FIRST DIVISION

[G.R. No. 115678. February 23, 2001]

PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. HON. COURT OF APPEALS

and BERNARDINO VILLANUEVA, respondents.

[G.R. No. 119723. February 23, 2001]

PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. HON. COURT OF APPEALS

and FILIPINAS TEXTILE MILLS, INC., respondents.

DECISION

YNARES-SANTIAGO, J.:

Before us are consolidated petitions for review both filed by Philippine Bank of
Communications; one against the May 24, 1994 Decision of respondent Court of Appeals in CA-
G.R. SP No. 32863i[1] and the other against its March 31, 1995 Decision in CA-G.R. SP No.
32762.ii[2] Both Decisions set aside and nullified the August 11, 1993 Orderiii[3] of the
Regional Trial Court of Manila, Branch 7, granting the issuance of a writ of preliminary
attachment in Civil Case No. 91-56711.

The case commenced with the filing by petitioner, on April 8, 1991, of a Complaint against
private respondent Bernardino Villanueva, private respondent Filipinas Textile Mills and one
Sochi Villanueva (now deceased) before the Regional Trial Court of Manila. In the said
Complaint, petitioner sought the payment of P2,244,926.30 representing the proceeds or value of
various textile goods, the purchase of which was covered by irrevocable letters of credit and trust
receipts executed by petitioner with private respondent Filipinas Textile Mills as obligor; which,
in turn, were covered by surety agreements executed by private respondent Bernardino
Villanueva and Sochi Villanueva. In their Answer, private respondents admitted the existence of
the surety agreements and trust receipts but countered that they had already made payments on
the amount demanded and that the interest and other charges imposed by petitioner were
onerous.

On May 31, 1993, petitioner filed a Motion for Attachment,iv[4] contending that violation of the
trust receipts law constitutes estafa, thus providing ground for the issuance of a writ of
preliminary attachment; specifically under paragraphs b and d, Section 1, Rule 57 of the Revised
Rules of Court. Petitioner further claimed that attachment was necessary since private
respondents were disposing of their properties to its detriment as a creditor. Finally, petitioner
offered to post a bond for the issuance of such writ of attachment.

The Motion was duly opposed by private respondents and, after the filing of a Reply thereto by
petitioner, the lower court issued its August 11, 1993 Order for the issuance of a writ of
preliminary attachment, conditioned upon the filing of an attachment bond. Following the denial
of the Motion for Reconsideration filed by private respondent Filipinas Textile Mills, both
private respondents filed separate petitions for certiorari before respondent Court assailing the
order granting the writ of preliminary attachment.

Both petitions were granted, albeit on different grounds. In CA-G.R. SP No. 32762, respondent
Court of Appeals ruled that the lower court was guilty of grave abuse of discretion in not
conducting a hearing on the application for a writ of preliminary attachment and not requiring
petitioner to substantiate its allegations of fraud, embezzlement or misappropriation. On the other
hand, in CA-G.R. SP No. 32863, respondent Court of Appeals found that the grounds cited by
petitioner in its Motion do not provide sufficient basis for the issuance of a writ of preliminary
attachment, they being mere general averments. Respondent Court of Appeals held that neither
embezzlement, misappropriation nor incipient fraud may be presumed; they must be established
in order for a writ of preliminary attachment to issue.

Hence, the instant consolidatedv[5] petitions charging that respondent Court of Appeals erred in

1. Holding that there was no sufficient basis for the issuance of the writ of preliminary
attachment in spite of the allegations of fraud, embezzlement and misappropriation of the
proceeds or goods entrusted to the private respondents;

2. Disregarding the fact that that the failure of FTMI and Villanueva to remit the proceeds or
return the goods entrusted, in violation of private respondents fiduciary duty as entrustee,
constitute embezzlement or misappropriation which is a valid ground for the issuance of a writ of
preliminary attachment.vi[6]

We find no merit in the instant petitions.

To begin with, we are in accord with respondent Court of Appeals in CA-G.R. SP No. 32863 that
the Motion for Attachment filed by petitioner and its supporting affidavit did not sufficiently
establish the grounds relied upon in applying for the writ of preliminary attachment.

The Motion for Attachment of petitioner states that

1. The instant case is based on the failure of defendants as entrustee to pay or remit the
proceeds of the goods entrusted by plaintiff to defendant as evidenced by the trust receipts
(Annexes B, C and D of the complaint), nor to return the goods entrusted thereto, in violation of
their fiduciary duty as agent or entrustee;

2. Under Section 13 of P.D. 115, as amended, violation of the trust receipt law constitute(s)
estafa (fraud and/or deceit) punishable under Article 315 par. 1[b] of the Revised Penal Code;

3. On account of the foregoing, there exist(s) valid ground for the issuance of a writ of
preliminary attachment under Section 1 of Rule 57 of the Revised Rules of Court particularly
under sub-paragraphs b and d, i.e. for embezzlement or fraudulent misapplication or conversion
of money (proceeds) or property (goods entrusted) by an agent (entrustee) in violation of his
fiduciary duty as such, and against a party who has been guilty of fraud in contracting or
incurring the debt or obligation;
4. The issuance of a writ of preliminary attachment is likewise urgently necessary as there
exist(s) no sufficient security for the satisfaction of any judgment that may be rendered against
the defendants as the latter appears to have disposed of their properties to the detriment of the
creditors like the herein plaintiff;

5. Herein plaintiff is willing to post a bond in the amount fixed by this Honorable Court as a
condition to the issuance of a writ of preliminary attachment against the properties of the
defendants.

Section 1(b) and (d), Rule 57 of the then controlling Revised Rules of Court, provides, to wit

SECTION 1. Grounds upon which attachment may issue. A plaintiff or any proper party may, at
the commencement of the action or at any time thereafter, have the property of the adverse party
attached as security for the satisfaction of any judgment that may be recovered in the following
cases:

xxx xxx xxx

(b) In an action for money or property embezzled or fraudulently misapplied or converted to

his use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent or
clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or
for a willful violation of duty;

xxx xxx xxx

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

xxx xxx xxx

While the Motion refers to the transaction complained of as involving trust receipts, the violation
of the terms of which is qualified by law as constituting estafa, it does not follow that a writ of
attachment can and should automatically issue. Petitioner cannot merely cite Section 1(b) and
(d), Rule 57, of the Revised Rules of Court, as mere reproduction of the rules, without more,
cannot serve as good ground for issuing a writ of attachment. An order of attachment cannot be
issued on a general averment, such as one ceremoniously quoting from a pertinent rule.vii[7]

The supporting Affidavit is even less instructive. It merely states, as follows --

I, DOMINGO S. AURE, of legal age, married, with address at No. 214-216 Juan Luna Street,
Binondo, Manila, after having been sworn in accordance with law, do hereby depose and say,
THAT:
1. I am the Assistant Manager for Central Collection Units Acquired Assets Section of the
plaintiff, Philippine Bank of Communications, and as such I have caused the preparation of the
above motion for issuance of a writ of preliminary attachment;

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

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

4. The instant case is one of those mentioned in Section 1 of Rule 57 of the Revised Rules
of Court wherein a writ of preliminary attachment may be issued against the defendants,
particularly sub-paragraphs b and d of said section;

5. There is no other sufficient security for the claim sought to be enforced by the instant
case and the amount due to herein plaintiff or the value of the property sought to be recovered is
as much as the sum for which the order for attachment is granted, above all legal counterclaims.

Again, it lacks particulars upon which the court can discern whether or not a writ of attachment
should issue.

