G.R. No.

197802, November 11, 2015 the use of "ZYNAPS" for being nearly
identical to "ZYNAPSE"; and
ZUNECA PHARMACEUTICAL, AKRAM ARAIN AND/OR
VENUS ARAIN, M.D. DBA ZUNECA b. Because there is confusing similarity
PHARMACEUTICAL, Petitioners, v. NATRAPHARM, between "ZYNAPSE" and "ZYNAPS," there
INC., Respondent. is a danger of medicine switching, with
the patient on "ZYNAPSE" medication
placed in a more injurious situation given
RESOLUTION
the Steven-Johnson Syndrome side effect
of the "ZYNAPS" CARBAMAZEPINE.9
VILLARAMA, JR., J.:

This is a petition for review1 under Rule 45 of the 1997 Petitioners refused to heed the above demand, claiming
Rules of Civil Procedure, as amended, assailing the April that they had prior use of the name "ZYNAPS" since year
18, 2011 Decision2 and July 21, 2011 Resolution3 of the 2003, having been issued by the BFAD a Certificate of
Court of Appeals (CA) in the petition Product Registration (CPR) on April 15, 2003, which
for certiorari docketed as CA-G.R. SP No. 103333 granting allowed them to sell CARBAMAZEPINE under the brand
a permanent injunction in favor of respondent name "ZYNAPS."10
Natrapharm, Inc. and against petitioner Zuneca
Pharmaceutical. On November 29, 2007, respondent filed a complaint
against petitioners for trademark infringement for
The facts follow: violation of Republic Act (R.A.) No. 8293, or
the Intellectual Property Code of the Philippines (IPC),
Respondent is an all-Filipino pharmaceutical company with prayer for a temporary restraining order (TRO)
which manufactures and sells a medicine bearing the and/or writ of preliminary injunction. To justify the
generic name "CITICOLINE," which is indicated for heart TRO/writ of preliminary injunction, respondent cited
and stroke patients. The said medicine is marketed by Section 12211 of R.A. No. 8293, under which the
respondent under its registered trademark "ZYNAPSE," registration of "ZYNAPSE" gives it the exclusive right to
which respondent obtained from the Intellectual Property use the said name as well as to exclude others from using
Office (IPO) on September 24, 2007 under Certificate of the same.12 In addition, respondent argued that under
Trademark Registration No. 4-2007-005596. With its Sections 13813 and 147.114of the IPC, certificates of
registration, the trademark "ZYNAPSE" enjoys protection registration are prima facie evidence of the registrant's
for a term of 10 years from September 24, 2007.4 ownership of the mark and of the registrant's exclusive
right to use the same.15 Respondent also invoked the case
In addition, respondent obtained from the Bureau of Food of Conrad and Company, Inc. v. Court of Appeals16 where
and Drugs (BFAD) all necessary permits and licenses to it was ruled that an invasion of a registered mark entitles
register, list and sell its "ZYNAPSE" medicine in its various the holder of a certificate of registration thereof to
forms and dosages.5 injunctive relief.17

Allegedly unknown to respondent, since 2003 or even as In their answer, petitioners argued that they enjoyed prior
early as 2001, petitioners have been selling a medicine use in good faith of the brand name "ZYNAPS," having
imported from Lahore, Pakistan bearing the generic name submitted their application for CPR with the BFAD on
"CARBAMAZEPINE," an anti-convulsant indicated for October 2, 2001, with the name "ZYNAPS" expressly
epilepsy, under the brand name "ZYNAPS," which indicated thereon. The CPR was issued to them on April
trademark is however not registered with the IPO. 15, 2003.18Moreover, petitioners averred that under
"ZYNAPS" is pronounced exactly like "ZYNAPSE."6 Section 15919 of the IPC their right to use the said mark is
protected.20
Respondent further alleged that petitioners are selling
their product "ZYNAPS" CARBAMAZEPINE in numerous In its December 21, 2007 Order,21 the Regional Trial Court
drugstores in the country where its own product (RTC) denied respondent's application for a TRO, ruling
"ZYNAPSE" CITICOLINE is also being sold.7 that even if respondent was able to first register its mark
"ZYNAPSE" with the IPO in 2007, it is nevertheless
Moreover, respondent claimed that the drug defeated by the prior actual use by petitioners of
CARBAMAZEPINE has one documented serious and "ZYNAPS" in 2003.
disfiguring side-effect called "Stevens-Johnson
Syndrome," and that the sale of the medicines "ZYNAPSE" In its March 12, 2008 Order,22 the RTC denied the
and "ZYNAPS" in the same drugstores will give rise to application for a writ of preliminary injunction, reiterating
medicine switching.8 the reasons stated in the order denying the application for
a TRO:
On October 30, 2007, respondent sent petitioners a
cease-and-desist demand letter, pointing out that: In this Court's objective evaluation, neither party is, at
this point, entitled to any injunctive solace. Plaintiff, while
a. "ZYNAPSE" is the registered trademark of admittedly the holder of a registered trademark under the
[respondent], and that as such owner, it IPC, may not invoke ascendancy or superiority of its CTR
has exclusive trademark right under the [certificate of trademark registration] over the CPR
law to the use thereof and prevent others [certificate of product registration of the BFAD] of the
from using identical or confusingly similar defendants, as the latter certificate is, in the Court's
marks, and that [petitioners] must stop opinion, evidence of its "prior use". Parenthetically, the
plaintiff would have been entitled to an injunction as
against any or all third persons in respect of its registered
mark under normal conditions, that is, in the event Petitioners, on the other hand, opposed the motion to
wherein Section 159.1 would not be invoked by such third dismiss arguing that the December 2, 2011 RTC Decision
person. Such is the case however in this litigation. Section had not yet attained finality, thus, the present petition
159 of the IPC explicitly curtails the registrant's rights by had not yet been rendered moot.
providing for limitations on those rights as against a "prior
user" under Section 159.1 xxx.23 The two issues which need to be addressed are:

Via a petition for certiorari with an application for a TRO 1) Whether the decision on the merits rendered the issues
and/or a writ of preliminary injunction, respondent in this case moot and academic? and
questioned before the CA the RTC's denial of the
application for a writ of preliminary injunction. 2) Whether the CA may order a permanent
injunction in deciding a petition for certiorari against the
On June 17, 2008, the CA issued a Resolution24 denying denial of an application for a preliminary
respondent's application for TRO and/or preliminary injunction issued by the RTC?
injunction for lack of merit. The CA found no compelling
reason to grant the application for TRO and/or preliminary We hold that the issues raised in the instant petition have
injunction because there was no showing that respondent been rendered moot and academic given the RTC's
had a clear and existing right that will be violated by December 2, 2011 Decision on the merits of the case.
petitioners. Respondent moved for reconsideration but
was denied by the CA in its July 31, 2008 Resolution.25 cralaw red Rule 58 of the Rules of Court provides for both preliminary
and permanent injunction. Section 1, Rule 58 provides for
However, contrary to its earlier resolutions denying the the definition of preliminary injunction:
application for a TRO/preliminary injunction, the CA, in its
April 18, 2011 Decision, upheld the allegations of SECTION 1. Preliminary injunction defined; classes. � A
respondent that it is entitled to injunctive relief on the preliminary injunction is an order granted at any stage
basis of its IPO registration and permanently enjoined of an action or proceeding prior to the judgment or
petitioners from the commercial use of "ZYNAPS." final order, requiring a party or a court, agency or a
The fallo of the CA Decision reads: person to refrain from a particular act or acts. It may
also require the performance of a particular act or acts, in
WHEREFORE, premises considered, the Petition which case it shall be known as a preliminary mandatory
for Certiorari is GRANTED. The assailed Omnibus Order injunction. (Emphasis supplied)
dated 12 March 2008 of the Regional Trial Court, Branch
93 of Quezon City in Civil Case No. Q-07-61561 On the other hand, Section 9 of the same Rule defines a
is REVERSED and SET ASIDE, and a new one is permanent injunction in this wise:
entered permanently ENJOINING defendants-
respondents, their employees, agents, representatives, SEC. 9. When final injunction granted. � If after the
dealers, retailers, and/or assigns, and any and all persons trial of the action it appears that the applicant is entitled
acting in their behalf, from manufacturing, importing, to have the act or acts complained of permanently
distributing, selling and/or advertising for sale, or enjoined, the court shall grant a final injunction
otherwise using in commerce, the anti-convulsant perpetually restraining the party or person enjoined from
drug CARBAMAZEPINE under the brand name and mark the commission or continuance of the act or acts or
"ZYNAPS," or using any other name which is similar or confirming the preliminary mandatory injunction.
confusingly similar to petitioner's registered trademark (Emphasis supplied)
"ZYNAPSE," including filing of application for permits,
license, or certificate of product registration with the Food A writ of preliminary injunction is generally based solely
and Drug Administration and other government agencies. on initial and incomplete evidence.30 The evidence
submitted during the hearing on an application for a writ
SO ORDERED.26 (Underscoring and additional emphasis of preliminary injunction is not conclusive or complete for
supplied) only a sampling is needed to give the trial court an idea of
the justification for the preliminary injunction pending the
Petitioners' motion for reconsideration was denied by the decision of the case on the merits.31 As such, the findings
CA in its Resolution dated July 21, 2011. of fact and opinion of a court when issuing the writ of
preliminary injunction are interlocutory in nature and
Hence, this petition for review. made even before the trial on the merits is commenced or
terminated.32
On December 2, 2011, the RTC rendered a Decision27 on
the merits of the case. It found petitioners liable to By contrast a permanent injunction, based on Section 9,
respondent for damages. Moreover, it enjoined the Rule 58 of the Rules of Court, forms part of the judgment
petitioners from using "ZYNAPS" and ordered all materials on the merits and it can only be properly ordered only on
related to it be disposed outside the channel of commerce final judgment. A permanent injunction may thus be
or destroyed without compensation.28 granted after a trial or hearing on the merits of the case
and a decree granting or refusing an injunction should not
Respondent moved to dismiss the present petition in view be entered until after a hearing on the merits where a
of the December 2, 2011 RTC Decision which functions as verified answer containing denials is filed or where no
a full adjudication on the merits of the main issue of answer is required, or a rule to show cause is equivalent
trademark infringement. Respondent contended that the to an answer.33
present petition is moot and academic, it only involving an
ancillary writ.29 As such a preliminary injunction, like any preliminary writ
and any interlocutory order, cannot survive the main case Court), concurring.
of which it is an incident; because an ancillary writ of
preliminary injunction loses its force and effect after the 3
Id. at 78-82.
decision in the main petition.34
4
Id. at 53.
In Casilan v. Yba�ez, 35
this Court stated:
5
Id.
As things stand now, this Court can no longer interfere
with the preliminary injunctions issued by the Leyte court
6
Id. at 54.
in its cases Nos. 2985 and 2990, because such
preliminary writs have already been vacated, being
7
Id.
superseded and replaced by the permanent injunction
ordered in the decision on the merits rendered on 21
8
Id. at 55.
March 1962. And as to the permanent injunction, no
action can be taken thereon without reviewing the
9
Id. at 56.
judgment on the merits, such injunction being but a
consequence of the pronouncement that the credits of
10
Id.
Tiongson and Montilla are entitled to priority over that of
Casilan. Since the court below had the power and
11
THE INTELLECTUAL PROPERTY CODE OF THE
right to determine such question of preference, its PHILIPPINES, Section 122 provides:
judgment is not without, nor in excess of,
jurisdiction; and even assuming that its findings are Sec. 122. How Marks are Acquired. - The rights in a mark
not correct, they would, at most, constitute errors shall be acquired through registration made validly in
of law, and not abuses of discretion, correctible accordance with the provisions of this law.
bycertiorari . The obvious remedy for petitioner
Casilan was a timely appeal from the judgment on
12
Rollo, p. 57.
the merits to the Court of Appeals, the amount involved
being less than P200,000. But the judgment has become
13
THE INTELLECTUAL PROPERTY CODE OF THE
final and unappealable and can not be set aside PHILIPPINES, Section 138 provides:
through certiorari proceedings. (Emphasis supplied)
SEC. 138. Certificates of Registration. - A certificate of
Here, this Court is being asked to determine whether the registration of a mark shall be prima facie evidence of the
CA erred by issuing a permanent injunction in a case validity of the registration, the registrant's ownership of
which questioned the propriety of the denial of an the mark, and of the registrant's exclusive right to use the
ancillary writ. But with the RTC's December 2, 2011 same in connection with goods or services and those that
Decision on the case for "Injunction, Trademark are related thereto specified in the certificate.
Infringement, Damages and Destruction," the issues
raised in the instant petition have been rendered moot
14
Id., Section 147.1 provides:
and academic. We note that the case brought to the CA
on a petition for certiorari merely involved the RTC's Sec. 147. Rights Conferred. - 147.1. The owner of a
denial of respondent's application for a writ of preliminary registered mark shall have the exclusive right to prevent
injunction, a mere ancillary writ. Since a decision on the all third parties not having the owner's consent from using
merits has already been rendered and which includes in in the course of trade identical or similar signs or
its disposition a permanent injunction, the proper remedy containers for goods or services which are identical or
is an appeal36 from the decision in the main case. similar to those in respect of which the trademark is
registered where such use would result in a likelihood of
WHEREFORE, in light of all the foregoing, the petition is confusion. In case of the use of an identical sign for
hereby DENIED for being moot and academic. identical goods or services, a likelihood of confusion shall
be presumed.
SO ORDERED.
15
Rollo, pp. 57-58.
Velasco, Jr., (Chairperson),
16
Bersamin,* Leonen,** and Jardeleza, JJ., concur. 316 Phil. 850(1995).

17
Rollo, p. 58.
Endnotes:
18
CA rollo (Vol. I), p. 385.
*
Designated additional Member in lieu of Associate Justice 19
THE INTELLECTUAL PROPERTY CODE OF THE
Diosdado M. Peralta, per Raffle dated October 21, 2015. PHILIPPINES, Section 159 provides:
**
Designated Acting Member in lieu of Associate Justice SEC. 159. Limitations to Actions for Infringement. -
Bienvenido L. Reyes, per Raffle dated October 12, 2015. Notwithstanding any other provision of this Act, the
remedies given to the owner of a right infringed under this
Rollo,
1
pp. 14-46. Act shall be limited as follows:
2
Id. at 52-76. Penned by Associate Justice Elihu A. 159.1. Notwithstanding the provision of Section 155
Yba�ez with Associate Justices Bienvenido L. Reyes and hereof, a registered mark shall have no effect against any
Estela M. Perlas-Bernabe (both now Members of this person who, in good faith, before the filing date or the
priority date, was using the mark for the purposes of his
business or enterprise; x x x DECISION

20
Rollo, pp. 58-59. LEONARDO-DE CASTRO, J.:
21
Id. at 121-122.
This Petition for Review on Certiorari under Rule 45 of the
22
Id. at 88-90. Rules of Court assails the Decision[1] dated October 27,
2005 of the Court of Appeals in CA-G.R. SP No. 82826,
23
Id. at 89. nullifying and setting aside (1) the Order[2] dated
November 21, 2003 of the Regional Trial Court (RTC),
24
Id. at 217. Penned by Associate Justice Fernanda Branch 202 of Las Piñas City, in Civil Case No. 03-0151,
Lampas Peralta with Associate Justices Edgardo P. Cruz thereby dissolving the writ of injunction against
and Ricardo R. Rosario concurring. respondent Manila Electric Company (MERALCO); and (2)
the Resolution[3] dated February 7, 2006 of the Court of
25
Id. at 248-249. Appeals denying the Motion for Reconsideration of
petitioners BF Homes, Inc. (BF Homes) and Philippine
26
Id. at 74-75. Waterworks and Construction Corporation (PWCC).

