RULE 57 PRELIMINARY ATTACHMENT

SECTION 1
G.R. No. L-252
March 30, 1946
TRANQUILINO CALO and DOROTEO SAN JOSE, petitioners,
vs.
ARSENIO C. ROLDAN, Judge of First Instance of Laguna, REGINO RELOVA and TEODULA
BARTOLOME,respondents.
Zosimo D. Tanalega for petitioners.
Estanislao A. Fernandez for respondents Relova and Bartolome.
No appearance for respondent Judge.
FERIA, J.:
This is a petition for writ of certiorari against the respondent Judge Arsenio C. Roldan of the Court
First Instance of Laguna, on the ground that the latter has exceeded his jurisdiction or acted with
grave abuse of discretion in appointing a receiver of certain lands and their fruits which, according to
the complainant filed by the other respondents, as plaintiffs, against petitioners, as defendants, in
case No. 7951, were in the actual possession of and belong to said plaintiffs.
The complaint filed by plaintiffs and respondents against defendants and petitioners in the Court of
First Instance of Laguna reads as follows:
1. That the plaintiffs and the defendants are all of legal age, Filipino citizens, and residents of
Pila, Laguna; the plaintiffs are husband and wife..
2. That the plaintiff spouses are the owners and the possessors of the following described
parcels of land, to wit:.
xxx
xxx
xxx
3. That parcel No. (a) described above is now an unplanted rice land and parcel No. (b)
described in the complaint is a coconut land, both under the possession of the plaintiffs..
4. That the defendants, without any legal right whatsoever and in connivance with each
other, through the use of force, stealth, threats and intimidation, intend or are intending to
enter and work or harvest whatever existing fruits may now be found in the lands abovementioned in violation of plaintiff's in this case ineffectual..
5. That unless defendants are barred, restrained, enjoined, and prohibited from entering or
harvesting the lands or working therein through ex-parte injunction, the plaintiffs will suffer
injustice, damages and irreparable injury to their great prejudice..
6. That the plaintiffs are offering a bond in their application for ex-parte injunction in the
amount of P2,000, subject to the approval of this Hon. Court, which bond is attached hereto
marked as Annex A and made an integral part of this complaint..
7. That on or about June 26, 1945, the defendants, through force, destroyed and took away
the madre-cacao fencer, and barbed wires built on the northwestern portion of the land
designated as parcel No. (b) of this complaint to the damage and prejudice of the plaintiffs in
the amount of at least P200..
Wherefore, it is respectfully prayed:.
(a) That the accompanying bond in the amount of P2,000 be approved;
(b) That a writ of preliminary injunction be issued ex-parte immediately restraining, enjoining
and prohibiting the defendants, their agents, servants, representatives, attorneys, and, (or)
other persons acting for and in their behalf, from entering in, interfering with and/or in any
wise taking any participation in the harvest of the lands belonging to the plaintiffs; or in any
wise working the lands above-described;
(c) That judgment be rendered, after due hearing, declaring the preliminary injunction final;.

(d) That the defendants be condemned jointly and severally to pay the plaintiffs the sum of
P200 as damages; and.
(e) That plaintiffs be given such other and further relief just and equitable with costs of suit to
the defendants.
The defendants filed an opposition dated August 8, 1945, to the issuance of the writ of preliminary
injunction prayed for in the above-quoted complaint, on the ground that they are owners of the lands
and have been in actual possession thereof since the year 1925; and their answer to the complaint
filed on August 14, 1945, they reiterate that they are the owners and were then in actual possession
of said property, and that the plaintiffs have never been in possession thereof.
The hearing of the petition for preliminary injunction was held on August 9, 1945, at which evidence
was introduced by both parties. After the hearing, Judge Rilloraza, then presiding over the Court of
First Instance of Laguna, denied the petition on the ground that the defendants were in actual
possession of said lands. A motion for reconsideration was filed by plaintiffs on August 20, 1945, but
said motion had not yet, up to the hearing of the present case, been decided either by Judge
Rilloraza, who was assigned to another court, or by the respondent judge.
The plaintiffs (respondents) filed on September 4, 1945, a reply to defendants' answer in which,
among others, they reiterate their allegation in the complaint that they are possessors in good faith
of the properties in question.
And on December 17, plaintiffs filed an urgent petition ex-parte praying that plaintiffs' motion for
reconsideration of the order denying their petition for preliminary injunction be granted and or for the
appointment of a receiver of the properties described in the complaint, on the ground that (a) the
plaintiffs have an interest in the properties in question, and the fruits thereof were in danger of being
lost unless a receiver was appointed; and that (b) the appointment of a receiver was the most
convenient and feasible means of preserving, administering and or disposing of the properties in
litigation which included their fruits. Respondents Judge Roldan, on the same date, December 17,
1945, decided that the court would consider the motion for reconsideration in due time, and granted
the petition for appointment of and appointed a receiver in the case.
The question to be determined in the present special civil action of certiorari is, whether or not the
respondent judge acted in excess of his jurisdiction or with grave abuse of discretion in issuing the
order appointing a receiver in the case No. 7951 of the Court of First Instance of Laguna; for it is
evident that there is no appeal or any other plain, speedy, and adequate remedy in the ordinary
course of the law against the said order, which is an incidental or interlocutory one.
It is a truism in legal procedure that what determines the nature of an action filed in the courts are
the facts alleged in the complaint as constituting the cause of the action. The facts averred as a
defense in the defendant's answer do not and can not determine or change the nature of the
plaintiff's action. The theory adopted by the plaintiff in his complaint is one thing, and that of the
defendant in his answer is another. The plaintiff has to establish or prove his theory or cause of
action in order to obtain the remedy he prays for; and the defendant his theory, if necessary, in order
to defeat the claim or action of the plaintiff..
According to the complaint filed in the said case No. 7951, the plaintiff's action is one of ordinary
injunction, for the plaintiffs allege that they are the owners of the lands therein described, and were
in actual possession thereof, and that "the defendants without any legal right whatever and in
connivance with each other, through the use of force, stealth, threat and intimidation, intend or are
intending to enter and work or harvest whatever existing fruits may be found in the lands above
mentioned in violation of plaintiffs' proprietary rights thereto;" and prays "that the defendants, their
agents, servants, representatives, and other persons acting for or in their behalf, be restrained,
enjoined and prohibited from entering in, interfering with, or in any way taking any participation in the
harvest of the lands above describe belonging to the plaintiffs."
That this is the nature of plaintiffs' action corroborated by the fact that they petitioned in the same
complaint for a preliminary prohibitory injunction, which was denied by the court in its order dated
August 17, 1945, and that the plaintiffs, in their motion for reconsideration of said order filed on

August 20 of the same year, and in their urgent petition dated December 17, moving the court to
grant said motion for reconsideration, reiterated that they were actual possessors of the land in
question.
The fact that plaintiffs, in their reply dated September 4, after reiterating their allegation or claim that
they are the owners in fee simple and possessors in good faith of the properties in question, pray
that they be declared the owners in fee simple, has not changed the nature of the action alleged in
the complaint or added a new cause of action thereto; because the allegations in plaintiffs' reply
were in answer to defendants' defenses, and the nature of plaintiffs' cause of action, as set forth in
their complaint, was not and could not be amended or changed by the reply, which plaintiffs had the
right to present as a matter of course. A plaintiff can not, after defendant's answer, amend his
complaint by changing the cause of action or adding a new one without previously obtaining leave of
court (section 2, Rule 17)..
Respondents' contention in paragraph I of their answer that the action filed by them against
petitioners in the case No. 7951 of the Court of First Instance of Laguna is not only for injunction, but
also to quiet title over the two parcels of land described in the complaint, is untenable for the reasons
stated in the previous paragraph. Besides, an equitable action to quiet title, in order to prevent
harrassment by continued assertion of adverse title, or to protect the plaintiff's legal title and
possession, may be filed in courts of equity (and our courts are also of equity), only where no other
remedy at law exists or where the legal remedy invokable would not afford adequate remedy (32
Cyc., 1306, 1307). In the present case wherein plaintiffs alleged that they are the owners and were
in actual possession of the lands described in the complaint and their fruits, the action of injunction
filed by them is the proper and adequate remedy in law, for a judgment in favor of plaintiffs would
quiet their title to said lands..
The provisional remedies denominated attachment, preliminary injunction, receivership, and delivery
of personal property, provided in Rules 59, 60, 61, and 62 of the Rules of Court, respectively, are
remedies to which parties litigant may resort for the preservation or protection of their rights or
interest, and for no other purpose, during the pendency of the principal action. If an action, by its
nature, does not require such protection or preservation, said remedies can not be applied for and
granted. To each kind of action or actions a proper provisional remedy is provided for by law. The
Rules of Court clearly specify the case in which they may be properly granted. .
Attachment may be issued only in the case or actions specifically stated in section 1, Rule 59, in
order that the defendant may not dispose of his property attached, and thus secure the satisfaction
of any judgment that may be recovered by plaintiff from defendant. For that reason a property
subject of litigation between the parties, or claimed by plaintiff as his, can not be attached upon
motion of the same plaintiff..
The special remedy of preliminary prohibitory injunction lies when the plaintiff's principal action is an
ordinary action of injunction, that is, when the relief demanded in the plaintiff's complaint consists in
restraining the commission or continuance of the act complained of, either perpetually or for a limited
period, and the other conditions required by section 3 of Rule 60 are present. The purpose of this
provisional remedy is to preserve 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.
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.
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.
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.
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 ACG.R. SP. No. 01914 which declared null-and void, the Order of the Hon. Judge Felix V. Barbers,
issued in Civil Case No. 83-16829, dated April 14, 1983, granting petitioner's application for the
issuance of a writ of preliminary attachment and the Order dated September 13, 1983 denying
respondent's motion to lift said attachment.
The pertinent facts that gave rise to the instant petition are as follows: Petitioner William Alain
Miailhe, his sisters Monique Miailhe Sichere, Elaine Miailhe de Lencquesaing and their mother,
Madame Victoria D. Miailhe are co-owners of several registered real properties located in Metro
Manila. By common consent of the said co-owners, petitioner William Alain has been administering
said properties since 1960. As Madame Victoria D. Miailhe, her daughter Monique and son William
Alain (herein petitioner) failed to secure an out-of court partition thereof due to the unwillingness or
opposition of respondent Elaine, they filed in the Court of First Instance of Manila (now Regional
Trial Court) an action for Partition, which was docketed as Civil Case No. 105774 and assigned to
Branch . . . thereof, presided over by Judge Pedro Ramirez. Among the issues presented in the
partition case was the matter of petitioner's account as administrator of the properties sought to be