Petitioner cannot insist that its allegation that private respondents failed to remit the proceeds of
the sale of the entrusted goods nor to return the same is sufficient for attachment to issue. We
note that petitioner anchors its application upon Section 1(d), Rule 57. This particular provision
was adequately explained in Liberty Insurance Corporation v. Court of Appeals,viii[8] as
follows

To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt
or incurring the obligation intended to defraud the creditor. The fraud must relate to the
execution of the agreement and must have been the reason which induced the other party into
giving consent which he would not have otherwise given. To constitute a ground for attachment
in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the
obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the
debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of
mind and need not be proved by direct evidence but may be inferred from the circumstances
attendant in each case (Republic v. Gonzales, 13 SCRA 633). (Emphasis ours)

We find an absence of factual allegations as to how the fraud alleged by petitioner was
committed. As correctly held by respondent Court of Appeals, such fraudulent intent not to
honor the admitted obligation cannot be inferred from the debtors inability to pay or to comply
with the obligations.ix[9] On the other hand, as stressed, above, fraud may be gleaned from a
preconceived plan or intention not to pay. This does not appear to be so in the case at bar. In fact,
it is alleged by private respondents that out of the total P419,613.96 covered by the subject trust
receipts, the amount of P400,000.00 had already been paid, leaving only P19,613.96 as balance.
Hence, regardless of the arguments regarding penalty and interest, it can hardly be said that
private respondents harbored a preconceived plan or intention not to pay petitioner.
The Court of Appeals was correct, therefore, in its finding in CA-G.R. SP No. 32863 that neither
petitioners Motion or its supporting Affidavit provides sufficient basis for the issuance of the
writ of attachment prayed for.

We also agree with respondent Court of Appeals in CA-G.R. SP No. 32762 that the lower court
should have conducted a hearing and required private petitioner to substantiate its allegations of
fraud, embezzlement and misappropriation.

To reiterate, petitioners Motion for Attachment fails to meet the standard set forth in D.P. Lub
Oil Marketing Center, Inc. v. Nicolas,x[10] in applications for attachment. In the said case, this
Court cautioned --

The petitioners prayer for a writ of preliminary attachment hinges on the allegations in paragraph
16 of the complaint and paragraph 4 of the affidavit of Daniel Pe which are couched in general
terms devoid of particulars of time, persons and places to support such a serious assertion that
defendants are disposing of their properties in fraud of creditors. There is thus the necessity of
giving to the private respondents an opportunity to ventilate their side in a hearing, in accordance
with due process, in order to determine the truthfulness of the allegations. But no hearing was
afforded to the private respondents the writ having been issued ex parte. A writ of attachment
can only be granted on concrete and specific grounds and not on general averments merely
quoting the words of the rules.

As was frowned upon in D.P. Lub Oil Marketing Center, Inc.,xi[11] not only was petitioners
application defective for having merely given general averments; what is worse, there was no
hearing to afford private respondents an opportunity to ventilate their side, in accordance with
due process, in order to determine the truthfulness of the allegations of petitioner. As already
mentioned, private respondents claimed that substantial payments were made on the proceeds of
the trust receipts sued upon. They also refuted the allegations of fraud, embezzlement and
misappropriation by averring that private respondent Filipinas Textile Mills could not have done
these as it had ceased its operations starting in June of 1984 due to workers strike. These are
matters which should have been addressed in a preliminary hearing to guide the lower court to a
judicious exercise of its discretion regarding the attachment prayed for. On this score, respondent
Court of Appeals was correct in setting aside the issued writ of preliminary attachment.

Time and again, we have held that the rules on the issuance of a writ of attachment must be
construed strictly against the applicants. This stringency is required because the remedy of
attachment is harsh, extraordinary and summary in nature. If all the requisites for the granting of
the writ are not present, then the court which issues it acts in excess of its jurisdiction.xii[12]

WHEREFORE, for the foregoing reasons, the instant petitions are DENIED. The decision of
the Court of Appeals in CA-G.R. SP No. 32863 and CA-G.R. SP No. 32762 are AFFIRMED. No
pronouncement as to costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.
 G.R. No. 181721, September 09, 2015

WATERCRAFT VENTURE CORPORATION, REPRESENTED BY ITS VICE-

PRESIDENT, ROSARIO E. RAOA, Petitioner, v. ALFRED RAYMOND WOLFE,
Respondent.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse
and set aside the Court of Appeals (CA) Resolution1 dated January 24, 2008 denying the motion
for reconsideration of its Decision2 dated September 27, 2007 in CA-G.R. SP No. 97804.

The facts are as follows: chanRoblesvirtualLawlibrary

Petitioner Watercraft Venture Corporation (Watercraft) is engaged in the business of building,

repairing, storing and maintaining yachts, boats and other pleasure crafts at the Subic Bay
Freeport Zone, Subic, Zambales. In connection with its operations and maintenance of boat
storage facilities, it charges a boat storage fee of Two Hundred Seventy-Two US Dollars
(US$272.00) per month with interest of 4% per month for unpaid charges.

Sometime in June 1997, Watercraft hired respondent Alfred Raymond Wolfe (Wolfe), a British
national and resident of Subic Bay Freeport Zone, Zambales, as its Shipyard Manager.

During his empolyment, Wolfe stored the sailboat, Knotty Gull, within Watercraft1 s boat
storage facilities, but never paid for the storage fees.

On March 7, 2002, Watercraft terminated the employment of Wolfe.

Sometime in June 2002, Wolfe pulled out his sailboat from Watercraft's storage facilities after
signing a Boat Pull-Out Clearance dated June 29, 2002 where he allegedly acknowledged the
outstanding obligation of Sixteen Thousand Three Hundred and Twenty-Four and 82/100 US
Dollars (US$16,324.82) representing unpaid boat storage fees for the period of June 1997 to June
2002. Despite repeated demands, he failed to pay the said amount.

Thus, on July 7, 2005, Watercraft filed against Wolfe a Complaint for Collection of Sum of
Money with Damages with an Application for the Issuance of a Writ of Preliminary Attachment.
The case was docketed as Civil Case No. 4534-MN, and raffled to Branch 1703 of the Regional
Trial Court (RTC) of Malabon City.

In his Answer, Wolfe claimed he was hired as Service and Repair Manager, instead of Shipyard
Manager. He denied owing Watercraft the amount of US$16,324.82 representing storage fees for
the sailboat. He explained that the sailboat was purchased in February 1998 as part of an
agreement between him and Watercraft1 s then General Manager, Barry Bailey, and its
President, Ricky Sandoval, for it to be repaired and used as training or fill-in project for the staff,
and to be sold later on. He added that pursuant to a central Listing Agreement for the sale of the
sailboat, he was appointed as agent, placed in possession thereof and entitled to a ten percent
(10%) sales commission. He insisted that nowhere in the agreement was there a stipulation that
berthing and storage fees will be charged during the entire time that the sailboat was in
Watercraft's dockyard. Thus, he claimed to have been surprised when he received five (5)
invoices billing him for the said fees two (2) months after his services were terminated. Fie
pointed out that the complaint was an offshoot of an illegal dismissal case he filed against
Watercraft which had been decided in his favor by the Labor Arbiter.

Meanwhile, finding Watercraft's ex-parte application for writ of preliminary attachment

sufficient in form and in substance pursuant to Section 1 of Rule 57 of the Rules of Court, the
RTC granted the same in the Order dated July 15, 2005, thus:

WHEREFORE, let a Writ of Preliminary Attachment be issued accordingly in favor of the

plaintiff, Watercraft Ventures Corporation conditioned upon the filing of attachment bond in the
amount of Three Million Two Hundred Thirty-One Thousand Five Hundred and Eighty-Nine
and 25/100 Pesos (Php3,231,589.25) and the said writ be served simultaneously with the
summons, copies of the complaint, application for attachment, applicant's affidavit and bond,
and this Order upon the defendant.

