Republic of the Philippines

SUPREME COURT
Manila
EN BANC
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 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.
Avancea,
C.J.,
Johnson,
Johns, J., dissents.

Street,
J.,

Villamor
and
reserves

Ostrand,
his

JJ.,

concur.
vote.

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.
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 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 Third-Party Defendants.
Costs against private respondent.
SO ORDERED.
Cruz and Grio-Aquino, JJ., concur.
Padilla, J., took no part.

# Footnotes
1 Rollo, pp. 13-14.
2 State Investment House, Inc. v. Court of Appeals, G.R. No. 72764, 13
July 1989; 175 SCRA 310.
3 Per Deeds of Sale of 2 July 1979 and 25 July 1979, respectively; Rollo,
p. 13.
4 Salas v. Court of Appeals, G.R. No. 76788, 22 January 1990; 181 SCRA
296.
5 Montgomery v. Schwald, 177 Mo App 75, 166 SW 831; Wilkins v.
Shaglund, 127 Neb 589, 256 NW 31.
6 See Henson v. Henson, 268 SW 378.
7 Art. 1231. Obligations are extinguished: (1) By payment or performance;
(2) By the loss of the thing due; (3) By the condonation or remission of the

debt; (4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation; (6) By novation . . . . .
8 Martin v. Browns, 75 Ala 442.
9 Reinhart v. Lucas, 118 W Va 466, 190 SE 772.
10 11 Am Jur 589.
11 See Agbayani, Commercial Laws of the Philippines, Vol. 1, 1984 Ed.,
citing Ellenbogen v. State Bank, 197 NY Supp 278.
12 TSN, 25 April 1985, pp. 16-17.
13 Philippine Bank of Commerce v. de Vera, No. L-18816, 29 December
1962;
6 SCRA 1029.
14 Medina v. Philippine National Bank, 56 Phil 651.
15. Art. 2115. The sale of the thing pledged shall extinguish the principal
obligation, whether or not the proceeds of the sale are equal to the
amount of the principal obligation, interest and expenses in a proper case.
. . . If the price of the sale is less, neither shall the creditor be entitled to
recover the deficiency, notwithstanding any stipulation to the contrary.
16 Art. 1484 [3] of the Civil Code.
17 See Note 14.

G.R. No. 92067

March 22, 1991

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

vs.
COURT OF APPEALS, JOSEPH L.G. CHUA and JALECO DEVELOPMENT,
INC., respondents.
Sepidoza and Laogan Law Offices for petitioner.
Sotto & Sotto Law Offices for respondent Joseph L.G. Chua
Elias L. De los Reyes for Jaleco Development Inc.

GUTIERREZ, JR., J.:

This petition seeks the reversal of the Court of Appeals' decision affirming the earlier
decision of the Regional Trial Court of Makati, Branch 150 in Civil Case No. 7889
dismissing petitioner Philippine Bank of Communications' (PBCOM) complaint for
annulment of a Deed of Exchange executed by respondent Joseph L.G. Chua in favor
of Jaleco Development, Inc. (JALECO). The deed of exchange was alleged to be in
fraud of PBCOM as creditor of Chua who previously signed as one of the sureties in

three (3) Surety Agreements executed in favor of PBCOM. It involved a transfer by

Chua of his real property in exchange for shares of stocks of JALECO.
The facts of the case as summarized by the appellate court are not in dispute, to wit:
On April 14, 1976, Fortune Motors (Phils.), Inc. executed a Surety Agreement in
favor of Philippine Bank of Communications (PBCOM for short) with defendantappellee Joseph L.G. Chua, as one of the sureties (Exh. "A"). Again, on October
1, 1981, Fortune Motors (Phils.), Inc. executed another Surety Agreement in
favor of PBCOM with Chua likewise acting as one of the sureties (Exh. "A-1").
From March 7, 1983 to May 3, 1983 Fortune Motors, (Phils.) thru its authorized
officers and/or representatives executed several trust receipts (Exhibits "B", "B1", "B-2", "B-3", "B-4", "B-5" and "B-6") in favor of PBCOM, the total principal
amount of which was P2,492,543.00.
On March 6, 1981, Forte Merchant Finance, Inc., executed a Surety Agreement
in favor of PBCOM with Joseph L.G. Chua as one of the sureties (Exh. "A-2").
On May 13, 1983 to March 16, 1984, Forte Merchant Finance, Inc. obtained
credit accommodations from PBCOM in the form of trust receipt (Exh. "B-7") and
loans represented by promissory notes (Exhibits "C", "C-1", "C-2", and "C-3") in
the total amount of P2,609,862.00.
On October 24, 1983 Chua executed a Deed of Exchange (Exh. "F") transferring
a parcel of land with improvements thereon covered by TCT No. S-52808
(343721) to JALECO Development, Inc., in exchange for 12,000 shares of said
Corporation with a par value of P1,200,000.00. As a result, TCT No. 126573 of
the Register of Deeds of Rizal covering the aforementioned parcel of land was
issued in the name of JALECO Development, Inc., on November 24, 1983.
On November 2, 1983, Chua sold 6,000 shares of JALECO Development, Inc., to
Mr. Chua Tiong King for P600,000.00 (Exh. "10"-Chua; Exh. "3"-JALECO) and
another 6,000 shares of JALECO Development, Inc. to Guillermo Jose, Jr. also
for P600,000.00 (Exh. "5"-JALECO) and Caw Le Ja Chua, wife of Chua sold the
6,000 share of JALECO Development, Inc., to Chua Tiong King for P200,000.00
(Exh. "11"-Chua).
In the meanwhile, for failure of both Fortune Motors (Phils.), Inc. and Forte
Merchant Finance, Inc. to meet their respective financial obligations with
PBCOM, the latter filed Civil Case No. 84-25159 against Fortune Motors (Phils.),
Inc., Joseph L. G. Chua, George D. Tan, Edgar L. Rodriguez and Jose C.
Alcantara and Civil Case No. 84-25160 against Forte Merchant Finance, Inc.,
Joseph L. G. Chua, George O. Tan and Edgar L. Rodriguez with the Regional
Trial Court of Manila, both for Sum of Money with Writ of Preliminary Attachment
where PBCOM was able to obtain a notice of levy on the properties of Fortune
Motors (Phils.) covered by TCT No. S-41915 (Makati, MM IV) and S-54185 to 86
(Province of Rizal). When plaintiff was able to locate Chua's former property
situated in Dasmarias, Makati, Metro Manila, covered by TCT No. S-52808
containing an area of 1,541 square meters which was already transferred to
JALECO Development, Inc., under TCT No. 126573 by virtue of the Deed of
Exchange dated October 24, 1983, PBCOM filed Civil Case No. 7889 for
annulment of Deed of Exchange with the Regional Trial Court of Makati, Metro
Manila.
In due course, a decision was rendered on September 18, 1986 dismissing said
case. (Rollo, pp. 37-39)

