SECOND DIVISION Dissatisfied, respondents filed a petition for certiorari before

January 30, 2017 the CA seeking to reverse and set aside the RTC orders
G.R. No. 219345 denying their motion to lift the writ of preliminary
SECURITY BANK CORPORATION, Petitioner attachment issued.
vs.
GREAT WALL COMMERCIAL PRESS COMPANY, INC., The CA Ruling
ALFREDO BURIEL ATIENZA, FREDINO CHENG
ATIENZA and SPS. FREDERICK CHENG ATIENZA and
In its assailed decision, dated December 12, 2014, the CA
MONICA CU ATIENZA, Respondents
lifted the writ of preliminary attachment. The appellate
DECISION
court explained that the allegations of Security Bank were
insufficient to warrant the provisional remedy of preliminary
Mendoza, J.: attachment. It pointed out that fraudulent intent could not
be inferred from a debtor's inability to pay or comply with
This is a petition for review on certiorari seeking to reverse its obligations. The CA opined that the non-return of the
and set aside the December 12, 2014 Decision1 and June proceeds of the sale and/or the goods subject of the trust
26, 2015 Resolution2 of the Court of Appeals (CA) in CA- receipts did not, by itself, constitute fraud and that, at
G.R. SP No. 131714, which lifted the writ of preliminary most, these were only averments for the award of damages
attachment issued by the Regional Trial Court, Branch 59, once substantiated by competent evidence. It also stressed
Makati City (RTC), in Civil Case No. 13-570, in favor of that respondents' act of offering a repayment proposal
petitioner Security Bank Corporation (Security Bank). negated the allegation of fraud. The CA held that fraud
must be present at the time of contracting the obligation,
The Antecedents not thereafter, and that the rules on the issuance of a writ
of attachment must be construed strictly against the
applicant. It disposed the case in this wise:
On May 15, 2013, Security Bank filed a Complaint for Sum
of Money (with Application for Issuance of a Writ of
Preliminary Attachment)3 against respondents Great Wall WHEREFORE, for the foregoing reasons, the instant petition
Commercial Press Company, Inc. (Great Wall) and its is GRANTED. Accordingly, the attachment over any property
sureties, Alfredo Buriel Atienza, Fredino Cheng Atienza, and of petitioners by the writ of preliminary attachment is
Spouses Frederick Cheng Atienza and Monica Cu Atienza ordered LIFTED effective upon the finality of this Decision.
(respondents), before the RTC. The complaint sought to No costs.
recover from respondents their unpaid obligations under a
credit facility covered by several trust receipts and surety SO ORDERED. 11
agreements, as well as interests, attorney's fees and costs.
Security Bank argued that in spite of the lapse of the Security Bank moved for reconsideration but its motion was
maturity date of the obligations from December 11, 2012 to denied by the CA in its assailed resolution, dated June 26,
May 7, 2013, respondents failed to pay their obligations. 2015.
The total principal amount sought was ₱10,000,000.00.
Hence, this petition raising the lone
On May 31, 2013, after due hearing, the RTC granted the
application for a writ of preliminary attachment of Security
ISSUE
Bank, which then posted a bond in the amount of
₱10,000,000.00.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
NULLIFYING THE WRIT OF PRELIMINARY ATTACHMENT
On June 3, 2013, respondents filed their Motion to Lift Writ
ISSUED BY THE TRIAL COURT. 12
of Preliminary Attachment Ad Cautelam,4 claiming that the
writ was issued with grave abuse of discretion based on the
following grounds: (1) Security Bank's allegations in its Security Bank argues that there are sufficient factual and
application did not show a prima facie basis therefor; (2) legal bases to justify the issuance of the writ of preliminary
the application and the accompanying affidavits failed to attachment. It claims that it was misled by respondents,
allege at least one circumstance which would show who employed fraud in contracting their obligation, as they
fraudulent intent on their part; and (3) the general made the bank believe that they had the capacity to pay;
imputation of fraud was contradicted by their efforts to that respondents also committed fraud in the performance
secure an approval for a loan restructure. 5 of their obligation when they failed to tum over the goods
subject of the trust receipt agreements,13 or remit the
proceeds thereof despite demands; and that these were not
The RTC Orders
mere allegations in the complaint but facts that were
testified to by its witness and supported by written
In its Order,6 dated July 4, 2013, the RTC denied documents.
respondents' motion to lift, explaining that the Credit
Agreement7 and the Continuing Suretyship
Security Bank added that respondents' effort to settle their
Agreement8 contained provisions on representations and
outstanding obligation was just a subterfuge to conceal
warranties; that the said representations and warranties
their real intention of not honoring their commitment and to
were the very reasons why Security Bank decided to extend
delay any legal action that the bank would take against
the loan; that respondents executed various trust receipt
them; that respondents submitted a repayment proposal
agreements but did not pay or return the goods covered by
through a letter, dated January 23, 2013, knowing fully well
the trust receipts in violation thereof; that they failed to
that they were already in default; that they requested a
explain why the goods subject of the trust receipts were
meeting to discuss their proposal but they failed to show up
not returned and the proceeds of sale thereof remitted; and
and meet with the bank's representative; and that
that it was clear that respondents committed fraud in the
respondents did not submit any supporting documents to
performance of the obligation. 9
back up their repayment proposal.

Respondents filed a motion for reconsideration, but it was

In their Comment,14 respondents countered that there was
denied by the RTC in its Order, 10 dated August 12, 2013.
insufficient basis for the issuance of the writ of preliminary
attachment against them; that the mere failure to pay their
obligation was not an act of fraud; that the application for must of necessity be proved in many cases by inferences
the issuance of the writ of preliminary attachment, the from circumstances shown to have been involved in the
affidavit of merit and judicial affidavit merely cited general transaction in question. 19
allegations of fraud and Security Bank failed to sufficiently
show the factual circumstances constituting fraud. The allegations of Security Bank in support of its application
Moreover, respondents claimed that they did not commit for a writ of preliminary attachment are as follow:
fraud because they were earnestly negotiating with Security
Bank for a loan restructuring as shown by their
15. During the negotiation for the approval of the loan
Letter, 15 dated January 23, 2013, and email
application/ renewal of Respondents the latter through
correspondences.
Alfredo Buriel Atienza, Fredino Cheng Atienza and Sps.
Frederick Cheng Atienza and Monica Cu Atienza, assured
In its Reply,16 Security Bank stressed that respondents SBC that the loan obligation covered by the several Trust
misled them on their financial capacity and ability to pay Receipts shall be paid in full on or before its maturity date
their obligations. It emphasized that there were specific pursuant to the terms and conditions of the aforesaid trust
allegations in its complaint and its witness testified that receipts. However, Respondents as well as the sureties
respondents committed fraud, specifically their failure to failed to pay the aforesaid obligation.
comply with the trust receipt agreements, that they would
turn over the goods covered by the trust receipt
16. In addition, the assurance to pay in full the obligation is
agreements or the proceeds thereof to Security Bank.
further solidified by the warranty of solvency provisions of
the Credit Agreement, the pertinent portion of which states
The Court’s Ruling that:

The Court finds merit in the petition. "5. Representations at Warranties. - The Borrower further
represents and warrants that xx:xe) The maintenance of
Preliminary Attachment the Credit Facility is premised on the Borrower's continued
ability to service its obligations to its creditors. Accordingly,
A writ of preliminary attachment is a provisional remedy the Borrower hereby warrants that while any of the Credit
issued upon the order of the court where an action is Obligations remain unpaid, the Borrower shall at all times
pending. Through the writ, the property or properties of the have sufficient liquid assets to meet operating requirements
defendant may be levied upon and held thereafter by the and pay all its/his debts as they fall due. Failure of the
sheriff as security for the satisfaction of whatever judgment Borrower to pay any maturing interest, principal or other
might be secured by the attaching creditor against the charges under the Credit Facility shall be conclusive
defendant. The provisional remedy of attachment is evidence of violation of this warranty."
available in order that the defendant may not dispose of
the property attached, and thus prevent the satisfaction of 17. To allay whatever fear or apprehension of herein
any judgment that may be secured by the plaintiff from the plaintiff on the commitment of Respondents to honor its
former.17 obligations, defendants-sureties likewise executed a
"Continuing Suretyship Agreement.
In this case, Security Bank relied on Section 1 (d), Rule 57
of the Rules of Court as basis of its application for a writ of 18. Under paragraph 3 of the said Suretyship Agreement, it
preliminary attachment. It reads: is provided that:

RULE 57 "3. Liability of the Surety - The liability of the Surety is

Preliminary Attachment solidary, direct and immediate and not contingent upon the
pursuit by SBC of whatever remedies it may have against
Section 1. Grounds upon which attachment may issue. - At the Borrower or the collateral/liens it may possess. If any of
the commencement of the action or at any time before the Guaranteed Obligations is not paid or performed on due
entry of judgment, a plaintiff or any proper party may have date (at stated maturity or by acceleration), or upon the
the property of the adverse party attached as security for occurrence of any of the events of default under Section 5
the satisfaction of any judgment that may be recovered in hereof and/or under the Credit Instruments, the Surety
the following cases: shall without need for any notice, demand or any other act
or deed, immediately and automatically become liable
therefor and the Surety shall pay and perform the same."
xxx