SO ORDERED.4
Pursuant to the Order dated July 15, 2005, the Writ of Attachment dated August 3, 2005 and the
Notice of Attachment dated August 5, 2005 were issued, and Wolfe's two vehicles, a gray
Mercedes Benz with plate number XGJ 819 and a maroon Toyota Corolla with plate number
TFW 110, were levied upon.

On August 12, 2005, Wolfe's accounts at the Bank of the Philippine Islands were also garnished.

By virtue of the Notice of Attachment and Levy dated September 5, 2005, a white Dodge pick-up
truck with plate number XXL 111 was also levied upon. However, a certain Jeremy Simpson filed
a Motion for Leave of Court to Intervene, claiming that he is the owner of the truck as shown by
a duly-notarized Deed of Sale executed on August 4, 2005, the Certificate of Registration No.
3628665-1 and the Official Receipt No. 271839105.

On November 8, 2005, Wolfe filed a Motion to Discharge the Writ of Attachment, arguing that
Watercraft failed to show the existence of fraud and that the mere failure to pay or perform an
obligation does not amount to fraud. Me also claimed that he is not a flight risk for the following
reasons: (1) contrary to the claim that his Special Working Visa expired in April 2005, his
Special Subic Working Visa and Alien Certificate of Registration are valid until April 25, 2007
and May 11, 2006, respectively; (2) he and his family have been residing in the Philippines since
1997; (3) he is an existing stockholder and officer of Wolfe Marine Corporation which is
registered with the Securities and Exchange Commission, and a consultant of "Sudeco/Ayala"
projects in Subic, a member of the Multipartite Committee for the new port development in
Subic, and the Subic Chamber of Commerce; and (4) he intends to finish prosecuting his pending
labor case against Watercraft. On even date, Watercraft also filed a Motion for Preliminary
Hearing of its affirmative defenses of forum shopping, litis pendentia, and laches.

In an Order dated March 20, 2006, the RTC denied Wolfe's Motion to Discharge Writ of
Attachment and Motion for Preliminary Hearing for lack of merit.

Wolfe filed a motion for reconsideration, but the RTC also denied it for lack of merit in an Order
dated November 10, 2006. Aggrieved, Wolfe filed a petition for certiorari before the CA.

The CA granted Wolfe's petition in a Decision dated September 2007, the dispositive portion of
which reads:
WHEREFORE, the Order dated March 20, 2006 and the Order dated November 10, 2006 of
respondent Judge are hereby ANNULLED and SET ASIDE. Accordingly, the Writ of
Attachment issued on August 3, 2005, the Notice of Attachment dated August 5, 2005 and the
Notice of Attachment and Levy dated September 5, 2005 are hereby also declared NULL and
VOID, and private respondent is DIRECTED to return to their owners the vehicles that were
attached pursuant to the Writ.

SO ORDERED.5
The CA ruled that the act of issuing the writ of preliminary attachment ex-parte constitutes grave
abuse of discretion on the part of the RTC, thus:
x x x In Cosiquien [v. Court of Appeals], the Supreme Court held that:
"Where a judge issues a fatally defective writ of preliminary attachment based on an affidavit
which failed to allege the requisites prescribed for the issuance of the writ of preliminary
attachment, renders the writ of preliminary attachment issued against the property of the
defendant fatally defective. The judge issuing it is deemed to have acted in excess of
jurisdiction. In fact, the defect cannot even be cured by amendment. Since the attachment is a
harsh and rigorous remedy which exposed the debtor to humiliation and annoyance, the rule
authorizing its issuance must be strictly construed in favor of defendant. It is the duty of the
court before issuing the Avrit to ensure that all the requisites of the law have been complied
with. Otherwise, a judge acquires no jurisdiction to issue the writ." (emphasis supplied)
In the instant case, the Affidavit of Merit executed by Rosario E. Raoa, Watercraft's Vice-
President, failed to show fraudulent intent on the part of Wolfe to defraud the company. It merely
enumerated the circumstances tending to show the alleged possibility of Wolfe's flight from the
country. And upon Wolfe's filing of the Motion to Discharge the Writ, what the respondent Judge
should have done was to determine, through a hearing, whether the allegations of fraud were
true. As further held in Cosiquien:
"When a judge issues a writ of preliminary attachment ex-parte, it is incumbent on him, upon
proper challenge of his order to determine whether or not the same was improvidently issued.
If the party against whom the writ is prayed for squarely controverts the allegation of fraud, it
is incumbent on the applicant to prove his allegation. The burden of proving that there indeed
was fraud lies with the party making such allegation. This finds support in Section 1, Rule 131
Rules of Court. In this jurisdiction, fraud is never presumed." (Emphasis supplied)
As correctly noted by Wolfe, although Sec. 1 of Rule 57 allows a party to invoke fraud as a
ground for the issuance of a writ of attachment, the Rules require that in all averments of fraud,
the circumstances constituting fraud must be stated with particularity, pursuant to Rule 8,
Section 5. The Complaint merely stated, in paragraph 23 thereof that "For failing to pay the use
[of] facilities and services in the form of boat storage fees, the Defendant is clearly guilty of
fraud which entitles the Plaintiff to a Writ of Preliminary Attachment upon the property of the
Defendant as security for the satisfaction of any judgment herein." This allegation does not
constitute fraud as contemplated by law, fraud being the "generic term embracing all
multifarious means which human ingenuity can devise, and which are resorted to by one
individual to secure an advantage over another by false suggestions or by suppression of truth
and includes all surprise, trick, cunning, dissembling and any unfair way by which another is
cheated." In this instance, Wolfe's mere failure to pay the boat storage fees does not necessarily
amount to fraud, absent any showing that such failure was due to [insidious] machinations and
intent on his part to defraud Watercraft of the amount due it.

As to the allegation that Wolfe is a flight risk, thereby warranting the issuance of the writ, the
same lacks merit. The mere fact that Wolfe is a British national does not automatically mean that
he would leave the country at will. As Wolfe avers, he and his family had been staying in the
Philippines since 1997, with his daughters studying at a local school. He also claims to be an
existing stockholder and officer of Wolfe Marine Corporation, a SEC-registered corporation, as
well as a consultant of projects in the Subic Area, a member of the Multipartite Committee for
the new port development in Subic, and a member of the Subic Chamber of Commerce. More
importantly, Wolfe has a pending labor case against Watercraft - a fact which the company
glaringly failed to mention in its complaint - which Wolfe claims to want to prosecute until its
very end. The said circumstances, as well as the existence of said labor case where Wolfe stands
not only to be vindicated for his alleged illegal dismissal, but also to receive recompense, should
have convinced the trial court that Wolfe would not want to leave the country at will just because
a suit for the collection of the alleged unpaid boat storage fees has been filed against him by
Watercraft.

Neither should the fact that Wolfe's Special Working Visa expired in April 2005 lead
automatically to the conclusion that he would leave the country. It is worth noting that all visas
issued by the government to foreigners staying in the Philippines have expiration periods. These
visas, however, may be renewed, subject to the requirements of the law. In Wolfe's case, he
indeed renewed his visa, as shown by Special Working Visa No. 05-WV-0124P issued by the
Subic Bay Metropolitan Authority Visa Processing Office on April 25, 2005, and with validity of
two (2) years therefrom. Moreover, his Alien Certificate of Registration was valid up to May 11,
2006.

