Professional Documents
Culture Documents
RESOLUTION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the July 10, 2008
Decision2 and December 18, 2008 Resolution3 of the Court of Appeals (CA)
in CA-G.R. SP No. 100270, affirming the March 29, 2007 Order4of the
Regional Trial Court of Quezon City, Branch 223 (RTC), which lifted the writ
of preliminary attachment issued in favor of petitioner Alfredo C. Lim, Jr.
(Lim, Jr.).
The Facts
On August 22, 2005, Lim, Jr. filed a complaint5 for sum of money with
prayer for the issuance of a writ of preliminary attachment before the RTC,
seeking to recover from respondents-spouses Tito S. Lazaro and Carmen T.
Lazaro (Sps. Lazaro) the sum of P2,160,000.00, which represented the
amounts stated in several dishonored checks issued by the latter to the
former, as well as interests, attorney’s fees, and costs. The RTC granted the
writ of preliminary attachment application6 and upon the posting of the
required P2,160,000.00 bond,7 issued the corresponding writ on October 14,
2005.8 In this accord, three (3) parcels of land situated in Bulacan, covered
by Transfer Certificates of Title (TCT) Nos. T-64940, T-64939, and T-86369
(subject TCTs), registered in the names of Sps. Lazaro, were levied upon.9
1
aforesaid checks issued to Colim were merely intended as a form of
collateral.11 Hinged on the same grounds, Sps. Lazaro equally opposed the
issuance of a writ of preliminary attachment.12
Subsequently, Sps. Lazaro filed an Omnibus Motion,17 seeking to lift the writ
of preliminary attachment annotated on the subject TCTs, which the RTC
granted on March 29, 2007.18 It ruled that a writ of preliminary attachment
is a mere provisional or ancillary remedy, resorted to by a litigant to protect
and preserve certain rights and interests pending final judgment.
Considering that the case had already been considered closed and
terminated by the rendition of the January 5, 2007 Amended Decision on the
basis of the September 22, 2006 compromise agreement, the writ of
preliminary attachment should be lifted and quashed. Consequently, it
ordered the Registry of Deeds of Bulacan to cancel the writ’s annotation on
the subject TCTs.
Lim, Jr. filed a motion for reconsideration19 which was, however, denied on
July 26, 2007,20 prompting him to file a petition for certiorari21 before the
CA.
The CA Ruling
On July 10, 2008, the CA rendered the assailed decision,22 finding no grave
abuse of discretion on the RTC’s part. It observed that a writ of preliminary
attachment may only be issued at the commencement of the action or at
any time before entry of judgment. Thus, since the principal cause of action
had already been declared closed and terminated by the RTC, the provisional
or ancillary remedy of preliminary attachment would have no leg to stand
on, necessitating its discharge.23
2
Aggrieved, Lim, Jr. moved for reconsideration24 which was likewise denied
by the CA in its December 18, 2008 Resolution.25
The sole issue in this case is whether or not the writ of preliminary
attachment was properly lifted.
In this relation, while the provisions of Rule 57 are silent on the length of
time within which an attachment lien shall continue to subsist after the
rendition of a final judgment, jurisprudence dictates that the said
lien continues until the debt is paid, or the sale is had under
execution issued on the judgment or until the judgment is satisfied,
or the attachment discharged or vacated in the same manner
provided by law.28
Applying these principles, the Court finds that the discharge of the writ of
preliminary attachment against the properties of Sps. Lazaro was improper.
Records indicate that while the parties have entered into a compromise
agreement which had already been approved by the RTC in its January 5,
2007 Amended Decision, the obligations thereunder have yet to be fully
complied with – particularly, the payment of the total compromise amount of
P2,351,064.80. Hence, given that the foregoing debt remains unpaid, the
attachment of Sps. Lazaro’s properties should have continued to subsist.
3
In Chemphil Export & Import Corporation v. CA,29 the Court pronounced that
a writ of attachment is not extinguished by the execution of a compromise
agreement between the parties, viz:cralavvonlinelawlibrary
Did the compromise agreement between Antonio Garcia and the consortium
discharge the latter’s attachment lien over the disputed shares?
xxxx
The case at bench admits of peculiar character in the sense that it involves a
compromise agreement. Nonetheless, x x x. The parties to the
compromise agreement should not be deprived of the protection
provided by an attachment lien especially in an instance where one
reneges on his obligations under the agreement, as in the case at
bench, where Antonio Garcia failed to hold up his own end of the deal, so to
speak.
xxxx
In fine, the Court holds that the writ of preliminary attachment subject of
this case should be restored and its annotation revived in the subject TCTs,
re-vesting unto Lim, Jr. his preferential lien over the properties covered by
the same as it were before the cancellation of the said writ. Lest it be
misunderstood, the lien or security obtained by an attachment even before
judgment, is in the nature of a vested interest which affords specific security
for the satisfaction of the debt put in suit.30 Verily, the lifting of the
4
attachment lien would be tantamount to an abdication of Lim, Jr.’s rights
over Sps. Lazaro’s properties which the Court, absent any justifiable ground
therefor, cannot allow.
WHEREFORE, the petition is GRANTED. The July 10, 2008 Decision and the
December 18, 2008 Resolution of the Court of Appeals in CA-G.R. SP No.
100270 are REVERSED and SET ASIDE, and the March 29, 2007 Order of
the Regional Trial Court of Quezon City, Branch 223 is NULLIFIED.
Accordingly, the trial court is directed to RESTORE the attachment lien over
Transfer Certificates of Title Nos. T-64940, T-64939, and T-86369, in favor
of petitioner Alfredo C. Lim, Jr.
SO ORDERED.
5
SECOND DIVISION
DECISION
PERLAS–BERNABE, J.:
(a) the Order3 dated February 9, 2007 which directed the Register of Deeds
of Muntinlupa City, respondent Atty. Silverio Garing (Atty. Garing), to (1)
register the Officer’s Final Deed of Sale issued by respondent Sheriff Lucito
V. Alejo (Sheriff Alejo) on October 27, 2006 in favor of the highest bidder,
respondent Leonardo J. Ting (Ting), (2) cancel Transfer Certificate of Title
(TCT) No. 8502/T44 in the name of Spouses Rosario and Saturnino Baladjay
(Sps. Baladjay), and (3) issue a new certificate of title in favor of Ting, free
from any liens and encumbrances;
(b) the Order4 dated March 20, 2007 which directed Atty. Garing to comply
with the February 9, 2007 Order under pain of contempt of court; and
(c) the Order5 dated April 25, 2007 which reiterated the directive to Atty.
Garing to issue a new title in favor of Ting after the latter’s payment of
capital gains, documentary and transfer taxes, as required.
The Facts
6
preliminary attachment, docketed as Civil Case No. Q–10–48145 (Quezon
City Case), against Sps. Baladjay, a certain Olivia Marasigan (Marasigan),
Polished Arrow Holdings, Inc. (Polished Arrow), and its
incorporators,7 namely, Spouses Julius Gonzalo and Charaine Doreece Anne
Fuentebella (Sps. Fuentebella), Ma. Linda Mendoza (Mendoza), Barbara C.
Clavo (Clavo), Bayani E. Arit, Jr. (Arit, Jr.), and Peter M. Kairuz (Kairuz), as
well as the latter’s spouses (individual defendants).
In her complaint, Ligon alleged, inter alia, that Rosario Baladjay (Rosario)
enticed her to extend a short–term loan in the amount of P3,000,000.00,
payable in a month’s time and secured by an Allied Bank post–dated check
for the same amount.8 Ligon likewise claimed that Rosario, as further
enticement for the loan extension, represented that she and her husband
Saturnino were in the process of selling their property in Ayala Alabang
Village, Muntinlupa City (subject property), covered by a clean title, i.e., TCT
No. 8502[9 in the name of Rosario Baladjay, married to Saturnino
Baladjay, and that the proceeds of the said sale could easily pay–off the
loan.10 Unfortunately, the Allied Bank check was dishonored upon
presentment and, despite assurances to replace it with cash, Rosario failed
to do so. Moreover, Ligon discovered that the subject property had already
been transferred to Polished Arrow, alleged to be a dummy corporation of
Sps. Baladjay and the individual defendants (defendants). As a result, TCT
No. 8502 was cancelled and replaced on October 11, 2002 by TCT No.
9273[11 in the name of Polished Arrow. Thus, Ligon prayed that all
defendants be held solidarily liable to pay her the amount of P3,000,000.00,
with interest due, as well as P1,000,000.00 as attorney’s fees and another
P1,000,000.00 by way of moral and exemplary damages. Asserting that the
transfer of the subject property to Polished Arrow was made in fraud of Sps.
Baladjay’s creditors, Ligon also prayed that the said transfer be nullified, and
that a writ of preliminary attachment be issued in the interim against
defendants’ assets, including the subject property. Subsequently, an
Amended Writ of Preliminary Attachment12 was issued on November
26, 2002, and annotated on the dorsal portion13 of TCT No. 9273 on
December 3, 2002 (December 3, 2002 attachment annotation).
7
the subject property was issued and annotated on the dorsal portion
of TCT No. 9273 on March 12, 2003. Thereafter, but before the Quezon
City Case was concluded, the Makati City RTC rendered a Decision15 dated
December 9, 2004 (December 9, 2004 Decision), rescinding the transfer of
the subject property from Sps. Baladjay to Polished Arrow upon a finding
that the same was made in fraud of creditors.16 Consequently, the Makati
City RTC directed the Register of Deeds of Muntinlupa City to: (a) cancel TCT
No. 9273 in the name of Polished Arrow; and (b) restore TCT No. 8502 “in
its previous condition” in the name of Rosario Baladjay, married to Saturnino
Baladjay.
Meanwhile, in the pending Quezon City Case, Polished Arrow and the
individual defendants (with the exception of Marasigan) were successively
dropped17 as party–defendants, after it was established that they, by
themselves directly or through other persons, had no more ownership,
interest, title, or claim over the subject property. The parties stipulated on
the existence of the December 9, 2004 Decision of the Makati City RTC, and
the fact that the same was no longer questioned by defendants Sps.
Fuentebella, Arit, Jr., and Polished Arrow were made conditions for their
dropping as party–defendants in the case.18 In view of the foregoing, the
Quezon City Case proceeded only against Sps. Baladjay and Marasigan and,
after due proceedings, the Quezon City RTC rendered a Decision19 dated
March 26, 2008 (March 26, 2008 Decision), directing Sps. Baladjay to pay
Ligon the amount of P3,000,000.00 with interest, as well as attorney’s fees
and costs of suit.
On September 25, 2008, the March 26, 2008 Decision of the Quezon City
RTC became final and executory.20 However, when Ligon sought its
execution, she discovered that the December 3, 2002 attachment annotation
had been deleted from TCT No. 9273 when the subject property was sold by
way of public auction on September 9, 2005 to the highest bidder,
respondent Ting, for the amount of P9,000,000.00 during the execution
proceedings in the Makati City Case, as evidenced by the Officer’s Final Deed
of Sale21 dated October 27, 2006 (Officer’s Final Deed of Sale) issued by
Sheriff Alejo. In this regard, Ligon learned that the Makati City RTC had
issued its first assailed Order22dated February 9, 2007 (First Assailed
Order), directing Atty. Garing, as the Register of Deeds of Muntinlupa City,
to: (a) register the Officer’s Final Deed of Sale on the official Record Book of
the Register of Deeds of Muntinlupa City; and (b) cancel TCT No. 8502 in the
name of Sps. Baladjay and issue a new title in the name of Ting, free
from any liens and encumbrances.
Atty. Garing manifested23 before the Makati City RTC that it submitted the
matter en consulta24 to the Land Registration Authority (LRA) as he was
8
uncertain whether the annotations on TCT No. 9273 should be carried over
to TCT No. 8502. In response to the manifestation, the Makati City RTC
issued its second assailed Order25 dated March 20, 2007 (Second Assailed
Order), directing Atty. Garing to comply with the First Assailed Order under
pain of contempt. It explained that it could not allow the LRA to carry over
all annotations previously annotated on TCT No. 9273 in the name of
Polished Arrow as said course of action would run counter to its December 9,
2004 Decision which specifically ordered the cancellation of said TCT and the
restoration of TCT No. 8502 in its previous condition. It further clarified
that:26
[I]f there were liens or encumbrances annotated on TCT No. 8502 in the
name of Rosario Baladjay when the same was cancelled and TCT No. 9273
was issued by the Register of Deeds of Muntinlupa City in favor of Polished
Arrow Holdings, Inc. based on the Deed of Absolute Sale executed between
the former and the latter, only such liens or encumbrances will have to
be carried over to the new Transfer Certificate of Title that he (Atty.
Garing) is mandated to immediately issue in favor of Leonardo J.
Ting even as the Order of the Court dated February 9, 2007 decreed
that a new TCT be issued in the name of Mr. Leonardo J. Ting, free
from any encumbrance.On the other hand, if TCT No. 8502 in the name of
Rosario Baladjay was free from any liens or encumbrances when the same
was cancelled and TCT No. 9273 was issued by the Register of Deeds of
Muntinlupa City in favor of Polished Arrow Holdings, Inc. by virtue of that
Deed of Absolute Sale executed between Rosario Baladjay and Polished
Arrow Holdings, Inc., it necessarily follows that the new Transfer of
Certificate of Title that the said Registrar of Deeds is duty bound to
issue immediately in favor of Leonardo Ting will also be freed from
any liens and encumbrances, as simple as that. (Emphases and
underscoring supplied)
Separately, Ting filed a motion before the Makati City RTC on account of
Atty. Garing’s letter28 dated March 26, 2006 requiring him to comply with
certain documentary requirements and to pay the appropriate capital gains,
documentary stamp and transfer taxes before a new title could be issued in
his name. In its third assailed Order29 dated April 25, 2007 (Third
Assailed Order), the Makati City RTC directed Ting to pay the aforesaid taxes
and ordered Atty. Garing to immediately cancel TCT No. 8502 and issue a
new title in the former’s name.
9
On June 7, 2007, Atty. Garing issued TCT No. 19756[30 in the name
of Ting, free from any liens and encumbrances. Later, Ting sold31 the
subject property to respondent Benito G. Techico (Techico), resulting in the
cancellation of TCT No. 19756 and the issuance of TCT No.
31001[32 in Techico’s name.
The CA Ruling
The Court resolves the following essential issues: (a) whether or not the CA
erred in ruling that the Makati City RTC did not gravely abuse its discretion
in issuing the Assailed Orders; and (b) whether or not Judge Laigo should be
cited in contempt and penalized administratively.
10
The Court’s Ruling
Applying these principles to this case, the Court finds that the CA erred in
holding that the RTC did not gravely abuse its discretion in issuing the
Assailed Orders as these issuances essentially disregarded,inter alia, Ligon’s
prior attachment lien over the subject property patently anathema to the
nature of attachment proceedings which is well–established in law and
jurisprudence.44 In this case, Ligon, in order to secure the satisfaction of a
favorable judgment in the Quezon City Case, applied for and was eventually
able to secure a writ of preliminary attachment45 over the subject property
on November 25, 2002, which was later annotated on the dorsal portion46 of
TCT No. 9273 in the name of Polished Arrow on December 3, 2002.