27
Id. at 741-751. Penned by Acting Presiding Judge MERALCO is a corporation duly organized and existing
Bernelito R. Fernandez. under Philippine laws engaged in the distribution and sale
of electric power in Metro Manila. On the other hand, BF
28
Id. at 751. The dispositive part of the December 2, Homes and PWCC are owners and operators of
2011 Decision of the RTC reads: waterworks systems delivering water to over 12,000
households and commercial buildings in BF Homes
WHEREFORE, in view of the foregoing, judgment is subdivisions in Parañaque City, Las Piñas City, Caloocan
hereby rendered in favor of plaintiff [Natrapharm], Inc. City, and Quezon City. The water distributed in the
and against defendants Zuneca Pharmaceutical, Akram waterworks systems owned and operated by BF Homes
Arain and/or Venus Arain, MD, doing business in the name and PWCC is drawn from deep wells using pumps run by
and style of Zuneca Pharmaceutical. electricity supplied by MERALCO.

Defendants, jointly and severally, are hereby directed to On June 23, 2003, BF Homes and PWCC filed a Petition
pay the plaintiff the following amounts, to wit: [With Prayer for the Issuance of Writ of Preliminary
Injunction and for the Immediate Issuance of Restraining
One Million Pesos (P1,000,000.00) as damages; Order] against MERALCO before the RTC, docketed as
Civil Case No. 03-0151.
cralawlaw lib rary

One Million Pesos (P1,000,000.00) as exemplary

damages;
In their Petition before the RTC, BF Homes and PWCC
cralawlawlib ra ry

Two Hundred Thousand Pesos (P200,000.00) as

attorney'[s] fees; invoked their right to refund based on the ruling of this
Court in Republic v. Manila Electric Company[4]:
cra lawlawlib rary

and the Costs.

Defendants are further enjoined from henceforth using
Zynaps or any other variations thereto which are 7. It is of judicial notice that on November 15, 2002, in
confusingly similar to the plaintiffs Zynapse. G.R. No. 141314, entitled Republic of the Philippines vs.
Manila Electric Company, and G.R. No. 141369,
It is likewise ordered that all infringing goods, labels, entitled Lawyers Against Monopoly and Poverty (LAMP) et
signs, prints, packages, wrappers, receptacles and al. vs. Manila Electric Compnay (MERALCO), (both cases
advertisements in possession of the defendants, bearing shall hereafter be referred to as "MERALCO Refund cases,"
the registered mark or any reproduction, counterfeit, copy for brevity), the Supreme Court ordered MERALCO to
or colourable imitation thereof, all plates, molds, matrices refund its customers, which shall be credited against the
and other means of making the same, implements, customer's future consumption, the excess average
machines and other items related to the conduct, and amount of P0.167 per kilowatt hour starting with the
predominantly used, by the defendants in such infringing customer's billing cycles beginning February 1998. The
activities, be disposed of outside the channels of dispositive portion of the Supreme Court Decision in the
commerce or destroyed, without compensation. MERALCO Refund cases reads:

The counterclaim of the defendants is DISMISSED for lack WHEREFORE, in view of the foregoing, the instant
of merit. petitions are GRANTED and the decision of the Court of
Appeals in C.A. G.R. SP No. 46888 is
SO ORDERED. REVERSED. Respondent MERALCO is authorized to adopt
a rate adjustment in the amount of P0.017 kilowatthour,
effective with respect to MERALCO's billing cycles
beginning February 1994. Further, in accordance with the
[G.R. No. 171624, December 06 : 2010] decision of the ERB dated February 16, 1998, the excess
average amount of P0.167 per kilowatt hour starting with
BF HOMES, INC. AND THE PHILIPPINE the applicant's billing cycles beginning February 1998 is
WATERWORKS AND CONSTRUCTION CORP., ordered to be refunded to MERALCO's customers or
PETITIONERS, VS. MANILA ELECTRIC COMPANY, correspondingly credited in their favor for future
RESPONDENT. consumption.
x x x x. connection to [BF Homes and PWCC's] water pumps.

8. The Motion for Reconsideration filed by MERALCO in 18. MERALCO's unjust and oppressive acts have cast
the MERALCO Refund cases was DENIED WITH FINALITY dishonor upon [BF Homes and PWCC's] good name and
(the uppercase letters were used by the Supreme Court) besmirched their reputation for which [BF Homes and
in the Resolution of the Supreme Court dated April 9, PWCC] should be indemnified by way of moral damages in
2003. the amount of not less than P1,000,000.00.

9. The amount that MERALCO was mandated to refund 19. As an example for the public good, to dissuade others
to [BF Homes and PWCC] pursuant to the MERALCO from emulating MERALCO's unjust, oppressive and
Refund cases is in the amount of P11,834,570.91.[5] mercenary conduct, MERALCO should be directed to pay
[BF Homes and PWCC] exemplary damages of at least
BF Homes and PWCC then alleged in their RTC Petition P1,000,000.00.
that:
20. MERALCO's oppressive and inequitable conduct forced
10. On May 20, 2003, without giving any notice [BF Homes and PWCC] to engage the services of counsel
whatsoever, MERALCO disconnected electric supply to [BF to defend their rights and thereby incur litigation
Homes and PWCC's] sixteen (16) water pumps located in expenses in the amount of at least P500,000.00 for which
BF Homes in Parañaque, Caloocan, and Quezon City, [BF Homes and PWCC] should be indemnified.[7]
which thus disrupted water supply in those areas.
BF Homes and PWCC additionally prayed that the RTC
11. On June 4, 2003, [BF Homes and PWCC] received by issue a writ of preliminary injunction and restraining order
facsimile transmission a letter from MERALCO, x x x, in considering that:
which MERALCO demanded to [BF Homes and PWCC] the
payment of electric bills amounting to P4,717,768.15. 21. As indicated in its letter dated June 4, 2003 (Annex
A), unless seasonably restrained, MERALCO will cut off
12. [MERALCO] replied in a letter dated June 11, 2003, x electric power connections to all of [BF Homes and
x x, requesting MERALCO to apply the P4,717,768.15 PWCC's] water pumps on June 20, 2003.
electric bill against the P11,834,570.91 that MERALCO
was ordered to refund to [BF Homes and PWCC] pursuant 22. Part of the reliefs herein prayed for is to restrain
to the MERALCO Refund cases. x x x MERALCO from cutting off electric power connections to
[BF Homes and PWCC's] water pumps.
13. Displaying the arrogance that has become its
distinction, MERALCO, in its letter dated June 16, 2003, x 23. Unless MERALCO'S announced intention to cut off
x x, denied [BF Homes and PWCC's] request alleging that electric power connections to [BF Homes and PWCC's]
it has not yet come up with the schedule for the refund of water pumps is restrained, [BF Homes and PWCC] will
large amounts, such as those of [BF Homes and PWCC]. suffer great and irreparable injury because they would not
[be] able to supply water to their customers.
14. Even while MERALCO was serving its reply-letter to
[BF Homes and PWCC], MERALCO, again, without giving 24. [BF Homes and PWCC] therefore pray that a writ for
any notice, cut off power supply to [BF Homes and preliminary injunction be issued upon posting of a bond in
PWCC's] five (5) water pumps located in BF Homes an amount as will be determined by this Honorable Court.
Parañaque and BF Resort Village, in Pamplona, Las Piñas
City. 25. [BF Homes and PWCC] further pray that, in the
meantime and immediately upon the filing of the above
15. In its letter dated June 4, 2003 (Annex A), MERALCO captioned Petition, a restraining order be issued before
threatened to cut off electric power connections to all of the matter of preliminary injunction can be heard.[8]
[BF Homes and PWCC's] water pumps if [BF Homes and
PWCC] failed to pay their bills demanded by MERALCO by On August 15, 2003, MERALCO filed before the RTC its
June 20, 2003.[6] Answer with Counterclaims and Opposition to the
Application for Writ of Preliminary Injunction[9] of BF
BF Homes and PWCC thus cited the following causes of Homes and PWCC.
action for their RTC Petition:
According to MERALCO:
16. In refusing to apply [MERALCO's] electric bills against
the amounts that it was ordered to refund to [BF Homes 2.2. Both petitioners BF Homes, Incorporated and
and PWCC] pursuant to the MERALCO Refund cases and in Philippine Waterworks Corporation are admittedly the
making the implementation of the refund ordered by the registered customers of [MERALCO] by virtue of the
Supreme Court dependent upon its own will and caprice, service contracts executed between them under which the
MERALCO acted with utmost bad faith. latter undertook to supply electric energy to the former
for a fee. The following twenty-three (23) Service
17. [BF Homes and PWCC] are clearly entitled to the Identification Nos. (SINs) are registered under the name
remedies under the law to compel MERALCO to consider of BF Homes, Incorporated: x x x. While the following
[BF Homes and PWCC's] electric bills fully paid by the twenty-one (21) Service Identification Nos. (SINs) are
amounts which MERALCO was ordered to refund to [BF registered under the name of Philippine Waterworks
Homes and PWCC] pursuant to the MERALCO Refund Construction Corporation: x x x
cases, to enjoin MERALCO to reconnect electric power to
all of [BF Homes and PWCC's] water pumps, and to order x x x x
MERALCO to desist from further cutting off power
2.4. The service contracts as well as the terms and is wholly regulated by the ERC. The latter, being the
conditions of [MERALCO's] service as approved by BOE regulatory agency of the government having the authority
[Board of Energy], now ERC [Energy Regulatory over the respondent, is the one tasked to approve the
Commission], provide in relevant parts, that [BF Homes guidelines, schedules and details of the refund.
and PWCC] agree as follows:
c) The decision of the Supreme Court, dated November
DISCONTINUANCE OF SERVICE: 15, 2002, clearly states that respondent is directed to
make the refund to its customers in accordance with the
The Company reserves the right to discontinue decision of the ERC (formerly ERB) dated February 16,
service in case the customer is in arrears in the 1998. Hence, [MERALCO] has to wait for the schedule
payment of bills or for failure to pay the adjusted bills in and details of the refund to be approved by the ERC
those cases where the meter stopped or failed to register before it can comply with the Supreme Court decision.
the correct amount of energy consumed, or for failure to
comply with any of these terms and conditions, or in case 3.2. [MERALCO] has the right to disconnect the electric
of or to prevent fraud upon the Company. Before service to [BF Homes and PWCC] in that:
disconnection is made in the case of, or to prevent fraud,
the Company may adjust the bill of said customer a) The service contracts between [MERALCO] and [BF
accordingly and if the adjusted bill is not paid, the Homes and PWCC] expressly authorize the former to
Company may disconnect the same." (Emphasis supplied) discontinue and disconnect electric services of the latter
for their failure to pay the regular electric bills rendered.
2.5. This contractual right of [MERALCO] to discontinue
electric service for default in the payment of its regular b) It is [MERALCO's] legal duty as a public utility to
bills is sanctioned and approved by the rules and furnish its service to the general public without arbitrary
regulations of ERB (now the ERC). This right is necessary discrimination and, consequently, [MERALCO] is obligated
and reasonable means to properly protect and enable to discontinue and disconnect electric services to [BF
[MERALCO] to perform and discharge its legal and Homes and PWCC] for their refusal or failure to pay the
contractual obligation under its legislative franchise and electric energy actually used by them.[11]
the law. Cutting off service for non-payment by the
customers of the regular monthly electric bills is the only For its compulsory counterclaims, MERALCO prayed that
practical way a public utility, such as [MERALCO], can the RTC orders BF Homes and PWCC to pay MERALCO
ensure and maintain efficient service in accordance with P6,551,969.55 as actual damages (representing the
the terms and conditions of its legislative franchise and unpaid electric bills of BF Homes and PWCC for May and
the law. June 2003), P1,500,000.00 as exemplary damages,
P1,500,000.00 as moral damages, and P1,000,000.00 as
x x x x attorney's fees.

2.14. Instead of paying their unpaid electric bills and Lastly, MERALCO opposed the application for writ of
before [MERALCO] could effect its legal and contractual preliminary injunction of BF Homes and PWCC because:
right to disconnect [BF Homes and PWCC's] electric
services, [BF Homes and PWCC] filed the instant petition I
to avoid payment of [MERALCO's] valid and legal claim for
regular monthly electric bills. [MERALCO] HAS THE LEGAL AND CONTRACTUAL RIGHT
TO DEMAND PAYMENT OF THE ELECTRIC BILLS AND, IN
2.15. [BF Homes and PWCC's] unpaid regular bills totaled CASE OF NON-PAYMENT, TO DISCONTINUE THE ELECTRIC
P6,551,969.55 covering the May and June 2003 electric SERVICES OF [BF HOMES and PWCC]
bills. x x x
II
x x x x
[BF HOMES and PWCC] HAVE NO CLEAR RIGHT WHICH
2.17. [BF Homes and PWCC] knew that [MERALCO] is WARRANTS PROTECTION BY INJUNCTIVE PROCESS
already in the process of implementing the decision of the
Supreme Court as to the refund case. But this refund has After hearing,[12] the RTC issued an Order on November
to be implemented in accordance with the guidelines and 21, 2003 granting the application of BF Homes and PWCC
schedule to be approved by the ERC. Thus [BF Homes for the issuance of a writ of preliminary injunction. The
and PWCC's] filing of the instant petition is merely to RTC found that the records showed that all requisites for
evade payment of their unpaid electric bills to the issuance of said writ were sufficiently satisfied by BF
[MERALCO].[10] Homes and PWCC. The RTC stated in its Order:

