SECTION 14

G.R. No. 83897 November 9, 1990

ESTEBAN B. UY JR. and NILO S. CABANG, petitioners,

vs.
THE HONORABLE COURT OF APPEALS, WILSON TING, and YU HON. respondents.

PARAS, J.:

This is a petition for review on certiorari seeking to reverse the decision ** which dismissed CA-G.R. No. SP-
05659 for certiorari and Prohibition with Preliminary Injunction and/or Restraining Order filed by petitioner seeking to annul and set aside the
two Orders dated August 24, 1982 and October 10, 1983 issued by the then Court of First Instance of Rizal Branch LII *** (now Regional
Trial Court of Quezon City Branch XCLVll ****) in Civil Case No. Q-35128, granting a writ of preliminary attachment and directing the sheriff
assigned therein to attach the properties of defendants Uy and Cabang (herein petitioners); and denying defendants' motion to dismiss.

The antecedent facts of the case as found by the Court of Appeals are as follows:

On March 24, 1982, Esteban B. Uy, Jr. (herein petitioner) filed a complaint against
Sy Yuk Tat for sum of money, damages, with preliminary attachment, docketed as
Civil Case No. Q-34782 ("the first case" for short) in the then Court of First Instance
of Rizal, Branch LII, Quezon City (the case was later assigned to the Regional Trial
Court of Quezon City, Branch XCVII now presided over by respondent Judge). On
the same day, upon plaintiff filing a bond of P232,780.00 said court issued a writ of
preliminary attachment and appointed Deputy Sheriff Nilo S. Cabang (co-petitioner
herein) as Special Sheriff to implement the writ. On April 6, 1982, the same court
issued a break-open order upon motion filed by petitioner Uy.

On the following day, April 7, 1982, petitioner Cabang began to implement the writ of
preliminary attachment as the Special Sheriff on the case.

On April 19, 1982, petitioner Cabang filed a Partial Sheriffs Return, stating, inter alia:

xxx xxx xxx

That in the afternoon of April 12, 1982, the undersigned together with Atty. Lupino
Lazaro, plaintiff's counsel and the members of the same team proceeded to No. 65
Speaker Perez St., Quezon City, and effected a physical and actual count of the
items and merchandise pointed to by the Ting family as having been taken from the
Mansion Emporium and nearby bodega which are as follows:

a) 329 boxes of "GE" Flat Iron, each box containing 6 pcs. each;

b) 229 boxes of Magnetic Blank Tapes with 48 pcs. each;

c) 239 boxes of floor polishers marked "Sanyo"

d) 54 boxes of floor polishers marked "Ronson"

xxx xxx xxx

On April 12, 1982, a third party claim was filed by Wilson Ting and Yu Hon (private
respondents herein) in the same Civil Case No. Q-34782, addressed to petitioner
Cabang asserting ownership over the properties attached at No. 65 Speaker Perez
St., Quezon City (other than those attached at No. 296 Palanca St., Manila). The
third party claim specifically enumerated the properties, as reflected in the Partial
Sheriffs Return dated April 1 3, 1 982, belonging to the plaintiffs (private respondents
herein).

On the same day that petitioner Cabang filed his Partial Sheriffs Return (April 19,
1982) the third party claimants and Yu filed a motion to dissolve the aforementioned
writ of preliminary attachment in the same Civil Case No. Q-34782; alleging among
others, that being the absolute owners of the personal properties listed in their third
party claim which were illegally seized from them they were willing to file a
counterbond for the return thereof; which motion was opposed by plaintiff Uy.

On April 29, 1982, then CFI Judge Jose P. Castro rendered judgment by default in
said Civil Case No. Q-34782 in favor of plaintiff Uy.

Meanwhile, on May 5, 1982, third party claimants Wilson Ting and Yu Hon filed a
complaint for Damages with application for preliminary injunction against Esteban Uy
and Nilo Cabang (co-petitioners herein) in the then Court of First Instance of Rizal,
Branch 52, Quezon City ('the court a quo'for short) which case was docketed as Civil
Case No. Q-35128 ('the second case' for short). The complaint alleged inter alia that
the plaintiffs are the owners of the personal properties reflected in the Partial Sheriffs
Return dated April 13, 1983 which have been attached and seized by defendant
Cabang. In this second civil case, the court a quo (then presided over by CFI Judge
Concepcion B. Buencamino) issued an order on May 5, 1982, stating among other
things, the following:

Considering that it will take time before this Court could act upon said
prayers for the issuance of a Writ of Preliminary Injunction, the parties
are hereby ordered to maintain the STATUS QUO in this case with
respect to the properties attached and subject of this action alleged to
belong to the plaintiffs" (Rollo, p. 133)

Meanwhile, in the first case, where a judgment by default had been

rendered, the first court issued an order striking off from the records
all pleadings filed by the third party claimants.

With respect to the case in the court a quo, defendants Uy and

Cabang filed their answer with counterclaim.

Meanwhile, in the first case, plaintiff Uy on June 7, 1982, filed an ex-

parte motion for writ of execution which was granted the following
day, June 8, 1982.

On the same day (June 7, 1982) that plaintiff Uy filed his exparte
motion for writ of execution he and Cabang filed a motion to quash or
dissolve status quo order in the case a quo as defendants therein on
the ground that the court "has no jurisdiction to interfere with
properties under custodia legis on orders of a court of co-equal and
co-ordinate jurisdiction" and that plaintiffs' complaint is not for
recovery of properties in question.

On June 24, 1982, plaintiff Uy in the first case filed his ex

parte motion to authorize Sheriff to sell the attached properties
enumerated in Sheriff Cabang's partial return filed on April 19, 1982,
on the ground that the properties under custodia legis were
perishable especially those taken from No. 65 Speaker Perez,
Quezon City.

Subsequently, on July 2, 1982, in the case a quo the court denied

defendants', Uy and Cabang, motion to quash or dissolve the status
quo order.

Meanwhile, the first case on July 12, 1982, Cabang filed another
partial sheriffs return this time stating among others that the judgment
in that case had been partially satisfied, and that in the public auction
sale held on July 6, 1982, certain personal properties had been sold
to plaintiff Esteban Uy, Jr., the winning bidder for P15,000.00 while
the other properties were sold in the amount of P200,000.00 in cash
with Bernabe Ortiz of No. 97 Industrial Avenue, Northern Hill,
Malabon Manila as the highest bidder.

Back to the case a quo, on August 23, 1982, plaintiffs Ting and Yu
Hon filed a motion for preliminary attachment alleging this ground: "In
the case at bar, which, is one 'to recover possession of personal
properties unjustly detained, ... the property... has been ... removed ...
(and) disposed of to prevent its being found or taken by the applicant
or an officer" and/or said defendants are guilty of fraud in disposing of
the property for the taking, (or) detention ... of which the action is
brought (Sec. 1(c) and (d), Rule 57, Rules of Court)

Acting on such motion the court a quo, on August 24, 1 982, issued
the disputed order granting the writ of preliminary attachment prayed
for by the plaintiffs (Wilson Ting and Yu Hon), stating that:

Let a writ of preliminary attachment issue upon the plaintiffs putting

up a bond in the amount of P1,430,070.00, which shall be furnished
to each of the defendants with copies of the verified application
therewith, and the sheriff assigned to this court, Danilo Del Mundo,
shall forthwith attach such properties of the defendants not exempt
from execution, sufficient to satisfy the applicants' demand. (Rollo, p.
247)

On August 31, 1982, in the same case a quo, defendant Uy filed an

urgent motion to quash and/or dissolve preliminary attachment which
motion was opposed by plaintiffs Ting and Yu Hon.

About half a year later, on February 21, 1982, in the case a quo,
defendant Uy filed a motion for preliminary hearing on affirmative
defenses as motion to dismiss. Following an exchange of subsequent
papers between the parties, the court a quo issued the other disputed
 order which denied defendant Uy's motion to dismiss on October 10,
1983. The motion to quash was also denied by the court a quo on
December 9, 1983. Defendant Uy filed a motion for reconsideration
on both Orders. Finally, on February 15, 1985, respondent Judge
issued two Orders denying both motions for reconsideration. (CA
decision, Rollo, p. 109-122)

Thereafter, petitioners Esteban Uy, Jr. and Nilo Cabang filed with the Court of Appeals a petition for
Certiorari and Prohibition with prayer for a Writ of Preliminary Injunction or a Restraining Order to
annul and set aside the two orders issued by the then CFI of Rizal Branch 52.

In its decision, the Court of Appeals dismissed the petition, the dispositive portion of which reads:

WHEREFORE, finding respondent Judge not to have committed a grave abuse of

discretion amounting to lack or excess of jurisdiction in issuing the order dated
August 24, 1982, denying petitioners' motion to quash the writ of preliminary
attachment, and the order dated October 10, 1983, denying petitioners' motion to
dismiss the complaint a quo, we hereby deny the instant petition, and therefore
dismiss the same. No pronouncement as to cost. (Rollo, pp. 132-133)

Hence, the instant petition.

In the resolution of October 16, 1989, the Court gave due course to the petition and required both
parties to submit simultaneous memoranda within thirty days from notice (Rollo, p. 190). Private
respondents filed their memorandum on December 6, 1989 (Ibid., p. 192) while petitioners filed their
memorandum on January 5, 1990 (Ibid., p. 208)

The main issue in this case is whether or not properties levied and seized by virtue of a writ of
attachment and later by a writ of execution, were under custodia legis and therefore not subject to
the jurisdiction of another co-equal court where a third party claimant claimed ownership of the same
properties.

The issue has long been laid to rest in the case of Manila Herald Publishing Co. Inc. v. Ramos (88
Phil. 94 [1951]) where the Court filed that while it is true that property in custody of the law may not
be interfered with, without the permission of the proper court, this rule is confined to cases where the
property belongs to the defendant or one in which the defendant has proprietary interests. But when
the Sheriff, acting beyond the bounds of his office seizes a stranger's property, the rule does not
apply and interference with his custody is not interference with another court's order of attachment.

Under the circumstances, this Court categorically stated:

It has been seen that a separate action by the third party who claims to be the owner
of the property attached is appropriate. If this is so, it must be admitted that the judge
trying such action may render judgment ordering the sheriff or whoever has in
possession of the attached property to deliver it to the plaintiff claimant or desist from
seizing it. It follows further that the court may make an interlocutory order, upon the
filing of such bond as may be necessary, to release the property pending final
adjudication of the title. Jurisdiction over an action includes jurisdiction on
interlocutory matter incidental to the cause and deemed necessary to preserve the
subject matter of the suit or protect the parties' interests. This is self-evident. (Manila
Herald Publishing Co. Inc. v. Ramos, supra).
The foregoing ruling was reiterated in the later case of Traders Royal Bank v. IAC (133 SCRA 141
[1984]) and even more recently in the case of Escovilla v. C.A. G.R. No. 84497, November 6, 1989,
where this Court stressed:

The power of the court in the execution of judgments extends only over properties
unquestionably belonging to the judgment debtor. The levy by the sheriff of a
property by virtue of a writ of attachment may be considered as made under the
authority of the court only when the property levied upon belongs to the defendant. If
he attaches properties other than those of the defendant, he acts beyond the limits of
this authority. The court issuing a writ of execution is supposed to enforce its
authority only over properties of the judgment debtor. Should a third party appear to
claim the property levied upon by the sheriff, the procedure laid down by the Rules is
that such claim should be the subject of a separate and independent action.

Neither can petitioner complain that they were denied their day in court when the Regional Trial
Court issued a writ of preliminary attachment without hearing as it is well settled that its issuance
may be made by the court ex parte. As clearly explained by this Court, no grave abuse of discretion
can be ascribed to respondent Judge in the issuance of a writ of attachment without notice to
petitioners as there is nothing in the Rules of Court which makes notice and hearing indispensable
and mandatory requisites in its issuance. (Filinvest Credit Corp. v. Relova, 117 SCRA 420 [1982];
Belisle Investment & Finance Co. Inc. v. State Investment House, Inc. 151 SCRA 631 [1987]; Toledo
v. Burgos, 168 SCRA 513 [1988]).

In addition, petitioner's motion to quash or discharge the questioned attachment in the court a quo is
in effect a motion for reconsideration which cured any defect of absence of notice. (Dormitorio v.
Fernandez, 72 SCRA 388 [1976]).

Estoppel is likewise unavailing in the case at bar by the mere fact that private respondent Ting
(complainant in the court a quo) pointed the items and merchandise taken from the Mansion House
and nearby Bodega which were levied and hauled by Special Sheriff Cabang, where in the report of
said Sheriff made earlier on April 6, 1982, he stated that on the same occasion referred to in his
Partial Return, private respondents denied Sy Yuk Tat's ownership over the goods in question.
(Rollo, pp. 203-204).

In like manner, the sale of the disputed properties at the public auction, in satisfaction of a judgment
of a co-equal court does not render the case moot and academic. The undeviating ruling of this
Court in such cases is that attachment and sale of properties belonging to a third person is void
because such properties cannot be attached and sold at public auction for the purpose of enforcing
a judgment against the judgment debtor. (Orosco v. Nepomuceno, 57 Phil. 1007 [1932-33]).

The other issues in this case deserve scant consideration.

On the issue of the expiration of the restraining order, there is no argument that the life span of
the status quo order automatically expires on the 20th day and no judicial declaration to that effect is
necessary (Paras v. Roura, 163 SCRA 1 [1988]). But such fact is of no consequence in so far as the
propriety of the questioned attachment is concerned. As found by the Court of Appeals, the grounds
invoked by respondents for said attachment did not depend at all upon the continuing efficacy of the
restraining order.

As to petitioner's contention that the complaint filed by private respondent in the lower court is
merely seeking an ancillary remedy of injunction which is not a cause of action itself, the Court of
Appeals correctly observed that the object of private respondents' complaint is injunction although
the ancillary remedy of preliminary injunction was also prayed for during the pendency of the
proceeding.

Finally, the non-joinder of the husband of private respondent, Yu Hon as well as her failure to verify
the complaint does not warrant dismissal of the complaint for they are mere formal requirements
which could be immediately cured without prejudice to the rights of the petitioners. This Court frowns
on the resort to technicalities to defeat substantial justice. Thus, the Court states that the rules of
procedure are intended to promote not to defeat substantial justice, and therefore, they should not
be applied in a very rigid and technical sense. (Angel v. Inopiquez, G.R. 66712, January 13, 1989).
Again on another occasion where an appeal should have been dismissed for non-compliance with
the Rules, the Court relaxed the rigid interpretation of the Rules holding that a straight-jacket
application will do more injustice. (Pan-Am Airways v. Espiritu, 69 SCRA 45 [1976]).

PREMISES CONSIDERED, the petition is hereby DENIED and the assailed decision of the Court of
Appeals is hereby AFFIRMED.

SO ORDERED.

G.R. No. L-4268 January 18, 1951

MANILA HERALD PUBLISHING CO., INC., doing business under the name of Evening Herald
Publishing Co., Inc., and Printers, Inc., petitioner,
vs.
SIMEON RAMOS, Judge of the Court of First Instance of Manila, MACARIO A. OFILADA,
Sheriff of City of Manila, ANTONIO QUIRINO and ALTO SURETY AND INSURANCE CO.,
INC., respondents.

TUASON, J.:

This is a petition for "certiorari with preliminary injunction" arising upon the following antecedents:

Respondent Antonio Quirino filed a libel suit, docketed as civil case No. 11531, against Aproniano G.
Borres, Pedro Padilla and Loreto Pastor, editor, managing editor and reporter, respectively, of the
Daily Record, a daily newspaper published in Manila, asking damages aggregating P90,000. With
the filing of this suit, the plaintiff secureda writ of preliminary attachment upon putting up a P50,000
bond, and the Sheriff of the City of Manila levied an attachment upon certain office and printing
equipment found in the premises of the Daily Record.

Thereafter the Manila Herald Publishing Co. Inc. and Printers, Inc., filed with the sheriff separate
third-party claims, alleging that they were the owners of the property attached. Whereupon, the
sheriff required of Quirino a counter bound of P41,500 to meet the claim of the Manila Herald
Publishing Co., Inc., and another bond of P59,500 to meet the claim of Printers, Inc. These amounts,
upon Quirino's motion filed under Section 13, Rule 59, of the Rules of Court, were reduced by the
court to P11,000 and P10,000 respectively.

Unsuccessful in their attempt to quash the attachment, on October 7, 1950, the Manila Herald
Publishing Co., Inc. and Printers, Inc. commenced a joint suit against the sheriff, Quirino and Alto
Surety and Insurance Co. Inc., in which the former sought (1) to enjoin the defendants from
proceeding with the attachment of the properties above mentioned and (2) P45,000 damages. This
suit was docketed as civil case No. 12263.
Whereas case No. 11531 was being handled by Judge Sanchez or pending in the branch of the
Court presided by him, case No. 12263 fell in the branch of Judge Pecson. On the same date, in
virtue of an ex parte motion in case No. 12263 by the Manila Herald Publishing Co. Inc., and
Printers, Inc., Judge Pecson issued a writ of preliminary injunction to the sheriff directing him to
desist from proceeding with the attachment of the said properties.

After the issuance of that preliminary injunction, Antonio Quirino filed an ex parte petition for its
dissolution, and Judge Simeon Ramos, to whom case No. 12263 had in the meanwhile been
transferred, granted the petition on a bond of P21,000. However Judge Ramos soon set aside the
order just mentioned on a motion for reconsideration by the Manila Herald Publishing Co. Inc. and
Printer, Inc. and set the matter for hearing for October 14, then continued to October 16.

Upon the conclusion of that hearing, Judge Ramos required the parties to submit memoranda on the
question whether "the subject matter of civil case No. 12263 should be ventilated in an independent
action or by means of a complaint in intervention in civil case No. 11531." Memoranda having been
filed, His Honor declared that the suit, in case No. 12263, was "unnecessary, superfluous and illegal"
and so dismissed the same. He held that what Manila Herald Publishing Co., Inc., and Printers, Inc.,
should do was intervene in Case No. 11531.

The questions that emerge from these facts and the arguments are: Did Judge Ramos have
authority to dismiss case No. 12263 at the stage when it was thrown out of court? Should the Manila
Herald Publishing Co., Inc., and Printers, Inc., come as intervernors into the case for libel instead of
bringing an independent action? And did Judge Pecson or Judge Ramos have jurisdiction in case
No. 12263 to quash the attachment levied in case No. 11531?

In case No. 12263, it should be recalled, neither a motion to dismiss nor an answer had been made
when the decision under consideration was handed down. The matter then before the court was a
motion seeking a provisional or collateral remedy, connected with and incidental to the principal
action. It was a motion to dissolve the preliminary injunction granted by Judge Pecson restraining the
sheriff from proceeding with the attachment in case No. 11531. The question of dismissal was
suggested by Judge Ramos on a ground perceived by His Honor. To all intents and purposes, the
dismissal was decreed by the court on its own initiative.

Section 1 Rule 8 enumerates the grounds upon which an action may be dismissed, and it specifically
ordains that a motion to this end be filed. In the light of this express requirement we do not believe
that the court had power to dismiss the case without the requisite motion duly presented. The fact
that the parties filed memoranda upon the court's indication or order in which they discussed the
proposition that the action was unnecessary and was improperly brought outside and independently
of the case for libel did not supply deficiency. Rule 30 of the Rules of Court provides for the cases in
which an action may be dismissed, and the inclusion of those therein provided excludes any other,
under the familiar maxim, inclusio unius est exclusio alterius. The only instance in which, according
to said Rules, the court may dismiss upon the court's own motion an action is, when the "plaintiff fails
to appear at the time of the trial or to prosecute his action for an unreasonable length of time or to
comply with the Rules or any order of the court."

The Rules of Court are devised as a matter of necessity, intended to be observed with diligence by
the courts as well as by the parties for the orderly conduct of litigation and judicial business. In
general, it is compliance with these rules which gives the court jurisdiction to act.

We are the opinion that the court acted with grave abuse of discretion if not in excess of its
jurisdiction in dismissing the case without any formal motion to dismiss.
The foregoing conclusions should suffice to dispose of this proceeding for certiorari, but the parties
have discussed the second question and we propose to rule upon it if only to put out of the way a
probable cause for future controversy and consequent delay in the disposal of the main cause.

Section 14 of rule 59, which treats of the steps to betaken when property attached is claimed by the
other person than that defendant or his agent, contains the proviso that "Nothing herein contained
shall prevent such third person from vindicating his claim to the property by any proper action." What
is "proper action"? Section 1 of Rule 2 defines action as "an ordinary suit in court of justice, by which
one party prosecutes another for the enforcement or protection of a right, or the prevention or
redress of a wrong," while section 2, entitled "Commencement of Action," says that "civil action may
be commenced by filing a complaint with the court."

"Action" has acquired a well-define, technical meaning, and it is in this restricted sense that the word
"action" is used in the above rule. In employing the word "commencement" the rule clearly indicates
an action which originates an entire proceeding and puts in motion the instruments of the court
calling for summons, answer, etc, and not any intermediary step taken in the course of the
proceeding whether by the parties themselves or by a stranger. It would be strange indeed if the
framers of the Rules of Court or the Legislature should have employed the term "proper action"
instead of "intervention" or equivalent expression if the intention had been just that. It was all the
easier, simplier and the more natural to say intervention if that had been the purpose, since the
asserted right of the third-party claimant necessarily grows out of the pending suit, the suit in which
the order of attachment was issued.

The most liberal view that can be taken in favor of the respondents' position is that intervention as a
means of protecting the third-party claimants' right is not exclusive but cumulative and suppletory to
the right to bring a new, independent suit. It is significant that there are courts which go so far as to
take the view that even where the statute expressly grants the right of intervention is such cases as
this, the statute does not extend to owners of property attached, for, under this view, "it is considered
that the ownership is not one of the essential questions to be determined in the litigation between
plaintiff and defendant;" that "whether the property belongs to defendant or claimant, if determined,
is considered as shedding no light upon the question in controversy, namely, that defendant is
indebted to plaintiff."

(See 7 C. J. S., 545 and footnote No. 89 where extracts from the decision in Lewis vs. Lewis, 10 N.
W., 586, a leading case, are printed.)

Separate action was indeed said to be the correct and only procedure contemplated by Act No. 190,
intervention addition to, but not in substitution of, the old process. The new Rules adopted section
121 of Act No. 190 and added thereto Rule 24 (a) of the Federal Rules of Procedure. Combined, the
two modes of redress are now section 1 of Rule 13,1 the last clause of which is the newly added
provision. The result is that, whereas, "under the old procedure, the third person could not intervene,
he having no interest in the debt (or damages) sued upon by the plaintiff," under the present Rules,
"a third person claiming to be the owner of such property may, not only file a third-party claim with
the sheriff, but also intervene in the action to ask that the writ of attachment be quashed." (I Moran's
Comments on the Rules of Court, 3rd Ed., 238, 239.) Yet, the right to inetervene, unlike the right to
bring a new action, is not absolute but left to the sound discretion of the court to allow. This
qualification makes intervention less preferable to an independent action from the standpoint of the
claimants, at least. Because availability of intervention depends upon the court in which Case No.
11531 is pending, there would be assurance for the herein petitioners that they would be permitted
to come into that case.
Little reflection should disabuse the mind from the assumption that an independent action creates a
multiplicity of suits. There can be no multiplicity of suits when the parties in the suit where the
attachment was levied are different from the parties in the new action, and so are the issues in the
two cases entirely different. In the circumstances, separate action might, indeed, be the more
convenient of the two competing modes of redress, in that intervention is more likely to inject
confusion into the issues between the parties in the case for debt or damages with which the third-
party claimant has nothing to do and thereby retard instead of facilitate the prompt dispatch of the
controversy which is underlying objective of the rules of pleading and practice. That is why
intervention is subject to the court's discretion.