partitioned. But while the said administrator's account was still being examined, respondent Elaine
filed a motion praying that the sum of P203,167.36 which allegedly appeared as a cash balance in
her favor as of December 31, 1982, be ordered delivered to her by petitioner William Alain. Against
the opposition of petitioner and the other co-owners, Judge Pedro Ramirez granted the motion in his
Order dated December 19, 1983 which order is now the subject of a certiorari proceeding in the
Intermediate Appellate Court under AC-G.R. No. SP-03070.
Meanwhile however, and more specifically on February 28, 1983, respondent Elaine filed a criminal
complaint for estafa against petitioner William Alain, with the office of the City Fiscal of Manila,
alleging in her supporting affidavit that on the face of the very account submitted by him as
Administrator, he had misappropriated considerable amounts, which should have been turned over
to her as her share in the net rentals of the common properties. Two days after filing the complaint,
respondent flew back to Paris, the City of her residence. Likewise, a few days after the filing of the
criminal complaint, an extensive news item about it appeared prominently in the Bulletin Today,
March 4, 1983 issue, stating substantially that Alain Miailhe, a consul of the Philippines in the
Republic of France, had been charged with Estafa of several million pesos by his own sister with the
office of the City Fiscal of Manila.
On April 12, 1983, petitioner Alain filed a verified complaint against respondent Elaine, for Damages
in the amount of P2,000,000.00 and attorney's fees of P250,000.00 allegedly sustained by him by
reason of the filing by respondent (then defendant) of a criminal complaint for estafa, solely for the
purpose of embarrassing petitioner (then plaintiff) and besmirching his honor and reputation as a
private person and as an Honorary Consul of the Republic of the Philippine's in the City of Bordeaux,
France. Petitioner further charged respondent with having caused the publication in the March 4,
1983 issue of the Bulletin Today, of a libelous news item. In his verified complaint, petitioner prayed
for the issuance of a writ of preliminary attachment of the properties of respondent consisting of 1/6
undivided interests in certain real properties in the City of Manila on the ground that "respondentdefendant 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 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.
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 counter-bond in Civil Case No. 92-145, while the equally assailed
resolution of January 24, 1996 denied petitioners motion for reconsideration.
The undisputed facts are summarized in the appellate courts 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 ofP25,200,000.00. 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 ofP25,200,000.00. During the hearing
on February 11, 1992 before the Arbitration Committee of the Philippine Clearing House Corporation,
petitioner and respondent Bank agreed to temporarily divide between them the disputed amount
of P25,200,000.00 while the dispute has not yet been resolved. As a result, the sum
ofP12,600,000.00 is in the possession of respondent Bank. On March 9, 1994, petitioner filed a
motion to discharge attachment by counter-bond in the amount of P12,600,000.00. On June 13,
1994, respondent Judge issued the first assailed order denying the motion. On June 27, 1994,
petitioner filed a motion for reconsideration which was denied in the second assailed order
dated July 20, 1994" (Emphasis and words in bracket added).
From the order denying its motion to discharge attachment by counter-bond, petitioner went to the
Court of Appeals on a petition for certiorari thereat docketed as CA-G.R. SP No. 34876, ascribing on
the trial court the commission of grave abuse of discretion amounting to lack of jurisdiction.
While acknowledging that "[R]espondent Judge may have erred in his Order of June 13, 1994 that
the counter-bond should be in the amount of P27,237,700.00", in that he erroneously factored in, in
arriving at such amount, unliquidated claim items, such as actual and exemplary damages, legal
interest, attorneys fees and expenses of litigation, the CA, in the herein assailed decision dated
October 9, 1995, nonetheless denied due course to and dismissed the petition. For, according to the
appellate court, the RTCs order may be defended by, among others, the provision of Section 12 of
Rule 57 of the Rules of Court, infra. The CA added that, assuming that the RTC erred on the matter
of computing the amount of the discharging counter-bond, its error does not amount to grave abuse
of discretion.
With its motion for reconsideration having been similarly denied, petitioner is now with us, faulting
the appellate court, as follows:
"I. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE PRINCIPAL AMOUNT
CLAIMED BY RESPONDENT BANK SHOULD BE THE BASIS FOR COMPUTING THE
AMOUNT OF THE COUNTER-BOND, FOR THE PRELIMINARY ATTACHMENT WAS
ISSUED FOR THE SAID AMOUNT ONLY.
"II. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE ARGUMENT THAT
THE AMOUNT OF THE COUNTER-BOND SHOULD BE BASED ON THE VALUE OF THE
PROPERTY ATTACHED CANNOT BE RAISED FOR THE FIRST TIME IN THE COURT OF
APPEALS.

"III. THE COURT OF APPEALS ERRED IN RULING THAT THE AMOUNT OF THE
COUNTER-BOND SHOULD BE BASED ON THE VALUE OF THE PROPERTY ATTACHED
EVEN IF IT WILL RESULT IN MAKING THE AMOUNT OF THE COUNTER-BOND EXCEED
THE AMOUNT FOR WHICH PRELIMINARY ATTACHMENT WAS ISSUED."
Simply put, the issue is whether or not the CA erred in not ruling that the trial court committed grave
abuse of discretion in denying petitioners motion to discharge attachment by counter-bond in the
amount of P12,600,000.00.
Says the trial court in its Order of June 13, 1994:
"xxx (T)he counter-bond posted by [petitioner] Insular Savings Bank should include the unsecured
portion of [respondents] claim of P12,600,000.00 as agreed by means of arbitration between
[respondent] and [petitioner]; Actual damages at 25% percent per annum of unsecured amount of
claim from October 21, 1991 in the amount ofP7,827,500.00; 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 ofP1,000,000.00 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).
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, atP6,000,000.00. The writ of attachment issued on January 27, 1992, in turn, expressly
indicated that petitioner is justly indebted to respondent in the amount of P25,200,000.00.8 On
February 11, 1992, before the Arbitration Committee of the Philippine Clearing House Corporation,
petitioner and respondent, however, agreed to equally divide between themselves, albeit on a
temporary basis, the disputed amount of P25,200,000.00, subject to the outcome of the arbitration
proceedings. Thus, the release by petitioner of the amount of P12,600,000.00 to respondent. On
March 7, 1994, petitioner filed a motion to discharge attachment by counter-bond in the amount
ofP12,600,000.009 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 ofP27,237,700.00,
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 theP25,200,000.00 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
1avvphi1.net

defining measure in the computation of the discharging counter-attachment bond, the present less
stringent Section 12 of Rule 57 provides that the court shall order the discharge of attachment if the
movant "makes a cash deposit, or files a counter-bond . . . in an amount equal to that fixed by the
court in the order of attachment, exclusive of costs." Not being in the nature of a penal statute, the
Rules of Court cannot be given retroactive effect.11
This disposition should be taken in the light of then Section 12, Rule 57 of the Rules of Court.
WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution of
the Courts of Appeals are hereby REVERSED and SET ASIDE, along with the orders dated June
13, 1994 and July 20, 1994 of the Regional Trial Court at Makati, Branch 135, in Civil Case No. 92145 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.
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.
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 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.
G.R. No. L-18740
April 28, 1922
WALTER E. OLSEN & CO., INC., petitioner,
vs.
VICENTE ALDANESE, as Insular Collector of Customs of the Philippine Islands, and W.
TRINIDAD, as Collector of Internal Revenue, respondents.
STATEMENT
On March 29, 1922, respondents' demurrer to the petition was overruled; on April 3, an answer was
duly filed; and on April 21, the petitioner filed a motion for judgment on the pleadings.
The facts are fully stated in the former opinion.1