19. Thus, in the light of the representation made by

(d) In an action against a party who has been guilty of a
Respondents Commercial Press Co, Inc., Alfredo Buriel
fraud in contracting the debt or incurring the obligation
Atienza, Fredino Cheng Atienza and Sps. Frederick Cheng
upon which the action is brought, or in the performance
Atienza and Monica Cu Atienza that the loan shall be paid in
thereof;
full on or before maturity, coupled by the warranty of
solvency embodied in the Credit Agreement as well as the
xxx execution of the Continuing Suretyship Agreement, the loan
application was eventually approved.
For a writ of preliminary attachment to issue under the
above-quoted rule, the applicant must sufficiently show the 20. Needless to say that without said representations and
factual circumstances of the alleged fraud. It is settled that warranties, including the Continuing Suretyship Agreement,
fraudulent intent cannot be inferred from the debtor's mere the plaintiff would not have approved and granted the
non-payment of the debt or failure to comply with his credit facility to Respondents. It is thus clear that
obligation. 18 Respondents, Alfredo Buriel Atienza, Fredino Cheng Atienza
and Sps. Frederick Cheng Atienza and Monica Cu Atienza,
While fraud cannot be presumed, it need not be proved by misled SBC and employed fraud in contracting said
direct evidence and can well be inferred from attendant obligation.
circumstances. Fraud by its nature is not a thing susceptible
of ocular observation or readily demonstrable physically; it
21. Respondents, through its Vice President Fredino Cheng A trust receipt transaction is one where the entrustee has
Atienza, likewise executed various Trust Receipt the obligation to deliver to the entruster the price of the
Agreements with the plaintiff whereby it bound itself under sale, or if the merchandise is not sold, to return the
the following provision: merchandise to the entruster. There are, therefore, two
obligations in a trust receipt transaction: the first refers to
"2. In consideration of the delivery to the Entrustee of the money received under the obligation involving the duty to
possession of the Goods/Documents, the Entrustee hereby turn it over (entregarla) to the owner of the merchandise
agrees and undertakes, in accordance with the provisions sold, while the second refers to the merchandise received
of the Presidential Decree No. 115; (i) to hold in trust for under the obligation to "return" it (devolvera) to the
the Bank the Goods/Documents; (ii) to sell the Goods for owner. 22 The obligations under the trust receipts are
cash only for the account and benefit of the Bank, and governed by a special law, Presidential Decree (P.D.) No.
without authority to make any other disposition of the 115, and non-compliance have particular legal
Goods/Documents or any part thereof, or to create a lien consequences.
thereon; (iii) to turn over to the Bank, without need of
demand, the proceeds of the sale of the Goods to the Failure of the entrustee to tum over the proceeds of the
extent of the amount of obligation specified above (the sale of the goods, covered by the trust receipt to the
"Obligation"), including the interest thereon, and other entruster or to return said goods if they were not disposed
amounts owing by the Entrustee to the Bank under this of in accordance with the terms of the trust receipt shall be
Trust Receipt, on or before the maturity date above- punishable as es ta fa under Article 315 (1) of the Revised
mentioned (the "Maturity Date"); or (iv) to return, on or Penal Code, without need of proving intent to
before Maturity Date, without need of demand and at the defraud. 23 The offense punished under P.D. No. 115 is in
Entrustee's expense, the Goods/Documents to the Bank, in the nature of malum prohibitum. Mere failure to deliver the
the event of non-sale of the Goods." proceeds of the sale or the goods, if not sold, constitutes a
criminal offense that causes prejudice not only to another,
Despite the above covenants, defendants failed to pay nor but more to the public interest.24 The present case,
return the goods subject of the Trust Receipt Agreements. however, only deals with the civil fraud in the
noncompliance with the trust receipts to warrant the
issuance of a writ of preliminary attached. A fortiori, in a
22. Knowing fully well that they are already in default,
civil case involving a trust receipt, the entrustee's failure to
Respondents and defendants sureties submitted a
comply with its obligations under the trust receipt constitute
repayment proposal through their letter dated January 23,
as civil fraud provided that it is alleged, and substantiated
2013. Through their lawyer, they likewise requested the
with specificity, in the complaint, its attachments and
bank for a meeting to discuss their proposal. However, as it
supporting evidence.
turned out, the proposed repayment proposal for their loan
was only intended to delay legal action against them. They
failed to meet with the Bank's representative and neither Security Bank's complaint stated that Great Wall, through
did they submit supporting documents to back up their its Vice President Fredino Cheng Atienza, executed various
repayment proposal.20 trust receipt agreements in relation to its loan transactions.
The trust receipts stated that in consideration of the
delivery to the entrustee (Great Wall) of the possession of
To support its allegation of fraud, Security Bank attached
the goods, it obligates itself to hold in trust for the bank the
the Affidavit21 of German Vincent Pulgar IV (Pu/gar), the
goods, to sell the goods for the benefit of the bank, to tum
Manager of the Remedial Management Division of the said
over the proceeds of the sale to the bank, and to return the
bank. He detailed how respondents represented to Security
goods to the bank in the event of non-sale. By signing the
Bank that they would pay the loans upon their maturity
trust receipt agreements, respondents fully acknowledged
date. Pulgar added that respondents signed the Credit
the consequences under the law once they failed to abide
Agreement which contained the Warranty of Solvency and
by their obligations therein. The said trust receipt
several Trust Receipt Agreements in favor of Security Bank.
agreements were attached to the complaint.
The said trust receipts were attached to the complaint
which stated that respondents were obligated to tum over
to Security Bank the proceeds of the sale of the good or to Upon the maturity date, however, respondents failed to
return the goods. The several demand letters sent by deliver the proceeds of the sale to Security Bank or to
Security Bank to respondents, which were unheeded, were return the goods in case of nonsale. Security Bank sent a
likewise attached to the complaint. These pieces of final demand letter to respondents, which was also
evidence were presented by Security Bank during the attached to the complaint, but it was unheeded. Curiously,
hearing of the application for the issuance of a writ of in their letter, dated January 23, 2013, respondents did not
preliminary attachment in the RTC. explain their reason for noncompliance with their
obligations under the trust receipts; rather, they simply
stated that Great Wall was having a sudden drop of its
After a judicious study of the records, the Court finds that
income. Such unsubstantiated excuse cannot vindicate
Security Bank was able to substantiate its factual allegation
respondents from their failure to fulfill their duties under
of fraud, particularly, the violation of the trust receipt
the trust receipts.
agreements, to warrant the issuance of the writ of
preliminary attachment.
In addition, Security Bank attached Pulgar's affidavit, which
substantiated its allegation that respondents failed to
There were violations of the
comply with its obligations under the trust receipts. During
trust receipts agreements
the hearing before the RTC, Security Bank presented him
and his judicial affidavit. Regarding the trust receipts, he
While the Court agrees that mere violations of the testified:
warranties and representations contained in the credit
agreement and the continuing suretyship agreement do not
Q: Do you have any other basis in saying that you have
constitute fraud under Section 1(d) of Rule 57 of the Rules
grounds for attachment?
of Court, the same cannot be said with respect to the
A: Yes, defendants not only failed to pay but they also
violation of the trust receipts agreements.
failed to return the goods covered by the Trust Receipt.
Q: What do you mean by failure to return the goods? In this regard, the CA erred.
A: They executed several TRs where they obligated to turn
over the proceeds of sale of goods or pay the value thereof Previously, Section 1 (d), Rule 57 of the 1964 Rules of
or return the goods themselves if they are unable to pay. Court provided that a writ of preliminary attachment may
be issued "[i]n an action against a party who has been
Q: What happened in this case? guilty of a fraud in contracting the debt or incurring the
A: Defendants failed to pay the value of the goods covered obligation upon which the action is brought xxx" Thus, the
by the TRs and they likewise failed to return the goods fraud that justified the issuance of a writ of preliminary
without any explanation. Hence, obviously they attachment then was only fraud committed in contracting
misappropriated the proceeds of the sale of goods.25 an obligation (dolo casuante). 28 When the 1997 Rules of
Civil Procedure was issued by the Court, Section l(d) of Rule
The Court is of the view that Security Bank's allegations of 57 conspicuously included the phrase "in the performance
violation of the trust receipts in its complaint was specific thereof." Hence, the fraud committed in the performance of
and sufficient to assert fraud on the part of respondents. the obligation (dolo incidente) was included as a ground for
These allegations were duly substantiated by the the issuance of a writ of preliminary attachment.29
attachments thereto and the testimony of Security Bank's
witness. This significant change in Section 1 (d) of Rule 57 was
recognized recently in Republic v. Mega Pacific eSolutions,
The case of Philippine Bank of Inc. 30 The Court stated therein that "[a]n amendment to
Communications v. Court of the Rules of Court added the phrase "in the performance
Appeals is inapplicable thereof' to include within the scope of the grounds for
issuance of a writ of preliminary attachment those instances
relating to fraud in the performance of the obligation."
The CA cited Philippine Bank of Communications v. Court of
Appeals26 (PBCom) to bolster its argument that fraudulent
intent cannot be inferred from a debtor's inability to pay or Accordingly, the alleged fraud committed by respondents in
comply with its obligations and that there must be proof of the performance of their obligation should have been
a preconceived plan not to pay.27 considered by the CA. Security Bank detailed in its
complaint that respondents, knowing fully well that they
were in default, submitted a Repayment Proposal. 31 Then,
At face value, PBCom and the present case may show a
they requested for a meeting with the bank to discuss their
semblance of similarity. Thus, the CA cannot be faulted for
proposal. For unknown reasons, they did not meet the
relying on the said case.1âwphi1 A closer scrutiny of these
representatives of the Security Bank.
two cases, however, shows that their similarity is more
apparent than real.
Respondents even attached to its Motion to Lift Writ of
Preliminary Attachment Ad Cautelam32 the correspondence
In PBCom, the applicant for the writ of preliminary
they had with Security Bank, which revealed that they did
attachment simply stated in its motion that the defendant
not meet the representatives of the latter despite providing
therein failed to remit the proceeds or return the goods
a specific date to discuss the proposed repayment scheme.
subject of the trust receipt and attached an ambiguous
Respondents merely offered lame excuses to justify their
affidavit stating that the case was covered by Sections 1 (b)
absence in the arranged meeting and, ultimately, they
and (d) of Rule 57. Obviously, these allegations and
failed to clarify the non-compliance with their commitments.
attachments are too general and vague to prove that the
Such acts bared that respondents were not sincere in
defendant committed fraud. Likewise, there was no hearing
paying their obligation despite their maturity, substantiating
conducted in the RTC before it granted the issuance of the
the allegations of fraud in the performance thereof.
writ of preliminary attachment. Thus, the Court had no
option but to lift the said writ.
These circumstances of the fraud committed by
respondents in the performance of their obligation
In contrast, the complaint in the present case explained in
undoubtedly support the issuance of a writ of preliminary
detail the factual circumstances surrounding the execution
attachment in favor of Security Bank.
of the trust receipts, its contents and the subsequent
violation thereof. Security Bank attached supporting
annexes and presented its witness during the hearing in the Final Note
R TC to substantiate the specific violation of trust receipts
by respondents. Security Bank took great lengths to explain While the Court finds that Security Bank has substantiated
the contents of the trust receipt and show that respondents its allegation of fraud against respondents to warrant the
expressed their conformity to it. When the obligation issuance of writ or preliminary attachment, this finding
became due, respondents did not satisfactorily explain the should not in any manner affect the merits of the principal
non-compliance of their obligations, and. despite a final case. The writ of preliminary attachment is only a
demand, they did not fulfill their obligations under the trust provisional remedy, which is not a cause of action in itself
receipts. Clearly, PBCom is inapplicable in the present case. but is merely adjunct to a main suit.33