The same reasons which impelled us to decide the second question, just discussed, urge us to take
cognizance of and express an opinion on the third.

The objection that at once suggests itself entertaining in Case No. 12263 the motion to discharge the
preliminary attachment levied in case No. 11531 is that by so doing one judge would intefere with
another judge's actuations. The objection is superficial and will not bear analysis.

It has been seen that a separate action by the third party who claims to be the owner of the property
attached is appropriate. If this is so, it must be admitted that the judge trying such action may render
judgment ordering the sheriff of whoever has in possession the attached property to deliver it to the
plaintiff-claimant or desist from seizing it. It follows further that the court may make an interlocutory
order, upon the filing of such bond as may be necessary, to release the property pending final
adjudication of the title. Jurisdiction over an action includes jurisdiction over a interlocutory matter
incidental to the cause and deemed necessary to preserve the subject matter of the suit or protect
the parties' interests. This is self-evident.

The fault with the respondents' argument is that it assumes that the Sheriff is holding the property in
question by order of the court handling the case for libel. In reality this is true only to limited extent.
That court did not direct the sheriff to attach the particular property in dispute. The order was for the
sheriff to attach Borres', Padilla's and Pastor's property. He was not supposed to touch any property
other than that of these defendants', and if he did, he acted beyond the limits of his authority and
upon his personal responsibility.

It is true of course that property in custody of the law can not be interferred with without the
permission of the proper court, and property legally attached is property in custodia legis. But for the
reason just stated, this rule is confined to cases where the property belongs to the defendant or one
in which the defendant has proprietary interest. When the sheriff acting beyond the bounds of his
office seizes a stranger's property, the rule does not apply and interference with his custody is not
interference with another court's order of attachment.

It may be argued that the third-party claim may be unfounded; but so may it be meritorious, for the
matter. Speculations are however beside the point. The title is the very issue in the case for the
recovery of property or the dissolution of the attachment, and pending final decision, the court may
enter any interlocutory order calculated to preserve the property in litigation and protect the parties'
rights and interests.

None of what has been said is to be construed as implying that the setting aside of the attachment
prayed for by the plaintiffs in Case No. 12263 should be granted. The preceding discussion is
intended merely to point out that the court has jurisdiction to act in the premises, not the way the
jurisdiction should be exercised. The granting or denial, as the case may be, of the prayer for the
dissolution of the attachment would be a proper subject of a new proceeding if the party adversely
affected should be dissatisfied.
The petition for certiorari is granted with costs against the respondents except the respondent
Judge.

G.R. No. L-66321 October 31 1984

TRADERS ROYAL BANK, petitioner,

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

ESCOLIN, J.: +. wph!1

The issue posed for resolution in this petition involves the authority of a Regional Trial Court to
issue, at the instance of a third-party claimant, an injunction enjoining the sale of property previously
levied upon by the sheriff pursuant to a writ of attachment issued by another Regional Trial Court.

The antecedent facts, undisputed by the parties, are set forth in the decision of the respondent
Intermediate Appellate Court thus: t.hqw

Sometime on March 18, 1983 herein petitioner Traders Royal Bank instituted a suit
against the Remco Alcohol Distillery, Inc. REMCO before the Regional Trial Court,
Branch CX, Pasay City, in Civil Case No. 9894-P, for the recovery of the sum of Two
Million Three Hundred Eighty Two Thousand Two Hundred Fifty Eight & 71/100
Pesos (P2,382,258.71) obtaining therein a writ of pre attachment directed against the
assets and properties of Remco Alcohol Distillery, Inc.

Pursuant to said writ of attachment issued in Civil Case No. 9894-P, Deputy Sheriff
Edilberto Santiago levied among others about 4,600 barrels of aged or rectified
alcohol found within the premises of said Remco Distillery Inc. A third party claim
was filed with the Deputy Sheriff by herein respondent La Tondea, Inc. on April 1,
1982 claiming ownership over said attached property (Complaint, p. 17, Rollo).

On May 12, 1982, private respondent La Tondea, Inc. filed a complaint-in-

intervention in said Civil Case No. 9894, alleging among others, that 'it had made
advances to Remco Distillery Inc. which totalled P3M and which remains outstanding
as of date' and that the 'attached properties are owned by La Tondea, Inc.' (Annex
'3' to petitioner's Motion to Dismiss dated July 27, 1983 Annex "C" to the petition).

Subsequently, private respondent La Tondea, Inc., without the foregoing complaint-

in- intervention having been passed upon by the Regional Trial Court, Branch CX,
(Pasay City), filed in Civil Case No. 9894-P a "Motion to Withdraw" dated October 8,
1983, praying that it be allowed to withdraw alcohol and molasses from the Remco
Distillery Plant (Annex 4 to Petitioner's Motion to Dismiss-Annex C, Petition) and
which motion was granted per order of the Pasay Court dated January 27, 1983,
authorizing respondent La Tondea, Inc. to withdraw alcohol and molasses from the
Remco Distillery Plant at Calumpit, Bulacan (Annex "I" to Reply to Plaintiff's
Opposition dated August 2, 1983 Annex E to the Petition).

The foregoing order dated January 27, 1983 was however reconsidered by the
Pasay Court by virtue of its order dated February 18, 1983 (Annex A Petition, p.
15) declaring that the alcohol "which has not been withdrawn remains in the
ownership of defendant Remco Alcohol Distillery Corporation" and which order
likewise denied La Tondea's motion to intervene.

A motion for reconsideration of the foregoing order of February 18, 1983 was filed by
respondent La Tondea, Inc., on March 8, 1983 reiterating its request for leave to
withdraw alcohol from the Remco Distillery Plant, and praying further that the "portion
of the order dated February 18, 1983" declaring Remco to be the owner of subject
alcohol, "be reconsidered and striken off said order". This motion has not been
resolved (p. 4, Petition) up to July 18, 1983 when a manifestation that it was
withdrawing its motion for reconsideration was filed by respondent La Tondea Inc.

On July 19, 1983, private respondent La Tondea Inc. instituted before the Regional
Trial Court, Branch IX, Malolos, Bulacan presided over by Respondent Judge, Civil
Case No. 7003-M, in which it asserted its claim of ownership over the properties
attached in Civil Case No. 9894-P, and likewise prayed for the issuance of a writ of
Preliminary Mandatory and Prohibitory Injunction (Annex B,id ).

A Motion to Dismiss and/or Opposition to the application for a writ of Preliminary

Injunction by herein respondent La Tondea Inc. was filed by petitioner on July 27,
1983 (Annex C, p. 42, Id.)

This was followed by respondent La Tondea's opposition to petitioner's Motion to

Dismiss on August 1, 1983 (Annex D, p. 67, Id.).

A reply on the part of petitioner was made on the foregoing opposition on August 3,
1983 (p. 92, Id.).

Hearings were held on respondent La Tondea's application for injunctive relief and
on petitioner's motion to dismiss on August 8, 19 & 23, 1983 (p. 5, Id.).

Thereafter, the parties filed their respective memoranda (Annex F, p. 104; Annex G,
p. 113, Rollo).

Subsequently, the questioned order dated September 28, 1983 was issued by the
respondent Judge declaring respondent La Tondea Inc. to be the owner of the
disputed alcohol, and granting the latter's application for injunctive relief (Annex H-
1, Id.).

On October 6, 1983, respondent Sheriff Victorino Evangelista issued on Edilberto A.

Santiago Deputy Sheriff of Pasay City the corresponding writ of preliminary injunction
(Annex N, p. 127, Id.).

This was followed by an order issued by the Pasay Court dated October 11, 1983 in
Civil Case No. 9894-P requiring Deputy Sheriff Edilberto A. Santiago to enforce the
writ of preliminary attachment previously issued by said court, by preventing
respondent sheriff and respondent La Tondea, Inc. from withdrawing or removing
the disputed alcohol from the Remco ageing warehouse at Calumpit, Bulacan, and
requiring the aforenamed respondents to explain and show cause why they should
not be cited for contempt for withdrawing or removing said attached alcohol
belonging to Remco, from the latter's ageing warehouse at Calumpit, Bulacan (Annex
F, p. 141, Petition).
Thereafter, petitioner Traders Royal Bank filed with the Intermediate Appellate Court a petition for
certiorari and prohibition, with application for a writ of preliminary injunction, to annul and set aside
the Order dated September 28, 1983 of the respondent Regional Trial Court of Malolos, Bulacan,
Branch IX, issued in Civil Case No. 7003-M; to dissolve the writ of preliminary injunction dated
October 6, 1983 issued pursuant to said order; to prohibit respondent Judge from taking cognizance
of and assuming jurisdiction over Civil Case No. 7003-M, and to compel private respondent La
Tondea, Inc., and Ex- Oficio Provincial Sheriff of Bulacan to return the disputed alcohol to their
original location at Remco's ageing warehouse at Calumpit, Bulacan.

In its decision, the Intermediate Appellate Court dismissed the petition for lack of legal and factual
basis, holding that the respondent Judge did not abuse his discretion in issuing the Order of
September 28, 1983 and the writ of preliminary injunction dated October 3, 1983. citing the decision
in Detective and Protective Bureau vs. Cloribel (26 SCRA 255). Petitioner moved for
reconsideration, but the respondent court denied the same in its resolution dated February 2, 1984.

Hence, this petition.

Petitioner contends that respondent Judge of the Regional T- trial Court of Bulacan acted without
jurisdiction in entertaining Civil Case No. 7003-M, in authorizing the issuance of a writ of preliminary
mandatory and prohibitory injunction, which enjoined the sheriff of Pasay City from interferring with
La Tondea's right to enter and withdraw the barrels of alcohol and molasses from Remco's ageing
warehouse and from conducting the sale thereof, said merchandise having been previously levied
upon pursuant to the attachment writ issued by the Regional Trial Court of Pasay City in Civil Case
No. 9894-P. It is submitted that such order of the Bulacan Court constitutes undue and illegal
interference with the exercise by the Pasay Court of its coordinate and co-equal authority on matters
properly brought before it.

We find the petition devoid of merit.

There is no question that the action filed by private respondent La Tondea, Inc., as third-party
claimant, before the Regional Trial Court of Bulacan in Civil Case No. 7003-M wherein it claimed
ownership over the property levied upon by Pasay City Deputy Sheriff Edilberto Santiago is
sanctioned by Section 14, Rule 57 of the Rules of Court. Thus t.hqw

If property taken be claimed by any person other than the party against whom
attachment had been issued or his agent, and such person makes an affidavit of his
title thereto or right to the possession thereof, stating the grounds of such right or
title, and serves such affidavit upon the officer while the latter has possession of the
property, and a copy thereof upon the attaching creditor, the officer shall not be
bound to keep the property under the attachment, unless the attaching creditor or his
agent, on demand of said officer, secures aim against such claim by a bond in a sum
not greater than the value of the property attached. In case of disagreement as to
such value, the same shall be decided by the court issuing the writ of attachment.
The officer shall not be liable for damages, for the taking or keeping of such property,
to any such third-party claimant, unless such a claim is so made and the action upon
the bond brought within one hundred and twenty (120) days from the date of the filing
of said bond. But nothing herein contained shall prevent such third person from
vindicating his claim to the property by proper action ...

The foregoing rule explicitly sets forth the remedy that may be availed of by a person who claims to
be the owner of property levied upon by attachment, viz: to lodge a third- party claim with the sheriff,
and if the attaching creditor posts an indemnity bond in favor of the sheriff, to file a separate and
independent action to vindicate his claim (Abiera vs. Court of Appeals, 45 SCRA 314). And this
precisely was the remedy resorted to by private respondent La Tondea when it filed the vindicatory
action before the Bulacan Court.

The case before us does not really present an issue of first impression. In Manila Herald Publishing
Co., Inc. vs. Ramos, 1 this Court resolved a similar question in this wise:
t.hqw

The objection that at once suggests itself to entertaining in Case No. 12263 the
motion to discharge the preliminary attachment levied in Case No. 11531 is that by
so doing one judge would interfere with another judge's actuations. The objection is
superficial and will not bear analysis.

It has been seen that a separate action by the third party who claims to be the owner
of the property attached is appropriate. If this is so, it must be admitted that the judge
trying such action may render judgment ordering the sheriff of whoever has in
possession the attached property to deliver it to the plaintiff-claimant or desist from
seizing it. It follows further that the court may make an interlocutory order, upon the
filing of such bond as may be necessary, to release the property pending final
adjudication of the title. Jurisdiction over an action includes jurisdiction over an
interlocutory matter incidental to the cause and deemed necessary to preserve the
subject matter of the suit or protect the parties' interests. This is self-evident.

xxx xxx xxx

It is true of course that property in custody of the law can not be interfered without
the permission of the proper court, and property legally attached is property in
custodia legis. But for the reason just stated, this rule is confined to cases where the
property belongs to the defendant or one in which the defendant has proprietary
interest. When the sheriff acting beyond the bounds of his office seizes a stranger's
property, the rule does not apply and interference with his custody is not interference
with another court's order of attachment.

It may be argued that the third-party claim may be unfounded; but so may it be
meritorious, for that matter. Speculations are however beside the point. The title is
the very issue in the case for the recovery of property or the dissolution of the
attachment, and pending final decision, the court may enter any interlocutory order
calculated to preserve the property in litigation and protect the parties' rights and
interests.

Generally, the rule that no court has the power to interfere by injunction with the judgments or
decrees of a concurrent or coordinate jurisdiction having equal power to grant the injunctive relief
sought by injunction, is applied in cases where no third-party claimant is involved, in order to prevent
one court from nullifying the judgment or process of another court of the same rank or category, a
power which devolves upon the proper appellate court . 2The purpose of the rule is to avoid conflict of
power between different courts of coordinate jurisdiction and to bring about a harmonious and smooth
functioning of their proceedings.

It is further argued that since private respondent La Tondea, Inc., had voluntarily submitted itself to
the jurisdiction of the Pasay Court by filing a motion to intervene in Civil Case No. 9894-P, the denial
or dismissal thereof constitutes a bar to the present action filed before the Bulacan Court.
We cannot sustain the petitioner's view. Suffice it to state that intervention as a means of protecting
the third-party claimant's right in an attachment proceeding is not exclusive but cumulative and
suppletory to the right to bring an independent suit. 3 The denial or dismissal of a third-party claim to
property levied upon cannot operate to bar a subsequent independent action by the claimant to establish
his right to the property even if he failed to appeal from the order denying his original third-party claim. 4

WHEREFORE, the instant petition is hereby dismissed and the decision of the Intermediate
Appellate Court in AC-G.R. No. SP-01860 is affirmed, with costs against petitioner Traders Royal
Bank.

SO ORDERED. 1w ph1.t

G.R. No. 124642 February 23, 2004

ALFREDO CHING and ENCARNACION CHING, petitioners

vs.
THE HON. COURT OF APPEALS and ALLIED BANKING CORPORATION, respondents.

DECISION

CALLEJO, SR., J.:

This petition for review, under Rule 45 of the Revised Rules of Court, assails the Decision1 of the
Court of Appeals (CA) dated November 27, 1995 in CA-G.R. SP No. 33585, as well as the
Resolution2 on April 2, 1996 denying the petitioners motion for reconsideration. The impugned
decision granted the private respondents petition for certiorariand set aside the Orders of the trial
court dated December 15, 19933 and February 17, 19944 nullifying the attachment of 100,000 shares
of stocks of the Citycorp Investment Philippines under the name of petitioner Alfredo Ching.

The following facts are undisputed:

On September 26, 1978, the Philippine Blooming Mills Company, Inc. (PBMCI) obtained a loan
of P9,000,000.00 from the Allied Banking Corporation (ABC). By virtue of this loan, the PBMCI,
through its Executive Vice-President Alfredo Ching, executed a promissory note for the said amount
promising to pay on December 22, 1978 at an interest rate of 14% per annum.5 As added security for
the said loan, on September 28, 1978, Alfredo Ching, together with Emilio Taedo and Chung Kiat
Hua, executed a continuing guaranty with the ABC binding themselves to jointly and severally
guarantee the payment of all the PBMCI obligations owing the ABC to the extent
ofP38,000,000.00.6 The loan was subsequently renewed on various dates, the last renewal having
been made on December 4, 1980.7

Earlier, on December 28, 1979, the ABC extended another loan to the PBMCI in the amount
of P13,000,000.00 payable in eighteen months at 16% interest per annum. As in the previous loan,
the PBMCI, through Alfredo Ching, executed a promissory note to evidence the loan maturing on
June 29, 1981.8 This was renewed once for a period of one month.9

The PBMCI defaulted in the payment of all its loans. Hence, on August 21, 1981, the ABC filed a
complaint for sum of money with prayer for a writ of preliminary attachment against the PBMCI to
collect the P12,612,972.88 exclusive of interests, penalties and other bank charges. Impleaded as
co-defendants in the complaint were Alfredo Ching, Emilio Taedo and Chung Kiat Hua in their
capacity as sureties of the PBMCI.
The case was docketed as Civil Case No. 142729 in the Regional Trial Court of Manila, Branch
XVIII.10 In its application for a writ of preliminary attachment, the ABC averred that the "defendants
are guilty of fraud in incurring the obligations upon which the present action is brought11 in that they
falsely represented themselves to be in a financial position to pay their obligation upon maturity
thereof."12 Its supporting affidavit stated, inter alia, that the "[d]efendants have removed or disposed
of their properties, or [are] ABOUT to do so, with intent to defraud their creditors."13

On August 26, 1981, after an ex-parte hearing, the trial court issued an Order denying the ABCs
application for a writ of preliminary attachment. The trial court decreed that the grounds alleged in
the application and that of its supporting affidavit "are all conclusions of fact and of law" which do not
warrant the issuance of the writ prayed for.14On motion for reconsideration, however, the trial court,
in an Order dated September 14, 1981, reconsidered its previous order and granted the ABCs
application for a writ of preliminary attachment on a bond of P12,700,000. The order, in relevant part,
stated:

With respect to the second ground relied upon for the grant of the writ of preliminary attachment ex-
parte, which is the alleged disposal of properties by the defendants with intent to defraud creditors
as provided in Sec. 1(e) of Rule 57 of the Rules of Court, the affidavits can only barely justify the
issuance of said writ as against the defendant Alfredo Ching who has allegedly bound himself jointly
and severally to pay plaintiff the defendant corporations obligation to the plaintiff as a surety thereof.

WHEREFORE, let a writ of preliminary attachment issue as against the defendant Alfredo Ching
requiring the sheriff of this Court to attach all the properties of said Alfredo Ching not
exceeding P12,612,972.82 in value, which are within the jurisdiction of this Court and not exempt
from execution upon, the filing by plaintiff of a bond duly approved by this Court in the sum of Twelve
Million Seven Hundred Thousand Pesos (P12,700,000.00) executed in favor of the defendant
Alfredo Ching to secure the payment by plaintiff to him of all the costs which may be adjudged in his
favor and all damages he may sustain by reason of the attachment if the court shall finally adjudge
that the plaintiff was not entitled thereto.

SO ORDERED.15

Upon the ABCs posting of the requisite bond, the trial court issued a writ of preliminary attachment.
Subsequently, summonses were served on the defendants,16 save Chung Kiat Hua who could not be
found.

Meanwhile, on April 1, 1982, the PBMCI and Alfredo Ching jointly filed a petition for suspension of
payments with the Securities and Exchange Commission (SEC), docketed as SEC Case No. 2250,
at the same time seeking the PBMCIs rehabilitation.17

On July 9, 1982, the SEC issued an Order placing the PBMCIs business, including its assets and
liabilities, under rehabilitation receivership, and ordered that "all actions for claims listed in Schedule
"A" of the petition pending before any court or tribunal are hereby suspended in whatever stage the
same may be until further orders from the Commission."18 The ABC was among the PBMCIs
creditors named in the said schedule.

Subsequently, on January 31, 1983, the PBMCI and Alfredo Ching jointly filed a Motion to Dismiss
and/or motion to suspend the proceedings in Civil Case No. 142729 invoking the PBMCIs pending
application for suspension of payments (which Ching co-signed) and over which the SEC had
already assumed jurisdiction.19 On February 4, 1983, the ABC filed its Opposition thereto.20
In the meantime, on July 26, 1983, the deputy sheriff of the trial court levied on attachment the
100,000 common shares of Citycorp stocks in the name of Alfredo Ching.21

Thereafter, in an Order dated September 16, 1983, the trial court partially granted the
aforementioned motion by suspending the proceedings only with respect to the PBMCI. It denied
Chings motion to dismiss the complaint/or suspend the proceedings and pointed out that P.D. No.
1758 only concerns the activities of corporations, partnerships and associations and was never
intended to regulate and/or control activities of individuals. Thus, it directed the individual defendants
to file their answers.22

Instead of filing an answer, Ching filed on January 14, 1984 a Motion to Suspend Proceedings on
the same ground of the pendency of SEC Case No. 2250. This motion met the opposition from the
ABC.23

On January 20, 1984, Taedo filed his Answer with counterclaim and cross-claim.24 Ching eventually
filed his Answer on July 12, 1984.25

On October 25, 1984, long after submitting their answers, Ching filed an Omnibus Motion,26 again
praying for the dismissal of the complaint or suspension of the proceedings on the ground of the July
9, 1982 Injunctive Order issued in SEC Case No. 2250. He averred that as a surety of the PBMCI,
he must also necessarily benefit from the defenses of his principal. The ABC opposed Chings
omnibus motion.

Emilio Y. Taedo, thereafter, filed his own Omnibus Motion27 praying for the dismissal of the
complaint, arguing that the ABC had "abandoned and waived" its right to proceed against the
continuing guaranty by its act of resorting to preliminary attachment.

On December 17, 1986, the ABC filed a Motion to Reduce the amount of his preliminary attachment
bond fromP12,700,000 to P6,350,000.28 Alfredo Ching opposed the motion,29 but on April 2, 1987,
the court issued an Order setting the incident for further hearing on May 28, 1987 at 8:30 a.m. for the
parties to adduce evidence on the actual value of the properties of Alfredo Ching levied on by the
sheriff.30

On March 2, 1988, the trial court issued an Order granting the motion of the ABC and rendered the
attachment bond of P6,350,000.31

On November 16, 1993, Encarnacion T. Ching, assisted by her husband Alfredo Ching, filed a
Motion to Set Aside the levy on attachment. She alleged inter alia that the 100,000 shares of stocks
levied on by the sheriff were acquired by her and her husband during their marriage out of conjugal
funds after the Citycorp Investment Philippines was established in 1974. Furthermore, the
indebtedness covered by the continuing guaranty/comprehensive suretyship contract executed by
petitioner Alfredo Ching for the account of PBMCI did not redound to the benefit of the conjugal
partnership. She, likewise, alleged that being the wife of Alfredo Ching, she was a third-party
claimant entitled to file a motion for the release of the properties.32 She attached therewith a copy of
her marriage contract with Alfredo Ching.33

The ABC filed a comment on the motion to quash preliminary attachment and/or motion to expunge
records, contending that:

2.1 The supposed movant, Encarnacion T. Ching, is not a party to this present case; thus,
she has no personality to file any motion before this Honorable Court;
 2.2 Said supposed movant did not file any Motion for Intervention pursuant to Section 2, Rule
12 of the Rules of Court;

2.3 Said Motion cannot even be construed to be in the nature of a Third-Party Claim
conformably with Sec. 14, Rule 57 of the Rules of Court.

3. Furthermore, assuming in gracia argumenti that the supposed movant has the required
personality, her Motion cannot be acted upon by this Honorable Court as the above-entitled case is
still in the archives and the proceedings thereon still remains suspended. And there is no previous
Motion to revive the same.34

The ABC also alleged that the motion was barred by prescription or by laches because the shares of
stocks were in custodia legis.