Based on the foregoing, it is therefore clear that the writ was improvidently issued. It is well to
emphasize that "[T]he rules on the issuance of a writ of attachment must be construed strictly
against the applicants. This stringency is required because the remedy of attachment is harsh,
extraordinary and summary in nature. If all the requisites for the granting of the writ are not
present, then the court which issues it acts in excess of its jurisdiction. Thus, in this case,
Watercraft failed to meet all the requisites for the issuance of the writ. Thus, in granting the
same, respondent Judge acted with grave abuse of discretion.6
In a Resolution dated January 24, 2008, the CA denied Watercraft's motion for reconsideration
of its Decision, there being no new or significant issues raised in the motion.
Dissatisfied with the CA Decision and Resolution, Watercraft filed this petition for review on
certiorari, raising these two issues:
I.

WHETHER THE EX-PARTE ISSUANCE OF THE PRELIMINARY ATTACHMENT BY THE

TRIAL COURT IN FAVOR OF THE PETITIONER IS VALID.

II.

WHETHER THE ALLEGATIONS IN THE AFFIDAVIT OF MERIT CONCERNING FRAUD

ARE SUFFICIENT TO WARRANT THE ISSUANCE OF A PRELIMINARY WRIT OF
ATTACHMENT BY THE TRIAL COURT IN FAVOR OF THE PETITIONER.7
Watercraft argues that the CA erred in holding that the RTC committed grave abuse of
discretion in issuing the writ of preliminary attachment, and in finding that the affidavit of merit
only enumerated circumstances tending to show the possibility of Wolfe's flight from the country,
but failed to show fraudulent intent on his part to defraud the company.

Stressing that its application for such writ was anchored on two (2) grounds under Section 1, 8
Rule 57, Watercraft insists that, contrary to the CA ruling, its affidavit of merit sufficiently
averred with particularity the circumstances constituting fraud as a common element of said
grounds.

Watercraft points out that its affidavit of merit shows that from 1997, soon after Wolfe's
employment as Shipyard Manager, up to 2002, when his employment was terminated, or for a
period of five (5) years, not once did he pay the cost for the use of the company's boat storage
facilities, despite knowledge of obligation and obvious ability to pay by reason of his position.

Watercraft adds that its affidavit clearly stated that Wolfe, in an attempt to avoid settling of his
outstanding obligations to the company, signed a Boat Pull-Out Clearance where he merely
acknowledged but did not pay Sixteen Thousand Three Hundred and Twenty-Four and 82/100
US Dollars (US$16,324.82) representing unpaid boat storage fees for the period commencing
June 1997 to June 2002. It avers that the execution of such clearance enabled Wolfe to pull out
his boat from the company storage facilities without payment of storage fees.

Watercraft also faults the CA in finding no merit in its allegation that Wolfe is a flight risk. It
avers that he was supposed to stay and work in the country for a limited period, and will
eventually leave; that despite the fact that his wife and children reside in the country, he can still
leave with them anytime; and that his work in the country will not prevent him from leaving,
thereby defeating the purpose of the action, especially since he had denied responsibility for his
outstanding obligations. It submits that the CA overlooked paragraph 28 of its Complaint which
alleged that "[i]n support of the foregoing allegations and the prayer for the issuance of a Writ
of Preliminary Attachment in the instant case, the Plaintiff has attached hereto the Affidavit of
the Vice-President of the Plaintiff, MS. ROSARIO E. RANOA x x x."9

Watercraft asserts that it has sufficiently complied with the only requisites for the issuance of the
writ of preliminary attachment under Section 3, Rule 57 of the Rules of Court, i.e., affidavit of
merit and bond of the applicant. It posits that contrary to the CA ruling, there is no requirement
that evidence must first be offered before a court can grant such writ on the basis of Section 1 (d)
of Rule 57, and that the rules only require an affidavit showing that the case is one of those
mentioned in Section 1, Rule 57. It notes that although a party is entitled to oppose an
application for the issuance of the writ or to move for the discharge thereof by controverting the
allegations of fraud, such rule does not apply when the same allegations constituting fraud are
the very facts disputed in the main action, as in this case.

Watercraft also points out the inconsistent stance of Wolfe with regard to the ownership and
possession of the sailboat. Contrary to Wolfe's Answer that the purchase of the sailboat was
made pursuant to a three (3)-way partnership agreement between him and its General Manager
and Executive Vice-President, Barry Bailey, and its President, Ricky Sandoval, Watercraft
claims that he made a complete turnaround and exhibited acts of sole-ownership by signing the
Boat Pull-Out Clearance in order to retrieve the sailboat. It argues that common sense and logic
would dictate that he should have invoked the existence of the partnership to answer the demand
for payment of the storage fees.

Watercraft contends that in order to pre-empt whatever action it may decide to take with respect
to the sailboat in relation to his liabilities, Wolfe accomplished in no time the clearance that
paved the way for its removal from the company's premises without paying his outstanding
obligations. It claims that such act reveals a fraudulent intent to use the company storage
facilities without payment of storage fees, and constitutes unjust enrichment.

The petition lacks merit.

A writ of preliminary attachment is defined as a provisional remedy issued upon order of the
court where an action is pending to be levied upon the property or properties of the defendant
therein, the same to be held thereafter by the sheriff as security for the satisfaction of whatever
judgment that might be secured in the said action by the attaching creditor against the
defendant.10 However, it should be resorted to only when necessary and as a last remedy
because it exposes the debtor to humiliation and annoyance.11 It must be granted only on
concrete and specific grounds and not merely on general averments quoting the words of the
rules.12 Since attachment is harsh, extraordinary, and summary in nature, 13 the rules on the
application of a writ of attachment must be strictly construed in favor of the defendant.

For the issuance of an ex-parte issuance of the preliminary attachment to be valid, an affidavit of
merit and an applicant's bond must be filed with the court 14 in which the action is pending. Such
bond executed to the adverse party in the amount fixed by the court is subject to the conditions
that the applicant will pay: (1) all costs which may be adjudged to the adverse party; and (2) all
damages which such party may sustain by reason of the attachment, if the court shall finally
adjudge that the applicant was not entitled thereto.15 As to the requisite affidavit of merit,
Section 3,16 Rule 57 of the Rules of Court states that an order of attachment shall be granted
only when it appears in the affidavit of the applicant, or of some other person who personally
knows the facts:
that a sufficient cause of action exists;
ChanRoblesVirtualawlibrary

that the case is one of those mentioned in Section 1 17 hereof; ChanRoblesVirtualawlibrary

that there is no other sufficient security for the claim sought to be enforced by the action; and

that the amount due to the applicant, or the value of the property the possession of which he is
entitled to recover, is as much as the sum for which the order is granted above all legal
counterclaims.
The mere filing of an affidavit reciting the facts required by Section 3, Rule 57, however, is not
enough to compel the judge to grant the writ of preliminary attachment. Whether or not the
affidavit sufficiently established facts therein stated is a question to be determined by the court in
the exercise of its discretion.18 "The sufficiency or insufficiency of an affidavit depends upon the
amount of credit given it by the judge, and its acceptance or rejection, upon his sound
discretion."19 Thus, in reviewing the conflicting findings of the CA and the RTC on the pivotal
issue of whether or not Watercraft's affidavit of merit sufficiently established facts which
constitute as grounds upon which attachment may be issued under Section 1 (a) 20 and (d),21 Rule
57, the Court will examine the Affidavit of Preliminary Attachment 22 of Rosario E. Raoa, its
Vice-President, which reiterated the following allegations in its complaint to substantiate the
application for a writ of preliminary attachment:
xxxx

4. Sometime in June 1997, the Defendant was hired as Watercraft's Shipyard Manager.

5. Soon thereafter, the Defendant placed his sailboat, the Knotty Gull, within the boat storage
facilities of Watercraft for purposes of storage and safekeeping.

6. Despite having been employed by Watercraft, the Defendant was not exempted from paying
Watercraft boat storage fees for the use of the said storage facilities.

7. By virtue of his then position and employment with Watercraft, the Defendant was very much
knowledgeable of the foregoing fact.