Hence, MERALCO sought the dismissal of the RTC Petition Albeit, this Court respects the right of a public utility
of BF Homes and PWCC on the following grounds: company like MERALCO, being a grantee of a legislative
franchise under Republic Act No. 9029, to collect overdue
3.1 The Honorable Court has no jurisdiction to award the payments from its subscribers or customers for their
relief prayed for by [BF Homes and PWCC] because: respective consumption of electric energy, such right
must, however, succumb to the paramount substantial
a) The petition is in effect preempting or defeating the and constitutional rights of the public to the usage and
power of the ERC to implement the decision of the enjoyment of waters in their community. Thus, there is an
Supreme Court. urgent need for the issuance of a writ of preliminary
injunction in order to prevent social unrest in the
b) [MERALCO] is a utility company whose business activity community for having been deprived of the use and
enjoyment of waters flowing through [BF Homes and Appeals agreed with MERALCO that the RTC had no
PWCC's] water pumps.[13] jurisdiction to issue a writ of preliminary injunction in Civil
Case No. 03-0151, as said trial court had no jurisdiction
The RTC decreed in the end: over the subject matter of the case to begin with. It
ratiocinated in this wise:
WHEREFORE, in the light of the foregoing, [BF Homes and
PWCC's] prayer for the issuance of a writ of preliminary For one, it cannot be gainsaid that the ERC has original
injunction is hereby GRANTED. Respondent Manila and exclusive jurisdiction over the case. Explicitly,
Electric Company is permanently restrained from Section 43(u) of Republic Act No. 9136, otherwise known
proceeding with its announced intention to cut-off electric as the "Electric Power Industry Reform Act," (RA 9136),
power connection to [BF Homes and PWCC's] water states that the ERC shall have the original and exclusive
pumps unless otherwise ordered by this Court. Further, jurisdiction over all cases contesting rates, fees, fines and
[BF Homes and PWCC] are hereby ordered to post a bond penalties imposed by the ERC in the exercise of its
in the amount of P500,000 to answer for whatever injury powers, functions and responsibilities and over all cases
or damage that may be caused by reason of the involving disputes between and among participants or
preliminary injunction.[14] players in the energy sector. Section 4(o) of Rule 3 of the
Implementing Rules and Regulations of RA 9136 likewise
The Motion for Reconsideration of MERALCO of the provides that the ERC shall also be empowered to issue
aforementioned Order was denied by the RTC in another such other rules that are essential in the discharge of its
Order issued on January 9, 2004.[15] The RTC reiterated functions as an independent quasi-judicial body.
its earlier finding that all the requisites for the proper
issuance of an injunction had been fully complied with by For another, the respondent judge, instead of presiding
BF Homes and PWCC, thus: over the case, should have dismissed the same and
yielded jurisdiction to the ERC pursuant to the doctrine of
Records indubitably show that all the requisites for the primary jurisdiction. It is plain error on the part of the
proper issuance of an injunction have been fully complied respondent judge to determine, preliminary or otherwise,
with in the instant case. a controversy involving a question which is within the
jurisdiction of an administrative tribunal, especially so
It should be noted that a disconnection of power supply where the question demands the exercise of sound
would obviously cause irreparable injury because the administrative discretion.
pumps that supply water to the BF community will be
without electricity, thereby rendering said community Needless to state, the doctrine of primary jurisdiction
without water. Water is a basic and endemic necessity of applies where the administrative agency, as in the case of
life. This is why its enjoyment and use has been ERC, exercises its quasi-judicial and adjudicatory
constitutionally safeguarded and protected. Likewise, a function. Thus, in cases involving specialized disputes,
community without water might create social unrest, the practice has been to refer the same to an
which situation this Court has the mandate to administrative agency of special competence pursuant to
prevent. There is an urgent and paramount necessity for the doctrine of primary jurisdiction. The courts will not
the issuance of the injunctive writ to prevent serious determine a controversy involving a question which is
damage to the guaranteed rights of [BF Homes and within the jurisdiction of the administrative tribunal prior
PWCC] and the residents of the community to use and to the resolution of that question by the administrative
enjoy water.[16] tribunal, where the question demands the exercise of
sound administrative discretion requiring the special
The RTC resolved the issue on jurisdiction raised by knowledge, experience and services of the administrative
MERALCO, as follows: tribunal to determine technical and intricate matters of
fact, and a uniformity of ruling is essential to comply with
As to the jurisdictional issue raised by respondent the premises of the regulatory statute administered.
MERALCO, it can be gleaned from a re-evaluation and re-
assessment of the records that this Court has jurisdiction Verily, the cause of action of [BF Homes and PWCC]
to delve into the case. This Court gave both parties the against [MERALCO] originates from the Meralco Refund
opportunity to be heard as they introduced evidence on Decision as it involves the perceived right of the former to
the propriety of the issuance of the injunctive writ. It is compel the latter to set-off or apply their refund to their
well-settled that no grave abuse of discretion could be present electric bill. The issue delves into the right of the
attributed to its issuance where a party was not deprived private respondents to collect their refund without
of its day in court as it was heard and had exhaustively submitting to the approved schedule of the ERC, and in
presented all its arguments and defenses. (National effect give unto themselves preferential right over other
Mines and Allied Workers Union vs. Valero, 132 SCRA 578, equally situated consumers of [MERALCO]. Perforce, the
1984.)[17] ERC, as can be gleaned from the afore-stated legal
provisions, has primary, original and exclusive jurisdiction
Aggrieved, MERALCO filed with the Court of Appeals a over the said controversy.
Petition for Certiorari under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 82826. MERALCO sought the Indeed, the respondent judge glaringly erred in enjoining
reversal of the RTC Orders dated November 21, 2003 and the right of [MERALCO] to disconnect its services to [BF
January 9, 2004 granting a writ of preliminary injunction Homes and PWCC] on the premise that the court has
in favor of BF Homes and PWCC. MERALCO asserted that jurisdiction to apply the provisions on compensation or
the RTC had no jurisdiction over the application of BF set-off in this case. Although [MERALCO] recognizes the
Homes and PWCC for issuance of such a writ. right of [BF Homes and PWCC] to the refund as provided
in the Meralco Refund Decision, it is the ERC which has
In its Decision dated October 27, 2005, the Court of the authority to implement the same according to its
approved schedule, it being a dispute arising from the merits of Civil Case No. 03-0151 was not yet in issue, only
exercise of its jurisdiction. the propriety of issuing a writ of preliminary injunction to
prevent an irreparable injury. Even granting that the RTC
Moreover, it bears to stress that the Meralco Refund has no jurisdiction over the subject matter of Civil Case
Decision was brought into fore by the Decision dated 16 No. 03-0151, the ERC by enabling law has no injunctive
February 1998 of the ERC (then Energy Regulatory Board) power to prevent the disconnection by MERALCO of
granting refund to [MERALCO's] consumers. Being the electric services to BF Homes and PWCC.
agency of origin, the ERC has the jurisdiction to execute
the same. Besides, as stated, it is empowered to The Petition has no merit.
promulgate rules that are essential in the discharge of its
functions as an independent quasi-judicial body.[18] Settled is the rule that jurisdiction is conferred only by the
Constitution or the law.[21] Republic v. Court of
The dispositive portion of the judgment of the appellate Appeals[22] also enunciatedthat only a statute can confer
court reads: jurisdiction on courts and administrative agencies.

WHEREFORE, the foregoing considered, the instant Related to the foregoing and equally well-settled is the
petition is hereby GRANTED and the assailed rule that the nature of an action and the subject matter
Orders REVERSED and SET ASIDE. Accordingly, the writ thereof, as well as which court or agency of the
of injunction against [MERALCO] is government has jurisdiction over the same, are
hereby DISSOLVED. No costs.[19] determined by the material allegations of the complaint in
relation to the law involved and the character of the
In a Resolution dated February 7, 2006, the Court of reliefs prayed for, whether or not the complainant/plaintiff
Appeals denied the Motion for Reconsideration of BF is entitled to any or all of such reliefs. A prayer or
Homes and PWCC for failing to raise new and persuasive demand for relief is not part of the petition of the cause of
and meritorious arguments. action; nor does it enlarge the cause of action stated or
br>Now, BF Homes and PWCC come before this change the legal effect of what is alleged. In determining
Court via the instant Petition, raising the following which body has jurisdiction over a case, the better policy
assignment of errors: is to consider not only the status or relationship of the
parties but also the nature of the action that is the subject
of their controversy.[23]
1. The Court of Appeals ERRED in saying that the
respondent judge committed grave abuse of
In Manila Electric Company v. Energy Regulatory
discretion by issuing the disputed writ of
Board,[24] the Court traced the legislative history of the
injunction pending the merits of the case
regulatory agencies which preceded the ERC, presenting a
including the issue of subject matter jurisdiction.
summary of these agencies, the statutes or issuances that
created them, and the extent of the jurisdiction conferred
2. The Court of Appeals ERRED in saying that the upon them, viz:
ERC under the doctrine of primary jurisdiction has
the original and EXCLUSIVE jurisdiction to take
1. The first regulatory body, the Board of Rate Regulation
cognizance of a petition for injunction to prevent
(BRR), was created by virtue of Act No. 1779. Its
electrical disconnection to a customer entitled to
regulatory mandate under Section 5 of the law was limited
a refund.
to fixing or regulating rates of every public service
corporation.
3. The Court of Appeals ERRED in NOT SAYING that
the ERC as a quasi-judicial body under RA 9136 2. In 1913, Act No. 2307 created the Board of Public
has no power to issue any injunctive relief or Utility Commissioners (BPUC) to take over the functions of
remedy to prevent disconnection. the BRR. By express provision of Act No. 2307, the BPUC
was vested with jurisdiction, supervision and control over
4. The Court of Appeals ERRED in not resolving the all public utilities and their properties and franchises.
issue as to the violation of MERALCO of a
standing injunction order while the case remains 3. On November 7, 1936, Commonwealth Act (C.A.) No.
undecided.[20] 146, or the Public Service Act (PSA), was passed creating
the Public Service Commission (PSC) to replace the
BPUC. Like the BPUC, the PSC was expressly granted
At the core of the Petition is the issue of whether jurisdiction, supervision and control over public services,
jurisdiction over the subject matter of Civil Case No. 03- with the concomitant authority of calling on the public
0151 lies with the RTC or the Energy Regulatory force to exercise its power, to wit:
Commission (ERC). If it is with the RTC, then the said
trial court also has jurisdiction to issue the writ of "SEC. 13. Except as otherwise provided herein, the
preliminary injunction against MERALCO. If it is with the Commission shall have general supervision and regulation
ERC, then the RTC also has no jurisdiction to act on any of, jurisdiction and control over, all public
incidents in Civil Case No. 03-0151, including the utilities, and also over their property, property rights,
application for issuance of a writ of preliminary injunction equipment, facilities and franchises so far as may be
of BF Homes and PWCC therein. necessary for the purpose of carrying out the provisions of
this Act, and in the exercise of its authority it shall have
BF Homes and PWCC argued that due to the threat of the necessary powers and the aid of the public forcex x
MERALCO to disconnect electric services, BF Homes and x."
PWCC had no other recourse but to seek an injunctive
remedy from the RTC under its general jurisdiction. The Section 14 of C.A. No. 146 defines the term "public
service" or "public utility" as including "every individual, amended, otherwise known as the "Public Service
copartnership, association, corporation or joint-stock Act." Republic Act 6395, as amended, revising the charter
company, . . . that now or hereafter may own, operate, of NPC; Presidential Decree 269, as amended, referred to
manage or control within the Philippines, for hire or as the National Electrification Decree; Republic Act 7638,
compensation, any common carrier, x x x, electric light, otherwise known as the "Department of Energy Act of
heat, power, x x x, when owned, operated and 1992"; Executive Order 172, as amended, creating the
managed for public use or service within the Philippines ERB; Republic Act 7832 otherwise known as the "Anti-
x x x." Under the succeeding Section 17(a), the PSC has Electricity and Electric Transmission Lines/Materials
the power even without prior hearing - Pilferage Act of 1994"; shall continue to have full force
and effect except insofar as they are inconsistent with this
(a) To investigate, upon its own initiative, or upon Act.
complaint in writing, any matter concerning any public
service as regards matters under its jurisdiction; to The provisions with respect to electric power of Section
require any public service to furnish safe, adequate and 11(c) of Republic Act 7916, as amended, and Section 5(f)
proper service as the public interest may require and of Republic Act 7227, are hereby repealed or modified
warrant, to enforce compliance with any standard, rule, accordingly.
regulation, order or other requirement of this Act or of the
Commission, x x x. Presidential Decree No. 40 and all laws, decrees, rules and
regulations, or portions thereof, inconsistent with this Act
4. Then came Presidential Decree (P.D.) No. 1, are hereby repealed or modified accordingly.
reorganizing the national government and implementing
the Integrated Reorganization Plan. Under the In addition to the foregoing, the EPIRA also conferred new
reorganization plan, jurisdiction, supervision and control powers upon the ERC under Section 43, among which are:
over public services related to electric light, and power
heretofore vested in the PSC were transferred to SEC. 43. Functions of the ERC. - The ERC shall promote
the Board of Power and Waterworks (BOPW). competition, encourage market development, ensure
customer choice and penalize abuse of market power in
Later, P.D. No. 1206 abolished the BOPW. Its powers and the restructured electricity industry. In appropriate cases,
function relative to power utilities, including its authority the ERC is authorized to issue cease and desist order after
to grant provisional relief, were transferred to the newly- due notice and hearing. Towards this end, it shall be
created Board of Energy (BOE). responsible for the following key functions in the
restructured industry:
5. On May 8, 1987, then President Corazon C. Aquino
issued E.O. No. 172 reconstituting the BOE into the ERB, x x x x
transferring the former's functions and powers under P.D.
No. 1206 to the latter and consolidating in and entrusting (f) In the public interest, establish and enforce a
on the ERB "all the regulatory and adjudicatory functions methodology for setting transmission and distribution
covering the energy sector." Section 14 of E.O. No. 172 wheeling rates and retail rates for the captive market of a
states that "(T)he applicable provisions of [C.A.] No. 146, distribution utility, taking into account all relevant
as amended, otherwise known as the `Public Service Act'; considerations, including the efficiency or inefficiency of
x x x and [P.D.] No. 1206, as amended, creating the the regulated entities. The rates must be such as to allow
Department of Energy, shall continue to have full force the recovery of just and reasonable costs and a
and effect, except insofar as inconsistent with this reasonable return on rate base (RORB) to enable the
Order."[25] entity to operate viably. The ERC may adopt alternative
forms of internationally-accepted rate-setting
Thereafter, on June 8, 2001, Republic Act No. 9136, methodology as it may deem appropriate. The rate-
known as the Electric Power Industry Reform Act of 2001 setting methodology so adopted and applied must ensure
(EPIRA), was enacted, providing a framework for a reasonable price of electricity. The rates prescribed
restructuring the electric power industry. One of the shall be non-discriminatory. To achieve this objective and
avowed purposes of the EPIRA is to establish a strong and to ensure the complete removal of cross subsidies, the
purely independent regulatory body. The Energy cap on the recoverable rate of system losses prescribed in
Regulatory Board (ERB) was abolished and its powers and Section 10 of Republic Act No. 7832, is hereby amended
functions not inconsistent with the provision of the EPIRA and shall be replaced by caps which shall be determined
were expressly transferred to the ERC.[26] by the ERC based on load density, sales mix, cost of
service, delivery voltage and other technical
The powers and functions of the ERB not inconsistent with considerations it may promulgate. The ERC shall
the EPIRA were transferred to the ERC by virtue of determine such form of rate-setting methodology, which
Sections 44 and 80 of the EPIRA, which read: shall promote efficiency. x x x.

Sec. 44. Transfer of Powers and Functions. - The powers x x x x

and functions of the Energy Regulatory Board not
inconsistent with the provisions of this Act are hereby (u) The ERC shall have the original and exclusive
transferred to the ERC. The foregoing transfer of powers jurisdiction over all cases contesting rates, fees, fines and
and functions shall include all applicable funds and penalties imposed by the ERC in the exercise of the
appropriations, records, equipment, property and abovementioned powers, functions and responsibilities
personnel as may be necessary. and over all cases involving disputes between and among
participants or players in the energy sector.
Sec. 80. Applicability and Repealing Clause. - The
applicability provisions of Commonwealth Act No. 146, as All notices of hearings to be conducted by the ERC for the
purpose of fixing rates or fees shall be published at least court cannot arrogate into itself the authority to resolve a
twice for two successive weeks in two (2) newspapers of controversy, the jurisdiction of which is initially lodged
nationwide circulation. with the administrative body of special competence.[27]

A careful review of the material allegations of BF Homes Since the RTC had no jurisdiction over the Petition of BF
and PWCC in their Petition before the RTC reveals that the Homes and PWCC in Civil Case No. 03-0151, then it was
very subject matter thereof is the off-setting of the also devoid of any authority to act on the application of BF
amount of refund they are supposed to receive from Homes and PWCC for the issuance of a writ of preliminary
MERALCO against the electric bills they are to pay to the injunction contained in the same Petition. The ancillary
same company. This is squarely within the primary and provisional remedy of preliminary injunction cannot
jurisdiction of the ERC. exist except only as an incident of an independent action
or proceeding.[28]
The right of BF Homes and PWCC to refund, on which their
claim for off-setting depends, originated from the Incidentally, BF Homes and PWCC seemed to have lost
MERALCO Refund cases. In said cases, the Court (1) sight of Section 8 of Executive Order No. 172 which
authorized MERALCO to adopt a rate adjustment in the explicitly vested on the ERB, as an incident of its principal
amount of P0.017 per kilowatthour, effective with respect function, the authority to grant provisional relief, thus:
to its billing cycles beginning February 1994; and (2)
ordered MERALCO to refund to its customers or credit in Section 8. Authority to Grant Provisional Relief. -- The
said customers' favor for future consumption P0.167 per Board may, upon the filing of an application, petition or
kilowatthour, starting with the customers' billing cycles complaint or at any stage thereafter and without prior
that begin February 1998, in accordance with the ERB hearing, on the basis of supporting papers duly verified or
Decision dated February 16, 1998. authenticated, grant provisional relief on motion of a party
in the case or on its own initiative, without prejudice to a
It bears to stress that in the MERALCO Refund cases, this final decision after hearing, should the Board find that the
Court only affirmed the February 16, 1998 Decision of the pleadings, together with such affidavits, documents and
ERB (predecessor of the ERC) fixing the just and other evidence which may be submitted in support of the
reasonable rate for the electric services of MERALCO and motion, substantially support the provisional
granting refund to MERALCO consumers of the amount order: Provided, That the Board shall immediately
they overpaid. Said Decision was rendered by the ERB in schedule and conduct a hearing thereon within thirty (30)
the exercise of its jurisdiction to determine and fix the just days thereafter, upon publication and notice to all affected
and reasonable rate of power utilities such as MERALCO. parties.

