpose of defrauding the plaintiff.
Referring to the answer of defendant corporation it stipulated that the allegations of paragraphs 2, 3, 4, 5, and 6 are
true.
The defendant corporation offers in evidence the original contract of pledge marked Exhibit 1, as part of this
stipulation.
With reference to the admission of the contents of paragraph 3 of the answer, it is understood that the word "neutral" is
eliminated.
From the allegations of the complain and answer admitted to be true in conformity with the foregoing stipulation, it
appears:
(1)
That on the 7th of November 1912, the plaintiff sold to the "La Urania Cigar Factory (Ltd.)," a quantity of leaf
tobacco. (Paragraph 1 of complaint.)
(2)
That on the 16th January, 1913, the "La Urania Cigar Factory (Ltd.)," pledged to the defendant corporation as
security for the payment of an indebtedness of P25,000 the bales of tobacco described in Exhibit A of the answer, the
original of which has been offered in evidence in connection with the stipulation of facts as Exhibit 1.
(3)
That the bales of tobacco thus pledged and described in Exhibit 1 were stored in the bodega of a third person,
that is to say, in the bodega of Messrs. Sprungli & Co., situated at No. 42 (now No. 214) of Calle David, Manila.
(Paragraph 3 of answer.)
(4)
That on or about the 1st day of February, 1913, the defendant corporation demanded of the obtained from
Messrs. Sprungli & Co. the keys to the said bodega, and discovered that of the 436 bales of tobacco described in
Exhibit 1 there remained only those set forth in paragraph 4 of the answer. (Paragraph 4 of answer.)
(5)
That the defendant bank did not know and had been unable to ascertain whether "La Urania Cigar Factory
(Ltd.)," misrepresented the quantity of the tobacco in the said warehouse at the time of the execution of said document
of pledge, or whether the difference between the amount described in the document of pledge and that found on hand
on the 1st of February, 1913, and in the meantime been disposed of by "La Urania Cigar Factory (Ltd.)," in collusion
with Messrs. Sprungli & Co., but that if such disposition was made it was without the knowledge or consent of the
defendant bank. (Paragraph 5 of answer.)

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(6)
That from said 1st day of February, 1913, the defendant corporation had been in the absolute and exclusive
possession of the tobacco described in the fourth paragraph of the answer and in Exhibit 1 of the stipulation of facts,
until the 15th of May, 1913, when same was sold under and by virtue of the document of pledge Exhibit 1 by the
defendant bank for the sum of P12,722.36 which was applied on account of said loan, the entire amount of which was
then past due and unpaid, leaving a large balance thereof still due and unpaid. (Paragraph 6 of answer.)
(7)
That on the 22nd day of April, 1913, the plaintiff Tec Bi & Co., filed a complaint in the Court of First Instance of
Manila against "La Urania Cigar Factory (Ltd.)," claiming the payment of the sum of P11,572.96 as the balance of the
unpaid purchase price of the tobacco referred to in paragraph 2. (Paragraph 1 of complaint.)
(8)
That on the 5th day of May, 1913, Tec Bi & Co. asked for and obtained from the Court of First Instance an
attachment against the said bales of tobacco, but inasmuch as the bodega was locked and the sheriff was informed
that the keys were in the possession of the bank, he demanded the delivery thereof from the latter, which demand was
refused by the bank, alleging that it held possession of the tobacco under a pledge. (Paragraph 2 of complaint.)
(9)
That in view of the statement of the bank, the sheriff notified it that the bales of tobacco identified in Exhibit A
of the complaint were attached subject to the results of the complaint were attached subject to the results of the
complaint filed by Tec Bi & Co. against "La Urania Cigar Factory (Ltd.)," (Paragraph 2 of complaint.)
(10)
That on the 8th day of May, 1913, the bank answered the notification of the sheriff, confirming the fact that it
had in its possession the bales of tobacco specified in the notification, as security for the payment of a loan and that it
intended to sell the same; that the sheriff communicated the answer of the bank to the attorneys to Tec Bi & Co., who
replied insisting upon the levy of the attachment. (Paragraph 3 of complaint.)
(11)
That on the 19th day of May, 1913, the Court of First Instance rendered judgment in said case against "La
Urania Cigar Factory (Ltd.)," in favor of Tec Bi & Co., for the sum of P11,572.96, with legal interest from April 22, 1913,
and costs. (Paragraph 4 of complaint.)
(12)
That on the 22d day of May, 1913, the sheriff attempted to execute the judgment upon the bales of tobacco
attached and in the possession of the defendant corporation, but was unable to do so due to the statement of the
agent of said corporation, that the tobacco had been sold and that the proceeds of the sale had been applied upon the
payment of the amount due to from "La Urania Cigar Factory (Ltd.)," (Paragraph 4 of complaint.)
The case having been submitted on the foregoing stipulation of facts, the Court of First Instance found that the
plaintiff's claim was a preferred credit under the provisions of paragraph 1 of article 1922 of the Civil Code; that the
pledge executed by "La Urania Cigar Factory (Ltd.)," in favor of the defendant corporation (Exhibit 1) was not binding
upon the plaintiff for the reason that it was not set forth in a public instrument as required by article 1865 of the Civil
Code in order to be effective against, third person, and rendered judgment in favor of the plaintiff and against the
defendant for the amount of the former's judgment against "La Urania Cigar Factory (Ltd.)," with interest and costs.
(Pages 17 to 23, inclusive, bill of exceptions.)
From this judgment the defendant corporation appeals, assigning the following errors:
ASSIGNMENT OF ERRORS
I.
The court erred in holding that the plaintiff's claim as vendor of the tobacco was entitled to preference over
that of the defendant bank secured by a pledge on the same tobacco.
II.
The court erred in applying article 1865 of the Civil Code to the defendant's pledge, and in holding that such
pledge was ineffective as to the plaintiff.
III.
The court erred in holding that the plaintiff was a third person as contemplated by that term in article 1865 of
the Civil Code.
IV.
Assuming that article 1865 is applicable to the transaction in question, the court erred in holding that the
plaintiff did not waive any defect in the private instrument of pledge by expressly admitting its genuineness and the
correctness of its date by stipulation, and by failure to object to its introduction in evidence.
V.
The court erred in rendering judgment in favor of the plaintiff and against the defendant, and in denying the
latter's motion for a new trial.
It will readily be seen that our disposition of this appeal must turn upon the force and effect which should be given the
instrument referred to in the statement of facts as the "original contract of pledge marked Exhibit 1."

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Plaintiff's contention is that under the provisions of clause 1 of article 1922, his right as a preferred creditor for the
amount of the purchase price of the tobacco was not prejudice and could not be prejudiced by the pledge of the
tobacco to the defendant, since the date of the contract of pledge is not evidenced by a public document; and, further,
that he had a perfect right to attach the tobacco in the course of judicial proceedings for the recovery of his claim
against the pledgor, for the purchase price of the tobacco pledged to the defendant bank.
The defendant bank, on the other hand, contends that under the provisions of clause 2 of article 1922 of the Civil
Code read together with clause 1 of section 1926, the right of preference in favor of the bank, to which the tobacco
had been pledged by the common debtor, excluded the preference in favor of the plaintiff; and that plaintiff could not
rely on the provisions of article 1865 of the Code, because he was not a "third person" in the sense in which these
words are used in that article.
Clauses 1 and 2 of article 1922 of the Civil Code are as follows:
1922.

With regard to the specified personal property of the debtor, the following are preferred:

1.
Credits for the construction, repair, preservation, or for the amount of the sale of personal property which may
be in the possession of the debtor to the extent of the value of the same.
2.
Those secured by a pledge which may be in the possession of the creditor, with regard to the thing pledged
and to the extent of its value.
Clause 1 of article 1926 of the Civil Code is as follows:
1926. Credits which enjoy preference with regard to certain personal property, exclude all the other to the extent of
the value of the personal property to which the preference refers.
When two or more, creditors claim preference with regard to certain personal property, the following rules shall be
observed as to priority of payment:
1.

Credits secured by a pledge exclude all other to the extent of the value of the thing given in pledge.

Article 1865 of the Civil Code is as follows:

A pledge shall not be effective against a third person, when evidence of its date does not appear in a public
instrument.
Under these provisions of the Code there can be no doubt that had the date of the contract of pledge been evidenced
by a public document, the preferential right of the pledgee would have been superior to and excluded all and any
preferential rights of the vendor. We so held in Macke and Macke vs. Rubert (11 Phil., 480).
The pledge contract (Exhibit 1) is before us, however, and it is admitted that the date is not evidenced by a public
instrument. It cannot therefore be permitted to prejudice the rights of the vendor of the tobacco if he is a "third person:
in the sense in which that term is used in the above-cited article 1865 of the code.
It cannot be doubted that with relation to the pledgor and the pledgee the original vendor of the goods was a third
person. The words are not susceptible of any possible explanation which would exclude him. He had no privity with
either of the parties to the pledge contract. He had no knowledge of the execution of that contract. He did not
participate in it in any way whatever. His rights so far as they affected the pledged property, were adverse to both
pledgor and pledgee. In a word he was as to them a third person.
It necessarily follows that since the execution of the pledge in favor of the defendant bank without the date of
execution being evidenced by a public instrument could have no effect as again the plaintiff, he was strictly within his
rights in asserting his claims as a preferred creditor and in levying an attachment against the tobacco; and the
defendant bank could not lawfully assert any right as a pledgee or preferred creditor which adversely affected the
rights of the plaintiff in the premises.
To these conclusions a number of objections have been raised, none of which, however, will bear close inspection.
It is said that even though the date of the defendant bank's pledge is not evidenced in a public document, still the
delivery of the tobacco into the possession of the bank defeated the right of the plaintiff to a preference. This
contention is based on the provision of article 1922 which limits the preference for the purchase price of goods sold to
the time during which they continue in the possession of the purchaser.

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To this contention there are two sufficient answers.

First. While the contract of pledge and the delivery of the tobacco undoubtedly created a valid pledge as between the
pledgor and the pledgee, so that the pledgor himself could not disturb the possession of the pledgee; still, with relation
to third person, the possession of the bank must be deemed to be that of the purchaser of the tobacco, since under
the provisions of article 1865 of the Code, the execution of the pledge could not affect the right of third person. As to
third persons the pledge and the pledged property must be treated as if the pledge never had been executed.
Second. Even if it were true that the plaintiff had lost his statutory right of preference as a result of the execution of the
pledge and the delivery of possession to the bank, still he had a perfect right to levy an attachment on the tobacco
pending his action to recover the amount of the pledgor's indebtedness, unless the execution of the pledge had the
effect of depriving him of that right. But it is very clear that under the express provisions of article 1865 of the code no
such effect could be given the pledge.
Much is made in the brief of the appellant of the fact that one of the allegations of the answer set forth that at the date
of the issuance of the attachment the defendant bank was in the absolute and exclusive possession of the tobacco in
question; and that the truth of this allegation was admitted in the agreed statement of facts.
The defendant's answer contains a series of allegations setting forth the precise nature and character of the
possession of the tobacco by the bank, and of all the circumstances under the by virtue of which the bank came into
possession; and there is attached to the answer, as an exhibit a copy of the pledge contract itself. We have shown that
accepting these allegations as true, the possession of the bank was not absolute and exclusive in the sense that it
could in any wise affect the right of another credit of the common debtor, a "third person" with relation to the pledge
contract, to levy an attachment upon the tobacco. We must conclude therefore that the stipulation as to the truth of the
allegation of the answer that the possession of the tobacco by the bank was "absolute and exclusive" was intended
only to mean that it was "absolute and exclusive" so far as the pledgor himself was concerned; or else that the
stipulation as to the truth of the allegations of the answer did not include this averment as to the "absolute and
exclusive" possession of the tobacco by the bank it being merely a conclusion of law, based upon the other allegations
of facts alleged by the pleader.
A general admission of the truth of the allegations set forth in a pleading is not an admission of the truth of an
impossible conclusion of fact drawn from other facts set out in the pleading, nor of a wrong conclusion of law based on
the allegations of fact well pleaded, nor of the truth of a general averment of facts contradicted by more specific
averments. Thus, if a pleader alleges that two pesos were borrowed on one day and two more borrowed on another
making five Pin all, a stipulation of the truth of the allegations in the pleading does not amount to an admission by the
opposing party that twice two make five. Again if a pleader alleges that one hundred pesos were loaned without
interest for one year and had not been paid, and that the borrower is indebted to the lender in the sum of one hundred
and ten pesos, that being the amount of the capital together with interest for the year for which the money was loaned,
a stipulation as to the truth of the allegation set forth in the pleadings is not an admission of the truth of the conclusion
of law as to the interest due by the borrower. These elementary principles have been quite fully developed in a great
variety of cases arising on demurrers, and sufficiently dispose of the attempt of counsel to fix the attention of the court
upon this single averment of the answer, apart from the context and to the exclusion of the specific allegations of fact,
the truth of which, as stipulated by the parties, cannot be questioned. (Cf. 144 U.S., 751; 97 Ala., 491 2; 31 Cyc., 333337; 6 Encyc. Pl. & Pr., 334-338.)
One other contention of counsel for the appellant remains to be considered. It is that on which his fourth assignment of
error is based. Counsel insist that "assuming that article 1865 is applicable to the transaction in question, the court
erred in holding that the plaintiff did not waive any defect in the private instrument of pledge by expressly admitting its
genuineness and the correctness of its date by stipulation, and by failure to object to its introduction in evidence."
This contention rests on a misconception of the real purpose and object of the provisions of article 1865 of the code.
This article is not a mere rule of adjective law, prescribing the mode whereby proof may be made of the date of a
contract of pledge. It is a rule of substantive law, prescribing a condition without which the execution of a pledge
contract cannot affect third person adversely.
The plaintiff in this action does not question the truth of the bank's allegations that the pledge contract was executed
on the day on which it purports on its face to have been signed and delivered. There is no suggestion of bad faith or
sharp practice on the part of either the pledgor or pledgee in the execution of the pledge. Under the circumstances
plaintiff had no reason to object to the introduction of evidence which tended direct to establish his claim that although
the pledge had been executed as alleged by the defendant bank, it could not affect his rights on the premises. On the
contrary he must have welcomed the introduction of this evidence, which conclusively established the very point upon
which his whole case necessarily turns.

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Plaintiff stands strictly on the rule of substantive law laid down in this article of the code which declared that this rights,
as a "third person," cannot be adversely affected by a pledge the date of which is not evidenced in a public document.
His right so to do cannot be successfully challenged; and indeed we are inclined to think that the equities of the case,
as far as they appear from the record, are with the vendor of a large quantity of tobacco, in his effort to recover the
unpaid purchase price, rather than the creditor, who succeeded in having the debtor who had failed to pay the
purchase price of this tobacco, bought on credit, turn it over to him by way of a pledge to secure the payment of a
preexisting debt.
What has been said would seem to dispose of all the contentions of the appellant; but at the risk of extending this
opinion to an undue length, we here insert the comment of a learned Spanish commentator (Manresa) on the
provisions of article 1865 of the code, because he seems to have anticipated every contention of appellant in this
case, and the citation demonstrates quite conclusively that the plaintiff is entitled to rely on his rights in the premises
as a "third person," who cannot be adversely affected by the execution of a pledge in the manner and form in which
the pledge to the defendant bank was made.
Article 1865. A pledge will not be valid against a third party if the certainty of the date is not expressed in a public
instrument.
This article, the precept of which did not exist in our old law, answers the necessity for not disturbing the relationship
or the status of the ownership of things with hidden or simulated contract of pledge, in the same way and for the
identical reasons that were taken into account by the mortgage law in order to suppress the implied and legal
mortgages which produced so much instability in real property.
Considering the effects of a contract of pledge, it is easily understood that, without this warranty demanded by law, the
case may happen wherein a debtor in bad faith from the moment that he sees his movable property in danger of
execution may attempt to withdraw the same from the action of justice and the reach of his creditors by simulating,
through criminal confabulations, anterior and fraudulent alterations in his possession by means of feigned contract of
this nature; and, with the object of avoiding or preventing such abuses, almost all the foreign writers advise that for the
effectiveness of the pledge, it be demanded as a precise condition that in every case the contract be executed in a
public writing, for, otherwise, the determination of its date will be rendered difficult and its proof more so, even in cases
in which it is executed before witnesses, due to the difficulty to be encountered in seeking those before whom it was
executed.
Our code has not gone so far, for it does not demand in express terms that in all cases the pledge be constituted or
formalized in a public writing, nor even in private document, but only that the certainty of the date be expressed in the
first of the said class of instruments in order that it may be valid against a third party; and, in default of any express
provision of law, in the cases where no agreement requiring the execution in a public writing exists, it should be
subjected to the general rule, especially to that established in the last paragraph of article 1280, according to which all
contracts not included in the foregoing cases of the said article should be made in writing even though it be private,
whenever the amount of the prestation of one or of the two contracting parties exceeds 1,500 pesetas.
The pledge, therefore, can be constituted in whatever form, as all other contracts, and the one formalized in that way
will be valid and will produce its natural and legal consequences in the juridical order with respect to the contracting
parties and to their assigns; but it will not have effect with respect to a third party if the certainty of the date is not
evidenced in a public writing, by which means the legislator has tried to render impossible the existence of the
fraudulent confabulations which we have hereinbefore indicated as otherwise possible.
That is to say, what the law wishes in the precept that we are examining is to impose the existence, not only of an
efficacious and authentic means of proof of the constitution of a pledge, but also of a security of its certainty and the
reality of the pledge in order to avoid frauds and damages to the creditors, arising from the bad faith of the debtor;
something like the inscription of the mortgage in the Registry of Property, as has been said by an author, although with
less warranties than this one.
Some authors criticise the limitations in the wording of the article insofar as it does not demand an identical expression
respecting the other essential circumstances of the contract, they upholding the necessity or at lest the convenience of
expressing in the public instrument principally the debt for the security of which the pledge is constituted, the date of
debt, the designation of the thing pledged, the period during which the accessory obligation is contracted form, with all
the other stipulations which constitute the essence of the contract. But his should not be imposed by the law but by the
private interest which is the only one affected, and for the same reason, a like determination should be demanded in
all contracts.
The only thing in this case that could interest or concern the legislator would be to prevent or to make impossible any
simulation or fraud, supposing the existence of fraudulent pledged to be to the prejudice of third parties and to that
end, it is sufficient that the date of its constitution be evidenced with all certainty in a public instrument. Any thing else

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would amount to an attempt against the principle of liberty with which contract of the modern legislation are inspired,
placing obstacles to it by demanding the execution in every case of a public writing, a thing which though it constitutes
a worthy and just aspiration, yet, ca not take precedence over the will and the freedom of the contracting parties.
Hence, any one who may wish to constitute a pledge in a private document or verbally, if the prestations of the parties
do not exceed 1,500 pesetas, can validly make it; but the contract celebrated will not prejudice a third party while the
requisite of the execution of a public instrument referred to in the article is not complied with.
There exists another reason which justifies the precept we are discussing. In fact, from the contract of pledge arises
the preference established in No. 2 of article 1922, respecting the credits guaranteed by the thing pledged which is in
the possession of the creditor, up to the amount of its value, which preference may be opposed against third parties;
and, in order that the latter may not be prejudiced, it is necessary that the date of the contract be expressed in a true,
indubitable and authentic manner and that it be certain to the end that even the bare possibility of fraud and of
collusion between the creditor keeping the pledge and the debtor owner thereof may be excluded.
What has been said necessitates the entry of judgment affirming the judgment entered in the court below, with the
costs of this instance against the appellant.
Let judgment be entered accordingly. So ordered.

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G.R. No. 73976 May 29, 1987

THE CONSOLIDATED BANK and TRUST CORPORATION (SOLIDBANK), petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, GOLDEN STAR INDUSTRIAL CORPORATION, NICOS INDUSTRIAL
CORPORATION and THE PROVINCIAL SHERIFF OF BULACAN, respondents.
C.M. Delos Reyes and Associates for petitioner.
Magtanggol C. Gunigundo and Fajardo Law office for respondents.

GUTIERREZ, JR., J.:

The basic issue for resolution in this petition for review of the December 13, 1985 decision of the Intermediate
Appellate Court, now the Court of Appeals, as well as the resolution of March 13, 1986 denying the motion for
reconsideration, is whether or not an attaching creditor acquires the right of redemption of a debtor over the attached
properties of the latter which are subsequently extrajudicially foreclosed by third parties.
Briefly, the facts are as follows: Originally, petitioner Consolidated Bank and Trust Corporation (SOLIDBANK) loaned
private respondent NICOS Industrial Corporation (NICOS) sums of money in the total amount of FOUR MILLION
SEVENTY SIX THOUSAND FIVE HUNDRED EIGHTEEN AND 64/100 PESOS (P4,076,518.64).
Subsequently, NICOS failed to pay back the loan prompting SOLIDBANK to file a collection case before the Court of
First Instance of Manila, Branch XXIX. The case was docketed as Civil Case No. 82-11611.
On August 30, 1982, the court in the aforecited case issued an order of attachment " ... upon the rights, interests and
participation of which defendants NICOS Industrial Corporation ... may have in Transfer Certificate of Title No. T210581 (T-32.505 M) and Transfer Certificate of Title No. T-10580 (T-32.504 M) (Annexes "B", "B-1", "B-2" and "B-3"
of petition).
On September 1, 1982, pursuant to the writ of attachment issued by the Court and upon petitioner's posting of
sufficient bond, the Sheriff of Manila levied and attached the two real properties described by the foregoing order of
attachment, including the buildings and other improvements thereon. Afterwards, the Sheriff sent separate Notices of
Levy Upon Realty to the Registrar of Deeds of Malolos, Bulacan, dated September 1, 1982 requesting him "to make
the proper annotation in the books of your office" by virtue of the order of attachment dated August 30,1982 issued by
the Manila Court in Civil Case No. 82-11611.
Accordingly, on September 7, 1982, the Registrar of Deeds of Malolos, Bulacan, pursuant to the request of the Manila
Sheriff, inscribed and annotated the Notices of Levy Upon Real Property at the back of Transfer Certificates of Title
Nos. T-210581 (T-32.505 M) and T-210580 (T-32.504 M).
Pursuant to the foregoing ng inscription and annotations, guards were deputized by the Manila Sheriff to secure the
premises of the two attached realties.
A year later, however, on July 11, 1983, the attached properties which had been mortgaged by NICOS to the United
Coconut Planters Bank (UCPB) on March 11, 1982, were extrajudicially foreclosed by the latter. As the highest bidder
therein, a certificate of sale was issued to it by the Sheriff of Bulacan over the subject realties including the buildings
and improvements thereon.
Surprisingly, two transactions occurred soon thereafter, both on August 29, 1983. First, UCPB sold all of its rights,
interests, and participation over the properties in question to a certain Manuel Go; Second, Manuel Go sold all the
rights he acquired from UCPB over the same lots on that very same day to private respondent Golden Star Industrial
Corporation (GOLDEN STAR).
Barely a month later, on October 5, 1983, respondent NICOS, though fully aware that it still had the right to redeem
the auctioned properties within the one year period of redemption from July 11, 1983, suddenly executed a document
entitled "Waiver of Right of Redemption" in favor of respondent GOLDEN STAR.
On September 15, 1983, GOLDEN STAR filed a petition for the issuance of a writ of possession over the subject
realties before the Regional Trial Court, Branch VI of Malolos, Bulacan.

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On November 4, 1983, the Malolos Court granted GOLDEN STAR's petition for a writ of possession and issued the
writ. In accordance with these orders, armed men of GOLDEN STAR forcibly took over the possession of the
properties in dispute from the guards deputized by the Sheriff of Manila to secure the premises.
Thus on November 21, 1983, petitioner SOLIDBANK, on the strength of its prior attachment over the lands in question
filed with the Malolos court an omnibus motion to annul the writ of possession issued to GOLDEN STAR and to punish
for contempt of court the persons who implemented the writ of possession with the use of force and intimidation.
The respondents NICOS and GOLDEN STAR, filed oppositions to the foregoing omnibus motion, the former on the
basis of the waiver of its right of redemption to GOLDEN STAR, and the latter on its alleged ignorance that the lands in
question were under custodia legis, having been attached by the Sheriff of Manila.
On June 9, 1984, the Malolos Court issued an order denying the omnibus motion, the decretal portion of which is as
follows:
WHEREFORE, the Omnibus Motion of movant Consolidated Bank and Trust Corporation to annul the writ of
possession issued by this Court in favor of Golden Star Industrial Corporation and to cite for contempt those who
fraudulently secured and unlawfully implemented the writ of possession is hereby DENIED for lack of merit. (p. 8 of
the Brief for the Complainant-Oppositor-Appellant in AC-G.R. CV No. 04398 [p.118, Rollo])
The petitioner SOLIDBANK forthwith interposed an appeal before the Intermediate Appellate Court arguing inter alia
that the properties were under custodia legis, hence the extrajudicial foreclosure and the writ of possession were null
and void, and that the right of NICOS to redeem the auctioned properties had been acquired by SOLIDBANK.
On December 13, 1985, the Intermediate Appellate Court rendered its assailed decision "finding no merit in this
appeal and affirming in toto the appealed order of June 9, 1984, ruling that "the properties in issue ... were not in
custodia legis at the time of the extrajudicial foreclosure."
The petitioner moved for reconsideration, arguing that its writ of attachment over the properties in question was duly
registered in the Register of Deeds of Malolos, Bulacan, and that the right to redeem said properties should be
retained or given back to SOLIDBANK as attaching creditor.
On March 13, 1986, the Intermediate Appellate Court promulgated its resolution denying the motion for
reconsideration for lack of merit.
Hence this petition for review, on the grounds that respondent appellate court decided the case contrary to law and
applicable decisions of the Supreme Court, and has departed from the accepted and usual course of judicial
proceedings as to call for an exercise of the power of supervision of this Court.
The fundamental question herein, which is determinative of the other issues, is whether or not the subject properties
were under custodia legis by virtue of the prior annotation of a writ of attachment in petitioner's favor at the time the
properties were extrajudicially foreclosed.
We rule in the affirmative on the following grounds:
First of all, the records show (specifically Annexes "B," "B-1" to "B-3" of the petition) that on September 1, 1982, the
Sheriff of Branch XXIX of the Court of First Instance of Manila, sent separate Notices of Levy Upon Realty to the
Registrar of Deeds of Malolos Bulacan, requesting him "to make the proper annotation in the books of your office," "by
virtue of an order of attachment issued in Civil Case No. 82-11611 dated August 30, 1982, ... upon the rights, interests,
and participation of which defendant NICOS Industrial Corporation in this case may have in ... ."Transfer Certificate of
Title No. T-210581 (T-32.505 M) and Transfer Certificate of Title No. T-210580 (T-32,505 M).
Secondly, and more significant, the records clearly show (page 4, Annex "D" of petition) that the Registrar of Deeds of
Malolos, Bulacan, on September 7, 1982, inscribed and annotated the foregoing Notices of Levy at the back of
Transfer Certificate of Title Nos. 210580 and 210581, to wit:
TRANSFER CERTIFICATE OF TITLE
No. T-210580 (T-32.504 M)
Entry No. 79524 (M): Kind; NOTICE OF LEVY UPON REALTY, Executed in favor of the CONSOLIDATED BANK AND
TRUST CORPORATION (SOLIDBANK);-Plaintiff; Conditions: Notice is hereby given that by virtue of an Order of
Attachment issued by the C.F.I. of Manila, Branch XXIX, in Civil Case No. 82-11611, all the rights, interest and

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participation of NICOS INDUSTRIAL CORPORATION-Defendant over the herein described lot is hereby levied upon
attached.; Date of Instrument: September 1, 1982; Date of Inscription: September 7, 1982 at 2:35.
Meycauayan, Bulacan.
(SGD.) VIOLETA R. LINCALLO GARCIA
Branch Register of Deeds
TRANSFER CERTIFICATE OF TITLE
No. T-210581 (T-32.505 M)
Entry No. 79524 (M); Kind: NOTICE OF LEVY UPON REALTY, Executed in favor of THE CONSOLIDATED BANK
AND TRUST CORPORATION (SOLIDBANK) Plaintiff; Conditions: Notice is hereby given that by virtue of an Order
of Attachment issued by the C.F.I. of Manila, Branch XXIX, in Civil Case No. 82-11611, all the rights, interest and
participation of NICOS INDUSTRIAL CORPORATION Defendants over the herein described lot is hereby levied
upon attached.; Date of Instrument; September 1, 1982; Date of Inscription: September 7, 1982 at 2:35.
Meycauayan, Bulacan.
(SGD.) VIOLETA R. LINCALLO GARCIA
Branch Register of Deeds
(pp. 91-92, Rollo)
Based on the foregoing evidence on record, the conclusion is clear that the disputed real properties were under
custodia legis by virtue of a valid attachment at the time the same were extrajudicially foreclosed by a third party
mortgagee.
The rule is well settled that when a writ of attachment has been levied on real property or any interest therein
belonging to the judgment debtor, the levy thus effected creates a lien which nothing can destroy but its dissolution
(Chua Pua Hermanos v. Register of Deeds of Batangas, 50 Phil. 670; Government, et. al. v. Mercado, 67 Phil. 409).
The foregoing conclusion has two necessary consequences.
Firstly, it follows that the writ of possession issued by the Malolos court in favor of respondent GOLDEN STAR is nun
and void ab initio because it interfered with the jurisdiction of a co-ordinate and co-equal court (See De Leon v.
Salvador, 36 SCRA 567):
While property or money is in custodia legis, the officer holding it is the mere hand of the court, his possession is the
possession of the court, and to interfere with it is to invade the jurisdiction of the court itself (Gende v. Fleming, 371
N.E. 2d. 191; Bishop v. Atlantic Smokeless Coal Co., 88F. Supp. 27, 7 CJS 320).
Of equal importance is the fact that the transactions on which respondent GOLDEN STAR's right to a writ of
possession are based are highly irregular and questionable, to say the least, considering the following circumstances:
On July 11, 1983, the Sheriff of Bulacan executed a certificate of sale over the two lots in question in favor of UCPB.
On August 29, 1983, or about a month and a half later, UCPB sold its rights, interests and participation over the lands
to Manuel Go.
On that very same day, August 29, 1983, Manuel Go sold the same properties to respondent GOLDEN STAR.
On October 5, 1983, respondent NICOS which had a one year right of redemption over the lands in question executed
a "Waiver of Right of Redemption in favor of respondent GOLDEN STAR." The attempts to bring the disputed
properties out of the petitioner's reach, inspite of the attachment, are plain and apparent.
Based on the foregoing facts, we find that respondents NICOS and GOLDEN STAR conspired to defeat petitioner's
lien on the attached properties and to deny the latter its right of redemption.

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It appears that in issuing the writ of possession, the Malolos court relied on copies of documents (which did not show
the memorandum of encumbrance) submitted to it by GOLDEN STAR. It was thus led into the error of ruling that the
petitioner's attachment was not properly annotated.
Secondly, it likewise follows that the petitioner has acquired by operation of law the right of redemption over the
foreclosed properties pursuant to Sec. 6 of Act No. 3135, to wit:
In all such cases in which an extrajudicial sale is made ... any person having a lien on the property subsequent to the
mortgage ... may redeem the same at any time within the term of one year from and after the date of sale.
It has been held that "an attaching creditor may succeed to the incidental rights to which the debtor was entitled by
reason of his ownership of the property, as for example, a right to redeem from a prior mortgage" (Lyon v. Stanford, 5
Conn. 541, 7 SJS 505).
The fact that respondent NICOS executed a waiver of right of redemption in favor of respondent GOLDEN STAR on
October 5, 1983 is of no moment as by that time it had no more right which it may waive in favor of another,
Finally, GOLDEN STAR argues that even if the attachment in issue was duly registered and the petitioner has a right
of redemption, the certificate of sale of the lands in question was registered on September 6, 1983. It claims that the
period to redeem therefore lapsed on September 6, 1984 without the petitioner bank ever exercising any right of
redemption.
This argument is untenable. Well settled is the rule that the pendency of an action tolls the term of the right of
redemption. Specifically, tills Court in Ong Chua v. Carr, (53 Phil. 975, 983) categorically ruled that:
xxx

xxx

xxx

... Neither was it error on the part of the court to hold that the pendency of the action tolled the term for the right of
redemption; that is an old and well established rule.
This was reiterated in Fernandez v. Suplido (96 Phil. 541, 543), as follows:
xxx

xxx

xxx

... As pointed out in Ong Chua v. Carr, 53 Phil. 975, the pendency of an action brought in good faith and relating to the
validity of a sale with pacto de retro tolls the term for the right of redemption. ...
Not only that. It has been held that "under a statute limiting the time for redemption ... the right of redemption
continues after perfection of an appeal ... until the decision of the appeal (Philadelphia Mortgage Co. v. Gustus, 75
N.W. 1107).
In the case at bar, the petitioner commenced the instant action by way of an omnibus motion before the Bulacan Court
on November 21, 1983 or barely two months after the certificate of sale was registered on September 6, 1983, well
within the one year period of redemption.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is granted and judgment is hereby rendered:
1)
declaring as valid and binding the levy and attachment by the Manila Sheriff on the two realties in question
including the buildings and improvements thereon;
2)
declaring that petitioner has acquired the right of redemption over the aforesaid properties which it may
exercise within one year from notice of entry of judgment in this case; and
3)
declaring as null and void (a) the order of the Bulacan Court dated November 4, 1983 granting the writ of
possession to respondent GOLDEN STAR, (b) its order of June 9, 1984 denying the petitioner's omnibus motion, and
(c) the Waiver of Right of Redemption executed by respondent NICOS in favor of respondent GOLDEN STAR.
SO ORDERED.

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G.R. No. 76879 October 3, 1990

BF HOMES, INCORPORATED, petitioner,
vs.
COURT OF APPEALS, ROSALINDA R. ROA and VICENTE MENDOZA, respondents.
G.R.No. 77143 October 3, 1990
ROSALINDA ROA and VICENTE MENDOZA, petitioners,
vs.
COURT OF APPEALS and BF HOMES, INCORPORATED, respondents.
Espinosa, Cabrera & Associates for Rosalinda Roa, et al.
Balgos & Perez for BF Homes, Inc.

CRUZ, J.:
Involved here are two petitions for review assailing the decision of the Court of Appeals in CA-G.R. No. Sp 05411,
entitled BF Homes, Inc. v. Judge Tutaan, et al., dated June 6, 1986, as amended on October 22, 1986.
BF Homes, Inc. is a domestic corporation previously engaged in the business of developing and selling residential lots
and houses and other related realty matters.
On July 19, 1984, BF contracted a loan from Rosalinda R. Roa and Vicente Mendoza in the amount of P250,000.00
with interest at the rate of 33% per annum payable after 32 days. The obligation was embodied in a promissory note
and secured by two post-dated checks issued by BF in favor of the lenders.
On September 25, 1984, BF filed a Petition for Rehabilitation and for a Declaration in a State of Suspension of
Payments under Sec. 5(d) of P.D. No. 902-A with a prayer that upon the filing of the petition and in the meantime, all
claims against it for any and all accounts or indebtedness be suspended, but allowing petitioner to continue with its
normal operations. It also asked for the approval of the proposed rehabilitation plan.
On October 17, 1984, Roa and Mendoza filed a complaint against BF with the Regional Trial Court of Quezon City,
docketed as Civil Case No. Q-43104, for the recovery of the loan of P250,000.00, with interest and attorney's fees.
The complaint also prayed for the issuance of a writ of preliminary attachment against the properties of BF.
October 22, 1984, the trial court issued the writ against properties of BF sufficient to satisfy the principal claim in the
amount of P257,333.33.
In a motion dated October 25, 1984, BF moved for the dismissal of the case for lack of jurisdiction, or at least for its
suspension in view of the pendency of SEC Case No. 002693. it also asked for the lifting of the writ of preliminary
attachment.
The trial court denied the motion to dismiss on November 20, 1984, and the motion for reconsideration on January 11,
1985. Citing the case of DMRC Enterprises v. Este del Sol Mountain Reserves, Inc., 1 the trial court held it had
jurisdiction because what was involved was not an intra-corporate or partnership dispute but merely a determination of
the rights of the parties arising out of the contract of loan.
On February 13, 1985, BF filed with the Intermediate Appellate Court (now Court of Appeals) an original action for
certiorari with prayer for a writ of preliminary injunction against the regional trial court, Roa and Mendoza. On February
14, 1985, the Court of Appeals issued an order temporarily restraining proceedings in Civil Case No. Q-43104.
On March 18, 1985, the SEC, finding an urgent need to rehabilitate BF issued an order creating a management
committee and suspending all actions for claims against BF pending before any court, tribunal or board.
On June 6, 1986, the Court of Appeals rendered a decision dismissing the complaint in Civil Case No. Q-43104 and
declaring the writ of preliminary attachment null and void. But upon a motion for reconsideration filed by Roa and
Mendoza, the decision was set aside and a new one was entered upholding the jurisdiction of the regional trial court
over the case. At the same time, however, it suspended the proceedings therein until after the management committee
shall have been impleaded as party defendant. The dissolution of the writ of preliminary attachment was maintained.

236

Both parties filed separate motions for reconsideration, BF took exception to the amended decision insofar as it
directed the continuation of proceedings in Civil Case No. Q-43104 until after the management committee shall have
been impleaded. Roa and Mendoza faulted the Court of Appeals for ordering BF to be substituted by the management
committee and for dissolving the writ of preliminary attachment without the filing of the necessary counter-bond by the
defendant.
In a resolution dated December 22, 1986, the Court of Appeals denied both motions for reconsideration, noting that
the proceedings in the civil case could not remain suspended forever. The purpose of the suspension, it said, was to
enable the management committee to substitute BF as party defendant and prosecute the defense to conclusion.
Substitution was necessary to prevent collusion between the previous management and creditors it might seek to
favor, to the prejudice of its other creditors.
In sustaining the dissolution of the writ of preliminary attachment, the respondent court said that Roa and Mendoza
were secured in the satisfaction of any judgment they might obtain against BF since all the properties of the latter
were already in the custody of the management committee.
Their motions for reconsideration having been denied, both parties filed their respective petitions for review before this
Court.
In G.R. No. 76879, entitled "BF Homes, Inc. v. Court of Appeals, Rosalinda R. Roa and Vicente Mendoza," the
petitioner contends that the respondent court committed an error and violated Sec. 5(d) of P.D. No. 902-A when it
authorized continuation of proceedings in Civil Case No. Q-43104 after the management committee created by the
SEC shall have been impleaded.
In G.R. No. 77143, entitled "Rosalinda R. Roa and Vicente Mendoza v. Court of Appeals and BF Homes, Inc.," the
petitioners seek a review on the grounds that the management committee was not a proper party and should not have
been ordered substituted as party defendant in the regional trial court and that the writ of preliminary attachment
should not have been dissolved.
These two petitions were ordered consolidated in the resolution of this Court dated August 17, 1987.
On February 2, 1988, the SEC issued an order approving the proposed revised rehabilitation plan and dissolving the
management committee earlier created. Atty. Florencio Orendain was appointed rehabilitation receiver.
Now to the merits.
The parties in both cases are agreed that the proceedings in the civil case for the recovery of a sum of money should
be suspended. BF originally maintained that the action should be resumed only until after SEC Case No. 002693 shall
have been adjudicated on the merits but now agrees with Roa and Mendoza, in line with the "assessment" of the
Solicitor General, that the action should be suspended pending the outcome of the rehabilitation proceedings.
The pertinent provision of law dealing with the suspension of actions for claims against the corporation is Sec. 6(c) of
P.D. 902-A, as amended, which reads:
Sec. 6. n order to effectively exercise such jurisdiction, the Commission shall possess the following powers:
xxx

xxx

xxx

(c)
To appoint one or more receivers of the property, real and personal, which is the subject of the action pending
before the Commission in accordance with the pertinent provisions of the Rules of Court, and in such other cases
whenever necessary in order to preserve the rights of parties-litigants and/or protect the interest of the investing public
and creditors: Provided, however, That the Commission may, in appropriate cases, appoint a rehabilitation receiver of
corporations, partnerships or other associations not supervised or regulated by other government agencies who shall
have, in addition to the powers of a regular receiver under the provisions of the Rules of Court, such functions and
powers as are provided for in the succeeding paragraph (d) hereof: Provided, further, That the Commission may
appoint a rehabilitation receiver of corporations, partnership or other associations supervised or regulated by other
government agencies, such as banks and insurance companies, upon request of the government agency concerned:
Provided, finally, That upon appointment of a management committee, rehabilitation receiver, board or body, pursuant
to this Decree, all actions for claims against corporations, partnership, or associations under management or
receivership pending before any court, tribunal, board or body shall be suspended accordingly. (As amended by P.D.
Nos. 1653, 1758 and 1799; Emphasis supplied.)
As will be noted, the duration of the suspension is not indicated in the law itself. And neither is it specified in the SEC
order creating the management committee.

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The Court feels that the respondent court erred in ordering the resumption of the civil proceeding after the
management committee shall have been impleaded as party defendant. The explanation that the only purpose of
suspending the civil action was to enable the management committee to substitute BF as party defendant is not
acceptable.
The view of the respondent court is that the continuation of the action is necessary for the purpose of determining the
extent of the liability of BF to Roa and Mendoza. The flaw in this theory is that even if such liability is determined, it still
cannot be enforced by the trial court as long as BF is under receivership. 2 Moreover, it disregards the possibility that
such determination would not be necessary at all should the rehabilitation receiver favorably consider and fully
acknowledge the claims made by Roa and Mendoza.
Under Sec. 6(d) of P.D. No. 902-A, the management committee or rehabilitation receiver is empowered to take
custody and control of all existing assets and properties of such corporations under management; to evaluate the
existing assets and liabilities, earnings and operations of such corporations; to determine the best way to salvage and
protect the interest of investors and creditors; to study, review and evaluate the feasibility of continuing operations and
restructure and rehabilitate such entities if determined to be feasible by the SEC.
In light of these powers, the reason for suspending actions for claims against the corporation should not be difficult to
discover. It is not really to enable the management committee or the rehabilitation receiver to substitute the defendant
in any pending action against it before any court, tribunal, board or body. Obviously, the real justification is to enable
the management committee or rehabilitation receiver to effectively exercise its/his powers free from any judicial or
extra-judicial interference that might unduly hinder or prevent the "rescue" of the debtor company. To allow such other
action to continue would only add to the burden of the management committee or rehabilitation receiver, whose time,
effort and resources would be wasted in defending claims against the corporation instead of being directed toward its
restructuring and rehabilitation.
In BF Homes, Inc. v. Hon. Fernando P. Agdamag et al., 3 the Court of Appeals held:
It must be emphasized that the suspension is only for a temporary period to prevent the irreversible collapse of the
corporation and give the management committee or receiver the absolute tranquility to study the viability of the
corporation. During this period, the law creates a wall around the corporation against all claims.
In Alemar's Sibal & Sons, Inc. v. Hon. Jesus M. Elbinias, et al., 4 this Court, explaining the legal consequences of a
receivership, said:
. . . When a corporation threatened by bankruptcy is taken over by a receiver, all the creditors should stand on an
equal footing. Not anyone of them should be given any preference by paying one or some of them ahead of the
others. This is precisely the reason for the suspension of all pending claims against the corporation under
receivership. Instead of creditors vexing the courts with suits against the distressed firm, they are directed to file their
claims with the receiver who is a duly appointed officer of the SEC. (Emphasis supplied)
Consequently, we feel that the trial court cannot at this point determine the extent of BF's liability, if any, to Roa and
Mendoza. This is true whether it is retained as party defendant or substituted by the management committee (or the
rehabilitation receiver) as directed by the respondent court. What Roa and Mendoza should do now is file their claims
with the rehabilitation receiver and submit to him such evidence as they would otherwise have to adduce before the
trial court to prove such claims.
As the revised rehabilitation plan approved by the SEC is expected to be implemented within ten years, the
proceedings in the Regional Trial Court of Quezon City should be suspended during that period, to begin from
February 2, 1988, the date of its approval. This is without prejudice to the authority of the SEC to extend the period
when warranted and even to order the liquidation of BF if the plan is found to be no longer feasible. On the other hand,
on a more positive note, the SEC can also find within that period that BF has been sufficiently revived and able to
resume its normal business operations without further need of rehabilitation.
Coming now to the writ of preliminary attachment, we find that it must stand despite the suspension of the proceedings
in the Regional Trial Court of Quezon City. The writ was issued prior to the creation of the management committee and
so should not be regarded as an undue advantage of Mendoza and Roa over the other creditors of BF.
In its amended decision and the resolution ordering the discharge of the writ of preliminary attachment, the respondent
court did not rule on whether the issuance of the writ was improper or irregular. It simply said that the writ was no
longer proper or necessary at that time because the properties of BF were in the hands of the receiver. We do not
think so.

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The appointment of a rehabilitation receiver who took control and custody of BF has not necessarily secured the
claims of Roa and Mendoza. In the event that the receivership is terminated with such claims not having been
satisfied, the creditors may also find themselves without security therefor in the civil action because of the dissolution
of the attachment. This should not be permitted. Having previously obtained the issuance of the writ in good faith, they
should not be deprived of its protection if the rehabilitation plan does not succeed and the civil action is resumed.
It is settled that:
If there is an attachment or sequestration of the goods or estate of the defendant in an action which is removed to a
bankruptcy court, such an attachment or sequestration will continue in existence and hold the goods or estate to
answer the final judgment or decree in the same manner as they would have been held to answer the final judgment
or decree rendered by the Court from which the action was removed, unless the attachment or sequestration is
invalidated under applicable law. (28 USCS No. 1479 [a].) 5
As we ruled in Government of the Philippine Islands v. Mercado: 6
Attachment is in the nature of a proceeding in rem. It is against the particular property. The attaching creditor thereby
acquires specific lien upon the attached property which ripens into a judgment against the res when the order of sale
is made. Such a proceeding is in effect a finding that the property attached is an indebted thing and a virtual
condemnation of it to pay the owner's debt. The law does not provide the length of time an attachment lien shall
continue after the rendition of judgment, and it must therefore necessarily continue until the debt is paid, or sale is had
under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in
some manner provided by law.
It has been held that the hen obtained by attachment stands upon as high equitable grounds as a mortgage lien:
The lien or security obtained by an attachment even before judgment, is a fixed and positive security, a specific lien,
and, although whether it will ever be made available to the creditor depends on contingencies, its existence is in no
way contingent, conditioned or inchoate. It is a vested interest, an actual and substantial security, affording specific
security for satisfaction of the debt put in suit, which constitutes a cloud on the legal title, and is as specific as if
created by virtue of a voluntary act of the debtor and stands upon as high equitable grounds as a mortgage. (7 Corpus
Juris Secundum, 433, and authorities therein cited.)
Under the Rules of Court, a writ of attachment may be dissolved only upon the filing of a counter-bond or upon proof
of its improper or irregular issuance. Neither ground has been established in the case at bar to warrant the discharge
of the writ. No counter-bond has been given. As for the contention that the writ was improperly issued for lack of notice
to BF on the application for the writ, it suffices to cite Mindanao Savings & Loan Association, Inc. v. Court of Appeals,
where we held: 7
The only requisites for the issuance of a writ of preliminary attachment under Section 3, Rule 57 of the Rules of Court
are the affidavit and bond of the applicant.
SEC. 3. Affidavit and bond required. An order of attachment shall be granted only when it is made to appear by the
affidavit of the applicant, or of some other person who personally knows the facts, that a sufficient cause of action
exists, that the case is one of those mentioned in section 1 hereof, that there is no other sufficient security for the
claim sought to be enforced by the action and that the amount due to the applicant, or the value of the property the
possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal
counterclaims. The affidavit, and the bond required by the next succeeding section must be duly filed with the clerk or
judge of the court before the order issues.
No notice to the adverse party or hearing of the application is required. As a matter of fact a hearing would defeat the
purpose of this provisional remedy. The time which such a hearing would take, could be enough to enable the
defendant to abscond or dispose of his property before a writ of attachment issues. Nevertheless, while no hearing is
required by the Rules of Court for the issuance of an attachment (Belisle Investment & Finance Co., Inc. v. State
Investment House, Inc., 72927, June 30, 1987; Filinvest Credit Corp. v. Relova, 117 SCRA 420), a motion to quash the
writ may not be granted without "reasonable notice to the applicant" and only "after hearing" (Secs. 12 and 13, Rule
57, Rules of Court).
In sum, the Court holds that the substitution of the management committee/rehabilitation receiver in Civil Case No. Q43104 in the Regional Trial Court of Quezon City is not necessary because the proceedings therein shall be
suspended anyway pending implementation of the revised rehabilitation plan, during which the writ of preliminary
attachment shall remain in force.
WHEREFORE, the decision of the respondent court is SET ASIDE and judgment is rendered as follows:

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(1)
In G.R. No. 76879, the petition is GRANTED. The proceedings in Civil Case No. Q-43104 shall remain
suspended for a period of ten (10) years from February 2, 1988, unless extended or shortened by the SEC as
circumstances may warrant; and
(2)
In G.R.No.77143, the petition is GRANTED insofar as it seeks restoration of the writ of preliminary
attachment, issued on October 22, 1984, which is hereby reinstated.
SO ORDERED.

240

G.R. No. 73489 April 25, 1994

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
CIC LORETO GAPASIN, PC NICANOR SALUDARES, LORENZO SORIANO, alias "Olit", AMOR SALUDARES,
FRANK SALUDARES, BEL SALUDARES, and NICK SALUDARES, accused, CIC LORETO GAPASIN, accusedappellant.
The Solicitor General for plaintiff-appellee.
Silvestre Br. Bello for accused-appellant.

QUIASON, J.:
This is an appeal from the decision of the Regional Trial Court, Branch XVI, Isabela in Criminal Case No. IV-781,
finding appellant guilty beyond reasonable doubt of murder qualified by treachery, with the attendance of the mitigating
circumstance of voluntary surrender, and the aggravating circumstances of taking advantage of public position and
evident premeditation. The trial court sentenced him to suffer the penalty of reclusion perpetua and to pay to the heirs
of the late Jerry Calpito, Sr., the sum of P88,596.00 as actual or compensatory damages; P30,000.00 as death
indemnity; P20,000.00 as moral damages; P30,000.00 as exemplary damages; and the costs.
I
The information in Criminal Case No. IV-781 reads as follows:
That on or about the 6th day of October, 1979, at Barangay San Jose, municipality of Roxas, province of Isabela,
Philippines, and within the jurisdiction of this Honorable Court, the accused CIC LORETO GAPASIN, PC NICANOR
SALUDARES, LORENZO SORIANO alias Olit, AMOR SALUDARES, FRANK SALUDARES, BEL SALUDARES, and
NICK SALUDARES, conspiring and confederating together and all helping one another, with evident premeditation
and treachery, did then and there wilfully, unlawfully, criminally and feloniously, with intent to kill, attack and shoot Jerry
Calpito, with an Armalite rifle SN No. 3267485
Cal. 5.56 duly issued to the accused PC soldier under Memorandum Receipt dated September 17, 1979 by the 118th
PC Company, inflicting multiple gunshot wounds on the body of the latter, step and kick (sic) the victim several times,
causing his instantaneous death due to hemorrhage secondary to gunshot wounds, to the damage and prejudice of
the heirs of the deceased Jerry Calpito in the amount of P12,000.00, Philippine Currency.
That the crime was committed with the aggravating circumstances of (1) ignominy, the accused having stepped and
kicked the body of the deceased; (2) abuse of superior strength, and (3) taking advantage of public position, with
respect to the accused CIC Loreto Gapasin who is a PC soldier" (Rollo, pp. 35-36).
A warrant for the arrest of all the accused was issued on December 14, 1980. However, as of January 10, 1980, only
Nicanor Saludares and appellant had been arrested. On January 17, 1980, the trial court granted the petition for bail
of the two accused and fixed the same at P20,000.00 each. Having posted bail, Nicanor Saludares was ordered
released on January 22, 1980. On the
other hand, appellant was ordered by the court to remain in the custody of
Capt. Alexander M. Bellen, commanding officer of the 118th Constabulary Company, in Roxas, Isabela.
On February 4, 1980, Frank, Bel and Amor, all surnamed Saludares, were arrested. Lorenzo Soriano, alias Olit, was
arrested the following day. They were all allowed to post bail bonds in the amount of P20,000.00 each and thereafter
they were released from custody.
On the strength of LOI No. 947, as amended by LOI No. 1011, vesting jurisdiction on the Military Tribunals of all
crimes against persons and property committed with the use of unlicensed firearms, the provincial fiscal filed a motion
praying that Criminal Case No. IV-781 be transferred to the Military Tribunal and that the bail bonds posted be
cancelled. The prosecution reiterated the motion in a manifestation dated August 21, 1980.
Accordingly, on August 27, 1980, the trial court ordered: (a) the cancellation of the bail bonds of the accused; (b) the
issuance of the warrants of arrest for all the accused except for Nicanor Saludares, who was reported to have died; (c)
the turn over of appellant to the Provincial Warden of Isabela as he was not entitled to technical rearrest under
Executive Order No. 106; (d) the turn over to the said Provincial Warden of all the other accused upon their rearrest;
and (e) thereafter, the turn over of the case and the accused to the Military Tribunal thru the Provincial Commander of
the PC/INP, Ilagan, Isabela for further proceedings.

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Pursuant to the endorsement dated September 19, 1980 of Lt. Col. Oscar M. Florendo, Isabela Provincial
Commander, appellant, together with Lorenzo Soriano, Amor Saludares and Bel Saludares, was rearrested; while Nick
and Frank Saludares remained at-large. On September 29, 1980, the trial court ordered the dismissal of the case
against Nicanor Saludares on account of his death on June 7, 1980.
The accused, however, filed a motion for the reconsideration of the Order of August 27, 1980 on the grounds that the
case was not covered by LOI
No. 947, the crime having been committed on October 6, 1979 or several days before the issuance of said LOI. The
trial court denied their motion.
By virtue of General Order No. 69 dated January 12, 1981, the records of the case were transferred back to the trial
court from the Military Tribunal. On April 1, 1981, the prosecution moved for the recommitment of the accused to the
provincial jail. The defense opposed the motion fearing retaliation from a provincial jail guard, who was a relative of the
victim. On May 12, 1981, the trial court denied the motion and set the arraignment of the accused on June 1, 1981.
On May 18, 1981, Col. Florendo informed the trial court that Bel and Amor Saludares have escaped from the
Rehabilitation Center of the Provincial Command on April 10, 1981.
On May 29, 1981, the provincial fiscal moved for the reconsideration of the Order of May 12, 1981, alleging that the
accused were not actually detained at the PC Headquarters and that, except for appellant, the accused have
absconded. Hence, to prevent a miscarriage of justice, the provincial fiscal prayed for the recommitment of accused
Soriano and appellant at the provincial jail and for the issuance of the warrants of arrest for Amor, Bel and Frank
Saludares.
The trial court granted the motion and issued warrants of arrest. Despite diligent efforts, however, the other accused
were not rearrested and hence, trial proceeded against accused Soriano and appellant only. On June 1, 1981, they
both pleaded not guilty.
Two years later, on June 1, 1983, the trial court denied appellant's application for bail but granted that of accused
Soriano, whose bail bond was fixed at P30,000.00. Being so persistent, appellant filed a second motion for bail, which
was denied by the trial court on June 1, 1984. He filed a third motion to fix bail, which was likewise denied.
Relying on the provisions of Section 4 of P.D. No. 1850, appellant filed an urgent motion praying that he be transferred
to the custody of Col. Alfonso M. Mesa, then Provincial Commander of Isabela. The trial court denied the motion. His
motion for reconsideration having been denied, appellant filed a petition for certiorari before the then Intermediate
Appellate Court, alleging that the trial court acted with grave abuse of discretion in refusing to apply Section 4 of P.D.
No. 1850. The appellate court granted the petition and ordered the immediate transfer of appellant to the custody of
his military commander.
Meanwhile, accused Frank Saludares was arrested and he entered a plea of not guilty at his arraignment. He was
later allowed to post bail. Since Soriano and Frank Saludares were both out on bail, the defense opted to present
evidence on behalf of appellant only and to submit the case for decision as soon as possible. Thus, after almost six
years, trial on the case ensued.
II
According to prosecution witness Alberto Carrido, he and Rodrigo Ballad left the house of Enteng Teppang at about
2:00 P.M. of October 6, 1979 after attending the "pamisa" for the deceased father of Teppang. Jerry Calpito followed
them. While they were walking along the barangay road, Calpito was shot by appellant with an armalite rifle. When
Calpito fell on the ground, appellant fired more shots at him. Thereafter, accused Amor Saludares planted a .22 caliber
revolver on the left hand of Calpito. Upon hearing the shots, Faustina Calpito ran to succor her fallen husband.
Accused Nicanor Saludares pointed his gun at Faustina while accused Soriano fired his gun upwards. Saludares
warned that he would kill any relative of Jerry Calpito who would come near him. Faustina and the other relatives of
the victim scampered away as the Saludares' group chased them.
The body of Calpito was autopsied by Dr. Bernardo Layugan, who found that the victim sustained four bullet wounds:
(1) on the right lateral side of the arm fracturing the humerus; (2) on the right lateral side of the thorax between the 7th
and 8th ribs with exit wound at the sternum; (3) on the left side of the thorax, anterior, between the 5th and 6th ribs;
and (4) on the right fronto-parietal portion of the head "severing the skull and brain tissues" (Exh. "F"). Dr. Layugan
opined that the victim was in a standing position when he was shot by someone positioned at his right.

242

Appellant invoked self-defense. He testified that he was issued a mission order on September 23, 1979 to investigate
a report regarding the presence of unidentified armed men in Barrio San Jose, Roxas, Isabela. The following day, he
was instructed by Sgt. Dominador Ignacio to get in touch with Nicanor Saludares who may be able to give him
information on the identities of the persons with unlicensed firearms in the place. When appellant met Nicanor
Saludares on September 29, 1979, he was informed that Jerry Calpito had an unlicensed firearm.
On October 5, 1979, Nicanor Saludares went to the P.C. Headquarters in Roxas and told appellant that it would be
best for him to see Jerry Calpito the following day as a relative of the latter would be buried. The next day, appellant
went to Barangay San Jose, arriving there at 12 noon. Instead of going to the cemetery, he went to the house of
Nicanor Saludares. From there, they went to the house of Enteng Teppang to attend the "pamisa." While they were
having lunch, Nick Saludares advised appellant against confronting Calpito because it would create a disturbance at
the "pamisa." He also told appellant that Calpito would surely pass his (Saludares) house on his way home.
Appellant and Nicanor Saludares positioned themselves inside the yard of the latter. When appellant saw Calpito, he
went out of the yard into the barangay road. When Calpito was about three meters away from him, appellant asked
him what was bulging in his waist. Instead of answering, Calpito took a step backward, drew his firearm from the waist
and fired twice at appellant. He missed because appellant dropped to the ground simultaneously firing his armalite.
After fifteen minutes, the police arrived and took the body of the victim to the morgue. Appellant was brought to the
P.C. Headquarters in Roxas, where he was investigated.
III
The appeal hinges primarily on the credibility of the prosecution witnesses. Appellant claims that the prosecution
witnesses, all of them being relatives of the victim, were naturally biased against him.
This Court has time and again reiterated the principle that it will not interfere with the findings of the trial court on the
issue of credibility of witnesses and their testimonies unless the trial court has plainly overlooked undisputed facts of
substance and value which would have altered the result of the case (People v. Matrimonio, 215 SCRA 613 [1992]).
Findings of the trial court are generally accorded great respect by an appellate tribunal for the latter can only read in
cold print the testimonies of the witnesses.
In the trial before the lower court, the eye-witnesses testified in their local dialect and their testimonies had to be
translated to English. In the process of converting into written form the testimonies of the witnesses, not only the fine
nuances but a world of meaning apparent only to the trial judge, may escape the reader of the translated words
(People v. Baslot, 209 SCRA 537 [1992]).
The fact that the prosecution witnesses are relatives of the victim does not necessarily indicate that they were biased
as to impair their credibility. In the absence of proof of ill motive on the part of witnesses, relationship between them
and the victim does not undermine their credibility. On the contrary, it would be unnatural for persons such as the
relatives of the victim who themselves seek justice to commit the injustice by imputing the crime on persons other than
those who are actually responsible (People v. De Paz, 212 SCRA 56 [1992]).
Appellant's claim of self-defense is belied by the finding of the trial court that the victim was shot by someone who was
standing on his right side. Appellant's version that he was in front of the victim when the latter fired a shot at him and
that he retaliated while dropping on the ground, crumbles in the face of the physical evidence that the victim sustained
two gunshot wounds which entered the right side of his body and a gunshot wound on the right side of his head. The
nature and number of wounds inflicted by the appellant disprove the plea of self-defense (People v. Bigcas, 211 SCRA
631 [1992]).
Had appellant and Nicanor Saludares, Sr. not intended to harm the victim, they could have simply apprehended him.
Or, having verified that Calpito possessed an unlicensed firearm, appellant could have reported the matter to his
superiors so that warrants for Calpito's arrest and the seizure of his unlicensed firearm could have been obtained.
Appellant contended that the crime committed is homicide. The trial court correctly ruled that the crime of murder
under Article 248 of the Revised Penal Code was indeed committed. Treachery attended the commission of the crime.
The two conditions to constitute treachery were present in the case at bench, to wit: (a) the employment of means of
execution that gives the person who is attacked no opportunity to defend himself or to retaliate; and (b) the means of
execution were deliberately or consciously adopted (People v. Narit, 197 SCRA 334 [1991]).
Appellant deliberately executed the act in such a way that his quarry was unaware and helpless. This can be gleaned
from his act of waiting for the victim behind the hollow-block fence of Nicanor Saludares and shooting the victim from
his right side.

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Evident premeditation was indubitably proven by the evidence showing that the execution of the criminal case was
preceded by cool thought and reflection. Appellant's resolution to carry out the criminal intent during the space of time
sufficient to arrive at a clear judgment was shown (People v. Castor, 216 SCRA 410 [1992]).
In view of the presence of treachery which qualified the killing as murder, the evident premeditation should be
considered only as a generic aggravating circumstance (People v. Fabros, 214 SCRA 694 [1992]).
The information alleged three other generic aggravating circumstances: ignominy, abuse of superior strength and
taking advantage of public position. The trial court correctly ruled out ignominy on the strength of the autopsy
conducted by the doctor who failed to find any other injuries such as bruises and contusions which may indicate that
the victim was kicked by his assailants. It also correctly held that treachery absorbed abuse of superior strength
(People v. Moral, 132 SCRA 474 [1984]).
The trial court properly appreciated taking advantage of public position as an aggravating circumstance. Appellant, a
member of the Philippine Constabulary, committed the crime with an armalite which was issued to him when he
received the mission order (People v. Madrid, 88 Phil. 1 [1951]).
Voluntary surrender may be considered in appellant's favor but this is offset by the aggravating circumstance of taking
advantage of public position. Therefore, only the generic aggravating circumstance of evident premeditation may be
appreciated against appellant. As such, the correct penalty would have been death in accordance with Articles 248
and 64(3) of the Revised Penal Code Were it not for the fact that such penalty is constitutionally abhorrent. Hence, the
proper penalty is reclusion perpetua.
The trial court correctly exercised its discretion in imposing moral, compensatory and exemplary damages (People v.
Rabanes, 208 SCRA 768 [1992]; People v. Quilaton, 205 SCRA 279 [1992]).
WHEREFORE, the decision appealed from is AFFIRMED.
SO ORDERED.

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G.R. No. 144740 August 31, 2005

SECURITY PACIFIC ASSURANCE CORPORATION, Petitioners,
vs.
THE HON. AMELIA TRIA-INFANTE, In her official capacity as Presiding Judge, Regional Trial Court, Branch 9,
Manila; THE PEOPLE OF THE PHILIPPINES, represented by Spouses REYNALDO and ZENAIDA ANZURES; and
REYNALDO R. BUAZON, In his official capacity as Sheriff IV, Regional Trial Court, Branch 9, Manila, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review on certiorari, assailing the Decision1 and Resolution2 of the Court of Appeals in CAG.R. SP No. 58147, dated 16 June 2000 and 22 August 2000, respectively. The said Decision and Resolution
declared that there was no grave abuse of discretion on the part of respondent Judge in issuing the assailed order
dated 31 March 2000, which was the subject in CA-G.R. SP No. 58147.
THE FACTS
The factual milieu of the instant case can be traced from this Courts decision in G.R. No. 106214 promulgated on 05
September 1997.
On 26 August 1988, Reynaldo Anzures instituted a complaint against Teresita Villaluz (Villaluz) for violation of Batas
Pambansa Blg. 22. The criminal information was brought before the Regional Trial Court, City of Manila, and raffled off
to Branch 9, then presided over by Judge Edilberto G. Sandoval, docketed as Criminal Case No. 89-69257.
An Ex-Parte Motion for Preliminary Attachment3 dated 06 March 1989 was filed by Reynaldo Anzures praying that
pending the hearing on the merits of the case, a Writ of Preliminary Attachment be issued ordering the sheriff to attach
the properties of Villaluz in accordance with the Rules.
On 03 July 1989, the trial court issued an Order4 for the issuance of a writ of preliminary attachment "upon
complainants posting of a bond which is hereby fixed at P2,123,400.00 and the Courts approval of the same under
the condition prescribed by Sec. 4 of Rule 57 of the Rules of Court."
An attachment bond5 was thereafter posted by Reynaldo Anzures and approved by the court. Thereafter, the sheriff
attached certain properties of Villaluz, which were duly annotated on the corresponding certificates of title.
On 25 May 1990, the trial court rendered a Decision6 on the case acquitting Villaluz of the crime charged, but held her
civilly liable. The dispositive portion of the said decision is reproduced hereunder:
WHEREFORE, premises considered, judgment is hereby rendered ACQUITTING the accused TERESITA E.
VILLALUZ with cost de oficio. As to the civil aspect of the case however, accused is ordered to pay complainant
Reynaldo Anzures the sum of TWO MILLION ONE HUNDRED TWENTY THREE THOUSAND FOUR HUNDRED
(P2,123,400.00) PESOS with legal rate of interest from December 18, 1987 until fully paid, the sum of P50,000.00 as
attorneys fees and the cost of suit.7
Villaluz interposed an appeal with the Court of Appeals, and on 30 April 1992, the latter rendered its Decision,8 the
dispositive portion of which partly reads:
WHEREFORE, in CA-G.R. CV No. 28780, the Decision of the Regional Trial Court of Manila, Branch 9, dated May 25,
1990, as to the civil aspect of Criminal Case No. 89-69257, is hereby AFFIRMED, in all respects.
The case was elevated to the Supreme Court (G.R. No. 106214), and during its pendency, Villaluz posted a counterbond in the amount of P2,500,000.00 issued by petitioner Security Pacific Assurance Corporation.9 Villaluz, on the
same date10 of the counter-bond, filed an Urgent Motion to Discharge Attachment.11
On 05 September 1997, we promulgated our decision in G.R. No. 106214, affirming in toto the decision of the Court of
Appeals.
In view of the finality of this Courts decision in G.R. No. 106214, the private complainant moved for execution of
judgment before the trial court.12
On 07 May 1999, the trial court, now presided over by respondent Judge, issued a Writ of Execution.13

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Sheriff Reynaldo R. Buazon tried to serve the writ of execution upon Villaluz, but the latter no longer resided in her
given address. This being the case, the sheriff sent a Notice of Garnishment upon petitioner at its office in Makati City,
by virtue of the counter-bond posted by Villaluz with said insurance corporation in the amount of P2,500,000.00. As
reported by the sheriff, petitioner refused to assume its obligation on the counter-bond it posted for the discharge of
the attachment made by Villaluz.14
Reynaldo Anzures, through the private prosecutor, filed a Motion to Proceed with Garnishment,15 which was opposed
by petitioner16 contending that it should not be held liable on the counter-attachment bond.
The trial court, in its Order dated 31 March 2000,17 granted the Motion to Proceed with Garnishment. The sheriff
issued a Follow-Up of Garnishment18 addressed to the President/General Manager of petitioner dated 03 April 2000.
On 07 April 2000, petitioner filed a Petition for Certiorari with Preliminary Injunction and/or Temporary Restraining
Order19 with the Court of Appeals, seeking the nullification of the trial courts order dated 31 March 2000 granting the
motion to proceed with garnishment. Villaluz was also named as petitioner. The petitioners contended that the
respondent Judge, in issuing the order dated 31 March 2000, and the sheriff committed grave abuse of discretion and
grave errors of law in proceeding against the petitioner corporation on its counter-attachment bond, despite the fact
that said bond was not approved by the Supreme Court, and that the condition by which said bond was issued did not
happen.20
On 16 June 2000, the Court of Appeals rendered a Decision,21 the dispositive portion of which reads:
WHEREFORE, premises considered, the Court finds no grave abuse of discretion on the part of respondent judge in
issuing the assailed order. Hence, the petition is dismissed.
A Motion for Reconsideration22 was filed by petitioner, but was denied for lack of merit by the Court of Appeals in its
Resolution23 dated 22 August 2000.
Undeterred, petitioner filed the instant petition under Rule 45 of the 1997 Rules of Civil Procedure, with Urgent
Application for a Writ of Preliminary Injunction and/or Temporary Restraining Order.24
On 13 December 2000, this Court issued a Resolution25 requiring the private respondents to file their Comment to the
Petition, which they did. Petitioner was required to file its Reply26 thereafter.
Meanwhile, on 17 January 2001, petitioner and the spouses Reynaldo and Zenaida Anzures executed a Memorandum
of Understanding (MOU).27 In it, it was stipulated that as of said date, the total amount garnished from petitioner had
amounted to P1,541,063.85, and so the remaining amount still sought to be executed was P958,936.15.28 Petitioner
tendered and paid the amount of P300,000.00 upon signing of the MOU, and the balance of P658,936.15 was to be
paid in installment at P100,000.00 at the end of each month from February 2001 up to July 2001. At the end of August
2001, the amount of P58,936.00 would have to be paid. This would make the aggregate amount paid to the private
respondents P2,500,000.00.29 There was, however, a proviso in the MOU which states that "this contract shall not be
construed as a waiver or abandonment of the appellate review pending before the Supreme Court and that it will be
subject to all such interim orders and final outcome of said case."
On 13 August 2001, the instant petition was given due course, and the parties were obliged to submit their respective
Memoranda.30
ISSUES
The petitioner raises the following issues for the resolution of this Court:
Main Issue - WHETHER OR NOT THE COURT OF Appeals committed reversible error in affirming the 31 march 2000
order of public respondent judge which allowed execution on the counter-bond issued by the petitioner.
Corollary Issues (1) WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED THAT THE
ATTACHMENT ON THE PROPERTY OF VILLALUZ WAS DISCHARGED WITHOUT NEED OF COURT APPROVAL
OF THE COUNTER-BOND POSTED; and (2) WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED
THAT THE ATTACHMENT ON THE PROPERTY OF VILLALUZ WAS DISCHARGED BY THE MERE ACT OF
POSTING THE COUNTER-BOND.
THE COURTS RULING
Petitioner seeks to escape liability by contending, in the main, that the writ of attachment which was earlier issued
against the real properties of Villaluz was not discharged. Since the writ was not discharged, then its liability did not

246

accrue. The alleged failure of this Court in G.R. No. 106214 to approve the counter-bond and to cause the discharge
of the attachment against Villaluz prevented the happening of a condition upon which the counter-bonds issuance
was premised, such that petitioner should not be held liable thereon.31
Petitioner further asserts that the agreement between it and Villaluz is not a suretyship agreement in the sense that
petitioner has become an additional debtor in relation to private respondents. It is merely waiving its right of
excussion32 that would ordinarily apply to counter-bond guarantors as originally contemplated in Section 12, Rule 57
of the 1997 Rules.
In their Comment,33 the private respondents assert that the filing of the counter-bond by Villaluz had already ipso
facto discharged the attachment on the properties and made the petitioner liable on the bond. Upon acceptance of the
premium, there was already an express contract for surety between Villaluz and petitioner in the amount of
P2,500,000.00 to answer for any adverse judgment/decision against Villaluz.
Petitioner filed a Reply34 dated 09 May 2001 to private respondents Comment, admitting the binding effect of the
bond as between the parties thereto. What it did not subscribe to was the theory that the attachment was ipso facto or
automatically discharged by the mere filing of the bond in court. Such theory, according to petitioner, has no
foundation. Without an order of discharge of attachment and approval of the bond, petitioner submits that its stipulated
liability on said bond, premised on their occurrence, could not possibly arise, for to hold otherwise would be to trample
upon the statutorily guaranteed right of the parties to contractual autonomy.
Based on the circumstances present in this case, we find no compelling reason to reverse the ruling of the Court of
Appeals.
Over the years, in a number of cases, we have made certain pronouncements about counter-bonds.
In Tijam v. Sibonghanoy,35 as reiterated in Vanguard Assurance Corp. v. Court of Appeals,36 we held:
. . . [A]fter the judgment for the plaintiff has become executory and the execution is returned unsatisfied, as in this
case, the liability of the bond automatically attaches and, in failure of the surety to satisfy the judgment against the
defendant despite demand therefore, writ of execution may issue against the surety to enforce the obligation of the
bond.
In Luzon Steel Coporation v. Sia, et al.: 37
. . . [C]ounterbonds posted to obtain the lifting of a writ of attachment is due to these bonds being security for the
payment of any judgment that the attaching party may obtain; they are thus mere replacements of the property
formerly attached, and just as the latter may be levied upon after final judgment in the case in order to realize the
amount adjudged, so is the liability of the countersureties ascertainable after the judgment has become final. . . .
In Imperial Insurance, Inc. v. De Los Angeles,38 we ruled:
. . . Section 17, Rule 57 of the Rules of Court cannot be construed that an "execution against the debtor be first
returned unsatisfied even if the bond were a solidary one, for a procedural may not amend the substantive law
expressed in the Civil Code, and further would nullify the express stipulation of the parties that the suretys obligation
should be solidary with that of the defendant.
In Philippine British Assurance Co., Inc. v. Intermediate Appellate Court,39 we further held that "the counterbond is
intended to secure the payment of any judgment that the attaching creditor may recover in the action."
Petitioner does not deny that the contract between it and Villaluz is one of surety. However, it points out that the kind
of surety agreement between them is one that merely waives its right of excussion. This cannot be so. The counterbond itself states that the parties jointly and severally bind themselves to secure the payment of any judgment that the
plaintiff may recover against the defendant in the action. A surety is considered in law as being the same party as the
debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to
be inseparable.40
Suretyship is a contractual relation resulting from an agreement whereby one person, the surety, engages to be
answerable for the debt, default or miscarriage of another, known as the principal. The suretys obligation is not an
original and direct one for the performance of his own act, but merely accessory or collateral to the obligation
contracted by the principal. Nevertheless, although the contract of a surety is in essence secondary only to a valid
principal obligation, his liability to the creditor or promise of the principal is said to be direct, primary and absolute; in
other words, he is directly and equally bound with the principal. The surety therefore becomes liable for the debt or

247

duty of another although he possesses no direct or personal interest over the obligations nor does he receive any
benefit therefrom.41
In view of the nature and purpose of a surety agreement, petitioner, thus, is barred from disclaiming liability.
Petitioners argument that the mere filing of a counter-bond in this case cannot automatically discharge the attachment
without first an order of discharge and approval of the bond, is lame.
Under the Rules, there are two (2) ways to secure the discharge of an attachment. First, the party whose property has
been attached or a person appearing on his behalf may post a security. Second, said party may show that the order of
attachment was improperly or irregularly issued.42 The first applies in the instant case. Section 12, Rule 57,43
provides:
SEC. 12. Discharge of attachment upon giving counter-bond. After a writ of attachment has been enforced, the party
whose property has been attached, or the person appearing on his behalf, may move for the discharge of the
attachment wholly or in part on the security given. The court shall, after due notice and hearing, order the discharge of
the attachment if the movant makes a cash deposit, or files a counter-bond executed to the attaching party with the
clerk of the court where the application is made, in an amount equal to that fixed by the court in the order of
attachment, exclusive of costs. But if the attachment is sought to be discharged with respect to a particular property,
the counter-bond shall be equal to the value of that property as determined by the court. In either case, the cash
deposit or the counter-bond shall secure the payment of any judgment that the attaching party may recover in the
action. A notice of the deposit shall forthwith be served on the attaching party. Upon the discharge of an attachment in
accordance with the provisions of this section, the property attached, or the proceeds of any sale thereof, shall be
delivered to the party making the deposit or giving the counter-bond, or to the person appearing on his behalf, the
deposit or counter-bond aforesaid standing in place of the property so released. Should such counter-bond for any
reason be found to be or become insufficient, and the party furnishing the same fail to file an additional counter-bond,
the attaching party may apply for a new order of attachment.
It should be noted that in G.R. No. 106214, per our Resolution dated 15 January 1997,44 we permitted Villaluz to file a
counter-attachment bond. On 17 February 1997,45 we required the private respondents to comment on the sufficiency
of the counter-bond posted by Villaluz.
It is quite palpable that the necessary steps in the discharge of an attachment upon giving counter-bond have been
taken. To require a specific order for the discharge of the attachment when this Court, in our decision in G.R. No.
106214, had already declared that the petitioner is solidarily bound with Villaluz would be mere surplusage. Thus:
During the pendency of this petition, a counter-attachment bond was filed by petitioner Villaluz before this Court to
discharge the attachment earlier issued by the trial court. Said bond amounting to P2.5 million was furnished by
Security Pacific Assurance, Corp. which agreed to bind itself "jointly and severally" with petitioner for "any judgment"
that may be recovered by private respondent against the former.46
We are not unmindful of our ruling in the case of Belisle Investment and Finance Co., Inc. v. State Investment House,
Inc.,47 where we held:
. . . [T]he Court of Appeals correctly ruled that the mere posting of a counterbond does not automatically discharge the
writ of attachment. It is only after hearing and after the judge has ordered the discharge of the attachment if a cash
deposit is made or a counterbond is executed to the attaching creditor is filed, that the writ of attachment is properly
discharged under Section 12, Rule 57 of the Rules of Court.
The ruling in Belisle, at first glance, would suggest an error in the assailed ruling of the Court of Appeals because
there was no specific resolution discharging the attachment and approving the counter-bond. As above-explained,
however, consideration of our decision in G.R. No. 106214 in its entirety will readily show that this Court has virtually
discharged the attachment after all the parties therein have been heard on the matter.
On this score, we hew to the pertinent ratiocination of the Court of Appeals as regards the heretofore cited provision of
Section 12, Rule 57 of the 1997 Rules of Civil Procedure, on the discharge of attachment upon giving counter-bond:
. . . The filing of the counter-attachment bond by petitioner Villaluz has discharged the attachment on the properties
and made the petitioner corporation liable on the counter-attachment bond. This can be gleaned from the
"DEFENDANTS BOND FOR THE DISSOLUTION OF ATTACHMENT", which states that Security Pacific Assurance
Corporation, as surety, in consideration of the dissolution of the said attachment jointly and severally, binds itself with
petitioner Villaluz for any judgment that may be recovered by private respondent Anzures against petitioner Villaluz.

248

The contract of surety is only between petitioner Villaluz and petitioner corporation. The petitioner corporation cannot
escape liability by stating that a court approval is needed before it can be made liable. This defense can only be
availed by petitioner corporation against petitioner Villaluz but not against third persons who are not parties to the
contract of surety. The petitioners hold themselves out as jointly and severally liable without any conditions in the
counter-attachment bond. The petitioner corporation cannot impose requisites before it can be made liable when the
law clearly does not require such requisites to be fulfilled.48 (Emphases supplied.)
Verily, a judgment must be read in its entirety, and it must be construed as a whole so as to bring all of its parts into
harmony as far as this can be done by fair and reasonable interpretation and so as to give effect to every word and
part, if possible, and to effectuate the intention and purpose of the Court, consistent with the provisions of the organic
law.49
Insurance companies are prone to invent excuses to avoid their just obligation.50 It seems that this statement very
well fits the instant case.
WHEREFORE, in view of all the foregoing, the Decision and Resolution of the Court of Appeals dated 16 June 2000
and 22 August 2000, respectively, are both AFFIRMED. Costs against petitioner.
SO ORDERED.

249

G.R. No. 171741

November 27, 2009

METRO, INC. and SPOUSES FREDERICK JUAN and LIZA JUAN, Petitioners,
vs.
LARA'S GIFTS AND DECORS, INC., LUIS VILLAFUERTE, JR. and LARA MARIA R. VILLAFUERTE, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the 29 September 2004 Decision2 and 2 March 2006 Resolution3 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 complaint5 and alleged that, as of July 2002, petitioners defrauded them
in the amount of $521,841.62. Respondents also prayed for P1,000,000 as moral damages, P1,000,000 as exemplary
damages and 10% of the judgment award as attorneys fees. Respondents also prayed for the issuance of a writ of
preliminary attachment.
In its 23 June 2003 Order,6 the trial court granted respondents prayer and issued the writ of attachment against the
properties and assets of petitioners. The 23 June 2003 Order provides:
WHEREFORE, let a Writ of Preliminary Attachment issue against the properties and assets of Defendant METRO,
INC. and against the properties and assets of Defendant SPOUSES FREDERICK AND LIZA JUAN not exempt from
execution, as may be sufficient to satisfy the applicants demand of US$521,841.62 US Dollars or its equivalent in
Pesos upon actual attachment, which is about P27 Million, unless such Defendants make a deposit or give a bond in
an amount equal to P27 Million to satisfy the applicants demand exclusive of costs, upon posting by the Plaintiffs of a
Bond for Preliminary Attachment in the amount of twenty five million pesos (P25,000,000.00), subject to the approval
of this Court.
SO ORDERED.7
On 26 June 2003, petitioners filed a motion to discharge the writ of attachment. Petitioners argued that the writ of
attachment should be discharged on the following grounds: (1) that the 2001 agreement was not a valid contract
because it did not show that there was a meeting of the minds between the parties; (2) assuming that the 2001
agreement was a valid contract, the same was inadmissible because respondents failed to authenticate it in
accordance with the Rules on Electronic Evidence; (3) that respondents failed to substantiate their allegations of fraud
with specific acts or deeds showing how petitioners defrauded them; and (4) that respondents failed to establish that
the unpaid commissions were already due and demandable.
After considering the arguments of the parties, the trial court granted petitioners motion and lifted the writ of
attachment. The 12 August 2003 Order8 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.

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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 counter-bond. Petitioners also argue that respondents
failed to show that the writ of attachment was issued upon a ground which is at the same time also respondents
cause of action. Petitioners maintain that respondents amended complaint was not an action based on fraud but was
a simple case for collection of sum of money plus damages.
On the other hand, respondents argue that the Court of Appeals did not err in ruling that the writ of attachment can
only be discharged by filing a counter-bond. According to respondents, petitioners cannot avail of Section 13,13 Rule
57 of the Rules of Court to have the attachment set aside because the ground for the issuance of the writ of

251

attachment is also the basis of respondents amended complaint. Respondents assert that the amended complaint is a
complaint for damages for the breach of obligation and acts of fraud committed by petitioners.1 a vv p h i 1
In this case, the basis of respondents application for the issuance of a writ of preliminary attachment is Section 1(d),
Rule 57 of the Rules of Court which provides:
SEC. 1. Grounds upon which attachment may issue. At the commencement of the action or at any time before
entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for
the satisfaction of any judgment that maybe recovered in the following cases: x x x
(d) In an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon
which the action is brought, or in the performance thereof; x x x
In Liberty Insurance Corporation v. Court of Appeals,14 we explained:
To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the
obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have
been the reason which induced the other party into giving consent which he would not have otherwise given. To
constitute a ground for attachment in Section 1(d), Rule 57 of the Rules of Court, fraud should be committed upon
contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a
preconceived plan or intention not to pay, as it is in this case.15
The applicant for a writ of preliminary attachment must sufficiently show the factual circumstances of the alleged fraud
because fraudulent intent cannot be inferred from the debtors mere non-payment of the debt or failure to comply with
his obligation.16
In their amended complaint, respondents alleged the following in support of their prayer for a writ of preliminary
attachment:
5. Sometime in early 2001, defendant Frederick Juan approached plaintiff spouses and asked them to help
defendants export business. Defendants enticed plaintiffs to enter into a business deal. He proposed to plaintiff
spouses the following:
a. That plaintiffs transfer and endorse to defendant Metro some of the Purchase Orders (POs) they will receive from
their US buyers;
b. That defendants will sell exclusively and "only thru" plaintiffs for their US buyer;
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

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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 Appeals20 is proper. The rule that
"when the writ of attachment is issued upon a ground which is at the same time the applicants cause of action, the
only other way the writ can be lifted or dissolved is by a counter-bond"21 is applicable in this case. It is clear that in
respondents amended complaint of fraud is not only alleged as a ground for the issuance of the writ of preliminary
attachment, but it is also the core of respondents complaint. The fear of the Court of Appeals that petitioners could
force a trial on the merits of the case on the strength of a mere motion to dissolve the attachment has a basis.
WHEREFORE, we DENY the petition. We AFFIRM the 29 September 2004 Decision and 2 March 2006 Resolution of
the Court of Appeals in CA-G.R. SP No. 79475.
SO ORDERED.

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G.R. No. 84481 April 18, 1989

MINDANAO SAVINGS & LOAN ASSOCIATION, INC. (formerly Davao Savings & Loan Association) & FRANCISCO
VILLAMOR, petitioners,
vs.
HON. COURT OF APPEALS, POLY R. MERCADO, and JUAN P. MERCADO, respondents.
Villarica, Tiongco & Caboverde Law Office for petitioners.
A B C Law Offices for private respondents.

GRIO-AQUINO, J.:
On September 10, 1986, private respondents filed in the Regional Trial Court of Davao City, a complaint against
defendants D.S. Homes, Inc., and its directors, Laurentino G. Cuevas, Saturnino R. Petalcorin, Engr. Uldarico D.
Dumdum, Aurora P. De Leon, Ramon D. Basa, Francisco D. Villamor, Richard F. Magallanes, Geronimo S. Palermo
Felicisima V. Ramos and Eugenio M. De los Santos (hereinafter referred to as D.S. Homes, et al.) for "Rescission of
Contract and Damages" with a prayer for the issuance of a writ of preliminary attachment, docketed as Civil Case No.
18263.
On September 28, 1986, Judge Dinopol issued an order granting ex parte the application for a writ of preliminary
attachment.
On September 22, 1986, the private respondents amended their complaint and on October 10, 1986, filed a second
amended complaint impleading as additional defendants herein petitioners Davao Savings & Loan Association, Inc.
and its president, Francisco Villamor, but dropping Eugenio M. De los Santos.
On November 5, 1986, Judge Dinopol issued ex parte an amended order of attachment against all the defendants
named in the second amended complaint, including the petitioners but excluding Eugenio C. de los Santos.
D. S. Homes. Inc., et al. and the Davao Savings & Loan Association (later renamed Mindanao Savings & Loan
Association, Inc. or "MSLA") and Francisco Villamor filed separate motions to quash the writ of attachment. When their
motions were denied by the Court, D.S. Homes, Inc., et al. offered a counterbond in the amount of Pl,752,861.41 per
certificate issued by the Land Bank of the Philippines, a banking partner of petitioner MSLA The lower court accepted
the Land Bank Certificate of . Deposit for Pl,752,861.41 as counterbond and lifted the writ of preliminary attachment
on June 5, 1987 (Annex V)
On July 29, 1987, MSLA and Villamor filed in the Court of Appeals a petition for certiorari (Annex A) to annul the order
of attachment and the denial of their motion to quash the same (CA-G.R. SP No. 12467). The petitioners alleged that
the trial court acted in excess of its jurisdiction in issuing the ex parte orders of preliminary attachment and in denying
their motion to quash the writ of attachment, D.S. Homes, Inc., et al. did not join them.
On May 5, 1988, the Court of Appeals dismissed the petition for certiorari and remanded the records of Civil Case No.
18263 to the Regional Trial Court of Davao City, Branch 13, for expeditious proceedings. It held:
Objections against the writ may no longer be invoked once a counterbond is filed for its lifting or dissolution.
The grounds invoked for the issuance of the writ form the core of the complaint and it is right away obvious that a trial
on the merits was necessary. The merits of a main action are not triable in a motion to discharge an attachment
otherwise an applicant for dissolution could force a trial on the merits on his motion (4 Am. Jur., Sec. 635, 934, cited in
G.G. Inc. vs. Sanchez, et al., 98 Phil. 886, 890, 891). (Annex B, p. 185, Rollo.)
Dissatisfied, the petitioners appealed to this Court.
A careful consideration of the petition for review fails to yield any novel legal questions for this Court to resolve.
The only requisites for the issuance of a writ of preliminary attachment under Section 3, Rule 57 of the Rules of Court
are the affidavit and bond of the applicant.
SEC. 3. Affidavit and bond required . An order of attachment shall be granted only when it is made to appear by the
affidavit of the applicant, or of some other person who personally knows the facts, that a sufficient cause of action
exists that the case is one of those mentioned in section 1 hereof, that there is no other sufficient security for the claim

254

sought to be enforced by the action, and that the amount due to the applicant, or the value of the. property the
possession of which he is entitled to recover, is as much as the sum for which the order is granted above all legal
counterclaims. The affidavit, and the bond required by the next succeeding section must be duly filed with the clerk or
judge of the court before the order issues.
No notice to the adverse party or hearing of the application is required. As a matter of fact a hearing would defeat the
purpose of this provisional remedy. The time which such a hearing would take, could be enough to enable the
defendant to abscond or dispose of his property before a writ of attachment issues. Nevertheless, while no hearing is
required by the Rules of Court for the issuance of an attachment (Belisle Investment & Finance Co., Inc. vs. State
Investment House, Inc., 72927, June 30, 1987; Filinvest Credit Corp. vs. Relova, 11 7 SCRA 420), a motion to quash
the writ may not be granted without "reasonable notice to the applicant" and only "after hearing" (Secs. 12 and 13,
Rule 57, Rules of Court).
The Court of Appeals did not err in holding that objections to the impropriety or irregularity of the writ of attachment
"may no longer be invoked once a counterbond is filed," when the ground for the issuance of the writ forms the core of
the complaint.
Indeed, after the defendant has obtained the discharge of the writ of attachment by filing a counterbond under Section
12, Rule 57 of the Rules of Court, he may not file another motion under Section 13, Rule 57 to quash the writ for
impropriety or irregularity in issuing it.
The reason is simple. The writ had already been quashed by filing a counterbond, hence, another motion to quash it
would be pointless. Moreover, as the Court of Appeals correctly observed, when the ground for the issuance of the writ
is also the core of the complaint, the question of whether the plaintiff was entitled to the writ can only be determined
after, not before, a full-blown trial on the merits of the case. This accords with our ruling G.B. Inc. vs. Sanchez, 98 Phil.
886 that: "The merits of a main action are not triable in a motion to discharge an attachment, otherwise an applicant
for the dissolution could force a trial on the merits of the case on this motion."
May the defendant, after procuring the dissolution of the attachment by filing a counterbond, ask for the cancellation of
the counterbond on the ground that the order of attachment was improperly issued? That question was answered by
this Court when it ruled in Uy Kimpang vs. Javier, 65 Phil. 170, that "the obligors in the bond are absolutely liable for
the amount of any judgment that the plaintiff may recover in the action without reference to the question of whether the
attachment was rightfully or wrongfully issued."
The liability of the surety on the counterbond subsists until the Court shall have finally absolved the defendant from the
plaintiff s claims. Only then may the counterbond be released. The same rule applies to the plaintiffs attachment bond.
"The liability of the surety on the bond subsists because the final reckoning is when the Court shall finally adjudge that
the attaching creditor was not entitled to the issuance of the attachment writ," (Calderon vs. Intermediate Appellate
Court, 155 SCRA 531.)
WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. SP No. 12467, the
petition for review is denied for lack of merit with costs against the petitioners.
SO ORDERED.
Cruz, Gancayco and Medialdea, JJ., concur.

Separate Opinions

NARVASA, J.: Concurring And Dissenting Opinion

I agree that the decision of the Court of Appeals subject of the appeal in this case should be affirmed. I write this
separate opinion simply to stress certain principles relative to the discharge of preliminary attachments so that our
own decision or that thereby affirmed be not applied to juridical situations beyond their intendment, which may well
result from the statement that "after the defendant has obtained the discharge of the writ of attachment by filing a
counterbond under Section 12, Rule 57 of the Rules of Court, he may not file another motion under Section 13, Rule
57 to quash the writ for impropriety or irregularity in issuing it."

255

Rule 57 specifies in clear terms the modes by which a preliminary attachment may be discharged at the instance of
the party against whom it has been issued. The first is by the submission of a counterbond or security. The second is
by a demonstration of the attachment's improper or irregular issuance.
1.0.

The discharge of an attachment on security given is governed by Section 12 of the Rule.