8. All throughout his employment with Watercraft, the Defendant used the boat storage facilities
of Watercraft for his Knotty Gull.

9. However, all throughout the said period of his employment, the Defendant never paid the boat
storage fees in favor of the Plaintiff.

10. The Defendant's contract of employment with Watercraft was terminated on 07 March 2002.

11. [Sometime] thereafter, that is, in or about June 2002, the Defendant pulled out the Knotty
Gull from the boat storage facilities of Watercraft.

12. Instead of settling in full his outstanding obligations concerning unpaid storage fees before
pulling our the Knotty Gull, the Defendant signed a Boat Pull-Out Clearance dated 29 June
2002 wherein he merely acknowledged the then outstanding balance of Sixteen Thousand Three
Hundred and Twenty-four and 82/100 US Dollars (US$16,324.82), representing unpaid boat
storage fees for the period commencing June 1997 to June 2002, that he owed Watercraft.
13. By reason of Defendant's mere accomplishment of the said Boat Pull-Out Clearance with
acknowledgment of his outstanding obligation to Watercraft in unpaid boat storage fees, Mr.
Franz Urbanek, then the Shipyard Manager who replaced the Defendant, contrary to company
policy, rules and regulations, permitted the latter to physically pull out his boat from the storage
facilities of the Plaintiff without paying any portion of his outstanding obligation in storage fees.

14. Several demands were then made upon the Defendant for him to settle his outstanding
obligations to the Plaintiff in unpaid storage fees but the same went unheeded.

15. As of 02 April 2005, the outstanding obligation of the Defendant to the Plaintiff in unpaid
boat storage fees stands at Three Million Two Hundred Thirty-One Thousand Five Hundred and
Eighty-Nine and 25/100 Pesos (Php3,231,589.25) inclusive of interest charges.

16. For failing to pay for the use [of] facilities and servicesin the form of boat storage
facilitiesduly enjoyed by him and for failing and refusing to fulfill his promise to pay for the
said boat storage fees, the Defendant is clearly guilty of fraud which entitles the Plaintiff to a
Writ of Preliminary Attachment upon the property of the Defendant as security for the
satisfaction of any judgment in its favor in accordance with the provisions of Paragraph (d),
Section 1, Rule 57 of the Rules of Court.

17. The instant case clearly falls under the said provision of law.

18. Furthermore, lawful factual and legal grounds exist which show that the Defendant may
have departed or is about to depart the country to defraud his creditors thus rendering it
imperative that a Writ of Preliminary Attachment be issued in favor of the Plaintiff in the instant
case.

19. The possibility of flight on the part of the Defendant is heightened by the existence of the
following circumstances:
a. The Special Working Visa issued in favor of the Defendant expired in April 2005; ChanRoblesVirtualawlibrary

b. The Defendant is a British national who may easily leave the country at will; ChanRoblesVirtualawlibrary

c. The Defendant has no real properties and visible, permanent business or employment in the
Philippines; and

e. The house last known to have been occupied by the Defendant is merely being rented by him.
20. All told, the Defendant is a very serious flight risk which fact will certainly render for naught
the capacity of the Plaintiff to recover in the instant case. 23
After a careful perusal of the foregoing; allegations, the Court agrees with the CA that
Watercraft failed to state with particularity the circumstances constituting fraud, as required by
Section 5,24 Rule 8 of the Rules of Court, and that Wolfe's mere failure to pay the boat storage
fees does not necessarily amount to fraud, absent any showing that such failure was due to
insidious machinations and intent on his part to defraud Watercraft of the amount due it.
In Liberty Insurance Corporation v. Court of Appeals,25 the Court explained that to constitute a
ground for attachment in Section 1(d), Rule 57 of the Rules of Court, it must be shown that the
debtor in contracting the debt or incurring the obligation intended to defraud the creditor. A
debt is fraudulently contracted if at the time of contracting it, the debtor has a preconceived plan
or intention not to pay. "The fraud must relate to the execution of the agreement and must have
been the reason which induced the other party into giving consent which he would not have
otherwise given."26

Fraudulent intent is not a physical entity, but a condition of the mind beyond the reach of the
senses, usually kept secret, very unlikely to be confessed, and therefore, can only be proved by
unguarded expressions, conduct and circumstances.27 Thus, the applicant for a writ of
preliminary attachment must sufficiently show the factual circumstances of the alleged fraud
because fraudulent intent cannot be inferred from the debtor's mere non-payment of the debt or
failure to comply with his obligation.28 The particulars of such circumstances necessarily include
the time, persons, places and specific acts of fraud committed. 29 An affidavit which does not
contain concrete and specific grounds is inadequate to sustain the issuance of such writ. In fact,
mere general averments render the writ defective and the court that ordered its issuance acted
with grave abuse of discretion amounting to excess of jurisdiction. 30

In this case, Watercraft's Affidavit of Preliminary Attachment does not contain specific
allegations of other factual circumstances to show that Wolfe, at the time of contracting the
obligation, had a preconceived plan or intention not to pay. Neither can it be inferred from such
affidavit the particulars of why he was guilty of fraud in the performance of such obligation. To
be specific, Watercraft's following allegation is unsupported by any particular averment of
circumstances that will show why or how such inference or conclusion was arrived at, to wit:
"16. For failing to pay for the use [of] facilities and services - in the form of boat storage
facilities - duly enjoyed by him and for failing and refusing to fulfill his promise to pay for the
said boat storage fees, the Defendant is clearly guilty of fraud x x x." 31 It is not an allegation of
essential facts constituting Watercraft's causes of action, but a mere conclusion of law.

With respect to Section 1 (a),32 Rule 57, the other ground invoked by Watercraft for the issuance
of the writ of preliminary attachment, the Court finds no compelling reason to depart from the
CA's exhaustive ruling to the effect that such writ is unnecessary because Wolfe is not a flight
risk, thus:
As to the allegation that Wolfe is a (light risk, thereby warranting the issuance of the writ, the
same lacks merit. The mere fact that Wolfe is a British national does not automatically mean that
he would leave the country at will. As Wolfe avers, he and his family had been staying in the
Philippines since 1997, with his daughters studying at a local school. He also claims to be an
existing stockholder and officer of Wolfe Marine Corporation, a SEC - registered corporation,
as well as a consultant of projects in the Subic Area, a member of the Multipartite Committee for
the new port development in Subic, and a member of the Subic Chamber of Commerce. More
importantly, Wolfe has a pending labor case against Watercraft - a fact which the company
glaringly failed to mention in its complaint - which Wolfe claims to want to prosecute until its
very end. The said circumstances, as well as the existence of said labor case where Wolfe stands
not only to be vindicated for his alleged illegal dismissal, but also to receive recompense, should
have convinced the trial court that Wolfe would not want to leave the country at will just because
a suit for the collection of the alleged unpaid boat storage fees has been filed against him by
Watercraft.