Paragraph 4 of the petition contains certain subdivisions of section 6 of Act No. 2613 of the
Philippine Legislature, passed February 4, 1916, entitled "an act to improve the methods of
production and the quality of tobacco in the Philippine and to develop the export trade therein." They
empower the Collector of Internal Revenue to establish certain general and local rules respecting the
classification, marking and parking of tobacco for domestic sale or for exportation to the United
States, and, among other things, provide:
No leaf tobacco or manufactured tobacco shall be exported from the Philippine Islands to the
United States until it shall have been inspected by the Collector of Internal Revenue or his
duly authorized representative and found to be standard for export ...
In order to facilitate the free entry of tobacco products from the Philippine Islands into the
United States, the Collector of Internal Revenue is authorized to act as stamp agent for the
Untied States Commissioner of Internal Revenue, and to certify to the Insular Collector of
Customs that the standard tobacco exported is the growth and product of the Philippine
Islands. The Insular Collector of Customs upon certificate from the Collector of Internal
Revenue as aforesaid, shall issue such certificate of origin as may be necessary to insure
the speedy admission of the standard tobacco into the United States free of customs duties.
Paragraph 5 of the petition alleges that under clause B of section 6 of the Act, the Collector of
Internal Revenue promulgated Administrative Order No. 35, known as "Tobacco Inspection
Regulations," in which it is said:
To be classed as standard, cigars must be manufactured under sanitary conditions from
good, clean, selected tobacco, properly cured and seasoned, of a crop which has been
harvested at least six months, exclusively the product of the provinces of Cagayan, Isabela,
or Nueva Vizcaya. The cigars must be well made, with suitable spiral wrapper and with long
filler, etc.
Paragraph 6 pleads the provisions of section 1 of article 1 of the Constitution of the United States,
and paragraph 7 pleads section 10 of the "Jones Law."
The answer admits paragraphs 4, 5, 6, and 7 of the petition.
Paragraph 6 of the answer says:
They admit the facts alleged in Paragraph XI of the petition in so far as they refer to the
Insular Collector of Customs, but they deny that the acts performed by the said officer are
wrongful or illegal; and they also deny the others facts alleged in the same paragraph except
as they may hereinafter be impliedly admitted, that is, that on or about February 6, 1922, the
petitioner applied to the Collector of Internal Revenue for a certificate of origin covering a
consignment of 10,000 machine-made cigars to San Francisco, and as the petitioner himself
stated on making such application that the cigars sought to be exported must have been
manufactured from short-filler tobacco which was not the product of the provinces of
Cagayan, Isabela, and Nueva Vizcaya, the Collector of Internal Revenue did not deem it
necessary to make an actual examination and inspection of said cigars and stated to the
petitioner that he did not see his ways clear to the granting of petitioner's request, in view of
the fact that the cigars which the petitioner's request, in view of the fact that the cigars which
the petitioner was seeking to export were not made with long-filler nor were they made from
tobacco exclusively the product of any of the three mentioned provinces, and the said cigars
were neither inspected nor examined by the Collector of Internal Revenue.
As a special defense, the respondents allege that under section 11 of Act No. 2613 and section 5 of
the Administrative Code of 1917, the Collector of Internal Revenue has discretionary power to decide
whether the manufactured tobacco that the petitioner seeks to export to the United States fulfills the
requisites prescribed by Administrative Order No. 35. That it is not within the jurisdiction of this court
to order the Collector of Internal Revenue to issue a certificate to the petitioner to the effect that the
manufactured tobacco that the petitioner seeks to export is a product of the Philippine Islands, but it
is for the Collector of Internal Revenue to exercise the power of issuing said certificate if after an
inspection of said tobacco, he should find that "it conforms to the conditions required by

Administrative order No. 35 with the exclusion of those conditions which, according to the said
decision of the Supreme Courts, the Collector of Internal Revenue is not authorized to required
under Act No. 2613."
That the cigars which petitioner seeks to export to the United States have not as yet been
examined or inspected by the Collector of Internal Revenue.
Wherefore, the defendants pray that the petition be dismissed, with costs.
The question presented is whether under the facts admitted, the answer is a good defense to the
petition.

JOHNS, J.:
The defendants are public officers of the Philippine Islands, and the acts of which the petitioner
complains are their official acts.
In paragraph 11 of the petition, among other things, it is alleged:
That on the 6th day of February the said respondent Collector of Internal Revenue wrongfully
and unlawfully refused and neglected and still unlawfully refuses and neglects to issue such
certificate of origin on the ground that said cigars were not manufactured of long-filler
tobacco produced exlusively in the provisions of Cagayan, Isabela, or Nueva Vizcaya.
Paragraph 6 of the answer says:
"The petitioner applied to the Collector of Internal Revenue for a certificate of origin covering a
consignment of 10,000 machine-made cigars to San Francisco," and represented that the cigars
were made from short-filler tobacco which was not the product of Cagayan, Isabela, and Nueva
Vizcaya. The Collector of Internal Revenue did not deem it necessary to make an actual examination
and inspection of said cigars, and stated to the petitioner that he did not see his way clear to the
granting of petitioner's request, in view of the fact that the cigars which the petitioner was seeking to
export were not made with long-filler nor were they made from tobacco exclusively the product of
any of the three provinces, and the said cigars were neither inspected nor examined by the Collector
of Internal Revenue.
In its final analysis, this is an admission by the defendants the cigars in question were rejected by
the Collector of Internal Revenue, for the specified reason that they were not long-filler cigars
manufactured from tobacco grown in one of the three provinces. That the Collector accepted and
treated the statement to the petitioner as true, and, relying thereon, refused to use the certificate of
origin, for the sole reason that the cigars in question were not long-filler cigars, and were not
manufactured from tobacco grown in one of the three provinces.
If, when the cigars were presented, the Collector of Internal Revenue had simply refused to issue the
certificate of origin and had not specified any grounds for such refusal he would then have a legal
right to plead and rely upon any and all grounds of refusal. But where, as in the instant case, it is
alleged in the petition, and, in legal effects, admitted in the answer, that the cigars were rejected
because they were not long-filler and were not manufactured from tobacco grown in one of the three
provinces, then, under the authorities and rule of construction, the defendants are confined and
limited to the specified grounds of refusal, and cannot be heard to say that the cigars were rejected
upon any other or different grounds than those specified in the refusal.
Again, it appears from the whole purport and tenor of the answer that, in their refusal, the defendant
were acting under, and relying upon, those portions of Administrative Order No. 35, known as
"Tobacco Inspection Regulations," which this court held to be null and void in its former opinion.
Although in this class of cases, as a general rule, a demand and refusal is prerequisite to the
granting of a writ, it is not necessary where it appears from the record that the demand, if made,
would have been refused.
Merrill on Mandamus, section 225, says:

The law never demands a vain thing, and when the conduct and action of the officer is
equivalent to a refusal to perform the duty desired, it is not necessary to go through the
useless formality of demanding its performance. Anything showing that the defendant does
not intend to perform the duty is sufficient to warrant the issue of a mandamus.
Cyc., vol. 26, p. 182, says:
Where it appears that a demand would be unavailing it need not be made, as where the
course and conduct of officers is such as to show a settled purpose not to perform the
imposed duty.
In the case of Chicago, K. & W. R. Co. vs. Harris (30 Pac., 456), on page 459, the court says:
The action of the officers before and since the commencement of this action clearly shows
that a formal demand would have been unavailing. The commencement of this proceeding
was at least a sufficient demand; and the defendants, instead of indicating a willingness to
execute the bonds, expressly denied the right of the plaintiff to the bonds, and denied the
existence of any obligation or duty to issue and deliver them. Having distinctly manifested
their purpose not to perform this duty, the question of a formal demand is no longer
important. It appears that it would have been useless and foolish, and the law rarely requires
the doing of a useless act. (Citing a number of authorities.)
In United States vs. Auditors of Town of Brooklyn (8 Fe. Rep., 473), the court says:
But while it is generally true that a court will not issue a mandamus to compel the
performance of an act which it is merely anticipated the defendant will not perform, still if the
defendant has shown by his conduct that he does not intend to perform the act, and that fact
is apparent to the court, it would be a work of supererogation to require that a demand
should be made for its performance.
The facts in this case are peculiar.
Under the provisions of Act No. 2613, the Collector of Internal Revenue of the Philippine Islands
promulgated Administrative Order No. 35, known as "Tobacco Inspections Regulations." Such rules
and regulations, having been promulgated by that officer, we have a right to assume that he was
acting under such rules and regulations when he refused to issue the certificate of origin.
It appears from the record that the cigars in question were not long-filler cigars, and that they were
not manufactured from tobacco grown in one of the three provinces.
By the express terms and provisions of such rules and regulations promulgated by the Collector of
Internal Revenue, it was his duty to refuse petitioner's request, and decline the certificate or origin,
because the cigars tendered were not of the specified kind, and we have a right to assume that he
performed his official duty as the understood it. After such refusal and upon such grounds, it would
indeed, have been a vain and useless thing for the Collector of Internal Revenue to his examined or
inspected the cigars.
Having refused to issue the certificate of origin for the reason above assigned, it is very apparent
that a request thereafter made examine or inspect the cigars would also have been refused.
The motion for judgment on the pleadings is sustained, and the writ will issue, as prayed for in the
petition, without costs. So ordered.
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.
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.
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
1awphil.net

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.
G.R. No. 82446 July 29, 1988
STATE INVESTMENT HOUSE, INC., petitioner,
vs.
HON. COURT OF APPEALS, HON. DOROTEO N. CANEBA, in his capacity as Presiding Judge
of Branch 20, Regional Trial Court, Manila, P.O. VALDEZ, INC., and PEDRO 0.
VALDEZ, respondents.
GRIO-AQUINO, J.:
The issue posed by the petition in this case is whether the trial court (whom the Court of Appeals
sustained) gravely abused its discretion in lifting the preliminary attachment on the private
respondents' properties.
On September 30 and October 31,1977, Pedro 0. Valdez and Rudy H. Sales executed two
Comprehensive Surety Agreements to secure any and all loans of P.O. Valdez, Inc. not exceeding
the sums of P500,000 (Annex C) and P4,934,000 (Annex D) from the petitioner State Investment
House, Inc., a domestic corporation engaged in quasi banking.
Four years later, on July 30, 1981, petitioner and P.O. Valdez, Inc. entered into an agreement for
discounting with the petitioner the receivables of P.O. Valdez, Inc. (Annex E). The other details of the
transactions between the petitioner and P.O. Valdez, Inc. are recited in the decision of the Court of
Appeals as follows:
At the time the basic loan agreement (which is the Agreement dated July 30, 1981)
was entered into, respondent P.O. Valdez, Inc. was required to provide collateral
security for the loan. And pursuant thereto, private respondents turned over to the
petitioner various certificates of stock of several corporations such as CDCP-Mining,
Northern Lines, Inc., Oriental Petroleum and others. In addition, private respondents
executed a Real Estate Mortgage in favor of the petitioner covering two (2) parcels of
land located outside Baguio City. Later, private respondents were also made to
execute a Deed of Sale dated December 29, 1982 covering the proceeds of a
postdated check for P4,066,410.20, another Deed of Sale dated January 4, 1983,
covering the proceeds as a postdated check for P197,010.31 and a Deed of
Assignment dated January 4, 1983, covering P.O. Valdez, Inc.'s construction
receivables from the Development Academy of the Philippines to the extent of
P100,000.00. (p. 34, Rollo.)
When Pedro Valdez' two checks were deposited by the petitioner upon maturity, they bounced for
insufficient funds. Despite demands, respondent corporation failed to pay its obligations to petitioner
amounting to P6,342,855.70 as of April 11, 1985.
Petitioner foreclosed its real estate mortgage on the two lots in Benguet of Pedro and Remedios
Valdez on April 11, 1985 and acquired them as the highest bidder in the foreclosure sale.
Presumably because the proceeds of the foreclosure were insufficient to satisfy the debt, petitioner