SEC 12.
Discharge of attachment upon giving counterbond. At any time after an order of attachment has
been granted, the party whose property has been attached, or the person appearing in his behalf, may, upon
reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the
action is pending, for an order discharging the attachment wholly or in part on the security given .. in an amount equal
to the value of the property attached as determined by the judge to secure the payment of any judgment that the
attaching creditor may recover in the action. .. .
This mode of dissolution presents no apparent difficulty. It applies when there has already been a seizure of property
by the sheriff. All that is entailed is the presentation of a motion to the proper court, seeking approval of a cash or
surety bond in an amount equivalent to the value of the property seized and the lifting of the attachment on the basis
thereof. The counter-bond stands, according to the cited section, "in place of the property so released."
1.1.
But a party need not wait until his property has been seized before seeking its dissolution upon security. In
fact he may prevent the seizure of his property under attachment by giving security in an amount sufficient to satisfy
the claims against him. The relevant provision of the Rule is Section 5. 1
SEC. 5. Manner of attaching property . The officer executing the order shall without delay attach, to await judgment
and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt
from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a
deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the
applicant, in an amount sufficient to satisfy such demand besides costs or in an amount equal to the value of the
property which is about to be attached, to secure payment to the applicant of any judgment which he may recover in
the action. .. .
2.0.
The second way of lifting a preliminary attachment is by proving its irregular or improper issuance, under
Section 13 of Rule 57. Like the first, this second mode may be availed of even before any property has been actually
attached. It may even be resorted to after the property has already been released from the levy on attachment, as the
pertinent provision makes clear. 2
SEC. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached
may also, at any time either before or after the release of the attached properly, or before any attachment shall have
been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to
the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the
same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property
has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other
evidence in addition to that on which the attachment was made. .. .
As pointed out in Calderon v. I.A.C. 155 SCRA 531 (1987), "The attachment debtor cannot be deemed to have waived
any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment
writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ
maliciously sought out by the attaching creditor instead of the other way, which, in most instances .. would require
presentation of evidence in a fullblown trial on the merits and cannot easily be settled in a pending incident of the
case."
3.0.
However, when the preliminary attachment is issued upon a ground which is at the same time the applicant's
cause of action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own
use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his
employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty," 3 or "an action
against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is
brought, 4 the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by
offering to show the falsity of the factual averments in the plaintiffs application and affidavits on which the writ was
based and consequently that the writ based thereon had been improperly or irregularly issued 5 the reason
being that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the
action. In other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the
regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counterbond. 6

256

4.0.
The dissolution of the preliminary attachment upon security given, or a showing of its irregular or improper
issuance, does not of course operate to discharge the sureties on plaintiffs own attachment bond. The reason is
simple. That bond is 'executed to the adverse party, .. conditioned that the .. (applicant) will pay all the costs which
may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court
shall finally adjudge that the applicant was not entitled thereto." 7 Hence, until that determination is made, as to the
applicant's entitlement to the attachment, his bond must stand and cannot be withdrawn.

Separate Opinions
NARVASA, J.: Concurring And Dissenting Opinion
I agree that the decision of the Court of Appeals subject of the appeal in this case should be affirmed. I write this
separate opinion simply to stress certain principles relative to the discharge of preliminary attachments so that our
own decision or that thereby affirmed be not applied to juridical situations beyond their intendment, which may well
result from the statement that "after the defendant has obtained the discharge of the writ of attachment by filing a
counterbond under Section 12, Rule 57 of the Rules of Court, he may not file another motion under Section 13, Rule
57 to quash the writ for impropriety or irregularity in issuing it."
Rule 57 specifies in clear terms the modes by which a preliminary attachment may be discharged at the instance of
the party against whom it has been issued. The first is by the submission of a counterbond or security. The second is
by a demonstration of the attachment's improper or irregular issuance.
1.0.

The discharge of an attachment on security given is governed by Section 12 of the Rule.

SEC 12.
Discharge of attachment upon giving counterbond. At any time after an order of attachment has
been granted, the party whose property has been attached, or the person appearing in his behalf, may, upon
reasonable notice to the applicant, apply to the judge e who granted the order, or to the judge of the court in which the
action is pending, for an order discharging the attachment wholly or in part on the security given .. in an amount equal
to the value of the property attached as determined by the judge to secure the payment of any judgment that the
attaching creditor may recover in the action. .. .
This mode of dissolution presents no apparent difficulty. It applies when there has already been a seizure of property
by the sheriff. All that is entailed is the presentation of a motion to the proper court, seeking approval of a cash or
surety bond in an amount equivalent to the value of the property seized and the lifting of the attachment on the basis
thereof. The counter- bond stands, according to the cited section, "in place of the property so released."
1.1.
But a party need not wait until his property has been seized before seeking its dissolution upon security. In
fact he may prevent the seizure of his property under attachment by giving security in an amount sufficient to satisfy
the claims against him. The relevant provision of the Rule is Section 5. 1
SEC. 5. Manner of attaching property. The officer executing the order shall without delay attach, to await judgment
and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt
from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a
deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the
applicant, in an amount sufficient to satisfy such demand besides costs or in an amount equal to the value of the
property which is about to be attached, to secure payment to the applicant of any judgment which he may recover in
the action. .. .
2.0.
The second way of lifting a preliminary attachment is by proving its irregular or improper issuance, under
Section 13 of Rule 57. Like the first, this second mode may be availed of even before any property has been actually
attached. It may even be resorted to after the property has already been released from the levy on attachment, as the
pertinent provision makes clear. 2
SEC. 13. Discharge of attachment for improper or irregular issuance. The party whose property has been attached
may also, at any time either before or after the release of the attached properly, or before any attachment shall have
been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to
the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the
same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property
has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other
evidence in addition to that on which the attachment was made. .. .

257

As pointed out in Calderon v. I.A.C. 155 SCRA 531 (1987), "The attachment debtor cannot be deemed to have waived
any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment
writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ
maliciously sought out by the attaching creditor instead of the other way, which, in most instances .. would require
presentation of evidence in a fullblown trial on the merits and cannot easily be settled in a pending incident of the
case."
3.0.
However, when the preliminary attachment is issued upon a ground which is at the same time the applicant's
cause of action; e.g., "an action for money or property embezzled or fraudulently misapplied or converted to his own
use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his
employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty," 3 or "an action
against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is
brought, 4 the defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by
offering to show the falsity of the factual averments in the plaintiffs application and affidavits on which the writ was
basedand consequently that the writ based thereon had been improperly or irregularly issued 5 the reason being
that the hearing on such a motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In
other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular trial.
Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counter-bond. 6
4.0.
The dissolution of the preliminary attachment upon security given, or a showing of its irregular or improper
issuance, does not of course operate to discharge the sureties on plaintiffs own attachment bond. The reason is
simple. That bond is 'executed to the adverse party, .. conditioned that the .. (applicant) will pay all the costs which
may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court
shall finally adjudge that the applicant was not entitled thereto." 7 Hence, until that determination is made, as to the
applicant's entitlement to the attachment, his bond must stand and cannot be withdrawn.

258

G.R. No. 71535 September 15, 1987

HELENA Z. T. BENITEZ, petitioner-appellee,
vs.
THE INTERMEDIATE APPELLATE COURT, ROSARIO R. VELOSO, in her capacity as Judge of the Regional Trial
Court, National Capital Judicial Region, Branch 133, et al., respondents-appellants.

YAP, J.:
This is a petition for review on certiorari of the decision of respondent Intermediate Appellate Court dated July 25,
1985, affirming the questioned orders of the Regional Trial Court of Makati, to wit: (a) the order dated December 11,
1984, granting the private respondents' petition for a writ of attachment ex-parte; (b) the order dated January 31, 1985,
denying petitioner's urgent motion to discharge attachment; and (c) the order dated April 24, 1985, denying petitioner's
motion for reconsideration.
The records show that on December 6, 1984, private respondent Casa Filipina Development Corporation (Casa
Filipina for brevity) filed a complaint against herein petitioner Helena T. Benitez for recission of contract, plus
damages, with a prayer for preliminary attachment. The complaint alleged that sometime on April 16, 1983, the plaintiff
Casa Filipina, a real estate corporation, represented by Renato P. Dragon, and defendant Benitez (the petitioner
herein), entered into a verbal contract whereby Benitez allegedly agreed to undertake to purchase/convey land for
Casa Filipina in the total value of One Million Pesos (P1,000,000.00) within the period of four (4) months from receipt
of the total amount. On the same date, Casa Filipina tendered a check payment in the amount of Five Hundred
Thousand Pesos (P500,000.00) in the name of Benitez. On August 26, 1983, to complete the amount of One Million
Pesos as allegedly agreed upon, Casa Filipina issued again another check in the amount of Five Hundred Thousand
Pesos (P500,000.00). Both checks were deposited and credited in petitioner's bank account. The four-month period
allegedly elapsed without Benitez having purchased nor conveyed any real estate in the total value of One Million
Pesos (P1,000,000.00) in favor of Casa Filipina, but instead Benitez converted the entrusted money for her own
personal use in violation of her fiduciary relationship with plaintiff and that despite repeated demands for the refund or
return of the aforementioned amount, Benitez chose to ignore the same. Praying for a writ of preliminary attachment,
Casa Filipina submitted with its complaint, the affidavit of one Nestor P. Borromeo, the corporate secretary and acting
treasurer of the corporation.
The writ of attachment was granted by respondent court exparte in an order dated December 11, 1985.
On December 27, 1984, the Clerk of Court issued a writ of preliminary attachment, by virtue of which the respondent
Sheriff served notices of garnishment to the Philippine Women's University, Taft Avenue, Manila, the Unlad
Development Resources Corporation and Bank of the Philippine Islands, Unlad Condominium, Taft Avenue, Manila,
thereby garnishing the deposits, shares of stocks, salaries and other personal property of the petitioner. Likewise on
January 30, 1984, petitioner was advised by the Acting Register of Deeds of Quezon City that a notice of levy was
filed with the Registrar's Office affecting two parcels of prime land at Mariposa Street, with an aggregate area of 4,304
square meters which are owned by and registered in the name of the petitioner.
Earlier on January 21, 1985, Benitez filed an answer with counterclaim and opposition to the petition for issuance of a
writ of preliminary attachment. On the same date, Benitez also filed an Urgent Motion to Discharge Writ of Preliminary
Attachment under Section 13, Rule 57 of the Rules of Court, on the ground that the same was improperly or irregularly
issued. Benitez alleged that sometime in March 1983, Mr. Renato Dragon, acting for himself and Casa Filipina agreed
to buy ten (10) hectares of petitioner's land in Dasmarinas, Cavite, for a price of P15.00 per square meter or for a total
consideration of One Million Five Hundred Thousand Pesos (P1,500,000.00); that it was agreed upon by the parties
that it is only upon full payment of the amount of P1,500,000.00 that delivery of the ten-hectare property of the
petitioner will be made; that Casa Filipina was not able to comply with the obligation to pay the balance of
P500,000.00 despite repeated demands and instead filed the present action for recission.
In support of its urgent motion to discharge the writ of preliminary attachment, petitioner attached thereto the affidavit
of her technical assistant and attorney-in-fact by the name of Virginia Real, who alleged. among other things, that she
knows for a fact that the transaction between Benitez and Dragon for Casa Filipina, was one of purchase and sale;
that a copy of TCT No. 9833 covering the land to be purchased was furnished the office of Mr. Dragon on February 28,
1984; that petitioner is willing and able to execute a deed of absolute sale in favor of Casa Filipina upon full payment
of the balance of P500,000.00.
The said motion was set for hearing on January 25, 1985 but the private respondent and its counsel failed to appear
despite notice. Consequently, the motion was deemed submitted for resolution.

259

On January 31, 1985, respondent Court denied petitioner's motion to discharge writ of preliminary attachment. The
said order reads:
Considering defendant's motion to quash and/or lift the writ of preliminary attachment issued by this Court upon
properties of defendant on the ground that the same was predicated upon false and untrue allegations, the Court
believes and so rules that the issue cannot be determined without adducing evidence at the same time going into the
merits of the case which in the opinion of the Court could not be done at this stage of the proceedings.
Considering that the writ of preliminary attachment was issued after having satisfied the requirements of the rules, the
same may not be lifted or discharged without the defendant filing a counterbond.
WHEREFORE, the motion to lift and/or discharge the writ of preliminary attachment is hereby denied.
SO ORDERED.
On February 5, 1985, despite the lower court's denial of petitioner's motion to discharge preliminary attachment, the
private respondent filed a belated opposition to the said motion, to which the petitioner filed a reply a February 18,
1985.
On March 14, 1985, petitioner discovered that her motion to discharge preliminary attachment was denied. Hence, on
March 20, 1985, petitioner filed a motion for reconsideration which was likewise denied by respondent judge on April
24, 1985, Whereupon, a petition for certiorari, mandamus and prohibition was filed by the petitioner before respondent
Intermediate Appellate Court, which, as stated earlier, was dismissed for I acknowledge of merit. Hence, this petition.
On January 8, 1986, the Court gave due course to the petition and required the parties to submit their memoranda.
Petitioner poses the following questions for resolution, to wit:
1.
Whether a counter-attachment bond is necessary and indispensable under the circumstances before the
subject writ of preliminary attachment may be recalled, quashed and/or discharged?
2.
Whether or not the issue on the propriety of the issuance of the subject writ may be resolved without going
into the merits of the principal action?
We find the petition meritorious.
The attachment was granted by the lower court ex-parte under Section 1 (b), Rule 57, Rules of Court, upon the
allegation of respondent Casa Filipina, that petitioner Helena Benitez, the defendant, had violated their alleged
fiduciary relationship and had unlawfully converted the amount of P1,000,000.00 for her own use. Petitioner promptly
filed an urgent motion to discharge writ of preliminary attachment for improper or irregular issuance, supported by the
affidavit of Virginia Real, who alleged that there was no fiduciary relationship between the plaintiff and defendant
inasmuch as the transaction between them was one of sale of real property. Thus, in effect, the petitioner claims that
the private respondent's allegation of fraud was false, that hence there was no ground for the attachment, and that
consequently, the attachment order was improperly or irregularly issued.
In Villongco, et al. vs. Hon. Panlilio, et al., 1 we held that the affidavit supporting the petition for the issuance of the
preliminary attachment may have been sufficient to justify the issuance of the preliminary writ, but it cannot be
considered as proof of the allegations contained in the affidavit, which are mere conclusions of law, not statement of
facts. Petitioner in the instant case having squarely controverted the private respondent's allegation of fraud, it was
incumbent on the latter to prove its allegation. The burden of proving that there indeed was fraud lies with the party
making such allegation. This finds support in Section 1, Rule 131 of the Rules of Court which provides: "Each party
must prove his own affirmation allegations. . . . The burden of proof lies on the party who would be defeated if no
evidence were given on either side." In this jurisdiction, fraud is never presumed. 2
The petitioner's Urgent Motion to Discharge Writ of Preliminary Attachment was filed under Section 13, Rule 57. The
last sentence of said provision indicates that a hearing must be conducted by the judge for the purpose of determining
whether or not there really was a defect in the issuance of the attachment.
It appears from the records that no hearing was conducted by the lower court. Indeed, when the case was called for
hearing, the plaintiff (private respondent herein), failed to appear and the petitioner's motion was considered submitted
for resolution.
Private respondent has alleged in its memorandum that petitioner did not file an affidavit in support of her Urgent
Motion to Discharge Attachment, as required under Section 13 of Rule 57, hence, it was not necessary or imperative

260

that a hearing be held. The Court finds private respondent's allegation to be irresponsible, for attached to petitioner's
motion was the supporting affidavit of Virginia L. Real, the technical assistant of petitioner Benitez. In her affidavit, she
stated that she had personal knowledge of the transaction between respondent Casa Filipina and petitioner Benitez;
that Mr. Renato Dragon, for himself and/or Casa Filipina, agreed to buy a portion consisting of 10 hectares of a parcel
of land belonging to Benitez in Dasmarinas, Cavite, for the total price of P1,500,000.00 of which private respondent
made a downpayment of P500,000.00 on April 16, 1983; and a second payment of P500,000.00 on August 27, 1983;
that private respondent having failed to pay the balance of P500,000.00, the deed of sale could not be executed in
favor of private respondent. The record amply supports petitioner's version, as against the private respondent's
allegation that Benitez had acted as agent in receiving the money and converted the same for her own use in violation
of the fiduciary relationship existing between her and private respondent. Private respondent acknowledged the
receipt of a xerox copy of TCT No. 9833 covering petitioner's land in Dasmarinas, Cavite, 3 and the check voucher
issued by private respondent on April 16, 1983 showed that the check for P500,000.00 was for "Payment for
downpayment of lot to be purchased" 4 and the check voucher dated August 27, 1983 for P500,000.00 was for
"Second payment for lot to be purchased." 5
It was grave abuse of discretion on the part of respondent Judge Rosario Veloso to deny petitioner's Urgent Motion to
Discharge Writ of Preliminary Attachment, without conducting a hearing and requiring the plaintiff to substantiate its
allegation of fraud. Neither can respondent Judge avoid deciding the issue raised in petitioner's urgent motion by
ruling that "the issue cannot be determined without adducing evidence at the same time going into the merits of the
case." Having issued the writ of preliminary attachment ex parte, it was incumbent on the respondent court, upon
proper challenge of its order, to determine whether or not the same was improvidently issued. A preliminary
attachment is a rigorous remedy which exposes the debtor to humiliation and annoyance, such that it should not be
abused to cause unnecessary prejudice and, if wrongfully issued on the basis of false allegation, should at once be
corrected.
We agree with petitioner that a writ of attachment may be discharged pursuant to Section 13, Rule 57, without the
necessity of filing a cash deposit or counterbond. The provisions of the aforesaid section grants an aggrieved party
relief from baseless and unjustifiable attachments procured, among others, upon false allegations, without having to
file any cash deposit or counterbond.
WHEREFORE, in view of the foregoing, the appealed decision is hereby reversed and the ex parte writ of preliminary
attachment issued by the respondent Regional Trial Court on December 11, 1984 is ANNULLED and SET ASIDE.
Costs against private respondent.
SO ORDERED.

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G.R. No. L-43461

December 16, 1937

J. UY KIMPANG & CO., plaintiff-appellant,

vs.
VICENTE JAVIER, ET AL., defendants;
JUAN AUTAJAY and SEVERINO MAGBANUA, sureties-appellees.
Engracio Padilla and Manuel Laserna and Vickers, Ohnick, Opisso and Velilla for appellant.
Tobias Fornier for appellee Autajay.
No appearance for the other appelle Magbanua.

DIAZ, J.:
By virtue of a writ of execution issued by the Court of First Instance of Antique on August 8, 1933 to enforce the
payment to the plaintiff of the sum of P6,678.84 plus interest and costs, which the defendants Vicente Javier, Ramon
Majandog, Zenon Javier, Paz Javier with her husband Hugo Mabaquiao and Ramon Maza, in case G. R. No. 36414 1
(civil case No. 1253 of the Court of First Instance of Antique), were sentenced by this court to pay, the sheriff of the
aforesaid province levied upon the seven parcels of land belonging to the defendant Ramona Majandog and
enumerated in the return of said sheriff of September 9, 1933 for the purpose of selling, as he in fact later sold, them
at public auction to the highest bidder who was found in the person of Uy Cay Ju, manager of the plaintiff entity, for the
sum of only P1,730. In view of the fact that this sum was not sufficient to cover the full value of the judgment and that
the defendants failed to deliver to the sheriff the properties which were released from the attachment by the virtue of
the obligation which, on December 29, 1925 and the approval of the court, they executed jointly with their sureties
Severino Magbanua and Juan Autajay, the plaintiff in its motion of January 23, 1934 moved the court to again order
the execution of the aforesaid judgement, but this time against the properties of two sureties. The surety Juan Autajay
objected to the plaintiff's motion on the grounds: (1) That the attachment of the properties of the defendants was null
and void because it does not appear that they were served with a copy of the writ ordering the same; (2) that said
attachment was not inscribed in the registry of properties; (3) that he (Autajay) was released from his obligation as
surety because his undertaking had been cancelled when the court, in its order of February 15, 1930, permitted him to
withdraw therefrom; (4)that the undertaking should in any event be enforced exclusively against the other surety
(Severino Magbanua) inasmuch as he did not withdraw therefrom.
After passing upon the question raised by Juan Autajay, the lower court, in its order of July 18, 1934, denied the
plaintiff's motion for the following reasons:
(a)
That in view of the amount in litigation (P9,352), the justice of the peace of the capital of antique, even in the
absence of the Judge of First Instance of said province, had no power to issue the writ of attachment in question;
(b)
That the issuance of the said writ by the clerk was illegal, because only the justices and the judges of First
Instance may issue such writs, and their power cannot in any case be delegated to the clerk;
(c)
That there was no valid attachment because, aside from the fact that the basic writ was not signed by any
judge, the obligation executed by the plaintiff was not approved by the court; and
(d)
that, in violation of the provisions of section 440 of Act No. 190, the discharge of the attachment levied upon
the properties of the defendants was not ordered.
The plaintiff duly appealed from the order denying his motion and now contends that the lower court erred:lawphil.net
1.
In holding that the justice of the peace of the capital of Antique could not issue the writ of attachment because
the amount sued for was in excess of that provided by law in the cases in which justice of the peace of the provincial
capitals may order an attachment;
2.
In holding that the writ of attachment was illegal because it was issued by the clerk and not by the judge, and
that the order authorizing the clerk to issue the same was likewise illegal because it conferred powers which under the
law could not be delegated;
3.
In holding that the properties of the defendants were not validly attached, because the writ of attachment was
not signed by the judge;
4.

In holding that the obligation executed by the plaintiff was not valid, because it was not approved by the court;

262

5.
In holding that the counterobligation executed by Juan Autajay and Severino Magbanua is without any legal
effect;
6.
In holding that the plaintiff has no right to enforce the counterobligation signed by Juan Autajay and Severino
Magbanua, and in denying its motion for the enforcement thereof; and
7.

In not granting its motion for reconsideration and in denying its motion for new trial.lawphil.net

The background necessary to a better grasp of the facts of the case may be briefly stated as follows: On December
20, 1925 the plaintiff filed in the Court of First Instance of Antique a verified complaint in which it alleged among other
things that the defendant were indebted to it in the sum of P9,352 plus interest from May, 1918, at the rate of 12 per
cent per annum; that the defendants were disposing or about to dispose of their properties with intent to defraud their
creditors and the plaintiff; that in order to secure plaintiff's rights, it was necessary to attach the properties of said
defendants, unless they were willing to execute an obligation as guaranty for their solvency; and that to obtain such
remedy, it was ready to execute the requisite obligation. Four days later, or on December 24, 1925, the plaintiff filed a
motion in which, after reiterating the allegations of its complaint, it was prayed that a writ of attachment be issued
against the defendant. The justice of the peace of the capital of Antique, acting in the place of the Judge of the Court
of First Instance of said province, ruled favorably on the plaintiff's motion and stated the following in his order of
December 24, 1925.
Wherefore the court, being of the opinion that the plaintiff entity is entitled thereto, hereby orders the clerk of court to
issue a writ of attachment against the properties of the said defendants upon the execution by the plaintiff of an
obligation in the sum of P9,500 which will respond for the damages recoverable by the defendants in case the court
decides this case in their favor.
So ordered.
San Jose, Antique, P.I., December 24, 1925.
(Sgd.) DELFIN HOFILEA
Justice of the Peace of the Capital
of San Jose, Antique, acting in the
Seventeenth District.
After the plaintiff had executed the obligation in the sum of P9,500 as required in this order, issued on December
29,1925 the writ of attachment in question, notwithstanding the fact that the aforesaid obligation was not yet approved.
The provincial sheriff, upon receipt of the writ, attached the properties belonging to defendants and enumerated in the
sheriff's return, the assessed value of which was noted at the bottom of said return. On the same day, December 29,
1925, the defendants executed a counterobligation in the sum of P9,500 with a view to dissolving the attachment
levied upon their properties. Said counterbond, which was approved on the same date by the justice of the peace who
issued the order of attachment, was signed by all the defendant and their sureties Juan Autajay and Severino
Magbanua who bound themselves jointly and severally thereunder.
On March 29, Juan Autajay prayed that he be permitted to withdraw from his obligation as surety of the defendant. In
view, however, of the opposition registered by the plaintiff in which it was alleged that the purpose of Juan Autajay was
merely to evade the performance of an obligation voluntarily contracted and to defeat the judgment which might be
entered in plaintiff's favor, the trial court denied the motion in its order of April 17, 1926 the dispositive part of which
reads as follows:
The court, after hearing the arguments of both parties, sustains the demurrer, admits the amended complaint, and
denies the motion of Juan Autajay, unless the defendant Vicente Javier should execute a new obligation within the
period of thirty days.
Two other similar motions were filed by Autajay and by the surety Magbanua on November 21 and December 17,
1927, but they were not acted upon by the court for lack of prosecution. On January 31, 1930, Autajay filed another
motion, the plaintiff objected; but the trial court granted the same under the conditions expressed in the order of
February 15, 1930 to wit:
Considering the motion of the surety Juan Autajay and the statement of the Attorney Hon. Segundo C. Moscoso in
representation of the defendants Vicente Javier and other the withdrawal of the movant Juan Autajay is hereby
granted and said defendants are given sixty days within which to submit to the court for approval another obligation in
substitution for the one to be rendered ineffective by the withdrawal of the surety Juan Autajay.
The fact, however, remains that the defendant did not execute the new obligation required in the foregoing order.

263

I.
The question raised under the first error alleged to have been resolve by this court in an analogous case
wherein it was held that the justice of the peace of the capital acting "in the absence of the Justice of First Instance"
has the power to issue an order of attachment in spite of the fact that the amount litigated is in excess of that fixed by
law for his ordinary jurisdiction. (Wise & Co. vs. Larion, 45 Phil., 314.)
Section 1, paragraph 4, of act No. 2131 which was in force on December 24, 1925, the date of the attachment,
provides that the justice of the peace in the capitals of provinces organized under the Provincial Government Act, in
the absence of the judge of the province, may exercise within the province like interlocutory jurisdiction as that of the
said judge, including the appointment of receivers and the issuance of all other orders which are final and do not
involve, as the attachment under consideration, a decision of the case on its merits.
The defendants failed to prove that the Judge of the Court of First Instance of Antique was then holding sessions in
said province; and, in the absence of proof to the contrary, the legal presumption being that official duty has been
regularly performed (sec. 334, No. 14, Act No. 190), it much be held that said judge was absence from his district on
December 24, 1925. It must follow that the justice of the peace of the capital acted in full conformity with the law in
issuing the aforesaid order.
II.
There is no doubt that, under the provisions of sections 425, 426 and 427 of Act No. 190, only the justice,
judges of First Instance, and justices of the peace or municipal judges may issue an order of attachment when prayed
for, provided the legal requisites are present. In the case at bar all the requirements of the law were complied with.
Inasmuch as the order of December 24, 1925 under which the questioned writ of attachment was issued, was entered
by a competent judge, it cannot be alleged that said writ was a mere capricious act of the clerk. On the contrary, it may
and should be inferred that the writ was issue in strict compliance with a perfectly valid order given to him. The law
does not provide or state that the writs of attachment must be issued by the very justice or judge who is to authorize it;
it simply determines the judicial authority who shall have the power to grant an attachment. Even supposing that the
writ in dispute is defective because it was not signed by the judge who authorized its issuance, it is now too late to
raise the question after the same was accepted and believed to be valid not only by the defendants but by their
sureties. It is noteworthy that in their counterobligation they made it understood that they were aware of the issuance
of a writ of attachment against the defendants; that the properties of the latter had been attached by the sheriff; that all
wanted or at least prayed that said attachment be discharged; and that they offered to execute, as in fact they
immediately did execute, the counterobligation required. The general rule is that "irregularities and defects in
attachment or garnishment proceedings which render the attachment merely voidable and not void, are deemed to be
waived unless promptly taken advantage of by appropriate mode of raising objection thereto." (4 Am. Jur., par., 616, p.
923.)
In case of Hammond vs. Starr (79 Cal., 556, 559; 21 Pac., 971), it was held that:
Irregularities in affidavit and undertaking or in proceedings to procure attachment, if waived in attachment suit, cannot
be taken advantage of by sureties in collateral proceedings on undertaking given to secure release of attachment.
In the case of Moffitt vs. Garrett, the supreme Court of Oklahoma (100 Pac. Rep., 533), construing two legal
provisions of said State, 4404 and 4376 (4851 and 4821), which are analogous to section 440 of Act No. 190, and
adhering to the decisions of the court of Iowa, New York, Illinois, Wisconsin, Michigan, Minnesota, Texas, Washington,
Rhode Island, California, Oregon, North Dakota and South Dakota, held that:
The court in these states have held that the execution of a bond under and in accordance with these statutes estops
the defendant from controverting the attachment, and renders the obligors in the bond absolutely liable for the amount
of any judgment the plaintiff recovers in the action, without reference to the question whether the attachment was
rightfully or wrongfully sued out. And concluded that:
The obligors in the bond are precluded and estopped from traversing the truth of the allegations of the affidavit, or
setting up that the defendant in attachment was not the owner of the property levied on.
What has been stated also disposes of the contention advanced by the sureties-appellees to the effect that the
defendants were not given a copy of the order of attachment, which is an essential requisite prescribed by section 429
of Act No. 190. The Inference must be drawn that they were notified of said order; otherwise, they would not have
stated in their counterobligation that:
"The defendant having prayed for the discharge of the attachment levied upon his properties in an action pending in
the Court of First Instance of the Province of Antique, Philippines Island, in which J. Uy Kimpang & Co. is plaintiff and
Vicente Javier and Others, defendant, . . . ." The other contention that the plaintiff's motion praying for the issuance of
a attachment was not sworn to as required by law, is likewise disposed of. It was unnecessary that the same should
be under oath because it was merely a repetition or renewal of what was already prayed for in the complaint which

264

was verified. In order not to nullify the purposes of the law, technicalities should be disregarded, especially when, as in
the case under advisement, there was substantial compliance therewith. On the other hand, the law enjoins that the
provisions of the Code of Civil Procedure shall be liberally construed in order to promote its object and assist the
parties in obtaining speedy justice, bearing in mind, in construing and applying them, their spirit and purpose, rather
than their strict letter (sec. 2, Act No. 190, Garcia vs. Ambler and Sweeney, 4 Phil., 81).
The conditions of the counterobligation executed by the defendants and the sureties-appellees are as follows:
Should the judgment be favorable to the plaintiff, the defendant, upon being required, shall redeliver to the officer of
the court the property discharge from the attachment, in order that it may be applied to the payment of the judgment,
and in case of failure to do so , the defendant and his sureties, when required, shall pay to the plaintiff the full value of
attached property. (Page 16, Bill of Exceptions.)
It must be remembered that the defendants and the sureties-appellees not only failed to object to the procedure
followed by the clerk but, as already stated, executed the counterobligation required by law for discharge of the
attachment levied upon the properties of the defendant, and that Autajay and Magbanua were the ones who signed
the counterobligation as sureties and submitted the same to the justice of the peace of the capital for approval. It must
also be remembered that in all the motions which they subsequently filed in these proceedings, the said sureties
confined themselves to the request that they be permitted to withdraw from their obligation for the reason that it was
against their interest to continue being sureties of the defendants. Under these circumstances, we believe we should
adhere to the rule that:
All objections to the writ will be waived by moving to set aside the attachment on other grounds and failing to make the
objections before bond for the release of the property. (6 C.J., par. 346, p. 190.)
because,
After issue made and trial begun upon the merits of a case, it is too late for an objection of the petition or attachment
for want of verification. (Id.)
For the reasons given, we hold that the trial court committed the second error assigned by the appellant.
III.
The question whether or not there was valid attachment is impliedly resolved in the discussion of the
appellant's second assignment of error. The omission referred to by the trial court could be supplied and was not in
any wise capital, because, as already said, the writ signed by the clerk was issued by him in compliance with the order
entered on December 24, 1925 by the justice of the peace of the capital who was authorized by law (Act No. 2131) to
do so in the absence of the Judge of First Instance of the District.
IV
Inasmuch as both the defendants and the sureties-appellees, by executing the counterobligation required by
law for the discharge of the attachment, had accepted the obligation filed by the plaintiff with the justice of the peace of
the capital for the issuance of the writ of attachment against the defendants, it is now too late and futile to allege that
the said obligation is invalid for lack of approval by the judge. They are estopped from doing so by their own acts,
inasmuch as their failure to question the said obligation at the proper time constitutes a waiver of their right. One who
has any objection to the sufficiency or validity of an obligation in attachment proceedings, should record the same
before executing the counterobligation required for the discharge of the attachment; otherwise, it will be understood
that he does not question, or that he renounces his right to question, the sufficiency or validity of the said obligation.
V.
There is no importance in the fact that it does not appear in the record that the court had dissolved, after the
approval of the aforesaid counterobligation, the attachment levied upon the properties of the defendants. It must be
assumed that the court discharged it by virtue of the said counterobligation; otherwise, the reason for approving it
cannot be explained, and said approval would have no finality.
In the case of Rosenthal (123 Cal., 240), where a similar question was involved, the court said:
Where the goods were in fact released as a consequence of the bond being given, and the undertaking for the
released of the attached property recited that it was given pursuant to an order of the court requiring it to be given, and
the officer accepted the bond and surrendered the property, it must be presumed that an order discharging the
attachment was made . . . and that the officer regularly performed his duty in releasing the goods.
VI and VII.
Inasmuch as the trial court committed the preceding five errors, it must follow that it also committed
errors 6 and 7 which are a necessary consequence thereof. The counterobligation executed by the sureties-appellees
is enforceable under the provisions of section 440 of Act No. 190 (Bautista vs. Joaquin, 46 Phil., 885), because, when
the defendants were required to deliver to the sheriff the properties released from the attachment, they could not do
so, as at least three of said properties (Exhs. A, B and E of the opposition of the appellee Juan Autajay, dated June 11,

265

1934) were sold after their release, and the appellees failed to proved that the defendants had other properties
susceptible of attachment and execution.
It is superfluous to state that there is no basis for the contention of the appellee Juan Autajay that he was released
from his obligation as surety of the defendants, because he was never so released in view of the failure of the
defendants to execute the new obligation required by the order of February 15, 1930 which has hereinbefore been
referred to.
Wherefore, the order of July 18, 1934 is set aside and the lower court is ordered to issue another writ of execution
against the properties of the sureties-appellees, to the extent of the value of their obligation of December 29, 1925,
with a view to satisfying the unpaid portion of the judgment rendered in civil case No. 1253 of the Court of First
Instance of Antique, without prejudice to the right of the said sureties to recover from the defendants the amount that
may be paid by virtue of the execution herein ordered. The costs will be assessed against the appellees. So ordered.

266

G.R. No. L-50378

September 30, 1982

FILINVEST CREDIT CORPORATION, petitioner,

vs.
THE HONORABLE JUDGE BENJAMIN RELOVA (In his capacity as Presiding Judge of the Court of First Instance of
Manila, Branch XI) and ERNESTO SALAZAR, respondents.
Labaquis, Loyola & Angara Law Offices for petitioner.
Cecilio D. Ignacio for respondents.

GUERRERO, J.:
This is a special civil action for certiorari, with prayer for restraining order or preliminary injunction, filed by petitioner
Filinvest Credit Corporation seeking to annul the Orders issued by respondent Judge dated February 2, 1979 and April
4, 1979 in Civil Case No. 109900.
As shown by the records, the antecedents of the instant Petition are as follows:
On August 2, 1977, Filinvest Credit Corporation (hereinafter referred to as FILINVEST) filed a complaint in the lower
court against defendants Rallye Motor Co., Inc. (hereinafter referred to as RALLYE) and Emesto Salazar for the
collection of a sum of money with damages and preliminary writ of attachment. From the allegations of the complaint,
1 it appears that in payment of a motor vehicle described as: "One (1) Unit MAZDA DIESEL SCHOOL BUS, Model:
E4100, Serial No.: EXC43P-02356, Motor No.: Y-13676," Salazar executed a promissory note dated May 5, 1977 in
favor of RALLYE for the amount of P99,828.00. To secure the note, Salazar also executed in favor of RALLYE a deed
of chattel mortgage over the above described motor vehicle. On May 7, 1977, RALLYE, for valuable consideration,
assigned all its rights, title and interest to the aforementioned note and mortgage to FILINVEST. Thereafter,
FILINVEST came to know that RALLYE had not delivered the motor vehicle subject of the chattel mortgage to Salazar,
"as the said vehicle (had) been the subject of a sales agreement between the codefendants." Salazar defaulted in
complying with the terms and conditions of the aforesaid promissory note and chattel mortgage. RALLYE, as assignor
who guaranteed the validity of the obligation, also failed and refused to pay FILINVEST despite demand. According to
FILINVEST, the defendants intentionally, fraudulently and with malice concealed from it the fact that there was no
vehicle delivered under the documents negotiated and assigned to it, otherwise, it would not have accepted the
negotiation and assignment of the rights and interest covered by the promissory note and chattel mortgage. Praying
for a writ of preliminary attachment, FILINVEST submitted with its complaint the affidavit of one Gil Mananghaya,
pertinent portions of which read thus:
That he is the Collection Manager, Automotive Division of Filinvest Credit Corporation;
That in the performance of his duties, he came to know of the account of Ernesto Salazar, which is covered by a
Promissory Note and secured by a Chattel Mortgage, which documents together with all the rights and interest thereto
were assigned by Rallye Motor Co., Inc.;
That for failure to pay a stipulated installment, and the fact that the principal debtor, Ernesto Salazar, and the assignor,
Rallye Motor Co., Inc. concealed the fact that there was really no motor vehicle mortgaged under the terms of the
Promissory Note and the Chattel Mortgage, the entire amount of the obligation stated in the Promissory Note
becomes due and demandable, which Ernesto Salazar and Rallye Motor Co., Inc. failed and refused to pay, so much
so that a sufficient cause of action really exists for Filinvest Credit Corporation to institute the corresponding complaint
against said person and entity;
That the case is one of those mentioned in Section 1, Rule 57 of his Rules of Court, particularly an action against
parties who have been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is
brought;
That there is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to
the applicant Filinvest Credit Corporation is as much as the sum for which the order is granted above all legal
counterclaims;
That this affidavit is executed for the purpose of securing a writ of attachment from the court. 2
The specific provision adverted to in the above Affidavit is Section 1(d) of Rule 57 which includes "an action against a
party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought,

267

or in concealing or disposing of the property for the taking, detention or conversion of which the action is brought" as
one of the cases in which a "plaintiff or any proper party may, at the commencement of the action or at any time
thereafter, have the property of the adverse party attached as security for the satisfaction of any judgment that may be
recovered."
Judge Jorge R. Coquia (now Justice of the Court of Appeals), then presiding Judge of the lower court, granted the
prayer for a writ of attachment in an Order dated August 17, 1977 stating that:
Finding the complaint sufficient in form and substance, and in view of the sworn statement of Gil Mananghaya,
Collection Manager of the plaintiff that defendants have committed fraud in securing the obligation and are now
avoiding payment of the same, let a writ of attachment issue upon the plaintiff's filing of a bond in the sum of
P97,000.00.
In the meantime, let summons issue on the defendants. 3
More than a year later, in an Urgent Motion dated December 11, 1978, 4 defendant Salazar prayed that the writ of
preliminary attachment issued ex parte and implemented solely against his property be recalled and/or quashed. He
argued that when he signed the promissory note and chattel mortgage on May 5, 1977 in favor of RALLYE,
FILINVEST was hot vet his creditor or obligee, therefore, he could not be said to have committed fraud when he
contracted the obligation on May 5, 1977. Salazar added that as the motor vehicle which was the object of the chattel
mortgage and the consideration for the promissory note had admittedly not been delivered to him by RALLYE, his
repudiation of the loan and mortgage is more justifiable.
FILINVEST filed an Opposition, but on February 2, 1979, the court a quo, this time presided over by herein respondent
Judge, ordered the dissolution and setting aside of the writ of preliminary attachment issued on August 17, 1977 and
the return to defendant Salazar of all his properties attached by the Sheriff by virtue of the said writ. In this Order,
respondent Judge explained that:
When the incident was called for hearing, the Court announced that, as a matter of procedure, when a motion to
quash a writ of preliminary attachment is filed, it is incumbent upon the plaintiff to prove the truth of the allegations
which were the basis for the issuance of said writ. In this hearing, counsel for the plaintiff manifested that he was not
going to present evidence in support of the allegation of fraud. He maintained that it should be the defendant who
should prove the truth of his allegation in the motion to dissolve the said writ. The Court disagrees. 5
FILINVEST filed a Motion for Reconsideration of the above Order, and was subsequently allowed to adduce evidence
to prove that Salazar committed fraud as alleged in the affidavit of Gil Mananghaya earlier quoted. This
notwithstanding, respondent Judge denied the Motion in an Order dated April 4, 1979 reasoning thus:
The plaintiff's evidence show that the defendant Rallye Motor assigned to the former defendant Salazar's promissory
note and chattel mortgage by virtue of which plaintiff discounted the note. Defendant Salazar refused to pay the
plaintiff for the reason that Rallye Motor has not delivered to Salazar the motor vehicle which he bought from Rallye. It
is the position of plaintiff that defendant Salazar was in conspiracy with Rallye Motor in defrauding plaintiff.
Ernesto Salazar, on his part complained that he was himself defrauded, because while he signed a promissory note
and chattel mortgage over the motor vehicle which he bought from Rallye Motor, Rallye Motor did not deliver to him
the personal property he bought; that the address and existence of Rallye Motor can no longer be found.
While it is true that the plaintiff may have been defrauded in this transaction, it having paid Rallye Motor the amount of
the promissory note, there is no evidence that Ernesto Salazar had connived or in any way conspired with Rallye
Motor in the assignment of the promissory note to the plaintiff, because of which the plaintiff paid Rallye Motor the
amount of the promissory note. Defendant Ernesto Salazar was himself a victim of fraud. Rallye Motor was the only
party which committed it. 6
From the above order denying reconsideration and ordering the sheriff to return to Salazar the personal property
attached by virtue of the writ of preliminary attachment issued on August 17, 1977, FILINVEST filed the instant Petition
on April 19, 1979. On July 16, 1979, petitioner FILINVEST also filed an Urgent Petition for Restraining Order 7
alleging, among others, that pending this certiorari proceeding in this court, private respondent Salazar filed a Motion
for Contempt of Court in the court below directed against FILINVEST and four other persons allegedly for their failure
to obey the Order of respondent Judge dated April 4, 1979, which Order is the subject of this Petition. On July 23,
1979, this Court issued a temporary restraining order "enjoining respondent Judge or any person or persons acting in
his behalf from hearing private respondent's motion for contempt in Civil Case No. 109900, entitled, 'Filinvest Credit
Corporation, Plaintiff, versus The Rallye Motor Co., Inc., et al., Defendants' of the Court of First Instance of Manila,
Branch XI. " 8

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Petitioner FILINVEST in its MEMORANDUM contends that respondent Judge erred:

(1)
In dissolving the writ of preliminary attachment already enforced by the Sheriff of Manila without Salazar's
posting a counter-replevin bond as required by Rule 57, Section 12; and
(2)
In finding that there was no fraud on the part of Salazar, despite evidence in abundance to show the fraud
perpetrated by Salazar at the very inception of the contract.
It is urged in petitioner's first assignment of error that the writ of preliminary attachment having been validly and
properly issued by the lower court on August 17, 1977, the same may only be dissolved, quashed or recalled by the
posting of a counter-replevin bond under Section 12, Rule 57 of the Revised Rules of Court which provides that:
Section 12. Discharge of Attachment upon, gluing counterbond.At any time after an order of attachment has been
granted, the party whose property has been attached, or the person appearing on his behalf, may, upon reasonable
notice to the applicant, apply to the judge who granted the order, or to the judge of the court, in which the action is
pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after hearing,
order the discharge of the attachment if a cash deposit is made, or a counter-bond executed to the attaching creditor
is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made, in an amount
equal to the value of the property attached as determined by the judge, to secure the payment of any judgment that
the attaching creditor may recover in the action. ...
Citing the above provision, petitioner contends that the court below should not have issued the Orders dated February
2, 1979 and April 4, 1979 for failure of private respondent Salazar to make a cash deposit or to file a counter-bond.
On the other hand, private respondent counters that the subject writ of preliminary attachment was improperly or
irregularly issued in the first place, in that it was issued ex parte without notice to him and without hearing.
We do not agree with the contention of private respondent. Nothing in the Rules of Court makes notice and hearing
indispensable and mandatory requisites for the issuance of a writ of attachment. The statement in the case of Blue
Green Waters, Inc. vs. Hon. Sundiam and Tan 9 cited by private respondent, to the effect that the order of attachment
issued without notice to therein petitioner Blue Green Waters, Inc. and without giving it a chance to prove that it was
not fraudulently disposing of its properties is irregular, gives the wrong implication. As clarified in the separate opinion
of Mr. Justice Claudio Teehankee in the same cited case, 10 a writ of attachment may be issued ex parte. Sections 3
and 4, Rule 57, merely require that an applicant for an order of attachment file an affidavit and a bond: the affidavit to
be executed by the applicant himself or some other person who personally knows the facts and to show that (1) there
is a sufficient cause of action, (2) the case is one of those mentioned in Section 1 of Rule 57, (3) there is no other
sufficient security for the claim sought to be enforced, and (4) the amount claimed in the action is as much as the sum
for which the order is granted above all legal counterclaims; and the bond to be "executed to the adverse party in an
amount fixed by the judge, not exceeding the applicant's claim, conditioned that the latter will pay all the costs which
may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court
shall finally adjudge that the applicant was not entitled thereto."
We agree, however, with private respondents contention that a writ of attachment may be discharged without the
necessity of filing the cash deposit or counter-bond required by Section 12, Rule 57, cited by petitioner. The following
provision of the same Rule allows it:
Sec. 13. Discharge of attachment for improper or irregular issuance.The party whose property has been attached
may also, at any time either before or after the release of the attached property, or before any attachment shall have
been actually levied, upon reasonable notice to the attaching creditor, apply to the judge who granted the order, or to
the judge of the court in which the action is pending, for an order to discharge the attachment on the ground that the
same was improperly or irregularly issued. If the motion be made on affidavits on the part of the party whose property
has been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits or other
evidence in addition to that on which the attachment was made. After hearing, the judge shall order the discharge of
the attachment if it appears that it was improperly or irregularly issued and the defect is not cured forthwith."(Emphasis
supplied)
The foregoing provision grants an aggrieved party relief from baseless and unjustifiable attachments procured, among
others, upon false allegations, without having to file any cash deposit or counter-bond. In the instant case the order of
attachment was granted upon the allegation of petitioner, as plaintiff in the court below, that private respondent
RALLYE, the defendants, had committed "fraud in contracting the debt or incurring the obligation upon which the
action is brought," covered by Section i(d), Rule 57, earlier quoted. Subsequent to the issuance of the attachment
order on August 17, 1977, private respondent filed in the lower court an "Urgent Motion for the Recall and Quashal of
the Writ of Preliminary Attachment on (his property)" dated December 11, 1978 11 precisely upon the assertion that
there was "absolutely no fraud on (his) part" in contracting the obligation sued upon by petitioner. Private respondent

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was in effect claiming that petitioner's allegation of fraud was false, that hence there was no ground for attachment,
and that therefore the attachment order was "improperly or irregularly issued." This Court was held that "(i)f the
grounds upon which the attachment was issued were not true ..., the defendant has his remedy by immediately
presenting a motion for the dissolution of the same. 12 We find that private respondent's abovementioned Urgent
Motion was filed under option 13, Rule 57.
The last sentence of the said provision, however, indicates that a hearing must be conducted by the judge for the
purpose of determining whether or not there reality was a defect in the issuance of the attachment. The question is: At
this hearing, on whom does the burden of proof lie? Under the circumstances of the present case, We sustain the
ruling of the court a quo in its questioned Order dated February 2, 1979 that it should be the plaintiff (attaching
creditor), who should prove his allegation of fraud. This pronouncement finds support in the first sentence of Section 1,
Rule 131, which states that: "Each party must prove his own affirmative allegations." The last part of the same
provision also provides that: "The burden of proof lies on the party who would be defeated if no evidence were given
on either side." It must be brne in mind that in this jurisdiction, fraud is never presumed. FRAUS EST IdIOS ET NON
PRAESUMENDA. 13 Indeed, private transactions are presumed to have been fair and regular. 14 Likewise, written
contracts such as the documents executed by the parties in the instant case, are presumed to have been entered into
for a sufficient consideration. 15
In a similar case of Villongco, et al., vs. Hon. Panlilio, et al., 16 a writ of preliminary attachment was issued ex parte in
a case for damages on the strength of the affidavit of therein petitioners to the effect that therein respondents had
concealed, removed or disposed of their properties, credits or accounts collectible to defraud their creditors.
Subsequently, the lower court dissolved the writ of attachment. This was questioned in a certiorari proceeding wherein
this Court held, inter alia, that:
The affidavit supporting the petition for the issuance of the preliminary attachment may have been sufficient to justify
the issuance of the preliminary writ, but it cannot be considered as proof of the allegations contained in the affidavit.
The reason is obvious. The allegations are mere conclusions of law, not statement of facts. No acts of the defendants
are ever mentioned in the affidavit to show or prove the supposed concealment to defraud creditors. Said allegations
are affirmative allegations, which plaintiffs had the obligation to prove ... 17
It appears from the records that both herein private parties did in fact adduce evidence to support their respective
claims. 18 Attached to the instant Petition as its Annex "H" 19 is a Memorandum filed by herein petitioner FILINVEST
in the court below on March 20, 1979. After private respondent filed his Comment to the Petition, 20 petitioner filed a
Reply 21 ,attaching another copy of the aforesaid Memorandum as Annex "A" 22 In this case on February 28, 1979
and March 1, 1979, the plaintiff (FILINVEST) presented in evidence documentary exhibits "marked Exhibit A, A- I, B,
B-1, B-2, B-3, B-4, C, C-1, D, E, F, G and G-1. The Memorandum goes on to state that FILINVEST presented as its
witness defendant Salazar himself who testified that he signed Exhibits A, B, C, D, E and G; that he is a holder of a
master's degree in Business Administration and is himself a very careful and prudent person; that he does not sign
post-dated documents; that he does not sign contracts which do not reflect the truth or which are irregular on their
face, that he intended to purchase a school bus from Rallye Motors Co., Inc. from whom he had already acquired one
unit; that he had been dealing with Abel Sahagun, manager of RALLYE, whom he had known for a long time that he
intended to purchase the school bus on installment basis so he applied for financing with the FILINVEST; that he knew
his application was approved; that with his experience as a business executive, he knew that under a financing
arrangement, upon approval of his application, when he signed Exhibits A, B, C, D, E and G, the financing company
(FILINVEST) would release the proceeds of the loan to RALLYE and that he would be obligated to pay the
installments to FILINVEST; that he signed Exhibits A, B and C simultaneously; that it was his wife who was always
transacting business with RALLYE and Abel Sahagun. 23
Without disputing the above summary of evidence, private respondent Salazar states in his Comment that "the same
evidence proferred by (petitioner's) counsel was adopted by (private respondent) Ernesto Salazar during the
proceedings. 24
According to the court a quo in its assailed order of April 4, 1979, Emesto Salazar "was himself defrauded because
while he signed the promissory note and the chattel mortgage over the vehicle which he bought from Rallye Motors,
RALLYE did not deliver to him the personal property he bought." And since no fraud was committed by Salazar, the
court accordingly ordered the sheriff to return to Salazar the properties attached by virtue of the writ of preliminary
attachment issued on August 17, 1977.
We do not agree. Considering the claim of respondent Salazar that Rallye Motors did not deliver the motor vehicle to
him, it follows that the Invoice, Exhibit "C", for the motor vehicle and the Receipt, Exhibit "G", for its delivery and both
signed by Salazar, Exhibits "C-1 " and "G-1", were fictitious. It also follows that the Promissory Note, Exhibit "A", to
pay the price of the undelivered vehicle was without consideration and therefore fake; the Chattel Mortgage, Exhibit
"B", over the non-existent vehicle was likewise a fraud; the registration of the vehicle in the name of Salazar was a

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falsity and the assignment of the promissory note by RALLYE with the conforme of respondent Salazar in favor of
petitioner over the undelivered motor vehicle was fraudulent and a falsification.
Respondent Salazar, knowing that no motor vehicle was delivered to him by RALLYE, executed and committed all the
above acts as shown the exhibits enumerated above. He agreed and consented to the assignment by RALLYE of the
fictitious promissory note and the fraudulent chattel mortgage, affixing his signature thereto, in favor of petitioner
FILINVEST who, in the ordinary course of business, relied on the regularity and validity of the transaction. Respondent
had previously applied for financing assistance from petitioner FILINVEST as shown in Exhibits "E " and "E-1 " and his
application was approved, thus he negotiated for the acquisition of the motor vehicle in question from Rallye Motors.
Since he claimed that the motor vehicle was not delivered to him, then he was duty-bound to reveal that to
FILINVEST, it being material in inducing the latter to accept the assignment of the promissory note and the chattel
mortgage. More than that, good faith as well as commercial usages or customs require the disclosure of facts and
circumstances which go into the very object and consideration of the contractual obligation. We rule that the failure of
respondent Salazar to disclose the material fact of non-delivery of the motor vehicle, there being a duty on his part to
reveal them, constitutes fraud. (Article 1339, New Civil Code).
We hold that the court a quo committed grave abuse of discretion in dissolving and setting aside the writ of preliminary
attachment issued on August 17, 1977.
WHEREFORE, IN VIEW OF THE FOREGOING, the appealed Orders of the lower court dated February 2, 1979 and
April 4, 1979 are hereby REVERSED and SET ASIDE. The temporary restraining order issued by Us on July 23, 1979
is hereby made permanent. No costs.
Petition granted.
SO ORDERED.

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G.R. No. 114243

February 23, 2000

SPS. ISAGANI MIRANDA and MIGUEL JOGUILON, petitioners,

vs.
COURT OF APPEALS, LUCILA L. VDA. DE JAVA (Deceased) Substituted by the Heirs ESTELLA JAVA BACALLA,
Assisted by her husband APOLONIO BACALLA and JAIME JAVA, respondents.
QUISUMBING, J.:
For review on certiorari is the decision1 of the Court of Appeals dated February 28, 1994 in CA-G.R. CV No. 20546,
which reversed and set aside the judgment of the Regional Trial Court of Manila, Branch 4, in Civil Case No. 112765.
The decretal portion of the assailed decision reads:
WHEREFORE, the appealed judgment is hereby REVERSED and SET ASIDE. The judgment rendered in Civil Case
No. 63117 is hereby declared NULL and VOID. The execution, sales and subsequent transfers of the Thames jeep
and Lot 8015 are ANNULLED. Defendant-appellees Spouses Miranda are hereby ordered to execute a Deed of
Reconveyance over Lot 8015 in favor of plaintiff-appellants.
No pronouncement as to costs.
SO ORDERED.2
The facts as supported by the records are as follows:
On October 27, 1965, Luneta Motor Company (hereinafter LMC) filed suit against the spouses Lucila and Pablo D.
Java, et al., with the former Court of First Instance (CFI) of Manila, which docketed the same as Civil Case No. 63117.
LMC sought to recover one "Thames" jeep and the sum of P9,403.00, plus interest and attorney's fees from
defendants.
On March 11, 1966, LMC moved to declare the Java spouses in default for failure to file their answer within the
reglementary period, notwithstanding notice. The trial court granted the motion.
On November 9, 1966, the CFI disposed of the case as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendant, ordering the latter to pay
plaintiff the amount of P8,354.00, the sum total of the balances on the defendants' promissory notes, plus interest
thereon at the rate of 12% per annum from April 7, 1966, until fully paid, plus the sum of P1,000.00 as and for
attorney's fees, and the cost of this action.
The case against John Doe is hereby dismissed.
SO ORDERED.3
Pursuant to the writ of the execution, the City Sheriff of the Cebu City sold the vehicle at public auction to one Jose
Angulo.4 Also subsequently sold at public auction to LMC, was a parcel of land described as Lot 8015 of the Cadastral
Survey of Cebu, and owned by the Javas.5 LMC then sold Lot 8015 to petitioners.
On December 19, 1977, Lucila vda. de Java and her daughter Estela Java, filed Civil Case No. 112765 to nullify the
judgment in Civil Case No. 63117, as well as the execution sales and subsequent transfers, with the then CFI of
Manila. Among those named as defendants were the petitioners herein; and the spouses Ernesto Elizondo and
Angeles Java Elizondo, the son-in-law and daughter of Lucila vda. de Java.
On July 19, 1987, Lucila vda de Java died and was substituted by her heirs.
On November 11, 1988, the trial court decided the case as follows:
WHEREFORE, premises considered, let this case be, as it is hereby dismissed without pronouncement as to costs for
lack of jurisdiction. The Writ of Preliminary Injunction issued by this Court is ordered lifted. The counterclaim of
defendants Mirandas, being without merit under the circumstance(s), is likewise ordered dismissed.
SO ORDERED16
Private respondents appealed to the Court of Appeals, which, as issued earlier noted, reversed the lower court.

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Hence, the instant case relying on the following grounds:

I
THE COURT OF APPEALS ERRED IN RULING THAT THE TRIAL COURT NEVER ACQUIRED JURISDICTION
OVER LUCILA L. JAVA AND HER HUSBAND SINCE THERE WAS NO PROPER SERVICE OF SUMMONS.
II
THE COURT OF APPEALS ERRED IN NOT RULING THAT THE JUDGMENT IN CIVIL CASE NO. 63117 ENTITLED
LUNETA MOTOR COMPANY V LUCILA JAVA, ET AL., HAD LONG BECOME FINAL AND EXECUTORY
III
THE COURT OF APPEALS ERRED IN HOLDING AS NULL AND VOID THE JUDGMENT RENDERED IN CIVIL
CASE NO. 63117 AND ORDERING PETITIONERS TO EXECUTE A DEED OF RECONVEYANCE OVER LOT NO.
8015 IN FAVOR OF THE PLAINTIFFS.7
The pivotal issue in this case is whether or not the Court of Appeals committed reversible error in annulling the
judgment in Civil Case No. 63117 for want of jurisdiction on the part of the trial court.
In declaring the judgment in Civil Case No. 63117 null and void, the appellate court found from the Sheriff's Return of
Service,8 that summons was served on the spouses Java by substituted service without effort at personal service. The
court a quo held that the said service was invalid and the lower court never acquired jurisdiction over the persons of
defendants (private respondents herein) in Civil Case No. 63117, thus, the execution sale of the "Thames" vehicle, as
well as the sale of Lot 8015 to LMC, and the subsequent sale by the latter to petitioners were null and void.
Petitioners contend that the decision of the Court of Appeals that service of summons was invalid is contradicted by
the trial court and is not supported by the evidence. Besides, the judgment had already become final since there were
no grounds to annul it.
On the question of the validity of service of summons, pertinent is Rule 14 of the Rules of Court, particularly Sections
7 and 8 which respectively provide:
Sec. 7. Personal service of summons. The summons shall be served by handing a copy thereof to the defendant in
person, or if he refuses to receive it, by tendering it to him.9
Sec. 8. Substituted service. If the defendant cannot be served within a reasonable time as provided in the
preceding section, service may be effected (a) by leaving copies of the summons in the defendant's dwelling house or
residence with some person of suitable age and discretion then residing therein; or (b) by leaving the copies at
defendant's office or regular place of business with some competent person in charge thereof.10
Service of summons upon the defendant is essential for the court to acquire jurisdiction over his person.11 The modes
of service should be strictly followed in order that the court may acquire jurisdiction over the person.12 Thus, it is only
when a defendant cannot be served personally "within a reasonable time" that substituted service may be made.13
In the instant case, the Sheriff's Return of Service reads:
Respectfully returned to the Clerk of Court, Court of First Instance, Manila, the herein summons of the above-entitled
case, copy of which and a copy of the complaint were served on December 9, 1965 at 11:00 o'clock in the morning by
substituted service (stress supplied) through Ernesto Elizondo, son-in-law of defendants Lucila Java and Pablo Java
and living together with them.14
Even the briefest perusal of the aforementioned Return clearly shows no reason why personal service could not be
made. Impossibility of prompt, personal service should be shown by stating in the proof of service that efforts were
made to find the defendant personally and that said efforts failed, hence the resort to substituted service.15 Here no
such explanation was made. Failure to faithfully, strictly, and fully comply with the requirements of substituted service
said service ineffective.16
Petitioners points to the deposition of Ernesto Elizondo to support their argument that there was valid service of
summons.17 Ernesto Elizondo emphatically testified under oath, however, that at the time he allegedly signed for the
summons, he was not living in the same house as his parents-in-law, "although I am living within the compound of my
father-in-law."18 Rule 14, Section 8 of the Rules of Court specifically provides that substituted service must be
effected by "(a) leaving copies of the summons at the defendant's dwelling house or residence with some person of

273

suitable age and discretion then residing therein." Since Ernesto Elizondo admitted that he was not living with the
spouses Java, the requirement that the summons be left with a person of suitable are residing the same dwelling
house or residence as the defendant, for substituted service to be valid, has not been complies with.
For want of proper service of summons upon defendants, the trial court in Civil Case No. 63117 never acquired
jurisdiction over the former and hence, could not render valid judgment over their persons. Hence, the execution sales
of the sales of the "Thames" vehicle and Lot 8015, pursuant to said void judgment, are void ab initio. A final judgment
may be annulled upon either of two grounds: (1) extrinsic fraud, and (2) lack of jurisdiction.19 In the present case, the
trial court did not have jurisdiction. No reversible error was thus committed by the Court of Appeals in annulling the
judgment in Civil Case No. 63117 for absence of jurisdiction on the part of the court which rendered the same.
IN VIEW OF THE FOREGOING, the instant petition is DENIED and the assailed Decision of the Court of Appeals
dated February 28, 1994 in CA-G.R. CV No. 20546 is hereby AFFIRMED. Costs against petitioners.
SO ORDERED.

274

G.R. No. 92813 July 31, 1991

PEROXIDE PHILIPPINES CORPORATION, EASTMAN CHEMICAL INDUSTRIES, INC., EDMUNDO O. MAPUA and
ROSE U. MAPUA, petitioners,
vs.
HON. COURT OF APPEALS and BANK OF THE PHILIPPINE, ISLANDS, respondents.
Antonio P. Barredo for petitioners.
Padilla Law Office for private respondent.

REGALADO, J.:p
Assailed in this petition for review on certiorari are the decision 1 of respondent Court of Appeals, promulgated on
September 4, 1989 in CA-G. R. SP No. 15672, granting the petition for certiorari filed by private respondent, and its
resolution 2 of March 29, 1990 denying petitioners' motion for reconsideration. On December 6, 1982, herein private
respondent Bank of the Philippine Islands (BPI) sued herein petitioners Peroxide Philippines Corporation (Peroxide),
Eastman Chemical Industries, Inc. (Eastman), and the spouses Edmund O. Mapua and Rose U. Mapua (Mapuas) in
Civil Case No. 48849 of the then Court of First Instance of Pasig, Metro Manila for the collection of an indebtedness of
Peroxide wherein Eastman and the Mapuas bound themselves to be solidarily liable.
Upon the filing of said action, the trial court, then presided over by Judge Gregorio G. Pineda, ordered the issuance of
a writ of preliminary attachment which was actually done on January 7, 1983 after BPI filed an attachment bond in the
amount of P32,700,000.00. Petitioners' properties were accordingly attached by the sheriff.
On January 11, 1983, Eastman and the Mapuas moved to lift the attachment, which motion was set for hearing on
January 14, 1983. On said date and on motion of BPI, it was granted up to January 17, 1983 to file a written
opposition to the motion to lift the writ of attachment. BPI also filed a motion to set for hearing the said motion to lift
attachment and its opposition thereto.
However, on January 17, 1983, Judge Pineda issued two (2) orders, the first, denying BPI's motion for a hearing, and,
the second, lifting the writ of attachment as prayed for by Eastman and the Mapuas. BPI filed a motion for
reconsideration but, consequent to the then judiciary reorganization, the case was re-raffled and assigned to the sala
of Judge Pastor Reyes.
On November 28, 1983, Judge Reyes issued an order with an explicit finding that the attachment against the
properties of Eastman and the Mapuas was proper on the ground that they had disposed of their properties in fraud of
BPI. It also directed the sheriff to implement the writ of attachment upon the finality of said order.
After a motion for partial reconsideration by BPI and some exchanges between the parties, on December 17, 1984 the
trial court, this time with Judge Eficio B. Acosta presiding, issued an order granting BPI's motion for partial
reconsideration by finding, inter alia, that "(c)onsidering the lapse of more than a year since the Order of November
28, 1983 and the nature and purpose of attachment, the writ of attachment revived in the Order of November 28, 1983
and hereby re-affirmed may be executed and implemented immediately," and directing the sheriff to execute said writ
which "is hereby declared immediately executory." 3
Contending that said order of December 17, 1984 was rendered with grave abuse of discretion amounting to lack of
jurisdiction, petitioners sought the annulment thereof in a petition for certiorari and prohibition in AC-G.R. SP No.
05043 of the Intermediate Appellate Court, wherein a temporary restraining order was issued. This restraining order
was lifted when said court rendered its decision in said case on March 14, 1986 4 dismissing the petition and holding,
among others, that:
We find nothing wrong with the attachment of the properties of PEROXIDE. Even were We to assume that the original
petition for attachment was defective for failure to specify the particular transactions involved in the alleged "alienation"
of PEROXIDE's properties, the fact is that the defect, if any, was cured by the other pleadings (like the opposition or
virtual amendment) filed by BANK With such amendment, the specific properties concerned were distinctly
enumerated. 5
Petitioners then sought the review of said decision by this Court in G.R. No. 74558, but no temporary restraining order
was granted therein. In the meantime, on May 29, 1986, Judge Acosta issued an order 6 suspending the writ of
preliminary attachment in the aforesaid Civil Case No. 48849 pursuant to an ex parte motion filed by herein
petitioners.

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Thereafter, in its resolution dated October 27, 1986, this Court denied the aforesaid petition for review on certiorari
"considering that the writ of preliminary attachment issued was in accordance with law and applicable jurisprudence."
7 Petitioners' motion for reconsideration was denied with finality in our resolution of October 6, 1987. 8
Dissatisfied, petitioners again filed an urgent motion for clarification submitting that the Court failed to pass upon two
issues, namely: (1) whether Eastman and the Mapuas were sureties or mere guarantors of Peroxide, and (2) whether
Rose U. Mapua was bound by the "Continuing Guarantee" executed by her husband, Edmund O. Mapua. Acting upon
said motion, on November 10, 1987 the Court resolved to deny the same for the reason, among others, that the
clarification sought regarding the propriety of the attachment of the properties of Eastman and the Mapuas involves
questions of fact. 9
On July 30, 1987, BPI filed a motion to order Bataan Pulp and Paper Mills, Inc. (Bataan), jointly and severally with
petitioners, to deliver to the sheriff the cash dividends declared on the garnished shares of stock of said petitioners
with said paper company, and to cite for contempt the officers of Bataan for releasing and/or paying the dividends to
petitioners in disregard of the notice of garnishment.
In an exhaustive order dated December 16, 1987, 10 the trial court, now presided over by Judge Fernando L. Gerona,
Jr. and wherein Civil Case No. 48849 was then pending, addressing all the issues raised by the parties, granted BPI's
motion for delivery of the dividends. Judge Gerona sustained the position of BPI that dividends are but incidents or
mere fruits of the shares of stock and as such the attachment of the stock necessarily included the dividends declared
thereon if they were declared subsequent to the notice of garnishment.
He further held that the preliminary attachment, being a provisional remedy, must necessarily become effective
immediately upon the issuance thereof and must continue to be effective even during the pendency of an appeal from
a judgment of the court which issued the said provisional remedy and will only cease to have effect when the judgment
is satisfied or the attachment is discharged or vacated in some manner provided by law. The motion to cite the officers
of Bataan was, however, denied.
Petitioners moved for reconsideration but the same was denied for the reason that the order of May 29, 1986 of Judge
Acosta was based on an ex parte motion without reasonable notice, hence a patent nullity for lack of due process.
Accordingly, the aforesaid order of December 16, 1987 held that the writ of attachment continued to be effective. 11
Petitioners thereafter filed a second motion for reconsideration which, however, remained pending and unresolved
when Judge Gerona inhibited himself from further sitting in the case. Said case was then re-raffled to the sala of
Judge Jainal D. Rasul who required the parties to re-summarize their respective positions upon the issue of the
attachment.
Then, resolving the pending incidents before it, the court a quo issued the disputed order of August 23, 1988, which
states, inter alia that:
THIS Court thru Judge Gerona had arrived at the correct conclusion that the contempt charge against the Officers of
the Garnishee Corporation cannot be sustained, for the reason that they relied on the Order of the Court thru Judge
Acosta under date of May 29, 1986 suspending the Writ of Attachment and since said order was not then set aside,
there was no order or writ violated by said officers. It follows a fortiori that the release of the cash dividends was valid,
legal and not contemptuous. Consequently, there is no reason to justify or deserve the return of cash dividends prayed
for by the plaintiff.
Besides, the propriety of the attachment of the properties of the defendant Eastman Chemical Industries, Inc., and
defendant Mapua Spouses should still be determined by this Court as a question of fact, pursuant to the Supreme
Court resolution dated November 23, 1987. Meanwhile, it is only fair that the properties of the Eastman Chemical
Industries, Inc. and the defendants Mapua spouses should not, pending such proper determination, be attached as to
give life and meaning to the Supreme Court resolution of November 23, 1987.
SO ORDERED. 12
BPI moved for the reconsideration of said order. Thereafter, it learned that Bataan had again declared a cash dividend
on its shares payable on or before September 30, 1988. Furthermore, Bataan informed BPI that it would be releasing
to Eastman and Edmund O. Mapua the cash dividends on their shares on September 23, 1988 on the strength of the
order of the trial court of August 23, 1988.
Consequently, BPI filed an urgent ex parte motion on September 19, 1988 for the suspension of the effects of the trial
court's order of August 23, 1988 in view of the pending motion for reconsideration it had filed against said order. In an

276

order likewise dated September 19, 1988, the trial court denied BPI's motion for suspension of the order of August 23,
1988. 13
BPI then filed a petition for certiorari in respondent court, docketed therein as CA-G.R. SP No. 15672, invoking the
following grounds:
1.
The trial court acted with grave abuse of discretion in denying BPI's urgent ex parte motion to suspend the
order of August 23, 1988;
2.

The order of September 19, 1988 renders moot and academic BPI's pending motion for reconsideration;

3.
The lower court erroneously held that the writ of attachment secured by BPI had ceased to be valid and
effective or had been suspended by virtue of its orders of January 17, 1983 and May 29, 1986;
4.
The trial court committed grave abuse of discretion when it nullified the writ of attachment as against Eastman
and the Mapuas;
5.
There is no inconsistency between the resolution of the Supreme Court dated October 27, 1986 and its
subsequent resolution of November 10, 1987;
6.

The attachment can validly issue against the conjugal properties of the Mapuas; and

7.
The trial court disregarded the clear and unequivocal records of the case when it issued its order of August 23,
1988. 14
Ruling on these issues, respondent Court of Appeals declared:
WHEREFORE, the petition for certiorari is hereby GRANTED. Judgment is hereby rendered as follows:
(a)
Declaring the writ of preliminary attachment against the defendants Eastman Chemical Industries, Inc. and the
spouses, Edmund and Rose Mapua valid and enforceable from the beginning, without prejudice to determining the
solidary liability of said defendants with defendant Peroxide Philippines Corporation;
(b)
Setting aside the Order of August 23, 1988 insofar as it decreed that the cash dividends declared or the
garnished shares of stocks (sic) of the defendants with Bataan Pulp and Paper Mills, Inc. are not subject to
attachment;
(c)
Ordering the defendants and the Bataan Pulp and Paper Mills, Inc., jointly and severally, to deliver to the
sheriff the cash dividends as may hereafter be declared and paid on the garnished shares of stock;
(d)

Setting aside the Order of September 19, 1988.

With costs against private respondents.

SO ORDERED. 15
Their motion for reconsideration having been denied, petitioners are once again before us on this spin-off facet of the
same case, contending that respondent court has departed from the accepted and usual course of judicial
proceedings.
1.
As correctly formulated by respondent court, the threshold issue is the validity of the attachment of the
properties of Eastman and the Mapuas, from which arises the correlative question of whether or not the disputed cash
dividends on the garnished shares of stock are likewise subject thereto. Necessarily involved is the matter of the
continuing validity of the writ or whether or not the same was validly lifted and suspended by the lower court's orders
dated January 17, 1983 and May 29, 1986, respectively.
BPI asserts that the discharge is illegal and void because the order lifting the same is violative of Section 13, Rule 57
of the Rules of Court which requires, among others, a prior hearing before the judge may order the discharge of the
attachment upon proof adduced therein of the impropriety or irregularity in the issuance of the writ and the defect is
not cured forthwith. We may mention in this regard that if the petition for the discharge of the writ violates the
requirements of the law, the trial judge does not acquire jurisdiction to act thereon. 16
It is true that petitioner's motion to discharge was set for hearing with notice to BPI but it is likewise true that counsel
for the latter asked for an opportunity to file a written opposition and for a hearing to which he asked that petitioner

277

Edmund O. Mapua be subpoenaed. Said counsel was allowed to file a written opposition which he seasonably did, but
Judge Pineda denied both the requested subpoena and hearing and, instead, granted the discharge of the
attachment. These are the bases for BPI's complaint that it was denied due
process. 17
Now, it is undeniable that when the attachment is challenged for having been illegally or improperly issued, there must
be a hearing with the burden of proof to sustain the writ being on the attaching creditor. 18 That hearing embraces not
only the right to present evidence but also a reasonable opportunity to know the claims of the opposing parties and
meet them. The right to submit arguments implies that opportunity, otherwise the right would be a barren one. It
means a fair and open hearing. 19 And, as provided by the aforecited Section 13 of Rule 57, the attaching creditor
should be allowed to oppose the application for the discharge of the attachment by counter-affidavit or other evidence,
in addition to that on which the attachment was made.
Respondent court was, therefore, correct in holding that, on the above-stated premises, the attachment of the
properties of Eastman and the Mapuas remained valid from its issuance since the judgment had not been satisfied,
nor has the writ been validly discharged either by the filing of a counterbond or for improper or irregular issuance.
We likewise affirm the findings and conclusion of respondent court that the order of Judge Acosta, dated May 29,
1986, suspending the writ of attachment was in essence a lifting of said writ which order, having likewise been issued
ex parte and without notice and hearing in disregard of Section 13 of Rule 57, could not have resulted in the discharge
of the attachment. Said attachment continued unaffected by the so-called order or suspension and could not have
been deemed inefficacious until and only by reason of its supposed restoration in the order of December 16, 1987 of
Judge Gerona. Under the facts of this case, the ex parte discharge or suspension of the attachment is a disservice to
the orderly administration of justice and nullifies the underlying role and purpose of preliminary attachment in
preserving the rights of the parties pendente lite as an ancillary remedy.
We, therefore, sustain the position of BPI that the Court of Appeals, in its judgment presently under challenge, did not
err in upholding the continuing and uninterrupted validity and enforceability of the writ of preliminary attachment issued
in Civil Case No. 48849 since the order of discharge and, later, the order of suspension of the trial court were void and
could not have created the operational lacuna in its effectivity as claimed by petitioners. Further, the cancellation of the
annotations regarding the levy on attachment of petitioners' properties, procured by the sheriff pursuant to the
aforesaid invalid orders, is likewise a nullity and another levy thereon is not required. We observe, however, that the
records do not disclose the lifting of the levy on the Bataan shares of Eastman and the Mapuas and on their real
properties in Caloocan City.
2.
Petitioners next call attention to the fact that when the order of Judge Acosta of December 17, 1984, which
directed the immediate execution and implementation of the writ of attachment, was brought on a petition for certiorari
and prohibition to the Intermediate Appellate Court in AC-G.R. SP No. 05043, said court issued a temporary
restraining order.
They allege that although the restraining order was lifted by said appellate court in its decision in the case on March
14, 1986, the same was reinstated by the court "until further orders" in its order of April 24, 1986 in connection with
petitioners' motion for reconsideration therein. On May 14, 1986, respondent court denied the motion for
reconsideration but, so petitioners insist, "without, however, stating that it was lifting its restraining order." When the
case went on review to this Court in G.R. No. 74558, no mention was made regarding said restraining order. Hence,
petitioners assert, the said restraining order had not been lifted, in effect arguing that the writ of attachment cannot be
implemented as a consequence.
This misleading argument is confuted by the records in AC-G.R. SP No. 05043. In its aforesaid resolution of April 24,
1986, the appellate court stated that "(a)s of this date, April 23, 1986, the motion for reconsideration could not be
considered in view of the absence of the comment of the private respondents." Hence, the court directed that "(i)n
order to maintain the status quo of the parties, . . . the restraining order issued by us on December 28, 1984 is hereby
revived and made effective until further orders." 20
Thereafter, finding no merit in the motion for reconsideration, the court denied the same, declaring that "(w)ith this
resolution, we find no need in resolving the Urgent Motion to Reconsider and set aside Resolution of April 24, 1985
(sic, 1986) filed by the private respondent BPI and the other incidents still pending resolution." 21
All incidents in AC-G.R. SP No. 05043 having been disposed of, it follows that the temporary restraining order which
had been expressly lifted in the decision therein, and which was merely temporarily reinstated for purposes of the
motion for reconsideration that was ultimately denied, was also necessarily lifted. Parenthetically, said temporary
restraining order, not having been supplanted by a writ of preliminary injunction, could not have had an effectivity of
more than twenty (20) days, 22 and this limitation applies to temporary restraining orders issued by the Court of
Appeals. 23

278

3.
We reject petitioners' theory that the preliminary attachment is not applicable to Eastman and the Mapuas.
The writ was issued in Civil Case No. 48849 against the properties of all the petitioners herein. Eastman and the
Mapuas moved for the discharge of the attachment on the ground that they were not disposing of their properties in
fraud of creditors, but they did not raise the issue of their liabilities as being allegedly those of mere guarantors. They
did so only when this Court resolved on October 27, 1986 that the writ of preliminary attachment was issued in
accordance with law and applicable jurisprudence. 24
Also, what was considered in AC-G.R. SP No. 05043 and thereafter in G.R. No. 74558 was the matter of the validity of
the attachment against Eastman and the Mapuas, considering that, even before the proceedings had reached the
Intermediate Appellate Court in AC-G.R. SP No. 05043, BPI no longer had any attachment against Peroxide whose
only remaining asset in Bulacan had been levied upon and acquired by its other creditors when Judge Pineda lifted
the attachment obtained by BPI.
Petitioners seek to capitalize on a passage in the decision in AC-G.R. SP No. 05043, hereinbefore quoted, where the
appellate court stated that "(w)e find nothing wrong with the attachment of the properties of PEROXIDE," without
mentioning Eastman and the Mapuas. This was clearly in the nature of peccata minuta, a plain case of harmless
oversight, since the properties referred to in the decision as having been alienated in fraud of BPI were properties of
Eastman and the Mapuas, not of Peroxide.
In fact, as pointed out by private respondent, petitioners' own motion for reconsideration of March 24, 1986 filed in
said case specifically adverted to that prefatory statement as being equivocal, with the following observation: "Actually
no properties of Peroxide had been attached. What were attached were properties of Eastman and Rose Mapua." 25
Private respondent further invites attention to the petition for certiorari in G.R. No. 74558, against the decision in ACG.R. SP No. 05043, wherein, assailing the aforequoted statement therein, petitioners aver:
As can be seen the paragraph begins with the holding that there is nothing wrong with the attachment of properties of
Peroxide. This holding on its face is limited only to the upholding of attachment against the properties of petitioner
Peroxide. And yet the alienations mentioned in the subsequent sentences do not refer to dispositions of properties of
Peroxide and by Peroxide. A cursory glance of records will show that they refer to dispositions alleged to have been
fraudulently made by Eastman Chemical Industries, Inc. and Edmund Mapua. Relating this point to the dispositive
portion which in effect sustains the attachment issued by the trial court not only against Peroxide, but also against
Eastman and Mapua spouses. 26
4.
As earlier narrated, this Court denied the petition for review on certiorari in G.R. No. 74558, and when
petitioners persisted in seeking a clarification as to the nature of the liability of Eastman and the Mapuas, the Court
denied the same on the ground that the clarification sought involves questions of fact. As observed by respondent
Court of Appeals, the aforesaid ruling was erroneously construed by the lower court when it declared that the
properties of Eastman and the Mapuas should not, pending proper determination, be attached. In doing so, the court
below virtually lifted or discharged the attachment even before its propriety had been determined.
We sustain respondent court's ratiocination in its decision under review that when petitioners sought clarification from
us regarding the propriety of the attachment on the properties of Eastman and the Mapuas, and we said that this
involves a question of fact, what this means is that the court a quo should determine the propriety or regularity thereof,
and such determination can only be had in appropriate proceedings conducted for that purpose. However, until such
attachment has been found to be improper and irregular, the attachment is valid and subsisting.
Thus, as correctly posited by BPI, before the determination of the liability of Eastman and the Mapuas after trial on the
merits, the writ of preliminary attachment may properly issue. Even assuming that when Eastman and the Mapuas
asked for the lifting of the attachment they presented evidence that they were guarantors and not sureties of Peroxide,
the trial court could not have admitted such evidence or ruled upon that issue since the same could be entertained
only after a full-blown trial and not before then. 27 Otherwise, we would have the procedural absurdity wherein the trial
court would be forced to decide in advance and preempt in an auxiliary proceeding an issue which can and should be
determined only in a trial on the merits.
The proceeding in the issuance of a writ of preliminary attachment, as a mere provisional remedy, is ancillary to an
action commenced at or before the time when the attachment is sued out. Accordingly the attachment does not affect
the decision of the case on the merits, the right to recover judgment on the alleged indebtedness and the right to
attach the property of the debtor being entirely separate and distinct. As a rule, the judgment in the main action neither
changes the nature nor determines the validity of the attachment. 28 At any rate, whether said petitioners are
guarantors or sureties, there exists a valid cause of action against them and their properties were properly attached on
the basis of that indubitable circumstance.

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5.
Petitioners bewail the fact that respondent court allegedly handled the certiorari case, CA-G.R. SP No. 15672
now on appeal before us, as if it were a petition for review on certiorari by passing upon what they submit should be
considered as errors of judgment and not errors of jurisdiction. From the foregoing disquisition, however, it is readily
apparent that the petition in said case faults the orders of the trial court as tainted with grave abuse of discretion
equivalent to a jurisdictional flaw. The errors assigned necessarily involved a discussion of erroneous conclusions
and/or lack of factual bases much beyond the pale of mere errors of judgment or misperception of evidence, and dwelt
on the improvident issuance of orders clearly arbitrary and oppressive for being in defiance of the rules and devoid of
justifying factual moorings. We cannot, therefore, share the sentiments and stance of petitioners on this score.
Neither do we subscribe to petitioners' charge that respondent court injudiciously gave due course to the aforesaid
petition for certiorari without requiring the prior filing and resolution of a motion for the reconsideration of the
questioned orders of the trial court. There are, admittedly, settled exceptions to that requisite and which obtain in the
present case. A motion for reconsideration was correctly dispensed with by respondent court since the questions
raised in the certiorari proceeding had been duly raised and passed upon by the lower court. 29 Also, under the
circumstances therein, a motion for reconsideration would serve no practical purpose since the trial judge had already
had the opportunity to consider and pass upon the questions elevated on certiorari to respondent court. 30
FOR ALL THE FOREGOING CONSIDERATIONS, the petition at bar is DENIED and the judgment of respondent
Court of Appeals is hereby AFFIRMED.
SO ORDERED.

280

G.R. No. 102726

May 27, 1994

TSHIATE L. UY and RAMON UY, petitioners,

vs.
THE COURT OF APPEALS, NATIVIDAD CALAUNAN-UY, and THE ESTATE OF MENILO B. UY, SR.,
REPRESENTED BY MENILO C. UY, JR., NILDA C. UY, MELVIN C. UY and MERLITO C. UY, respondents.
Abad, Santos and Associates for petitioners.
Cristino C. Abasolo and Jose C. Cordova for Natividad Calaunan-Uy.

VITUG, J.:
This petition for review on certiorari assails the decision, dated
23 September 1991, of respondent Court of Appeals, which has reversed the questioned order of the Regional Trial
Court, Branch 58, Makati, Metro Manila.
The facts, hereunder recited, are culled from the findings of the Court of Appeals.
Private respondent Natividad Calaunan-Uy was the common-law wife of the late Menilo B. Uy, Sr., for about thirty-six
(36) years. Their union bore four children Melito, Jr., Nilda, Melvin and Merlito all surnamed Uy. On
31 October 1990, soon after the death of Menilo Uy, Sr., herein petitioners Tshiate Uy and Ramon Uy initiated before
the Regional Trial Court (RTC), Branch 65, Makati, Metro Manila. Special Proceedings No. M-2606, entitled "In the
Matter of the Petition for Letters of Administration of the Estate of Menilo B. Uy, Sr." On 28 February 1991, private
respondent filed a motion to hold the special proceedings in abeyance. The day before, or on 27 February 1991,
private respondent filed with the RTC, Branch 58, Makati, Civil Case No. 91-573 for "Partition of Properties Under Coownership," against the Estate of Menilo Uy, Sr. (supposedly represented by their four children).
On the day of trial in Civil Case No. 91-573, or on 23 April 1991, the parties, upon the suggestion of the trial court,
submitted a Compromise Agreement. On 24 April 1991, a judgment, based on that compromise, was rendered, and a
writ of execution was issued on 15 May 1991. On 24 May 1991, petitioner Tshiate Uy filed an omnibus motion, alleging
that by virtue of a Hong Kong marriage, she was the surviving legal spouse of Menilo, Sr. She prayed that she and her
son Ramon Uy be allowed to intervene in the civil case, submitting at the same time their answer in intervention. The
intervenors contended, among other things, that the judgment upon the compromise was a patent nullity. On 10 June
1991, the trial court issued an order allowing the intervention and setting aside the "compromise judgment." Private
respondent filed a motion for reconsideration; it was denied by the trial court in its order of 08 July 1991. A petition for
certiorari was filed with respondent appellate court, which, on 23 September 1991, promulgated its decision, the
dispositive portion of which read:
WHEREFORE, the petition is hereby granted and the orders of respondent court dated June 10, 1991 and July 8,
1991 are hereby SET ASIDE. No costs.
SO ORDERED. 1
A motion for reconsideration filed by petitioners was denied by the appellate court in its resolution of 06 November
1991.
On 02 January 1992, the instant petition for review on certiorari was filed with this Court, asserting that:
The finding and the conclusion of the respondent Court of Appeals that Judge Zosimo Angeles of the Regional Trial
Court of Makati, Branch 58, erred in setting aside the Judgment by Compromise in Civil Case
No. 91-573 because the same was already final and in fact partly executed is contrary to law and jurisprudence to the
effect that a Judgment void
ab initio is non-existent and cannot acquire finality; and
The finding and conclusion of the respondent Court of Appeals to the effect that the intervention of petitioner in Civil
Case No. 91-573 came too late is contrary to the ruling of this Honorable Court in the case of Director of Lands vs.
Court of Appeals, et al., 93 SCRA 238. 2
The appeal has merit.

281

The action for partition in Civil Case No. 91-573 is predicated on an alleged co-ownership between private respondent
Natividad Calaunan-Uy and deceased Menilo, Sr., of property evidently acquired during the period of their commonlaw relationship. The governing provisions, applicable to their case, are now found in Article 147 and Article 148 of the
Family Code, considering that Menilo Uy, Sr., died on 27 September 1990, well after the effectivity of Executive Order
No. 209 (The Family Code of the Philippines) on 03 August 1988. Hence
Art. 147.
When a man and a woman who are capacitated to marry each other, live exclusively with each other
as husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be
owned by them in equal shares and the property acquired by both of them through their work or industry shall be
governed by the rules on co-ownership.
In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been
obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. For purposes of this
Article, a party who did not participate in the acquisition by the other party of any property shall be deemed to have
contributed jointly in the acquisition thereof if the former's efforts consisted in the care and maintenance of the family
and of the household.
Neither party can encumber or dispose by acts inter vivos of his or her share in the property acquired during
cohabitation and owned in common, without the consent of the other, until after the termination of their cohabitation.
When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the co-ownership
shall be forfeited in favor of their common children. In case of default of or waiver by any or all of the common children
or their descendants, each vacant share shall belong to the respective surviving descendants. In the absence of
descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take place upon
termination of the cohabitation.
Art. 148.
In cases of cohabitation not falling under the preceding Article, only the properties acquired by both of
the parties through their actual joint contribution of money, property, or industry shall be owned by them in common in
proportion to their respective contributions. In the absence of proof to the contrary, their contributions and
corresponding shares are presumed to be equal. The same rule and presumption shall apply to joint deposits of
money and evidences of credit.
If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to the absolute
community or conjugal partnership existing in such valid marriage. If the party who acted in bad faith is not validly
married to another, his or her share shall be forfeited in the manner provided in the last paragraph of the preceding
Article.
The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith.
Parenthetically, closely intertwined with the legal questions posed by the parties are factual issues which are yet to be
determined in Special Proceedings No.
M-2606 filed by herein petitioners.
Respondent Court of Appeals set aside the orders of the trial court on two points: That
(1)

The intervention came too late, citing Section 2, Rule 12, of the Revised Rules of Court; and

(2)

The court a quo ignored the rule on finality of judgments.

Section 2, Rule 12 of the Revised Rules of Court provides:

Sec. 2. Intervention. A person may, before or during a trial, be permitted by the court, in its discretion, to intervene
in an action, if he has legal interest in the matter in litigation, or in the success of either of the parties, or an interest
against both, or when he is so situated as to be adversely affected by a distribution or other disposition of property in
the custody of the court or of an officer thereof.
The case Director of Lands vs. Court of Appeals, 3 may not be on all fours to the case at bench but the rationale
behind the decision can well be applicable. Citing Manila Railroad Co. vs. Attorney-General, 4 this Court held:
It is quite clear and patent that the motion for intervention filed by the movants at this stage of the proceedings where
trial has already been concluded, a judgment thereon had been promulgated in favor of private respondent and on
appeal by the losing party, the Director of Lands, the same was affirmed by the Court of Appeals and the instant
petition for certiorari to review said judgment is already submitted for decision by the Supreme Court, are obviously
and manifestly late, beyond the period prescribed under the aforecoded Section 2, Rule 12 of the Rules of Court.

282

But Rule 12 of the Rules of Court like all other Rules therein promulgated, is simply a rule of procedure, the whole
purpose and object of which is to make the powers of the court fully and completely available for justice. The purpose
of procedure is not to thwart justice. Its proper aim is to facilitate the application of justice to the rival claims of
contending parties. It was created not to hinder and delay but to facilitate and promote the administration of justice. It
does not constitute the thing itself which courts are always striving to secure to litigants. It is designed as the means
best adopted to obtain that thing. In other words, it is a means to an end.
The denial of the motions for intervention arising from the strict application of the Rule due to alleged lack of notice to,
or the alleged failure of, movants to act seasonably will lead the Court to commit an act of injustice to the movants, to
their successors-in-interest and to all purchasers for value and in good faith and thereby open the door to fraud,
falsehood and misrepresentation, should intervenors' claims be proven to be true. For it cannot be gainsaid that if the
petition for reconstitution is finally granted, the chaos and confusion arising from a situation where the certificates of
title of the movants covering large areas of land overlap or encroach on properties the title to which is being sought to
be reconstituted by private respondent, who herself indicates in her Opposition that, according to the Director of
Lands, the overlapping embraces some 87 hectares only, is certain and inevitable. The aggregate area of the property
claimed by respondent covering Lot 1 and Lot 2 is 1,435,062 sq. meters which is situated in a fast-growing, highly
residential sector of Metro Manila where growth and development are in rapid progress to meet the demands of an
urbanized, exploding population. Industries, factories, warehouses, plants, and other commercial infrastructures are
rising and spreading within the area and the owners of these lands and the valuable improvements thereon will not
simply fold their hands but certainly will seek judicial protection of their property rights or may even take the law into
their own hands, resulting to multiplicity of suits.
Section 7, Rule 3, of the Revised Rules of Court defines indispensable parties to be "(p)arties in interest without whom
no final determination can be had of an action . . . ." Even private respondents, in their complaint in Civil Case No. 91573, have acknowledged that petitioners "claim some interest in the Estate of Menilo B. Uy, Sr." 5 The trial court itself,
in setting aside its previous judgment upon compromise, has expressed "that the intervenors have legal interest in the
matter in litigation," a statement which we find hard to brush aside. In the interest of adjudicating the whole
controversy, petitioners' inclusion in the action for partition, given the circumstances, not only is preferable but rightly
essential in the proper disposition of the case. It is a settled rule that without the presence of indispensable parties to a
suit or proceeding, a judgment of the court cannot attain real finality. 6
Private respondents argue that their failure to implead petitioners in the complaint for partition has been cured by the
filing of petitioners' omnibus motion asking leave to intervene and attaching thereto an answer in intervention. Private
respondents overlook the fact that the motion has been filed subsequent to the judgment based upon the compromise
agreement (among private respondents themselves) that did not include, and thereby cannot be held to bind,
petitioners 7
WHEREFORE, the decision of respondent Court of Appeals is SET ASIDE and a new one is entered REINSTATING
the order, dated 10 June 1991, of the trial court.
SO ORDERED.