In affirming the dismissal of the complaint, the appellate court stated: The Deed of
Exchange was neither submitted nor offered as evidence rendering the petitioner's
cause of action untenable. Furthermore, the appellate court stated that the case for
annulment of the deed of exchange was filed at a time when two (2) other cases for
sums of money were filed against the respondent as one of the sureties of Fortune
Motors (Phils.), Inc. (Civil Case No. 84-25159) and of Forte Merchant Finance, Inc.
(Civil Case No. 84-25160) which are both pending. Hence, the annulment case which
was filed in the hope of receiving favorable judgments in the two (2) other cases in the
future is premature. Finally, the appellate court stated that the petitioner's interests in
the meantime are sufficiently protected by a writ of preliminary attachment on several
properties of one of the principal debtors.
The petition is impressed with merit.
The records reveal the following:
In its petition filed with the lower court, the petitioner alleged among others:
xxx

xxx

xxx

12. That plaintiff was able to locate a parcel of land with buildings and
improvements thereon situated in Dasmarias Village, Makati, Metro Manila, with
T.C.T. No. S-52808, containing an area of 1,514 square meters, but the said
property was transferred to the name of a corporation named Jaleco
Development Inc., pursuant to the Deed of Exchange executed between
Defendant Joseph L. G. Chua and Jaleco Development, Inc., dated October 24,
1983, photocopy of T.C.T. No. S-52808, the Deed of Exchange, and T.C.T. No.
126573 are hereto attached as Annexes E, F, and G; and made integral part
hereof; (Rollo, pp. 95-96)
xxx

xxx

xxx

xxx

xxx

In his answer, respondent Chua stated:

xxx

That paragraph 12, is admitted; the said Deed of Exchange (Annex "F") was
done in good faith, was done in accordance with law and same is valid; (Rollo, p.
44)
xxx

xxx

xxx

Chua's admission of the existence of the Deed of Exchange, attached to the "Petition as
Annex "F" falls squarely within the scope of Judicial Admissions under Section 4, Rule
129 of the Rules of Court. The rule provides:
Judicial Admissions. An admission, verbal or written, made by a party in the
course of the proceeding in the same case, does not require proof. The
admission may be contradicted only by showing that it was made through
palpable mistake or that no such admission was made.
As early as 1925 in the case of Asia Banking Corporation v. Walter E. Olsen & Co. (48
Phil. 529), we have ruled that documents attached to the complaint are considered a
part thereof and may be considered as evidence although they were not introduced as
such. We said:

Another error assigned by the appellant is the fact that the lower court took into
consideration the documents attached to the complaint as a part thereof, without
having been expressly introduced in evidence, This was no error. In the answer
of the defendants, there was no denial under oath of the authenticity of these
documents. Under section 103 of the Code of Civil Procedure, the authenticity
and due execution of these documents must, in that case, be deemed admitted.
The effect of this is to relieve the plaintiff from the duty of expressly presenting
such documents as evidence. The court, for the proper decision of the case, may
and should consider, without the introduction of evidence, the facts admitted by
the parties. (at p. 532)
We reiterated this principle in the later case of Bravo Jr. v. Borja (134 SCRA 466
[1985]). In that case we said:
But respondent judge claims that petitioner has not proved his minority. This is
inaccurate. In the motion for bail, petitioner alleged that he was a minor of 16 and
this averment was never challenged by the prosecution. Subsequently, in his
memorandum in support of the motion for bail, petitioner attached a copy of his
birth certificate. And finally, after respondent Judge had denied the motion for
bail, petitioner filed a motion for reconsideration, attaching thereto a certified true
copy of his birth certificate. Respondent Judge however refused to take
cognizance of petitioner's unchallenged minority allegedly because the certificate
of birth was not offered in evidence. This was error because evidence of
petitioner's minority was already a part of the record of the case. It was properly
filed in support of a motion. It would be a needless formality to offer it in
evidence. Respondent Judge therefore acted with grave abuse of discretion in
disregarding it.
For its part, JALECO stated in its Answer:
xxx