also filed a collection suit, with a prayer for preliminary attachment. It was docketed in the Regional
Trial Court of Manila as Civil Case No. 8533050 entitled "STATE INVESTMENT HOUSE, INC. vs.
P.O. VALDEZ, INC., PEDRO 0. VALDEZ and RUDY H. SALES." On November 5, 1985, the court,
through Judge (now CA Justice) Antonio Martinez, issued a writ of preliminary attachment against
the defendants' properties (Annex J). Pursuant thereto, certain real and personal properties of the
defendants were attached.
Tropical Homes, Inc. filed a third-party claim to certain properties titled in the name of Pedro Valdez.
As the sheriff failed to act on the third-party claim, the claimant filed on March 26, 1986, a motion to
lift the attachment on those properties. It was opposed by the petitioner. On May 22, 1 986,
respondent Judge Doroteo N. Caneba (who succeeded Justice Martinez) denied the motion.
In the meantime, the defendants filed their answer to the complaint. They admitted that they
obtained loans from the petitioner to finance their construction projects, namely, the DAP Building in
Pasig, the National Engineering Building in the U.P. Campus, and the UP Hostel for Economics, also
in U.P. Diliman, Quezon City.
On June 24, 1986, P.O. Valdez, Inc. and Pedro Valdez filed a motion to discharge the attachment on
the ground that there was no fraud in contracting the loans, and if any fraud existed, it was in the
performance of the obligations. The motion was opposed by the petitioner. It was denied by the
lower court on November 19, 1986.
Valdez filed a motion for reconsideration. The petitioner opposed it. Nevertheless, Judge Caeba
granted the motion for reconsideration and discharged the preliminary attachment on the properties
of Pedro O. Valdez and Remedios Valdez on the ground that their conjugal properties may not be
attached to answer for the debts of the corporation which has a juridical personality distinct from its
incorporators. It held that "neither P.O. Valdez, Inc. and (sic) Pedro O. Valdez can be faulted nor
could they be charged of incurring fraudulent acts in obtaining the loan agreement." (Annex K). It
was the petitioner's turn to file a motion for reconsideration, but without success (Annex L).
Petitioner went to the Court of Appeals on a petition for certiorari and prohibition alleging grave
abuse of discretion on the part of the lower court in lifting the writ of preliminary attachment on the
properties of the Valdez spouses (Annex K).
The Court of Appeals dismissed the petition on January 28, 1988 (Annex A). It affirmed the lower
court's finding that there was no fraud in contracting the debt. It observed that:
1. With respect to the shares of stock which the respondents pledged as additional security for the
loan, the decline in their value did not mean that the private respondents entered into the loan
transaction in bad faith or with fraudulent intent. For the private respondents could not have foreseen
how the stocks would fare in the market. And if the petitioner thought they were worthless at the
time, it should have rejected them as collateral.
2. With respect to the two parcels of land which were mortgaged to the petitioner, the latter should
also have declined to accept them as collateral if it believed they were worth less than their
supposed value.
3. With respect to the two postdated checks which bounced, the Court of Appeals observed that
since they were "sold" to the petitioner after the loan had been granted to private respondents, their
issuance did not fraudulently induce the petitioner to grant the loan applied for. They were "mere
evidence of the private respondents" standing loan obligation to the petitioner" or "mere collaterals
for the loan granted by the petitioner to the private respondents" (Annex A).
These factual conclusions of the Court of Appeals are binding on US (Bernardo vs. Bernardo, 101
SCRA 351).
Furthermore, We have examined the grounds enumerated in the petitioner's prayer for a writ of
preliminary attachment, as reproduced in the decision of the Court of Appeals, the petitioner having
failed to submit a copy of its complaint as an annex of its petition for certiorari. The main thrust of the
prayer for preliminary attachment is the alleged misrepresentation of the debtor P.O. Valdez, Inc., in
the Agreement for Discounting Receivables and in the deeds of sale of said receivables. (Annexes
E, F, and G); that the two checks or receivables" issued by Pedro Valdez were payment for "actual

sales of its merchandise and/or personalities made to its customers or otherwise arising from its
other legitimate business transactions" (par. a) and "that the receivables . . . were genuine, valid and
subsisting and represent bona fide sales of merchandise and/or personalities made in the ordinary
course of business" (par. c).
It can hardly be doubted that those representations in petitioner's printed deeds of sale were false.
But false though they were, the petitioners cannot claim to have been deceived or deluded by them
because it knew, or should have known , that the issuer of the checks, Pedro O. Valdez, was not a
"buyer" of the "merchandise and personalities made in the ordinary course of business" by P.O.
Valdez, Inc. of which he was the president.
Since the petitioner failed to prove during the hearing of private respondents' motion to lift the
preliminary writ of attachment, that P.O. Valdez, Inc. received from it independent consideration for
the "sale" of Pedro Valdez' checks to it, apart from the loans previously extended to the corporations,
We are constrained to affirm the finding of the court of Appeals that Valdez's checks are "mere
evidence of the outstanding obligation of P.O. Valdez, Inc. to the petitioner." The petition was not
defrauded by their issuance for the loans had been contracted and released to P.O. Valdez, Inc. long
before the checks were issued.
WHEREFORE, the petition for certiorari is denied for lack of merit.
SO ORDERED.
G.R. No. L-35990 June 17, 1981
ABOITIZ & COMPANY, INC., HONORABLE VICENTE N. CUSI JR., Judge of the Court of First
Instance of Davao, and the PROVINCIAL SHERIFF OF DAVAO DEL SUR, petitioners,
vs.
COTABATO BUS COMPANY, INC., respondent.
DE CASTRO, J.:
The instant petition stemmed from Civil Case No. 7329 of the Court of First Instance of Davao
(Branch 1) in which a writ of preliminary attachment was issued ex-parte by the Court on the
strength of an affidavit of merit attached to the verified complaint filed by petitioner herein, Aboitiz &
Co., Inc., on November 2, 1971, as plaintiff in said case, for the collection of money in the sum of P
155,739.41, which defendant therein, the respondent in the instant case, Cotabato Bus Co., owed
the said petitioner.
By virtue of the writ of preliminary attachment, the provincial sheriff attached personal properties of
the defendant bus company consisting of some buses, machinery and equipment. The ground for
the issuance of the writ is, as alleged in the complaint and the affidavit of merit executed by the
Assistant Manager of petitioner, that the defendant "has removed or disposed of its properties or
assets, or is about to do so, with intent to defraud its creditors."
Respondent company filed in the lower court an "Urgent Motion to Dissolve or Quash Writ of
Attachment" to which was attached an affidavit executed by its Assistant Manager, Baldovino
Lagbao, alleging among other things that "the Cotabato Bus Company has not been selling or
disposing of its properties, neither does it intend to do so, much less to defraud its creditors; that
also the Cotabato Bus Company, Inc. has been acquiring and buying more assets". An opposition
and a supplemental opposition were filed to the urgent motion. The lower court denied the motion
stating in its Order that "the testimony of Baldovino Lagbao, witness for the defendant, corroborates
the facts in the plaintiff's affidavit instead of disproving or showing them to be untrue."
A motion for reconsideration was filed by the defendant bus company but the lower court denied it.
Hence, the defendant went to the Court of Appeals on a petition for certiorari alleging grave abuse of
discretion on the part of herein respondent Judge, Hon. Vicente R. Cusi Jr. On giving due course to
the petition, the Court of Appeals issued a restraining order restraining the trial court from enforcing
further the writ of attachment and from proceeding with the hearing of Civil Case No. 7329. In its
decision promulgated on October 3, 1971, the Court of Appeals declared "null and void the order/writ
of attachment dated November 3, 1971 and the orders of December 2, 1971, as well as that of