283

G.R. No. L-4268

January 18, 1951

MANILA HERALD PUBLISHING CO., INC., doing business under the name of Evening Herald Publishing Co., Inc.,
and Printers, Inc., petitioner,
vs.
SIMEON RAMOS, Judge of the Court of First Instance of Manila, MACARIO A. OFILADA, Sheriff of City of Manila,
ANTONIO QUIRINO and ALTO SURETY AND INSURANCE CO., INC., respondents.
Edmundo M. Reyes and Antonio Barredo for petitioners.
Bausa and Ampil for respondents.
TUASON, J.:
This is a petition for "certiorari with preliminary injunction" arising upon the following antecedents:
Respondent Antonio Quirino filed a libel suit, docketed as civil case No. 11531, against Aproniano G. Borres, Pedro
Padilla and Loreto Pastor, editor, managing editor and reporter, respectively, of the Daily Record, a daily newspaper
published in Manila, asking damages aggregating P90,000. With the filing of this suit, the plaintiff secureda writ of
preliminary attachment upon putting up a P50,000 bond, and the Sheriff of the City of Manila levied an attachment
upon certain office and printing equipment found in the premises of the Daily Record.
Thereafter the Manila Herald Publishing Co. Inc. and Printers, Inc., filed with the sheriff separate third-party claims,
alleging that they were the owners of the property attached. Whereupon, the sheriff required of Quirino a counter
bound of P41,500 to meet the claim of the Manila Herald Publishing Co., Inc., and another bond of P59,500 to meet
the claim of Printers, Inc. These amounts, upon Quirino's motion filed under Section 13, Rule 59, of the Rules of
Court, were reduced by the court to P11,000 and P10,000 respectively.
Unsuccessful in their attempt to quash the attachment, on October 7, 1950, the Manila Herald Publishing Co., Inc. and
Printers, Inc. commenced a joint suit against the sheriff, Quirino and Alto Surety and Insurance Co. Inc., in which the
former sought (1) to enjoin the defendants from proceeding with the attachment of the properties above mentioned
and (2) P45,000 damages. This suit was docketed as civil case No. 12263.
Whereas case No. 11531 was being handled by Judge Sanchez or pending in the branch of the Court presided by
him, case No. 12263 fell in the branch of Judge Pecson. On the same date, in virtue of an ex parte motion in case No.
12263 by the Manila Herald Publishing Co. Inc., and Printers, Inc., Judge Pecson issued a writ of preliminary
injunction to the sheriff directing him to desist from proceeding with the attachment of the said properties.
After the issuance of that preliminary injunction, Antonio Quirino filed an ex parte petition for its dissolution, and Judge
Simeon Ramos, to whom case No. 12263 had in the meanwhile been transferred, granted the petition on a bond of
P21,000. However Judge Ramos soon set aside the order just mentioned on a motion for reconsideration by the
Manila Herald Publishing Co. Inc. and Printer, Inc. and set the matter for hearing for October 14, then continued to
October 16.
Upon the conclusion of that hearing, Judge Ramos required the parties to submit memoranda on the question whether
"the subject matter of civil case No. 12263 should be ventilated in an independent action or by means of a complaint in
intervention in civil case No. 11531." Memoranda having been filed, His Honor declared that the suit, in case No.
12263, was "unnecessary, superfluous and illegal" and so dismissed the same. He held that what Manila Herald
Publishing Co., Inc., and Printers, Inc., should do was intervene in Case No. 11531.
The questions that emerge from these facts and the arguments are: Did Judge Ramos have authority to dismiss case
No. 12263 at the stage when it was thrown out of court? Should the Manila Herald Publishing Co., Inc., and Printers,
Inc., come as intervernors into the case for libel instead of bringing an independent action? And did Judge Pecson or
Judge Ramos have jurisdiction in case No. 12263 to quash the attachment levied in case No. 11531?
In case No. 12263, it should be recalled, neither a motion to dismiss nor an answer had been made when the decision
under consideration was handed down. The matter then before the court was a motion seeking a provisional or
collateral remedy, connected with and incidental to the principal action. It was a motion to dissolve the preliminary
injunction granted by Judge Pecson restraining the sheriff from proceeding with the attachment in case No. 11531.
The question of dismissal was suggested by Judge Ramos on a ground perceived by His Honor. To all intents and
purposes, the dismissal was decreed by the court on its own initiative.
Section 1 Rule 8 enumerates the grounds upon which an action may be dismissed, and it specifically ordains that a
motion to this end be filed. In the light of this express requirement we do not believe that the court had power to
dismiss the case without the requisite motion duly presented. The fact that the parties filed memoranda upon the

284

court's indication or order in which they discussed the proposition that the action was unnecessary and was improperly
brought outside and independently of the case for libel did not supply deficiency. Rule 30 of the Rules of Court
provides for the cases in which an action may be dismissed, and the inclusion of those therein provided excludes any
other, under the familiar maxim, inclusio unius est exclusio alterius. The only instance in which, according to said
Rules, the court may dismiss upon the court's own motion an action is, when the "plaintiff fails to appear at the time of
the trial or to prosecute his action for an unreasonable length of time or to comply with the Rules or any order of the
court."
The Rules of Court are devised as a matter of necessity, intended to be observed with diligence by the courts as well
as by the parties for the orderly conduct of litigation and judicial business. In general, it is compliance with these rules
which gives the court jurisdiction to act.
We are the opinion that the court acted with grave abuse of discretion if not in excess of its jurisdiction in dismissing
the case without any formal motion to dismiss.
The foregoing conclusions should suffice to dispose of this proceeding for certiorari, but the parties have discussed
the second question and we propose to rule upon it if only to put out of the way a probable cause for future
controversy and consequent delay in the disposal of the main cause.
Section 14 of rule 59, which treats of the steps to betaken when property attached is claimed by the other person than
that defendant or his agent, contains the proviso that "Nothing herein contained shall prevent such third person from
vindicating his claim to the property by any proper action." What is "proper action"? Section 1 of Rule 2 defines action
as "an ordinary suit in court of justice, by which one party prosecutes another for the enforcement or protection of a
right, or the prevention or redress of a wrong," while section 2, entitled "Commencement of Action," says that "civil
action may be commenced by filing a complaint with the court."
"Action" has acquired a well-define, technical meaning, and it is in this restricted sense that the word "action" is used
in the above rule. In employing the word "commencement" the rule clearly indicates an action which originates an
entire proceeding and puts in motion the instruments of the court calling for summons, answer, etc, and not any
intermediary step taken in the course of the proceeding whether by the parties themselves or by a stranger. It would
be strange indeed if the framers of the Rules of Court or the Legislature should have employed the term "proper
action" instead of "intervention" or equivalent expression if the intention had been just that. It was all the easier,
simplier and the more natural to say intervention if that had been the purpose, since the asserted right of the thirdparty claimant necessarily grows out of the pending suit, the suit in which the order of attachment was issued.
The most liberal view that can be taken in favor of the respondents' position is that intervention as a means of
protecting the third-party claimants' right is not exclusive but cumulative and suppletory to the right to bring a new,
independent suit. It is significant that there are courts which go so far as to take the view that even where the statute
expressly grants the right of intervention is such cases as this, the statute does not extend to owners of property
attached, for, under this view, "it is considered that the ownership is not one of the essential questions to be
determined in the litigation between plaintiff and defendant;" that "whether the property belongs to defendant or
claimant, if determined, is considered as shedding no light upon the question in controversy, namely, that defendant is
indebted to plaintiff."
(See 7 C. J. S., 545 and footnote No. 89 where extracts from the decision in Lewis vs. Lewis, 10 N. W., 586, a leading
case, are printed.)
Separate action was indeed said to be the correct and only procedure contemplated by Act No. 190, intervention
addition to, but not in substitution of, the old process. The new Rules adopted section 121 of Act No. 190 and added
thereto Rule 24 (a) of the Federal Rules of Procedure. Combined, the two modes of redress are now section 1 of Rule
13,1 the last clause of which is the newly added provision. The result is that, whereas, "under the old procedure, the
third person could not intervene, he having no interest in the debt (or damages) sued upon by the plaintiff," under the
present Rules, "a third person claiming to be the owner of such property may, not only file a third-party claim with the
sheriff, but also intervene in the action to ask that the writ of attachment be quashed." (I Moran's Comments on the
Rules of Court, 3rd Ed., 238, 239.) Yet, the right to inetervene, unlike the right to bring a new action, is not absolute
but left to the sound discretion of the court to allow. This qualification makes intervention less preferable to an
independent action from the standpoint of the claimants, at least. Because availability of intervention depends upon
the court in which Case No. 11531 is pending, there would be assurance for the herein petitioners that they would be
permitted to come into that case.
Little reflection should disabuse the mind from the assumption that an independent action creates a multiplicity of
suits. There can be no multiplicity of suits when the parties in the suit where the attachment was levied are different
from the parties in the new action, and so are the issues in the two cases entirely different. In the circumstances,
separate action might, indeed, be the more convenient of the two competing modes of redress, in that intervention is

285

more likely to inject confusion into the issues between the parties in the case for debt or damages with which the thirdparty claimant has nothing to do and thereby retard instead of facilitate the prompt dispatch of the controversy which is
underlying objective of the rules of pleading and practice. That is why intervention is subject to the court's discretion.
The same reasons which impelled us to decide the second question, just discussed, urge us to take cognizance of
and express an opinion on the third.
The objection that at once suggests itself entertaining in Case No. 12263 the motion to discharge the preliminary
attachment levied in case No. 11531 is that by so doing one judge would intefere with another judge's actuations. The
objection is superficial and will not bear analysis.
It has been seen that a separate action by the third party who claims to be the owner of the property attached is
appropriate. If this is so, it must be admitted that the judge trying such action may render judgment ordering the sheriff
of whoever has in possession the attached property to deliver it to the plaintiff-claimant or desist from seizing it. It
follows further that the court may make an interlocutory order, upon the filing of such bond as may be necessary, to
release the property pending final adjudication of the title. Jurisdiction over an action includes jurisdiction over a
interlocutory matter incidental to the cause and deemed necessary to preserve the subject matter of the suit or protect
the parties' interests. This is self-evident.
The fault with the respondents' argument is that it assumes that the Sheriff is holding the property in question by order
of the court handling the case for libel. In reality this is true only to limited extent. That court did not direct the sheriff to
attach the particular property in dispute. The order was for the sheriff to attach Borres', Padilla's and Pastor's property.
He was not supposed to touch any property other than that of these defendants', and if he did, he acted beyond the
limits of his authority and upon his personal responsibility.
It is true of course that property in custody of the law can not be interferred with without the permission of the proper
court, and property legally attached is property in custodia legis. But for the reason just stated, this rule is confined to
cases where the property belongs to the defendant or one in which the defendant has proprietary interest. When the
sheriff acting beyond the bounds of his office seizes a stranger's property, the rule does not apply and interference
with his custody is not interference with another court's order of attachment.
It may be argued that the third-party claim may be unfounded; but so may it be meritorious, for the matter.
Speculations are however beside the point. The title is the very issue in the case for the recovery of property or the
dissolution of the attachment, and pending final decision, the court may enter any interlocutory order calculated to
preserve the property in litigation and protect the parties' rights and interests.
None of what has been said is to be construed as implying that the setting aside of the attachment prayed for by the
plaintiffs in Case No. 12263 should be granted. The preceding discussion is intended merely to point out that the court
has jurisdiction to act in the premises, not the way the jurisdiction should be exercised. The granting or denial, as the
case may be, of the prayer for the dissolution of the attachment would be a proper subject of a new proceeding if the
party adversely affected should be dissatisfied.
The petition for certiorari is granted with costs against the respondents except the respondent Judge.

286

G.R. No. L-66321

October 31 1984

TRADERS ROYAL BANK, petitioner,

vs.
THE HON INTERMEDIATE APPELATE COURT, HON., JESUS R. DE VEGA, AS PRESIDING JUDGE OF THE
RETIONAL TRIA COURT, THIRD JUDICIAL REGION, BRANCH IX, MALOLOS, Bulacan, LA TONDEA, INC.,
VICTORINO P. EVANGELISTA IN HIS CAPACITY AS Ex-Officio Provincial Sheriff of Bulacan, and/or any and all his
deputies, respondents.

ESCOLIN, J.:+.wph!1
The issue posed for resolution in this petition involves the authority of a Regional Trial Court to issue, at the instance
of a third-party claimant, an injunction enjoining the sale of property previously levied upon by the sheriff pursuant to a
writ of attachment issued by another Regional Trial Court.
The antecedent facts, undisputed by the parties, are set forth in the decision of the respondent Intermediate Appellate
Court thus: t.hqw
Sometime on March 18, 1983 herein petitioner Traders Royal Bank instituted a suit against the Remco Alcohol
Distillery, Inc. REMCO before the Regional Trial Court, Branch CX, Pasay City, in Civil Case No. 9894-P, for the
recovery of the sum of Two Million Three Hundred Eighty Two Thousand Two Hundred Fifty Eight & 71/100 Pesos
(P2,382,258.71) obtaining therein a writ of pre attachment directed against the assets and properties of Remco
Alcohol Distillery, Inc.
Pursuant to said writ of attachment issued in Civil Case No. 9894-P, Deputy Sheriff Edilberto Santiago levied among
others about 4,600 barrels of aged or rectified alcohol found within the premises of said Remco Distillery Inc. A third
party claim was filed with the Deputy Sheriff by herein respondent La Tondea, Inc. on April 1, 1982 claiming
ownership over said attached property (Complaint, p. 17, Rollo).
On May 12, 1982, private respondent La Tondea, Inc. filed a complaint-in- intervention in said Civil Case No. 9894,
alleging among others, that 'it had made advances to Remco Distillery Inc. which totalled P3M and which remains
outstanding as of date' and that the 'attached properties are owned by La Tondea, Inc.' (Annex '3' to petitioner's
Motion to Dismiss dated July 27, 1983 Annex "C" to the petition).
Subsequently, private respondent La Tondea, Inc., without the foregoing complaint-in- intervention having been
passed upon by the Regional Trial Court, Branch CX, (Pasay City), filed in Civil Case No. 9894-P a "Motion to
Withdraw" dated October 8, 1983, praying that it be allowed to withdraw alcohol and molasses from the Remco
Distillery Plant (Annex 4 to Petitioner's Motion to Dismiss-Annex C, Petition) and which motion was granted per order
of the Pasay Court dated January 27, 1983, authorizing respondent La Tondea, Inc. to withdraw alcohol and
molasses from the Remco Distillery Plant at Calumpit, Bulacan (Annex "I" to Reply to Plaintiff's Opposition dated
August 2, 1983 Annex E to the Petition).
The foregoing order dated January 27, 1983 was however reconsidered by the Pasay Court by virtue of its order
dated February 18, 1983 (Annex A Petition, p. 15) declaring that the alcohol "which has not been withdrawn
remains in the ownership of defendant Remco Alcohol Distillery Corporation" and which order likewise denied La
Tondea's motion to intervene.
A motion for reconsideration of the foregoing order of February 18, 1983 was filed by respondent La Tondea, Inc., on
March 8, 1983 reiterating its request for leave to withdraw alcohol from the Remco Distillery Plant, and praying further
that the "portion of the order dated February 18, 1983" declaring Remco to be the owner of subject alcohol, "be
reconsidered and striken off said order". This motion has not been resolved (p. 4, Petition) up to July 18, 1983 when a
manifestation that it was withdrawing its motion for reconsideration was filed by respondent La Tondea Inc.
On July 19, 1983, private respondent La Tondea Inc. instituted before the Regional Trial Court, Branch IX, Malolos,
Bulacan presided over by Respondent Judge, Civil Case No. 7003-M, in which it asserted its claim of ownership over
the properties attached in Civil Case No. 9894-P, and likewise prayed for the issuance of a writ of Preliminary
Mandatory and Prohibitory Injunction (Annex B,id ).
A Motion to Dismiss and/or Opposition to the application for a writ of Preliminary Injunction by herein respondent La
Tondea Inc. was filed by petitioner on July 27, 1983 (Annex C, p. 42, Id.)

287

This was followed by respondent La Tondea's opposition to petitioner's Motion to Dismiss on August 1, 1983 (Annex
D, p. 67, Id.).
A reply on the part of petitioner was made on the foregoing opposition on August 3, 1983 (p. 92, Id.).
Hearings were held on respondent La Tondea's application for injunctive relief and on petitioner's motion to dismiss
on August 8, 19 & 23, 1983 (p. 5, Id.).
Thereafter, the parties filed their respective memoranda (Annex F, p. 104; Annex G, p. 113, Rollo).
Subsequently, the questioned order dated September 28, 1983 was issued by the respondent Judge declaring
respondent La Tondea Inc. to be the owner of the disputed alcohol, and granting the latter's application for injunctive
relief (Annex H-1, Id.).
On October 6, 1983, respondent Sheriff Victorino Evangelista issued on Edilberto A. Santiago Deputy Sheriff of Pasay
City the corresponding writ of preliminary injunction (Annex N, p. 127, Id.).
This was followed by an order issued by the Pasay Court dated October 11, 1983 in Civil Case No. 9894-P requiring
Deputy Sheriff Edilberto A. Santiago to enforce the writ of preliminary attachment previously issued by said court, by
preventing respondent sheriff and respondent La Tondea, Inc. from withdrawing or removing the disputed alcohol
from the Remco ageing warehouse at Calumpit, Bulacan, and requiring the aforenamed respondents to explain and
show cause why they should not be cited for contempt for withdrawing or removing said attached alcohol belonging to
Remco, from the latter's ageing warehouse at Calumpit, Bulacan (Annex F, p. 141, Petition).
Thereafter, petitioner Traders Royal Bank filed with the Intermediate Appellate Court a petition for certiorari and
prohibition, with application for a writ of preliminary injunction, to annul and set aside the Order dated September 28,
1983 of the respondent Regional Trial Court of Malolos, Bulacan, Branch IX, issued in Civil Case No. 7003-M; to
dissolve the writ of preliminary injunction dated October 6, 1983 issued pursuant to said order; to prohibit respondent
Judge from taking cognizance of and assuming jurisdiction over Civil Case No. 7003-M, and to compel private
respondent La Tondea, Inc., and Ex- Oficio Provincial Sheriff of Bulacan to return the disputed alcohol to their original
location at Remco's ageing warehouse at Calumpit, Bulacan.
In its decision, the Intermediate Appellate Court dismissed the petition for lack of legal and factual basis, holding that
the respondent Judge did not abuse his discretion in issuing the Order of September 28, 1983 and the writ of
preliminary injunction dated October 3, 1983. citing the decision in Detective and Protective Bureau vs. Cloribel (26
SCRA 255). Petitioner moved for reconsideration, but the respondent court denied the same in its resolution dated
February 2, 1984.
Hence, this petition.
Petitioner contends that respondent Judge of the Regional T- trial Court of Bulacan acted without jurisdiction in
entertaining Civil Case No. 7003-M, in authorizing the issuance of a writ of preliminary mandatory and prohibitory
injunction, which enjoined the sheriff of Pasay City from interferring with La Tondea's right to enter and withdraw the
barrels of alcohol and molasses from Remco's ageing warehouse and from conducting the sale thereof, said
merchandise having been previously levied upon pursuant to the attachment writ issued by the Regional Trial Court of
Pasay City in Civil Case No. 9894-P. It is submitted that such order of the Bulacan Court constitutes undue and illegal
interference with the exercise by the Pasay Court of its coordinate and co-equal authority on matters properly brought
before it.
We find the petition devoid of merit.
There is no question that the action filed by private respondent La Tondea, Inc., as third-party claimant, before the
Regional Trial Court of Bulacan in Civil Case No. 7003-M wherein it claimed ownership over the property levied upon
by Pasay City Deputy Sheriff Edilberto Santiago is sanctioned by Section 14, Rule 57 of the Rules of Court. Thus
t.hqw
If property taken be claimed by any person other than the party against whom attachment had been issued or his
agent, and such person makes an affidavit of his title thereto or right to the possession thereof, stating the grounds of
such right or title, and serves such affidavit upon the officer while the latter has possession of the property, and a copy
thereof upon the attaching creditor, the officer shall not be bound to keep the property under the attachment, unless
the attaching creditor or his agent, on demand of said officer, secures aim against such claim by a bond in a sum not
greater than the value of the property attached. In case of disagreement as to such value, the same shall be decided
by the court issuing the writ of attachment. The officer shall not be liable for damages, for the taking or keeping of such
property, to any such third-party claimant, unless such a claim is so made and the action upon the bond brought within

288

one hundred and twenty (120) days from the date of the filing of said bond. But nothing herein contained shall prevent
such third person from vindicating his claim to the property by proper action ...
The foregoing rule explicitly sets forth the remedy that may be availed of by a person who claims to be the owner of
property levied upon by attachment, viz: to lodge a third- party claim with the sheriff, and if the attaching creditor posts
an indemnity bond in favor of the sheriff, to file a separate and independent action to vindicate his claim (Abiera vs.
Court of Appeals, 45 SCRA 314). And this precisely was the remedy resorted to by private respondent La Tondea
when it filed the vindicatory action before the Bulacan Court.
The case before us does not really present an issue of first impression. In Manila Herald Publishing Co., Inc. vs.
Ramos, 1 this Court resolved a similar question in this wise: t.hqw
The objection that at once suggests itself to entertaining in Case No. 12263 the motion to discharge the preliminary
attachment levied in Case No. 11531 is that by so doing one judge would interfere with another judge's actuations.
The objection is superficial and will not bear analysis.
It has been seen that a separate action by the third party who claims to be the owner of the property attached is
appropriate. If this is so, it must be admitted that the judge trying such action may render judgment ordering the sheriff
of whoever has in possession the attached property to deliver it to the plaintiff-claimant or desist from seizing it. It
follows further that the court may make an interlocutory order, upon the filing of such bond as may be necessary, to
release the property pending final adjudication of the title. Jurisdiction over an action includes jurisdiction over an
interlocutory matter incidental to the cause and deemed necessary to preserve the subject matter of the suit or protect
the parties' interests. This is self-evident.
xxx

xxx

xxx

It is true of course that property in custody of the law can not be interfered without the permission of the proper court,
and property legally attached is property in custodia legis. But for the reason just stated, this rule is confined to cases
where the property belongs to the defendant or one in which the defendant has proprietary interest. When the sheriff
acting beyond the bounds of his office seizes a stranger's property, the rule does not apply and interference with his
custody is not interference with another court's order of attachment.
It may be argued that the third-party claim may be unfounded; but so may it be meritorious, for that matter.
Speculations are however beside the point. The title is the very issue in the case for the recovery of property or the
dissolution of the attachment, and pending final decision, the court may enter any interlocutory order calculated to
preserve the property in litigation and protect the parties' rights and interests.
Generally, the rule that no court has the power to interfere by injunction with the judgments or decrees of a concurrent
or coordinate jurisdiction having equal power to grant the injunctive relief sought by injunction, is applied in cases
where no third-party claimant is involved, in order to prevent one court from nullifying the judgment or process of
another court of the same rank or category, a power which devolves upon the proper appellate court . 2 The purpose
of the rule is to avoid conflict of power between different courts of coordinate jurisdiction and to bring about a
harmonious and smooth functioning of their proceedings.
It is further argued that since private respondent La Tondea, Inc., had voluntarily submitted itself to the jurisdiction of
the Pasay Court by filing a motion to intervene in Civil Case No. 9894-P, the denial or dismissal thereof constitutes a
bar to the present action filed before the Bulacan Court.
We cannot sustain the petitioner's view. Suffice it to state that intervention as a means of protecting the third-party
claimant's right in an attachment proceeding is not exclusive but cumulative and suppletory to the right to bring an
independent suit. 3 The denial or dismissal of a third-party claim to property levied upon cannot operate to bar a
subsequent independent action by the claimant to establish his right to the property even if he failed to appeal from
the order denying his original third-party claim. 4
WHEREFORE, the instant petition is hereby dismissed and the decision of the Intermediate Appellate Court in ACG.R. No. SP-01860 is affirmed, with costs against petitioner Traders Royal Bank.
SO ORDERED.

289

G.R. No. 124642

February 23, 2004

ALFREDO CHING and ENCARNACION CHING, petitioners

vs.
THE HON. COURT OF APPEALS and ALLIED BANKING CORPORATION, respondents.
DECISION
CALLEJO, SR., J.:
This petition for review, under Rule 45 of the Revised Rules of Court, assails the Decision1 of the Court of Appeals
(CA) dated November 27, 1995 in CA-G.R. SP No. 33585, as well as the Resolution2 on April 2, 1996 denying the
petitioners motion for reconsideration. The impugned decision granted the private respondents petition for certiorari
and set aside the Orders of the trial court dated December 15, 19933 and February 17, 19944 nullifying the
attachment of 100,000 shares of stocks of the Citycorp Investment Philippines under the name of petitioner Alfredo
Ching.
The following facts are undisputed:
On September 26, 1978, the Philippine Blooming Mills Company, Inc. (PBMCI) obtained a loan of P9,000,000.00 from
the Allied Banking Corporation (ABC). By virtue of this loan, the PBMCI, through its Executive Vice-President Alfredo
Ching, executed a promissory note for the said amount promising to pay on December 22, 1978 at an interest rate of
14% per annum.5 As added security for the said loan, on September 28, 1978, Alfredo Ching, together with Emilio
Taedo and Chung Kiat Hua, executed a continuing guaranty with the ABC binding themselves to jointly and severally
guarantee the payment of all the PBMCI obligations owing the ABC to the extent of P38,000,000.00.6 The loan was
subsequently renewed on various dates, the last renewal having been made on December 4, 1980.7
Earlier, on December 28, 1979, the ABC extended another loan to the PBMCI in the amount of P13,000,000.00
payable in eighteen months at 16% interest per annum. As in the previous loan, the PBMCI, through Alfredo Ching,
executed a promissory note to evidence the loan maturing on June 29, 1981.8 This was renewed once for a period of
one month.9
The PBMCI defaulted in the payment of all its loans. Hence, on August 21, 1981, the ABC filed a complaint for sum of
money with prayer for a writ of preliminary attachment against the PBMCI to collect the P12,612,972.88 exclusive of
interests, penalties and other bank charges. Impleaded as co-defendants in the complaint were Alfredo Ching, Emilio
Taedo and Chung Kiat Hua in their capacity as sureties of the PBMCI.
The case was docketed as Civil Case No. 142729 in the Regional Trial Court of Manila, Branch XVIII.10 In its
application for a writ of preliminary attachment, the ABC averred that the "defendants are guilty of fraud in incurring the
obligations upon which the present action is brought11 in that they falsely represented themselves to be in a financial
position to pay their obligation upon maturity thereof."12 Its supporting affidavit stated, inter alia, that the "[d]efendants
have removed or disposed of their properties, or [are] ABOUT to do so, with intent to defraud their creditors."13
On August 26, 1981, after an ex-parte hearing, the trial court issued an Order denying the ABCs application for a writ
of preliminary attachment. The trial court decreed that the grounds alleged in the application and that of its supporting
affidavit "are all conclusions of fact and of law" which do not warrant the issuance of the writ prayed for.14 On motion
for reconsideration, however, the trial court, in an Order dated September 14, 1981, reconsidered its previous order
and granted the ABCs application for a writ of preliminary attachment on a bond of P12,700,000. The order, in
relevant part, stated:
With respect to the second ground relied upon for the grant of the writ of preliminary attachment ex-parte, which is the
alleged disposal of properties by the defendants with intent to defraud creditors as provided in Sec. 1(e) of Rule 57 of
the Rules of Court, the affidavits can only barely justify the issuance of said writ as against the defendant Alfredo
Ching who has allegedly bound himself jointly and severally to pay plaintiff the defendant corporations obligation to
the plaintiff as a surety thereof.
WHEREFORE, let a writ of preliminary attachment issue as against the defendant Alfredo Ching requiring the sheriff of
this Court to attach all the properties of said Alfredo Ching not exceeding P12,612,972.82 in value, which are within
the jurisdiction of this Court and not exempt from execution upon, the filing by plaintiff of a bond duly approved by this
Court in the sum of Twelve Million Seven Hundred Thousand Pesos (P12,700,000.00) executed in favor of the
defendant Alfredo Ching to secure the payment by plaintiff to him of all the costs which may be adjudged in his favor
and all damages he may sustain by reason of the attachment if the court shall finally adjudge that the plaintiff was not
entitled thereto.

290

SO ORDERED.15
Upon the ABCs posting of the requisite bond, the trial court issued a writ of preliminary attachment. Subsequently,
summonses were served on the defendants,16 save Chung Kiat Hua who could not be found.
Meanwhile, on April 1, 1982, the PBMCI and Alfredo Ching jointly filed a petition for suspension of payments with the
Securities and Exchange Commission (SEC), docketed as SEC Case No. 2250, at the same time seeking the
PBMCIs rehabilitation.17
On July 9, 1982, the SEC issued an Order placing the PBMCIs business, including its assets and liabilities, under
rehabilitation receivership, and ordered that "all actions for claims listed in Schedule "A" of the petition pending before
any court or tribunal are hereby suspended in whatever stage the same may be until further orders from the
Commission."18 The ABC was among the PBMCIs creditors named in the said schedule.
Subsequently, on January 31, 1983, the PBMCI and Alfredo Ching jointly filed a Motion to Dismiss and/or motion to
suspend the proceedings in Civil Case No. 142729 invoking the PBMCIs pending application for suspension of
payments (which Ching co-signed) and over which the SEC had already assumed jurisdiction.19 On February 4,
1983, the ABC filed its Opposition thereto.20
In the meantime, on July 26, 1983, the deputy sheriff of the trial court levied on attachment the 100,000 common
shares of Citycorp stocks in the name of Alfredo Ching.21
Thereafter, in an Order dated September 16, 1983, the trial court partially granted the aforementioned motion by
suspending the proceedings only with respect to the PBMCI. It denied Chings motion to dismiss the complaint/or
suspend the proceedings and pointed out that P.D. No. 1758 only concerns the activities of corporations, partnerships
and associations and was never intended to regulate and/or control activities of individuals. Thus, it directed the
individual defendants to file their answers.22
Instead of filing an answer, Ching filed on January 14, 1984 a Motion to Suspend Proceedings on the same ground of
the pendency of SEC Case No. 2250. This motion met the opposition from the ABC.23
On January 20, 1984, Taedo filed his Answer with counterclaim and cross-claim.24 Ching eventually filed his Answer
on July 12, 1984.25
On October 25, 1984, long after submitting their answers, Ching filed an Omnibus Motion,26 again praying for the
dismissal of the complaint or suspension of the proceedings on the ground of the July 9, 1982 Injunctive Order issued
in SEC Case No. 2250. He averred that as a surety of the PBMCI, he must also necessarily benefit from the defenses
of his principal. The ABC opposed Chings omnibus motion.
Emilio Y. Taedo, thereafter, filed his own Omnibus Motion27 praying for the dismissal of the complaint, arguing that
the ABC had "abandoned and waived" its right to proceed against the continuing guaranty by its act of resorting to
preliminary attachment.
On December 17, 1986, the ABC filed a Motion to Reduce the amount of his preliminary attachment bond from
P12,700,000 to P6,350,000.28 Alfredo Ching opposed the motion,29 but on April 2, 1987, the court issued an Order
setting the incident for further hearing on May 28, 1987 at 8:30 a.m. for the parties to adduce evidence on the actual
value of the properties of Alfredo Ching levied on by the sheriff.30
On March 2, 1988, the trial court issued an Order granting the motion of the ABC and rendered the attachment bond
of P6,350,000.31
On November 16, 1993, Encarnacion T. Ching, assisted by her husband Alfredo Ching, filed a Motion to Set Aside the
levy on attachment. She alleged inter alia that the 100,000 shares of stocks levied on by the sheriff were acquired by
her and her husband during their marriage out of conjugal funds after the Citycorp Investment Philippines was
established in 1974. Furthermore, the indebtedness covered by the continuing guaranty/comprehensive suretyship
contract executed by petitioner Alfredo Ching for the account of PBMCI did not redound to the benefit of the conjugal
partnership. She, likewise, alleged that being the wife of Alfredo Ching, she was a third-party claimant entitled to file a
motion for the release of the properties.32 She attached therewith a copy of her marriage contract with Alfredo
Ching.33
The ABC filed a comment on the motion to quash preliminary attachment and/or motion to expunge records,
contending that:

291

2.1 The supposed movant, Encarnacion T. Ching, is not a party to this present case; thus, she has no personality to
file any motion before this Honorable Court;
2.2 Said supposed movant did not file any Motion for Intervention pursuant to Section 2, Rule 12 of the Rules of Court;
2.3 Said Motion cannot even be construed to be in the nature of a Third-Party Claim conformably with Sec. 14, Rule
57 of the Rules of Court.
3. Furthermore, assuming in gracia argumenti that the supposed movant has the required personality, her Motion
cannot be acted upon by this Honorable Court as the above-entitled case is still in the archives and the proceedings
thereon still remains suspended. And there is no previous Motion to revive the same.34
The ABC also alleged that the motion was barred by prescription or by laches because the shares of stocks were in
custodia legis.
During the hearing of the motion, Encarnacion T. Ching adduced in evidence her marriage contract to Alfredo Ching to
prove that they were married on January 8, 1960;35 the articles of incorporation of Citycorp Investment Philippines
dated May 14, 1979;36 and, the General Information Sheet of the corporation showing that petitioner Alfredo Ching
was a member of the Board of Directors of the said corporation and was one of its top twenty stockholders.
On December 10, 1993, the Spouses Ching filed their Reply/Opposition to the motion to expunge records.
Acting on the aforementioned motion, the trial court issued on December 15, 1993 an Order37 lifting the writ of
preliminary attachment on the shares of stocks and ordering the sheriff to return the said stocks to the petitioners. The
dispositive portion reads:
WHEREFORE, the instant Motion to Quash Preliminary Attachment, dated November 9, 1993, is hereby granted. Let
the writ of preliminary attachment subject matter of said motion, be quashed and lifted with respect to the attached
100,000 common shares of stock of Citycorp Investment Philippines in the name of the defendant Alfredo Ching, the
said shares of stock to be returned to him and his movant-spouse by Deputy Sheriff Apolonio A. Golfo who effected
the levy thereon on July 26, 1983, or by whoever may be presently in possession thereof.
SO ORDERED.38
The plaintiff Allied Banking Corporation filed a motion for the reconsideration of the order but denied the same on
February 17, 1994. The petitioner bank forthwith filed a petition for certiorari with the CA, docketed as CA-G.R. SP No.
33585, for the nullification of the said order of the court, contending that:
1. The respondent Judge exceeded his authority thereby acted without jurisdiction in taking cognizance of, and
granting a "Motion" filed by a complete stranger to the case.
2. The respondent Judge committed a grave abuse of discretion in lifting the writ of preliminary attachment without any
basis in fact and in law, and contrary to established jurisprudence on the matter.39
On November 27, 1995, the CA rendered judgment granting the petition and setting aside the assailed orders of the
trial court, thus:
WHEREFORE, premises considered, the petition is GRANTED, hereby setting aside the questioned orders (dated
December 15, 1993 and February 17, 1994) for being null and void.
SO ORDERED.40
The CA sustained the contention of the private respondent and set aside the assailed orders. According to the CA, the
RTC deprived the private respondent of its right to file a bond under Section 14, Rule 57 of the Rules of Court. The
petitioner Encarnacion T. Ching was not a party in the trial court; hence, she had no right of action to have the levy
annulled with a motion for that purpose. Her remedy in such case was to file a separate action against the private
respondent to nullify the levy on the 100,000 Citycorp shares of stocks. The court stated that even assuming that
Encarnacion T. Ching had the right to file the said motion, the same was barred by laches.
Citing Wong v. Intermediate Appellate Court,41 the CA ruled that the presumption in Article 160 of the New Civil Code
shall not apply where, as in this case, the petitioner-spouses failed to prove the source of the money used to acquire
the shares of stock. It held that the levied shares of stocks belonged to Alfredo Ching, as evidenced by the fact that
the said shares were registered in the corporate books of Citycorp solely under his name. Thus, according to the
appellate court, the RTC committed a grave abuse of its discretion amounting to excess or lack of jurisdiction in

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issuing the assailed orders. The petitioners motion for reconsideration was denied by the CA in a Resolution dated
April 2, 1996.
The petitioner-spouses filed the instant petition for review on certiorari, asserting that the RTC did not commit any
grave abuse of discretion amounting to excess or lack of jurisdiction in issuing the assailed orders in their favor;
hence, the CA erred in reversing the same. They aver that the source of funds in the acquisition of the levied shares of
stocks is not the controlling factor when invoking the presumption of the conjugal nature of stocks under Art. 160,42
and that such presumption subsists even if the property is registered only in the name of one of the spouses, in this
case, petitioner Alfredo Ching.43 According to the petitioners, the suretyship obligation was not contracted in the
pursuit of the petitioner-husbands profession or business.44 And, contrary to the ruling of the CA, where conjugal
assets are attached in a collection suit on an obligation contracted by the husband, the wife should exhaust her motion
to quash in the main case and not file a separate suit.45 Furthermore, the petitioners contend that under Art. 125 of
the Family Code, the petitioner-husbands gratuitous suretyship is null and void ab initio,46 and that the share of one
of the spouses in the conjugal partnership remains inchoate until the dissolution and liquidation of the partnership.47
In its comment on the petition, the private respondent asserts that the CA correctly granted its petition for certiorari
nullifying the assailed order. It contends that the CA correctly relied on the ruling of this Court in Wong v. Intermediate
Appellate Court. Citing Cobb-Perez v. Lantin and G-Tractors, Inc. v. Court of Appeals, the private respondent alleges
that the continuing guaranty and suretyship executed by petitioner Alfredo Ching in pursuit of his profession or
business. Furthermore, according to the private respondent, the right of the petitioner-wife to a share in the conjugal
partnership property is merely inchoate before the dissolution of the partnership; as such, she had no right to file the
said motion to quash the levy on attachment of the shares of stocks.
The issues for resolution are as follows: (a) whether the petitioner-wife has the right to file the motion to quash the levy
on attachment on the 100,000 shares of stocks in the Citycorp Investment Philippines; (b) whether or not the RTC
committed a grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders.
On the first issue, we agree with the petitioners that the petitioner-wife had the right to file the said motion, although
she was not a party in Civil Case No. 142729.48
In Ong v. Tating,49 we held that the sheriff may attach only those properties of the defendant against whom a writ of
attachment has been issued by the court. When the sheriff erroneously levies on attachment and seizes the property
of a third person in which the said defendant holds no right or interest, the superior authority of the court which has
authorized the execution may be invoked by the aggrieved third person in the same case. Upon application of the third
person, the court shall order a summary hearing for the purpose of determining whether the sheriff has acted rightly or
wrongly in the performance of his duties in the execution of the writ of attachment, more specifically if he has indeed
levied on attachment and taken hold of property not belonging to the plaintiff. If so, the court may then order the sheriff
to release the property from the erroneous levy and to return the same to the third person. In resolving the motion of
the third party, the court does not and cannot pass upon the question of the title to the property with any character of
finality. It can treat the matter only insofar as may be necessary to decide if the sheriff has acted correctly or not. If the
claimants proof does not persuade the court of the validity of the title, or right of possession thereto, the claim will be
denied by the court. The aggrieved third party may also avail himself of the remedy of "terceria" by executing an
affidavit of his title or right of possession over the property levied on attachment and serving the same to the office
making the levy and the adverse party. Such party may also file an action to nullify the levy with damages resulting
from the unlawful levy and seizure, which should be a totally separate and distinct action from the former case. The
above-mentioned remedies are cumulative and any one of them may be resorted to by one third-party claimant
without availing of the other remedies.50
In this case, the petitioner-wife filed her motion to set aside the levy on attachment of the 100,000 shares of stocks in
the name of petitioner-husband claiming that the said shares of stocks were conjugal in nature; hence, not liable for
the account of her husband under his continuing guaranty and suretyship agreement with the PBMCI. The petitionerwife had the right to file the motion for said relief.
On the second issue, we find and so hold that the CA erred in setting aside and reversing the orders of the RTC. The
private respondent, the petitioner in the CA, was burdened to prove that the RTC committed a grave abuse of its
discretion amounting to excess or lack of jurisdiction. The tribunal acts without jurisdiction if it does not have the legal
purpose to determine the case; there is excess of jurisdiction where the tribunal, being clothed with the power to
determine the case, oversteps its authority as determined by law. There is grave abuse of discretion where the tribunal
acts in a capricious, whimsical, arbitrary or despotic manner in the exercise of its judgment and is equivalent to lack of
jurisdiction.51
It was incumbent upon the private respondent to adduce a sufficiently strong demonstration that the RTC acted
whimsically in total disregard of evidence material to, and even decide of, the controversy before certiorari will lie. A
special civil action for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of

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judgment. When a court exercises its jurisdiction, an error committed while so engaged does not deprive it of its
jurisdiction being exercised when the error is committed.52
After a comprehensive review of the records of the RTC and of the CA, we find and so hold that the RTC did not
commit any grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders.
Article 160 of the New Civil Code provides that all the properties acquired during the marriage are presumed to belong
to the conjugal partnership, unless it be proved that it pertains exclusively to the husband, or to the wife. In Tan v.
Court of Appeals,53 we held that it is not even necessary to prove that the properties were acquired with funds of the
partnership. As long as the properties were acquired by the parties during the marriage, they are presumed to be
conjugal in nature. In fact, even when the manner in which the properties were acquired does not appear, the
presumption will still apply, and the properties will still be considered conjugal. The presumption of the conjugal nature
of the properties acquired during the marriage subsists in the absence of clear, satisfactory and convincing evidence
to overcome the same.54
In this case, the evidence adduced by the petitioners in the RTC is that the 100,000 shares of stocks in the Citycorp
Investment Philippines were issued to and registered in its corporate books in the name of the petitioner-husband
when the said corporation was incorporated on May 14, 1979. This was done during the subsistence of the marriage
of the petitioner-spouses. The shares of stocks are, thus, presumed to be the conjugal partnership property of the
petitioners. The private respondent failed to adduce evidence that the petitioner-husband acquired the stocks with his
exclusive money.55 The barefaced fact that the shares of stocks were registered in the corporate books of Citycorp
Investment Philippines solely in the name of the petitioner-husband does not constitute proof that the petitionerhusband, not the conjugal partnership, owned the same.56 The private respondents reliance on the rulings of this
Court in Maramba v. Lozano57 and Associated Insurance & Surety Co., Inc. v. Banzon58 is misplaced. In the
Maramba case, we held that where there is no showing as to when the property was acquired, the fact that the title is
in the wifes name alone is determinative of the ownership of the property. The principle was reiterated in the
Associated Insurance case where the uncontroverted evidence showed that the shares of stocks were acquired during
the marriage of the petitioners.
Instead of fortifying the contention of the respondents, the ruling of this Court in Wong v. Intermediate Appellate
Court59 buttresses the case for the petitioners. In that case, we ruled that he who claims that property acquired by the
spouses during their marriage is not conjugal partnership property but belongs to one of them as his personal property
is burdened to prove the source of the money utilized to purchase the same. In this case, the private respondent
claimed that the petitioner-husband acquired the shares of stocks from the Citycorp Investment Philippines in his own
name as the owner thereof. It was, thus, the burden of the private respondent to prove that the source of the money
utilized in the acquisition of the shares of stocks was that of the petitioner-husband alone. As held by the trial court,
the private respondent failed to adduce evidence to prove this assertion.
The CA, likewise, erred in holding that by executing a continuing guaranty and suretyship agreement with the private
respondent for the payment of the PBMCI loans, the petitioner-husband was in the exercise of his profession,
pursuing a legitimate business. The appellate court erred in concluding that the conjugal partnership is liable for the
said account of PBMCI under Article 161(1) of the New Civil Code.
Article 161(1) of the New Civil Code (now Article 121[2 and 3]60 of the Family Code of the Philippines) provides:
Art. 161. The conjugal partnership shall be liable for:
(1) All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those
contracted by the wife, also for the same purpose, in the cases where she may legally bind the partnership.
The petitioner-husband signed the continuing guaranty and suretyship agreement as security for the payment of the
loan obtained by the PBMCI from the private respondent in the amount of P38,000,000. In Ayala Investment and
Development Corp. v. Court of Appeals,61 this Court ruled "that the signing as surety is certainly not an exercise of an
industry or profession. It is not embarking in a business. No matter how often an executive acted on or was persuaded
to act as surety for his own employer, this should not be taken to mean that he thereby embarked in the business of
suretyship or guaranty."
For the conjugal partnership to be liable for a liability that should appertain to the husband alone, there must be a
showing that some advantages accrued to the spouses. Certainly, to make a conjugal partnership responsible for a
liability that should appertain alone to one of the spouses is to frustrate the objective of the New Civil Code to show
the utmost concern for the solidarity and well being of the family as a unit. The husband, therefore, is denied the
power to assume unnecessary and unwarranted risks to the financial stability of the conjugal partnership.62

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In this case, the private respondent failed to prove that the conjugal partnership of the petitioners was benefited by the
petitioner-husbands act of executing a continuing guaranty and suretyship agreement with the private respondent for
and in behalf of PBMCI. The contract of loan was between the private respondent and the PBMCI, solely for the
benefit of the latter. No presumption can be inferred from the fact that when the petitioner-husband entered into an
accommodation agreement or a contract of surety, the conjugal partnership would thereby be benefited. The private
respondent was burdened to establish that such benefit redounded to the conjugal partnership.63
It could be argued that the petitioner-husband was a member of the Board of Directors of PBMCI and was one of its
top twenty stockholders, and that the shares of stocks of the petitioner-husband and his family would appreciate if the
PBMCI could be rehabilitated through the loans obtained; that the petitioner-husbands career would be enhanced
should PBMCI survive because of the infusion of fresh capital. However, these are not the benefits contemplated by
Article 161 of the New Civil Code. The benefits must be those directly resulting from the loan. They cannot merely be
a by-product or a spin-off of the loan itself.64
This is different from the situation where the husband borrows money or receives services to be used for his own
business or profession. In the Ayala case, we ruled that it is such a contract that is one within the term "obligation for
the benefit of the conjugal partnership." Thus:
(A) If the husband himself is the principal obligor in the contract, i.e., he directly received the money and services to be
used in or for his own business or his own profession, that contract falls within the term " obligations for the benefit
of the conjugal partnership." Here, no actual benefit may be proved. It is enough that the benefit to the family is
apparent at the time of the signing of the contract. From the very nature of the contract of loan or services, the family
stands to benefit from the loan facility or services to be rendered to the business or profession of the husband. It is
immaterial, if in the end, his business or profession fails or does not succeed. Simply stated, where the husband
contracts obligations on behalf of the family business, the law presumes, and rightly so, that such obligation will
redound to the benefit of the conjugal partnership.65
The Court held in the same case that the rulings of the Court in Cobb-Perez and G-Tractors, Inc. are not controlling
because the husband, in those cases, contracted the obligation for his own business. In this case, the petitionerhusband acted merely as a surety for the loan contracted by the PBMCI from the private respondent.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and Resolution of the Court of Appeals
are SET ASIDE AND REVERSED. The assailed orders of the RTC are AFFIRMED.
SO ORDERED.

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A.M. P-94-1008 July 6, 1995

FLORENTINA BILAG-RIVERA, petitioner,
vs.
CRISANTO FLORA, respondent.

PADILLA, J.:
In an affidavit-complaint 1 filed with the Office of the Court Administrator, complainant Florentina Bilag-Rivera charged
respondent Crisanto Flora, deputy sheriff, RTC of Baguio City, with grave misconduct and dishonesty, when he
released a motor vehicle subject of a writ of attachment to a representative of the plaintiff in a civil case, without
authority from the court which issued the writ, thereby enabling said plaintiff to sell the motor vehicle to a third person,
to the damage and prejudice of complainant who claims ownership over said motor vehicle.
On 5 August 1990, Elsie V. Tacay bought an Isuzu Jitney on installment basis from Panda Automotive Corporation
(PANDA), Dagupan City, represented by Charlie Q. Carlos, for the amount of P256,000.00. On 17 March 1992, when
the installment payments reached P145,000.00, Tacay demanded for the execution of a Deed of Absolute Sale which
she obtained from PANDA on the same date. On 23 March 1992, Tacay registered the vehicle in her name with the
Land Transportation Office (LTO) in Lingayen. On 10 May 1992, Tacay tendered a check for P100,000.00 to cover part
of the P120,000.00 balance still due PANDA. Upon presentment by PANDA with the drawee bank, the check for
P100,000.00 was dishonored as the same was allegedly forged. When confronted by PANDA about the check's
dishonor, Tacay promised to pay the balance of P120,000.00 on or before 23 June 1992.
On 8 July 1992, however, Tacay sold the Isuzu jitney to complainant Florentina Bilag-Rivera for the amount of
P250,000.00, covered by an Absolute Deed of Sale. 2 Hence, possession of the vehicle and its LTO registration
papers were turned over to complainant.
It appears that Tacay failed to fulfill her promise to pay the P120,000 balance on the vehicle due PANDA Corporation,
prompting the latter to verify the whereabouts of the said vehicle. PANDA later learned of the deed of sale between
Tacay and complainant and obtained information that the alleged deed of sale was not registered or even annotated
on the Certificate of Registration of the motor vehicle.
In September 1992, with Tacay still in default on her outstanding obligation to Panda Corporation, the latter, thru its
manager Charlie Carlos, filed a complaint for specific performance, replevin, and damages with the RTC of Dagupan
City, Branch 40 [docketed as Civil Case No. D-10205] with prayer for the issuance of a writ of preliminary attachment
against Elsie Tacay, with complainant (Rivera) impleaded as co-defendant.
On 18 September 1992, the, RTC of Dagupan issued a writ of preliminary attachment against Tacay and complainant.
Since the subject motor vehicle was believed to be in the City of Baguio, the writ was addressed to the RTC, City
Sheriff, Baguio City.
Complainant alleges that being a buyer in good faith, she should not have been impleaded in the complaint of Panda
Corporation. Instead of proceeding against the principal defendant Elsie V. Tacay, the respondent Deputy Sheriff
proceeded to attach the subject motor vehicle in complainant's possession. At that time, respondent Sheriff was
accompanied by Charlie Carlos, PANDA's Manager. Respondent issued to the complainant a handwritten receipt on
the same day (18 September 1992) which indicated that he took possession of the vehicle pursuant to the writ of
attachment. 3
Complainant requested the City Sheriff of the RTC, Baguio City to hold the vehicle for a few days as she would
prepare the amount of P20,000.00 as counterbond to discharge the attachment. Since there was no bonded
warehouse in the City of Baguio, the office of the City Sheriff requested complainant to pay P1,000.00 to justify their
holding on to said vehicle until she could post the counterbond. Complainant paid the amount of P1,000.00 and was
duly receipted for said payment. 4
On 23 December 1992, however, the RTC of Dagupan City issued an order in Civil Case No. D-10285 for the
issuance of an alias writ of attachment as prayed for by Panda Motors. The writ was again addressed to the office of
the City Sheriff, RTC of Baguio City with an order to attach the same motor vehicle in possession of complainant.
Respondent received the alias writ on 23 February 1993.
The alias writ was not served immediately by respondent because the whereabouts of the said vehicle could not be
ascertained. It was only on 15 March 1993 when Charlie Carlos, the manager of Panda Motors, came personally to

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the office of respondent and informed him; that the vehicle to be attached was in the possession of Carlos Camiwet, a
cousin of complainant.
Forthwith, respondent together with Charlie Carlos, proceeded to the residence of Carlos Camiwet and served the
alias writ of attachment on the latter with an attachment bond of P120,000.00. Complainant avers that this time,
respondent sheriff did not issue any receipt to cover for his re-possession of the said vehicle. Worse, complainant
maintains that at the time of the levy, various tools worth P50,000.00, which were not integral to the motor vehicle,
were also taken by respondent sheriff.
The following day, complainant accompanied by her lawyer, went to the office of respondent to inquire about the motor
vehicle and to request for a receipt. According to complainant, respondent told her not to worry and that the issuance
of a receipt was no longer necessary because the vehicle and its tools were being kept in a safe place. Complainant
then informed respondent that she would be posting a counterbond as soon as she had the money.
Complainant further alleges that on several occasions, she came to the office of respondent to inspect the vehicle but
respondent did not allow her to see the vehicle nor was she informed of its whereabouts. Respondent, however, gave
complainant repeated assurances that the vehicle was being kept in a safe place.
On 17 May 1993, complainant attended the hearing in Civil Case No.D-10285 to argue her Motion to Dismiss and
Motion to Quash the Writ of Preliminary Attachment. To her surprise, she was informed by the lawyer of Panda
Corporation that a certain Elsie Tacay had voluntarily surrendered the vehicle together with its documents to Panda
Corporation and that Panda's manager, Charlie Carlos, had already sold the vehicle to a person named Leonardo
Sarmiento for P175,000.00.
Complainant manifested before the court that the subject motor vehicle was in custodia legis and that the abovementioned transactions were anomalous and contrary to law. Thereafter, the court directed complainant's lawyer to
investigate the matter and to report his findings to the court.
Complainant's lawyer then sent a letter of inquiry to the Clerk of Court of Baguio City, asking why respondent did not
issue a receipt when he executed the alias writ of attachment; why there was no sheriff's return on the writ of
attachment filed in court; why the vehicle was no longer seen again after 15 March 1993; and whether it was true that
Elsie Tacay took the vehicle together with the tools from respondent and returned it to Panda Corporation. 5
Complainant also sent a letter of inquiry to the LTO office in Lingayen to check on the current registration of the said
vehicle. 6
Meanwhile, the Clerk of Court and the Ex-Officio Sheriff of RTC, Baguio issued a memo to respondent requiring him to
explain the proceedings he conducted in enforcing the alias writ of attachment in Civil Case No. D-10285.
In his compliance dated 18 June 1993, respondent stated that he:
. . . served and took the subject vehicle into "custodia legis", and a receipt was duly issued. The receipt not however
received nor signed by the defendants as they refused to do so, thereafter, said motor vehicle was surrendered to the
Plaintiff in the above-captioned case for safekeeping and custody for the reason that this office has no bonded
warehouse to keep the said motor vehicle. An acknowledgment receipt was duly signed by the manager of said
Plaintiff (Panda Motors) in the person of Mr. Charlie Marcos. 7 (Emphases supplied)
In addition, respondent denied the existence of the tools when he levied the alias writ of attachment on the said
vehicle.
In respondent's return of the alias writ of attachment dated 7 June 1993, he similarly stated that:
xxx

xxx

xxx

On March 15, 1993, the said (alias) writ of attachment was enforced together with the manager of Panda Corporation,
Mr. Charlie Carlos from Mrs. Florentina Rivera, but refused to acknowledge the receipt of the said motor vehicle for
the reason that she will just file(d) the necessary counterbond.
And on the said date said motor vehicle was taken by the plaintiff thru Mr. Charlie Carlos for safekeeping and custody
for the reason that this officer has no bonded warehouse to place the said motor vehicle. 8
On 10 June 1993, complainant's lawyer received a reply from the LTO in Lingayen with certified photocopies of the
vehicle's registration indicating that on 1 April 1993, Elsie V. Tacay re-sold the subject vehicle for P175,000.00 to
Charlie Carlos 9 and that on 10 April 1993, Charlie Carlos sold the same unit for P175,000.00 to Leonardo Sarmiento

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of Bautista, Pangasinan 10 and that the same had been registered in Sarmiento's name for LTO registration year
1993-1994.
Complainant now argues that the foregoing facts and circumstances clearly demonstrate that respondent sheriff
adopted an irregular procedure and entered into an anomalous transaction in not issuing a receipt to complainant
when he served the alias writ of attachment and on the very same day turned over possession of the vehicle to the
attaching creditor which simply issued an acknowledgment receipt for the vehicle, instead of securing the permission
of the trial court, knowing fully well that the vehicle was in custodia legis. Compared to the service of the first writ of
attachment when respondent requested the amount of P1,000.00 from complainant as storage fees for the vehicle,
respondent in serving the alias writ of attachment in effect made Charlie Carlos his agent when he turned over the
said vehicle to the latter for alleged "safekeeping and custody."
In his comment 11 filed with this Court, respondent contends that the Office of the City Sheriff of Baguio has no
bonded warehouse to store the vehicle for the disposition of the (trial) court, hence, the vehicle was turned over to the
attaching-creditor's representative, Charlie Carlos, who immediately asked respondent that the motor vehicle be kept
in his custody for which Carlos signed a receipt 12 acknowledging that the vehicle was under custody of the Court but
shall be temporarily deposited in the company's (Panda's) premises (in Dagupan City).
Respondent explains that after the due enforcement of the alias writ of attachment, he awaited for further disposition
of the same by the trial court, and for all intents and purposes, his (ministerial) function had been fully served. Thus,
he no longer had any knowledge, consent nor participation with respect to the subsequent deed of sale between Elsie
Tacay and Charlie Carlos 13 and between Charlie Carlos and Leonardo Sarmiento 14. Neither did he receive nor
enjoy any benefit in any form out of these transactions.
In a resolution dated 27 July 1994, this Court, as recommended by the Office of the Court Administrator, referred this
case to Executive Judge Clarence J. Villanueva of the Regional Trial Court of Baguio City, Branch 7 for investigation,
report and recommendation within sixty (60) days from receipt of the records.
In a six (6) page report dated 15 November 1994, Judge Villanueva made the following findings and
recommendations:
. . . there is clear evidence on record that respondent sheriff Crisanto Flora was remiss of [sic] his duties as an officer
of the court in releasing the subject motor vehicle to Charlie Carlos, a representative of the plaintiff in the case where
the writ of attachment emanated, without seeking an order or permission from the court concerned. It was incumbent
of Sheriff Flora to take into his custody the motor vehicle subject of attachment and protect it. A sheriff who takes
possession of the property under a writ of attachment is duty bound to protect the property from damage or loss and to
exercise ordinary and reasonable care for the preservation of the property (Adm. Matter p. 128, 81 SCRA 599). The
fact that respondent Flora failed to immediately make a return of his proceedings on the second writ of attachment is
something to consider. He enforced the second writ of attachment on March 15, 1993 but he waited until June 18,
1993 to do so at the direction of the Clerk of Court Atty. Delilah Gonzales-Muoz as contained in the memorandum
issued to respondent (see Exh. "B" page 45 record; see also Exhs. "C" and "C-1"). While it is true that there are no
bonded warehouse(s) where sheriffs could deposit attached properties for safe keeping, herein respondent is not
exempt from exercising reasonable diligence in performing his duties as an officer of the court. The least that he could
have done is to ask permission for the concerned court to allow him to turn over the subject vehicle to Charlie Carlos.
This he failed to do. 15
The Court agrees with the findings of Judge Villanueva and concludes that while the evidence may be insufficient to
prove that respondent conspired with Charlie Carlos and Elsie Tacay in eventually alienating the vehicle to a third
person, his particular zeal and precipitate decision to give possession of the vehicle to a party litigant (plaintiff) and
treat the same as "in custodia legis" effectively destroys the presumption of regularity in the performance of his official
duties.
As deputy sheriff, respondent could not be unaware of Rule 57, section 6 of the rules of Court which provides that:
Immediately after executing the order of the officer must make a return thereon to the clerk or judge of the court from
which the order issued, with a full statement of his proceeding under the order and a complete inventory of the
property attached, together with any counter-bond given by the party against whom attachment is issued, and serve a
copy of any such counter-bond on the applicant or his lawyer.
Section (7) (c) of the same Rule also mandates that:
Properties shall be attached by the officer executing the order in the following manner:
xxx

xxx

xxx

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(c)
Personal property capable of manual delivery, by taking and safely keeping it in his capacity, after issuing the
corresponding receipt therefor.
Chapter VIII (e) (4) of the Manual for Clerks of Court similarly states that:
All sheriffs and deputy sheriffs shall submit a report to the judge concerned on the action taken on all writs and
processes assigned to them within (10) days from receipt of said process or writ. Said report shall form part of the
records.
Respondent could not evade the positive duty of serving the attaching creditor's affidavit, bond, and the order of
attachment on complainant's representative (Camiwet) by now alleging that it was the fault of complainant and her
representative in refusing to sign the receipt that he allegedly issued on 15 March 1993.
The records of the investigation reveal otherwise-that complainant could not have signed the acknowledgment receipt
because she was not present when the vehicle was attached. In the same vein, her cousin Camiwet refused to sign
the receipt because, as he testified, the same was misleading as he was being forced to sign a receipt which indicated
that complainant and Elsie Tacay surrendered the vehicle to respondent by virtue of the said alias writ of attachment.
The Court is more inclined to believe the testimony of Camiwet during the investigation to the effect that he only
surrendered the vehicle to respondent because he was repeatedly assured by respondent that everything was all right
and that Charlie Carlos was really after Elsie Tacay, that as soon as Mr. Carlos returned to Dagupan, he (Camiwet) or
complainant could retrieve the vehicle in his (respondent's) possession. 16
Respondent himself virtually admitted his nonfeasance when he testified that it had been their practice to give
possession of properties subject of writs of attachment to party litigants because they have no bonded warehouse in
their jurisdiction. However, he could not explain why, in this particular case, in the first writ of attachment, he even
demanded P1,000.00 from complainant for alleged storage fees while complainant bought time to find the amount for
her counterbond, and yet, in the execution of the alias writ, he usurped the court's function and released the vehicle to
the custody of Mr. Carlos. Equally reprehensible is his attempt to cover up his misdeed by concealing it from
complainant when the latter confronted him thereafter in his office. 17
Thus, the return he executed more than two (2) months after the enforcement of the alias writ was more of an
afterthought rather than the fulfillment of a positive duty, because by then he had been ordered by the clerk of court to
explain his proceedings under the alias writ of attachment.
Time and again, the Court has reiterated the rule that the conduct of every employee of the judiciary must be at all
time characterized with propriety and decorum and above all else, it must be above and beyond suspicion. 18 In the
case at bench, respondent cannot successfully defend his negligent omission to secure a court order before disposing
of the property by simply alleging that a party litigant had agreed to be his agent. In the same vein, a sheriff or deputy
sheriff cannot act as special deputy sheriff of any party litigant.
The Court takes notice that on 18 July 1994, the RTC of Dagupan City rendered a decision in Civil Case No. D102805 awarding damages 19 in favor of complainant Rivera. Said decision became final and executory as Panda
and Elsie Tacay did not interpose any appeal therefrom. This circumstance adds more credence to complainant's
claim that she would not have been defrauded in the first place had respondent sheriff performed his duty in
accordance with the rules instead of unduly accommodating the request of a party litigant.
In his report, Judge Villanueva recommends that respondent be suspended for six (6) months without pay. The Court
considers said penalty to be too harsh in the absence of direct evidence showing that respondent has pecuniarily
received any financial gain from the anomalous transactions.
But for his failure to exercise reasonable diligence in the performance of his duties as an officer of the court, the Court
hereby imposes a fine of P5,000 on respondent Flora with STERN WARNING that any repetition of the same act in
the future will be dealt with more severely. Let a copy of this decision be entered in respondent's personal record.
SO ORDERED.

299

G.R. No. L-33320

May 30, 1983

RAMON A. GONZALES, petitioner,

vs.
THE PHILIPPINE NATIONAL BANK, respondent.
Ramon A. Gonzales in his own behalf.
Juan Diaz for respondent.

VASQUEZ, J.:
Petitioner Ramon A. Gonzales instituted in the erstwhile Court of First Instance of Manila a special civil action for
mandamus against the herein respondent praying that the latter be ordered to allow him to look into the books and
records of the respondent bank in order to satisfy himself as to the truth of the published reports that the respondent
has guaranteed the obligation of Southern Negros Development Corporation in the purchase of a US$ 23 million
sugar-mill to be financed by Japanese suppliers and financiers; that the respondent is financing the construction of the
P 21 million Cebu-Mactan Bridge to be constructed by V.C. Ponce, Inc., and the construction of Passi Sugar Mill at
Iloilo by the Honiron Philippines, Inc., as well as to inquire into the validity of Id transactions. The petitioner has alleged
hat his written request for such examination was denied by the respondent. The trial court having dismissed the
petition for mandamus, the instant appeal to review the said dismissal was filed.
The facts that gave rise to the subject controversy have been set forth by the trial court in the decision herein sought
to be reviewed, as follows:
Briefly stated, the following facts gathered from the stipulation of the parties served as the backdrop of this
proceeding.
Previous to the present action, the petitioner instituted several cases in this Court questioning different transactions
entered into by the Bark with other parties. First among them is Civil Case No. 69345 filed on April 27, 1967, by
petitioner as a taxpayer versus Sec. Antonio Raquiza of Public Works and Communications, the Commissioner of
Public Highways, the Bank, Continental Ore Phil., Inc., Continental Ore, Huber Corporation, Allis Chalmers and
General Motors Corporation In the course of the hearing of said case on August 3, 1967, the personality of herein
petitioner to sue the bank and question the letters of credit it has extended for the importation by the Republic of the
Philippines of public works equipment intended for the massive development program of the President was raised. In
view thereof, he expressed and made known his intention to acquire one share of stock from Congressman Justiniano
Montano which, on the following day, August 30, 1967, was transferred in his name in the books of the Bank.
Subsequent to his aforementioned acquisition of one share of stock of the Bank, petitioner, in his dual capacity as a
taxpayer and stockholder, filed the following cases involving the bank or the members of its Board of Directors to wit:
l.
On October l8,1967, Civil Case No. 71044 versus the Board of Directors of the Bank; the National Investment
and Development Corp., Marubeni Iida Co., Ltd., and Agro-Inc. Dev. Co. or Saravia;
2.
On May 11, 1968, Civil Case No. 72936 versus Roberto Benedicto and other Directors of the Bank, Passi
(Iloilo) Sugar Central, Inc., Calinog-Lambunao Sugar Mill Integrated Farming, Inc., Talog sugar Milling Co., Inc., Safary
Central, Inc., and Batangas Sugar Central Inc.;
3.
DBP;

On May 8, 1969, Civil Case No. 76427 versus Alfredo Montelibano and the Directors of both the PNB and

On January 11, 1969, however, petitioner addressed a letter to the President of the Bank (Annex A, Pet.), requesting
submission to look into the records of its transactions covering the purchase of a sugar central by the Southern
Negros Development Corp. to be financed by Japanese suppliers and financiers; its financing of the Cebu-Mactan
Bridge to be constructed by V.C. Ponce, Inc. and the construction of the Passi Sugar Mills in Iloilo. On January 23,
1969, the Asst. Vice-President and Legal Counsel of the Bank answered petitioner's letter denying his request for
being not germane to his interest as a one-share stockholder and for the cloud of doubt as to his real intention and
purpose in acquiring said share. (Annex B, Pet.) In view of the Bank's refusal the petitioner instituted this action.'
(Rollo, pp. 16-18.)
The petitioner has adopted the above finding of facts made by the trial court in its brief which he characterized as
having been "correctly stated." (Petitioner-Appellant"s Brief, pp. 57.)

300

The court a quo denied the prayer of the petitioner that he be allowed to examine and inspect the books and records
of the respondent bank regarding the transactions mentioned on the grounds that the right of a stockholder to inspect
the record of the business transactions of a corporation granted under Section 51 of the former Corporation Law (Act
No. 1459, as amended) is not absolute, but is limited to purposes reasonably related to the interest of the stockholder,
must be asked for in good faith for a specific and honest purpose and not gratify curiosity or for speculative or vicious
purposes; that such examination would violate the confidentiality of the records of the respondent bank as provided in
Section 16 of its charter, Republic Act No. 1300, as amended; and that the petitioner has not exhausted his
administrative remedies.
Assailing the conclusions of the lower court, the petitioner has assigned the single error to the lower court of having
ruled that his alleged improper motive in asking for an examination of the books and records of the respondent bank
disqualifies him to exercise the right of a stockholder to such inspection under Section 51 of Act No. 1459, as
amended. Said provision reads in part as follows:
Sec. 51. ... The record of all business transactions of the corporation and the minutes of any meeting shall be open to
the inspection of any director, member or stockholder of the corporation at reasonable hours.
Petitioner maintains that the above-quoted provision does not justify the qualification made by the lower court that the
inspection of corporate records may be denied on the ground that it is intended for an improper motive or purpose, the
law having granted such right to a stockholder in clear and unconditional terms. He further argues that, assuming that
a proper motive or purpose for the desired examination is necessary for its exercise, there is nothing improper in his
purpose for asking for the examination and inspection herein involved.
Petitioner may no longer insist on his interpretation of Section 51 of Act No. 1459, as amended, regarding the right of
a stockholder to inspect and examine the books and records of a corporation. The former Corporation Law (Act No.
1459, as amended) has been replaced by Batas Pambansa Blg. 68, otherwise known as the "Corporation Code of the
Philippines."
The right of inspection granted to a stockholder under Section 51 of Act No. 1459 has been retained, but with some
modifications. The second and third paragraphs of Section 74 of Batas Pambansa Blg. 68 provide the following:
The records of all business transactions of the corporation and the minutes of any meeting shag be open to inspection
by any director, trustee, stockholder or member of the corporation at reasonable hours on business days and he may
demand, in writing, for a copy of excerpts from said records or minutes, at his expense.
Any officer or agent of the corporation who shall refuse to allow any director, trustee, stockholder or member of the
corporation to examine and copy excerpts from its records or minutes, in accordance with the provisions of this Code,
shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall be guilty of an
offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is made pursuant to a
resolution or order of the board of directors or trustees, the liability under this section for such action shall be imposed
upon the directors or trustees who voted for such refusal; and Provided, further, That it shall be a defense to any
action under this section that the person demanding to examine and copy excerpts from the corporation's records and
minutes has improperly used any information secured through any prior examination of the records or minutes of such
corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his
demand.
As may be noted from the above-quoted provisions, among the changes introduced in the new Code with respect to
the right of inspection granted to a stockholder are the following the records must be kept at the principal office of the
corporation; the inspection must be made on business days; the stockholder may demand a copy of the excerpts of
the records or minutes; and the refusal to allow such inspection shall subject the erring officer or agent of the
corporation to civil and criminal liabilities. However, while seemingly enlarging the right of inspection, the new Code
has prescribed limitations to the same. It is now expressly required as a condition for such examination that the one
requesting it must not have been guilty of using improperly any information through a prior examination, and that the
person asking for such examination must be "acting in good faith and for a legitimate purpose in making his demand."
The unqualified provision on the right of inspection previously contained in Section 51, Act No. 1459, as amended, no
longer holds true under the provisions of the present law. The argument of the petitioner that the right granted to him
under Section 51 of the former Corporation Law should not be dependent on the propriety of his motive or purpose in
asking for the inspection of the books of the respondent bank loses whatever validity it might have had before the
amendment of the law. If there is any doubt in the correctness of the ruling of the trial court that the right of inspection
granted under Section 51 of the old Corporation Law must be dependent on a showing of proper motive on the part of
the stockholder demanding the same, it is now dissipated by the clear language of the pertinent provision contained in
Section 74 of Batas Pambansa Blg. 68.

301

Although the petitioner has claimed that he has justifiable motives in seeking the inspection of the books of the
respondent bank, he has not set forth the reasons and the purposes for which he desires such inspection, except to
satisfy himself as to the truth of published reports regarding certain transactions entered into by the respondent bank
and to inquire into their validity. The circumstances under which he acquired one share of stock in the respondent
bank purposely to exercise the right of inspection do not argue in favor of his good faith and proper motivation.
Admittedly he sought to be a stockholder in order to pry into transactions entered into by the respondent bank even
before he became a stockholder. His obvious purpose was to arm himself with materials which he can use against the
respondent bank for acts done by the latter when the petitioner was a total stranger to the same. He could have been
impelled by a laudable sense of civic consciousness, but it could not be said that his purpose is germane to his
interest as a stockholder.
We also find merit in the contention of the respondent bank that the inspection sought to be exercised by the petitioner
would be violative of the provisions of its charter. (Republic Act No. 1300, as amended.) Sections 15, 16 and 30 of the
said charter provide respectively as follows:
Sec. 15. Inspection by Department of Supervision and Examination of the Central Bank. The National Bank shall be
subject to inspection by the Department of Supervision and Examination of the Central Bank'
Sec. 16. Confidential information. The Superintendent of Banks and the Auditor General, or other officers
designated by law to inspect or investigate the condition of the National Bank, shall not reveal to any person other
than the President of the Philippines, the Secretary of Finance, and the Board of Directors the details of the inspection
or investigation, nor shall they give any information relative to the funds in its custody, its current accounts or deposits
belonging to private individuals, corporations, or any other entity, except by order of a Court of competent jurisdiction,'
Sec. 30. Penalties for violation of the provisions of this Act. Any director, officer, employee, or agent of the Bank,
who violates or permits the violation of any of the provisions of this Act, or any person aiding or abetting the violations
of any of the provisions of this Act, shall be punished by a fine not to exceed ten thousand pesos or by imprisonment
of not more than five years, or both such fine and imprisonment.
The Philippine National Bank is not an ordinary corporation. Having a charter of its own, it is not governed, as a rule,
by the Corporation Code of the Philippines. Section 4 of the said Code provides:
SEC. 4. Corporations created by special laws or charters. Corporations created by special laws or charters shall be
governed primarily by the provisions of the special law or charter creating them or applicable to them. supplemented
by the provisions of this Code, insofar as they are applicable.
The provision of Section 74 of Batas Pambansa Blg. 68 of the new Corporation Code with respect to the right of a
stockholder to demand an inspection or examination of the books of the corporation may not be reconciled with the
abovequoted provisions of the charter of the respondent bank. It is not correct to claim, therefore, that the right of
inspection under Section 74 of the new Corporation Code may apply in a supplementary capacity to the charter of the
respondent bank.
WHEREFORE, the petition is hereby DISMISSED, without costs.

302

G.R. No. L-49188

January 30, 1990

PHILIPPINE AIRLINES, INC., petitioner,

vs.
HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instance of Manila, Branch XIII,
JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First Instance, Manila, and AMELIA TAN, respondents.

GUTIERREZ, JR., J.:

Behind the simple issue of validity of an alias writ of execution in this case is a more fundamental question. Should the
Court allow a too literal interpretation of the Rules with an open invitation to knavery to prevail over a more discerning
and just approach? Should we not apply the ancient rule of statutory construction that laws are to be interpreted by the
spirit which vivifies and not by the letter which killeth?
This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No. 07695 entitled "Philippine
Airlines, Inc. v. Hon. Judge Ricardo D. Galano, et al.", dismissing the petition for certiorari against the order of the
Court of First Instance of Manila which issued an alias writ of execution against the petitioner.
The petition involving the alias writ of execution had its beginnings on November 8, 1967, when respondent Amelia
Tan, under the name and style of Able Printing Press commenced a complaint for damages before the Court of First
Instance of Manila. The case was docketed as Civil Case No. 71307, entitled Amelia Tan, et al. v. Philippine Airlines,
Inc.
After trial, the Court of First Instance of Manila, Branch 13, then presided over by the late Judge Jesus P. Morfe
rendered judgment on June 29, 1972, in favor of private respondent Amelia Tan and against petitioner Philippine
Airlines, Inc. (PAL) as follows:
WHEREFORE, judgment is hereby rendered, ordering the defendant Philippine Air Lines:
1.
On the first cause of action, to pay to the plaintiff the amount of P75,000.00 as actual damages, with legal
interest thereon from plaintiffs extra-judicial demand made by the letter of July 20, 1967;
2.
On the third cause of action, to pay to the plaintiff the amount of P18,200.00, representing the unrealized profit
of 10% included in the contract price of P200,000.00 plus legal interest thereon from July 20,1967;
3.
On the fourth cause of action, to pay to the plaintiff the amount of P20,000.00 as and for moral damages, with
legal interest thereon from July 20, 1 967;
4.

On the sixth cause of action, to pay to the plaintiff the amount of P5,000.00 damages as and for attorney's fee.

Plaintiffs second and fifth causes of action, and defendant's counterclaim, are dismissed.
With costs against the defendant. (CA Rollo, p. 18)
On July 28, 1972, the petitioner filed its appeal with the Court of Appeals. The case was docketed as CA-G.R. No.
51079-R.
On February 3, 1977, the appellate court rendered its decision, the dispositive portion of which reads:
IN VIEW WHEREOF, with the modification that PAL is condemned to pay plaintiff the sum of P25,000.00 as damages
and P5,000.00 as attorney's fee, judgment is affirmed, with costs. (CA Rollo, p. 29)
Notice of judgment was sent by the Court of Appeals to the trial court and on dates subsequent thereto, a motion for
reconsideration was filed by respondent Amelia Tan, duly opposed by petitioner PAL.
On May 23,1977, the Court of Appeals rendered its resolution denying the respondent's motion for reconsideration for
lack of merit.
No further appeal having been taken by the parties, the judgment became final and executory and on May 31, 1977,
judgment was correspondingly entered in the case.

303

The case was remanded to the trial court for execution and on September 2,1977, respondent Amelia Tan filed a
motion praying for the issuance of a writ of execution of the judgment rendered by the Court of Appeals. On October
11, 1977, the trial court, presided over by Judge Galano, issued its order of execution with the corresponding writ in
favor of the respondent. The writ was duly referred to Deputy Sheriff Emilio Z. Reyes of Branch 13 of the Court of First
Instance of Manila for enforcement.
Four months later, on February 11, 1978, respondent Amelia Tan moved for the issuance of an alias writ of execution
stating that the judgment rendered by the lower court, and affirmed with modification by the Court of Appeals,
remained unsatisfied.
On March 1, 1978, the petitioner filed an opposition to the motion for the issuance of an alias writ of execution stating
that it had already fully paid its obligation to plaintiff through the deputy sheriff of the respondent court, Emilio Z.
Reyes, as evidenced by cash vouchers properly signed and receipted by said Emilio Z. Reyes.
On March 3,1978, the Court of Appeals denied the issuance of the alias writ for being premature, ordering the
executing sheriff Emilio Z. Reyes to appear with his return and explain the reason for his failure to surrender the
amounts paid to him by petitioner PAL. However, the order could not be served upon Deputy Sheriff Reyes who had
absconded or disappeared.
On March 28, 1978, motion for the issuance of a partial alias writ of execution was filed by respondent Amelia Tan.
On April 19, 1978, respondent Amelia Tan filed a motion to withdraw "Motion for Partial Alias Writ of Execution" with
Substitute Motion for Alias Writ of Execution. On May 1, 1978, the respondent Judge issued an order which reads:
As prayed for by counsel for the plaintiff, the Motion to Withdraw 'Motion for Partial Alias Writ of Execution with
Substitute Motion for Alias Writ of Execution is hereby granted, and the motion for partial alias writ of execution is
considered withdrawn.
Let an Alias Writ of Execution issue against the defendant for the fall satisfaction of the judgment rendered. Deputy
Sheriff Jaime K. del Rosario is hereby appointed Special Sheriff for the enforcement thereof. (CA Rollo, p. 34)
On May 18, 1978, the petitioner received a copy of the first alias writ of execution issued on the same day directing
Special Sheriff Jaime K. del Rosario to levy on execution in the sum of P25,000.00 with legal interest thereon from
July 20,1967 when respondent Amelia Tan made an extra-judicial demand through a letter. Levy was also ordered for
the further sum of P5,000.00 awarded as attorney's fees.
On May 23, 1978, the petitioner filed an urgent motion to quash the alias writ of execution stating that no return of the
writ had as yet been made by Deputy Sheriff Emilio Z. Reyes and that the judgment debt had already been fully
satisfied by the petitioner as evidenced by the cash vouchers signed and receipted by the server of the writ of
execution, Deputy Sheriff Emilio Z. Reyes.
On May 26,1978, the respondent Jaime K. del Rosario served a notice of garnishment on the depository bank of
petitioner, Far East Bank and Trust Company, Rosario Branch, Binondo, Manila, through its manager and garnished
the petitioner's deposit in the said bank in the total amount of P64,408.00 as of May 16, 1978. Hence, this petition for
certiorari filed by the Philippine Airlines, Inc., on the grounds that:
I
AN ALIAS WRIT OF EXECUTION CANNOT BE ISSUED WITHOUT PRIOR RETURN OF THE ORIGINAL WRIT BY
THE IMPLEMENTING OFFICER.
II
PAYMENT OF JUDGMENT TO THE IMPLEMENTING OFFICER AS DIRECTED IN THE WRIT OF EXECUTION
CONSTITUTES SATISFACTION OF JUDGMENT.
III
INTEREST IS NOT PAYABLE WHEN THE DECISION IS SILENT AS TO THE PAYMENT THEREOF.
IV
SECTION 5, RULE 39, PARTICULARLY REFERS TO LEVY OF PROPERTY OF JUDGMENT DEBTOR AND
DISPOSAL OR SALE THEREOF TO SATISFY JUDGMENT.

304

Can an alias writ of execution be issued without a prior return of the original writ by the implementing officer?
We rule in the affirmative and we quote the respondent court's decision with approval:
The issuance of the questioned alias writ of execution under the circumstances here obtaining is justified because
even with the absence of a Sheriffs return on the original writ, the unalterable fact remains that such a return is
incapable of being obtained (sic) because the officer who is to make the said return has absconded and cannot be
brought to the Court despite the earlier order of the court for him to appear for this purpose. (Order of Feb. 21, 1978,
Annex C, Petition). Obviously, taking cognizance of this circumstance, the order of May 11, 1978 directing the
issuance of an alias writ was therefore issued. (Annex D. Petition). The need for such a return as a condition
precedent for the issuance of an alias writ was justifiably dispensed with by the court below and its action in this
regard meets with our concurrence. A contrary view will produce an abhorent situation whereby the mischief of an
erring officer of the court could be utilized to impede indefinitely the undisputed and awarded rights which a prevailing
party rightfully deserves to obtain and with dispatch. The final judgment in this case should not indeed be permitted to
become illusory or incapable of execution for an indefinite and over extended period, as had already transpired.
(Rollo, pp. 35-36)
Judicium non debet esse illusorium; suum effectum habere debet (A judgment ought not to be illusory it ought to have
its proper effect).
Indeed, technicality cannot be countenanced to defeat the execution of a judgment for execution is the fruit and end of
the suit and is very aptly called the life of the law (Ipekdjian Merchandising Co. v. Court of Tax Appeals, 8 SCRA 59
[1963]; Commissioner of Internal Revenue v. Visayan Electric Co., 19 SCRA 697, 698 [1967]). A judgment cannot be
rendered nugatory by the unreasonable application of a strict rule of procedure. Vested rights were never intended to
rest on the requirement of a return, the office of which is merely to inform the court and the parties, of any and all
actions taken under the writ of execution. Where such information can be established in some other manner, the
absence of an executing officer's return will not preclude a judgment from being treated as discharged or being
executed through an alias writ of execution as the case may be. More so, as in the case at bar. Where the return
cannot be expected to be forthcoming, to require the same would be to compel the enforcement of rights under a
judgment to rest on an impossibility, thereby allowing the total avoidance of judgment debts. So long as a judgment is
not satisfied, a plaintiff is entitled to other writs of execution (Government of the Philippines v. Echaus and Gonzales,
71 Phil. 318). It is a well known legal maxim that he who cannot prosecute his judgment with effect, sues his case
vainly.
More important in the determination of the propriety of the trial court's issuance of an alias writ of execution is the
issue of satisfaction of judgment.
Under the peculiar circumstances surrounding this case, did the payment made to the absconding sheriff by check in
his name operate to satisfy the judgment debt? The Court rules that the plaintiff who has won her case should not be
adjudged as having sued in vain. To decide otherwise would not only give her an empty but a pyrrhic victory.
It should be emphasized that under the initial judgment, Amelia Tan was found to have been wronged by PAL.
She filed her complaint in 1967.
After ten (10) years of protracted litigation in the Court of First Instance and the Court of Appeals, Ms. Tan won her
case.
It is now 1990.
Almost twenty-two (22) years later, Ms. Tan has not seen a centavo of what the courts have solemnly declared as
rightfully hers. Through absolutely no fault of her own, Ms. Tan has been deprived of what, technically, she should
have been paid from the start, before 1967, without need of her going to court to enforce her rights. And all because
PAL did not issue the checks intended for her, in her name.
Under the peculiar circumstances of this case, the payment to the absconding sheriff by check in his name did not
operate as a satisfaction of the judgment debt.
In general, a payment, in order to be effective to discharge an obligation, must be made to the proper person. Article
1240 of the Civil Code provides:
Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest,
or any person authorized to receive it. (Emphasis supplied)

305

Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the
particular payment (Ulen v. Knecttle 50 Wyo 94, 58 [2d] 446, 111 ALR 65). Payment made to one having apparent
authority to receive the money will, as a rule, be treated as though actual authority had been given for its receipt.
Likewise, if payment is made to one who by law is authorized to act for the creditor, it will work a discharge (Hendry v.
Benlisa 37 Fla. 609, 20 SO 800,34 LRA 283). The receipt of money due on ajudgment by an officer authorized by law
to accept it will, therefore, satisfy the debt (See 40 Am Jm 729, 25; Hendry v. Benlisa supra; Seattle v. Stirrat 55 Wash.
104 p. 834,24 LRA [NS] 1275).
The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a
person so authorized is deemed payment to the creditor. Under ordinary circumstances, payment by the judgment
debtor in the case at bar, to the sheriff should be valid payment to extinguish the judgment debt.
There are circumstances in this case, however, which compel a different conclusion.
The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in checks. The
checks were not payable to Amelia Tan or Able Printing Press but to the absconding sheriff.
Did such payments extinguish the judgment debt?
Article 1249 of the Civil Code provides:
The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such
currency, then in the currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce
the effect of payment only when they have been cashed, or when through the fault of the creditor they have been
impaired.
In the meantime, the action derived from the original obligation shall be held in abeyance.
In the absence of an agreement, either express or implied, payment means the discharge of a debt or obligation in
money (US v. Robertson, 5 Pet. [US] 641, 8 L. ed. 257) and unless the parties so agree, a debtor has no rights, except
at his own peril, to substitute something in lieu of cash as medium of payment of his debt (Anderson v. Gill, 79 Md..
312, 29 A 527, 25 LRA 200,47 Am. St. Rep. 402). Consequently, unless authorized to do so by law or by consent of
the obligee a public officer has no authority to accept anything other than money in payment of an obligation under a
judgment being executed. Strictly speaking, the acceptance by the sheriff of the petitioner's checks, in the case at bar,
does not, per se, operate as a discharge of the judgment debt.
Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does
not, by itself, operate as payment (See. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan Landon Co. v.
American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager's check
or ordinary cheek, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and
may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a
judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is
actually realized (Art. 1249, Civil Code, par. 3).
If bouncing checks had been issued in the name of Amelia Tan and not the Sheriff's, there would have been no
payment. After dishonor of the checks, Ms. Tan could have run after other properties of PAL. The theory is that she
has received no value for what had been awarded her. Because the checks were drawn in the name of Emilio Z.
Reyes, neither has she received anything. The same rule should apply.
It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment in full legal contemplation.
The reasoning is logical but is it valid and proper? Logic has its limits in decision making. We should not follow rulings
to their logical extremes if in doing so we arrive at unjust or absurd results.
In the first place, PAL did not pay in cash. It paid in cheeks.
And second, payment in cash always carries with it certain cautions. Nobody hands over big amounts of cash in a
careless and inane manner. Mature thought is given to the possibility of the cash being lost, of the bearer being
waylaid or running off with what he is carrying for another. Payment in checks is precisely intended to avoid the
possibility of the money going to the wrong party. The situation is entirely different where a Sheriff seizes a car, a
tractor, or a piece of land. Logic often has to give way to experience and to reality. Having paid with checks, PAL
should have done so properly.

306

Payment in money or cash to the implementing officer may be deemed absolute payment of the judgment debt but the
Court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge
amounts of cash or legal tender to sheriffs and other executing officers. Payment in cash would result in damage or
interminable litigations each time a sheriff with huge amounts of cash in his hands decides to abscond.
As a protective measure, therefore, the courts encourage the practice of payments by cheek provided adequate
controls are instituted to prevent wrongful payment and illegal withdrawal or disbursement of funds. If particularly big
amounts are involved, escrow arrangements with a bank and carefully supervised by the court would be the safer
procedure. Actual transfer of funds takes place within the safety of bank premises. These practices are perfectly legal.
The object is always the safe and incorrupt execution of the judgment.
It is, indeed, out of the ordinary that checks intended for a particular payee are made out in the name of another.
Making the checks payable to the judgment creditor would have prevented the encashment or the taking of undue
advantage by the sheriff, or any person into whose hands the checks may have fallen, whether wrongfully or in behalf
of the creditor. The issuance of the checks in the name of the sheriff clearly made possible the misappropriation of the
funds that were withdrawn.
As explained and held by the respondent court:
... [K]nowing as it does that the intended payment was for the private party respondent Amelia Tan, the petitioner
corporation, utilizing the services of its personnel who are or should be knowledgeable about the accepted procedures
and resulting consequences of the checks drawn, nevertheless, in this instance, without prudence, departed from
what is generally observed and done, and placed as payee in the checks the name of the errant Sheriff and not the
name of the rightful payee. Petitioner thereby created a situation which permitted the said Sheriff to personally encash
said checks and misappropriate the proceeds thereof to his exclusive personal benefit. For the prejudice that resulted,
the petitioner himself must bear the fault. The judicial guideline which we take note of states as follows:
As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made
it possible by his act of confidence must bear the loss. (Blondeau, et al. v. Nano, et al., L-41377, July 26, 1935, 61
Phil. 625)
Having failed to employ the proper safeguards to protect itself, the judgment debtor whose act made possible the loss
had but itself to blame.
The attention of this Court has been called to the bad practice of a number of executing officers, of requiring checks in
satisfaction of judgment debts to be made out in their own names. If a sheriff directs a judgment debtor to issue the
checks in the sheriff's name, claiming he must get his commission or fees, the debtor must report the sheriff
immediately to the court which ordered the execution or to the Supreme Court for appropriate disciplinary action.
Fees, commissions, and salaries are paid through regular channels. This improper procedure also allows such
officers, who have sixty (60) days within which to make a return, to treat the moneys as their personal finds and to
deposit the same in their private accounts to earn sixty (60) days interest, before said finds are turned over to the
court or judgment creditor (See Balgos v. Velasco, 108 SCRA 525 [1981]). Quite as easily, such officers could put up
the defense that said checks had been issued to them in their private or personal capacity. Without a receipt
evidencing payment of the judgment debt, the misappropriation of finds by such officers becomes clean and complete.
The practice is ingenious but evil as it unjustly enriches court personnel at the expense of litigants and the proper
administration of justice. The temptation could be far greater, as proved to be in this case of the absconding sheriff.
The correct and prudent thing for the petitioner was to have issued the checks in the intended payee's name.
The pernicious effects of issuing checks in the name of a person other than the intended payee, without the latter's
agreement or consent, are as many as the ways that an artful mind could concoct to get around the safeguards
provided by the law on negotiable instruments. An angry litigant who loses a case, as a rule, would not want the
winning party to get what he won in the judgment. He would think of ways to delay the winning party's getting what has
been adjudged in his favor. We cannot condone that practice especially in cases where the courts and their officers
are involved. We rule against the petitioner.
Anent the applicability of Section 15, Rule 39, as follows:
Section 15. Execution of money judgments. The officer must enforce an execution of a money judgment by levying
on all the property, real and personal of every name and nature whatsoever, and which may be disposed of for value,
of the judgment debtor not exempt from execution, or on a sufficient amount of such property, if they be sufficient, and
selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the
judgment. ...

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the respondent court held:

We are obliged to rule that the judgment debt cannot be considered satisfied and therefore the orders of the
respondent judge granting the alias writ of execution may not be pronounced as a nullity.
xxx

xxx

xxx

It is clear and manifest that after levy or garnishment, for a judgment to be executed there is the requisite of payment
by the officer to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment and none
such payment had been concededly made yet by the absconding Sheriff to the private respondent Amelia Tan. The
ultimate and essential step to complete the execution of the judgment not having been performed by the City Sheriff,
the judgment debt legally and factually remains unsatisfied.
Strictly speaking execution cannot be equated with satisfaction of a judgment. Under unusual circumstances as those
obtaining in this petition, the distinction comes out clearly.
Execution is the process which carries into effect a decree or judgment (Painter v. Berglund, 31 Cal. App. 2d. 63, 87 P
2d 360, 363; Miller v. London, 294 Mass 300, 1 NE 2d 198, 200; Black's Law Dictionary), whereas the satisfaction of a
judgment is the payment of the amount of the writ, or a lawful tender thereof, or the conversion by sale of the debtor's
property into an amount equal to that due, and, it may be done otherwise than upon an execution (Section 47, Rule
39). Levy and delivery by an execution officer are not prerequisites to the satisfaction of a judgment when the same
has already been realized in fact (Section 47, Rule 39). Execution is for the sheriff to accomplish while satisfaction of
the judgment is for the creditor to achieve. Section 15, Rule 39 merely provides the sheriff with his duties as executing
officer including delivery of the proceeds of his levy on the debtor's property to satisfy the judgment debt. It is but to
stress that the implementing officer's duty should not stop at his receipt of payments but must continue until payment
is delivered to the obligor or creditor.
Finally, we find no error in the respondent court's pronouncement on the inclusion of interests to be recovered under
the alias writ of execution. This logically follows from our ruling that PAL is liable for both the lost checks and interest.
The respondent court's decision in CA-G.R. No. 51079-R does not totally supersede the trial court's judgment in Civil
Case No. 71307. It merely modified the same as to the principal amount awarded as actual damages.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The judgment of the respondent
Court of Appeals is AFFIRMED and the trial court's issuance of the alias writ of execution against the petitioner is
upheld without prejudice to any action it should take against the errant sheriff Emilio Z. Reyes. The Court Administrator
is ordered to follow up the actions taken against Emilio Z. Reyes.
SO ORDERED.
Fernan, C.J., Cruz, Paras, Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Separate Opinions

NARVASA, J., dissenting:

The execution of final judgments and orders is a function of the sheriff, an officer of the court whose authority is by and
large statutorily determined to meet the particular exigencies arising from or connected with the performance of the
multifarious duties of the office. It is the acknowledgment of the many dimensions of this authority, defined by statute
and chiselled by practice, which compels me to disagree with the decision reached by the majority.
A consideration of the wide latitude of discretion allowed the sheriff as the officer of the court most directly involved
with the implementation and execution of final judgments and orders persuades me that PAL's payment to the sheriff
of its judgment debt to Amelia Tan, though made by check issued in said officer's name, lawfully satisfied said
obligation and foreclosed further recourse therefor against PAL, notwithstanding the sheriffs failure to deliver to Tan
the proceeds of the check.