Notwithstanding the subsequent cancellation of TCT No. 9273 due to the
Makati City RTC’s December 9, 2004 Decision rescinding the transfer of the
subject property from Sps. Baladjay to Polished Arrow upon a finding that
the same was made in fraud of creditors, Ligon’s attachment lien over the
subject property continued to subsist since the attachment she had earlier
secured binds the property itself, and, hence, continues until the judgment
debt of Sps. Baladjay to Ligon as adjudged in the Quezon City Case is
satisfied, or the attachment discharged or vacated in some manner provided
11
by law. The grave abuse of discretion of the Makati City RTC lies with its
directive to issue a new certificate of title in the name of Ting (i.e., TCT No.
19756),47 free from any liens and encumbrances. This course of action
clearly negates the efficacy of Ligon’s attachment lien and, also, defies the
legal characterization of attachment proceedings. It bears noting that Ligon’s
claim, secured by the aforesaid attachment, is against Sps. Baladjay whose
ownership over the subject property had been effectively restored in view of
the RTC’s rescission of the property’s previous sale to Polished
Arrow.48 Thus, Sps. Ligon’s attachment lien against Sps. Baladjay as well as
their successors–in–interest should have been preserved, and the annotation
thereof carried over to any subsequent certificate of title,49 the most recent
of which as it appears on record is TCT No. 31001 in the name of Techico,
without prejudice to the latter’s right to protect his own ownership interest
over the subject property.
That said, the Court now proceeds to resolve the second and final issue on
indirect contempt.
While the Court agrees with Ligon’s position on the issue of grave abuse of
discretion, it holds an opposite view anent its complaint for indirect contempt
against Judge Laigo and/or the respondents in this case.
12
Section 3. Indirect contempt to be punished after charge and hearing. —
After a charge in writing has been filed, and an opportunity given to the
respondent to comment thereon within such period as may be fixed by the
court and to be heard by himself or counsel, a person guilty of any of the
following acts may be punished for indirect contempt:
xxxx
Examining the petition, the Court finds that Ligon failed to sufficiently show
how the acts of each of the respondents, or more specifically, Judge Laigo,
constituted any of the acts punishable under the foregoing section tending
towards a wilful disregard or disobedience of a public authority. In issuing
the Assailed Orders, Judge Laigo merely performed his judicial functions
pursuant to the December 9, 2004 Decision in the Makati City Case which
had already attained finality. Thus, without Ligon’s proper substantiation,
considering too that Judge Laigo’s official acts are accorded with the
presumption of regularity,52 the Court is constrained to dismiss the indirect
contempt charges in this case.
SO ORDERED.
13
[G.R. No. 125027. August 12, 2002]
DECISION
CARPIO, J.:
The Case
The Facts
14
17, 24 and 31, 1988, petitioner failed to pay private respondent shipping
charges amounting to P109, 376.95.[4]
Despite several demands, petitioner never paid private respondent. Thus,
on June 10, 1988, private respondent filed Civil Case No. 5875 before the
Regional Trial Court of Pasay City for collection of sum of money.
On August 1, 1988, the sheriff filed his Sheriffs Return showing that
summons was not served on petitioner. A woman found at petitioners house
informed the sheriff that petitioner transferred her residence to Sto. Nio,
Guagua, Pampanga. The sheriff found out further that petitioner had left the
Philippines for Guam.[5]
Thus, on September 13, 1988, construing petitioners departure from the
Philippines as done with intent to defraud her creditors, private respondent
filed a Motion for Preliminary Attachment. On September 26, 1988, the trial
court issued an Order of Preliminary Attachment[6]against petitioner. The
following day, the trial court issued a Writ of Preliminary Attachment.
The trial court granted the request of its sheriff for assistance from their
counterparts in RTC, Pampanga. Thus, on October 28, 1988, Sheriff Alfredo
San Miguel of RTC Pampanga served on petitioners household help in San
Fernando, Pampanga, the Notice of Levy with the Order, Affidavit and
Bond.[7]
On November 7, 1988, petitioner filed an Urgent Motion to Discharge
Attachment[8] without submitting herself to the jurisdiction of the trial court.
She pointed out that up to then, she had not been served a copy of the
Complaint and the summons. Hence, petitioner claimed the court had not
acquired jurisdiction over her person.[9]
In the hearing of the Urgent Motion to Discharge Attachment on
November 11, 1988, private respondent sought and was granted a re-setting
to December 9, 1988. On that date, private respondents counsel did not
appear, so the Urgent Motion to Discharge Attachment was deemed
submitted for resolution.[10]
The trial court granted the Motion to Discharge Attachment on January
13, 1989 upon filing of petitioners counter-bond. The trial court, however,
did not rule on the question of jurisdiction and on the validity of the writ of
preliminary attachment.
On December 26, 1988, private respondent applied for an alias
summons, which the trial court issued on January 19, 1989.[11] It was only
on January 26, 1989 that summons was finally served on petitioner.[12]
On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint
on the ground of improper venue. Private respondents invoice for the freight
15
forwarding service stipulates that if court litigation becomes necessary to
enforce collection xxx the agreed venue for such action is Makati, Metro
Manila.[13] Private respondent filed an Opposition asserting that although
Makati appears as the stipulated venue, the same was merely an
inadvertence by the printing press whose general manager executed an
affidavit[14] admitting such inadvertence. Moreover, private respondent
claimed that petitioner knew that private respondent was holding office in
Pasay City and not in Makati.[15] The lower court, finding credence in private
respondents assertion, denied the Motion to Dismiss and gave petitioner five
days to file her Answer. Petitioner filed a Motion for Reconsideration but this
too was denied.
Petitioner filed her Answer[16] on June 16, 1989, maintaining her
contention that the venue was improperly laid.
On June 26, 1989, the trial court issued an Order setting the pre-trial for
July 18, 1989 at 8:30 a.m. and requiring the parties to submit their pre-trial
briefs. Meanwhile, private respondent filed a Motion to Sell Attached
Properties but the trial court denied the motion.
On motion of petitioner, the trial court issued an Order resetting the pre-
trial from July 18, 1989 to August 24, 1989 at 8:30 a.m..
On August 24, 1989, the day of the pre-trial, the trial court issued an
Order[17] terminating the pre-trial and allowing the private respondent to
present evidence ex-parte on September 12, 1989 at 8:30 a.m.. The Order
stated that when the case was called for pre-trial at 8:31 a.m., only the
counsel for private respondent appeared. Upon the trial courts second call 20
minutes later, petitioners counsel was still nowhere to be found. Thus, upon
motion of private respondent, the pre-trial was considered terminated.
On September 12, 1989, petitioner filed her Motion for Reconsideration
of the Order terminating the pre-trial. Petitioner explained that her counsel
arrived 5 minutes after the second call, as shown by the transcript of
stenographic notes, and was late because of heavy traffic. Petitioner claims
that the lower court erred in allowing private respondent to present
evidence ex-parte since there was no Order considering the petitioner as in
default. Petitioner contends that the Order of August 24, 1989 did not state
that petitioner was declared as in default but still the court allowed private
respondent to present evidence ex-parte.[18]
On October 6, 1989, the trial court denied the Motion for Reconsideration
and scheduled the presentation of private respondents evidence ex-parte on
October 10, 1989.
On October 10, 1989, petitioner filed an Omnibus Motion stating that the
presentation of evidence ex-parte should be suspended because there was
16
no declaration of petitioner as in default and petitioners counsel was not
absent, but merely late.
On October 18, 1989, the trial court denied the Omnibus Motion.[19]
On November 20, 1989, the petitioner received a copy of the Decision of
November 10, 1989, ordering petitioner to pay respondent P109,376.95 plus
18 percent interest per annum, 25 percent attorneys fees and costs of suit.
Private respondent filed a Motion for Execution Pending Appeal but the trial
court denied the same.
The Issues
II.
III.
IV.
17
WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS
OBLIGED TO PAY P109, 376.95, PLUS ATTORNEYS FEES.[20]
It goes without saying that whatever be the acts done by the Court prior to
the acquisition of jurisdiction over the person of defendant - issuance of
summons, order of attachment and writ of attachment - these do not
and cannot bind and affect the defendant until and unless
jurisdiction over his person is eventually obtained by the court, either
by service on him of summons or other coercive process or his voluntary
18
submission to the courts authority. Hence, when the sheriff or other proper
officer commences implementation of the writ of attachment, it is essential
that he serve on the defendant not only a copy of the applicants affidavit
and attachment bond, and of the order of attachment, as explicitly required
by Section 5 of Rule 57, but also the summons addressed to said defendant
as well as a copy of the complaint xxx. (Emphasis supplied.)
19
diligent inquiry, still she had some other recourse under the Rules of Civil
Procedure.
The rules provide for certain remedies in cases where personal service
could not be effected on a party. Section 14, Rule 14 of the Rules of Court
provides that whenever the defendants whereabouts are unknown and
cannot be ascertained by diligent inquiry, service may, by leave of court, be
effected upon him by publication in a newspaper of general circulation x x x.
Thus, if petitioners whereabouts could not be ascertained after the sheriff
had served the summons at her given address, then respondent could have
immediately asked the court for service of summons by publication on
petitioner.[25]
Moreover, as private respondent also claims that petitioner was abroad
at the time of the service of summons, this made petitioner a resident who
is temporarily out of the country. This is the exact situation contemplated in
Section 16,[26] Rule 14 of the Rules of Civil Procedure, providing for service
of summons by publication.
In conclusion, we hold that the alias summons belatedly served on
petitioner cannot be deemed to have cured the fatal defect in the
enforcement of the writ. The trial court cannot enforce such a coercive
process on petitioner without first obtaining jurisdiction over her person. The
preliminary writ of attachment must be served after or simultaneous with
the service of summons on the defendant whether by personal service,
substituted service or by publication as warranted by the circumstances of
the case.[27] The subsequent service of summons does not confer a
retroactive acquisition of jurisdiction over her person because the law does
not allow for retroactivity of a belated service.
Improper Venue
Petitioner assails the filing of this case in the RTC of Pasay and points to
a provision in private respondents invoice which contains the following:
Based on this provision, petitioner contends that the action should have
been instituted in the RTC of Makati and to do otherwise would be a ground
for the dismissal of the case.
We resolve to dismiss the case on the ground of improper venue but not
for the reason stated by petitioner.
20
The Rules of Court provide that parties to an action may agree in writing
on the venue on which an action should be brought.[29]However, a mere
stipulation on the venue of an action is not enough to preclude parties from
bringing a case in other venues.[30] The parties must be able to show that
such stipulation is exclusive. Thus, absent words that show the parties
intention to restrict the filing of a suit in a particular place, courts will allow
the filing of a case in any venue, as long as jurisdictional requirements are
followed. Venue stipulations in a contract, while considered valid and
enforceable, do not as a rule supersede the general rule set forth in Rule 4
of the Revised Rules of Court.[31] In the absence of qualifying or restrictive
words, they should be considered merely as an agreement on additional
forum, not as limiting venue to the specified place.[32]
In the instant case, the stipulation does not limit the venue exclusively to
Makati. There are no qualifying or restrictive words in the invoice that would
evince the intention of the parties that Makati is the only or exclusive venue
where the action could be instituted. We therefore agree with private
respondent that Makati is not the only venue where this case could be filed.
Nevertheless, we hold that Pasay is not the proper venue for this case.
Under the 1997 Rules of Civil Procedure, the general rule is venue in
personal actions is where the defendant or any of the defendants resides or
may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff.[33] The exception to this rule is when the parties
agree on an exclusive venue other than the places mentioned in the rules.
But, as we have discussed, this exception is not applicable in this case.
Hence, following the general rule, the instant case may be brought in the
place of residence of the plaintiff or defendant, at the election of the plaintiff
(private respondent herein).
In the instant case, the residence of private respondent (plaintiff in the
lower court) was not alleged in the complaint. Rather, what was alleged was
the postal address of her sole proprietorship, Air Swift International. It was
only when private respondent testified in court, after petitioner was declared
in default, that she mentioned her residence to be in Better Living
Subdivision, Paraaque City.
In the earlier case of Sy v. Tyson Enterprises, Inc.,[34] the reverse
happened. The plaintiff in that case was Tyson Enterprises, Inc., a
corporation owned and managed by Dominador Ti. The complaint, however,
did not allege the office or place of business of the corporation, which was in
Binondo, Manila. What was alleged was the residence of Dominador Ti, who
lived in San Juan, Rizal. The case was filed in the Court of First Instance of
Rizal, Pasig. The Court there held that the evident purpose of alleging the
address of the corporations president and manager was to justify the filing
21
of the suit in Rizal, Pasig instead of in Manila. Thus, the Court ruled that
there was no question that venue was improperly laid in that case and held
that the place of business of Tyson Enterpises, Inc. is considered as its
residence for purposes of venue. Furthermore, the Court held that the
residence of its president is not the residence of the corporation because a
corporation has a personality separate and distinct from that of its officers
and stockholders.
In the instant case, it was established in the lower court that petitioner
resides in San Fernando, Pampanga[35] while private respondent resides in
Paraaque City.[36] However, this case was brought in Pasay City, where the
business of private respondent is found. This would have been permissible
had private respondents business been a corporation, just like the case in Sy
v. Tyson Enterprises, Inc. However, as admitted by private respondent in
her Complaint[37] in the lower court, her business is a sole proprietorship,
and as such, does not have a separate juridical personality that could enable
it to file a suit in court.[38] In fact, there is no law authorizing sole
proprietorships to file a suit in court.[39]
A sole proprietorship does not possess a juridical personality separate
and distinct from the personality of the owner of the enterprise.[40]The law
merely recognizes the existence of a sole proprietorship as a form of
business organization conducted for profit by a single individual and requires
its proprietor or owner to secure licenses and permits, register its business
name, and pay taxes to the national government.[41] The law does not vest a
separate legal personality on the sole proprietorship or empower it to file or
defend an action in court.[42]
Thus, not being vested with legal personality to file this case, the sole
proprietorship is not the plaintiff in this case but rather Loreta Guina in her
personal capacity. In fact, the complaint in the lower court acknowledges in
its caption that the plaintiff and defendant are Loreta Guina and Anita
Mangila, respectively. The title of the petition before us does not state, and
rightly so, Anita Mangila v. Air Swift International, but rather Anita Mangila
v. Loreta Guina. Logically then, it is the residence of private respondent
Guina, the proprietor with the juridical personality, which should be
considered as one of the proper venues for this case.
All these considered, private respondent should have filed this case
either in San Fernando, Pampanga (petitioners residence) or Paraaque
(private respondents residence). Since private respondent (complainant
below) filed this case in Pasay, we hold that the case should be dismissed on
the ground of improper venue.
Although petitioner filed an Urgent Motion to Discharge Attachment in
the lower court, petitioner expressly stated that she was filing the motion
22
without submitting to the jurisdiction of the court. At that time, petitioner
had not been served the summons and a copy of the
[43] [44]
complaint. Thereafter, petitioner timely filed a Motion to Dismiss on
the ground of improper venue. Rule 16, Section 1 of the Rules of Court
provides that a motion to dismiss may be filed [W]ithin the time for but
before filing the answer to the complaint or pleading asserting a claim.
Petitioner even raised the issue of improper venue in his Answer [45] as a
special and affirmative defense. Petitioner also continued to raise the issue
of improper venue in her Petition for Review[46] before this Court. We thus
hold that the dismissal of this case on the ground of improper venue is
warranted.