Neither should the fact that Wolfe's Special Working Visa expired in April 2005 lead
automatically to the conclusion that he would leave the country. It is worth noting that all visas
issued by the government to foreigner staying in the Philippines have expiration periods. These
visas, however, may be renewed, subject to the requirements of the law. In Wolfe's case, he
indeed renewed his visa, as shown by Special Working Visa No. 05-WV-0124P issued by the
Subic Bay Metropolitan Authority Visa Processing Office on April 25, 2005, and with validity of
two (2) years therefrom. Moreover, his Alien Certificate of Registration was valid up to May 11,
2006.33
Meanwhile, Watercraft's reliance on Chuidian v. Sandiganbayan34 is displaced. It is well settled
that:
x x x when the preliminary attachment is issued upon a ground which is at the same time the
applicant's cause of action; e.g., "an action for money or property embezzled or fraudulently
misapplied or converted to his own use by a public officer, or an officer of a corporation, or an
attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other
person in a fiduciary capacity, or for a willful violation of duty," or "an action against a party
who has been guilty of fraud in contracting the debt or incurring the obligation upon which the
action is brought," the defendant is not allowed to file a motion to dissolve the attachment
under Section 13 of Rule 57 by offering to show the falsity of the factual averments in the
plaintiffs application and affidavits on which the writ was based - and consequently that the
writ based thereon had been improperly or irregularly issued - the reason being that the
hearing on such a motion for dissolution of the writ would be tantamount to a trial of the
merits of the action. In other words, the merits of the action would be ventilated at a mere
hearing of a motion, instead of at the regular trial.35

Be that as it may, the foregoing rule is not applicable in this case because when Wolfe filed a
motion to dissolve the writ of preliminary attachment, he did not offer to show the falsity of the
factual averments in Watercraft's application and affidavit on which the writ was based. Instead,
he sought the discharge of the writ on the ground that Watercraft failed to particularly allege any
circumstance amounting to fraud. No trial on the merits of the action at a mere hearing of such
motion will be had since only the sufficiency of the factual averments in the application and
affidavit of merit will be examined in order to find out whether or not Wolfe was guilty of fraud
in contracting the debt or incurring the obligation upon which the action is brought, or in the
performance thereof.

Furthermore, the other ground upon which the writ of preliminary attachment was issued by the
RTC is not at the same time the applicant's cause of action. Assuming arguendo that the RTC
was correct in issuing such writ on the ground that Watercraft's complaint involves an action for
the recovery of a specified amount of money or damages against a party, like Wolfe, who is
about to depart from the Philippines with intent to defraud his creditors, the Court stresses that
the circumstances36 cited in support thereof are merely allegations in support of its application
for such writ.37 Such circumstances, however, are neither the core of Watercraft's complaint for
collection of sum of money and damages, nor one of its three (3) causes of action therein. 38
All told, the CA correctly ruled that Watercraft failed to meet one of the requisites for the
issuance of a writ of preliminary attachment, i.e., that the case is one of those mentioned in
Section 1 of Rule 57, and that the RTC gravely abused its discretion in improvidently issuing
such writ. Watercraft failed to particularly state in its affidavit of merit the circumstances
constituting intent to defraud creditors on the part of Wolfe in contracting or in the performance
of his purported obligation to pay boat storage fees, as well as to establish that he is a flight risk.
Indeed, if all the requisites for granting such writ are not present, then the court which issues it
acts in excess of its jurisdiction.39 chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision
dated September 27, 2007 and its Resolution dated January 24, 2008 in CA-G.R. SP No. 97804,
are AFFIRMED.

SO ORDERED. chanroblesvirtuallawlibrary

Velasco, Jr., (Chairperson), Villarama, Jr., Perez,* and Jardeleza, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-50378 September 30, 1982

FILINVEST CREDIT CORPORATION, petitioner,

vs.
THE HONORABLE JUDGE BENJAMIN RELOVA (In his capacity as Presiding
Judge of the Court of First Instance of Manila, Branch XI) and ERNESTO
SALAZAR, respondents.

Labaquis, Loyola & Angara Law Offices for petitioner.

Cecilio D. Ignacio for respondents.

GUERRERO, J.:

This is a special civil action for certiorari, with prayer for restraining order or preliminary
injunction, filed by petitioner Filinvest Credit Corporation seeking to annul the Orders
issued by respondent Judge dated February 2, 1979 and April 4, 1979 in Civil Case No.
109900.

As shown by the records, the antecedents of the instant Petition are as follows:
On August 2, 1977, Filinvest Credit Corporation (hereinafter referred to as FILINVEST)
filed a complaint in the lower court against defendants Rallye Motor Co., Inc.
(hereinafter referred to as RALLYE) and Emesto Salazar for the collection of a sum of
money with damages and preliminary writ of attachment. From the allegations of the
complaint, 1 it appears that in payment of a motor vehicle described as: "One (1) Unit MAZDA DIESEL
SCHOOL BUS, Model: E4100, Serial No.: EXC43P-02356, Motor No.: Y-13676," Salazar executed a
promissory note dated May 5, 1977 in favor of RALLYE for the amount of P99,828.00. To secure the
note, Salazar also executed in favor of RALLYE a deed of chattel mortgage over the above described
motor vehicle. On May 7, 1977, RALLYE, for valuable consideration, assigned all its rights, title and
interest to the aforementioned note and mortgage to FILINVEST. Thereafter, FILINVEST came to know
that RALLYE had not delivered the motor vehicle subject of the chattel mortgage to Salazar, "as the said
vehicle (had) been the subject of a sales agreement between the codefendants." Salazar defaulted in
complying with the terms and conditions of the aforesaid promissory note and chattel mortgage. RALLYE,
as assignor who guaranteed the validity of the obligation, also failed and refused to pay FILINVEST
despite demand. According to FILINVEST, the defendants intentionally, fraudulently and with malice
concealed from it the fact that there was no vehicle delivered under the documents negotiated and
assigned to it, otherwise, it would not have accepted the negotiation and assignment of the rights and
interest covered by the promissory note and chattel mortgage. Praying for a writ of preliminary
attachment, FILINVEST submitted with its complaint the affidavit of one Gil Mananghaya, pertinent
portions of which read thus:

That he is the Collection Manager, Automotive Division of Filinvest Credit Corporation;

That in the performance of his duties, he came to know of the account of Ernesto
Salazar, which is covered by a Promissory Note and secured by a Chattel Mortgage,
which documents together with all the rights and interest thereto were assigned by Rallye
Motor Co., Inc.;

That for failure to pay a stipulated installment, and the fact that the principal debtor,
Ernesto Salazar, and the assignor, Rallye Motor Co., Inc. concealed the fact that there
was really no motor vehicle mortgaged under the terms of the Promissory Note and the
Chattel Mortgage, the entire amount of the obligation stated in the Promissory Note
becomes due and demandable, which Ernesto Salazar and Rallye Motor Co., Inc. failed
and refused to pay, so much so that a sufficient cause of action really exists for Filinvest
Credit Corporation to institute the corresponding complaint against said person and
entity;

That the case is one of those mentioned in Section 1, Rule 57 of his Rules of Court,
particularly an action against parties who have been guilty of a fraud in contracting the
debt or incurring the obligation upon which the action is brought;

That there is no other sufficient security for the claim sought to be enforced by the action,
and that the amount due to the applicant Filinvest Credit Corporation is as much as the
sum for which the order is granted above all legal counterclaims;

That this affidavit is executed for the purpose of securing a writ of attachment from the
court. 2

The specific provision adverted to in the above Affidavit is Section 1(d) of Rule 57 which includes "an
action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon
which the action is brought, or in concealing or disposing of the property for the taking, detention or
conversion of which the action is brought" as one of the cases in which a "plaintiff or any proper party
may, at the commencement of the action or at any time thereafter, have the property of the adverse party
attached as security for the satisfaction of any judgment that may be recovered."

Judge Jorge R. Coquia (now Justice of the Court of Appeals), then presiding Judge of the lower court,
granted the prayer for a writ of attachment in an Order dated August 17, 1977 stating that:

Finding the complaint sufficient in form and substance, and in view of the sworn
statement of Gil Mananghaya, Collection Manager of the plaintiff that defendants have
committed fraud in securing the obligation and are now avoiding payment of the same, let
a writ of attachment issue upon the plaintiff's filing of a bond in the sum of P97,000.00.