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It is a matter of history that the judiciary .. is an inherit or of the Anglo-American tradition. While the common law as
such .. "is not in force" in this jurisdiction, "to breathe the breath of life into many of the institutions, introduced [here]
under American sovereignty, recourse must be had to the rules, principles and doctrines of the common law under
whose protecting aegis the prototypes of these institutions had their birth" A sheriff is "an officer of great antiquity," and
was also called the shire reeve. A shire in English law is a Saxon word signifying a division later called a county. A
reeve is an ancient English officer of justice inferior in rank to an alderman .. appointed to process, keep the King's
peace, and put the laws in execution. From a very remote period in English constitutional history .. the shire had
another officer, namely the shire reeve or as we say, the sheriff. .. The Sheriff was the special representative of the
legal or central authority, and as such usually nominated by the King. .. Since the earliest times, both in England and
the United States, a sheriff has continued his status as an adjunct of the court .. . As it was there, so it has been in the
Philippines from the time of the organization of the judiciary .. . (J. Fernando's concurring opinion in Bagatsing v.
Herrera, 65 SCRA 434)
One of a sheriff s principal functions is to execute final judgments and orders. The Rules of Court require the writs of
execution to issue to him, directing him to enforce such judgments and orders in the manner therein provided (Rule
39). The mode of enforcement varies according to the nature of the judgment to be carried out: whether it be against
property of the judgment debtor in his hands or in the hands of a third person i e. money judgment), or for the sale of
property, real or personal (i.e. foreclosure of mortgage) or the delivery thereof, etc. (sec. 8, Rule 39).
Under sec. 15 of the same Rule, the sheriff is empowered to levy on so much of the judgment debtor's property as
may be sufficient to enforce the money judgment and sell these properties at public auction after due notice to satisfy
the adjudged amount. It is the sheriff who, after the auction sale, conveys to the purchaser the property thus sold
(secs. 25, 26, 27, Rule 39), and pays the judgment creditor so much of the proceeds as will satisfy the judgment.
When the property sold by him on execution is an immovable which consequently gives rise to a light of redemption
on the part of the judgment debtor and others (secs. 29, 30, Rule 39), it is to him (or to the purchaser or redemptioner
that the payments may be made by those declared by law as entitled to redeem (sec. 31, Rule 39); and in this
situation, it becomes his duty to accept payment and execute the certificate of redemption (Enage v. Vda. y Hijos de
Escano, 38 Phil. 657, cited in Moran, Comments on the Rules of Court, 1979 ed., vol. 2, pp. 326-327). It is also to the
sheriff that "written notice of any redemption must be given and a duplicate filed with the registrar of deeds of the
province, and if any assessments or taxes are paid by the redemptioner or if he has or acquires any lien other than
that upon which the redemption was made, notice thereof must in like manner be given to the officer and filed with the
registrar of deeds," the effect of failure to file such notice being that redemption may be made without paying such
assessments, taxes, or liens (sec. 30, Rule 39).
The sheriff may likewise be appointed a receiver of the property of the judgment debtor where the appointment of the
receiver is deemed necessary for the execution of the judgment (sec. 32, Rule 39).
At any time before the sale of property on execution, the judgment debtor may prevent the sale by paying the sheriff
the amount required by the execution and the costs that have been incurred therein (sec. 20, Rule 39).
The sheriff is also authorized to receive payments on account of the judgment debt tendered by "a person indebted to
the judgment debtor," and his "receipt shall be a sufficient discharge for the amount so paid or directed to be credited
by the judgment creditor on the execution" (sec. 41, Rule 39).
Now, obviously, the sheriff s sale extinguishes the liability of the judgment debtor either in fun, if the price paid by the
highest bidder is equal to, or more than the amount of the judgment or pro tanto if the price fetched at the sale be less.
Such extinction is not in any way dependent upon the judgment creditor's receiving the amount realized, so that the
conversion or embezzlement of the proceeds of the sale by the sheriff does not revive the judgment debt or render the
judgment creditor liable anew therefor.
So, also, the taking by the sheriff of, say, personal property from the judgment debtor for delivery to the judgment
creditor, in fulfillment of the verdict against him, extinguishes the debtor's liability; and the conversion of said property
by the sheriff, does not make said debtor responsible for replacing the property or paying the value thereof.
In the instances where the Rules allow or direct payments to be made to the sheriff, the payments may be made by
check, but it goes without saying that if the sheriff so desires, he may require payment to be made in lawful money. If
he accepts the check, he places himself in a position where he would be liable to the judgment creditor if any
damages are suffered by the latter as a result of the medium in which payment was made (Javellana v. Mirasol, et al.,
40 Phil. 761). The validity of the payment made by the judgment debtor, however, is in no wise affected and the latter
is discharged from his obligation to the judgment creditor as of the moment the check issued to the sheriff is encashed
and the proceeds are received by Id. office. The issuance of the check to a person authorized to receive it (Art. 1240,
Civil Code; See. 46 of the Code of Civil Procedure; Enage v. Vda y Hijos de Escano, 38 Phil. 657, cited in Javellana v.
Mirasol, 40 Phil. 761) operates to release the judgment debtor from any further obligations on the judgment.

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The sheriff is an adjunct of the court; a court functionary whose competence involves both discretion and personal
liability (concurring opinion of J. Fernando, citing Uy Piaoco v. Osmena, 9 Phil. 299, in Bagatsing v. Herrera, 65 SCRA
434). Being an officer of the court and acting within the scope of his authorized functions, the sheriff s receipt of the
checks in payment of the judgment execution, may be deemed, in legal contemplation, as received by the court itself
(Lara v. Bayona, 10 May 1955, No. L- 10919).
That the sheriff functions as a conduit of the court is further underscored by the fact that one of the requisites for
appointment to the office is the execution of a bond, "conditioned (upon) the faithful performance of his (the
appointee's) duties .. for the delivery or payment to Government, or the person entitled thereto, of all properties or
sums of money that shall officially come into his hands" (sec. 330, Revised Administrative Code).
There is no question that the checks came into the sheriffs possession in his official capacity. The court may require of
the judgment debtor, in complying with the judgment, no further burden than his vigilance in ensuring that the person
he is paying money or delivering property to is a person authorized by the court to receive it. Beyond this, further
expectations become unreasonable. To my mind, a proposal that would make the judgment debtor unqualifiedly the
insurer of the judgment creditor's entitlement to the judgment amount which is really what this case is all about begs
the question.
That the checks were made out in the sheriffs name (a practice, by the way, of long and common acceptance) is of
little consequence if juxtaposed with the extent of the authority explicitly granted him by law as the officer entrusted
with the power to execute and implement court judgments. The sheriffs requirement that the checks in payment of the
judgment debt be issued in his name was simply an assertion of that authority; and PAL's compliance cannot in the
premises be faulted merely because of the sheriffs subsequent malfeasance in absconding with the payment instead
of turning it over to the judgment creditor.
If payment had been in cash, no question about its validity or of the authority and duty of the sheriff to accept it in
settlement of PAL's judgment obligation would even have arisen. Simply because it was made by checks issued in the
sheriff s name does not warrant reaching any different conclusion.
As payment to the court discharges the judgment debtor from his responsibility on the judgment, so too must payment
to the person designated by such court and authorized to act in its behalf, operate to produce the same effect.
It is unfortunate and deserving of commiseration that Amelia Tan was deprived of what was adjudged to her when the
sheriff misappropriated the payment made to him by PAL in dereliction of his sworn duties. But I submit that her
remedy lies, not here and in reviving liability under a judgment already lawfully satisfied, but elsewhere.
ACCORDINGLY, I vote to grant the petition.
Melencio-Herrera, Gancayco, J., concurs.

FELICIANO, J., dissenting:

I concur in the able dissenting opinions of Narvasa and Padilla, JJ. and would merely wish to add a few footnotes to
their lucid opinions.
1.
Narvasa, J. has demonstrated in detail that a sheriff is authorized by the Rules of Court and our case law to
receive either legal tender or checks from the judgment debtor in satisfaction of the judgment debt. In addition, Padilla,
J. has underscored the obligation of the sheriff, imposed upon him by the nature of his office and the law, to turn over
such legal tender, checks and proceeds of execution sales to the judgment creditor. The failure of a sheriff to effect
such turnover and his conversion of the funds (or goods) held by him to his own uses, do not have the effect of
frustrating payment by and consequent discharge of the judgment debtor.
To hold otherwise would be to throw the risk of the sheriff faithfully performing his duty as a public officer upon those
members of the general public who are compelled to deal with him. It seems to me that a judgment debtor who turns
over funds or property to the sheriff can not reasonably be made an insurer of the honesty and integrity of the sheriff
and that the risk of the sheriff carrying out his duties honestly and faithfully is properly lodged in the State itself The
sheriff, like all other officers of the court, is appointed and paid and controlled and disciplined by the Government,
more specifically by this Court. The public surely has a duty to report possible wrongdoing by a sheriff or similar officer
to the proper authorities and, if necessary, to testify in the appropriate judicial and administrative disciplinary
proceedings. But to make the individual members of the general community insurers of the honest performance of
duty of a sheriff, or other officer of the court, over whom they have no control, is not only deeply unfair to the former. It

310

is also a confession of comprehensive failure and comes too close to an abdication of duty on the part of the Court
itself. This Court should have no part in that.
2.
I also feel compelled to comment on the majority opinion written by Gutierrez, J. with all his customary and
special way with words. My learned and eloquent brother in the Court apparently accepts the proposition that payment
by a judgment debtor of cash to a sheriff produces the legal effects of payment, the sheriff being authorized to accept
such payment. Thus, in page 10 of his ponencia, Gutierrez, J. writes:
The receipt of money due on a judgment by an officer authorized by law to accept it will satisfy the debt. (Citations
omitted)
The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a
person so authorized is deemed payment to the creditor. Under ordinary circumstances, payment by the judgment
debtor in the case at bar, to the sheriff would be valid payment to extinguish the judgment debt.
Shortly thereafter, however, Gutierrez, J. backs off from the above position and strongly implies that payment in cash
to the sheriff is sheer imprudence on the part of the judgment debtor and that therefore, should the sheriff abscond
with the cash, the judgment debtor has not validly discharged the judgment debt:
It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment in full legal contemplation.
The reasoning is logical but is it valid and proper?
In the first place, PAL did not pay in cash. It paid in checks.
And second, payment in cash always carries with it certain cautions. Nobody hands over big amounts of cash in a
careless and inane manner. Mature thought is given to the possibility of the cash being lost, of the bearer being
waylaid or running off with what he is carrying for another. Payment in checks is precisely intended to avoid the
possibility of the money going to the wrong party....
Payment in money or cash to the implementing officer may be deemed absolute payment of the judgment debt but the
court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge
amounts of cash or legal tender to sheriffs and other executing officers. ... (Emphasis in the original) (Majority opinion,
pp. 12-13)
There is no dispute with the suggestion apparently made that maximum safety is secured where the judgment debtor
delivers to the sheriff not cash but a check made out, not in the name of the sheriff, but in the judgment creditor's
name. The fundamental point that must be made, however, is that under our law only cash is legal tender and that the
sheriff can be compelled to accept only cash and not checks, even if made out to the name of the judgment creditor. 1
The sheriff could have quite lawfully required PAL to deliver to him only cash, i.e., Philippine currency. If the sheriff had
done so, and if PAL had complied with such a requirement, as it would have had to, one would have to agree that
legal payment must be deemed to have been effected. It requires no particularly acute mind to note that a dishonest
sheriff could easily convert the money and abscond. The fact that the sheriff in the instant case required, not cash to
be delivered to him, but rather a check made out in his name, does not change the legal situation. PAL did not thereby
become negligent; it did not make the loss anymore possible or probable than if it had instead delivered plain cash to
the sheriffs.
It seems to me that the majority opinion's real premise is the unspoken one that the judgment debtor should bear the
risk of the fragility of the sheriff s virtue until the money or property parted with by the judgment debtor actually
reaches the hands of the judgment creditor. This brings me back to my earlier point that risk is most appropriately
borne not by the judgment debtor, nor indeed by the judgment creditor, but by the State itself. The Court requires all
sheriffs to post good and adequate fidelity bonds before entering upon the performance of their duties and,
presumably, to maintain such bonds in force and effect throughout their stay in office. 2 The judgment creditor, in
circumstances like those of the instant case, could be allowed to execute upon the absconding sheriff s bond. 3
I believe the Petition should be granted and I vote accordingly.

PADILLA, J., Dissenting Opinion

From the facts that appear to be undisputed, I reach a conclusion different from that of the majority. Sheriff Emilio Z.
Reyes, the trial court's authorized sheriff, armed with a writ of execution to enforce a final money judgment against the
petitioner Philippine Airlines (PAL) in favor of private respondent Amelia Tan, proceeded to petitioner PAL's office to
implement the writ.

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There is no question that Sheriff Reyes, in enforcing the writ of execution, was acting with full authority as an officer of
the law and not in his personal capacity. Stated differently, PAL had every right to assume that, as an officer of the law,
Sheriff Reyes would perform his duties as enjoined by law. It would be grossly unfair to now charge PAL with
advanced or constructive notice that Mr. Reyes would abscond and not deliver to the judgment creditor the proceeds
of the writ of execution. If a judgment debtor cannot rely on and trust an officer of the law, as the Sheriff, whom else
can he trust?
Pursued to its logical extreme, if PAL had delivered to Sheriff Reyes the amount of the judgment in CASH, i.e.
Philippine currency, with the corresponding receipt signed by Sheriff Reyes, this would have been payment by PAL in
full legal contemplation, because under Article 1240 of the Civil Code, "payment shall be made to the person in whose
favor the obligation has been constituted or his successor in interest or any person authorized to receive it." And said
payment if made by PAL in cash, i.e., Philippine currency, to Sheriff Reyes would have satisfied PAL's judgment
obligation, as payment is a legally recognized mode for extinguishing one's obligation. (Article 1231, Civil Code).
Under Sec. 15, Rule 39, Rules of Court which provides thatSec. 15. Execution of money judgments. The officer must enforce an execution of a money judgment by levying on
all the property, real and personal of every name and nature whatsoever, and which may be disposed of for value, of
the judgment debtor not exempt from execution, or on a sufficient amount of such property, if there be sufficient, and
selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the
judgment. ... .(emphasis supplied)
it would be the duty of Sheriff Reyes to pay to the judgment creditor the proceeds of the execution i.e., the cash
received from PAL (under the above assumption). But, the duty of the sheriff to pay the cash to the judgment creditor
would be a matter separate the distinct from the fact that PAL would have satisfied its judgment obligation to Amelia
Tan, the judgment creditor, by delivering the cash amount due under the judgment to Sheriff Reyes.
Did the situation change by PAL's delivery of its two (2) checks totalling P30,000.00 drawn against its bank account,
payable to Sheriff Reyes, for account of the judgment rendered against PAL? I do not think so, because when Sheriff
Reyes encashed the checks, the encashment was in fact a payment by PAL to Amelia Tan through Sheriff Reyes, an
officer of the law authorized to receive payment, and such payment discharged PAL'S obligation under the executed
judgment.
If the PAL cheeks in question had not been encashed by Sheriff Reyes, there would be no payment by PAL and,
consequently no discharge or satisfaction of its judgment obligation. But the checks had been encashed by Sheriff
Reyes giving rise to a situation as if PAL had paid Sheriff Reyes in cash, i.e., Philippine currency. This, we repeat, is
payment, in legal contemplation, on the part of PAL and this payment legally discharged PAL from its judgment
obligation to the judgment creditor. To be sure, the same encashment by Sheriff Reyes of PAL's checks delivered to
him in his official capacity as Sheriff, imposed an obligation on Sheriff Reyes to pay and deliver the proceeds of the
encashment to Amelia Tan who is deemed to have acquired a cause of action against Sheriff Reyes for his failure to
deliver to her the proceeds of the encashment. As held:
Payment of a judgment, to operate as a release or satisfaction, even pro tanto must be made to the plaintiff or to some
person authorized by him, or by law, to receive it. The payment of money to the sheriff having an execution satisfies it,
and, if the plaintiff fails to receive it, his only remedy is against the officer (Henderson v. Planters' and Merchants Bank,
59 SO 493, 178 Ala. 420).
Payment of an execution satisfies it without regard to whether the officer pays it over to the creditor or misapplies it
(340, 33 C.J.S. 644, citing Elliot v. Higgins, 83 N.C. 459). If defendant consents to the Sheriff s misapplication of the
money, however, defendant is estopped to claim that the debt is satisfied (340, 33 C.J.S. 644, citing Heptinstall v.
Medlin 83 N.C. 16).
The above rulings find even more cogent application in the case at bar because, as contended by petitioner PAL (not
denied by private respondent), when Sheriff Reyes served the writ of execution on PAL, he (Reyes) was accompanied
by private respondent's counsel. Prudence dictated that when PAL delivered to Sheriff Reyes the two (2) questioned
checks (payable to Sheriff Reyes), private respondent's counsel should have insisted on their immediate encashment
by the Sheriff with the drawee bank in order to promptly get hold of the amount belonging to his client, the judgment
creditor.
ACCORDINGLY, I vote to grant the petition and to quash the court a quo's alias writ of execution.
Melencio-Herrera, Gancayco, Sarmiento, Cortes, JJ., concurs.

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Separate Opinions

NARVASA, J., dissenting:

The execution of final judgments and orders is a function of the sheriff, an officer of the court whose authority is by and
large statutorily determined to meet the particular exigencies arising from or connected with the performance of the
multifarious duties of the office. It is the acknowledgment of the many dimensions of this authority, defined by statute
and chiselled by practice, which compels me to disagree with the decision reached by the majority.
A consideration of the wide latitude of discretion allowed the sheriff as the officer of the court most directly involved
with the implementation and execution of final judgments and orders persuades me that PAL's payment to the sheriff
of its judgment debt to Amelia Tan, though made by check issued in said officer's name, lawfully satisfied said
obligation and foreclosed further recourse therefor against PAL, notwithstanding the sheriffs failure to deliver to Tan
the proceeds of the check.
It is a matter of history that the judiciary .. is an inherit or of the Anglo-American tradition. While the common law as
such .. "is not in force" in this jurisdiction, "to breathe the breath of life into many of the institutions, introduced [here]
under American sovereignty, recourse must be had to the rules, principles and doctrines of the common law under
whose protecting aegis the prototypes of these institutions had their birth" A sheriff is "an officer of great antiquity," and
was also called the shire reeve. A shire in English law is a Saxon word signifying a division later called a county. A
reeve is an ancient English officer of justice inferior in rank to an alderman .. appointed to process, keep the King's
peace, and put the laws in execution. From a very remote period in English constitutional history .. the shire had
another officer, namely the shire reeve or as we say, the sheriff. .. The Sheriff was the special representative of the
legal or central authority, and as such usually nominated by the King. .. Since the earliest times, both in England and
the United States, a sheriff has continued his status as an adjunct of the court .. . As it was there, so it has been in the
Philippines from the time of the organization of the judiciary .. . (J. Fernando's concurring opinion in Bagatsing v.
Herrera, 65 SCRA 434)
One of a sheriff s principal functions is to execute final judgments and orders. The Rules of Court require the writs of
execution to issue to him, directing him to enforce such judgments and orders in the manner therein provided (Rule
39). The mode of enforcement varies according to the nature of the judgment to be carried out: whether it be against
property of the judgment debtor in his hands or in the hands of a third person i e. money judgment), or for the sale of
property, real or personal (i.e. foreclosure of mortgage) or the delivery thereof, etc. (sec. 8, Rule 39).
Under sec. 15 of the same Rule, the sheriff is empowered to levy on so much of the judgment debtor's property as
may be sufficient to enforce the money judgment and sell these properties at public auction after due notice to satisfy
the adjudged amount. It is the sheriff who, after the auction sale, conveys to the purchaser the property thus sold
(secs. 25, 26, 27, Rule 39), and pays the judgment creditor so much of the proceeds as will satisfy the judgment.
When the property sold by him on execution is an immovable which consequently gives rise to a light of redemption
on the part of the judgment debtor and others (secs. 29, 30, Rule 39), it is to him (or to the purchaser or redemptioner
that the payments may be made by those declared by law as entitled to redeem (sec. 31, Rule 39); and in this
situation, it becomes his duty to accept payment and execute the certificate of redemption (Enage v. Vda. y Hijos de
Escano, 38 Phil. 657, cited in Moran, Comments on the Rules of Court, 1979 ed., vol. 2, pp. 326-327). It is also to the
sheriff that "written notice of any redemption must be given and a duplicate filed with the registrar of deeds of the
province, and if any assessments or taxes are paid by the redemptioner or if he has or acquires any lien other than
that upon which the redemption was made, notice thereof must in like manner be given to the officer and filed with the
registrar of deeds," the effect of failure to file such notice being that redemption may be made without paying such
assessments, taxes, or liens (sec. 30, Rule 39).
The sheriff may likewise be appointed a receiver of the property of the judgment debtor where the appointment of the
receiver is deemed necessary for the execution of the judgment (sec. 32, Rule 39).
At any time before the sale of property on execution, the judgment debtor may prevent the sale by paying the sheriff
the amount required by the execution and the costs that have been incurred therein (sec. 20, Rule 39).
The sheriff is also authorized to receive payments on account of the judgment debt tendered by "a person indebted to
the judgment debtor," and his "receipt shall be a sufficient discharge for the amount so paid or directed to be credited
by the judgment creditor on the execution" (sec. 41, Rule 39).

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Now, obviously, the sheriff s sale extinguishes the liability of the judgment debtor either in fun, if the price paid by the
highest bidder is equal to, or more than the amount of the judgment or pro tanto if the price fetched at the sale be less.
Such extinction is not in any way dependent upon the judgment creditor's receiving the amount realized, so that the
conversion or embezzlement of the proceeds of the sale by the sheriff does not revive the judgment debt or render the
judgment creditor liable anew therefor.
So, also, the taking by the sheriff of, say, personal property from the judgment debtor for delivery to the judgment
creditor, in fulfillment of the verdict against him, extinguishes the debtor's liability; and the conversion of said property
by the sheriff, does not make said debtor responsible for replacing the property or paying the value thereof.
In the instances where the Rules allow or direct payments to be made to the sheriff, the payments may be made by
check, but it goes without saying that if the sheriff so desires, he may require payment to be made in lawful money. If
he accepts the check, he places himself in a position where he would be liable to the judgment creditor if any
damages are suffered by the latter as a result of the medium in which payment was made (Javellana v. Mirasol, et al.,
40 Phil. 761). The validity of the payment made by the judgment debtor, however, is in no wise affected and the latter
is discharged from his obligation to the judgment creditor as of the moment the check issued to the sheriff is encashed
and the proceeds are received by Id. office. The issuance of the check to a person authorized to receive it (Art. 1240,
Civil Code; See. 46 of the Code of Civil Procedure; Enage v. Vda y Hijos de Escano, 38 Phil. 657, cited in Javellana v.
Mirasol, 40 Phil. 761) operates to release the judgment debtor from any further obligations on the judgment.
The sheriff is an adjunct of the court; a court functionary whose competence involves both discretion and personal
liability (concurring opinion of J. Fernando, citing Uy Piaoco v. Osmena, 9 Phil. 299, in Bagatsing v. Herrera, 65 SCRA
434). Being an officer of the court and acting within the scope of his authorized functions, the sheriff s receipt of the
checks in payment of the judgment execution, may be deemed, in legal contemplation, as received by the court itself
(Lara v. Bayona, 10 May 1955, No. L- 10919).
That the sheriff functions as a conduit of the court is further underscored by the fact that one of the requisites for
appointment to the office is the execution of a bond, "conditioned (upon) the faithful performance of his (the
appointee's) duties .. for the delivery or payment to Government, or the person entitled thereto, of all properties or
sums of money that shall officially come into his hands" (sec. 330, Revised Administrative Code).
There is no question that the checks came into the sheriffs possession in his official capacity. The court may require of
the judgment debtor, in complying with the judgment, no further burden than his vigilance in ensuring that the person
he is paying money or delivering property to is a person authorized by the court to receive it. Beyond this, further
expectations become unreasonable. To my mind, a proposal that would make the judgment debtor unqualifiedly the
insurer of the judgment creditor's entitlement to the judgment amount which is really what this case is all about-begs
the question.
That the checks were made out in the sheriffs name (a practice, by the way, of long and common acceptance) is of
little consequence if juxtaposed with the extent of the authority explicitly granted him by law as the officer entrusted
with the power to execute and implement court judgments. The sheriffs requirement that the checks in payment of the
judgment debt be issued in his name was simply an assertion of that authority; and PAL's compliance cannot in the
premises be faulted merely because of the sheriffs subsequent malfeasance in absconding with the payment instead
of turning it over to the judgment creditor.
If payment had been in cash, no question about its validity or of the authority and duty of the sheriff to accept it in
settlement of PAL's judgment obligation would even have arisen. Simply because it was made by checks issued in the
sheriff s name does not warrant reaching any different conclusion.
As payment to the court discharges the judgment debtor from his responsibility on the judgment, so too must payment
to the person designated by such court and authorized to act in its behalf, operate to produce the same effect.
It is unfortunate and deserving of commiseration that Amelia Tan was deprived of what was adjudged to her when the
sheriff misappropriated the payment made to him by PAL in dereliction of his sworn duties. But I submit that her
remedy lies, not here and in reviving liability under a judgment already lawfully satisfied, but elsewhere.
ACCORDINGLY, I vote to grant the petition.
Melencio-Herrera, Gancayco, J., concurs.

FELICIANO, J., dissenting:

314

I concur in the able dissenting opinions of Narvasa and Padilla, JJ. and would merely wish to add a few footnotes to
their lucid opinions.
1.
Narvasa, J. has demonstrated in detail that a sheriff is authorized by the Rules of Court and our case law to
receive either legal tender or checks from the judgment debtor in satisfaction of the judgment debt. In addition, Padilla,
J. has underscored the obligation of the sheriff, imposed upon him by the nature of his office and the law, to turn over
such legal tender, checks and proceeds of execution sales to the judgment creditor. The failure of a sheriff to effect
such turnover and his conversion of the funds (or goods) held by him to his own uses, do not have the effect of
frustrating payment by and consequent discharge of the judgment debtor.
To hold otherwise would be to throw the risk of the sheriff faithfully performing his duty as a public officer upon those
members of the general public who are compelled to deal with him. It seems to me that a judgment debtor who turns
over funds or property to the sheriff can not reasonably be made an insurer of the honesty and integrity of the sheriff
and that the risk of the sheriff carrying out his duties honestly and faithfully is properly lodged in the State itself The
sheriff, like all other officers of the court, is appointed and paid and controlled and disciplined by the Government,
more specifically by this Court. The public surely has a duty to report possible wrongdoing by a sheriff or similar officer
to the proper authorities and, if necessary, to testify in the appropriate judicial and administrative disciplinary
proceedings. But to make the individual members of the general community insurers of the honest performance of
duty of a sheriff, or other officer of the court, over whom they have no control, is not only deeply unfair to the former. It
is also a confession of comprehensive failure and comes too close to an abdication of duty on the part of the Court
itself. This Court should have no part in that.
2.
I also feel compelled to comment on the majority opinion written by Gutierrez, J. with all his customary and
special way with words. My learned and eloquent brother in the Court apparently accepts the proposition that payment
by a judgment debtor of cash to a sheriff produces the legal effects of payment, the sheriff being authorized to accept
such payment. Thus, in page 10 of his ponencia, Gutierrez, J. writes:
The receipt of money due on a judgment by an officer authorized by law to accept it will satisfy the debt. (Citations
omitted)
The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a
person so authorized is deemed payment to the creditor. Under ordinary circumstances, payment by the judgment
debtor in the case at bar, to the sheriff would be valid payment to extinguish the judgment debt.
Shortly thereafter, however, Gutierrez, J. backs off from the above position and strongly implies that payment in cash
to the sheriff is sheer imprudence on the part of the judgment debtor and that therefore, should the sheriff abscond
with the cash, the judgment debtor has not validly discharged the judgment debt:
It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment in full legal contemplation.
The reasoning is logical but is it valid and proper?
In the first place, PAL did not pay in cash. It paid in checks.
And second, payment in cash always carries with it certain cautions. Nobody hands over big amounts of cash in a
careless and inane manner. Mature thought is given to the possibility of the cash being lost, of the bearer being
waylaid or running off with what he is carrying for another. Payment in checks is precisely intended to avoid the
possibility of the money going to the wrong party....
Payment in money or cash to the implementing officer may be deemed absolute payment of the judgment debt but the
court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge
amounts of cash or legal tender to sheriffs and other executing officers. ... (Emphasis in the original) (Majority opinion,
pp. 12-13)
There is no dispute with the suggestion apparently made that maximum safety is secured where the judgment debtor
delivers to the sheriff not cash but a check made out, not in the name of the sheriff, but in the judgment creditor's
name. The fundamental point that must be made, however, is that under our law only cash is legal tender and that the
sheriff can be compelled to accept only cash and not checks, even if made out to the name of the judgment creditor. 1
The sheriff could have quite lawfully required PAL to deliver to him only cash, i.e., Philippine currency. If the sheriff had
done so, and if PAL had complied with such a requirement, as it would have had to, one would have to agree that
legal payment must be deemed to have been effected. It requires no particularly acute mind to note that a dishonest
sheriff could easily convert the money and abscond. The fact that the sheriff in the instant case required, not cash to
be delivered to him, but rather a check made out in his name, does not change the legal situation. PAL did not thereby

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become negligent; it did not make the loss anymore possible or probable than if it had instead delivered plain cash to
the sheriffs.
It seems to me that the majority opinion's real premise is the unspoken one that the judgment debtor should bear the
risk of the fragility of the sheriff s virtue until the money or property parted with by the judgment debtor actually
reaches the hands of the judgment creditor. This brings me back to my earlier point that risk is most appropriately
borne not by the judgment debtor, nor indeed by the judgment creditor, but by the State itself. The Court requires all
sheriffs to post good and adequate fidelity bonds before entering upon the performance of their duties and,
presumably, to maintain such bonds in force and effect throughout their stay in office. 2 The judgment creditor, in
circumstances like those of the instant case, could be allowed to execute upon the absconding sheriff s bond. 3
I believe the Petition should be granted and I vote accordingly.

PADILLA, J., Dissenting Opinion

From the facts that appear to be undisputed, I reach a conclusion different from that of the majority. Sheriff Emilio Z.
Reyes, the trial court's authorized sheriff, armed with a writ of execution to enforce a final money judgment against the
petitioner Philippine Airlines (PAL) in favor of private respondent Amelia Tan, proceeded to petitioner PAL's office to
implement the writ.
There is no question that Sheriff Reyes, in enforcing the writ of execution, was acting with full authority as an officer of
the law and not in his personal capacity. Stated differently, PAL had every right to assume that, as an officer of the law,
Sheriff Reyes would perform his duties as enjoined by law. It would be grossly unfair to now charge PAL with
advanced or constructive notice that Mr. Reyes would abscond and not deliver to the judgment creditor the proceeds
of the writ of execution. If a judgment debtor cannot rely on and trust an officer of the law, as the Sheriff, whom else
can he trust?
Pursued to its logical extreme, if PAL had delivered to Sheriff Reyes the amount of the judgment in CASH, i.e.
Philippine currency, with the corresponding receipt signed by Sheriff Reyes, this would have been payment by PAL in
full legal contemplation, because under Article 1240 of the Civil Code, "payment shall be made to the person in whose
favor the obligation has been constituted or his successor in interest or any person authorized to receive it." And said
payment if made by PAL in cash, i.e., Philippine currency, to Sheriff Reyes would have satisfied PAL's judgment
obligation, as payment is a legally recognized mode for extinguishing one's obligation. (Article 1231, Civil Code).
Under Sec. 15, Rule 39, Rules of Court which provides thatSec. 15. Execution of money judgments.-The officer must enforce an execution of a money judgment by levying on all
the property, real and personal of every name and nature whatsoever, and which may be disposed of for value, of the
judgment debtor not exempt from execution, or on a sufficient amount of such property, if there be sufficient, and
selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the
judgment. ... .(emphasis supplied)
it would be the duty of Sheriff Reyes to pay to the judgment creditor the proceeds of the execution i.e., the cash
received from PAL (under the above assumption). But, the duty of the sheriff to pay the cash to the judgment creditor
would be a matter separate the distinct from the fact that PAL would have satisfied its judgment obligation to Amelia
Tan, the judgment creditor, by delivering the cash amount due under the judgment to Sheriff Reyes.
Did the situation change by PAL's delivery of its two (2) checks totalling P30,000.00 drawn against its bank account,
payable to Sheriff Reyes, for account of the judgment rendered against PAL? I do not think so, because when Sheriff
Reyes encashed the checks, the encashment was in fact a payment by PAL to Amelia Tan through Sheriff Reyes, an
officer of the law authorized to receive payment, and such payment discharged PAL'S obligation under the executed
judgment.
If the PAL cheeks in question had not been encashed by Sheriff Reyes, there would be no payment by PAL and,
consequently no discharge or satisfaction of its judgment obligation. But the checks had been encashed by Sheriff
Reyes giving rise to a situation as if PAL had paid Sheriff Reyes in cash, i.e., Philippine currency. This, we repeat, is
payment, in legal contemplation, on the part of PAL and this payment legally discharged PAL from its judgment
obligation to the judgment creditor. To be sure, the same encashment by Sheriff Reyes of PAL's checks delivered to
him in his official capacity as Sheriff, imposed an obligation on Sheriff Reyes to pay and deliver the proceeds of the
encashment to Amelia Tan who is deemed to have acquired a cause of action against Sheriff Reyes for his failure to
deliver to her the proceeds of the encashment. As held:

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Payment of a judgment, to operate as a release or satisfaction, even pro tanto must be made to the plaintiff or to some
person authorized by him, or by law, to receive it. The payment of money to the sheriff having an execution satisfies it,
and, if the plaintiff fails to receive it, his only remedy is against the officer (Henderson v. Planters' and Merchants Bank,
59 SO 493, 178 Ala. 420).
Payment of an execution satisfies it without regard to whether the officer pays it over to the creditor or misapplies it
(340, 33 C.J.S. 644, citing Elliot v. Higgins, 83 N.C. 459). If defendant consents to the Sheriff s misapplication of the
money, however, defendant is estopped to claim that the debt is satisfied (340, 33 C.J.S. 644, citing Heptinstall v.
Medlin 83 N.C. 16).
The above rulings find even more cogent application in the case at bar because, as contended by petitioner PAL (not
denied by private respondent), when Sheriff Reyes served the writ of execution on PAL, he (Reyes) was accompanied
by private respondent's counsel. Prudence dictated that when PAL delivered to Sheriff Reyes the two (2) questioned
checks (payable to Sheriff Reyes), private respondent's counsel should have insisted on their immediate encashment
by the Sheriff with the drawee bank in order to promptly get hold of the amount belonging to his client, the judgment
creditor.
ACCORDINGLY, I vote to grant the petition and to quash the court a quo's alias writ of execution.

317

G.R. No. L-26449

May 15, 1969

LUZON STEEL CORPORATION, represented by TOMAS AQUINO CU, plaintiff-appellant,

vs.
JOSE O. SIA, defendant,
TIMES SURETY & INSURANCE CO. INC., surety-appellee.
German A. Sipin for plaintiff-appellant.
Galicano S. Calapatia for surety-appellee.
REYES, J.B.L., J.:
Direct appeal from two orders, dated 19 May and 5 June 1965, issued by the Court of First Instance of Manila (Judge
Francisco Arca presiding), in its Civil Case No. 54913, entitled Luzon Steel Corporation, plaintiff vs. Metal
Manufacturing of the Philippines, Inc., and Jose O. Sia, defendants, whereby the court aforesaid quashed a writ of
execution issued against the Times Surety & Insurance Co., Inc., and cancelled the undertaking of said surety
company.
The essential and uncontroverted facts of the case may be summarized as follows:
Luzon Steel Corporation has sued Metal Manufacturing of the Philippines and Jose O. Sia, the former's manager, for
breach of contract and damages. It obtained a writ of preliminary attachment of the properties of the defendants, but
the attachment was lifted upon a P25,000.00 counterbond executed by the defendant Sia, as principal, and the Times
Surety & Insurance Co., Inc. (hereinafter designated as the surety), as solidary guarantor, in the following terms:
WHEREFORE, we JOSE O. SIA, as principal and the TIMES SURETY & INSURANCE CO., INC., as Surety, in
consideration of the dissolution of attachment, hereby jointly and severally bind ourselves in the sum of Twenty Five
Thousand Pesos (P25,000.00), Philippine Currency, to answer for the payment to the plaintiff of any judgment it may
recover in the action in accordance with Section 12, Rule 59, of the Rules of Court. (pp. 32, 45, Rec. on Appeal.)
Issues having been joined, plaintiff and defendant (without intervention of the surety) entered into a compromise
whereby defendant Sia agreed to settle the plaintiff's claim in the following manner:
1. That the defendant shall settle with the Plaintiff the amount of TWENTY FIVE THOUSAND (P25,000.00) PESOS, in
the following manner: FIVE HUNDRED (P500.00) PESOS, monthly for the first six (6) months to be paid at the end of
every month and to commence in January, 1965, and within one month after paying the last installment of P500.00,
the balance of P22,000.00 shall be paid in lump sum, without interest. It is understood that failure of the Defendant to
pay one or any installment will make the whole obligation immediately due and demandable and that a writ of
execution will be issued immediately against Defendants bond.lawphi1.et
The compromise was submitted to the court and the latter approved it, rendered judgment in conformity therewith, and
directed the parties to comply with the same (Record on Appeal, page 22).
Defendant having failed to comply, plaintiff moved for and obtained a writ of execution against defendant and the joint
and several counterbond. The surety, however, moved to quash the writ of execution against it, averring that it was not
a party to the compromise, and that the writ was issued without giving the surety notice and hearing. The court,
overruling the plaintiff's opposition, set aside the writ of execution, and later cancelled the counterbond, and denied
the motion for reconsideration. Hence this appeal.
Main issues posed are (1) whether the judgment upon the compromise discharged the surety from its obligation under
its attachment counterbond and (2) whether the writ of execution could be issued against the surety without previous
exhaustion of the debtor's properties.
Both questions can be solved by bearing in mind that we are dealing with a counterbond filed to discharge a levy on
attachment. Rule 57, section 12, specifies that an attachment may be discharged upon the making of a cash deposit
or filing a counterbond "in an amount equal to the value of the property attached as determined by the judge"; that
upon the filing of the counterbond "the property attached ... shall be delivered to the party making the deposit or giving
the counterbond, or the person appearing on his behalf, the deposit or counterbond aforesaid standing in place of the
property so released".
The italicized expressions constitute the key to the entire problem. Whether the judgment be rendered after trial on the
merits or upon compromise, such judgment undoubtedly may be made effective upon the property released; and since
the counterbond merely stands in the place of such property, there is no reason why the judgment should not be made
effective against the counterbond regardless of the manner how the judgment was obtained.

318

Squarely on the point, and rebutting the appellee's apprehension that the compromise could be the result of a
collusion between the parties to injure the surety, is our decision in Anzures vs. Alto Surety & Insurance Co., Inc., et
al., 92 Phil. 742, where this Court, through former Chief Justice Paras, ruled as follows:
Under section 12, Rule 59, of the Rules of Court, the bond filed, as in this case, for the discharge of an attachment is
"to secure the payment to the plaintiff of any judgment he may recover in the action," and stands "in place of the
property so released". It follows that the order of cancellation issued by the respondent judge is erroneous. Indeed,
judgment had already been rendered by the Court of First Instance of Manila in civil case No. 11748, sentencing
Benjamin Aguilar to pay the sum of P3,500.00 to the petitioner; and it is not pretended that said judgment is a nullity.
There is no point in the contention of the respondent Surety Company that the compromise was entered into without
its knowledge and consent, thus becoming as to it essentially fraudulent. The Surety is not a party to civil case No.
11748 and, therefore, need not be served with notice of the petition for judgment. As against the conjecture of said
respondent that the parties may easily connive by means of a compromise to prejudice it, there is also the likelihood
that the same end may be attained by parties acting in bad faith through a simulated trial. At any rate, it is within the
power of the Surety Company to protect itself against a risk of the kind.
Wherefore, the order of the respondent Judge cancelling the bond in question is set aside. So ordered with costs
against the respondent Alto Surety & Insurance Co., Inc.
The lower court and the appellee herein appear to have relied on doctrines of this Court concerning the liability of
sureties in bonds filed by a plaintiff for the issuance of writs of attachment, without discriminating between such bonds
and those filed by a defendant for the lifting of writs of attachment already issued and levied. This confusion is hardly
excusable considering that this Court has already called attention to the difference between these kinds of bonds.
Thus, in Cajefe vs. Judge Fernandez, et al., L-15709, 19 October 1960, this Court pointed out that
The diverse rule in section 17 of Rule 59 for counterbonds posted to obtain the lifting of a writ of attachment is due to
these bonds being security for the payment of any judgment that the attaching party may obtain; they are thus mere
replacements of the property formerly attached, and just as the latter may be levied upon after final judgment in the
case in order to realize the amount adjudged, so is the liability of the countersureties ascertainable after the judgment
has become final. This situation does not obtain in the case of injunction counterbonds, since the sureties in the latter
case merely undertake "to pay all damages that the plaintiff may suffer by reason of the continuance ... of the acts
complained of" (Rule 60, section 6) and not to secure payment of the judgment recovered.1
It was, therefore, error on the part of the court below to have ordered the surety bond cancelled, on the theory that the
parties' compromise discharged the obligation of the surety.
As declared by us in Mercado vs. Macapayag, 69 Phil. 403, 405-406, in passing upon the liability of counter sureties in
replevin who bound themselves to answer solidarily for the obligations of the defendants to the plaintiffs in a fixed
amount of P912.04, to secure payment of the amount that said plaintiff be adjudged to recover from the defendants,2
the liability of the sureties was fixed and conditioned on the finality of the judgment rendered regardless of whether the
decision was based on the consent of the parties or on the merits. A judgment entered on a stipulation is nonetheless
a judgment of the court because consented to by the parties.
But the surety in the present case insists (and the court below so ruled) that the execution issued against it was invalid
because the writ issued against its principal, Jose O. Sia, et al., defendants below, had not been returned unsatisfied;
and the surety invoked in its favor Section 17 of Rule 57 of the Revised Rules of Court (old Rule 59), couched in the
following terms:
SEC. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be returned unsatisfied in
whole or in part, the surety or sureties on any counterbond given pursuant to the provisions of this rule to secure the
payment of the judgment shall become charged on such counter-bond, and bound to pay to the judgment creditor
upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties
after notice and summary hearing in the same action.
The surety's contention is untenable. The counterbond contemplated in the rule is evidently an ordinary guaranty
where the sureties assume a subsidiary liability. This is not the case here, because the surety in the present case
bound itself "jointly and severally" (in solidum) with the defendant; and it is prescribed in Article 2059, paragraph 2, of
the Civil Code of the Philippines that excusion (previous exhaustion of the property of the debtor) shall not take place
"if he (the guarantor) has bound himself solidarily with the debtor". The rule heretofore quoted cannot be construed as
requiring that an execution against the debtor be first returned unsatisfied even if the bond were a solidary one; for a
procedural rule may not amend the substantive law expressed in the Civil Code, and further would nullify the express
stipulation of the parties that the surety's obligation should be solidary with that of the defendant.

319

A second reason against the stand of the surety and of the court below is that even if the surety's undertaking were
not solidary with that of the principal debtor, still he may not demand exhaustion of the property of the latter, unless he
can point out sufficient leviable property of the debtor within Philippine territory. There is no record that the appellee
surety has done so. Says Article 2060 of the Civil Code of the Philippines:
ART. 2060. In order that the guarantor may make use of the benefit of excussion, he must set it up against the creditor
upon the latter's demand for payment from him, and point out to the creditor available property of the debtor within
Philippine territory, sufficient to cover the amount of the debt.
A third reason against the thesis of appellee is that, under the rule and its own terms, the counter-bond is only
conditioned upon the rendition of the judgment. Payment under the bond is not made to depend upon the delivery or
availability of the property previously attached, as it was under Section 440 of the old Code of Civil Procedure. Where
under the rule and the bond the undertaking is to pay the judgment, the liability of the surety or sureties attaches upon
the rendition of the judgment, and the issue of an execution and its return nulla bona is not, and should not be, a
condition to the right to resort to the bond. 3
It is true that under Section 17 recovery from the surety or sureties should be "after notice and summary hearing in the
same action". But this requirement has been substantially complied with from the time the surety was allowed to move
for the quashal of the writ of execution and for the cancellation of their obligation.
WHEREFORE, the orders appealed from are reversed, and the court of origin is ordered to proceed with the
execution against the surety appellee, Times Surety & Insurance Co., Inc. Costs against said appellee.

320

G.R. No. 72005 May 29, 1987

PHILIPPINE BRITISH ASSURANCE CO., INC., petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT; SYCWIN COATING & WIRES, INC., and DOMINADOR
CACPAL, CHIEF DEPUTY SHERRIF OF MANILA, respondents.

GANCAYCO, J.:
This is a Petition for Review on certiorari of the Resolution dated September 12, 1985 of the Intermediate Appellate
Court in AC-G.R. No. CR-05409 1 granting private respondent's motion for execution pending appeal and ordering the
issuance of the corresponding writ of execution on the counterbond to lift attachment filed by petitioner. The focal
issue that emerges is whether an order of execution pending appeal of a judgment maybe enforced on the said bond.
In the Resolution of September 25, 1985 2 this Court as prayed for, without necessarily giving due course to the
petition, issued a temporary restraining order enjoining the respondents from enforcing the order complaint of.
The records disclose that private respondent Sycwin Coating & Wires, Inc., filed a complaint for collection of a sum of
money against Varian Industrial Corporation before the Regional Trial Court of Quezon City. During the pendency of
the suit, private respondent succeeded in attaching some of the properties of Varian Industrial Corporation upon the
posting of a supersedeas bond. 3 The latter in turn posted a counterbond in the sum of P1,400, 000.00 4 thru
petitioner Philippine British Assurance Co., Inc., so the attached properties were released.
On December 28, 1984, the trial court rendered a Decision, the dispositive portion of which reads:
WHEREFORE, plaintiff's Motion for Summary Judgment is hereby GRANTED, and judgment is rendered in favor of
the plaintiff and against the defendant Varian Industrial Corporation, and the latter is hereby ordered:
1.
To pay plaintiff the amount of P1,401,468.00, the principal obligation with 12% interest per annum from the
date of default until fully paid;
2.

To pay plaintiff 5% of the principal obligation as liquidated damages;

3.

To pay plaintiff P30,000.00 as exemplary damages;

4.

To pay plaintiff 15% of P1,401,468.00, the principal obligation, as and for attorney's fees; and

5.

To pay the costs of suit.

Accordingly, the counterclaim of the defendant is hereby DISMISSED for lack of merit.
SO ORDERED. 5
Varian Industrial Corporation appealed the decision to the respondent Court. Sycwin then filed a petition for execution
pending appeal against the properties of Varian in respondent Court. Varian was required to file its comment but none
was filed. In the Resolution of July 5, 1985, respondent Court ordered the execution pending appeal as prayed for. 6
However, the writ of execution was returned unsatisfied as Varian failed to deliver the previously attached personal
properties upon demand. In a Petition dated August 13, 1985 filed with respondent Court Sycwin prayed that the
surety (herein petitioner) be ordered to pay the value of its bond. 7 In compliance with the Resolution of August 23,
1985 of the respondent Court herein petitioner filed its comment. 8 In the Resolution of September 12, 1985, 9 the
respondent Court granted the petition. Hence this action.
It is the submission of private respondent Sycwin that without a previous motion for reconsideration of the questioned
resolution, certiorari would not lie. While as a general rule a motion for reconsideration has been considered a
condition sine qua non for the granting of a writ of certiorari, this rule does not apply when special circumstances
warrant immediate or more direct action. 10 It has been held further that a motion for reconsideration may be
dispensed with in cases like this where execution had been ordered and the need for relief was extremely urgent. 11
The counterbond provides:
WHEREAS, in the above-entitled case pending in the Regional Trial Court, National Capital Judicial Region, Branch
LXXXV, Quezon City, an order of Attachment was issued against abovenamed Defendant;

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WHEREAS, the Defendant, for the purpose of lifting and/or dissolving the order of attachment issued against them in
the above-en-titled case, have offered to file a counterbond in the sum of PESOS ONE MILLION FOUR HUNDRED
THOUSAND ONLY (P1,400,000.00), Philippine Currency, as provided for in Section 5, Rule 57 of the Revised Rules
of Court.
NOW, THEREFORE, we, VARIAN INDUSTRIAL CORPORATION, as Principal and the PHILIPPINE BRITISH
ASSURANCE COMPANY, INC., a corporation duly organized and existing under and by virtue of the laws of the
Philippines, as Surety, in consideration of the above and of the lifting or dissolution of the order of attachment, hereby
jointly and severally, bind ourselves in favor of the above Plaintiff in the sum of PESOS ONE MILLION FOUR
HUNDRED THOUSAND ONLY (P1,400,000.00), Philippine Currency, under the condition that in case the Plaintiff
recovers judgment in the action, and Defendant will, on demand, re-deliver the attached property so released to the
Officer of the Court and the same shall be applied to the payment of the judgment, or in default thereof, the defendant
and Surety will, on demand, pay to the Plaintiff the full value of the property released.
EXECUTED at Manila, Philippines, this 28th day of June, 1984. 12
Sections 5, 12, and 17 of Rule 57 of the Revised Rules of Court also provide:
SEC. 5. Manner of attaching property. The officer executing the order shall without delay attach, to await judgment
and execution in the action, all the properties of the party against whom the order is issued in the province, not exempt
from execution, or so much thereof as may be sufficient to satisfy the applicant's demand, unless the former makes a
deposit with the clerk or judge of the court from which the order issued, or gives a counter-bond executed to the
applicant, in an amount sufficient to satisfy such demand besides costs, or in an amount equal to the value of the
property which is about to be attached, to secure payment to the applicant of any judgement ment which he may
recover in the action. The officer shall also forthwith serve a copy of the applicant's affidavit and bond, and of the order
of attachment, on the adverse party, if he be found within the province.
SEC. 12.
Discharge of attachment upon giving counterbond. At any time after an order of attachment has
been granted, the party whose property has been attached, or the person appearing on his behalf, may, upon
reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of the court in which the
action is pending, for an order discharging the attachment wholly or in part on the security given. The judge shall, after
hearing, order the discharge of the attachment if a cash deposit is made, or a counter-bond executed to the attaching
creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the application is made, in an
amount equal to the value of the property attached as determined by the judge, to secure the payment of any
judgment that the attaching creditor may recover in the action. Upon the filing of such counter-bond, copy thereof shall
forthwith be served on the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance with
the provisions of this section the property attached, or the proceeds of any sale thereof, shall be delivered to the party
making the deposit or giving the counterbond aforesaid standing in place of the property so released. Should such
counterbond for any reason be found to be, or become, insufficient, and the party furnishing the same fail to file an
additional counterbond, the attaching creditor may apply for a new order of attachment.
SEC. 17.
When execution returned unsatisfied, recovery had upon bond. If the execution be returned
unsatisfied in whole or in part, the surety or sureties on any counter-bond given pursuant to the provisions of this rule
to secure the payment of the judgment shall become charged on such counter- bond, and bound to pay to the
judgement creditor upon demand, the amount due under the judgment, which amount may be recovered from such
surety or sureties after notice and summary hearing in the same action. (Emphasis supplied.)
Under Sections 5 and 12, Rule 57 above reproduced it is provided that the counterbond is intended to secure the
payment of "any judgment" that the attaching creditor may recover in the action. Under Section 17 of same rule it
provides that when "the execution be returned unsatisfied in whole or in part" it is only then that "payment of the
judgment shall become charged on such counterbond."
The counterbond was issued in accordance with the provisions of Section 5, Rule 57 of the Rules of Court as provided
in the second paragraph aforecited which is deemed reproduced as part of the counterbond. In the third paragraph it
is also stipulated that the counterbond is to be "applied for the payment of the judgment." Neither the rules nor the
provisions of the counterbond limited its application to a final and executory judgment. Indeed, it is specified that it
applies to the payment of any judgment that maybe recovered by plaintiff. Thus, the only logical conclusion is that an
execution of any judgment including one pending appeal if returned unsatisfied maybe charged against such a
counterbond.
It is well recognized rule that where the law does not distinguish, courts should not distinguish. Ubi lex non distinguish
nec nos distinguere debemos. 13 "The rule, founded on logic, is a corollary of the principle that general words and
phrases in a statute should ordinarily be accorded their natural and general significance. 14 The rule requires that a
general term or phrase should not be reduced into parts and one part distinguished from the other so as to justify its

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exclusion from the operation of the law. 15 In other words, there should be no distinction in the application of a statute
where none is indicated.16 For courts are not authorized to distinguish where the law makes no distinction. They
should instead administer the law not as they think it ought to be but as they find it and without regard to
consequences. 17
A corollary of the principle is the rule that where the law does not make any exception, courts may not except
something therefrom, unless there is compelling reason apparent in the law to justify it.18 Thus where a statute grants
a person against whom possession of "any land" is unlawfully withheld the right to bring an action for unlawful
detainer, this Court held that the phrase "any land" includes all kinds of land, whether agricultural, residential, or
mineral.19 Since the law in this case does not make any distinction nor intended to make any exception, when it
speaks of "any judgment" which maybe charged against the counterbond, it should be interpreted to refer not only to a
final and executory judgment in the case but also a judgment pending appeal.
All that is required is that the conditions provided for by law are complied with, as outlined in the case of Towers
Assurance Corporation v. Ororama Supermart, 20
Under Section 17, in order that the judgment creditor might recover from the surety on the counterbond, it is
necessary (1) that the execution be first issued against the principal debtor and that such execution was returned
unsatisfied in whole or in part; (2) that the creditor make a demand upon the surety for the satisfaction of the
judgment, and (3) that the surety be given notice and a summary hearing on the same action as to his liability for the
judgment under his counterbond.
The rule therefore, is that the counterbond to lift attachment that is issued in accordance with the provisions of Section
5, Rule 57, of the Rules of Court, shall be charged with the payment of any judgment that is returned unsatisfied. It
covers not only a final and executory judgement but also the execution of a judgment pending appeal.
WHEREFORE, the petition is hereby DISMISSED for lack of merit and the restraining order issued on September 25,
1985 is hereby dissolved with costs against petitioner.
SO ORDERED.

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G.R. No. L-28030

January 18, 1982

THE IMPERIAL INSURANCE, INC., petitioner,

vs.
HON. WALFRIDO DE LOS ANGELES, Judge of the Court of First Instance of Rizal, Quezon City Branch IV, ROSA V.
REYES, PEDRO V. REYES and CONSOLACION V. REYES, respondents.

FERNANDEZ, J.:
This is a petition for certiorari to review the decision of the Court of Appeals in CA-G.R. No. 38824-R promulgated on
July 19, 1967 entitled "The Imperial Insurance, Inc., petitioner vs. Hon. Walfrido de los Angeles, Judge of the Court of
First Instance of Rizal, Branch IV, Quezon City, et al, respondents," the dispositive part of which reads:
WHEREFORE, the instant petition is dismissed and the writ of preliminary injunction issued by the Court on January
31, 1967, is hereby dissolved, with costs against petitioner.
SO ORDERED. 1
As found by the Court of Appeals, the uncontroverted facts are:
It appears that herein private respondent Rosa V. Reyes is the plaintiff in Civil Case N. Q-8213 of the Court of First
Instance of Rizal, Branch IV, Quezon City, entitled, 'Rosa V. Reyes vs, Felicisimo V. Reyes, etc.,' where she obtained a
writ of preliminary attachment and, accordingly, levied upon all the properties of the defendant, Felicisimo V. Reyes, in
said case. The other two herein private respondents, namely, Pedro V. Reyes and Consolacion V. Reyes, are the
plaintiffs in Civil Case No. Q-5214 of the same court entitled, 'Pedro V. Reyes, etc.,' and likewise, obtained a writ of
preliminary attachment and, accordingly, levied upon all the properties of the defendant, Felicisimo V. Reyes, in said
case.
For the dissolution of the attachments referred to above, the herein petitioner, The Imperial Insurance, Inc., as surety,
and Felicisimo V. Reyes, as principal, posted a 'defendant's bond for dissolution of attachment' in the amount of
P60,000.00 in Civil Case No. Q-5213 and another bond of the same nature in the amount of P40,000.00 in Civil Case
No. Q-5214.
Civil Cases Nos. Q-5213 and 5214 were jointly tried and the decision therein rendered was in favor of the plaintiffs.
This decision was affirmed by this Court on appeal in cases CA-G.R. NOS. 33783-R and 33784-R. The decision of
this Court, having become final, the records of the cases were remanded to the Court of First Instance of Rizal,
Quezon City Branch, for execution of judgment.
Accordingly, on June 24, 1966, the Court below, presided by the herein respondent Judge, Hon. Walfrido de los
Angeles, issued the writs of execution of judgment in said cases. However, on August 20, 1966, the Provincial Sheriff
of Bulacan returned the writs of execution' unsatisfied in whole or in part'.
On September 9, 1966, private respondents filed a 'motion for recovery on the surety bonds'. Thereafter, said private
respondents, thru counsel, sent a letter of demand upon petitioner asking the latter to pay them the accounts on the
counter-bonds. On September 24, 1966, petitioner filed its 'opposition' to the private respondents "Motion for recovery
on the surety bonds'. Respondent Judge, in his order, dated November 10, 1966, rendered judgment against the
counter-bonds.
On November 15, 1966, private respondents filed an ex parte motion for writ of execution' without serving copy thereof
on petitioner.
In the meantime, on or about November 23 1966, petitioner filed a 'motion for reconsideration' of the order, dated
November 10, 1966. This motion was, however, denied by the respondent Judge on January 9, 1967.
On or about January 11, 1967, petitioner filed its 'notice of intention to appeal' from the final orders of the respondent
Judge, dated November 10, 1966 and January 9. 1967.
On January 19, 1967, the respondent Judge issued an order granting the issuance of the writ of execution against the
bonds riled by the petitioner (Exhibit J, petition). 2
On January 25, 1967, the petitioner filed a petition for certiorari with prayer for for preliminary injunction with the Court
of Appeals to restrain the enforcement of the writ of execution. 3

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The petition was given due course and on January 30, 1967 a writ of preliminary injunction was issued. 4 After the
parties had submitted their respective pleadings and memoranda in lieu of oral argument, the Court of Appeals
rendered the decision now under review.
The defendant, Felicisimo V. Reyes, in the abovementioned cases died during the pendency of the trial. He was duly
substituted by his surviving spouse, Emilia T. David, an administratrix of his intestate estate. 5
The petitioner assigns as errors allegedly committed by the Court of Appeals the following:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE RESPONDENT JUDGE COULD LEGALLY
ISSUE THE WRIT OF EXECUTION AGAINST THE PETITIONER AS SURETY IN A COUNTERBOND (BOND TO
DISSOLVE ATTACHMENT) ON THE BASIS OF AN EX-PARTE MOTION FOR EXECUTION WHICH WAS NEITHER
SERVED UPON THE SURETY NOR SET FOR HEARING.
II
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE PLAINTIFF WHO OBTAINED A JUDGMENT
AGAINST THE DEFENDANT MAY LEGALLY CHOOSE 'TO GO DIRECTLY' AFTER THE SURETY IN A
COUNTERBOND WITHOUT PRIOR EXHAUSTION OF THE DEFENDANTS PROPERTIES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE 'JUDGMENT' RENDERED AGAINST
THE MENTIONED COUNTERBONDS IS A 'FINAL ORDER' IN THE CONTEMPLATION OF SECTION 2, RULE 41 OF
THE REVISED RULES OF COURT AND, THEREFORE, APPEALABLE.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT IN THE ABSENCE OF AN EXPRESS
PROVISION OF THE REVISED RULES OF COURT, THE PROCEDURE FOLLOWED BY THE SHERIFF IN THE
EXECUTION OF THE JUDGMENT ON THE 'SURVIVING CLAIMS', WHEN THE DEFENDANT DIED DURING THE
PENDENCY OF THE TRIAL OF HIS CASE AND BEFORE JUDGMENT WAS DULY SUBSTITUTED BY THE COURT
APPOINTED ADMINISTRATRIX OF HIS ESTATE, SHOULD HAVE BEEN THE SAME AS THE PROCEDURE SET
OUT IN SECTION (f), RULE 57 RESPECTING THE EXECUTION OF A WRIT OF PRELIMINARY ATTACHMENT OF
PROPERTIES IN CUSTODIALEGIS. 6
Anent the first error, the petitioner contends that the Court of Appeals erred in holding that the respondent judge could
legally issue the writ of execution against the petitioner as surety in a counterbond (bond to dissolve attachment) on
the basis of an ex parte motion for execution which was allegedly never served upon the surety nor set for hearing.
This contention is devoid of merit.
The counterbonds filed to lift the writs of attachment executed by the herein petitioner, The Imperial Insurance, Inc., for
and in behalf of the deceased defendant Felicisimo V. Reyes in favor of the plaintiffs, private respondents herein Rosa
V. Reyes and Consolacion V. Reyes in Civil Case No. Q-5214 docketed with the Court of First Instance of Rizal,
Branch IV, Quezon City, are clearly the bonds contemplated under Sec. 17, Rule 57 of the Rules of Court which
provides:
Sec. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be returned unsatisfied in
whole or in part, the surety or sureties on any counterbond given pursuant to the provisions of this rule to secure the
payment of the judgment shall become charged on such counter-bond, and bound to pay to the judgment creditor
upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties
after notice and summary hearing in the same action.
This section allows the counterbond filed to lift an attachment to be charged only after notice and summary hearing in
the same action.
The records show that the notice and hearing requirement was substantially complied with in the instant case.
Prior to the filing of the ex parte motion for a writ of execution, the respondents filed a motion for recovery on the
surety bonds where the petitioner was duly notified and the said motion was heard on September 24, 1966. 7
Moreover, on November 23, 1966 the petitioner filed a motion for reconsideration of the order dated November 10,

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1966 rendering judgment against the petitioner on its counter-bonds in the amount of P60,000.00 in Civil Case No. Q5213 and P40,000.00 in Civil Case No. Q-5214. 8 The respondent judge set the hearing of the ex parte motion for writ
of execution together with the motion for reconsideration of the order dated November 10, 1966 on December 17,
1966 at 8:30 o'clock in the morning. 9 The petitioner received the notice of the said hearing on December 9, 1966 as
evidenced by Registry Return Receipt No. 40122. 10 On January 9, 1967, the respondent Judge issued an order
denying the motion for reconsideration dated November 23, 1966 for lack of merit. 11 in an order dated January 19,
1967, the motion for writ of execution was granted by the respondent judge. 12
It is thus clear from indubitable documents on record that the requirements of notice and hearing had been
satisfactorily complied with by the respondents. The first error assigned is overruled.
The petitioner asserts that the Court of Appeals gravely erred in holding that the plaintiff who obtained judgment
against the defendant may legally choose "to go directly" after the surety in a counterbond without prior exhaustion of
the defendant's properties. This contention is likewise not meritorious.
Although the counterbond contemplated in the aforequoted Sec. 17, Rule 57, of the Rules of Court is an ordinary
guaranty where the sureties assume a subsidiary liability, the rule cannot apply to a counterbond where the surety
bound itself "jointly and severally" (in solidum) with the defendant as in the present case. The counterbond executed
by the deceased defendant Felicisimo V. Reyes, as principal, and the petitioner, The Imperial Insurance, Inc., as
solidary quarantor to lift the attachment in Civil Case No. Q-5213 is in the following terms:
WHEREFORE, WE, FELICISIMO V. REYES, of legal age, Filipino, and with postal address at San Jose, San Miguel,
Bulacan and/or 1480 Batangas Street, Sta. Cruz, Manila, as PRINCIPAL and THE IMPERIAL INSURANCE, INC., a
corporation duly organized and existing under the laws of the Philippines, as SURETY, in consideration of the
dissolution of said attachment, hereby JOINTLY AND SEVERALLY, bind ourselves in the sum of SIXTY THOUSAND
PESOS ONLY (P60,000.00), Philippine Currency, under the condition that in case the plaintiff recovers judgment in the
action, the defendant shall pay the sum of SIXTY THOUSAND PESOS (P60,000.00), Philippine Currency, being the
amount release for attachment, to be applied to the payment of the judgment, or in default thereof, the Surety will, on
demand, pay to the plaintiff said amount of SIXTY THOUSAND PESOS ONLY (P60,000.00), Philippine Currency.
(Capitalizations supplied).
Manila, Philippines, June 30,1960. 13
The counterbond executed by the same parties in Civil Case No. Q-5214, likewise states.
WHEREFORE, we, FELICISIMO V. REYES, of legal age, Filipino, and with postal address at San Jose, San Miguel,
Bulacan, and/or 1480 Batangas Street, Sta. Cruz, Manila, as PRINCIPAL and THE IMPERIAL INSURANCE, INC., a
corporation duly organized and existing under the laws of the Philippines, as SURETY, in consideration of the
dissolution of said attachment, hereby JOINTLY and SEVERALLY, bind ourselves in the sum of FORTY THOUSAND
PESOS ONLY (P40,000.00), Philippine Currency, under the condition that in case the plaintiff recover judgment in the
action the defendant shall pay the sum of FORTY THOUSAND PESOS ONLY (P40,000.00), Philippine Currency,
being the amount released for attachment, to be applied to the payment of the judgment, or in default thereof, the
Surety will, on demand, pay to the plaintiffs said amount of FORTY THOUSAND PESOS ONLY (P40,000.00),
Philippine Currency. (Emphasis supplied).
Manila, Philippines, June 30th, 1960. 14
Clearly, the petitioner, the Imperial Insurance, Inc., had bound itself solidarily with the principal, the deceased
defendant Felicisimo V. Reyes. In accordance with Article 2059, par. 2 of the Civil Code of the Philippines, 15
excussion (previous exhaustion of the property of the debtor) shall not take place "if he (the guarantor) has bound
himself solidarily with the debtor." Section 17, Rule 57 of the Rules of Court cannot be construed that an "execution
against the debtor be first returned unsatisfied even if the bond were a solidary one, for a procedural rule may not
amend the substantive law expressed in the Civil Code, and further would nullify the express stipulation of the parties
that the surety's obligation should be solidary with that of the defendant." 16
Hence the petitioner cannot escape liability on its counter-bonds based on the second error assigned.
As regards the third error, the petitioner submits that the Court of Appeals erred in not holding that the order dated
November 10, 1966 rendering judgment against the counter-bonds, as well as the order dated January 9, 1967,
denying the motion for reconsideration thereof, and the order of the writ of execution dated January 19, 1967 are final
and appealable in accordance with Sec. 2, Rule 41 of the Rec. Rules of Court. This submission is also without merit.

326

To recover against the petitioner surety on its counter-bonds it is not necessary to file a separate action. Recovery and
execution may be had in the same Civil Cases Nos. Q-5213 and Q-5214, as sanctioned by Sec. 17, Rule 57, of the
Revised Rules of Court.
The decision in Civil Cases Nos. Q-5213 and Q-5214, having become final, the respondent judo issued the writs of
execution in said cases. On August 20, 1966, the Provincial Sheriff of Bulacan returned the writs of execution
"unsatisfied in whole or in part." 17
Sec. 12, Rule 57 of the Revised Rules of Court 18 specifies that an attachment may be discharged upon the making
of a cash deposit or filing a counterbond "in an amount equal to the value of the property attached as determined by
the judge"; and that upon filing the counterbond "the property attached shall be delivered to the party making the
deposit or giving the counterbond or the person appearing in his behalf, the deposit or counterbond standing in place
of the property so released."
The counter-bonds merely stand in place of the properties so released. They are mere replacements of the properties
formerly attached, and just as the latter may be levied upon after final judgment in the case in order to realize the
amount adjudged so is the liability of the counter sureties ascertainable after the judgment has become final. 19
The judgment having been rendered against the defendant, Felicisimo V. Reyes, the counter-bonds given by him and
the surety, The Imperial Insurance, Inc., under Sec. 12, Rule 57 are made liable after execution was returned
unsatisfied. Under the said rule, a demand shall be made upon the surety to pay the plaintiff the amount due on the
judgment, and if no payment is so made, the amount may be recovered from such surety after notice and hearing in
the same action. A separate action against the sureties is not necessary. 20
In the present case, the demand upon the petitioner surety was made with due notice and hearing thereon when the
private respondents filed the motion for recovery on the surety bonds dated September 9, 1966 and to which the
petitioner filed their opposition dated September 24, 1966. 21
Therefore, all the requisites under Sec. 17, Rule 57, being present, namely: (1) the writ of execution must be returned
unsatisfied, in whole or in part; (2) the plaintiff must demand the amount due under the judgment from the surety or
sureties, and (3) notice and hearing of such demand although in a summary manner, complied with, the liability of the
petitioner automatically attaches.
In effect, the order dated November 10, 1966 rendering judgment against the counter-bonds was a superfluity. The
respondent judge could have issued immediately a writ of execution against the petitioner surety upon demand.
As correctly held by the Court of Appeals:
In fact, respondent Judge could have even issued a writ of execution against petitioner on its bond immediately after
its failure to satisfy the judgment against the defendant upon demand, since liability on the bond automatically
attaches after the writ of execution against the defendant was returned unsatisfied as held in the case of Tijan vs.
Sibonghanoy, CA-G.R. No. 23669-R, December 11, 1927. 22
Moreover, the finality and non-appealability of the order dated November 10, 1966 is made certain and absolute with
the issuance of the order of execution dated January 19, 1967 23 upon the filing of the ex parte motion for writ of
execution 24 of which the petitioner was duly notified by the respondent Judge and which was duly heard. 25 The
general rule is that an order of execution is not appealable, otherwise a case would never end. The two exceptions 26
to this rule are: (1) where the order of execution varies the tenor of the judgment; and (2) when the terms of the
judgment are not very clear, and there is room for interpretation. The case at bar does not fall under either exception.
There is no showing that the order of execution varies the tenor of the judgment in Civil Cases Nos. Q-5213 and Q5214, nor of the order dated November 10, 1966, but is in fact, in consonance therewith and the terms of the judgment
are clear and definite, therefore, the general rule of non-appealability applies.
It is no longer necessary to discuss the fourth error assigned because of this Court's finding that the liability expressly
assumed by the petitioner on the counter-bonds is solidary with the principal debtor, the deceased defendant,
Felicisimo V. Reyes. As a solidary guarantor, the petitioner, the Imperial Insurance, Inc., is liable to pay the amount
due on such counter-bonds should the creditors, private respondents herein, choose to go directly after it. 27
Under the law and under their own terms, the counter-bonds are only conditioned upon the rendition of the judgment.
As held by this Court in the aforecited case of Luzon Steel Corporation vs. Sia 28 "where under the rule and the bond
the undertaking is to pay the judgment, the liability of the surety or sureties attaches upon the rendition of the
judgment, and the issue of an execution and its return nulla bona is not, and should not be a condition to the right to
resort to the bond." Thus, it matters not whether the Provincial Sheriff of Bulacan, in making the return of the writ of
execution served or did not serve a copy thereof with notice of attachment on the administratrix of the intestate estate

327

of Felicisimo V. Reyes and filed a copy of said writ with the office of the clerk of court with notice in accordance with
See. 7 (f), Rule 57 of the Revised Rules of Court. The petitioner surety as solidary obligor is liable just the same.
WHEREFORE, the decision of the Court of Appeals promulgated on July 19,1967 in CA-G.R. NO. 38824-R is affirmed
and the order of the respondent judge dated January 19, 1967 and all writs or orders issued in consequence or in
pursuance thereof are also affirmed. The court of origin is hereby ordered to proceed with the execution against the
petitioner surety, the Imperial Insurance Inc., with costs against said petitioner.
SO ORDERED.

328

G.R. No. L-16113

October 31, 1963

VICTOR VADIL, JOAQUIN VADIL, VICENTE VADIL, ESTEBAN VADIL, EUGENIO VADIL and JUAN GALIBOSO,
petitioners,
vs.
HON. JOSE R. DE VENECIA, Judge of the Court of First Instance of NUEVA VIZCAYA, MIGUEL M. GUEVARA,
Provincial Sheriff Ex-Oficio for Nueva Vizcaya, and PABLO ESPAOLA ESTATE, INC., respondents.
Primicias and Del Castillo for petitioners.
F. S. Galutera for respondents.
REGALA, J.:
This is a petition for certiorari to review the order dated August 5, 1959 of the Court of First Instance of Nueva Vizcaya,
directing the execution of petitioners' bond.
On April 13, 1953, Pablo Espaola Estate, Inc. filed in the Court of First Instance of Nueva Vizcaya an action against
Raymundo Guinsatao for the recovery of the sum of P9,360. It applied for a writ of preliminary attachment on the
ground that Guinsatao had removed or was about to remove his properties with intent to defraud his creditors.
Guinsatao denied the allegations of the complaint and expressed willingness to file a counterbond to discharge the
writ of preliminary attachment applied for by Pablo Espaola Estate, Inc. Whereupon, the court ordered him "to file a
counterbond within 5 days from the receipt of this order, in the amount of P9,360.00 to secure the payment to the
plaintiff of any judgment he may recover in the present case."
Guinsatao filed a bond entitled "Defendant's Bond" which reads:
Whereas, in an action now pending in the Court of First Instance of the Province of Nueva Vizcaya, First Judicial
District, wherein PABLO ESPAOLA ESTATE, INC., is plaintiff, and RAYMUNDO GUINSATAO defendant, the abovenamed plaintiff has applied for an order of a Writ of Preliminary Attachment against RAYMUNDO GUINSATAO.
And whereas, the Law allows the plaintiff certain securities:
Know all men by these presents: That RAYMUNDO GUINSATAO of Mabasa, Dupax, Nueva Vizcaya as principal and
ESTEBAN VADIL, EUGENIO VADIL, JUAN GALIBOSO, JOAQUIN VADIL, VICTOR VADIL and VICENTE VADIL all of
Mabasa, Dupax, Nueva Vizcaya as sureties, are hereby held and in the sum of NINE THOUSAND THREE HUNDRED
SIXTY (P9,360.000) PESOS, for which payment well and truly to be made we bind ourselves, our heirs, and legal
representatives jointly and severally, firmly by these presents.
The condition of this obligation is as follows:
To pay all the costs which may be awarded to the defendant, and all damages that the defendant may suffer by reason
of the Writ of Preliminary Attachment should it be finally adjudged that the same was done without legitimate cause.
Then this obligation shall be null and void, otherwise of full force and virtue.
(Sgd.) JOAQUIN VADIL
(Sgd.) RAYMUNDO GUINSATAO
(Sgd.) VICTOR VADIL
(Sgd.) ESTEBAN VADIL
(Sgd.) VICENTE VADIL
(Sgd.) EUGENIO VADIL
(Sgd.) JUAN GALIBOSO
The case was then tried, after which the trial court rendered judgment ordering Guinsatao to pay respondent Pablo
Espaola Estate, Inc. the sum of P9,360 plus legal interest. After the decision became final, execution followed but
Guinsatao had no sufficient property. And so, on motion of Pablo Espaola Estate, Inc., the lower court ordered the
execution of the bond. Hence, this petition.

329

While this case was pending in this Court, petitioner Joaquin Vadil moved for the dismissal of the case as him on the
ground that he had not engaged the services of Attorneys Primicias & Del Castillo. While joining the motion to dismiss
the case as to Joaquin Vadil, Atty. Teodoro Regino of the law firm of Primicias & Del Castillo denied Joaquin's
allegation and asked that Joaquin Vadil be cited for contempt for allegedly telling falsehood.
As prayed for by Joaquin Vadil, this case is dismiss as to him. There is no ground in the motion to cite Joaquin Vadil
for contempt.
We now come to the merits of this case. Petition contend that they are not liable to the plaintiff in the trial court
because their undertaking under the bond was to pay "all the costs which may be awarded to the defendant, and 23
all damages that the defendant may suffer by reason of the Writ of Preliminary Attachment should it be finally
adjudicated that the same was done without legitimate cause" rather than to pay the judgment that plaintiff might
recover.
This is a case where, instead of a bond conditioned the payment to the plaintiff of any judgment which may recover in
an action, as the trial court directed, the bond filed provides that the sureties will pay
... all the costs which may be awarded to the defendant, and all damages that the defendant may suffer by reason the
Writ of Preliminary Attachment should it be finally a judged that the same was done without legitimate cause.
thus raising doubt as to whether the petitioners, as sureties, understood the import of the order of the court.
This doubt, as to whether petitioners understood the court order, is further shown by the fact that under Section 2 of
Rule 59 of the Rules of Court, the issuance an order of attachment may be prevented if the defend "makes deposit or
gives bond ... in an amount sufficient to satisfy such demand, besides costs, or in an amount equal to the value of the
property which is to be attached. Now, if, as alleged in the motion of Pablo Espaola Estate Inc., only P150 was
realized from the sale of Guinsatao's property, it is not likely that petitioners would agree to stand surety for P9,360 for
the defendant, whose properties (worth only P150) stood in imminent danger of attachment.
We are inclined to resolve the doubt in favor of petitioners. As this Court held in People v. De la Cruz, 49 O.G. No. 8,
3389, sureties are favorites of the law. Assuming an obligation without any thought of material gain, except in some
instances, all presumptions are indulged in their favor. And in Pacific Tobacco Co. v. Lorenzana, et al., G.R. No. L8088, October 31, 1957, this Court said in amplification:
... The rationale of this doctrine is reasonable; an accommodation surety acts without motive of pecuniary gain and,
hence, should be protected against unjust pecuniary impoverishment by imposing on the principal duties akin to those
of a fiduciary. This cannot be said of compensated corporate surety which is a business association organized for the
purpose of assuming classified risks in large numbers, for profit and on an impersonal basis, through the medium of
standardized written contractual forms drawn by its own representatives with the primary aim of protecting its own
interests (See Stearn's The Law of Suretyship, 4th ed. 402-403).
We hold therefore that petitioners are not liable to Pablo Espaola Estate, Inc. on their bond.
Another reason in support of the conclusion reached herein is that actually there was no writ of attachment issued by
the Court. It is to be noted that the obligation to be assumed by the bondsmen is premised upon the issuance of such
a writ.
We feel it unnecessary to pass upon the other assignments of error.
WHEREFORE, the petition is granted; the writ of preliminary injunction is made permanent and the order dated
August 5, 1959 and the writ of execution dated September 4, 1959 are hereby set aside, without pronouncement as to
costs.

330

G.R. No. L-29723

July 14, 1988

ANTONIO ZARAGOZA, plaintiff-appellee,

vs.
MARIA ANGELA FIDELINO and/or "JOHN DOE," defendants MABINI INSURANCE & FIDELITY CO., INC., suretyappellant.

NARVASA, J.:
Involved in this appeal is no more than the procedure to hold a surety hable upon a counter-bond posted by it for the
release of an automobile seized from a defendant in a replevin action under a writ issued by the Trial Court at the
plaintiffs instance.
The suit for the replevy of the car was brought by Antonio Zaragoza in the Court of First Instance at Quezon City 1
against Ma. Angela Fidelino and/or John Doe. His complaint alleged that the car had been sold to Fidelino but the
latter had failed to pay the price in the manner stipulated in their agreement. The car was taken from Fidelino's
possession by the sheriff on the strength of a writ of delivery 2 but was promptly returned to her on orders of the Court
when a surety bond for the car's releases 3 was posted in her behalf "by Mabini Insurance & Fidelity Co., Inc.
The action resulted in a judgment 4 for the plaintiff the dispositive part of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter to
pay to the plaintiff the sum of P19,417.46, representing the balance of the purchase price of the car sold including
interest thereon, collection charges, notarial fees and sheriffs fees and expenses in conn with the recovery of the
vehicle sold; to pay liquidated damage in the amount of P6,471.84 equivalent to 33 1/3 % of the balance outstanding
and to pay the costs of this suit.
Within the reglementary period for taking an appeal, Zaragoza moved for the amendment of the decision so as to
include the surety, Mabini Insurance & Fidelity Co., Inc., as a party solidarily liable with the defendant for the payment
of the sums awarded in the judgment. 5 Despite having been duly furnished with copies of the motion and the notice
of hearing, neither Fidelino nor the surety company filed any opposition to the motion, nor did either of them appear at
the hearing thereof. 6 The Trial Court deemed the motion meritorious and granted it. Its Order of April 16, 1968 7
decreed the following:
WHEREFORE, the motion is hereby granted, and the dispositive portion of the decision in this case is hereby
amended to read as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering defendant
Maria Angela Fidelino and her surety, the Mabini Insurance & Fidelity Co., Inc., to pay jointly and severally to the
plaintiff the sum of P19,417.46, representing the balance of the purchase price of the car sold, including interests
thereon, collection charges, notarial fees and sheriffs fees and expenses in connection with the recovery of the vehicle
sold, liquidated damages in the amount of P6,471.84 equivalent to 33 1/3% of the balance outstanding and to pay the
costs of this suit.
No motion for reconsideration was filed or appeal taken by the defendant Fidelino as regards either the original or the
amended decision. It was the surety which presented a motion for reconsideration, and upon its denial, appealed to
this Court. 8 It ascribes to the Court a quo, as might be expected, reversible error in amending the judgment in the
manner just described. It argues that the Lower Court never acquired jurisdiction over it since no summons was ever
served on it, its filing of a counter-bond not being equivalent to voluntary submission to the Court's jurisdiction;
Zaragoza failed to make a proper application with notice before finality of the decision as provided by Section 20, Rule
57 of the Rules of Court; and when the order amending the judgment was promulgated, the judgment had already
become final, the running of the period of appeal not having been suspended by Zaragoza's motion to amend
decision, 9 and so, the Court no longer had authority to amend it on April 16, 1968.
The appellant surety deposits quite correctly, that the situation at bar is governed by Section 10, Rule 60, in relation to
Section 20, Rule 57, of the Rules of Court. Section 10, Rule 60, provides as follows:
SEC. 10. Judgment to include recovery against sureties. The amount, if any, to be awarded to either party upon any
bond filed by the other in accordance with the provisions of this rule, shag be claimed, ascertained, and granted under
the same procedure as prescribed in section 20 of Rule 57.
And Section 20, Rule 57 reads as follows:

331

SEC. 20. Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party
against whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor,
any damages resulting from the attachment. Such damages may be awarded only upon application and after proper
hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is
perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or
sureties, setting forth the facts showing his right to damages and the amount thereof
xxx

xxx

xxx 10

It would seem at first blush that Section 20, Rule 57 above quoted is not relevant. Its title and first sentence speak [1]
of an illegal attachment, and [2] of a judgment "in favor of the party against whom (said illegal) attachment was
issued." In the case at bar, the writ of delivery was not illegal; and the judgment was for, not against, the party in
whose favor the writ of delivery was issued. In other words, it would appear that for Section 20, Rule 57 to apply to the
instant action," 11 the judgment should have been "in favor of" defendant Fidelino (the party "against whom" the writ of
delivery was issued). This however was not the case. The judgment was in fact against, NOT in favor of Fidelino.
It thus sums indeed that the first sentence of Section 20 precludes recovery of damages by a party against whom an
attachment is issued and enforced if the judgment be adverse to him. This is not however correct. Although a party be
adjudged liable to another, ff it be established that the attachment issued at the latter's instance was wrongful and the
former had suffered injury thereby, recovery for damages may be had by the party thus prejudiced by the wrongful
attachment, even if the judgment be adverse to him. Slight reflection will show the validity of this proposition. For it is
entirely possible for a plaintiff to have a meritorious cause of action against a defendant but have no proper ground for
a preliminary attachment. In such a case, if the plaintiff nevertheless applies for and somehow succeeds in obtaining
an attachment, but is subsequently declared by final judgment as not entitled thereto, and the defendant shows that
he has suffered damages by reason of the attachment, there can be no gainsaying that indemnification is justly due
the latter. So has this Court already had occasion to rule, in Baron v. David, 51 Phil. 1, and Javellana v. D.O. Plaza
Enterprises, 32 SCRA 26].
Be all this as it may, the second and third sentences of Section 20, Rule 57, in relation to Section 10, Rule 60, are
unquestionably relevant to the matter of the surety's liability upon a counter-bond for the discharge of a writ of delivery
in a replevin suit. 12 Under Section 10, Rule 60 (which makes reference "to either party upon any bond filed by the
other in accordance with the provisions of this rule" [60]), the surety's liability for damages upon its counter-bond
should "W claimed, ascertained, and granted under the same procedure as prescribed in section 20 of Rule 57; 13
and andd section 20 pertinently decrees that '(s)uch damages may be awarded only upon application and after proper
hearing, and shall be included in the final judgment .. (which means that the (application must be filed before the trial
or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and
his surety or sureties, setting forth the facts showing his right to damages and the amount thereof." Stated otherwise,
to hold a surety on a counter-bond liable, what is entailed is (1) the filing of an application therefor with the Court
having jurisdiction of the action; (2) the presentation thereof before the judgment becomes executory (or before the
trial or before appeal is perfected); (3) the statement in said application of the facts showing the applicant's right to
damages and the amount thereof, (4) the giving of due notice of the application to the attaching creditor and his surety
or sureties; and (5) the holding of a proper hearing at which the attaching creditor and the sureties may be heard on
the application. These requisites apply not only in cases of seizure or delivery under Rule 60, but also in cases of
preliminary injunctions under Rule 58, 14 and receiverships under Rule 59. 15
It should be stressed, however, that enforcement of a surety's liability on a counter-bond given for the release of
property seized under a writ of preliminary attachment is governed, not by said Section 20, but by another specifically
and specially dealing with the matter; Section 17 of Rule 57, which reads as follows:
SEC. 17. When execution returned unsatiated, recovery had upon bond. If the execution be returned unsatisfied in
whole or in part, the surety or sureties on any counter-bond given pursuant to the provisions of this rule to secure the
payment of the judgment shall become charged on such counter-bond, and bound to pay to the judgment creditor
upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties
after notice and summary hearing in the same action."
The record shows that the appellant surety company bound itself "jointly and severally" with the defendant Fidelino "in
the sum of PESOS FORTY EIGHT THOUSAND ONLY (P48,000.00), Philippine Currency, which is double the value of
the property stated in the affidavit of the plaintiff, for the delivery thereof if such delivery is adjudged, or for the
payment of such sum to him as may be recovered against the defendant and the costs of the action. 16
This being so, the appellant surety's liability attached upon the promulgation of the verdict against Fidelino. All that
was necessary to enforce the judgment against it was, as aforestated, an application therefor with the Court, with due
notice to the surety, and a proper hearing, i.e., that it be formally notified that it was in truth being made responsible for

332

its co-principal's adjudicated prestation (in this case, the payment of the balance of the purchase price of the
automobile which could no longer be found and therefore could not be ordered returned), 17 and an opportunity, at a
hearing called for the purpose, to show to the Court why it should not be adjudged so responsible. A separate action
was not necessary; it was in fact proscribed. 18 And again, the record shows substantial compliance with these basic
requirements, obviously imposed in deference to due process.
Appellant surety undoubtedly received copy of Zaragoza's Motion to Amend Decision. 19 That motion made clear its
purposethat the decision "be amended, or an appropriate order be issued, to include .. (the surety) as a party jointly
and severally liable with the defendant to the extent of the sums awarded in the decision to be paid to plaintiff'-as well
as the basis thereof-the counter-bond filed by it by the explicit terms of which it bound itself "jointly and severally (with
the defendant) .. for the payment of such sum to him (plaintiff) as may be recovered against the defendant and the
cost of the action." The motion contained, at the foot thereof, a "notice that on Saturday, March 23, 1968, at 8:30 a.m.,
or as soon thereafter as the matter may be heard, the .. (plaintiffs counsel would) submit the foregoing motion for the
consideration of the Court." And likewise indubitable is the fact that, as the Court a quo has observed, "neither ..
Fidelinos counsel nor the surety company filed any opposition to said motion, nor did they appear in the hearing of the
motion on March 23, 1968 .. (for which reason) the motion was deemed submitted for resolution." 20 The surety's
omission to appear at the hearing despite notice of course constituted a waiver of the right to be heard on the matter.
The surety's theory that never having been served with summons, it never came under the Lower Court's jurisdiction,
is untenable. The terms of the counter-bond voluntarily filed by it in defendant's behalf leave no doubt of its assent to
be bound by the Court's adjudgment of the defendant's liability, i.e., its acceptance of the Court's jurisdiction. For in
that counterbond, it implicitly prayed for affirmative relief; the release of the seized car, in consideration of which it
explicitly bound itself solidarily with said defendant to answer for the delivery of the car subject of the action "if such
delivery is adjudged," i.e., commanded by the Court's judgment, or "for the payment of such sum as may be recovered
against the defendant and the costs of the action," the reference to a possible future judgment against the defendant,
and necessarily against itself, being certain and unmistakable. The filing of that bond was clearly an act of voluntary
submission to the Court's authority, which is one of the modes for the acquisition of jurisdiction over a party. 21
The same theory as that espoused by appellant surety in this case was, in substance, passed upon and declared to
be without merit in a 1962 decision of this Court, Dee v. Masloff. 22 There, a surety on a counter-bond given to release
property from receivership, also sought to avoid liability by asserting that it was not a party to the case, had never
been made a party, and had not been notified of the trial. The Court overruled the contention, and upheld the propriety
of the amendment of the judgment which ordered the appellant surety company to pay to the extent of its bond and
jointly and severally with defendant the judgment obligation. The Court ruled that since such "amended judgment ..
(had been) rendered after the appellant surety company as party jointly and severally liable with the defendant .. for
the damages already awarded to the appellees, to which the appellant surety company filed its "Opposition" and
"Rejoinder" to the "Reply to Opposition filed by the appellees, without putting in issue the reasonableness of the
amount awarded for damages but confining itself to the defense in avoidance of liability on its bond that it was not a
party to the case and never made a party therein and was not notified of the trial of the case, and that the appellees
were guilty of laches, the requirement of hearing was fully satisfied or complied with; .. (in any case,) appellant surety
company never prayed for an opportunity to present evidence in its behalf."
The appellant surety's last argument that by the time the Court amended its decision, the decision had already
become final, and therefore unalterable, is also untenable. The motion for amendment of the decision was
unquestionably in the nature of a motion for reconsideration under Section 1 (c), Rule 37 of the Rules of Court which,
having been filed within "the period for perfecting an appeal," had the effect of interrupting said period of appeal. 23
WHEREFORE, judgment is hereby rendered AFFIRMING in toto the Decision of the Court a quo dated February 12,
1968, as amended by the Order of April 16, 1968. Costs against the appellant surety.

333

G.R. No. L-23920

April 25, 1968

RAMON R. DIZON, plaintiff-appellant,

vs.
LORENZO J. VALDES, VALLESON, INC., and AUGUSTO J. VALDES, defendants-appellees.
Jose Agbulos for plaintiff-appellant.
Felix Law Office for defendants-appellees.
SANCHEZ, J.:
The case before us is an incident in a suit for a sum of money (Civil Case Q-2618, Court of First Instance of Rizal,
Quezon City Branch), entitled "Ramon R. Dizon, Plaintiff, vs. Lorenzo J. Valdes, Valleson, Inc., and Augusto J. Valdes,
Defendants." Judgment was, on December 2, 1960, there rendered directing defendants Valleson, Inc. and Augusto J.
Valdes (Lorenzo J. Valdes excluded) "to pay jointly and severally to the plaintiff the amount of P6,260.00 with interest
at the rate of 12% per annum from September 1, 1954 until fully paid and to pay attorney's fees in the amount of
P600.00 with costs." The counterclaim of defendants Lorenzo J. Valdes and Valleson, Inc. was dismissed.
On January 11, 1961, Valleson, Inc. filed its notice of appeal. Its appeal was perfected on February 11, 1961.
Meanwhile, on January 10, 1961, one day before Valleson's notice of appeal, plaintiff petitioned for and the trial court
directed the issuance of a writ of preliminary attachment against the properties, real and personal, of defendants
Augusto J. Valdes and Valleson, Inc. upon an P11,730-bond. On January 11, said bond having been filed, the
corresponding writ was issued. Pursuant thereto, garnishment notices were served by the Manila Sheriff on one
Restituto Sibal and the Philippine Guaranty Co.
On February 9, 1961, the judgment debtors moved to dissolve the writ of attachment, upon an P11,730-counterbond
subscribed by the Capital Insurance & Surety Co., Inc. The following day, February 10, 1961, the trial court dissolved
the writ.
On February 24, 1961, plaintiff registered a motion to admit its "Claim for Damages" attached thereto. Plaintiff's claim
was that the dissolution of the attachment "put out of the reach of the plaintiff the properties and assets which may be
held to answer for the adjudged claim"; and that, by reason thereof, "plaintiff suffered and will suffer damages in the
amount of P11,730.00 plus the corresponding 12% interest thereon and attorney's fees and costs." He then prayed
that "defendants and the Capital Insurance & Surety Co., Inc. be ordered to pay the plaintiff, jointly and severally, the
amount of P11,730.00 plus interests, expenses, and attorney's fees."
On March 1, 1961, the surety, Capitol Insurance & Surety Co., Inc., opposed. Assertion was made that pursuant to the
Rules of Court (then, Section 17, Rule 59; now Section 17, Rule 57), the surety on any counter-bond shall only
become charged and bound to pay plaintiff upon demand, the amount due under the judgment; and that such amount
may be recovered from the surety after notice and summary hearing in the same action only if execution be
returned unsatisfied in whole or in part.
On April 25, 1961, at the hearing fixed by the court, plaintiff presented evidence on the merits of its claim for damages,
in the absence of defendants and surety, who made no appearance thereat.
The trial court, in its order of May 16, 1961, ruled that plaintiff's claim for damages was premature, since the main
case was then still pending appeal.
Plaintiff's motion for reconsideration, filed on July 10, 1961, was thwarted by the court below on September 16,
1961.1wph1.t
Under the environmental facts, can plaintiff's claim for damages on defendants' counter-bond prosper? The answer
must be in the negative.
1. By the terms of the counter-bond itself,1 liability thereunder attaches only "in case the plaintiff recovers judgment in
the action." Indeed, by Section 12 of Rule 59 of the old Rules,2 the law in force at the time the counterbond was
executed, the statutory counter-bond was made "to secure the payment to the plaintiff of any judgment he may
recover in the action." Complementary to this legal precept is Section 17 of the same Rule 59 of the old Rules3
which should be deemed as read into the bond viz:
Sec. 17. When execution returned unsatisfied, recovery had upon bond. If the execution be returned unsatisfied in
whole or in part, the surety or sureties on any bond given pursuant to the provisions of this rule to secure the payment
of the judgment shall become finally charged on such bond, and bound to pay to the plaintiff upon demand the amount

334

due under the judgment, which amount may be recovered from such surety or sureties after notice and summary
hearing in the same action.
Since at the time the claim for damages was registered, the case was still pending appeal, it is quite obvious that the
motion for the claim for damages was premature. And the lower court thus correctly ruled out plaintiff's motion. For,
Section 17 contemplates of proceedings on execution after judgment. And, it is only thereafter that liability upon the
surety's bond may be determined. The key term in Section 17 is the phrase "[i]f the execution be returned unsatisfied
in whole or in part." Until such proceeding shall have taken place and unless unsatisfied liability under the judgment
still exists, no action upon the counter-bond may be taken against the surety.4
2. We do not follow plaintiff when he says that what controls here is Section 20 of Rule 57 (then Rule 59). By its very
terms,5 this obviously refers to the recovery of damages by a party against whom attachment was issued. This is a
remedy available to the defendants here, not the plaintiff.
It is therefore not to be doubted that, upon the applicable rules, the counter-bond does not answer for damages on
account of the lifting of the attachment, but for the payment of the amount due under the judgment that may be
recovered by an attaching creditor.6
3. Nor is importance to be attached to plaintiff's argument that the dissolution of the attachments put out of his reach
the properties and assets answerable for his claim. The counter-bond, it should be emphasized, precisely stands "in
place of the properties so released."7 Thus, the release of such property cannot really "prejudice the rights of the
attaching party."8
We accordingly affirm the lower court's order of May 16, 1961 under review.
Costs against plaintiff-appellant. So ordered.