Presently, the ERC has original and exclusive jurisdiction The aforequoted provision is still applicable to the ERC as
under Rule 43(u) of the EPIRA over all cases contesting it succeeded the ERB, by virtue of Section 80 of the
rates, fees, fines, and penalties imposed by the ERC in the EPIRA. A writ of preliminary injunction is one such
exercise of its powers, functions and responsibilities, and provisional relief which a party in a case before the ERC
over all cases involving disputes between and among may move for.
participants or players in the energy sector. Section 4(o)
of the EPIRA Implementing Rules and Regulation provides Lastly, the Court herein already declared that the RTC not
that the ERC "shall also be empowered to issue such other only lacked the jurisdiction to issue the writ of preliminary
rules that are essential in the discharge of its functions as injunction against MERALCO, but that the RTC actually
in independent quasi-judicial body." had no jurisdiction at all over the subject matter of the
Petition of BF Homes and PWCC in Civil Case No. 03-
Indubitably, the ERC is the regulatory agency of the 0151. Therefore, in addition to the dissolution of the writ
government having the authority and supervision over of preliminary injunction issued by the RTC, the Court also
MERALCO. Thus, the task to approve the guidelines, deems it appropriate to already order the dismissal of the
schedules, and details of the refund by MERALCO to its Petition of BF Homes and PWCC in Civil Case No. 03-0151
consumers, to implement the judgment of this Court in for lack of jurisdiction of the RTC over the subject matter
the MERALCO Refund cases, also falls upon the ERC. By of the same. Although only the matter of the writ of
filing their Petition before the RTC, BF Homes and PWCC preliminary injunction was brought before this Court in the
intend to collect their refund without submitting to the instant Petition, the Court is already taking cognizance of
approved schedule of the ERC, and in effect, enjoy the issue on the jurisdiction of the RTC over the subject
preferential right over the other equally situated MERALCO matter of the Petition. The Court may motu
consumers. proprio consider the issue of jurisdiction. The Court has
discretion to determine whether the RTC validly acquired
Administrative agencies, like the ERC, are tribunals of jurisdiction over Civil Case No. 03-0151 since, to
limited jurisdiction and, as such, could wield only such as reiterate, jurisdiction over the subject matter is conferred
are specifically granted to them by the enabling only by law. Jurisdiction over the subject matter cannot
statutes. In relation thereto is the doctrine of primary be acquired through, or waived by, any act or omission of
jurisdiction involving matters that demand the special the parties. Neither would the active participation of the
competence of administrative agencies even if the parties nor estoppel operate to confer jurisdiction on the
question involved is also judicial in nature. Courts cannot RTC where the latter has none over a cause of
and will not resolve a controversy involving a question action.[29] Indeed, when a court has no jurisdiction over
within the jurisdiction of an administrative tribunal, the subject matter, the only power it has is to dismiss the
especially when the question demands the sound exercise action.[30]
of administrative discretion requiring special knowledge,
experience and services of the administrative tribunal to WHEREFORE, the instant Petition for Review is DENIED.
determine technical and intricate matters of fact. The The Decision dated October 27, 2005 of the Court of
Appeals in CA-G.R. SP No. 82826 is AFFIRMED with November 11, 2001, an Urgent Motion for Extension of
the MODIFICATION that the Regional Trial Court, Time to File Proper Pleading and Motion for Discovery
Branch 202 of Las Piñas City, is ORDERED to dismiss the (Production and Inspection)13 (November 11, 2001
Petition [With Prayer for the Issuance of Writ of Motion), asking the RTC to allow them to photocopy and
Preliminary Injunction and for the Immediate Issuance of personally examine the original invoices, delivery cargo
Restraining Order] of BF Homes, Inc. and Philippine receipts, and bills of lading attached to the Amended
Waterworks and Construction Corporation in Civil Case Complaint, claiming that they could not �come up with an
No. 03-0151. Costs against BF Homes, Inc. and Philippine intelligent answer� without being presented with the
Waterworks and Construction Corporation. originals of such documents.14

SO ORDERED. Thereafter, or on January 11, 2006, respondents filed a

Motion to Discharge Excess Attachment,15alleging that the
attachment previously ordered by the RTC exceeded by
P9,232,564.56 given that the estimated value of the
attached properties, including the garnished bank
accounts, as assessed by their appraiser, Gaudioso W.
G.R. No. 203240, March 18, 2015 Lapaz (Lapaz), amounted to P17,273,409.73, while the
attachment bond is only in the amount of
P8,040,825.17.16
NORTHERN ISLANDS, CO.,
INC., Petitioner, v. SPOUSES DENNIS AND In an Order17 dated February 28, 2006, the RTC denied
CHERYLIN* GARCIA, DOING BUSINESS UNDER THE the November 11, 2001 Motion, and, instead, directed
NAME AND STYLE �ECOLAMP MULTI respondents to file their answer, which the latter complied
RESOURCES,�, Respondents. with through the filing of their Answer Ad Cautelam Ex
Abudante with Compulsory Counterclaim18 on April 3,
DECISION 2006. Despite this, respondents again filed a Motion for
Leave of Court to File Motion for Discovery (Production
PERLAS-BERNABE, J.: and Inspection)19 (Motion for Discovery) on April 7,
2006.20

Assailed in this petition for review on certiorari1 are the

The RTC Ruling
Decision2 dated January 19, 2012 and the
Resolution3 dated August 24, 2012 of the Court of Appeals
In an Order21 dated June 21, 2006, the RTC, among
(CA) in CA-G.R. SP No. 97448, ordering the Regional Trial
others, denied the Motion to Discharge Excess
Court of Quezon City, Branch 215 (RTC) to appoint a
Attachment, finding that the appraisal made by Lapaz was
commissioner to determine the value of the attached
not reflective of the true valuation of the properties,
properties of respondents Spouses Dennis and Cherylin
adding too that the bond posted by petitioner stands as
Garcia (respondents), and to discharge any excessive
sufficient security for whatever damages respondents may
attachment found thereby.
sustain by reason of the attachment.22

The Facts On the other hand, the RTC granted the Motion for
Discovery in accordance with Rule 27 of the Rules of
On September 23, 2005, petitioner Northern Islands Co., Court, despite petitioner�s claim that it did not have the
Inc. (petitioner) filed a Complaint4 with application for a originals of the documents being sought.23
writ of preliminary attachment, before the RTC against
respondents, docketed as Civil Case No. Q-05-53699 However, no production or inspection was conducted on
(Main Case), which was subsequently amended5 on July 10, 2006 as the RTC directed since respondents
October 25, 2005.6 It alleged that: (a) from March to July received the copy of the above order only on July 11,
2004, petitioner caused the delivery to respondents of 2006.24
various appliances in the aggregate amount of
P8,040,825.17;7 (b) the goods were transported, shipped, On July 25, 2006, respondents filed a Motion for Partial
and delivered by Sulpicio Lines, Inc., and were accepted Reconsideration of the Order dated June 21, 2006,
in good order and condition by respondents� specifically assailing the denial of their Motion to
representatives;8 (c)� the parties agreed that the goods Discharge Excess Attachment. In this relation, they
delivered were payable within 120 days, and that the prayed that the RTC refer to a commissioner, pursuant to
unpaid amounts would earn interest at a rate of eighteen Rule 32 of the Rules of Court, the factual determination of
percent (18%) per annum;9 (d) however, the value of the the total aggregate amount of respondents� attached
goods were not paid by respondents despite repeated properties so as to ascertain if the attachment was
demands;10 and (e) respondents fraudulently asserted excessive.� Also, they prayed that the order for
that petitioner had no proof that they� had indeed production and inspection be modified and that petitioner
received the quantity of the subject goods.11 be ordered to produce the original documents anew for
their inspection and copying. 25
In connection with the application for a writ of preliminary
attachment, petitioner posted a bond, through Visayan The foregoing motion was, however, denied by the RTC in
Surety and Insurance Corporation, in the amount of an Order26 dated August 23, 2006 for lack of merit. Thus,
?8,040,825.17.� On November 7, 2005, the RTC issued respondents elevated the matter to the CA via petition
the writ sought for.12 for certiorari and mandamus,27docketed as CA-G.R. SP
No. 97448 (Certiorari Case).
Instead of filing an answer, respondents filed on
In the interim, the RTC rendered a Decision28 dated filed any appeal, resulting in the lapse of its own period to
September 21, 2011 in the Main Case. Essentially, it appeal therefrom. Thus, based on Section 9, Rule 41, it
dismissed petitioner�s Amended Complaint due to the cannot be seriously doubted that the RTC had already lost
absence of any evidence to prove that respondents had jurisdiction over the Main Case.
agreed to the pricing of the subject goods.29
With the RTC�s loss of jurisdiction over the Main Case
The RTC�s September 21, 2011 Decision was later necessarily comes its loss of jurisdiction over all matters
appealed30 by petitioner before the CA on October 27, merely ancillary thereto. Thus, the propriety of conducting
2011. Finding that the Notice of Appeal was seasonably a trial by commissioners in order to determine the
filed, with the payment of the appropriate docket fees, the excessiveness of the subject preliminary attachment,
RTC, in an Order31 dated January 25, 2012, ordered the being a mere ancillary matter to the Main Case, is now
elevation of the entire records of the Main Case to the CA. mooted by its supervening appeal in CA-G.R. CV No.
The appeal was then raffled to the CA�s Eighth Division, 98237.
and docketed as CA-G.R. CV No. 98237. On the other
hand, records do not show that respondents filed any Note that in Sps. Olib v. Judge Pastoral,40 the Court, in
appeal.32 view of the nature of a preliminary attachment,
definitively ruled that the attachment itself cannot be the
The CA Ruling in the Certiorari Case subject of a separate action independent of the principal
action because the attachment was only an incident of
Meanwhile, the CA, in a Decision33 dated January 19, such action, viz.:
2012, partly granted the certiorari petition of respondents,
ordering the RTC to appoint a commissioner as provided Attachment is defined as a provisional remedy by which
under Rule 32 of the Rules of Court as well as the the property of an adverse party is taken into legal
subsequent discharge of any excess attachment if so custody, either at the commencement of an action or at
found therein, and, on the other hand, denying any time thereafter, as a security for the satisfaction of
respondents� Motion for Discovery.34 any judgment that may be recovered by the plaintiff or
any proper party.
It held that: (a) on the issue of attachment, trial by
commissioners under Rule 32 of the Rules of Court was It is an auxiliary remedy and cannot have an independent
proper so that the parties may finally settle their existence apart from the main suit or claim instituted by
conflicting valuations;35 and (b) on the matter of the plaintiff against the defendant. Being merely
discovery, petitioner could not be compelled to produce ancillary to a principal proceeding, the attachment
the originals sought by respondents for inspection since must fail if the suit itself cannot be maintained as
they were not in the former�s possession.36 the purpose of the writ can no longer be justified.

Aggrieved, petitioner filed a Motion for Partial The consequence is that where the main action is
Reconsideration37 on February 13, 2012 but was, appealed, the attachment which may have been issued as
however, denied in a Resolution38 dated August 24, 2012, an incident of that action, is also considered appealed and
hence, the present petition. so also removed from the jurisdiction of the court a
quo.� The attachment itself cannot be the subject of
The Issues Before the Court a separate action independent of the principal
action because the attachment was only an incident
The issues presented for the Court�s resolution are: (a) of such action.41 (Emphases supplied)
whether the RTC had lost jurisdiction over the matter of
the preliminary attachment after petitioner appealed the That being said, it is now unnecessary to discuss the other
decision in the Main Case, and thereafter ordered the issues raised herein. In fine, the petition is granted and
transmittal of the records to the CA; and (b) whether the the assailed CA rulings are set aside.
CA erred in ordering the appointment of a commissioner
and the subsequent discharge of any excess attachment WHEREFORE, the petition is GRANTED. The Decision
found by said commissioner. dated January 19, 2012 and the Resolution dated August
24, 2012 of the Court of Appeals in CA-G.R. SP No. 97448
The Court�s Ruling are hereby SET ASIDE.

The petition is meritorious. SO ORDERED.