xxx

xxx

2. That it has no knowledge or information sufficient to form a belief as to the

truth of the allegation contained in pars. 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 of the
Petitioner; (Emphasis supplied)
Paragraph 12 refers to the deed of exchange in the petition.
The Deed of Exchange was attached to the petition. Necessarily, JALECO's contention
that it has no knowledge or information sufficient to form a belief as to the truth of the
deed of exchange becomes an invalid or ineffective denial pursuant to the Rules of
Court. Under the circumstances, the petitioner could have easily asserted whether or
not it executed the deed of exchange. The ruling in Capitol Motors Corporations
vs. Yabut (32 SCRA 1 [1970]) applies:
We agree with defendant-appellant that one of the modes of specific denial
contemplated in Section 10, Rule 8, is a denial by stating that the defendant is
without knowledge or information sufficient to form a belief as to the truth of a
material averment in the complaint. The question, however, is whether paragraph
2 of the defendant-appellant's answer constitutes a specific denial under the said
rule. We do not think so. In Warner Barnes & Co., Ltd. vs. Reyes, et al. G.R. No.
L-9531, May 14, 1958 (103 Phil. 662), this Court said that the rule authorizing an
answer to the effect that the defendant has no knowledge or information sufficient
to form a belief as to the truth of an averment and giving such answer the effect
of a denial, does not apply where the fact as to which want of knowledge is
asserted, is so plainly and necessarily within the defendant's knowledge that his
averment of ignorance must be palpably untrue. In said case, the suit was one

for foreclosure of mortgage, and a copy of the deed of mortgage was attached to
the complaint thus; according to this Court, it would have been easy for the
defendants to specifically allege in their answer whether or not they had
executed the alleged mortgage. The same thing can be said in the present case,
where a copy of the promissory note sued upon was attached to the complaint. . .
.
Considering the admission by Chua and the non-denial by JALECO of the document
forming part of the petition, the appellate court committed reversible error in not
admitting the deed of exchange as evidence.
Furthermore, we find as not well-taken the appellate court's ruling that the pendency of
two (2) other cases for collection of money against respondent Chua, among others as
surety of Fortune Motors (Phils.), Inc. and Forte Merchant Finance, Inc., renders the
petition for annulment of deed of exchange premature.
For failure of both Fortune Motors (Phils), Inc. and Forte Merchant Finance, Inc. to pay
their obligations with the petitioner, the latter filed the two civil cases against Fortune
Motors (Phils.), Inc. and Forte Merchant Finance, Inc. and respondent Chua, among
others with the Regional Trial Court of Manila. The petitioner was granted a writ of
attachment as a result of which properties belonging to Fortune Motors (Phils.) were
attached. It turned out, however, that the attached properties of Fortune Motors (Phils.),
Inc. were already previously attached/mortgaged to prior lien holders in the amount of
about P70,000,000.00. As regards Forte Merchant Finance, Inc., it appears that it has
no property to satisfy the debts it incurred with PBCOM. The record further shows that
as regards Chua, the property subject of the Deed of Exchange between him and
JALECO was his only property.
Under these circumstances, the petitioner's petition for annulment of the deed of
exchange on the ground that the deed was executed in fraud of creditors, despite the
pendency of the two (2) other civil cases is well-taken.
As surety for the financial obligations of Fortune Motors (Phils.), Inc. and the Forte
Merchant Finance, Inc., with the petitioner, respondent Chua bound himself solidarily
liable with the two (2) principal debtors. (Article 2047, Civil Code) The petitioner may
therefore demand payment of the whole financial obligations of Fortune Motors (Phils.),
Inc. and Forte Finance, Inc., from Chua, if the petitioner chooses to go directly after him.
Hence, since the only property of Chua was sold to JALECO after the debts became
due, the petitioner has the right to file an annulment of the deed of exchange between
Chua and JALECO wherein Chua sold his only property to JALECO to protect his
interests and so as not to make the judgments in the two (2) cases illusory:
Rescission requires the existence of creditors at the time of the fraudulent
alienation, and this must be proved as one of the bases of the judicial
pronouncement setting aside the contract; without prior existing debts, there can
be neither injury nor fraud. The credit must be existing at the time of the
fraudulent alienation, even if it is not yet due. But at the time the accion
pauliana is brought, the credit must already be due. Therefore, credits with
suspensive term or condition are excluded, because the accion
paulianapresupposes a judgment and unsatisfied execution, which cannot exist
when the debt is not demandable at the time the rescissory action is brought.
Rescission is a subsidiary action, which presupposes that the creditor has
exhausted the property of the debtor, which is impossible in credits which cannot
be enforced because of the term or condition.
While it is necessary that the credit of the plaintiff in the accion pauliana must be
prior to the fraudulent alienation, the date of the judgment enforcing it is