Fraud in the performance of WHEREFORE, the December 12, 2014 Decision and the
the obligation must be June 26, 2015 Resolution of the Court of Appeals in CA-G.R.
considered SP No. 131714 are REVERSED and SET ASIDE. The
issuance of the writ of preliminary attachment by the
The CA stated in the assailed decision that under Section 1 Regional Trial Court, Branch 59, Makati City, in Civil Case
(d) of Rule 57, fraud must only be present at the time of No. 13-570, pursuant to its May 31, 2013 Order, is upheld.
contracting the obligation, and not thereafter. Hence, the
CA did not consider the allegation of fraud - that SO ORDERED.
respondents offered a repayment proposal but questionably
failed to attend the meeting with Security Bank regarding
the said proposal - because these acts were done after
contracting the obligation.
 SECOND DIVISION of a writ of preliminary attachment.14 Phil-Air sought to
G.R. No. 193821, November 23, 2015 recover from RCJ Lines:
PHIL-AIR CONDITIONING CENTER, Petitioner, v. RCJ
LINES AND ROLANDO ABADILLA, JR., Respondent. a) The total amount of P840,000.00 exclusive of interest
DECISION for the unpaid delivered air-conditioning units;
BRION, J.:
b) The amount of P60,000.00 for the unpaid repair
Phil-Air Conditioning Center (Phil-Air) filed this petition for services;
review on certiorari1 to assail the September 15, 2010 c) The total interest in the amount of P756,000.00
decision2 of the Court of Appeals (CA) in CA-G.R. CV No. (P840,000.00 x 12% x 7 years + P60,000.00 x 12% x
85866. The CA affirmed the September 8, 2004 decision of 7 years);
the Regional Trial Court (RTC), Branch 119 of Pasay City,
dismissing Phil-Air's complaint for sum of money with d) The sum equivalent to 25% of the total amount due
prayer for a writ of preliminary attachment.3 Designated as as attorney's fees, plus P3,000.00 per court
Acting Member in lieu of Associate Justice Antonio T. appearance; and
Carpio, per Special Order No. 2282 dated November 13, e) Costs of the suit.
2015. Designated as Acting Chairperson in lieu of Associate
Justice Antonio T. Carpio, per Special Order No. 2281 dated
November 13, 2015. In its answer with compulsory counterclaim,15RCJ Lines
admitted that it purchased the units in the total amount of
Antecedents PI,240,000.00 and that it had only paid P400,000.00. It
refused to pay the balance because Phil-Air allegedly
On various dates between March 5, 1990, and August 29, breached its warranty.16
1990, petitioner Phil-Air sold to respondent RCJ Lines four
Carrier Paris 240 air-conditioning units for buses (units). RCJ Lines averred that the units did not sufficiently cool the
The units included compressors, condensers, evaporators, buses despite repeated repairs. Phil-Air purportedly
switches, wiring, circuit boards, brackets, and fittings.4 represented that the units were in accord with RCJ Lines'
cooling requirements as shown in Phil-Air's price
The total purchases amounted to P1,240,000.00 as shown quotation17 dated August 4, 1989. The price quotation
on a sales invoice dated November 5, 1990.5 RCJ Lines paid provided that full payment should be made upon the units'
P400,000.00, leaving a balance of P840,000.00.6 complete installation. Complete installation, according to
RCJ Lines, is equivalent to being in operational condition.
RCJ Lines accepted the delivery of the units, which Phil-Air
then installed after they were inspected by RCJ Lines As it turned out, the Carrier Paris 240 model was not suited
president Rolando Abadilla, Sr.7 to the 45 to 49-seater buses operated by RCJ Lines. The
units, according to RCJ Lines, were defective and did not
Phil-Air allegedly performed regular maintenance checks on attain full operational condition.18
the units pursuant to the one-year warranty on parts and
labor. After some months from installation, Phil-Air Further, RCJ Lines claimed that it was also entitled to be
supposedly boosted the capacity of the units by upgrading reimbursed for costs and damages occasioned by the
them to the Carrier Paris 280 model.8 It also purportedly enforcement of the writ of attachment.
repaired the control switch panel of one of the units for an
additional cost of P60,000.00.9 RCJ Lines thus urged the RTC to order Phil-Air to pay (1)
the replacement costs of the units; (2) lost profits for nine
RCJ Lines issued three post-dated checks in favor of Phil-Air days from April 22 to April 30, 1999, resulting from the
to partly cover the unpaid balance: attachment of its two buses amounting to
P207,000.00;19 and (3) P64,390.00 for the counter-bond
Check No. Amount Post-dated premium, moral damages, exemplary damages and
479759 Php 244,998.00 February 28, 1992 attorney's fees.
479760 Php 244,998.00 March 31, 1992 The RTC Ruling
479761 Php 244,998.00 April 30, 1992
The RTC granted the application for the issuance of a writ
TOTAL Php 734,994.00 of preliminary attachment after Phil-Air posted an
attachment bond in the amount of P1,656,000.00.20 Two
All the post-dated checks were dishonored when Phil-Air buses of RCJ Lines were attached pursuant to the writ
subsequently presented them for payment. Check No. dated December 18, 1998.21 The writ was executed on April
479759 was returned because it was drawn against 21, 1999.22 The attachment, however, was later lifted when
insufficient funds, while Check Nos. 479760 and 479761 the RTC granted RCJ Lines' urgent motion to discharge the
were returned because payments were stopped.10 writ of attachment.23 RCJ Lines posted a counter-bond in
the same amount as the attachment bond.24
Before presenting the third check for payment, Phil-Air sent
a demand letter11 to Rolando Abadilla, Sr. on April 7, 1992, Ruling on the merits after trial, the RTC found that Phil-Air
asking him to fund the post-dated checks. was guilty of laches and estopped from pursuing its claim.
It also sustained the allegation that Phil-Air had breached
On July 17, 1996, Phil-Air demanded payment from its warranty.
Rolando Abadilla, Jr., for the total amount of P734,994.00
plus interest, and attorney's fees equivalent to 25% of the The dispositive portion of the RTC judgment reads:
amount due. Phil-Air warned that it would take court action
if payment is not made within five days from demand.12 WHEREFORE, judgment is hereby rendered as follows:

In view of the failure of RCJ Lines to pay the balance A. Dismissing the complaint of plaintiff for
despite demand, Phil-Air filed on April 1, 1998 the lack of merit.
complaint13 for sum of money with prayer for the issuance
 B. Directing the plaintiff to pay the various dates in August and September 2000.34
defendants the amount of PI00,000.00 as
attorney's fees as they were forced to Finally, the CA sustained the award of attorney's fees for PI
spend and hire a lawyer to litigate for 00,000.00 in favor of RCJ lines for having been compelled
seven (7) years in this Court the to litigate.
unfounded and invalid cause of action of
plaintiff.

C. Directing the plaintiff to pay P82,274.00 as The Petition

refund of the premium xxx for defendant's
counter-bond for the release of the two First, Phil-Air argues that the doctrine of laches is not
buses which were attached per Writ of applicable when the action is filed within the prescriptive
Attachment of this Court. period. Laches, being a doctrine of equity, should only be
applied to fill a void in the law.35
D. Directing the plaintiff to pay P216,000.00
for the lost profits of defendants for the Phil-Air asserts that it filed the complaint on April 1, 1998,
attachment of their two buses as there or less than eight years from the execution of the sales
was no fraud in the transaction of the invoice dated November 5, 1990. The complaint was thus
parties and plaintiff had no sufficient filed within the ten-year prescriptive period for actions
cause of action for the issuance of the writ based upon a written contract.
of attachment.
Second, Phil-Air denies that it breached its warranty.
E. Dismissing all other claims of defendants
as stated in their counter-claims. It maintains that all the units were brand new and were
F. Costs against plaintiff. SO ORDERED.25 accepted by RCJ Lines in good, working, and operational
condition. The units were inspected, tested, and approved
The CA Ruling by then RCJ Lines president, Rolando Abadilla, Sr., as
proved by the delivery receipts in which he affixed his
The CA affirmed the RTC decision in toto.26 signature.36