Section 9, Rule 41 of the Rules of Court provides that in

appeals by notice of appeal, the court loses
jurisdiction over the case upon the perfection of the
appeals filed in due time and the expiration of the
time to appeal of the other parties. [G.R. No. 133303. February 17, 2005]
In this case,� petitioner had duly perfected its appeal of
the RTC�s September 21, 2011 Decision resolving the
Main Case through the timely filing of its Notice of Appeal
dated October 27, 2011, together with the payment of the BERNARDO
appropriate docket fees. The RTC, in an Order39 dated
January 25, 2012, had actually confirmed this fact, and VALDEVIESO, petitioner, vs.
thereby ordered the elevation of the entire records to the CANDELARIO DAMALERIO
CA. Meanwhile, records do not show that respondents
 AND AUREA C. On 23 April 1996, the trial court issued
DAMALERIO, respondents. a Writ of Preliminary Attachment by virtue
of which the property, then still in the
DECISION name of Lorenzo Uy but which had
CHICO-NAZARIO, J.: already been sold to petitioner, was
levied. The levy was duly recorded in the
Before this Court is a Petition for Register of Deeds of General Santos City
Review under Rule 45 of the Rules of and annotated upon TCT No. T-30586.[6]
Court, seeking to set aside the 25 On 06 June 1996, TCT No. T-30586 in
September 1997 Decision and the 10 the name of Lorenzo Uy was cancelled
February 1998 Resolution of the Court of and, in lieu thereof, TCT No. T-74439 was
Appeals in CA-G.R. SP No. 43082 issued in the name of petitioner.[7] This
entitled, Candelario Damalerio and Aurea new TCT carried with it the attachment in
Damalerio v. Honorable Antonio S. Alano, favor of respondents.
et al.[1]
On 14 August 1996, petitioner filed a
There is no dispute as to the following third-party claim in Civil Case No. 5748 to
facts: discharge or annul the attachment levied
On 05 December 1995, Bernardo on the property covered by TCT No. T-
Valdevieso (petitioner) bought from 74439 on the ground that the said
spouses Lorenzo and Elenita Uy a parcel property belongs to him and no longer to
of land consisting of 10,000 square Lorenzo and Elenita Uy.[8]
meters, more or less, located at Bo. In a resolution dated 21 October
Tambler, General Santos City, and 1996, the trial court ruled for the
covered by Transfer Certificate of Title petitioner.[9] Citing Manliguez v. Court of
(TCT) No. T-30586.[2] Appeals[10] and Santos v. Bayhon,[11] it
The deed of sale was not registered, held that the levy of the property by virtue
nor was the title of the land transferred to of attachment is lawful only when the
petitioner.[3] levied property indubitably belongs to the
defendant. Applying the rulings in the
On 07 December 1995, the said cited cases, it opined that although
property was immediately declared by defendant Lorenzo Uy remained the
petitioner for taxation purposes as Tax registered owner of the property attached,
Declaration No. l6205 with the City yet the fact was that he was no longer the
Assessors Office.[4] owner thereof as it was already sold
It came to pass that on 19 April 1996, earlier to petitioner, hence, the writ of
spouses Candelario and Aurea Damalerio attachment was unlawful.
(respondents) filed with the Regional Trial Respondents sought reconsideration
Court (RTC) of General Santos City, a thereof which was denied by the trial
complaint for a sum of money against court in a resolution dated 03 January
spouses Lorenzo and Elenita Uy 1997.[12]
docketed as Civil Case No. 5748 with
application for the issuance of a Writ of From the unfavorable resolution of the
Preliminary Attachment.[5] trial court in the third-party claim,
respondents appealed to the Court of
Appeals. The appellate court reversed the
resolution and by judgment promulgated Considering the peculiar facts and
on 25 September 1997, it declared that circumstances obtaining in this case,
an attachment or levy of execution, petitioner submits it would be in accord
though posterior to the sale, but if with justice and equity to declare him as
registered before the sale is registered, having a superior right to the disputed
takes precedence over the sale.[13] The property than the respondents.
writ of attachment in favor of the
Respondents maintain the contrary
respondents, being recorded ahead of the
view. They aver that registration of a deed
sale to petitioner, will therefore take
of sale is the operative act which binds
precedence.
the land and creates a lien thereon.
Petitioner moved for reconsideration Before the registration of the deed, the
but this was denied by the Court of property is not bound insofar as third
Appeals in its Resolution of 10 February persons are concerned. Since the writ of
1998.[14] attachment in favor of respondents was
registered earlier than the deed of sale to
Hence, this Petition for Review
petitioner, respondents were of the belief
on Certiorari.
that their registered writ of attachment on
The sole issue in this case is whether the subject property enjoys preference
or not a registered writ of attachment on and priority over petitioners earlier
the land is a superior lien over that of an unregistered deed of sale over the same
earlier unregistered deed of sale. property. They also contend that Articles
Petitioner maintains that he has a 1477 and 1498 of the Civil Code as cited
superior right over the questioned by petitioner are not applicable to the
property because when the same was case because said provisions apply only
attached on 23 April 1996, this property as between the parties to the deed of
was no longer owned by spouses Uy sale. These provisions do not apply to,
against whom attachment was issued as nor bind, third parties, like respondents,
it was already sold to petitioner on 05 because what affects or binds third
December 1995. The ownership thereof parties is the registration of the instrument
was already transferred to petitioner in the Register of Deeds. Furthermore,
pursuant to Article 1477[15] in relation to respondents argue that petitioner cannot
Article 1498[16] of the Civil Code. invoke equity in his favor unless the
following conditions are met: (a) the
Dismissing the allegation that he slept absence of specific provision of a law on
on his rights by not immediately the matter; and (b) if the person who
registering at least an adverse claim invokes it is not guilty of delay. Both
based on his deed of sale, petitioner conditions have not been met, however,
avers that he promptly worked out for the since there is a law on the subject
transfer of registration in his name. The matter, i.e., Section 51 of Presidential
slight delay in the registration, he claims Decree No. 1529, and that petitioner
was not due to his fault but attributable to allegedly slept on his rights by not
the process involved in the registration of immediately registering an adverse claim
property such as the issuance of the based on his deed of sale.
Department of Agrarian Reform clearance
which was effected only after compliance We agree with the respondents.
with several requirements.
 The law applicable to the facts of this property on 05 December 1995, it was, at
case is Section 51 of P.D. No. 1529. Said that point, no more than a private
Section provides: transaction between him and the spouses
Uy. It needed to be registered before it
Sec. 51. Conveyance and other dealings by could bind third parties, including
registered owner. - An owner of registered respondents. When the registration finally
land may convey, mortgage, lease, charge, or took place on 06 June 1996, it was
otherwise deal with the same in accordance already too late because, by then, the
with existing laws. He may use such forms of levy in favor of respondents, pursuant to
deeds, mortgages, leases or other voluntary the preliminary attachment ordered by the
instruments as are sufficient in law. But no General Santos City RTC, had already
deed, mortgage, lease, or other voluntary been annotated on the title.
instrument, except a will purporting to convey
or affect registered land, shall take effect as a The settled rule is that levy on
conveyance or bind the land, but shall operate attachment, duly registered, takes
only as a contract between the parties and as preference over a prior unregistered
evidence of authority to the Register of Deeds sale.[17] This result is a necessary
to make registration. consequence of the fact that the property
involved was duly covered by the Torrens
The act of registration shall be the operative system which works under the
act to convey or affect the land insofar as third fundamental principle that registration is
persons are concerned, and in all cases under the operative act which gives validity to
this Decree, the registration shall be made in the transfer or creates a lien upon the
the office of the Register of Deeds for the land.[18]
province or city where the land lies. The preference created by the levy on
attachment is not diminished even by the
It is to be noted that though the subsequent registration of the prior sale.
subject land was deeded to petitioner as This is so because an attachment is a
early as 05 December 1995, it was not proceeding in rem.[19] It is against the
until 06 June 1996 that the conveyance particular property, enforceable against
was registered, and, during that the whole world. The attaching creditor
interregnum, the land was subjected to a acquires a specific lien on the attached
levy on attachment. It should also be property which nothing can subsequently
observed that, at the time of the destroy except the very dissolution of the
attachment of the property on 23 April attachment or levy itself.[20] Such a
1996, the spouses Uy were still the proceeding, in effect, means that the
registered owners of said property. Under property attached is an indebted thing
the cited law, the execution of the deed of and a virtual condemnation of it to pay the
sale in favor of petitioner was not enough owners debt.[21] The lien continues until
as a succeeding step had to be taken, the debt is paid, or sale is had under
which was the registration of the sale execution issued on the judgment, or until
from the spouses Uy to him. Insofar as the judgment is satisfied, or the
third persons are concerned, what validly attachment discharged or vacated in
transfers or conveys a persons interest in some manner provided by law.
real property is the registration of the
deed. Thus, when petitioner bought the
 Thus, in the registry, the attachment in enforced so as to overrule positive
favor of respondents appeared in the provisions of law in favor of the
nature of a real lien when petitioner had other.[24] Equity cannot supplant or
his purchase recorded. The effect of the contravene the law.[25] The rule must
notation of said lien was to subject and stand no matter how harsh it may
subordinate the right of petitioner, as seem. Dura lex sed lex.
purchaser, to the lien. Petitioner acquired
WHEREFORE, the appealed Decision
ownership of the land only from the date
of the Court of Appeals in CA-G.R. SP
of the recording of his title in the register,
No. 43082 dated 25 September 1997,
and the right of ownership which he
and its Resolution dated 10 February
inscribed was not absolute but a limited
1998, are hereby AFFIRMED. No costs.
right, subject to a prior registered lien of
respondents, a right which is preferred SO ORDERED.
and superior to that of petitioner.[22]
G.R. No. L-48756 September 11, 1982
Anent petitioners reliance on the
rulings laid down in Manliguez v. Court of K.O. GLASS CONSTRUCTION CO., INC., petitioner,
vs.
Appeals and Santos v. Bayhon, we find THE HONORABLE MANUEL VALENZUELA, Judge
the same to be misplaced. These cases of the Court of First Instance of Rizal, and
did not deal at all with the dilemma at ANTONIO D. PINZON, respondents.
hand, i.e. the question of whether or not a
Guillermo E. Aragones for petitioner.
registered writ of attachment on land is
superior to that of an earlier unregistered Ruben V. Lopez for respondent Antonio D. Pinzon.
deed of sale. In Santos, what was
involved were machinery and pieces of
equipment which were executed upon
pursuant to the favorable ruling of the CONCEPCION, JR., J.:
National Labor Relations Commission. A Petition for certiorari to annul and set aside the writ of
third party claimed that the machinery preliminary attachment issued by the respondent
were already sold to her, but it does not Judge in Civil Case No. 5902-P of the Court of First
appear in the facts of the case if such Instance of Rizal, entitled: Antonio D. Pinzon plaintiff,
versus K.O. Glass Construction Co., Inc., and
sale was ever registered. Manliguez is Kenneth O. Glass, defendants, and for the release of
similar to Santos, except that the former the amount of P37,190.00, which had been deposited
involved buildings and improvements on a with the Clerk of Court, to the petitioner.
piece of land. To stress, in both cited
On October 6, 1977, an action was instituted in the
cases, the registration of the sale, if any, Court of First Instance of Rizal by Antonio D. Pinzon
of the subject properties was never in to recover from Kenneth O. Glass the sum of
issue. P37,190.00, alleged to be the agreed rentals of his
truck, as well as the value of spare parts which have
As to petitioners invocation of equity, not been returned to him upon termination of the
we cannot, at this instance, yield to such lease. In his verified complaint, the plaintiff asked for
an attachment against the property of the defendant
principle in the presence of a law clearly consisting of collectibles and payables with the
applicable to the case. We reiterate that Philippine Geothermal, Inc., on the grounds that the
this Court, while aware of its equity defendant is a foreigner; that he has sufficient cause
of action against the said defendant; and that there is
jurisdiction, is first and foremost, a court no sufficient security for his claim against the
of law.[23] While equity might tilt on the defendant in the event a judgment is rendered in his
side of one party, the same cannot be favor. 1
Finding the petition to be sufficient in form and We find merit in the petition. The respondent Judge
substance, the respondent Judge ordered the gravely abused his discretion in issuing the writ of
issuance of a writ of attachment against the properties preliminary attachment and in not ordering the release
of the defendant upon the plaintiff's filing of a bond in of the money which had been deposited with the
the amount of P37,190.00. 2 Clerk of Court for the following reasons:

Thereupon, on November 22, 1977, the defendant First, there was no ground for the issuance of the writ
Kenneth O. Glass moved to quash the writ of of preliminary attachment. Section 1, Rule 57 of the
attachment on the grounds that there is no cause of Revised Rules of Court, which enumerates the
action against him since the transactions or claims of grounds for the issuance of a writ of preliminary
the plaintiff were entered into by and between the attachment, reads, as follows:
plaintiff and the K.O. Glass Construction Co., Inc., a
corporation duly organized and existing under Sec. 1. Grounds upon which
Philippine laws; that there is no ground for the attachment may issue. —A plaintiff or
issuance of the writ of preliminary attachment as any proper party may, at the
defendant Kenneth O. Glass never intended to leave commencement of the action or at any
the Philippines, and even if he does, plaintiff can not time thereafter, have the property of
be prejudiced thereby because his claims are against the adverse party attached as security
a corporation which has sufficient funds and property for the satisfaction of any judgment
to satisfy his claim; and that the money being that may be recovered in the following
garnished belongs to the K.O. Glass Corporation Co., cases:
Inc. and not to defendant Kenneth O. Glass. 3
(a) In an action for the recovery of
By reason thereof, Pinzon amended his complaint to money or damages on a cause of
include K.O. Glass Construction Co., Inc. as co- action arising from contract, express
defendant of Kenneth O. Glass. 4 or implied, against a party who is
about to depart from the Philippines
On January 26, 1978, the defendants therein filed a with intent to defraud his creditor;
supplementary motion to discharge and/or dissolve
the writ of preliminary attachment upon the ground (b) In an action for money or property
that the affidavit filed in support of the motion for embezzled or fraudulently misapplied
preliminary attachment was not sufficient or wanting or converted to his own use by a
in law for the reason that: (1) the affidavit did not state public officer, or an officer of a
that the amount of plaintiff's claim was above all legal corporation, or an attorney, factor,
set-offs or counterclaims, as required by Sec. 3, Rule broker, agent, or clerk, in the course of
57 of the Revised Rules of Court; (2) the affidavit did his employment as such, or by any
not state that there is no other sufficient security for other person in a fiduciary capacity, or
the claim sought to be recovered by the action as also for a willful violation of duty;
required by said Sec. 3; and (3) the affidavit did not
specify any of the grounds enumerated in Sec. 1 of
(c) In an action to recover the
Rule 57, 5 but, the respondent Judge denied the motion
possession of personal property
and ordered the Philippine Geothermal, Inc. to deliver
unjustly detained, when the property,
and deposit with the Clerk of Court the amount of
P37,190.00 immediately upon receipt of the order which
or any part thereof, has been
amount shall remain so deposited to await the judgment concealed, removed, or disposed of to
to be rendered in the case. 6 prevent its being found or taken by the
applicant or an officer;
On June 19, 1978, the defendants therein filed a bond in
the amount of P37,190.00 and asked the court for the (d) In an action against the party who
release of the same amount deposited with the Clerk of has been guilty of a fraud in
Court, 7 but, the respondent Judge did not order the contracting the debt or incurring the
release of the money deposited. 8 obligation upon which the action is
brought, or in concealing or disposing
Hence, the present recourse. As prayed for, the Court of the property for the taking,
issued a temporary restraining order, restraining the detention or conversion of which the
respondent Judge from further proceeding with the action is brought;
trial of the case. 9
(e) In an action against a party who
has removed or disposed of his
 property, or is about to do so, with however, defendant has sufficient
intent to defraud his creditors; assets in the Philippines in the form of
collectible and payables due from the
(f) In an action against a party who Philippine Geothermal, Inc. with office
resides out of the Philippines, or on address at Citibank Center, Paseo de
whom summons may be served by Roxas, Makati, Metro Manila, but
publication. which properties, if not timely
attached, may be disposed of
In ordering the issuance of the controversial writ of by defendants and would render
preliminary attachment, the respondent Judge said ineffectual the reliefs prayed for by
and We quote: plaintiff in this Complaint. 11

The plaintiff filed a complaint for a sum In his Amended Complaint, Pinzon alleged the
of money with prayer for Writ of following:
Preliminary Attachment dated
September 14, 1977, alleging that the 15. Plaintiff hereby avers under oath
defendant who is a foreigner may, at that defendant GLASS is an American
any time, depart from the Philippines citizen who controls most, if not all, the
with intent to defraud his creditors affairs of defendant CORPORATION.
including the plaintiff herein; that there Defendants CORPORATION and
is no sufficient security for the claim GLASS have a valid and just
sought to be enforced by this action; obligation to plaintiff in the total sum of
that the amount due the plaintiff is as P32,290.00 arising out for their failure
much as the sum for which an order of to pay (i) service charges for hauling
attachment is sought to be granted; of construction materials, (ii) rentals
and that defendant has sufficient for the lease of plaintiff's Isuzu Cargo
leviable assets in the Philippines truck, and (iii) total cost of the
consisting of collectibles and payables missing/destroyed spare parts of said
due from Philippine Geothermal, Inc., leased unit: hence, a sufficient cause
which may be disposed of at any time, of action exist against
by defendant if no Writ of Preliminary said defendants. Plaintiff also avers
Attachment may be issued. Finding under oath that there is no sufficient
said motion and petition to be security for his claim against
sufficient in form and substance. 10 the defendants in the event a
judgment be rendered in favor of the
Pinzon however, did not allege that the defendant plaintiff. however, defendant
Kenneth O. Glass "is a foreigner (who) may, at any time, CORPORATION has sufficient assets
depart from the Philippines with intent to defraud his in the Philippines in the form of
creditors including the plaintiff." He merely stated that collectibles and payables due from the
the defendant Kenneth O. Glass is a foreigner. The Philippine Geothermal., Inc. with office
pertinent portion of the complaint reads, as follows: address at Citibank Center, Paseo de
Roxas, Makati, Metro Manila, but
15. Plaintiff hereby avers under oath which properties, if not timely
that defendant is a foreigner and that attached, may be disposed of
said defendant has a valid and just by defendants and would render
obligation to plaintiff in the total sum of ineffectual the reliefs prayed for by
P32,290.00 arising out from his failure plaintiff in this Complaint. 12
to pay (i) service charges for the
hauling of construction materials; (ii) There being no showing, much less an allegation, that
rentals for the lease of plaintiff's Isuzu the defendants are about to depart from the
Cargo truck, and (iii) total cost of the Philippines with intent to defraud their creditor, or that
missing/destroyed spare parts of said they are non-resident aliens, the attachment of their
leased unit; hence, a sufficient cause properties is not justified.
of action exists against
said defendant. Plaintiff also avers Second, the affidavit submitted by Pinzon does not
under oath that there is no sufficient comply with the Rules. Under the Rules, an affidavit
security for his claim against for attachment must state that (a) sufficient cause of
the defendant in the event a judgment action exists, (b) the case is one of those mentioned
be rendered in favor of the plaintiff.
in Section I (a) of Rule 57; (c) there is no other (ii) Also, on June 18, 1977, we entered
sufficient security 'or the claim sought to be enforced into a separate agreement whereby
by the action, and (d) the amount due to the applicant my Isuzu cargo truck will be leased to
for attachment or the value of the property the him for a consideration of P4,000.00 a
possession of which he is entitled to recover, is as month payable on the 15th day of
much as the sum for which the order is granted above each month;
all legal counterclaims. Section 3, Rule 57 of the
Revised Rules of Court reads. as follows: (iii) On September 7, 1977, after
making use of my Isuzu truck, he
Section 3. Affidavit and bond surrendered the same without paying
required.—An order of attachment the monthly rentals for the leased
shall be granted only when it is made Isuzu truck and the peso equivalent of
to appear by the affidavit of the the spare parts that were either
applicant, or of some person who destroyed or misappropriated by him;
personally knows the facts, that a
sufficient cause of action exists that 3. As of today, October 11, 1977, Mr.
the case is one of those mentioned in Kenneth 0. Glass still owes me the
Section 1 hereof; that there is no other total sum of P32,290.00 representing
sufficient security for the claim sought his obligation arising from the hauling
to be enforced by the action, and that of his construction materials, monthly
the amount due to the applicant, or the rentals for the lease Isuzu truck and
value of the property the possession the peso equivalent of the spare parts
of which he is entitled to recover, is as that were either destroyed or
much as the sum for which the order misappropriated by him;
is granted above all legal
counterclaims. The affidavit, and the 4. I am executing this Affidavit to attest
bond required by the next succeeding to the truthfulness of the foregoing and
section, must be duly filed with the in compliance with the provisions of
clerk or judge of the court before the Rule 57 of the Revised Rules of
order issues. Court. 13