During the hearing of the motion, Encarnacion T. Ching adduced in evidence her marriage contract
to Alfredo Ching to prove that they were married on January 8, 1960;35 the articles of incorporation of
Citycorp Investment Philippines dated May 14, 1979;36 and, the General Information Sheet of the
corporation showing that petitioner Alfredo Ching was a member of the Board of Directors of the said
corporation and was one of its top twenty stockholders.

On December 10, 1993, the Spouses Ching filed their Reply/Opposition to the motion to expunge
records.

Acting on the aforementioned motion, the trial court issued on December 15, 1993 an Order37 lifting
the writ of preliminary attachment on the shares of stocks and ordering the sheriff to return the said
stocks to the petitioners. The dispositive portion reads:

WHEREFORE, the instant Motion to Quash Preliminary Attachment, dated November 9, 1993, is
hereby granted. Let the writ of preliminary attachment subject matter of said motion, be quashed and
lifted with respect to the attached 100,000 common shares of stock of Citycorp Investment
Philippines in the name of the defendant Alfredo Ching, the said shares of stock to be returned to
him and his movant-spouse by Deputy Sheriff Apolonio A. Golfo who effected the levy thereon on
July 26, 1983, or by whoever may be presently in possession thereof.

SO ORDERED.38

The plaintiff Allied Banking Corporation filed a motion for the reconsideration of the order but denied
the same on February 17, 1994. The petitioner bank forthwith filed a petition for certiorari with the
CA, docketed as CA-G.R. SP No. 33585, for the nullification of the said order of the court,
contending that:

1. The respondent Judge exceeded his authority thereby acted without jurisdiction in taking
cognizance of, and granting a "Motion" filed by a complete stranger to the case.

2. The respondent Judge committed a grave abuse of discretion in lifting the writ of
preliminary attachment without any basis in fact and in law, and contrary to established
jurisprudence on the matter.39

On November 27, 1995, the CA rendered judgment granting the petition and setting aside the
assailed orders of the trial court, thus:
WHEREFORE, premises considered, the petition is GRANTED, hereby setting aside the questioned
orders (dated December 15, 1993 and February 17, 1994) for being null and void.

SO ORDERED.40

The CA sustained the contention of the private respondent and set aside the assailed orders.
According to the CA, the RTC deprived the private respondent of its right to file a bond under
Section 14, Rule 57 of the Rules of Court. The petitioner Encarnacion T. Ching was not a party in the
trial court; hence, she had no right of action to have the levy annulled with a motion for that purpose.
Her remedy in such case was to file a separate action against the private respondent to nullify the
levy on the 100,000 Citycorp shares of stocks. The court stated that even assuming that
Encarnacion T. Ching had the right to file the said motion, the same was barred by laches.

Citing Wong v. Intermediate Appellate Court,41 the CA ruled that the presumption in Article 160 of the
New Civil Code shall not apply where, as in this case, the petitioner-spouses failed to prove the
source of the money used to acquire the shares of stock. It held that the levied shares of stocks
belonged to Alfredo Ching, as evidenced by the fact that the said shares were registered in the
corporate books of Citycorp solely under his name. Thus, according to the appellate court, the RTC
committed a grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the
assailed orders. The petitioners motion for reconsideration was denied by the CA in a Resolution
dated April 2, 1996.

The petitioner-spouses filed the instant petition for review on certiorari, asserting that the RTC did
not commit any grave abuse of discretion amounting to excess or lack of jurisdiction in issuing the
assailed orders in their favor; hence, the CA erred in reversing the same. They aver that the source
of funds in the acquisition of the levied shares of stocks is not the controlling factor when invoking
the presumption of the conjugal nature of stocks under Art. 160,42 and that such presumption
subsists even if the property is registered only in the name of one of the spouses, in this case,
petitioner Alfredo Ching.43 According to the petitioners, the suretyship obligation was not contracted
in the pursuit of the petitioner-husbands profession or business.44 And, contrary to the ruling of the
CA, where conjugal assets are attached in a collection suit on an obligation contracted by the
husband, the wife should exhaust her motion to quash in the main case and not file a separate
suit.45 Furthermore, the petitioners contend that under Art. 125 of the Family Code, the petitioner-
husbands gratuitous suretyship is null and void ab initio,46 and that the share of one of the spouses
in the conjugal partnership remains inchoate until the dissolution and liquidation of the partnership.47

In its comment on the petition, the private respondent asserts that the CA correctly granted its
petition for certiorari nullifying the assailed order. It contends that the CA correctly relied on the ruling
of this Court in Wong v. Intermediate Appellate Court. Citing Cobb-Perez v. Lantin and G-Tractors,
Inc. v. Court of Appeals, the private respondent alleges that the continuing guaranty and suretyship
executed by petitioner Alfredo Ching in pursuit of his profession or business. Furthermore, according
to the private respondent, the right of the petitioner-wife to a share in the conjugal partnership
property is merely inchoate before the dissolution of the partnership; as such, she had no right to file
the said motion to quash the levy on attachment of the shares of stocks.

The issues for resolution are as follows: (a) whether the petitioner-wife has the right to file the motion
to quash the levy on attachment on the 100,000 shares of stocks in the Citycorp Investment
Philippines; (b) whether or not the RTC committed a grave abuse of its discretion amounting to
excess or lack of jurisdiction in issuing the assailed orders.

On the first issue, we agree with the petitioners that the petitioner-wife had the right to file the said
motion, although she was not a party in Civil Case No. 142729.48
In Ong v. Tating,49 we held that the sheriff may attach only those properties of the defendant against
whom a writ of attachment has been issued by the court. When the sheriff erroneously levies on
attachment and seizes the property of a third person in which the said defendant holds no right or
interest, the superior authority of the court which has authorized the execution may be invoked by
the aggrieved third person in the same case. Upon application of the third person, the court shall
order a summary hearing for the purpose of determining whether the sheriff has acted rightly or
wrongly in the performance of his duties in the execution of the writ of attachment, more specifically
if he has indeed levied on attachment and taken hold of property not belonging to the plaintiff. If so,
the court may then order the sheriff to release the property from the erroneous levy and to return the
same to the third person. In resolving the motion of the third party, the court does not and cannot
pass upon the question of the title to the property with any character of finality. It can treat the matter
only insofar as may be necessary to decide if the sheriff has acted correctly or not. If the claimants
proof does not persuade the court of the validity of the title, or right of possession thereto, the claim
will be denied by the court. The aggrieved third party may also avail himself of the remedy of
"terceria" by executing an affidavit of his title or right of possession over the property levied on
attachment and serving the same to the office making the levy and the adverse party. Such party
may also file an action to nullify the levy with damages resulting from the unlawful levy and seizure,
which should be a totally separate and distinct action from the former case. The above-mentioned
remedies are cumulative and any one of them may be resorted to by one third-party claimant without
availing of the other remedies.50

In this case, the petitioner-wife filed her motion to set aside the levy on attachment of the 100,000
shares of stocks in the name of petitioner-husband claiming that the said shares of stocks were
conjugal in nature; hence, not liable for the account of her husband under his continuing guaranty
and suretyship agreement with the PBMCI. The petitioner-wife had the right to file the motion for said
relief.

On the second issue, we find and so hold that the CA erred in setting aside and reversing the orders
of the RTC. The private respondent, the petitioner in the CA, was burdened to prove that the RTC
committed a grave abuse of its discretion amounting to excess or lack of jurisdiction. The tribunal
acts without jurisdiction if it does not have the legal purpose to determine the case; there is excess
of jurisdiction where the tribunal, being clothed with the power to determine the case, oversteps its
authority as determined by law. There is grave abuse of discretion where the tribunal acts in a
capricious, whimsical, arbitrary or despotic manner in the exercise of its judgment and is equivalent
to lack of jurisdiction.51

It was incumbent upon the private respondent to adduce a sufficiently strong demonstration that the
RTC acted whimsically in total disregard of evidence material to, and even decide of, the controversy
before certiorari will lie. A special civil action for certiorari is a remedy designed for the correction of
errors of jurisdiction and not errors of judgment. When a court exercises its jurisdiction, an error
committed while so engaged does not deprive it of its jurisdiction being exercised when the error is
committed.52

After a comprehensive review of the records of the RTC and of the CA, we find and so hold that the
RTC did not commit any grave abuse of its discretion amounting to excess or lack of jurisdiction in
issuing the assailed orders.

Article 160 of the New Civil Code provides that all the properties acquired during the marriage are
presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the
husband, or to the wife. InTan v. Court of Appeals,53 we held that it is not even necessary to prove
that the properties were acquired with funds of the partnership. As long as the properties were
acquired by the parties during the marriage, they are presumed to be conjugal in nature. In fact,
even when the manner in which the properties were acquired does not appear, the presumption will
still apply, and the properties will still be considered conjugal. The presumption of the conjugal
nature of the properties acquired during the marriage subsists in the absence of clear, satisfactory
and convincing evidence to overcome the same.54

In this case, the evidence adduced by the petitioners in the RTC is that the 100,000 shares of stocks
in the Citycorp Investment Philippines were issued to and registered in its corporate books in the
name of the petitioner-husband when the said corporation was incorporated on May 14, 1979. This
was done during the subsistence of the marriage of the petitioner-spouses. The shares of stocks
are, thus, presumed to be the conjugal partnership property of the petitioners. The private
respondent failed to adduce evidence that the petitioner-husband acquired the stocks with his
exclusive money.55 The barefaced fact that the shares of stocks were registered in the corporate
books of Citycorp Investment Philippines solely in the name of the petitioner-husband does not
constitute proof that the petitioner-husband, not the conjugal partnership, owned the same.56 The
private respondents reliance on the rulings of this Court in Maramba v. Lozano57 and Associated
Insurance & Surety Co., Inc. v. Banzon58 is misplaced. In the Maramba case, we held that where
there is no showing as to when the property was acquired, the fact that the title is in the wifes name
alone is determinative of the ownership of the property. The principle was reiterated in the
Associated Insurance case where the uncontroverted evidence showed that the shares of stocks
were acquired during the marriage of the petitioners.

Instead of fortifying the contention of the respondents, the ruling of this Court in Wong v.
Intermediate Appellate Court59 buttresses the case for the petitioners. In that case, we ruled that he
who claims that property acquired by the spouses during their marriage is not conjugal partnership
property but belongs to one of them as his personal property is burdened to prove the source of the
money utilized to purchase the same. In this case, the private respondent claimed that the petitioner-
husband acquired the shares of stocks from the Citycorp Investment Philippines in his own name as
the owner thereof. It was, thus, the burden of the private respondent to prove that the source of the
money utilized in the acquisition of the shares of stocks was that of the petitioner-husband alone. As
held by the trial court, the private respondent failed to adduce evidence to prove this assertion.

The CA, likewise, erred in holding that by executing a continuing guaranty and suretyship agreement
with the private respondent for the payment of the PBMCI loans, the petitioner-husband was in the
exercise of his profession, pursuing a legitimate business. The appellate court erred in concluding
that the conjugal partnership is liable for the said account of PBMCI under Article 161(1) of the New
Civil Code.

Article 161(1) of the New Civil Code (now Article 121[2 and 3]60 of the Family Code of the
Philippines) provides:

Art. 161. The conjugal partnership shall be liable for:

(1) All debts and obligations contracted by the husband for the benefit of the conjugal partnership,
and those contracted by the wife, also for the same purpose, in the cases where she may legally
bind the partnership.

The petitioner-husband signed the continuing guaranty and suretyship agreement as security for the
payment of the loan obtained by the PBMCI from the private respondent in the amount
of P38,000,000. In Ayala Investment and Development Corp. v. Court of Appeals,61 this Court ruled
"that the signing as surety is certainly not an exercise of an industry or profession. It is not
embarking in a business. No matter how often an executive acted on or was persuaded to act as
surety for his own employer, this should not be taken to mean that he thereby embarked in the
business of suretyship or guaranty."

For the conjugal partnership to be liable for a liability that should appertain to the husband alone,
there must be a showing that some advantages accrued to the spouses. Certainly, to make a
conjugal partnership responsible for a liability that should appertain alone to one of the spouses is to
frustrate the objective of the New Civil Code to show the utmost concern for the solidarity and well
being of the family as a unit. The husband, therefore, is denied the power to assume unnecessary
and unwarranted risks to the financial stability of the conjugal partnership.62

In this case, the private respondent failed to prove that the conjugal partnership of the petitioners
was benefited by the petitioner-husbands act of executing a continuing guaranty and suretyship
agreement with the private respondent for and in behalf of PBMCI. The contract of loan was
between the private respondent and the PBMCI, solely for the benefit of the latter. No presumption
can be inferred from the fact that when the petitioner-husband entered into an accommodation
agreement or a contract of surety, the conjugal partnership would thereby be benefited. The private
respondent was burdened to establish that such benefit redounded to the conjugal partnership.63

It could be argued that the petitioner-husband was a member of the Board of Directors of PBMCI
and was one of its top twenty stockholders, and that the shares of stocks of the petitioner-husband
and his family would appreciate if the PBMCI could be rehabilitated through the loans obtained; that
the petitioner-husbands career would be enhanced should PBMCI survive because of the infusion of
fresh capital. However, these are not the benefits contemplated by Article 161 of the New Civil Code.
The benefits must be those directly resulting from the loan. They cannot merely be a by-product or a
spin-off of the loan itself.64

This is different from the situation where the husband borrows money or receives services to be
used for his own business or profession. In the Ayala case, we ruled that it is such a contract that is
one within the term "obligation for the benefit of the conjugal partnership." Thus:

(A) If the husband himself is the principal obligor in the contract, i.e., he directly received the money
and services to be used in or for his own business or his own profession, that contract falls within the
term " obligations for the benefit of the conjugal partnership." Here, no actual benefit may be
proved. It is enough that the benefit to the family is apparent at the time of the signing of the
contract. From the very nature of the contract of loan or services, the family stands to benefit from
the loan facility or services to be rendered to the business or profession of the husband. It is
immaterial, if in the end, his business or profession fails or does not succeed. Simply stated, where
the husband contracts obligations on behalf of the family business, the law presumes, and rightly so,
that such obligation will redound to the benefit of the conjugal partnership.65

The Court held in the same case that the rulings of the Court in Cobb-Perez and G-Tractors, Inc. are
not controlling because the husband, in those cases, contracted the obligation for his own business.
In this case, the petitioner-husband acted merely as a surety for the loan contracted by the PBMCI
from the private respondent.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and Resolution of the
Court of Appeals are SET ASIDE AND REVERSED. The assailed orders of the RTC are
AFFIRMED.

SO ORDERED.
SECTION 15

Tayabas land vs sharruf (supra)

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

FLORENTINA BILAG-RIVERA, petitioner,

vs.
CRISANTO FLORA, respondent.

PADILLA, J.:

In an affidavit-complaint 1 filed with the Office of the Court Administrator, complainant Florentina Bilag-
Rivera charged respondent Crisanto Flora, deputy sheriff, RTC of Baguio City, with grave misconduct and
dishonesty, when he released a motor vehicle subject of a writ of attachment to a representative of the
plaintiff in a civil case, without authority from the court which issued the writ, thereby enabling said plaintiff
to sell the motor vehicle to a third person, to the damage and prejudice of complainant who claims
ownership over said motor vehicle.

On 5 August 1990, Elsie V. Tacay bought an Isuzu Jitney on installment basis from Panda
Automotive Corporation (PANDA), Dagupan City, represented by Charlie Q. Carlos, for the amount
of P256,000.00. On 17 March 1992, when the installment payments reached P145,000.00, Tacay
demanded for the execution of a Deed of Absolute Sale which she obtained from PANDA on the
same date. On 23 March 1992, Tacay registered the vehicle in her name with the Land
Transportation Office (LTO) in Lingayen. On 10 May 1992, Tacay tendered a check for P100,000.00
to cover part of the P120,000.00 balance still due PANDA. Upon presentment by PANDA with the
drawee bank, the check for P100,000.00 was dishonored as the same was allegedly forged. When
confronted by PANDA about the check's dishonor, Tacay promised to pay the balance of
P120,000.00 on or before 23 June 1992.

On 8 July 1992, however, Tacay sold the Isuzu jitney to complainant Florentina Bilag-Rivera for the
amount of P250,000.00, covered by an Absolute Deed of Sale. 2 Hence, possession of the vehicle and
its LTO registration papers were turned over to complainant.

It appears that Tacay failed to fulfill her promise to pay the P120,000 balance on the vehicle due
PANDA Corporation, prompting the latter to verify the whereabouts of the said vehicle. PANDA later
learned of the deed of sale between Tacay and complainant and obtained information that the
alleged deed of sale was not registered or even annotated on the Certificate of Registration of the
motor vehicle.

In September 1992, with Tacay still in default on her outstanding obligation to Panda Corporation,
the latter, thru its manager Charlie Carlos, filed a complaint for specific performance, replevin, and
damages with the RTC of Dagupan City, Branch 40 [docketed as Civil Case No. D-10205] with
prayer for the issuance of a writ of preliminary attachment against Elsie Tacay, with complainant
(Rivera) impleaded as co-defendant.

On 18 September 1992, the, RTC of Dagupan issued a writ of preliminary attachment against Tacay
and complainant. Since the subject motor vehicle was believed to be in the City of Baguio, the writ
was addressed to the RTC, City Sheriff, Baguio City.
Complainant alleges that being a buyer in good faith, she should not have been impleaded in the
complaint of Panda Corporation. Instead of proceeding against the principal defendant Elsie V.
Tacay, the respondent Deputy Sheriff proceeded to attach the subject motor vehicle in complainant's
possession. At that time, respondent Sheriff was accompanied by Charlie Carlos, PANDA's
Manager. Respondent issued to the complainant a handwritten receipt on the same day (18
September 1992) which indicated that he took possession of the vehicle pursuant to the writ of
attachment. 3

Complainant requested the City Sheriff of the RTC, Baguio City to hold the vehicle for a few days as
she would prepare the amount of P20,000.00 as counterbond to discharge the attachment. Since
there was no bonded warehouse in the City of Baguio, the office of the City Sheriff requested
complainant to pay P1,000.00 to justify their holding on to said vehicle until she could post the
counterbond. Complainant paid the amount of P1,000.00 and was duly receipted for said payment. 4

On 23 December 1992, however, the RTC of Dagupan City issued an order in Civil Case No. D-
10285 for the issuance of an alias writ of attachment as prayed for by Panda Motors. The writ was
again addressed to the office of the City Sheriff, RTC of Baguio City with an order to attach the same
motor vehicle in possession of complainant. Respondent received the alias writ on 23 February
1993.

The alias writ was not served immediately by respondent because the whereabouts of the said
vehicle could not be ascertained. It was only on 15 March 1993 when Charlie Carlos, the manager of
Panda Motors, came personally to the office of respondent and informed him; that the vehicle to be
attached was in the possession of Carlos Camiwet, a cousin of complainant.

Forthwith, respondent together with Charlie Carlos, proceeded to the residence of Carlos Camiwet
and served thealias writ of attachment on the latter with an attachment bond of P120,000.00.
Complainant avers that this time, respondent sheriff did not issue any receipt to cover for his re-
possession of the said vehicle. Worse, complainant maintains that at the time of the levy, various
tools worth P50,000.00, which were not integral to the motor vehicle, were also taken by respondent
sheriff.

The following day, complainant accompanied by her lawyer, went to the office of respondent to
inquire about the motor vehicle and to request for a receipt. According to complainant, respondent
told her not to worry and that the issuance of a receipt was no longer necessary because the vehicle
and its tools were being kept in a safe place. Complainant then informed respondent that she would
be posting a counterbond as soon as she had the money.

Complainant further alleges that on several occasions, she came to the office of respondent to
inspect the vehicle but respondent did not allow her to see the vehicle nor was she informed of its
whereabouts. Respondent, however, gave complainant repeated assurances that the vehicle was
being kept in a safe place.

On 17 May 1993, complainant attended the hearing in Civil Case No.D-10285 to argue her Motion to
Dismiss and Motion to Quash the Writ of Preliminary Attachment. To her surprise, she was informed
by the lawyer of Panda Corporation that a certain Elsie Tacay had voluntarily surrendered the
vehicle together with its documents to Panda Corporation and that Panda's manager, Charlie Carlos,
had already sold the vehicle to a person named Leonardo Sarmiento for P175,000.00.

Complainant manifested before the court that the subject motor vehicle was in custodia legis and
that the above-mentioned transactions were anomalous and contrary to law. Thereafter, the court
directed complainant's lawyer to investigate the matter and to report his findings to the court.
Complainant's lawyer then sent a letter of inquiry to the Clerk of Court of Baguio City, asking why
respondent did not issue a receipt when he executed the alias writ of attachment; why there was no
sheriff's return on the writ of attachment filed in court; why the vehicle was no longer seen again after
15 March 1993; and whether it was true that Elsie Tacay took the vehicle together with the tools from
respondent and returned it to Panda Corporation. 5Complainant also sent a letter of inquiry to the LTO
office in Lingayen to check on the current registration of the said vehicle. 6

Meanwhile, the Clerk of Court and the Ex-Officio Sheriff of RTC, Baguio issued a memo to
respondent requiring him to explain the proceedings he conducted in enforcing the alias writ of
attachment in Civil Case No. D-10285.

In his compliance dated 18 June 1993, respondent stated that he:

. . . served and took the subject vehicle into "custodia legis", and a receipt was duly
issued. The receipt not however received nor signed by the defendants as they
refused to do so, thereafter, said motor vehicle was surrendered to the Plaintiff in the
above-captioned case for safekeeping and custody for the reason that this office has
no bonded warehouse to keep the said motor vehicle. An acknowledgment receipt
was duly signed by the manager of said Plaintiff (Panda Motors) in the person of Mr.
Charlie Marcos. 7 (Emphases supplied)

In addition, respondent denied the existence of the tools when he levied the alias writ of attachment
on the said vehicle.

In respondent's return of the alias writ of attachment dated 7 June 1993, he similarly stated that:

xxx xxx xxx

On March 15, 1993, the said (alias) writ of attachment was enforced together with the
manager of Panda Corporation, Mr. Charlie Carlos from Mrs. Florentina Rivera, but
refused to acknowledge the receipt of the said motor vehicle for the reason that she
will just file(d) the necessary counterbond.

And on the said date said motor vehicle was taken by the plaintiff thru Mr. Charlie
Carlos for safekeeping and custody for the reason that this officer has no bonded
warehouse to place the said motor vehicle. 8

On 10 June 1993, complainant's lawyer received a reply from the LTO in Lingayen with certified
photocopies of the vehicle's registration indicating that on 1 April 1993, Elsie V. Tacay re-sold the
subject vehicle for P175,000.00 to Charlie Carlos 9 and that on 10 April 1993, Charlie Carlos sold the
same unit for P175,000.00 to Leonardo Sarmiento of Bautista, Pangasinan 10 and that the same had been
registered in Sarmiento's name for LTO registration year 1993-1994.

Complainant now argues that the foregoing facts and circumstances clearly demonstrate that
respondent sheriff adopted an irregular procedure and entered into an anomalous transaction
in not issuing a receipt to complainant when he served the alias writ of attachment and on the very
same day turned over possession of the vehicle to the attaching creditor which simply issued an
acknowledgment receipt for the vehicle, instead of securing the permission of the trial court, knowing
fully well that the vehicle was in custodia legis. Compared to the service of the first writ of attachment
when respondent requested the amount of P1,000.00 from complainant as storage fees for the
vehicle, respondent in serving the alias writ of attachment in effect made Charlie Carlos his agent
when he turned over the said vehicle to the latter for alleged "safekeeping and custody."
In his comment 11 filed with this Court, respondent contends that the Office of the City Sheriff of Baguio
has no bonded warehouse to store the vehicle for the disposition of the (trial) court, hence, the vehicle
was turned over to the attaching-creditor's representative, Charlie Carlos, who immediately asked
respondent that the motor vehicle be kept in his custody for which Carlos signed a
receipt 12 acknowledging that the vehicle was under custody of the Court but shall be temporarily
deposited in the company's (Panda's) premises (in Dagupan City).