First, the CA held that Phil-Air's cause of action was barred Phil-Air further avers that it was not notified of the alleged
by laches.27 breach of warranty. Assuming it breached its warranty, Phil-
Air submits that the action to enforce the warranty had
The CA concluded that "Phil-Air's inaction on RCJ Lines' already prescribed.
repeated demands and inexplicable failure to comply with
its obligations had certainly led the latter to believe [Phil- Third, Phil-Air rejects the CA's order that it must reimburse
Air] was no longer interested in pursuing any claim" and the premium payment for the counter-bond and the alleged
that "[Phil-Air] had been conspicuously silent for so long a losses suffered by RCJ Lines. The attachment bond should
time which is disturbingly unusual for one claiming to have be answerable for damages, if any.
been aggrieved by another."28
Respondent's Comment
Second, the CA held that Phil-Air breached its warranty.
The price quotation supposedly warranted that the Carrier RCJ Lines reiterates all the arguments it raised in its
Paris 240 model was suitable for 50-60-passenger coaches counterclaim. It admits that it did not pay the balance of
and especially recommended for operation in the tropics.29 the purchase price.37 It maintains, however, that it was
justified in doing so because Phil-Air breached its warranty.
The CA gave credence to the testimony of the country It insists that Phil-Air was guilty of laches because it waited
manager of Carrier Refrigeration Philippines Inc. (Carrier for eight years to file the collection case.38
Philippines) who testified that the Carrier Paris 240 model is
suited for buses with a maximum seating capacity of up to Issues
35 persons; beyond that, the units would not function
properly.30 The CA also found convincing the testimonies of Based on the foregoing, the Court resolves the following
two RCJ Lines employees who testified that they issues:chanRoblesvirtualLawlibrary
experienced firsthand the inefficient cooling of the Carrier
Paris 240.31 (1)Whether the claim of Phil-Air was barred by laches;
(2)Whether Phil-Air should reimburse RCJ Lines for the
Relying on these testimonies, the CA found that the four counter- bond premium and its alleged unrealized
units did not meet the cooling requirements of RCJ Lines.32 profits;
(3)Whether RCJ Lines proved its alleged unrealized profits
Third, the CA ordered Phil-Air to reimburse the premium on arising from the enforcement of the preliminary writ of
the counter-bond amounting to P82,274.00 since the writ attachment; and
was improvidently issued. (4)Whether RCJ Lines proved that Phil-Air breached its
warranty.
Fourth, the CA affirmed the finding of the RTC that RCJ
Lines suffered losses when the RTC attached two of its Our Ruling
buses.
We grant the petition.
The RTC and the CA relied on the testimony of Rolando
Abadilla, Jr., who claimed to be in charge of the daily Phil-Air's claim is not
operations of RCJ Lines. He testified that they suffered barred by laches.
losses for nine days as a result of the enforcement of the
writ of preliminary attachment. The lost profits purportedly In general, there is no room to apply the concept of laches
amounted to P227,280.00. To support this claim, RCJ Lines when the law provides the period within which to enforce a
adduced as evidence the summary of the daily cash claim or file an action in court. Phil-Air's complaint for sum
collections33 from the buses that were not attached, on of money is based on a written contract of sale. The ten-
year prescriptive period under Article 1144 of the Civil Code sureties invoked laches and maintained that the creditor-
thus applies.39 bank with full knowledge of the deteriorating financial
condition of the principal debtor did not take steps to
In the present case, both parties admit the existence and collect from the latter while still solvent. The sureties thus
validity of the contract of sale. They recognize that argued that the creditor-bank's action was barred by
the price quotation dated August 4, 1989, contained the laches.
terms and conditions of the sale contract. They also agree
that the price and description of the units were indicated on We found that the sureties failed to prove all the elements
the sales invoice dated November 5, 1990. The sales were of laches, namely:
in fact consummated on various dates between March 5, (1) conduct on the part of the defendant or one under
1990 and August 29, 1990, as proved by several delivery whom he claims, giving rise to the situation of which
receipts. complaint is made and for which the complainant
seeks a remedy;
The Court therefore can resolve whether Phil-Air's action to
enforce the contract was timely filed even in the apparent (2) delay in asserting the complainant's right, the
absence of a formal or notarized deed of sale.40 More complainant having had knowledge or notice of
significantly, Rolando Abadilla, Jr., admitted under oath that defendant's conduct and having been afforded an
the sale was in writing.41 opportunity to institute a suit;
(3) lack of knowledge or notice on the part of the
We note that Phil-Air filed the complaint with the RTC on defendant that the complainant would assert the
April 1, 1998. Counting from the date of the sales invoice, right on which he bases his claim; and
or from the date of the delivery receipts, or even from the
date of the price quotation, it is clear that the complaint (4) injury or prejudice to the defendant in the event
was filed within the ten-year prescriptive period. Contrary relief is accorded to the complainant, or the suit is
to the CA's ruling, laches does not apply. not held barred.47
cralawlawlibrary
Laches is defined as the failure or neglect for an
unreasonable and unexplained length of time, to do that
Examining these elements, we found that only the first
which by exercising due diligence, could or should have
element was present. There was no delay (second element)
been done earlier; it is negligence or omission to assert a
because the creditor-bank filed the action within the ten-
right within a reasonable time, warranting a presumption
year prescriptive period. Since the claim was timely filed,
that the party entitled to assert it either has abandoned it
the defendants did not lack notice that the creditor-bank
or declined to assert it.42
would assert its claim (third element). Nor was the
assertion of the right deemed injurious to the defendants
While the CA correctly held that prescription and estoppel
(fourth element); the creditor-bank could assert its claim at
by laches are two different concepts, it failed to appreciate
any time within the prescriptive period.
the marked distinctions between the two concepts.
The same conclusion holds true in the present case; not all
On the one hand, the question of laches is addressed to the
the elements of laches are present. To repeat, Phil-Air filed
sound discretion of the court.43 The court resolves whether
the complaint with the RTC on April 1, 1998. The time
the claimant asserted its claim within a reasonable
elapsed from August 4, 1989 (the date of the price
time and whether its failure to do so warrants the
quotation, which is the earliest possible reckoning point), is
presumption that it either has abandoned it or declined to
eight years and eight months, well within the ten-year
assert it. The court determines the claimant's intent to
prescriptive period. There was simply no delay (second
assert its claim based on its past actions or lack of action.
element of laches) where Phil-Air can be said to have
After all, what is invoked in instances where a party raises
negligently slept on its rights.
laches as a defense is the equity jurisdiction of the court.44
More significantly, there is no basis for laches as the facts
On the other hand, if the law gives the period within which
of the present case do not give rise to an inequitable
to enforce a claim or file an action in court, the court
situation that calls for the application of equity and the
confirms whether the claim is asserted or the action is filed
principle of laches.48
in court within the prescriptive period. The court
determines the claimant's intent to assert its claim by
Phil-Air is not directly liable
simply measuring the time elapsed from the proper
for the counter-bond premium and
reckoning point (e.g., the date of the written contract) to
RCJ Lines' alleged unrealized profits.
the filing of the action or assertion of the claim.
The CA and the RTC erred when it held Phil-Air directly
In sum, where the law provides the period within which to
liable for the counter-bond premium and RCJ Lines' alleged
assert a claim or file an action in court, the assertion of
unrealized profits. Granting that RCJ Lines suffered losses,
the claim or the filing of the action in court at any
the judgment award should have been first executed on the
time within the prescriptive period is generally
attachment bond. Only if the attachment bond is
deemed reasonable, and thus, does not call for the
insufficient to cover the judgment award can Phil-Air be
application of laches. As we held in one case, unless
held liable.49
reasons of inequitable proportions are adduced, any
imputed delay within the prescriptive period is not delay in
We explain below the purpose of a preliminary attachment,
law that would bar relief.45
the procedure in obtaining it, and the manner of having it
lifted.
In Agra, et al. v. Philippine National Bank,46 we held that
"[l]aches is a recourse in equity [and] is applied only in
A writ of preliminary attachment is a provisional remedy
the absence, never in contravention, of statutory law. Thus,
issued by the court where an action is pending to be levied
laches cannot, as a rule, abate a collection suit filed within
upon the property or properties of the defendant. The
the prescriptive period mandated by the Civil Code."
property is held by the sheriff as security for the
satisfaction of whatever judgment that might be secured by
Agra involved an action for collection of a sum of money
the attaching party against the defendant.50
arising from an unpaid loan. In resisting payment, the
 does not result in the dissolution of the attachment
The grant of the writ is conditioned not only on the finding bond. Justice Narvasa, writing his separate opinion in one
of the court that there exists a valid ground for its case, explained:chanRoblesvirtualLawlibrary
issuance.51 The Rules also require the applicant to post a
bond. The dissolution of the preliminary attachment upon
security given [Section 12], or a showing of its irregular
Section 4 of Rule 57 of the Rules of Civil Procedure (Rules) or improper issuance [Section 13], does not of course
provides that "the party applying for the order must...give a operate to discharge the sureties on plaintiffs own
bond executed to the adverse party in the amount fixed by attachment bond. The reason is simple. That bond is
the court, in its order granting the issuance of the executed to the adverse party,. . . conditioned that the ...
writ, conditioned that the latter will pay all the (applicant) will pay all the costs which may be adjudged to
costs that may be adjudged to the adverse party the adverse party and all damages which he may sustain by
and all damages that he may sustain by reason of reason of the attachment, if the court shall finally adjudge
the attachment, if the court shall finally adjudge that the applicant was not entitled thereto." Hence, until
that the applicant was not entitled thereto." that determination is made, as to the applicant's
entitlement to the attachment, his bond must stand and
The enforcement of the writ notwithstanding, the party cannot be withdrawn.59 [emphasis and underscoring
whose property is attached is afforded relief to have the supplied, citations omitted]cralawlawlibrary
attachment lifted.
In the present case, the RTC lifted the preliminary
There are various modes of discharging an attachment
attachment after it heard RCJ Lines' urgent motion to
under Rule 57, viz.: (1) by depositing cash or posting a
discharge attachment and the latter posted a counter-bond.
counter-bond under Section 12;52 (2) by proving that the
The RTC found that there was no fraud and Phil-Air had no
attachment bond was improperly or irregularly issued or
sufficient cause of action for the issuance of the writ of the
enforced, or that the bond is insufficient under Section
attachment. As a consequence, it ordered Phil-Air to refund
13;53 (3) by showing that the attachment is excessive under
the premium payment for the counter-bond and the losses
Section 13; and (4) by claiming that the property is exempt
suffered by RCJ Lines resulting from the enforcement of the
from execution under Section 2.54
writ. The CA affirmed the RTC ruling in toto.
RCJ Lines availed of the first mode by posting a counter-
We reverse the CA and RTC rulings.
bond.
As discussed above, it is patent that under the Rules, the
Under the first mode, the court will order the discharge of
attachment bond answers for all damages incurred by the
the attachment after (1) the movant makes a cash deposit
party against whom the attachment was issued.60
or posts a counter-bond and (2) the court hears the motion
to discharge the attachment with due notice to the adverse
Thus, Phil-Air cannot be held directly liable for the costs
party.55
adjudged to and the damages sustained by RCJ Lines
because of the attachment. Section 4 of Rule 57 positively
The amount of the cash deposit or counter-bond must be
lays down the rule that the attachment bond will pay "all
equal to that fixed by the court in the order of attachment,
the costs which may be adjudged to the adverse
exclusive of costs. The cash deposit or counter-bond shall
party and all damages which he may sustain by
secure the payment of any judgment that the attaching
reason of the attachment, if the court shall finally
party may recover in the action.56
adjudge that the applicant was not entitled thereto."
The filing of a counter-bond to discharge the attachment
The RTC, instead of declaring Phil-Air liable for the alleged
applies when there has already been a seizure of property
unrealized profits and counter-bond premium, should have
by the sheriff and all that is entailed is the presentation of a
ordered the execution of the judgment award on the
motion to the proper court, seeking approval of a cash or
attachment bond. To impose direct liability to Phil-Air would
surety bond in an amount equivalent to the value of the
defeat the purpose of the attachment bond, which was not
property seized and the lifting of the attachment on the
dissolved despite the lifting of the writ of preliminary
basis thereof. The counter-bond stands in place of the
attachment.
property so released.57
The order to refund the counter-bond premium is likewise
To be clear, the discharge of the attachment by depositing
erroneous. The premium payment may be deemed a cost
cash or posting a counter-bond under Section 12 should not
incurred by RCJ Lines to lift the attachment. Such cost may
be confused with the discharge sanctioned under Section
be charged against the attachment bond.
13. Section 13 speaks of discharge on the ground that the
writ was improperly or irregularly issued or enforced, or
RCJ Lines failed to prove its
that the attachment bond is insufficient, or that the
alleged unrealized profits.
attachment is excessive.
In finding that RCJ Lines suffered damages because of the
To reiterate, the discharge under Section 12 takes effect
attachment, the RTC and the CA gave complete credence to
upon posting of a counter-bond or depositing cash, and
the testimony of Rolando Abadilla, Jr. He claimed that RCJ
after hearing to determine the sufficiency of the cash
Lines lost P216,000.00 in unrealized profits for nine days
deposit or counter-bond. On the other hand, the discharge
when the buses were wrongfully seized.
under Section 13 takes effect only upon showing that the
plaintiffs attachment bond was improperly or irregularly
To arrive at this amount, RCJ Lines alleged that a bus
issued, or that the bond is insufficient. The discharge of the
travelling from Manila to Ilocos and vice versa earned an
attachment under Section 13 must be made only after
average daily income of P12,000.00. To back this claim,
hearing.58
RCJ Lines prepared a summary of the daily cash collections
of its nine buses on certain days of August and September
These differences notwithstanding, the discharge of the
2000.
preliminary attachment either through Section 12 or Section
13 has no effect on and does not discharge the attachment
The summary of daily cash collections apparently prepared
bond. The dissolution of the preliminary attachment
 by one RCJ Lines employee was in turn based on the 50,000.00.64
reports of the dispatchers indicating the number of
passengers and the amount of fare collected on a particular The allegation of breach
trip. Except for one bus which travelled round-trip on of express warranty was
August 22-23, 2000, the daily cash collections all pertained notproved.
to the round-trip of eight buses on September 2-3, 2000.
We are not convinced that Phil-Air breached its express
These documents are insufficient to prove actual damages. warranty. RCJ Lines had no right to recoupment in
diminution of the price.65
In Spouses Yu v. Ngo Yet Te,61 we held that if the claim for
actual damages covers unrealized profits, the amount of The Civil Code defines an express warranty as any
unrealized profits must be established and supported by affirmation of fact or any promise by the seller relating to
independent evidence of the mean income of the business the thing if the natural tendency of such affirmation or
undertaking interrupted by the illegal seizure. promise is to induce the buyer to purchase the same, and if
the buyer purchases the thing relying thereon.66
We explained in Spouses Yu  that to merit an award of
actual damages arising from a wrongful attachment, the The question whether there was a breach of warranty is
attachment defendant must prove, with the best evidence factual. Consequently, the Court should rely on the factual
obtainable, the fact of loss or injury suffered and the findings of the CA and RTC, which are generally deemed
amount thereof. Such loss or injury must be of the kind binding and conclusive to the Court. More so in a Rule 45
which is not only capable of proof but must actually be petition where only questions of law can be raised. Further,
proved with a reasonable degree of certainty. As to its factual findings of the RTC, when affirmed by the CA, are
amount, the same must be measurable based on specific conclusive on the Court when supported by the evidence on
facts, and not on guesswork or speculation.62 record.67

Spouses Yu is on all fours with the present dispute because The evidence on record does not support the findings of
it also involved a claim for actual damages arising from the the CA and RTC.
illegal attachment of the claimant's properties, one of which
was a passenger bus. We emphasize that there are recognized cases where the
Court can disregard the factual findings of the RTC and CA.
The claimants in that case attempted to prove actual In these cases, the Court draws its own conclusion based
damages by computing the daily average income of its bus on the evidence on record.68
operation based on the value of three ticket stubs sold over
five separate days. The claimants likewise cited unused In this case, Phil-Air denies that it breached its express
ticket stubs as proof of income foregone when the bus was warranty and strongly argues that the CA and RTC
wrongfully seized. completely ignored its evidence while it sustained the bare
allegations of Rolando Abadilla, Jr.
We found the claimant's evidence insufficient to prove
actual damages. While we recognized that they suffered We agree with Phil-Air. Our examination of the record
some damages, we held that "[b]y no stretch of the reveals that the RTC and CA manifestly overlooked certain
imagination can we consider ticket sales for five days relevant facts not disputed by the parties which, if properly
sufficient evidence of the average daily income of the considered, would justify a different conclusion.
passenger bus, much less its mean income. Not even the
unrebutted testimony of [the claimant] can add credence to To prove that Phil-Air breached its express warranty, RCJ
such evidence for the testimony itself lacks corroboration."63 Lines presented the following testimonial and documentary
evidence:chanRoblesvirtualLawlibrary
Similarly, the evidence adduced by RCJ Lines to show
actual damages fell short of the required proof. Its average 1) Rolando Abadilla, Jr. who claimed that their
daily income cannot be derived from the summary of daily employees reported the defect of the units to him
cash collections from only two separate occasions, i.e., and to his late father. His late father allegedly
August 22-23 and September 2-3, 2000. The data demanded Phil-Air to repair the defects. But despite
submitted is too meager and insignificant to conclude that repeated verbal demands, Phil-Air purportedly failed
the buses were indeed earning an average daily income of to comply with its one-year warranty on parts and
P12,000.00. labor.