The rules on venue, like other procedural rules, are designed to insure a
just and orderly administration of justice or the impartial and evenhanded
determination of every action and proceeding. Obviously, this objective will
not be attained if the plaintiff is given unrestricted freedom to choose where
to file the complaint or petition.[47]
We find no reason to rule on the other issues raised by petitioner.
WHEREFORE, the petition is GRANTED on the grounds of improper
venue and invalidity of the service of the writ of attachment. The decision of
the Court of Appeals and the order of respondent judge denying the motion
to dismiss are REVERSED and SET ASIDE. Civil Case No. 5875 is hereby
dismissed without prejudice to refiling it in the proper venue. The attached
properties of petitioner are ordered returned to her immediately.
SO ORDERED.
23
G.R. No. 139941. January 19, 2001]
DECISION
YNARES-SANTIAGO, J.:
The instant petition arises from transactions that were entered into by
the government in the penultimate days of the Marcos
administration. Petitioner Vicente B. Chuidian was alleged to be a dummy or
nominee of Ferdinand and Imelda Marcos in several companies said to have
been illegally acquired by the Marcos spouses. As a favored business
associate of the Marcoses, Chuidian allegedly used false pretenses to induce
the officers of the Philippine Export and Foreign Loan Guarantee Corporation
(PHILGUARANTEE), the Board of Investments (BOI) and the Central Bank, to
facilitate the procurement and issuance of a loan guarantee in favor of the
Asian Reliability Company, Incorporated (ARCI) sometime in September
1980. ARCI, 98% of which was allegedly owned by Chuidian, was granted a
loan guarantee of Twenty-Five Million U.S. Dollars (US$25,000,000.00).
While ARCI represented to Philguarantee that the loan proceeds would be
used to establish five inter-related projects in the Philippines, Chuidian
reneged on the approved business plan and instead invested the proceeds of
the loan in corporations operating in the United States, more particularly
Dynetics, Incorporated and Interlek, Incorporated. Although ARCI had
received the proceeds of the loan guaranteed by Philguarantee, the former
defaulted in the payments thereof, compelling Philguarantee to undertake
payments for the same. Consequently, in June 1985, Philguarantee sued
Chuidian before the Santa Clara County Superior Court,[1] charging that in
violation of the terms of the loan, Chuidian not only defaulted in payment,
but also misused the funds by investing them in Silicon Valley corporations
and using them for his personal benefit.
For his part, Chuidian claimed that he himself was a victim of the
systematic plunder perpetrated by the Marcoses as he was the true owner of
these companies, and that he had in fact instituted an action before the
Federal Courts of the United States to recover the companies which the
Marcoses had illegally wrested from him.[2]
On November 27, 1985, or three (3) months before the successful
peoples revolt that toppled the Marcos dictatorship, Philguarantee entered
into a compromise agreement with Chuidian whereby petitioner Chuidian
shall assign and surrender title to all his companies in favor of the Philippine
24
government. In return, Philguarantee shall absolve Chuidian from all civil
and criminal liability, and in so doing, desist from pursuing any suit against
Chuidian concerning the payments Philguarantee had made on Chuidians
defaulted loans.
It was further stipulated that instead of Chuidian reimbursing the
payments made by Philguarantee arising from Chuidians default, the
Philippine government shall pay Chuidian the amount of Five Million Three
Hundred Thousand Dollars (US$5,300,000.00). Initial payment of Five
Hundred Thousand Dollars (US$500,000.00) was actually received by
Chuidian, as well as succeeding payment of Two Hundred Thousand Dollars
(US$200,000.00). The remaining balance of Four Million Six Hundred
Thousand Dollars (US$4,600,000.00) was to be paid through an irrevocable
Letter of Credit (L/C) from which Chuidian would draw One Hundred
Thousand Dollars (US$100,000.00) monthly.[3] Accordingly, on December
12, 1985, L/C No. SSD-005-85 was issued for the said amount by the
Philippine National Bank (PNB). Subsequently, Chuidian was able to make
two (2) monthly drawings from said L/C at the Los Angeles branch of the
PNB.[4]
With the advent of the Aquino administration, the newly-established
Presidential Commission on Good Government (PCGG) exerted earnest
efforts to search and recover money, gold, properties, stocks and other
assets suspected as having been illegally acquired by the Marcoses, their
relatives and cronies.
Petitioner Chuidian was among those whose assets were sequestered by
the PCGG. On May 30, 1986, the PCGG issued a Sequestration
Order[5]directing the PNB to place under its custody, for and in behalf of the
PCGG, the irrevocable L/C (No. SSD-005-85). Although Chuidian was then
residing in the United States, his name was placed in the Department of
Foreign Affairs Hold Order list.[6]
In the meantime, Philguarantee filed a motion before the Superior Court
of Santa Clara County of California in Civil Case Nos. 575867 and 577697
seeking to vacate the stipulated judgment containing the settlement
between Philguarantee and Chuidian on the grounds that: (a) Philguarantee
was compelled by the Marcos administration to agree to the terms of the
settlement which was highly unfavorable to Philguarantee and grossly
disadvantageous to the government; (b) Chuidian blackmailed Marcos into
pursuing and concluding the settlement agreement by threatening to expose
the fact that the Marcoses made investments in Chuidians American
enterprises; and (c) the Aquino administration had ordered Philguarantee
not to make further payments on the L/C to Chuidian. After considering the
factual matters before it, the said court concluded that Philguarantee had
not carried its burden of showing that the settlement between the parties
25
should be set aside.[7] On appeal, the Sixth Appellate District of the Court of
Appeal of the State of California affirmed the judgment of the Superior Court
of Sta. Clara County denying Philguarantees motion to vacate the stipulated
judgment based on the settlement agreement.[8]
After payment on the L/C was frozen by the PCGG, Chuidian filed before
the United States District Court, Central District of California, an action
against PNB seeking, among others, to compel PNB to pay the proceeds of
the L/C. PNB countered that it cannot be held liable for a breach of contract
under principles of illegality, international comity and act of state, and thus
it is excused from payment of the L/C. Philguarantee intervened in said
action, raising the same issues and arguments it had earlier raised in the
action before the Santa Clara Superior Court, alleging that PNB was excused
from making payments on the L/C since the settlement was void due to
illegality, duress and fraud.[9]
The Federal Court rendered judgment ruling: (1) in favor of PNB
excusing the said bank from making payment on the L/C; and (2) in
Chuidians favor by denying intervenor Philguarantees action to set aside the
settlement agreement.[10]
Meanwhile, on February 27, 1987, a Deed of Transfer [11] was executed
between then Secretary of Finance Jaime V. Ongpin and then PNB President
Edgardo B. Espiritu, to facilitate the rehabilitation of PNB, among others, as
part of the governments economic recovery program. The said Deed of
Transfer provided for the transfer to the government of certain assets of PNB
in exchange for which the government would assume certain liabilities of
PNB.[12] Among those liabilities which the government assumed were unused
commercial L/Cs and Deferred L/Cs, including SSD-005-85 listed under
Dynetics, Incorporated in favor of Chuidian in the amount of Four Million
Four Hundred Thousand Dollars (US$4,400,000.00).[13]
On July 30, 1987, the government filed before the Sandiganbayan Civil
Case No. 0027 against the Marcos spouses, several government officials who
served under the Marcos administration, and a number of individuals known
to be cronies of the Marcoses, including Chuidian. The complaint sought the
reconveyance, reversion, accounting and restitution of all forms of wealth
allegedly procured illegally and stashed away by the defendants.
In particular, the complaint charged that Chuidian, by himself and/or in
conspiracy with the Marcos spouses, engaged in devices, schemes and
stratagems by: (1) forming corporations for the purpose of hiding and
avoiding discovery of illegally obtained assets; (2) pillaging the coffers of
government financial institutions such as the Philguarantee; and (3)
executing the court settlement between Philguarantee and Chuidian which
was grossly disadvantageous to the government and the Filipino people.
26
In fine, the PCGG averred that the above-stated acts of Chuidian
committed in unlawful concert with the other defendants constituted gross
abuse of official position of authority, flagrant breach of public trust and
fiduciary obligations, brazen abuse of right and power, unjust enrichment,
violation of the Constitution and laws of the land.[14]
While the case was pending, on March 17, 1993, the Republic of the
Philippines filed a motion for issuance of a writ of attachment[15] over the
L/C, citing as grounds therefor the following:
(1) Chuidian embezzled or fraudulently misapplied the funds of ARCI
acting in a fiduciary capacity, justifying issuance of the writ under
Section 1(b), Rule 57 of the Rules of Court;
(2) The writ is justified under Section 1(d) of the same rule as
Chuidian is guilty of fraud in contracting the debt or incurring the
obligation upon which the action was brought, or that he concealed
or disposed of the property that is the subject of the action;
(3) Chuidian has removed or disposed of his property with the intent
of defrauding the plaintiff as justified under Section 1(c) of Rule
57; and
(4) Chuidian is residing out of the country or one on whom summons
may be served by publication, which justifies the writ of
attachment prayed for under Section 1(e) of the same rule.
The Republic also averred that should the action brought by Chuidian
before the U.S. District Court of California to compel payment of the L/C
prosper, inspite of the sequestration of the said L/C, Chuidian can ask the
said foreign court to compel the PNB Los Angeles branch to pay the proceeds
of the L/C. Eventually, Philguarantee will be made to shoulder the expense
resulting in further damage to the government. Thus, there was an urgent
need for the writ of attachment to place the L/C under the custody of the
Sandiganbayan so the same may be preserved as security for the
satisfaction of judgment in the case before said court.
Chuidian opposed the motion for issuance of the writ of attachment,
contending that:
(1) The plaintiffs affidavit appended to the motion was in form and
substance fatally defective;
(2) Section 1(b) of Rule 57 does not apply since there was no
fiduciary relationship between the plaintiff and Chuidian;
(3) While Chuidian does not admit fraud on his part, if ever there was
breach of contract, such fraud must be present at the time the
contract is entered into;
27
(4) Chuidian has not removed or disposed of his property in the
absence of any intent to defraud plaintiff;
(5) Chuidians absence from the country does not necessarily make
him a non-resident; and
(6) Service of summons by publication cannot be used to justify the
issuance of the writ since Chuidian had already submitted to the
jurisdiction of the Court by way of a motion to lift the freeze order
filed through his counsel.
On July 14, 1993, the Sandiganbayan issued a Resolution ordering the
issuance of a writ of attachment against L/C No. SSD-005-85 as security for
the satisfaction of judgment.[16] The Sandiganbayans ruling was based on its
disquisition of the five points of contention raised by the parties. On the first
issue, the Sandiganbayan found that although no separate affidavit was
attached to the motion, the motion itself contained all the requisites of an
affidavit, and the verification thereof is deemed a substantial compliance of
Rule 57, Section 3 of the Rules of Court.
Anent the second contention, the Sandiganbayan ruled that there was no
fiduciary relationship existing between Chuidian and the Republic, but only
between Chuidian and ARCI. Since the Republic is not privy to the fiduciary
relationship between Chuidian and ARCI, it cannot invoke Section 1(b) of
Rule 57.
On the third issue of fraud on the part of Chuidian in contracting the
loan, or in concealing or disposing of the subject property, the
Sandiganbayan held that there was a prima facie case of fraud committed by
Chuidian, justifying the issuance of the writ of attachment. The
Sandiganbayan also adopted the Republics position that since it was
compelled to pay, through Philguarantee, the bank loans taken out by
Chuidian, the proceeds of which were fraudulently diverted, it is entitled to
the issuance of the writ of attachment to protect its rights as creditor.
Assuming that there is truth to the governments allegation that Chuidian
has removed or disposed of his property with the intent to defraud, the
Sandiganbayan held that the writ of attachment is warranted, applying
Section 1(e) of Rule 57. Besides, the Rules provide for sufficient security
should the owner of the property attached suffer damage or prejudice
caused by the attachment.[17]
Chuidians absence from the country was considered by the
Sandiganbayan to be the most potent insofar as the relief being sought is
concerned.[18]Taking judicial notice of the admitted fact that Chuidian was
residing outside of the country, the Sandiganbayan observed that:
28
x x x no explanation whatsoever was given by him as to his absence from
the country, or as to his homecoming plans in the future. It may be added,
moreover, that he has no definite or clearcut plan to return to the country at
this juncture given the manner by which he has submitted himself to the
jurisdiction of the court.[19]
Thus, the Sandiganbayan ruled that even if Chuidian is one who ordinarily
resides in the Philippines, but is temporarily living outside, he is still subject
to the provisional remedy of attachment.
Accordingly, an order of attachment[20] was issued by the Sandiganbayan
on July 19, 1993, ordering the Sandiganbayan Sheriff to attach PNB L/C No.
SSD-005-85 for safekeeping pursuant to the Rules of Court as security for
the satisfaction of judgment in Sandiganbayan Civil Case No. 0027.
On August 11, 1997, or almost four (4) years after the issuance of the
order of attachment, Chuidian filed a motion to lift the attachment based on
the following grounds: First, he had returned to the Philippines; hence, the
Sandiganbayans most potent ground for the issuance of the writ of
preliminary attachment no longer existed. Since his absence in the past was
the very foundation of the Sandiganbayans writ of preliminary attachment,
his presence in the country warrants the immediate lifting thereof. Second,
there was no evidence at all of initial fraud or subsequent concealment
except for the affidavit submitted by the PCGG Chairman citing mere belief
and information and not on knowledge of the facts. Moreover, this statement
is hearsay since the PCGG Chairman was not a witness to the litigated
incidents, was never presented as a witness by the Republic and thus was
not subject to cross-examination.
Third, Chuidian denies that he ever disposed of his assets to defraud the
Republic, and there is nothing in the records that support the
Sandiganbayans erroneous conclusion on the matter. Fourth, Chuidian belied
the allegation that he was also a defendant in other related criminal action,
for in fact, he had never been a defendant in any prosecution of any sort in
the Philippines.[21] Moreover, he could not have personally appeared in any
other action because he had been deprived of his right to a travel document
by the government.
Fifth, the preliminary attachment was, in the first place, unwarranted
because he was not guilty of fraud in contracting the debt or incurring the
obligation. In fact, the L/C was not a product of fraudulent transactions, but
was the result of a US Court-approved settlement. Although he was accused
of employing blackmail tactics to procure the settlement, the California
Supreme Court ruled otherwise. And in relation thereto, he cites as a sixth
ground the fact that all these allegations of fraud and wrongdoing had
already been dealt with in actions before the State and Federal Courts of
29
California. While it cannot technically be considered as forum shopping, it is
nevertheless a form of suit multiplicity over the same issues, parties and
subject matter.[22]These foreign judgments constitute res judicata which
warrant the dismissal of the case itself.
Chuidian further contends that should the attachment be allowed to
continue, he will be deprived of his property without due process. The L/C
was payment to Chuidian in exchange for the assets he turned over to the
Republic pursuant to the terms of the settlement in Case No. 575867. Said
assets, however, had already been sold by the Republic and cannot be
returned to Chuidian should the government succeed in depriving him of the
proceeds of the L/C. Since said assets were disposed of without his or the
Sandiganbayans consent, it is the Republic who is fraudulently disposing of
assets.