December 11, 1971, ordered the release of the attached properties, and made the restraining order
originally issued permanent.
The present recourse is an appeal by certiorari from the decision of the Court of Appeals reversing
the assailed orders of the Court of First Instance of Davao, (Branch I), petitioner assigning against
the lower court the following errors:
ERROR I
THE COURT OF APPEALS ERRED IN HASTILY AND PERFUNCTORILY
RENDERING, ON OCTOBER 3, 1971, A DECISION WITHOUT CONSIDERING
MOST OF THE EVIDENCE SUCH THAT
l) EVEN AN IMPORTANT FACT, ESTABLISHED BY DOCUMENTARY EVIDENCE
AND NOT DENIED BY RESPONDENT, IS MENTIONED ONLY AS A "CLAIM" OF
PETITIONER COMPANY;
2) THE DECISION CONTAINS NO DISCUSSION AND APPRECIATION OF THE
FACTS AS PROVED, ASSEMBLED AND PRESENTED BY PETITIONER
COMPANY SHOWING IN THEIR TOTALITY THAT RESPONDENT HAS
REMOVED, DIVERTED OR DISPOSED OF ITS BANK DEPOSITS, INCOME AND
OTHER LIQUID ASSETS WITH INTENT TO DEFRAUD ITS CREDITORS,
ESPECIALLY ITS UNSECURED SUPPLIERS;
3) THE DECISION IGNORES THE SIGNIFICANCE OF THE REFUSAL OF
RESPONDENT TO PERMIT, UNDER REP. ACT NO. 1405, THE METROPOLITAN
BANK & TRUST CO. TO BRING, IN COMPLIANCE WITH A subpoena DUCES
TECUM TO THE TRIAL COURT ALL THE RECORDS OF RESPONDENT'S
DEPOSITS AND WITHDRAWALS UNDER ITS CURRENT AND SAVINGS
ACCOUNTS (NOW NIL) FOR EXAMINATION BY PETITIONER COMPANY FOR
THE PURPOSE OF SHOWING DIRECTLY THE REMOVAL, DIVERSION OR
DISPOSAL OF RESPONDENT'S DEPOSITS AND INCOME WITH INTENT TO
DEFRAUD ITS CREDITORS.
ERROR II
THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE FACTS THAT
RESPONDENT'S BANK DEPOSITS ARE NIL AS PROOF WHICH - TOGETHER
WITH RESPONDENT'S ADMISSION OF AN INCOME OF FROM P10,000.00 to P
14,000.00 A DAY AND THE EVIDENCE THAT IT CANNOT PRODUCE P 634.00
WITHOUT USING A PERSONAL CHECK OF ITS PRESIDENT AND MAJORITY
STOCKHOLDER, AND OTHER EVIDENCE SHOWS THE REMOVAL OR
CHANNELING OF ITS INCOME TO THE LATTER.
ERROR III
THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE RESCUE AND
REMOVAL BY RESPONDENT OF FIVE ATTACHED BUSES, DURING THE
DEPENDENCY OF ITS MOTION TO DISSOLVE THE ATTACHMENT IN THE, TRIAL
COURT, AS A FURTHER ACT OF REMOVAL OF PROPERTIES BY RESPONDENT
WITH INTENT TO DEFRAUD PETITIONER COMPANY, FOR WHOSE BENEFIT
SAID BUSES HAD BEEN ATTACHED.
The questions raised are mainly, if not solely, factual revolving on whether respondent bus company
has in fact removed its properties, or is about to do so, in fraud of its creditors. This being so, the
findings of the Court of Appeals on said issues of facts are generally considered conclusive and final,
and should no longer be disturbed. However, We gave due course to the petition because it raises
also a legal question of whether the writ of attachment was properly issued upon a showing that
defendant is on the verge of insolvency and may no longer satisfy its just debts without issuing the
writ. This may be inferred from the emphasis laid by petitioner on the fact that even for the measly
amount of P 634.00 payment thereof was made with a personal check of the respondent company's
president and majority stockholder, and its debts to several creditors, including secured ones like the

DBP, have remained unpaid, despite its supposed daily income of an average of P 12,000.00, as
declared by its assistant manager, Baldovino Lagbao. 1
Going forthwith to this question of whether insolvency, which petitioners in effect claims to have been
proven by the evidence, particularly by company's bank account which has been reduced to nil, may
be a ground for the issuance of a writ of attachment, the respondent Court of Appeals correctly took
its position in the negative on the strength of the explicit ruling of this Court in Max Chamorro & Co.
vs. Philippine Ready Mix Concrete Company, Inc. and Hon. Manuel P. Barcelona. 2
Petitioner, however, disclaims any intention of advancing the theory that insolvency is a ground for
the issuance of a writ of attachment , 3 and insists that its evidence -is intended to prove his assertion
that respondent company has disposed, or is about to dispose, of its properties, in fraud of its creditors.
Aside from the reference petitioner had made to respondent company's "nil" bank account, as if to show
removal of company's funds, petitioner also cited the alleged non-payment of its other creditors, including
secured creditors like the DBP to which all its buses have been mortgaged, despite its daily income
averaging P12,000.00, and the rescue and removal of five attached buses.
It is an undisputed fact that, as averred by petitioner itself, the several buses attached are nearly
junks. However, upon permission by the sheriff, five of them were repaired, but they were substituted
with five buses which were also in the same condition as the five repaired ones before the repair.
This cannot be the removal intended as ground for the issuance of a writ of attachment under
section 1 (e), Rule 57, of the Rules of Court. The repair of the five buses was evidently motivated by
a desire to serve the interest of the riding public, clearly not to defraud its creditors, as there is no
showing that they were not put on the run after their repairs, as was the obvious purpose of their
substitution to be placed in running condition.
Moreover, as the buses were mortgaged to the DBP, their removal or disposal as alleged by
petitioner to provide the basis for its prayer for the issuance of a writ of attachment should be very
remote, if not nil. If removal of the buses had in fact been committed, which seems to exist only in
petitioner's apprehensive imagination, the DBP should not have failed to take proper court action,
both civil and criminal, which apparently has not been done.
The dwindling of respondent's bank account despite its daily income of from P10,000.00 to
P14,000.00 is easily explained by its having to meet heavy operating expenses, which include
salaries and wages of employees and workers. If, indeed the income of the company were
sufficiently profitable, it should not allow its buses to fall into disuse by lack of repairs. It should also
maintain a good credit standing with its suppliers of equipment, and other needs of the company to
keep its business a going concern. Petitioner is only one of the suppliers.
It is, indeed, extremely hard to remove the buses, machinery and other equipments which
respondent company have to own and keep to be able to engage and continue in the operation of its
transportation business. The sale or other form of disposition of any of this kind of property is not
difficult of detection or discovery, and strangely, petitioner, has adduced no proof of any sale or
transfer of any of them, which should have been easily obtainable.
In the main, therefore, We find that the respondent Court of Appeals has not committed any
reversible error, much less grave abuse of discretion, except that the restraining order issued by it
should not have included restraining the trial court from hearing the case, altogether. Accordingly, the
instant petition is hereby denied, but the trial court is hereby ordered to immediately proceed with the
hearing of Civil Case No. 7329 and decide it in accordance with the law and the evidence. No
special pronouncement as to costs.
SO ORDERED.
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.
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
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."
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.
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.
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 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 non-existent." Accordingly, the dispositive portion of the April 3,
1990 decision of the Third Division of this Court was modified to read as follows:
WHEREFORE, in view of the foregoing, this Court rules that the properties in the
custody of the private respondent Aboitiz & Company by virtue of the writ of
attachment issued in Civil Case No. R-21761 be returned to the petitioner, but
properties in the custody of the private respondent by virtue of the writ of replevin
issued in Civil Case No. 619-L be continued in custodia legis of said court pending
litigation therein.
The Decision in G.R. No. 63225 having become final and executory, entry of judgment was made on
November 15, 1990. This should have terminated the controversy between petitioners and
respondent Aboitiz insofar as the Supreme Court was concerned, but that was not to be. On
September 9, 1983 respondent Aboitiz filed against petitioners two complaints for collection of sums
of money with prayers for the issuance of writs of attachment in the Regional Trail Court, Branch 23,
Cebu City, docketed as Civil Cases Nos. CEB-1185 and CEB-1186. The complaint in Civil Case No.
CEB-1185 alleged that petitioner Eleazar Adlawan (defendant therein) was awarded a contract for
the construction of the Tago Diversion Works for the Tago River Irrigation Project by the National
Irrigation Administration and that respondent Aboitiz (plaintiff therein) loaned him money and

equipment, which indebtedness as of June 30, 1983 totaled P13,430,259.14. Paragraph 16 of the
complaint states:
16. That, in view of the enormous liabilities which the defendants have with the
plaintiff, defendants executed a real estate mortgage covering eleven (11) parcels of
land in favor of Philippine Commercial and Industrial Bank (PCIB) to secure a
P1,000,000.00 loan with said bank and was able to remove, conceal and dispose of
their properties, obviously to defraud the plaintiff, . . . (Rollo, pp. 65-66).
The complaint in Civil Case No. CEB-1186 alleged that petitioner Eleazar Adlawan (defendant
therein) was awarded a contract for the construction of the Lasang River Irrigation Project by the
National Irrigation Administration and that respondent Aboitiz (plaintiff therein) loaned him money
and equipment, which indebtedness as of June 30, 1983 totalled P5,370,672.08. Paragraph 15 of
the complaint is similarly worded as paragraph 16 of the complaint in Civil Case No. CEB-1185.
Civil Case No. CEB-1185 was raffled to the Regional Trial Court, Branch 6, presided by respondent
Judge Ramon Am. Torres. On September 14, 1983, respondent Judge ordered the issuance of a writ
of attachment upon respondent Aboitiz' filing of a bond of P5,000,000.00. Similarly, in Civil Case No.
CEB-1186, which was raffled to Branch 23, presiding Judge Emilio A. Jacinto ordered the issuance
of a writ of attachment upon the filing of a bond of P2,500,000.00. Accordingly, in Civil Case No.
CEB-1185, the Acting Provincial Sheriff of Cebu issued separate writs dated September 26, 1983
addressed to the Sheriffs of Cebu, Davao and Metro Manila. No writ of preliminary attachment was,
however, issued in Civil Case No. CEB-1186.
Petitioners then filed in Civil Cases Nos. CEB-1185 and CEB-1186 urgent motions to hold in
abeyance the enforcement of the writs of attachments. They alleged in the main that since their
property had been previously attached and said attachment was being questioned before the
Supreme Court in G.R. No. 63225, the filing of the two cases, as well as the issuance of the writs of
attachment, constituted undue interference with the processes of this court in the then pending
petition involving the same property.
Upon motion of respondent Aboitiz, Branch 23 issued on October 13, 1983, an order directing the
transfer to Branch 6 of Civil Case No. CEB-1186 for consolidation with Civil Case No. CEB-1185.
Meanwhile, in its comment on petitioners' motion to withhold the enforcement of the writs of
attachment, respondent Aboitiz alleged that the voluntary dismissal of Civil Case No. R-21761 under
Section 1, Rule 17 of the Revised Rules of Court was without prejudice to the institution of another
action based on the same subject matter. It averred that the issuance of the writ of attachment was
justified because petitioners were intending to defraud respondent Aboitiz by mortgaging 11 parcels
of land to the Philippine Commercial and Industrial Bank (PCIB) in consideration of the loan of
P1,100,000.00, thereby making PCIB a preferred creditor to the prejudice of respondent Aboitiz,
which had an exposure amounting to P13,430,259.14.
Petitioners then filed a rejoinder to said comment, contending that since the property subject of the
writ of attachment have earlier been attached or replevied, the same property were under custodia
legis and therefore could not be the subject of other writs of attachment.
On December 12, 1983, respondent Judge issued an order finding no merit in petitioners' motion for
reconsideration and directing the sheriffs of Cebu, Davao and Metro Manila "to proceed with the
enforcement and implementation of the writs of preliminary attachment." Respondent Judge ruled
that the writs of attachment were issued on the basis of the supporting affidavits alleging that
petitioner had removed or disposed of their property with intent to defraud respondent Aboitiz (Rollo,
pp. 109-113).
On December 15, petitioners filed an ex parte motion praying: (1) that the December 12, 1983 Order
be set for hearing; (2) that they be given 15 days within which to either file a motion for
reconsideration or elevate the matter to this Court or the then Intermediate Appellate Court; and (3)
that within the same 15-day period the implementation or enforcement of the writs of attachment be
held in abeyance.