More significant, the person who prepared the unsigned 2) Two RCJ Lines employees who claimed that they
summary of daily cash collections was not presented before experienced firsthand the inefficient cooling of the
the RTC to verify and explain how she arrived at the units.
computation. The dispatchers who prepared the collection 3) The general manager of Carrier Philippines who
reports were likewise not presented; some of the reports testified that the Carrier 240 model was not suitable
were also unsigned. While the summary was approved by for buses with a capacity of more than 35
Rolando Abadilla, Jr., his testimony on the alleged passengers, like those operated by RCJ Lines.
unrealized profits was uncorroborated and self-serving.
4) Summary of expenses, sales invoices, provisional
Nonetheless, we recognize that RCJ Lines suffered some receipts, and statements of accounts issued by other
form of pecuniary loss when two of its buses were suppliers and shops (Car Cool Philippines, Inc. and
wrongfully seized, although the amount cannot be Sta. Rosa Motor Works, Inc.) engaged by RCJ Lines
determined with certainty. during the period of warranty to repair the defective
units, amounting to P208,132.00
We note that in its prayer for the issuance of the writ of 5) Commercial invoice for the $68,780.00 US Dollars
preliminary attachment, Phil-Air alleged that RCJ Lines was worth of new units bought from another supplier
guilty of fraud in entering into the sale transaction. A after the lapse of warranty to replace the units
perusal of the record, however, would show that Phil-Air supplied by Phil-Air.69
failed to prove this bare assertion. This justifies an award of
temperate or moderate damages in the amount of Php
 parts/items that Phil-Air was supposed to supply, again, a
In defense, Phil-Air claimed that it regularly checked the fact admitted by Rolando Abadilla, Jr.78 It was likewise
units and that during the effectivity of the one-year unclear that the repairs made by the other service providers
warranty, RCJ Lines never once complained of defects; if were done on the same buses on which the subject units
there were defects, the latter should have demanded Phil- were installed.79
Air to perform its warranty in writing; the reason it had no
proof it made repairs and delivered spare parts was We also find glaring the fact that RCJ Lines did not respond
precisely because it was not apprised of any defect; and to the April 7, 1992 demand letter sent by Phil-Air, viz. -
that the testimonies of the RCJ Lines witnesses were self-
serving.70 Dear Mr. Abadilla,

The RTC noted that Phil-Air did not present evidence to I have been trying to get in touch with you and Junjun the
rebut the allegation of breach.71 Phil-Air instead opposed past several weeks but have been unsuccessful xxx The
the admission of the documentary evidence of RCJ Lines for two checks that you used to partly pay for the four units
failing to comply with the best evidence rule.72 bus air conditions [sic] were all dishonored by the bank
[because they were drawn against insufficient funds].
We hold that the evidence that RCJ Lines submitted failed
to prove breach of express warranty. We are but a small company and our cash flow was
adversely affected by the return of the checks, xxx It would
As to the testimonial evidence mean so much if you could somehow help us replenished
these checks, xxx We look forward to hearing from you
The testimonies of the RCJ Lines witnesses were self- Respectfully, we remain.
serving and uncorroborated.
Yours truly,
The claim of Rolando Abadilla, Jr. that his late father Ricardo Cokieng
verbally communicated the defects of the units to Phil-Air
was hearsay and not admissible.73 He admitted that he was If RCJ Lines was aware all along that the units were
not around when his father phoned Phil-Air to demand the defective and that Phil-Air refused to heed
repair of the units. He likewise admitted that they did not its verbal demands to make repairs, we do not understand
attempt to personally meet with nor send a letter to Phil-Air why it ignored Phil-Air's written demand to replenish the
to demand the repairs.74 returned checks. We also find it unthinkable that RCJ Lines
would spend for parts and services from other suppliers
More tellingly, Rolando Abadilla, Jr. admitted that they and providers, during the period of warranty, without
issued the post-dated checks to Phil-Air to cover the demanding first in writing that Phil-Air make good its
balance of the purchase price sometime in 1992, viz- express warranty.

Q. Mr. Witness is it not in this case that you personally In this regard, we note that the right of the buyer to the
issued three (3) checks draws against the name recoupment in the diminution of the price under Article
Rolando Abadilla and Susan or Rolando Abadilla, and 1599 (1) should be read together with Article 1586 of the
this was some time in 1992? Civil Code,80 which provides that:

A. Yes, Sir. Art. 1586. In the absence of express or implied agreement

Q. And you confirm that these were all dated March 31, of the parties, acceptance of the goods by the buyer shall
April 30 and February 29, 1992? not discharge the seller from liability in damages or other
legal remedy for breach of any promise or warranty in the
A. Yes, Sir. contract of sale. But, if, after acceptance of the goods,
Q. Despite your claim that these air-conditioning units the buyer fails to give notice to the seller of the
were defective and despite your claim that these air- breach in any promise of warranty within a
conditioning units were not repaired by plaintiff, reasonable time after the buyer knows, or ought to
hence you referred them for repair to other know of such breach, the seller shall not be liable
companies who are not authorized, do you still therefor.
affirm the fact that you issued the postdated checks,
the total of which is exactly the balance of the The obvious purpose of the notice is to protect the seller
purchase price as quoted in the price quotation, yes against belated claims. If the seller is not duly notified, he
or no? [Emphasis supplied] is prevented from making prompt investigation to
A. Yes, Sir.75 determine the cause and extent of his
liability.81 Consequently, he is barred from repairing or
xxx rectifying whatever defects the goods sold had.

RCJ Lines failed to convince us that it notified Phil-Air of the

breach of warranty within a reasonable time. In truth, we
We note that the alleged repairs made by Car Cool
are not convinced at all that it had even notified Phil-Air.
Philippines, Inc. and Sta. Rosa Motor Works, Inc. started in
Although Article 1586 does not require that the notice to
1991.76 If RCJ Lines knew as early as 1991 that the units
the seller be in writing, we cannot accept the claim of
were defective and that Phil-Air refused to perform its
Rolando Abadilla, Jr. that his late father verbally notified
warranty despite repeated demands, we wonder why RCJ
Phil-Air of the defects, without violating the rule on
Lines still issued the post-dated checks in 1992 to cover the
hearsay.
balance of the purchase price.
Also, the testimonies of the two RCJ Lines employees that
The record also reveals that Car Cool Philippines, Inc. and
they experienced firsthand the insufficient cooling of the
Sta. Rosa Motor Works, Inc. were not authorized by the
units were self-serving and uncorroborated by a
Carrier brand to repair the units, a fact not denied by
disinterested party.
Rolando Abadilla, Jr.77 It was likewise established that some
of the parts/items purportedly provided by the other
Further, the reliance of the CA and the RTC on the
suppliers were expressly excluded from the list of
 testimony82 of the general manager of Carrier Philippines
was misplaced and unwarranted. It appears that the ACCORDINGLY, RCJ Lines is DIRECTED to pay:
computation of the cooling efficiency of the Carrier 240
model was merely theoretical, based only on the 1. Eight Hundred Forty Thousand Pesos
specifications of the model and not on actual test, viz. — (P840,000.00) representing the unpaid balance of
the purchase price;
Q: Have you seen RCJ Bus?
2. Interest of twelve percent (12%) per annum on
A: I did see.
the unpaid balance to be computed from
xxx November 5, 199086 until June 30, 2013;
Q: With respect to car aircon Paris 240 installed, have
3. Interest of six percent (6%) per annum on the
you seen this bus?
unpaid balance to be computed from July 1,
A: No, I did not. 2013,87 until fully paid;
Q: Mr. Witness, this case involves a particular product a
4. Attorney's fees in the fixed amount of
brand of the product that you did not try [sic] but
P30,000.00.88
specifically Paris 240. Have you seen it personally,
the four units installed?
The total amount to be recovered shall further be subject to
A: No I did not. the legal interest rate of six percent (6 %) per annum from
Q: Even one unit? the finality of this decision until fully paid.89

A: No Sir. The attachment bond posted by Phil-Air shall be levied

upon to satisfy the P50,000.00 temperate damages
awarded to RCJ Lines and the P82,274.00 refund of the
counter-bond premium.
The meat of his testimony centered not on the subject units
but on the cooling capacity of the product that Carrier SO ORDERED.
Philippines was then selling in the market. In fact, he
admitted that his role in the company had nothing to do
with repairs of air-conditioning units.

On this basis, we do not find his testimony conclusive as to

the alleged breach of express warranty. It was too
tangential and speculative. We note that he was not even
presented as an expert witness. Even if we assume that the
computation of the cooling capacity of the Carrier 240 was
accurate, RCJ Lines still failed to prove that it duly and
promptly informed Phil-Air of the alleged breach.

On the documentary evidence

The pieces of documentary evidence submitted by RCJ

Lines to prove breach of express warranty failed to comply
with the best evidence rule. It is established on record that
the sales invoices and provisional receipts issued by
the other suppliers and service providers were mere
photocopies.83 The counsel of Phil-Air objected to the
admission of the secondary evidence without proof that the
originals were indeed lost. The counsel for RCJ Lines
requested that the evidence be conditionally accepted and
marked, which the trial court granted.

Nowhere on record, however, was it ever established that

the originals were later submitted. It was also not shown
that the originals were indeed lost, which could have
justified the submission of secondary evidence.84 The RTC
simply ignored this fact when it finally decided the case.

Conclusion

Based on the foregoing analysis, we find- that RCJ Lines

failed to prove its allegation that Phil-Air breached its
express warranty. RCJ Lines is thus held liable to pay the
balance of the purchase price plus interest and attorney's
fees.85 RCJ Lines, however, is entitled to temperate
damages as a result of the wrongful attachment of its
buses and to the refund of the premium payment for the
counter-bond.

WHEREFORE, in view of the foregoing, we

hereby GRANT the petition. The September 15, 2010
decision of the Court of Appeals in CA-G.R. CV No. 85866
is REVERSED and SET ASIDE.
 THIRD DIVISION during the entire time that the sailboat was in Watercraft's
September 9, 2015 dockyard. Thus, he claimed to have been surprised when
G.R. No. 181721 he received five (5) invoices billing him for the said fees
WATERCRAFT VENTURE CORPORATION, two (2) months after his services were terminated. He
represented by its Vice-President, ROSARIO E. pointed out that the complaint was an offshoot of an illegal
RANOA, Petitioners, dismissal case he filed against Watercraft which had been
vs. decided in his favor by the Labor Arbiter.
ALFRED RAYMOND WOLFE, Respondent.
Meanwhile, finding Watercraft's ex-parte application for writ
DECISION of preliminary attachment sufficient in form and in
substance pursuant to Section 1 of Rule 57 of the Rules of
PERALTA, J.: Court, the RTC granted the same in the Order dated July
15, 2005, thus:
This is a petition for review on certiorari under Rule 45 of
the Rules of Court, seeking to reverse and set aside the WHEREFORE, let a Writ of Preliminary Attachment be
Court of Appeals (CA) Resolution1 dated January 24, 2008 issued accordingly in favor of the plaintiff, Watercraft
denying the motion for reconsideration of its Ventures Corporation conditioned upon the filing of
Decision2 dated September 27, 2007 in CA-G.R. SP No. attachment bond in the amount of Three Million Two
97804. Hundred Thirty-One Thousand Five Hundred and Eighty-
Nine and 25/100 Pesos (Php3,231,589.25) and the said writ
be served simultaneously with the summons, copies of the
The facts are as follows:
complaint, application for attachment, applicant's affidavit
and bond, and this Order upon the defendant.
Petitioner Watercraft Venture Corporation (Watercraft) is
engaged in the business of building, repairing, storing and
SO ORDERED.4
maintaining yachts, boats and other pleasure crafts at the
Subic Bay Freeport Zone, Subic, Zambales. In connection
with its operations and maintenance of boat storage Pursuant to the Order dated July 15, 2005, the Writ of
facilities, it charges a boat storage fee of Two Hundred Attachment dated August 3, 2005 and the Notice of
Seventy-Two US Dollars (US$272.00) per month with Attachment dated August 5, 2005 were issued, and Wolfe's
interest of 4% per month for unpaid charges. two vehicles, a gray Mercedes Benz with plate number XGJ
819 and a maroon Toyota Corolla with plate number TFW
110, were levied upon.
Sometime in June 1997, Watercraft hired respondent Alfred
Raymond Wolfe (Wolfe), a British national and resident of
Subic Bay Freeport Zone, Zambales, as its Shipyard On August 12, 2005, Wolfe's accounts at the Bank of the
Manager. Philippine Islands were also garnished.