Finally, Chuidian stressed that throughout the four (4) years that the
preliminary attachment had been in effect, the government had not set the
case for hearing. Under Rule 17, Section 3, the case itself should be
dismissed for laches owing to the Republics failure to prosecute its action for
an unreasonable length of time. Accordingly, the preliminary attachment,
being only a temporary or ancillary remedy, must be lifted and the PNB
ordered to immediately pay the proceeds of the L/C to Chuidian.
Subsequently, on August 20, 1997, Chuidian filed a motion to require the
Republic to deposit the L/C in an interest bearing account. [23] He pointed out
to the Sandiganbayan that the face amount of the L/C had, since its
attachment, become fully demandable and payable. However, since the
amount is just lying dormant in the PNB, without earning any interest, he
proposed that it would be to the benefit of all if the Sandiganbayan requires
PNB to deposit the full amount to a Sandiganbayan trust account at any
bank in order to earn interest while awaiting judgment of the action.
The Republic opposed Chuidians motion to lift attachment, alleging that
Chuidians absence was not the only ground for the attachment and,
therefore, his belated appearance before the Sandiganbayan is not a
sufficient reason to lift the attachment. Moreover, allowing the foreign
judgment as a basis for the lifting of the attachment would essentially
amount to an abdication of the jurisdiction of the Sandiganbayan to hear and
decide the ill gotten wealth cases lodged before it in deference to the
judgment of foreign courts.
In a Resolution promulgated on November 13, 1998, the Sandiganbayan
denied Chuidians motion to lift attachment.[24]
On the same day, the Sandiganbayan issued another Resolution denying
Chuidians motion to require deposit of the attached L/C in an interest
bearing account.[25]
30
In a motion seeking a reconsideration of the first resolution, Chuidian
assailed the Sandiganbayans finding that the issues raised in his motion to
lift attachment had already been dealt with in the earlier resolution dated
July 14, 1993 granting the application for the writ of preliminary attachment
based on the following grounds: First, Chuidian was out of the country in
1993, but is now presently residing in the country. Second, the
Sandiganbayan could not have known then that his absence was due to the
non-renewal of his passport at the instance of the PCGG. Neither was it
revealed that the Republic had already disposed of Chuidians assets ceded to
the Republic in exchange for the L/C. The foreign judgment was not an issue
then because at that time, said judgment had not yet been issued and much
less final. Furthermore, the authority of the PCGG Commissioner to
subscribe as a knowledgeable witness relative to the issuance of the writ of
preliminary attachment was raised for the first time in the motion to lift the
attachment. Finally, the issue of laches could not have been raised then
because it was the Republics subsequent neglect or failure to prosecute
despite the passing of the years that gave rise to laches.[26]
Chuidian also moved for a reconsideration of the Sandiganbayan
resolution denying the motion to require deposit of the L/C into an interest
bearing account. He argued that contrary to the Sandiganbayans
pronouncement, allowing the deposit would not amount to a virtual
recognition of his right over the L/C, for he is not asking for payment but
simply requesting that it be deposited in an account under the control of the
Sandiganbayan. He further stressed that the Sandiganbayan abdicated its
bounden duty to rule on an issue when it found that his motion will render
nugatory the purpose of sequestration and freeze orders over the L/C.
Considering that his assets had already been sold by the Republic, he
claimed that the Sandiganbayans refusal to exercise its fiduciary duty over
attached assets will cause him irreparable injury. Lastly, the Sandiganbayans
position that Chuidian was not the owner but a mere payee-beneficiary of
the L/C issued in his favor negates overwhelming jurisprudence on the
Negotiable Instruments Law, while at the same time obliterating his rights of
ownership under the Civil Code.[27]
On July 13, 1999, the Sandiganbayan gave due course to Chuidians plea
for the attached L/C to be deposited in an interest-bearing account, on the
ground that it will redound to the benefit of both parties.
The Sandiganbayan declared the national government as the principal
obligor of the L/C even though the liability remained in the books of the PNB
for accounting and monitoring purposes.
The Sandiganbayan, however, denied Chuidians motion for
reconsideration of the denial of his motion to lift attachment, agreeing in full
with the governments apriorisms that:
31
x x x (1) it is a matter of record that the Court granted the application for
writ of attachment upon grounds other than defendants absence in the
Philippine territory. In its Resolution dated July 14, 1993, the Court found a
prima facie case of fraud committed by defendant Chuidian, and that
defendant has recovered or disposed of his property with the intent of
defrauding plaintiff; (2) Chuidians belated presence in the Philippines cannot
be invoked to secure the lifting of attachment. The rule is specific that it
applies to a party who is about to depart from the Philippines with intent to
defraud his creditors.Chuidians stay in the country is uncertain and he may
leave at will because he holds a foreign passport; and (3) Chuidians other
ground, sufficiency of former PCGG Chairman Gunigundos verification of the
complaint, has been met fairly and squarely in the Resolution of July 14,
1993.[28]
Hence, the instant petition for certiorari contending that the respondent
Sandiganbayan committed grave abuse of discretion amounting to lack or
excess of jurisdiction when it ruled that:
1) Most of the issues raised in the motion to lift attachment had been
substantially addressed in the previous resolutions dated July 14,
1993 and August 26, 1998, while the rest were of no imperative
relevance as to affect the Sandiganbayans disposition; and
2) PNB was relieved of the obligation to pay on its own L/C by virtue
of Presidential Proclamation No. 50.
The Rules of Court specifically provide for the remedies of a defendant
whose property or asset has been attached. As has been consistently ruled
by this Court, the determination of the existence of grounds to discharge a
writ of attachment rests in the sound discretion of the lower courts.[29]
The question in this case is: What can the herein petitioner do to quash
the attachment of the L/C? There are two courses of action available to the
petitioner:
First. To file a counterbond in accordance with Rule 57, Section 12, which
provides:
or
Second. To quash the attachment on the ground that it was irregularly or
improvidently issued, as provided for in Section 13 of the same Rule:
It would appear that petitioner chose the latter because the grounds he
raised assail the propriety of the issuance of the writ of attachment. By his
own admission, however, he repeatedly acknowledged that his justifications
to warrant the lifting of the attachment are facts or events that came to light
or took place after the writ of attachment had already been implemented.
More particularly, petitioner emphasized that four (4) years after the writ
was issued, he had returned to the Philippines. Yet while he noted that he
would have returned earlier but for the cancellation of his passport by the
PCGG, he was not barred from returning to the Philippines. Then he
informed the Sandiganbayan that while the case against him was pending,
but after the attachment had already been executed, the government lost
two (2) cases for fraud lodged against him before the U.S. Courts, thus
33
invoking res judicata. Next, he also pointed out that the government is
estopped from pursuing the case against him for failing to prosecute for the
number of years that it had been pending litigation.
It is clear that these grounds have nothing to do with the issuance of the
writ of attachment. Much less do they attack the issuance of the writ at that
time as improper or irregular. And yet, the rule contemplates that the defect
must be in the very issuance of the attachment writ. For instance, the
attachment may be discharged under Section 13 of Rule 57 when it is
proven that the allegations of the complaint were deceptively framed,[30] or
when the complaint fails to state a cause of action.[31] Supervening events
which may or may not justify the discharge of the writ are not within the
purview of this particular rule.
In the instant case, there is no showing that the issuance of the writ of
attachment was attended by impropriety or irregularity. Apart from seeking
a reconsideration of the resolution granting the application for the writ,
petitioner no longer questioned the writ itself. For four (4) long years he
kept silent and did not exercise any of the remedies available to a defendant
whose property or asset has been attached. It is rather too late in the day
for petitioner to question the propriety of the issuance of the writ.
Petitioner also makes capital of the two foreign judgments which he
claims warrant the application of the principle of res judicata. The first
judgment, in Civil Case Nos. 575867 and 577697 brought by Philguarantee
before the Santa Clara Country Superior Court, denied Philguarantees prayer
to set aside the stipulated judgment wherein Philguarantee and Chuidian
agreed on the subject attached L/C. On March 14, 1990, the Court of Appeal
of the State of California affirmed the Superior Courts judgment. The said
judgment became the subject of a petition for review by the California
Supreme Court. There is no showing, however, of any final judgment by the
California Supreme Court. The records, including petitioners pleadings, are
bereft of any evidence to show that there is a final foreign judgment which
the Philippine courts must defer to. Hence, res judicata finds no application
in this instance because it is a requisite that the former judgment or order
must be final.[32]
Second, petitioner cites the judgment of the United States District Court
in Civil Case 86-2255 RSWL brought by petitioner Chuidian against PNB to
compel the latter to pay the L/C. The said Courts judgment, while it ruled in
favor of petitioner on the matter of Philguarantees action-in-intervention to
set aside the settlement agreement, also ruled in favor of PNB, to wit:
Under Executive Order No. 1, the PCGG is vested by the Philippine President
with the power to enforce its directives and orders by contempt
proceedings. Under Executive Order No. 2, the PCGG is empowered to freeze
34
any, and all assets, funds and property illegally acquired by former President
Marcos or his close friends and business associates.
On March 11, 1986, PNB/Manila received an order from the PCGG ordering
PNB to freeze any further drawings on the L/C. The freeze order has
remained in effect and was followed by a sequestration order issued by the
PCGG. Subsequently, Chuidians Philippine counsel filed a series of challenges
to the freeze and sequestration orders, which challenges were unsuccessful
as the orders were found valid by the Philippine Supreme Court. The freeze
and sequestration orders are presently in effect. Thus, under the PCGG order
and Executive Orders Nos. 1 and 2, performance by PNB would be illegal
under Philippine Law. Therefore PNB is excused from performance of the L/C
agreement as long as the freeze and sequestration orders remain in
effect.(Underscoring ours)
xxxxxxxxx
Chuidian argues that the fact that the L/C was issued pursuant to a
settlement in California, that the negotiations for which occurred in
California, and that two of the payments were made at PNB/LA, compels the
conclusion that the act of prohibiting payment of the L/C occurred in Los
Angeles. However, the majority of the evidence
and Tchacosh and Sabbatino compel the opposite conclusion. The L/C was
issued in Manila, such was done at the request of a Philippine government
instrumentality for the benefit of a Philippine citizen, the L/C was to be
performed in the Philippines, all significant events relating to the issuance
and implementation of the L/C occurred in the Philippines, the L/C
agreement provided that the L/C was to be construed according to laws of
the Philippines, and the Philippine government certainly has an interest in
preventing the L/C from being remitted in that it would be the release of
funds that are potentially illgotten gains. Accordingly, the Court finds that
the PCGG orders are acts of state that must be respected by this Court, and
thus PNB is excused from making payment on the L/C as long as the freeze
and sequestration orders remain in effect.[33] (Underscoring ours)
Thus, this Court has time and again ruled that the merits of the action in
which a writ of preliminary attachment has been issued are not triable on a
motion for dissolution of the attachment, otherwise an applicant for the
lifting of the writ could force a trial of the merits of the case on a mere
motion.[35]
It is not the Republics fault that the litigation has been protracted. There
is as yet no evidence of fraud on the part of petitioner. Petitioner is only one
of the twenty-three (23) defendants in the main action. As such, the
litigation would take longer than most cases. Petitioner cannot invoke this
delay in the proceedings as an excuse for not seeking the proper recourse in
having the writ of attachment lifted in due time. If ever laches set in, it was
petitioner, not the government, who failed to take action within a reasonable
time period. Challenging the issuance of the writ of attachment four (4)
years after its implementation showed petitioners apparent indifference
towards the proceedings before the Sandiganbayan.
36
In sum, petitioner has failed to convince this Court that the
Sandiganbayan gravely abused its discretion in a whimsical, capricious and
arbitrary manner. There are no compelling reasons to warrant the immediate
lifting of the attachment even as the main case is still pending. On the other
hand, allowing the discharge of the attachment at this stage of the
proceedings would put in jeopardy the right of the attaching party to realize
upon the relief sought and expected to be granted in the main or principal
action. It would have the effect of prejudging the main case.
The attachment is a mere provisional remedy to ensure the safety and
preservation of the thing attached until the plaintiff can, by appropriate
proceedings, obtain a judgment and have such property applied to its
satisfaction.[36] To discharge the attachment at this stage of the proceedings
would render inutile any favorable judgment should the government prevail
in the principal action against petitioner. Thus, the Sandiganbayan, in
issuing the questioned resolutions, which are interlocutory in nature,
committed no grave abuse of discretion amounting to lack or excess of
jurisdiction. As long as the Sandiganbayan acted within its jurisdiction, any
alleged errors committed in the exercise of its jurisdiction will amount to
nothing more than errors of judgment which are reviewable by timely appeal
and not by special civil action of certiorari.[37]
Moreover, we have held that when the writ of attachment is issued upon
a ground which is at the same time the applicants cause of action, the only
other way the writ can be lifted or dissolved is by a counterbond, in
accordance with Section 12 of the same rule.[38] This recourse, however, was
not availed of by petitioner, as noted by the Solicitor General in his
comment.[39]
To reiterate, there are only two ways of quashing a writ of
attachment: (a) by filing a counterbond immediately; or (b) by moving to
quash on the ground of improper and irregular issuance.[40] These grounds
for the dissolution of an attachment are fixed in Rule 57 of the Rules of
Court and the power of the Court to dissolve an attachment is circumscribed
by the grounds specified therein.[41] Petitioners motion to lift attachment
failed to demonstrate any infirmity or defect in the issuance of the writ of
attachment; neither did he file a counterbond.
Finally, we come to the matter of depositing the Letter of Credit in an
interest-bearing account. We agree with the Sandiganbayan that any
interest that the proceeds of the L/C may earn while the case is being
litigated would redound to the benefit of whichever party will prevail, the
Philippine government included. Thus, we affirm the Sandiganbayans ruling
that the proceeds of the L/C should be deposited in an interest bearing
account with the Land Bank of the Philippines for the account of the
Sandiganbayan in escrow until ordered released by the said Court.
37
We find no legal reason, however, to release the PNB from any liability
thereunder. The Deed of Transfer, whereby certain liabilities of PNB were
transferred to the national government, cannot affect the said L/C since
there was no valid substitution of debtor. Article 1293 of the New Civil Code
provides:
(b) the BANK shall have secured such governmental and creditors approvals
as may be necessary to establish the consummation, legality and
enforceability of the transactions contemplated hereby.
x x x Movant has basis in pointing out that inasmuch as the L/C was issued
in his favor, he is presumed to be the lawful payee-beneficiary of the L/C
until such time that the plaintiff successfully proves that said L/C is ill-gotten
and he has no right over the same.[42]
38
frozen or taken over and vest it in the sequestering agency, the Government
or other person.
Thus, until such time that the government is able to successfully prove
that petitioner has no right to claim the proceeds of the L/C, he is deemed to
be the lawful payee-beneficiary of said L/C, for which any substitution of
debtor requires his consent. The Sandiganbayan thus erred in relieving PNB
of its liability as the original debtor.
WHEREFORE, in view of all the foregoing, the petition is
DISMISSED. The Resolutions of the Sandiganbayan dated November 6, 1998
and July 2, 1999 are AFFIRMED. The PNB is DIRECTED to remit to the
Sandiganbayan the proceeds of Letter of Credit No. SFD-005-85 in the
amount of U.S. $4.4 million within fifteen (15) days from notice hereof, the
same to be placed under special time deposit with the Land Bank of the
Philippines, for the account of Sandiganbayan in escrow for the person or
persons, natural or juridical, who shall eventually be adjudged lawfully
entitled thereto, the same to earn interest at the current legal bank
rates. The principal and its interest shall remain in said account until ordered
released by the Court in accordance with law.