immaterial. Even if the judgment be subsequent to the alienation, it is merely

declaratory, with retroactive effect to the date when the credit was
constituted. . . . (Emphasis Supplied) (Tolentino, Civil Code of the Philippines,
Vol. IV Ed. pp. 578-579)
Parenthetically, the appellate court's observation that the petitioner's interests are
sufficiently protected by a writ of attachment on the properties of Fortune Finance
(Phils.), Inc. has neither legal nor factual basis.
One other point.
The trial court disregarded the ex-parte evidence adduced by the petitioner against
JALECO when the latter was declared in default on the ground that the exparte proceedings were conducted by the Deputy Clerk of Court which is not allowed in
accordance with the ruling in the case of Lim Tanhu vs. Ramolete (66 SCRA 425
[1975]). That ruling has already been overruled in the later case of Gochangco vs. CFI
of Negros Occidental (157 SCRA 40 [1988]), wherein we said:
The respondent Court also declared null and void "the reception of evidence ex
parte before . . (the) deputy clerk of court." It invoked what it termed the doctrinal
rule laid down in the recent case of Lim Tan Hu vs.Ramolete, 66 SCRA 430,
promulgated on August 29, 1975 (inter alia declaring that) a Clerk of Court is not
legally authorized to receive evidence ex-parte.
Now, that declaration does not reflect long observed and established judicial
practice with respect to default cases. It is not quite consistent, too, with the
several explicitly authorized instances under the Rules where the function of
receiving evidence and even of making recommendatory findings of facts on the
basis thereof may be delegated to commissioners, inclusive of the Clerk of Court.
These instances are set out in Rule 33, treating of presentation of evidence
before commissioners, etc., in particular situations, such as when the trial of an
issue of fact requires the examination of a long account, or when the taking of an
account is necessary for the information of the court, or when issues of fact arise
otherwise than upon the pleadings or while carrying a judgment or order into
effect; Rules 67 and 69, dealing with submission of evidence also before
commissioners in special civil actions of eminent domain and partition,
respectively; Rule 86 regarding trials of contested claims in judicial proceedings
for the settlement of a decedent's estate; Rule 136 empowering the clerk of court,
directed by the judge inter alia to receive evidence relating to the accounts of
executors, administrators, guardians, trustees and receivers, or relative to the
settlement of the estates of deceased persons, or to guardianships, trusteeships,
or receiverships. In all these instances, the competence of the clerk of court is
assumed. Indeed, there would seem, to be sure, nothing intrinsically wrong in
allowing presentation of evidence ex parte before a Clerk of Court. Such a
procedure certainly does not foreclose relief to the party adversely affected who,
for valid cause and upon appropriate and seasonable application, may bring
about the undoing thereof or the elimination of prejudice thereby caused to him;
and it is, after all, the Court itself which is duty bound and has the ultimate
responsibility to pass upon the evidence received in this manner, discarding in
the process such proofs as are incompetent and then declare what facts have
thereby been established. In considering and analyzing the evidence preparatory
to rendition of judgment on the merits, it may not unreasonably be assumed that
any serious error in the ex parte presentation of evidence, prejudicial to any
absent party, will be detected and duly remedied by the Court, and/or may
always, in any event be drawn to its attention by any interested party. . . .