During his empolyment, Wolfe stored the sailboat, Knotty By virtue of the Notice of Attachment and Levy dated
Gull, within Watercraft's boat storage facilities, but never September 5, 2005, a white Dodge pick-up truck with plate
paid for the storage fees. number XXL 111 was also levied upon. However, a certain
Jeremy Simpson filed a Motion for Leave of Court to
Intervene, claiming that he is the owner of the truck as
On March 7, 2002, Watercraft terminated the employment
shown by a duly-notarized Deed of Sale executed on
of Wolfe.
August 4, 2005, the Certificate of Registration No.
3628665-1 and the Official Receipt No. 271839105.
Sometime in June 2002, Wolfe pulled out his sailboat from
Watercraft's storage facilities after signing a Boat Pull-Out
On November 8, 2005, Wolfe filed a Motion to Discharge
Clearance dated June 29, 2002 where he allegedly
the Writ of Attachment, arguing that Watercraft failed to
acknowledged the outstanding obligation of Sixteen
show the existence of fraud and that the mere failure to
Thousand Three Hundred and Twenty-Four and 82/100 US
pay or perform an obligation does not amount to fraud. He
Dollars (US$16,324.82) representing unpaid boat storage
also claimed that he is not a flight risk for the following
fees for the period of June 1997 to June 2002. Despite
reasons: (1) contrary to the claim that his Special Working
repeated demands, he failed to pay the said amount.
Visa expired in April 2005, his Special Subic Working Visa
and Alien Certificate of Registration are valid until April 25,
Thus, on July 7, 2005, Watercraft filed against Wolfe a 2007 and May 11, 2006, respectively; (2) he and his family
Complaint for Collection of Sum of Money with Damages have been residing in the Philippines since 1997; (3) he is
with an Application for the Issuance of a Writ of Preliminary an existing stockholder and officer of Wolfe Marine
Attachment. The case was docketed as Civil Case No. 4534- Corporation which is registered with the Securities and
MN, and raffled to Branch 1703 of the Regional Trial Court Exchange Commission, and a consultant of "Sudeco/Ayala"
(RTC) of Malabon City. projects in Subic, a member of the Multipartite Committee
for the new port development in Subic, and the Subic
In his Answer, Wolfe claimed he was hired as Service and Chamber of Commerce; and (4) he intends to finish
Repair Manager, instead of Shipyard Manager. He denied prosecuting his pending labor case against Watercraft. On
owing Watercraft the amount of US$16,324.82 representing even date, Watercraft also filed a Motion for Preliminary
storage fees for the sailboat. He explained that the sailboat Hearing of its affirmative defenses of forum shopping, litis
was purchased in February 1998 as part of an agreement pendentia, and laches.
between him and Watercraft's then General Manager, Barry
Bailey, and its President, Ricky Sandoval, for it to be In an Order dated March 20, 2006, the RTC denied Wolfe's
repaired and used as training or fill-in project for the staff, Motion to Discharge Writ of Attachment and Motion for
and to be sold later on. He added that pursuant to a central Preliminary Hearing for lack of merit.
Listing Agreement for the sale of the sailboat, he was
appointed as agent, placed in possession thereof and
Wolfe filed a motion for reconsideration, but the RTC also
entitled to a ten percent (10%) sales commission. He
denied it for lack of merit in an Order dated November 10,
insisted that nowhere in the agreement was there a
stipulation that berthing and storage fees will be charged
2006. Aggrieved, Wolfe filed a petition for certiorari before being the "generic term embracing all multifarious means
the CA. which human ingenuity can devise, and which are resorted
to by one individual to secure an advantage over another
The CA granted Wolfe's petition in a Decision dated by false suggestions or by suppression of truth and includes
September 27, 2007, the dispositive portion of which reads: all surprise, trick, cunning, dissembling and any unfair way
by which another is cheated." In this instance, Wolfe's mere
failure to pay the boat storage fees does not necessarily
WHEREFORE, the Order dated March 20, 2006 and the
amount to fraud, absent any showing that such failure was
Order dated November 10, 2006 of respondent Judge are
due to [insidious] machinations and intent on his part to
hereby ANNULLED and SET ASIDE. Accordingly, the Writ of
defraud Watercraft of the amount due it.
Attachment issued on August 3, 2005, the Notice of
Attachment dated August 5, 2005 and the Notice of
Attachment and Levy dated September 5, 2005 are hereby As to the allegation that Wolfe is a flight risk, thereby
also declared NULL and VOID, and private respondent is warranting the issuance of the writ, the same lacks merit.
DIRECTED to return to their owners the vehicles that were The mere fact that Wolfe is a British national does not
attached pursuant to the Writ. automatically mean that he would leave the country at will.
As Wolfe avers, he and his family had been staying in the
Philippines since 1997, with his daughters studying at a
SO ORDERED.5
local school. He also claims to be an existing stockholder
and officer of Wolfe Marine Corporation, a SEC-registered
The CA ruled that the act of issuing the writ of preliminary corporation, as well as a consultant of projects in the Subic
attachment ex-parte constitutes grave abuse of discretion Area, a member of the Multipartite Committee for the new
on the part of the RTC, thus: port development in Subic, and a member of the Subic
Chamber of Commerce. More importantly, Wolfe has a
x x x In Cosiquien [v. Court of Appeals], the Supreme Court pending labor case against Watercraft – a fact which the
held that: company glaringly failed to mention in its complaint – which
Wolfe claims to want to prosecute until its very end. The
"Where a judge issues a fatally defective writ of preliminary said circumstances, as well as the existence of said labor
attachment based on an affidavit which failed to allege the case where Wolfe stands not only to be vindicated for his
requisites prescribed for the issuance of the writ of alleged illegal dismissal, but also to receive recompense,
preliminary attachment, renders the writ of preliminary should have convinced the trial court that Wolfe would not
attachment issued against the property of the defendant want to leave the country at will just because a suit for the
fatally defective. The judge issuing it is deemed to have collection of the alleged unpaid boat storage fees has been
acted in excess of jurisdiction. In fact, the defect cannot filed against him by Watercraft.
even be cured by amendment. Since the attachment is a
harsh and rigorous remedy which exposed the debtor to Neither should the fact that Wolfe's Special Working Visa
humiliation and annoyance, the rule authorizing its issuance expired in April 2005 lead automatically to the conclusion
must be strictly construed in favor of defendant. It is the that he would leave the country. It is worth noting that all
duty of the court before issuing the writ to ensure that all visas issued by the government to foreigners staying in the
the requisites of the law have been complied with. Philippines have expiration periods. These visas, however,
Otherwise, a judge acquires no jurisdiction to issue the may be renewed, subject to the requirements of the law. In
writ." (emphasis supplied) Wolfe's case, he indeed renewed his visa, as shown by
Special Working Visa No. 05-WV-0124P issued by the Subic
In the instant case, the Affidavit of Merit executed by Bay Metropolitan Authority Visa Processing Office on April
Rosario E. Rañoa, Watercraft's Vice-President, failed to 25, 2005, and with validity of two (2) years therefrom.
show fraudulent intent on the part of Wolfe to defraud the Moreover, his Alien Certificate of Registration was valid up
company. It merely enumerated the circumstances tending to May 11, 2006.
to show the alleged possibility of Wolfe's flight from the
country. And upon Wolfe's filing of the Motion to Discharge Based on the foregoing, it is therefore clear that the writ
the Writ, what the respondent Judge should have done was was improvidently issued. It is well to emphasize that
to determine, through a hearing, whether the allegations of "[T]he rules on the issuance of a writ of attachment must
fraud were true. As further held in Cosiquien: be construed strictly against the applicants. This stringency
is required because the remedy of attachment is harsh,
"When a judge issues a writ of preliminary attachment ex- extraordinary and summary in nature. If all the requisites
parte, it is incumbent on him, upon proper challenge of his for the granting of the writ are not present, then the court
order to determine whether or not the same was which issues it acts in excess of its jurisdiction. Thus, in this
improvidently issued. If the party against whom the writ is case, Watercraft failed to meet all the requisites for the
prayed for squarely controverts the allegation of fraud, it is issuance of the writ. Thus, in granting the same,
incumbent on the applicant to prove his allegation. The respondent Judge acted with grave abuse of discretion.6
burden of proving that there indeed was fraud lies with the
party making such allegation. This finds support in Section In a Resolution dated January 24, 2008, the CA denied
1, Rule 131 Rules of Court. In this jurisdiction, fraud is Watercraft's motion for reconsideration of its Decision,
never presumed." (Emphasis supplied) As correctly noted there being no new or significant issues raised in the
by Wolfe, although Sec. 1 of Rule 57 allows a party to motion.
invoke fraud as a ground for the issuance of a writ of
attachment, the Rules require that in all averments of Dissatisfied with the CA Decision and Resolution, Watercraft
fraud, the circumstances constituting fraud must be stated filed this petition for review on certiorari, raising these two
with particularity, pursuant to Rule 8, Section 5. The issues:
Complaint merely stated, in paragraph 23 thereof that "For
failing to pay the use [of] facilities and services – in the
I.
form of boat storage fees, the Defendant is clearly guilty of
fraud which entitles the Plaintiff to a Writ of Preliminary
Attachment upon the property of the Defendant as security WHETHER THE EX-PARTE ISSUANCE OF THE PRELIMINARY
for the satisfaction of any judgment herein." This allegation ATTACHMENT BY THE TRIAL COURT IN FAVOR OF THE
does not constitute fraud as contemplated by law, fraud PETITIONER IS VALID.
 II. Watercraft also points out the inconsistent stance of Wolfe
with regard to the ownership and possession of the
WHETHER THE ALLEGATIONS IN THE AFFIDAVIT OF sailboat. Contrary to Wolfe's Answer that the purchase of
MERIT CONCERNING FRAUD ARE SUFFICIENT TO the sailboat was made pursuant to a three (3)-way
WARRANT THE ISSUANCE OF A PRELIMINARY WRIT OF partnership agreement between him and its General
ATTACHMENT BY THE Manager and Executive Vice-President, Barry Bailey, and its
President, Ricky Sandoval, Watercraft claims that he made
a complete turnaround and exhibited acts of soleownership
TRIAL COURT IN FAVOR OF THE PETITIONER.7
by signing the Boat Pull-Out Clearance in order to retrieve
the sailboat. It argues that common sense and logic would
Watercraft argues that the CA erred in holding that the RTC dictate that he should have invoked the existence of the
committed grave abuse of discretion in issuing the writ of partnership to answer the demand for payment of the
preliminary attachment, and in finding that the affidavit of storage fees.
merit only enumerated circumstances tending to show the
possibility of Wolfe's flight from the country, but failed to
Watercraft contends that in order to pre-empt whatever
show fraudulent intent on his part mpany.
action it may decide to take with respect to the sailboat in
relation to his liabilities, Wolfe accomplished in no time the
Stressing that its application for such writ was anchored on clearance that paved the way for its removal from the
two (2) grounds under Section 1,8 Rule 57, Watercraft company's premises without paying his outstanding
insists that, contrary to the CA ruling, its affidavit of merit obligations. It claims that such act reveals a fraudulent
sufficiently averred with particularity the circumstances intent to use the company storage facilities without
constituting fraud as a common element of said grounds. payment of storage fees, and constitutes unjust
enrichment.
Watercraft points out that its affidavit of merit shows that
from 1997, soon after Wolfe's employment as Shipyard The petition lacks merit.
Manager, up to 2002, when his employment was
terminated, or for a period of five (5) years, not once did
A writ of preliminary attachment is defined as a provisional
he pay the cost for the use of the company's boat storage
remedy issued upon order of the court where an action is
facilities, despite knowledge of obligation and obvious
pending to be levied upon the property or properties of the
ability to pay by reason of his position.
defendant therein, the same to be held thereafter by the
sheriff as security for the satisfaction of whatever judgment
Watercraft adds that its affidavit clearly stated that Wolfe, that might be secured in the said action by the attaching
in an attempt to avoid settling of his outstanding creditor against the defendant.10 However, it should be
obligations to the company, signed a Boat Pull-Out resorted to only when necessary and as a last remedy
Clearance where he merely acknowledged but did not pay because it exposes the debtor to humiliation and
Sixteen Thousand Three Hundred and Twenty-Four and annoyance.11 It must be granted only on concrete and
82/100 US Dollars (US$16,324.82) representing unpaid specific grounds and not merely on general averments
boat storage fees for the period commencing June 1997 to quoting the words of the rules.12 Since attachment is harsh,
June 2002. It avers that the execution of such clearance extraordinary, and summary in nature,13 the rules on the
enabled Wolfe to pull out his boat from the company application of a writ of attachment must be strictly
storage facilities without payment of storage fees. construed in favor of the defendant. the court14 in which
the action is pending. Such bond executed to the adverse
Watercraft also faults the CA in finding no merit in its party in the amount fixed by the court is subject to the
allegation that Wolfe is a flight risk. It avers that he was conditions that the applicant will pay: (1) all costs which
supposed to stay and work in the country for a limited may be adjudged to the adverse party; and (2) all damages
period, and will eventually leave; that despite the fact that which such party may sustain by reason of the attachment,
his wife and children reside in the country, he can still leave if the court shall finally adjudge that the applicant was not
with them anytime; and that his work in the country will entitled thereto.15 As to the requisite affidavit of merit,
not prevent him from leaving, thereby defeating the Section 3,16 Rule 57of the Rules of Court states that an
purpose of the action, especially since he had denied order of attachment shall be granted only when it appears
responsibility for his outstanding obligations. It submits that in the affidavit of the applicant, or of some other person
the CA overlooked paragraph 28 of its Complaint which who personally knows the facts:
alleged that "[i]n support of the foregoing allegations and
the prayer for the issuance of a Writ of Preliminary 1. that a sufficient cause of action exists;
Attachment in the instant case, the Plaintiff has attached
hereto the Affidavit of the Vice-President of the Plaintiff,
2. that the case is one of those mentioned in
MS. ROSARIO E. RAÑOA x x x."9
Section 117 hereof;