3
In the meantime, let summons issue on the defendants.

More than a year later, in an Urgent Motion dated December 11, 1978, 4 defendant Salazar prayed that
the writ of preliminary attachment issued ex parte and implemented solely against his property be recalled
and/or quashed. He argued that when he signed the promissory note and chattel mortgage on May 5,
1977 in favor of RALLYE, FILINVEST was hot vet his creditor or obligee, therefore, he could not be said
to have committed fraud when he contracted the obligation on May 5, 1977. Salazar added that as the
motor vehicle which was the object of the chattel mortgage and the consideration for the promissory note
had admittedly not been delivered to him by RALLYE, his repudiation of the loan and mortgage is more
justifiable.

FILINVEST filed an Opposition, but on February 2, 1979, the court a quo, this time presided over by
herein respondent Judge, ordered the dissolution and setting aside of the writ of preliminary attachment
issued on August 17, 1977 and the return to defendant Salazar of all his properties attached by the
Sheriff by virtue of the said writ. In this Order, respondent Judge explained that:

When the incident was called for hearing, the Court announced that, as a matter of
procedure, when a motion to quash a writ of preliminary attachment is filed, it is
incumbent upon the plaintiff to prove the truth of the allegations which were the basis for
the issuance of said writ. In this hearing, counsel for the plaintiff manifested that he was
not going to present evidence in support of the allegation of fraud. He maintained that it
should be the defendant who should prove the truth of his allegation in the motion to
dissolve the said writ. The Court disagrees. 5

FILINVEST filed a Motion for Reconsideration of the above Order, and was subsequently allowed to
adduce evidence to prove that Salazar committed fraud as alleged in the affidavit of Gil Mananghaya
earlier quoted. This notwithstanding, respondent Judge denied the Motion in an Order dated April 4, 1979
reasoning thus:

The plaintiff's evidence show that the defendant Rallye Motor assigned to the former
defendant Salazar's promissory note and chattel mortgage by virtue of which plaintiff
discounted the note. Defendant Salazar refused to pay the plaintiff for the reason that
Rallye Motor has not delivered to Salazar the motor vehicle which he bought from Rallye.
It is the position of plaintiff that defendant Salazar was in conspiracy with Rallye Motor in
defrauding plaintiff.

Ernesto Salazar, on his part complained that he was himself defrauded, because while
he signed a promissory note and chattel mortgage over the motor vehicle which he
bought from Rallye Motor, Rallye Motor did not deliver to him the personal property he
bought; that the address and existence of Rallye Motor can no longer be found.

While it is true that the plaintiff may have been defrauded in this transaction, it having
paid Rallye Motor the amount of the promissory note, there is no evidence that Ernesto
 Salazar had connived or in any way conspired with Rallye Motor in the assignment of the
promissory note to the plaintiff, because of which the plaintiff paid Rallye Motor the
amount of the promissory note. Defendant Ernesto Salazar was himself a victim of fraud.
Rallye Motor was the only party which committed it. 6

From the above order denying reconsideration and ordering the sheriff to return to Salazar the personal
property attached by virtue of the writ of preliminary attachment issued on August 17, 1977, FILINVEST
filed the instant Petition on April 19, 1979. On July 16, 1979, petitioner FILINVEST also filed an Urgent
Petition for Restraining Order 7 alleging, among others, that pending this certiorari proceeding in this
court, private respondent Salazar filed a Motion for Contempt of Court in the court below directed against
FILINVEST and four other persons allegedly for their failure to obey the Order of respondent Judge dated
April 4, 1979, which Order is the subject of this Petition. On July 23, 1979, this Court issued a temporary
restraining order "enjoining respondent Judge or any person or persons acting in his behalf from hearing
private respondent's motion for contempt in Civil Case No. 109900, entitled, 'Filinvest Credit Corporation,
Plaintiff, versus The Rallye Motor Co., Inc., et al., Defendants' of the Court of First Instance of Manila,
Branch XI. " 8

Petitioner FILINVEST in its MEMORANDUM contends that respondent Judge erred:

(1) In dissolving the writ of preliminary attachment already enforced by the Sheriff of
Manila without Salazar's posting a counter-replevin bond as required by Rule 57, Section
12; and

(2) In finding that there was no fraud on the part of Salazar, despite evidence in
abundance to show the fraud perpetrated by Salazar at the very inception of the contract.

It is urged in petitioner's first assignment of error that the writ of preliminary attachment having been
validly and properly issued by the lower court on August 17, 1977, the same may only be dissolved,
quashed or recalled by the posting of a counter-replevin bond under Section 12, Rule 57 of the Revised
Rules of Court which provides that:

Section 12. Discharge of Attachment upon, gluing counterbond.At any time after an
order of attachment has been granted, the party whose property has been attached, or
the person appearing on his behalf, may, upon reasonable notice to the applicant, apply
to the judge who granted the order, or to the judge of the court, in which the action is
pending, for an order discharging the attachment wholly or in part on the security given.
The judge shall, after hearing, order the discharge of the attachment if a cash deposit is
made, or a counter-bond executed to the attaching creditor is filed, on behalf of the
adverse party, with the clerk or judge of the court where the application is made, in an
amount equal to the value of the property attached as determined by the judge, to secure
the payment of any judgment that the attaching creditor may recover in the action. ...

Citing the above provision, petitioner contends that the court below should not have issued the Orders
dated February 2, 1979 and April 4, 1979 for failure of private respondent Salazar to make a cash deposit
or to file a counter-bond.

On the other hand, private respondent counters that the subject writ of preliminary attachment was
improperly or irregularly issued in the first place, in that it was issued ex parte without notice to him and
without hearing.

We do not agree with the contention of private respondent. Nothing in the Rules of Court makes notice
and hearing indispensable and mandatory requisites for the issuance of a writ of attachment. The
statement in the case of Blue Green Waters, Inc. vs. Hon. Sundiam and Tan 9 cited by private
respondent, to the effect that the order of attachment issued without notice to therein petitioner Blue
Green Waters, Inc. and without giving it a chance to prove that it was not fraudulently disposing of its
properties is irregular, gives the wrong implication. As clarified in the separate opinion of Mr. Justice
Claudio Teehankee in the same cited case, 10 a writ of attachment may be issued ex parte. Sections 3
and 4, Rule 57, merely require that an applicant for an order of attachment file an affidavit and a bond: the
affidavit to be executed by the applicant himself or some other person who personally knows the facts
and to show that (1) there is a sufficient cause of action, (2) the case is one of those mentioned in Section
1 of Rule 57, (3) there is no other sufficient security for the claim sought to be enforced, and (4) the
amount claimed in the action is as much as the sum for which the order is granted above all legal
counterclaims; and the bond to be "executed to the adverse party in an amount fixed by the judge, not
exceeding the applicant's claim, conditioned that the latter will pay all the costs which may be adjudged to
the adverse party and all damages which he may sustain by reason of the attachment, if the court shall
finally adjudge that the applicant was not entitled thereto."