Consequently, there is no legal impediment to the admissibility of the evidence

presented by the petitioner against JALECO.
These findings pave the way to the resolution of the case on its merits.
Respondent Chua admitted his liability under the various Surety Agreements executed
on several dates by Fortune Motors (Phils.), Inc. and Forte Merchants Finance, Inc. as
principal debtors, respondent Chua, among others, as surety and the petitioner as
creditor. He also admitted in the Pre-Trial Order that he has no other properties
sufficient to cover the claims of the petitioner except for the Dasmarias property,
subject matter of the Deed of Exchange.
During the above-mentioned proceedings, the petitioner established the following:
After the petitioner attached the properties of Fortune Motors (Phils.), Inc. by virtue of
the writ of attachment filed in the two (2) civil cases, it found out the same properties
were previously mortgaged and/or attached in the amount of about P70,000,000.00.
Thereafter, the petitioner was able to locate a property in the name of respondent Chua.
This property was, however already sold to JALECO on November 24, 1983 pursuant to
a Deed of Exchange and the Register of Deeds of Makati had already issued T.C.T. No.
126573 covering the property in the name of JALECO.
Upon investigation with the Securities and Exchange Commission (SEC), the petitioner
gathered the following facts based on the SEC records: a) JALECO was organized on
November 2, 1982 with a capital stock of P5,000,000.00; b) the stockholders of said
corporation were mostly members of the immediate family of Joseph L. G. Chua; c) on
April 4, 1983, a Board Resolution was passed authorizing the issuance of 12,000
shares of stocks worth Pl,200,000.00 to a new subscriber and non-stockholder Joseph
L. G. Chua; and d) prior to the acquisition by the corporation of the property located at
Dasmarias Village, Makati, the percentage of the shareholding of the members of the
family of Joseph L. G. Chua was 88% while after the acquisition of the property and the
issuance of the shares to Chua, they owned 94% of the corporation.
The evidence on record also shows that despite the "sale" of the Dasmarias property,
respondent Chua continued to stay in the said property.
The well-settled principle is that a corporation "is invested by law with a separate
personality, separate and distinct from that of the person composing it as well as from
any other legal entity to which it may be related." (Tan Boon Been & Co., Inc. vs.
Jarencio, 163 SCRA 205 [1988] citing Yutivo and Sons Hardware Company vs. Court of
Tax Appeals, 1 SCRA 160 [1961]; Emilio Cano Enterprises, Inc. vs. Court of Industrial
Relations, 13 SCRA 290 [1965]; and Western Agro Industrial Corporation and Antonio
Rodriguez vs. Court of Appeals, and Sia's Automotive and Diesel Parts, Inc., G.R. No.
82558, August 20, 1990) However, the separate personality of the corporation may be
disregarded, or the veil of corporate fiction pierced when the corporation is used "as a
cloak or cover for fraud or illegality, or to work an injustice, or where necessary to
achieve equity or when necessary for the protection of creditors." (Sulo ng Bayan, Inc.
vs. Araneta, Inc., 72 SCRA 347 [1976] cited in Tan Boon Bee & Co., Inc. vs.
Jarencio, supra; Western Agro Industrial Corporation, et al. vs. Court of Appeals, supra.)
In the instant case, the evidence clearly shows that Chua and his immediate family
control JALECO. The Deed of Exchange executed by Chua and JALECO had for its
subject matter the sale of the only property of Chua at the time when Chua's financial
obligations became due and demandable. The records also show that despite the
"sale", respondent Chua continued to stay in the property, subject matter of the Deed of
Exchange.

These circumstances tend to show that the Deed of Exchange was not what it purports
to be.1wphi1 Instead, they tend to show that the Deed of Exchange was executed with
the sole intention to defraud Chua's creditorthe petitioner. It was not a bona fide
transaction between JALECO and Chua. Chua entered a sham or simulated transaction
with JALECO for the sole purpose of transferring the title of the property to JALECO
without really divesting himself of the title and control of the said property.
Hence, JALECO's separate personality should be disregarded and the corporation veil
pierced. In this regard, the transaction leading to the execution of the Deed of Exchange
between Chua and JALECO must be considered a transaction between Chua and
himself and not between Chua and JALECO. Indeed, Chua took advantage of his
control over JALECO to execute the Deed of Exchange to defraud his creditor, the
petitioner herein. JALECO was but a mere alter ego of Chua. (See Tan Boon Bee & Co.,
Inc. vs. Jarencio, supra)
WHEREFORE, the instant petition is GRANTED, The questioned decision dated
February 8, 1990 of the Court of Appeals is REVERSED and SET ASIDE. The Deed of
Exchange executed by and between Joseph L. G. Chua and JALECO Development,
Inc., and the title issued in the name of JALECO on the basis thereof are declared
NULL and VOID. Costs against the private respondents.
SO ORDERED.
Fernan, C.J., Feliciano, Bidin and Davide, Jr., JJ., concur.

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).
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. Q33798 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, 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 . . . .
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 probationmust
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.
Narvasa (Chairman), Gancayco and Grio-Aquino, JJ., concur.

Separate Opinion
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.

G.R. No. 158271

April 8, 2008

CHINA BANKING CORPORATION, petitioner,

vs.
ASIAN CONSTRUCTION and DEVELOPMENT CORPORATION, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court filed by petitioner China Banking Corporation (China Bank) seeking to annul the
Resolution1 dated October 14, 2002 and the Resolution 2dated May 16, 2003 of the
Court of Appeals (CA) in CA-G.R. CV No. 72175.
The facts of the case:
On July 24, 1996, China Bank granted respondent Asian Construction and Development
Corporation (ACDC) an Omnibus Credit Line in the amount of P90,000,000.00.3
On April 12, 1999, alleging that ACDC failed to comply with its obligations under the
Omnibus Credit Line, China Bank filed a Complaint 4 for recovery of sum of money and
damages with prayer for the issuance of writ of preliminary attachment before the
Regional Trial Court (RTC) of Makati, Branch 138, docketed as Civil Case No. 99-796.
In the Complaint, China Bank claimed that ACDC, after collecting and receiving the
proceeds or receivables from the various construction contracts and purportedly holding
them in trust for China Bank under several Deeds of Assignment, misappropriated,
converted, and used the funds for its own purpose and benefit, instead of remitting or
delivering them to China Bank.5
On April 22, 1999, the RTC issued an Order 6 granting China Banks prayer for writ of
preliminary attachment. Consequently, as shown in the Sheriffs Report 7 dated June 14,
1999, the writ of preliminary attachment was implemented levying personal properties of
ACDC, i.e., vans, dump trucks, cement mixers, cargo trucks, utility vehicles, machinery,
equipment and office machines and fixtures.
On March 27, 2000, upon motion of China Bank, the RTC issued a Summary
Judgment8 in favor of China Bank. ACDC filed its Notice of Appeal 9 dated April 24, 2000.