Watercraft asserts that it has sufficiently complied with the

3. that there is no other sufficient security for the
only requisites for the issuance of the writ of preliminary
claim sought to be enforced by the action; and
attachment under Section 3, Rule 57 of the Rules of Court,
i.e., affidavit of merit and bond of the applicant. It posits
that contrary to the CA ruling, there is no requirement that 4. that the amount due to the applicant, or the
evidence must first be offered before a court can grant value of the property the possession of which he is
such writ on the basis of Section 1 (d) of Rule 57, and that entitled to recover, is as much as the sum for
the rules only require an affidavit showing that the case is which the order is granted above all legal
one of those mentioned in Section 1, Rule 57. It notes that counterclaims.
although a party is entitled to oppose an application for the
issuance of the writ or to move for the discharge thereof by The mere filing of an affidavit reciting the facts
controverting the allegations of fraud, such rule does not required by Section 3, Rule 57, however, is not
apply when the same allegations constituting fraud are the enough to compel the judge to grant the writ of
very facts disputed in the main action, as in this case. preliminary attachment. Whether or not the
affidavit sufficiently established facts therein stated
is a question to be determined by the court in the
exercise of its discretion.18 "The sufficiency or 14. Several demands were then made upon the
insufficiency of an affidavit depends upon the Defendant for him to settle his outstanding
amount of credit given it by the judge, and its obligations to the Plaintiff in unpaid storage fees
acceptance or rejection, upon his sound but the same went unheeded.
discretion."19 Thus, in reviewing the conflicting
findings of the CA and the RTC on the pivotal issue 15. As of 02 April 2005, the outstanding obligation
of whether or not Watercraft's affidavit of merit of the Defendant to the Plaintiff in unpaid boat
sufficiently established facts which constitute as storage fees stands at Three Million Two Hundred
grounds upon which attachment may be issued Thirty-One Thousand Five Hundred and Eighty-
under Section 1 (a)20 and (d),21 Rule 57, the Court Nine and 25/100 Pesos (Php 3,231,589.25)
will examine the Affidavit of Preliminary inclusive of interest charges.
Attachment22 of Rosario E. Rañoa, its Vice-
President, which reiterated the following
16. For failing to pay for the use [of] facilities and
allegations in its complaint to substantiate the
services—in the form of boat storage facilities—
application for a writ of preliminary attachment:
duly enjoyed by him and for failing and refusing to
fulfill his promise to pay for the said boat storage
xxxx fees, the Defendant is clearly guilty of fraud which
entitles the Plaintiff to a Writ of Preliminary
4. Sometime in June 1997, the Defendant was Attachment upon the property of the Defendant as
hired as Watercraft's Shipyard Manager. security for the satisfaction of any judgment in its
favor in accordance with the provisions of
5. Soon thereafter, the Defendant placed his Paragraph (d), Section 1, Rule 57 of the Rules of
sailboat, the Knotty Gull, within the boat storage Court.
facilities of Watercraft for purposes of storage and
safekeeping. 17. The instant case clearly falls under the said
provision of law.
6. Despite having been employed by Watercraft,
the Defendant was not exempted from paying 18. Furthermore, lawful factual and legal grounds
Watercraft boat storage fees for the use of the said exist which show that the Defendant may have
storage facilities. departed or is about to depart the country to
defraud his creditors thus rendering it imperative
7. By virtue of his then position and employment that a Writ of Preliminary Attachment be issued in
with Watercraft, the Defendant was very much favor of the Plaintiff in the instant case.
knowledgeable of the foregoing fact.
19. The possibility of flight on the part of the
8. All throughout his employment with Watercraft, Defendant is heightened by the existence of the
the Defendant used the boat storage facilities of following circumstances:
Watercraft for his Knotty Gull.
a. The Special Working Visa issued in
9. However, all throughout the said period of his favor of the Defendant expired in April
employment, the Defendant never paid the boat 2005;
storage fees in favor of the Plaintiff.
b. The Defendant is a British national who
10. The Defendant's contract of employment with may easily leave the country at will;
Watercraft was terminated on 07 March 2002.
c. The Defendant has no real properties
11. [Sometime] thereafter, that is, in or about June and visible, permanent business or
2002, the Defendant pulled out the Knotty Gull employment in the Philippines; and
from the boat storage facilities of Watercraft.
e. The house last known to have been
12. Instead of settling in full his outstanding occupied by the Defendant is merely being
obligations concerning unpaid storage fees before rented by him.
pulling our the Knotty Gull, the Defendant signed a
Boat Pull-Out Clearance dated 29 June 2002 20. All told, the Defendant is a very serious flight
wherein he merely acknowledged the then risk which fact will certainly render for naught the
outstanding balance of Sixteen Thousand Three capacity of the Plaintiff to recover in the instant
Hundred and Twenty-four and 82/100 US Dollars case.23
(US$16,324.82), representing unpaid boat storage
fees for the period commencing June 1997 to June After a careful perusal of the foregoing allegations, the
2002, that he owed Watercraft. Court agrees with the CA that Watercraft failed to state
with particularity the circumstances constituting fraud, as
13. By reason of Defendant's mere accomplishment required by Section 5,24 Rule 8 of the Rules of Court, and
of the said Boat Pull-Out Clearance with that Wolfe's mere failure to pay the boat storage fees does
acknowledgment of his outstanding obligation to not necessarily amount to fraud, absent any showing that
Watercraft in unpaid boat storage fees, Mr. Franz such failure was due to insidious machinations and intent
Urbanek, then the Shipyard Manager who replaced on his part to defraud Watercraft of the amount due it.
the Defendant, contrary to company policy, rules
and regulations, permitted the latter to physically In Liberty Insurance Corporation v. Court of Appeals,25 the
pull out his boat from the storage facilities of the Court explained that to constitute a ground for attachment
Plaintiff without paying any portion of his in Section 1(d), Rule 57 of the Rules of Court, it must be
outstanding obligation in storage fees. shown that the debtor in contracting the debt or incurring
the obligation intended to defraud the creditor. A debt is
fraudulently contracted if at the time of contracting it, the that he would leave the country.1âwphi1 It is worth noting
debtor has a preconceived plan or intention not to pay. that all visas issued by the government to
"The fraud must relate to the execution of the agreement
and must have been the reason which induced the other foreigner staying in the Philippines have expiration periods.
party into giving consent which he would not have These visas, however, may be renewed, subject to the
otherwise given."26 requirements of the law. In Wolfe's case, he indeed
renewed his visa, as shown by Special Working Visa No. 05-
Fraudulent intent is not a physical entity, but a condition of WV-0124P issued by the Subic Bay Metropolitan Authority
the mind beyond the reach of the senses, usually kept Visa Processing Office on April 25, 2005, and with validity
secret, very unlikely to be confessed, and therefore, can of two (2) years therefrom. Moreover, his Alien Certificate
only be proved by unguarded expressions, conduct and of Registration was valid up to May 11, 2006.33
circumstances.27 Thus, the applicant for a writ of
preliminary attachment must sufficiently show the factual Meanwhile, Watercraft's reliance on Chuidian v.
circumstances of the alleged fraud because fraudulent Sandiganbayan34 is misplaced. It is well settled that:
intent cannot be inferred from the debtor's mere non-
payment of the debt or failure to comply with his
x x x when the preliminary attachment is issued upon a
obligation.28 The particulars of such circumstances
ground which is at the same time the applicant's cause of
necessarily include the time, persons, places and specific
action; e.g., "an action for money or property embezzled or
acts of fraud committed.29 An affidavit which does not
fraudulently misapplied or converted to his own use by a
contain concrete and specific grounds is inadequate to
public officer, or an officer of a corporation, or an attorney,
sustain the issuance of such writ. In fact, mere general
factor, broker, agent, or clerk, in the course of his
averments render the writ defective and the court that
employment as such, or by any other person in a fiduciary
ordered its issuance acted with grave abuse of discretion
capacity, or for a willful violation of duty," or "an action
amounting to excess of jurisdiction.30
against a party who has been guilty of fraud in contracting
the debt or incurring the obligation upon which the action is
In this case, Watercraft's Affidavit of Preliminary brought," the defendant is not allowed to file a motion to
Attachment does not contain specific allegations of other dissolve the attachment under Section 13 of Rule 57 by
factual circumstances to show that Wolfe, at the time of offering to show the falsity of the factual averments in the
contracting the obligation, had a preconceived plan or plaintiff's application and affidavits on which the writ was
intention not to pay. Neither can it be inferred from such based – and consequently that the writ based thereon had
affidavit the particulars of why he was guilty of fraud in the been improperly or irregularly issued – the reason being
performance of such obligation. To be specific, Watercraft's that the hearing on such a motion for dissolution of the writ
following allegation is unsupported by any particular would be tantamount to a trial of the merits of the action.
averment of circumstances that will show why or how such In other words, the merits of the action would be ventilated
inference or conclusion was arrived at, to wit: "16. For at a mere hearing of a motion, instead of at the regular
failing to pay for the use [of] facilities and services - in the trial.35
form of boat storage facilities – duly enjoyed by him and for
failing and refusing to fulfill his promise to pay for the said
Be that as it may, the foregoing rule is not applicable in this
boat storage fees, the Defendant is clearly guilty of fraud x
case because when Wolfe filed a motion to dissolve the writ
x x."31 It is not an allegation of essential facts constituting
of preliminary attachment, he did not offer to show the
Watercraft's causes of action, but a mere conclusion of law.
falsity of the factual averments in Watercraft's application
and affidavit on which the writ was based. Instead, he
With respect to Section 1 (a),32 Rule 57, the other ground sought the discharge of the writ on the ground that
invoked by Watercraft for the issuance of the writ of Watercraft failed to particularly allege any circumstance
preliminary attachment, the Court finds no compelling amounting to fraud. No trial on the merits of the action at a
reason to depart from the CA's exhaustive ruling to the mere hearing of such motion will be had since only the
effect that such writ is unnecessary because Wolfe is not a sufficiency of the factual averments in the application and
flight risk, thus: affidavit of merit will be examined in order to find out
whether or not Wolfe was guilty of fraud in contracting the
As to the allegation that Wolfe is a flight risk, thereby debt or incurring the obligation upon which the action is
warranting the issuance of the writ, the same lacks merit. brought, or in the performance thereof.
The mere fact that Wolfe is a British national does not
automatically mean that he would leave the country at will. Furthermore, the other ground upon which the writ of
As Wolfe avers, he and his family had been staying in the preliminary attachment was issued by the RTC is not at the
Philippines since 1997, with his daughters studying at a same time the applicant's cause of action. Assuming
local school. He also claims to be an existing stockholder arguendo that the RTC was correct in issuing such writ on
and officer of Wolfe Marine Corporation, a SEC-registered the ground that Watercraft's complaint involves an action
corporation, as well as a consultant of projects in the Subic for the recovery of a specified amount of money or
Area, a member of the Multipartite Committee for the new damages against a party, like Wolfe, who is about to depart
port development in Subic, and a member of the Subic from the Philippines with intent to defraud his creditors, the
Chamber of Commerce. More importantly, Wolfe has a Court stresses that the circumstances36 cited in support
pending labor case against Watercraft – a fact which the thereof are merely allegations in support of its application
company glaringly failed to mention in its complaint – which for such writ.37 Such circumstances, however, are neither
Wolfe claims to want to prosecute until its very end. The the core of Watercraft's complaint for collection of sum of
said circumstances, as well as the existence of said labor money and damages, nor one of its three (3) causes of
case where Wolfe stands not only to be vindicated for his action therein.38
alleged illegal dismissal, but also to receive recompense,
should have convinced the trial court that Wolfe would not
All told, the CA correctly ruled that Watercraft failed to
want to leave the country at will just because a suit for the
meet one of the requisites for the issuance of a writ of
collection of the alleged unpaid boat storage fees has been
preliminary attachment, i.e., that the case is one of those
filed against him by Watercraft.
mentioned in Section 1 of Rule 57, and that the RTC
gravely abused its discretion in improvidently issuing such
Neither should the fact that Wolfe's Special Working Visa writ. Watercraft failed to particularly state in its affidavit of
expired in April 2005 lead automatically to the conclusion merit the circumstances constituting intent to defraud
creditors on the part of Wolfe in contracting or in the
performance of his purported obligation to pay boat storage
fees, as well as to establish that he is a flight risk. Indeed,
if all the requisites for granting such writ are not present,
then the court which issues it acts in excess of its
jurisdiction.39