Respondent explains that after the due enforcement of the alias writ of attachment, he awaited for
further disposition of the same by the trial court, and for all intents and purposes, his (ministerial)
function had been fully served. Thus, he no longer had any knowledge, consent nor participation
with respect to the subsequent deed of sale between Elsie Tacay and Charlie Carlos 13 and between
Charlie Carlos and Leonardo Sarmiento 14. Neither did he receive nor enjoy any benefit in any form out of
these transactions.

In a resolution dated 27 July 1994, this Court, as recommended by the Office of the Court
Administrator, referred this case to Executive Judge Clarence J. Villanueva of the Regional Trial
Court of Baguio City, Branch 7 for investigation, report and recommendation within sixty (60) days
from receipt of the records.

In a six (6) page report dated 15 November 1994, Judge Villanueva made the following findings and
recommendations:

. . . there is clear evidence on record that respondent sheriff Crisanto Flora was
remiss of [sic] his duties as an officer of the court in releasing the subject motor
vehicle to Charlie Carlos, a representative of the plaintiff in the case where the writ of
attachment emanated, without seeking an order or permission from the court
concerned. It was incumbent of Sheriff Flora to take into his custody the motor
vehicle subject of attachment and protect it. A sheriff who takes possession of the
property under a writ of attachment is duty bound to protect the property from
damage or loss and to exercise ordinary and reasonable care for the preservation of
the property (Adm. Matter p. 128, 81 SCRA 599). The fact that respondent Flora
failed to immediately make a return of his proceedings on the second writ of
attachment is something to consider. He enforced the second writ of attachment on
March 15, 1993 but he waited until June 18, 1993 to do so at the direction of the
Clerk of Court Atty. Delilah Gonzales-Muoz as contained in the memorandum
issued to respondent (see Exh. "B" page 45 record; see also Exhs. "C" and "C-1").
While it is true that there are no bonded warehouse(s) where sheriffs could deposit
attached properties for safe keeping, herein respondent is not exempt from
exercising reasonable diligence in performing his duties as an officer of the court.
The least that he could have done is to ask permission for the concerned court to
allow him to turn over the subject vehicle to Charlie Carlos. This he failed to do. 15

The Court agrees with the findings of Judge Villanueva and concludes that while the evidence may
be insufficient to prove that respondent conspired with Charlie Carlos and Elsie Tacay in eventually
alienating the vehicle to a third person, his particular zeal and precipitate decision to give possession
of the vehicle to a party litigant (plaintiff) and treat the same as "in custodia legis" effectively destroys
the presumption of regularity in the performance of his official duties.

As deputy sheriff, respondent could not be unaware of Rule 57, section 6 of the rules of Court which
provides that:
 Immediately after executing the order of the officer must make a return thereon to the
clerk or judge of the court from which the order issued, with a full statement of his
proceeding under the order and a complete inventory of the property attached,
together with any counter-bond given by the party against whom attachment is
issued, and serve a copy of any such counter-bond on the applicant or his lawyer.

Section (7) (c) of the same Rule also mandates that:

Properties shall be attached by the officer executing the order in the following
manner:

xxx xxx xxx

(c) Personal property capable of manual delivery, by taking and safely keeping it in
his capacity, after issuing the corresponding receipt therefor.

Chapter VIII (e) (4) of the Manual for Clerks of Court similarly states that:

All sheriffs and deputy sheriffs shall submit a report to the judge concerned on the
action taken on all writs and processes assigned to them within (10) days from
receipt of said process or writ. Said report shall form part of the records.

Respondent could not evade the positive duty of serving the attaching creditor's affidavit, bond, and
the order of attachment on complainant's representative (Camiwet) by now alleging that it was the
fault of complainant and her representative in refusing to sign the receipt that he allegedly issued on
15 March 1993.

The records of the investigation reveal otherwise-that complainant could not have signed the
acknowledgment receipt because she was not present when the vehicle was attached. In the same
vein, her cousin Camiwet refused to sign the receipt because, as he testified, the same was
misleading as he was being forced to sign a receipt which indicated that complainant and Elsie
Tacay surrendered the vehicle to respondent by virtue of the said alias writ of attachment.

The Court is more inclined to believe the testimony of Camiwet during the investigation to the effect
that he only surrendered the vehicle to respondent because he was repeatedly assured by
respondent that everything was all right and that Charlie Carlos was really after Elsie Tacay, that as
soon as Mr. Carlos returned to Dagupan, he (Camiwet) or complainant could retrieve the vehicle in
his (respondent's) possession. 16

Respondent himself virtually admitted his nonfeasance when he testified that it had been their
practice to give possession of properties subject of writs of attachment to party litigants because
they have no bonded warehouse in their jurisdiction. However, he could not explain why, in this
particular case, in the first writ of attachment, he even demanded P1,000.00 from complainant for
alleged storage fees while complainant bought time to find the amount for her counterbond, and yet,
in the execution of the alias writ, he usurped the court's function and released the vehicle to the
custody of Mr. Carlos. Equally reprehensible is his attempt to cover up his misdeed by concealing it
from complainant when the latter confronted him thereafter in his office. 17

Thus, the return he executed more than two (2) months after the enforcement of the alias writ was
more of an afterthought rather than the fulfillment of a positive duty, because by then he had been
ordered by the clerk of court to explain his proceedings under the alias writ of attachment.
Time and again, the Court has reiterated the rule that the conduct of every employee of the judiciary
must be at all time characterized with propriety and decorum and above all else, it must be above
and beyond suspicion. 18 In the case at bench, respondent cannot successfully defend his negligent
omission to secure a court order before disposing of the property by simply alleging that a party litigant
had agreed to be his agent. In the same vein, a sheriff or deputy sheriff cannot act as special deputy
sheriff of any party litigant.

The Court takes notice that on 18 July 1994, the RTC of Dagupan City rendered a decision in Civil
Case No. D-102805 awarding damages 19 in favor of complainant Rivera. Said decision became final
and executory as Panda and Elsie Tacay did not interpose any appeal therefrom. This circumstance adds
more credence to complainant's claim that she would not have been defrauded in the first place had
respondent sheriff performed his duty in accordance with the rules instead of unduly accommodating the
request of a party litigant.

In his report, Judge Villanueva recommends that respondent be suspended for six (6) months
without pay. The Court considers said penalty to be too harsh in the absence of direct evidence
showing that respondent has pecuniarily received any financial gain from the anomalous
transactions.

But for his failure to exercise reasonable diligence in the performance of his duties as an officer of
the court, the Court hereby imposes a fine of P5,000 on respondent Flora with STERN WARNING
that any repetition of the same act in the future will be dealt with more severely. Let a copy of this
decision be entered in respondent's personal record.

SO ORDERED.

G.R. No. L-47578 April 8, 1941

PHILIPPINE NATIONAL BANK, plaintiff-appellant,

vs.
ESTEBAN I. VAZQUEZ, defendant-appellee.

LAUREL, J.:

Plaintiff appeals to this court from a decision of the Court of First Instance of Occidental Negros,
promulgated January 18, 1938, the dispositive part reading:

Wherefore, the court hereby renders judgment in favor of the plaintiff and against the
defendant, reviving the judgment in the aforesaid civil case No. 4031 of this same court, but
deducting from the amount thereof the sum of P5,250.13, the deduction to be computed as
of the date the judgment in said civil case had become final and executory.

It appears that on or about the 27th day of May, 1925, Esteban I. Vazquez succeeded in negotiating
with the Philippine National Bank a loan for P24,000, on the 1925-26 sugar-cane harvest of
his hacienda. "Mandalagan"; that the money advanced him by the plaintiff bank totalled P19,521.09,
at an agreed 9 per cent interest per annum and a mortgage executed on his sugar-cane harvest;
that additional guaranty was put up by one Cristeta Ibaez; and that after liquidation of the debt as of
March 31, 1927, the following was the result:

Total advances against 1925-26 crop loan P19,521.09

 Total proceeds of sugar sales 7,636.59

Deficit (principal) 11,884.50

Interest at 9 per cent to March 31, 1927 7,984.97

Total deficit to March 31, 1937 19,869.47

Daily interest on P11,884.50 at 9 per cent 2.97

(Bill of Exceptions, pp. 9-10.)

Subsequently, in an action filed by the bank for the recovery of the total amount due and owing,
defendant Vazquez was ordered by the court to settle his obligation in full. (Civil Case No. 4031,
Court of First Instance of Occidental Negros.) No appeal was interposed by any of the parties to the
decision of October 31, 1931, and the same became final and executory. But the said judgment not
having years enforced by writ of execution and the period of five years having elapsed, the plaintiff
bank, on July 22, 1937, filed a complaint (Bill of Executions, pp. 2-6) for the August 12, 1937, filed
his answer and set up the following counterclaim:

Que, como se puede ver en el expediente de la causa civil No. 4031 mencionada en el
parrafo II de la demanda, a peticion del demandante, previa fianza prestada por el mismo
actor y en virtud de ordenes judiciales, fueron embargados preventivamente del demandado
500 picos de azucar de la propiedad de este, y vendidos por el Sheriff Provincial de Negros
Occidental a razon de P10.75 cada uno, habiendose tambien ordenado por el mismo Hon.
Juzgado, a peticion igualmente del demandante, el deposito en el Banco Nacional Filipino
del producto neto de dicha venta montante a P5,250.13, cantidad que debe ser descontada
de la suma de P19,869.47 expresada en el parrafo IV de la demanda, con la consiguiente
reduccion de los intereses referidos en dicho mismo parrafo IV, por no haberse levantado ni
anulado nunca dicho embargo y por haberse dictado contra el demandado sentencia
condenatoria, que ha sido firme, en dicho asunto civil No. 4031.

The plaintiff's appeal is limited to the portion of the decision which orders the deduction of the sum
mentioned therein from the amount adjudicated to the plaintiff. In the aforementioned civil case No.
4031, the plaintiff bank prayed for and obtained an order of preliminary attachment, by virtue of
which 500 piculs of sugar belonging to the defendant Vazquez was levied upon by the sheriff and
sold at public auction at the rate of P10.75 per picul, the proceeds therefrom amounting to
P5,250.13. This amount was deposited with the plaintiff bank, upon its own petition, in the name of
one Andres Covacha personally, then a deputy of the Provincial Sheriff of Occidental Negros. On
August 14, 1928, a deposit of P5,250.13, was made in the name of the Provincial Sheriff of
Occidental Negros with the bank, by virtue of another petition of the plaintiff approved by the court to
transfer the deposit in the name of the provincial sheriff proper. It appears, however, that the
Provincial Sheriff made other deposits on this current account, and that he has been making
withdrawals therefrom until it was closed on January 6, 1932.

The plaintiff Bank contends that the amount of P5,250.13 should not have been deducted from the
judgment awarded to it, for the reason that the defendant, despite the attachment, is still the owner
of the 500 piculs of sugar and of its proceeds after the public auction sale, and loss or
misappropriation thereof should be for his account. The reason invoked is not applicable here. As
correctly observed by the trial judge, "once the decision in the aforesaid civil case had become final,
the proceed of the sugar attached in connection therewith should be considered as partial
satisfaction of the amount of the judgment." "Personal property may have levied upon under
attachment and left in the possession of the sheriff or other officer levying the writ to secure the
payment of such judgment as may be recovered in the action. Where execution issues, it is the duty
of such officer to apply towards its satisfaction the property so attached and left in his hands; but he
may have embezzled or otherwise misappropriated it, or allowed it to be lost by his negligence.
When such is the case, we think the better opinion is, that it must, as between the plaintiff and
defendant, and persons claiming under defendant, be treated as though it had been levied upon
under execution as well as under attachment, and therefore as satisfying the judgment to the extent
of its value." (Freeman on Judgments, pp. 2366-2367, citing Yourt v. Hopkins, 24 Ill. 326 and
Kenrick v. Ruff, 71 Mo. 570.)

And whether or not the Provincial Sheriff was negligent in the performance of his official duties by
not turning the money over the plaintiff, is a question which could only be determined in a separate
case and hence, immaterial in the present controversy.

It should be observed that affirmative acts of the plaintiff Bank have resulted in the attachment and
subsequent sale of the property of the defendant. It seems fair that plaintiff having put defendant's
property into the hands of the sheriff, the loss should fall on him and not on defendant. When a
sheriff takes property or goods in execution or by attachment, he becomes the bailee for the benefit
of all parties interested, and certainly for the party who set him in motion. After obtaining the
judgment, plaintiff at once was entitled to have the proceeds of the sale applied to the satisfaction of
his judgment and it was the duty of the sheriff to pay the proceeds over. The money collected or paid
the sheriff on the sale of the goods or property may be regarded just like money in the hands of a
sheriff collected on execution. If the sheriff collects money from a judgment debtor, and then fails to
pay it over, the debtor cannot be compelled to pay it again.

We find defendant Esteban I. Vazquez liable to the plaintiff Philippine National Bank for the principal
sum of P19,869.47, with interest on the sum of P11,884.50 at 9 per cent per annum from April 1,
1927, but deducting the sum of P5,250.13, the deduction to be computed as of the date the
judgment in civil case No. 4031 had become final and executory. The appealed decision is therefore
affirmed, with costs against the appellant. So ordered.

G.R. No. L-49188 January 30, 1990

PHILIPPINE AIRLINES, INC., petitioner,

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

GUTIERREZ, JR., J.:

Behind the simple issue of validity of an alias writ of execution in this case is a more fundamental
question. Should the Court allow a too literal interpretation of the Rules with an open invitation to
knavery to prevail over a more discerning and just approach? Should we not apply the ancient rule
of statutory construction that laws are to be interpreted by the spirit which vivifies and not by the
letter which killeth?

This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No. 07695
entitled "Philippine Airlines, Inc. v. Hon. Judge Ricardo D. Galano, et al.", dismissing the petition for
certiorari against the order of the Court of First Instance of Manila which issued an alias writ of
execution against the petitioner.

The petition involving the alias writ of execution had its beginnings on November 8, 1967, when
respondent Amelia Tan, under the name and style of Able Printing Press commenced a complaint
for damages before the Court of First Instance of Manila. The case was docketed as Civil Case No.
71307, entitled Amelia Tan, et al. v. Philippine Airlines, Inc.

After trial, the Court of First Instance of Manila, Branch 13, then presided over by the late Judge
Jesus P. Morfe rendered judgment on June 29, 1972, in favor of private respondent Amelia Tan and
against petitioner Philippine Airlines, Inc. (PAL) as follows:

WHEREFORE, judgment is hereby rendered, ordering the defendant Philippine Air

Lines:

1. On the first cause of action, to pay to the plaintiff the amount of P75,000.00 as
actual damages, with legal interest thereon from plaintiffs extra-judicial demand
made by the letter of July 20, 1967;

2. On the third cause of action, to pay to the plaintiff the amount of P18,200.00,
representing the unrealized profit of 10% included in the contract price of
P200,000.00 plus legal interest thereon from July 20,1967;

3. On the fourth cause of action, to pay to the plaintiff the amount of P20,000.00 as
and for moral damages, with legal interest thereon from July 20, 1 967;

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

Plaintiffs second and fifth causes of action, and defendant's counterclaim, are
dismissed.

With costs against the defendant. (CA Rollo, p. 18)

On July 28, 1972, the petitioner filed its appeal with the Court of Appeals. The case was docketed as
CA-G.R. No. 51079-R.

On February 3, 1977, the appellate court rendered its decision, the dispositive portion of which
reads:

IN VIEW WHEREOF, with the modification that PAL is condemned to pay plaintiff the
sum of P25,000.00 as damages and P5,000.00 as attorney's fee, judgment is
affirmed, with costs. (CA Rollo, p. 29)

Notice of judgment was sent by the Court of Appeals to the trial court and on dates subsequent
thereto, a motion for reconsideration was filed by respondent Amelia Tan, duly opposed by petitioner
PAL.

On May 23,1977, the Court of Appeals rendered its resolution denying the respondent's motion for
reconsideration for lack of merit.
No further appeal having been taken by the parties, the judgment became final and executory and
on May 31, 1977, judgment was correspondingly entered in the case.

The case was remanded to the trial court for execution and on September 2,1977, respondent
Amelia Tan filed a motion praying for the issuance of a writ of execution of the judgment rendered by
the Court of Appeals. On October 11, 1977, the trial court, presided over by Judge Galano, issued its
order of execution with the corresponding writ in favor of the respondent. The writ was duly referred
to Deputy Sheriff Emilio Z. Reyes of Branch 13 of the Court of First Instance of Manila for
enforcement.

Four months later, on February 11, 1978, respondent Amelia Tan moved for the issuance of an alias
writ of execution stating that the judgment rendered by the lower court, and affirmed with
modification by the Court of Appeals, remained unsatisfied.

On March 1, 1978, the petitioner filed an opposition to the motion for the issuance of an alias writ of
execution stating that it had already fully paid its obligation to plaintiff through the deputy sheriff of
the respondent court, Emilio Z. Reyes, as evidenced by cash vouchers properly signed and
receipted by said Emilio Z. Reyes.

On March 3,1978, the Court of Appeals denied the issuance of the alias writ for being premature,
ordering the executing sheriff Emilio Z. Reyes to appear with his return and explain the reason for
his failure to surrender the amounts paid to him by petitioner PAL. However, the order could not be
served upon Deputy Sheriff Reyes who had absconded or disappeared.

On March 28, 1978, motion for the issuance of a partial alias writ of execution was filed by
respondent Amelia Tan.

On April 19, 1978, respondent Amelia Tan filed a motion to withdraw "Motion for Partial Alias Writ of
Execution" with Substitute Motion for Alias Writ of Execution. On May 1, 1978, the respondent Judge
issued an order which reads:

As prayed for by counsel for the plaintiff, the Motion to Withdraw 'Motion for Partial
Alias Writ of Execution with Substitute Motion for Alias Writ of Execution is hereby
granted, and the motion for partial alias writ of execution is considered withdrawn.

Let an Alias Writ of Execution issue against the defendant for the fall satisfaction of
the judgment rendered. Deputy Sheriff Jaime K. del Rosario is hereby appointed
Special Sheriff for the enforcement thereof. (CA Rollo, p. 34)

On May 18, 1978, the petitioner received a copy of the first alias writ of execution issued on the
same day directing Special Sheriff Jaime K. del Rosario to levy on execution in the sum of
P25,000.00 with legal interest thereon from July 20,1967 when respondent Amelia Tan made an
extra-judicial demand through a letter. Levy was also ordered for the further sum of P5,000.00
awarded as attorney's fees.

On May 23, 1978, the petitioner filed an urgent motion to quash the alias writ of execution stating
that no return of the writ had as yet been made by Deputy Sheriff Emilio Z. Reyes and that the
judgment debt had already been fully satisfied by the petitioner as evidenced by the cash vouchers
signed and receipted by the server of the writ of execution, Deputy Sheriff Emilio Z. Reyes.
On May 26,1978, the respondent Jaime K. del Rosario served a notice of garnishment on the
depository bank of petitioner, Far East Bank and Trust Company, Rosario Branch, Binondo, Manila,
through its manager and garnished the petitioner's deposit in the said bank in the total amount of
P64,408.00 as of May 16, 1978. Hence, this petition for certiorari filed by the Philippine Airlines, Inc.,
on the grounds that:

AN ALIAS WRIT OF EXECUTION CANNOT BE ISSUED WITHOUT PRIOR

RETURN OF THE ORIGINAL WRIT BY THE IMPLEMENTING OFFICER.

II

PAYMENT OF JUDGMENT TO THE IMPLEMENTING OFFICER AS DIRECTED IN

THE WRIT OF EXECUTION CONSTITUTES SATISFACTION OF JUDGMENT.

III

INTEREST IS NOT PAYABLE WHEN THE DECISION IS SILENT AS TO THE

PAYMENT THEREOF.

IV

SECTION 5, RULE 39, PARTICULARLY REFERS TO LEVY OF PROPERTY OF

JUDGMENT DEBTOR AND DISPOSAL OR SALE THEREOF TO SATISFY
JUDGMENT.

Can an alias writ of execution be issued without a prior return of the original writ by the implementing
officer?

We rule in the affirmative and we quote the respondent court's decision with approval:

The issuance of the questioned alias writ of execution under the circumstances here
obtaining is justified because even with the absence of a Sheriffs return on the
original writ, the unalterable fact remains that such a return is incapable of being
obtained (sic) because the officer who is to make the said return has absconded and
cannot be brought to the Court despite the earlier order of the court for him to appear
for this purpose. (Order of Feb. 21, 1978, Annex C, Petition). Obviously, taking
cognizance of this circumstance, the order of May 11, 1978 directing the issuance of
an alias writ was therefore issued. (Annex D. Petition). The need for such a return as
a condition precedent for the issuance of an alias writ was justifiably dispensed with
by the court below and its action in this regard meets with our concurrence. A
contrary view will produce an abhorent situation whereby the mischief of an erring
officer of the court could be utilized to impede indefinitely the undisputed and
awarded rights which a prevailing party rightfully deserves to obtain and with
dispatch. The final judgment in this case should not indeed be permitted to become
illusory or incapable of execution for an indefinite and over extended period, as had
already transpired. (Rollo, pp. 35-36)

Judicium non debet esse illusorium; suum effectum habere debet (A judgment ought not to be
illusory it ought to have its proper effect).
Indeed, technicality cannot be countenanced to defeat the execution of a judgment for execution is
the fruit and end of the suit and is very aptly called the life of the law (Ipekdjian Merchandising Co. v.
Court of Tax Appeals, 8 SCRA 59 [1963]; Commissioner of Internal Revenue v. Visayan Electric Co.,
19 SCRA 697, 698 [1967]). A judgment cannot be rendered nugatory by the unreasonable
application of a strict rule of procedure. Vested rights were never intended to rest on the requirement
of a return, the office of which is merely to inform the court and the parties, of any and all actions
taken under the writ of execution. Where such information can be established in some other manner,
the absence of an executing officer's return will not preclude a judgment from being treated as
discharged or being executed through an alias writ of execution as the case may be. More so, as in
the case at bar. Where the return cannot be expected to be forthcoming, to require the same would
be to compel the enforcement of rights under a judgment to rest on an impossibility, thereby allowing
the total avoidance of judgment debts. So long as a judgment is not satisfied, a plaintiff is entitled to
other writs of execution (Government of the Philippines v. Echaus and Gonzales, 71 Phil. 318). It is a
well known legal maxim that he who cannot prosecute his judgment with effect, sues his case vainly.

More important in the determination of the propriety of the trial court's issuance of an alias writ of
execution is the issue of satisfaction of judgment.

Under the peculiar circumstances surrounding this case, did the payment made to the absconding
sheriff by check in his name operate to satisfy the judgment debt? The Court rules that the plaintiff
who has won her case should not be adjudged as having sued in vain. To decide otherwise would
not only give her an empty but a pyrrhic victory.

It should be emphasized that under the initial judgment, Amelia Tan was found to have been
wronged by PAL.

She filed her complaint in 1967.

After ten (10) years of protracted litigation in the Court of First Instance and the Court of Appeals,
Ms. Tan won her case.

It is now 1990.

Almost twenty-two (22) years later, Ms. Tan has not seen a centavo of what the courts have
solemnly declared as rightfully hers. Through absolutely no fault of her own, Ms. Tan has been
deprived of what, technically, she should have been paid from the start, before 1967, without need of
her going to court to enforce her rights. And all because PAL did not issue the checks intended for
her, in her name.

Under the peculiar circumstances of this case, the payment to the absconding sheriff by check in his
name did not operate as a satisfaction of the judgment debt.