No costs.
SO ORDERED.
39
THIRD DIVISION
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CORONA,*
NACHURA, and
REYES, JJ.
Promulgated:
MANUEL TANKIANSEE,
Respondent. February 13, 2008
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the September 14, 2005 Decision[1] of the Court of
40
The facts are undisputed. Petitioner Alejandro Ng Wee, a valued client of
credit.[3]
discovered that the company extended a loan equal to his total money
only P37.5M. This credit facility originated from another loan of about P1.5B
latter defaulted in its obligation, Wincorp instituted a case against it and its
virtually freed the latter of any liability. Allegedly, through the false
41
representations of Wincorp and its officers and directors, petitioner was
enticed to roll over his placements so that Wincorp could loan the same to
Virata/Power Merge.[5]
connived with Wincorps officers and directors to fraudulently obtain for his
instituted, on October 19, 2000, Civil Case No. 00-99006 for damages with
the Regional Trial Court (RTC) of Manila.[6] One of the defendants impleaded
and the October 12, 2000 Affidavit[8] of petitioner, the trial court ordered the
exempt from execution of all the defendants in the civil case subject, among
Arguing that the writ was improperly issued and that the bond
moved for the discharge of the attachment.[11] The other defendants likewise
42
filed similar motions.[12] On October 23, 2001, the RTC, in an Omnibus
Order,[13] denied all the motions for the discharge of the attachment. The
reconsideration[14] but the trial court denied the same on October 14,
2002.[15]
(UEM-MARA), assailed the same via certiorari under Rule 65 before the CA
the certiorari petition on August 21, 2003,[16] and the motion for
on certiorari before this Court, in G.R. No. 162928, we denied the petition
and affirmed the CA rulings on May 19, 2004 for Viratas and UEM-MARAs
failure to sufficiently show that the appellate court committed any reversible
2004.[19]
raised in his first motion but raising the following additional grounds: (1)
43
questionable transactions;[21] and (2) that he could not have connived with
Ruling that the grounds raised were already passed upon by it in the
previous orders affirmed by the CA and this Court, and that the additional
the merits of the case, the trial court denied the motion in its January 6,
2005 Order.[23]
Petitioner moved for the reconsideration of the said ruling, but the CA denied
44
A.
B.
C.
For his part, respondent counters, among others, that the general and
with the other defendants to defraud petitioneris not sufficient basis for the
45
said affidavit does petitioner mention the name of respondent and any
attachment can only be granted on concrete and specific grounds and not on
and established as a fact. Respondent further contends that the trial court,
into the merits of the case. All that the court has to examine are the
also rely on the decisions of the appellate court in CA-G.R. SP No. 74610 and
this Court in G.R. No. 162928 to support his claim because respondent is not
reads:
46
of the adverse party attached as security for the satisfaction of
any judgment that may be recovered in the following cases:
xxxx
For a writ of attachment to issue under this rule, the applicant must
the debt or failure to comply with his obligation.[30] The applicant must then
explained as follows:
47
In the instant case, petitioners October 12, 2000 Affidavit[34] is bereft
narrated only the alleged fraudulent transaction between Wincorp and Virata
and/or Power Merge, which, by the way, explains why this Court, in G.R. No.
162928, affirmed the writ of attachment issued against the latter. As to the
states that respondent, an officer and director of Wincorp, connived with the
has not shown any specific act or deed to support the allegation that
The affidavit, being the foundation of the writ,[35] must contain such
the court to decide whether or not to issue the writ. [36] Absent any
fraud, the general averment in the affidavit that respondent is an officer and
48
commit a fraud, is insufficient to support the issuance of a writ of
preliminary attachment.[37] In the application for the writ under the said
ground, compelling is the need to give a hint about what constituted the
fraud and how it was perpetrated[38] because established is the rule that
officer and director of the company does not necessarily give rise to the
liability will directly attach, this is only done when the wrongdoing has been
attachment is harsh and rigorous for it exposes the debtor to humiliation and
construed against the applicant,[42] such that if the requisites for its grant
are not shown to be all present, the court shall refrain from issuing it, for,
49
Considering, therefore, that, in this case, petitioner has not fully
satisfied the legal obligation to show the specific acts constitutive of the
alleged fraud committed by respondent, the trial court acted in excess of its
properties of respondent.
However, the principle finds no application here because petitioner has not
yet fulfilled the requirements set by the Rules of Court for the issuance of
prevented by the said ruling will not arise, because the propriety or
simply reading the complaint and the affidavit in support of the application.
Furthermore, our ruling in G.R. No. 162928, to the effect that the writ of
and UEM-MARA, does not affect respondent herein, for, as correctly ruled by
50
the CA, respondent is never a party thereto.[48] Also, he is not in the same
respondent.
We state, in closing, that our ruling herein deals only with the writ of
not concern the other parties in the civil case, nor affect the trial courts
14, 2005 Decision and the January 6, 2006 Resolution of the Court of
SO ORDERED.
51
THIRD DIVISION
DECISION
PERALTA, J.:
The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario
Torres (Mario) each own adjacent 20,000 square meters track of land
situated at Barrio Lankaan, Dasmariñas, Cavite, covered by Transfer
Certificate of Title (TCT) Nos. 251267,3 251266,4 and 251265,5 respectively.
Petitioners claimed that Solar has already paid the entire purchase price of
₱35,000,000.00 to Nicanor in Thirty-Two (32) post-dated checks which the
latter encashed/deposited on their respective due dates. Petitioners added
that they also learned that during the period from January 2000 to April
2002, Nicanor allegedly acquired a house and lot at Vista Grande BF Resort
52
Village, Las Piñas City and a car, which he registered in the names of his
unemployed children, Nikki Normel Satsatin and Nikki Norlin Satsatin.
However, notwithstanding the receipt of the entire payment for the subject
property, Nicanor only remitted the total amount of ₱9,000,000.00, leaving
an unremitted balance of ₱19,000,000.00. Despite repeated verbal and
written demands, Nicanor failed to remit to them the balance of
₱19,000,000.00.
Consequently, on October 25, 2002, petitioners filed before the regional trial
court (RTC) a Complaint7 for sum of money and damages, against Nicanor,
Ermilinda Satsatin, Nikki Normel Satsatin, and Nikki Norlin Satsatin. The
case was docketed as Civil Case No. 2694-02, and raffled to RTC, Branch 90,
Dasmariñas, Cavite.
On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of
a Writ of Attachment,8 alleging among other things: that respondents are
about to depart the Philippines; that they have properties, real and personal
in Metro Manila and in the nearby provinces; that the amount due them
is P19,000,000.00 above all other claims; that there is no other sufficient
security for the claim sought to be enforced; and that they are willing to
post a bond fixed by the court to answer for all costs which may be adjudged
to the respondents and all damages which respondents may sustain by
reason of the attachment prayed for, if it shall be finally adjudged that
petitioners are not entitled thereto.
On October 30, 2002, the trial court issued an Order9 directing the
petitioners to post a bond in the amount of ₱7,000,000.00 before the court
issues the writ of attachment, the dispositive portion of which reads as
follows:
In the Order12 dated November 15, 2002, the RTC granted the above motion
and deputized the sheriff, together with police security assistance, to serve
the writ of attachment.
53
Thereafter, the RTC issued a Writ of Attachment13 dated November 15,
2002, directing the sheriff to attach the estate, real or personal, of the
respondents, the decretal portion of which reads:
WE, THEREFORE, command you to attach the estate, real or personal, not
exempt from execution, of the said defendants, in your province, to the
value of said demands, and that you safely keep the same according to the
said Rule, unless the defendants give security to pay such judgment as may
be recovered on the said action, in the manner provided by the said Rule,
provided that your legal fees and all necessary expenses are fully paid.
You shall return this writ with your proceedings indorsed hereon within
twenty (20) days from the date of receipt hereof.
GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day of November,
2002, at Imus for Dasmariñas, Cavite, Philippines.14
On November 19, 2002, a copy of the writ of attachment was served upon
the respondents. On the same date, the sheriff levied the real and personal
properties of the respondent, including household appliances, cars, and a
parcel of land located at Las Piñas, Manila.15
On the same day respondents filed their answer, they also filed a Motion to
Discharge Writ of Attachment18anchored on the following grounds: the bond
was issued before the issuance of the writ of attachment; the writ of
attachment was issued before the summons was received by the
respondents; the sheriff did not serve copies of the application for
attachment, order of attachment, plaintiffs’ affidavit, and attachment bond,
to the respondents; the sheriff did not submit a sheriff’s return in violation of
the Rules; and the grounds cited for the issuance of the writ are baseless
and devoid of merit. In the alternative, respondents offered to post a
counter-bond for the lifting of the writ of attachment.19
On March 11, 2003, after the parties filed their respective pleadings, the RTC
issued an Order20 denying the motion, but at the same time, directing the
respondents to file a counter-bond, to wit:
54
directed to file a counter-bond executed to the attaching party, in the
amount of Seven Million Pesos (₱7,000,000.00), to secure the payment of
any judgment that the attaching party may recover in the action, with notice
on the attaching party, whereas, the Motion to Discharge Writ of Attachment
is DENIED.
SO ORDERED.21
SO ORDERED.
SO ORDERED.
55
(1) public respondents committed grave abuse of discretion amounting
to lack of or in excess of jurisdiction in failing to notice that the lower
court has no jurisdiction over the person and subject matter of the
complaint when the subject Writ of Attachment was issued;
Respondents argued that the subject writ was improper and irregular having
been issued and enforced without the lower court acquiring jurisdiction over
the persons of the respondents. They maintained that the writ of attachment
was implemented without serving upon them the summons together with
the complaint. They also argued that the bond issued in favor of the
petitioners was defective, because the bonding company failed to obtain the
proper clearance that it can transact business with the RTC of Dasmariñas,
Cavite. They added that the various clearances which were issued in favor of
the bonding company were applicable only in the courts of the cities of
Pasay, Pasig, Manila, and Makati, but not in the RTC, Imus, Cavite.29
SO ORDERED.30
I.
56
II.
III.
IV.
57
respondent had already expired on November 14, 2003 and petitioners have
renewed the attachment bond covering the period from November 14, 2003
to November 14, 2004, and further renewed to cover the period of
November 14, 2004 to November 14, 2005.
In the case at bar, the CA correctly found that there was grave abuse of
discretion amounting to lack of or in excess of jurisdiction on the part of the
trial court in approving the bond posted by petitioners despite the fact that
not all the requisites for its approval were complied with. In accepting a
surety bond, it is necessary that all the requisites for its approval are met;
otherwise, the bond should be rejected.37
58
This Court has long put to rest the issue of when jurisdiction over the person
of the defendant should be acquired in cases where a party resorts to
provisional remedies. A party to a suit may, at any time after filing the
complaint, avail of the provisional remedies under the Rules of Court.
Specifically, Rule 57 on preliminary attachment speaks of the grant of the
remedy "at the commencement of the action or at any time before entry of
judgment."40 This phrase refers to the date of the filing of the complaint,
which is the moment that marks "the commencement of the action." The
reference plainly is to a time before summons is served on the defendant, or
even before summons issues.41
In Davao Light & Power Co., Inc. v. Court of Appeals,42 this Court clarified
the actual time when jurisdiction should be had:
It goes without saying that whatever be the acts done by the Court prior to
the acquisition of jurisdiction over the person of defendant x x x issuance of
summons, order of attachment and writ of attachment x x x these do
not and cannot bind and affect the defendant until and unless
jurisdiction over his person is eventually obtained by the court, either
by service on him of summons or other coercive process or his voluntary
submission to the court’s authority. Hence, when the sheriff or other proper
officer commences implementation of the writ of attachment, it is essential
that he serve on the defendant not only a copy of the applicant’s affidavit
and attachment bond, and of the order of attachment, as explicitly required
by Section 5 of Rule 57, but also the summons addressed to said defendant
as well as a copy of the complaint x x x. (Emphasis supplied.)
In Cuartero v. Court of Appeals,43 this Court held that the grant of the
provisional remedy of attachment involves three stages: first, the court
issues the order granting the application; second, the writ of attachment
issues pursuant to the order granting the writ; and third, the writ is
implemented. For the initial two stages, it is not necessary that jurisdiction
over the person of the defendant be first obtained. However, once the
implementation of the writ commences, the court must have acquired
jurisdiction over the defendant, for without such jurisdiction, the court has
no power and authority to act in any manner against the defendant. Any
order issuing from the Court will not bind the defendant.44
Thus, it is indispensable not only for the acquisition of jurisdiction over the
person of the defendant, but also upon consideration of fairness, to apprise
the defendant of the complaint against him and the issuance of a writ of
preliminary attachment and the grounds therefor that prior or
contemporaneously to the serving of the writ of attachment, service of
summons, together with a copy of the complaint, the application for
59
attachment, the applicant’s affidavit and bond, and the order must be served
upon him.
In the instant case, assuming arguendo that the trial court validly issued the
writ of attachment on November 15, 2002, which was implemented on
November 19, 2002, it is to be noted that the summons, together with a
copy of the complaint, was served only on November 21, 2002.
At the time the trial court issued the writ of attachment on November 15,
2002, it can validly to do so since the motion for its issuance can be filed "at
the commencement of the action or at any time before entry of judgment."
However, at the time the writ was implemented, the trial court has not
acquired jurisdiction over the persons of the respondent since no summons
was yet served upon them. The proper officer should have previously or
simultaneously with the implementation of the writ of attachment, served a
copy of the summons upon the respondents in order for the trial court to
have acquired jurisdiction upon them and for the writ to have binding effect.
Consequently, even if the writ of attachment was validly issued, it was
improperly or irregularly enforced and, therefore, cannot bind and affect the
respondents.
There are two ways of discharging the attachment. First, to file a counter-
bond in accordance with Section 12 of Rule 57. Second[,] [t]o quash the
attachment on the ground that it was irregularly or improvidently issued, as
provided for in Section 13 of the same rule. Whether the attachment was
discharged by either of the two ways indicated in the law, the attachment
debtor cannot be deemed to have waived any defect in the issuance of the
attachment writ by simply availing himself of one way of discharging the
60
attachment writ, instead of the other. The filing of a counter-bond is merely
a speedier way of discharging the attachment writ instead of the other
way.45
Moreover, again assuming arguendo that the writ of attachment was validly
issued, although the trial court later acquired jurisdiction over the
respondents by service of the summons upon them, such belated service of
summons on respondents cannot be deemed to have cured the fatal defect
in the enforcement of the writ. The trial court cannot enforce such a coercive
process on respondents without first obtaining jurisdiction over their person.
The preliminary writ of attachment must be served after or simultaneous
with the service of summons on the defendant whether by personal service,
substituted service or by publication as warranted by the circumstances of
the case. The subsequent service of summons does not confer a retroactive
acquisition of jurisdiction over her person because the law does not allow for
retroactivity of a belated service.46
SO ORDERED.
DIOSDADO M. PERALTA
61
THIRD DIVISION
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of
Civil Procedure praying for the annulment of the Decision1 dated March 27,
2012 and Resolution2 dated September 11, 2012 of the Court of Appeals
(CA) in CA-G.R. SP No. 120664, which affirmed the Orders dated September
24, 2010 and May 26, 2011, respectively, of Branch 30, Regional Trial Court
(RTC) - Manila.