In his affidavit, Pinzon stated the following: While Pinzon may have stated in his affidavit that a
sufficient cause of action exists against the defendant
I, ANTONIO D. PINZON Filipino, of Kenneth O. Glass, he did not state therein that "the case
legal age, married and with residence is one of those mentioned in Section 1 hereof; that there
and postal address at 1422 A. Mabini is no other sufficient security for the claim sought to be
Street, Ermita, Manila, subscribing enforced by the action; and that the amount due to the
under oath, depose and states that. applicant is as much as the sum for which the order
granted above all legal counter-claims." It has been held
1. On October 6,1977,I filed with the that the failure to allege in the affidavit the requisites
prescribed for the issuance of a writ of preliminary
Court of First Instance of Rizal, Pasay
attachment, renders the writ of preliminary attachment
City Branch, a case against Kenneth
issued against the property of the defendant fatally
O. Glass entitled 'ANTONIO D. defective, and the judge issuing it is deemed to have
PINZON vs. KENNETH O. GLASS', acted in excess of his jurisdiction. 14
docketed as Civil Case No. 5902-P;
Finally, it appears that the petitioner has filed a
2. My Complaint against Kenneth O. counterbond in the amount of P37,190.00 to answer
Glass is based on several causes of for any judgment that may be rendered against the
action, namely: defendant. Upon receipt of the counter-bond the
respondent Judge should have discharged the
(i) On February 15, 1977, we mutually attachment pursuant to Section 12, Rule 57 of the
agreed that I undertake to haul his Revised Rules of Court which reads, as follows:
construction materials from Manila to
his construction project in Bulalo, Bay, Section 12. Discharge of attachment
Laguna and vice-versa, for a upon giving counterbond.—At any
consideration of P50.00 per hour; time after an order of attachment has
been granted, the party whose
property has been attached, or the
 person appearing on his behalf, may SO ORDERED.
upon reasonable notice to the
applicant, apply to the judge who G.R. No. 175587 September 21, 2007
granted the order, or to the judge of
the court in which the action is PHILIPPINE COMMERCIAL INTERNATIONAL
pending, for an order discharging the BANK, Petitioner,
attachment wholly or in part on the vs.
security given. The judge shall, after JOSEPH ANTHONY M. ALEJANDRO, Respondent.
hearing, order the discharge of the
attachment if a cash deposit is made
DECISION
or a counterbond executed to the
attaching creditor is filed, on behalf of
the adverse party, with the clerk or YNARES-SANTIAGO, J.:
judge of the court where the
application is made, in an amount This petition for review assails the May 31, 2006
equal to the value of the property Decision1 of the Court of Appeals in CA-G.R. CV No.
attached as determined by the judge, 78200 affirming the August 30, 2000 Decision2 of the
to secure the payment of any Regional Trial Court of Makati, which granted
judgment that the attaching creditor respondent Joseph Anthony M. Alejandro’s claim for
may recover in the action. Upon the damages arising from petitioner Philippine
filing of such counter-bond, copy Commercial International Bank’s (PCIB) invalid
thereof shall forthwith be served on garnishment of respondent’s deposits.
the attaching creditor or his lawyer.
Upon the discharge of an attachment On October 23, 1997, petitioner filed against
in accordance with the provisions of respondent a complaint3 for sum of money with prayer
this section the property attached, or for the issuance of a writ of preliminary attachment.
the proceeds of any sale thereof, shall Said complaint alleged that on September 10, 1997,
be delivered to the party making the respondent, a resident of Hong Kong, executed in
deposit or giving the counter-bond, or favor of petitioner a promissory note obligating himself
the person appearing on his behalf, to pay ₱249,828,588.90 plus interest. In view of the
the deposit or counter-bond aforesaid fluctuations in the foreign exchange rates which
standing in the place of the property resulted in the insufficiency of the deposits assigned
so released. Should such counter- by respondent as security for the loan, petitioner
bond for any reason be found to be, or requested the latter to put up additional security for
become, insufficient, and the party the loan. Respondent, however, sought a
furnishing the same fail to file an reconsideration of said request pointing out
additional counter-bond the attaching petitioner’s alleged mishandling of his account due to
creditor may apply for a new order of its failure to carry out his instruction to close his
attachment. account as early as April 1997, when the prevailing
rate of exchange of the US Dollar to Japanese yen
The filing of the counter-bond will serve the purpose was US$1.00:JPY127.50.4 It appears that the amount
of preserving the defendant's property and at the of ₱249,828,588.90 was the consolidated amount of a
same time give the plaintiff security for any judgment series of yen loans granted by petitioner to
that may be obtained against the defendant. 15 respondent during the months of February and April
1997.5
WHEREFORE, the petition is GRANTED and the writ
prayed for is issued. The orders issued by the In praying for the issuance of a writ of preliminary
respondent Judge on October 11, 19719, January 26, attachment under Section 1 paragraphs (e) and (f) of
1978, and February 3, 1978 in Civil Case No. 5902-P Rule 57 of the Rules of Court, petitioner alleged that
of the Court of First Instance of Rizal, insofar as they (1) respondent fraudulently withdrew his unassigned
relate to the issuance of the writ of preliminary deposits notwithstanding his verbal promise to PCIB
attachment, should be as they are hereby Assistant Vice President Corazon B. Nepomuceno not
ANNULLED and SET ASIDE and the respondents are to withdraw the same prior to their assignment as
hereby ordered to forthwith release the garnished security for the loan; and (2) that respondent is not a
amount of P37,190.00 to the petitioner. The resident of the Philippines. The application for the
temporary restraining order, heretofore issued, is issuance of a writ was supported with the affidavit of
hereby lifted and set aside. Costs against the private Nepomuceno.6
respondent Antonio D. Pinzon.
On October 24, 1997, the trial court granted the with this Court, the case was dismissed for late filing
application and issued the writ ex parte7 after in a minute resolution (G.R. No. 140605) dated
petitioner posted a bond in the amount of January 19, 2000.15 Petitioner filed a motion for
₱18,798,734.69, issued by Prudential Guarantee & reconsideration but was likewise denied with finality
Assurance Inc., under Bond No. HO-46764-97. On on March 6, 2000.16
the same date, the bank deposits of respondent with
Rizal Commercial Banking Corporation (RCBC) were Meanwhile, on May 20, 1998, respondent filed a claim
garnished. On October 27, 1997, respondent, through for damages in the amount of P25 Million17 on the
counsel, filed a manifestation informing the court that attachment bond (posted by Prudential Guarantee &
he is voluntarily submitting to its jurisdiction.8 Assurance, Inc., under JCL(4) No. 01081, Bond No.
HO-46764-97) on account of the wrongful
Subsequently, respondent filed a motion to quash9 the garnishment of his deposits. He presented evidence
writ contending that the withdrawal of his unassigned showing that his ₱150,000.00 RCBC check payable
deposits was not fraudulent as it was approved by to his counsel as attorney’s fees, was dishonored by
petitioner. He also alleged that petitioner knew that he reason of the garnishment of his deposits. He also
maintains a permanent residence at Calle Victoria, testified that he is a graduate of the Ateneo de Manila
Ciudad Regina, Batasan Hills, Quezon City, and an University in 1982 with a double degree of Economics
office address in Makati City at the Law Firm Romulo and Management Engineering and of the University of
Mabanta Buenaventura Sayoc & De los the Philippines in 1987 with the degree of Bachelor of
Angeles, 10 where he is a partner. In both addresses, Laws. Respondent likewise presented witnesses to
petitioner regularly communicated with him through its prove that he is a well known lawyer in the business
representatives. Respondent added that he is the community both in the Philippines and in Hong
managing partner of the Hong Kong branch of said Kong.18 For its part, the lone witness presented by
Law Firm; that his stay in Hong Kong is only petitioner was Nepomuceno who claimed that she
temporary; and that he frequently travels back to the acted in good faith in alleging that respondent is a
Philippines. resident of Hong Kong.19

On December 24, 1997, the trial court issued an order On August 30, 2000, the trial court awarded damages
quashing the writ and holding that the withdrawal of to respondent in the amount of P25 Million without
respondent’s unassigned deposits was not intended specifying the basis thereof, thus:
to defraud petitioner. It also found that the
representatives of petitioner personally transacted WHEREFORE, premises above considered, and
with respondent through his home address in Quezon defendant having duly established his claim in the
City and/or his office in Makati City. It thus concluded amount of ₱25,000,000.00, judgment is hereby
that petitioner misrepresented and suppressed the rendered ordering Prudential Guarantee &
facts regarding respondent’s residence considering [Assurance] Co., which is solidarily liable with plaintiff
that it has personal and official knowledge that for to pay defendant the full amount of bond under
purposes of service of summons, respondent’s Prudential Guarantee & Assurance, Inc. JCL(4) No.
residence and office addresses are located in the 01081, [Bond No. HO-46764-97], dated 24 October
Philippines. The dispositive portion of the court’s 1997 in the amount of ₱18,798,734.69. And,
decision is as follows: considering that the amount of the bond is insufficient
to fully satisfy the award for damages, plaintiff is
WHEREFORE, the URGENT MOTION TO QUASH, hereby ordered to pay defendant the amount of
being meritorious, is hereby GRANTED, and the ₱6,201,265.31.
ORDER of 24 October 1997 is hereby
RECONSIDERED and SET ASIDE and the WRIT OF SO ORDERED.20
attachment of the same is hereby DISCHARGED.
The trial court denied petitioner’s motion for
SO ORDERED.11 reconsideration on October 24, 2000.21

With the denial12 of petitioner’s motion for Petitioner elevated the case to the Court of Appeals
reconsideration, it elevated the case to the Court of which affirmed the findings of the trial court. It held
Appeals (CA-G.R. SP No. 50748) via a petition for that in claiming that respondent was not a resident of
certiorari. On May 10, 1999, the petition was the Philippines, petitioner cannot be said to have
dismissed for failure to prove that the trial court been in good faith considering that its knowledge of
abused its discretion in issuing the aforesaid respondent’s Philippine residence and office address
order.13 Petitioner filed a motion for reconsideration goes into the very issue of the trial court’s jurisdiction
but was denied on October 28, 1999.14 On petition
which would have been defective had respondent not respondent for purposes of service of summons can
voluntarily appeared before it. no longer be questioned by petitioner in this case.

The Court of Appeals, however, reduced the amount The core issue for resolution is whether petitioner
of damages awarded to petitioner and specified their bank is liable for damages for the improper issuance
basis. The dispositive portion of the decision of the of the writ of attachment against respondent.
Court of Appeals states:
We rule in the affirmative.
WHEREFORE, the appeal is PARTIALLY GRANTED
and the decision appealed from is hereby MODIFIED. Notwithstanding the final judgment that petitioner is
The award of damages in the amount of guilty of misrepresentation and suppression of a
₱25,000,000.00 is deleted. In lieu thereof, Prudential material fact, the latter contends that it acted in good
Guarantee & [Assurance, Inc.], which is solidarily faith. Petitioner also contends that even if respondent
liable with appellant [herein petitioner], is ORDERED is considered a resident of the Philippines, attachment
to pay appellee [herein respondent] ₱2,000,000.00 as is still proper under Section 1, paragraph (f), Rule 57
nominal damages; ₱5,000,000.00 as moral damages; of the Rules of Court since he (respondent) is a
and ₱1,000,000.00 as attorney’s fees, to be satisfied resident who is temporarily out of the Philippines upon
against the attachment bond under Prudential whom service of summons may be effected by
Guarantee & Assurance, Inc. JCL (4) No. 01081. publication.

SO ORDERED.22 Petitioner’s contentions are without merit.