In general, a payment, in order to be effective to discharge an obligation, must be made to the

proper person. Article 1240 of the Civil Code provides:

Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive
it. (Emphasis supplied)

Thus, payment must be made to the obligee himself or to an agent having authority, express or
implied, to receive the particular payment (Ulen v. Knecttle 50 Wyo 94, 58 [2d] 446, 111 ALR 65).
Payment made to one having apparent authority to receive the money will, as a rule, be treated as
though actual authority had been given for its receipt. Likewise, if payment is made to one who by
law is authorized to act for the creditor, it will work a discharge (Hendry v. Benlisa 37 Fla. 609, 20
SO 800,34 LRA 283). The receipt of money due on ajudgment by an officer authorized by law to
accept it will, therefore, satisfy the debt (See 40 Am Jm 729, 25; Hendry v. Benlisa supra; Seattle v.
Stirrat 55 Wash. 104 p. 834,24 LRA [NS] 1275).

The theory is where payment is made to a person authorized and recognized by the creditor, the
payment to such a person so authorized is deemed payment to the creditor. Under ordinary
circumstances, payment by the judgment debtor in the case at bar, to the sheriff should be valid
payment to extinguish the judgment debt.

There are circumstances in this case, however, which compel a different conclusion.

The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in
checks. The checks were not payable to Amelia Tan or Able Printing Press but to the absconding
sheriff.

Did such payments extinguish the judgment debt?

Article 1249 of the Civil Code provides:

The payment of debts in money shall be made in the currency stipulated, and if it is
not possible to deliver such currency, then in the currency which is legal tender in the
Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other

mercantile documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in
abeyance.

In the absence of an agreement, either express or implied, payment means the discharge of a debt
or obligation in money (US v. Robertson, 5 Pet. [US] 641, 8 L. ed. 257) and unless the parties so
agree, a debtor has no rights, except at his own peril, to substitute something in lieu of cash as
medium of payment of his debt (Anderson v. Gill, 79 Md.. 312, 29 A 527, 25 LRA 200,47 Am. St.
Rep. 402). Consequently, unless authorized to do so by law or by consent of the obligee a public
officer has no authority to accept anything other than money in payment of an obligation under a
judgment being executed. Strictly speaking, the acceptance by the sheriff of the petitioner's checks,
in the case at bar, does not, per se, operate as a discharge of the judgment debt.

Since a negotiable instrument is only a substitute for money and not money, the delivery of such an
instrument does not, by itself, operate as payment (See. 189, Act 2031 on Negs. Insts.; Art. 1249,
Civil Code; Bryan Landon Co. v. American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9 Phil. 44; 21
R.C.L. 60, 61). A check, whether a manager's check or ordinary cheek, is not legal tender, and an
offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by
the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment.
The obligation is not extinguished and remains suspended until the payment by commercial
document is actually realized (Art. 1249, Civil Code, par. 3).
If bouncing checks had been issued in the name of Amelia Tan and not the Sheriff's, there would
have been no payment. After dishonor of the checks, Ms. Tan could have run after other properties
of PAL. The theory is that she has received no value for what had been awarded her. Because the
checks were drawn in the name of Emilio Z. Reyes, neither has she received anything. The same
rule should apply.

It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment in full
legal contemplation. The reasoning is logical but is it valid and proper? Logic has its limits in decision
making. We should not follow rulings to their logical extremes if in doing so we arrive at unjust or
absurd results.

In the first place, PAL did not pay in cash. It paid in cheeks.

And second, payment in cash always carries with it certain cautions. Nobody hands over big
amounts of cash in a careless and inane manner. Mature thought is given to the possibility of the
cash being lost, of the bearer being waylaid or running off with what he is carrying for another.
Payment in checks is precisely intended to avoid the possibility of the money going to the wrong
party. The situation is entirely different where a Sheriff seizes a car, a tractor, or a piece of land.
Logic often has to give way to experience and to reality. Having paid with checks, PAL should have
done so properly.

Payment in money or cash to the implementing officer may be deemed absolute payment of the
judgment debt but the Court has never, in the least bit, suggested that judgment debtors should
settle their obligations by turning over huge amounts of cash or legal tender to sheriffs and other
executing officers. Payment in cash would result in damage or interminable litigations each time a
sheriff with huge amounts of cash in his hands decides to abscond.

As a protective measure, therefore, the courts encourage the practice of payments by cheek
provided adequate controls are instituted to prevent wrongful payment and illegal withdrawal or
disbursement of funds. If particularly big amounts are involved, escrow arrangements with a bank
and carefully supervised by the court would be the safer procedure. Actual transfer of funds takes
place within the safety of bank premises. These practices are perfectly legal. The object is always
the safe and incorrupt execution of the judgment.

It is, indeed, out of the ordinary that checks intended for a particular payee are made out in the name
of another. Making the checks payable to the judgment creditor would have prevented the
encashment or the taking of undue advantage by the sheriff, or any person into whose hands the
checks may have fallen, whether wrongfully or in behalf of the creditor. The issuance of the checks
in the name of the sheriff clearly made possible the misappropriation of the funds that were
withdrawn.

As explained and held by the respondent court:

... [K]nowing as it does that the intended payment was for the private party
respondent Amelia Tan, the petitioner corporation, utilizing the services of its
personnel who are or should be knowledgeable about the accepted procedures and
resulting consequences of the checks drawn, nevertheless, in this instance, without
prudence, departed from what is generally observed and done, and placed as payee
in the checks the name of the errant Sheriff and not the name of the rightful payee.
Petitioner thereby created a situation which permitted the said Sheriff to personally
encash said checks and misappropriate the proceeds thereof to his exclusive
 personal benefit. For the prejudice that resulted, the petitioner himself must bear the
fault. The judicial guideline which we take note of states as follows:

As between two innocent persons, one of whom must suffer the consequence of a
breach of trust, the one who made it possible by his act of confidence must bear the
loss. (Blondeau, et al. v. Nano, et al., L-41377, July 26, 1935, 61 Phil. 625)

Having failed to employ the proper safeguards to protect itself, the judgment debtor whose act made
possible the loss had but itself to blame.

The attention of this Court has been called to the bad practice of a number of executing officers, of
requiring checks in satisfaction of judgment debts to be made out in their own names. If a sheriff
directs a judgment debtor to issue the checks in the sheriff's name, claiming he must get his
commission or fees, the debtor must report the sheriff immediately to the court which ordered the
execution or to the Supreme Court for appropriate disciplinary action. Fees, commissions, and
salaries are paid through regular channels. This improper procedure also allows such officers, who
have sixty (60) days within which to make a return, to treat the moneys as their personal finds and to
deposit the same in their private accounts to earn sixty (60) days interest, before said finds are
turned over to the court or judgment creditor (See Balgos v. Velasco, 108 SCRA 525 [1981]). Quite
as easily, such officers could put up the defense that said checks had been issued to them in their
private or personal capacity. Without a receipt evidencing payment of the judgment debt, the
misappropriation of finds by such officers becomes clean and complete. The practice is ingenious
but evil as it unjustly enriches court personnel at the expense of litigants and the proper
administration of justice. The temptation could be far greater, as proved to be in this case of the
absconding sheriff. The correct and prudent thing for the petitioner was to have issued the checks in
the intended payee's name.

The pernicious effects of issuing checks in the name of a person other than the intended payee,
without the latter's agreement or consent, are as many as the ways that an artful mind could concoct
to get around the safeguards provided by the law on negotiable instruments. An angry litigant who
loses a case, as a rule, would not want the winning party to get what he won in the judgment. He
would think of ways to delay the winning party's getting what has been adjudged in his favor. We
cannot condone that practice especially in cases where the courts and their officers are involved. We
rule against the petitioner.

Anent the applicability of Section 15, Rule 39, as follows:

Section 15. Execution of money judgments. The officer must enforce an execution
of a money judgment by levying on all the property, real and personal of every name
and nature whatsoever, and which may be disposed of for value, of the judgment
debtor not exempt from execution, or on a sufficient amount of such property, if they
be sufficient, and selling the same, and paying to the judgment creditor, or his
attorney, so much of the proceeds as will satisfy the judgment. ...

the respondent court held:

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

xxx xxx xxx

 It is clear and manifest that after levy or garnishment, for a judgment to be executed
there is the requisite of payment by the officer to the judgment creditor, or his
attorney, so much of the proceeds as will satisfy the judgment and none such
payment had been concededly made yet by the absconding Sheriff to the private
respondent Amelia Tan. The ultimate and essential step to complete the execution of
the judgment not having been performed by the City Sheriff, the judgment debt
legally and factually remains unsatisfied.

Strictly speaking execution cannot be equated with satisfaction of a judgment. Under unusual
circumstances as those obtaining in this petition, the distinction comes out clearly.

Execution is the process which carries into effect a decree or judgment (Painter v. Berglund, 31 Cal.
App. 2d. 63, 87 P 2d 360, 363; Miller v. London, 294 Mass 300, 1 NE 2d 198, 200; Black's Law
Dictionary), whereas the satisfaction of a judgment is the payment of the amount of the writ, or a
lawful tender thereof, or the conversion by sale of the debtor's property into an amount equal to that
due, and, it may be done otherwise than upon an execution (Section 47, Rule 39). Levy and delivery
by an execution officer are not prerequisites to the satisfaction of a judgment when the same has
already been realized in fact (Section 47, Rule 39). Execution is for the sheriff to accomplish while
satisfaction of the judgment is for the creditor to achieve. Section 15, Rule 39 merely provides the
sheriff with his duties as executing officer including delivery of the proceeds of his levy on the
debtor's property to satisfy the judgment debt. It is but to stress that the implementing officer's duty
should not stop at his receipt of payments but must continue until payment is delivered to the obligor
or creditor.

Finally, we find no error in the respondent court's pronouncement on the inclusion of interests to be
recovered under the alias writ of execution. This logically follows from our ruling that PAL is liable for
both the lost checks and interest. The respondent court's decision in CA-G.R. No. 51079-R does not
totally supersede the trial court's judgment in Civil Case No. 71307. It merely modified the same as
to the principal amount awarded as actual damages.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The judgment of
the respondent Court of Appeals is AFFIRMED and the trial court's issuance of the alias writ of
execution against the petitioner is upheld without prejudice to any action it should take against the
errant sheriff Emilio Z. Reyes. The Court Administrator is ordered to follow up the actions taken
against Emilio Z. Reyes.

SO ORDERED.

SECTION 17
G.R. No. L-26449 May 15, 1969

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

vs.
JOSE O. SIA, defendant,
TIMES SURETY & INSURANCE CO. INC., surety-appellee.

German A. Sipin for plaintiff-appellant.

Galicano S. Calapatia for surety-appellee.

REYES, J.B.L., J.:

Direct appeal from two orders, dated 19 May and 5 June 1965, issued by the Court of First Instance
of Manila (Judge Francisco Arca presiding), in its Civil Case No. 54913, entitled Luzon Steel
Corporation, plaintiff vs. Metal Manufacturing of the Philippines, Inc., and Jose O. Sia, defendants,
whereby the court aforesaid quashed a writ of execution issued against the Times Surety &
Insurance Co., Inc., and cancelled the undertaking of said surety company.

The essential and uncontroverted facts of the case may be summarized as follows:

Luzon Steel Corporation has sued Metal Manufacturing of the Philippines and Jose O. Sia, the
former's manager, for breach of contract and damages. It obtained a writ of preliminary attachment
of the properties of the defendants, but the attachment was lifted upon a P25,000.00 counterbond
executed by the defendant Sia, as principal, and the Times Surety & Insurance Co., Inc. (hereinafter
designated as the surety), as solidary guarantor, in the following terms:

WHEREFORE, we JOSE O. SIA, as principal and the TIMES SURETY & INSURANCE CO.,
INC., as Surety, in consideration of the dissolution of attachment, hereby jointly and severally
bind ourselves in the sum of Twenty Five Thousand Pesos (P25,000.00), Philippine
Currency, to answer for the payment to the plaintiff of any judgment it may recover in the
action in accordance with Section 12, Rule 59, of the Rules of Court. (pp. 32, 45, Rec. on
Appeal.)

Issues having been joined, plaintiff and defendant (without intervention of the surety) entered into a
compromise whereby defendant Sia agreed to settle the plaintiff's claim in the following manner:

1. That the defendant shall settle with the Plaintiff the amount of TWENTY FIVE THOUSAND
(P25,000.00) PESOS, in the following manner: FIVE HUNDRED (P500.00) PESOS, monthly
for the first six (6) months to be paid at the end of every month and to commence in January,
1965, and within one month after paying the last installment of P500.00, the balance of
P22,000.00 shall be paid in lump sum, without interest. It is understood that failure of the
Defendant to pay one or any installment will make the whole obligation immediately due and
demandable and that a writ of execution will be issued immediately against Defendants
bond. lawphi1.et

The compromise was submitted to the court and the latter approved it, rendered judgment in
conformity therewith, and directed the parties to comply with the same (Record on Appeal, page 22).

Defendant having failed to comply, plaintiff moved for and obtained a writ of execution against
defendant and the joint and several counterbond. The surety, however, moved to quash the writ of
execution against it, averring that it was not a party to the compromise, and that the writ was issued
without giving the surety notice and hearing. The court, overruling the plaintiff's opposition, set aside
the writ of execution, and later cancelled the counterbond, and denied the motion for
reconsideration. Hence this appeal.

Main issues posed are (1) whether the judgment upon the compromise discharged the surety from
its obligation under its attachment counterbond and (2) whether the writ of execution could be issued
against the surety without previous exhaustion of the debtor's properties.

Both questions can be solved by bearing in mind that we are dealing with a counterbond filed
to discharge a levy on attachment. Rule 57, section 12, specifies that an attachment may be
discharged upon the making of a cash deposit or filing a counterbond "in an amount equal to the
value of the property attached as determined by the judge"; that upon the filing of the counterbond
"the property attached ... shall be delivered to the party making the deposit or giving the
counterbond, or the person appearing on his behalf, the deposit or counterbond aforesaid standing
in place of the property so released".

The italicized expressions constitute the key to the entire problem. Whether the judgment be
rendered after trial on the merits or upon compromise, such judgment undoubtedly may be made
effective upon the property released; and since the counterbond merely stands in the place of such
property, there is no reason why the judgment should not be made effective against the counterbond
regardless of the manner how the judgment was obtained.

Squarely on the point, and rebutting the appellee's apprehension that the compromise could be the
result of a collusion between the parties to injure the surety, is our decision in Anzures vs. Alto
Surety & Insurance Co., Inc., et al., 92 Phil. 742, where this Court, through former Chief Justice
Paras, ruled as follows:

Under section 12, Rule 59, of the Rules of Court, the bond filed, as in this case, for the
discharge of an attachment is "to secure the payment to the plaintiff of any judgment he may
recover in the action," and stands "in place of the property so released". It follows that the
order of cancellation issued by the respondent judge is erroneous. Indeed, judgment had
already been rendered by the Court of First Instance of Manila in civil case No. 11748,
sentencing Benjamin Aguilar to pay the sum of P3,500.00 to the petitioner; and it is not
pretended that said judgment is a nullity. There is no point in the contention of the
respondent Surety Company that the compromise was entered into without its knowledge
and consent, thus becoming as to it essentially fraudulent. The Surety is not a party to civil
case No. 11748 and, therefore, need not be served with notice of the petition for judgment.
As against the conjecture of said respondent that the parties may easily connive by means of
a compromise to prejudice it, there is also the likelihood that the same end may be attained
by parties acting in bad faith through a simulated trial. At any rate, it is within the power of the
Surety Company to protect itself against a risk of the kind.

Wherefore, the order of the respondent Judge cancelling the bond in question is set aside.
So ordered with costs against the respondent Alto Surety & Insurance Co., Inc.

The lower court and the appellee herein appear to have relied on doctrines of this Court concerning
the liability of sureties in bonds filed by a plaintiff for the issuance of writs of attachment, without
discriminating between such bonds and those filed by a defendant for the lifting of writs of
attachment already issued and levied. This confusion is hardly excusable considering that this Court
has already called attention to the difference between these kinds of bonds. Thus, in Cajefe vs.
Judge Fernandez, et al., L-15709, 19 October 1960, this Court pointed out that

The diverse rule in section 17 of Rule 59 for counterbonds posted to obtain the lifting of a writ
of attachment is due to these bonds being security for the payment of any judgment that the
attaching party may obtain; they are thus mere replacements of the property formerly
attached, and just as the latter may be levied upon after final judgment in the case in order to
realize the amount adjudged, so is the liability of the countersureties ascertainable after the
judgment has become final. This situation does not obtain in the case of injunction
counterbonds, since the sureties in the latter case merely undertake "to pay all damages that
the plaintiff may suffer by reason of the continuance ... of the acts complained of" (Rule 60,
section 6) and not to secure payment of the judgment recovered.1

It was, therefore, error on the part of the court below to have ordered the surety bond cancelled, on
the theory that the parties' compromise discharged the obligation of the surety.
As declared by us in Mercado vs. Macapayag, 69 Phil. 403, 405-406, in passing upon the liability of
counter sureties in replevin who bound themselves to answer solidarily for the obligations of the
defendants to the plaintiffs in a fixed amount of P912.04, to secure payment of the amount that said
plaintiff be adjudged to recover from the defendants,2

the liability of the sureties was fixed and conditioned on the finality of the judgment rendered
regardless of whether the decision was based on the consent of the parties or on the merits.
A judgment entered on a stipulation is nonetheless a judgment of the court because
consented to by the parties.

But the surety in the present case insists (and the court below so ruled) that the execution issued
against it was invalid because the writ issued against its principal, Jose O. Sia, et al., defendants
below, had not been returned unsatisfied; and the surety invoked in its favor Section 17 of Rule 57 of
the Revised Rules of Court (old Rule 59), couched in the following terms:

SEC. 17. When execution returned unsatisfied, recovery had upon bond. If the execution
be returned unsatisfied in whole or in part, the surety or sureties on any counterbond given
pursuant to the provisions of this rule to secure the payment of the judgment shall become
charged on such counter-bond, and bound to pay to the judgment creditor upon demand, the
amount due under the judgment, which amount may be recovered from such surety or
sureties after notice and summary hearing in the same action.

The surety's contention is untenable. The counterbond contemplated in the rule is evidently an
ordinary guaranty where the sureties assume a subsidiary liability. This is not the case here,
because the surety in the present case bound itself "jointly and severally" (in solidum) with the
defendant; and it is prescribed in Article 2059, paragraph 2, of the Civil Code of the Philippines
that excusion (previous exhaustion of the property of the debtor) shall not take place "if he (the
guarantor) has bound himself solidarily with the debtor". The rule heretofore quoted cannot be
construed as requiring that an execution against the debtor be first returned unsatisfied even if the
bond were a solidary one; for a procedural rule may not amend the substantive law expressed in the
Civil Code, and further would nullify the express stipulation of the parties that the surety's obligation
should be solidary with that of the defendant.

A second reason against the stand of the surety and of the court below is that even if the surety's
undertaking were not solidary with that of the principal debtor, still he may not demand exhaustion of
the property of the latter, unless he can point out sufficient leviable property of the debtor within
Philippine territory. There is no record that the appellee surety has done so. Says Article 2060 of the
Civil Code of the Philippines:

ART. 2060. In order that the guarantor may make use of the benefit of excussion, he must
set it up against the creditor upon the latter's demand for payment from him, and point out to
the creditor available property of the debtor within Philippine territory, sufficient to cover the
amount of the debt.

A third reason against the thesis of appellee is that, under the rule and its own terms, the counter-
bond is only conditioned upon the rendition of the judgment. Payment under the bond is not made to
depend upon the delivery or availability of the property previously attached, as it was under Section
440 of the old Code of Civil Procedure. Where under the rule and the bond the undertaking is to pay
the judgment, the liability of the surety or sureties attaches upon the rendition of the judgment, and
the issue of an execution and its return nulla bona is not, and should not be, a condition to the right
to resort to the bond. 3
It is true that under Section 17 recovery from the surety or sureties should be "after notice and
summary hearing in the same action". But this requirement has been substantially complied with
from the time the surety was allowed to move for the quashal of the writ of execution and for the
cancellation of their obligation.

WHEREFORE, the orders appealed from are reversed, and the court of origin is ordered to proceed
with the execution against the surety appellee, Times Surety & Insurance Co., Inc. Costs against
said appellee.

G.R. No. 72005 May 29, 1987

PHILIPPINE BRITISH ASSURANCE CO., INC., petitioner,

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

GANCAYCO, J.:

This is a Petition for Review on certiorari of the Resolution dated September 12, 1985 of the
Intermediate Appellate Court in AC-G.R. No. CR-05409 1 granting private respondent's motion for execution pending
appeal and ordering the issuance of the corresponding writ of execution on the counterbond to lift attachment filed by petitioner. The focal
issue that emerges is whether an order of execution pending appeal of a judgment maybe enforced on the said bond. In the Resolution of
September 25, 1985 2 this Court as prayed for, without necessarily giving due course to the petition, issued a
temporary restraining order enjoining the respondents from enforcing the order complaint of.

The records disclose that private respondent Sycwin Coating & Wires, Inc., filed a complaint for
collection of a sum of money against Varian Industrial Corporation before the Regional Trial Court of
Quezon City. During the pendency of the suit, private respondent succeeded in attaching some of
the properties of Varian Industrial Corporation upon the posting of a supersedeas bond. 3 The latter in
turn posted a counterbond in the sum of P1,400, 000.00 4 thru petitioner Philippine British Assurance Co.,
Inc., so the attached properties were released.

On December 28, 1984, the trial court rendered a Decision, the dispositive portion of which reads:

WHEREFORE, plaintiff's Motion for Summary Judgment is hereby GRANTED, and

judgment is rendered in favor of the plaintiff and against the defendant Varian
Industrial Corporation, and the latter is hereby ordered:

1. To pay plaintiff the amount of P1,401,468.00, the principal obligation with 12%
interest per annum from the date of default until fully paid;

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

3. To pay plaintiff P30,000.00 as exemplary damages;

4. To pay plaintiff 15% of P1,401,468.00, the principal obligation, as and for

attorney's fees; and

5. To pay the costs of suit.

Accordingly, the counterclaim of the defendant is hereby DISMISSED for lack of

merit.
 SO ORDERED. 5

Varian Industrial Corporation appealed the decision to the respondent Court. Sycwin then filed a
petition for execution pending appeal against the properties of Varian in respondent Court. Varian
was required to file its comment but none was filed. In the Resolution of July 5, 1985, respondent
Court ordered the execution pending appeal as prayed for. 6 However, the writ of execution was
returned unsatisfied as Varian failed to deliver the previously attached personal properties upon demand.
In a Petition dated August 13, 1985 filed with respondent Court Sycwin prayed that the surety (herein
petitioner) be ordered to pay the value of its bond. 7 In compliance with the Resolution of August 23, 1985
of the respondent Court herein petitioner filed its comment. 8 In the Resolution of September 12,
1985, 9 the respondent Court granted the petition. Hence this action.

It is the submission of private respondent Sycwin that without a previous motion for reconsideration
of the questioned resolution, certiorari would not lie. While as a general rule a motion for
reconsideration has been considered a condition sine qua non for the granting of a writ of certiorari,
this rule does not apply when special circumstances warrant immediate or more direct action. 10 It has
been held further that a motion for reconsideration may be dispensed with in cases like this where execution had been ordered and the need
for relief was extremely urgent. 11

The counterbond provides:

WHEREAS, in the above-entitled case pending in the Regional Trial Court, National
Capital Judicial Region, Branch LXXXV, Quezon City, an order of Attachment was
issued against abovenamed Defendant;

WHEREAS, the Defendant, for the purpose of lifting and/or dissolving the order of
attachment issued against them in the above-en-titled case, have offered to file a
counterbond in the sum of PESOS ONE MILLION FOUR HUNDRED THOUSAND
ONLY (P1,400,000.00), Philippine Currency, as provided for in Section 5, Rule 57 of
the Revised Rules of Court.