62
substitution of their garnished account with government securities and the
immediate resolution of their motion to discharge attachment and setting
the motion for hearing, which respondent Erlinda opposed.
On May 22, 2002, the RTC resolved the pending incidents and required the
petitioners to justify their motion to discharge the attachment. During pre-
trial on May 23, 2002, respondents requested additional time to file a
supplemental motion to justify their earlier motions which was granted and
gave petitioners ten (10) days from receipt within which to comment or
opposed (sic) it.
THE ORDERS dated September 8, 2003, and December 18, 2003 are
NULLIFIED and SET ASIDE.
63
Respondent Erlinda filed her attachment bond on June 25, 2009 in the
amount of P35,000,000.00 through Visayan Surety and Insurance
Corporation which was approved by respondent on July 7, 2009.
On July 20, 2009, petitioners filed a motion for extension of time to comply
and/or file the appropriate pleading and to hold in abeyance the
reinstatement of the writ of attachment.
On June 27, 2011, respondent judge issued an Order reinstating the Writ of
Attachment dated March 1, 2001 for failure of petitioners to file the required
counterbond. Respondent judge also issued an amended Reinstated Writ of
Attachment directing respondent Sheriff Oscar L. Rojas (hereafter
respondent Sheriff) to attach the real estate or personal properties of
petitioners in the amount of P28,597,472.70. On June 30, 2011, the sheriff
served the Notice of Garnishment and the Amended Reinstated Writ of
Attachment.
64
WHEREFORE, premises considered, the petition is DISMISSED and
accordingly, DENIED DUE COURSE. The Orders dated September 24, 2010
and May 26, 2011 are hereby AFFIRMED.
SO ORDERED.3cralawlawlibrary
Petitioners filed a motion for reconsideration against said decision, but the
same was denied in a Resolution dated September 11, 2012.
Simply stated, the issue for our resolution is whether the CA erred in
affirming the RTC's decision which denied petitioners' motion praying that
bank property be deposited in lieu of cash or a counter-bond.
In their petition, petitioners contend that it has the option to deposit real
property, in lieu of cash or a counter-bond, to secure any contingent lien on
its property in the event respondent wins the case. They argue that Section
2 of Rule 57 only mentions the term "deposit," thus, it cannot only be
confined or construed to refer to cash.
Section 2, Rule 57 of the Rules of Court explicitly states that "[a]n order of
attachment may be issued either ex parte or upon motion with notice and
hearing by the court in which the action is pending, or by the Court of
Appeals or the Supreme Court, and must require the sheriff of the court to
attach so much of the property in the Philippines of the party against whom
it is issued, not exempt from execution, as may be sufficient to satisfy the
applicant's demand, unless such party makes deposit or gives a bond
as hereinafter provided in an amount equal to that fixed in the order,
which may be the amount sufficient to satisfy the applicant's demand or the
value of the property to be attached as stated by the applicant, exclusive of
costs."
65
Section 5 of the same Rule likewise states that "[t]he sheriff enforcing the
writ shall without delay and with all reasonable diligence attach, to await
judgment and execution in the action, only so much of the property in the
Philippines of the party against whom the writ is issued, not exempt from
execution, as may be sufficient to satisfy the applicant's demand, unless
the former makes a deposit with the court from which the writ is
issued, or gives a counter-bond executed to the applicant, in an
amount equal to the bond fixed by the court in the order of
attachment or to the value of the property to be attached, exclusive
of costs."
From the foregoing, it is evidently clear that once the writ of attachment has
been issued, the only remedy of the petitioners in lifting the same is through
a cash deposit or the filing of the counter-bond. Thus, the Court holds that
petitioner's argument that it has the option to deposit real property instead
of depositing cash or filing a counter-bond to discharge the attachment or
stay the implementation thereof is unmeritorious.
Apropos, the trial court aptly ruled that while it is true that the word deposit
cannot only be confined or construed to refer to cash, a broader
interpretation thereof is not justified in the present case for the reason that
a party seeking a stay of the attachment under Section 5 is required to
make a deposit in an amount equal to the bond fixed by the court in the
order of attachment or to the value of the property to be attached. The
proximate relation of the word "deposit" and "amount" is unmistakable in
Section 5 of Rule 57. Plainly, in construing said words, it can be safely
concluded that Section 5 requires the deposit of money as the word
"amount" commonly refers to or is regularly associated with a sum of
money.
66
not give a special or technical interpretation to a word which is otherwise
construed in its ordinary sense by the law and broaden the signification of
the term "deposit" to include that of real properties.cralawred
SO ORDERED.chanroblesvirtuallawlibrary
67
SECOND DIVISION
DECISION
MENDOZA, J.:
The present case involves the wrongful attachment and release of the
petitioner's funds to the adverse party and its plight to recover the same. It
seems that when misfortune poured down from the skies, the petitioner
received a handful. The scales of justice, however, do not tilt based on
chance; rather on the proper application of law, jurisprudence and justice.
This is a petition for review on certiorari seeking to reverse and set aside the
October 21, 2013 Decision1and the April 1, 2014 Resolution2 of the Court of
Appeals (CA), in CA-G.R. CV No. 95421, which affirmed the January 15,
20103 and May 19, 20104 Orders of the Regional Trial Court of Manila,
Branch 32 (RTC), in Civil Case No. 04-108940.
The Facts
On February 20, 1997, Win Multi-Rich Builders, Inc. (Win Multi-Rich) was
incorporated with the Securities and Exchange Commission (SEC).
On January 26, 2004, Win Multi-Rich filed a complaint for sum of money and
damages against petitioner and Ying before the RTC.5 It also prayed for the
68
issuance of a writ of attachment, claiming that Ying was about to abscond
and that petitioner had an impending closure.
The motion, however, was denied by the RTC in its Order,10 dated April 12,
2004, because the issues of the case could be resolved after a fullblown trial.
On April 29, 2004, the RTC issued another order12 directing the deposit of
the garnished funds of petitioner to the cashier of the Clerk of Court of the
RTC.
Win Multi-Rich then filed a motion,13 dated April 29, 2004, to release
petitioner's cash deposit to it. Notably, the motion was granted by the RTC
in the Order,14 dated May 3, 2004. Subsequently, on May 7, 2004, Win
Multi-Rich posted Surety Bond No. 1019815 issued by respondent Far Eastern
Surety and Insurance Co., Inc. (FESICO) for the amount of P9,000,000.00,
to secure the withdrawal of the cash deposited by petitioner. Thus, Win
Multi-Rich was able to receive the funds of petitioner even before the trial
began.
On June 18, 2004, petitioner filed a petition for certiorari16 under Rule 65 of
the 1997 Rules of Civil Procedure before the CA. The petition sought to.
69
annul and set aside the April 12, 2004 and April 29, 2004 Orders of the RTC.
Petitioner then filed its Supplemental Manifestation and Motion,17 asserting
that its cash deposit with the RTC was turned over to Win Multi-Rich.
SO ORDERED.19
Petitioner filed a motion for reconsideration arguing, among others, that the
CA decision failed to state an order to return the garnished amount of
P8,634,448.[20], which was taken from its bank account and given to Win
Multi-Rich. In its Resolution,20 dated October 11, 2006, the CA denied the
motion.
SO ORDERED.22
70
Win Multi-Rich filed a motion for reconsideration but it was denied by the
Court in its April 20, 2009 Resolution.23 Pursuant to an entry of
judgment,24 the Court's decision became final and executory on June 2,
2009.
On June 26, 2009, petitioner moved for execution thereof, praying for the
return of its cash deposit and, in the event of refusal of Win Multi-Rich to
comply, to hold Visayan Surety and FESICO liable under their respective
bonds.25redarclaw
Win Multi-Rich, Visayan Surety and FESICO were served with copies of the
motion for execution.26During the August 7, 2009 hearing on the motion for
execution, counsels for petitioner, Win Multi-Rich and FESICO were
present.27 The hearing, however, was reset to September 16, 2009. On the
said date, Win Multi-Rich, Visayan Surety and FESICO were given fifteen
(15) days to submit their respective comments or oppositions to the motion
for execution.28redarclaw
The RTC granted the motion for execution in an Order,30 dated October 19,
2009, and issued a writ of execution.31 Visayan Surety and FESICO
separately moved for reconsideration of the RTC order.
On January 15, 2010, the RTC issued the order,32 granting the surety
respondents' motion for reconsideration and lifting its October 19, 2009
Order insofar as it granted the motion for execution against Visayan Surety
and FESICO. The RTC absolved the surety respondents because petitioner
did not file a motion for judgment on the attachment bond before the finality
of judgment, thus, violating the surety respondents' right to due process. It
further held that the execution against the surety respondents would go
beyond the terms of the judgment sought to be executed considering that
the Court decision pertained to Win Multi-Rich only.
Petitioner moved for reconsideration, but its motion was denied by the RTC
in its May 19, 2010 Order.33redarclaw
Undaunted, petitioner appealed before the CA, arguing that there was no
violation of the right to due process because the liability of the surety
respondents were based on the bonds issued by them.
71
The CA Ruling
In the assailed decision, dated October 21, 2013, the CA found petitioner's
appeal without merit. Citing Section 20, Rule 57 of the 1997 Rules of Civil
Procedure (Section 20, Rule 57), the CA held that petitioner failed to timely
claim damages against the surety before the decision of the Court became
final and executory. It further stated that a court judgment could not bind
persons who were not parties to the action as the records showed that
Visayan Surety and FESICO were neither impleaded nor informed of the
proceedings before the Court in G.R. No. 175048. It was the view of the CA
that "[hjaving failed to observe very elementary rules of procedure which
are mandatory, [petitioner] caused its own predicament."
II
72
bonds. Also, petitioner claims that the surety bond of FESICO is not covered
by Section 20, Rule 57 because it did not pertain to the writ of attachment
itself, but on the withdrawal of the cash deposit.
There was an application for damages; but there was no notice given to
Visayan Surety
The party applying for the order of attachment must thereafter give a bond
73
executed to the adverse party in the amount fixed by the court in its order
granting the issuance of the writ.40 The purpose of an attachment bond is to
answer for all costs and damages which the adverse party may sustain by
reason of the attachment if the court finally rules that the applicant is not
entitled to the writ.41redarclaw
In this case, the attachment bond was issued by Visayan Surety in order for
Win Multi-Rich to secure the issuance of the writ of attachment. Hence, any
application for damages arising from the improper, irregular or excessive
attachment shall be governed by Section 20, Rule 57, which
provides:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Sec. 20. Claim for damages on account of improper, irregular or excessive
attachment.
Nothing herein contained shall prevent the party against whom the
attachment was issued from recovering in the same action the damages
awarded to him from any property of the attaching party not exempt from
execution should the bond or deposit given by the latter be insufficient or fail
to fully satisfy the award.
The history of Section 20, Rule 57 was discussed in Malayan Insurance, Inc.
v. Salas42 In that case, the Court explained that Section 20, Rule 57 was a
revised version of Section 20, Rule 59 of the 1940 Rules of Court, which, in
turn, was a consolidation of Sections 170, 177, 223, 272, and 439 of the
Code of Civil Procedure regarding the damages recoverable in case of
wrongful issuance of the writs of preliminary injunction, attachment,
mandamus and replevin and the appointment of a receiver.
Thus, the current provision of Section 20, Rule 57 of the 1997 Rules of Civil
74
Procedure covers application for damages against improper attachment,
preliminary injunction, receivership, and replevin.43Consequently,
jurisprudence concerning application for damages against preliminary
injunction, receivership and replevin bonds can be equally applied in the
present case.
In a catena of cases,44 the Court has cited the requisites under Section 20,
Rule 57 in order to claim damages against the bond, as
follows:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
1. The application for damages must be filed in the same case where the
bond was issued;chanRoblesvirtualLawlibrary
The first and second requisites, as stated above, relate to the application for
damages against the bond. An application for damages must be filed in the
same case where the bond was issued, either (a) before the trial or (b)
before the appeal is perfected or (c) before the judgment becomes
executory.45 The usual procedure is to file an application for damages with
due notice to the other party and his sureties. The other method would be to
incorporate the application in the answer with compulsory
counterclaim.46redarclaw
The purpose of requiring the application for damages to be filed in the same
proceeding is to avoid the multiplicity of suit and forum shopping. It is also
required to file the application against the bond before the finality of the
decision to prevent the alteration of the immutable judgment.47redarclaw
75
incorporated an application for damages against the wrongful attachment in
its answer with compulsory counterclaim filed before the RTC. Petitioner
alleged that the issuance of the improper writ of attachment caused it actual
damages in the amount of at least P3,000,000.00. It added that the
Equitable PCI Bank Check No. 160149 it issued to the RTC Clerk of Court, to
lift the improper writ of attachment, should be returned to it.50 Evidently,
these allegations constitute petitioner's application for damages arising from
the wrongful attachment, and the said application was timely filed as it was
filed before the finality of judgment.
The next requisite that must be satisfied by petitioner to hold Visayan Surety
liable would be that the judgment against the wrongful attachment was
promulgated after the hearing with notice to the surety. Certainly, the surety
must be given prior notice and an opportunity to be heard with respect to
the application for damages before the finality of the judgment. The Court
rules that petitioner did not satisfy this crucial element.
Section 20, Rule 57 specifically requires that the application for damages
against the wrongful attachment, whether filed before the trial court or
appellate court, must be with due notice to the attaching party and his
surety or sureties. Such damages may be awarded only after proper hearing
and shall be included in the judgment on the main case.
Due notice to the adverse party and its surety setting forth the facts
supporting the applicant's right to damages and the amount thereof under
the bond is indispensable. The surety should be given an opportunity to be
heard as to the reality or reasonableness of the damages resulting from the
wrongful issuance of the writ. In the absence of due notice to the surety,
therefore, no judgment for damages may be entered and executed against
it.51redarclaw
In the old case of Visayan Surety and Insurance Corp. v. Pascual,52 the
application for damages was made before the finality of judgment, but the
surety was not given due notice. The Court allowed such application under
Section 20, Rule 59 of the 1940 Rules of Court because there was no rule
which stated that the failure to give to the surety due notice of the
application for damages would release the surety from the obligation of the
bond.53redarclaw
The case of Visayan Surety and Insurance Corp. v. Pascual, however, was
abandoned in the subsequent rulings of the Court because this was contrary
to the explicit provision of Section 20, Rule 57.54redarclaw
In People Surety and Insurance Co. v. CA,55 the defendant therein filed an
76
application for damages during the trial but the surety was not notified. The
Court denied the application and stated that "it is now well settled that a
court has no jurisdiction to entertain any proceeding seeking to hold a surety
liable upon its bond, where the surety has not been given notice of the
proceedings for damages against the principal and the judgment holding the
latter liable has already become final."56redarclaw
Clearly, petitioner failed to comply with the requisites under Section 20, Rule
57 because Visayan Surety was not given due notice on the application for
damages before the finality of judgment. The subsequent motion for
execution, which sought to implicate Visayan Surety, cannot alter the
immutable judgment anymore.
While Visayan Surety could not be held liable under Section 20, Rule 57, the
same cannot be said of FESICO. In the case at bench, to forestall the
enforcement of the writ of preliminary attachment, petitioner issued
Equitable PCI Bank Check No. 160149, dated February 16, 2004, in the
amount of P8,634,448.20 payable to the Clerk of Court of the RTC. Pursuant
to the RTC Order, dated April 29, 2004, the garnished funds of petitioner
were deposited to the cashier of the Clerk of Court of the RTC. The
procedure to discharge the writ of preliminary attachment is stated in
Section 12, Rule 57, to wit:LawlibraryofCRAlaw
77
Sec. 12. Discharge of attachment upon giving counterbond.