Both parties moved for reconsideration. On November While the final order of the trial court which quashed
21, 2006, the Court of Appeals denied petitioner’s the writ did not categorically use the word "bad faith"
motion for reconsideration but granted that of in characterizing the representations of petitioner, the
respondent’s by ordering petitioner to pay additional tenor of said order evidently considers the latter to
₱5Million as exemplary damages.23 have acted in bad faith by resorting to a deliberate
strategy to mislead the court. Thus –
Hence, the instant petition.
In the hearings of the motion, and oral arguments of
At the outset, it must be noted that the ruling of the counsels before the Court, it appears that plaintiff
trial court that petitioner is not entitled to a writ of BANK through its contracting officers Vice President
attachment because respondent is a resident of the Corazon B. Nepomuceno and Executive Vice
Philippines and that his act of withdrawing his President Jose Ramon F. Revilla, personally
deposits with petitioner was without intent to defraud, transacted with defendant mainly through defendant’s
can no longer be passed upon by this Court. More permanent residence in METRO-MANILA, either in
importantly, the conclusions of the court that petitioner defendant’s home address in Quezon City or his main
bank misrepresented that respondent was residing business address at the Romulo Mabanta
out of the Philippines and suppressed the fact that Buenaventura Sayoc & Delos Angeles in MAKATI and
respondent has a permanent residence in Metro while at times follow ups were made through
Manila where he may be served with summons, are defendant’s temporary home and business addresses
now beyond the power of this Court to review having in Hongkong. It is therefore clear that plaintiff could
been the subject of a final and executory order. Said not deny their personal and official knowledge that
findings were sustained by the Court of Appeals in defendant’s permanent and official residence for
CA-G.R. SP No. 50784 and by this Court in G.R. No. purposes of service of summons is in the Philippines.
140605. The rule on conclusiveness of judgment, In fact, this finding is further confirmed by the letter of
which obtains under the premises, precludes the Mr. JOHN GOKONGWEI, JR. Chairman, Executive
relitigation of a particular fact or issue in another Committee of plaintiff BANK, in his letter dated 6
action between the same parties even if based on a October 1997 on the subject loan to defendant of the
different claim or cause of action. The judgment in the same law firm was addressed to the ROMULO LAW
prior action operates as estoppel as to those matters FIRM in MAKATI.
in issue or points controverted, upon the
determination of which the finding or judgment was [Anent the] second ground of attachment x x x [t]he
rendered. The previous judgment is conclusive in the Court finds that the amount withdrawn was not part of
second case, as to those matters actually and directly defendant’s peso deposits assigned with the bank to
controverted and determined.24 Hence, the issues of secure the loan and as proof that the withdrawal was
misrepresentation by petitioner and the residence of not intended to defraud plaintiff as creditor is that
plaintiff approved and allowed said withdrawals. It is
even noted that when the Court granted the prayer for were no longer existing from their compound." All
attachment it was mainly on the first ground under these allegations of Escobar were found to be totally
Section 1(f) of Rule 57 of the 1997 Rules of Civil baseless and untrue.
Procedure, that defendant resides out of the
Philippines. Even assuming that the trial court did not make a
categorical pronouncement of misrepresentation and
On the above findings, it is obvious that plaintiff suppression of material facts on the part of petitioner,
already knew from the beginning the deficiency of its the factual backdrop of this case does not support
second ground for attachment [i.e.,] disposing petitioner’s claim of good faith. The facts and
properties with intent to defraud his creditors, and circumstances omitted are highly material and
therefore plaintiff had to resort to this relevant to the grant or denial of writ of attachment
misrepresentation that defendant was residing out of applied for.
the Philippines and suppressed the fact that
defendant’s permanent residence is in METRO Finally, there is no merit in petitioner’s contention that
MANILA where he could be served with summons. respondent can be considered a resident who is
temporarily out of the Philippines upon whom service
On the above findings, and mainly on the of summons may be effected by publication, and
misrepresentations made by plaintiff on the grounds therefore qualifies as among those against whom a
for the issuance of the attachment in the verified writ of attachment may be issued under Section 1,
complaint, the Court concludes that defendant has paragraph (f), Rule 57 of the Rules of Court which
duly proven its grounds in the MOTION and that provides:
plaintiff is not entitled to the attachment.25
(f) In an action against a party x x x on whom
Petitioner is therefore barred by the principle of summons may be served by publication.
conclusiveness of judgment from again invoking good
faith in the application for the issuance of the writ. In so arguing, petitioner attempts to give the
Similarly, in the case of Hanil Development Co., Ltd. impression that although it erroneously invoked the
v. Court of Appeals,26the Court debunked the claim of ground that respondent does not reside in the
good faith by a party who maliciously sought the Philippines, it should not be made to pay damages
issuance of a writ of attachment, the bad faith of said because it is in fact entitled to a writ of attachment
party having been previously determined in a final had it invoked the proper ground under Rule 57.
decision which voided the assailed writ. Thus – However, even on this alternative ground, petitioner is
still not entitled to the issuance of a writ of
Apropos the Application for Judgment on the attachment.
Attachment Bond, Escobar claims in its petition that
the award of attorney’s fees and injunction bond The circumstances under which a writ of preliminary
premium in favor of Hanil is [contrary] to law and attachment may be issued are set forth in Section 1,
jurisprudence. It contends that no malice or bad faith Rule 57 of the Rules of Court, to wit:
may be imputed to it in procuring the writ.
SEC. 1. Grounds upon which attachment may issue.
Escobar’s protestation is now too late in the day. The — At the commencement of the action or at any time
question of the illegality of the attachment and before entry of judgment, a plaintiff or any proper
Escobar’s bad faith in obtaining it has long been party may have the property of the adverse party
settled in one of the earlier incidents of this case. The attached as security for the satisfaction of any
Court of Appeals, in its decision rendered on February judgment that may be recovered in the following
3, 1983 in C.A.-G.R. No. SP-14512, voided the cases:
challenged writ, having been issued with grave abuse
of discretion. Escobar’s bad faith in procuring the writ (a) In an action for the recovery of a specified
cannot be doubted. Its Petition for the Issuance of amount of money or damages, other than
Preliminary Attachment made such damning moral and exemplary, on a cause of action
allegations that: Hanil was already able to secure a arising from law, contract, quasi-contract,
complete release of its final collection from the delict or quasi-delict against a party who is
MPWH; it has moved out some of its heavy about to depart from the Philippines with intent
equipments for unknown destination, and it may leave to defraud his creditors;
the country anytime. Worse, its Ex Parte Motion to
Resolve Petition alleged that "after personal
(b) In an action for money or property
verification by (Escobar) of (Hanil’s) equipment in
embezzled or fraudulently misapplied or
Cagayan de Oro City, it appears that the equipments
converted to his own use by a public officer, or
 an officer of a corporation or an attorney, to the last known address of the defendant), is no
factor, broker, agent, or clerk, in the course of longer for the purpose of acquiring jurisdiction but for
his employment as such, or by any other compliance with the requirements of due process.30
person in a fiduciary capacity, or for a willful
violation of duty; However, where the defendant is a resident who is
temporarily out of the Philippines, attachment of
(c) In an action to recover the possession of his/her property in an action in personam, is not
personal property unjustly or fraudulently always necessary in order for the court to acquire
taken, detained, or converted, when the jurisdiction to hear the case.
property, or any part thereof, has been
concealed, removed, or disposed of to prevent Section 16, Rule 14 of the Rules of Court reads:
its being found or taken by the applicant or an
authorized person; Sec. 16. Residents temporarily out of the Philippines.
– When an action is commenced against a defendant
(d) In an action against a party who has been who ordinarily resides within the Philippines, but who
guilty of a fraud in contracting the debt or is temporarily out of it, service may, by leave of court,
incurring the obligation upon which the action be also effected out of the Philippines, as under the
is brought, or in the performance thereof; preceding section.

(e) In an action against a party who has The preceding section referred to in the above
removed or disposed of his property, or is provision is Section 15 which provides for
about to do so, with intent to defraud his extraterritorial service – (a) personal service out of the
creditors; Philippines, (b) publication coupled with the sending
by registered mail of the copy of the summons and
(f) In an action against a party who resides out the court order to the last known address of the
of the Philippines, or on whom summons may defendant; or (c) in any other manner which the court
be served by publication. may deem sufficient.

The purposes of preliminary attachment are: (1) to In Montalban v. Maximo,31 however, the Court held
seize the property of the debtor in advance of final that substituted service of summons (under the
judgment and to hold it for purposes of satisfying said present Section 7, Rule 14 of the Rules of Court) is
judgment, as in the grounds stated in paragraphs (a) the normal mode of service of summons that will
to (e) of Section 1, Rule 57 of the Rules of Court; or confer jurisdiction on the court over the person of
(2) to acquire jurisdiction over the action by actual or residents temporarily out of the Philippines. Meaning,
constructive seizure of the property in those instances service of summons may be effected by (a) leaving
where personal or substituted service of summons on copies of the summons at the defendant’s residence
the defendant cannot be effected, as in paragraph (f) with some person of suitable discretion residing
of the same provision.27 therein, or (b) by leaving copies at the defendant’s
office or regular place of business with some
Corollarily, in actions in personam, such as the instant competent person in charge thereof.32 Hence, the
case for collection of sum of money,28 summons must court may acquire jurisdiction over an action in
be served by personal or substituted service, personam by mere substituted service without need of
otherwise the court will not acquire jurisdiction over attaching the property of the defendant.
the defendant. In case the defendant does not reside
and is not found in the Philippines (and hence The rationale in providing for substituted service as
personal and substituted service cannot be effected), the normal mode of service for residents temporarily
the remedy of the plaintiff in order for the court to out of the Philippines, was expounded in Montalban v.
acquire jurisdiction to try the case is to convert the Maximo,33 in this wise:
action into a proceeding in rem or quasi in rem by
attaching the property of the defendant.29Thus, in A man temporarily absent from this country leaves a
order to acquire jurisdiction in actions in personam definite place of residence, a dwelling where he lives,
where defendant resides out of and is not found in the a local base, so to speak, to which any inquiry about
Philippines, it becomes a matter of course for the him may be directed and where he is bound to return.
court to convert the action into a proceeding in rem or Where one temporarily absents himself, he leaves his
quasi in rem by attaching the defendant’s property. affairs in the hands of one who may be reasonably
The service of summons in this case (which may be expected to act in his place and stead; to do all that is
by publication coupled with the sending by registered necessary to protect his interests; and to
mail of the copy of the summons and the court order communicate with him from time to time any incident
of importance that may affect him or his business or In light of the foregoing, the Court of Appeals properly
his affairs. It is usual for such a man to leave at his sustained the finding of the trial court that petitioner is
home or with his business associates information as liable for damages for the wrongful issuance of a writ
to where he may be contacted in the event a question of attachment against respondent.
that affects him crops up.
Anent the actual damages, the Court of Appeals is
Thus, in actions in personam against residents correct in not awarding the same inasmuch as the
temporarily out of the Philippines, the court need not respondent failed to establish the amount garnished
always attach the defendant’s property in order to by petitioner. It is a well settled rule that one who has
have authority to try the case. Where the plaintiff been injured by a wrongful attachment can recover
seeks to attach the defendant’s property and to resort damages for the actual loss resulting therefrom. But
to the concomitant service of summons by for such losses to be recoverable, they must
publication, the same must be with prior leave, constitute actual damages duly established by
precisely because, if the sole purpose of the competent proofs, which are, however, wanting in the
attachment is for the court to acquire jurisdiction, the present case.36
latter must determine whether from the allegations in
the complaint, substituted service (to persons of Nevertheless, nominal damages may be awarded to a
suitable discretion at the defendant’s residence or to a plaintiff whose right has been violated or invaded by
competent person in charge of his office or regular the defendant, for the purpose of vindicating or
place of business) will suffice, or whether there is a recognizing that right, and not for indemnifying the
need to attach the property of the defendant and plaintiff for any loss suffered by him. Its award is thus
resort to service of summons by publication in order not for the purpose of indemnification for a loss but for
for the court to acquire jurisdiction over the case and the recognition and vindication of a right. Indeed,
to comply with the requirements of due process. nominal damages are damages in name only and not
in fact.37 They are recoverable where some injury has
In the instant case, it must be stressed that the writ been done but the pecuniary value of the damage is
was issued by the trial court mainly on the not shown by evidence and are thus subject to the
representation of petitioner that respondent is not a discretion of the court according to the circumstances
resident of the Philippines.34 Obviously, the trial of the case.38
court’s issuance of the writ was for the sole purpose
of acquiring jurisdiction to hear and decide the case. In this case, the award of nominal damages is proper
Had the allegations in the complaint disclosed that considering that the right of respondent to use his
respondent has a residence in Quezon City and an money has been violated by its garnishment. The
office in Makati City, the trial court, if only for the amount of nominal damages must, however, be
purpose of acquiring jurisdiction, could have served reduced from ₱2 million to ₱50,000.00 considering
summons by substituted service on the said the short period of 2 months during which the writ was
addresses, instead of attaching the property of the in effect as well as the lack of evidence as to the
defendant. The rules on the application of a writ of amount garnished. 1âwphi 1

attachment must be strictly construed in favor of the

defendant. For attachment is harsh, extraordinary, Likewise, the award of attorney’s fees is proper when
and summary in nature; it is a rigorous remedy which a party is compelled to incur expenses to lift a
exposes the debtor to humiliation and annoyance.35 It wrongfully issued writ of attachment. The basis of the
should be resorted to only when necessary and as a award thereof is also the amount of money garnished,
last remedy. and the length of time respondents have been
deprived of the use of their money by reason of the
It is clear from the foregoing that even on the wrongful attachment.39 It may also be based upon (1)
allegation that respondent is a resident temporarily the amount and the character of the services
out of the Philippines, petitioner is still not entitled to a rendered; (2) the labor, time and trouble involved; (3)
writ of attachment because the trial court could the nature and importance of the litigation and
acquire jurisdiction over the case by substituted business in which the services were rendered; (4) the
service instead of attaching the property of the responsibility imposed; (5) the amount of money and
defendant. The misrepresentation of petitioner that the value of the property affected by the controversy
respondent does not reside in the Philippines and its or involved in the employment; (6) the skill and the
omission of his local addresses was thus a deliberate experience called for in the performance of the
move to ensure that the application for the writ will be services; (7) the professional character and the social
granted. standing of the attorney; (8) the results secured, it
being a recognized rule that an attorney may properly
charge a much larger fee when it is contingent than ₱200,000.00 as attorney’s fees; and ₱500,000.00 as
when it is not.40 moral damages, and ₱500,000.00 as exemplary
damages, to be satisfied against the attachment bond
All the aforementioned weighed, and considering the issued by Prudential Guarantee & Assurance
short period of time it took to have the writ lifted, the Inc.,45 under JCL (4) No. 01081, Bond No. HO-46764-
favorable decisions of the courts below, the absence 97.
of evidence as to the professional character and the
social standing of the attorney handling the case and No pronouncement as to costs.
the amount garnished, the award of attorney’s fees
should be fixed not at ₱1 Million, but only at SO ORDERED.
₱200,000.00.

The courts below correctly awarded moral damages

on account of petitioner’s misrepresentation and bad
faith; however, we find the award in the amount of ₱5 G.R. No. 93262 December 29, 1991
Million excessive. Moral damages are to be fixed
upon the discretion of the court taking into DAVAO LIGHT & POWER CO., INC., petitioner,
consideration the educational, social and financial vs.
standing of the parties.41Moral damages are not THE COURT OF APPEALS, QUEENSLAND HOTEL
intended to enrich a complainant at the expense of a or MOTEL or QUEENSLAND TOURIST INN, and
defendant.42 They are awarded only to enable the TEODORICO ADARNA, respondents.
injured party to obtain means, diversion or
amusements that will serve to obviate the moral Breva & Breva Law Offices for petitioner.
suffering he has undergone, by reason of petitioner’s
culpable action. Moral damages must be Goc-Ong & Associates for private respondents.
commensurate with the loss or injury suffered. Hence,
the award of moral damages is reduced to
₱500,000.00.

Considering petitioner’s bad faith in securing the writ NARVASA, J.:

of attachment, we sustain the award of exemplary
damages by way of example or correction for public
Subject of the appellate proceedings at bar is the
good. This should deter parties in litigations from
decision of the Court of Appeals in CA-G.R. Sp. No.
resorting to baseless and preposterous allegations to
1967 entitled "Queensland Hotel, Inc., etc. and
obtain writs of attachments. While as a general rule,
Adarna v. Davao Light & Power Co., Inc.,"
the liability on the attachment bond is limited to actual
promulgated on May 4, 1990.1 That decision nullified
(or in some cases, temperate or nominal) damages,
and set aside the writ of preliminary attachment
exemplary damages may be recovered where the
issued by the Regional Trial Court of Davao City 2 in
attachment was established to be maliciously sued
Civil Case No. 19513-89 on application of the plaintiff
out.43 Nevertheless, the award of exemplary damages
(Davao Light & Power Co.), before the service of
in this case should be reduced from ₱5M to
summons on the defendants (herein respondents
₱500,000.00.
Queensland Co., Inc. and Adarna).
Finally, contrary to the claim of petitioner, the instant
Following is the chronology of the undisputed material
case for damages by reason of the invalid issuance of
facts culled from the Appellate Tribunal's judgment of
the writ, survives the dismissal of the main case for
May 4, 1990.
sum of money. Suffice it to state that the claim for
damages arising from such wrongful attachment may
arise and be decided separately from the merits of the 1. On May 2, 1989 Davao Light & Power Co., Inc.
main action.44 (hereafter, simply Davao Light) filed a verified
complaint for recovery of a sum of money and
damages against Queensland Hotel, etc. and
WHEREFORE, the petition is PARTIALLY
Teodorico Adarna (docketed as Civil Case No. 19513-
GRANTED. The May 31, 2006 Decision of the Court
89). The complaint contained an ex parte application
of Appeals in CA-G.R. CV No. 78200 is AFFIRMED
for a writ of preliminary attachment.
with MODIFICATIONS. As modified, petitioner
Philippine Commercial International Bank is ordered
to pay respondent Joseph Anthony M. Alejandro the 2. On May 3, 1989 Judge Nartatez, to whose branch
following amounts: ₱50,000.00 as nominal damages, the case was assigned by raffle, issued an Order
granting the ex parte application and fixing the voluntarily appears, and adding the phrase
attachment bond at P4,600,513.37. that it be issued "ex parte" does not confer
said jurisdiction before actual summons had
3. On May 11, 1989 the attachment bond having been been made, nor retroact jurisdiction upon
submitted by Davao Light, the writ of attachment summons being made. . . .
issued.
It went on to say, citing Sievert v. Court of
4. On May 12, 1989, the summons and a copy of the Appeals, 3 that "in a proceedings in attachment," the
complaint, as well as the writ of attachment and a "critical time which must be identified is . . . when the
copy of the attachment bond, were served on trial court acquires authority under law to act
defendants Queensland and Adarna; and pursuant to coercively against the defendant or his property . . .;"
the writ, the sheriff seized properties belonging to the and that "the critical time is the of the vesting of
latter. jurisdiction in the court over the person of the
defendant in the main case."
5. On September 6, 1989, defendants Queensland
and Adarna filed a motion to discharge the Reversal of this Decision of the Court of Appeals of
attachment for lack of jurisdiction to issue the same May 4, 1990 is what Davao Light seeks in the present
because at the time the order of attachment was appellate proceedings.
promulgated (May 3, 1989) and the attachment writ
issued (May 11, 1989), the Trial Court had not yet The question is whether or not a writ of preliminary
acquired jurisdiction over the cause and over the attachment may issue ex parte against a defendant
persons of the defendants. before acquisition of jurisdiction of the latter's person
by service of summons or his voluntary submission to
6. On September 14, 1989, Davao Light filed an the Court's authority.
opposition to the motion to discharge attachment.
The Court rules that the question must be answered
7. On September 19, 1989, the Trial Court issued an in the affirmative and that consequently, the petition
Order denying the motion to discharge. for review will have to be granted.