On June 15, 2000, China Bank filed a Motion to Take Custody of Attached Properties
with Motion for Grant of Authority to Sell to the Branch Sheriff 10 with the RTC, praying
that it be allowed to take custody of ACDCs properties for the purpose of selling them in
an auction.11 On June 20, 2000, ACDC filed its Opposition 12 to the June 15, 2000 Motion
arguing that there can be no sale of the latters attached properties in the absence of a
final and executory judgment against ACDC.
On August 25, 2000, China Bank partially appealed the Summary Judgment for not
awarding interest on one of its promissory notes. 13 Records of the case were elevated to
the CA.14
On April 18, 2002, China Bank filed a Motion for Leave for Grant of Authority to Sell
Attached Properties15 which the CA denied in the herein assailed Resolution dated
October 14, 2002.
According to the CA, selling the attached properties prior to final judgment of the
appealed case is premature and contrary to the intent and purpose of preliminary
attachment for the following reasons: first, the records reveal that the attached
properties subject of the motion are not perishable in nature; and second, while the sale
of the attached properties may serve the interest of China Bank, it will not be so for
ACDC. The CA recognized China Banks apprehension that by the time a final judgment
is rendered, the attached properties would be worthless. However, the CA also
acknowledged that since ACDC is a corporation engaged in a construction business,
the preservation of the properties is of paramount importance; and that in the event that
the decision of the lower court is reversed and a final judgment rendered in favor ACDC,
great prejudice will result if the attached properties were already sold.
China Bank filed a Motion for Reconsideration 16 which was denied in the herein assailed
CA Resolution17 dated May 16, 2003.
Hence, the present petition for review on certiorari, on the following ground:
THE HONORABLE COURT OF APPEALS RENDERED THE QUESTIONED
RESOLUTIONS (ANNEXES "A" and "B") IN A MANNER NOT IN ACCORD WITH THE
PROVISIONS OF SECTION 11, RULE 57 OF THE RULES OF CIVIL PROCEDURE, AS
IT SHELVED THE DEMANDS OF EQUITY BY ARBITRARILY DISALLOWING THE
SALE OF THE ATTACHED PROPERTIES, UPHOLDING ONLY THE INTEREST OF
RESPONDENT, IN UTTER PARTIALITY.18
Considering that the herein assailed CA Resolutions are interlocutory in nature as they
do not dispose of the case completely but leave something to be done upon the
merits,19 the proper remedy should have been by way of petition for certiorari under
Rule 65, as provided for in Section 1 (b), Rule 41 of the Rules of Court, as amended by
A.M. No. 07-7-12-SC,20 which provides:
Section 1. Subject of appeal. - An appeal may be taken from a judgment or final order
that completely disposes of the case, or of a particular matter therein when declared by
these Rules to be appealable.
No appeal may be taken from:
xxxx
(b) An interlocutory order;

xxxx
In any of the foregoing instances, the aggrieved party may file an appropriate special
civil action as provided in Rule 65. (Emphasis supplied).
The present petition for review on certiorari should have been dismissed outright.
However, in many instances, the Court has treated a petition for review
on certiorari under Rule 45 as a petition for certiorari under Rule 65 of the Rules of
Court, such as in cases where the subject of the recourse was one of jurisdiction, or the
act complained of was perpetrated by a court with grave abuse of discretion amounting
to lack or excess of jurisdiction. 21 The present petition does not involve any issue on
jurisdiction, neither does it show that the CA committed grave abuse of discretion in
denying the motion to sell the attached property.
Section 11, Rule 57 of the Rules of Court provides:
Sec. 11. When attached property may be sold after levy on attachment and before entry
of judgment.-Whenever it shall be made to appear to the court in which the action is
pending, upon hearing with notice to both parties, that the property attached is
perishable, or that the interests of all the parties to the actionwill be subserved by
the sale thereof, the court may order such property to be sold at public auction in such
manner as it may direct, and the proceeds of such sale to be deposited in court to abide
the judgment in the action. (Emphasis supplied)
Thus, an attached property may be sold after levy on attachment and before entry of
judgment whenever it shall be made to appear to the court in which the action is
pending, upon hearing with notice to both parties, that the attached property is
perishable or that the interests of all the parties to the action will be subserved by
the sale of the attached property.
In its Memorandum,22 China Bank argues that the CAs notion of perishable property,
which pertains only to those goods which rot and decay and lose their value if not
speedily put to their intended use, 23 is a strict and stringent interpretation that would
betray
the
purpose
for
which
the
preliminary
attachment
was
24
25
engrafted. CitingWitherspoon v. Cross, China Bank invokes the definition of
"perishable property" laid down by the Supreme Court of California as goods which
decay and lose their value if not speedily put to their intended use; but where the time
contemplated is necessarily long, the term may embrace property liable merely to
material depreciation in value from other causes than such decay.
As stated in the Sheriffs Report26 and Notices of Levy on Properties,27 all of
ACDCs properties which were levied are personal properties consisting of used
vehicles, i.e., vans, dump trucks, cement mixers, cargo trucks, utility vehicles,
machinery, equipment and office machines and fixtures. China Bank insists that the
attached properties, all placed inside ACDCs stockyard located at Silang, Cavite and
the branch office in Mayamot, Antipolo City, are totally exposed to natural elements and
adverse weather conditions.28 Thus, China Bank argues, that should the attached
properties be allowed to depreciate, perish or rot while the main case is pending, the
attached properties will continue losing their worth thereby rendering the rules on
preliminary attachment nugatory.