335

G.R. No. L-42447

August 30, 1982

PIONEER INSURANCE AND SURETY CORPORATION, petitioner,

vs.
HON. SERAFIN E. CAMILON, in his capacity as Judge of the Court of First Instance of Rizal, Branch VIII; THE CITY
SHERIFF OF MANILA; and STEEL DISTRIBUTORS, INC., respondents.
Jose T.M. Mayo for petitioner.
Eugenio T. Estavillo for respondents.
RESOLUTION
&
BARREDO, J.:1wph1.t
It appearing from the allegations of the petition and the comment of respondents, that, as reiterated in their respective
memoranda, (1) in Civil Case No. 9205 of the Court of First Instance of Rizal, entitled Steel Distributors, Inc. vs. Co
Ban Ling & Sons, et al. a judgment was rendered on August 24, 1968, worded as follows: 1wph1.t
WHEREFORE, judgment is hereby rendered ordering the defendants Co Ban Ling and Sons, Co Chin Leng and the
Pioneer Insurance and Surety Corporation, to pay, jointly and severally, the plaintiff, Steel Distributors, Inc. the sum of
P35,760.00 with interest of 12% per annum from March 31, 1966, the date of the filing of the complaint, until fully paid,
the further sum of P3,000.00 as attorney's fees, and the costs of this suit.
In the event that the properties of the defendants Co Ban Ling and Sons, Co Chin Leng and the Pioneer Insurance
and Surety Corporation are not sufficient to satisfy the judgment, defendant Co Chin Tong and Macario Co Ling are
hereby ordered to pay, jointly with the other partners, the balance of the obligation to the plaintiff
The counterclaim filed by the defendants is hereby dismissed. (Pp. 14-15, Record.)
and upon appeal to the Court of Appeals, the appellate court decided thus: 1wph1.t
WHEREFORE, except with the modification that the liability of appellant Co Chin Leng in the questioned transaction at
bar is only joint, or pro rata and subsidiary, the decision under review is hereby affirmed in all other respects, at
appellants costs. (Page 23, Record.)
(2)
upon motion of the judgment creditors, the respondent judge ordered the issuance of a writ of execution
wherein petitioner herein was included as object also thereof; (3) a motion to quash the said writ of execution insofar
as petitioner is concerned was denied by respondent judge this wise: 1wph1.t
There is no merit in the Motion to Quash Writ of Execution filed by Pioneer Insurance and Surety Corporation since
under the decision affirmed by the Court of Appeals its liability was adjudged to be jointly and severally with defendant
Co Ban Ling & Sons Co.
On the other hand, non-inclusion of the other defendants in the writ is of no consequence at this stage since their
liability is not primary but will accrue only in the event the judgment cannot be satisfied by defendant partnership and
Pioneer Insurance and Surety Corporation.
In view thereof, the Motion to Quash is denied.
SO ORDERED. (Page 31, Record.)
and, the Court being of the view that the rule of excussion claimed by petitioner under Section 17 of Rule 17, which
petitioner invokes considering it was only the bondsman to secure the lifting of the writ of preliminary attachment, is
not applicable in the instant case where there is already a final and executory judgment sentencing the bondsman as
joint and solidarily liable, as in the case of Luzon Steel Corporation vs. Sia, 28 SCRA, 58-63, the Court resolved to
DISMISS the petition, without prejudice to petitioner recovering from its co-judgment debtor whatever it has to pay
under the writ of execution herein questioned. The restraining order issued by this Court on January 22, 1976 is
hereby lifted effective immediately.
Barredo (Chairman), Concepcion, Jr., Guerrero, Abad Santos, De Castro and Escolin, JJ., concur.1wph1.t

336

&
&
Separate Opinions
&
AQUINO, J., dissenting:
I dissent because the petitioner was not served with copies of the decisions of the trial court and the Court of Appeals
and of the motion for execution, It came to know of its solidarily liability only when the sheriff wanted to enforce the writ
of execution against it.
It contends that its liability under its counterbond was fixed at P35,760 but under the judgment it is liable to pay 12%
interest and attorney's fees.t@lF The amount sought to be enforced against it in 1976 already exceeded P80,000.
The petitioner is entitled to a summary hearing on the amount of its liability, as contemplated in section 17, Rule 57 of
the Rules of Court (Towers Assurance Corporation vs. Ororarama Supermart, L-45848, November 9, 1977, 80 SCRA
262). The hearing on its motion to quash the writ of execution was not a sufficient hearing.
&
Separate Opinions
AQUINO, J., dissenting:
I dissent because the petitioner was not served with copies of the decisions of the trial court and the Court of Appeals
and of the motion for execution, It came to know of its solidarily liability only when the sheriff wanted to enforce the writ
of execution against it.
It contends that its liability under its counterbond was fixed at P35,760 but under the judgment it is liable to pay 12%
interest and attorney's fees. The amount sought to be enforced against it in 1976 already exceeded P80,000.
The petitioner is entitled to a summary hearing on the amount of its liability, as contemplated in section 17, Rule 57 of
the Rules of Court (Towers Assurance Corporation vs. Ororarama Supermart, L-45848, November 9, 1977, 80 SCRA
262). The hearing on its motion to quash the writ of execution was not a sufficient hearing.

337

G.R. No. 171750

January 25, 2012

UNITED PULP AND PAPER CO., INC., Petitioner,

vs.
ACROPOLIS CENTRAL GUARANTY CORPORATION, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review under Rule 45 praying for the annulment of the November 17, 2005 Decision1 and the
March 2, 2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 89135 entitled Acropolis Central Guaranty
Corporation (formerly known as the Philippine Pryce Assurance Corp.) v. Hon. Oscar B. Pimentel, as Presiding Judge,
RTC of Makati City, Branch 148 (RTC), and United Pulp and Paper Co., Inc.
The Facts
On May 14, 2002, United Pulp and Paper Co., Inc. (UPPC) filed a civil case for collection of the amount of
P42,844,353.14 against Unibox Packaging Corporation (Unibox) and Vicente Ortega (Ortega) before the Regional
Trial Court of Makati, Branch 148 (RTC).3 UPPC also prayed for a Writ of Preliminary Attachment against the
properties of Unibox and Ortega for the reason that the latter were on the verge of insolvency and were transferring
assets in fraud of creditors.4 On August 29, 2002, the RTC issued the Writ of Attachment5 after UPPC posted a bond
in the same amount of its claim. By virtue of the said writ, several properties and assets of Unibox and Ortega were
attached.6
On October 10, 2002, Unibox and Ortega filed their Motion for the Discharge of Attachment,7 praying that they be
allowed to file a counter-bond in the amount of P42,844,353.14 and that the writ of preliminary attachment be
discharged after the filing of such bond. Although this was opposed by UPPC, the RTC, in its Order dated October 25,
2002, granted the said motion for the discharge of the writ of attachment subject to the condition that Unibox and
Ortega file a counter-bond.8 Thus, on November 21, 2002, respondent Acropolis Central Guaranty Corporation
(Acropolis) issued the Defendants Bond for Dissolution of Attachment9 in the amount of P42,844,353.14 in favor of
Unibox.
Not satisfied with the counter-bond issued by Acropolis, UPPC filed its Manifestation and Motion to Discharge the
Counter-Bond10 dated November 27, 2002, claiming that Acropolis was among those insurance companies whose
licenses were set to be cancelled due to their failure to put up the minimum amount of capitalization required by law.
For that reason, UPPC prayed for the discharge of the counter-bond and the reinstatement of the attachment. In its
December 10, 2002 Order,11 the RTC denied UPPCs Motion to Discharge Counter-Bond and, instead, approved and
admitted the counter-bond posted by Acropolis. Accordingly, it ordered the sheriff to cause the lifting of the attachment
on the properties of Unibox and Ortega.
On September 29, 2003, Unibox, Ortega and UPPC executed a compromise agreement,12 wherein Unibox and
Ortega acknowledged their obligation to UPPC in the amount of P35,089,544.00 as of August 31, 2003, inclusive of
the principal and the accrued interest, and bound themselves to pay the said amount in accordance with a schedule of
payments agreed upon by the parties. Consequently, the RTC promulgated its Judgment13 dated October 2, 2003
approving the compromise agreement.
For failure of Unibox and Ortega to pay the required amounts for the months of May and June 2004 despite demand
by UPPC, the latter filed its Motion for Execution14 to satisfy the remaining unpaid balance. In the July 30, 2004
Order,15 the RTC acted favorably on the said motion and, on August 4, 2004, it issued the requested Writ of
Execution.16
The sheriff then proceeded to enforce the Writ of Execution. It was discovered, however, that Unibox had already
ceased its business operation and all of its assets had been foreclosed by its creditor bank. Moreover, the responses
of the selected banks which were served with notices of garnishment indicated that Unibox and Ortega no longer had
funds available for garnishment. The sheriff also proceeded to the residence of Ortega to serve the writ but he was
denied entry to the premises. Despite his efforts, the sheriff reported in his November 4, 2008 Partial Return17 that
there was no satisfaction of the remaining unpaid balance by Unibox and Ortega.
On the basis of the said return, UPPC filed its Motion to Order Surety to Pay Amount of Counter-Bond18 directed at
Acropolis. On November 30, 2004, the RTC issued its Order19 granting the motion and ordering Acropolis to comply
with the terms of its counter-bond and pay UPPC the unpaid balance of the judgment in the amount of
P27,048,568.78 with interest of 12% per annum from default.

338

Thereafter, on December 13, 2004, Acropolis filed its Manifestation and Very Urgent Motion for Reconsideration,20
arguing that it could not be made to pay the amount of the counter-bond because it did not receive a demand for
payment from UPPC. Furthermore, it reasoned that its obligation had been discharged by virtue of the novation of its
obligation pursuant to the compromise agreement executed by UPPC, Unibox and Ortega. The motion, which was set
for hearing on December 17, 2004, was received by the RTC and UPPC only on December 20, 2004.21 In the Order
dated February 22, 2005, the RTC denied the motion for reconsideration for lack of merit and for having been filed
three days after the date set for the hearing on the said motion.22
Aggrieved, Acropolis filed a petition for certiorari before the CA with a prayer for the issuance of a Temporary
Restraining Order and Writ of Preliminary Injunction.23 On November 17, 2005, the CA rendered its Decision24
granting the petition, reversing the February 22, 2005 Order of the RTC, and absolving and relieving Acropolis of its
liability to honor and pay the amount of its counter-attachment bond. In arriving at said disposition, the CA stated that,
firstly, Acropolis was able to comply with the three-day notice rule because the motion it filed was sent by registered
mail on December 13, 2004, four days prior to the hearing set for December 17, 2004;25 secondly, UPPC failed to
comply with the following requirements for recovery of a judgment creditor from the surety on the counter-bond in
accordance with Section 17, Rule 57 of the Rules of Court, to wit: (1) demand made by creditor on the surety, (2)
notice to surety and (3) summary hearing as to his liability for the judgment under the counter-bond;26 and, thirdly, the
failure of UPPC to include Acropolis in the compromise agreement was fatal to its case.27
UPPC then filed a motion for reconsideration but it was denied by the CA in its Resolution dated March 1, 2006.28
Hence, this petition.
The Issues
For the allowance of its petition, UPPC raises the following
GROUNDS
I.
The Court of Appeals erred in not holding respondent liable on its counter-attachment bond which it posted before the
trial court inasmuch as:
A. The requisites for recovering upon the respondent-surety were clearly complied with by petitioner and the trial court,
inasmuch as prior demand and notice in writing was made upon respondent, by personal service, of petitioners
motion to order respondent surety to pay the amount of its counter-attachment bond, and a hearing thereon was held
for the purpose of determining the liability of the respondent-surety.
B. The terms of respondents counter-attachment bond are clear, and unequivocally provide that respondent as surety
shall jointly and solidarily bind itself with defendants to secure and pay any judgment that petitioner may recover in the
action. Hence, such being the terms of the bond, in accordance with fair insurance practices, respondent cannot, and
should not be allowed to, evade its liability to pay on its counter-attachment bond posted by it before the trial court.
II.
The Court of Appeals erred in holding that the trial court gravely abused its discretion in denying respondents
manifestation and motion for reconsideration considering that the said motion failed to comply with the three (3)-day
notice rule under Section 4, Rule 15 of the Rules of Court, and that it had lacked substantial merit to warrant a
reversal of the trial courts previous order.29
Simply put, the issues to be dealt with in this case are as follows:
(1) Whether UPPC failed to make the required demand and notice upon Acropolis; and
(2) Whether the execution of the compromise agreement between UPPC and Unibox and Ortega was tantamount to a
novation which had the effect of releasing Acropolis from its obligation under the counter-attachment bond.
The Courts Ruling
UPPC complied with the twin requirements of notice and demand
On the recovery upon the counter-bond, the Court finds merit in the arguments of the petitioner.

339

UPPC argues that it complied with the requirement of demanding payment from Acropolis by notifying it, in writing and
by personal service, of the hearing held on UPPCs Motion to Order Respondent-Surety to Pay the Bond.30 Moreover,
it points out that the terms of the counter-attachment bond are clear in that Acropolis, as surety, shall jointly and
solidarily bind itself with Unibox and Ortega to secure the payment of any judgment that UPPC may recover in the
action.31
Section 17, Rule 57 of the Rules of Court sets forth the procedure for the recovery from a surety on a counter-bond:
Sec. 17. Recovery upon the counter-bond. When the judgment has become executory, the surety or sureties on any
counter-bond given pursuant to the provisions of this Rule to secure the payment of the judgment shall become
charged on such counter-bond and bound to pay the judgment obligee upon demand the amount due under the
judgment, which amount may be recovered from such surety or sureties after notice and summary hearing on the
same action.
From a reading of the abovequoted provision, it is evident that a surety on a counter-bond given to secure the
payment of a judgment becomes liable for the payment of the amount due upon: (1) demand made upon the surety;
and (2) notice and summary hearing on the same action. After a careful scrutiny of the records of the case, the Court
is of the view that UPPC indeed complied with these twin requirements.
This Court has consistently held that the filing of a complaint constitutes a judicial demand.32 Accordingly, the filing by
UPPC of the Motion to Order Surety to Pay Amount of Counter-Bond was already a demand upon Acropolis, as surety,
for the payment of the amount due, pursuant to the terms of the bond. In said bond, Acropolis bound itself in the sum
of P 42,844,353.14 to secure the payment of any judgment that UPPC might recover against Unibox and Ortega.33
Furthermore, an examination of the records reveals that the motion was filed by UPPC on November 11, 2004 and
was set for hearing on November 19, 2004.34 Acropolis was duly notified of the hearing and it was personally served
a copy of the motion on November 11, 2004,35 contrary to its claim that it did not receive a copy of the motion.
On November 19, 2004, the case was reset for hearing on November 30, 2004. The minutes of the hearing on both
dates show that only the counsel for UPPC was present. Thus, Acropolis was given the opportunity to defend itself.
That it chose to ignore its day in court is no longer the fault of the RTC and of UPPC. It cannot now invoke the alleged
lack of notice and hearing when, undeniably, both requirements were met by UPPC.
No novation despite compromise agreement; Acropolis still liable under the terms of the counter-bond
UPPC argues that the undertaking of Acropolis is to secure any judgment rendered by the RTC in its favor. It points
out that because of the posting of the counter-bond by Acropolis and the dissolution of the writ of preliminary
attachment against Unibox and Ortega, UPPC lost its security against the latter two who had gone bankrupt.36 It cites
the cases of Guerrero v. Court of Appeals37 and Martinez v. Cavives38 to support its position that the execution of a
compromise agreement between the parties and the subsequent rendition of a judgment based on the said
compromise agreement does not release the surety from its obligation nor does it novate the obligation.39
Acropolis, on the other hand, contends that it was not a party to the compromise agreement. Neither was it aware of
the execution of such an agreement which contains an acknowledgment of liability on the part of Unibox and Ortega
that was prejudicial to it as the surety. Accordingly, it cannot be bound by the judgment issued based on the said
agreement.40 Acropolis also questions the applicability of Guerrero and draws attention to the fact that in said case,
the compromise agreement specifically stipulated that the surety shall continue to be liable, unlike in the case at
bench where the compromise agreement made no mention of its obligation to UPPC.41
On this issue, the Court finds for UPPC also.
The terms of the Bond for Dissolution of Attachment issued by Unibox and Acropolis in favor of UPPC are clear and
leave no room for ambiguity:
WHEREAS, the Honorable Court in the above-entitled case issued on _____ an Order dissolving / lifting partially the
writ of attachment levied upon the defendant/s personal property, upon the filing of a counterbond by the defendants in
the sun of PESOS FORTY TWO MILLION EIGHT HUNDRED FORTY FOUR THOUSAND THREE HUNDRED FIFTY
THREE AND 14/100 ONLY (P 42,844,353.14) Philippine Currency.
NOW, THEREFORE, we UNIBOX PACKAGING CORP. as Principal and PHILIPPINE PRYCE ASSURANCE CORP., a
corporation duly organized and existing under and by virtue of the laws of the Philippines, as Surety, in consideration
of the dissolution of said attachment, hereby jointly and severally bind ourselves in the sum of FORTY TWO MILLION
EIGHT HUNDRED FORTY FOUR THOUSAND THREE HUNDRED FIFTY THREE AND 14/100 ONLY (P

340

42,844,353.14) Philippine Currency, in favor of the plaintiff to secure the payment of any judgment that the plaintiff
may recover against the defendants in this action.42 [Emphasis and underscoring supplied]
Based on the foregoing, Acropolis voluntarily bound itself with Unibox to be solidarily liable to answer for ANY
judgment which UPPC may recover from Unibox in its civil case for collection. Its counter-bond was issued in
consideration of the dissolution of the writ of attachment on the properties of Unibox and Ortega. The counter-bond
then replaced the properties to ensure recovery by UPPC from Unibox and Ortega. It would be the height of injustice
to allow Acropolis to evade its obligation to UPPC, especially after the latter has already secured a favorable
judgment.
This issue is not novel. In the case of Luzon Steel Corporation v. Sia,43 Luzon Steel Corporation sued Metal
Manufacturing of the Philippines and Jose Sia for breach of contract and damages. A writ of preliminary attachment
was issued against the properties of the defendants therein but the attachment was lifted upon the filing of a counterbond issued by Sia, as principal, and Times Surety & Insurance Co., as surety. Later, the plaintiff and the defendants
entered into a compromise agreement whereby Sia agreed to settle the plaintiffs claim. The lower court rendered a
judgment in accordance with the terms of the compromise. Because the defendants failed to comply with the same,
the plaintiff obtained a writ of execution against Sia and the surety on the counter-bond. The surety moved to quash
the writ of execution on the ground that it was not a party to the compromise and that the writ was issued without
giving the surety notice and hearing. Thus, the court set aside the writ of execution and cancelled the counter-bond.
On appeal, this Court, speaking through the learned Justice J.B.L. Reyes, discussed the nature of the liability of a
surety on a counter-bond:
Main issues posed are (1) whether the judgment upon the compromise discharged the surety from its obligation under
its attachment counterbond and (2) whether the writ of execution could be issued against the surety without previous
exhaustion of the debtor's properties.
Both questions can be solved by bearing in mind that we are dealing with a counterbond filed to discharge a levy on
attachment. Rule 57, section 12, specifies that an attachment may be discharged upon the making of a cash deposit
or filing a counterbond "in an amount equal to the value of the property attached as determined by the judge"; that
upon the filing of the counterbond "the property attached ... shall be delivered to the party making the deposit or giving
the counterbond, or the person appearing on his behalf, the deposit or counterbond aforesaid standing in place of the
property so released."
The italicized expressions constitute the key to the entire problem. Whether the judgment be rendered after trial on the
merits or upon compromise, such judgment undoubtedly may be made effective upon the property released; and since
the counterbond merely stands in the place of such property, there is no reason why the judgment should not be made
effective against the counterbond regardless of the manner how the judgment was obtained.
xxx
As declared by us in Mercado v. Macapayag, 69 Phil. 403, 405-406, in passing upon the liability of counter sureties in
replevin who bound themselves to answer solidarily for the obligations of the defendants to the plaintiffs in a fixed
amount of P 912.04, to secure payment of the amount that said plaintiff be adjudged to recover from the defendants,
the liability of the sureties was fixed and conditioned on the finality of the judgment rendered regardless of whether the
decision was based on the consent of the parties or on the merits. A judgment entered on a stipulation is nonetheless
a judgment of the court because consented to by the parties.44
[Emphases and underscoring supplied]
The argument of Acropolis that its obligation under the counter-bond was novated by the compromise agreement is,
thus, untenable. In order for novation to extinguish its obligation, Acropolis must be able to show that there is an
incompatibility between the compromise agreement and the terms of the counter-bond, as required by Article 1292 of
the Civil Code, which provides that:
Art. 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative that it
be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each
other. (1204)
Nothing in the compromise agreement indicates, or even hints at, releasing Acropolis from its obligation to pay UPPC
after the latter has obtained a favorable judgment. Clearly, there is no incompatibility between the compromise
agreement and the counter-bond. Neither can novation be presumed in this case. As explained in Dugo v. Lopena:45

341

Novation by presumption has never been favored. To be sustained, it need be established that the old and new
contracts are incompatible in all points, or that the will to novate appears by express agreement of the parties or in
acts of similar import.46
All things considered, Acropolis, as surety under the terms of the counter-bond it issued, should be held liable for the
payment of the unpaid balance due to UPPC.
Three-day notice rule, not a hard and fast rule
Although this issue has been obviated by our disposition of the two main issues, the Court would like to point out that
the three-day notice requirement is not a hard and fast rule and substantial compliance is allowed.
Pertinently, Section 4, Rule 15 of the Rules of Court reads:
Sec. 4. Hearing of motion. Except for motions which the court may act upon without prejudicing the rights of the
adverse party, every written motion shall be set for hearing by the applicant.
Every written motion required to be heard and the notice of the hearing thereof shall be served in such a manner as to
insure its receipt by the other party at least three (3) days before the date of hearing, unless the court for good cause
sets the hearing on shorter notice. [Emphasis supplied]1wphi1
The law is clear that it intends for the other party to receive a copy of the written motion at least three days before the
date set for its hearing. The purpose of the three (3)-day notice requirement, which was established not for the benefit
of the movant but rather for the adverse party, is to avoid surprises upon the latter and to grant it sufficient time to
study the motion and to enable it to meet the arguments interposed therein.47 In Preysler, Jr. v. Manila Southcoast
Development Corporation,48 the Court restated the ruling that "the date of the hearing should be at least three days
after receipt of the notice of hearing by the other parties."
It is not, however, a hard and fast rule. Where a party has been given the opportunity to be heard, the time to study
the motion and oppose it, there is compliance with the rule. This was the ruling in the case of Jehan Shipping
Corporation v. National Food Authority,49 where it was written:
Purpose Behind the
Notice Requirement
This Court has indeed held time and time again that, under Sections 4 and 5 of Rule 15 of the Rules of Court,
mandatory is the notice requirement in a motion, which is rendered defective by failure to comply with the requirement.
As a rule, a motion without a notice of hearing is considered pro forma and does not affect the reglementary period for
the appeal or the filing of the requisite pleading.
As an integral component of procedural due process, the three-day notice required by the Rules is not intended for the
benefit of the movant. Rather, the requirement is for the purpose of avoiding surprises that may be sprung upon the
adverse party, who must be given time to study and meet the arguments in the motion before a resolution by the court.
Principles of natural justice demand that the right of a party should not be affected without giving it an opportunity to
be heard.
The test is the presence of the opportunity to be heard, as well as to have time to study the motion and meaningfully
oppose or controvert the grounds upon which it is based. Considering the circumstances of the present case, we
believe that the requirements of procedural due process were substantially complied with, and that the compliance
justified a departure from a literal application of the rule on notice of hearing.50 [Emphasis supplied]
In the case at bench, the RTC gave UPPC sufficient time to file its comment on the motion. On January 14, 2005,
UPPC filed its Opposition to the motion, discussing the issues raised by Acropolis in its motion. Thus, UPPCs right to
due process was not violated because it was afforded the chance to argue its position.
WHEREFORE, the petition is GRANTED. The November 17, 2005 Decision and the March 1, 2006 Resolution of the
Court of Appeals, in CA-G.R. SP No. 89135, are hereby REVERSED and SET ASIDE. The November 30, 2004 Order
of the Regional Trial Court, Branch 148, Makati City, ordering Acropolis to comply with the terms of its counter-bond
and pay UPPC the unpaid balance of the judgment in the amount of P27,048,568.78 with interest of 12% per annum
from default is REINSTATED.

342

G.R. No. L-35951

August 31, 1977

PIONEER INSURANCE & SURETY CORP. AND HADJI ESMAYATEN LUCMAN, petitioners-appellants,
vs.
THE HON. AGAPITO HONTANOSAS, JUDGE OF THE COURT OF FIRST INSTANCE OF CEBU, BRANCH XI AND
THE SPOUSES BEN UY RODRIGUEZ, respondents-appellees.
Eriberto D. Ignacio for appellant.
Francisco E.F. Remotigue & Hilario G. Davide, Jr. for private respondent.

GUERRERO, J:
We reverse the decision of the Court of Appeals 1 promulgated, on October 30, 1972 in CA-G.R. No. 00951-R entitled
"Pioneer Insurance & Surety Corp., et al., petitioners, vs. Hon Judge Agapito Hontanosas, et al., respondents," which
decision had denied for lack of merit the petition filed therein for certiorari. prohibition and/or mandamus with
preliminary injunction seeking to nullify the order of default of February 29, 1972 and the decision of March 9, 1972 in
Civil Case No. R-12069, entitled "Ben Rodriguez, et al. vs. Allied Overseas Commercial Co., et al." issued by the
respondent Presiding Judge of the Court of First Instance of Cebu.
The case commenced on October 12, 1970 when Allied Overseas Commercial Co., Ltd., a foreign corporation
domiciled in Hongkong, filed in the Court of First Instance of Manila a complaint against the respondent-appellee Ben
Uy Rodriguez for the collection of a sum of money arising out of a transaction between them in the amount of
P450,533.00, the agreed peso equivalent of the HK$418,279.60 balance unpaid. Plaintiff therein having prayed for the
issuance of a writ of preliminary attachment, the game was granted by the Court against Rodriguez upon the filing by
said plaintiff of a bond in the amount of P450,000.00, which petitioner-appellant Pioneer Insurance & Surety Corp. duly
posted. The corresponding levy in attachment was made by annotation on the properties of Rodriguez which
consisted of 4 pieces of lots; notices of garnishment on different Cebu banks turned out negative, while personal
properties found at the Rodriguez residence, although attached, were, however, not removed therefrom.
A motion to dismiss the complaint was thereupon filed by Rodriguez, followed by an application for damages against
the bond, praying that he be permitted to present evidence of damages he sustained by reason of the wrongful
attachment, and to enforce said claim against the surety on its bond, alleging further that otherwise his claim against
the bond will forever be barred as said claim cannot be the subject of an independent civil action under Sec. 20, Rule
57 of the Rules of Court. The court iii its order of December 22, 1970 dismissed the complaint on the ground of
improper venue since defendant Rodriguez was a resident of Cebu, and lifted the writ of preliminary attachment
setting. the hearing on the claim for damages against the bond on January 14, 1971.
With the intention of filing a separate civil action in the Court t T of Firs instance of Cebu, respondent-appellee
Rodriguez withdrew his claim for damages against Pioneer Insurance and Surety Corp., which motion for withdrawal
was granted by the Court Thereafter, the respondents-appellees Rodriguez spouses filed a complaint for damages on
February 15, 1971 against Pioneer Insurance & Surety Corp. and Allied Overseas (the Hongkong-based corporation),
docketed as Civil Case No. R-12069, Court of First Instance of Cebu presided by respondent judge lion Agapito
Hontanosas, the complaint praying that Rodriguez be declared as not in any manner indebted to the defendant Allied
Overseas Commercial Co. and that Pioneer Insurance & Surety Corp. be held liable for damages, attorneys foes and
expenses of litigation by reason of the and malicious attachment issued by the Manila Court.
Defendant Pioneer Insurance and Surety Corp. filed its manner to the complaint (Civil Case No. R-12069) alleging
affirmative and special defenses. With respect to the other defendant Allied Overseas Commercial Co., summons was
(coursed thru the Philippine Consulate General in Honkong which turned it down as it had no authority to serve the
process under the Rules of Court.
On April 27, 1971, defendant Pioneer Insurance & Surety Corp. filed a motion for a preliminary hearing of its
affirmative defenses of lack of cause of action and bar by prior judgment and/or abandonment, which are grounds for
a motion to dismiss. This was denied by the respondent Judge in his Order dated May 15, 1971, so also was the
motion for reconsideration per its Order of June 2, 1971.
On May 5, 1971, the case was called for pre-trial. Plaintiffs with counsel attended; defendant Pioneer Insurance &
Surety Corp. thru counsel was present The other defendant, Allied Overseas Commercial Co was not yet summoned,
hence absent. The parties manifested failure to settle the case amicably, thus the Court set the trial of the case on the
merits for June 11, 1971.

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A petition for certiorari and prohibition was then filed by Pioneer Insurance and Surety Corp. on August 3, 1971 in the
Court of Appeals, CA-G.R. No. 00369-R (Record on Appeal, p. 133) with prayer to enjoin a hearing scheduled on
August 7, 1971, alleging that respondent Judge committed grave abuse of discretion amounting to lack and/or excess
of jurisdiction in lending the motion for preliminary hearing. The Court of Appeals In its Resolution dated August 7,
1971 distributed this petition for certiorari. Record on Appeal, pp. 133-137)
An amended complaint was now submitted to ad admitted by the Court on August 14, 1971 by impleading left
petitioner-appellant Hadji Esmayaten Lucman as additional, defendant., making allegations tending show
confabulation between the new defendant, and the foreign-based corporation to collect a non-existing debt. To the
amended complaint, Pioneer Insurance & Surety Corp filed its answer.
Lucman having been impleaded as assignee defendant Allied Overseas Commercial filed a motion to dismiss on the
ground of auter action pendant, that is an action pending in the Court of First Instance of Rizal, Civil Case No. 14351
between the same parties with the same allegation and defences of counterclaims. On November 25, 1971,
respondent Judge denied the motion to dismiss, whereupon Lucman filed his answer to the amended complaint.
Upon an ex parte motion of Rodriguez, the Court declared Lucman in default in its Order of January 10, 1972 and
thereafter promulgated a decision dated January 28, 1972 against Lucman only, ordering him to pay damage,- in the
amount of P150,000.00; declaring that Rodriguez was no in any manner indebted to Lucman or to Allied Overseas
Commercial Co and that the Metropolitan Bank & Trust Co. (Cebu Branch) Check No. CB2169 (xerox copy marked
Exhibit M issued iv Rodriguez to pay the indebtedness was a forgery.
Lucman moved on February 11, 1972 to set aside the order of default and to admit the answer earlier filed by him to
the amended complaint. On February 21. 1972, respondent Judge set aside the order of default against Lucman
including the decision against him, the dispositive portion of which order reads as follows:
WHEREFORE, the Order of Default dated January 10, 1972 as well as the decision (Re: Hadji Esmayaten Lucman)
dated January 28, 1972, are hereby reconsidered and set aside. Let the hearing of this case on the merits be
scheduled as previously set for February 28, 1972 at 8:30 o'clock in the morning.
The parties thru their respective counsels are to be immediately notified of this order. The Clerk of Court is directed to
notify defendant Hadji Esmayaten Lucman thru counsel Atty. Eriberto D. Ignacio At Rm. 414, Madrigal Bldg., Escolta,
Manila by telegram.
SO ORDERED.
Cebu City, Philippines, February 21, 1972.
(SGD.) AGAPITO HONTANOSAS
JUDGE
(Record on Appeal, pp. 297-298)
Forthwith, the clerk of court sent the telegram notices in the following wise:
YOUR MOTION SET ASIDE ORDER, DEFAULT AND DECLARE PROCEEDINGS NULL AND VOID RE CIVIL CASE
BEN RODGIGUEZ ET AL VERSUS HADJI ESMAYATEN LUCMAN GRANTED STOP PRETRIAL SHALL PROCEED
AS PREVIOUSLY SCHEDULED FEBRARY 28 1972 MORNING
(Record on Appeal, p. 298)
Counsel for the petitioners received the telegram notices on February 21, 1972; and on February 23, 1972 counsel
filed an urgent motion for postponement of the pre-trial, claiming that he was not aware of any such pre-trial having
been previously set for February 28, 1972 in the morning, as indeed no such pre-trial can as yet be set as the issues
with respect to the amended complaint are not yet fully joined since plaintiffs have not answered the compulsory
conterclaims separately set up by the defendants in said summons to theforeign corporations Allied Overseas
Commercial Co. Ltd. of Hongkong, nor have plaintiffs asked that said foreign corporation be dropped from the
amended complaint; that counsel has a hearing in Manila of a criminal case which is of intransferable character, and
prayed that the pre-trial be set at some other date in March preferably either March 22 or 23, 1972 at 9:00 a.m. which
were the only free dates for the month of March 1972 in the calendar of the counsel. (Record on Appeal, pp. 301-303)
Apparently, the above urgent motion for postponement although sent through registered airmail special delivery and
received by the Dispatching Section of the Post Office of Cebu on February 28, 1972 (Resolution, Court of Appeals,

344

Recrod on Appeal, pp. 365-366) was not received by the Court for on February 28, 1972 when the case was called, an
order was issued by the Court postponing the pre-trial of the case to March 20, 1972 in ivew of the absence of the
defendants and counsel notwithstanding notices of hearing and telegrams sent to them, on the condition that should
defendants be found that as to plaintiffs will be allowed to present their evidence and the defendants will be declared
in default for failure to appear at the pre-trial. (Record on Appeal, pp. 304-305)
Upon verification from the radio Communications of the Philippines that the telegrams mentioned above were
delivered and received by the addresses on February 21, 1972, the Court on February 29, 1972 declared the
defendants in default and allowed the plaintiffs to present their evidence in support of their complaint before the Clerk
of Court. (Record on Appeal, pp. 306-307). The evidence was thereupon presented and on March 9, 1977 the
respondent Judge promulgated his Decision declaring that the plaintiff Rodriguez is not in any manner indebted to
defendant Lucman or to Allied Overseas Commercial Co., declaring the personal check of the plaintiff to be a forgery;
that the attachment of the properties of plaintiff in the Manila case was wrongfu; amd malicious, and ordering
defendant Pioneer Insurance and Surety Co. to pay P350,000.00 as moral damages, P50,000.00 as exemplary
damages and P50,000.00 for expenses of litigation in Manila. Defendant Lucman was also ordered to pay plaintiffs the
sum of P50,000,00 as exemplary damages and P30,000.00 as attorney's fees.
Within 30 days reglementary period to perfect the appeal, defendants Pioneer Insurance & Surety Corp. and Hadji
Esmayaten Lucman filed the Notice of Appeal and the Original record on Appeal, the latter ordered corrected and
amended but finally approved by the Court on July 31, 1972.
Meanwhile, petitioner's filed on April 4, 1972 before the Court of Appeals a petition for certiorari, prohibition and/or
mandamus with preliminary injunction CA-G.R. No. 00951-R) seeking to nullify the order of default of February 29,
1972 and the Decision of March 9, 1972 of respondent Judge, to command said Judge to elevate the records of the
case for review and to prohibit him from enforcing his decision and from taking further action in the case, No. 12069.
On April 13, 1972, the Court of Appeals promulgated its resolution dismissing the petition aforestated and ruled among
others as follows:
Furthermore, petitioners instant remedy is not proper because of their own admission that appeal is available from the
decision of respondent Judge (Discussion, pp. 12-13 of their Petition). This is shown by the handwriting at the upper
right hand corner of Annex R (Decision) when they received the decision on March 25, 1972 and the period to appeal
will expire on April 24, 1972.
We are not, therefore, convinced that the remedy of appeal is inadequate, considering that whatever errors
respondent Judge might have committed can be assigned as specific errors on appeal. It has been consistently held
that certiorari is not available where the remedy of appeal is present .
(Record on Appeal, p. 373)
On a motion for reconsideration, the Court of Appeals reconsidered the resolution cited above, and issued another
resolution dated July 25, 1972 giving due course to the petition and required the respondents to answer the petition
(not a motion to dismiss), and among others, stated, to wit:
Upon this fact alone, we believe as petitioners contend that although appeal is available, such remedy is not
sufficiently speedy and adequate to cure the defects in the proceedings therein or to remedy the disadvantageous
position of Petitioners because, since they were deprived of raising any issue or defense that they have in the
respondent court by reason of the order of default, they cannot raise said issues or defenses for the first time on
appeal.
(Rollo, P. 98)
The petition having been given due course, the respondents herein answered the same, and on October 30, 1972, the
Court of Appeals rendered its Decision denying the petition for lack of merit, and held among others, thus
Finally we are not also convinced that the remedy of appeal is inadequate under the circumstances obtaining in the
principal cue Whatever errors respondent Judge might have committed in his order or judgment may be assigned as
specific errors in their appeal. This Court can review any all such errors of fact and law in the appeal.
(Rollo, p. 138)
Petitioners filed a motion for reconsideration which was denied, hence this appeal by certiorari from the decision of the
Court of Appeals and is now before Us being assailed and faulted on three principal issues: 1. the illegality of th order

345

of the default and the decision arising therefrom; 2. the inadequacy of the remedy of appeal; and 3. the lack of
jurisdiction of the Court in the principal case.
The petitioner's main thrust in this legal attack is directed to the other dated February 29, 1972 declaring defendants
(now the petitioners) in default at the second pre-trial hearing and allowing the plaintiffs (the present private
respondents) to present evidence ex parte before the Clerk of Court, which evidence uncotradicted and unrebutted
was lifted almost en toto as the basis of the decision granting damages so enormous and so huge in amount as to
exceed the bounds of reason and fairness.
The procedure for the pre-trial of a case is laid down by Rule 20, Revised Rules of court, which provides, to wit:
Sec. 1. Pre-trial mandatory. In any action, after the last pleading has been filed, the ourt shall direct the parties and
their attorneys to appear before it for a conference to consider':
(a)

The possibility of an amicable settlement or of a submission to arbitration;

(b)

The simplification of the issues;

(c)

The necessity or desirability of amendments to the pleadings;

(d)

The possibility of obtaining stipulations or admissions of facts and of documents to avoid unnecessary proofs;

(e)

The limitation of the number of witnesses;

(f)

The advisability of a preliminary reference of isues to a commissioner,

(g)

Such other matters as may aid in the prompt disposition of the action.

Sec. 2. Failure to appear at pre-trial conference. A party who fails to appear at a pre-trial conference may be nonsuited or considered as in default.
Sec. 3. Allows the ocurt to render judgment on the pleading or summary judgment as justice require. Sec. 4 directs
that a reocrd of the pre-trial results be made; and Sec. 5 requires the court to prepare a pre-trial calendar of cases for
consideration as above provided, and that upon the submission of the last pleading in a particular case, it shall be the
duty of the clerk of court to place case in the pre-trial calendar.
Unquestionably, the present Rules make pre-trial mandatory. And the reason for making pre-trial mandatory is that
pre-trial conferences bring the parteis together, thus making possible an amicable settlement or doing away with at
least the non-essentials of a case from the beginning. (Borja vs. Roxas, 73 Phil. 647).
Philippine jurisprudence has laid down the legal doctrine that while it is true that it is mandatory for the parties and
their attorneys to appear before the trial court for a pre-trial conference to to consider inter alia the possibility of an
amicable settlement, the rule wa sby no means intended as an implacable bludgeon but as a tool to assist the trial
court in the orderly and expeditious conduct of trial. The rule is addressed to the sound discretion of the trial court
(Rice and Corn Administration vs. Ong Ante, et. al., G.R. No. L-30558, Oct. 4, 1971).
Both client and counsel must appear at the pre-trial. this is mandatory. Failure of the client to appear is a ground for
dismissal. (American Ins. Co. vs. Republic 1967D Phil. 63; Home Ins. Co. vs. United States Lines Co., 1967D Phil.
401, cited in Saulog vs. Custombuilt Manufacturing Corp. No. L-29612, Nov. 15, 1968; Taroma v. Sayo, L-37296, Oct.
30, 1975 (67 SCRA 508).
In the case of Insurance Co. of the North America vs. Republic, et. al., G.R. No.L-26794, Nov. 15, 1967, 21 SCRA 887,
the Supreme Court, speaking thru Justice Bengzon, held that Sec. 1, Rule 20 of the Rules requries the court to hold a
pre-trial before the case is heard and since in this case, a pre-trial has already been had, the fact that an amended
complaint was later filed, did not necessitate another pre-trial. it would have been impractical, useless and timeconsuming to call another pre-trial.
Under the rules of pleading and practice, the answer ordinarily is the last pleading, but when the defendant's answer
contrains a counterclaim, plaintiff's answer to it is the last pleading. When the defendant's answer has a cross-claim,
the answer or the cross-defendant to it sit he last pleading. Where the plaintiff's answer to a counterclaim contains a
counterclaim constains a counter-claim agains the opposing party or a cross-claim against a co-defendant, the answer
of the opposing party to the counterclaim or the answer of the co-defendant to the cross-claim is the last pleading. And
where the plaintiff files a reply alleging facts in denial or avoidance of new matter by way of defense in the answer,
such reply constitutes the last pleading. (Francisco, the Revised Rules of Court, Vo. II, pp. 2-3).

346

The above citations and authorites are the ground rules upon which the conflictings claims of the opposing partie's
may be resolved and decided.
First, the legality of the order of default dated February 29, 1971 and the decision dated March 9, 1972. there is
spread out in the Record on Appeal, pp. 92-93 that on May 5, 1971, a pre-trial. was conducted by the court between
the plaintiff Ben Uy Rodriguez spouses and the defendant Pioneer Insurance & Surety Corp. The record or results of
said pre-trial is found in the ordr of the court dated May 5, 1971, which states:
When this case was called for pre-trial today, the plaintiffs and their counsel, Atty. Hilario Davide Jr. appeared. On the
other hand, the defendant Pioneer Insurance & Surety Corp. represented by its counsel, Atty. Amando Ignacio also
appeared.
When asked by the court if there is any possibility of settling this case amicably, the counsel for the defendant
answered in the negative. Both counsels agreed that the only issue to the resolved bu the Court is whether the
bonding company is laible or not, and if so, how much?
Atty. Hilario Davide, Jr. caused the markings of the following exhibit.
Exhibit "A-pre-trial", the finanacial report of Ben Rodriguez as of December 31, 1969; and
Exhibit "B-pre-trial", the affidavit of handwriting expert Perfecto Espina, and thereafter he reserved his right to mark
additinal exhibits during the trial on the merits.
The counsel for the defendant also reserved his right to object to the Exhibits of the plaintiffs and mark his exhibits
during the trial on the merits of the case.
Both counsels are given ten (10) days from today within which to file their simulatteneous memoranda or authorities in
support of the motion for preliminary hearing and its objection thereto. and thereafter his incident will be resolved by
the Court.
Following agreement of the partiesm, the trial on the the merits of this case is set for June 11, 1971 at 8:30 o'clock in
the moring.
The parties thru their respective counsels are notified in open court of this order.
SO ORDERED.
Cebu City, Philippines, May 5, 1971.
SGD.) AGAPITO HONTANOSAS
JUDGE
(Record on Appeal, p. 93)
The defendant Pioneer Insurance & Surety Corp. having complied with the order of the Court to appear and attend
this pre-trial, and had manifested its opposition to settling the case amicably, said party may no longer be compelled to
attend a second pre-trial hearing, and neither may it be punished by the court by its orde declaring said defendant as
in default. The mandatory character of a pre-trial nad the serious consequences confronting the parties in the event
that each party fails to attend the same must impose a strict application of the Rule such that where we find no
authority for the the Court to call another pre-trial hearing, as in fact there is none in said Rule, the conclusion is
inescapable that the respondent Judge committed a grave and serious abuse of discretion and acted in excess of
jurisdiction in declaring defedant Pioneer Insurance & Surety Corp. "as in default" for failure to attend the second pretrial called by the Judge on February 29, 1972. In other words, there is nothing in the Rules that empowers or has
called a first pre-trial duly attended by tha prties, and lacking such authority, the court perforce lack the autority to
declare a failure to prosecute on the part of the plaintiff for failing to attend such second pre-trial; it also lack the
authority to declare the defendant "as in default" by reason of the latter's failure to be present at the said second pretrial.
It serves no purpose for the court to call again another pre-trial where the parties had previously agreed to disagree,
where the issues had been joined and where the court itself had been satisfied that a hearing on the merits is the next
step to conduct as int he instant case where the court, after the pre-trial on May 5, 1971, set he trial of the case on its
merits for June 11, 1971. Indeed, a second pre-trial is impractical, useless and time-consuming.

347

We have not lost sight of the fact that when the first pre-trial was called and conducted, the party litigants were the
Ben Uy Rodriguez spouses as plaintiffs, while Pioneer Insurance & Surety Corp. and Allied Overseas Commercial Co.
(although not yet summoned) were the defendants, whereas at the time the second pre-trial was called, the original
complaint had been amended to implead Hadji Esmayaten Lucman as additional defendant. The amendment of the
complaint to implead Lucman did not, however, alter the impracticability, the uselessness and the absence of authority
to call a second pretrial hearing since the amended complaint merely impleaded Lucman as the assignee of the
original defendant Allied Overseas Commercial Co. and no additional cause of action was alleged; the prayer was the
same and the amount of damages sought was the same as that in the original complaint.
Second, the prematureness of the pre-trial called on February 28, 1972, assuming that there was need to have
another pre-trial. The records (Record on Appeal, p. 293) show that the notice of the clerk of court setting the case for
pre-trial on February 28, 1972 was issued and dated February 7, 1972. As of this date, February 7,1972, the complaint
had been amended on August 27, 1971 by impleading the defendant Hadji Esmayaten Lucman who filed his answer
on December 24, 1971, interposing therein a compulsory counterclaim. (Record on Appeal, pp. 239-240). Before this
date of February 7, 1972, the court had already promulgated the Decision dated January 28, 1972 as against Lucman
only.
Likewise, as of February 7, 1972, defendant Pioneer Insurance & Surety Corp. had also filed its answer to the
amended complaint, interposing too a compulsory counterclaim. But as of February 7, 1972, the plaintiffs have not yet
filed their answer to the compulsory counterclaims of the defendants (which is necessarily the last pleading to be filed
in order that the case is ready and ripe for the pre-trial). It was only on February 22, 1972 that plaintiffs made their
reply to the answer, and their answer to the compulsory, counterclaim of defendant Lucman 'Record on Appeal, pp.
299- 301).
The records do not disclose any reply of the plaintiffs to the answer of Pioneer Insurance & Surety Corp., nor any
answer to the compulsory counterclaim of the Corp. The above state of the case as far as the pleadings are
concerned clearly and manifestly show that the case was not yet ready for pre-trial, that it was as yet premature
because the last pleading had not yet been filed by the plaintiffs.
Even the state of the pleadings as of February 21, 1972 when the telegrams were sent notifying the parties of the pretrial for February 28, 1972 reveals the prematureness of calendaring the case pre-trial. As of February 21, 1972, the
complaint was already amended to implead Lucman who submitted his answer with compulsory counterclaim. but
plaintiffs had not yet filed their reply and their answer to the counterclaim, because the records indicate that the
plaintiffs' answer to the counterclaim, because the records indicate that the plaintiffs' answer to the counterclaim is
dated February 22, 1972. (Record on Appeal, pp. 299-301). And to the compulsory counterclaim of defendant Pioneer
Insurance & Surety Corp., plaintiffs made no answer whatsoever.
Third, the notices given by the clerk of court thru telegrams on February 21, 1972 notifying the parties of the pre-trial
on February 28, 1972 were insufficient, in law and jurisprudence.
We have careffully noted the telegraphic notices sent by the clerk of court and we find this omission which is fatal to
the respondents' cause: no telegram was sent to the defendant Pioneer Insurance & Surety Corp. The telegram was
sent to the counsel of this defendant, but none to the defendant itself.
The Court had directed the clerk of court to send notice by telegram to the parties for the February 28 pre-trial. The
clerk did send the telegram to Atty. Eriberto Ignacio, counsel for Pioneer Insurance & Surety Corp., but omitted and
failed to send telegram to the party itself, the corporation, as required strictly by law. Notice to the counsel is not
enough. We reiterate that this failure is a jurisdictional defect.
Reading the order of the court dated february 29, it appears in black and white (Record on Appeal, pp. 306-307,
Annex W, Rollo, p. 194) that only two telegraphic messages were sent by the clerk of court, thus (1) the message
addressed to Atty. Eriberto Ignacio delivered to the given address at 3:45 P.M. the same day it was filed but the
signature of he recipient was unreadable; (2) the other message addressed to Hadji Esmayaten Lucman per RCPI
San Juan also delivered on the same day, February 21, 1972 and personally 4eceived by the addressee himself. This
was the offficial advice received by the Court from the Radio Communications of the Philippines thru which the
telegrams were wired.
This is also confirmed by the Order of the Court dated April 11, 1972 denying the defendant's Urgent Motion for
Reconsideration. The other states.
Per advice from the Radio Communications of the Philippines, Inc. these two messages were received by the
addressees, Atty. Eriberto Ignacio and Hadji Esmayaten Lucman on the same day it was filed, that is on February 21,
1972.

348

(Record on Appeal, p. 357)

Decidedly, there was no telegram sent to party defendant Pioneer Insurance & Surety Corp., informing it of the
February 28 pre-trial hearng. The reason for requiring the presence of the party who must be notified is explained in
the case of Home Insurance Co. vs. United Lines Co. (L-25593, November 15, 1967, 21 SCRA 863), where the Court,
speaking thru Justice Bengzon, said that:
A party who fails to appear at a pre-trial conference may be non-suited or considered as in default. This shows the
purpose of the Rules to compel the parties to appear personally before the court to reach, if possible, a compromise.
Accordingly the court is given the discretion to dismiss the case should plaintiff not appear at the pre-trial.
Fourth, the denial of the motion for postponement was a grave abuse of discretion. We grant the court the discretion to
postpone any hearing, pre-trial or on the merits of the case, but the exercise of discretion must be based on
reasonable grounds. The motion (Record on Appeal, pp. 301-303) had alleged grounds which are meritorious and not
frivolous nor intended for delay, which are 1. no formal order of the court scheduling the February 28 pre-trial had
been received; 2. pre-trial cannot be had as yet be set as the issues are not yet fully joined; 3. counsel has a hearing
previously set in Manila in a criminal case which was of an intransferable character. We are also concede that counsel
may not presume nor take for granted that his motion for postponement and the proposed setting to March 22 or 23,
1972 will be granted by the court but where the court had actually postponed the hearing on February 28, 1972 due to
the absence of the defendants and their counsel, and scheduled the pre-trial to March 20, 1972 at 8:30 o'clock in the
morning (Record on Appeal, pp. 304-306), we find no reason nor fairness in the court's order of February 29, 1972
finding defendants as in default since the pre-trial was moved to a later date in March as prayed in the motion.
The motion for postponement was received on February 28, 1972 at the Cebu Post Office, as shown in the postmarks
on the envelope (photographed on p. 322, record on Appeal) but was not immediately delivered to the court although
the envelope bore the words, "registered Air Mail/Special Delivery with Return Card." If the letter containing the moton
was not yet delivered to the Court the next day, February 29, 1972 when the court made the order declaring
defendants in default, this was clearly a postal neglect and omission to perform its duty, not attributable to defendants,
The Court, in the exercise of wise discretion, could have restored their standing in court and given them an even
chance to face their opponents.
For refusing to set aside said order of default and the decision, we hold the Court of Appeals in reversible error
therefor. The respondent Court of Appeals has ignored established rulings of the Supreme Court in Pineda vs. Court of
Appeals, 67 SCRA 228, that a party may not be declared in default for future to attend the pre-trial where only his
counsel was notified of the pre-trial schedule; in Sta. Maria, Jr. vs. Court of Appeals, 45 SCRA 596 that a pre-trial is
unnecessary where the case could not be settled and that the fact that an amended complaint was later filed with
leave of court did not, undue the circumstances, necessitate another pre-trial; and in Pineda vs. Court of Appeals, 67
SCRA 288 that Courys should be liberal in setting asiode default judgment.
At this juncture, it is necessary to emphasize once more the pronouncement of this Court speaking through Justice
Teehankee in Taroma vs. sayo, 67 SCRA 509, pp. 512-513, that:
For the guidelines of the bench and bar, therefore, the Court in reaffirminf the ruling that notice of pre-trial must be
served separately upon the party and his counsel of record, retates that while service of such notice to party may be
made directly to the party, it is best that the trial courts uniformly serve such notice to party through or care of his
counsel of the obligation of notifying the party of the date, time and palce of the pre-trial conference and assuring that
the party either appear thereat or deliver to counsel a written authority to represent the party with power to
compromise the case, with the warning that a party who fails to do so may be non-suited or declared in default.
The second point at issue is whether the remedy of ordinary appeal in the case is palin, speedy and adequate such
that the writ of certiorari will not lie. We have adverted to previously that the Court of Appeals in its extended
Resolution dated July 25, 1972 ruled that although appeal was available, such remedy is not sufficiently speedy and
adequate to cure the defects in the proceedings therein or to remedy the disadvantageous position of petitioners
because, since they were deprived of raising any issue or defense that they have in the respondent court by reason of
the order of default, they cannot raise said issue or defense for the first time on appeal. Yet, on October 30, 1972, the
Court in its decision held that the remedy of appeal is not inadequate in that whatever errors respondent Judge might
have committed in his order or judgment may be assigned as specific errors in their appeal before said tribunal, and
that it can review any errors of fact and of law in the appeal.
This conflicting stand of the Court of Appeals issuing from the same case is as difficult to resolve as it is to reconcile
them. We have but to rule on them. hold one to be correct and dislodge the other as an error.

349

On general principles, the writ of certiorari will lie where there is no appeal, nor any plain, speedy and adequate
remedy in the ordinary course of law. The existence of an appeal is a bar to writ of certiorari where such appeal is in
itself a sufficient and adequate remedy, in that it will promptly relieve the petitioner from the injurious effects of the
order or judgment complained of. (Silvestre v. Torres, 57 Philippines 885, 890; Pachoco v. Tumangday L-14500, May
25, 1960; Lopez et al. v. Alvendia, et al. L-20697, Dec. 24, 1964). Courts ordinarily do not deny the writ if the result
would be to deprive a party of his substantial rights and leave him without remedy, and in those instances wherein the
lower court has acted without jurisdiction over the subject matter, or where the order or judgment complained of is a
patent nullity, courts have gone even as far as to disregard completely the question of petitioner's fault, the reason
being, undoubtedly, that acts performed with absolute want of jurisdiction over the subject matter are void ab initio and
cannot be validated by consent, express or implied, of the parties. (Moran, Comments on the Rules of Court, Vol. 3,
1970 ed., pp. 169-170).
There are numerous cases where the Supreme Court has granted the writ notwithstanding the existence of an appeal.
Thus, the Supreme Court to avoid future litigations, passed upon a petition for certiorari though the proper remedy
was appeal. Writs have been granted despite the existence of the remedy of appeal where public welfare and the
advancement of public policy so dictate, the broader interests of justice so require, or where the orders complained of
were found to be completely null and void, or that the appeal was not considered the appropriate remedy. (Fernando v.
Varquez, No. L-26417, Jan. 30, 1970)
As to what is an adequate remedy, it has been defined as "a remedy which is equally beneficial, speedy and sufficient,
not merely a remedy which at some time in the future will bring about a revival of the judgment of the lower court
complained of in the certiorari proceeding, but a remedy which will promptly relieve the petitioner from the injurious
effects of that judgment and the acts of the inferior court or tribunal." (Silvestre v. Torres, 57 Phil. 885, 11 CJ., p. 113)
Now to the case at bar, We find here a number of special facts and circumstances which addresses themselves to the
wise discretion of this court with such force to induce Us to grant the writ in order to prevent a total or partial failure of
justice, to redress or prevent the wrong done. We are satisfied that petitioners are cornered into a desperate position
where they have been ordered to pay damages over and above the amount of the bond posted for the attachment of
private respondents' properties as ordered by the decision of the court based on evidence presented ex parte by
reason of the order of default, and more than that, plaintiff Rodriguez is relieved from civil liability on an inexplicable
and unprecedented finding that the plaintiffs' check was a forgery, (when the check exhibited was only a xerox copy of
the original, which original was in the records of the case filed in the court of First instance of Rizal, Civil Case No.
14499 entitled "Hadji Esmayaten Lucman vs. Benjamin Rodriguez, et al.," (Record on Appeal, pp. 49-55). Again, the
conflicting notices as to the hearing ordered, pre-trial in one and on the merits in the other, is not the doing of the
petitioners of their standing in court was in effect a failure of justice. Petitioners can no longer present their evidence to
rebut the claim of damages, or reduce the unconscionable and excessive damages or question the release of
plaintiff's debt, for the same may not be submitted nor raised for the first time on appeal. We, therefore, hold that the
Court of Appeals erred in holding that the appeal is adequate. The court erred in ignoring the doctrine laid down in
Omico v. Villegas, 63 SCRA 285, that appeal is not an adequate remedy where party is illegally declared in default.
Petitioners assail the jurisdiction of the court of First Instance of Cebu in Civil Case No. 12069-R filed by the
Rodriguez spouses, seeking damages for the alleged malicious and unlawful is2suance of the writ of preliminary
attachment against the latter's properties granted by the Court of First Instance of Manila upon the posting of a
security bond in the amount of P450,000.00 given by the petitioner Pioneer Insurance & Surety Corp. The petitioners
contend that under See. 20, Rule 57 of the Revised Rules of Court, the claim for damages against a bond in an
alleged wrongful attachment can only be prosecuted in the same court where the bond was filed and the attachment
issued.
Rule 57, Sec. 20 of the Revised Rules of Court provides, to wit:
Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party against
whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor, any
damages resulting from the attachment. Such damages may be awarded only upon application and after proper
hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is
perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or
sureties, setting forth the facts shaking his right if damages and the amount thereof.
xxx

xxx

xxx

On the other hand, the private respondents argue that the above rule is not applicable to the case at bar, citing Moran,
Vol. Rules of Court, 1963 pp. 51-52, to wit:

350

... the rule that a claim for damages arising from the issuance of a wit of attachment, injunction, receivership and
replevin should be presented in the same action is not applicable where the principal case has been dismissed for
lack of Jurisdiction and no claim for damages could therefore have beer presented in said case.
The position of the petitioners is correct. The ruling in the case of Santos vs. Court of Appeals, et al., 95 Phil. 360
advanced by respondents to support their stand, is not controlling here, or We find that no claim for damages against
the surety bond in support of a preliminary. attachment was ever presented or filed. The latest decisions of this Court
in Ty Tion et al., vs. Marsman & Co., et al., L-17229, July 31, 1962, 5 SCRA 761 reiterating the rulings in Del Rosario
vs. Nava, 50 O.G. 4189; Estioco vs. Hamada, L- 11079, May 21, 1958; Neva Espa;a vs. Montelibano, 58 Phil, 807;
Tan Suyco vs. Javier, 21 Phil. 82; Raymundo vs. Carpio, 33 Phil. 894; Santos v. Moir, 36 Phil. 350; lay down the
proper and pertinent rule that the claim for damages against a bond in an aleged wrongful attachment can only be
prosecuted in the same court where the bond was filed and the attachment issued.
Moreover, the records show that private respondent Rodriguez filed an Application for Damages Against Bond dated
December 3, 1970 (Record on Appeal, pp. 77-81) praying that
Wherefore, it is respectfully prayed that in the event the motion to dismiss and the motion to discharge attachment
were granted, the defendant be allowed to present evidence to prove damages sustained by him by reason of the
attachment against the Pioneer Insurance & Surety Corp. in a hearing that may be conducted for the purpose with due
notice to the plaintiff and the surety, and that after due notice and hearing judgment be rendered against the Pioneer
Insurance and Surety Corp. for such amount of damages as may be proved and established for defendant.
The defendant further prays for such other reliefs and remedies consistent with law, justice and equity.
Cebu City, December 3, 1970.
ESTANISLAO FERNANDEZ
JOSE D. PALMA
Attorney for Defendant
The Court of First Instance of Manila in its order dated Dcember 22, 1970, after dismissing the complaint and lifting
the writ of preliminary attachment, ordered that the hearing of the application for damages against the bond be set
aside on January 14, 1971 at 8:30 a.m. (Record on Appeal, pp. 82-86)
In other words, defendant Rodriguez sought that judgment be rendered against the surety for such amount of
damages as may be proved or established by him, and was granted by the court the opportunity to prove damages
against the bond of the surety company. He even cited the very provision of the Revised Rules of Court, Rule 57, Sec.
20 to justify his application, and the cases supporting his application, for otherwise his claim will forever be barred. In
effect, at this point in time, defendant Rodriguez waived the lack of jurisdiction on his person, be seeking an affirmative
relief from the court, which he cannot now complain before this Court.
Thus, Francisco, in his Revised Rules of Court, Vol. 1, p. 130 citing 21 C.J.S. writes that:
Objections to lack of jurisdiction of the person, and other objections to jurisdiction not based on the contention that
there is an absolute want of jurisdiction of the subject matter, are waived by invoking the court's jurisdiction, as by a
counterclaim, consent, or voluntary submission, to jurisdiction, or conduct amounting to a general appearance.
In Soriano v. Palacio, 12 SCRA 557, this Court held that even if jurisdiction was not originally acquired by the Court
over the defendant due to allegedly defective services of summons, still when the latter filed a motion for
reconsideration of the judgment by default, he is considered to have submitted to said court's jurisdiction.
We agree with the petitioners that the Court of Appeals erred in not dismissing the complaint with respect to the
petitioner Pioneer Insurance & Surety Corp., over which respondent-appellee Judge had not acquired jurisdiction
pursuant to Sec. 20, Rule 57 of the Revised Rules of the Court.
IN VIEW OF THE FOREGOING, the judgment of the Court of Appeals is reversed and another one is entered
declaring the order of default dated February 29, 1972 and the decision rendered by the respondent Judge on March
9, 1972 null and void, holding that the Court of First Instance of Cebu lacks jurisdiction to hear and determine the
claim for damages arising from the alleged wrongful attachment issued by the Court of First Instance of Manila and
ordering the dismissal of that case (Civil Case No. 12069 of the Court of First Instance of Cebu), as well as the
pending of the judgment herein annuled in the Court of Appeals which has been rendered moot.

351

Petition granted.
SO ORDERED.

352

G.R. No. 73559-62

March 26, 1990

THE HEIRS OF THE LATE SANTIAGO MANINGO NAMELY: PIOGUITA C. VDA. DE MANINGO, JANNILDA C.
MANINGO, MARY LOU C. MANINGO, and MINORS: SANTIAGO C. MANINGO JR., CORAZON C. MANINGO,
CHRISTINE C. MANINGO, ENGELBERT C. MANINGO (ALL REPRESENTED IN THIS PETITION BY THEIR
MOTHER, PIOGUITA C. VDS. DE MANINONGO), petitioners,
vs.
INTERMEDIATE APPELLATE COURT, NEVILLE V. LAMIS ENTERPRISES and NEVILLE V. LAMIS, respondents.

MEDIALDEA, J:
This is a petition for review on certiorari seeking the reversal of the decision rendered by the Intermediate Appellate
Court (now Court of Appeals) on November 18, 1985, dismissing the following cases: 1) AC G.R. SP No. 03725,
entitled, "The Heirs of the late Santiago Maningo, et al. vs. Hon. Adolfo Alba, as Presiding Judge of RTC Davao, et al.,
2) AC-G.R. SP No. 04480 entitled, Pioquita Vda. de Maningo as Administratrix of the Estate of Santiago Maningo vs.
Judge Jose R. Nolasco of the RTC, Tagum, Davao, et al., 3) AC-G.R. SP No. 04517 entitled, "Paramount Insurance
Corporation vs. Hon. Jose R. Nolasco, et I al., and 4) AC-G.R. SP No. 04377 entitled, "Pioquita Vda. de Maningo vs.
Hon. Judge Adolfo Alba, et al."
The antecedent facts in the aforestated cases as found by the I respondent appellate court are as follows:
AC-G.R. SP No. 03725
On November 16, 1979, Neville Lamis Enterprises through its proprietor Neville Lamis, filed a complaint for specific
performance with damages against Santiago Maningo before the Court of First Instance (now Regional Trial Court) of
Pasig, Rizal, docketed as Civil Case No. 35199, to enforce a Memorandum Agreement entered into by them.
During the pendency of the case, on December 8, 1979, Maningo instituted a complaint against Lamis for collection of
a sum of money with preliminary attachment before the RTC-Tagum, Davao, docketed as Civil Case No. 1395. The
following day, on December 9, 1980, the court issued a writ of preliminary attachment upon a bond of P100,000.00
issued by Paramount Insurance Corporation. As a consequence thereof, the Deputy Provincial Sheriff levied upon
certain personal properties of Lamis. The latter filed an ex-parte manifestation with the Provincial Sheriff for the
suspension of the levy on the ground that Civil Case No. 1395 was merely a duplicity of Civil Case No. 35199 which
was pending in the CFI (now RTC) of Pasig. Lamis further moved for the dismissal of Civil Case No. 1395 based on lis
pendens and for improper venue. The court denied the motion in an order dated April 2, 1981.
Lamis went on certiorari to this Court in a petition filed on July 1, 1981 docketed as G.R. No. 57250. On October
30,1981, We rendered a decision granting the petition and ordering the dismissal of Civil Case No. 1395. Said
decision became final on April 8, 1982.
Four months later, on August 2, 1982, Lamis filed an urgent ex-parte motion in Civil Case No. 1395 for the confiscation
of Maningo's attachment bond. The lower court, on October 18, 1982, issued an order setting for hearing the issue of
damages.
At the said hearing for the reception of evidence on damages suffered by Lamis, both the surety, Paramount
Insurance Corp. and Maningo objected to the hearing.
On December 22, 1 982, Maningo filed a petition for certiorari and prohibition with this Court, docketed as G.R. No.
62733, alleging the following: That Lamis failed to comply with Section 20, Rule 57, which provides that the application
for damages must be made before entry of judgment in the subject case; that Lamis filed his application for damages
only after final judgment; that Lamis' claim for damages could not by law, exceed the attachment bond; and that in
G.R. No. 57250, Lamis is not entitled to the possession of the tractor unit, which is one of properties attached. The
petition was dismissed by this Court in a resolution dated February 28, 1983, for lack of merit. This became final on
May 4, 1983.
In view of the dismissal, Lamis filed a motion for the execution of this Court's resolution in G.R. No. 62733 and a
motion in Civil Case No. 1395 to be allowed to present evidence for the confiscation of Maningo's attachment bond
and for damages.
However, on August 14, 1983, Santiago Maningo died intestate and his counsel moved for the dismissal of Case No.
1395 on the ground that the heirs are no longer interested in the prosecution of the case.

353

The lower court, on December 28, 1983, denied the above motion and set the case for hearing.
In the meantime, on March 6,1984, the court issued an order requiring the sheriffs to take into custody in favor of
Lamis1 all attached properties still unreleased by Maningo.
On March 13, 1984, the intestate proceedings of the late Santiago Maningo began in the RTC of Davao, docketed as
Sp. Proc. 248.
On May 24, 1984, the lower court issued two orders: 1) an order requiring the surety to pay Lamis the sum of
P100,000.00 as the total claim for damages by reason of the unlawful attachment; and 2) another order for the
issuance of a writ of execution against the surety. The hearing for the reception of evidence against the heirs was
reset to another date.
Hence, on July 10, 1984, the heirs of Manigno filed with the Intermediate Appellate Court, a petition for certiorari,
mandamus, with preliminary injunction dockected was AC-G.R. SP No. 03725, seeking to set asice all the orders of th
lower court. Upon dismissal thereof, the present petition was filed by the heirs of Santiago Manigno.
AC-G.R. No. 04480
On December 11, 1981, the late Santiago Maningo filed with the Regional Trial Court of Tagum, Branch I, Davao City,
a complaint for Foreclosure of Chattel Mortgage, interest, damages and attorney's fees with prayer for attachment
against Neville Lamis Enterprises, Neville Lamis and others, docketed as Civil Case No. 147 (Santiago Maningo
(deceased), as substituted by his heirs thru Special Administratrix, Mrs. Pioquita Vda. de Maningo v. Neville Y. Lamis
Enterprises and Neville Lamis). The complaint was later amended to Replevin, damages and attorney's fees.
On December 21, 1981, the court issued an order for the seizure of a bulldozer, upon a replevin bond of P340,000 by
Paramount Insurance Corporation.
On May 25,1982, Lamis moved for the dismissal of the aforesaid Civil Case No. 147 and to cite Maningo for contempt
on the ground of litis pendencia or multiplicity of suits; that the said case is barred by the pendency of his Civil Case
No. 35199 then pending with Regional Trial Court of Pasig and also by the prior judgment of this Court in G.R. No.
57250 dismissing Civil Case
No. 1395 filed by Maningo.
On July 2, 1982, Lamis filed with this Court a petition for certiorari and prohibition, docketed as G.R. No. 61419, to
dismiss Civil Case No. 147
One and a half years later, on June 11, 1984, Lamis filed a motion in Civil Case No. 147 for the reception of evidence
on the damages he sustained by reason of the issuance of the writ of replevin. Despite objections by the surety,
Paramount Insurance Corporation, the lower court granted the said motion, and in an - order dated September 20, 1
984, it required the Estate of Maningo to pay to Lamis, compensatory damages by reason of the unlawful issuance of
replevin.
The Administratrix of Maningo's estate filed a petition for certiorari with preliminary injunction with this Court seeking
the dismissal of Lamis' action for damages in the lower court. We, however, referred the case to the Intermediate
Appellate Court for proper determination docketed as AC-G.R. SP No. 04480.
SP-04377
In the meantime, in an order dated September 20, 1984, the Regional Trial Court in Civil Case No. 147 awarded
Lamis, et al. the amount of P7,677,177.00 as compensatory damages by reason of the issuance of the writ of replevin.
On September 21, 1984, writs of execution were issued by the court and the cash deposits of Santiago Maningo, now
deceased, with the Philippine National Bank, Davao Branch and the Bank of the Philippine Islands, Davao Branch,
were ordered garnished. On September 25,1984, Lamis filed an ex-parte application in Special Proceedings No. 248,
for the release of Maningo estate's garnished deposits which was granted, and an order was issued directing the
banks concerned to release to the sheriff the cash deposits of Maningo. Prior to the issuance of the above-stated
order, however, the court had authorized the Special Administratrix of Maningo's estate to withdraw in cash from the
Philippine National Bank, Davao Branch, the amounts of P654,963.03 and P90,829.45. On a motion for clarification,
the court issued an order on September 26, 1984, setting aside its previous order allowing the special administratrix to
withdraw the amount from the bank, and declared the branch manager and branch attorney of PNB in contempt of
court. Aggrieved, Pioquita Vda. de Maningo, special administratrix
SP-04517

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On the other hand, on September 21, 1984, the surety, Paramount mount Insurance Corporation, appealed to the
respondent appellate court from the order of the trial court making it liable for the sum of P340,000.00. On the same
date, the trial court issued a writ of execution of Civil Case No. 147.
The surety, Paramount Insurance Corporation, filed with this Court a petition for certiorari, prohibition with preliminary
injunction against Judge Jose R. Nolasco of the Regional Trial Court of Tagum, Davao and against Lamis. We referred
the case to the Intermediate Appellate Court (now Court of Appeals) on October 8, 1984. On November 18, 1985, the
Intermediate Appellate Court (now Court of Appeals) rendered judgment on the above four cases, namely, SP-03725,
SP-04480, SP-04517 and SP-04377, the dispositive portion of which states:
WHEREFORE, premises considered, the petitions in SP-03725, SP-04480 and SP-04517 are all dismissed with costs
against the qqqw petitioners, while in SP-04377 including the PNB's intervention thereon, the petition is also
dismissed insofar as the orders of Judge Adolfo Alba dated September 25 and 26,1984 in SP Proc. No. 248 are
concerned. However, his (Judge Alba) orders dated September 29, 1984, October 1, 1984, October 2,1984 and
October 3,1984 are hereby annulled and set aside. No costs.
SO ORDERED.(p. 88, Rollo)
Hence, the present petition, which was filed on February 19, 1986. We issued a temporary restraining order on
February 20, 1986, against the implementation of the orders of the trial court on the award of damages, and the
decision of the Intermediate Appellate Court (now Court of Appeals).
For Us to consider is the following error assigned by petitioners:
THE RESPONDENT HONORABLE INTERMEDIATE APPELLATE COURT, WITH ALL DUE RESPECT, HAS
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AND/OR SANCTIONED
SUCH DEPARTURE OF THE LOWER COURT WHEN IT AFFIRMED THE PROCEEDINGS CONDUCTED BY THE
LOWER COURTS (RTC-TAGUM, DAVAO, BRANCH II IN CIVIL CASE NO. 1395 AND RTC-TAGUM, DAVAO
BRANCH I IN SP. CIVIL CASE NO. 147), IN ALLOWING RESPONDENT LAMIS TO PRESENT EVIDENCE ON
ALLEGED DAMAGES SUSTAINED AND IN AWARDING DAMAGES, EVEN LONG AFTER THE ABOVEMENTIONED
CASES HAS BEEN ORDERED DISMISSED BY THIS HONORABLE SUPREME COURT WITHOUT AWARD OF
DAMAGES. (pp. 33-34, Rollo)
Petitioners contend that Civil Case No. 1395 was ordered dismissed by Us in G.R. No. 57250 upon petition of private
respondent Lamis; and that said decision became final on April 8, 1982 long before the latter applied for damages
sustained by reason of the unlawful attachment. Anent Civil Case No. 1395, the respondent appellate court, in ACG.R. SP No. 03725, made the following findings:
Actually, this matter had already been threshed out by the deceased Santiago Maningo to the Supreme Court when
(he) filed a petition for certiorari and prohibition on December 22, 1982 which was docketed therein as G.R. L-62733.
Unfortunately, the Supreme Court, in a minute resolution dated February 28,1983 dismissed the aforesaid petition,
(see p. 103, Annex L 03725) which resolution became final on May 4,1983. (p. 77, Rollo)
We agree with the aforequoted findings of the appellate court. The principle of resjudicata is applicable herein. Its
requisites are present in the instant case, namely: 1) the presence of a final former judgment; 2) the former judgment
was rendered by a court having jurisdiction over the subject matter and the parties; 3) the former judgment is a
judgment on the merits; and 4) there is between the first and second actions, Identity of parties, of subject matter and
of cause of action (Pantranco North Express, Inc. v. NLRC, No. 64152, December 29, 1983, 126 SCRA 526).
We find that Our Resolution in G.R. No. 62733 on February 28, 1983 is a bar to SP No. 03725 subject of this petition
for review. G.R. No. 62733 is a petition for certiorari filed by Maningo, who is now succeeded by petitioners herein,
questioning the order of the lower court granting the application for damages of Lamis in Civil Case No. 1395, and
alleging: that Lamis failed to comply with Rule 57, Sec. 20 insofar as the application for damages must be made
before entry of judgment in the subject case; and that Lamis made such application only after final judgment. These
are the very same issues and contentions raised by the heirs in the present petition with respect to AC-G.R. SP No.
03725.
It is worthy to note that G.R. No. 62733 was dismissed with finality by this Court on February 28, 1983 and entry of
final judgment was made on May 4, 1983. While contained in a minute resolution, the dismissal was an adjudication
on the merits of the case and constituted a bar to a relitigation of the issues raised therein under the rules of
resjudicata (Commercial Union Assurance Company Limited v. Lepanto Consolidated Mining Company, L-43342,
October 30,1978,86 SCRA 79; Sy v. Tuvera, No. 76639, July 16, 1987, 152 SCRA 103). A final judgment on the merits
is conclusive as to matters put in issue and actually determined by the court, when they are raised in again in a

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subsequent litigation between the same parties, even though it is irregular or erroneous. Hence, whether Our
resolution in petition in G.R. No. 62733 is right or wrong, is of no importance; herein. As long as the judgment in that
case had become final, the issues that were litigated therein cannot be reopened by the parties in this subsequent
petition, whether erroneously decided or not.
With respect to AC-G.R. SP No. 04480, petitioners allege that Civil Case No. 147 was also ordered dismissed on
December 15, 1982 by this Court upon petition of private respondent Lamis in G.R. No. 61419; and that the said
dismissal became final on March 3,1983 long before Lamis applied for damages sustained by reason of unlawful
replevin.
The respondent appellate court, on this matter, ruled, interalia:
Thus, after the Supreme Court in a decision rendered on December 15, 1982 in G.R. L-61419, has ordered for (sic)
the dismissal of Civil Case No. 147, the discharge of the writ of replevin issued in the aforesaid civil case is likewise
necessarily included therein. Hence, the respondent judge has all the reason to order the return of the property
subject of the replevin order and to proceed in hearing and adjudicating whatever damages the defendants (Lamises)
may have suffered by reasons thereof. (p. 79, Rollo)
We find the latter portion of the ruling of the appellate court as aforequoted, incorrect.
Section 1 0 of Rule 60 of the Rules of Court provides that in the recovery of damages against the bond posted by the
applicant in replevin cases, the procedure shall follow that what is laid down in Section 20 of Rule 57, which reads:
Sec. 20. Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party
against who attachment was issued, he may recover upon the bond given or deposit made by the attaching creditor,
any damages resulting from the attachment. Such damages may be awarded only upon application and after proper
hearing, and shall be included in the final judgment. The application must be filed before the tirial or before appeal is
perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or
sureties, setting forth the facts showing his right to damages and the amount thereof
If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must
claim damages sustained during the pendency of the appeal by an application by, with notice to the party in whose
favor the attachement was issued or his surety or sureties, before the judment of the appellate court becomes
executory. The appellate court may allow the application to be heard and decided by the trial court.
As may be gathered from Section 20, Rule 57, the claim for damages resulting from wrongful seizure of personalty
property must be filed in the same action in which the writ attachment or the writ of replevin was issued; otherwise, it is
bar' red (Tan Suyco v. Javier, 21 Phil. 82; Nueva-Espaa v. Montelibano, 58 Phil. 807). It may be presented, before
trial in the answer by way of counterclaim (Medina v. Maderera del Norte de Catanduanes 51 Phil. 240). In the
discretion of the court, it may also be made at any other time even after the rendition of final judgment if the court has
still jurisdiction over the case (Visayan Surety & Insurance Corp. v. Pascual, 85 Phil. 779). Hence, if the application for
damages is not made in compliance with the procedure laid down in the rules, even the surety on the bond is relieved
from liability therefor. The remedy provided by law isexclusive and by failing to file a motion for the determination of 1
the damages on time and whilejudment is still under the control of the court, the claimant loses his right to damages
(Santos v. Mair, 36 phil. 350; Japco v. The City of Manila, 48 Phil. 851; Cruz v. Manila Surety & Fidelity Co., Inc., et al.,
92 Phil. 699).
In the case at bar, there is no showing that respondent Lamis had timely filed his claim for damages arising from the
wrongful issuance of the writ of replevin in Civil Case No. 147, or prior to dismissal on December 15, 1982, of the
replevin case, upon Lamis' petition for certiorari. It was only years later on June 11, 1984 that Lamis applied for
damages on the replevin bond, after the case had long been dismissed. The trial court no longer had jurisdiction and
control over the case when it awarded damages after it was dismissed and thrown out of court in the certiorari case
filed by Lamis himself. Thus, the judgment of the y trial court awarding damages against the estate of Maningo in the
amount of P7,677,177.00 in the replevin case is null and void. Logically, the petitioners' surety, Paramount Insurance
Corporation, should be released from its liability under the bond. Notwithstanding, Our dismissal of the latter's
petitionseeking review on certiorari of the same decision of the respondent dent appellate court on July 2, 1986,
upholding the award of damages to Lamis, We release said surety from liability based on the same principles We have
pronounced in the foregoing discussion.
ACCORDINGLY, the petition is hereby GRANTED in part, and the judgment of the Intermediate Appellate Court (now
Court of Appeals) dated November 18, 1985 with respect to ACCUSED G.R. SP No. 04480, which upheld the award
of damages by the trial court in Civil Case No. 147, is REVERSED and SET ASIDE. In all other respects, the petition
is DENIED and the judgment of the respondent appellate court is AFFIRMED. The temporary restraining order issued
on February 20, 1986, is lifted.

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SO ORDERED.

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G.R. No. 112019

January 4, 1995

LEOUEL SANTOS, petitioner,

vs.
THE HONORABLE COURT OF APPEALS AND JULIA ROSARIO BEDIA-SANTOS, respondents.

VITUG, J.:
Concededly a highly, if not indeed the most likely, controversial provision introduced by the Family Code is Article 36
(as amended by E.O. No. 227 dated 17 July 1987), which declares:
Art. 36. A marriage contracted by any party who, at the time of the celebration, was psychologically incapacitated to
comply with the essential marital obligations of marriage, shall likewise be void even if such incapacity becomes
manifest only after its solemnization.
The present petition for review on certiorari, at the instance of Leouel Santos ("Leouel"), brings into fore the above
provision which is now invoked by him. Undaunted by the decisions of the court a quo 1 and the Court of Appeal, 2
Leouel persists in beseeching its application in his attempt to have his marriage with herein private respondent, Julia
Rosario Bedia-Santos ("Julia"), declared a nullity.
It was in Iloilo City where Leouel, who then held the rank of First Lieutenant in the Philippine Army, first met Julia. The
meeting later proved to be an eventful day for Leouel and Julia. On 20 September 1986, the two exchanged vows
before Municipal Trial Court Judge Cornelio G. Lazaro of Iloilo City, followed, shortly thereafter, by a church wedding.
Leouel and Julia lived with the latter's parents at the J. Bedia Compound, La Paz, Iloilo City. On 18 July 1987, Julia
gave birth to a baby boy, and he was christened Leouel Santos, Jr. The ecstasy, however, did not last long. It was
bound to happen, Leouel averred, because of the frequent interference by Julia's parents into the young spouses
family affairs. Occasionally, the couple would also start a "quarrel" over a number of other things, like when and where
the couple should start living independently from Julia's parents or whenever Julia would express resentment on
Leouel's spending a few days with his own parents.
On 18 May 1988, Julia finally left for the United Sates of America to work as a nurse despite Leouel's pleas to so
dissuade her. Seven months after her departure, or on 01 January 1989, Julia called up Leouel for the first time by
long distance telephone. She promised to return home upon the expiration of her contract in July 1989. She never did.
When Leouel got a chance to visit the United States, where he underwent a training program under the auspices of
the Armed Forces of the Philippines from 01 April up to 25 August 1990, he desperately tried to locate, or to somehow
get in touch with, Julia but all his efforts were of no avail.
Having failed to get Julia to somehow come home, Leouel filed with the regional trial Court of Negros Oriental, Branch
30, a complaint for "Voiding of marriage Under Article 36 of the Family Code" (docketed, Civil Case No. 9814).
Summons was served by publication in a newspaper of general circulation in Negros Oriental.
On 31 May 1991, respondent Julia, in her answer (through counsel), opposed the complaint and denied its
allegations, claiming, in main, that it was the petitioner who had, in fact, been irresponsible and incompetent.
A possible collusion between the parties to obtain a decree of nullity of their marriage was ruled out by the Office of
the Provincial Prosecutor (in its report to the court).
On 25 October 1991, after pre-trial conferences had repeatedly been set, albeit unsuccessfully, by the court, Julia
ultimately filed a manifestation, stating that she would neither appear nor submit evidence.
On 06 November 1991, the court a quo finally dismissed the complaint for lack of merit. 3
Leouel appealed to the Court of Appeal. The latter affirmed the decision of the trial court. 4
The petition should be denied not only because of its non-compliance with Circular 28-91, which requires a
certification of non-shopping, but also for its lack of merit.
Leouel argues that the failure of Julia to return home, or at the very least to communicate with him, for more than five
years are circumstances that clearly show her being psychologically incapacitated to enter into married life. In his own
words, Leouel asserts:

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. . . (T)here is no leave, there is no affection for (him) because respondent Julia Rosario Bedia-Santos failed all these
years to communicate with the petitioner. A wife who does not care to inform her husband about her whereabouts for a
period of five years, more or less, is psychologically incapacitated.
The family Code did not define the term "psychological incapacity." The deliberations during the sessions of the Family
Code Revision Committee, which has drafted the Code, can, however, provide an insight on the import of the
provision.
Art. 35. The following marriages shall be void from the beginning:
xxx

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Art. 36. . . .
(7)
Those marriages contracted by any party who, at the time of the celebration, was wanting in the sufficient use
of reason or judgment to understand the essential nature of marriage or was psychologically or mentally incapacitated
to discharge the essential marital obligations, even if such lack of incapacity is made manifest after the celebration.
On subparagraph (7), which as lifted from the Canon Law, Justice (Jose B.L.) Reyes suggested that they say "wanting
in sufficient use," but Justice (Eduardo) Caguioa preferred to say "wanting in the sufficient use." On the other hand,
Justice Reyes proposed that they say "wanting in sufficient reason." Justice Caguioa, however, pointed out that the
idea is that one is not lacking in judgment but that he is lacking in the exercise of judgment. He added that lack of
judgment would make the marriage voidable. Judge (Alicia Sempio-) Diy remarked that lack of judgment is more
serious than insufficient use of judgment and yet the latter would make the marriage null and void and the former only
voidable. Justice Caguioa suggested that subparagraph (7) be modified to read:
"That contracted by any party who, at the time of the celebration, was psychologically incapacitated to discharge the
essential marital obligations, even if such lack of incapacity is made manifest after the celebration."
Justice Caguioa explained that the phrase "was wanting in sufficient use of reason of judgment to understand the
essential nature of marriage" refers to defects in the mental faculties vitiating consent, which is not the idea in
subparagraph (7), but lack of appreciation of one's marital obligations.
Judge Diy raised the question: Since "insanity" is also a psychological or mental incapacity, why is "insanity" only a
ground for annulment and not for declaration or nullity? In reply, Justice Caguioa explained that in insanity, there is the
appearance of consent, which is the reason why it is a ground for voidable marriages, while subparagraph (7) does
not refer to consent but to the very essence of marital obligations.
Prof. (Araceli) Baviera suggested that, in subparagraph (7), the word "mentally" be deleted, with which Justice
Caguioa concurred. Judge Diy, however, prefers to retain the word "mentally."
Justice Caguioa remarked that subparagraph (7) refers to psychological impotence. Justice (Ricardo) Puno stated that
sometimes a person may be psychologically impotent with one but not with another. Justice (Leonor Ines-) Luciano
said that it is called selective impotency.
Dean (Fortunato) Gupit stated that the confusion lies in the fact that in inserting the Canon Law annulment in the
Family Code, the Committee used a language which describes a ground for voidable marriages under the Civil Code.
Justice Caguioa added that in Canon Law, there are voidable marriages under the Canon Law, there are no voidable
marriages Dean Gupit said that this is precisely the reason why they should make a distinction.
Justice Puno remarked that in Canon Law, the defects in marriage cannot be cured.
Justice Reyes pointed out that the problem is: Why is "insanity" a ground for void ab initio marriages? In reply, Justice
Caguioa explained that insanity is curable and there are lucid intervals, while psychological incapacity is not.
On another point, Justice Puno suggested that the phrase "even if such lack or incapacity is made manifest" be
modified to read "even if such lack or incapacity becomes manifest."
Justice Reyes remarked that in insanity, at the time of the marriage, it is not apparent.
Justice Caguioa stated that there are two interpretations of the phrase "psychological or mentally incapacitated" in
the first one, there is vitiation of consent because one does not know all the consequences of the marriages, and if he
had known these completely, he might not have consented to the marriage.

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xxx

xxx

Prof. Bautista stated that he is in favor of making psychological incapacity a ground for voidable marriages since
otherwise it will encourage one who really understood the consequences of marriage to claim that he did not and to
make excuses for invalidating the marriage by acting as if he did not understand the obligations of marriage. Dean
Gupit added that it is a loose way of providing for divorce.
xxx

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Justice Caguioa explained that his point is that in the case of incapacity by reason of defects in the mental faculties,
which is less than insanity, there is a defect in consent and, therefore, it is clear that it should be a ground for voidable
marriage because there is the appearance of consent and it is capable of convalidation for the simple reason that
there are lucid intervals and there are cases when the insanity is curable. He emphasized that psychological
incapacity does not refer to mental faculties and has nothing to do with consent; it refers to obligations attendant to
marriage.
xxx

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xxx

On psychological incapacity, Prof. (Flerida Ruth P.) Romero inquired if they do not consider it as going to the very
essence of consent. She asked if they are really removing it from consent. In reply, Justice Caguioa explained that,
ultimately, consent in general is effected but he stressed that his point is that it is not principally a vitiation of consent
since there is a valid consent. He objected to the lumping together of the validity of the marriage celebration and the
obligations attendant to marriage, which are completely different from each other, because they require a different
capacity, which is eighteen years of age, for marriage but in contract, it is different. Justice Puno, however, felt that
psychological incapacity is still a kind of vice of consent and that it should not be classified as a voidable marriage
which is incapable of convalidation; it should be convalidated but there should be no prescription. In other words, as
long as the defect has not been cured, there is always a right to annul the marriage and if the defect has been really
cured, it should be a defense in the action for annulment so that when the action for annulment is instituted, the issue
can be raised that actually, although one might have been psychologically incapacitated, at the time the action is
brought, it is no longer true that he has no concept of the consequence of marriage.
Prof. (Esteban) Bautista raised the question: Will not cohabitation be a defense? In response, Justice Puno stated that
even the bearing of children and cohabitation should not be a sign that psychological incapacity has been cured.
Prof. Romero opined that psychological incapacity is still insanity of a lesser degree. Justice Luciano suggested that
they invite a psychiatrist, who is the expert on this matter. Justice Caguioa, however, reiterated that psychological
incapacity is not a defect in the mind but in the understanding of the consequences of marriage, and therefore, a
psychiatrist will not be a help.
Prof. Bautista stated that, in the same manner that there is a lucid interval in insanity, there are also momentary
periods when there is an understanding of the consequences of marriage. Justice Reyes and Dean Gupit remarked
that the ground of psychological incapacity will not apply if the marriage was contracted at the time when there is
understanding of the consequences of marriage. 5
xxx

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Judge Diy proposed that they include physical incapacity to copulate among the grounds for void marriages. Justice
Reyes commented that in some instances the impotence that in some instances the impotence is only temporary and
only with respect to a particular person. Judge Diy stated that they can specify that it is incurable. Justice Caguioa
remarked that the term "incurable" has a different meaning in law and in medicine. Judge Diy stated that
"psychological incapacity" can also be cured. Justice Caguioa, however, pointed out that "psychological incapacity" is
incurable.
Justice Puno observed that under the present draft provision, it is enough to show that at the time of the celebration of
the marriage, one was psychologically incapacitated so that later on if already he can comply with the essential marital
obligations, the marriage is still void ab initio. Justice Caguioa explained that since in divorce, the psychological
incapacity may occur after the marriage, in void marriages, it has to be at the time of the celebration of marriage. He,
however, stressed that the idea in the provision is that at the time of the celebration of the marriage, one is
psychologically incapacitated to comply with the essential marital obligations, which incapacity continues and later
becomes manifest.
Justice Puno and Judge Diy, however, pointed out that it is possible that after the marriage, one's psychological
incapacity become manifest but later on he is cured. Justice Reyes and Justice Caguioa opined that the remedy in this
case is to allow him to remarry. 6

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xxx

Justice Puno formulated the next Article as follows:

Art. 37. A marriage contracted by any party who, at the time of the celebration, was psychologically incapacitated, to
comply with the essential obligations of marriage shall likewise be void from the beginning even if such incapacity
becomes manifest after its solemnization.
Justice Caguioa suggested that "even if" be substituted with "although." On the other hand, Prof. Bautista proposed
that the clause "although such incapacity becomes manifest after its solemnization" be deleted since it may encourage
one to create the manifestation of psychological incapacity. Justice Caguioa pointed out that, as in other provisions,
they cannot argue on the basis of abuse.
Judge Diy suggested that they also include mental and physical incapacities, which are lesser in degree than
psychological incapacity. Justice Caguioa explained that mental and physical incapacities are vices of consent while
psychological incapacity is not a species of vice or consent.
Dean Gupit read what Bishop Cruz said on the matter in the minutes of their February 9, 1984 meeting:
"On the third ground, Bishop Cruz indicated that the phrase "psychological or mental impotence" is an invention of
some churchmen who are moralists but not canonists, that is why it is considered a weak phrase. He said that the
Code of Canon Law would rather express it as "psychological or mental incapacity to discharge . . ."
Justice Caguioa remarked that they deleted the word "mental" precisely to distinguish it from vice of consent. He
explained that "psychological incapacity" refers to lack of understanding of the essential obligations of marriage.
Justice Puno reminded the members that, at the last meeting, they have decided not to go into the classification of
"psychological incapacity" because there was a lot of debate on it and that this is precisely the reason why they
classified it as a special case.
At this point, Justice Puno, remarked that, since there having been annulments of marriages arising from
psychological incapacity, Civil Law should not reconcile with Canon Law because it is a new ground even under
Canon Law.
Prof. Romero raised the question: With this common provision in Civil Law and in Canon Law, are they going to have
a provision in the Family Code to the effect that marriages annulled or declared void by the church on the ground of
psychological incapacity is automatically annulled in Civil Law? The other members replied negatively.
Justice Puno and Prof. Romero inquired if Article 37 should be retroactive or prospective in application.
Justice Diy opined that she was for its retroactivity because it is their answer to the problem of church annulments of
marriages, which are still valid under the Civil Law. On the other hand, Justice Reyes and Justice Puno were
concerned about the avalanche of cases.
Dean Gupit suggested that they put the issue to a vote, which the Committee approved.
The members voted as follows:
(1)

Justice Reyes, Justice Puno and Prof. Romero were for prospectivity.