NOW, THEREFORE, we, VARIAN INDUSTRIAL CORPORATION, as Principal and

the PHILIPPINE BRITISH ASSURANCE COMPANY, INC., a corporation duly
organized and existing under and by virtue of the laws of the Philippines, as Surety,
in consideration of the above and of the lifting or dissolution of the order of
attachment, hereby jointly and severally, bind ourselves in favor of the above Plaintiff
in the sum of PESOS ONE MILLION FOUR HUNDRED THOUSAND ONLY
(P1,400,000.00), Philippine Currency, under the condition that in case the Plaintiff
recovers judgment in the action, and Defendant will, on demand, re-deliver the
attached property so released to the Officer of the Court and the same shall be
applied to the payment of the judgment, or in default thereof, the defendant and
Surety will, on demand, pay to the Plaintiff the full value of the property released.

EXECUTED at Manila, Philippines, this 28th day of June, 1984. 12

Sections 5, 12, and 17 of Rule 57 of the Revised Rules of Court also provide:

SEC. 5. Manner of attaching property. The officer executing the order shall without
delay attach, to await judgment and execution in the action, all the properties of the
party against whom the order is issued in the province, not exempt from execution, or
so much thereof as may be sufficient to satisfy the applicant's demand, unless the
former makes a deposit with the clerk or judge of the court from which the order
issued, or gives a counter-bond executed to the applicant, in an amount sufficient to
 satisfy such demand besides costs, or in an amount equal to the value of the
property which is about to be attached, to secure payment to the applicant of any
judgement ment which he may recover in the action. The officer shall also forthwith
serve a copy of the applicant's affidavit and bond, and of the order of attachment, on
the adverse party, if he be found within the province.

SEC. 12. Discharge of attachment upon giving counterbond. At any time after an
order of attachment has been granted, the party whose property has been attached,
or the person appearing on his behalf, may, upon reasonable notice to the applicant,
apply to the judge who granted the order, or to the judge of the court in which the
action is pending, for an order discharging the attachment wholly or in part on the
security given. The judge shall, after hearing, order the discharge of the attachment if
a cash deposit is made, or a counter-bond executed to the attaching creditor is filed,
on behalf of the adverse party, with the clerk or judge of the court where the
application is made, in an amount equal to the value of the property attached as
determined by the judge, to secure the payment of any judgment that the attaching
creditor may recover in the action. Upon the filing of such counter-bond, copy thereof
shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge
of an attachment in accordance with the provisions of this section the property
attached, or the proceeds of any sale thereof, shall be delivered to the party making
the deposit or giving the counterbond aforesaid standing in place of the property so
released. Should such counterbond for any reason be found to be, or become,
insufficient, and the party furnishing the same fail to file an additional counterbond,
the attaching creditor may apply for a new order of attachment.

SEC. 17. When execution returned unsatisfied, recovery had upon bond. If the
execution be returned unsatisfied in whole or in part, the surety or sureties on any
counter-bond given pursuant to the provisions of this rule to secure the payment of
the judgment shall become charged on such counter- bond, and bound to pay to the
judgement creditor upon demand, the amount due under the judgment, which
amount may be recovered from such surety or sureties after notice and summary
hearing in the same action. (Emphasis supplied.)

Under Sections 5 and 12, Rule 57 above reproduced it is provided that the counterbond is intended
to secure the payment of "any judgment" that the attaching creditor may recover in the action. Under
Section 17 of same rule it provides that when "the execution be returned unsatisfied in whole or in
part" it is only then that "payment of thejudgment shall become charged on such counterbond."

The counterbond was issued in accordance with the provisions of Section 5, Rule 57 of the Rules of
Court as provided in the second paragraph aforecited which is deemed reproduced as part of the
counterbond. In the third paragraph it is also stipulated that the counterbond is to be "applied for the
payment of the judgment." Neither the rules nor the provisions of the counterbond limited its
application to a final and executory judgment. Indeed, it is specified that it applies to the payment
of any judgment that maybe recovered by plaintiff. Thus, the only logical conclusion is that an
execution of any judgment including one pending appeal if returned unsatisfied maybe charged
against such a counterbond.

It is well recognized rule that where the law does not distinguish, courts should not distinguish. Ubi
lex non distinguish nec nos distinguere debemos. 13 "The rule, founded on logic, is a corollary of the principle that
general words and phrases in a statute should ordinarily be accorded their natural and general significance. 14 The rule requires that a
general term or phrase should not be reduced into parts and one part distinguished from the other so as to justify its exclusion from the
operation of the law. 15 In other words, there should be no distinction in the application of a statute where none is indicated.16 For courts are
not authorized to distinguish where the law makes no distinction. They should instead administer the law not as they think it ought to be but
as they find it and without regard to consequences. 17
A corollary of the principle is the rule that where the law does not make any exception, courts may
not except something therefrom, unless there is compelling reason apparent in the law to justify
it.18 Thus where a statute grants a person against whom possession of "any land" is unlawfully withheld the right to bring an action for
unlawful detainer, this Court held that the phrase "any land" includes all kinds of land, whether agricultural, residential, or mineral.19 Since
the law in this case does not make any distinction nor intended to make any exception, when it speaks of "any judgment" which maybe
charged against the counterbond, it should be interpreted to refer not only to a final and executory judgment in the case but also a judgment
pending appeal.

All that is required is that the conditions provided for by law are complied with, as outlined in the
case of Towers Assurance Corporation v. Ororama Supermart, 20

Under Section 17, in order that the judgment creditor might recover from the surety
on the counterbond, it is necessary (1) that the execution be first issued against the
principal debtor and that such execution was returned unsatisfied in whole or in part;
(2) that the creditor make a demand upon the surety for the satisfaction of the
judgment, and (3) that the surety be given notice and a summary hearing on the
same action as to his liability for the judgment under his counterbond.

The rule therefore, is that the counterbond to lift attachment that is issued in accordance with the
provisions of Section 5, Rule 57, of the Rules of Court, shall be charged with the payment of any
judgment that is returned unsatisfied. It covers not only a final and executory judgement but also the
execution of a judgment pending appeal.

WHEREFORE, the petition is hereby DISMISSED for lack of merit and the restraining order issued
on September 25, 1985 is hereby dissolved with costs against petitioner.

SO ORDERED.

G.R. No. L-28030 January 18, 1982

THE IMPERIAL INSURANCE, INC., petitioner,

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

FERNANDEZ, J.:

This is a petition for certiorari to review the decision of the Court of Appeals in CA-G.R. No. 38824-R
promulgated on July 19, 1967 entitled "The Imperial Insurance, Inc., petitioner vs. Hon. Walfrido de
los Angeles, Judge of the Court of First Instance of Rizal, Branch IV, Quezon City, et al,
respondents," the dispositive part of which reads:

WHEREFORE, the instant petition is dismissed and the writ of preliminary injunction
issued by the Court on January 31, 1967, is hereby dissolved, with costs against
petitioner.

SO ORDERED. 1

As found by the Court of Appeals, the uncontroverted facts are:

 It appears that herein private respondent Rosa V. Reyes is the plaintiff in Civil Case
N. Q-8213 of the Court of First Instance of Rizal, Branch IV, Quezon City, entitled,
'Rosa V. Reyes vs, Felicisimo V. Reyes, etc.,' where she obtained a writ of
preliminary attachment and, accordingly, levied upon all the properties of the
defendant, Felicisimo V. Reyes, in said case. The other two herein private
respondents, namely, Pedro V. Reyes and Consolacion V. Reyes, are the plaintiffs in
Civil Case No. Q-5214 of the same court entitled, 'Pedro V. Reyes, etc.,' and
likewise, obtained a writ of preliminary attachment and, accordingly, levied upon all
the properties of the defendant, Felicisimo V. Reyes, in said case.

For the dissolution of the attachments referred to above, the herein petitioner, The
Imperial Insurance, Inc., as surety, and Felicisimo V. Reyes, as principal, posted a
'defendant's bond for dissolution of attachment' in the amount of P60,000.00 in Civil
Case No. Q-5213 and another bond of the same nature in the amount of P40,000.00
in Civil Case No. Q-5214.

Civil Cases Nos. Q-5213 and 5214 were jointly tried and the decision therein
rendered was in favor of the plaintiffs. This decision was affirmed by this Court on
appeal in cases CA-G.R. NOS. 33783-R and 33784-R. The decision of this Court,
having become final, the records of the cases were remanded to the Court of First
Instance of Rizal, Quezon City Branch, for execution of judgment.

Accordingly, on June 24, 1966, the Court below, presided by the herein respondent
Judge, Hon. Walfrido de los Angeles, issued the writs of execution of judgment in
said cases. However, on August 20, 1966, the Provincial Sheriff of Bulacan returned
the writs of execution' unsatisfied in whole or in part'.

On September 9, 1966, private respondents filed a 'motion for recovery on the surety
bonds'. Thereafter, said private respondents, thru counsel, sent a letter of demand
upon petitioner asking the latter to pay them the accounts on the counter-bonds. On
September 24, 1966, petitioner filed its 'opposition' to the private respondents
"Motion for recovery on the surety bonds'. Respondent Judge, in his order, dated
November 10, 1966, rendered judgment against the counter-bonds.

On November 15, 1966, private respondents filed an ex parte motion for writ of
execution' without serving copy thereof on petitioner.

In the meantime, on or about November 23 1966, petitioner filed a 'motion for

reconsideration' of the order, dated November 10, 1966. This motion was, however,
denied by the respondent Judge on January 9, 1967.

On or about January 11, 1967, petitioner filed its 'notice of intention to appeal' from
the final orders of the respondent Judge, dated November 10, 1966 and January 9.
1967.

On January 19, 1967, the respondent Judge issued an order granting the issuance of
the writ of execution against the bonds riled by the petitioner (Exhibit J, petition). 2

On January 25, 1967, the petitioner filed a petition for certiorari with prayer for for preliminary
injunction with the Court of Appeals to restrain the enforcement of the writ of execution. 3
The petition was given due course and on January 30, 1967 a writ of preliminary injunction was
issued. 4 After the parties had submitted their respective pleadings and memoranda in lieu of oral
argument, the Court of Appeals rendered the decision now under review.

The defendant, Felicisimo V. Reyes, in the abovementioned cases died during the pendency of the
trial. He was duly substituted by his surviving spouse, Emilia T. David, an administratrix of his
intestate estate. 5

The petitioner assigns as errors allegedly committed by the Court of Appeals the following:

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE

RESPONDENT JUDGE COULD LEGALLY ISSUE THE WRIT OF EXECUTION
AGAINST THE PETITIONER AS SURETY IN A COUNTERBOND (BOND TO
DISSOLVE ATTACHMENT) ON THE BASIS OF AN EX-PARTE MOTION FOR
EXECUTION WHICH WAS NEITHER SERVED UPON THE SURETY NOR SET
FOR HEARING.

II

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE PLAINTIFF

WHO OBTAINED A JUDGMENT AGAINST THE DEFENDANT MAY LEGALLY
CHOOSE 'TO GO DIRECTLY' AFTER THE SURETY IN A COUNTERBOND
WITHOUT PRIOR EXHAUSTION OF THE DEFENDANTS PROPERTIES.

III

THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE

'JUDGMENT' RENDERED AGAINST THE MENTIONED COUNTERBONDS IS A
'FINAL ORDER' IN THE CONTEMPLATION OF SECTION 2, RULE 41 OF THE
REVISED RULES OF COURT AND, THEREFORE, APPEALABLE.

IV

THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT IN THE

ABSENCE OF AN EXPRESS PROVISION OF THE REVISED RULES OF COURT,
THE PROCEDURE FOLLOWED BY THE SHERIFF IN THE EXECUTION OF THE
JUDGMENT ON THE 'SURVIVING CLAIMS', WHEN THE DEFENDANT DIED
DURING THE PENDENCY OF THE TRIAL OF HIS CASE AND BEFORE
JUDGMENT WAS DULY SUBSTITUTED BY THE COURT APPOINTED
ADMINISTRATRIX OF HIS ESTATE, SHOULD HAVE BEEN THE SAME AS THE
PROCEDURE SET OUT IN SECTION (f), RULE 57 RESPECTING THE
EXECUTION OF A WRIT OF PRELIMINARY ATTACHMENT OF PROPERTIES IN
CUSTODIALEGIS. 6

Anent the first error, the petitioner contends that the Court of Appeals erred in holding that the
respondent judge could legally issue the writ of execution against the petitioner as surety in a
counterbond (bond to dissolve attachment) on the basis of an ex parte motion for execution which
was allegedly never served upon the surety nor set for hearing. This contention is devoid of merit.
The counterbonds filed to lift the writs of attachment executed by the herein petitioner, The Imperial
Insurance, Inc., for and in behalf of the deceased defendant Felicisimo V. Reyes in favor of the
plaintiffs, private respondents herein Rosa V. Reyes and Consolacion V. Reyes in Civil Case No. Q-
5214 docketed with the Court of First Instance of Rizal, Branch IV, Quezon City, are clearly the
bonds contemplated under Sec. 17, Rule 57 of the Rules of Court which provides:

Sec. 17. When execution returned unsatisfied, recovery had upon bond. If the
execution be returned unsatisfied in whole or in part, the surety or sureties on any
counterbond given pursuant to the provisions of this rule to secure the payment of
the judgment shall become charged on such counter-bond, and bound to pay to the
judgment creditor upon demand, the amount due under the judgment, which amount
may be recovered from such surety or sureties after notice and summary hearing in
the same action.

This section allows the counterbond filed to lift an attachment to be charged only after notice and
summary hearing in the same action.

The records show that the notice and hearing requirement was substantially complied with in the
instant case.

Prior to the filing of the ex parte motion for a writ of execution, the respondents filed a motion for
recovery on the surety bonds where the petitioner was duly notified and the said motion was heard
on September 24, 1966. 7Moreover, on November 23, 1966 the petitioner filed a motion for
reconsideration of the order dated November 10, 1966 rendering judgment against the petitioner on its
counter-bonds in the amount of P60,000.00 in Civil Case No. Q-5213 and P40,000.00 in Civil Case No.
Q-5214. 8 The respondent judge set the hearing of the ex parte motion for writ of execution together with
the motion for reconsideration of the order dated November 10, 1966 on December 17, 1966 at 8:30
o'clock in the morning. 9 The petitioner received the notice of the said hearing on December 9, 1966 as
evidenced by Registry Return Receipt No. 40122. 10 On January 9, 1967, the respondent Judge issued an
order denying the motion for reconsideration dated November 23, 1966 for lack of merit. 11 in an order
dated January 19, 1967, the motion for writ of execution was granted by the respondent judge. 12

It is thus clear from indubitable documents on record that the requirements of notice and hearing had
been satisfactorily complied with by the respondents. The first error assigned is overruled.

The petitioner asserts that the Court of Appeals gravely erred in holding that the plaintiff who
obtained judgment against the defendant may legally choose "to go directly" after the surety in a
counterbond without prior exhaustion of the defendant's properties. This contention is likewise not
meritorious.

Although the counterbond contemplated in the aforequoted Sec. 17, Rule 57, of the Rules of Court is
an ordinary guaranty where the sureties assume a subsidiary liability, the rule cannot apply to a
counterbond where the surety bound itself "jointly and severally" (in solidum) with the defendant as
in the present case. The counterbond executed by the deceased defendant Felicisimo V. Reyes, as
principal, and the petitioner, The Imperial Insurance, Inc., as solidary quarantor to lift the attachment
in Civil Case No. Q-5213 is in the following terms:

WHEREFORE, WE, FELICISIMO V. REYES, of legal age, Filipino, and with postal
address at San Jose, San Miguel, Bulacan and/or 1480 Batangas Street, Sta. Cruz,
Manila, as PRINCIPAL and THE IMPERIAL INSURANCE, INC., a corporation duly
organized and existing under the laws of the Philippines, as SURETY, in
consideration of the dissolution of said attachment, hereby JOINTLY AND
 SEVERALLY, bind ourselves in the sum of SIXTY THOUSAND PESOS ONLY
(P60,000.00), Philippine Currency, under the condition that in case the plaintiff
recovers judgment in the action, the defendant shall pay the sum of SIXTY
THOUSAND PESOS (P60,000.00), Philippine Currency, being the amount release
for attachment, to be applied to the payment of the judgment, or in default thereof,
the Surety will, on demand, pay to the plaintiff said amount of SIXTY THOUSAND
PESOS ONLY (P60,000.00), Philippine Currency. (Capitalizations supplied).

Manila, Philippines, June 30,1960. 13

The counterbond executed by the same parties in Civil Case No. Q-5214, likewise states.

WHEREFORE, we, FELICISIMO V. REYES, of legal age, Filipino, and with postal
address at San Jose, San Miguel, Bulacan, and/or 1480 Batangas Street, Sta. Cruz,
Manila, as PRINCIPAL and THE IMPERIAL INSURANCE, INC., a corporation duly
organized and existing under the laws of the Philippines, as SURETY, in
consideration of the dissolution of said attachment, hereby JOINTLY and
SEVERALLY, bind ourselves in the sum of FORTY THOUSAND PESOS ONLY
(P40,000.00), Philippine Currency, under the condition that in case the plaintiff
recover judgment in the action the defendant shall pay the sum of FORTY
THOUSAND PESOS ONLY (P40,000.00), Philippine Currency, being the amount
released for attachment, to be applied to the payment of the judgment, or in default
thereof, the Surety will, on demand, pay to the plaintiffs said amount of FORTY
THOUSAND PESOS ONLY (P40,000.00), Philippine Currency. (Emphasis supplied).

Manila, Philippines, June 30th, 1960. 14

Clearly, the petitioner, the Imperial Insurance, Inc., had bound itself solidarily with the principal, the
deceased defendant Felicisimo V. Reyes. In accordance with Article 2059, par. 2 of the Civil Code of
the Philippines, 15excussion (previous exhaustion of the property of the debtor) shall not take place "if he
(the guarantor) has bound himself solidarily with the debtor." Section 17, Rule 57 of the Rules of Court
cannot be construed that an "execution against the debtor be first returned unsatisfied even if the bond
were a solidary one, for a procedural rule may not amend the substantive law expressed in the Civil
Code, and further would nullify the express stipulation of the parties that the surety's obligation should be
solidary with that of the defendant." 16

Hence the petitioner cannot escape liability on its counter-bonds based on the second error
assigned.

As regards the third error, the petitioner submits that the Court of Appeals erred in not holding that
the order dated November 10, 1966 rendering judgment against the counter-bonds, as well as the
order dated January 9, 1967, denying the motion for reconsideration thereof, and the order of the
writ of execution dated January 19, 1967 are final and appealable in accordance with Sec. 2, Rule
41 of the Rec. Rules of Court. This submission is also without merit.

To recover against the petitioner surety on its counter-bonds it is not necessary to file a separate
action. Recovery and execution may be had in the same Civil Cases Nos. Q-5213 and Q-5214, as
sanctioned by Sec. 17, Rule 57, of the Revised Rules of Court.

The decision in Civil Cases Nos. Q-5213 and Q-5214, having become final, the respondent judo
issued the writs of execution in said cases. On August 20, 1966, the Provincial Sheriff of Bulacan
returned the writs of execution "unsatisfied in whole or in part." 17
Sec. 12, Rule 57 of the Revised Rules of Court 18 specifies that an attachment may be discharged upon
the making of a cash deposit or filing a counterbond "in an amount equal to the value of the property
attached as determined by the judge"; and that upon filing the counterbond "the property attached shall
be delivered to the party making the deposit or giving the counterbond or the person appearing in his
behalf, the deposit or counterbond standing in place of the property so released."

The counter-bonds merely stand in place of the properties so released. They are mere replacements
of the properties formerly attached, and just as the latter may be levied upon after final judgment in
the case in order to realize the amount adjudged so is the liability of the counter sureties
ascertainable after the judgment has become final. 19

The judgment having been rendered against the defendant, Felicisimo V. Reyes, the counter-bonds
given by him and the surety, The Imperial Insurance, Inc., under Sec. 12, Rule 57 are made liable
after execution was returned unsatisfied. Under the said rule, a demand shall be made upon the
surety to pay the plaintiff the amount due on the judgment, and if no payment is so made, the
amount may be recovered from such surety after notice and hearing in the same action. A separate
action against the sureties is not necessary. 20

In the present case, the demand upon the petitioner surety was made with due notice and hearing
thereon when the private respondents filed the motion for recovery on the surety bonds dated
September 9, 1966 and to which the petitioner filed their opposition dated September 24, 1966. 21

Therefore, all the requisites under Sec. 17, Rule 57, being present, namely: (1) the writ of execution
must be returned unsatisfied, in whole or in part; (2) the plaintiff must demand the amount due under
the judgment from the surety or sureties, and (3) notice and hearing of such demand although in a
summary manner, complied with, the liability of the petitioner automatically attaches.

In effect, the order dated November 10, 1966 rendering judgment against the counter-bonds was a
superfluity. The respondent judge could have issued immediately a writ of execution against the
petitioner surety upon demand.

As correctly held by the Court of Appeals:

In fact, respondent Judge could have even issued a writ of execution against
petitioner on its bond immediately after its failure to satisfy the judgment against the
defendant upon demand, since liability on the bond automatically attaches after the
writ of execution against the defendant was returned unsatisfied as held in the case
of Tijan vs. Sibonghanoy, CA-G.R. No. 23669-R, December 11, 1927. 22

Moreover, the finality and non-appealability of the order dated November 10, 1966 is made certain
and absolute with the issuance of the order of execution dated January 19, 1967 23 upon the filing of
the ex parte motion for writ of execution 24 of which the petitioner was duly notified by the respondent
Judge and which was duly heard. 25 The general rule is that an order of execution is not appealable,
otherwise a case would never end. The two exceptions 26 to this rule are: (1) where the order of execution
varies the tenor of the judgment; and (2) when the terms of the judgment are not very clear, and there is
room for interpretation. The case at bar does not fall under either exception. There is no showing that the
order of execution varies the tenor of the judgment in Civil Cases Nos. Q-5213 and Q-5214, nor of the
order dated November 10, 1966, but is in fact, in consonance therewith and the terms of the judgment are
clear and definite, therefore, the general rule of non-appealability applies.

It is no longer necessary to discuss the fourth error assigned because of this Court's finding that the
liability expressly assumed by the petitioner on the counter-bonds is solidary with the principal
debtor, the deceased defendant, Felicisimo V. Reyes. As a solidary guarantor, the petitioner, the
Imperial Insurance, Inc., is liable to pay the amount due on such counter-bonds should the creditors,
private respondents herein, choose to go directly after it. 27

Under the law and under their own terms, the counter-bonds are only conditioned upon the rendition
of the judgment. As held by this Court in the aforecited case of Luzon Steel Corporation vs.
Sia 28 "where under the rule and the bond the undertaking is to pay the judgment, the liability of the surety
or sureties attaches upon the rendition of the judgment, and the issue of an execution and its return nulla
bona is not, and should not be a condition to the right to resort to the bond." Thus, it matters not whether
the Provincial Sheriff of Bulacan, in making the return of the writ of execution served or did not serve a
copy thereof with notice of attachment on the administratrix of the intestate estate of Felicisimo V. Reyes
and filed a copy of said writ with the office of the clerk of court with notice in accordance with See. 7 (f),
Rule 57 of the Revised Rules of Court. The petitioner surety as solidary obligor is liable just the same.