On the same day, respondent Judge issued an order holding in abeyance the enforcement of the
writs of preliminary attachment in order to afford petitioners an opportunity to seek their other
remedies (Rollo, p. 116).
On December 27, petitioners filed the instant petition for certiorari and mandamus. They alleged that
respondent Judge gravely abused his discretion in ordering the issuance of the writs of preliminary
attachment inasmuch as the real estate mortgage executed by them in favor of PCIB did not
constitute fraudulent removal, concealment or disposition of property. They argued that granting the
mortgage constituted removal or disposition of property, it was not per se a ground for attachment
lacking proof of intent to defraud the creditors of the defendant.
Petitioners contended that in Civil Case No. 21761, Branch 11 had ruled that the loan for which the
mortgage was executed was contracted in good faith, as it was necessary for them to continue their
business operations even after respondent Aboitiz had stopped giving them financial aid.
Petitioners also contended that respondent Judge exceeded his jurisdiction when he issued the
Order of December 12, 1983, without first hearing the parties on the motion for attachment and the
motion to dissolve the attachment. Moreover, they argued that respondent Judge gravely abused his
discretion in proceeding with the case, notwithstanding that his attention had been called with regard
to the pendency of G.R. No. 63225 in this Court.
As prayed for by petitioners, we issued a temporary restraining order on January 6, 1984 "enjoining
the respondents from enforcing or implementing the writs of preliminary attachment against the
property of petitioners, all dated September 26, 1983 and issued in Civil Cases Nos. CEB 1185 and
1186" (Rollo, p. 118).
II
The resolution of this case centers on the issue of the legality of the writ of attachment issued by
respondent Judge in the consolidated cases for collection of sums of money.
The affidavit submitted by respondent Aboitiz in support of its prayer for the writ of attachment does
not meet the requirements of Rule 57 of the Revised Rules of Court regarding the allegations on
impending fraudulent removal, concealment and disposition of defendant's property. As held
in Carpio v. Macadaeg, 9 SCRA 552 (1963), to justify a preliminary attachment, the removal or
disposal must have been made with intent to defraud defendant's creditors. Proof of fraud is
mandated by paragraphs (d) and (e) of Section 1, Rule 57 of the Revised Rules of Court on the
grounds upon which attachment may issue. Thus, the factual basis on defendant's intent to defraud
must be clearly alleged in the affidavit in support of the prayer for the writ of attachment if not so
specifically alleged in the verified complaint. The affidavit submitted by respondent Aboitiz states:
REPUBLIC OF THE PHILIPPINES
CITY OF CEBU ...............) S.S.
I, ROMAN S. RONQUILLO, of legal age, married and a resident of Cebu City, after
being sworn in accordance with law, hereby depose and say:
That I am the Vice-President of the plaintiff corporation in the above-entitled case;
That a sufficient cause of action exists against the defendants named therein
because the said defendants are indebted to the plaintiffs in the amount of
P13,430,259.14 exclusive of interests thereon and damages claimed;
That the defendants have removed or disposed of their properties with intent to
defraud the plaintiff, their creditor, because on May 27, 1982 they executed a real
estate mortgage in favor of Philippine Commercial and Industrial Bank (PCIB)
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.)
RAMO
N S.
RONQ
UILLO
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 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.
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.
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
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-bynight" 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 Governor-General 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 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.)
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."
lawphil.net

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

The petition for involuntary insolvency alleged:

1) that CMI had obtained loans from the three petitioning banks, and that as of
November/December, 1981, its outstanding obligations were as follows:
a) In favor of Bank of America (BA) P15,297,367.67
(as of December 10, 1981) US$ 4,175,831.88
(b) In favor of Citibank US$ 4,920,548.85
(as of December 10, 1981)
c) In favor of Hongkong & Shanghai Bank US$ 5,389,434.12
(as of November 30, 1981); P6,233,969.24
2) that in November, 1981, State Investment House, Inc. (SIHI) and State Financing Center, Inc.
(SFCI) had separately instituted actions for collection of sums of money and damages in the Court of
First Instance of Rizal against CMI, docketed respectively as Civil Cases Numbered 43588 and
43677; and that on application of said plaintiffs, writs of preliminary attachment had been issued
which were executed on "the royalty/profit sharing payments due CMI from Benguet Consolidated
Mining, Inc;" and
3) that CMI had "committed specific acts of insolvency as provided in Section 20 of the Insolvency
Law, to wit:
xxx xxx xxx
5. that he (CMI) has suffered his (CMI's) property to remain under attachment or
legal process for three days for the purpose of hindering or delaying or defrauding his
(CMI's) creditors;
xxx xxx xxx

11. that being a merchant or tradesman he (CMI) has generally defaulted in the
payment of his (CMI's) current obligations for a period of thirty days; . . .
The petition was opposed by State Investment House, Inc. (SIHI) and State Financing Center, Inc.
(SFCI). 3 It claimed that:
1) the three petitioner banks had come to court with unclean hands in that they filed the petition for
insolvency alleging the CMI was defrauding its creditors, and they wished all creditors to share in
its assets although a few days earlier, they had "received for the account of CMI substantial
payments aggregating P10,800,000.00;"
2) the Court had no jurisdiction because the alleged acts of insolvency were false: the writs of
attachment against CMI had remained in force because there were "just, valid and lawful grounds for
the(ir) issuance," and CMI was not a "merchant or tradesman" nor had it "generally defaulted in the
payment of (its) obligations for a period of thirty days . . . ;"
3) the Court had no jurisdiction to take cognizance of the petition for insolvency because petitioners
are not resident creditors of CMI in contemplation of the Insolvency Law; and
4) the Court has no power to set aside the attachment issued in favor of intervenors-oppositors SIHI
and SFCI.
CMI filed its Answer to the petition for insolvency, asserting in the main that it was not insolvent, 4 and
later filed a "Motion to Dismiss Based on Affirmative Defense of Petitioner's Lack of Capacity to Sue," echoing the theory of SIHI and SFCI
that the petitioner banks are not "Philippine residents." 5 Resolution on the motion was "deferred until after hearing of the case on the merits"
it appearing to the Court that the grounds therefor did not appear to be indubitable. 6

SIHI and SFCI filed their own Answer-in-Intervention, 7 and served on the three petitioner banks requests for admission
of certain facts in accordance with Rule 26 of the Rules of Court, 8 receiving a response only from Hongkong & Shanghai Bank. 9

SIHI and SFCI then filed a Motion for Summary Judgment dated May 23, 1983 "on the ground that,
based on the pleadings and admissions on record, the trial court had no jurisdiction to adjudicate
CMI insolvent since the petitioners (respondent foreign banks) are not "resident creditors" of CMI as
required under the Insolvency Law." 10Oppositions 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.
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) actually, the non-resident status of the banks within the context of the Insolvency Law is confirmed
by other laws;
5) the license granted to the banks to do business in the Philippines does not make them residents;
6) no substantive law explicitly grants foreign banks the power to petition for the adjudication of the
Philippine corporation as a bankrupt;

7) the Monetary Board can not appoint a conservator or receiver for a foreign bank or orders its
liquidation having only the power to revoke its license, subject to such proceedings as the Solicitor
General may thereafter deem proper to protect its creditors;
8) the foreign banks are not denied the right to collect their credits against Philippine debtors, only
the right to "petition for the harsh remedy of involuntary insolvency" not being conceded to them;
9) said banks have come to court with unclean hands, their filing of the petition for involuntary
insolvency being an attempt to defeat validly acquired rights of domestic corporations.
The concept of a foreign corporation under Section 123 of the Corporation Code is of "one formed,
organized or existing under laws other than those of the Philippines and . . . (which) laws allow
Filipino citizens and corporations to do business . . . ." There is no question that the three banks are
foreign corporations in this sence, with principal offices situated outside of the Philippines. There is
no question either that said banks have been licensed to do business in this country and have in fact
been doing business here for many years, through branch offices or agencies, including "foreign
currency deposit units;" in fact, one of them, Hongkong & Shanghai Bank has been doing business
in the Philippines since as early as 1875.
The issue is whether these Philippine branches or units may be considered "residents of the
Philippine Islands" as that term is used in Section 20 of the Insolvency Law, supra, 20 or residents of the
state under the laws of which they were respectively incorporated. The answer cannot be found in the Insolvency Law itself, which contains
no definition of the term, resident, or any clear indication of its meaning. There are however other statutes, albeit of subsequent enactment
and effectivity, from which enlightening notions of the term may be derived.