ChanRoblesVirtualawlibrary
After a writ of attachment has been enforced, the party whose property has
been attached, or the person appearing on his behalf, may move for the
discharge of the attachment wholly or in part on the security given. The
court shall, after due notice and hearing, order the discharge of the
attachment if the movant makes a cash deposit, or files a counter-
bond executed to the attaching party with the clerk of the court
where the application is made, in an amount equal to that fixed by
the court in the order of attachment, exclusive of costs. But if the
attachment is sought to be discharged with respect to a particular property,
the counter-bond shall be equal to the value of that property as determined
by the court. In either case, the cash deposit or the counter-bond shall
secure the payment of any judgment that the attaching party may recover in
the action. A notice of the deposit shall forthwith be served on the attaching
party. Upon the discharge of an attachment in accordance with the
provisions of this section, the property attached, or the proceeds of any sale
thereof, shall be delivered to the party making the deposit or giving the
counter-bond, or to the person appearing on his behalf, the deposit or
counter-bond aforesaid standing in place of the property so released. Should
such counter-bond for any reason to be found to be or become insufficient,
and the party furnishing the same fail to file an additional counter-bond, the
attaching party may apply for a new order of attachment.
[Emphasis Supplied]
Win Multi-Rich, however, took a step further and filed a motion to release
petitioner's cash deposit to it. Immediately, the RTC granted the motion and
directed Win Multi-Rich to post a bond in favor of petitioner in the amount of
P9,000,000.00 to answer for the damages which the latter may sustain
should the court decide that Win Multi-Rich was not entitled to the relief
sought. Subsequently, Win Multi-Rich filed a surety bond of FESICO before
the RTC and was able to obtain the P8,634,448.20 cash deposit of petitioner,
even before the trial commenced.
Strictly speaking, the surety bond of FESICO is not covered by any of the
provisions in Rule 57 of the Rules of Court because, in the first place, Win
Multi-Rich should not have filed its motion to release the cash deposit of
petitioner and the RTC should not have granted the same. The release of the
cash deposit to the attaching party is anathema to the basic tenets of a
preliminary attachment.
78
make some provision for unsecured debts in cases where the means of
satisfaction thereof are liable to be removed beyond the jurisdiction, or
improperly disposed of or concealed, or otherwise placed beyond the reach
of creditors.61 The garnished funds or attached properties could only be
released to the attaching party after a judgment in his favor is
obtained. Under no circumstance, whatsoever, can the garnished
funds or attached properties, under the custody of the sheriff or the
clerk of court, be released to the attaching party before the
promulgation of judgment.
Cash deposits and counterbonds posted by the defendant to lift the writ of
attachment is a security for the payment of any judgment that the attaching
party may obtain; they are, thus, mere replacements of the property
previously attached.62 Accordingly, the P8,634,448.20 cash deposit of
petitioner, as replacement of the properties to be attached, should never
have been released to Win Multi-Rich.
Nevertheless, the Court must determine the nature of the surety bond of
FESICO. The cash deposit or the counter-bond was supposed to secure the
payment of any judgment that the attaching party may recover in the
action.63 In this case, however, Win Multi-Rich was able to withdraw the cash
deposit and, in exchange, it posted a surety bond of FESICO in favor of
petitioner to answer for the damages that the latter may sustain. Corollarily,
the surety bond of FESICO substituted the cash deposit of petitioner as a
security for the judgment. Thus, to claim damages from the surety bond of
FESICO, Section 17, Rule 57 could be applied. It reads:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
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 in the same action.
From a reading of the above-quoted 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.64 Noticeably, unlike Section 20, Rule 57, which requires notice and
hearing before the finality of the judgment in an application for damages,
Section 17, Rule 57 allows a party to claim damages on the surety bond
after the judgment has become executory.65redarclaw
79
The question remains, in contrast to Section 20, why does Section 17
sanction the notice and hearing to the surety after the finality of judgment?
The answer lies in the kind of damages sought to be enforced against the
bond.
Under Section 20, Rule 57, in relation to Section 4 therein,66 the surety bond
shall answer for all the costs which may be adjudged to the adverse party
and all damages which he may sustain by reason of the attachment. In other
words, the damages sought to be enforced against the surety bond
are unliquidated. Necessarily, a notice and hearing before the finality of
judgment must be undertaken to properly determine the amount of
damages that was suffered by the defendant due to the improper
attachment. These damages to be imposed against the attaching party and
his sureties are different from the principal case, and must be included in the
judgment.
On the other hand, under Section 17, Rule 57, in relation to Section 12
therein, the cash deposit or the counter-bond shall secure the payment of
any judgment that the attaching party may recover in the action. Stated
differently, the damages sought to be charged against the surety bond
are liquidated. The final judgment had already determined the amount to
be awarded to the winning litigant on the main action. Thus, there is nothing
left to do but to execute the judgment against the losing party, or in case of
insufficiency, against its sureties.
Here, the Court is convinced that a demand against FESICO had been made,
and that it was given due notice and an opportunity to be heard on its
defense. First, petitioner filed a motion for execution on June 29, 2009, a
copy of which was furnished to FESICO;67second, petitioner filed a
manifestation,68 dated July 13, 2009, that FESICO was duly served with the
said motion and notified of the hearing on August 7, 2009; third, during the
August 7, 2009 hearing on the motion for execution, the counsels for
petitioner, Win Multi-Rich and FESICO were all present;69fourth, in an Order,
dated September 16, 2009, FESICO was given fifteen (15) days to submit its
comment or opposition to the motion for execution;70 and lastly, FESICO
filed its comment71 on the motion on October 1, 2009. Based on the
foregoing, the requirements under Section 17, Rule 57 have been more than
satisfied.
Indeed, FESICO cannot escape liability on its surety bond issued in favor of
petitioner. The purpose of FESICO's bond was to secure the withdrawal of
the cash deposit and to answer any damages that would be inflicted against
petitioner in the course of the proceedings.72 Also, the undertaking73 signed
by FESICO stated that the duration of the effeetivity of the bond shall be
80
from its approval by the court until the action is fully decided, resolved or
terminated.
FESICO cannot simply escape liability by invoking that it was not a party in
G.R. No. 175048. From the moment that FESICO issued Surety Bond No.
10198 to Win Multi-Rich and the same was posted before the RTC, the court
has acquired jurisdiction over the surety, and the provisions of Sections 12
and 17 of Rule 57 became operational. Thus, the Court holds that FESICO is
solidarity liable under its surety bond with its principal Win Multi-Rich.
On a final note, the Court reminds the bench and the bar that lawsuits,
unlike duels, are not to be won by a rapier's thrust. Technicality, when it
deserts its proper office as an aid to justice and becomes its great hindrance
and chief enemy, deserves scant consideration from courts. There should be
no vested rights in technicalities.74redarclaw
SO ORDERED.cralawlawlibrary
81
THIRD DIVISION
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.
During his empolyment, Wolfe stored the sailboat, Knotty Gull, within
Watercraft1 s boat storage facilities, but never paid for the storage fees.
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.
82
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.
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.
83
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.
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.
SO ORDERED.5
84
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. Rañoa,
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
85
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.
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
86
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.
II.
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
87
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.
88
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.
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
89
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
Attachment22 of Rosario E. Rañoa, its Vice-President, which reiterated the
following allegations in its complaint to substantiate the application for a writ
of preliminary attachment:
xxxx
5. Soon thereafter, the Defendant placed his sailboat, the Knotty Gull, within
the boat storage facilities of Watercraft for purposes of storage and
safekeeping.
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.
11. [Sometime] thereafter, that is, in or about June 2002, the Defendant
pulled out the Knotty Gull from the boat storage facilities of Watercraft.
90
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.
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 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
e. The house last known to have been occupied by the Defendant is merely
being rented by him.
91
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.
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
92
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
93
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.
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
94
granting such writ are not present, then the court which issues it acts in
excess of its jurisdiction.39chanroblesvirtuallawlibrary
SO ORDERED.chanroblesvirtuallawlibrary
95
SECOND DIVISION
DECISION
BRION, J.:
The CA affirmed the September 8, 2004 decision of the Regional Trial Court
(RTC), Branch 119 of Pasay City, dismissing Phil-Air's complaint for sum of
money with prayer for a writ of preliminary attachment.3
Antecedents
On various dates between March 5, 1990, and August 29, 1990, petitioner
Phil-Air sold to respondent RCJ Lines four Carrier Paris 240 air-conditioning
units for buses (units). The units included compressors, condensers,
evaporators, switches, wiring, circuit boards, brackets, and fittings.4
RCJ Lines accepted the delivery of the units, which Phil-Air then installed
after they were inspected by RCJ Lines president Rolando Abadilla, Sr.7
96
pursuant to the one-year warranty on parts and labor. After some months
from installation, Phil-Air supposedly boosted the capacity of the units by
upgrading them to the Carrier Paris 280 model.8 It also purportedly repaired
the control switch panel of one of the units for an additional cost of
P60,000.00.9
RCJ Lines issued three post-dated checks in favor of Phil-Air to partly cover
the unpaid balance:chanRoblesvirtualLawlibrary
Before presenting the third check for payment, Phil-Air sent a demand
letter11 to Rolando Abadilla, Sr. on April 7, 1992, asking him to fund the
post-dated checks.
On July 17, 1996, Phil-Air demanded payment from Rolando Abadilla, Jr., for
the total amount of P734,994.00 plus interest, and attorney's fees
equivalent to 25% of the amount due. Phil-Air warned that it would take
court action if payment is not made within five days from demand.12
In view of the failure of RCJ Lines to pay the balance despite demand, Phil-
Air filed on April 1, 1998 the complaint13 for sum of money with prayer for
the issuance of a writ of preliminary attachment.14 Phil-Air sought to recover
from RCJ Lines:chanRoblesvirtualLawlibrary
97
c) The total interest in the amount of P756,000.00 (P840,000.00 x 12% x 7
years + P60,000.00 x 12% x 7 years);
d) The sum equivalent to 25% of the total amount due as attorney's fees,
plus P3,000.00 per court appearance; and
RCJ Lines averred that the units did not sufficiently cool the buses despite
repeated repairs. Phil-Air purportedly represented that the units were in
accord with RCJ Lines' cooling requirements as shown in Phil-Air's price
quotation17 dated August 4, 1989. The price quotation provided that full
payment should be made upon the units' complete installation. Complete
installation, according to RCJ Lines, is equivalent to being in operational
condition.
As it turned out, the Carrier Paris 240 model was not suited to the 45 to 49-
seater buses operated by RCJ Lines. The units, according to RCJ Lines, were
defective and did not attain full operational condition.18
Further, RCJ Lines claimed that it was also entitled to be reimbursed for
costs and damages occasioned by the enforcement of the writ of
attachment.
RCJ Lines thus urged the RTC to order Phil-Air to pay (1) the replacement
costs of the units; (2) lost profits for nine days from April 22 to April 30,
1999, resulting from the attachment of its two buses amounting to
P207,000.00;19 and (3) P64,390.00 for the counter-bond premium, moral
damages, exemplary damages and attorney's fees.
The RTC granted the application for the issuance of a writ of preliminary
attachment after Phil-Air posted an attachment bond in the amount of
P1,656,000.00.20 Two buses of RCJ Lines were attached pursuant to the writ
dated December 18, 1998.21 The writ was executed on April 21, 1999.22 The
attachment, however, was later lifted when the RTC granted RCJ Lines'
urgent motion to discharge the writ of attachment.23 RCJ Lines posted a
counter-bond in the same amount as the attachment bond.24
98
Ruling on the merits after trial, the RTC found that Phil-Air was guilty of
laches and estopped from pursuing its claim. It also sustained the allegation
that Phil-Air had breached its warranty.
cralawlawlibrary
The CA Ruling
First, the CA held that Phil-Air's cause of action was barred by laches.27
Second, the CA held that Phil-Air breached its warranty. The price quotation
99
supposedly warranted that the Carrier Paris 240 model was suitable for 50-
60-passenger coaches and especially recommended for operation in the
tropics.29
Relying on these testimonies, the CA found that the four units did not meet
the cooling requirements of RCJ Lines.32
Fourth, the CA affirmed the finding of the RTC that RCJ Lines suffered losses
when the RTC attached two of its buses.
The RTC and the CA relied on the testimony of Rolando Abadilla, Jr., who
claimed to be in charge of the daily operations of RCJ Lines. He testified that
they suffered losses for nine days as a result of the enforcement of the writ
of preliminary attachment. The lost profits purportedly amounted to
P227,280.00. To support this claim, RCJ Lines adduced as evidence the
summary of the daily cash collections33 from the buses that were not
attached, on various dates in August and September 2000.34
The Petition
First, Phil-Air argues that the doctrine of laches is not applicable when the
action is filed within the prescriptive period. Laches, being a doctrine of
equity, should only be applied to fill a void in the law.35
Phil-Air asserts that it filed the complaint on April 1, 1998, or less than eight
years from the execution of the sales invoice dated November 5, 1990. The
complaint was thus filed within the ten-year prescriptive period for actions
based upon a written contract.
100
It maintains that all the units were brand new and were accepted by RCJ
Lines in good, working, and operational condition. The units were inspected,
tested, and approved by then RCJ Lines president, Rolando Abadilla, Sr., as
proved by the delivery receipts in which he affixed his signature.36
Phil-Air further avers that it was not notified of the alleged breach of
warranty. Assuming it breached its warranty, Phil-Air submits that the action
to enforce the warranty had already prescribed.
Third, Phil-Air rejects the CA's order that it must reimburse the premium
payment for the counter-bond and the alleged losses suffered by RCJ Lines.
The attachment bond should be answerable for damages, if any.
Respondent's Comment
RCJ Lines reiterates all the arguments it raised in its counterclaim. It admits
that it did not pay the balance of the purchase price.37 It maintains,
however, that it was justified in doing so because Phil-Air breached its
warranty. It insists that Phil-Air was guilty of laches because it waited for
eight years to file the collection case.38
Issues
Our Ruling
In general, there is no room to apply the concept of laches when the law
provides the period within which to enforce a claim or file an action in court.
Phil-Air's complaint for sum of money is based on a written contract of sale.
101
The ten-year prescriptive period under Article 1144 of the Civil Code thus
applies.39
In the present case, both parties admit the existence and validity of the
contract of sale. They recognize that the price quotation dated August 4,
1989, contained the terms and conditions of the sale contract. They also
agree that the price and description of the units were indicated on the sales
invoice dated November 5, 1990. The sales were in fact consummated on
various dates between March 5, 1990 and August 29, 1990, as proved by
several delivery receipts.
The Court therefore can resolve whether Phil-Air's action to enforce the
contract was timely filed even in the apparent absence of a formal or
notarized deed of sale.40 More significantly, Rolando Abadilla, Jr., admitted
under oath that the sale was in writing.41
We note that Phil-Air filed the complaint with the RTC on April 1, 1998.
Counting from the date of the sales invoice, or from the date of the delivery
receipts, or even from the date of the price quotation, it is clear that the
complaint was filed within the ten-year prescriptive period. Contrary to the
CA's ruling, laches does not apply.