WHEREFORE, the decision of the Court of Appeals promulgated on July 19,1967 in CA-G.R. NO.
38824-R is affirmed and the order of the respondent judge dated January 19, 1967 and all writs or
orders issued in consequence or in pursuance thereof are also affirmed. The court of origin is hereby
ordered to proceed with the execution against the petitioner surety, the Imperial Insurance Inc., with
costs against said petitioner.

SO ORDERED.

G.R. No. L-16113 October 31, 1963

VICTOR VADIL, JOAQUIN VADIL, VICENTE VADIL, ESTEBAN VADIL, EUGENIO VADIL and
JUAN GALIBOSO,petitioners,
vs.
HON. JOSE R. DE VENECIA, Judge of the Court of First Instance of NUEVA VIZCAYA,
MIGUEL M. GUEVARA, Provincial Sheriff Ex-Oficio for Nueva Vizcaya, and PABLO
ESPAOLA ESTATE, INC., respondents.

REGALA, J.:

This is a petition for certiorari to review the order dated August 5, 1959 of the Court of First Instance
of Nueva Vizcaya, directing the execution of petitioners' bond.

On April 13, 1953, Pablo Espaola Estate, Inc. filed in the Court of First Instance of Nueva Vizcaya
an action against Raymundo Guinsatao for the recovery of the sum of P9,360. It applied for a writ of
preliminary attachment on the ground that Guinsatao had removed or was about to remove his
properties with intent to defraud his creditors.

Guinsatao denied the allegations of the complaint and expressed willingness to file a counterbond to
discharge the writ of preliminary attachment applied for by Pablo Espaola Estate, Inc. Whereupon,
the court ordered him "to file a counterbond within 5 days from the receipt of this order, in the
amount of P9,360.00 to secure the payment to the plaintiff of any judgment he may recover in the
present case."

Guinsatao filed a bond entitled "Defendant's Bond" which reads:

Whereas, in an action now pending in the Court of First Instance of the Province of Nueva
Vizcaya, First Judicial District, wherein PABLO ESPAOLA ESTATE, INC., is plaintiff, and
 RAYMUNDO GUINSATAO defendant, the above-named plaintiff has applied for an order of
a Writ of Preliminary Attachment against RAYMUNDO GUINSATAO.

And whereas, the Law allows the plaintiff certain securities:

Know all men by these presents: That RAYMUNDO GUINSATAO of Mabasa, Dupax, Nueva
Vizcaya as principal and ESTEBAN VADIL, EUGENIO VADIL, JUAN GALIBOSO, JOAQUIN
VADIL, VICTOR VADIL and VICENTE VADIL all of Mabasa, Dupax, Nueva Vizcaya as
sureties, are hereby held and in the sum of NINE THOUSAND THREE HUNDRED SIXTY
(P9,360.000) PESOS, for which payment well and truly to be made we bind ourselves, our
heirs, and legal representatives jointly and severally, firmly by these presents.

The condition of this obligation is as follows:

To pay all the costs which may be awarded to the defendant, and all damages that the
defendant may suffer by reason of the Writ of Preliminary Attachment should it be finally
adjudged that the same was done without legitimate cause.

Then this obligation shall be null and void, otherwise of full force and virtue.

(Sgd.) JOAQUIN VADIL (Sgd.) RAYMUNDO GUINSATAO

(Sgd.) VICTOR VADIL (Sgd.) ESTEBAN VADIL

(Sgd.) VICENTE VADIL (Sgd.) EUGENIO VADIL

(Sgd.) JUAN GALIBOSO

The case was then tried, after which the trial court rendered judgment ordering Guinsatao to pay
respondent Pablo Espaola Estate, Inc. the sum of P9,360 plus legal interest. After the decision
became final, execution followed but Guinsatao had no sufficient property. And so, on motion of
Pablo Espaola Estate, Inc., the lower court ordered the execution of the bond. Hence, this petition.

While this case was pending in this Court, petitioner Joaquin Vadil moved for the dismissal of the
case as him on the ground that he had not engaged the services of Attorneys Primicias & Del
Castillo. While joining the motion to dismiss the case as to Joaquin Vadil, Atty. Teodoro Regino of
the law firm of Primicias & Del Castillo denied Joaquin's allegation and asked that Joaquin Vadil be
cited for contempt for allegedly telling falsehood.

As prayed for by Joaquin Vadil, this case is dismiss as to him. There is no ground in the motion to
cite Joaquin Vadil for contempt.

We now come to the merits of this case. Petition contend that they are not liable to the plaintiff in the
trial court because their undertaking under the bond was to pay "all the costs which may be awarded
to the defendant, and 23 all damages that the defendant may suffer by reason of the Writ of
Preliminary Attachment should it be finally adjudicated that the same was done without legitimate
cause" rather than to pay the judgment that plaintiff might recover.
This is a case where, instead of a bond conditioned the payment to the plaintiff of any judgment
which may recover in an action, as the trial court directed, the bond filed provides that the sureties
will pay

... all the costs which may be awarded to the defendant, and all damages that
the defendant may suffer by reason the Writ of Preliminary Attachment should it be finally a
judged that the same was done without legitimate cause.

thus raising doubt as to whether the petitioners, as sureties, understood the import of the order of
the court.

This doubt, as to whether petitioners understood the court order, is further shown by the fact that
under Section 2 of Rule 59 of the Rules of Court, the issuance an order of attachment may be
prevented if the defend "makes deposit or gives bond ... in an amount sufficient to satisfy such
demand, besides costs, or in an amount equal to the value of the property which is to be attached.
Now, if, as alleged in the motion of Pablo Espaola Estate Inc., only P150 was realized from the sale
of Guinsatao's property, it is not likely that petitioners would agree to stand surety for P9,360 for the
defendant, whose properties (worth only P150) stood in imminent danger of attachment.

We are inclined to resolve the doubt in favor of petitioners. As this Court held in People v. De la
Cruz, 49 O.G. No. 8, 3389, sureties are favorites of the law. Assuming an obligation without any
thought of material gain, except in some instances, all presumptions are indulged in their favor. And
in Pacific Tobacco Co. v. Lorenzana, et al., G.R. No. L-8088, October 31, 1957, this Court said in
amplification:

... The rationale of this doctrine is reasonable; an accommodation surety acts without motive
of pecuniary gain and, hence, should be protected against unjust pecuniary impoverishment
by imposing on the principal duties akin to those of a fiduciary. This cannot be said of
compensated corporate surety which is a business association organized for the purpose of
assuming classified risks in large numbers, for profit and on an impersonal basis, through the
medium of standardized written contractual forms drawn by its own representatives with the
primary aim of protecting its own interests (See Stearn's The Law of Suretyship, 4th ed. 402-
403).

We hold therefore that petitioners are not liable to Pablo Espaola Estate, Inc. on their bond.

Another reason in support of the conclusion reached herein is that actually there was no writ of
attachment issued by the Court. It is to be noted that the obligation to be assumed by the bondsmen
is premised upon the issuance of such a writ.

We feel it unnecessary to pass upon the other assignments of error.

WHEREFORE, the petition is granted; the writ of preliminary injunction is made permanent and the
order dated August 5, 1959 and the writ of execution dated September 4, 1959 are hereby set aside,
without pronouncement as to costs.

G.R. No. L29723 July 14, 1988

ANTONIO ZARAGOZA, plaintiff-appellee,

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

NARVASA, J.:

Involved in this appeal is no more than the procedure to hold a surety hable upon a counter-bond
posted by it for the release of an automobile seized from a defendant in a replevin action under a
writ issued by the Trial Court at the plaintiffs instance.

The suit for the replevy of the car was brought by Antonio Zaragoza in the Court of First Instance at
Quezon City 1against Ma. Angela Fidelino and/or John Doe. His complaint alleged that the car had been
sold to Fidelino but the latter had failed to pay the price in the manner stipulated in their agreement. The
car was taken from Fidelino's possession by the sheriff on the strength of a writ of delivery 2 but was
promptly returned to her on orders of the Court when a surety bond for the car's releases 3 was posted in
her behalf "by Mabini Insurance & Fidelity Co., Inc.

The action resulted in a judgment 4 for the plaintiff the dispositive part of which reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant, ordering the latter to pay to the plaintiff the sum of P19,417.46,
representing the balance of the purchase price of the car sold including interest
thereon, collection charges, notarial fees and sheriffs fees and expenses in conn with
the recovery of the vehicle sold; to pay liquidated damage in the amount of
P6,471.84 equivalent to 33 1/3 % of the balance outstanding and to pay the costs of
this suit.

Within the reglementary period for taking an appeal, Zaragoza moved for the amendment of the
decision so as to include the surety, Mabini Insurance & Fidelity Co., Inc., as a party solidarily liable
with the defendant for the payment of the sums awarded in the judgment. 5 Despite having been duly
furnished with copies of the motion and the notice of hearing, neither Fidelino nor the surety company
filed any opposition to the motion, nor did either of them appear at the hearing thereof. 6 The Trial Court
deemed the motion meritorious and granted it. Its Order of April 16, 1968 7 decreed the following:

WHEREFORE, the motion is hereby granted, and the dispositive portion of the
decision in this case is hereby amended to read as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff

and against the defendant, ordering defendant Maria Angela
Fidelino and her surety, the Mabini Insurance & Fidelity Co., Inc., to
pay jointly and severally to the plaintiff the sum of P19,417.46,
representing the balance of the purchase price of the car sold,
including interests thereon, collection charges, notarial fees and
sheriffs fees and expenses in connection with the recovery of the
vehicle sold, liquidated damages in the amount of P6,471.84
equivalent to 33 1/3% of the balance outstanding and to pay the costs
of this suit.

No motion for reconsideration was filed or appeal taken by the defendant Fidelino as regards either
the original or the amended decision. It was the surety which presented a motion for reconsideration,
and upon its denial, appealed to this Court. 8 It ascribes to the Court a quo, as might be expected,
reversible error in amending the judgment in the manner just described. It argues that the Lower Court
never acquired jurisdiction over it since no summons was ever served on it, its filing of a counter-bond not
being equivalent to voluntary submission to the Court's jurisdiction; Zaragoza failed to make a proper
application with notice before finality of the decision as provided by Section 20, Rule 57 of the Rules of
Court; and when the order amending the judgment was promulgated, the judgment had already become
final, the running of the period of appeal not having been suspended by Zaragoza's motion to amend
decision, 9 and so, the Court no longer had authority to amend it on April 16, 1968.

The appellant surety deposits quite correctly, that the situation at bar is governed by Section 10,
Rule 60, in relation to Section 20, Rule 57, of the Rules of Court. Section 10, Rule 60, provides as
follows:

SEC. 10. Judgment to include recovery against sureties. The amount, if any, to be
awarded to either party upon any bond filed by the other in accordance with the
provisions of this rule, shag be claimed, ascertained, and granted under the same
procedure as prescribed in section 20 of Rule 57.

And Section 20, Rule 57 reads as follows:

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

xxx xxx xxx 10

It would seem at first blush that Section 20, Rule 57 above quoted is not relevant. Its title and first
sentence speak [1] of an illegal attachment, and [2] of a judgment "in favor of the party against whom
(said illegal) attachment was issued." In the case at bar, the writ of delivery was not illegal; and the
judgment was for, not against, the party in whose favor the writ of delivery was issued. In other
words, it would appear that for Section 20, Rule 57 to apply to the instant action," 11 the judgment
should have been "in favor of" defendant Fidelino (the party "against whom" the writ of delivery was
issued). This however was not the case. The judgment was in fact against, NOT in favor of Fidelino.

It thus sums indeed that the first sentence of Section 20 precludes recovery of damages by a party
against whom an attachment is issued and enforced if the judgment be adverse to him. This is not
however correct. Although a party be adjudged liable to another, ff it be established that the
attachment issued at the latter's instance was wrongful and the former had suffered injury thereby,
recovery for damages may be had by the party thus prejudiced by the wrongful attachment, even if
the judgment be adverse to him. Slight reflection will show the validity of this proposition. For it is
entirely possible for a plaintiff to have a meritorious cause of action against a defendant but have no
proper ground for a preliminary attachment. In such a case, if the plaintiff nevertheless applies for
and somehow succeeds in obtaining an attachment, but is subsequently declared by final judgment
as not entitled thereto, and the defendant shows that he has suffered damages by reason of the
attachment, there can be no gainsaying that indemnification is justly due the latter. So has this Court
already had occasion to rule, in Baron v. David, 51 Phil. 1, and Javellana v. D.O. Plaza
Enterprises, 32 SCRA 26].
Be all this as it may, the second and third sentences of Section 20, Rule 57, in relation to Section 10,
Rule 60, are unquestionably relevant to the matter of the surety's liability upon a counter-bond for the
discharge of a writ of delivery in a replevin suit. 12 Under Section 10, Rule 60 (which makes reference
"to either party upon any bond filed by the other in accordance with the provisions of this rule" [60]), the
surety's liability for damages upon its counter-bond should "W claimed, ascertained, and granted under
the same procedure as prescribed in section 20 of Rule 57; 13 and andd section 20 pertinently decrees
that '(s)uch damages may be awarded only upon application and after proper hearing, and shall be
included in the final judgment .. (which means that the (application must be filed before the trial or before
appeal is perfected or before the judgment becomes executory, with due notice to the attaching creditor
and his surety or sureties, setting forth the facts showing his right to damages and the amount
thereof." Stated otherwise, to hold a surety on a counter-bond liable, what is entailed is (1) the filing of an
application therefor with the Court having jurisdiction of the action; (2) the presentation thereof before the
judgment becomes executory (or before the trial or before appeal is perfected); (3) the statement in said
application of the facts showing the applicant's right to damages and the amount thereof, (4) the giving of
due notice of the application to the attaching creditor and his surety or sureties; and (5) the holding of a
proper hearing at which the attaching creditor and the sureties may be heard on the application. These
requisites apply not only in cases of seizure or deliveryunder Rule 60, but also in cases of preliminary
injunctions under Rule 58, 14 and receiverships under Rule 59. 15

It should be stressed, however, that enforcement of a surety's liability on a counter-bond given for
the release of property seized under a writ of preliminary attachment is governed, not by said
Section 20, but by another specifically and specially dealing with the matter; Section 17 of Rule 57,
which reads as follows:

SEC. 17. When execution returned unsatiated, recovery had upon bond. If the
execution be returned unsatisfied in whole or in part, the surety or sureties on any
counter-bond given pursuant to the provisions of this rule to secure the payment of
the judgment shall become charged on such counter-bond, and bound to pay to the
judgment creditor upon demand, the amount due under the judgment, which amount
may be recovered from such surety or sureties after notice and summary hearing in
the same action."

The record shows that the appellant surety company bound itself "jointly and severally" with the
defendant Fidelino"in the sum of PESOS FORTY EIGHT THOUSAND ONLY (P48,000.00),
Philippine Currency, which is double the value of the property stated in the affidavit of the plaintiff, for
the delivery thereof if such delivery is adjudged, or for the payment of such sum to him as may be
recovered against the defendant and the costs of the action. 16

This being so, the appellant surety's liability attached upon the promulgation of the verdict against
Fidelino. All that was necessary to enforce the judgment against it was, as aforestated, an
application therefor with the Court, with due notice to the surety, and a proper hearing, i.e., that it be
formally notified that it was in truth being made responsible for its co-principal's adjudicated
prestation (in this case, the payment of the balance of the purchase price of the automobile which
could no longer be found and therefore could not be ordered returned), 17 and an opportunity, at a
hearing called for the purpose, to show to the Court why it should not be adjudged so responsible. A
separate action was not necessary; it was in fact proscribed. 18 And again, the record shows substantial
compliance with these basic requirements, obviously imposed in deference to due process.

Appellant surety undoubtedly received copy of Zaragoza's Motion to Amend Decision. 19 That motion
made clear its purposethat the decision "be amended, or an appropriate order be issued, to include ..
(the surety) as a party jointly and severally liable with the defendant to the extent of the sums awarded in
the decision to be paid to plaintiff'-as well as the basis thereof-the counter-bond filed by it by the explicit
terms of which it bound itself "jointly and severally (with the defendant) .. for the payment of such sum to
him (plaintiff) as may be recovered against the defendant and the cost of the action." The motion
contained, at the foot thereof, a "notice that on Saturday, March 23, 1968, at 8:30 a.m., or as soon
thereafter as the matter may be heard, the .. (plaintiffs counsel would) submit the foregoing motion for the
consideration of the Court." And likewise indubitable is the fact that, as the Court a quo has observed,
"neither .. Fidelinos counsel nor the surety company filed any opposition to said motion, nor did they
appear in the hearing of the motion on March 23, 1968 .. (for which reason) the motion was deemed
submitted for resolution." 20 The surety's omission to appear at the hearing despite notice of course
constituted a waiver of the right to be heard on the matter.

The surety's theory that never having been served with summons, it never came under the Lower
Court's jurisdiction, is untenable. The terms of the counter-bond voluntarily filed by it in defendant's
behalf leave no doubt of its assent to be bound by the Court's adjudgment of the defendant's liability,
i.e., its acceptance of the Court's jurisdiction. For in that counterbond, it implicitly prayed for
affirmative relief; the release of the seized car, in consideration of which it explicitly bound itself
solidarily with said defendant to answer for the delivery of the car subject of the action "if such
delivery is adjudged," i.e., commanded by the Court's judgment, or "for the payment of such sum as
may be recovered against the defendant and the costs of the action," the reference to a possible
future judgment against the defendant, and necessarily against itself, being certain and
unmistakable. The filing of that bond was clearly an act of voluntary submission to the Court's
authority, which is one of the modes for the acquisition of jurisdiction over a party. 21

The same theory as that espoused by appellant surety in this case was, in substance, passed upon
and declared to be without merit in a 1962 decision of this Court, Dee v. Masloff. 22 There, a surety on
a counter-bond given to release property from receivership, also sought to avoid liability by asserting that
it was not a party to the case, had never been made a party, and had not been notified of the trial. The
Court overruled the contention, and upheld the propriety of the amendment of the judgment which
ordered the appellant surety company to pay to the extent of its bond and jointly and severally with
defendant the judgment obligation. The Court ruled that since such "amended judgment .. (had been)
rendered after the appellant surety company as party jointly and severally liable with the defendant .. for
the damages already awarded to the appellees, to which the appellant surety company filed its
"Opposition" and "Rejoinder" to the "Reply to Opposition filed by the appellees, without putting in issue
the reasonableness of the amount awarded for damages but confining itself to the defense in avoidance
of liability on its bond that it was not a party to the case and never made a party therein and was not
notified of the trial of the case, and that the appellees were guilty of laches, the requirement of hearing
was fully satisfied or complied with; .. (in any case,) appellant surety company never prayed for an
opportunity to present evidence in its behalf."

The appellant surety's last argument that by the time the Court amended its decision, the decision
had already become final, and therefore unalterable, is also untenable. The motion for amendment
of the decision was unquestionably in the nature of a motion for reconsideration under Section 1 (c),
Rule 37 of the Rules of Court which, having been filed within "the period for perfecting an appeal,"
had the effect of interrupting said period of appeal. 23

WHEREFORE, judgment is hereby rendered AFFIRMING in toto the Decision of the Court a
quo dated February 12, 1968, as amended by the Order of April 16, 1968. Costs against the
appellant surety.

G.R. No. L-23920 April 25, 1968

RAMON R. DIZON, plaintiff-appellant,

vs.
LORENZO J. VALDES, VALLESON, INC., and AUGUSTO J. VALDES, defendants-appellees.
SANCHEZ, J.:

The case before us is an incident in a suit for a sum of money (Civil Case Q-2618, Court of First
Instance of Rizal, Quezon City Branch), entitled "Ramon R. Dizon, Plaintiff, vs. Lorenzo J. Valdes,
Valleson, Inc., and Augusto J. Valdes, Defendants." Judgment was, on December 2, 1960, there
rendered directing defendants Valleson, Inc. and Augusto J. Valdes (Lorenzo J. Valdes excluded) "to
pay jointly and severally to the plaintiff the amount of P6,260.00 with interest at the rate of 12% per
annum from September 1, 1954 until fully paid and to pay attorney's fees in the amount of P600.00
with costs." The counterclaim of defendants Lorenzo J. Valdes and Valleson, Inc. was dismissed.

On January 11, 1961, Valleson, Inc. filed its notice of appeal. Its appeal was perfected on February
11, 1961.

Meanwhile, on January 10, 1961, one day before Valleson's notice of appeal, plaintiff petitioned for
and the trial court directed the issuance of a writ of preliminary attachment against the properties,
real and personal, of defendants Augusto J. Valdes and Valleson, Inc. upon an P11,730-bond. On
January 11, said bond having been filed, the corresponding writ was issued. Pursuant thereto,
garnishment notices were served by the Manila Sheriff on one Restituto Sibal and the Philippine
Guaranty Co.

On February 9, 1961, the judgment debtors moved to dissolve the writ of attachment, upon an
P11,730-counterbond subscribed by the Capital Insurance & Surety Co., Inc. The following day,
February 10, 1961, the trial court dissolved the writ.

On February 24, 1961, plaintiff registered a motion to admit its "Claim for Damages" attached
thereto. Plaintiff's claim was that the dissolution of the attachment "put out of the reach of the plaintiff
the properties and assets which may be held to answer for the adjudged claim"; and that, by reason
thereof, "plaintiff suffered and will suffer damages in the amount of P11,730.00 plus the
corresponding 12% interest thereon and attorney's fees and costs." He then prayed that "defendants
and the Capital Insurance & Surety Co., Inc. be ordered to pay the plaintiff, jointly and severally, the
amount of P11,730.00 plus interests, expenses, and attorney's fees."

On March 1, 1961, the surety, Capitol Insurance & Surety Co., Inc., opposed. Assertion was made
that pursuant to the Rules of Court (then, Section 17, Rule 59; now Section 17, Rule 57), the surety
on any counter-bond shall only become charged and bound to pay plaintiff upon demand, the
amount due under the judgment; and that such amount may be recovered from the surety after
notice and summary hearing in the same action only if execution be returned unsatisfied in whole
or in part.

On April 25, 1961, at the hearing fixed by the court, plaintiff presented evidence on the merits of its
claim for damages, in the absence of defendants and surety, who made no appearance thereat.

The trial court, in its order of May 16, 1961, ruled that plaintiff's claim for damages was premature,
since the main case was then still pending appeal.

Plaintiff's motion for reconsideration, filed on July 10, 1961, was thwarted by the court below on
September 16, 1961. 1wph1.t

Under the environmental facts, can plaintiff's claim for damages on defendants' counter-bond
prosper? The answer must be in the negative.
1. By the terms of the counter-bond itself,1 liability thereunder attaches only "in case the plaintiff
recovers judgment in the action." Indeed, by Section 12 of Rule 59 of the old Rules,2 the law in force
at the time the counterbond was executed, the statutory counter-bond was made "to secure the
payment to the plaintiff of any judgment he may recover in the action." Complementary to this legal
precept is Section 17 of the same Rule 59 of the old Rules3 which should be deemed as read into
the bond viz:

Sec. 17. When execution returned unsatisfied, recovery had upon bond. If the execution
be returned unsatisfied in whole or in part, the surety or sureties on any bond given pursuant
to the provisions of this rule to secure the payment of the judgment shall become finally
charged on such bond, and bound to pay to the plaintiff upon demand the amount due under
the judgment, which amount may be recovered from such surety or sureties after notice and
summary hearing in the same action.

Since at the time the claim for damages was registered, the case was still pending appeal, it is quite
obvious that the motion for the claim for damages was premature. And the lower court thus correctly
ruled out plaintiff's motion. For, Section 17 contemplates of proceedings on execution after
judgment. And, it is only thereafter that liability upon the surety's bond may be determined. The key
term in Section 17 is the phrase "[i]f the execution be returned unsatisfied in whole or in part." Until
such proceeding shall have taken place and unless unsatisfied liability under the judgment still
exists, no action upon the counter-bond may be taken against the surety.4

2. We do not follow plaintiff when he says that what controls here is Section 20 of Rule 57 (then Rule
59). By its very terms,5 this obviously refers to the recovery of damages by a party against
whom attachment was issued. This is a remedy available to the defendants here, not the plaintiff.