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 ofdomestic 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 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.
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.

G.R. No. L-825

July 20, 1948
ROMAN MABANAG, plaintiff-appellant,
vs.
JOSEPH M. GALLEMORE, defendant-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 remover the property and to adjudicate the
title in favor of the petitioner against all the world. (Banco Espaol-Filipino vs.
Palanca, supra, 927-928.).
In an ordinary attachment proceeding, if the defendant is not personally served, the
preliminary seizure is to be considered necessary in order to confer jurisdiction upon the
court. In this case the lien on the property is acquired by the seizure; and the purpose of the
proceeding is to subject the property to that lien. If a lien already exists, whether created by
mortgage, contract, or statute, the preliminary seizure is not necessary; and the court
proceeds to enforce such lien in the manner provided by law precisely as though the
property had been seized upon attachment. (Roller vs. Holly, 176 U.S., 398, 405; 44 Law.
ed., 520.) It results that the mere circumstance that in an attachment the property may be
seized at the inception of the proceedings, while in the foreclosure suit it is not taken into
legal custody until the time comes for the sale, does not materially affect the fundamental
principle involved in both cases, which is that the court is here exercising a jurisdiction over
the property in a proceeding directed essentially in rem. (Id., 929-930.).
When, however, the action relates to property located in the Philippines, the Philippine courts
may validly try the case, upon the principles that a "State, through its tribunals, may subject
property situated within its limit owned by non-residents to the payment of the demand of its
own citizens against them; and the exercise of this jurisdiction in no respect infringes upon
the sovereignty of the State were the owners are domiciled. Every State owes protection to
its own citizens; and, when non-residents deal with them, it is a legitimate and just exercise
of authority to hold any appropriate any property owned by such non-residents to satisfy the
claims of its citizens. It is in virtue of the State's jurisdiction over the property of the nonresident situated within its limits that its tribunals can inquire into the non-resident'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 nonresident 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.
G.R. No. 115678
February 23, 2001
PHILIPPINES BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS and BERNARDINO VILLANUEVA, respondents.
x ---------------------------------------- x
G.R. No. 119723
February 23, 2001
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS and FILIPINAS TEXTILE MILLS, INC., respondents.
YNARES-SANTIAGO, J.:
Before us are consolidated petitions for review both filed by Philippine Bank of Communications; one
against the May 24, 1994 Decision of respondent Court of Appeals in CA-G.R. SP No. 32863 1 and
the other against its March 31, 1995 Decision in CA-G.R. SP No. 32762. 2 Both Decisions set aside
and nullified the August 11, 1993 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.
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
1wphi1.nt

substantiate its allegations of fraud, embezzlement or misappropriation. On the other hand, in CAG.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.
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;
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 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.
SO ORDERED.
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.
1wphi1.nt

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 parte 7 after
petitioner posted a bond in the amount of P18,798,734.69, issued by Prudential Guarantee &
Assurance Inc., under Bond No. HO-46764-97. On the same date, the bank deposits of respondent
with Rizal Commercial Banking Corporation (RCBC) were garnished. On October 27, 1997,
respondent, through counsel, filed a manifestation informing the court that he is voluntarily
submitting to its jurisdiction.8
Subsequently, respondent filed a motion to 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 (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 hisP150,000.00 RCBC check payable to his counsel as attorneys fees, was
dishonored by reason of the garnishment of his deposits. He also testified that he is a graduate of
the Ateneo de Manila University in 1982 with a double degree of Economics and Management
Engineering and of the University of the Philippines in 1987 with the degree of Bachelor of Laws.
Respondent likewise presented witnesses to prove that he is a well known lawyer in the business
community both in the Philippines and in Hong Kong.18 For its part, the lone witness presented by
petitioner was Nepomuceno who claimed that she acted in good faith in alleging that respondent is a
resident of Hong Kong.19
On August 30, 2000, the trial court awarded damages to respondent in the amount of P25 Million
without specifying the basis thereof, thus:
WHEREFORE, premises above considered, and defendant having duly established his claim in the
amount ofP25,000,000.00, judgment is hereby rendered ordering Prudential Guarantee &
[Assurance] Co., which is solidarily liable with plaintiff to pay defendant the full amount of bond under
Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081, [Bond No. HO-46764-97], dated 24
October 1997 in the amount of P18,798,734.69. And, considering that the amount of the bond is
insufficient to fully satisfy the award for damages, plaintiff is hereby ordered to pay defendant the
amount 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.
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,26the Court debunked the claim of good faith by a party who maliciously
sought the issuance of a writ of attachment, the bad faith of said party having been previously
determined in a final decision which voided the assailed writ. Thus
Apropos the Application for Judgment on the Attachment Bond, Escobar claims in its petition that the
award of attorneys fees and injunction bond premium in favor of Hanil is [contrary] to law and
jurisprudence. It contends that no malice or bad faith may be imputed to it in procuring the writ.

Escobars protestation is now too late in the day. The question of the illegality of the attachment and
Escobars bad faith in obtaining it has long been settled in one of the earlier incidents of this case.
The Court of Appeals, in its decision rendered on February 3, 1983 in C.A.-G.R. No. SP-14512,
voided the challenged writ, having been issued with grave abuse of discretion. Escobars bad faith in
procuring the writ cannot be doubted. Its Petition for the Issuance of Preliminary Attachment made
such damning allegations that: Hanil was already able to secure a complete release of its final
collection from the MPWH; it has moved out some of its heavy equipments for unknown destination,
and it may leave the country anytime. Worse, its Ex Parte Motion to Resolve Petition alleged that
"after personal verification by (Escobar) of (Hanils) equipment in Cagayan de Oro City, it appears
that the equipments were no longer existing from their compound." All these allegations of Escobar
were found to be totally baseless and untrue.
Even assuming that the trial court did not make a categorical pronouncement of misrepresentation
and suppression of material facts on the part of petitioner, the factual backdrop of this case does not
support petitioners claim of good faith. The facts and circumstances omitted are highly material and
relevant to the grant or denial of writ of attachment applied for.
Finally, there is no merit in petitioners contention that respondent can be considered a resident who
is temporarily out of the Philippines upon whom service of summons may be effected by publication,
and therefore qualifies as among those against whom a writ of attachment may be issued under
Section 1, paragraph (f), Rule 57 of the Rules of Court which provides:
(f) In an action against a party x x x on whom summons may be served by publication.
In so arguing, petitioner attempts to give the impression that although it erroneously invoked the
ground that respondent does not reside in the Philippines, it should not be made to pay damages
because it is in fact entitled to a writ of attachment had it invoked the proper ground under Rule 57.
However, even on this alternative ground, petitioner is still not entitled to the issuance of a writ of
attachment.
The circumstances under which a writ of preliminary attachment may be issued are set forth in
Section 1, Rule 57 of the Rules of Court, to wit:
SEC. 1. Grounds upon which attachment may issue. At the commencement of the action or at
any time before entry of judgment, a plaintiff or any proper party may have the property of the
adverse party attached as security for the satisfaction of any judgment that may be recovered in the
following cases:
(a) In an action for the recovery of a specified amount of money or damages, other than
moral and exemplary, on a cause of action arising 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:
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 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 toP50,000.00 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.
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
1wphi1

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.
G.R. No. 171124
February 13, 2008
ALEJANDRO NG WEE, petitioner,
vs.
MANUEL TANKIANSEE, respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the September 14, 2005 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 90130 and its
January 6, 2006 Resolution2denying the motion for reconsideration thereof.
The facts are undisputed. Petitioner Alejandro Ng Wee, a valued client of Westmont Bank (now
United Overseas Bank), made several money placements totaling P210,595,991.62 with the bank's
affiliate, Westmont Investment Corporation (Wincorp), a domestic entity engaged in the business of
an investment house with the authority and license to extend credit. 3
Sometime in February 2000, petitioner received disturbing news on Wincorp's financial condition
prompting him to inquire about and investigate the company's operations and transactions with its
borrowers. He then discovered that the company extended a loan equal to his total money
placement to a corporation [Power Merge] with a subscribed capital of only P37.5M. This credit
facility originated from another loan of about P1.5B extended by Wincorp to another corporation