(2)

Justice Caguioa, Judge Diy, Dean Gupit, Prof. Bautista and Director Eufemio were for retroactivity.

(3)

Prof. Baviera abstained.

Justice Caguioa suggested that they put in the prescriptive period of ten years within which the action for declaration
of nullity of the marriage should be filed in court. The Committee approved the suggestion. 7
It could well be that, in sum, the Family Code Revision Committee in ultimately deciding to adopt the provision with
less specificity than expected, has in fact, so designed the law as to allow some resiliency in its application. Mme.
Justice Alicia V. Sempio-Diy, a member of the Code Committee, has been quoted by Mr. Justice Josue N. Bellosillo in
Salita vs. Hon. Magtolis (G.R. No. 106429, 13 June 1994); thus: 8

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The Committee did not give any examples of psychological incapacity for fear that the giving of examples would limit
the applicability of the provision under the principle of ejusdem generis. Rather, the Committee would like the judge to
interpret the provision on a case-to-case basis, guided by experience, the findings of experts and researchers in
psychological disciplines, and by decisions of church tribunals which, although not binding on the civil courts, may be
given persuasive effect since the provision was taken from Canon Law.
A part of the provision is similar to Canon 1095 of the New Code of Canon Law, 9 which reads:
Canon 1095.
1.

They are incapable of contracting marriage:

who lack sufficient use of reason;

2.
who suffer from a grave defect of discretion of judgment concerning essentila matrimonial rights and duties, to
be given and accepted mutually;
3.
who for causes of psychological nature are unable to assume the essential obligations of marriage. (Emphasis
supplied.)
Accordingly, although neither decisive nor even perhaps all that persuasive for having no juridical or secular effect, the
jurisprudence under Canon Law prevailing at the time of the code's enactment, nevertheless, cannot be dismissed as
impertinent for its value as an aid, at least, to the interpretation or construction of the codal provision.
One author, Ladislas Orsy, S.J., in his treaties, 10 giving an account on how the third paragraph of Canon 1095 has
been framed, states:
The history of the drafting of this canon does not leave any doubt that the legislator intended, indeed, to broaden the
rule. A strict and narrow norm was proposed first:
Those who cannot assume the essential obligations of marriage because of a grave psycho-sexual anomaly (ob
gravem anomaliam psychosexualem) are unable to contract marriage (cf. SCH/1975, canon 297, a new canon,
novus);
then a broader one followed:
. . . because of a grave psychological anomaly (ob gravem anomaliam psychicam) . . . (cf. SCH/1980, canon 1049);
then the same wording was retained in the text submitted to the pope (cf. SCH/1982, canon 1095, 3);
finally, a new version was promulgated:
because of causes of a psychological nature (ob causas naturae psychiae).
So the progress was from psycho-sexual to psychological anomaly, then the term anomaly was altogether eliminated.
it would be, however, incorrect to draw the conclusion that the cause of the incapacity need not be some kind of
psychological disorder; after all, normal and healthy person should be able to assume the ordinary obligations of
marriage.
Fr. Orsy concedes that the term "psychological incapacity" defies any precise definition since psychological causes
can be of an infinite variety.
In a book, entitled "Canons and Commentaries on Marriage," written by Ignatius Gramunt, Javier Hervada and LeRoy
Wauck, the following explanation appears:
This incapacity consists of the following: (a) a true inability to commit oneself to the essentials of marriage. Some
psychosexual disorders and other disorders of personality can be the psychic cause of this defect, which is here
described in legal terms. This particular type of incapacity consists of a real inability to render what is due by the
contract. This could be compared to the incapacity of a farmer to enter a binding contract to deliver the crops which he
cannot possibly reap; (b) this inability to commit oneself must refer to the essential obligations of marriage: the
conjugal act, the community of life and love, the rendering of mutual help, the procreation and education of offspring;
(c) the inability must be tantamount to a psychological abnormality. The mere difficulty of assuming these obligations,
which could be overcome by normal effort, obviously does not constitute incapacity. The canon contemplates a true
psychological disorder which incapacitates a person from giving what is due (cf. John Paul II, Address to R. Rota, Feb.
5, 1987). However, if the marriage is to be declared invalid under this incapacity, it must be proved not only that the
person is afflicted by a psychological defect, but that the defect did in fact deprive the person, at the moment of giving

362

consent, of the ability to assume the essential duties of marriage and consequently of the possibility of being bound by
these duties.
Justice Sempio-Diy 11 cites with approval the work of Dr. Gerardo Veloso, a former Presiding Judge of the
Metropolitan Marriage Tribunal of the Catholic Archdiocese of Manila (Branch 1), who opines that psychological
incapacity must be characterized by (a) gravity, (b) juridical antecedence, and (c) incurability. The incapacity must be
grave or serious such that the party would be incapable of carrying out the ordinary duties required in marriage; it
must be rooted in the history of the party antedating the marriage, although the overt manifestations may emerge only
after the marriage; and it must be incurable or, even if it were otherwise, the cure would be beyond the means of the
party involved.
It should be obvious, looking at all the foregoing disquisitions, including, and most importantly, the deliberations of the
Family Code Revision Committee itself, that the use of the phrase "psychological incapacity" under Article 36 of the
Code has not been meant to comprehend all such possible cases of psychoses as, likewise mentioned by some
ecclesiastical authorities, extremely low intelligence, immaturity, and like circumstances (cited in Fr. Artemio Baluma's
"Void and Voidable Marriages in the Family Code and their Parallels in Canon Law," quoting from the Diagnostic
Statistical Manual of Mental Disorder by the American Psychiatric Association; Edward Hudson's "Handbook II for
Marriage Nullity Cases"). Article 36 of the Family Code cannot be taken and construed independently of, but must
stand in conjunction with, existing precepts in our law on marriage. Thus correlated, "psychological incapacity" should
refer to no less than a mental (not physical) incapacity that causes a party to be truly incognitive of the basic marital
covenants that concomitantly must be assumed and discharged by the parties to the marriage which, as so expressed
by Article 68 of the Family Code, include their mutual obligations to live together, observe love, respect and fidelity and
render help and support. There is hardly any doubt that the intendment of the law has been to confine the meaning of
"psychological incapacity" to the most serious cases of personality disorders clearly demonstrative of an utter
intensitivity or inability to give meaning and significance to the marriage. This pschologic condition must exist at the
time the marriage is celebrated. The law does not evidently envision, upon the other hand, an inability of the spouse to
have sexual relations with the other. This conclusion is implicit under Article 54 of the Family Code which considers
children conceived prior to the judicial declaration of nullity of the void marriage to be "legitimate."
The other forms of psychoses, if existing at the inception of marriage, like the state of a party being of unsound mind
or concealment of drug addiction, habitual alcoholism, homosexuality or lesbianism, merely renders the marriage
contract voidable pursuant to Article 46, Family Code. If drug addiction, habitual alcholism, lesbianism or
homosexuality should occur only during the marriage, they become mere grounds for legal separation under Article 55
of the Family Code. These provisions of the Code, however, do not necessarily preclude the possibility of these
various circumstances being themselves, depending on the degree and severity of the disorder, indicia of
psychological incapacity.
Until further statutory and jurisprudential parameters are established, every circumstance that may have some bearing
on the degree, extent, and other conditions of that incapacity must, in every case, be carefully examined and
evaluated so that no precipitate and indiscriminate nullity is peremptorily decreed. The well-considered opinions of
psychiatrists, psychologists, and persons with expertise in psychological disciplines might be helpful or even desirable.
Marriage is not an adventure but a lifetime commitment. We should continue to be reminded that innate in our society,
then enshrined in our Civil Code, and even now still indelible in Article 1 of the Family Code, is that
Art. 1. Marriage is a special contract of permanent union between a man a woman entered into in accordance with
law for the establishment of conjugal and family life. It is the foundation of the family and an inviolable social institution
whose nature, consequences, and incidents are governed by law and not subject to stipulation, except that marriage
settlements may fix the property relations during the marriage within the limits provided by this Code. (Emphasis
supplied.)
Our Constitution is no less emphatic:
Sec. 1. The State recognizes the Filipino family as the foundation of the nation. Accordingly, it shall strengthen its
solidarity and actively promote its total development.
Sec. 2. Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the State.
(Article XV, 1987 Constitution).
The above provisions express so well and so distinctly the basic nucleus of our laws on marriage and the family, and
they are doubt the tenets we still hold on to.

363

The factual settings in the case at bench, in no measure at all, can come close to the standards required to decree a
nullity of marriage. Undeniably and understandably, Leouel stands aggrieved, even desperate, in his present situation.
Regrettably, neither law nor society itself can always provide all the specific answers to every individual problem.
WHEREFORE, the petition is DENIED.
SO ORDERED.
Narvasa, C.J., Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno Kapunan and Mendoza, JJ.,
concur.
Feliciano, J., is on leave.

Separate Opinions

PADILLA, J., dissenting:

It is difficult to dissent from a well-written and studied opinion as Mr. Justice Vitug's ponencia. But, after an extended
reflection on the facts of this case, I cannot see my way clear into holding, as the majority do, that there is no ground
for the declaration of nullity of the marriage between petitioner and private respondent.
To my mind, it is clear that private respondent has been shown to be psychologically incapacitated to comply with at
least one essential marital obligation, i.e. that of living and cohabiting with her husband, herein petitioner. On the other
hand, it has not been shown that petitioner does not deserve to live and cohabit with his wife, herein private
respondent.
There appears to be no disagreement that the term "psychological incapacity" defies precision in definition. But, as
used in Article 36 of the Family Code as a ground for the declaration of nullity of a marriage, the intent of the framers
of the Code is evidently to expand and liberalize the grounds for nullifying a marriage, as well pointed out by Madam
Justice Flerida Ruth P. Romero in her separate opinion in this case.
While it is true that the board term "psychological incapacity" can open the doors to abuse by couples who may wish
to have an easy way out of their marriage, there are, however, enough safeguards against this contingency, among
which, is the intervention by the State, through the public prosecutor, to guard against collusion between the parties
and/or fabrication of evidence.
In their case at bench, it has been abundantly established that private respondent Julia Rosario Bedia-Santos exhibits
specific behavior which, to my mind, shows that she is psychologically incapacitated to fulfill her essential marital
obligations, to writ:
a.

It took her seven (7) months after she left for the United States to call up her husband.

b.
Julia promised to return home after her job contract expired in July 1989, but she never did and neither is
there any showing that she informed her husband (herein petitioner) of her whereabouts in the U.S.A.
c.
When petitioner went to the United States on a mission for the Philippine Army, he exerted efforts to "touch
base" with Julia; there were no similar efforts on the part of Julia; there were no similar efforts on the part of Julia to do
the same.
d.
When petitioner filed this suit, more than five (5) years had elapsed, without Julia indicating her plans to rejoin
the petitioner or her whereabouts.
e.
When petitioner filed this case in the trial court, Julia, in her answer, claimed that it is the former who has been
irresponsible and incompetent.
f.

During the trial, Julia waived her right to appear and submit evidence.

364

A spouse's obligation to live and cohabit with his/her partner in marriage is a basic ground rule in marriage, unless
there are overpowering compelling reasons such as, for instance, an incurable contagious disease on the part of a
spouse or cruelty of one partner, bordering on insanity. There may also be instances when, for economic and practical
reasons, husband and wife have to live separately, but the marital bond between the spouses always remains. Mutual
love and respect for each other would, in such cases, compel the absent spouse to at least have regular contracts
with the other to inform the latter of his/her condition and whereabouts.
In the present case, it is apparent that private respondent Julia Rosario Bedia-Santos has no intention of cohabiting
with petitioner, her husband, or maintaining contact with him. In fact, her acts eloquently show that she does not want
her husband to know of her whereabouts and neither has she any intention of living and cohabiting with him.
To me there appears to be, on the part of private respondent, an unmistakeable indication of psychological incapacity
to comply with her essential marital obligations, although these indications were made manifest after the celebration of
the marriage.
It would be a great injustice, I believe, to petitioner for this Court to give a much too restrictive interpretation of the law
and compel the petitioner to continue to be married to a wife who for purposes of fulfilling her marital duties has, for all
practical purposes, ceased to exist.
Besides, there are public policy considerations involved in the ruling the Court makes today. Is it not, in effect directly
or indirectly, facilitating the transformation of petitioner into a "habitual tryster" or one forced to maintain illicit relations
with another woman or women with emerging problems of illegitimate children, simply because he is denied by private
respondent, his wife, the companionship and conjugal love which he has sought from her and to which he is legally
entitled?
I do not go as far as to suggest that Art. 36 of the Family Code is a sanction for absolute divorce but I submit that we
should not constrict it to non-recognition of its evident purpose and thus deny to one like petitioner, an opportunity to
turn a new leaf in his life by declaring his marriage a nullity by reason of his wife's psychological incapacity to perform
an essential marital obligation.
I therefore vote to GRANT the petition and to DECLARE the marriage between petitioner Leouel Santos and private
respondent Julia Rosario Bedia-Santos VOID on the basis of Article 36 of the Family Code.
ROMERO, J., concurring:
I agree under the circumstances of the case, petitioner is not entitled to have his marriage declared a nullity on the
ground of psychological incapacity of private respondent.
However, as a member of both the Family Law Revision Committee of the Integrated Bar of the Philippines and the
Civil Code Revision Committee of the UP Law Center, I wish to add some observations. The letter 1 dated April 15,
1985 of then Judge Alicia V. Sempio-Diy written in behalf of the Family Law and Civil Code Revision Committee to
then Assemblywoman Mercedes Cojuangco-Teodoro traced the background of the inclusion of the present Article 36
in the Family Code.
During its early meetings, the Family Law Committee had thought of including a chapter on absolute divorce in the
draft of a new Family Code (Book I of the Civil Code) that it had been tasked by the IBP and the UP Law Center to
prepare. In fact, some members of the Committee were in favor of a no-fault divorce between the spouses after a
number of years of separation, legal or de-facto. Justice J.B.L. Reyes was then requested to prepare a proposal for an
action for dissolution of marriage and the effects thereof based on two grounds: (a) five continuous years of separation
between the spouses, with or without a judicial decree of legal separation, and (b) whenever a married person would
have obtained a decree of absolute divorce in another country. Actually, such a proposal is one for absolute divorce
but called by another name. Later, even the Civil Code Revision Committee took time to discuss the proposal of
Justice Reyes on this matter.
Subsequently, however, when the Civil Code Revision Committee and Family Law Committee started holding joint
meetings on the preparation of the draft of the New Family Code, they agreed and formulated the definition of
marriage as
"a special contract of permanent partnership between a man and a woman entered into in accordance with law for the
establishment of conjugal and family life. It is an inviolable social institution whose nature, consequences, and
incidents are governed by law and not subject to stipulation, except that marriage settlements may fix the property
relations during the marriage within the limits provided by law."

365

With the above definition, and considering the Christian traditional concept of marriage of the Filipino people as a
permanent, inviolable, indissoluble social institution upon which the family and society are founded, and also realizing
the strong opposition that any provision on absolute divorce would encounter from the Catholic Church and the
Catholic sector of our citizenry to whom the great majority of our people belong, the two Committees in their joint
meetings did not pursue the idea of absolute divorce and instead opted for an action for judicial declaration of
invalidity of marriage based on grounds available in the Canon Law. It was thought that such an action would not only
be an acceptable alternative to divorce but would also solve the nagging problem of church annulments of marriages
on grounds not recognized by the civil law of the State. Justice Reyes was thus requested to again prepare a draft of
provisions on such action for celebration of invalidity of marriage. Still later, to avoid the overlapping of provisions on
void marriages as found in the present Civil Code and those proposed by Justice Reyes on judicial declaration of
invalidity of marriage on grounds similar to the Canon Law, the two Committees now working as a Joint Committee in
the preparation of a New Family Code decided to consolidate the present provisions on void marriages with the
proposals of Justice Reyes. The result was the inclusion of an additional kind of void marriage in the enumeration of
void marriages in the present Civil Code, to wit:
"(7)
Those marriages contracted by any party who, at the time of the celebration, was wanting in the sufficient use
of reason or judgment to understand the essential nature of marriage or was psychologically or mentally incapacitated
to discharge the essential marital obligations, even if such lack of incapacity is made manifest after the celebration."
as well as the following implementing provisions:
"Art. 32. The absolute nullity of a marriage may be invoked or pleaded only on the basis of a final judgment declaring
the marriage void, without prejudice to the provision of Article 34."
"Art. 33. The action or defense for the declaration of the absolute nullity of a marriage shall not prescribe."
xxx

xxx

xxx

It is believed that many hopelessly broken marriages in our country today may already dissolved or annulled on the
grounds proposed by the Joint Committee on declaration of nullity as well as annulment of marriages, thus rendering
an absolute divorce law unnecessary. In fact, during a conference with Father Gerald Healy of the Ateneo University
as well as another meeting with Archbishop Oscar Cruz of the Archdiocese of Pampanga, the Joint Committee was
informed that since Vatican II, the Catholic Church has been declaring marriages null and void on the ground of "lack
of due discretion" for causes that, in other jurisdictions, would be clear grounds for divorce, like teen-age or premature
marriages; marriage to a man who, because of some personality disorder or disturbance, cannot support a family; the
foolish or ridiculous choice of a spouse by an otherwise perfectly normal person; marriage to a woman who refuses to
cohabit with her husband or who refuses to have children. Bishop Cruz also informed the Committee that they have
found out in tribunal work that a lot of machismo among husbands are manifestations of their sociopathic personality
anomaly, like inflicting physical violence upon their wives, constitutional indolence or laziness, drug dependence or
addiction, and psychological anomaly. . . . (Emphasis supplied)
Clearly, by incorporating what is now Article 36 into the Family Code, the Revision Committee referred to above
intended to add another ground to those already listed in the Civil Code as grounds for nullifying a marriage, thus
expanding or liberalizing the same. Inherent in the inclusion of the provision on psychological incapacity was the
understanding that every petition for declaration of nullity based on it should be treated on a case-to-case basis;
hence, the absence of a definition and an enumeration of what constitutes psychological incapacity. Moreover, the
Committee feared that the giving of examples would limit the applicability of the provision under the principle of
ejusdem generis. But the law requires that the same be existing at the time of marriage although it be manifested later.
Admittedly, the provision on psychological incapacity, just like any other provision of law, is open to abuse. To prevent
this, "the court shall take order the prosecuting attorney or fiscal assigned to it to appear on behalf of the State to take
steps to prevent collusion between the parties and to take care that evidence is not fabricated or suppressed." 2
Moreover, the judge, in interpreting the provision on a case-to-case basis, must be guided by "experience, the findings
of experts and researchers in psychological disciplines, and by decisions of church tribunals which, although not
binding on the civil courts, may be given persuasive effect since the provisions was taken from Canon Law." 3
The constitutional and statutory provisions on the family 4 will remain the lodestar which our society will hope to
achieve ultimately. Therefore, the inclusion of Article 36 is not to be taken as an abandonment of the ideal which we all
cherish. If at all, it is a recognition of the reality that some marriages, by reason of the incapacity of one of the
contracting parties, fall short of this ideal; thus, the parties are constrained to find a way of putting an end to their
union through some legally-accepted means.
Any criticism directed at the way that judges have interpreted the provision since its enactment as to render it easier
for unhappily-married couples to separate is addressed, not to the wisdom of the lawmakers but to the manner by

366

which some members of the Bench have implemented the provision. These are not interchangeable, each being
separate and distinct from the other.

Separate Opinions
PADILLA, J., dissenting:
It is difficult to dissent from a well-written and studied opinion as Mr. Justice Vitug's ponencia. But, after an extended
reflection on the facts of this case, I cannot see my way clear into holding, as the majority do, that there is no ground
for the declaration of nullity of the marriage between petitioner and private respondent.
To my mind, it is clear that private respondent has been shown to be psychologically incapacitated to comply with at
least one essential marital obligation, i.e. that of living and cohabiting with her husband, herein petitioner. On the other
hand, it has not been shown that petitioner does not deserve to live and cohabit with his wife, herein private
respondent.
There appears to be no disagreement that the term "psychological incapacity" defies precision in definition. But, as
used in Article 36 of the Family Code as a ground for the declaration of nullity of a marriage, the intent of the framers
of the Code is evidently to expand and liberalize the grounds for nullifying a marriage, as well pointed out by Madam
Justice Flerida Ruth P. Romero in her separate opinion in this case.
While it is true that the board term "psychological incapacity" can open the doors to abuse by couples who may wish
to have an easy way out of their marriage, there are, however, enough safeguards against this contingency, among
which, is the intervention by the State, through the public prosecutor, to guard against collusion between the parties
and/or fabrication of evidence.
In their case at bench, it has been abundantly established that private respondent Julia Rosario Bedia-Santos exhibits
specific behavior which, to my mind, shows that she is psychologically incapacitated to fulfill her essential marital
obligations, to writ:
a.

It took her seven (7) months after she left for the United States to call up her husband.

b.
Julia promised to return home after her job contract expired in July 1989, but she never did and neither is
there any showing that she informed her husband (herein petitioner) of her whereabouts in the U.S.A.
c.
When petitioner went to the United States on a mission for the Philippine Army, he exerted efforts to "touch
base" with Julia; there were no similar efforts on the part of Julia; there were no similar efforts on the part of Julia to do
the same.
d.
When petitioner filed this suit, more than five (5) years had elapsed, without Julia indicating her plans to rejoin
the petitioner or her whereabouts.
e.
When petitioner filed this case in the trial court, Julia, in her answer, claimed that it is the former who has been
irresponsible and incompetent.
f.

During the trial, Julia waived her right to appear and submit evidence.

A spouse's obligation to live and cohabit with his/her partner in marriage is a basic ground rule in marriage, unless
there are overpowering compelling reasons such as, for instance, an incurable contagious disease on the part of a
spouse or cruelty of one partner, bordering on insanity. There may also be instances when, for economic and practical
reasons, husband and wife have to live separately, but the marital bond between the spouses always remains. Mutual
love and respect for each other would, in such cases, compel the absent spouse to at least have regular contracts
with the other to inform the latter of his/her condition and whereabouts.
In the present case, it is apparent that private respondent Julia Rosario Bedia-Santos has no intention of cohabiting
with petitioner, her husband, or maintaining contact with him. In fact, her acts eloquently show that she does not want
her husband to know of her whereabouts and neither has she any intention of living and cohabiting with him.
To me there appears to be, on the part of private respondent, an unmistakeable indication of psychological incapacity
to comply with her essential marital obligations, although these indications were made manifest after the celebration of
the marriage.

367

It would be a great injustice, I believe, to petitioner for this Court to give a much too restrictive interpretation of the law
and compel the petitioner to continue to be married to a wife who for purposes of fulfilling her marital duties has, for all
practical purposes, ceased to exist.
Besides, there are public policy considerations involved in the ruling the Court makes today. Is it not, in effect directly
or indirectly, facilitating the transformation of petitioner into a "habitual tryster" or one forced to maintain illicit relations
with another woman or women with emerging problems of illegitimate children, simply because he is denied by private
respondent, his wife, the companionship and conjugal love which he has sought from her and to which he is legally
entitled?
I do not go as far as to suggest that Art. 36 of the Family Code is a sanction for absolute divorce but I submit that we
should not constrict it to non-recognition of its evident purpose and thus deny to one like petitioner, an opportunity to
turn a new leaf in his life by declaring his marriage a nullity by reason of his wife's psychological incapacity to perform
an essential marital obligation.
I therefore vote to GRANT the petition and to DECLARE the marriage between petitioner Leouel Santos and private
respondent Julia Rosario Bedia-Santos VOID on the basis of Article 36 of the Family Code.
ROMERO, J., concurring:
I agree under the circumstances of the case, petitioner is not entitled to have his marriage declared a nullity on the
ground of psychological incapacity of private respondent.
However, as a member of both the Family Law Revision Committee of the Integrated Bar of the Philippines and the
Civil Code Revision Committee of the UP Law Center, I wish to add some observations. The letter 1 dated April 15,
1985 of then Judge Alicia V. Sempio-Diy written in behalf of the Family Law and Civil Code Revision Committee to
then Assemblywoman Mercedes Cojuangco-Teodoro traced the background of the inclusion of the present Article 36
in the Family Code.
During its early meetings, the Family Law Committee had thought of including a chapter on absolute divorce in the
draft of a new Family Code (Book I of the Civil Code) that it had been tasked by the IBP and the UP Law Center to
prepare. In fact, some members of the Committee were in favor of a no-fault divorce between the spouses after a
number of years of separation, legal or de-facto. Justice J.B.L. Reyes was then requested to prepare a proposal for an
action for dissolution of marriage and the effects thereof based on two grounds: (a) five continuous years of separation
between the spouses, with or without a judicial decree of legal separation, and (b) whenever a married person would
have obtained a decree of absolute divorce in another country. Actually, such a proposal is one for absolute divorce
but called by another name. Later, even the Civil Code Revision Committee took time to discuss the proposal of
Justice Reyes on this matter.
Subsequently, however, when the Civil Code Revision Committee and Family Law Committee started holding joint
meetings on the preparation of the draft of the New Family Code, they agreed and formulated the definition of
marriage as
"a special contract of permanent partnership between a man and a woman entered into in accordance with law for the
establishment of conjugal and family life. It is an inviolable social institution whose nature, consequences, and
incidents are governed by law and not subject to stipulation, except that marriage settlements may fix the property
relations during the marriage within the limits provided by law."
With the above definition, and considering the Christian traditional concept of marriage of the Filipino people as a
permanent, inviolable, indissoluble social institution upon which the family and society are founded, and also realizing
the strong opposition that any provision on absolute divorce would encounter from the Catholic Church and the
Catholic sector of our citizenry to whom the great majority of our people belong, the two Committees in their joint
meetings did not pursue the idea of absolute divorce and instead opted for an action for judicial declaration of
invalidity of marriage based on grounds available in the Canon Law. It was thought that such an action would not only
be an acceptable alternative to divorce but would also solve the nagging problem of church annulments of marriages
on grounds not recognized by the civil law of the State. Justice Reyes was thus requested to again prepare a draft of
provisions on such action for celebration of invalidity of marriage. Still later, to avoid the overlapping of provisions on
void marriages as found in the present Civil Code and those proposed by Justice Reyes on judicial declaration of
invalidity of marriage on grounds similar to the Canon Law, the two Committees now working as a Joint Committee in
the preparation of a New Family Code decided to consolidate the present provisions on void marriages with the
proposals of Justice Reyes. The result was the inclusion of an additional kind of void marriage in the enumeration of
void marriages in the present Civil Code, to wit:

368

"(7)
Those marriages contracted by any party who, at the time of the celebration, was wanting in the sufficient use
of reason or judgment to understand the essential nature of marriage or was psychologically or mentally incapacitated
to discharge the essential marital obligations, even if such lack of incapacity is made manifest after the celebration."
as well as the following implementing provisions:
"Art. 32. The absolute nullity of a marriage may be invoked or pleaded only on the basis of a final judgment declaring
the marriage void, without prejudice to the provision of Article 34."
"Art. 33. The action or defense for the declaration of the absolute nullity of a marriage shall not prescribe."
xxx

xxx

xxx

It is believed that many hopelessly broken marriages in our country today may already dissolved or annulled on the
grounds proposed by the Joint Committee on declaration of nullity as well as annulment of marriages, thus rendering
an absolute divorce law unnecessary. In fact, during a conference with Father Gerald Healy of the Ateneo University
as well as another meeting with Archbishop Oscar Cruz of the Archdiocese of Pampanga, the Joint Committee was
informed that since Vatican II, the Catholic Church has been declaring marriages null and void on the ground of "lack
of due discretion" for causes that, in other jurisdictions, would be clear grounds for divorce, like teen-age or premature
marriages; marriage to a man who, because of some personality disorder or disturbance, cannot support a family; the
foolish or ridiculous choice of a spouse by an otherwise perfectly normal person; marriage to a woman who refuses to
cohabit with her husband or who refuses to have children. Bishop Cruz also informed the Committee that they have
found out in tribunal work that a lot of machismo among husbands are manifestations of their sociopathic personality
anomaly, like inflicting physical violence upon their wives, constitutional indolence or laziness, drug dependence or
addiction, and psychological anomaly. . . . (Emphasis supplied)
Clearly, by incorporating what is now Article 36 into the Family Code, the Revision Committee referred to above
intended to add another ground to those already listed in the Civil Code as grounds for nullifying a marriage, thus
expanding or liberalizing the same. Inherent in the inclusion of the provision on psychological incapacity was the
understanding that every petition for declaration of nullity based on it should be treated on a case-to-case basis;
hence, the absence of a definition and an enumeration of what constitutes psychological incapacity. Moreover, the
Committee feared that the giving of examples would limit the applicability of the provision under the principle of
ejusdem generis. But the law requires that the same be existing at the time of marriage although it be manifested later.
Admittedly, the provision on psychological incapacity, just like any other provision of law, is open to abuse. To prevent
this, "the court shall take order the prosecuting attorney or fiscal assigned to it to appear on behalf of the State to take
steps to prevent collusion between the parties and to take care that evidence is not fabricated or suppressed." 2
Moreover, the judge, in interpreting the provision on a case-to-case basis, must be guided by "experience, the findings
of experts and researchers in psychological disciplines, and by decisions of church tribunals which, although not
binding on the civil courts, may be given persuasive effect since the provisions was taken from Canon Law." 3
The constitutional and statutory provisions on the family 4 will remain the lodestar which our society will hope to
achieve ultimately. Therefore, the inclusion of Article 36 is not to be taken as an abandonment of the ideal which we all
cherish. If at all, it is a recognition of the reality that some marriages, by reason of the incapacity of one of the
contracting parties, fall short of this ideal; thus, the parties are constrained to find a way of putting an end to their
union through some legally-accepted means.
Any criticism directed at the way that judges have interpreted the provision since its enactment as to render it easier
for unhappily-married couples to separate is addressed, not to the wisdom of the lawmakers but to the manner by
which some members of the Bench have implemented the provision. These are not interchangeable, each being
separate and distinct from the other.

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G.R. No. L-23868

October 22, 1970

ZACARIAS C. AQUINO, petitioner,

vs.
FRANCISCO SOCORRO and COURT OF APPEALS, respondents.
Tranquilino O. Calo, Jr. for petitioner.
Alfaro and Associates for respondent Francisco Socorro.

CASTRO, J.:.
On February 14, 1964 the Court of Appeals, upon petition of Francisco Socorro in CA-G.R. 33560-R,1 issued a writ of
preliminary injunction in his favor upon his posting a P1,000 bond. The writ of preliminary injunction, among others,
restrained Zacarias Aquino "from entering, cutting, hauling, selling and/or exporting logs or other forest products from
the forest area" subject of litigation. Aquino, however, filed a counterbond in the amount of P2,000, effecting the
immediate dissolution of the writ.
The Court of Appeals, on June 29, 1964, dismissed Socorro's petition re the main action, for lack of jurisdiction to
entertain the same. Socorro subsequently appealed the decision of the appellate court to this Court. We affirmed the
appellate court's decision in a resolution dated December 24, 1964 in case G.R. L-23608.
On July 15, 1964, before the appellate court's decision dismissing Socorro's petition became final, Aquino filed with
the appellate court his claim for damages in the amount of P199,000 on account of the wrongful issuance of the writ of
preliminary injunction. The appellate court denied Aquino's claim, for want of bad faith and malice on the part of
Socorro in filing his petition and securing the issuance of the writ of preliminary injunction. Aquino's subsequent motion
for reconsideration was denied.
Hence, the present petition for certiorari to review the resolution of the Court of Appeals denying his claim for
damages.
Aquino contends that the respondent appellate court erred in denying his claim for damages on the ground of want of
bad faith and malice on the part of the respondent Socorro in filing the petition for certiorari re the main case and
securing the issuance of the writ of preliminary injunction. He invokes the provisions of Section 9, Rule 58 in relation to
Section 20, Rule 57, of the Rules of Court. Section 9, Rule 58 recites:.
Judgement to include damages against party and surities. Upon the trial the amount of damages to be awarded to
the plaintiff, or to the defendant, as the case may be, upon the bond of the other party, shall be claimed, ascertained,
and awarded under the same procedure as prescribed in Section 20 of Rule 57.
Section 20, Rule 57 reads:.
Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party against
whom attachment was issued, be may recover, upon the bond given or deposit made by the attaching creditor, any
damages resulting from the attachment. Such damages may be awarded only upon application and after proper
hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is
perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or
sureties, setting forth the facts showing his right to damages and the amount thereof.
If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must
claim damages sustained during the pendency of the appeal by filing an application with notice to the party in whose
favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes
executory. The appellate court may allow the application to be heard and decided by the trial court.
Aquino points out that the said provisions do not require a claimant who seeks to recover damages on account of the
wrongful issuance of a writ of preliminary injunction, to prove bad faith and malice on the part of the party who
obtained the issuance of the writ. To reinforce his contention, he invokes the provisions of Section 4 (b) of Rule 58 of
the Rules of Court. This rule, Aquino avers, makes the party applying for an injunction liable for all damages sustained
by the other party if the court finally decides the party applicant as not entitled thereto. He maintains that, in the case
at bar, the dissolution of the writ of preliminary injunction by the respondent appellate court clearly demonstrates that
the respondent Socorro was not entitled thereto.

370

Socorro, on the other hand, plays for the dismissal of the present petition on the following grounds: (1) The petitioner
"refused to prosecute his claim for damages ... in the main action then already on appeal to this Court;" (2) The
petitioner "failed to state in his motion claiming for damages the facts upon which his rights thereto are based;" (3) The
petitioner, if "suing on the bond ... has no more cause of action as the said bond had already been dissolved 2 upon
motion by the petitioner Aquino;" and (4) The petitioner, if "suing beyond the bond ... failed to show, or there is no
showing that the respondent Socorro," in filing his petition for certiorari and securing the issuance of the writ of
preliminary injunction, "was motivated by malice or bad faith."
The present case raises the question of whether Aquino's claim for damages on account of the improvident issuance
by the respondent appellate court of the writ of preliminary injunction should be dismissed on the ground that he has
failed to show or prove bad faith and malice on the part of the respondent Socorro in obtaining the issuance of the writ
of preliminary injunction.
In Pacis vs. The Commission on Elections,3 this Court made an extensive discussion of the principles applicable to
the recovery of damages caused through the improvident issuance of a writ of preliminary injunction. This Court said
that "damages sustained as a result of a wrongfully obtained injunction may be recovered upon the injunction bond
required to be filed with the court." The same provisions permitting the issuance of the writ of preliminary injunction
require the filing of a bond before the grant of the writ. "The statutory undertaking of the bond is that it shall answer for
all damages which the party to be restrained may sustain by reason of the injunction if the court should finally decide
that the plaintiff was not entitled thereto. Malice or lack of good faith is not an element of recovery on the bond. This
must be so, because to require malice as a prerequisite would make the filing of the bond a useless formality."
Continuing, this Court said that "the dissolution of the injunction, even if the injunction was obtained in good faith,
amounts to a determination that the injunction was wrongfully obtained and a right of action on the injunction bond
immediately accrues." Thus, for the purpose of recovery upon the injunction bond, "the dissolution of the injunction
because of the failure of petitioner's main cause of action" provides the "actionable wrong" for the purpose of recovery
upon the bond.
This Court also stressed, in the same case, that "there is nothing in the Rules of Court which allows recovery of
damages other than upon the bond pledged by the party suing for an injunction. Section 9, Rule 58, limits recovery
only upon the bond, and it specifically states that ... 'the amount of damages to be awarded to the plaintiff, or to the
defendant, as the case may be, upon the bond of the other party, shall be claimed, ascertained, and awarded under
the same procedure as prescribed in Section 20 of Rule 57.' " Under this provision, the party restrained, if he can
recover anything, can recover only by reason of and upon the bond the only security and protection conceded to
him by the rules. Consequently, the rule limits the amount of recovery in a suit on an injunction bond to the sum thus
fixed, the amount measuring the extent of the assumed liability.
This Court also finds it necessary to restate the rule in Molina vs. Somes4 that "an action for damages for the
improper suing out of an injunction must be maintained upon the same principles which govern an action for the
wrongful bringing of an action." This rule, however, applies only when the party restrained pursues his claim for
damages not upon the injunction bond. In such a case where the party restrained sues not on the injunction bond, the
rules accord him no relief by way of a claim for damages unless he can establish that the party applicant secured the
issuance of the writ maliciously and without probable cause. This Court stated that "... when the process has been
sued out maliciously there may be a right of action in favor of the defendant. But this right depends upon the law
governing malicious prosecutions, and has no relation to the claim for damages urged by the defendant in this
case. ..."5
Additionally, this Court, citing Palmer vs. Foley (71 N.Y. 106, 108), said:.
It seems that, without some security given before the granting of an injunction order, or without some order of the court
or a judge, requiring some act on the part of the plaintiff, which is equivalent to the giving of security such as a
deposit of money in court the defendant has no remedy for any damages which he may sustain from the issuing of
the injunction, unless the conduct of the plaintiff has been such as to give ground for an action for malicious
prosecution.
In the case at bar, the record reveals that the petitioner Aquino, in the proceedings before the respondent appellate
court filed a counterbond in the amount of P2,000 and opposed the injunction bond filed by the respondent Socorro on
the ground of its insufficiency. In effect, those brought about the immediate dissolution of the writ of preliminary
injunction. Thus Aquino pursues his claim for damages in the amount of P199,000 no longer upon the injunction bond
in the amount of P1,000 filed by Socorro with the respondent appellate court. This being the case, applicable here is
the holding in Molina vs. Somes, supra, that an application for damages on account of the improvident issuance of a
preliminary injunction writ must be governed by the same principles applicable to an action for the wrongful bringing of
action. Before the respondent's liability can attach, it must appear that he filed his petition for certiorari re the main
action and obtained the issuance of the writ of preliminary injunction maliciously and without probable cause. These

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two essential requisites, malicious prosecution and lack of probable cause, are neither alleged nor proved in this case
before us. Nothing in the record tends to establish the liability of the respondent Socorro.
ACCORDINGLY, the present petition for certiorari is hereby denied. No cost.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Fernando, Teehankee, Villamor and Makasiar, JJ., concur.
Concepcion, C.J., is on leave.

Separate Opinions

BARREDO, J., concurring:

I concur in the result.
The first thing I would like to clarify because it is not touched in the main opinion is that were it not for the fact that
petitioner has erroneously assumed that respondent's injunction bond had been validly cancelled, apparently without
any objection of protest on his party, and, on the basis of such erroneous assumption, he filed his application for
damages without regard to said bond, I would have voted to reverse the appealed resolution in order to the full extent
thereof, its cancellation, if true, having been improperly made.
Secondly, I consider it necessary to emphasize that the appealed main resolution of the Court of Appeals made
reference to the "want of bad faith and malice on the part of petitioner (herein respondent) in filing the instant (in that
court) petition." In other words, the want of bad faith or malice contemplated by the appellate court is not with
reference to the seeking or securing of the injunction itself. I stress this point because, indeed, the records fail to show
any specific finding of the appellate court that the injunction in question had been improvidently issued. I am not ready
to hold that the mere dismissal of an action wherein a preliminary injunction has been issued at the instance of plaintiff
or the mere rendition of a judgment favorable to defendant in such an action constitutes in itself an implied finding that
the plaintiff was not entitled to the injunction. The provision in Section 20 of Rule 57 on Attachment to the effect that "if
the judgment on the action be in favor of the party against whom attachment was issued, he may recover, upon the
bond given or deposit made by the attaching creditor, any damages resulting from the attachment" may not
necessarily apply to injunctions, since it is conceivable that the propriety or impropriety of an injunction may not
depend on the tenability or lack of it of plaintiff's alleged cause of action as in the case of attachment. The terms of
Section 3 of Rule 58, to wit:.
SEC. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be granted at any time after the
commencement of the action and before judgment, when it is established:.
"(a)
That the plaintiff is entitled to the relief demanded, and the whole or part of such relief consists in restraining
the commission or continuance of the acts complained of, or in the performance of an act or acts, either for a limited
period or perpetually;
"(b)
That the commission or continuance of some act complained of during the litigation or the non-performance
thereof would probably work injustice to the plaintiff; or
"(c)
That the defendant is doing, threatens, or is about to do, or is procuring or suffering to be done, some act
probably in violation of the plaintiff's rights respecting the subject of the action, and tending to render the judgment
ineffectual."
do not necessarily exclude the possibility of an injunction being properly and justly issued, even if the plaintiff
ultimately fails to prove the cause of action alleged in his complaint.
Thirdly, an examination of Annex C of the petition reveals that all that petitioner alleged in his "Claim for Damages for
Wrongful Injunction" were these:.
COMES now respondent Zacarias C. Aquino through counsel and before this honorable Court respectfully states:.

372

"1.
That this Court issued a writ of preliminary injunction in the above-entitled case subject to the condition that
petitioner shall answer for whatever damages that may be suffered by respondents;
"2.
That because of the issuance of the writ of preliminary injunction, respondent Aquino suffered damages
amounting to P199,000.00.
WHEREFORE, it is respectfully prayed that after due trial, petitioner be ordered to pay damages to respondent Aquino
in the sum of P199,000.00.
In the face of the undenied statement of fact in respondent's brief to the effect that upon the dissolution of the
injunction on account of petitioner's having filed a counterbond of P2,000.00 "Socorro (respondent) did not press on
the injunction and had not taken possession and enjoyed the use of said forest area," I sustain respondent's
contention that for such a huge claim of practically one-fifth of a million pesos, petitioner's above-quoted application
does not comply with the requirement of Section 20 of Rule 57 in relation to Section 9 of Rule 58 of "setting forth the
facts showing his right to damages." In other words, petitioner has not even alleged that after the wit of injunction was
issued it was actually enforced or implemented. I cannot imagine how the mere issuance of the without more, could
have occasioned the huge amount of damages claimed by petitioner.
Fourthly, the main opinion gives me the impression that the ruling in Pacis as follows:.
As stated, this present proceeding is upon a motion for assessment of damages on the bond. There is nothing in the
Rules of Court which allows recovery of damages other than upon the bond pledged by the party suing for an
injunction. Section 9, Rule 58, limits recovery only upon the bond, thus:.
"SEC. 9.
Judgment to include damages against party and
sureties. Upon the trial the amount of damages to be awarded to the plaintiff, or to the defendant, as the case may
be, upon the bond of the other party, shall be claimed, ascertained, and awarded under the same procedure as
prescribed in Section 20 of Rule 57." (Emphasis supplied. Section 20, Rule 57, has been here quoted earlier.)
It would be misreading the rule to allow damages beyond the amount of the bond. The bond, under this rule, is the
only protection conceded to the party restrained. Recovery cannot be made beyond what the law permits.
This principle is skillfully explained in Molina vs. Somes, supra, at pp. 64-65, thus:.
"The assertion by some text writers and courts that the one who sues out an injunction without legal cause is liable on
the theory that he wrongfully induced or moved the court to take the action which it did, is, in our judgment, without
stable foundation. He who obtains a thing by permission of the law, and by strict compliance with the law, ought not to
be held liable in any manner except that specified in the law under which he operates. He ought not to be held for a
trespass or other wrong, as they assert he may be in replevin, etc. How can it be logically said that one who, acting in
good faith, obtains an injunction or property under a replevin in precisely the manner required by law has committed a
legal wrong against the person as to whom the law authorizes him to obtain the injunction? The law itself, by virtue of
the conditions which it imposes fully protects the defendant against the evil effects of the injunction; and if the party
securing the injunction has performed all that the law requires of him as a condition precedent to obtaining it, what
more can be asked? In return for the restrictions of the injunction, the defendant has been given certain legal rights
against the plaintiff by way of an undertaking which, by virtue of the law itself, fully compensates him for the change of
position. The bond is full compensation for the privileges which the plaintiff receives and for those which the defendant
loses. The law says so. The statute asserts that the doing of certain things by the plaintiff shall be a complete
compensation to the defendant for that which the law requires him to give up. If it is not complete compensation, then
the law is unjust, in that it requires the defendant to give up something for which he receives no compensation. It is not
to be presumed or believed that the legislature intended to do such a thing, and it is not to be presumed or believed
that it did do it. But even if the law be unjust, an injustice of the law cannot be cured by an injustice to a party. The
giving of the undertaking legally equalizes the status of the two. To put upon the plaintiff the additional burden of a
trespass or other wrong would destroy the legal equilibrium and produce an injustice."
Recovery of private respondent must therefore be limited to the amount of the bond. Where the bond is insufficient in
amount, the law expressly gives the party affected the recourse of excepting thereto and provides for the dissolution of
the injunction if "a bond sufficient in amount with sufficient sureties approved after justification is not filed forthwith.
(Section 8, Rule 58, Rules of Court.)"1
which to me means that a defendant in injunction has no remedy for the recovery of damages arising from the
unwarranted or unjustified issuance of the injunction other than upon the bond, is qualified by Somes in that
independently of the bond or when the amount of damages claimed is in excess of the amount of the bond, the
enjoined party may sue for damages upon a showing of malicious prosecution. I am not sure that such is the true

373

import of Somes. While I may admit that some of the decisions cited or quoted in Somes do give hints of such a
possibility, I do not see that the statutory background of the injunction bonds in those cases is the same as ours in this
jurisdiction.
Besides, the following passage in Somes, added to that quoted by Justice Sanchez in Pacis, is to me clear enough in
indicating that when a bond is required by law, it is the exclusive recourse to which an injunction defendant is entitled:.
The assertion of text writers that the party in cases of replevin or injunction, wrongfully put the court in operation, and
that, therefore, he is liable as in tort or otherwise apart from his bond to the defendant therefore, is, in our judgment,
also unfounded. Such a theory is bad not only for the reasons already given but also for the further reason that it
makes the plaintiff an insurer of the judgment of the court. In other words, upon that theory, the plaintiff, before he can
safely obtain an injunction or a replevin, must be certain that the court will decide in his favor; that is, the plaintiff must
insure a judgment of the court in his favor, on the pain of being sued in tort or other legal wrong, in addition to his
liability resulting from the responsibility of his sureties on the bond. Such a theory nullifies the symmetry of the law and
destroys the equality between the parties which the law establishes. As we have said, the statute asserts conclusively
that the giving of a bond to the defendant is an exact equivalent for the loss which he sustains by reason of his change
of position. In other words, the plaintiff has paid the defendant in full for whatever benefits he has obtained from him.
If, now, we add to that payment the obligation to respond to a defense in damage for the commission of a tort or the
wrong, we at once destroy that equality which the law has established, and lay a burden upon the plaintiff which, in
equity, he ought not to bear and which, under the law, he is not required to bear. The law expressly states what shall
be his punishment if he is wrong. Courts cannot be their own fiat add anything more. The injury is caused by operation
of the law, not by the act of plaintiff. (Molina vs. Somes, 24 Phil. 49, 65-66.)
I am more inclined, therefore, to hold that Pacis has restricted whatever broad implications Somes may have. In other
words, my view is that under Pacis there is no remedy other than upon the bond, whether the injunction is maliciously
or otherwise obtained, and that good faith of the enjoiner is never a defense in a claim for damages caused by the
unwarranted or unjustified issuance of the injunction. If additional authority of similar weight to those relied upon in
Somes is needed to support this view I find that in Gorton v. Brown, 27 Ill. 489, 81 Am. Dec. 245, wherein it appeared
that a bond had been given upon obtaining an injunction, the bond being required by statute, it was held that the
remedy of the defendant in injunction proceedings was exclusively upon the bond. The Court said: "We hold the
remedy on the bond given on obtaining the injunction is all the remedy to which the injured party can resort. It is
designed by the statute, to cover all damages the party enjoined can possibly sustain, and it is in the power of the
judge or officer granting the writ to require a bond in a penalty sufficient to cover all conceivable damages. This bond
is a high security which the law requires the complainant in a bill for an injunction to execute, to indemnify the
defendant, in case the injunction shall be dissolved. It is a familiar principle, when a party has taken a higher security,
his suit must be brought on that security. ... The bond becomes, when forfeited, the cause of action, and is intended by
the law, to measure the damages of every kind which the party may sustain by wrongfully suing out the injunction in
case it is dissolved. It is not at all like the official bonds of sheriffs. They are made payable to the People of the State,
not to any particular person, and consequently do not merge a remedy one may have outside of the bond, and
besides, it is the policy of the law to multiply the remedies against public officers. Not so with the injunction bond; that
is made payable to the defendant. He is the only person interested in it. It is his security. It is all the law gives him as
his security, and he is bound to sue on the bond. Were no bond given or required, then the action might lie. This action
on the case under the circumstances shown cannot and ought not to be maintained. It is against public policy." (150
ALR 907-908.)
This case looks to me nearer to our statutory background than any of those cited in Somes.
In any event, I do not feel it is necessary for me to make a definite commitment on this point in this case. The first
three reasons I have given above, are more than enough to justify the denial of the present petition. Withal, although it
appears that its original appealed resolution of denial the Court of Appeals did mention "want of bad faith or malice", it
is not clear to me that after the petitioner filed his motion for reconsideration, the appellate court was still of the same
view. The record shows that respondent filed with the said appellate court the following opposition or answer to
petitioner's motion for reconsideration, which motion pointed out that the rules do not require any showing of the
malice or bad faith referred to by the Court of Appeals:.
Comes now petitioner above, and per order of this Court, dated October 2, 1964, in answer to the motion for
reconsideration to the denial of the original motion of respondents demanding damages for wrongful injunction,
respectfully submit:
"1.
That the decision of this Honorable Court under date of June 29, 1964, having been appealed for review with
the Supreme Court under case No. L-23605, and the petition for the issuance of a writ of Certiorari, still pending with
said Superior Court, it is deemed that said motion in the part of respondents is still premature and should be
addressed to the latter as it was held in said decision that this Court lacked, jurisdiction over the petition as aboveentitled; and

374

"2.
That the matter of the determination whether there was any wrongful attachment or not is still to be resolved in
what final decision may be made on the case of Certiorari and Mandamus, and therefore, any issues incidental to the
question of the issuance of a preliminary injunction, should be resolved in a court with proper jurisdiction and not with
this Court, as it was held that it had no jurisdiction over the main action.
WHEREFORE, premises considered, it is prayed that the motion for reconsideration be denied.
and the appellate court simply resolved as follows: .
Upon consideration of the motion filed by counsel for the respondents in case CA-G.R. No. 33560-R. Francisco
Socorro vs. Hon. Montano A. Ortiz, etc., et al., praying that the resolution of August 17, 1964, be reconsidered on the
ground that malice and bad faith or motive are not factors in the determination of whether or not a party litigant is liable
for damages for the wrongful issuance of a writ of preliminary injunction, and that as long as the issuance of the writ
caused damages to the adverse party he is entitled to a judgment for damages; and of the answer thereto of counsel
for petitioner; the Court RESOLVED to DENY the motion. Let the resolution of August 17, 1964, denying respondent
Zacarias C. Aquino's claim for damages, STAND.
Under these circumstances, I am not convinced that the grounds of the action taken by the Court of Appeals being
mailed in the present case before Us is clear enough for Us to make a categorical ruling on the point under
discussion. I prefer to reserve my final opinion on it until a more appropriate case comes to this Court.
Lastly, if the ruling in the main opinion that an action for malicious prosecution lies independently of the claim on the
injunction bond is meant to prevail, I believe it is but fair to petitioner to hold also as a corollary to said ruling that the
procedural requirements and limitations of Section 9 of Rule 58, which contemplates exclusively claims upon the
injunction bond, do not apply to such action for malicious prosecution. In consequence, the Court of Appeals is not the
proper court where petitioner's claim should have been filed and, therefore, petitioner is still free to pursue such claim
elsewhere.
Before closing, I notice that the main opinion holds towards the end thus:.
... This being the case, applicable here is the holding in Molina vs. Somes, supra that an application for damages on
account of the improvident issuance of a preliminary injunction writ must be governed by the same principles
applicable to an action for the wrongful bringing of in action. Before the respondent's liability can attach, it must appear
that he filed his petition for certiorari re the main action and obtained the issuance of the writ of preliminary injunction
maliciously and without probable cause. These two essential requisites, malicious prosecution and lack of probable
cause, are neither alleged nor proved in this case before us. Nothing in the record tends to establish the liability of the
respondent Socorro.
Does this mean that in the action for malicious prosecution to recover damages arising from an unwarranted
injunction, the damaged party has to show malice or bad faith in both the filing of the action and the securing of the
injunction, otherwise, he cannot recover? In the affirmative, is the resolution of the Court of Appeals which We are
refusing to review, correct in requiring the showing of malice or bad faith in the main claim, without also referring to the
malice or bad faith in the securing of the injunction? Does Somes require malice or bad faith in filing the main action in
order that there may be a recovery for malicious obtaining of an injunction in connection with such main action? What,
indeed, is the basis of the possible award of damages, the malicious prosecution of the suit, the malicious securing of
the injunction, or both? In Somes, Justice Moreland quotes from Russel vs. Farley, 105 U.S. 433, 438, thus:.
And if the legal right is doubtful, either in point of law or of fact, the court is always reluctant to take a course which
may result in material injury to either party, for the damage arising from the act of the court itself is a damnum absque
injuria for which there is no redress except a decree for the costs of the suit, or in a particular (proper) case, an action
for malicious prosecution. To remedy this defect (difficulty), the court, in the exercise of its discretion, frequently resorts
the expedient of imposing terms and conditions upon the party at whose instance it proposes to act.
Is it clear from this that the action that can be filed independently of the bond is one for malicious prosecution of the
main action or merely for malicious suing out of the injunction? Frankly, I cannot answer these questions in the light of
the main opinion.
These considerations have compelled me to write this separate concurring opinion.

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# Separate Opinions
BARREDO, J., concurring:
I concur in the result. .
The first thing I would like to clarify because it is not touched in the main opinion is that were it not for the fact that
petitioner has erroneously assumed that respondent's injunction bond had been validly cancelled, apparently without
any objection of protest on his party, and, on the basis of such erroneous assumption, he filed his application for
damages without regard to said bond, I would have voted to reverse the appealed resolution in order to the full extent
thereof, its cancellation, if true, having been improperly made.
Secondly, I consider it necessary to emphasize that the appealed main resolution of the Court of Appeals made
reference to the "want of bad faith and malice on the part of petitioner (herein respondent) in filing the instant (in that
court) petition." In other words, the want of bad faith or malice contemplated by the appellate court is not with
reference to the seeking or securing of the injunction itself. I stress this point because, indeed, the records fail to show
any specific finding of the appellate court that the injunction in question had been improvidently issued. I am not ready
to hold that the mere dismissal of an action wherein a preliminary injunction has been issued at the instance of plaintiff
or the mere rendition of a judgment favorable to defendant in such an action constitutes in itself an implied finding that
the plaintiff was not entitled to the injunction. The provision in Section 20 of Rule 57 on Attachment to the effect that "if
the judgment on the action be in favor of the party against whom attachment was issued, he may recover, upon the
bond given or deposit made by the attaching creditor, any damages resulting from the attachment" may not
necessarily apply to injunctions, since it is conceivable that the propriety or impropriety of an injunction may not
depend on the tenability or lack of it of plaintiff's alleged cause of action as in the case of attachment. The terms of
Section 3 of Rule 58, to wit:.
SEC. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be granted at any time after the
commencement of the action and before judgment, when it is established:.
"(a)
That the plaintiff is entitled to the relief demanded, and the whole or part of such relief consists in restraining
the commission or continuance of the acts complained of, or in the performance of an act or acts, either for a limited
period or perpetually;
"(b)
That the commission or continuance of some act complained of during the litigation or the non-performance
thereof would probably work injustice to the plaintiff; or
"(c)
That the defendant is doing, threatens, or is about to do, or is procuring or suffering to be done, some act
probably in violation of the plaintiff's rights respecting the subject of the action, and tending to render the judgment
ineffectual."
do not necessarily exclude the possibility of an injunction being properly and justly issued, even if the plaintiff
ultimately fails to prove the cause of action alleged in his complaint.
Thirdly, an examination of Annex C of the petition reveals that all that petitioner alleged in his "Claim for Damages for
Wrongful Injunction" were these:.
COMES now respondent Zacarias C. Aquino through counsel and before this honorable Court respectfully states:.
"1.
That this Court issued a writ of preliminary injunction in the above-entitled case subject to the condition that
petitioner shall answer for whatever damages that may be suffered by respondents;
"2.
That because of the issuance of the writ of preliminary injunction, respondent Aquino suffered damages
amounting to P199,000.00.
WHEREFORE, it is respectfully prayed that after due trial, petitioner be ordered to pay damages to respondent Aquino
in the sum of P199,000.00.
In the face of the undenied statement of fact in respondent's brief to the effect that upon the dissolution of the
injunction on account of petitioner's having filed a counterbond of P2,000.00 "Socorro (respondent) did not press on
the injunction and had not taken possession and enjoyed the use of said forest area," I sustain respondent's
contention that for such a huge claim of practically one-fifth of a million pesos, petitioner's above-quoted application
does not comply with the requirement of Section 20 of Rule 57 in relation to Section 9 of Rule 58 of "setting forth the
facts showing his right to damages." In other words, petitioner has not even alleged that after the wit of injunction was

376

issued it was actually enforced or implemented. I cannot imagine how the mere issuance of the without more, could
have occasioned the huge amount of damages claimed by petitioner.
Fourthly, the main opinion gives me the impression that the ruling in Pacis as follows:.
As stated, this present proceeding is upon a motion for assessment of damages on the bond. There is nothing in the
Rules of Court which allows recovery of damages other than upon the bond pledged by the party suing for an
injunction. Section 9, Rule 58, limits recovery only upon the bond, thus:.
"SEC. 9.
Judgment to include damages against party and
sureties. Upon the trial the amount of damages to be awarded to the plaintiff, or to the defendant, as the case may
be, upon the bond of the other party, shall be claimed, ascertained, and awarded under the same procedure as
prescribed in Section 20 of Rule 57." (Emphasis supplied. Section 20, Rule 57, has been here quoted earlier.)
It would be misreading the rule to allow damages beyond the amount of the bond. The bond, under this rule, is the
only protection conceded to the party restrained. Recovery cannot be made beyond what the law permits.
This principle is skillfully explained in Molina vs. Somes, supra, at pp. 64-65, thus:.
"The assertion by some text writers and courts that the one who sues out an injunction without legal cause is liable on
the theory that he wrongfully induced or moved the court to take the action which it did, is, in our judgment, without
stable foundation. He who obtains a thing by permission of the law, and by strict compliance with the law, ought not to
be held liable in any manner except that specified in the law under which he operates. He ought not to be held for a
trespass or other wrong, as they assert he may be in replevin, etc. How can it be logically said that one who, acting in
good faith, obtains an injunction or property under a replevin in precisely the manner required by law has committed a
legal wrong against the person as to whom the law authorizes him to obtain the injunction? The law itself, by virtue of
the conditions which it imposes fully protects the defendant against the evil effects of the injunction; and if the party
securing the injunction has performed all that the law requires of him as a condition precedent to obtaining it, what
more can be asked? In return for the restrictions of the injunction, the defendant has been given certain legal rights
against the plaintiff by way of an undertaking which, by virtue of the law itself, fully compensates him for the change of
position. The bond is full compensation for the privileges which the plaintiff receives and for those which the defendant
loses. The law says so. The statute asserts that the doing of certain things by the plaintiff shall be a complete
compensation to the defendant for that which the law requires him to give up. If it is not complete compensation, then
the law is unjust, in that it requires the defendant to give up something for which he receives no compensation. It is not
to be presumed or believed that the legislature intended to do such a thing, and it is not to be presumed or believed
that it did do it. But even if the law be unjust, an injustice of the law cannot be cured by an injustice to a party. The
giving of the undertaking legally equalizes the status of the two. To put upon the plaintiff the additional burden of a
trespass or other wrong would destroy the legal equilibrium and produce an injustice."
Recovery of private respondent must therefore be limited to the amount of the bond. Where the bond is insufficient in
amount, the law expressly gives the party affected the recourse of excepting thereto and provides for the dissolution of
the injunction if "a bond sufficient in amount with sufficient sureties approved after justification is not filed forthwith.
(Section 8, Rule 58, Rules of Court.)"1
which to me means that a defendant in injunction has no remedy for the recovery of damages arising from the
unwarranted or unjustified issuance of the injunction other than upon the bond, is qualified by Somes in that
independently of the bond or when the amount of damages claimed is in excess of the amount of the bond, the
enjoined party may sue for damages upon a showing of malicious prosecution. I am not sure that such is the true
import of Somes. While I may admit that some of the decisions cited or quoted in Somes do give hints of such a
possibility, I do not see that the statutory background of the injunction bonds in those cases is the same as ours in this
jurisdiction.
Besides, the following passage in Somes, added to that quoted by Justice Sanchez in Pacis, is to me clear enough in
indicating that when a bond is required by law, it is the exclusive recourse to which an injunction defendant is entitled:.
The assertion of text writers that the party in cases of replevin or injunction, wrongfully put the court in operation, and
that, therefore, he is liable as in tort or otherwise apart from his bond to the defendant therefore, is, in our judgment,
also unfounded. Such a theory is bad not only for the reasons already given but also for the further reason that it
makes the plaintiff an insurer of the judgment of the court. In other words, upon that theory, the plaintiff, before he can
safely obtain an injunction or a replevin, must be certain that the court will decide in his favor; that is, the plaintiff must
insure a judgment of the court in his favor, on the pain of being sued in tort or other legal wrong, in addition to his
liability resulting from the responsibility of his sureties on the bond. Such a theory nullifies the symmetry of the law and
destroys the equality between the parties which the law establishes. As we have said, the statute asserts conclusively
that the giving of a bond to the defendant is an exact equivalent for the loss which he sustains by reason of his change

377

of position. In other words, the plaintiff has paid the defendant in full for whatever benefits he has obtained from him.
If, now, we add to that payment the obligation to respond to a defense in damage for the commission of a tort or the
wrong, we at once destroy that equality which the law has established, and lay a burden upon the plaintiff which, in
equity, he ought not to bear and which, under the law, he is not required to bear. The law expressly states what shall
be his punishment if he is wrong. Courts cannot be their own fiat add anything more. The injury is caused by operation
of the law, not by the act of plaintiff. (Molina vs. Somes, 24 Phil. 49, 65-66.)
I am more inclined, therefore, to hold that Pacis has restricted whatever broad implications Somes may have. In other
words, my view is that under Pacis there is no remedy other than upon the bond, whether the injunction is maliciously
or otherwise obtained, and that good faith of the enjoiner is never a defense in a claim for damages caused by the
unwarranted or unjustified issuance of the injunction. If additional authority of similar weight to those relied upon in
Somes is needed to support this view I find that in Gorton v. Brown, 27 Ill. 489, 81 Am. Dec. 245, wherein it appeared
that a bond had been given upon obtaining an injunction, the bond being required by statute, it was held that the
remedy of the defendant in injunction proceedings was exclusively upon the bond. The Court said: "We hold the
remedy on the bond given on obtaining the injunction is all the remedy to which the injured party can resort. It is
designed by the statute, to cover all damages the party enjoined can possibly sustain, and it is in the power of the
judge or officer granting the writ to require a bond in a penalty sufficient to cover all conceivable damages. This bond
is a high security which the law requires the complainant in a bill for an injunction to execute, to indemnify the
defendant, in case the injunction shall be dissolved. It is a familiar principle, when a party has taken a higher security,
his suit must be brought on that security. ... The bond becomes, when forfeited, the cause of action, and is intended by
the law, to measure the damages of every kind which the party may sustain by wrongfully suing out the injunction in
case it is dissolved. It is not at all like the official bonds of sheriffs. They are made payable to the People of the State,
not to any particular person, and consequently do not merge a remedy one may have outside of the bond, and
besides, it is the policy of the law to multiply the remedies against public officers. Not so with the injunction bond; that
is made payable to the defendant. He is the only person interested in it. It is his security. It is all the law gives him as
his security, and he is bound to sue on the bond. Were no bond given or required, then the action might lie. This action
on the case under the circumstances shown cannot and ought not to be maintained. It is against public policy." (150
ALR 907-908.)
This case looks to me nearer to our statutory background than any of those cited in Somes.
In any event, I do not feel it is necessary for me to make a definite commitment on this point in this case. The first
three reasons I have given above, are more than enough to justify the denial of the present petition. Withal, although it
appears that its original appealed resolution of denial the Court of Appeals did mention "want of bad faith or malice", it
is not clear to me that after the petitioner filed his motion for reconsideration, the appellate court was still of the same
view. The record shows that respondent filed with the said appellate court the following opposition or answer to
petitioner's motion for reconsideration, which motion pointed out that the rules do not require any showing of the
malice or bad faith referred to by the Court of Appeals:.
Comes now petitioner above, and per order of this Court, dated October 2, 1964, in answer to the motion for
reconsideration to the denial of the original motion of respondents demanding damages for wrongful injunction,
respectfully submit:
"1.
That the decision of this Honorable Court under date of June 29, 1964, having been appealed for review with
the Supreme Court under case No. L-23605, and the petition for the issuance of a writ of Certiorari, still pending with
said Superior Court, it is deemed that said motion in the part of respondents is still premature and should be
addressed to the latter as it was held in said decision that this Court lacked, jurisdiction over the petition as aboveentitled; and
"2.
That the matter of the determination whether there was any wrongful attachment or not is still to be resolved in
what final decision may be made on the case of Certiorari and Mandamus, and therefore, any issues incidental to the
question of the issuance of a preliminary injunction, should be resolved in a court with proper jurisdiction and not with
this Court, as it was held that it had no jurisdiction over the main action.
WHEREFORE, premises considered, it is prayed that the motion for reconsideration be denied.
and the appellate court simply resolved as follows: .
Upon consideration of the motion filed by counsel for the respondents in case CA-G.R. No. 33560-R. Francisco
Socorro vs. Hon. Montano A. Ortiz, etc., et al., praying that the resolution of August 17, 1964, be reconsidered on the
ground that malice and bad faith or motive are not factors in the determination of whether or not a party litigant is liable
for damages for the wrongful issuance of a writ of preliminary injunction, and that as long as the issuance of the writ
caused damages to the adverse party he is entitled to a judgment for damages; and of the answer thereto of counsel

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for petitioner; the Court RESOLVED to DENY the motion. Let the resolution of August 17, 1964, denying respondent
Zacarias C. Aquino's claim for damages, STAND.
Under these circumstances, I am not convinced that the grounds of the action taken by the Court of Appeals being
mailed in the present case before Us is clear enough for Us to make a categorical ruling on the point under
discussion. I prefer to reserve my final opinion on it until a more appropriate case comes to this Court.
Lastly, if the ruling in the main opinion that an action for malicious prosecution lies independently of the claim on the
injunction bond is meant to prevail, I believe it is but fair to petitioner to hold also as a corollary to said ruling that the
procedural requirements and limitations of Section 9 of Rule 58, which contemplates exclusively claims upon the
injunction bond, do not apply to such action for malicious prosecution. In consequence, the Court of Appeals is not the
proper court where petitioner's claim should have been filed and, therefore, petitioner is still free to pursue such claim
elsewhere.
Before closing, I notice that the main opinion holds towards the end thus:.
... This being the case, applicable here is the holding in Molina vs. Somes, supra that an application for damages on
account of the improvident issuance of a preliminary injunction writ must be governed by the same principles
applicable to an action for the wrongful bringing of in action. Before the respondent's liability can attach, it must appear
that he filed his petition for certiorari re the main action and obtained the issuance of the writ of preliminary injunction
maliciously and without probable cause. These two essential requisites, malicious prosecution and lack of probable
cause, are neither alleged nor proved in this case before us. Nothing in the record tends to establish the liability of the
respondent Socorro.
Does this mean that in the action for malicious prosecution to recover damages arising from an unwarranted
injunction, the damaged party has to show malice or bad faith in both the filing of the action and the securing of the
injunction, otherwise, he cannot recover? In the affirmative, is the resolution of the Court of Appeals which We are
refusing to review, correct in requiring the showing of malice or bad faith in the main claim, without also referring to the
malice or bad faith in the securing of the injunction? Does Somes require malice or bad faith in filing the main action in
order that there may be a recovery for malicious obtaining of an injunction in connection with such main action? What,
indeed, is the basis of the possible award of damages, the malicious prosecution of the suit, the malicious securing of
the injunction, or both? In Somes, Justice Moreland quotes from Russel vs. Farley, 105 U.S. 433, 438, thus:.
And if the legal right is doubtful, either in point of law or of fact, the court is always reluctant to take a course which
may result in material injury to either party, for the damage arising from the act of the court itself is a damnum absque
injuria for which there is no redress except a decree for the costs of the suit, or in a particular (proper) case, an action
for malicious prosecution. To remedy this defect (difficulty), the court, in the exercise of its discretion, frequently resorts
the expedient of imposing terms and conditions upon the party at whose instance it proposes to act.
Is it clear from this that the action that can be filed independently of the bond is one for malicious prosecution of the
main action or merely for malicious suing out of the injunction? Frankly, I cannot answer these questions in the light of
the main opinion. .
These considerations have compelled me to write this separate concurring opinion.

379

G.R. No. 71229 September 30, 1986

HANIL DEVELOPMENT CO., LTD., petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and M. R. ESCOBAR EXPLOSIVES ENGINEERS, INC., represented by
its General Manager, MANUEL R. ESCOBAR, respondents.
M.A. Aguinaldo & Associates for petitioner.
Ponciano H. Gupit for private respondent.

GUTIERREZ, JR., J.:

This is a petition for certiorari, mandamus, and prohibition, with prayer for mandatory injunction and restraining order
from the resolutions of the then Intermediate Appellate Court dated April 30, 1985 and June 20, 1985 in AC-G.R. No.
05055 entitled "Hanil Development Co., Ltd. v. M.R. Escobar Explosives Engineers, Inc., represented by its General
Manager, Manuel R. Escobar."
The present controversy has its origins in a complaint for recovery of a sum of money with damages filed by private
respondent Escobar Explosives Engineers, Inc., against petitioner Hanil Development Co., Ltd., before the then Court
of First Instance of Rizal, Branch XXXI, Pasig, Metro Manila. The petitioner is a foreign corporation organized under
the laws of the Republic of Korea and doing business in the Philippines pursuant to the Corporation Code and the
Foreign Investment Act. The complaint docketed as Civil Case No. 35966 sought to compel the petitioner to pay for
the blasting services rendered by the private respondent in connection with the former's contract with the Ministry of
Public Highways to construct the 200 Km. Oro-Butuan Road Project in Mindanao.
The trial court, on April 16, 1983, rendered a decision in favor of the private respondent. The petitioner was ordered to
pay the private respondent the sum of P1,341,727.40 corresponding to the value of the rocks blasted by the private
respondent; ten percent (10%) of said amount as attorney's fees and costs.
On May 6, 1982, the private respondent filed a petition for the issuance of a preliminary attachment. The motion was
set for hearing.
On May 13, 1982, the petitioner filed its notice of appeal and cash appeal bond with the trial court.
On May 24, 1982, the trial court issued an order granting the petition for the issuance of preliminary attachment.
On May 26, 1982, the private respondent moved for the appointment of Deputy Sheriff Felix Honoracion as special
sheriff to serve the writ of attachment/garnishment.
Consequently, the order dated May 24, 1982 and the writ of attachment dated May 27, 1982 were enforced by the
respondents and the bank accounts of the petitioner were garnished and its equipment attached.
The petitioner then filed a motion for reconsideration of the May 24, 1982 order. While this motion was pending, the
private respondent filed another motion, this time an "Ex-Parte Motion to Deposit Cash" praying that an order be
issued directing the Finance Manager of the National Power Corporation (NAPOCOR) to withdraw available funds of
the petitioner from the NAPOCOR and deposit them with the clerk of court of the Court of First Instance of Rizal. This
motion was granted in an order dated June 29, 1982.
In view of this development, the petitioner filed with the then Intermediate Appellate Court a petition for certiorari with
prayer for prohibition, injunction and preliminary restraining order challenging the orders dated May 24, 1982 and June
29, 1982 of the trial court. The case was docketed as CA-G.R. No. 14512.
The appellate court temporarily restrained the enforcement of the challenged orders and after a hearing issued a
preliminary injunction enjoining the implementation of said orders upon the filing of a P50,000.00 cash bond by the
petitioner.
In a decision dated February 3, 1983, the appellate court granted the petition and declared the challenged orders null
and void, having been issued with grave abuse of discretion.
While the above-mentioned petition was pending before the appellate court and despite the writ of injunction issued by
it, other developments continued to unfold in the trial court.

380

In an order dated August 23, 1982, the trial court disapproved the petitioner's amended record on appeal on the
ground that it was "filed beyond the reglementary period and the extension granted." The appeal was dismissed. The
petitioner filed a motion for reconsideration of the dismissal while the private respondent filed a motion for execution of
judgment.
On October 19, 1982, the trial court issued an order denying the petitioner's motion for reconsideration and at the
same time granting the private respondent's motion for execution of judgment.
The petitioner filed a petition for certiorari and mandamus with prayer for prohibition with the Intermediate Appellate
Court assailing the trial court's orders dated August 23, 1982 and October 19, 1982. The case was docketed as ACG.R. No. 15050.
The appellate court granted the petition. The challenged orders were set aside and declared null and void. Hence, the
petitioner's appeal in Civil Case No. 35966 was reinstated and the trial court was ordered to elevate the entire records
of the case to the appellate court.
A petition for review of the decision in AC-G.R. No. 15050 was filed by the private respondent before this Court, but
was denied for lack of merit.
After transmittal of the records, the appellate court on February 11, 1985, sent a notice to the petitioner to file
appellant's brief within forty-five (45) days from receipt. The petitioner received the notice on February 25, 1985.
On March 13, 1985, and within the reglementary period to file appellant's brief, the petitioner filed an "Application for
Judgment against Attachment Bond" and "Motion to Defer Filing of Appellant's Brief" praying for a hearing before the
appellate court so it could prove the damages it sustained as a result of the illegal writ of attachment issued by the trial
court. It wanted a judgment against the attachment bond posted by the private respondent and its insurer Sanpiro
Insurance Corporation to be included in the final decision in the main case, Civil Case No. 35966, now pending before
the appellate court.
Acting on the petitioner's motions, the appellate court issued a resolution directing the private respondent to comment
on these motions.
The private respondent filed its "Comment" with a "Motion to Dismiss Appeal" for the petitioner's alleged failure to file
its appellant's brief.
In a resolution dated April 30, 1985, the appellate court denied the petitioner's application for judgment against the
attachment bond and the motion to defer filing of appellant's brief, granted the private respondent's motion to dismiss
the appeal, and dismissed the appeal. The petitioner filed a motion for reconsideration but this was denied in a
resolution dated June 20, 1985.
Hence, this petition.
In a resolution dated July 17, 1985, we issued a temporary restraining order to enjoin the respondents from
proceeding with the execution of the decision in Civil Case No. 35966.
The petitioner now asserts that the April 30, 1985 and June 20, 1985 resolutions were issued by the appellate court
with grave abuse of discretion.
The questioned April 30, 1985 minute resolution of the appellate court states:
Acting upon (1) the application for judgment against attachment bond, etc. filed by counsel for defendant-appellant on
March 13, 1985; (2) the comment thereto; (3) the motion to dismiss appeal filed by counsel for plaintiff-appellee on
April 24, 1985; and the docket report dated April 25, 1985, the COURT RESOLVED: (a) to DENY the application for
judgment against attachment bond and the motion to defer filing of appellant's brief; and (b) to GRANT the motion to
dismiss appeal and to dismiss the instant appeal.
The issues to be resolved in the instant petition are: (1) whether or not the petitioner's application for judgment against
the attachment bond and its motion to defer filing of appellant's brief were correctly denied by the appellate court and
(2) whether or not the same court rightly dismissed the petitioner's appeal.
Anent the first issue, the petitioner contends that its application for judgment against the attachment bond was
pursuant to Section 20, Rule 57 of the Revised Rules of Court.

381

Section 20, Rule 57 of the Revised Rules of Court provides for the claim of damages on account of illegal attachment,
to wit:
Claim for damages on account of illegal attachment. If the judgment on the motion be in favor of the party against
whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor, any
damages resulting from the attachment. Such damages may be awarded only upon application and after proper
hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is
perfected or before the judgment becomes executory, with notice to the attaching creditor and his surety or sureties,
setting forth the facts showing his right to damages and the amount thereof.
If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must
claim damages sustained during the pendency of the appeal by filing an application with notice to the party in whose
favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes
executory. The appellate court may allow the application to be heard and decided by the trial court.
In the instant case, the initial writ of attachment issued by the trial court in the main case Civil Case No. 35966
which is the subject of appeal was declared null and void by the appellate court in CA-G.R. No. 14512. This present
writ of attachment was issued and subsequently enforced after the trial court's decision in Civil Case No. 35966 had
been rendered and after the petitioner had already perfected its appeal. The petitioner, therefore, argues that the
application for judgment against the attachment bond was properly lodged with the appellate court pursuant to Section
9, of the Judiciary Reorganization Act of 1980 (Batas Pambansa Blg. 129) which grants the Intermediate Appellate
Court "power to try cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve
factual issues ... ." It contends that it is only in the appellate court that these damages could well be ventilated
because they occurred during the pendency of the appeal in AC-G.R. No. 15050.
The petitioner's arguments are well-taken.
The application for judgment against attachment bond was filed to prove the damages sustained by the petitioner as a
result of the illegal writ of attachment issued by the trial court so that the judgment against the attachment bond posted
by the private respondent and its insurer could be included in the final judgment of the main case. The assessment
and award of such damages could not have been made in CA-G.R. No. 14512 as alleged by the private respondent
because the question therein was whether or not the writ of attachment in Civil Case No. 35966 should have been
issued.
The object was to set aside the preliminary attachment immediately. It was a preventive measure.
The private respondent, in its petition for writ of attachment filed with the trial court, posted an attachment bond issued
by the Sanpiro Insurance Corporation in the amount of P1,341,727.40, the relevant portion of which reads:
WHEREFORE, WE, M.R. ESCOBAR EXPLOSIVE ENGINEERS as PRINCIPAL, and the SANPIRO INSURANCE
CORPORATION, a corporation duly organized and existing under and by virtue of the laws of the Philippines, as
SURETY, in consideration of the above and of the levying of said attachment, hereby jointly and severally bind
ourselves in the sum of PESOS: ONE MILLION THREE HUNDRED FORTY ONE THOUSAND SEVEN HUNDRED
TWENTY SEVEN & 40/100 (P1,341,727.40), Philippine Currency, under the condition that we will pay all the costs
which may be adjudged to said defendant/s and all damages which said defendant/s may sustain by reason of the
attachment, if the Court shall finally adjudge that plaintiff/s was/were not entitled thereto.
Contrary to the claim of the private respondent, this writ of attachment issued by the trial court was executed. The
petitioner's equipment and bank accounts were garnished pursuant to the writ. In fact, the private respondent's
opposition to the petitioner's motion for reconsideration of the trial court's order which issued the writ of attachment
stated that the same should be denied for being moot and academic "because the writ of attachment and/or
garnishment have already been executed."
Considering that the writ of attachment was declared null and void, the petitioner had the right to ask for whatever
damages it may have incurred as a result of its issuance pursuant to Section 20, Rule 57 of the Revised Rules of
Court.
Malayan Insurance Co., Inc. v. Salas (90 SCRA 252), lays down the procedure regarding claims for damages against
an illegal attachment. It states:
Under section 20, in order to recover damages on a replevin bond (or on a bond for preliminary attachment, injunction
or receivership) it is necessary (1) that the defendant-claimant has secured a favorable judgment in the main action,
meaning that the plaintiff has no cause of action and was not, therefore, entitled to the provisional remedy of replevin;
(2) that the application for damages, showing claimant's right thereto and the amount thereof, be filed in the same

382

action before trial or before appeal is perfected or before the judgment becomes executory; (3) that due notice be
given to the other party and his surety or sureties, notice to the principal not being sufficient and (4) that there should
be a proper hearing and the award for damages should be included in the final judgment (Luneta Motor Co. v.
Menendez, 117 Phil. 970, 974; 3 Moran's Comments on the Rules of Court, 1970 Ed., pp. 54-56. See Cruz v. Manila
Surety & Fidelity Co., Inc., 92 Phil. 699).
xxx

xxx

xxx

As may be gathered from section 20 of Rule 57, the application for damages against the surety must be filed (with
notice to the surety) in the Court of First Instance before the trial or before appeal is perfected or before the judgment
becomes executory.
If an appeal is taken, the application must be filed in the appellate court but always before the judgment of that court
becomes executory so that the award may be included in its judgment (Luneta Motor Co. v. Menendez, supra).
But it is not always mandatory that the appellate court should include in its judgment the award of damages against
the surety. Thus, it was held that where the application for damages against the surety is seasonably made in the
appellate court, 'the latter must either proceed to hear and decide the application or refer 'it' to the trial court and allow
it to hear and decide the same' (Rivera v. Talavera, 112 Phil. 209, 219).
xxx

xxx

xxx

Note that under the second paragraph of section 20, Rule 57 of the present Rules of Court, the damages suffered
during the pendency of an appeal in a case where the writs of attachment, injunction and replevin or an order of
receivership were issued should be claimed in the appellate court.
xxx

xxx

xxx

In the instant case, the application for judgment against the attachment bond was filed under the following
circumstances: (1) the writ of attachment was issued by the trial court after it had rendered its decision and after the
petitioner had already perfected its appeal; (2) the private respondent posted a surety bond to answer for any
damages that may be adjudged to the petitioner if the writ is later found to be illegal; (3) the writ of attachment was
declared illegal; and (4) the application for judgment against the attachment bond was made with notice to the insurer,
Sanpiro Insurance Corporation.
Applying the principles laid down in the Malayan case to the circumstances surrounding the application for judgment
against attachment bond in this case, the appellate court committed grave abuse of discretion in denying the
application for judgment against attachment bond. The appellate court's error in this case is more pronounced
considering that under Section 9 of the Judiciary Reorganization Act of 1980 (Batas Pambansa Blg. 129) the
Intermediate Appellate Court is now empowered to try cases and conduct hearings, receive evidence and perform
acts necessary to resolve factual issues in cases falling within its original and appellate jurisdiction. Certainly, the
amount of damages, if any, suffered by the petitioner as a result of the issuance of the illegal attachment during the
pendency of the appeal is a factual issue.
Moreover, the application for judgment against the bond seasonably filed by the petitioner in the appellate court would
avoid multiplicity of suits. We have earlier ruled that "the explicit provision of Section 20 of Rule 57, Revised Rules of
Court that the judgment against the surety should be included in the final judgment is to avoid additional proceedings.
(Cruz v. Manila Surety & Fidelity Co., Inc. et al., 92 Phil. 699; (Japco v. City of Manila, 48 Phil. 851, 855 cited in
Malayan insurance Corporation v. Salas, supra).
Consequently, the appellate court also committed a grave abuse of discretion in denying the motion to defer filing of
appellant's brief. The petitioner filed this motion for the purpose of first settling the issue on damages against the
attachment bond so that such issue would be discussed and included in the appellant's brief and ultimately in the final
judgment thereby avoiding multiplicity of suits.
Needless to say, the appellate court should not have dismissed the petitioner's appeal.
We take notice of the circumstances under which the appellate court dismissed the appeal. Granting that the
petitioner's application for judgment against attachment bond was not meritorious, the appellate court's dismissal of
the appeal would still be unwarranted.
The record shows that in response to the petitioner's application for judgment against the attachment bond and motion
to defer filing of the appellant's brief which was filed on March 13, 1985 and within the 45-day reglementary period to
fife appellant's brief, the appellate court issued a resolution directing the private respondent to comment on the motion

383

within ten (10) days from notice. Upon motion ' of the private respondent, the appellate court issued another resolution
granting an extension of ten (10) days from April 13, 1985 to file comment on the said motions of the petitioner. The
extension granted meant that the private respondent had until April 24, 1985 to file its comment. In addition to the
comment, the private respondent filed on April 24, 1985 a motion to dismiss appeal contending that the petitioner had
not filed its appellant's brief within the 45-day reglementary period. Upon verification from its docket decision that no
appellant's brief was filed as of April 25, 1985, the appellate court dismissed the appeal.
Under these circumstances, the dismissal of the appeal by the appellate court due to the failure to file the appellant's
brief within the 45-day reglementary period counted from February 25, 1985 to April 25, 1985 without allowing any
interruption gave undue advantage to the private respondent. This is so, because the private respondent after having
been given ten (10) days from receipt of notice to comment on the twin motions of the petitioner was again granted a
ten-day extension or until April 24, 1985 to file its comment thereto. This, in effect, removed a substantial number of
days from the 45-day period of the petitioner to file its brief, through no fault of its own.
The procedure adopted by the appellate court in interpreting the 45-day reglementary period to file appellant's brief
was unfair. When the appellate court issued the resolution requiring the private respondent to comment on the
petitioner's application for judgment against the attachment bond and motion to defer appellant's brief the 45-day
period should be deemed to have stopped, and the period to commence again after denial of the motions.
The notice to "file appellant's brief within 45 days from receipt" was received by the petitioner on February 25, 1985.
The petitioner filed the application for judgment against the attachment bond and motion to defer filing of appellant's
brief on March 13, 1985. Thus, the petitioner filed its motions on the 16th day after receipt of the notice to file
appellant's brief and within the 45-day reglementary period. On March 26, 1985, the appellate court issued its
resolution directing the private respondent to file its comment on the motions of the petitioner. At this point, counting
from February 25, 1985 to March 26, 1985, a total number of 29 days had lapsed. Hence, the petitioner still had 16
days within the 45-day reglementary period to file its appellant's brief in the event that its motions were denied.
It is likewise the practise in the Court of Appeals, after granting an initial period of 45 days, to routinely grant a motion
for extension of another 45 days for the filing of an appellant's brief. Considering the amount involved in this litigation
and the nature of the defenses raised by the petitioner, the appellate court was unduly severe when it peremptorily
dismissed the appeal.
Therefore, we have to set aside the appellate court's action in simultaneously denying the application for judgment
against the attachment bond and the motion to defer the filing of appellant's brief and in dismissing the appeal. Since
the petitioner's two motions were denied on April 30, 1985, the petitioner still had 16 days from notice of the denial to
file its appellant's brief. In short, the petitioner's 45-day period within which to file its appellant's brief had not yet
lapsed when the appellate court dismissed the appeal. The brief could have been filed or a motion for extension of
time requested.
WHEREFORE, the instant petition is GRANTED. The questioned resolutions dated April 30, 1985 and June 20, 1985
of the then Intermediate Appellate Court are hereby REVERSED and SET ASIDE. The Court of Appeals is directed to
conduct hearings on the application for judgment against attachment bond filed by the petitioner and to reinstate the
appeal. The temporary restraining order dated July 17, 1985 is made PERMANENT.
SO ORDERED.

384

G.R. No. L-61464

May 28, 1988

BA FINANCE CORPORATION, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, AUGUSTO YULO, LILY YULO (doing business under the name and style
of A & L INDUSTRIES), respondents.

GUTIERREZ, JR., J.:

This is a petition for review seeking to set aside the decision of the Court of Appeals which affirmed the decision of the
then Court of First Instance of Manila, dismissing the complaint instituted by the petitioner and ordering it to pay
damages on the basis of the private respondent's counterclaim.
On July 1, 1975, private respondent Augusto Yulo secured a loan from the petitioner in the amount of P591,003.59 as
evidenced by a promissory note he signed in his own behalf and as representative of the A & L Industries. Respondent
Yulo presented an alleged special power of attorney executed by his wife, respondent Lily Yulo, who manages A & L
Industries and under whose name the said business is registered, purportedly authorizing Augusto Yulo to procure the
loan and sign the promissory note. About two months prior to the loan, however, Augusto Yulo had already left Lily
Yulo and their children and had abandoned their conjugal home. When the obligation became due and demandable,
Augusto Yulo failed to pay the same.
On October 7, 1975, the petitioner filed its amended complaint against the spouses Augusto and Lily Yulo on the basis
of the promissory note. It also prayed for the issuance of a writ of attatchment alleging that the said spouses were
guilty of fraud in contracting the debt upon which the action was brought and that the fraud consisted of the spouses'
inducing the petitioner to enter into a contract with them by executing a Deed of Assignment in favor of the petitioner,
assigning all their rights, titles and interests over a construction contract executed by and between the spouses and A.
Soriano Corporation on June 19, 1974 for a consideration of P615,732.50 when, in truth, the spouses did not have
any intention of remitting the proceeds of the said construction contract to the petitioner because despite the
provisions in the Deed of Assignment that the spouses shall, without compensation or costs, collect and receive in
trust for the petitioner all payments made upon the construction contract and shall remit to the petitioner all collections
therefrom, the said spouses failed and refuse to remit the collections and instead, misappropriated the proceeds for
their own use and benefit, without the knowledge or consent of the petitioner.
The trial court issued the writ of attachment prayed for thereby enabling the petitioner to attach the properties of A & L
Industries. Apparently not contented with the order, the petitioner filed another motion for the examination of
attachment debtor, alleging that the properties attached by the sheriff were not sufficient to secure the satisfaction of
any judgment that may be recovered by it in the case. This was likewise granted by the court.
Private respondent Lily Yulo filed her answer with counterclaim, alleging that although Augusta Yulo and she are
husband and wife, the former had abandoned her and their children five (5) months before the filing of the complaint;
that they were already separated when the promissory note was executed; that her signature in the special power of
attorney was forged because she had never authorized Augusto Yulo in any capacity to transact any business for and
in behalf of A & L Industries, which is owned by her as a single proprietor, that she never got a single centavo from the
proceeds of the loan mentioned in the promissory note; and that as a result of the illegal attachment of her properties,
which constituted the assets of the A & L Industries, the latter closed its business and was taken over by the new
owner.
After hearing, the trial court rendered judgment dismissing the petitioner's complaint against the private respondent
Lily Yulo and A & L Industries and ordering the petitioner to pay the respondent Lily Yulo P660,000.00 as actual
damages; P500,000.00 as unrealized profits; P300,000.00 as exemplary damages; P30,000.00 as and for attorney's
fees; and to pay the costs.
The petitioner appealed. The Court of Appeals affirmed the trial court's decision except for the exemplary damages
which it reduced from P300,000.00 to P150,000.00 and the attorney's fees which were reduced from P30,000.00 to
P20,000.00.
In resolving the question of whether or not the trial court erred in holding that the signature of respondent Lily Yulo in
the special power of attorney was forged, the Court of Appeals said:
The crucial issue to be determined is whether or not the signatures of the appellee Lily Yulo in Exhibits B and B-1 are
forged. Atty. Crispin Ordoa, the Notary Public, admitted in open court that the parties in the subject documents did
not sign their signatures in his presence. The same were already signed by the supposed parties and their supposed

385

witnesses at the time they were brought to him for ratification. We quote from the records the pertinent testimony of
Atty. Ordoa, thus:
Q.
This document marked as Exhibit B-1, when this was presented to you by that common friend, June Enriquez,
it was already typewritten, it was already accomplished, all typewritten.?
A. Yes, sir.
Q

And the parties had already affixed their signatures in this document?

A.

Yes, sir.