This Order of September 19, 1989 was successfully It is incorrect to theorize that after an action or
challenged by Queensland and Adarna in a special proceeding has been commenced and jurisdiction
civil action of certiorari instituted by them in the Court over the person of the plaintiff has been vested in the
of Appeals. The Order was, as aforestated, annulled court, but before the acquisition of jurisdiction over the
by the Court of Appeals in its Decision of May 4, person of the defendant (either by service of
1990. The Appellate Court's decision closed with the summons or his voluntary submission to the court's
following disposition: authority), nothing can be validly done by the plaintiff
or the court. It is wrong to assume that the validity of
. . . the Orders dated May 3, 1989 granting the acts done during this period should be defendant on,
issuance of a writ of preliminary attachment, or held in suspension until, the actual obtention of
dated September 19, 1989 denying the motion jurisdiction over the defendant's person. The
to discharge attachment; dated November 7, obtention by the court of jurisdiction over the person
1989 denying petitioner's motion for of the defendant is one thing; quite another is the
reconsideration; as well as all other orders acquisition of jurisdiction over the person of the
emanating therefrom, specially the Writ of plaintiff or over the subject-matter or nature of the
Attachment dated May 11, 1989 and Notice of action, or the res or object hereof.
Levy on Preliminary Attachment dated May
11, 1989, are hereby declared null and void An action or proceeding is commenced by the filing of
and the attachment hereby ordered the complaint or other initiatory pleading. 4 By that act, the jurisdiction
DISCHARGED. of the court over the subject matter or nature of the action or proceeding is invoked or called into activity; 5
and it is
thus that the court acquires jurisdiction over said
The Appellate Tribunal declared that — subject matter or nature of the action. 6 And it is by
that self-same act of the plaintiff (or petitioner) of filing
the complaint (or other appropriate pleading) — by
. . . While it is true that a prayer for the
which he signifies his submission to the court's power
issuance of a writ of preliminary attachment
and authority — that jurisdiction is acquired by the
may be included m the complaint, as is
court over his person. 7 On the other hand, jurisdiction
usually done, it is likewise true that the Court
over the person of the defendant is obtained, as
does not acquire jurisdiction over the person
above stated, by the service of summons or other
of the defendant until he is duly summoned or
coercive process upon him or by his voluntary In Toledo v. Burgos, 19 this Court ruled that a hearing
submission to the authority of the court. 8 on a motion or application for preliminary attachment
is not generally necessary unless otherwise directed
The events that follow the filing of the complaint as a matter of routine are well known. After the complaint is filed, summons
issues to the defendant, the summons is then transmitted to the sheriff, and finally, service of the summons is effected on the
by the Trial Court in its discretion. 20 And in Filinvest
defendant in any of the ways authorized by the Rules of Court. There is thus ordinarily some appreciable interval of time Credit Corporation v. Relova, 21 the Court declared
between the day of the filing of the complaint and the day of service of summons of the defendant. During this period, different
acts may be done by the plaintiff or by the Court, which are unquestionable validity and propriety. Among these, for example,
that "(n)othing in the Rules of Court makes notice and
hearing indispensable and mandatory requisites for
the grant of authority to the
are the appointment of a guardian ad litem, 9
the issuance of a writ of attachment." The only pre-
plaintiff to prosecute the suit as a pauper litigant, 10 the
requisite is that the Court be satisfied, upon
amendment of the complaint by the plaintiff as a
consideration of "the affidavit of the applicant or of
matter of right without leave of court, 11 authorization
some other person who personally knows the facts,
by the Court of service of summons by
that a sufficient cause of action exists, that the case is
publication, 12 the dismissal of the action by the
one of those mentioned in Section 1 . . . (Rule 57),
plaintiff on mere notice. 13
that there is no other sufficient security for the claim
This, too, is true with regard to the provisional remedies of preliminary attachment, preliminary injunction, receivership or sought to be enforced by the action, and that the
They may be validly and properly applied for
replevin. 14 amount due to the applicant, or the value of the
and granted even before the defendant is summoned property the possession of which he is entitled to
or is heard from. recover, is as much as the sum for which the order (of
attachment) is granted above all legal
counterclaims." 22 If the court be so satisfied, the
A preliminary attachment may be defined,
"order of attachment shall be granted," 23 and the writ
paraphrasing the Rules of Court, as the provisional
shall issue upon the applicant's posting of "a bond
remedy in virtue of which a plaintiff or other party
executed to the adverse party in an amount to be
may, at the commencement of the action or at any
fixed by the judge, not exceeding the plaintiffs claim,
time thereafter, have the property of the adverse party
conditioned that the latter will pay all the costs which
taken into the custody of the court as security for the
may be adjudged to the adverse party and all
satisfaction of any judgment that may be
damages which he may sustain by reason of the
recovered. 15 It is a remedy which is purely statutory in
attachment, if the court shall finally adjudge that the
respect of which the law requires a strict construction
applicant was not entitled thereto." 24
of the provisions granting it. 16 Withal no principle,
statutory or jurisprudential, prohibits its issuance by
any court before acquisition of jurisdiction over the this Court
In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18, 1989, 25

person of the defendant. had occasion to emphasize the postulate that no

hearing is required on an application for preliminary
attachment, with notice to the defendant, for the
Rule 57 in fact speaks of the grant of the remedy "at
reason that this "would defeat the objective of the
the commencement of the action or at any time
remedy . . . (since the) time which such a hearing
thereafter."17 The phase, "at the commencement of the
would take, could be enough to enable the defendant
action," obviously refers to the date of the filing of the
to abscond or dispose of his property before a writ of
complaint — which, as above pointed out, is the date
attachment issues." As observed by a former member
that marks "the commencement of the action;" 18 and
of this Court, 26 such a procedure would warn
the reference plainly is to a time before summons is
absconding debtors-defendants of the
served on the defendant, or even before summons
commencement of the suit against them and the
issues. What the rule is saying quite clearly is that
probable seizure of their properties, and thus give
after an action is properly commenced — by the filing
them the advantage of time to hide their assets,
of the complaint and the payment of all requisite
leaving the creditor-plaintiff holding the proverbial
docket and other fees — the plaintiff may apply for
empty bag; it would place the creditor-applicant in
and obtain a writ of preliminary attachment upon
danger of losing any security for a favorable judgment
fulfillment of the pertinent requisites laid down by law,
and thus give him only an illusory victory.
and that he may do so at any time, either before or
after service of summons on the defendant. And this
indeed, has been the immemorial practice sanctioned Withal, ample modes of recourse against a
by the courts: for the plaintiff or other proper party to preliminary attachment are secured by law to the
incorporate the application for attachment in the defendant. The relative ease with which a preliminary
complaint or other appropriate pleading (counter- attachment may be obtained is matched and
claim, cross-claim, third-party claim) and for the Trial paralleled by the relative facility with which the
Court to issue the writ ex-parte at the commencement attachment may legitimately be prevented or
of the action if it finds the application otherwise frustrated. These modes of recourse against
sufficient in form and substance. preliminary attachments granted by Rule 57 were
discussed at some length by the separate opinion
in Mindanao Savings & Loans Asso. Inc. v. 2.0. Aside from the filing of a counterbond, a
CA., supra. preliminary attachment may also be lifted or
discharged on the ground that it has been irregularly
That separate opinion stressed that there are two (2) or improperly issued, in accordance with Section 13 of
ways of discharging an attachment: first, by the Rule 57. Like the first, this second mode of lifting an
posting of a counterbond; and second, by a showing attachment may be resorted to even before any
of its improper or irregular issuance. property has been levied on. Indeed, it may be
availed of after property has been released from a
1.0. The submission of a counterbond is an levy on attachment, as is made clear by said Section
efficacious mode of lifting an attachment already 13, viz.:
enforced against property, or even of preventing its
enforcement altogether. Sec. 13. Discharge of attachment for improper
or irregular issuance. — The party whose
1.1. When property has already been seized under property has been attached may also, at any
attachment, the attachment may be discharged upon time either BEFORE or AFTER the release of
counterbond in accordance with Section 12 of Rule the attached property, or before any
57. attachment shall have been actually levied,
upon reasonable notice to the attaching
creditor, apply to the judge who granted the
Sec. 12. Discharge of attachment upon giving
order, or to the judge of the court in which the
counterbond. — At any time after an order of
action is pending, for an order to discharge
attachment has been granted, the party
the attachment on the ground that the same
whose property has been attached or the
was improperly or irregularly issued. If the
person appearing in his behalf, may, upon
motion be made on affidavits on the part of
reasonable notice to the applicant, apply to
the party whose property has been attached,
the judge who granted the order, or to the
but not otherwise, the attaching creditor may
judge of the court in which the action is
oppose the same by counter-affidavits or
pending, for an order discharging the
other evidence in addition to that on which the
attachment wholly or in part on the security
attachment was made. . . . (Emphasis
given . . . in an amount equal to the value of
supplied)
the property attached as determined by the
judge to secure the payment of any judgment
that the attaching creditor may recover in the This is so because "(a)s pointed out in Calderon v.
action. . . . I.A.C., 155 SCRA 531 (1987), The attachment debtor
cannot be deemed to have waived any defect in the
issuance of the attachment writ by simply availing
1.2. But even before actual levy on property, seizure
himself of one way of discharging the attachment writ,
under attachment may be prevented also upon
instead of the other. Moreover, the filing of a
counterbond. The defendant need not wait until his
counterbond is a speedier way of discharging the
property is seized before seeking the discharge of the
attachment writ maliciously sought out by the
attachment by a counterbond. This is made possible
attaching creditor instead of the other way, which, in
by Section 5 of Rule 57.
most instances . . . would require presentation of
evidence in a fullblown trial on the merits, and cannot
Sec. 5. Manner of attaching property. — The easily be settled in a pending incident of the case." 27
officer executing the order shall without delay
attach, to await judgment and execution in the It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings & Loans Asso. Inc. v. C.A.,

action, all the properties of the party against supra., 28

to wit:
whom the order is issued in the province, not
exempt from execution, or so much thereof as (a) When an attachment may not be dissolved
may be sufficient to satisfy the applicant's by a showing of its irregular or improper
demand, unless the former makes a deposit issuance:
with the clerk or judge of the court from which
the order issued, or gives a counter-bond
. . . (W)hen the preliminary attachment is
executed to the applicant, in an amount
issued upon a ground which is at the same
sufficient to satisfy such demand besides
time the applicant's cause of action; e.g., "an
costs, or in an amount equal to the value of
action for money or property embezzled or
the property which is about to be attached, to
fraudulently misapplied or converted to his
secure payment to the applicant of any
own use by a public officer, or an officer of a
judgment which he may recover in the
corporation, or an attorney, factor, broker,
action. . . . (Emphasis supplied)
agent, or clerk, in the course of his
 employment as such, or by any other person other coercive process or his voluntary submission to
in a fiduciary capacity, or for a willful violation the court's authority. Hence, when the sheriff or other
of duty." (Sec. 1 [b], Rule 57), or "an action proper officer commences implementation of the writ
against a party who has been guilty of fraud m of attachment, it is essential that he serve on the
contracting the debt or incurring the obligation defendant not only a copy of the applicant's affidavit
upon which the action is brought" (Sec. 1 [d], and attachment bond, and of the order of attachment,
Rule 57), the defendant is not allowed to file a as explicity required by Section 5 of Rule 57, but also
motion to dissolve the attachment under the summons addressed to said defendant as well as
Section 13 of Rule 57 by offering to show the a copy of the complaint and order for appointment of
falsity of the factual averments in the plaintiff's guardian ad litem, if any, as also explicity directed by
application and affidavits on which the writ Section 3, Rule 14 of the Rules of Court. Service of all
was based — and consequently that the writ such documents is indispensable not only for the
based thereon had been improperly or acquisition of jurisdiction over the person of the
irregularly issued (SEE Benitez v. I.A.C., 154 defendant, but also upon considerations of fairness,
SCRA 41) — the reason being that the to apprise the defendant of the complaint against him,
hearing on such a motion for dissolution of the of the issuance of a writ of preliminary attachment and
writ would be tantamount to a trial of the the grounds therefor and thus accord him the
merits of the action. In other words, the merits opportunity to prevent attachment of his property by
of the action would be ventilated at a mere the posting of a counterbond in an amount equal to
hearing of a motion, instead of at the regular the plaintiff's claim in the complaint pursuant to
trial. Therefore, when the writ of attachment is Section 5 (or Section 12), Rule 57, or dissolving it by
of this nature, the only way it can be dissolved causing dismissal of the complaint itself on any of the
is by a counterbond (G.B. Inc. v. Sanchez, 98 grounds set forth in Rule 16, or demonstrating the
Phil. 886). insufficiency of the applicant's affidavit or bond in
accordance with Section 13, Rule 57.
(b) Effect of the dissolution of a preliminary
attachment on the plaintiffs attachment bond: It was on account of the failure to comply with this
fundamental requirement of service of summons and
. . . The dissolution of the preliminary the other documents above indicated that writs of
attachment upon security given, or a showing attachment issued by the Trial Court ex parte were
of its irregular or improper issuance, does not struck down by this Court's Third Division in two (2)
of course operate to discharge the sureties on cases, namely: Sievert v. Court of
plaintiff's own attachment bond. The reason is Appeals, 31 and BAC Manufacturing and Sales
simple. That bond is "executed to the adverse Corporation v. Court of Appeals, et al. 32 In contrast to
party, . . . conditioned that the . . . (applicant) the case at bar — where the summons and a copy of
will pay all the costs which may be adjudged the complaint, as well as the order and writ of
to the adverse party and all damages which attachment and the attachment bond were served on
he may sustain by reason of the attachment, if the defendant — in Sievert, levy on attachment was
the court shall finally adjudge that the attempted notwithstanding that only the petition for
applicant was not entitled thereto" (SEC. 4, issuance of the writ of preliminary attachment was
Rule 57). Hence, until that determination is served on the defendant, without any prior or
made, as to the applicant's entitlement to the accompanying summons and copy of the complaint;
attachment, his bond must stand and cannot and in BAC Manufacturing and Sales Corporation,
be with-drawn. neither the summons nor the order granting the
preliminary attachment or the writ of attachment itself
With respect to the other provisional remedies, i.e., was served on the defendant "before or at the time
preliminary injunction (Rule 58), receivership (Rule the levy was made."
59), replevin or delivery of personal property (Rule
60), the rule is the same: they may also issue ex For the guidance of all concerned, the Court reiterates
parte. 29 and reaffirms the proposition that writs of attachment
may properly issue ex parte provided that the Court is
It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of satisfied that the relevant requisites therefor have
defendant, as above indicated — issuance of summons, order of attachment and writ of attachment (and/or appointments of
guardian ad litem, or grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment of the complaint been fulfilled by the applicant, although it may, in its
— and however valid and
by the plaintiff as a matter of right without leave of court 30 discretion, require prior hearing on the application
proper they might otherwise be, these do not and with notice to the defendant; but that levy on property
cannot bind and affect the defendant until and unless pursuant to the writ thus issued may not be validly
jurisdiction over his person is eventually obtained by effected unless preceded, or contemporaneously
the court, either by service on him of summons or accompanied, by service on the defendant of
summons, a copy of the complaint (and of the
appointment of guardian ad litem, if any), the
application for attachment (if not incorporated in but
submitted separately from the complaint), the order of
attachment, and the plaintiff's attachment bond.

WHEREFORE, the petition is GRANTED; the

challenged decision of the Court of Appeals is hereby
REVERSED, and the order and writ of attachment
issued by Hon. Milagros C. Nartatez, Presiding Judge
of Branch 8, Regional Trial Court of Davao City in
Civil Case No. 19513-89 against Queensland Hotel or
Motel or Queensland Tourist Inn and Teodorico
Adarna are hereby REINSTATED. Costs against
private respondents.

SO ORDERED.