[Hottick Holdings]. When the latter defaulted in its obligation, Wincorp instituted a case against it and
its surety. Settlement was, however, reached in which Hottick's president, Luis Juan L. Virata
(Virata), assumed the obligation of the surety.4
Under the scheme agreed upon by Wincorp and Hottick's president, petitioner's money placements
were transferred without his knowledge and consent to the loan account of Power Merge through an
agreement that virtually freed the latter of any liability. Allegedly, through the false representations of
Wincorp and its officers and directors, petitioner was enticed to roll over his placements so that
Wincorp could loan the same to Virata/Power Merge.5
Finding that Virata purportedly used Power Merge as a conduit and connived with Wincorp's officers
and directors to fraudulently obtain for his benefit without any intention of paying the said
placements, petitioner instituted, on October 19, 2000, Civil Case No. 00-99006 for damages with
the Regional Trial Court (RTC) of Manila.6 One of the defendants impleaded in the complaint is
herein respondent Manuel Tankiansee, Vice-Chairman and Director of Wincorp. 7
On October 26, 2000, on the basis of the allegations in the complaint and the October 12, 2000
Affidavit8 of petitioner, the trial court ordered the issuance of a writ of preliminary attachment against
the properties not exempt from execution of all the defendants in the civil case subject, among
others, to petitioner's filing of a P50M-bond.9The writ was, consequently, issued on November 6,
2000.10
Arguing that the writ was improperly issued and that the bond furnished was grossly insufficient,
respondent, on December 22, 2000, moved for the discharge of the attachment. 11 The other
defendants likewise filed similar motions.12 On October 23, 2001, the RTC, in an Omnibus
Order,13 denied all the motions for the discharge of the attachment. The defendants, including
respondent herein, filed their respective motions for reconsideration 14 but the trial court denied the
same on October 14, 2002.15
Incidentally, while respondent opted not to question anymore the said orders, his co-defendants,
Virata and UEM-MARA Philippines Corporation (UEM-MARA), assailed the same via certiorari under
Rule 65 before the CA [docketed as CA-G.R. SP No. 74610]. The appellate court, however, denied
the certiorari petition on August 21, 2003,16 and the motion for reconsideration thereof on March 16,
2004.17 In a petition for review on certiorari before this Court, in G.R. No. 162928, we denied the
petition and affirmed the CA rulings on May 19, 2004 for Virata's and UEM-MARA's failure to
sufficiently show that the appellate court committed any reversible error.18 We subsequently denied
the petition with finality on August 23, 2004.19
On September 30, 2004, respondent filed before the trial court another Motion to Discharge
Attachment,20 re-pleading the grounds he raised in his first motion but raising the following additional
grounds: (1) that he was not present in Wincorp's board meetings approving the questionable
transactions;21 and (2) that he could not have connived with Wincorp and the other defendants
because he and Pearlbank Securities, Inc., in which he is a major stockholder, filed cases against
the company as they were also victimized by its fraudulent schemes. 22
Ruling that the grounds raised were already passed upon by it in the previous orders affirmed by the
CA and this Court, and that the additional grounds were respondent's affirmative defenses that
properly pertained to the merits of the case, the trial court denied the motion in its January 6, 2005
Order.23
With the denial of its motion for reconsideration,24 respondent filed a certiorari petition before the CA
docketed as CA-G.R. SP No. 90130. On September 14, 2005, the appellate court rendered the
assailed Decision25 reversing and setting aside the aforementioned orders of the trial court and lifting
the November 6, 2000 Writ of Preliminary Attachment26 to the extent that it concerned respondent's
properties. Petitioner moved for the reconsideration of the said ruling, but the CA denied the same in
its January 6, 2006 Resolution.27
Thus, petitioner filed the instant petition on the following grounds:
A.

IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS SHOULD NOT

HAVE GIVEN DUE COURSE TO THE PETITION FOR CERTIORARI FILED BY
RESPONDENT, SINCE IT MERELY RAISED ERRORS IN JUDGMENT, WHICH, UNDER
PREVAILING JURISPRUDENCE, ARE NOT THE PROPER SUBJECTS OF A WRIT OF
CERTIORARI.
B.
MOREOVER, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS
COMMITTED SERIOUS LEGAL ERROR IN RESOLVING FAVORABLY THE GROUNDS
ALLEGED BY RESPONDENT IN HIS PETITION AND (SIC) LIFTING THE WRIT OF
PRELIMINARY ATTACHMENT, SINCE THESE GROUNDS ALREADY RELATE TO THE
MERITS OF CIVIL CASE NO. 00-99006 WHICH, UNDER PREVAILING JURISPRUDENCE,
CANNOT BE USED AS BASIS (SIC) FOR DISCHARGING A WRIT OF PRELIMINARY
ATTACHMENT.
C.
LIKEWISE, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS ERRED
IN SUSTAINING THE ERRORS IN JUDGMENT ALLEGED BY RESPONDENT, NOT ONLY
BECAUSE THESE ARE BELIED BY THE VERY DOCUMENTS HE SUBMITTED AS PROOF
OF SUCH ERRORS, BUT ALSO BECAUSE THESE HAD EARLIER BEEN RESOLVED
WITH FINALITY BY THE LOWER COURT.28
For his part, respondent counters, among others, that the general and sweeping allegation of fraud
against respondent in petitioner's affidavit-respondent as an officer and director of Wincorp allegedly
connived with the other defendants to defraud petitioner-is not sufficient basis for the trial court to
order the attachment of respondent's properties. Nowhere in the said affidavit does petitioner
mention the name of respondent and any specific act committed by the latter to defraud the former.
A writ of attachment can only be granted on concrete and specific grounds and not on general
averments quoting perfunctorily the words of the Rules. Connivance cannot also be based on mere
association but must be particularly alleged and established as a fact. Respondent further contends
that the trial court, in resolving the Motion to Discharge Attachment, need not actually delve into the
merits of the case. All that the court has to examine are the allegations in the complaint and the
supporting affidavit. Petitioner cannot also rely on the decisions of the appellate court in CA-G.R. SP
No. 74610 and this Court in G.R. No. 162928 to support his claim because respondent is not a party
to the said cases.29
We agree with respondent's contentions and deny the petition.
In the case at bench, the basis of petitioner's application for the issuance of the writ of preliminary
attachment against the properties of respondent is Section 1(d) of Rule 57 of the Rules of Court
which pertinently reads:
Section 1. Grounds upon which attachment may issue.-At the commencement of the action
or at any time before entry of judgment, a plaintiff or any proper party may have the property
of the adverse party attached as security for the satisfaction of any judgment that may be
recovered in the following cases:
xxxx
(d) In an action against a party who has been guilty of a fraud in contracting the debt or
incurring the obligation upon which the action is brought, or in the performance thereof.
For a writ of attachment to issue under this rule, the applicant must sufficiently show the factual
circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor's
mere non-payment of the debt or failure to comply with his obligation. 30 The applicant must then be
able to demonstrate that the debtor has intended to defraud the creditor.31 In Liberty Insurance
Corporation v. Court of Appeals,32 we explained as follows:
To sustain an attachment on this ground, it must be shown that the debtor in contracting the
debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the
execution of the agreement and must have been the reason which induced the other party

into giving consent which he would not have otherwise given. To constitute a ground for
attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon
contracting the obligation sued upon. A debt is fraudulently contracted if at the time of
contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case.
Fraud is a state of mind and need not be proved by direct evidence but may be inferred from
the circumstances attendant in each case.33
In the instant case, petitioner's October 12, 2000 Affidavit34 is bereft of any factual statement that
respondent committed a fraud. The affidavit narrated only the alleged fraudulent transaction between
Wincorp and Virata and/or Power Merge, which, by the way, explains why this Court, in G.R. No.
162928, affirmed the writ of attachment issued against the latter. As to the participation of
respondent in the said transaction, the affidavit merely states that respondent, an officer and director
of Wincorp, connived with the other defendants in the civil case to defraud petitioner of his money
placements. No other factual averment or circumstance details how respondent committed a fraud or
how he connived with the other defendants to commit a fraud in the transaction sued upon. In other
words, petitioner has not shown any specific act or deed to support the allegation that respondent is
guilty of fraud.
The affidavit, being the foundation of the writ,35 must contain such particulars as to how the fraud
imputed to respondent was committed for the court to decide whether or not to issue the
writ.36 Absent any statement of other factual circumstances to show that respondent, at the time of
contracting the obligation, had a preconceived plan or intention not to pay, or without any showing of
how respondent committed the alleged fraud, the general averment in the affidavit that respondent is
an officer and director of Wincorp who allegedly connived with the other defendants to commit a
fraud, is insufficient to support the issuance of a writ of preliminary attachment.37 In the application for
the writ under the said ground, compelling is the need to give a hint about what constituted the fraud
and how it was perpetrated38 because established is the rule that fraud is never presumed.39 Verily,
the mere fact that respondent is an officer and director of the company does not necessarily give rise
to the inference that he committed a fraud or that he connived with the other defendants to commit a
fraud. While under certain circumstances, courts may treat a corporation as a mere aggroupment of
persons, to whom liability will directly attach, this is only done when the wrongdoing has been clearly
and convincingly established.40
Let it be stressed that the provisional remedy of preliminary attachment is harsh and rigorous for it
exposes the debtor to humiliation and annoyance.41 The rules governing its issuance are, therefore,
strictly construed against the applicant,42 such that if the requisites for its grant are not shown to be
all present, the court shall refrain from issuing it, for, otherwise, the court which issues it acts in
excess of its jurisdiction.43 Likewise, the writ should not be abused to cause unnecessary prejudice. If
it is wrongfully issued on the basis of false or insufficient allegations, it should at once be corrected.44
Considering, therefore, that, in this case, petitioner has not fully satisfied the legal obligation to show
the specific acts constitutive of the alleged fraud committed by respondent, the trial court acted in
excess of its jurisdiction when it issued the writ of preliminary attachment against the properties of
respondent.
We are not unmindful of the rule enunciated in G.B. Inc., etc. v. Sanchez, et al.,45 that
[t]he merits of the main action are not triable in a motion to discharge an attachment
otherwise an applicant for the dissolution could force a trial of the merits of the case on his
motion.46
However, the principle finds no application here because petitioner has not yet fulfilled the
requirements set by the Rules of Court for the issuance of the writ against the properties of
respondent.47 The evil sought to be prevented by the said ruling will not arise, because the propriety
or impropriety of the issuance of the writ in this case can be determined by simply reading the
complaint and the affidavit in support of the application.
Furthermore, our ruling in G.R. No. 162928, to the effect that the writ of attachment is properly
issued insofar as it concerns the properties of Virata and UEM-MARA, does not affect respondent

herein, for, as correctly ruled by the CA, respondent is "never a party thereto."48 Also, he is not in the
same situation as Virata and UEM-MARA since, as aforesaid, while petitioner's affidavit detailed the
alleged fraudulent scheme perpetrated by Virata and/or Power Merge, only a general allegation of
fraud was made against respondent.
We state, in closing, that our ruling herein deals only with the writ of preliminary attachment issued
against the properties of respondent-it does not concern the other parties in the civil case, nor affect
the trial court's resolution on the merits of the aforesaid civil case.
WHEREFORE, premises considered, the petition is DENIED. The September 14, 2005 Decision and
the January 6, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 90130 are AFFIRMED.
SO ORDERED.