Q.
In this document marked as Exhibit B although it appears here that this is an acknowledgment, you have not
stated here that the principal actually acknowledged this document to be her voluntary act and deed?
A
This in one of those things that escaped my attention. Actually I have not gone over the second page. I
believed it was in order I signed it. (TSN pp. 13-14, Hearing of Nov. 26, 1976).
The glaring admission by the Notary Public that he failed to state in the acknowledgment portion of Exhibit B-1 that the
appellee Lily Yulo acknowledged the said document to be her own voluntary act and deed, is a very strong and
commanding circumstance to show that she did not appear personally before the said Notary Public and did not sign
the document.
Additionally, the Notary Public admitted that, while June Enriquez is admittedly a mutual friend of his and the
defendant Augusta Yulo, and who is also an instrumental witness in said Exhibit B-1., he could not recognize or tell
which of the two signatures appearing therein, was the signature of this June Enriquez.
Furthermore, as the issue is one of credibility of a witness, the findings and conclusions of the trial court before whom
said witness, Atty. Crispin Ordoa, the Notary Public before whom the questioned document was supposedly ratified
and acknowledged, deserve great respect and are seldom disturbed on appeal by appellate tribunals, since it is in the
best and peculiar advantage of determining and observing the conduct, demeanor and deportment of a particular
witness while he is testifying in court, an opportunity not enjoyed by the appellate courts who merely have to rely on
the recorded proceedings which transpired in the court below, and the records are bare of any circumstance of weight,
which the trial court had overlooked and which if duly considered, may radically affect the outcome of the case.
On the other hand, the appellee Lily Yulo, to back up her claim of forgery of her signature in Exhibit B-1, presented in
court a handwriting expert witness in the person of Police Captain Yakal Giron of the Integrated National Police
Training Command, and who is also a Document Examiner of the same Command's Crime Laboratory at Fort
Bonifacio, Metro Manila. His experience as an examiner of questioned and disputed documents, in our mind, is quite
impressive. To qualify him as a handwriting expert, he declared that he underwent extensive and actual studies and
examination of disputed or questioned document, both at the National Bureau of Investigation Academy and National
Bureau of Investigation Questioned Document Laboratory, respectively, from July 1964, up to his appointment as
Document Examiner in June, 1975, and, to further his experience along this line, he attended the 297th Annual
Conference of the American Society of Questioned Docurnent Examiners held at Seattle, Washington, in August 1971,
as a representative of the Philippines, and likewise conducted an observation of the present and modern trends of
crime laboratories in the West Coast, U.S.A., in 1971; that he likewise had conducted actual tests and examination of
about 100,000 documents, as requested by the different courts, administrative, and governmental agencies of the
Government, substantial portions of which relate to actual court cases.
In concluding that the signatures of the appellee Lily Yulo, in the disputed document in question (Exh. B-1), were all
forgeries, and not her genuine signature, the expert witness categorically recited and specified in open court what he
observed to be about twelve (12) glaring and material significant differences, in his comparison of the signatures
appearing in the genuine specimen signatures of the said appellee and with those appearing in the questioned
document (Exhibit B-1). Indeed, we have likewise seen the supposed notable differences, found in the standard or
genuine signatures of the appellee which were lifted and obtained in the official files of the government, such as the
Bureau of Internal Revenue on her income tax returns, as compared to the pretended signature of the appellee
appearing in Exhibits B, B-1. It is also noteworthy to mention that the appellant did not even bother to conduct a crossexamination of the handwriting expert witness, Capt. Giron, neither did the appellant present another handwriting
expert, at least to counter-act or balance the appellee's handwriting expert.
Prescinding from the foregoing facts, we subscribe fully to the lower court's observations that the signatures of the
appellee Lily Yulo in the questioned document (Exh. B-1) were forged. Hence, we find no factual basis to disagree.
(pp. 28-30, Rollo)

386

As to the petitioner's contention that even if the signature of Lily Yulo was forged or even if the attached properties
were her exclusive property, the same can be made answerable to the obligation because the said properties form
part of the conjugal partnership of the spouses Yulo, the appellate court held that these contentions are without merit
because there is strong preponderant evidence to show that A & L Industries belongs exclusively to respondent Lily
Yulo, namely: a) The Certificate of Registration of A & L Industries, issued by the Bureau of Commerce, showing that
said business is a single proprietorship, and that the registered owner thereof is only Lily Yulo; b) The Mayor's Permit
issued in favor of A & L Industries, by the Caloocan City Mayor's Office showing compliance by said single
proprietorship company with the City Ordinance governing business establishments; and c) The Special Power of
Attorney itself, assuming but without admitting its due execution, is tangible proof that Augusto Yulo has no interest
whatsoever in the A & L Industries, otherwise, there would have been no necessity for the Special Power of Attorney if
he is a part owner of said single proprietorship.
With regard to the award of damages, the Court of Appeals affirmed the findings of the trial court that there was bad
faith on the part of the petitioner as to entitle the private respondent to damages as shown not only by the fact that the
petitioner did not present the Deed of Assignment or the construction agreement or any evidence whatsoever to
support its claim of fraud on the part of the private respondent and to justify the issuance of a preliminary attachment,
but also by the following findings:
Continuing and elaborating further on the appellant's mala fide actuations in securing the writ of attachment, the lower
court stated as follows:
Plaintiff not satisfied with the instant case where an order for attachment has already been issued and enforced, on
the strength of the same Promissory Note (Exhibit"A"), utilizing the Deed of Chattel Mortgage (Exhibit "4"), filed a
foreclosure proceedings before the Office of the Sheriff of Caloocan (Exhibit"6") foreclosing the remaining properties
found inside the premises formerly occupied by the A & L Industries. A minute examination of Exhibit "4" will show that
the contracting parties thereto, as appearing in par. 1 thereof, are Augusto Yulo, doing business under the style of A &
L Industries (should be A & L Glass Industries Corporation), as mortgagor and BA Finance Corporation as mortgagee,
thus the enforcement of the Chattel Mortgage against the property of A & L Industries exclusively owned by Lily T. Yulo
appears to be without any factual or legal basis whatsoever. The chattel mortgage, Exhibit "4" and the Promissory
Note, Exhibit A, are based on one and the same obligation. Plaintiff tried to enforce as it did enforce its claim into two
different modes a single obligation.
Aware that defendant Lily Yulo, filed a Motion to Suspend Proceedings by virtue of a complaint she filed with the Court
of First Instance of Caloocan, seeking annulment of the Promissory Note, the very basis of the plaintiff in filing this
complaint, immediately after the day it filed a Motion for the Issuance of an Alias Writ of Preliminary Attachment . .
.Yet, inspite of the knowledge and the filing of this Motion to Suspend Proceedings, the Plaintiff still filed a Motion for
the Issuance of a Writ of Attachment dated February 6, 1976 before this court. To add insult to injury, plaintiff even filed
a Motion for Examination of the Attachment Debtor, although aware that Lily Yulo had already denied participation in
the execution of Exhibits "A" and "B". These incidents and actions taken by plaintiff, to the thinking of the court, are
sufficient to prove and establish the element of bad faith and malice on the part of plaintiff which may warrant the
award of damages in favor of defendant Lily Yulo. (Ibid., pp. 102-103).<re||an1w>
Indeed, the existence of evident bad faith on the appellant's part in proceeding against the appellee Lily Yulo in the
present case, may likewise be distressed on the fact that its officer Mr. Abraham Co, did not even bother to demand
the production of at least the duplicate original of the Special Power of Attorney (Exhibit B) and merely contended
himself with a mere xerox copy thereof, neither did he require a more specific authority from the A & L Industries to
contract the loan in question, since from the very content and recitals of the disputed document, no authority, express
or implied, has been delegated or granted to August Yulo to contract a loan, especially with the appellant. (pp. 33-34,
Rollo)
Concerning the actual damages, the appellate court ruled that the petitioner should have presented evidence to
disprove or rebut the private respondent's claim but it remained quiet and chose not to disturb the testimony and the
evidence presented by the private respondent to prove her claim.
In this petition for certiorari, the petitioner raises three issues. The first issue deals with the appellate court's affirmance
of the trial court's findings that the signature of the private respondent on the Special Power of Attorney was forged.
According to the petitioner, the Court of Appeals disregarded the direct mandate of Section 23, Rule 132 of the Rules
of Court which states in part that evidence of handwriting by comparison may be made "with writings admitted or
treated as genuine by the party against whom the evidence is offered, or proved to be genuine to the satisfaction of
the judge," and that there is no evidence on record which proves or tends to prove the genuineness of the standards
used.
There is no merit in this contention.

387

The records show that the signatures which were used as "standards" for comparison with the alleged signature of the
private respondent in the Special Power of Attorney were those from the latter's residence certificates in the years
1973, 1974 and 1975, her income tax returns for the years 1973 and 1975 and from a document on long bond paper
dated May 18, 1977. Not only were the signatures in the foregoing documents admitted by the private respondent as
hers but most of the said documents were used by the private respondent in her transactions with the government. As
was held in the case of Plymouth Saving & Loan Assn. No. 2 v. Kassing (125 NE 488, 494):
We believe the true rule deduced from the authorities to be that the genuineness of a "standard" writing may be
established (1) by the admission of the person sought to be charged with the disputed writing made at or for the
purposes of the trial or by his testimony; (2) by witnesses who saw the standards written or to whom or in whose
hearing the person sought to be charged acknowledged the writing thereof; (3) by evidence showing that the reputed
writer of the standard has acquiesced in or recognized the same, or that it has been adopted and acted upon by him
his business transactions or other concerns....
Furthermore, the judge found such signatures to be sufficient as standards. In the case of Taylor-Wharton Iron & Steel
Co. v. Earnshaw (156 N.E. 855, 856), it was held:
When a writing is offered as a standard of comparison it is for the presiding judge to decide whether it is the
handwriting of the party to be charged. Unless his finding is founded upon error of law, or upon evidence which is, as
matter of law, insufficient to justify the finding, this court will not revise it upon exceptions." (Costelo v. Crowell, 139
Mass. 588, 590, 2 N.E. 648; Nuez v. Perry, 113 Mass, 274, 276.)
We cannot find any error on the part of the trial judge in using the above documents as standards and also in giving
credence to the expert witness presented by the private respondent whose testimony the petitioner failed to rebut and
whose credibility it likewise failed to impeach. But more important is the fact that the unrebutted handwriting expert's
testimony noted twelve (12) glaring and material differences in the alleged signature of the private respondent in the
Special Power of Attorney as compared with the specimen signatures, something which the appellate court also took
into account. In Cesar v. Sandiganbayan (134 SCRA 105, 132), we ruled:
Mr. Maniwang pointed to other significant divergences and distinctive characteristics between the sample signatures
and the signatures on the questioned checks in his report which the court's Presiding Justice kept mentioning during
Maniwang's testimony.
In the course of his cross-examination, NBI expert Tabayoyong admitted that he saw the differences between the
exemplars used and the questioned signatures but he dismissed the differences because he did not consider them
fundamental. We rule that significant differences are more fundamental than a few similarities. A forger always strives
to master some similarities.
The second issue raised by the petitioner is that while it is true that A & L Industries is a single proprietorship and the
registered owner thereof is private respondent Lily Yulo, the said proprietorship was established during the marriage
and its assets were also acquired during the same. Therefore, it is presumed that this property forms part of the
conjugal partnership of the spouses Augusto and Lily Yulo and thus, could be held liable for the obligations contracted
by Augusto Yulo, as administrator of the partnership.
There is no dispute that A & L Industries was established during the marriage of Augusta and Lily Yulo and therefore
the same is presumed conjugal and the fact that it was registered in the name of only one of the spouses does not
destroy its conjugal nature (See Mendoza v. Reyes, 124 SCRA 161, 165). However, for the said property to be held
liable, the obligation contracted by the husband must have redounded to the benefit of the conjugal partnership under
Article 161 of the Civil Code. In the present case, the obligation which the petitioner is seeking to enforce against the
conjugal property managed by the private respondent Lily Yulo was undoubtedly contracted by Augusto Yulo for his
own benefit because at the time he incurred the obligation he had already abandoned his family and had left their
conjugal home. Worse, he made it appear that he was duly authorized by his wife in behalf of A & L Industries, to
procure such loan from the petitioner. Clearly, to make A & L Industries liable now for the said loan would be unjust
and contrary to the express provision of the Civil Code. As we have ruled in Luzon Surety Co., Inc. v. De Gracia (30
SCRA 111, 115-117):
As explained in the decision now under review: "It is true that the husband is the administrator of the conjugal property
pursuant to the provisions of Art. 163 of the new Civil Code. However, as such administrator the only obligations
incurred by the husband that are chargeable against the conjugal property are those incurred in the legitimate pursuit
of his career, profession or business with the honest belief that he is doing right for the benefit of the family. This is not
true in the case at bar for we believe that the husband in acting as guarantor or surety for another in an indemnity
agreement as that involved in this case did not act for the benefit of the conjugal partnership. Such inference is more
emphatic in this case, when no proof is presented that Vicente Garcia in acting as surety or guarantor received
consideration therefore, which may redound to the benefit of the conjugal partnership.(Ibid, pp. 46-47).

388

xxx

xxx

xxx

xxx

xxx

xxx

In the most categorical language, a conjugal partnership under that provision is liable only for such "debts and
obligations contracted by the husband for the benefit of the conjugal partnership." There must be the requisite showing
then of some advantage which clearly accrued to the welfare of the spouses. There is none in this case.
xxx

xxx

xxx

Moreover, it would negate the plain object of the additional requirement in the present Civil Code that a debt
contracted by the husband to bind a conjugal partnership must redound to its benefit. That is still another provision
indicative of the solicitude and tender regard that the law manifests for the family as a unit. Its interest is paramount;
its welfare uppermost in the minds of the codifiers and legislators.
We, therefore, rule that the petitioner cannot enforce the obligation contracted by Augusto Yulo against his conjugal
properties with respondent Lily Yulo. Thus, it follows that the writ of attachment cannot issue against the said
properties.
Finally, the third issue assails the award of actual damages according to the petitioner, both the lower court and the
appellate court overlooked the fact that the properties referred to are still subject to a levy on attachment. They are,
therefore, still under custodia legis and thus, the assailed decision should have included a declaration as to who is
entitled to the attached properties and that assuming arguendo that the attachment was erroneous, the lower court
should have ordered the sheriff to return to the private respondent the attached properties instead of condemning the
petitioner to pay the value thereof by way of actual damages.
In the case of Lazatin v. Twao (2 SCRA 842, 847), we ruled:
xxx

xxx

xxx

... It should be observed that Sec. 4 of Rule 59, does not prescribed the remedies available to the attachment
defendant in case of a wrongful attachment, but merely provides an action for recovery upon the bond, based on the
undertaking therein made and not upon the liability arising from a tortuous act, like the malicious suing out of an
attachment. Under the first, where malice is not essential, the attachment defendant, is entitled to recover only the
actual damages sustained by him by reason of the attachment. Under the second, where the attachment is maliciously
sued out, the damages recoverable may include a compensation for every injury to his credit, business or feed (Tyler
v. Mahoney, 168 NC 237, 84 SE 362; Pittsburg etc. 5 Wakefield, etc., 135 NC 73, 47 SE 234). ...
The question before us, therefore, is whether the attachment of the properties of A & L Industries was wrongful so as
to entitle the petitioner to actual damages only or whether the said attachment was made in bad faith and with malice
to warrant the award of other kinds of damages. Moreover, if the private respondent is entitled only to actual damages,
was the court justified in ordering the petitioner to pay for the value of the attached properties instead of ordering the
return of the said properties to the private respondent Yulo ?
Both the trial and appellate courts found that there was bad faith on the part of the petitioner in securing the writ of
attachment. We do not think so. "An attachment may be said to be wrongful when, for instance, the plaintiff has no
cause of action, or that there is no true ground therefore, or that the plaintiff has a sufficient security other than the
property attached, which is tantamout to saying that the plaintiff is not entitled to attachment because the requirements
of entitling him to the writ are wanting. (7 C.J.S., 664)" (p. 48, Section 4, Rule 57, Francisco, Revised Rules of Court).
Although the petitioner failed to prove the ground relied upon for the issuance of the writ of attachment, this failure
cannot be equated with bad faith or malicious intent. The steps which were taken by the petitioner to ensure the
security of its claim were premised, on the firm belief that the properties involved could be made answerable for the
unpaid obligation due it. There is no question that a loan in the amount of P591,003.59 was borrowed from the bank.
We, thus, find that the petitioner is liable only for actual damages and not for exemplary damages and attorney's fees.
Respondent Lily Yulo has manifested before this Court that she no longer desires the return of the attached properties
since the said attachment caused her to close down the business. From that time she has become a mere employee
of the new owner of the premises. She has grave doubts as to the running condition of the attached machineries and
equipments considering that the attachment was effected way back in 1975. She states as a matter of fact that the
petitioner has already caused the sale of the machineries for fear that they might be destroyed due to prolonged
litigation. We, therefore, deem it just and equitable to allow private respondent Lily Yulo to recover actual damages

389

based on the value of the attached properties as proven in the trial court, in the amount of P660,000.00. In turn, if
there are any remaining attached properties, they should be permanently released to herein petitioner.
We cannot, however, sustain the award of P500,000.00 representing unrealized profits because this amount was not
proved or justified before the trial court. The basis of the alleged unearned profits is too speculative and conjectural to
show actual damages for a future period. The private respondent failed to present reports on the average actual profits
earned by her business and other evidence of profitability which are necessary to prove her claim for the said amount
(See G. A. Machineries, Inc. v. Yaptinchay, 126 SCRA 78, 88).
The judgment is therefore set aside insofar as it holds the petitioner liable for P500,000.00 actual damages
representing unrealized profits, P150,000.00 for exemplary damages and P20,000.00 for attorney's fees. As stated
earlier, the attached properties, should be released in favor of the petitioner.
WHEREFORE, the decision of the Court of Appeals is hereby SET ASIDE and the petitioner is ordered to pay the
private respondent Lily Yulo the amount of SIX HUNDRED SIXTY THOUSAND PESOS (P660,000.00) as actual
damages. The remaining properties subject of the attachment are ordered released in favor of the petitioner.
SO ORDERED.

390

G.R. No. L-48820

May 25, 1979

MALAYAN INSURANCE CO., INC., petitioner,

vs.
HON. EMILIO V. SALAS, as Presiding Judge, Court of First Instance of Rizal, Branch I, Pasig, Metro Manila,
ROSENDO FERNANDO and JOHN DOE, respondents.
Angara, Abello, Concepcion, Regata & Cruz for petitioner.
Lazaro, Abinoja & Associates for private respondents.

AQUINO, J.:
This case is about the surety company's liability on its replevin bond which was not included in the final judgment
against the principal in the bond. It is undisputed that in 1970 Makati Motor Sales, Inc., as vendor mortgagee, sued
Rosendo Fernando for the recovery of four diesel trucks and the connection of the balance of his obligation plus
damages (Civil Case No. 13874, Court of First Instance of Rizal, Pasig Branch 1).
To obtain immediate possession of the trucks pending trial, Makati Motors Sales, Inc. posted a replevin bond executed
by the Malayan Insurance Co., Inc. In that bond the surety bound itself to pay P362,775.92 "for the return of the
property to the defendant, if the return thereof be adjudged, and for the payment of such sum as may in the cause be
recovered against the plaintiff ". Pursuant to the order of the court, the sheriff seized the four trucks. Later, two of the
trucks were returned to Fernando.
After trial, or on March 2, 1973, the lower court rendered judgment ordering Makati Motor Sales, Inc. to return to
Fernando the other two trucks and to pay him for the seizure of each of them, damages in the sum of three hundred
pesos daily from September 25 and 26, 1970 (or six hundred pesos for the two trucks from the latter date) until their
return to Fernando plus P26,000 as actual and moral damages.
In turn, Fernando was ordered to pay Makati Motor Sales, Inc. the sum of P66,998.34, as the balance of the price of
the two trucks, with twelve percent interest from February 28, 1969 until fully paid and the further sum of P15,730.20
as the cost of the repair with six percent interest from September 11, 1970 until fully paid.
Makati Motor Sales, Inc. appealed to the Court of Appeals. It affirmed the lower court's judgment in its decision of
March 1, 1977 in CA-G. R. No. 54196-R.
Meanwhile, on May 11, 1973, or before the elevation of the record to the Court of Appeals, Fernando filed in the trial
court an application for damages against the replevin bond. It was opposed by the surety on the ground that the trial
court had lost jurisdiction over the case because of the perfection of the appeal. The trial court denied the application
on June 28, 1973.
On May 27, 1974 Fernando filed in the Court of Appeals his claim for damages against the replevin bond. He prayed
that the same be included in the judgment. The surety, which was furnished with a copy of the claim, filed an
opposition to it.
The Court of Appeals did not act immediately on that claim but in its 1977 decision it observed that Fernando's motion
or claim "was correct" and it ordered that his claim against Malayan Insurance Co., Inc. "be heard before the trial
court". That decision affirming the lower court's judgment became final and executory on March 18, 1977.
On April 6, 1977, or after the remand of the record to the trial court, Fernando filed a motion to set for hearing his
application for damages against the surety on its replevin bond. The application was heard with notice to Makati Motor
Sales, Inc. and Malayan Insurance Co., Inc. Fernando submitted documentary evidence. On December 15, 1977
Malayan Insurance Co., Inc. moved to quash the proceeding regarding the claim for damages. It contended that the
trial court has no jurisdiction to alter or modify the final judgment of the Court of Appeals.
The trial court in its order of July 14, 1978 denied the motion to quash. It directed Malayan Insurance Co., Inc. to pay
Fernando the damages which it had adjudged against Makati Motor Sales, Inc. The surety company appealed from
that order to this Court pursuant to Republic Act No. 5440.
Section 10, Rule 60 of the Rules of Court provides that in replevin cases, as in receivership and injunction cases, the
damages "to be awarded to either party upon any bond filed by the other" "shall be claimed, ascertained, and granted"
in accordance with section 20 of Rule 57 which reads:

391

SEC. 20.
Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the
party against whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching
creditor, any damages resulting from the attachment. Such damages may be awarded only upon application and after
proper hearing, and shall be included in the final judgment. The application must be filed before the trial or before
appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety
or sureties, setting forth the facts showing his right to damages and the amount thereof.
If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must
claim damages sustained during the pendency of the appeal by filing an application with notice to the party in whose
favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes
executory. The appellate court may allow the application to be heard and decided by the trial court.
Under section 20, in order to recover damages on a replevin bond (or on a bond for preliminary attachment, injunction
or receivership) it is necessary (1) that the defendant-claimant has secured a favorable judgment in the main action,
meaning that the plaintiff has no cause of action and was not, therefore, entitled to the provisional remedy of replevin;
(2) that the application for damages, showing claimant's right thereto and the amount thereof, be filed in the same
action before trial or before appeal is perfected or before the judgment becomes executory; (3) that due notice be
given to the other party and his surety or sureties, notice to the principal not being sufficient and (4) that there should
be a proper hearing and the award for damages should be included in the final judgment (Luneta Motor Co. vs.
Menendez 117 Phil. 970, 974; 3 Moran's Comments on the Rules of Court, 1970 Ed., pp. 54-56. See Cruz vs. Manila
Surety & Fidelity Co., Inc., 92 Phil. 699).
In this appeal, Malayan Insurance Co., Inc. contends that the trial court's judgment against it is not warranted under
section 20 of Rule 57. It assails the trial court's competence to render judgment against the surety after the decision of
the Court of Appeals against the surety's principal had become final and executory.
We hold that the trial court has jurisdiction to pass upon Fernando's application for the recovery of damages on the
surety's replevin bond. The reason is that Fernando seasonably filed his application for damages in the Court of
Appeals. It was not his fault that the damages claimed by him against the surety were not included in the judgment of
the Court of Appeals affirming the trial court's award of damages to Fernando payable by the principal in the replevin
bond. The peculiar factual situation of this case makes it an exception to the settled rule that the surety's liability for
damages should be included in the final judgment to prevent duplicity of suits or proceedings.
As may be gathered from section 20 of Rule 57, the application for damages against the surety must be filed (with
notice to the surety) in the Court of First Instance before the trial or before appeal is perfected or before the judgment
becomes executory.
If an appeal is taken, the application must be filed in the appellate court but always before the judgment of that court
becomes executory so that the award may be included in its judgment (Luneta Motor Co. vs. Menendez 117 Phil. 970,
976).
But it is not always mandatory that the appellate court should include in its judgment the award of damages against
the surety. Thus, it was held that where the application for damages against the surety is seasonably made in the
appellate court, "the latter must either proceed to hear and decide the application or refer "it" to the trial court and
allow it to hear and decide the same"(Rivera vs. Talavera, 112 Phil. 209, 219).
We have stated earlier that in the instant case Fernando in 1974 made a timely claim in the Court of Appeals for an
award of damages against Malayan Insurance Co., Inc. enforceable against its replevin bond. The surety was notified
of that application. It registered an opposition to the claim. The Court of Appeals did not resolve the claim immediately
but in its 1977 decision it directed the trial court to hear that claim.
Obviously, the lower court has no choice but to implement that directive which is the law of the case (See Compagnie
Franco Indochinoise vs. Deutsch, etc., 39 Phil. 474, 476).
However, the trial court's implementation of that directive was incorrect. It set the claim for hearing but the surety
assailed its jurisdiction and did not consider itself bound by the mandate of the appellate court. The merits of the claim
for damages were not threshed out at the hearing because the surety stood pat on its contention that the trial court
has no jurisdiction to allow the claim in view of the finality of the decision of the Court of Appeals.
This Court has held that, if the surety was not given notice when the claim for damages against the principal in the
replevin bond was heard, then as a matter of procedural due process the surety is entitled to be heard when the
judgment for damages against the principal is sought to be enforced against the surety's replevin bond.

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The hearing win be summary and win be limited to such new defense, not previously set up by the principal, as the
surety may allege and offer to prove. The oral proof of damages already adduced by the claimant may be reproduced
without the necessity of retaking the testimony, but the surety should be given an opportunity to cross-examine the
witness or witnesses if it so desires." That procedure would forestall the perpetration of fraud or collusion against the
surety (Visayan Surety and Insurance Corporation vs. Pascual, 85 Phil. 779, 785-786).
Inasmuch as in this case appellant Malayan Insurance Co., Inc. was not given the summary hearing during which it
could contest the reality or reasonableness of Fernando's claim for damages, we have to set aside the trial court's
order awarding damages against it and, in the interest of justice, give it another opportunity to be heard on the merits
of Fernando's claim for damages.
Before closing, it may be useful to make a review and synthesis of the copious jurisprudence on the surety's liability in
attachment, injunction, replevin and receivership bonds. It was observed in one case that once upon a time the rulings
on that point were in a muddled state.
Section 20 of Rule 57 is a revised version of section 20, Rule 59 of the 1940 Rules of Court which earlier section 20 is
a restatement of this Court's rulings under sections 170, 177, 223, 272 and 439 of the Code of Civil Procedure
regarding the damages recoverable in case of the wrongful issuance of the writs of preliminary injunction, attachment,
mandamus and replevin and the appointment of a receiver.
Section 170 contains the provision that the damages suffered in connection with the issuance of a preliminary
injunction shall be ascertained by the court trying the action (meaning the court where the action is pending) and shall
be included in the final judgment "against the plaintiff and against the sureties". As to damages in case of wrongful
attachment, see section 439 of the Code of Civil Procedure and Belzunce vs. Fernandez, 10 Phil. 452.
So, as held under the Code of Civil Procedure, if the preliminary injunction was issued by this Court, the specification
of damages should be filed in this Court. The petitioner and his bondsmen should be served with copies of the
specification (Somes vs. Crossfield, 9 Phil. 13 and Macatangay vs. Municipality of San Juan de Bocboc, 9 Phil. 19).
On the other hand, under section 439 of the Code of Civil Procedure, the damages caused by a wrongful attachment
may be adjudicated in a summary hearing but the better practice would be to claim the damages in the answer and to
offer evidence in support thereof during the trial (Gasataya vs. Fallon 32 Phil. 245 and Raymundo vs. Carpio, 33 Phil.
395).
Note that under the second paragraph of section 20, Rule 57 of the present Rules of Court, the damages suffered
during the pendency of an appeal in a case where the writs of attachment, injunction and replevin or an order of
receivership were issued should be claimed in the appellate court.
There is an old ruling that the sureties in an injunction bond are bound by a judgment for damages against their
principal even if the sureties were not heard at the time the claim for damages was tried. The reason for that ruling is
that the sureties in an injunction bond "assume such a connection with the suit that they are included by a judgment in
it in a suit at law upon the bond, so far as the same issues are involved; and that, upon the entry of a judgment against
the principal, their liability is absolute" (Florentino vs. Domadag, 45 O.G. 4937, 81 Phil. 882).
Also, it was held that if damages were awarded against the principal in a replevin bond without notice to the surety,
that final judgment may be enforced against the surety after it has been given an opportunity to be heard as to the
reality or reasonableness of the alleged damages. In such a case, the trial court must order the surety to show cause
why the bond should not answer for the judgment for damages. The hearing is summary and the surety may crossexamine the witnesses presented by the defendant (Visayan Surety & Insurance Corporation vs. Pascual, 85 Phil
779).
Insofar as those rulings in the Florentino and Visayan Surety cases allowed a claim for damages against the surety to
be ventilated in a separate proceeding or after the finality of the judgment for damages against the principal in the
bond, those rulings were jettisoned and abandoned in several subsequent cases because they are contrary to the
explicit provision of section 20 of Rule 59, now Rule 57, that the judgment for damages against the surety should be
included in the final judgment to avoid additional proceedings (Cruz vs. Manila Surety & Fidelity Co., Inc., 92 Phil. 699;
Japco vs. City of Manila, 48 Phil. 851, 855).
The damages are recoverable on the theory that an actionable wrong was committed by the losing party. The recovery
is limited to the amount of the bond (Pacis vs. Commission on Elections, L-29026, August 22, 1969, 29 SCRA 24, 29).
The usual procedure is to file an application for damages with due notice to the other party and his sureties. The other
part may answer the application. Upon the issues thus being Joined, the matter will be tried and determined. A court

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order declaring the bond confiscated without adhering to that procedure is void ( Fabella vs. Tancinco 86 Phil. 543;
Luzon Sureo Inc. Guerrero, L-20705, June 20, 1966. 17 SCRA 100).
The claim for damages against the surety should be made it notice to the surety and before the judgment against the
principal becomes executory. The liability of the surety should be included in the final judgment. That remedy is
exclusive. If riot assailed of, the surety is released (Curilan vs. Court of Appeals, 105 Phil. 1160 and De la Rama vs.
Villarosa, 118 Phil. 42-1. 430: Jesswani vs. Dialdas 91 Phil. 915: Estioco vs. Hamada, 103 Phil. 1145).
Therefore, the prevailing settled rule is that a court has no jurisdiction to entertain any proceeding seeking to hold a
surety upon its bond if such surety has not been given notice the claim for damages against the principal and the
judgment holding the latter liable has already become executor (People's Surety & Insurance Co., Inc. vs. Court of
Appeals, L-21627. June 29, 1961, 20 SCRA 481).
If the judgment awarding damages against the principal in a bond for the lifting of a preliminary injunction had already
become executory, that claim cannot be pressed against the surety by setting it for hearing with notice to the surety.
The failure to notify the surety of the claim for damages against the principal relieves the surety from any liability on
his bond (Sy vs. Ceniza, 115 Phil. 396; Pacis vs. Commission on Elections, L-29026, August 22, 1969, 29 SCRA 24;
Dee vs. Masloff, 116 Phil. 412).
To entertain the belated claim against the surety after the judgment for damages against the principal has become
executory would result in the alteration of that judgment. That should not be done (De Guia vs. Alto Surety &
Insurance Co., Inc., 117 Phil. 434; Visayan Surety & Insurance Co., Inc. vs. De Aquino, 96 P1. 900; Port Motors, Inc.
vs. Raposas and Alto Surety & Insurance Co., Inc., 100 Phil. 732; Gerardo vs. Plaridel Surety & Insurance Co., Inc.,
100 Phil. 178; Luneta Motor Co. vs. Lopez, 105 Phil. 327; Curilan vs. Court of Appeals, 105 Phil. 1160; Riel vs.
Lacson, 104 Phil. 1055).
Moreover, the damages claimed by the defendant should be pleaded as a compulsory counterclaim in his answer.
Hence, a separate action to claim those damages is unwarranted (Ty Tion and Yu vs. Marsman & Co. and Alpha
Insurance & Surety Co., Inc., 115 Phil. 746, 749; Medina vs. Maderera del Norte de Catanduanes, Inc., 51 Phil. 240;
Nueva-Espaa vs. Montelibano, 58 Phil. 807; Tan Suyco vs. Javier, 21 Phil. 82).
It may be noted that in the Visayan Surety case, 85 Phil 779, Visayan Surety & Insurance Corporation filed a replevin
bond for one Yu Sip who sued Victoria Pascual for the recovery of a truck. The trial court found that the writ of replevin
was wrongfully procured, that Victoria Pascual was the lawful owner of the truck and that she suffered damages on
account of its wrongful seizure by the sheriff at the instance of plaintiff Yu Sip.
The trial court ordered Yu Sip to return the truck to Victoria Pascual or to pay its value of P2,300 in case of his inability
to return it and, in either case, to pay thirty pesos daily from January 6, 1947 up to the date of the return of the truck or
until its value was fully paid. The Court of Appeals affirmed that judgment.
After the return of the record to the trial court, Victoria Pascual filed a "petition for execution of the surety bond"
wherein she prayed for a writ of execution against the surety to satisfy the judgment out of its replevin bond. The
surety opposed that petition. It contended that it was never notified by Victoria Pascual regarding her presentation of
evidence covering the damages which she had suffered. The trial court granted the petition and ordered the issuance
of a writ of execution against the surety. That order was assailed in a certiorari in this Court.
It was held that the writ of execution should be set aside and that the surety should be given a chance to be heard in a
summary proceeding. That proceeding was conducted after the judgment against Yu Sip, the principal in the replevin
bond, had become final and executory.
What was done in the Visayan Surety case, as recounted above, was not allowed in subsequent cases. Thus, in
Manila Underwriters Insurance Co., Inc. vs. Tan, 107 Phil. 911, the trial court rendered in 1954 a judgment dissolving
the preliminary attachment and ordering the plaintiff to pay the defendant the damages which the latter suffered by
reason of the wrongful attachment. The surety in the attachment bond was not notified of the hearing but it was
furnished with a copy of the decision.
In 1957 the Court of Appeals affirmed that judgment. After it became final, the defendant filed in the trial court against
the surety a motion for execution winch the latter opposed. At the hearing of the motion, the defendant offered to
reproduce the evidence which he had presented at the trial. The offer was accepted by the trial court. It issued the writ
of execution against the surety.
It was held that, because the surety was not notified of the hearing on the damages suffered by the defendant in the
manner prescribed in section 20 of Rule 59, now Rule 57, it was not liable for damages under its attachment bond.

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The surety is notified so that he may cross-examine the witnesses testifying as to the damages and question the
evidence presented by the claimant and interpose any appropriate defense (Riel vs. Lacson, 104 Phil. 1055; Liberty
Construction Supply Co. vs. Pecson, 89 Phil. 50).
So, if plaintiff's claim for damages resulting from the wrongful lifting of the writ of preliminary injunction was awarded in
the main decision without notice to the surety and the decision had become executory, the failure to notify the surety
on time relieves him from liability under the bond (Alliance Insurance & Surety Co., Inc. vs. Piccio, 105 Phil. 1192).
The surety may be held liable only if before the judgment for damages against the principal becomes executory, an
order is entered against him after a hearing with notice to him. After the judgment becomes executory, it is too late to
file such claim for damages with notice to the surety (Abelow vs. Riva 105 Phil. 159; Visayan Surety & Insurance Corp.
vs. Lacson, 96 Phil. 878).
Where the Court of Appeals dismissed a mandamus action originally filed in that court and dissolved the preliminary
injunction which it had issued and after entry of judgment was made the record was remanded to the trial court, it was
error for the Court of Appeals to allow the respondent in that case to file a claim for damages against the principal and
surety in the injunction bond. The claim should have been filed before the judgment of dismissal became final (Luzon
Surety Co. Inc. vs. Court of Appeals, 108 Phil. 157).
Section 20 of Rule 57 contemplates one judgment for damages against the principal and the surety in the injunction,
replevin, attachment and receivership bonds. Since the judicial bondsman has no right to demand the exhaustion of
the property of the principal debtor, there is no justification for entering separate judgments against them. The claim for
damages against the surety should be made before entry of judgment (Del Rosario vs. Nava, 95 Phil. 637).
In the Del Rosario case a judgment for damages was rendered against the principal in an attachment bond but there
was no notice to the surety of the claim for damages. That judgment became final. After the execution against the
principal was returned unsatisfied, the claimant filed a motion praying that the surety company be required to show
cause why it should not answer for the judgment against the principal.
It was held that, while the prevailing party may apply for an award of damages against the surety even after the award
has already been obtained against the principal, nevertheless, in order that all awards for damages may be included in
the final judgment, the application and notice to the surety must be made before the judgment against the principal
becomes final and executory.
In another case, it was held that as the winning party sought to hold the surety liable on its replevin bond almost a
year after the judgment of the Court of Appeals became final, the trial court erred in enforcing its judgment against the
surety. "The surety may only be held liable if, before judgment becomes final, an order against the surety is entered
after a hearing with notice to the surety". The claim against the surety should be included in the final judgment. It is not
sufficient that the surety be afforded an opportunity to oppose the writ of execution. (Plaridel Surety & Insurance
Company vs. De los Angeles, L-25550, July 31, 1968, 24 SCRA 487).
After this Court's judgment dissolving a preliminary injunction had become final and executory, it would be too late to
entertain in the trial court the defendant's application for damages allegedly caused by the injunction (Santos vs. Moir
36 Phil. 350).
The defendant in a replevin case cannot file a separate action for damages due to the wrongful issuance of the writ.
He should have claimed the damages as a counterclaim in the original replevin suit (Pascua vs. Sideco 24 Phil. 26, Ty
Tion and Yu vs. Marsman & Co. and Alpha Ins. & Surety Co. Inc., 115 Phil. 746).
A final judgment for damages against the principal in a replevin bond cannot be enforced against the surety company
which was not notified of the claim for damages and was not afforded a chance to be heard (People's Surety and Ins.
Co., Inc. vs. Aragon, 117 Phil, 257).
Where an injunction was dissolved and only attorney's fees and costs were adjudged against the principal, and the
procedure for claiming damages against the surety was not followed, no recourse could be had against the injunction
bond in case the writ of execution against the principal was not satisfied. Moreover, the attorney's fees and costs could
be recovered from the principal even without the filing of the bond (People's Surety & Insurance Co., Inc. vs. Bayona,
103 Phil. 1109).
Where after the dismissal of a petition for relief from the judgment of a municipal court, the Court of First Instance
ordered ex parte the issuance of a writ of execution against the petitioner's injunction bond, that order is void because
there was no formal claim for damages and there was no hearing with notice to the petitioner and his surety. The court
should hold a hearing. (Luzon Surety Co., Inc. vs. Guerrero, L-20705, June 20, 1966, 17 SCRA 400).

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Where on June 11, 1959 an action to stop the foreclosure of a chattel mortgage was dismissed, without prejudice, for
failure to prosecute and, before that dismissal became final, the defendant did not prove any damages resulting from
the issuance of the preliminary injunction, defendant's motion of September 7, 1959 praying that judgment be
rendered against the surety's bond could no longer be entertained. The claim for damages should have been made
before entry of final judgment. It must be duly substantiated at the proper hearing with notice to the surety (Jao and
Sia vs. Royal Financing Corporation, 114 Phil. 1152; Visayan Surety & Insurance Corp. vs. Lacson, 96 Phil. 878).
If the case wherein the injunction was issued was dismissed for failure to prosecute and no damages were awarded to
the defendant by reason of the issuance of the injunction, it was error for the trial court to issue a writ of execution
against the surety since there was no claim nor evidence of damages suffered the defendant. The order of dismissal
did not include in final of damages. (Vet Bros. and Co., Inc. vs. Movido 11 4 Phil, 211).
The case of Vadil vs. De Venecia, 118 Phil. 1217, involves a queer situation. Plaintiff corporation in that case filed an
action to recover a sum of money. It asked for a writ of attachment. Before any attachment could be issued, the
defendant filed a counterbond. But this bond provided that the defendant and his sureties would pay "all damages that
the defendant (sic) may suffer by reason of" the attachment. In other words, the defendant executed a bond in favor of
himself.
Judgment was rendered for the plaintiff. As the execution was returned unsatisfied, the trial court on plaintiff's motion
ordered execution against defendant's bond. It was held that the execution was wrongfully issued.
However, where an injunction was issued in a forcible entry case but on certiorari to the Court of First Instance, the
justice of the peace court was held to be without jurisdiction to entertain the ejectment case, that ejectment suit is not
considered dismissed and it may still be regarded as pending in the justice of the peace court for the purpose of
allowing the defendant's claim for damages on the injunction bond (Cruz vs. Manila Surety & Fidelity Co., 92 Phil.
699).
Section 10 of Rule 60 makes section 20 of Rule 57 applicable not only to the replevin bond but also to the redelivery
bond posted by the defendant for the lifting of the order of seizure. The requisites for holding the surety liable on the
replevin bond are also the requisites for holding the surety hable on the redelivery bond. So, if the surety on the
redelivery bond was not notified of the plaintiff's claim for damages, the surety cannot be held liable on its redelivery
bond for the damages adjudged against the principal. It is necessary that the surety be notified and that its liability be
included in the final judgment against the principal (Luneta Motor Co. vs. Menendez 117 Phil. 970).
The writ of execution issued against the counterbond for the dissolution of an injunction is void if it was issued without
notice to the surety and after the judgment on the merits had become executory. The surety's liability should have
been included in the final judgment (Cajefe vs. Fernandez, 109 Phil. 743).
If the judgment awarding damages against the principals in the counterbonds filed for the lifting of the receivership
was appealed to the Court of Appeals and the plaintiff-appellee filed in the trial court (not in the appellate court) his
application for damages against the sureties in the counterbonds, the trial court cannot hear the said application after
the record is remanded to it because, by then, the decision of the appellate court had become final and the damages
to be awarded against the sureties could no longer be included in that judgment. The application for damages against
the sureties should have been filed in the Court of Appeals (Luneta Motor Co. vs. Menendez 117 Phil. 970, 976).
The procedure in section 20 of Rule 57 should not be confounded with the procedure in section 17 of the same rule
regarding the surety's liability on the counterbond for the lifting of the preliminary attachment. Under section 17, the
surety may be held liable after notice and summary hearing conducted after the judgment had become executory and
the execution was returned unsatisfied (Towers Assurance Corporation vs. Ororama Supermart, L-45848, November
9, 1977, 80 SCRA 262; Vanguard Assurance Corporation vs. Court of Appeals, L-25921, May 27, 1975, 64 SCRA
148).
The case contemplated in section 17 of Rule 57 is different from the case envisaged in section 20 of that rule (Dizon
vs. Valdes, L-23920, April 25, 1968, 23 SCRA 200; Visayan Surety & Insurance Corp. vs. De Aquino, 96 Phil. 900).
Nor does section 20 of Rule 57 apply to cases where the surety bound himself to abide by the judgment against his
principal and thereby renounced his right to be sued or cited, or where the surety guaranteed the return of certain
goods and he did not raise the issue of lack of notice, or where the sureties bound themselves to pay the plaintiff a
definite amount (Aguasin vs. Velasquez, 88 Phil. 357; Lawyers Cooperative Publishing Co. vs. Periquet, 71 Phil. 204;
Mercado vs. Macapayag and Pineda, 69 Phil. 403 cited in Alliance Insurance case, 105 Phil. 1201).
Note that a different rule also obtains with respect to the surety in the bond of an administrator or executor The nature
of a surety's obligation on an administrator's bond, which makes him privy to the proceeding against his principal, is
such that he is bound and concluded, in the absence of fraud or collusion, by a judgment against his principal, even

396

though the surety was not a party to the proceedings (Laurente vs. Rizal Surety & Insurance Co., Inc., L-21250, March
31, 1966, 16 SCRA 551, citing Philippine Trust Co. vs. Luzon Surety Co., Inc., 112 Phil. 44. See Cosme de Mendoza
vs. Pacheco and Cordero, 64 Phil. 34).
It should be underscored that in the instant case, although the surety's liability was not included in the final judgment,
which became executory, nevertheless, there was a timely application for damages in the Court of Appeals which in its
decision ordered the trial court to hear defendant-appellee Fernando's claim for damages against the surety. That
feature of the case removes it from the coverage of the rule that the surety should be heard before the judgment
becomes executory and that his liability should be included in the final judgment.
WHEREFORE, we hold that the trial court has jurisdiction to comply with the directive of the Court of Appeals but we
reverse and set aside its order of July 14, 1978, requiring petitioner-appellant Malayan Insurance Co., Inc. to pay the
damages which it had adjudged against Makati Motor Sales, Inc.
The trial court is required to hold a summary hearing wherein appellant surety should be given a chance to contest the
reality or reasonableness of respondent-appellee Rosendo Fernando's claim for damages. After such hearing, or if the
surety should waive it, the trial court should render the proper judgment. No costs.
SO ORDERED.
Concepcion, Jr., Santos and A bad Santos, JJ., concur.
Fernando, Actg C.J. and Barredo, J., took no part.

Separate Opinions

ANTONIO, J., concurring:

I concur.
1. Under section 20 of Rule 57, application for damages against the surety resulting from wrongful attachment or
wrongful seizure of personal property must be filed in the Court of First Instance in the same action in which the Writ of
Attachment or the writ or replevin was issued, before trial, or even after trial but before the judgment becomes
executory or before perfection of the appeal. In other words, the court must still have jurisdiction over the case. The
attaching creditor and his surety or sureties must be notified of the application setting forth the facts showing the right
of the applicant to and the amount of damages sustained by him. If the appeal is taken, then the application must be
filed in the Appellate Court but always before the judgment of said court becomes final and executory.
2. That where such application is seasonably made to the Appellate Court, the latter must either proceed to hear and
decide the application or refer the application to the trial court and allow it to hear and decide the same. Application for
damages sustained during the proceeding of the appeal may similarly be filed with the Appellate Court, which may
hear the application or refer it to the trial court for the said court to hear and decide,
3. The hearing is summary and will be limited to such new defense not previously set up by the principal, as the surety
may allege and offer to prove. While the previous testimony by the claimant on the damages may be reproduced, the
surety should be given an opportunity to cross-examine the witness or witnesses, if it so desires.
In the case at bar, there was a timely application for damages in the Court of Appeals on May 27, 1974, where the
case was then pending, and in its 1977 decision the Appellate Court ordered that the claim against the surety be
heard before the trial court. This circumstance apparently brings it out of the ambit of the rule that the application to
recover damages cannot be the subject of separate action, in order to avoid multiplicity of suits, since the hearing
before the trial court is just an implementation of the judgment of the Appellate Court.

# Separate Opinions
ANTONIO, J., concurring:

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I concur.
1. Under section 20 of Rule 57, application for damages against the surety resulting from wrongful attachment or
wrongful seizure of personal property must be filed in the Court of First Instance in the same action in which the Writ of
Attachment or the writ or replevin was issued, before trial, or even after trial but before the judgment becomes
executory or before perfection of the appeal. In other words, the court must still have jurisdiction over the case. The
attaching creditor and his surety or sureties must be notified of the application setting forth the facts showing the right
of the applicant to and the amount of damages sustained by him. If the appeal is taken, then the application must be
filed in the Appellate Court but always before the judgment of said court becomes final and executory.
2. That where such application is seasonably made to the Appellate Court, the latter must either proceed to hear and
decide the application or refer the application to the trial court and allow it to hear and decide the same. Application for
damages sustained during the proceeding of the appeal may similarly be filed with the Appellate Court, which may
hear the application or refer it to the trial court for the said court to hear and decide,
3. The hearing is summary and will be limited to such new defense not previously set up by the principal, as the surety
may allege and offer to prove. While the previous testimony by the claimant on the damages may be reproduced, the
surety should be given an opportunity to cross-examine the witness or witnesses, if it so desires.
In the case at bar, there was a timely application for damages in the Court of Appeals on May 27, 1974, where the
case was then pending, and in its 1977 decision the Appellate Court ordered that the claim against the surety be
heard before the trial court. This circumstance apparently brings it out of the ambit of the rule that the application to
recover damages cannot be the subject of separate action, in order to avoid multiplicity of suits, since the hearing
before the trial court is just an implementation of the judgment of the Appellate Court.

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G.R. No. 156167

May 16, 2005

GULF RESORTS, INC., petitioner,

vs.
PHILIPPINE CHARTER INSURANCE CORPORATION, respondent.
DECISION
PUNO, J.:
Before the Court is the petition for certiorari under Rule 45 of the Revised Rules of Court by petitioner GULF
RESORTS, INC., against respondent PHILIPPINE CHARTER INSURANCE CORPORATION. Petitioner assails the
appellate court decision1 which dismissed its two appeals and affirmed the judgment of the trial court.
For review are the warring interpretations of petitioner and respondent on the scope of the insurance companys
liability for earthquake damage to petitioners properties. Petitioner avers that, pursuant to its earthquake shock
endorsement rider, Insurance Policy No. 31944 covers all damages to the properties within its resort caused by
earthquake. Respondent contends that the rider limits its liability for loss to the two swimming pools of petitioner.
The facts as established by the court a quo, and affirmed by the appellate court are as follows:
[P]laintiff is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said resort insured
originally with the American Home Assurance Company (AHAC-AIU). In the first four insurance policies issued by
AHAC-AIU from 1984-85; 1985-86; 1986-1987; and 1987-88 (Exhs. "C", "D", "E" and "F"; also Exhs. "1", "2", "3" and
"4" respectively), the risk of loss from earthquake shock was extended only to plaintiffs two swimming pools, thus,
"earthquake shock endt." (Item 5 only) (Exhs. "C-1"; "D-1," and "E" and two (2) swimming pools only (Exhs. "C-1"; D1", "E" and "F-1"). "Item 5" in those policies referred to the two (2) swimming pools only (Exhs. "1-B", "2-B", "3-B" and
"F-2"); that subsequently AHAC(AIU) issued in plaintiffs favor Policy No. 206-4182383-0 covering the period March
14, 1988 to March 14, 1989 (Exhs. "G" also "G-1") and in said policy the earthquake endorsement clause as indicated
in Exhibits "C-1", "D-1", Exhibits "E" and "F-1" was deleted and the entry under Endorsements/Warranties at the time
of issue read that plaintiff renewed its policy with AHAC (AIU) for the period of March 14, 1989 to March 14, 1990
under Policy No. 206-4568061-9 (Exh. "H") which carried the entry under "Endorsement/Warranties at Time of Issue",
which read "Endorsement to Include Earthquake Shock (Exh. "6-B-1") in the amount of P10,700.00 and paid
P42,658.14 (Exhs. "6-A" and "6-B") as premium thereof, computed as follows:
Item
P7,691,000.00
on the Clubhouse only
@ .392%;
1,500,000.00
on the furniture, etc. contained in the building above-mentioned@ .490%;
393,000.00
on the two swimming pools, only (against the peril of earthquake shock only) @ 0.100%
-

399

116,600.00
other buildings include as follows:
a) Tilter House
P19,800.00
0.551%
b) Power House
P41,000.00
0.551%
c) House Shed
P55,000.00
0.540%
P100,000.00
for furniture, fixtures, lines air-con and operating equipment
that plaintiff agreed to insure with defendant the properties covered by AHAC (AIU) Policy No. 206-4568061-9 (Exh.
"H") provided that the policy wording and rates in said policy be copied in the policy to be issued by defendant; that
defendant issued Policy No. 31944 to plaintiff covering the period of March 14, 1990 to March 14, 1991 for
P10,700,600.00 for a total premium of P45,159.92 (Exh. "I"); that in the computation of the premium, defendants
Policy No. 31944 (Exh. "I"), which is the policy in question, contained on the right-hand upper portion of page 7
thereof, the following:
Rate-Various
Premium

P37,420.60 F/L

2,061.52

Typhoon

400


1,030.76

EC

393.00

ES
Doc. Stamps
3,068.10
F.S.T.
776.89
Prem. Tax
409.05
TOTAL
45,159.92;
that the above break-down of premiums shows that plaintiff paid only P393.00 as premium against earthquake shock
(ES); that in all the six insurance policies (Exhs. "C", "D", "E", "F", "G" and "H"), the premium against the peril of
earthquake shock is the same, that is P393.00 (Exhs. "C" and "1-B"; "2-B" and "3-B-1" and "3-B-2"; "F-02" and "4-A1"; "G-2" and "5-C-1"; "6-C-1"; issued by AHAC (Exhs. "C", "D", "E", "F", "G" and "H") and in Policy No. 31944 issued
by defendant, the shock endorsement provide(sic):
In consideration of the payment by the insured to the company of the sum included additional premium the Company
agrees, notwithstanding what is stated in the printed conditions of this policy due to the contrary, that this insurance
covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in
consequence of earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D" and "7-C");
that in Exhibit "7-C" the word "included" above the underlined portion was deleted; that on July 16, 1990 an
earthquake struck Central Luzon and Northern Luzon and plaintiffs properties covered by Policy No. 31944 issued by
defendant, including the two swimming pools in its Agoo Playa Resort were damaged.2
After the earthquake, petitioner advised respondent that it would be making a claim under its Insurance Policy No.
31944 for damages on its properties. Respondent instructed petitioner to file a formal claim, then assigned the
investigation of the claim to an independent claims adjuster, Bayne Adjusters and Surveyors, Inc.3 On July 30, 1990,
respondent, through its adjuster, requested petitioner to submit various documents in support of its claim. On August
7, 1990, Bayne Adjusters and Surveyors, Inc., through its Vice-President A.R. de Leon,4 rendered a preliminary
report5 finding extensive damage caused by the earthquake to the clubhouse and to the two swimming pools. Mr. de
Leon stated that "except for the swimming pools, all affected items have no coverage for earthquake shocks."6 On
August 11, 1990, petitioner filed its formal demand7 for settlement of the damage to all its properties in the Agoo Playa
Resort. On August 23, 1990, respondent denied petitioners claim on the ground that its insurance policy only afforded
earthquake shock coverage to the two swimming pools of the resort.8 Petitioner and respondent failed to arrive at a
settlement.9 Thus, on January 24, 1991, petitioner filed a complaint10 with the regional trial court of Pasig praying for
the payment of the following:
1.) The sum of P5,427,779.00, representing losses sustained by the insured properties, with interest thereon, as
computed under par. 29 of the policy (Annex "B") until fully paid;

401

2.) The sum of P428,842.00 per month, representing continuing losses sustained by plaintiff on account of defendants
refusal to pay the claims;
3.) The sum of P500,000.00, by way of exemplary damages;
4.) The sum of P500,000.00 by way of attorneys fees and expenses of litigation;
5.) Costs.11
Respondent filed its Answer with Special and Affirmative Defenses with Compulsory Counterclaims.12
On February 21, 1994, the lower court after trial ruled in favor of the respondent, viz:
The above schedule clearly shows that plaintiff paid only a premium of P393.00 against the peril of earthquake shock,
the same premium it paid against earthquake shock only on the two swimming pools in all the policies issued by
AHAC(AIU) (Exhibits "C", "D", "E", "F" and "G"). From this fact the Court must consequently agree with the position of
defendant that the endorsement rider (Exhibit "7-C") means that only the two swimming pools were insured against
earthquake shock.
Plaintiff correctly points out that a policy of insurance is a contract of adhesion hence, where the language used in an
insurance contract or application is such as to create ambiguity the same should be resolved against the party
responsible therefor, i.e., the insurance company which prepared the contract. To the mind of [the] Court, the language
used in the policy in litigation is clear and unambiguous hence there is no need for interpretation or construction but
only application of the provisions therein.
From the above observations the Court finds that only the two (2) swimming pools had earthquake shock coverage
and were heavily damaged by the earthquake which struck on July 16, 1990. Defendant having admitted that the
damage to the swimming pools was appraised by defendants adjuster at P386,000.00, defendant must, by virtue of
the contract of insurance, pay plaintiff said amount.
Because it is the finding of the Court as stated in the immediately preceding paragraph that defendant is liable only for
the damage caused to the two (2) swimming pools and that defendant has made known to plaintiff its willingness and
readiness to settle said liability, there is no basis for the grant of the other damages prayed for by plaintiff. As to the
counterclaims of defendant, the Court does not agree that the action filed by plaintiff is baseless and highly
speculative since such action is a lawful exercise of the plaintiffs right to come to Court in the honest belief that their
Complaint is meritorious. The prayer, therefore, of defendant for damages is likewise denied.
WHEREFORE, premises considered, defendant is ordered to pay plaintiffs the sum of THREE HUNDRED EIGHTY
SIX THOUSAND PESOS (P386,000.00) representing damage to the two (2) swimming pools, with interest at 6% per
annum from the date of the filing of the Complaint until defendants obligation to plaintiff is fully paid.
No pronouncement as to costs.13
Petitioners Motion for Reconsideration was denied. Thus, petitioner filed an appeal with the Court of Appeals based
on the following assigned errors:14
A. THE TRIAL COURT ERRED IN FINDING THAT PLAINTIFF-APPELLANT CAN ONLY RECOVER FOR THE
DAMAGE TO ITS TWO SWIMMING POOLS UNDER ITS FIRE POLICY NO. 31944, CONSIDERING ITS
PROVISIONS, THE CIRCUMSTANCES SURROUNDING THE ISSUANCE OF SAID POLICY AND THE
ACTUATIONS OF THE PARTIES SUBSEQUENT TO THE EARTHQUAKE OF JULY 16, 1990.
B. THE TRIAL COURT ERRED IN DETERMINING PLAINTIFF-APPELLANTS RIGHT TO RECOVER UNDER
DEFENDANT-APPELLEES POLICY (NO. 31944; EXH "I") BY LIMITING ITSELF TO A CONSIDERATION OF THE
SAID POLICY ISOLATED FROM THE CIRCUMSTANCES SURROUNDING ITS ISSUANCE AND THE ACTUATIONS
OF THE PARTIES AFTER THE EARTHQUAKE OF JULY 16, 1990.
C. THE TRIAL COURT ERRED IN NOT HOLDING THAT PLAINTIFF-APPELLANT IS ENTITLED TO THE DAMAGES
CLAIMED, WITH INTEREST COMPUTED AT 24% PER ANNUM ON CLAIMS ON PROCEEDS OF POLICY.
On the other hand, respondent filed a partial appeal, assailing the lower courts failure to award it attorneys fees and
damages on its compulsory counterclaim.
After review, the appellate court affirmed the decision of the trial court and ruled, thus:

402

However, after carefully perusing the documentary evidence of both parties, We are not convinced that the last two (2)
insurance contracts (Exhs. "G" and "H"), which the plaintiff-appellant had with AHAC (AIU) and upon which the subject
insurance contract with Philippine Charter Insurance Corporation is said to have been based and copied (Exh. "I"),
covered an extended earthquake shock insurance on all the insured properties.
xxx
We also find that the Court a quo was correct in not granting the plaintiff-appellants prayer for the imposition of
interest 24% on the insurance claim and 6% on loss of income allegedly amounting to P4,280,000.00. Since the
defendant-appellant has expressed its willingness to pay the damage caused on the two (2) swimming pools, as the
Court a quo and this Court correctly found it to be liable only, it then cannot be said that it was in default and therefore
liable for interest.
Coming to the defendant-appellants prayer for an attorneys fees, long-standing is the rule that the award thereof is
subject to the sound discretion of the court. Thus, if such discretion is well-exercised, it will not be disturbed on appeal
(Castro et al. v. CA, et al., G.R. No. 115838, July 18, 2002). Moreover, being the award thereof an exception rather
than a rule, it is necessary for the court to make findings of facts and law that would bring the case within the
exception and justify the grant of such award (Country Bankers Insurance Corp. v. Lianga Bay and Community MultiPurpose Coop., Inc., G.R. No. 136914, January 25, 2002). Therefore, holding that the plaintiff-appellants action is not
baseless and highly speculative, We find that the Court a quo did not err in granting the same.
WHEREFORE, in view of all the foregoing, both appeals are hereby DISMISSED and judgment of the Trial Court
hereby AFFIRMED in toto. No costs.15
Petitioner filed the present petition raising the following issues:16
A. WHETHER THE COURT OF APPEALS CORRECTLY HELD THAT UNDER RESPONDENTS INSURANCE
POLICY NO. 31944, ONLY THE TWO (2) SWIMMING POOLS, RATHER THAN ALL THE PROPERTIES COVERED
THEREUNDER, ARE INSURED AGAINST THE RISK OF EARTHQUAKE SHOCK.
B. WHETHER THE COURT OF APPEALS CORRECTLY DENIED PETITIONERS PRAYER FOR DAMAGES WITH
INTEREST THEREON AT THE RATE CLAIMED, ATTORNEYS FEES AND EXPENSES OF LITIGATION.
Petitioner contends:
First, that the policys earthquake shock endorsement clearly covers all of the properties insured and not only the
swimming pools. It used the words "any property insured by this policy," and it should be interpreted as all inclusive.
Second, the unqualified and unrestricted nature of the earthquake shock endorsement is confirmed in the body of the
insurance policy itself, which states that it is "[s]ubject to: Other Insurance Clause, Typhoon Endorsement, Earthquake
Shock Endt., Extended Coverage Endt., FEA Warranty & Annual Payment Agreement On Long Term Policies."17
Third, that the qualification referring to the two swimming pools had already been deleted in the earthquake shock
endorsement.
Fourth, it is unbelievable for respondent to claim that it only made an inadvertent omission when it deleted the said
qualification.
Fifth, that the earthquake shock endorsement rider should be given precedence over the wording of the insurance
policy, because the rider is the more deliberate expression of the agreement of the contracting parties.
Sixth, that in their previous insurance policies, limits were placed on the endorsements/warranties enumerated at the
time of issue.
Seventh, any ambiguity in the earthquake shock endorsement should be resolved in favor of petitioner and against
respondent. It was respondent which caused the ambiguity when it made the policy in issue.
Eighth, the qualification of the endorsement limiting the earthquake shock endorsement should be interpreted as a
caveat on the standard fire insurance policy, such as to remove the two swimming pools from the coverage for the risk
of fire. It should not be used to limit the respondents liability for earthquake shock to the two swimming pools only.
Ninth, there is no basis for the appellate court to hold that the additional premium was not paid under the extended
coverage. The premium for the earthquake shock coverage was already included in the premium paid for the policy.

403

Tenth, the parties contemporaneous and subsequent acts show that they intended to extend earthquake shock
coverage to all insured properties. When it secured an insurance policy from respondent, petitioner told respondent
that it wanted an exact replica of its latest insurance policy from American Home Assurance Company (AHAC-AIU),
which covered all the resorts properties for earthquake shock damage and respondent agreed. After the July 16, 1990
earthquake, respondent assured petitioner that it was covered for earthquake shock. Respondents insurance adjuster,
Bayne Adjusters and Surveyors, Inc., likewise requested petitioner to submit the necessary documents for its building
claims and other repair costs. Thus, under the doctrine of equitable estoppel, it cannot deny that the insurance policy it
issued to petitioner covered all of the properties within the resort.
Eleventh, that it is proper for it to avail of a petition for review by certiorari under Rule 45 of the Revised Rules of Court
as its remedy, and there is no need for calibration of the evidence in order to establish the facts upon which this
petition is based.
On the other hand, respondent made the following counter arguments:18
First, none of the previous policies issued by AHAC-AIU from 1983 to 1990 explicitly extended coverage against
earthquake shock to petitioners insured properties other than on the two swimming pools. Petitioner admitted that
from 1984 to 1988, only the two swimming pools were insured against earthquake shock. From 1988 until 1990, the
provisions in its policy were practically identical to its earlier policies, and there was no increase in the premium paid.
AHAC-AIU, in a letter19 by its representative Manuel C. Quijano, categorically stated that its previous policy, from
which respondents policy was copied, covered only earthquake shock for the two swimming pools.
Second, petitioners payment of additional premium in the amount of P393.00 shows that the policy only covered
earthquake shock damage on the two swimming pools. The amount was the same amount paid by petitioner for
earthquake shock coverage on the two swimming pools from 1990-1991. No additional premium was paid to warrant
coverage of the other properties in the resort.
Third, the deletion of the phrase pertaining to the limitation of the earthquake shock endorsement to the two swimming
pools in the policy schedule did not expand the earthquake shock coverage to all of petitioners properties. As per its
agreement with petitioner, respondent copied its policy from the AHAC-AIU policy provided by petitioner. Although the
first five policies contained the said qualification in their riders title, in the last two policies, this qualification in the title
was deleted. AHAC-AIU, through Mr. J. Baranda III, stated that such deletion was a mere inadvertence. This
inadvertence did not make the policy incomplete, nor did it broaden the scope of the endorsement whose descriptive
title was merely enumerated. Any ambiguity in the policy can be easily resolved by looking at the other provisions,
specially the enumeration of the items insured, where only the two swimming pools were noted as covered for
earthquake shock damage.
Fourth, in its Complaint, petitioner alleged that in its policies from 1984 through 1988, the phrase "Item 5
P393,000.00 on the two swimming pools only (against the peril of earthquake shock only)" meant that only the
swimming pools were insured for earthquake damage. The same phrase is used in toto in the policies from 1989 to
1990, the only difference being the designation of the two swimming pools as "Item 3."
Fifth, in order for the earthquake shock endorsement to be effective, premiums must be paid for all the properties
covered. In all of its seven insurance policies, petitioner only paid P393.00 as premium for coverage of the swimming
pools against earthquake shock. No other premium was paid for earthquake shock coverage on the other properties.
In addition, the use of the qualifier "ANY" instead of "ALL" to describe the property covered was done deliberately to
enable the parties to specify the properties included for earthquake coverage.
Sixth, petitioner did not inform respondent of its requirement that all of its properties must be included in the
earthquake shock coverage. Petitioners own evidence shows that it only required respondent to follow the exact
provisions of its previous policy from AHAC-AIU. Respondent complied with this requirement. Respondents only
deviation from the agreement was when it modified the provisions regarding the replacement cost endorsement. With
regard to the issue under litigation, the riders of the old policy and the policy in issue are identical.
Seventh, respondent did not do any act or give any assurance to petitioner as would estop it from maintaining that
only the two swimming pools were covered for earthquake shock. The adjusters letter notifying petitioner to present
certain documents for its building claims and repair costs was given to petitioner before the adjuster knew the full
coverage of its policy.
Petitioner anchors its claims on AHAC-AIUs inadvertent deletion of the phrase "Item 5 Only" after the descriptive
name or title of the Earthquake Shock Endorsement. However, the words of the policy reflect the parties clear
intention to limit earthquake shock coverage to the two swimming pools.

404

Before petitioner accepted the policy, it had the opportunity to read its conditions. It did not object to any deficiency nor
did it institute any action to reform the policy. The policy binds the petitioner.
Eighth, there is no basis for petitioner to claim damages, attorneys fees and litigation expenses. Since respondent
was willing and able to pay for the damage caused on the two swimming pools, it cannot be considered to be in
default, and therefore, it is not liable for interest.
We hold that the petition is devoid of merit.
In Insurance Policy No. 31944, four key items are important in the resolution of the case at bar.
First, in the designation of location of risk, only the two swimming pools were specified as included, viz:
ITEM 3 393,000.00 On the two (2) swimming pools only (against the peril of earthquake shock only)20
Second, under the breakdown for premium payments,21 it was stated that:
PREMIUM RECAPITULATION
ITEM NOS.
AMOUNT
RATES
PREMIUM
xxx
3
393,000.00
0.100%-E/S
393.0022]
Third, Policy Condition No. 6 stated:
6. This insurance does not cover any loss or damage occasioned by or through or in consequence, directly or
indirectly of any of the following occurrences, namely:-(a) Earthquake, volcanic eruption or other convulsion of nature. 23
Fourth, the rider attached to the policy, titled "Extended Coverage Endorsement (To Include the Perils of Explosion,
Aircraft, Vehicle and Smoke)," stated, viz:
ANNUAL PAYMENT AGREEMENT ON
LONG TERM POLICIES
THE INSURED UNDER THIS POLICY HAVING ESTABLISHED AGGREGATE SUMS INSURED IN EXCESS OF
FIVE MILLION PESOS, IN CONSIDERATION OF A DISCOUNT OF 5% OR 7 % OF THE NET PREMIUM x x x
POLICY HEREBY UNDERTAKES TO CONTINUE THE INSURANCE UNDER THE ABOVE NAMED x x x AND TO
PAY THE PREMIUM.
Earthquake Endorsement
In consideration of the payment by the Insured to the Company of the sum of P. . . . . . . . . . . . . . . . . additional
premium the Company agrees, notwithstanding what is stated in the printed conditions of this Policy to the contrary,
that this insurance covers loss or damage (including loss or damage by fire) to any of the property insured by this
Policy occasioned by or through or in consequence of Earthquake.

405

Provided always that all the conditions of this Policy shall apply (except in so far as they may be hereby expressly
varied) and that any reference therein to loss or damage by fire should be deemed to apply also to loss or damage
occasioned by or through or in consequence of Earthquake.24
Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of the earthquake shock
coverage. Thus, the policy extended earthquake shock coverage to all of the insured properties.
It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with each
other.25 All its parts are reflective of the true intent of the parties. The policy cannot be construed piecemeal. Certain
stipulations cannot be segregated and then made to control; neither do particular words or phrases necessarily
determine its character. Petitioner cannot focus on the earthquake shock endorsement to the exclusion of the other
provisions. All the provisions and riders, taken and interpreted together, indubitably show the intention of the parties to
extend earthquake shock coverage to the two swimming pools only.
A careful examination of the premium recapitulation will show that it is the clear intent of the parties to extend
earthquake shock coverage only to the two swimming pools. Section 2(1) of the Insurance Code defines a contract of
insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event. Thus, an insurance contract exists where the following elements
concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons
bearing a similar risk; and
5. In consideration of the insurer's promise, the insured pays a premium.26 (Emphasis ours)
An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified
peril.27 In fire, casualty, and marine insurance, the premium payable becomes a debt as soon as the risk attaches.28
In the subject policy, no premium payments were made with regard to earthquake shock coverage, except on the two
swimming pools. There is no mention of any premium payable for the other resort properties with regard to earthquake
shock. This is consistent with the history of petitioners previous insurance policies from AHAC-AIU. As borne out by
petitioners witnesses:
CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN, November 25, 1991
pp. 12-13
Q. Now Mr. Mantohac, will it be correct to state also that insofar as your insurance policy during the period from March
4, 1984 to March 4, 1985 the coverage on earthquake shock was limited to the two swimming pools only?
A. Yes, sir. It is limited to the two swimming pools, specifically shown in the warranty, there is a provision here that it
was only for item 5.
Q. More specifically Item 5 states the amount of P393,000.00 corresponding to the two swimming pools only?
A. Yes, sir.
CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN, November 25, 1991
pp. 23-26
Q. For the period from March 14, 1988 up to March 14, 1989, did you personally arrange for the procurement of this
policy?
A. Yes, sir.
Q. Did you also do this through your insurance agency?
A. If you are referring to Forte Insurance Agency, yes.

406

Q. Is Forte Insurance Agency a department or division of your company?

A. No, sir. They are our insurance agency.
Q. And they are independent of your company insofar as operations are concerned?
A. Yes, sir, they are separate entity.
Q. But insofar as the procurement of the insurance policy is concerned they are of course subject to your instruction,
is that not correct?
A. Yes, sir. The final action is still with us although they can recommend what insurance to take.
Q. In the procurement of the insurance police (sic) from March 14, 1988 to March 14, 1989, did you give written
instruction to Forte Insurance Agency advising it that the earthquake shock coverage must extend to all properties of
Agoo Playa Resort in La Union?
A. No, sir. We did not make any written instruction, although we made an oral instruction to that effect of extending the
coverage on (sic) the other properties of the company.
Q. And that instruction, according to you, was very important because in April 1987 there was an earthquake tremor in
La Union?
A. Yes, sir.
Q. And you wanted to protect all your properties against similar tremors in the [future], is that correct?
A. Yes, sir.
Q. Now, after this policy was delivered to you did you bother to check the provisions with respect to your instructions
that all properties must be covered again by earthquake shock endorsement?
A. Are you referring to the insurance policy issued by American Home Assurance Company marked Exhibit "G"?
Atty. Mejia: Yes.
Witness:
A. I examined the policy and seeing that the warranty on the earthquake shock endorsement has no more limitation
referring to the two swimming pools only, I was contented already that the previous limitation pertaining to the two
swimming pools was already removed.
Petitioner also cited and relies on the attachment of the phrase "Subject to: Other Insurance Clause, Typhoon
Endorsement, Earthquake Shock Endorsement, Extended Coverage Endorsement, FEA Warranty & Annual Payment
Agreement on Long Term Policies"29 to the insurance policy as proof of the intent of the parties to extend the
coverage for earthquake shock. However, this phrase is merely an enumeration of the descriptive titles of the riders,
clauses, warranties or endorsements to which the policy is subject, as required under Section 50, paragraph 2 of the
Insurance Code.
We also hold that no significance can be placed on the deletion of the qualification limiting the coverage to the two
swimming pools. The earthquake shock endorsement cannot stand alone. As explained by the testimony of Juan
Baranda III, underwriter for AHAC-AIU:
DIRECT EXAMINATION OF JUAN BARANDA III30
TSN, August 11, 1992
pp. 9-12
Atty. Mejia:
We respectfully manifest that the same exhibits C to H inclusive have been previously marked by counsel for
defendant as Exhibit[s] 1-6 inclusive. Did you have occasion to review of (sic) these six (6) policies issued by your
company [in favor] of Agoo Playa Resort?
WITNESS:

407

Yes[,] I remember having gone over these policies at one point of time, sir.
Q. Now, wach (sic) of these six (6) policies marked in evidence as Exhibits C to H respectively carries an earthquake
shock endorsement[?] My question to you is, on the basis on (sic) the wordings indicated in Exhibits C to H
respectively what was the extent of the coverage [against] the peril of earthquake shock as provided for in each of the
six (6) policies?
xxx
WITNESS:
The extent of the coverage is only up to the two (2) swimming pools, sir.
Q. Is that for each of the six (6) policies namely: Exhibits C, D, E, F, G and H?
A. Yes, sir.
ATTY. MEJIA:
What is your basis for stating that the coverage against earthquake shock as provided for in each of the six (6) policies
extend to the two (2) swimming pools only?
WITNESS:
Because it says here in the policies, in the enumeration "Earthquake Shock Endorsement, in the Clauses and
Warranties: Item 5 only (Earthquake Shock Endorsement)," sir.
ATTY. MEJIA:
Witness referring to Exhibit C-1, your Honor.
WITNESS:
We do not normally cover earthquake shock endorsement on stand alone basis. For swimming pools we do cover
earthquake shock. For building we covered it for full earthquake coverage which includes earthquake shock
COURT:
As far as earthquake shock endorsement you do not have a specific coverage for other things other than swimming
pool? You are covering building? They are covered by a general insurance?
WITNESS:
Earthquake shock coverage could not stand alone. If we are covering building or another we can issue earthquake
shock solely but that the moment I see this, the thing that comes to my mind is either insuring a swimming pool,
foundations, they are normally affected by earthquake but not by fire, sir.
DIRECT EXAMINATION OF JUAN BARANDA III
TSN, August 11, 1992
pp. 23-25
Q. Plaintiffs witness, Mr. Mantohac testified and he alleged that only Exhibits C, D, E and F inclusive [remained] its
coverage against earthquake shock to two (2) swimming pools only but that Exhibits G and H respectively entend the
coverage against earthquake shock to all the properties indicated in the respective schedules attached to said
policies, what can you say about that testimony of plaintiffs witness?
WITNESS:
As I have mentioned earlier, earthquake shock cannot stand alone without the other half of it. I assure you that this
one covers the two swimming pools with respect to earthquake shock endorsement. Based on it, if we are going to
look at the premium there has been no change with respect to the rates. Everytime (sic) there is a renewal if the
intention of the insurer was to include the earthquake shock, I think there is a substantial increase in the premium. We

408

are not only going to consider the two (2) swimming pools of the other as stated in the policy. As I see, there is no
increase in the amount of the premium. I must say that the coverage was not broaden (sic) to include the other items.
COURT:
They are the same, the premium rates?
WITNESS:
They are the same in the sence (sic), in the amount of the coverage. If you are going to do some computation based
on the rates you will arrive at the same premiums, your Honor.
CROSS-EXAMINATION OF JUAN BARANDA III
TSN, September 7, 1992
pp. 4-6
ATTY. ANDRES:
Would you as a matter of practice [insure] swimming pools for fire insurance?
WITNESS:
No, we dont, sir.
Q. That is why the phrase "earthquake shock to the two (2) swimming pools only" was placed, is it not?
A. Yes, sir.
ATTY. ANDRES:
Will you not also agree with me that these exhibits, Exhibits G and H which you have pointed to during your directexamination, the phrase "Item no. 5 only" meaning to (sic) the two (2) swimming pools was deleted from the policies
issued by AIU, is it not?
xxx
ATTY. ANDRES:
As an insurance executive will you not attach any significance to the deletion of the qualifying phrase for the policies?
WITNESS:
My answer to that would be, the deletion of that particular phrase is inadvertent. Being a company underwriter, we do
not cover. . it was inadvertent because of the previous policies that we have issued with no specific attachments,
premium rates and so on. It was inadvertent, sir.
The Court also rejects petitioners contention that respondents contemporaneous and subsequent acts to the
issuance of the insurance policy falsely gave the petitioner assurance that the coverage of the earthquake shock
endorsement included all its properties in the resort. Respondent only insured the properties as intended by the
petitioner. Petitioners own witness testified to this agreement, viz:
CROSS EXAMINATION OF LEOPOLDO MANTOHAC
TSN, January 14, 1992
pp. 4-5
Q. Just to be clear about this particular answer of yours Mr. Witness, what exactly did you tell Atty. Omlas (sic) to copy
from Exhibit "H" for purposes of procuring the policy from Philippine Charter Insurance Corporation?
A. I told him that the insurance that they will have to get will have the same provisions as this American Home
Insurance Policy No. 206-4568061-9.
Q. You are referring to Exhibit "H" of course?
A. Yes, sir, to Exhibit "H".

409

Q. So, all the provisions here will be the same except that of the premium rates?
A. Yes, sir. He assured me that with regards to the insurance premium rates that they will be charging will be limited to
this one. I (sic) can even be lesser.
CROSS EXAMINATION OF LEOPOLDO MANTOHAC
TSN, January 14, 1992
pp. 12-14
Atty. Mejia:
Q. Will it be correct to state[,] Mr. Witness, that you made a comparison of the provisions and scope of coverage of
Exhibits "I" and "H" sometime in the third week of March, 1990 or thereabout?
A. Yes, sir, about that time.
Q. And at that time did you notice any discrepancy or difference between the policy wordings as well as scope of
coverage of Exhibits "I" and "H" respectively?
A. No, sir, I did not discover any difference inasmuch (sic) as I was assured already that the policy wordings and rates
were copied from the insurance policy I sent them but it was only when this case erupted that we discovered some
discrepancies.
Q. With respect to the items declared for insurance coverage did you notice any discrepancy at any time between
those indicated in Exhibit "I" and those indicated in Exhibit "H" respectively?
A. With regard to the wordings I did not notice any difference because it was exactly the same P393,000.00 on the two
(2) swimming pools only against the peril of earthquake shock which I understood before that this provision will have
to be placed here because this particular provision under the peril of earthquake shock only is requested because this
is an insurance policy and therefore cannot be insured against fire, so this has to be placed.
The verbal assurances allegedly given by respondents representative Atty. Umlas were not proved. Atty. Umlas
categorically denied having given such assurances.
Finally, petitioner puts much stress on the letter of respondents independent claims adjuster, Bayne Adjusters and
Surveyors, Inc. But as testified to by the representative of Bayne Adjusters and Surveyors, Inc., respondent never
meant to lead petitioner to believe that the endorsement for earthquake shock covered properties other than the two
swimming pools, viz:
DIRECT EXAMINATION OF ALBERTO DE LEON (Bayne Adjusters and Surveyors, Inc.)
TSN, January 26, 1993
pp. 22-26
Q. Do you recall the circumstances that led to your discussion regarding the extent of coverage of the policy issued by
Philippine Charter Insurance Corporation?
A. I remember that when I returned to the office after the inspection, I got a photocopy of the insurance coverage
policy and it was indicated under Item 3 specifically that the coverage is only for earthquake shock. Then, I remember
I had a talk with Atty. Umlas (sic), and I relayed to him what I had found out in the policy and he confirmed to me
indeed only Item 3 which were the two swimming pools have coverage for earthquake shock.
xxx
Q. Now, may we know from you Engr. de Leon your basis, if any, for stating that except for the swimming pools all
affected items have no coverage for earthquake shock?
xxx
A. I based my statement on my findings, because upon my examination of the policy I found out that under Item 3 it
was specific on the wordings that on the two swimming pools only, then enclosed in parenthesis (against the peril[s] of
earthquake shock only), and secondly, when I examined the summary of premium payment only Item 3 which refers to
the swimming pools have a computation for premium payment for earthquake shock and all the other items have no
computation for payment of premiums.

410

In sum, there is no ambiguity in the terms of the contract and its riders. Petitioner cannot rely on the general rule that
insurance contracts are contracts of adhesion which should be liberally construed in favor of the insured and strictly
against the insurer company which usually prepares it.31 A contract of adhesion is one wherein a party, usually a
corporation, prepares the stipulations in the contract, while the other party merely affixes his signature or his
"adhesion" thereto. Through the years, the courts have held that in these type of contracts, the parties do not bargain
on equal footing, the weaker party's participation being reduced to the alternative to take it or leave it. Thus, these
contracts are viewed as traps for the weaker party whom the courts of justice must protect.32 Consequently, any
ambiguity therein is resolved against the insurer, or construed liberally in favor of the insured.33
The case law will show that this Court will only rule out blind adherence to terms where facts and circumstances will
show that they are basically one-sided.34 Thus, we have called on lower courts to remain careful in scrutinizing the
factual circumstances behind each case to determine the efficacy of the claims of contending parties. In Development
Bank of the Philippines v. National Merchandising Corporation, et al.,35 the parties, who were acute businessmen of
experience, were presumed to have assented to the assailed documents with full knowledge.
We cannot apply the general rule on contracts of adhesion to the case at bar. Petitioner cannot claim it did not know
the provisions of the policy. From the inception of the policy, petitioner had required the respondent to copy verbatim
the provisions and terms of its latest insurance policy from AHAC-AIU. The testimony of Mr. Leopoldo Mantohac, a
direct participant in securing the insurance policy of petitioner, is reflective of petitioners knowledge, viz:
DIRECT EXAMINATION OF LEOPOLDO MANTOHAC36
TSN, September 23, 1991
pp. 20-21
Q. Did you indicate to Atty. Omlas (sic) what kind of policy you would want for those facilities in Agoo Playa?
A. Yes, sir. I told him that I will agree to that renewal of this policy under Philippine Charter Insurance Corporation as
long as it will follow the same or exact provisions of the previous insurance policy we had with American Home
Assurance Corporation.
Q. Did you take any step Mr. Witness to ensure that the provisions which you wanted in the American Home Insurance
policy are to be incorporated in the PCIC policy?
A. Yes, sir.
Q. What steps did you take?
A. When I examined the policy of the Philippine Charter Insurance Corporation I specifically told him that the policy
and wordings shall be copied from the AIU Policy No. 206-4568061-9.
Respondent, in compliance with the condition set by the petitioner, copied AIU Policy No. 206-4568061-9 in drafting its
Insurance Policy No. 31944. It is true that there was variance in some terms, specifically in the replacement cost
endorsement, but the principal provisions of the policy remained essentially similar to AHAC-AIUs policy.
Consequently, we cannot apply the "fine print" or "contract of adhesion" rule in this case as the parties intent to limit
the coverage of the policy to the two swimming pools only is not ambiguous.37
IN VIEW WHEREOF, the judgment of the Court of Appeals is affirmed. The petition for certiorari is dismissed. No
costs.
SO ORDERED.

411

G.R. No. L-29723

July 14, 1988

ANTONIO ZARAGOZA, plaintiff-appellee,

vs.
MARIA ANGELA FIDELINO and/or "JOHN DOE," defendants MABINI INSURANCE & FIDELITY CO., INC., suretyappellant.

NARVASA, J.:
Involved in this appeal is no more than the procedure to hold a surety hable upon a counter-bond posted by it for the
release of an automobile seized from a defendant in a replevin action under a writ issued by the Trial Court at the
plaintiffs instance.
The suit for the replevy of the car was brought by Antonio Zaragoza in the Court of First Instance at Quezon City 1
against Ma. Angela Fidelino and/or John Doe. His complaint alleged that the car had been sold to Fidelino but the
latter had failed to pay the price in the manner stipulated in their agreement. The car was taken from Fidelino's
possession by the sheriff on the strength of a writ of delivery 2 but was promptly returned to her on orders of the Court
when a surety bond for the car's releases 3 was posted in her behalf "by Mabini Insurance & Fidelity Co., Inc.
The action resulted in a judgment 4 for the plaintiff the dispositive part of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter to
pay to the plaintiff the sum of P19,417.46, representing the balance of the purchase price of the car sold including
interest thereon, collection charges, notarial fees and sheriffs fees and expenses in conn with the recovery of the
vehicle sold; to pay liquidated damage in the amount of P6,471.84 equivalent to 33 1/3 % of the balance outstanding
and to pay the costs of this suit.
Within the reglementary period for taking an appeal, Zaragoza moved for the amendment of the decision so as to
include the surety, Mabini Insurance & Fidelity Co., Inc., as a party solidarily liable with the defendant for the payment
of the sums awarded in the judgment. 5 Despite having been duly furnished with copies of the motion and the notice
of hearing, neither Fidelino nor the surety company filed any opposition to the motion, nor did either of them appear at
the hearing thereof. 6 The Trial Court deemed the motion meritorious and granted it. Its Order of April 16, 1968 7
decreed the following:
WHEREFORE, the motion is hereby granted, and the dispositive portion of the decision in this case is hereby
amended to read as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering defendant
Maria Angela Fidelino and her surety, the Mabini Insurance & Fidelity Co., Inc., to pay jointly and severally to the
plaintiff the sum of P19,417.46, representing the balance of the purchase price of the car sold, including interests
thereon, collection charges, notarial fees and sheriffs fees and expenses in connection with the recovery of the vehicle
sold, liquidated damages in the amount of P6,471.84 equivalent to 33 1/3% of the balance outstanding and to pay the
costs of this suit.
No motion for reconsideration was filed or appeal taken by the defendant Fidelino as regards either the original or the
amended decision. It was the surety which presented a motion for reconsideration, and upon its denial, appealed to
this Court. 8 It ascribes to the Court a quo, as might be expected, reversible error in amending the judgment in the
manner just described. It argues that the Lower Court never acquired jurisdiction over it since no summons was ever
served on it, its filing of a counter-bond not being equivalent to voluntary submission to the Court's jurisdiction;
Zaragoza failed to make a proper application with notice before finality of the decision as provided by Section 20, Rule
57 of the Rules of Court; and when the order amending the judgment was promulgated, the judgment had already
become final, the running of the period of appeal not having been suspended by Zaragoza's motion to amend
decision, 9 and so, the Court no longer had authority to amend it on April 16, 1968.
The appellant surety deposits quite correctly, that the situation at bar is governed by Section 10, Rule 60, in relation to
Section 20, Rule 57, of the Rules of Court. Section 10, Rule 60, provides as follows:
SEC. 10. Judgment to include recovery against sureties. The amount, if any, to be awarded to either party upon any
bond filed by the other in accordance with the provisions of this rule, shag be claimed, ascertained, and granted under
the same procedure as prescribed in section 20 of Rule 57.
And Section 20, Rule 57 reads as follows:

412

SEC. 20. Claim for damages on account of illegal attachment. If the judgment on the action be in favor of the party
against whom attachment was issued, he may recover, upon the bond given or deposit made by the attaching creditor,
any damages resulting from the attachment. Such damages may be awarded only upon application and after proper
hearing, and shall be included in the final judgment. The application must be filed before the trial or before appeal is
perfected or before the judgment becomes executory, with due notice to the attaching creditor and his surety or
sureties, setting forth the facts showing his right to damages and the amount thereof
xxx

xxx

xxx 10

It would seem at first blush that Section 20, Rule 57 above quoted is not relevant. Its title and first sentence speak [1]
of an illegal attachment, and [2] of a judgment "in favor of the party against whom (said illegal) attachment was
issued." In the case at bar, the writ of delivery was not illegal; and the judgment was for, not against, the party in
whose favor the writ of delivery was issued. In other words, it would appear that for Section 20, Rule 57 to apply to the
instant action," 11 the judgment should have been "in favor of" defendant Fidelino (the party "against whom" the writ of
delivery was issued). This however was not the case. The judgment was in fact against, NOT in favor of Fidelino.
It thus sums indeed that the first sentence of Section 20 precludes recovery of damages by a party against whom an
attachment is issued and enforced if the judgment be adverse to him. This is not however correct. Although a party be
adjudged liable to another, ff it be established that the attachment issued at the latter's instance was wrongful and the
former had suffered injury thereby, recovery for damages may be had by the party thus prejudiced by the wrongful
attachment, even if the judgment be adverse to him. Slight reflection will show the validity of this proposition. For it is
entirely possible for a plaintiff to have a meritorious cause of action against a defendant but have no proper ground for
a preliminary attachment. In such a case, if the plaintiff nevertheless applies for and somehow succeeds in obtaining
an attachment, but is subsequently declared by final judgment as not entitled thereto, and the defendant shows that
he has suffered damages by reason of the attachment, there can be no gainsaying that indemnification is justly due
the latter. So has this Court already had occasion to rule, in Baron v. David, 51 Phil. 1, and Javellana v. D.O. Plaza
Enterprises, 32 SCRA 26].
Be all this as it may, the second and third sentences of Section 20, Rule 57, in relation to Section 10, Rule 60, are
unquestionably relevant to the matter of the surety's liability upon a counter-bond for the discharge of a writ of delivery
in a replevin suit. 12 Under Section 10, Rule 60 (which makes reference "to either party upon any bond filed by the
other in accordance with the provisions of this rule" [60]), the surety's liability for damages upon its counter-bond
should "W claimed, ascertained, and granted under the same procedure as prescribed in section 20 of Rule 57; 13
and andd section 20 pertinently decrees that '(s)uch damages may be awarded only upon application and after proper
hearing, and shall be included in the final judgment .. (which means that the (application must be filed before the trial
or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor and
his surety or sureties, setting forth the facts showing his right to damages and the amount thereof." Stated otherwise,
to hold a surety on a counter-bond liable, what is entailed is (1) the filing of an application therefor with the Court
having jurisdiction of the action; (2) the presentation thereof before the judgment becomes executory (or before the
trial or before appeal is perfected); (3) the statement in said application of the facts showing the applicant's right to
damages and the amount thereof, (4) the giving of due notice of the application to the attaching creditor and his surety
or sureties; and (5) the holding of a proper hearing at which the attaching creditor and the sureties may be heard on
the application. These requisites apply not only in cases of seizure or delivery under Rule 60, but also in cases of
preliminary injunctions under Rule 58, 14 and receiverships under Rule 59. 15
It should be stressed, however, that enforcement of a surety's liability on a counter-bond given for the release of
property seized under a writ of preliminary attachment is governed, not by said Section 20, but by another specifically
and specially dealing with the matter; Section 17 of Rule 57, which reads as follows:
SEC. 17. When execution returned unsatiated, recovery had upon bond. If the execution be returned unsatisfied in
whole or in part, the surety or sureties on any counter-bond given pursuant to the provisions of this rule to secure the
payment of the judgment shall become charged on such counter-bond, and bound to pay to the judgment creditor
upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties
after notice and summary hearing in the same action."
The record shows that the appellant surety company bound itself "jointly and severally" with the defendant Fidelino "in
the sum of PESOS FORTY EIGHT THOUSAND ONLY (P48,000.00), Philippine Currency, which is double the value of
the property stated in the affidavit of the plaintiff, for the delivery thereof if such delivery is adjudged, or for the
payment of such sum to him as may be recovered against the defendant and the costs of the action. 16
This being so, the appellant surety's liability attached upon the promulgation of the verdict against Fidelino. All that
was necessary to enforce the judgment against it was, as aforestated, an application therefor with the Court, with due
notice to the surety, and a proper hearing, i.e., that it be formally notified that it was in truth being made responsible for

413

its co-principal's adjudicated prestation (in this case, the payment of the balance of the purchase price of the
automobile which could no longer be found and therefore could not be ordered returned), 17 and an opportunity, at a
hearing called for the purpose, to show to the Court why it should not be adjudged so responsible. A separate action
was not necessary; it was in fact proscribed. 18 And again, the record shows substantial compliance with these basic
requirements, obviously imposed in deference to due process.
Appellant surety undoubtedly received copy of Zaragoza's Motion to Amend Decision. 19 That motion made clear its
purposethat the decision "be amended, or an appropriate order be issued, to include .. (the surety) as a party jointly
and severally liable with the defendant to the extent of the sums awarded in the decision to be paid to plaintiff'-as well
as the basis thereof-the counter-bond filed by it by the explicit terms of which it bound itself "jointly and severally (with
the defendant) .. for the payment of such sum to him (plaintiff) as may be recovered against the defendant and the
cost of the action." The motion contained, at the foot thereof, a "notice that on Saturday, March 23, 1968, at 8:30 a.m.,
or as soon thereafter as the matter may be heard, the .. (plaintiffs counsel would) submit the foregoing motion for the
consideration of the Court." And likewise indubitable is the fact that, as the Court a quo has observed, "neither ..
Fidelinos counsel nor the surety company filed any opposition to said motion, nor did they appear in the hearing of the
motion on March 23, 1968 .. (for which reason) the motion was deemed submitted for resolution." 20 The surety's
omission to appear at the hearing despite notice of course constituted a waiver of the right to be heard on the matter.
The surety's theory that never having been served with summons, it never came under the Lower Court's jurisdiction,
is untenable. The terms of the counter-bond voluntarily filed by it in defendant's behalf leave no doubt of its assent to
be bound by the Court's adjudgment of the defendant's liability, i.e., its acceptance of the Court's jurisdiction. For in
that counterbond, it implicitly prayed for affirmative relief; the release of the seized car, in consideration of which it
explicitly bound itself solidarily with said defendant to answer for the delivery of the car subject of the action "if such
delivery is adjudged," i.e., commanded by the Court's judgment, or "for the payment of such sum as may be recovered
against the defendant and the costs of the action," the reference to a possible future judgment against the defendant,
and necessarily against itself, being certain and unmistakable. The filing of that bond was clearly an act of voluntary
submission to the Court's authority, which is one of the modes for the acquisition of jurisdiction over a party. 21
The same theory as that espoused by appellant surety in this case was, in substance, passed upon and declared to
be without merit in a 1962 decision of this Court, Dee v. Masloff. 22 There, a surety on a counter-bond given to release
property from receivership, also sought to avoid liability by asserting that it was not a party to the case, had never
been made a party, and had not been notified of the trial. The Court overruled the contention, and upheld the propriety
of the amendment of the judgment which ordered the appellant surety company to pay to the extent of its bond and
jointly and severally with defendant the judgment obligation. The Court ruled that since such "amended judgment ..
(had been) rendered after the appellant surety company as party jointly and severally liable with the defendant .. for
the damages already awarded to the appellees, to which the appellant surety company filed its "Opposition" and
"Rejoinder" to the "Reply to Opposition filed by the appellees, without putting in issue the reasonableness of the
amount awarded for damages but confining itself to the defense in avoidance of liability on its bond that it was not a
party to the case and never made a party therein and was not notified of the trial of the case, and that the appellees
were guilty of laches, the requirement of hearing was fully satisfied or complied with; .. (in any case,) appellant surety
company never prayed for an opportunity to present evidence in its behalf."
The appellant surety's last argument that by the time the Court amended its decision, the decision had already
become final, and therefore unalterable, is also untenable. The motion for amendment of the decision was
unquestionably in the nature of a motion for reconsideration under Section 1 (c), Rule 37 of the Rules of Court which,
having been filed within "the period for perfecting an appeal," had the effect of interrupting said period of appeal. 23
WHEREFORE, judgment is hereby rendered AFFIRMING in toto the Decision of the Court a quo dated February 12,
1968, as amended by the Order of April 16, 1968. Costs against the appellant surety.