While the CA correctly held that prescription and estoppel by laches are two
different concepts, it failed to appreciate the marked distinctions between
the two concepts.
On the one hand, the question of laches is addressed to the sound discretion
of the court.43 The court resolves whether the claimant asserted its
claim within a reasonable time and whether its failure to do so warrants
the presumption that it either has abandoned it or declined to assert it. The
court determines the claimant's intent to assert its claim based on its past
actions or lack of action. After all, what is invoked in instances where a party
raises laches as a defense is the equity jurisdiction of the court.44
On the other hand, if the law gives the period within which to enforce a
claim or file an action in court, the court confirms whether the claim is
asserted or the action is filed in court within the prescriptive period. The
court determines the claimant's intent to assert its claim by simply
102
measuring the time elapsed from the proper reckoning point (e.g., the date
of the written contract) to the filing of the action or assertion of the claim.
In sum, where the law provides the period within which to assert a claim or
file an action in court, the assertion of the claim or the filing of the
action in court at any time within the prescriptive period is generally
deemed reasonable, and thus, does not call for the application of laches.
As we held in one case, unless reasons of inequitable proportions are
adduced, any imputed delay within the prescriptive period is not delay in
law that would bar relief.45
We found that the sureties failed to prove all the elements of laches,
namely:
(1) conduct on the part of the defendant or one under whom he claims,
giving rise to the situation of which complaint is made and for which the
complainant seeks a remedy;
(2) delay in asserting the complainant's right, the complainant having had
knowledge or notice of defendant's conduct and having been afforded
an opportunity to institute a suit;
(3) lack of knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his claim; and
Examining these elements, we found that only the first element was present.
There was no delay (second element) because the creditor-bank filed the
action within the ten-year prescriptive period. Since the claim was timely
103
filed, the defendants did not lack notice that the creditor-bank would assert
its claim (third element). Nor was the assertion of the right deemed injurious
to the defendants (fourth element); the creditor-bank could assert its claim
at any time within the prescriptive period.
The same conclusion holds true in the present case; not all the elements of
laches are present. To repeat, Phil-Air filed the complaint with the RTC on
April 1, 1998. The time elapsed from August 4, 1989 (the date of the price
quotation, which is the earliest possible reckoning point), is eight years and
eight months, well within the ten-year prescriptive period. There was simply
no delay (second element of laches) where Phil-Air can be said to have
negligently slept on its rights.
More significantly, there is no basis for laches as the facts of the present
case do not give rise to an inequitable situation that calls for the application
of equity and the principle of laches.48
The CA and the RTC erred when it held Phil-Air directly liable for the
counter-bond premium and RCJ Lines' alleged unrealized profits. Granting
that RCJ Lines suffered losses, the judgment award should have been first
executed on the attachment bond. Only if the attachment bond is insufficient
to cover the judgment award can Phil-Air be held liable.49
The grant of the writ is conditioned not only on the finding of the court that
there exists a valid ground for its issuance.51 The Rules also require the
applicant to post a bond.
104
adjudged to the adverse party and all damages that he may sustain
by reason of the attachment, if the court shall finally adjudge that
the applicant was not entitled thereto."
There are various modes of discharging an attachment under Rule 57, viz.:
(1) by depositing cash or posting a counter-bond under Section 12;52 (2) by
proving that the attachment bond was improperly or irregularly issued or
enforced, or that the bond is insufficient under Section 13;53 (3) by showing
that the attachment is excessive under Section 13; and (4) by claiming that
the property is exempt from execution under Section 2.54
Under the first mode, the court will order the discharge of the attachment
after (1) the movant makes a cash deposit or posts a counter-bond and (2)
the court hears the motion to discharge the attachment with due notice to
the adverse party.55
The amount of the cash deposit or counter-bond must be equal to that fixed
by the court in the order of attachment, exclusive of costs. The cash deposit
or counter-bond shall secure the payment of any judgment that the
attaching party may recover in the action.56
105
insufficient. The discharge of the attachment under Section 13 must be
made only after hearing.58
In the present case, the RTC lifted the preliminary attachment after it heard
RCJ Lines' urgent motion to discharge attachment and the latter posted a
counter-bond. The RTC found that there was no fraud and Phil-Air had no
sufficient cause of action for the issuance of the writ of the attachment. As a
consequence, it ordered Phil-Air to refund the premium payment for the
counter-bond and the losses suffered by RCJ Lines resulting from the
enforcement of the writ. The CA affirmed the RTC ruling in toto.
As discussed above, it is patent that under the Rules, the attachment bond
answers for all damages incurred by the party against whom the attachment
was issued.60
Thus, Phil-Air cannot be held directly liable for the costs adjudged to and the
damages sustained by RCJ Lines because of the attachment. Section 4 of
Rule 57 positively lays down the rule that the attachment bond 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."
106
The RTC, instead of declaring Phil-Air liable for the alleged unrealized profits
and counter-bond premium, should have ordered the execution of the
judgment award on the attachment bond. To impose direct liability to Phil-
Air would defeat the purpose of the attachment bond, which was not
dissolved despite the lifting of the writ of preliminary attachment.
In finding that RCJ Lines suffered damages because of the attachment, the
RTC and the CA gave complete credence to the testimony of Rolando
Abadilla, Jr. He claimed that RCJ Lines lost P216,000.00 in unrealized profits
for nine days when the buses were wrongfully seized.
To arrive at this amount, RCJ Lines alleged that a bus travelling from Manila
to Ilocos and vice versa earned an average daily income of P12,000.00. To
back this claim, RCJ Lines prepared a summary of the daily cash collections
of its nine buses on certain days of August and September 2000.
The summary of daily cash collections apparently prepared by one RCJ Lines
employee was in turn based on the reports of the dispatchers indicating the
number of passengers and the amount of fare collected on a particular trip.
Except for one bus which travelled round-trip on August 22-23, 2000, the
daily cash collections all pertained to the round-trip of eight buses on
September 2-3, 2000.
In Spouses Yu v. Ngo Yet Te,61 we held that if the claim for actual damages
covers unrealized profits, the amount of unrealized profits must be
established and supported by independent evidence of the mean income of
the business undertaking interrupted by the illegal seizure.
107
Spouses Yu is on all fours with the present dispute because it also involved a
claim for actual damages arising from the illegal attachment of the
claimant's properties, one of which was a passenger bus.
Similarly, the evidence adduced by RCJ Lines to show actual damages fell
short of the required proof. Its average daily income cannot be derived from
the summary of daily cash collections from only two separate occasions, i.e.,
August 22-23 and September 2-3, 2000. The data submitted is too meager
and insignificant to conclude that the buses were indeed earning an average
daily income of P12,000.00.
More significant, the person who prepared the unsigned summary of daily
cash collections was not presented before the RTC to verify and explain how
she arrived at the computation. The dispatchers who prepared the collection
reports were likewise not presented; some of the reports were also
unsigned. While the summary was approved by Rolando Abadilla, Jr., his
testimony on the alleged unrealized profits was uncorroborated and self-
serving.
We note that in its prayer for the issuance of the writ of preliminary
attachment, Phil-Air alleged that RCJ Lines was guilty of fraud in entering
into the sale transaction. A perusal of the record, however, would show that
Phil-Air failed to prove this bare assertion. This justifies an award of
temperate or moderate damages in the amount of Php 50,000.00.64
108
The allegation of breach
of express warranty was
notproved.
We are not convinced that Phil-Air breached its express warranty. RCJ Lines
had no right to recoupment in diminution of the price.65
The Civil Code defines an express warranty as any affirmation of fact or any
promise by the seller relating to the thing if the natural tendency of such
affirmation or promise is to induce the buyer to purchase the same, and if
the buyer purchases the thing relying thereon.66
The evidence on record does not support the findings of the CA and RTC.
We emphasize that there are recognized cases where the Court can
disregard the factual findings of the RTC and CA. In these cases, the Court
draws its own conclusion based on the evidence on record.68
In this case, Phil-Air denies that it breached its express warranty and
strongly argues that the CA and RTC completely ignored its evidence while it
sustained the bare allegations of Rolando Abadilla, Jr.
We agree with Phil-Air. Our examination of the record reveals that the RTC
and CA manifestly overlooked certain relevant facts not disputed by the
parties which, if properly considered, would justify a different conclusion.
To prove that Phil-Air breached its express warranty, RCJ Lines presented
the following testimonial and documentary
evidence:chanRoblesvirtualLawlibrary
1) Rolando Abadilla, Jr. who claimed that their employees reported the
defect of the units to him and to his late father. His late father allegedly
demanded Phil-Air to repair the defects. But despite repeated verbal
demands, Phil-Air purportedly failed to comply with its one-year
warranty on parts and labor.
109
2) Two RCJ Lines employees who claimed that they experienced firsthand
the inefficient cooling of the units.
3) The general manager of Carrier Philippines who testified that the Carrier
240 model was not suitable for buses with a capacity of more than 35
passengers, like those operated by RCJ Lines.
In defense, Phil-Air claimed that it regularly checked the units and that
during the effectivity of the one-year warranty, RCJ Lines never once
complained of defects; if there were defects, the latter should have
demanded Phil-Air to perform its warranty in writing; the reason it had no
proof it made repairs and delivered spare parts was precisely because it was
not apprised of any defect; and that the testimonies of the RCJ Lines
witnesses were self-serving.70
The RTC noted that Phil-Air did not present evidence to rebut the allegation
of breach.71 Phil-Air instead opposed the admission of the documentary
evidence of RCJ Lines for failing to comply with the best evidence rule.72
We hold that the evidence that RCJ Lines submitted failed to prove breach of
express warranty.
The claim of Rolando Abadilla, Jr. that his late father verbally communicated
the defects of the units to Phil-Air was hearsay and not admissible.73 He
admitted that he was not around when his father phoned Phil-Air to demand
the repair of the units. He likewise admitted that they did not attempt to
personally meet with nor send a letter to Phil-Air to demand the repairs.74
More tellingly, Rolando Abadilla, Jr. admitted that they issued the post-dated
110
checks to Phil-Air to cover the balance of the purchase price sometime in
1992, viz-
Q. Mr. Witness is it not in this case that you personally issued three (3)
checks draws against the name Rolando Abadilla and Susan or Rolando
Abadilla, and this was some time in 1992?
A. Yes, Sir.
Q. And you confirm that these were all dated March 31, April 30 and
February 29, 1992?
A. Yes, Sir.
Q. Despite your claim that these air-conditioning units were defective and
despite your claim that these air-conditioning units were not repaired
by plaintiff, hence you referred them for repair to other companies who
are not authorized, do you still affirm the fact that you issued the
postdated checks, the total of which is exactly the balance of the
purchase price as quoted in the price quotation, yes or no? [Emphasis
supplied]
A. Yes, Sir.75
xxx
cralawlawlibrary
We note that the alleged repairs made by Car Cool Philippines, Inc. and Sta.
Rosa Motor Works, Inc. started in 1991.76 If RCJ Lines knew as early as 1991
that the units were defective and that Phil-Air refused to perform its
warranty despite repeated demands, we wonder why RCJ Lines still issued
the post-dated checks in 1992 to cover the balance of the purchase price.
The record also reveals that Car Cool Philippines, Inc. and Sta. Rosa Motor
Works, Inc. were not authorized by the Carrier brand to repair the units, a
fact not denied by Rolando Abadilla, Jr.77 It was likewise established that
some of the parts/items purportedly provided by the other suppliers were
expressly excluded from the list of parts/items that Phil-Air was supposed to
supply, again, a fact admitted by Rolando Abadilla, Jr.78 It was likewise
unclear that the repairs made by the other service providers were done on
the same buses on which the subject units were installed.79
We also find glaring the fact that RCJ Lines did not respond to the April 7,
1992 demand letter sent by Phil-Air, viz. -
111
Dear Mr. Abadilla,
I have been trying to get in touch with you and Junjun the past several
weeks but have been unsuccessful xxx The two checks that you used to
partly pay for the four units bus air conditions [sic] were all dishonored by
the bank [because they were drawn against insufficient funds].
We are but a small company and our cash flow was adversely affected by
the return of the checks, xxx It would mean so much if you could somehow
help us replenished these checks, xxx We look forward to hearing from you
Respectfully, we remain.
Yours truly,
Ricardo Cokieng
cralawlawlibrary
If RCJ Lines was aware all along that the units were defective and that Phil-
Air refused to heed its verbaldemands to make repairs, we do not
understand why it ignored Phil-Air's written demand to replenish the
returned checks. We also find it unthinkable that RCJ Lines would spend for
parts and services from other suppliers and providers, during the period of
warranty, without demanding first in writing that Phil-Air make good its
express warranty.
In this regard, we note that the right of the buyer to the recoupment in the
diminution of the price under Article 1599 (1) should be read together with
Article 1586 of the Civil Code,80 which provides
that:chanRoblesvirtualLawlibrary
The obvious purpose of the notice is to protect the seller against belated
claims. If the seller is not duly notified, he is prevented from making prompt
investigation to determine the cause and extent of his
liability.81 Consequently, he is barred from repairing or rectifying whatever
defects the goods sold had.
112
RCJ Lines failed to convince us that it notified Phil-Air of the breach of
warranty within a reasonable time. In truth, we are not convinced at all that
it had even notified Phil-Air. Although Article 1586 does not require that the
notice to the seller be in writing, we cannot accept the claim of Rolando
Abadilla, Jr. that his late father verbally notified Phil-Air of the defects,
without violating the rule on hearsay.
Also, the testimonies of the two RCJ Lines employees that they experienced
firsthand the insufficient cooling of the units were self-serving and
uncorroborated by a disinterested party.
Further, the reliance of the CA and the RTC on the testimony82 of the general
manager of Carrier Philippines was misplaced and unwarranted. It appears
that the computation of the cooling efficiency of the Carrier 240 model was
merely theoretical, based only on the specifications of the model and not on
actual test, viz. —
A: I did see.
xxx
Q: With respect to car aircon Paris 240 installed, have you seen this bus?
A: No I did not.
A: No Sir.
cralawlawlibrary
The meat of his testimony centered not on the subject units but on the
cooling capacity of the product that Carrier Philippines was then selling in
the market. In fact, he admitted that his role in the company had nothing to
do with repairs of air-conditioning units.
113
that he was not even presented as an expert witness. Even if we assume
that the computation of the cooling capacity of the Carrier 240 was accurate,
RCJ Lines still failed to prove that it duly and promptly informed Phil-Air of
the alleged breach.
Nowhere on record, however, was it ever established that the originals were
later submitted. It was also not shown that the originals were indeed lost,
which could have justified the submission of secondary evidence.84 The RTC
simply ignored this fact when it finally decided the case.
Conclusion
Based on the foregoing analysis, we find- that RCJ Lines failed to prove its
allegation that Phil-Air breached its express warranty. RCJ Lines is thus held
liable to pay the balance of the purchase price plus interest and attorney's
fees.85 RCJ Lines, however, is entitled to temperate damages as a result of
the wrongful attachment of its buses and to the refund of the premium
payment for the counter-bond.
114
4. Attorney's fees in the fixed amount of P30,000.00.88
The attachment bond posted by Phil-Air shall be levied upon to satisfy the
P50,000.00 temperate damages awarded to RCJ Lines and the P82,274.00
refund of the counter-bond premium.
115