We agree, however, with private respondents contention that a writ of attachment may be discharged
without the necessity of filing the cash deposit or counter-bond required by Section 12, Rule 57, cited by
petitioner. The following provision of the same Rule allows it:

Sec. 13. Discharge of attachment for improper or irregular issuance.The party whose
property has been attached may also, at any time either before or after the release of the
attached property, or before any attachment shall have been actually levied, upon
reasonable notice to the attaching creditor, apply to the judge who granted the order, or
to the judge of the court in which the action is pending, for an order to discharge the
attachment on the ground that the same was improperly or irregularly issued. If the
motion be made on affidavits on the part of the party whose property has been attached,
but not otherwise, the attaching creditor may oppose the same by counter-affidavits or
other evidence in addition to that on which the attachment was made. After hearing, the
judge shall order the discharge of the attachment if it appears that it was improperly or
irregularly issued and the defect is not cured forthwith."(Emphasis supplied)

The foregoing provision grants an aggrieved party relief from baseless and unjustifiable attachments
procured, among others, upon false allegations, without having to file any cash deposit or counter-bond.
In the instant case the order of attachment was granted upon the allegation of petitioner, as plaintiff in the
court below, that private respondent RALLYE, the defendants, had committed "fraud in contracting the
debt or incurring the obligation upon which the action is brought," covered by Section i(d), Rule 57, earlier
quoted. Subsequent to the issuance of the attachment order on August 17, 1977, private respondent filed
in the lower court an "Urgent Motion for the Recall and Quashal of the Writ of Preliminary Attachment on
(his property)" dated December 11, 1978 11 precisely upon the assertion that there was "absolutely no
fraud on (his) part" in contracting the obligation sued upon by petitioner. Private respondent was in effect
claiming that petitioner's allegation of fraud was false, that hence there was no ground for attachment,
and that therefore the attachment order was "improperly or irregularly issued." This Court was held that
"(i)f the grounds upon which the attachment was issued were not true ..., the defendant has his remedy
by immediately presenting a motion for the dissolution of the same. 12 We find that private respondent's
abovementioned Urgent Motion was filed under option 13, Rule 57.

The last sentence of the said provision, however, indicates that a hearing must be conducted by the judge
for the purpose of determining whether or not there reality was a defect in the issuance of the attachment.
The question is: At this hearing, on whom does the burden of proof lie? Under the circumstances of the
present case, We sustain the ruling of the court a quo in its questioned Order dated February 2, 1979 that
it should be the plaintiff (attaching creditor), who should prove his allegation of fraud. This pronouncement
finds support in the first sentence of Section 1, Rule 131, which states that: "Each party must prove his
own affirmative allegations." The last part of the same provision also provides that: "The burden of proof
lies on the party who would be defeated if no evidence were given on either side." It must be brne in
mind that in this jurisdiction, fraud is never presumed. FRAUS EST IdIOS ET NON PRAESUMENDA. 13
Indeed, private transactions are presumed to have been fair and regular. 14 Likewise, written contracts
such as the documents executed by the parties in the instant case, are presumed to have been entered
into for a sufficient consideration. 15

In a similar case of Villongco, et al., vs. Hon. Panlilio, et al., 16 a writ of preliminary attachment was issued
ex parte in a case for damages on the strength of the affidavit of therein petitioners to the effect that
therein respondents had concealed, removed or disposed of their properties, credits or accounts
collectible to defraud their creditors. Subsequently, the lower court dissolved the writ of attachment. This
was questioned in a certiorari proceeding wherein this Court held, inter alia, that:

The affidavit supporting the petition for the issuance of the preliminary attachment may
have been sufficient to justify the issuance of the preliminary writ, but it cannot be
considered as proof of the allegations contained in the affidavit. The reason is obvious.
The allegations are mere conclusions of law, not statement of facts. No acts of the
defendants are ever mentioned in the affidavit to show or prove the supposed
concealment to defraud creditors. Said allegations are affirmative allegations, which
plaintiffs had the obligation to prove ... 17

It appears from the records that both herein private parties did in fact adduce evidence to support their
respective claims. 18 Attached to the instant Petition as its Annex "H" 19 is a Memorandum filed by herein
petitioner FILINVEST in the court below on March 20, 1979. After private respondent filed his Comment
to the Petition, 20 petitioner filed a Reply 21 ,attaching another copy of the aforesaid Memorandum as
Annex "A" 22 In this case on February 28, 1979 and March 1, 1979, the plaintiff (FILINVEST) presented in
evidence documentary exhibits "marked Exhibit A, A- I, B, B-1, B-2, B-3, B-4, C, C-1, D, E, F, G and G-1.
The Memorandum goes on to state that FILINVEST presented as its witness defendant Salazar himself
who testified that he signed Exhibits A, B, C, D, E and G; that he is a holder of a master's degree in
Business Administration and is himself a very careful and prudent person; that he does not sign post-
dated documents; that he does not sign contracts which do not reflect the truth or which are irregular on
their face, that he intended to purchase a school bus from Rallye Motors Co., Inc. from whom he had
already acquired one unit; that he had been dealing with Abel Sahagun, manager of RALLYE, whom he
had known for a long time that he intended to purchase the school bus on installment basis so he applied
for financing with the FILINVEST; that he knew his application was approved; that with his experience as
a business executive, he knew that under a financing arrangement, upon approval of his application,
when he signed Exhibits A, B, C, D, E and G, the financing company (FILINVEST) would release the
proceeds of the loan to RALLYE and that he would be obligated to pay the installments to FILINVEST;
that he signed Exhibits A, B and C simultaneously; that it was his wife who was always transacting
business with RALLYE and Abel Sahagun. 23

Without disputing the above summary of evidence, private respondent Salazar states in his Comment that
"the same evidence proferred by (petitioner's) counsel was adopted by (private respondent) Ernesto
Salazar during the proceedings. 24

According to the court a quo in its assailed order of April 4, 1979, Emesto Salazar "was himself defrauded
because while he signed the promissory note and the chattel mortgage over the vehicle which he bought
from Rallye Motors, RALLYE did not deliver to him the personal property he bought." And since no fraud
was committed by Salazar, the court accordingly ordered the sheriff to return to Salazar the properties
attached by virtue of the writ of preliminary attachment issued on August 17, 1977.

We do not agree. Considering the claim of respondent Salazar that Rallye Motors did not deliver the
motor vehicle to him, it follows that the Invoice, Exhibit "C", for the motor vehicle and the Receipt, Exhibit
"G", for its delivery and both signed by Salazar, Exhibits "C-1 " and "G-1", were fictitious. It also follows
that the Promissory Note, Exhibit "A", to pay the price of the undelivered vehicle was without
consideration and therefore fake; the Chattel Mortgage, Exhibit "B", over the non-existent vehicle was
likewise a fraud; the registration of the vehicle in the name of Salazar was a falsity and the assignment of
the promissory note by RALLYE with the conforme of respondent Salazar in favor of petitioner over the
undelivered motor vehicle was fraudulent and a falsification.
Respondent Salazar, knowing that no motor vehicle was delivered to him by RALLYE, executed and
committed all the above acts as shown the exhibits enumerated above. He agreed and consented to the
assignment by RALLYE of the fictitious promissory note and the fraudulent chattel mortgage, affixing his
signature thereto, in favor of petitioner FILINVEST who, in the ordinary course of business, relied on the
regularity and validity of the transaction. Respondent had previously applied for financing assistance from
petitioner FILINVEST as shown in Exhibits "E " and "E-1 " and his application was approved, thus he
negotiated for the acquisition of the motor vehicle in question from Rallye Motors. Since he claimed that
the motor vehicle was not delivered to him, then he was duty-bound to reveal that to FILINVEST, it being
material in inducing the latter to accept the assignment of the promissory note and the chattel mortgage.
More than that, good faith as well as commercial usages or customs require the disclosure of facts and
circumstances which go into the very object and consideration of the contractual obligation. We rule that
the failure of respondent Salazar to disclose the material fact of non-delivery of the motor vehicle, there
being a duty on his part to reveal them, constitutes fraud. (Article 1339, New Civil Code).

We hold that the court a quo committed grave abuse of discretion in dissolving and setting aside the writ
of preliminary attachment issued on August 17, 1977.

WHEREFORE, IN VIEW OF THE FOREGOING, the appealed Orders of the lower court dated February
2, 1979 and April 4, 1979 are hereby REVERSED and SET ASIDE. The temporary restraining order
issued by Us on July 23, 1979 is hereby made permanent. No costs.

Petition granted.

SO ORDERED.

Barredo (Chairman), Aquino, Concepcion, Jr., Santos, De Castro and Escolin, JJ., concur.