It is therefore not to be doubted that, upon the applicable rules, the counter-bond does not answer
for damages on account of the lifting of the attachment, but for the payment of the amount due under
the judgment that may be recovered by an attaching creditor.6

3. Nor is importance to be attached to plaintiff's argument that the dissolution of the attachments put
out of his reach the properties and assets answerable for his claim. The counter-bond, it should be
emphasized, precisely stands "in place of the properties so released."7 Thus, the release of such
property cannot really "prejudice the rights of the attaching party."8

We accordingly affirm the lower court's order of May 16, 1961 under review.

Costs against plaintiff-appellant. So ordered.

G.R. No. L-42447 August 30, 1982

PIONEER INSURANCE AND SURETY CORPORATION, petitioner,

vs.
HON. SERAFIN E. CAMILON, in his capacity as Judge of the Court of First Instance of Rizal,
Branch VIII; THE CITY SHERIFF OF MANILA; and STEEL DISTRIBUTORS, INC., respondents.

BARREDO, J.: 1wph1. t

It appearing from the allegations of the petition and the comment of respondents, that, as reiterated
in their respective memoranda, (1) in Civil Case No. 9205 of the Court of First Instance of Rizal,
entitled Steel Distributors, Inc. vs. Co Ban Ling & Sons, et al. a judgment was rendered on August
24, 1968, worded as follows: 1wph1.t

WHEREFORE, judgment is hereby rendered ordering the defendants Co Ban Ling

and Sons, Co Chin Leng and the Pioneer Insurance and Surety Corporation, to pay,
jointly and severally, the plaintiff, Steel Distributors, Inc. the sum of P35,760.00 with
interest of 12% per annum from March 31, 1966, the date of the filing of the
complaint, until fully paid, the further sum of P3,000.00 as attorney's fees, and the
costs of this suit.

In the event that the properties of the defendants Co Ban Ling and Sons, Co Chin
Leng and the Pioneer Insurance and Surety Corporation are not sufficient to satisfy
the judgment, defendant Co Chin Tong and Macario Co Ling are hereby ordered to
pay, jointly with the other partners, the balance of the obligation to the plaintiff

The counterclaim filed by the defendants is hereby dismissed. (Pp. 14-15, Record.)

and upon appeal to the Court of Appeals, the appellate court decided thus: 1w ph1.t

WHEREFORE, except with the modification that the liability of appellant Co Chin
Leng in the questioned transaction at bar is only joint, or pro rata and subsidiary, the
decision under review is hereby affirmed in all other respects, at appellants costs.
(Page 23, Record.)

(2) upon motion of the judgment creditors, the respondent judge ordered the issuance of a writ of
execution wherein petitioner herein was included as object also thereof; (3) a motion to quash the
said writ of execution insofar as petitioner is concerned was denied by respondent judge this wise: 1wph1.t

There is no merit in the Motion to Quash Writ of Execution filed by Pioneer Insurance
and Surety Corporation since under the decision affirmed by the Court of Appeals its
liability was adjudged to be jointly and severally with defendant Co Ban Ling & Sons
Co.

On the other hand, non-inclusion of the other defendants in the writ is of no

consequence at this stage since their liability is not primary but will accrue only in the
event the judgment cannot be satisfied by defendant partnership and Pioneer
Insurance and Surety Corporation.

In view thereof, the Motion to Quash is denied.

SO ORDERED. (Page 31, Record.)

and, the Court being of the view that the rule of excussion claimed by petitioner under Section 17 of
Rule 17, which petitioner invokes considering it was only the bondsman to secure the lifting of the
writ of preliminary attachment, is not applicable in the instant case where there is already a final and
executory judgment sentencing the bondsman as joint and solidarily liable, as in the case of Luzon
Steel Corporation vs. Sia, 28 SCRA, 58-63, the Court resolved to DISMISS the petition, without
prejudice to petitioner recovering from its co-judgment debtor whatever it has to pay under the writ of
execution herein questioned. The restraining order issued by this Court on January 22, 1976 is
hereby lifted effective immediately.
G.R. No. 171750 January 25, 2012

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

vs.
ACROPOLIS CENTRAL GUARANTY CORPORATION, Respondent.

MENDOZA, J.:

This is a petition for review under Rule 45 praying for the annulment of the November 17, 2005
Decision1 and the March 2, 2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 89135
entitled Acropolis Central Guaranty Corporation (formerly known as the Philippine Pryce Assurance
Corp.) v. Hon. Oscar B. Pimentel, as Presiding Judge, RTC of Makati City, Branch 148 (RTC), and
United Pulp and Paper Co., Inc.

The Facts

On May 14, 2002, United Pulp and Paper Co., Inc. (UPPC) filed a civil case for collection of the
amount ofP42,844,353.14 against Unibox Packaging Corporation (Unibox) and Vicente Ortega
(Ortega) before the Regional Trial Court of Makati, Branch 148 (RTC).3 UPPC also prayed for a Writ
of Preliminary Attachment against the properties of Unibox and Ortega for the reason that the latter
were on the verge of insolvency and were transferring assets in fraud of creditors.4 On August 29,
2002, the RTC issued the Writ of Attachment5 after UPPC posted a bond in the same amount of its
claim. By virtue of the said writ, several properties and assets of Unibox and Ortega were attached.6

On October 10, 2002, Unibox and Ortega filed their Motion for the Discharge of Attachment,7 praying
that they be allowed to file a counter-bond in the amount of P42,844,353.14 and that the writ of
preliminary attachment be discharged after the filing of such bond. Although this was opposed by
UPPC, the RTC, in its Order dated October 25, 2002, granted the said motion for the discharge of
the writ of attachment subject to the condition that Unibox and Ortega file a counter-bond.8 Thus, on
November 21, 2002, respondent Acropolis Central Guaranty Corporation (Acropolis) issued the
Defendants Bond for Dissolution of Attachment9 in the amount of P42,844,353.14 in favor of Unibox.

Not satisfied with the counter-bond issued by Acropolis, UPPC filed its Manifestation and Motion to
Discharge the Counter-Bond10 dated November 27, 2002, claiming that Acropolis was among those
insurance companies whose licenses were set to be cancelled due to their failure to put up the
minimum amount of capitalization required by law. For that reason, UPPC prayed for the discharge
of the counter-bond and the reinstatement of the attachment. In its December 10, 2002 Order,11 the
RTC denied UPPCs Motion to Discharge Counter-Bond and, instead, approved and admitted the
counter-bond posted by Acropolis. Accordingly, it ordered the sheriff to cause the lifting of the
attachment on the properties of Unibox and Ortega.

On September 29, 2003, Unibox, Ortega and UPPC executed a compromise agreement,12 wherein
Unibox and Ortega acknowledged their obligation to UPPC in the amount of P35,089,544.00 as of
August 31, 2003, inclusive of the principal and the accrued interest, and bound themselves to pay
the said amount in accordance with a schedule of payments agreed upon by the parties.
Consequently, the RTC promulgated its Judgment13 dated October 2, 2003 approving the
compromise agreement.

For failure of Unibox and Ortega to pay the required amounts for the months of May and June 2004
despite demand by UPPC, the latter filed its Motion for Execution14 to satisfy the remaining unpaid
balance. In the July 30, 2004 Order,15 the RTC acted favorably on the said motion and, on August 4,
2004, it issued the requested Writ of Execution.16
The sheriff then proceeded to enforce the Writ of Execution. It was discovered, however, that Unibox
had already ceased its business operation and all of its assets had been foreclosed by its creditor
bank. Moreover, the responses of the selected banks which were served with notices of garnishment
indicated that Unibox and Ortega no longer had funds available for garnishment. The sheriff also
proceeded to the residence of Ortega to serve the writ but he was denied entry to the premises.
Despite his efforts, the sheriff reported in his November 4, 2008 Partial Return17 that there was no
satisfaction of the remaining unpaid balance by Unibox and Ortega.

On the basis of the said return, UPPC filed its Motion to Order Surety to Pay Amount of Counter-
Bond18 directed at Acropolis. On November 30, 2004, the RTC issued its Order19 granting the motion
and ordering Acropolis to comply with the terms of its counter-bond and pay UPPC the unpaid
balance of the judgment in the amount ofP27,048,568.78 with interest of 12% per annum from
default.

Thereafter, on December 13, 2004, Acropolis filed its Manifestation and Very Urgent Motion for
Reconsideration,20arguing that it could not be made to pay the amount of the counter-bond because
it did not receive a demand for payment from UPPC. Furthermore, it reasoned that its obligation had
been discharged by virtue of the novation of its obligation pursuant to the compromise agreement
executed by UPPC, Unibox and Ortega. The motion, which was set for hearing on December 17,
2004, was received by the RTC and UPPC only on December 20, 2004.21 In the Order dated
February 22, 2005, the RTC denied the motion for reconsideration for lack of merit and for having
been filed three days after the date set for the hearing on the said motion.22

Aggrieved, Acropolis filed a petition for certiorari before the CA with a prayer for the issuance of a
Temporary Restraining Order and Writ of Preliminary Injunction.23 On November 17, 2005, the CA
rendered its Decision24granting the petition, reversing the February 22, 2005 Order of the RTC, and
absolving and relieving Acropolis of its liability to honor and pay the amount of its counter-
attachment bond. In arriving at said disposition, the CA stated that, firstly, Acropolis was able to
comply with the three-day notice rule because the motion it filed was sent by registered mail on
December 13, 2004, four days prior to the hearing set for December 17, 2004;25 secondly, UPPC
failed to comply with the following requirements for recovery of a judgment creditor from the surety
on the counter-bond in accordance with Section 17, Rule 57 of the Rules of Court, to wit: (1) demand
made by creditor on the surety, (2) notice to surety and (3) summary hearing as to his liability for the
judgment under the counter-bond;26and, thirdly, the failure of UPPC to include Acropolis in the
compromise agreement was fatal to its case.27

UPPC then filed a motion for reconsideration but it was denied by the CA in its Resolution dated
March 1, 2006.28

Hence, this petition.

The Issues

For the allowance of its petition, UPPC raises the following

GROUNDS

I.

The Court of Appeals erred in not holding respondent liable on its counter-attachment bond which it
posted before the trial court inasmuch as:
A. The requisites for recovering upon the respondent-surety were clearly complied with by petitioner
and the trial court, inasmuch as prior demand and notice in writing was made upon respondent, by
personal service, of petitioners motion to order respondent surety to pay the amount of its counter-
attachment bond, and a hearing thereon was held for the purpose of determining the liability of the
respondent-surety.

B. The terms of respondents counter-attachment bond are clear, and unequivocally provide that
respondent as surety shall jointly and solidarily bind itself with defendants to secure and pay any
judgment that petitioner may recover in the action. Hence, such being the terms of the bond, in
accordance with fair insurance practices, respondent cannot, and should not be allowed to, evade its
liability to pay on its counter-attachment bond posted by it before the trial court.

II.

The Court of Appeals erred in holding that the trial court gravely abused its discretion in denying
respondents manifestation and motion for reconsideration considering that the said motion failed to
comply with the three (3)-day notice rule under Section 4, Rule 15 of the Rules of Court, and that it
had lacked substantial merit to warrant a reversal of the trial courts previous order.29

Simply put, the issues to be dealt with in this case are as follows:

(1) Whether UPPC failed to make the required demand and notice upon Acropolis; and

(2) Whether the execution of the compromise agreement between UPPC and Unibox and Ortega
was tantamount to a novation which had the effect of releasing Acropolis from its obligation under
the counter-attachment bond.

The Courts Ruling

UPPC complied with the twin requirements of notice and demand

On the recovery upon the counter-bond, the Court finds merit in the arguments of the petitioner.

UPPC argues that it complied with the requirement of demanding payment from Acropolis by
notifying it, in writing and by personal service, of the hearing held on UPPCs Motion to Order
Respondent-Surety to Pay the Bond.30Moreover, it points out that the terms of the counter-
attachment bond are clear in that Acropolis, as surety, shall jointly and solidarily bind itself with
Unibox and Ortega to secure the payment of any judgment that UPPC may recover in the action.31

Section 17, Rule 57 of the Rules of Court sets forth the procedure for the recovery from a surety on
a counter-bond:

Sec. 17. Recovery upon the counter-bond. When the judgment has become executory, the surety
or sureties on any counter-bond given pursuant to the provisions of this Rule to secure the payment
of the judgment shall become charged on such counter-bond and bound to pay the judgment obligee
upon demand the amount due under the judgment, which amount may be recovered from such
surety or sureties after notice and summary hearing on the same action.

From a reading of the abovequoted provision, it is evident that a surety on a counter-bond given to
secure the payment of a judgment becomes liable for the payment of the amount due upon: (1)
demand made upon the surety; and (2) notice and summary hearing on the same action. After a
careful scrutiny of the records of the case, the Court is of the view that UPPC indeed complied with
these twin requirements.

This Court has consistently held that the filing of a complaint constitutes a judicial
demand.32 Accordingly, the filing by UPPC of the Motion to Order Surety to Pay Amount of Counter-
Bond was already a demand upon Acropolis, as surety, for the payment of the amount due, pursuant
to the terms of the bond. In said bond, Acropolis bound itself in the sum of P 42,844,353.14 to
secure the payment of any judgment that UPPC might recover against Unibox and Ortega.33

Furthermore, an examination of the records reveals that the motion was filed by UPPC on November
11, 2004 and was set for hearing on November 19, 2004.34 Acropolis was duly notified of the hearing
and it was personally served a copy of the motion on November 11, 2004,35 contrary to its claim that
it did not receive a copy of the motion.

On November 19, 2004, the case was reset for hearing on November 30, 2004. The minutes of the
hearing on both dates show that only the counsel for UPPC was present. Thus, Acropolis was given
the opportunity to defend itself. That it chose to ignore its day in court is no longer the fault of the
RTC and of UPPC. It cannot now invoke the alleged lack of notice and hearing when, undeniably,
both requirements were met by UPPC.

No novation despite compromise agreement; Acropolis still liable under the terms of the counter-
bond

UPPC argues that the undertaking of Acropolis is to secure any judgment rendered by the RTC in its
favor. It points out that because of the posting of the counter-bond by Acropolis and the dissolution
of the writ of preliminary attachment against Unibox and Ortega, UPPC lost its security against the
latter two who had gone bankrupt.36 It cites the cases of Guerrero v. Court of Appeals37 and Martinez
v. Cavives38 to support its position that the execution of a compromise agreement between the
parties and the subsequent rendition of a judgment based on the said compromise agreement does
not release the surety from its obligation nor does it novate the obligation.39

Acropolis, on the other hand, contends that it was not a party to the compromise agreement. Neither
was it aware of the execution of such an agreement which contains an acknowledgment of liability
on the part of Unibox and Ortega that was prejudicial to it as the surety. Accordingly, it cannot be
bound by the judgment issued based on the said agreement.40 Acropolis also questions the
applicability of Guerrero and draws attention to the fact that in said case, the compromise agreement
specifically stipulated that the surety shall continue to be liable, unlike in the case at bench where
the compromise agreement made no mention of its obligation to UPPC.41

On this issue, the Court finds for UPPC also.

The terms of the Bond for Dissolution of Attachment issued by Unibox and Acropolis in favor of
UPPC are clear and leave no room for ambiguity:

WHEREAS, the Honorable Court in the above-entitled case issued on _____ an Order dissolving /
lifting partially the writ of attachment levied upon the defendant/s personal property, upon the filing of
a counterbond by the defendants in the sun of PESOS FORTY TWO MILLION EIGHT HUNDRED
FORTY FOUR THOUSAND THREE HUNDRED FIFTY THREE AND 14/100 ONLY (P
42,844,353.14) Philippine Currency.

NOW, THEREFORE, we UNIBOX PACKAGING CORP. as Principal and PHILIPPINE PRYCE

ASSURANCE CORP., a corporation duly organized and existing under and by virtue of the laws of
the Philippines, as Surety, in consideration of the dissolution of said attachment, hereby jointly
and severally bind ourselves in the sum of FORTY TWO MILLION EIGHT HUNDRED FORTY
FOUR THOUSAND THREE HUNDRED FIFTY THREE AND 14/100 ONLY (P 42,844,353.14)
Philippine Currency, in favor of the plaintiff to secure the payment of any judgment that the
plaintiff may recover against the defendants in this action.42 [Emphasis and underscoring
supplied]

Based on the foregoing, Acropolis voluntarily bound itself with Unibox to be solidarily liable to answer
for ANY judgment which UPPC may recover from Unibox in its civil case for collection. Its counter-
bond was issued in consideration of the dissolution of the writ of attachment on the properties of
Unibox and Ortega. The counter-bond then replaced the properties to ensure recovery by UPPC
from Unibox and Ortega. It would be the height of injustice to allow Acropolis to evade its obligation
to UPPC, especially after the latter has already secured a favorable judgment.

This issue is not novel. In the case of Luzon Steel Corporation v. Sia,43 Luzon Steel Corporation
sued Metal Manufacturing of the Philippines and Jose Sia for breach of contract and damages. A
writ of preliminary attachment was issued against the properties of the defendants therein but the
attachment was lifted upon the filing of a counter-bond issued by Sia, as principal, and Times Surety
& Insurance Co., as surety. Later, the plaintiff and the defendants entered into a compromise
agreement whereby Sia agreed to settle the plaintiffs claim. The lower court rendered a judgment in
accordance with the terms of the compromise. Because the defendants failed to comply with the
same, the plaintiff obtained a writ of execution against Sia and the surety on the counter-bond. The
surety moved to quash the writ of execution on the ground that it was not a party to the compromise
and that the writ was issued without giving the surety notice and hearing. Thus, the court set aside
the writ of execution and cancelled the counter-bond. On appeal, this Court, speaking through the
learned Justice J.B.L. Reyes, discussed the nature of the liability of a surety on a counter-bond:

Main issues posed are (1) whether the judgment upon the compromise discharged the surety from
its obligation under its attachment counterbond and (2) whether the writ of execution could be issued
against the surety without previous exhaustion of the debtor's properties.

Both questions can be solved by bearing in mind that we are dealing with a counterbond filed to
discharge a levy on attachment. Rule 57, section 12, specifies that an attachment may be
discharged upon the making of a cash deposit or filing a counterbond "in an amount equal to the
value of the property attached as determined by the judge"; that upon the filing of the counterbond
"the property attached ... shall be delivered to the party making the deposit or giving the
counterbond, or the person appearing on his behalf, the deposit or counterbond aforesaid standing
in place of the property so released."

The italicized expressions constitute the key to the entire problem. Whether the judgment be
rendered after trial on the merits or upon compromise, such judgment undoubtedly may be made
effective upon the property released; and since the counterbond merely stands in the place of such
property, there is no reason why the judgment should not be made effective against the
counterbond regardless of the manner how the judgment was obtained.

xxx

As declared by us in Mercado v. Macapayag, 69 Phil. 403, 405-406, in passing upon the liability of
counter sureties in replevin who bound themselves to answer solidarily for the obligations of the
defendants to the plaintiffs in a fixed amount of P 912.04, to secure payment of the amount that said
plaintiff be adjudged to recover from the defendants,
the liability of the sureties was fixed and conditioned on the finality of the judgment
rendered regardless of whether the decision was based on the consent of the parties or on the
merits. A judgment entered on a stipulation is nonetheless a judgment of the court because
consented to by the parties.44

[Emphases and underscoring supplied]

The argument of Acropolis that its obligation under the counter-bond was novated by the
compromise agreement is, thus, untenable. In order for novation to extinguish its obligation,
Acropolis must be able to show that there is an incompatibility between the compromise agreement
and the terms of the counter-bond, as required by Article 1292 of the Civil Code, which provides that:

Art. 1292. In order that an obligation may be extinguished by another which substitute the same, it is
imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on
every point incompatible with each other. (1204)

Nothing in the compromise agreement indicates, or even hints at, releasing Acropolis from its
obligation to pay UPPC after the latter has obtained a favorable judgment. Clearly, there is no
incompatibility between the compromise agreement and the counter-bond. Neither can novation be
presumed in this case. As explained inDugo v. Lopena:45

Novation by presumption has never been favored. To be sustained, it need be established that the
old and new contracts are incompatible in all points, or that the will to novate appears by express
agreement of the parties or in acts of similar import.46

All things considered, Acropolis, as surety under the terms of the counter-bond it issued, should be
held liable for the payment of the unpaid balance due to UPPC.

Three-day notice rule, not a hard and fast rule

Although this issue has been obviated by our disposition of the two main issues, the Court would like
to point out that the three-day notice requirement is not a hard and fast rule and substantial
compliance is allowed.

Pertinently, Section 4, Rule 15 of the Rules of Court reads:

Sec. 4. Hearing of motion. Except for motions which the court may act upon without prejudicing the
rights of the adverse party, every written motion shall be set for hearing by the applicant.

Every written motion required to be heard and the notice of the hearing thereof shall be served in
such a manner as to insure its receipt by the other party at least three (3) days before the
date of hearing, unless the court for good cause sets the hearing on shorter notice. [Emphasis
supplied]1wphi1

The law is clear that it intends for the other party to receive a copy of the written motion at least three
days before the date set for its hearing. The purpose of the three (3)-day notice requirement, which
was established not for the benefit of the movant but rather for the adverse party, is to avoid
surprises upon the latter and to grant it sufficient time to study the motion and to enable it to meet
the arguments interposed therein.47 In Preysler, Jr. v. Manila Southcoast Development
Corporation,48 the Court restated the ruling that "the date of the hearing should be at least three days
after receipt of the notice of hearing by the other parties."
It is not, however, a hard and fast rule. Where a party has been given the opportunity to be heard,
the time to study the motion and oppose it, there is compliance with the rule. This was the ruling in
the case of Jehan Shipping Corporation v. National Food Authority,49 where it was written:

Purpose Behind the

Notice Requirement

This Court has indeed held time and time again that, under Sections 4 and 5 of Rule 15 of the Rules
of Court, mandatory is the notice requirement in a motion, which is rendered defective by failure to
comply with the requirement. As a rule, a motion without a notice of hearing is considered pro forma
and does not affect the reglementary period for the appeal or the filing of the requisite pleading.

As an integral component of procedural due process, the three-day notice required by the Rules is
not intended for the benefit of the movant. Rather, the requirement is for the purpose of avoiding
surprises that may be sprung upon the adverse party, who must be given time to study and meet the
arguments in the motion before a resolution by the court. Principles of natural justice demand that
the right of a party should not be affected without giving it an opportunity to be heard.

The test is the presence of the opportunity to be heard, as well as to have time to study the
motion and meaningfully oppose or controvert the grounds upon which it is
based. Considering the circumstances of the present case, we believe that the requirements of
procedural due process were substantially complied with, and that the compliance justified a
departure from a literal application of the rule on notice of hearing.50 [Emphasis supplied]

In the case at bench, the RTC gave UPPC sufficient time to file its comment on the motion. On
January 14, 2005, UPPC filed its Opposition to the motion, discussing the issues raised by Acropolis
in its motion. Thus, UPPCs right to due process was not violated because it was afforded the
chance to argue its position.

WHEREFORE, the petition is GRANTED. The November 17, 2005 Decision and the March 1, 2006
Resolution of the Court of Appeals, in CA-G.R. SP No. 89135, are hereby REVERSED and SET
ASIDE. The November 30, 2004 Order of the Regional Trial Court, Branch 148, Makati City, ordering
Acropolis to comply with the terms of its counter-bond and pay UPPC the unpaid balance of the
judgment in the amount of P27,048,568.78 with interest of 12% per annum from default is
REINSTATED.