The issue hinges on the determination whether the vehicles, office machines and
fixtures are "perishable property" under Section 11, Rules 57 of the Rules of Court,
which is actually one of first impression. No local jurisprudence or authoritative work has
touched upon this matter. This being so, an examination of foreign laws and
jurisprudence, particularly those of the United States where some of our laws and rules
were patterned after, is in order.29
In Mossler Acceptance Co. v. Denmark,30 an order of the lower court in directing the
sale of attached properties, consisting of 20 automobiles and 2 airplanes, was reversed
by the Supreme Court of Louisiana. In support of its contention that automobiles are
perishable, Mossler offered testimony to the effect that automobile tires tend to dry-rot in
storage, batteries to deteriorate, crankcases to become damaged, paint and upholstery
to fade, that generally automobiles tend to depreciate while in storage. 31 Rejecting these
arguments, the Supreme Court of Louisiana held that while there might be a
depreciation in the value of a car during storage, depending largely on existing
economic conditions, there would be no material deterioration of the car itself or any of
its appurtenances if the car was properly cared for, and therefore it could not be said
that automobiles were of a perishable nature within the intendment of the statute, which
could only be invoked when the property attached and seized was of a perishable
nature.32
With respect to the determination of the question on whether the attached office
furniture, office equipment, accessories and supplies are perishable properties, the
Supreme Court of Alabama in McCreery v. Berney National Bank 33 discussed the
"perishable" nature of the attached properties, consisting of shelving, stock of drygoods
and a complete set of store fixtures, consisting of counters iron safe, desk and
showcases, to be within the meaning of "perishable" property under the Alabama Code
which authorizes a court, on motion of either party, to order the sale, in advance of
judgment, of perishable property which had been levied on by a writ of attachment. 34
In McCreery, the Supreme Court of Alabama rejected the argument that the sale of the
attached property was void because the term "perishable" property, as used in the
statute, meant only such property as contained in itself the elements of speedy decay,
such as fruits, fish, fresh meats, etc.35 The Supreme Court of Alabama held that
whatever may be the character of the property, if the court is satisfied that, either by
reason of its perishable nature, or because of the expense of keeping it until the
termination of the litigation, it will prove, or be likely to prove, fruitless to the creditor, and
that the purpose of its original seizure will probably be frustrated, the sale of the
attached property is justified.
McCreery applied the doctrine in Millards Admrs. v. Hall36 where the Supreme Court of
Alabama held that an attached property is perishable "if it is shown that, by keeping the
article, it will necessarily become, or is likely to become, worthless to the creditor, and
by consequence to the debtor, then it is embraced by the statute. It matters not, in our
opinion, what the subject matter is. It may be cotton bales, live stock, hardware
provisions or dry goods." Although the statute under which Millards was decided used
the words "likely to waste or be destroyed by keeping," instead of the word "perishable,"
the reasons given for the construction placed on the statute apply equally to the
Alabama Code which uses the term "perishable." 37