414

G.R. No. 85296 May 14, 1990

ZENITH INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS and LAWRENCE FERNANDEZ, respondents.
Vicente R. Layawen for petitioner.
Lawrence L. Fernandez & Associates for private respondent.

MEDIALDEA, J.:
Assailed in this petition is the decision of the Court of Appeals in CA-G.R. C.V. No. 13498 entitled, "Lawrence L.
Fernandez, plaintiff-appellee v. Zenith Insurance Corp., defendant-appellant" which affirmed in toto the decision of the
Regional Trial Court of Cebu, Branch XX in Civil Case No. CEB-1215 and the denial of petitioner's Motion for
Reconsideration.
The antecedent facts are as follows:
On January 25, 1983, private respondent Lawrence Fernandez insured his car for "own damage" under private car
Policy No. 50459 with petitioner Zenith Insurance Corporation. On July 6, 1983, the car figured in an accident and
suffered actual damages in the amount of P3,640.00. After allegedly being given a run around by Zenith for two (2)
months, Fernandez filed a complaint with the Regional Trial Court of Cebu for sum of money and damages resulting
from the refusal of Zenith to pay the amount claimed. The complaint was docketed as Civil Case No. CEB-1215. Aside
from actual damages and interests, Fernandez also prayed for moral damages in the amount of P10,000.00,
exemplary damages of P5,000.00, attorney's fees of P3,000.00 and litigation expenses of P3,000.00.
On September 28, 1983, Zenith filed an answer alleging that it offered to pay the claim of Fernandez pursuant to the
terms and conditions of the contract which, the private respondent rejected. After the issues had been joined, the pretrial was scheduled on October 17, 1983 but the same was moved to November 4, 1983 upon petitioner's motion,
allegedly to explore ways to settle the case although at an amount lower than private respondent's claim. On
November 14, 1983, the trial court terminated the pre-trial. Subsequently, Fernandez presented his evidence.
Petitioner Zenith, however, failed to present its evidence in view of its failure to appear in court, without justifiable
reason, on the day scheduled for the purpose. The trial court issued an order on August 23, 1984 submitting the case
for decision without Zenith's evidence (pp. 10-11, Rollo). Petitioner filed a petition for certiorari with the Court of
Appeals assailing the order of the trial court submitting the case for decision without petitioner's evidence. The petition
was docketed as C.A.-G.R. No. 04644. However, the petition was denied due course on April 29, 1986 (p. 56, Rollo).
On June 4, 1986, a decision was rendered by the trial court in favor of private respondent Fernandez. The dispositive
portion of the trial court's decision provides:
WHEREFORE, defendant is hereby ordered to pay to the plaintiff:
1.
The amount of P3,640.00 representing the damage incurred plus interest at the rate of twice the prevailing
interest rates;
2.

The amount of P20,000.00 by way of moral damages;

3.

The amount of P20,000.00 by way of exemplary damages;

4.

The amount of P5,000.00 as attorney's fees;

5.

The amount of P3,000.00 as litigation expenses; and

6.

Costs. (p. 9, Rollo)

Upon motion of Fernandez and before the expiration of the period to appeal, the trial court, on June 20, 1986, ordered
the execution of the decision pending appeal. The order was assailed by petitioner in a petition for certiorari with the
Court of Appeals on October 23, 1986 in C.A. G.R. No. 10420 but which petition was also dismissed on December 24,
1986 (p. 69, Rollo).

415

On June 10, 1986, petitioner filed a notice of appeal before the trial court. The notice of appeal was granted in the
same order granting private respondent's motion for execution pending appeal. The appeal to respondent court
assigned the following errors:
I.

The lower court erred in denying defendant appellant to adduce evidence in its behalf.

II.

The lower court erred in ordering Zenith Insurance Corporation to pay the amount of P3,640.00 in its decision.

III.
The lower court erred in awarding moral damages, attorneys fees and exemplary damages, the worst is that,
the court awarded damages more than what are prayed for in the complaint. (p. 12, Rollo)
On August 17, 1988, the Court of Appeals rendered its decision affirming in toto the decision of the trial court. It also
ruled that the matter of the trial court's denial of Fernandez's right to adduce evidence is a closed matter in view of its
(CA) ruling in AC-G.R. 04644 wherein Zenith's petition questioning the trial court's order submitting the case for
decision without Zenith's evidence, was dismissed.
The Motion for Reconsideration of the decision of the Court of Appeals dated August 17, 1988 was denied on
September 29, 1988, for lack of merit. Hence, the instant petition was filed by Zenith on October 18, 1988 on the
allegation that respondent Court of Appeals' decision and resolution ran counter to applicable decisions of this Court
and that they were rendered without or in excess of jurisdiction. The issues raised by petitioners in this petition are:
a)
The legal basis of respondent Court of Appeals in awarding moral damages, exemplary damages and
attomey's fees in an amount more than that prayed for in the complaint.
b)
The award of actual damages of P3,460.00 instead of only P1,927.50 which was arrived at after deducting
P250.00 and P274.00 as deductible franchise and 20% depreciation on parts as agreed upon in the contract of
insurance.
Petitioner contends that while the complaint of private respondent prayed for P10,000.00 moral damages, the lower
court awarded twice the amount, or P20,000.00 without factual or legal basis; while private respondent prayed for
P5,000.00 exemplary damages, the trial court awarded P20,000.00; and while private respondent prayed for
P3,000.00 attorney's fees, the trial court awarded P5,000.00.
The propriety of the award of moral damages, exemplary damages and attorney's fees is the main issue raised herein
by petitioner.
The award of damages in case of unreasonable delay in the payment of insurance claims is governed by the
Philippine Insurance Code, which provides:
Sec. 244.
In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty
of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of
the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be
adjudged to pay damages which shall consist of attomey's fees and other expenses incurred by the insured person by
reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the
Monetary Board of the amount of the claim due the insured, from the date following the time prescribed in section two
hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided,
That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie
evidence of unreasonable delay in payment.
It is clear that under the Insurance Code, in case of unreasonable delay in the payment of the proceeds of an
insurance policy, the damages that may be awarded are: 1) attorney's fees; 2) other expenses incurred by the insured
person by reason of such unreasonable denial or withholding of payment; 3) interest at twice the ceiling prescribed by
the Monetary Board of the amount of the claim due the injured; and 4) the amount of the claim.
As regards the award of moral and exemplary damages, the rules under the Civil Code of the Philippines shall govern.
"The purpose of moral damages is essentially indemnity or reparation, not punishment or correction. Moral damages
are emphatically not intended to enrich a complainant at the expense of a defendant, they are awarded only to enable
the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he has
undergone by reason of the defendant's culpable action." (J. Cezar S. Sangco, Philippine Law on Torts and Damages,
Revised Edition, p. 539) (See also R and B Surety & Insurance Co., Inc. v. IAC, G.R. No. 64515, June 22, 1984; 129
SCRA 745). While it is true that no proof of pecuniary loss is necessary in order that moral damages may be
adjudicated, the assessment of which is left to the discretion of the court according to the circumstances of each case
(Art. 2216, New Civil Code), it is equally true that in awarding moral damages in case of breach of contract, there must

416

be a showing that the breach was wanton and deliberately injurious or the one responsible acted fraudently or in bad
faith (Perez v. Court of Appeals, G.R. No. L-20238, January 30,1965; 13 SCRA 137; Solis v. Salvador, G.R. No. L17022, August 14, 1965; 14 SCRA 887). In the instant case, there was a finding that private respondent was given a
"run-around" for two months, which is the basis for the award of the damages granted under the Insurance Code for
unreasonable delay in the payment of the claim. However, the act of petitioner of delaying payment for two months
cannot be considered as so wanton or malevolent to justify an award of P20,000.00 as moral damages, taking into
consideration also the fact that the actual damage on the car was only P3,460. In the pre-trial of the case, it was
shown that there was no total disclaimer by respondent. The reason for petitioner's failure to indemnify private
respondent within the two-month period was that the parties could not come to an agreement as regards the amount
of the actual damage on the car. The amount of P10,000.00 prayed for by private respondent as moral damages is
equitable.
On the other hand, exemplary or corrective damages are imposed by way of example or correction for the public good
(Art. 2229, New Civil Code of the Philippines). In the case of Noda v. Cruz-Arnaldo, G.R. No. 57322, June 22,1987;
151 SCRA 227, exemplary damages were not awarded as the insurance company had not acted in wanton,
oppressive or malevolent manner. The same is true in the case at bar.
The amount of P5,000.00 awarded as attomey's fees is justified under the circumstances of this case considering that
there were other petitions filed and defended by private respondent in connection with this case.
As regards the actual damages incurred by private respondent, the amount of P3,640.00 had been established before
the trial court and affirmed by the appellate court. Respondent appellate court correctly ruled that the deductions of
P250.00 and P274.00 as deductible franchise and 20% depreciation on parts, respectively claimed by petitioners as
agreed upon in the contract, had no basis. Respondent court ruled:
Under its second assigned error, defendant-appellant puts forward two arguments, both of which are entirely without
merit. It is contented that the amount recoverable under the insurance policy defendant-appellant issued over the car
of plaintiff-appellee is subject to deductible franchise, and . . . .
The policy (Exhibit G, pp. 4-9, Record), does not mntion any deductible franchise, . . . (p. 13, Rollo)
Therefore, the award of moral damages is reduced to P10,000.00 and the award of exemplary damages is hereby
deleted. The awards due to private respondent Fernandez are as follows:
1)
P3,640.00 as actual claim plus interest of twice the ceiling prescribed by the Monetary Board computed from
the time of submission of proof of loss;
2)

P10,000.00 as moral damages;

3)

P5,000.00 as attorney's fees;

4)

P3,000.00 as litigation expenses; and

5)

Costs.

ACCORDINGLY, the appealed decision is MODIFIED as above stated.

SO ORDERED.

417

G.R. No. L-12736

July 31, 1961

FRANCISCO L. LAZATIN, plaintiff-appellant,

vs.
ANGEL C. TWAO and GREGORIO T. CASTRO, defendants-appellees.
Leonardo Abola for plaintiff-appellant.
Manuel O. Chan for defendants-appellees.
PAREDES, J.:
The case at bar had its genesis in Civil Case No. 213, CFI, Manila, entitled "Angel C. Twao and Gregorio T. Castro,
plaintiffs, versus F. L. Lazatin, et al., defendants, Dionisio P. Tanglao, Intervenor," for the recovery of P35,000.00, plus
interest, realized in connection with the purchase by them (plaintiffs and defendants) from the U.S. government, and
the subsequent sale, of some 225 auto-trucks. After trial, the CFI of Manila dismissed the complaint as well as the
intervention. The order of dismissal was taken to the Court of Appeals (CA-G.R. No. 4533-R), which, on November 3,
1950, rendered judgment reversing the said order and declaring that plaintiffs and defendants were co-owners in the
business of buying and selling surplus auto-trucks, and ordered the defendants (one of them Lazatin) to pay to the
plaintiff s therein, the sum of P10,000.00, with legal interest from the filing of the complaint. The said decision became
final; it was executed, with the levy of the properties of defendant Lazatin and their subsequent sale at public auction,
wherein the plaintiffs Twao and Castro were the purchasers. Before the expiration of the redemption period, on
August 2, 1952, defendant Lazatin, deposited with the Sheriff of Pampanga the sum of P13,849.88, redemption price.
On August 9, 1952, the same Francisco Lazatin, filed the present action, to recover from the same Twao and Castro
the sum of P19,676.09, supposedly a balance of the proceeds of auto-trucks, sold directly to purchasers by said
defendants. On the same date, plaintiff Lazatin, alleging that "there is no security whatsoever for the payment of the
amount claimed in the complaint and that the defendant defendants are removing or are about to remove or dispose
of their property with intent to defraud their creditors, particularly the plaintiff," secured a writ of attachment on the
amount he deposited, and pursuant thereto, the Sheriff of Pampanga refused to deliver the sum of P13,849.88, which
should have been paid to the herein defendants.
On August 12, 1952, the herein defendants filed an Urgent Motion to Dissolve the Writ of Preliminary Attachment on
the following grounds:
1. That the plaintiff has no cause of action because (a) the right of action, if any, has prescribed, and (b) the cause of
action is barred by a prior judgment; and
2. That the allegations in the petition for the issuance of the writ and in the affidavit in support thereof are false.
On September 10, 1952, the lower court, after due hearing, dissolved the writ.
Subsequently, the defendants filed their answer and after the customary admissions and denials, interposed as
special defenses, the same grounds averred in the motion to lift the writ and counterclaimed:
1. That the plaintiff herein has filed a clearly unfounded civil action against the herein defendants as a result of which
the latter had suffered actual or compensatory damages by way of attorney's fees in the sum of P3,000.00
2. That as a result of the wrongful attachment and the false statements made by the plaintiffs, under oath, in support of
his Ex-Parte Petition for the Writ, the herein defendants have suffered moral damages to the amount of P10,000.00
3. That the wrongful attachment against the properties and the sum of P13,849.88 had caused actual damages to the
herein defendants, represented by the legal interest on such amount.
On May 9, 1953, plaintiff Lazatin died and on March 10, 1954, Gil Gotiangco was appointed and qualified as
administrator of plaintiff's estate.
On the date set for hearing, the defendants herein were granted, a preliminary hearing on their special defenses (Sec.
5, Rule 8). The lower court on November 12, 1954, entered an order, dismissing the complaint on the ground that it
was barred by a prior judgment and by the statute of limitations. At the same time, the Court set the case for hearing
on defendants' counterclaim. On October 28, 1955, the trial court rendered judgment, ordering the estate of Lazatin to
pay the defendants therein the following sums:
(1) P3,000.00 for the fees of Attorney Manuel O. Chan;
(2) P,500.00 for moral damages to each of the defendants;

418

(3) Six percent (6%) interest on the amount of P13,849.88 from August 6, 1952 until said amount is actually delivered
to and receipted by the defendants; and
(4) To pay the costs.
Judgment is also rendered against the Central Surety and Insurance Co., which is solidarily liable with the Estate of
the deceased plaintiff Francisco L. Lazatin on its bond for the sum of P20,000.00, filed by said Company for the
issuance on the writ of attachment for the amounts mentioned in Nos. (2) and (3) of the dispositive part of this
decision.
Upon appellant's request, the appeal was certified by the Court of Appeals to this Court, as the issues involved therein
are purely legal in character.
The law on damages is found on Title XVII of the Civil Code (Arts. 2195 to 2235). The rules governing damages laid
down in other laws, and the principles of the general law on damages are adopted in so far as they are not in
consistent with the Code (Arts. 2196 and 2198). Article 2197 mentions the kind of damages recoverable, among which
are (1) actual or compensatory and (2) moral Article 2219 provides that moral damages may be recovered in the
following and analogous cases . . . (3) malicious prosecution. There is an abundance of case holding that the action to
recover damages from the attachment plaintiff, for the wrongful issuance and levy of an attachment (malicious
attachment) is identical or is analogous to the ordinary action for malicious prosecution (Eastern v. Bank of Stockton,
66 Cal. 123, 56 Am. Rep. 77, 4 Pac. 1106; Robinson v. Kellum 6 Cal. 399; Grant v. Moore, 29 Cal. 644; King v.
Montgomery 50 Cal. 115; Gonzales v. Cobliner 68 Cal 151, 8 Pac. 697; Asevado v. Orr 100 Cal. 293, 34 Pac. 777). It
may logically be inferred, therefore, that in order hat moral damages may be recovered in connection with he writ of
attachment under consideration, malice is an essential ingredient thereof. In Songco v. Sellner, 37 Phil. 154, where the
evidence showed that defendant offered damages to his credit, as a result of writ of attachment wrongfully issued, the
Court declared that such damages were remote and speculative and that there was no 'ending that the attachment
was maliciously sued out. In Aboitiz v. Da Silva, 45 Phil. 883, the Court refused to grant damages for loss of reputation
by reason of an improper attachment, on the ground that there was no evidence from which malice on the part of the
plaintiff or loss of credit to the defendant, may be inferred or presumed. In Masterson v. Smith Navigation, 60 Phil. 366
' damages to good name, allegedly suffered by the defendant as a result f a writ of attachment wrongfully issued, were
disallowed in the ground that such damages were very problematical. In American jurisdictions where the principles of
the general laws on damages in common law (adopted by Art. 198 of the new Civil Code), are in force, only actual or
compensatory damages are recoverable for wrongful but not malicious attachment. An allowance may be made r
injury to feeling if the attachment was sued out maliciously and without probable cause; but in the absence of his
element there can be no recovery (6 C.J. 533- 534; 541). "The authorities are quite uniform in holding that, in the
absence of malice, injuries to credit, reputation and business are too remote and speculative to be recovered" (Union
Nat. Bank v. Cross, 100 Wis. 174, 75 NW 992). There is no issue of malice, damages must be compensatory merely,
and confined to the actual loss from deprivation of the property attached or injury to it, or in case of closing business,
to the probable profits of the business, during the time of its stoppage (Holiday Bros. Cohen 34 Ark. 707). All of which
go to show that the attachment defendant is not entitled to moral damages, unless it is alleged and established that
the writ was maliciously sued out.
This notwithstanding the defendants-appellees invoke the following rule, in support of their thesis.
SEC. 4. Bond required from plaintiff. The party applying for the order must give a bond executed to the defendant in
amount to be fixed by the judge, not exceeding the plaintiff claim that the plaintiff will pay all the costs which it may be
adjudged to the defendant and all damages which he may sustain by reason of the attachment, if the court shall finally
adjudge that the plaintiff was not entitled thereto. (Rule 59, R.C.)
They claim that under the above section, malice and want of probable cause are not essential (II Moran's Rules of
Court , 2nd Ed. pp. 19-20); that the language used therein is clear and its intent and purpose are obvious; its provision
cannot be given a broader scope than what it imports; and the element of malice cannot be implied from the terms
thereof. It is finally argued that as the attachment-plaintiff, according to the rule, should pay "all the damages" which
the attachment defendant might sustain by reason of the attachment, if the court shall finally adjudge that the plaintiff
was not entitled thereto, the ruling of the trial court that the appellant should pay the appellees moral damages, is
correct. We do not share this view. It should be observed that Sec. 4 of Rule 59, does not prescribe the remedies
available to the attachment defendant in case of a wrongful attachment, but merely provides an action for recovery
upon the bond, based on the undertaking therein made and not upon the ability arising from a tortious act, like the
malicious suing of an attachment. Under the first, where malice is not essential, the attachment defendant, is entitled
to recover only the actual damages sustained by him by reason of the attachment. Under the second, where the
attachment is maliciously sued out, the damages recoverable may include a compensation for every injury to his
credit, business or feelings (Tyler v. Mahoney 168 NC 237, 84 SE 362; Pittsburg etc. C 73, 47 SE 234). And
considering the fact that the rules of court are of older vintage than the new Civil Code, the matter of damages in the

419

said rules should be encompassed within the framework Of the Civil Code (Art. 2196 Civil Code). It is quite true that
said section 4 employs the expression "all damages", but this should be understood to refer to the damages resulting
from the undertaking itself, the recovery of which is subject to "the principles of the general law on damages", earlier
discussed. (Art. 2198, Civil Code, supra).
A cursory perusal of the decision would show that the trial court did not make any express ruling that the writ of
attachment was maliciously sued out by the plaintiff or any finding of facts or circumstances from which it may be
necessarily inferred that the attachment was thus obtained. The decision does not make any finding that the
defendants-appellees did in fact suffer mental anguish or injury to their credit or reputation. The decision simply states:
"Coming now to the moral damages which defendants have suffered consisting of mental anguish, serious anxiety and
besmirched reputation, it is believed that sing businessmen of good commercial standing and reputation, each of them
should be awarded at least P2,500.00." Moreover the dissolution of the writ was due to a technicality No moral
damages can be inferred from the mere act that the redemption price to which defendants were entitled, had been
retained by the provincial sheriff for a period of 38 days. The trial court held that the present action was already
investigated and adjudged in CA-G.R. To 4533-R and the right of action was barred by the state of limitations, and that
since the writ of attachment was only a remedy adjunct to the main suit, plaintiff-appellant was not entitled to the writ.
While the lower court declared that the defendants-appellees had an outstanding balance of P171,947.80, in the bank
and that they were not disposing their property in fraud of creditors or of the plaintiff, as alleged in the petition for the
issuance of the writ still the said court did not make any finding that the said petition was maliciously sued out. We are,
therefore, the opinion that the defendants-appellants are not entitled to moral damages.
In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be covered,
except: . . .
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff.
xxx

xxx

xxx

(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation
should be recovered." (Art. 2208, Civil Code).
Defendants' counterclaim for the recovery of attorney's fees is based on paragraph 4 of the cited provision, for legal
services rendered in defending the main suit. There is no showing in the decision appealed from that plaintiffs' action
is "clearly unfounded". Plaintiffs-appellants' complaint was not dismissed because the facts alleged therein were found
untrue, but on purely technical grounds; the special defenses of prescription of the action and res adjudicata. While it
may be hard to believe that the plaintiff had labored under the impression that the matters involved in his complaint
had not been adjudicated in the previous litigation between the same parties (Civil Case No. 213 CFI Manila),
because plaintiff himself was a lawyer such error of judgment on his part would not justify the inference that the action
was "clearly unfounded". As aptly observed by appellants' counsel, defenses as the one interposed by appellee in
their counterclaim "raise questions of law not always of obvious and easy solution." While it may appear also that the
move was a scheme to prevent the defendants-appellees from reaping the benefits of the final judgment rendered in
their favor in said case CA- G.R. No. 5433-R, still one cannot nullify, without cause, the good and honest motive,
which should be presumed, when a litigant goes to court for the determination of his alleged right.
Withal, and considering the fact that defendants-appellant lees were drawn into this litigation by plaintiff-appellant and
were compelled to hire an attorney to protect and defend them, and taking into account the work done by said
attorney, as reflected in the record, throughout the proceedings, we deem it just and equitable to award at attorney's
fees for defendants-appellees. The sum of P3,000.00 adjudicated by the trial court, is reasonable under the
circumstances (par. 11 Art. 2208, Civil Code).
It appears that plaintiffs-appellants have abandoned their appeal with respect to the payment of 6% interest in the
amount of P13,849.88.
Modified, with the elimination of moral damages, the decision appealed from is affirmed in all other respects. Costs
against plaintiff-appellant.

420

G.R. No. 104047

April 3, 2002

MC ENGINEERING, INC., petitioner,

vs.
THE COURT OF APPEALS, GERENT BUILDERS, INC. and STRONGHOLD INSURANCE CO., INC., respondents.
CARPIO, J.:
The Case
This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking the reversal of the decision of
the Court of Appeals dated November 14, 19911 and its resolution dated February 5, 1992.2 The Court of Appeals
reversed the decision dated July 15, 1989 of the Regional Trial Court, Branch 85,3 Quezon City, in Civil Case No. Q44392 dismissing the Complaint for Sum of Money With Preliminary Attachment and Damages filed by respondent
Gerent Builders, Inc. ("respondent Gerent" for brevity) against petitioner MC Engineering, Inc., ("petitioner" for brevity).
The trial court ordered respondents Gerent and Stronghold Surety and Insurance Company ("respondent Surety" for
brevity) to pay petitioner, jointly and severally, damages and attorneys fees.
The Facts
The undisputed facts in this case as found by the trial court and quoted by the Court of Appeals in its assailed decision
are as follows:
"x x x On October 29, 1984, Mc Engineering, Inc. and Surigao Coconut Development Corporation (Sucodeco, for
short) signed a contract (Exh. B, also Exh. 5), for the restoration of the latters building, land improvement, electrical,
and mechanical equipment located at Lipata, Surigao City, which was damaged by typhoon Nitang. The agreed
consideration was P5,150,000.00** of which P2,500,000.00*** was for the restoration of the damaged buildings and
land improvement, while the P3,000,000.00 was for the restoration of the electrical and mechanical works.
The next day, on October 30, 1984 defendant Mc Engineering and plaintiff Gerent Builders, Inc. entered into an
agreement wherein defendant subcontracted to plaintiff the restoration of the buildings and land improvement phase of
its contract with Sucodeco but defendant retained for itself the restoration of the electrical and mechanical works. The
subcontracted work covered the restoration of the buildings and improvement for P1,665,000.00 (Exh. C, also Exh. 6).
Two (2) months later, on December 3, 1984, Sucodeco and defendant Mc Engineering entered into an agreement
amending provision No. VII, par 1 of their contract dated October 29, 1984, by increasing the price of the civil works
from P2,250,000.00 to P3,104,851.51, or an increase of P854,851.51, with the express proviso that except for the
amendment above specified, all the other provisions of the original contract shall remain the same (Exh. L).
The civil work aspect consisting of the building restoration and land improvement from which plaintiff would get
P1,665,000.00 was completed (TSN., p. 14, July 30, 1986) and the corresponding certificate of acceptance was
executed (Exh. F), but the electrical works were cancelled (Tsn., p. 8, July 30, 1986; Tsn., p. 19, Feb. 11, 1987). On
January 2, 1985, plaintiff received from defendant the amount of P1,339,720.00**** as full payment of the sub-contract
price, after deducting earlier payments made by defendant to plaintiff, as evidenced by the affidavit executed by
plaintiffs president, Mr. Narciso C. Roque (Exh. 1), wherein the latter acknowledged complete satisfaction for such
payment on the basis of the Statement of Account (Exh. 2, 2-a & 2-b) which plaintiff had earlier forwarded to
defendant.
Nevertheless, plaintiff is still claiming from defendant the sum of P632,590.13 as its share in the adjusted contract cost
in the amount of P854,851.51, alleging that the sub-contract is subject to the readjustment provided for in Section VII
of the agreement, and also the sum of P166,252.00 in payment for additional electrical and civil works outside the
scope of the sub-contract."4
Petitioner refused to pay respondent Gerent. Thus, on March 21, 1985, respondent Gerent filed the complaint against
petitioner. On March 28, 1985, the trial court issued the corresponding writ of preliminary attachment upon the filing by
respondent Gerent of a P632,590.13 bond issued by respondent Surety.5 On April 24, 1985, petitioner moved to
quash the writ on the ground that it was improperly issued. The trial court denied the motion.
Petitioner assailed the denial in a petition for certiorari6 filed with the Court of Appeals. In a resolution dated October
17, 1986, the Court of Appeals7 rendered a decision granting the petition, as follows:
"Wherefore, finding merit to the petition, the writ of attachment dated March 28, 1985, and the order dated August 14,
1985, denying the motion to quash writ of attachment should be as it is hereby declared null and void, and the
execution made by respondent Deputy Sheriff Cristobal C. Florendo, under the writ of attachment issued should be as

421

it is hereby nullified. The respondent Sheriff is hereby directed to restore ownership of the properties heretofore seized
and attached to petitioner. No pronouncement as to costs."8
On July 13, 1987, the trial court ordered the return of petitioners properties that deputy sheriff Cristobal C. Florendo
attached and seized. The sheriff reported to the court that he never seized a single property of petitioner but merely
conducted a "paper levy".
On January 5, 1988, petitioner filed an application against the attachment bond to recover damages it suffered due to
the wrongful issuance of the writ of attachment. Respondent Surety opposed the application.
In its Answer, petitioner vigorously denied respondent Gerents causes of action. Petitioner counterclaimed for
damages and attorneys fees due to the improper issuance of the writ of attachment.
On July 15, 1989, after trial on the merits, the trial court rendered its decision, the dispositive portion of which reads:
"WHEREFORE, judgment is hereby rendered against the plaintiff and in favor of the defendant, as follows:
1. Dismissing the instant case;
2. Ordering the plaintiff and Stronghold Surety And Insurance Company to pay defendant M.C. Engineering, Inc.,
jointly and severally, the sum of P70,000.00 as moral damages; P30,000.00 as exemplary damages; and P50,000.00
as attorneys fees, plus costs.
SO ORDERED."9
From the foregoing decision, respondents filed separate notices of appeal on September 5, 1989 and November 2,
1989, respectively.10
The Court of Appeals rendered the assailed Decision on November 14, 1991.11 On February 5, 1992, the Court of
Appeals denied petitioners motion for reconsideration.12
The Ruling of the Court of Appeals
The Court of Appeals ruled respondent Gerents claim meritorious, declaring that Gerent is entitled to share 74% of
the price increase in the civil works portion of the main contract.
First, the Court of Appeals found that the price increase arose from a second detailed estimate of the costs of civil
works allegedly submitted by respondent Gerent to petitioner. Thus, the Court of Appeals stated:
"xxx. To obtain an adjustment in the contract price, it appears that plaintiff-appellant, as sub-contractor, submitted a
second detailed estimate of the costs of civil works (Exh. D) to appellee which, after marking up the figures therein to
reflect its share, attached the same to its letter of proposal for an increase in the contract price eventually submitted to
SUCODECO. On the basis of the estimates, the latter agreed to increase the cost for the full restoration of its typhoon
damaged buildings and land improvement (civil works) from P2,250,000.00 to P3,104,851.51 (Exh. L). Payment of this
adjustment was made by SUCODECO on December 27, 1984 (Exh. N). It is from this increase of P854,851.51 that
plaintiff-appellant sought to recover its share from the appellee."13
"Appellee denies the submission of the second detailed estimates by plaintiff-appellant. It must be observed, however,
that appellee is an electro-mechanical engineering firm which becomes an accredited civil contractor only for as long
as it has civil engineers to do the civil works. Thus, in the SUCODECO project, appellee hired plaintiff-appellant, an
undisputed civil contractor, to furnish civil engineering services. Taking into account the technical expertise required to
draw up such a detailed estimate of civil works as Exh. D and the absence of proof that other civil contractors apart
from plaintiff-appellant was ever engaged by appellee, it is undoubtedly plausible that plaintiff-appellant made the
estimates which appellee submitted to SUCODECO, with the corresponding adjustments in the costs."14
Second, the Court of Appeals noted that the price increase preceded the cancellation of petitioners electrical and
mechanical works portion of the main contract.
Petitioners president, Mario Cruel, testified that on December 3, 1984, Sucodeco approved the price increase for the
civil works portion of the main contract. A week later, or on December 14, 1984, Sucodeco wrote to petitioner
canceling the electrical and mechanical works portion of the main contract.15 The Court of Appeals thus reasoned:
"From the foregoing, it is apparent that the adjustment in the price of civil works preceded the cancellation of the
electro-mechanical works. If it is indeed true that the adjustment was for the sole benefit of appellee for its preparatory

422

expenses and lost profits, the increase would have been effected simultaneously with or after the cancellation of the
electrical and mechanical works. The fact that the amendment in the contract was made before the cancellation could
only mean that SUCODECO agreed to increase the cost of the civil works not to compensate appellee for the then still
subsisting original agreement but as a result of the higher estimates submitted by the contractor and subcontractor on
the expenses for the civil works."16
Third, the Court of Appeals did not consider the absence of an itemized listing of material and labor costs relevant to
respondent Gerents right to a share in the price increase.
The Court of Appeals ruled that it is Sucodeco, the project owner, and not petitioner who can question the true value of
the material and labor costs. Since Sucodeco did not raise any question, it must have agreed to the price increase
even without the submission of the true value. Consequently, the Court of Appeals held that it was petitioners
obligation to pay respondent Gerent its share of the price increase in accordance with the subcontract.17
Fourth, the Court of Appeals found no evidence that petitioner spent substantial amounts on the electrical and
mechanical portion of the main contract to justify petitioners claim to the entire price increase.
The Court of Appeals rejected petitioners claim that the price increase was intended to compensate petitioner for the
losses it suffered due to the cancellation of the electrical and mechanical portion of the main contract. The Court of
Appeals stated that:
"It is important to note that despite appellees posturing that it incurred expenses prior to the cancellation of its
contract, thus entitling it to the whole adjustment price, the records are bereft of proof showing substantial amounts
expended by appellee. To justify its entitlement to the whole amount, it could have presented receipts reflecting
purchases of materials, drawing plans of engineering designs, detailed estimates of electrical and mechanical works
and testimonies of engineers allegedly mobilized to start the planning. As it is, the most that appellee could produce
were three (3) purchase invoices totaling P110,000.00. xxx."18
Fifth, the Court of Appeals found the quitclaim executed by respondent Gerent on January 2, 1985 vitiated with fraud
since petitioner intentionally withheld from Gerent the information that on December 3, 1984 Sucodeco had already
agreed to the price increase. The Court of Appeals ruled:
"xxx. The mere fact that an affidavit or quitclaim was executed by Mr. Roque on behalf of his company does not
preclude or estop plaintiff-appellant from recovering its just share for it appears that appellee intentionally withheld
from Mr. Roque a vital information. Had he known, it is highly unlikely that he will sign the quitclaim. We are more apt
to believe Mr. Roques protestations that he did not know about the adjustment. His testimony is straightforward,
consistent and unwavering. Moreover, a prudent man engaged in the business of construction for decades and whose
interests are amply protected by a written instrument will not be easily convinced to acquiesce to have appellee get
P1.4M of the whole contractual price. Appellee apparently led Mr. Roque to believe that no adjustment was made to
hide its big share in the contract. Considering the fraud employed against plaintiff-appellant, the quitclaim is not
binding at all."19
Thus, in the dispositive portion of the assailed decision the Court of Appeals decreed:
"WHEREFORE, premises considered, judgment is hereby rendered setting aside the appealed decision of the lower
court, and in lieu thereof defendant-appellee is ordered to pay plaintiff-appellant the sum of P632,590.13 representing
the increased contract price in the sub-contract agreement, with the civil works by SUCODECO, and attorneys fees
equivalent to 25% of P632,590.13. Plaintiff-appellant and the surety-appellant are hereby adjudged to solidarily pay
appellee the sum of P5,000.00 as attorneys fees, in connection with the wrongful obtention of the writ of attachment.
With costs against defendant-appellee.
SO ORDERED."
Hence, this petition.
The Issues
In its Memorandum, petitioner raises the following issues:
1. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AND GROSSLY
ERRED IN HOLDING THAT RESPONDENT GERENT IS ENTITLED TO P632,590.13 OR 74% OF THE PRICE
INCREASE IN THE CIVIL WORKS PORTION OF THE MAIN CONTRACT BETWEEN PETITIONER AND
SUCODECO.

423

2. WHETHER OR NOT THE QUITCLAIM EXECUTED BY GERENT WAS VITIATED WITH FRAUD.
3. WHETHER OR NOT PETITIONER IS ENTITLED TO ACTUAL, MORAL, AND EXEMPLARY DAMAGES DUE TO
THE WRONGFUL ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT.
4. WHETHER OR NOT THE AMOUNT OF P5,000.00 AS ATTORNEYS FEES IS SUFFICIENT.
5. WHETHER OR NOT RESPONDENT GERENT IS ENTITLED TO ATTORNEYS FEES IN THE AMOUNT
EQUIVALENT TO TWENTY FIVE PERCENT (25%) OF P632,590.13.
The Ruling of the Court
The Court finds for petitioner MC Engineering, Inc.
The Quitclaim of Respondent Gerent
We begin with the issue of whether the so-called quitclaim executed by respondent Gerent is valid. If the quitclaim is
valid, then the quitclaim settles with finality all the claims of respondent Gerent, rendering its complaint against
petitioner without any legal basis. If fraud vitiated the quitclaim, then it becomes necessary to determine if petitioner
still owes respondent Gerent any amount under their subcontract.
The quitclaim is embodied in the Affidavit executed on January 2, 1985 by respondent Gerents president, Narciso
Roque. The Affidavit is not the usual quitclaim which expressly discharges and releases a party from any and all
liabilities. The Affidavit does not contain such express language. However, the Affidavit expressly acknowledges
receipt by Gerent of "full payment" of the subcontract price20 from petitioner. The effect, nevertheless, is the same
because a creditor who receives and acknowledges full payment from his debtor causes the extinguishment of his
claim against the debtor.21 Roque, however, now claims that had petitioner informed him of the price increase granted
by Sucodeco on December 3, 1984, he would not have signed the Affidavit of January 2, 1985.
The primary question to resolve is whether petitioner misled, deceived or coerced respondent Gerent into signing the
Affidavit. We rule petitioner did not. The Court of Appeals erred in declaring that fraud vitiated the Affidavit.
Fraud is never presumed but must be established by clear and convincing evidence. There is no evidence that
petitioner misled, deceived or coerced respondent Gerents president into signing the Affidavit. A mere preponderance
of evidence is not even adequate to prove fraud. Thus, in Maestrado vs. Court of Appeals, 22 the Court ruled that:
"The deceit employed must be serious. It must be sufficient to impress or lead an ordinarily prudent person into error,
taking into account the circumstances of each case. Silence or concealment, by itself, does not constitute fraud,
unless there is a special duty to disclose certain facts. Moreover, the bare existence of confidential relation between
the parties, standing alone, does not raise the presumption of fraud."23 (Emphasis supplied)
There was no proof of fraud presented by respondent Gerent other than its bare and unsubstantiated allegations. On
the contrary, respondent Gerents president, Roque, admitted that he was fully aware and certain of the impending
price increase. Thus, Roque testified:
"Q:

Is it really true that you knew that there will be an increase because you were discussing that already?

A:

I know that there will be an increase.

Q:

Because you were discussing it?

A:
Yes. I know that there will be an increase, that is why I am always inquiring from Mr. Cruel whether there was
already an increase made and adjustment of the contract.
Q:

When was the increase being discussed?

A:

Even during the time of the initial start of the project it was already discussed.

Q:

What particular month?

A:

About November.

Q:

And the contract was signed by Mario Cruel and Sucodeco in October? October 29, 1984?

424

A:

Yes, sir." 24 (Emphasis supplied)

Despite his certainty that a price increase was imminent, Roque still signed the Affidavit without any reservation. Since
respondent Gerent was fully aware of the impending price increase, it cannot claim that it was misled or deceived into
signing the Affidavit. The non-disclosure by petitioner of the price increase did not mislead or deceive respondent
Gerent because Roque fully knew that the price increase would in any event happen. Based on his own testimony,
Roque voluntarily, willingly and freely signed the Affidavit without any compulsion or coercion from anyone. Thus,
Roque testified:
"Q:

But you know before hand that what you signed is supposed to be an affidavit?

A:

Yes, sir.

Q:

Did you make any complaint to MC Engineering?

A:

No, sir.

xxx.
Q:

When you signed that affidavit Exh. "1", did you not make any protests?

A:

No, I did not make any protest."25

Petitioner was under no obligation to disclose to respondent Gerent, a subcontractor, any price increase in petitioners
main contract with Sucodeco. Respondent Gerent is not a party to the main contract. The subcontract between
petitioner and respondent Gerent does not require petitioner to disclose to Gerent any price increase in the main
contract. The non-disclosure by petitioner of the price increase cannot constitute fraud or breach of any obligation on
the part of petitioner.
Moreover, the record shows that the P139,720.30 representing final and full payment of the subcontract price was
paid by petitioner to respondent Gerent based on the statement of account Gerent itself prepared and submitted to
petitioner. This can be gleaned from the testimony of Roque, to wit:
"Q:

You have submitted likewise a statement of account?

A:

Yes, sir.

Q:

And this statement of account is this Annex "1" of the Answer?

A:

Yes, sir.

ATTY. AGUINALDO
May we request that this statement of account be marked as Exh. "2".
And the signature above the typewritten name Narciso Roque including the words submitted by, be marked as Exh. 2A and the figure P139,720.30 be encircled and be marked as Exh. 2-B."26
The Statement of Account signed and submitted by respondent Gerents president Roque to petitioner provides as
follows:
"January 2, 1985
MC ENGINEERING, INC.
98 Sgt. J. Catolos St.,
Cubao, Quezon City
Subject: Breakdown for sub-contracted work at Sucodeco Proj.
STATEMENT OF ACCOUNT
CONTRACT AMOUNT
P1,665,000.00

425

Less: Previous Payments:

October 30 - 50% downpayment P832,500.00
December 4 2nd partial payments. 400,000.00
December 13- 3rd partial payments. 200,000.00
P1432,500.00
Deduction for cost of materials taken from Sucodeco.
92,779.70
1,525,279.70
BALANCE DUE & COLLECTIBLE
P139,720.30
Submitted by:
NARCISO C. ROQUE
Chairman
Conforme:
__________________"27 (Emphasis supplied)
Again, nothing in the Statement of Account indicates any reservation relating to the impending price increase. Thus,
respondent Gerent was paid what it actually believed, estimated and demanded should be its fair compensation for its
subcontract work. The voucher issued by petitioner to respondent Gerent in full payment of the subcontract price
states as follows:
"MC ENGINEERING, INC.
Quezon City
CHECK VOUCHER NO. 21324
Date
January 2, 1985
TO: GERENT BUILDERS INCORPORATED
Full payment for subcontracted work at Sucodeco Project..................................
139,720.30
Less: 3% of 15% withholding tax
628.74
P139,091.56
Amount paid by Check No. RCBC # 479476

426

P139,091.56
Received the sum of PESOS one hundred thirty nine thousand ninety one pesos & 56/100 only from MC
ENGINEERING, INC.
in full payment of account.
By:
_____________________
Payee
Checked and recommended by:
_______________________
Office Assistant
APPROVED BY:
_______________________
President"28
(Emphasis supplied)
This voucher, stating that the amount of P139,091.56 was in "full payment" for the subcontract work, was signed by
Roque at the same time he received the check payment for the same amount.
Finally, the Affidavit that Roque signed provides as follows:
"A F F I D A V I T
I, NARCISO C. ROQUE, of legal age, Filipino, married with residence and postal address at No. 58 Lanzones Street,
Quezon City, Metro Manila, Philippines, after being sworn to in accordance with law, do hereby depose and say:
1. That I am the CHAIRMAN/PRESIDENT of GERENT BUILDERS, INC.;
2. That my Company, GERENT BUILDERS, INC., has sub-contracted with MC ENGINEERING, INC. for the
restoration works of building and land improvement of SUCODECO OIL HILLS, INC. located at Bo. Lipata, Surigao
City;
3. That in the prosecution of restoration works and land improvement of SUCODECO OIL MILLS, INC. Buildings,
GERENT BUILDERS, INC. had fully paid the wages of laborers, rentals of equipment and machineries used; and fully
paid materials used in the fabrication, delivery and erection of same, and that no supplier, laborer, equipment and
machinery owner has standing claim against my company;
4. That all taxes due in accordance with the project have been fully paid as of date;
5. That the ONE HUNDRED THIRTY NINE THOUSAND SEVEN HUNDRED TWENTY PESOS AND 30/100
(P139,720.30) ONLY, released on January 2, 1985 REPRESENTS FULL PAYMENT OF MY CONTRACT WITH MC
ENGINEERING, INC.; (Emphasis supplied)
6. That this affidavit is being executed for purpose of collecting from MC ENGINEERING, INC.;
7. That affiant, further sayeth none.
NARCISO C. ROQUE
Affiant" 29
(Emphasis supplied)
The inescapable conclusion is that the Affidavit was meant to be a total quitclaim by respondent Gerent, fully
discharging petitioner from whatever amounts it may have owed Gerent under the subcontract. There is nothing in the
Affidavit that reserves respondent Gerents right to collect a portion of any price increase in the main contract. On the
other hand, the Affidavit is clear, unequivocal and absolute that respondent Gerent had received "full payment" under

427

the subcontract. Respondent Gerent is now estopped from impugning the validity of the Affidavit simply because
petitioner secured a higher price for the main contract.
Thus, in Maestrado vs. Court of Appeals30 we stated that:
"The freedom to enter into contracts, such as the quitclaims, is protected by law and the courts are not quick to
interfere with such freedom unless the contract is contrary to law, morals, good customs, public policy or public order.
Quitclaims, being contracts of waiver, involve the relinquishment of rights, with knowledge of their existence and intent
to relinquish them. xxx.
Quitclaims being duly notarized and acknowledged before a notary public, deserve full credence and are valid and
enforceable in the absence of overwhelming evidence to the contrary."
In the instant case, the Affidavit is indisputably intended to document the fact that petitioner had fully paid respondent
Gerent for the subcontract work. Roques signature thereon attests to the truth of the contents of the Affidavit. Thus,
Roque again testified:
"Q:

But you read the contents of the affidavit?

A:

Yes, sir.

Q:

You understand the contents of the affidavit when you signed?

A:

Yes, sir."31

The execution of the Affidavit by Roque, president of respondent Gerent, finally puts to rest all the claims of Gerent
against petitioner under the subcontract. The very purpose of the Affidavit, just like a quitclaim, is precisely to finally
settle all the claims of respondent Gerent, regardless of the merits of the claims. The Affidavit can be annulled only if it
was procured through fraud. There is no convincing evidence to establish that fraud vitiated the Affidavit. The fact that
petitioner received a windfall because of the price increase is not a reason to annul the Affidavit. Consequently, the
Affidavit renders moot and academic all the other issues raised in this petition. Nevertheless, the Court will still
painstakingly discuss and resolve the remaining issues raised by petitioner.
The 74%-26% Sharing.
The Court of Appeals upheld respondent Gerents theory that the subcontract provides for a 74%-26% sharing
between Gerent and petitioner in any price increase for the civil woks portion of the main contract. Ruled the Court of
Appeals:
"The question left to be determined is the amount of appellants share in the adjusted price. The record reveals that
out of the P2,250,000.00 originally earmarked for civil works, plaintiff-appellant, as sub-contractor, was awarded
P1,665,000.00 which is 74% of the first amount. Moreover, in the second detailed estimate submitted by plaintiffappellant to appellee, the total cost of P2,297,590.00 was charged for civil works. This amount was subsequently
increased by appellee to P3,104,851.00***** when it submitted the estimates to SUCODECO. Again, the mark-up was
26% of plaintiff-appellants estimate. Under the circumstances, the parties had clearly intended to split the cost award
to 74%-26% in plaintiff-appellants favor. This entitles plaintiff-appellant to the sum of P632,590.13 as its share in the
adjusted price."32
Again, we do not agree. A perusal of the subcontract reveals the following stipulations:
"ARTICLE II
SUB-CONTRACT PRICE
2.1. In consideration of the full and satisfactory performance of the works by the SUB-CONTRACTOR the
CONTRACTOR shall pay the SUB-CONTRACTOR the Lump Sum amount of ONE MILLION SIX HUNDRED SIXTY
FIVE THOUSAND (P1,665,000.00) PESOS.
2.2. The SUB-CONTRACT PRICE above is subject to section VIII of MAIN CONTRACT. By reason thereof, parties
hereby declare and understand that the SUB-CONTRACT PRICE of P1.665 is subject to change and verification
pending the final submission of the true value as maybe determined by evaluation and inspection by representatives
of OWNER, CONTRACTOR and SUB-CONTRACTOR."33 (Emphasis supplied)
On the other hand, the main contract between petitioner and Sucodeco provides as follows:

428

"VIII. SPECIAL SIDE AGREEMENT. It is hereby declared and understood that Contract Price of P5.25M is subject to
changes and verification pending the final submission of the true value as maybe determined by evaluation and
inspection by representatives of both parties, SURIGAO COCONUT DEVELOPMENT CORPORATION and MC
ENGINEERING, INC."34
(Emphasis supplied)
The Court of Appeals was correct in holding that:
"The above-cited stipulations are very clear and need no extraneous interpretation. The lump sum amount of
P1,665,000.00 due to plaintiff-appellant in payment of the civil works subcontracted to it is subject to change
depending on the true value to be submitted and evaluated by the parties to the contracts."35 (Emphasis supplied)
However, the Court of Appeals erred in upholding respondent Gerents claim that it was entitled to a 74% share in the
price increase of the main contract.
Respondent Gerent alleges that as a customary business practice petitioner and respondent Gerent agreed to a 74%26% sharing in the main contract price for the civil works portion. The alleged 74%-26% sharing can be upheld only if
such specific sharing was agreed upon in the subcontract, or if the subcontract is a joint venture. A textual examination
of the terms of the subcontract shows no provision regarding any 74%-26% sharing between petitioner and
respondent Gerent. Instead, the subcontract specifically provides for a fixed price for the civil works in the amount of
P1,665,000.00, subject to change only upon submission of the "true value" of the work undertaken by the
subcontractor.
Neither is there any stipulation in the subcontract indicating a joint venture between petitioner and respondent Gerent.
That the subcontract price corresponds to 74% of the main contract price cannot by itself be interpreted to mean that
the parties agreed to a 74%-26% sharing of any price increase in petitioners main contract with Sucodeco. Roque,
respondent Gerents president, testified that the 74%-26% arrangement was not incorporated in the subcontract and
was a mere gentlemans agreement. This can be gleaned from the testimony of Roque, to wit:
"Q:
Mr. Witness, you mentioned under page 5 of the transcript when you gave your direct testimony that the
agreement between you and the defendant was a joint venture, is that correct?
A:

Yes, sir.

Q:

Where is that agreement?

A:

It was a verbal agreement between us. Among contractors there is such a thing as gentlemans agreement.

Q:

Are you referring toyou mean to say that that agreement is not in writing?

A:

It is not in writing but it was verbally agreed between the defendant and myself.

xxx.
"Q:

Why was that 74%-26% sharing not placed in the agreement with MC Engineering by your company?

xxx.
A:
Prior to entering into our proposal we have already an agreement with Mr. Cruel that whatever contract we will
get, the civil work will be awarded to me on subcontract wherein 26% will be for MC Engineering and 74% will be for
us.
Q:

That is verbal agreement?

A:

Verbal prior to the execution of the subcontract agreement.

Q:

That was the verbal agreement prior to the execution and signing of the subcontract agreement?

A:

It was.

xxx.

429

"Q:
This agreement, to reiterate your testimony for the alleged 74% and 26% sharing, this has never been
reduced into writing?
A:

It is not, sir."36 (Emphasis supplied)

The terms of the subcontract are clear and explicit. There is no need to read into them any alleged intention of the
parties. If the true intention of the parties was a 74%-26% sharing in any price increase in the main contract, the
parties could have easily incorporated such sharing in the subcontract, being a very important matter. They did not
because that was not their agreement.
Section 9, Rule 130 of the Revised Rules of Court provides that "[w]hen the terms of an agreement have been
reduced to writing, it is to be considered as containing all the terms agreed upon and there can be, between the
parties and their successors in interest, no evidence of such terms other than the contents of the written agreement."
Simply put, evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict,
or defeat the operation of a valid contract.37 While parol evidence is admissible to explain the meaning of written
contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which
are not mentioned at all in writing, unless there has been fraud or mistake.38 It is basic that parties are bound by the
terms of their contract which is the law between them.39
Respondent Gerent claims that petitioner cannot be allowed to evade its lawful obligation arising from the subcontract,
citing the well-known principle of law against unjust enrichment. Article 22 of the Civil Code provides that "[e]very
person who through an act or performance by another, or by any other means, acquires or comes into possession of
something at the expense of the latter without just or legal ground, shall return the same to him." Two conditions must
generally concur before the rule on unjust enrichment can apply, namely: (a) a person is unjustly benefited, and (b)
such benefit is derived at anothers expense or damage.40
Such a situation does not exist in this case. The benefit or profit derived by petitioner neither comes from respondent
Gerent nor makes the Gerent any poorer. The profit derived by petitioner comes from Sucodeco by virtue of the main
contract to which respondent Gerent is not a party. Respondent Gerents rights under the subcontract are not
diminished in any way, and Gerent remains fully compensated according to the terms of its own subcontract. The profit
derived by petitioner is neither unjust, nor made at the expense of respondent Gerent.
That a main contractor is able to secure a price increase from the project owner does not automatically result in a
corresponding price increase to the subcontractor in the absence of an agreement to the contrary. In this case, there is
no stipulation in the subcontract that respondent Gerent will automatically receive 74% of whatever price increase
petitioner may obtain in the civil works portion of the main contract. Neither has the subcontract been changed to
reflect a higher subcontract price.
In a subcontract transaction, the benefit of a main contractor is not unjust even if it does less work, and earns more
profit, than the subcontractor. The subcontractor should be satisfied with its own profit, even though less than the main
contractors, because that is what it bargained for and contracted with the main contractor. Article 22 of the Civil Code
is not intended to insure that every party to a commercial transaction receives a profit corresponding to its effort and
contribution. If a subcontractor knowingly agrees to receive a profit less than its proportionate contribution, that is its
own lookout. The fact that a subcontractor accepts less does not make it dumb for that may be the only way to beat its
competitors. The winning subcontractor cannot be allowed to later on demand a higher price after bagging the contract
and beating competitors who asked for higher prices. Even if the subcontractor incurs a loss because of its low price,
it cannot invoke Article 22 of the Civil Code to save it from financial loss. Article 22 is not a safety net against bad or
overly bold business decisions.
Under the foregoing circumstances, we hold that Gerent is not entitled to any share in the price increase in the main
contract. Whatever price increase petitioner obtained in the main contract, whether for the civil works portion or
otherwise, was solely for the benefit of petitioner.
The First and Second Detailed Estimates
There is no true valuation of the civil works.
The main contract clearly provides that as a condition precedent for any upward or downward adjustment in the
contract price, there must first be a true valuation of the materials and labor costs to be determined through evaluation
and inspection by representatives of petitioner and Sucodeco.41 A similar provision is found in the subcontract
requiring, before any change in the subcontract price, for a true valuation to be determined by Sucodeco, petitioner
and respondent Gerent. The records establish that respondent Gerent was responsible for making the estimates of the
actual cost of the civil works which served as basis for the original price of the main contract.

430

However, the Court of Appeals erred in finding that the price increase in the main contract was based on a second
detailed estimate supplied by respondent Gerent.42 The evidence adduced reveals that the parties did not undertake
any true valuation of the cost of the civil works. The price increase could not have been based on a true valuation
because no true valuation was ever made as required by the main contract and subcontract. There is no substantial
evidence to support respondent Gerents assertion that the price increase was based on a second estimate that
Gerent allegedly supplied petitioner.
The true valuation of the works must be based on the true value or estimates of the actual materials and labor
required for the work. An examination of the alleged second detailed estimate reveals nothing but a plain summary of
computation. Not only is it undated but there is also nothing in the said estimate which indicates that it was indeed
received, evaluated and marked-up by petitioner as claimed by respondent Gerent. Neither was it clearly established
by convincing evidence that the same was the true and final valuation of the civil works pursuant to the terms of the
subcontract and main contract. This is evident from the testimony of Roque, the president of respondent Gerent, to
wit:
"Q:
So your conclusion is that based on the payment of SUCODECO to MC Engineering, you are now entitled to
your claim of alleged 74%?
A:

Yes, sir.

Q:
And it is not based on the actual determination of the true value of the materials and labor spent and utilized in
the project?
A:

In the same manner as MC Engineering.it is not based on the true value.

Q:

It is not based on the true value?

A:

Yes sir."43 (Underscoring Supplied)

Clearly, the price increase did not result from a true valuation of materials and labor, which is the only valid ground for
any adjustment in the subcontract price.
The second estimate is lower than the first estimate.
A further perusal of the testimony of Narciso Roque clearly shows that the alleged second estimate, assuming it was
agreed to by petitioner and Sucodeco, was actually even lower than the first estimate which was the basis of the
original contract price for the civil works. Thus, respondent Gerents Roque testified as follows:
"Q:
A:

Now, you made a second estimate?

Yes, sir, I made a second estimate on November 5."

xxx.
"Q:
A:

How much was that?

P2,297,590.00, for the restoration of the civil works and land development."

xxx.
"Q:

How much again was the total of the first estimate?

A:

In the first estimate the total

Q:

The breakdown first.

A:

For building is P2,257,351.20 and the land improvement is P247,361.40.

Q:

And this is the first estimate, am I correct?

A:

Yes, sir.

Q:

When was this made?

431

A:

That was October 15.

Q:

Then there was a second estimate?

A:
The second estimate is the final adjusted cost submitted to MC Engineering by Gerent Builders. The total for
building and land improvement is P2,297,590.00."44 (Underscoring supplied)
If indeed the price increase in the main contract were based on the lower second estimate, then the actual price
adjustment would have been downward and not upward. The fact that the main contract price went up from the
original P2,250,000.00 to P3,104,851.51 shows that the price increase was not made on the basis of the second
estimate.
There was no itemized listing of material and labor costs.
Moreover, the record is bereft of proof of an itemized listing of the costs of materials and labor to be used upon which
respondent Gerent could have based its second estimate. This negates further respondent Gerents claim that the
price increase was based on its second estimate.
The inevitable conclusion is that the price increase in the civil works portion of the main contract was based on other
factors and not on the alleged second estimate submitted by respondent Gerent.
Third Issue: Award of actual, moral and exemplary damages.
We come to the issue of whether or not petitioner is entitled to its counterclaim for actual, moral and exemplary
damages due to the wrongful issuance of the writ of attachment. The Court of Appeals held that:
"xxx. In the instant suit, appellee failed to establish bad faith and malice against plaintiff-appellant when it sought to
attach the formers properties. The lower court itself in its decision did not make any express pronouncement as to the
existence of malice and bad faith in the procurement of the writ of attachment. Instead the trial court concluded that
as a result of such attachment, the defendants business operation and credit standing have been prejudiced and
damaged and the defendant is entitled to recover moral and exemplary damages by reason of the irregular issuance
of the writ of attachment. Such conclusions do not immediately warrant the award of moral damages. It is true that the
attachment was wrongful. But in the absence of proof of bad faith or malice, plaintiff-appellants application cannot be
said to be harassing or oppressing but merely an act done to assert and protect a legal right. (Emphasis supplied)
The grant of exemplary damages is likewise improper. Since no moral damages is due to appellee and it appearing
that no actual damages was awarded by the lower court, the grant of exemplary damages has no leg on which to
stand (Art. 2234, Civil Code).
If at all, the wrongful issuance of the writ of attachment, as ruled out by this Court, merely resulted in actual damages
to appellee. But such is not automatically awarded for it is subject to proof. Appellees claim that it lost major contracts
after a credit investigation revealed that its accounts were garnished is a bare allegation not merely unsupported by
solid evidence but is also speculative. The alleged $35,000.00 remittance refused by the Hongkong and Shanghai
Bank does not inspire belief for failure of appellee to produce documentary proof to buttress its claim."45
We agree with the Court of Appeals that the trial court erred in awarding moral and exemplary damages to petitioner.
The mere fact that a complaint is dismissed for lack of legal basis will not justify an award of moral damages to the
prevailing party.46 Even the dismissal of a "clearly unfounded civil action or proceeding" will not entitle the winning
party to moral damages.47 For moral damages to be awarded, the case must fall within the instances enumerated in
Article 2219, or under Article 2220, of the Civil Code.48 Moreover, in the absence of fraud, malice, wanton
recklessness or oppressiveness, exemplary damages cannot be awarded.49
Fourth and Fifth Issues : Award of Attorneys Fees
The last matter to be determined is the reasonableness of the attorneys fees awarded to both parties. The Court of
Appeals held that:
"xxx, the award of attorneys fees must vary. Considering the wrongful attachment made against appellees accounts,
it is understandable that it incurred attorneys fees in procuring the discharge of the attachment for which reason the
amount of P5,000.00 may reasonably be awarded. However, inasmuch as plaintiff-appellant was constrained to file
this suit to protect its legal interest, and pursuant to the terms of the sub-contract, appellee is adjudged to pay
appellant 25% of P632,590.13, the amount involved in this suit."50

432

The award must be modified. The Court of Appeals was partly correct in holding that the award of attorneys fees to
petitioner is justified considering that petitioner was constrained to engage the services of counsel at an agreed
attorneys fees. To secure the lifting of the writ of attachment, petitioners counsel, Atty. Mario Aguinaldo testified that
he was paid P1,250.00 on January 1985, P10,000.00 on April 10, 1985 and another P10,000.00 on June 30, 1985 for
his legal services, totaling P21,500.00.51 Accordingly, the award of P5,000.00 is hereby increased to P21,250.00. We
deem it just and equitable that attorneys fees be awarded when a party is compelled to incur expenses to lift a
wrongfully issued writ of attachment.52
WHEREFORE, the petition is GRANTED and the assailed Decision of the Court of Appeals is SET ASIDE. The
decision of the trial court is AFFIRMED WITH MODIFICATION. The complaint against petitioner is dismissed with
prejudice. Respondents Gerent Builders, Inc. and Stronghold Surety and Insurance Company are ordered to pay
petitioner MC Engineering, Inc., jointly and severally, the sum of P21,250.00 as attorneys fees. Costs against
respondents.
SO ORDERED.

433

G.R. No. 154106

June 29, 2004

D.M. WENCESLAO and ASSOCIATES, INC., and/or DOMINADOR S. DAYRIT, petitioners,

vs.
READYCON TRADING AND CONSTRUCTION CORP., respondent.
DECISION
QUISUMBING, J.:
This petition for review assails the decision1 of the Court of Appeals, dated January 30, 2002, as well as its
resolution2 dated June 20, 2002 in CA-GR CV No. 49101, denying petitioners motion for reconsideration. The
appellate court affirmed the decision3 of the Regional Trial Court of Pasig City, Branch 165, in Civil Case No. 61159,
ordering petitioners to pay the sum of P1,014,110.45 with interest rate of 12% per annum (compounded annually) from
August 9, 1991, the date of filing of the complaint, until fully paid to Readycon Trading and Construction Corp., plus
damages.
Petitioner D.M. Wenceslao and Associates, Inc. (WENCESLAO, for brevity) is a domestic corporation, organized
under and existing pursuant to Philippine laws, engaged in the construction business, primarily infrastructure,
foundation works, and subdivision development. Its co-petitioner, Dominador Dayrit, is the vice-president of said
company.4 Respondent Readycon Trading and Construction Corporation (READYCON, for brevity) is likewise a
corporate entity organized in accordance with Philippine laws. Its primary business is the manufacture and sale of
asphalt materials.5
The facts of this case are not in dispute.
WENCESLAO had a contract with the Public Estates Authority (PEA) for the improvement of the main expressway in
the R-1 Toll Project along the Coastal Road in Paraaque City. To fulfill its obligations to the PEA, WENCESLAO
entered into a contract with READYCON on April 16, 1991. READYCON agreed to sell to WENCESLAO asphalt
materials valued at P1,178,308.75. The contract bore the signature of co-petitioner Dominador Dayrit, as signatory
officer for WENCESLAO in this agreement. Under the contract, WENCESLAO was bound to pay respondent a twenty
percent (20%) downpayment, or P235,661.75, upon delivery of the materials contracted for. The balance of the
contract price, amounting to P942,647, was to be paid within fifteen (15) days thereof. It was further stipulated by the
parties that respondent was to furnish, deliver, lay, roll the asphalt, and if necessary, make the needed corrections on
a prepared base at the jobsite.6
On April 22, 1991, READYCON delivered the assorted asphalt materials worth P1,150,531.75. Accordingly,
WENCESLAO paid the downpayment of P235,661.75 to READYCON. Thereafter, READYCON performed its
obligation to lay and roll the asphalt materials on the jobsite.7
Fifteen (15) days after performance of said work, READYCON demanded that WENCESLAO pay the balance of the
contract price. WENCESLAO, however, ignored said demand.
On May 30, 1991, the counsel for READYCON wrote a demand letter to WENCESLAO asking that it make good on
the balance it owed. Again, WENCESLAO failed to heed the demand. It did not even bother to reply to the demand
letter.8
In view of this development, on July 19, 1991, READYCON filed a complaint with the Regional Trial Court of Pasig
City for collection of a sum of money and damages, with prayer for writ of preliminary attachment against D.M.
Wenceslao and/or Dominador Dayrit, docketed as Civil Case No. 61159. READYCON demanded payment of
P1,014,110.45 from petitioners herein with P914,870.75 as the balance of contract price, as well as payment of
P99,239.70, representing another unpaid account.9
As READYCON timely posted the required bond of P1,150,000, its application for the writ of preliminary attachment
was granted.
On September 5, 1991, the RTC Sheriff attached certain assets of WENCESLAO, particularly, the following heavy
equipments: One (1) asphalt paver, one (1) bulldozer, one (1) dozer and one (1) grader.10
On September 16, 1991, WENCESLAO moved for the release of the attached equipments and posted its counterbond. The trial court granted the motion and directed the RTC Sheriff to return the attached equipments.
On September 25, 1991, the Sheriff released the attached heavy machineries to WENCESLAO.11

434

In the proceedings below, WENCESLAO admitted that it owed READYCON P1,014,110.45 indeed. However, it
alleged that their contract was not merely one of sale but also of service, namely, that respondent shall lay the asphalt
in accordance with the specifications and standards imposed by and acceptable to the government. WENCESLAO
also alleged that since the contract did not indicate this condition with respect to the period within which the balance
must be paid, the contract failed to reflect the true intention of the parties.12 It alleged READYCON agreed that the
balance in the payments would be settled only after the government had accepted READYCONs work as to its quality
in laying the asphalt. By way of counterclaim, WENCESLAO prayed for the payment of damages caused by the filing
of READYCONs complaint and the issuance of the writ of attachment despite lack of cause.13
On December 26, 1994, the RTC rendered judgment in this wise:
WHEREFORE, judgment is hereby rendered ordering the defendant D.M. Wenceslao & Associates, Inc. to pay plaintiff
as follows:
1. The amount of P1,014,110.45 with interest at the rate of 12% per annum (compounded annually) from August 9,
1991, date of filing of the complaint, until fully paid.
2. The amount of P35,000.00 as and for attorneys fees and expenses of litigation.
3. Costs of suit.
The counterclaim of the defendants is dismissed for lack of merit.14
Dissatisfied with the decision, the petitioners appealed to the Court of Appeals. The appellate court, however, affirmed
in toto the decision of the lower court.15
In denying the appeal, the appellate court found that contrary to WENCESLAOs assertion, malice and bad faith in
obtaining a writ of attachment must be proved before a claim for damages on account of wrongful attachment will
prosper, citing Philippine Commercial International Bank v. Intermediate Appellate Court, 196 SCRA 29 (1991). The
CA stressed that the trial court found neither malice nor bad faith relative to the filing of the complaint and the
obtaining of the writ of attachment. Also, according to the CA, petitioners did not adduce evidence to show that the
attachment caused damage to the cited pieces of heavy equipment.16
The appellate court also found that the trial court correctly interpreted the period for payment of the balance. It held
that the text of the stipulation that the balance shall be paid within fifteen days is clear and unmistakable. Granting that
the sales contract was not merely for supply and delivery but also for service, the balance was already due and
demandable when demand was made on May 30, 1991, which was a month after READYCON performed its
obligation.17
Hence, the instant petition, wherein petitioners raise the following issues:
1. WHETHER OR NOT QUESTIONS OF FACTS ARE RAISED IN THE APPEAL BY CERTIORARI;
2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENT
LIABLE FOR COMPENSATORY DAMAGES FOR THE WRONGFUL ISSUANCE OF THE WRIT OF PRELIMINARY
ATTACHMENT;
3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THE OBLIGATION
[AS] NOT YET DUE AND DEMANDABLE.18
We find proper for resolution two issues: (1) Is respondent READYCON liable to petitioner WENCESLAO for damages
caused by the issuance and enforcement of the writ of preliminary attachment? (2) Was the obligation of
WENCESLAO to pay READYCON already due and demandable as of May 30, 1991?
On the first issue, petitioners rely mainly on Lazatin v. Twano and Castro, 112 Phil. 733 (1961), reiterated in MC
Engineering v. Court of Appeals, 380 SCRA 116 (2002). In Lazatin, we held that actual or compensatory damages may
be recovered for wrongful, though not malicious, attachment. Lazatin also held that attorneys fees may be recovered
under Article 2208 of the Civil Code.19 Petitioners contend that Lazatin applies in the instant case because the
wrongful attachment of WENCESLAOs equipment resulted in a paralysis of its operations, causing it to sustain a loss
of P100,000 per day in terms of accomplishment of work. Since the attachment lasted 19 days it suffered a total loss
of P1.9 million. Aside from that, it had to spend P50,000 on the pullout of the equipment and another P100,000 to
repair and restore them to their former working condition.20

435

Respondent counters that inasmuch as a preliminary attachment is an available ancillary remedy under the rules, a
penalty cannot be meted out for the enforcement of a right, such as in this case when it sought such relief. It stresses
that the writ was legally issued by the RTC, upon a finding that READYCON sought the relief without malice or bad
faith. Furthermore, WENCESLAO failed to show concrete and credible proof of the damages it suffered. The issuance
of a writ and its enforcement entail a rigorous process where the court found that it was not attended by malice or bad
faith. It cites Mindanao Savings and Loan Association v. Court of Appeals, 172 SCRA 480 (1989), to the effect where a
counter-bond is filed, the right to question the irregularity and propriety of the writ of attachment must be deemed
waived since the ground for the issuance of the writ forms the core of the complaint.21
We find for the respondent on this issue. However, its reliance upon Mindanao Savings and Loan Association is
misplaced.
It is to be stressed that the posting of a counter-bond is not tantamount to a waiver of the right to damages arising
from a wrongful attachment. This we have made clear in previous cases, e.g., Calderon v. Intermediate Appellate
Court,22 where we ruled that:
Whether the attachment was discharged by either of the two (2) ways indicated in the law, i.e., by filing a counterbond
or by showing that the order of attachment was improperly or irregularly issued, the liability of the surety on the
attachment bond subsists because the final reckoning is when "the Court shall finally adjudge that the attaching
creditor was not entitled" to the issuance of the attachment writ in the first place. The attachment debtor cannot be
deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of
discharging the attachment writ, instead of the other. Moreover, the filing of a counterbond is a speedier way of
discharging the attachment writ maliciously sought out by the attaching party creditor instead of the other way, which
in most instances like in the present case, would require presentation of evidence in a fullblown trial on the merits and
cannot easily be settled in a pending incident of the case.23
The point in Mindanao Savings, alluded to by respondent, pertained to the propriety of questioning the writ of
attachment by filing a motion to quash said writ, after a counter-bond had been posted by the movant. But nowhere in
Mindanao Savings did we rule that filing a counter-bond is tantamount to a waiver of the right to seek damages on
account of the impropriety or illegality of the writ.
We note that the appellate court, citing Philippine Commercial & Industrial Bank, 196 SCRA 29 (1991), stressed that
bad faith or malice must first be proven as a condition sine qua non to the award of damages. The appellate court
appears to have misread our ruling, for pertinently what this Court stated was as follows:
The silence of the decision in GR No. 55381 on whether there was bad faith or malice on the part of the petitioner in
securing the writ of attachment does not mean the absence thereof. Only the legality of the issuance of the writ of
attachment was brought in issue in that case. Hence, this Court ruled on that issue without a pronouncement that
procurement of the writ was attended by bad faith. Proof of bad faith or malice in obtaining a writ of attachment need
be proved only in the claim for damages on account of the issuance of the writ. We affirm the finding of the respondent
appellate court that malice and bad faith attended the application by PCIB of a writ of attachment.24
Plainly, we laid no hard and fast rule that bad faith or malice must be proved to recover any form of damages. In
Philippine Commercial & Industrial Bank, we found bad faith and malice to be present, thereby warranting the award
of moral and exemplary damages. But we denied the award of actual damages for want of evidence to show said
damages. For the mere existence of malice and bad faith would not per se warrant the award of actual or
compensatory damages. To grant such damages, sufficient proof thereon is required.
Petitioners cite Lazatin and MC Engineering insofar as proof of bad faith and malice as prerequisite to the claim of
actual damages is dispensed with. Otherwise stated, in the present case, proof of malice and bad faith are
unnecessary because, just like in Lazatin and MC Engineering, what is involved here is the issue of actual and
compensatory damages. Nonetheless, we find that petitioner is not entitled to an award of actual or compensatory
damages. Unlike Lazatin and MC Engineering, wherein the respective complaints were dismissed for being
unmeritorious, the writs of attachment were found to be wrongfully issued, in the present case, both the trial and the
appellate courts held that the complaint had merit. Stated differently, the two courts found READYCON entitled to a
writ of preliminary attachment as a provisional remedy by which the property of the defendant is taken into custody of
the law as a security for the satisfaction of any judgment which the plaintiff may recover.25
Rule 57, Section 4 of the 1997 Rules of Civil Procedure states that:
SEC. 4. Condition of applicants bond. - The party applying for the order must thereafter give a bond executed to the
adverse party in the amount fixed by the court in its order granting the issuance of the writ, conditioned that the latter
will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain by reason of
the attachment, if the court shall finally adjudge that the applicant was not entitled thereto (italics for emphasis).

436

In this case, both the RTC and the Court of Appeals found no reason to rule that READYCON was not entitled to
issuance of the writ. Neither do we find now that the writ is improper or illegal. If WENCESLAO suffered damages as a
result, it is merely because it did not heed the demand letter of the respondent in the first place. WENCESLAO could
have averted such damage if it immediately filed a counter-bond or a deposit in order to lift the writ at once. It did not,
and must bear its own loss, if any, on that account.
On the second issue, WENCESLAO admits that it indeed owed READYCON the amount being claimed by the latter.
However, it contends that while the contract provided that the balance was payable within fifteen (15) days, said
agreement did not specify when the period begins to run. Therefore, according to petitioner, the appellate court erred
when it held the contract clear enough to be understood on its face. WENCESLAO insists that the balance of the
purchase price was payable only "upon acceptance of the work by the government." In other words, the real intent of
the parties was that it shall be due and demandable only fifteen days after acceptance by the government of the work.
This is common practice, according to petitioner.
Respondent argues that the stipulation in the sales contract is very clear that it should be paid within fifteen (15) days
without any qualifications and conditions. When the terms of a contract are clear and readily understandable, there is
no room for construction. Even so, the contention was mooted and rendered academic when, a few days after
institution of the complaint, the government accepted the work but WENCESLAO still failed to pay respondent.
Under Article 1582 of the Civil Code, the buyer is obliged to pay the price of the thing sold at the time stipulated in the
contract. Both the RTC and the appellate court found that the parties contract stated that the buyer shall pay the
manufacturer the amount of P1,178,308.75 in the following manner:
20% downpayment - P235,661.75
Balance payable within fifteen (15) days P942,647.00
Following the rule on interpretation of contracts, no other evidence shall be admissible other than the original
document itself,26 except when a party puts in issue in his pleading the failure of the written agreement to express the
true intent of the parties.27 This was what the petitioners wanted done.
However, to rule on whether the written agreement failed to express the true intent of the parties would entail having
this Court reexamine the facts. The findings of the trial court as affirmed by the appellate court on this issue, however,
bind us now. For in a petition for certiorari under Rule 45 of the 1997 Rules of Civil Procedure, this Court may not
review the findings of fact all over again. Suffice it to say, however, that the findings by the RTC, then affirmed by the
CA, that the extra condition being insisted upon by the petitioners is not found in the sales contract between the
parties. Hence it cannot be used to qualify the reckoning of the period for payment. Besides, telling against petitioner
WENCESLAO is its failure still to pay the unpaid account, despite the fact of the works acceptance by the government
already.
With submissions of the parties carefully considered, we find no reason to warrant a reversal of the decisions of the
lower courts. But since Dominador Dayrit merely acted as representative of D.M. Wenceslao and Associates, Inc., in
signing the contract, he could not be made personally liable for the corporations failure to comply with its obligation
thereunder. Petitioner WENCESLAO is properly held liable to pay respondent the sum of P1,014,110.45 with interest
rate of 12% per annum (compounded annually) from August 9, 1991, the date of filing of the complaint, until fully paid,
plus damages.
WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV
No. 49101, affirming the judgment of the Regional Trial Court of Pasig City, Branch 165, in Civil Case No. 61159, are
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Puno, Austria-Martinez*, Callejo, Sr., and Tinga, JJ., concur.

437

G.R. No. 155868

February 6, 2007

SPOUSES GREGORIO and JOSEFA YU, Petitioners,

vs.
NGO YET TE, doing business under the name and style, ESSENTIAL MANUFACTURING, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the March 21, 2001
Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 522462 and its October 14, 2002 Resolution.3
The antecedent facts are not disputed.
Spouses Gregorio and Josefa Yu (Spouses Yu) purchased from Ngo Yet Te (Te) bars of detergent soap worth
P594,240.00, and issued to the latter three postdated checks 4 as payment of the purchase price. When Te presented
the checks at maturity for encashment, said checks were returned dishonored and stamped "ACCOUNT CLOSED".5
Te demanded6 payment from Spouses Yu but the latter did not heed her demands. Acting through her son and
attorney-in-fact, Charry Sy (Sy), Te filed with the Regional Trial Court (RTC), Branch 75, Valenzuela, Metro Manila, a
Complaint,7 docketed as Civil Case No. 4061-V-93, for Collection of Sum of Money and Damages with Prayer for
Preliminary Attachment.
In support of her prayer for preliminary attachment, Te attached to her Complaint an Affidavit executed by Sy that
Spouses Yu were guilty of fraud in entering into the purchase agreement for they never intended to pay the contract
price, and that, based on reliable information, they were about to move or dispose of their properties to defraud their
creditors.8
Upon Tes posting of an attachment bond,9 the RTC issued an Order of Attachment/Levy10 dated March 29, 1993 on
the basis of which Sheriff Constancio Alimurung (Sheriff Alimurung) of RTC, Branch 19, Cebu City levied and attached
Spouses Yus properties in Cebu City consisting of one parcel of land (known as Lot No. 11)11 and four units of motor
vehicle, specifically, a Toyota Ford Fierra, a jeep, a Canter delivery van, and a passenger bus.12
On April 21, 1993, Spouses Yu filed an Answer13 with counterclaim for damages arising from the wrongful attachment
of their properties, specifically, actual damages amounting to P1,500.00 per day; moral damages, P1,000,000.00; and
exemplary damages, P50,000.00. They also sought payment of P120,000.00 as attorneys fees and P80,000.00 as
litigation expenses.14 On the same date, Spouses Yu filed an Urgent Motion to Dissolve Writ of Preliminary
Attachment.15 They also filed a Claim Against Surety Bond16 in which they demanded payment from Visayan Surety
and Insurance Corporation (Visayan Surety), the surety which issued the attachment bond, of the sum of
P594,240.00, representing the damages they allegedly sustained as a consequence of the wrongful attachment of
their properties.
While the RTC did not resolve the Claim Against Surety Bond, it issued an Order17 dated May 3, 1993, discharging
from attachment the Toyota Ford Fierra, jeep, and Canter delivery van on humanitarian grounds, but maintaining
custody of Lot No. 11 and the passenger bus. Spouses Yu filed a Motion for Reconsideration18 which the RTC
denied.19
Dissatisfied, they filed with the CA a Petition for Certiorari,20 docketed as CA-G.R. SP No. 31230, in which a
Decision21 was rendered on September 14, 1993, lifting the RTC Order of Attachment on their remaining properties. It
reads in part:
In the case before Us, the complaint and the accompanying affidavit in support of the application for the writ only
contains general averments. Neither pleading states in particular how the fraud was committed or the badges of fraud
purportedly committed by the petitioners to establish that the latter never had an intention to pay the obligation; neither
is there a statement of the particular acts committed to show that the petitioners are in fact disposing of their
properties to defraud creditors. x x x.
xxxx
Moreover, at the hearing on the motion to discharge the order of attachment x x x petitioners presented evidence
showing that private respondent has been extending multi-million peso credit facilities to the petitioners for the past
seven years and that the latter have consistently settled their obligations. This was not denied by private respondent.
Neither does the private respondent contest the petitioners allegations that they have been recently robbed of
properties of substantial value, hence their inability to pay on time. By the respondent courts own pronouncements, it

438

appears that the order of attachment was upheld because of the admitted financial reverses the petitioner is
undergoing.
This is reversible error. Insolvency is not a ground for attachment especially when defendant has not been shown to
have committed any act intended to defraud its creditors x x x.
For lack of factual basis to justify its issuance, the writ of preliminary attachment issued by the respondent court was
improvidently issued and should be discharged.22
From said CA Decision, Te filed a Motion for Reconsideration but to no avail.23
Te filed with us a Petition for Review on Certiorari24 but we denied the same in a Resolution dated June 8, 1994 for
having been filed late and for failure to show that a reversible error was committed by the CA.25 Entry of Judgment of
our June 8, 1994 Resolution was made on July 22, 1994.26 Thus, the finding of the CA in its September 14, 1993
Decision in CA-G.R. SP No. 31230 on the wrongfulness of the attachment/levy of the properties of Spouses Yu
became conclusive and binding.
However, on July 20, 1994, the RTC, apparently not informed of the SC Decision, rendered a Decision, the dispositive
portion of which reads:
WHEREFORE, premises considered, the Court finds that the plaintiff has established a valid civil cause of action
against the defendants, and therefore, renders this judgment in favor of the plaintiff and against the defendants, and
hereby orders the following:
1) Defendants are hereby ordered or directed to pay the plaintiff the sum of P549,404.00, with interest from the date of
the filing of this case (March 3, 1993);
2) The Court, for reasons aforestated, hereby denies the grant of damages to the plaintiff;
3) The Court hereby adjudicates a reasonable attorneys fees and litigation expenses of P10,000.00 in favor of the
plaintiff;
4) On the counterclaim, this Court declines to rule on this, considering that the question of the attachment which
allegedly gave rise to the damages incurred by the defendants is being determined by the Supreme Court.
SO ORDERED.27 (Emphasis ours)
Spouses Yu filed with the RTC a Motion for Reconsideration28 questioning the disposition of their counterclaim. They
also filed a Manifestation29 informing the RTC of our June 8, 1994 Resolution in G.R. No. 114700.
The RTC issued an Order dated August 9, 1994, which read:
xxxx
(2) With regard the counter claim filed by the defendants against the plaintiff for the alleged improvident issuance of
this Court thru its former Presiding Judge (Honorable Emilio Leachon, Jr.), the same has been ruled with definiteness
by the Supreme Court that, indeed, the issuance by the Court of the writ of preliminary attachment appears to have
been improvidently done, but nowhere in the decision of the Supreme Court and for that matter, the Court of Appeals
decision which was in effect sustained by the High Court, contains any ruling or directive or imposition, of any
damages to be paid by the plaintiff to the defendants, in other words, both the High Court and the CA, merely declared
the previous issuance of the writ of attachment by this Court thru its former presiding judge to be improvidently issued,
but it did not award any damages of any kind to the defendants, hence, unless the High Court or the CA rules on this,
this Court coud not grant any damages by virtue of the improvident attachment made by this Court thru its former
presiding judge, which was claimed by the defendants in their counter claim.
(3) This Court hereby reiterates in toto its Decision in this case dated July 20, 1994. 30 (Emphasis ours)
The RTC also issued an Order dated December 2, 1994,31 denying the Motion for Reconsideration of Spouses Yu.32
In the same December 2, 1994 Order, the RTC granted two motions filed by Te, a Motion to Correct and to Include
Specific Amount for Interest and a Motion for Execution Pending Appeal.33 The RTC also denied Spouses Yus Notice
of Appeal34 from the July 20, 1994 Decision and August 9, 1994 Order of the RTC.

439

From said December 2, 1994 RTC Order, Spouses Yu filed another Notice of Appeal 35 which the RTC also denied in
an Order36 dated January 5, 1995.
Spouses Yu filed with the CA a Petition37 for Certiorari, Prohibition and Mandamus, docketed as CA-G.R. SP No.
36205, questioning the denial of their Notices of Appeal; and seeking the modification of the July 20, 1994 Decision
and the issuance of a Writ of Execution. The CA granted the Petition in a Decision38 dated June 22, 1995.
Hence, Spouses Yu filed with the CA an appeal39 docketed as CA-G.R. CV No. 52246, questioning only that portion
of the July 20, 1994 Decision where the RTC declined to rule on their counterclaim for damages.40 However, Spouses
Yu did not dispute the specific monetary awards granted to respondent Te; and therefore, the same have become final
and executory.
Although in the herein assailed Decision41 dated March 21, 2001, the CA affirmed in toto the RTC Decision, it
nonetheless made a ruling on the counterclaim of Spouses Yu by declaring that the latter had failed to adduce
sufficient evidence of their entitlement to damages.
Spouses Yu filed a Motion for Reconsideration42 but the CA denied it in the herein assailed Resolution43 dated
October 14, 2002.
Spouses Yu filed the present Petition raising the following issues:
I. Whether or not the appellate court erred in not holding that the writ of attachment was procured in bad faith, after it
was established by final judgment that there was no true ground therefor.
II. Whether or not the appellate court erred in refusing to award actual, moral and exemplary damages after it was
established by final judgment that the writ of attachment was procured with no true ground for its issuance.44
There is one preliminary matter to set straight before we resolve the foregoing issues.
According to respondent Te,45 regardless of the evidence presented by Spouses Yu, their counterclaim was correctly
dismissed for failure to comply with the procedure laid down in Section 20 of Rule 57. Te contends that as Visayan
Surety was not notified of the counterclaim, no judgment thereon could be validly rendered.
Such argument is not only flawed, it is also specious.
As stated earlier, Spouses Yu filed a Claim Against Surety Bond on the same day they filed their Answer and Urgent
Motion to Dissolve Writ of Preliminary Attachment.46 Further, the records reveal that on June 18, 1993, Spouses Yu
filed with the RTC a Motion to Give Notice to Surety.47 The RTC granted the Motion in an Order48 dated June 23,
1993. Accordingly, Visayan Surety was notified of the pre-trial conference to apprise it of a pending claim against its
attachment bond. Visayan Surety received the notice on July 12, 1993 as shown by a registry return receipt attached
to the records.49
Moreover, even if it were true that Visayan Surety was left in the proceedings a quo, such omission is not fatal to the
cause of Spouses Yu. In Malayan Insurance Company, Inc. v. Salas,50 we held that "x x x if the surety was not given
notice when the claim for damages against the principal in the replevin bond was heard, then as a matter of
procedural due process the surety is entitled to be heard when the judgment for damages against the principal is
sought to be enforced against the suretys replevin bond."51 This remedy is applicable for the procedures governing
claims for damages
on an attachment bond and on a replevin bond are the same.52
We now proceed to resolve the issues jointly.
Spouses Yu contend that they are entitled to their counterclaim for damages as a matter of right in view of the finality
of our June 8, 1994 Resolution in G.R. No. 114700 which affirmed the finding of the CA in its September 14, 1993
Decision in CA-G.R. SP No. 31230 that respondent Te had wrongfully caused the attachment of their properties. Citing
Javellana v. D.O. Plaza Enterprises, Inc.,53 they argue that they should be awarded damages based solely on the CA
finding that the attachment was illegal for it already suggests that Te acted with malice when she applied for
attachment. And even if we were to assume that Te did not act with malice, still she should be held liable for the
aggravation she inflicted when she applied for attachment even when she was clearly not entitled to it.54
That is a rather limited understanding of Javellana. The counterclaim disputed therein was not for moral damages and
therefore, there was no need to prove malice. As early as in Lazatin v. Twao,55 we laid down the rule that where
there is wrongful attachment, the attachment defendant may recover actual damages even without proof that the

440

attachment plaintiff acted in bad faith in obtaining the attachment. However, if it is alleged and established that the
attachment was not merely wrongful but also malicious, the attachment defendant may recover moral damages and
exemplary damages as well. 56 Either way, the wrongfulness of the attachment does not warrant the automatic award
of damages to the attachment defendant; the latter must first discharge the burden of proving the nature and extent of
the loss or injury incurred by reason of the wrongful attachment.57
In fine, the CA finding that the attachment of the properties of Spouses Yu was wrongful did not relieve Spouses Yu of
the burden of proving the factual basis of their counterclaim for damages.
To merit an award of actual damages arising from a wrongful attachment, the attachment defendant must prove, with
the best evidence obtainable, the fact of loss or injury suffered and the amount thereof.58 Such loss or injury must be
of the kind which is not only capable of proof but must actually be proved with a reasonable degree of certainty. As to
its amount, the same must be measurable based on specific facts, and not on guesswork or speculation. 59 In
particular, if the claim for actual damages covers unrealized profits, the amount of unrealized profits must be
estalished and supported by independent evidence of the mean income of the business undertaking interrupted by the
illegal seizure. 60
Spouses Yu insist that the evidence they presented met the foregoing standards. They point to the lists of their daily
net income from the operation of said passenger bus based on used ticket stubs61 issued to their passengers. They
also cite unused ticket stubs as proof of income foregone when the bus was wrongfully seized.62 They further cite the
unrebutted testimony of Josefa Yu that, in the day-to-day operation of their passenger bus, they use up at least three
ticket stubs and earn a minimum daily income of P1,500.00.63
In ruling that Spouses Yu failed to adduce sufficient evidence to support their counterclaim for actual damages, the CA
stated, thus:
In this case, the actual damages cannot be determined. Defendant-appellant Josefa Yu testified on supposed lost
profits without clear and appreciable explanation. Despite her submission of the used and unused ticket stubs, there
was no evidence on the daily net income, the routes plied by the bus and the average fares for each route. The
submitted basis is too speculative and conjectural. No reports regarding the average actual profits and other evidence
of profitability necessary to prove the amount of actual damages were presented. Thus, the Court a quo did not err in
not awarding damages in favor of defendants-appellants.64
We usually defer to the expertise of the CA, especially when it concurs with the factual findings of the RTC.65 Indeed,
findings of fact may be passed upon and reviewed by the Supreme Court in the following instances: (1) when the
conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2) when the inference made is
manifestly mistaken, absurd, or impossible; (3) where there is a grave abuse of discretion in the appreciation of facts;
(4) when judgment is based on a misapprehension of facts; (5) when the lower court, in making its findings, went
beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6)
when the factual findings of the CA are contrary to those of the trial court; (7) when the findings of fact are themselves
conflicting; (8) when the findings of fact are conclusions made without a citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by
the respondents; (10) when the findings of fact of the lower court are premised on the supposed absence of evidence
and are contradicted by the evidence on record.66 However, the present case does not fall under any of the
exceptions. We are in full accord with the CA that Spouses Yu failed to prove their counterclaim.
Spouses Yus claim for unrealized income of P1,500.00 per day was based on their computation of their average daily
income for the year 1992. Said computation in turn is based on the value of three ticket stubs sold over only five
separate days in 1992.67 By no stretch of the imagination can we consider ticket sales for five days sufficient
evidence of the average daily income of the passenger bus, much less its mean income. Not even the unrebutted
testimony of Josefa Yu can add credence to such evidence for the testimony itself lacks corroboration.68
Besides, based on the August 29, 1994 Manifestation69 filed by Sheriff Alimurung, it would appear that long before the
passenger bus was placed under preliminary attachment in Civil Case No. 4061-V-93, the same had been previously
attached by the Sheriff of Mandaue City in connection with another case and that it was placed in the Cebu Bonded
Warehousing Corporation, Cebu City. Thus, Spouses Yu cannot complain that they were unreasonably deprived of the
use of the passenger bus by reason of the subsequent wrongful attachment issued in Civil Case No. 4061-V-93. Nor
can they also attribute to the wrongful attachment their failure to earn income or profit from the operation of the
passenger bus.
Moreover, petitioners did not present evidence as to the damages they suffered by reason of the wrongful attachment
of Lot No. 11.

441

Nonetheless, we recognize that Spouses Yu suffered some form of pecuniary loss when their properties were
wrongfully seized, although the amount thereof cannot be definitively ascertained. Hence, an award of temperate or
moderate damages in the amount of P50,000.00 is in order.70
As to moral and exemplary damages, to merit an award thereof, it must be shown that the wrongful attachment was
obtained by the attachment plaintiff with malice or bad faith, such as by appending a false affidavit to his application.71
Spouses Yu argue that malice attended the issuance of the attachment bond as shown by the fact that Te deliberately
appended to her application for preliminary attachment an Affidavit where Sy perjured himself by stating that they had
no intention to pay their obligations even when he knew this to be untrue given that they had always paid their
obligations; and by accusing them of disposing of their properties to defraud their creditors even when he knew this to
be false, considering that the location of said properties was known to him.72
The testimony of petitioner Josefa Yu herself negates their claim for moral and exemplary damages. On crossexamination she testified, thus:
Q: Did you ever deposit any amount at that time to fund the check?
A: We requested that it be replaced and staggered into smaller amounts.
COURT: Did you fund it or not?
Atty. Ferrer: The three checks involved?
Atty. Florido: Already answered. She said that they were not able to fund it.
Atty. Ferrer: And as a matter of fact, you went to the bank to close your account?
A: We closed account with the bank because we transferred the account to another bank.
Q: How much money did you transfer from that bank to which the three checks were drawn to this new bank?
A: I dont know how much was there but we transferred already to the Solid Bank.
Q: Who transferred?
A: My daughter, sir.73 (Emphasis ours)
Based on the foregoing testimony, it is not difficult to understand why Te concluded that Spouses Yu never intended to
pay their obligation for they had available funds in their bank but chose to transfer said funds instead of cover the
checks they issued. Thus, we cannot attribute malice nor bad faith to Te in applying for the attachment writ. We cannot
hold her liable for moral and exemplary damages.
As a rule, attorneys fees cannot be awarded when moral and exemplary damages are not granted, the exception
however is when a party incurred expenses to lift a wrongfully issued writ of attachment.1awphi1.net74 Without a
doubt, Spouses Yu waged a protracted legal battle to fight off the illegal attachment of their properties and pursue their
claims for damages. It is only just and equitable that they be awarded reasonable attorneys fees in the amount of
P30,000.00.
In sum, we affirm the dismissal of the counterclaim of petitioners Spouses Yu for actual, moral, and exemplary
damages. However, we grant them temperate damages and attorneys fees.
WHEREFORE, the petition is partly GRANTED. The March 21, 2001 Decision of the Court of Appeals is AFFIRMED
with the MODIFICATION that petitioners counterclaim is PARTLY GRANTED. Gregorio Yu and Josefa Yu are
awarded P50,000.00 temperate damages and P30,000.00 attorneys fees.
No costs.
SO ORDERED.

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