In the Motion for Leave for Grant of Authority to Sell Attached Properties 38 filed before
the CA, China Bank alleged that the attached properties are placed in locations where
they are totally exposed to the natural elements and adverse weather conditions since
their attachment in 1999;39 that as a result, the attached properties have gravely
deteriorated with corrosions eating them up, with weeds germinating and growing
thereon and their engines and motors stock up; 40 and that the same holds true to the
office furniture, office equipment, accessories and supplies. 41 No evidence, however,
were submitted by China Bank to support and substantiate these claims before the CA.
Notably, in the Petition filed before the Court, China Bank, for the first time, included as
annexes,42 photographs of the attached properties which were alleged to be recently
taken, in an attempt to convince the Court of the deteriorated condition of the attached
properties.
The determination on whether the attached vehicles are properly cared for, and the
burden to show that, by keeping the attached office furniture, office equipment and
supplies, it will necessarily become, or is likely to become, worthless to China Bank, and
by consequence to ACDC, are factual issues requiring reception of evidence which the
Court cannot do in a petition for certiorari. Factual issues are beyond the scope
of certioraribecause they do not involve any jurisdictional issue.43
As a rule, only jurisdictional questions may be raised in a petition for certiorari, including
matters of grave abuse of discretion which are equivalent to lack of jurisdiction. 44 The
office of the writ of certiorari has been reduced to the correction of defects of jurisdiction
solely and cannot legally be used for any other purpose. 45
Certiorari is truly an extraordinary remedy and, in this jurisdiction, its use is restricted to
truly extraordinary cases - cases in which the action of the inferior court is wholly void;
where any further steps in the case would result in a waste of time and money and
would produce no result whatever; where the parties, or their privies, would be utterly
deceived; where a final judgment or decree would be nought but a snare and delusion,
deciding nothing, protecting nobody, a judicial pretension, a recorded falsehood, a
standing menace. It is only to avoid such results as these that a writ of certiorari is
issuable; and even here an appeal will lie if the aggrieved party prefers to prosecute it. 46
Moreover, the Court held in JAM Transportation Co., Inc. v. Flores 47 that it is well-settled,
too well-settled to require a citation of jurisprudence, that this Court does not make
findings of facts specially on evidence raised for the first time on appeal. 48 The Court will
not make an exception in the case at bar. Hence, the photographs of the attached
properties presented before the Court, for the first time on appeal, cannot be considered
by the Court.
China Bank argues that if the CA allowed the attached properties to be sold, whatever
monetary value which the attached properties still have will be realized and saved for
both parties.49 China Bank further claims that should ACDC prevail in the final
judgment50 of the collection suit, ACDC can proceed with the bond posted by China
Bank.51 The Court finds said arguments to be specious and misplaced.
Section 4, Rule 57 of the Rules of Court provides:
Section 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 the 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 foregoing provision that the bond posted by China Bank answers only
for the payment of all damages which ACDC may sustain if the court shall finally
adjudge that China Bank was not entitled to attachment. 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." 52 Clearly, ACDC can only claim from
the bond for all the damages which it may sustain by reason of the attachment and not
because of the sale of the attached properties prior to final judgment.
Sale of attached property before final judgment is an equitable remedy provided for the
convenience of the parties and preservation of the property.53 To repeat, the Court finds
that the issue of whether the sale of attached properties is for the convenience of the
parties and that the interests of all the parties will be subserved by the said sale is a
question of fact. Again, the foregoing issue can only be resolved upon examination of
the evidence presented by both parties which the Court cannot do in a petition
for certiorari under Rule 65 of the Rules of Court.
WHEREFORE, the petition is DENIED. The assailed Resolutions of the Court of
Appeals dated October 14, 2002 and May 16, 2003 in CA-G.R. CV No. 72175 are
hereby AFFIRMED.
SO ORDERED.
Tinga*, Austria-Martinez, Chico-Nazario, Nachura, Reyes, JJ., concur.

Footnotes
*

In lieu of Justice Consuelo Ynares-Santiago, per Special Order No. 497 dated March
14, 2008.
1

Penned by Justice Remedios A. Salazar-Fernando and concurred in by now Presiding

Justice Conrado M. Vasquez, Jr. and Justice Regalado E. Maambong; rollo, pp. 10-13.
2

Id. at 15-16.

Annex "A," rollo, p. 84.

Annex "D," id. at 54-74.

Id. at 333.

Annex "E," id. at 182-183.

Annex "F," id. at 184-185.

Annex "I," id. at 228-231.

Annex "J," id. at 232-233.

10

Annex "K," id. at 234-238.

11

Id. at 237.

12

Records, vol. II, pp. 651-656.

13

Annex "L," rollo, pp. 239-240.

14

CA rollo, p. 3.

15

Rollo, pp. 241-245.

16

Id. at 48-53.

17

Id. at 15-16.

18

Rollo, p. 26.

19

De Leon v. Court of Appeals, 432 Phil. 775, 787 (2002).

20

Effective December 27, 2007.

21

See Estandarte v. People of the Philippines , G.R. Nos. 156851-55, February 18,
2008; Longos Rural Waterworks and Sanitation Association, Inc. v. Desierto, 434 Phil.
618, 624 (2002); Fortich v. Corona, 352 Phil. 461, 477 (1998).
22

Rollo, pp. 296-318.

23

Id. at 310.

24

Id.

25

135 Cal. 96, 67 Pac. 18 (Dec. 14, 1901).

26

Annex "F," rollo, pp. 184-185.

27

Id. at 186-194.

28

Id. at 307.

29

Republic of the Philippines v. Sandiganbayan, 453 Phil. 1059, 1121(2003).

30

211 La. 1078, 31 So. 2d 216 (1947).

31

Id.

32

Id.

33

116 Ala. 224, 22 So. 577 (1897).

34

Id.

35

Id.

36

24 Ala. 209 (1854).

37

McCreery v. Berney National Bank, supra note 33.

38

CA rollo, pp. 24-28.

39

Id. at 25-26.

40

Id. at 26.

41

Id.

42

Annex "N," rollo, pp. 266-273.

43

Ongpauco v. Court of Appeals, G.R. No. 134039, December 21, 2004, 447 SCRA
395, 401; see Militante v. People of the Philippines , G.R. No. 150607, November 26,
2004, 444 SCRA 465, 476.
44

De Castro v. Delta Motor Sales Corp., 156 Phil. 334, 337 (1974).

45

Id.

46

Id., citing Herrera v. Baretto, 25 Phil. 245 (1913); Fernando v. Vasquez, G.R. No. L26417, January 30, 1970, 31 SCRA 288, 293.
47

G.R. No. 82829, March 19, 1993, 220 SCRA 114.

48

Id. at 123.

49

Rollo, p. 33.

50

Records do not show that the CA had rendered its decision on the merits in CA-G.R.
CV No. 72175.
51

Supra note 49.

52

Rocco v. Meads, 96 Phil. 884, 887-888 (1955).

53

Francisco, The Revised Rules of Court in the Philippines, Volume IV-A, 1971, p. 101.