WHEREFORE, premises considered, the petition is DENIED.

The Court of Appeals Decision dated September 27, 2007
and its Resolution dated January 24, 2008 in CA-G.R. SP
No. 97804, are AFFIRMED. SO ORDERED.
 SECOND DIVISION Commission (CIAC)  pursuant to Executive Order (E.O.)  No.
July 1, 2015 1008.
G.R. No. 212025
EXCELLENT QUALITY APPAREL, INC., Petitioners, The motion, however, was denied by the RTC in its
vs. Order,10 dated April 12, 2004, because the issues of the
VISAYAN SURETY & INSURANCE CORPORATION, case could be resolved after a full-blown trial.
and FAR EASTERN SURETY & INSURANCE CO.,
INC., Respondent.
On April 26, 2004, petitioner filed its Answer with
DECISION
Compulsory Counterclaim11 before the RTC. It denied the
material allegation of the complaint and sought the
MENDOZA, J.: immediate lifting of the writ of attachment. It also prayed
that the bond filed by Win Multi-Rich to support its
The present case involves the wrongful attachment and application for attachment be held to satisfy petitioner’s
release of the petitioner's funds to the adverse party and its claim for damages due to the improper issuance of such
plight to recover the same. It seems that when misfortune writ.
poured down from the skies, the petitioner received a
handful. The scales of justice, however, do not tilt based on On April 29, 2004, the RTC issued another order12 directing
chance; rather on the proper application of law, the deposit of the garnished funds of petitioner to the
jurisprudence and justice. cashier of the Clerk of Court of the RTC.

This is a petition for review on certiorari  seeking to reverse Win Multi-Rich then filed a motion,13 dated April 29, 2004,
and set aside the October 21, 2013 Decision1 and the April to release petitioner’s cash deposit to it. Notably, the
1, 2014 Resolution2 of the Court of Appeals (CA),  in CA- motion was granted by the RTC in the Order,14 dated May
G.R. CV No. 95421, which affirmed the January 15, 3, 2004. Subsequently, on May 7, 2004, Win Multi-Rich
20103 and May 19, 20104 Orders of the Regional Trial Court posted Surety Bond No. 1019815 issued by respondent Far
of Manila, Branch 32 (RTC),  in Civil Case No. 04-108940. Eastern Surety and Insurance Co., Inc. (FESICO)  for the
amount of P9,000,000.00, to secure the withdrawal of the
The Facts cash deposited by petitioner. Thus, Win Multi-Rich was able
to receive the funds of petitioner even before the trial
On March 26, 1996, petitioner Excellent Quality Apparel, began.
Inc. (petitioner),  then represented by Max L.F.
Ying (Ying),  Vice-President for Productions, and Alfiero R. On June 18, 2004, petitioner filed a petition
Orden, Treasurer, entered into a contract with Multi-Rich for certiorari16 under Rule 65 of the 1997 Rules of Civil
Builders (Multi-Rich),  a single proprietorship, represented Procedure before the CA. The petition sought to annul and
by Wilson G. Chua, its President and General Manager, for set aside the April 12, 2004 and April 29, 2004 Orders of
the construction of a garment factory within the Cavite the RTC. Petitioner then filed its Supplemental
Philippine Economic Zone Authority (CPEZA). The duration Manifestation and Motion,17 asserting that its cash deposit
of the project was for a maximum period of five (5) months with the RTC was turned over to Win Multi-Rich.
or 150 consecutive calendar days. Included in the contract
was an Arbitration Clause in case of dispute. On March 14, 2006, the CA rendered a decision,18 annulling
the April 12 2004 and April 29, 2004 Orders of the RTC.  It
On November 27, 1996, the construction of the factory ruled, however, that the RTC had jurisdiction over the case
building was completed. inspite of the arbitration clause because it was a suit for
collection of sum of money. The dispositive portion of which
On February 20, 1997, Win Multi-Rich Builders, Inc. (Win reads:
Multi-Rich)  was incorporated with the Securities and
Exchange Commission (SEC). IN LIGHT OF ALL THE FOREGOING, the instant petition is
hereby GRANTED. The Orders dated April 12, 2004 and
On January 26, 2004, Win Multi-Rich filed a complaint for April 29, 2004 of respondent judge are hereby ANNULLED
sum of money and damages against petitioner and Ying and SET ASIDE. Accordingly, the writ of preliminary
before the RTC.5 It also prayed for the issuance of a writ of injunction is hereby MADE PERMANENT.
attachment, claiming that Ying was about to abscond and
that petitioner had an impending closure. SO ORDERED.19

Win Multi-Rich then secured the necessary bond in the Petitioner filed a motion for reconsideration arguing, among
amount of P8,634,448.20 from respondent Visayan Surety others, that the CA decision failed to state an order to
and Insurance Corporation (Visayan Surety).6 In the return the garnished amount of P8,634,448.20, which was
Order,7 dated February 2, 2004, the RTC issued a writ of taken from its bank account and given to Win Multi-Rich. In
preliminary attachment in favor of Win Multi-Rich. its Resolution,20 dated October 11, 2006, the CA denied the
motion.
To prevent the enforcement of the writ of preliminary
attachment on its equipment and machinery, petitioner Aggrieved, petitioner elevated the matter to the Court by
issued Equitable PCI Bank Check No. 160149,8 dated way of a petition for review on certiorari  under Rule 45,
February 16, 2004, in the amount of P8,634,448.20 payable docketed as G.R. No. 175048.
to the Clerk of Court of the RTC.
On February 10, 2009, in G.R. No. 175048, the Court
On February 19, 2004, petitioner filed its Omnibus promulgated a Decision21 in favor of petitioner and
Motion,9 seeking to discharge the attachment. Petitioner held: first,  that Win Multi-Rich was not a real party in
also questioned the jurisdiction of the RTC due to the interest; second,  that the RTC should not have taken
presence of the Arbitration Clause in the contract. It cognizance of the collection suit because the presence of
asserted that the case should have been referred first to the arbitration clause vested jurisdiction on the CIAC over
the Construction Industry Arbitration all construction disputes between petitioner and Multi-Rich;
and lastly,  that Win Multi-Rich could not retain the
garnished amount, as the RTC did not have jurisdiction to In the assailed decision, dated October 21, 2013, the CA
issue the questioned writ of attachment and to order the found petitioner’s appeal without merit. Citing Section 20,
release of the funds. The dispositive portion reads: Rule 57 of the 1997 Rules of Civil Procedure (Section 20,
Rule 57), the CA held that petitioner failed to timely claim
WHEREFORE, the petition is GRANTED. The Decision of the damages against the surety before the decision of the Court
Court of Appeals is hereby MODIFIED. Civil Case No. 04- became final and executory. It further stated that a court
108940 is DISMISSED. Win Multi-Rich Builders, Inc. is judgment could not bind persons who were not parties to
ORDERED to return the garnished amount of EIGHT the action as the records showed that Visayan Surety and
MILLION SIX HUNDRED THIRTY FOUR THOUSAND FOUR FESICO were neither impleaded nor informed of the
HUNDRED FORTY-EIGHT PESOS AND TWENTY CENTAVOS proceedings before the Court in G.R. No. 175048. It was
(P8,634,448.20), which was turned over by the Regional the view of the CA that "[h]aving failed to observe very
Trial Court, to petitioner with legal interest of 12 percent elementary rules of procedure which are mandatory,
(12%) per annum upon finality of this Decision until [petitioner] caused its own predicament."
payment.
Petitioner filed a motion for reconsideration, but it was
SO ORDERED.22 denied by the CA in the assailed April 1, 2014 Resolution.

Win Multi-Rich filed a motion for reconsideration but it was Hence, this present petition, anchored on the following
denied by the Court in its April 20, 2009
Resolution.23 Pursuant to an entry of judgment, 24 the STATEMENT OF ISSUES
Court’s decision became final and executory on June 2,
2009. I

On June 26, 2009, petitioner moved for execution thereof, THE ASSAILED DECISION AND THE ASSAILED
praying for the return of its cash deposit and, in the event RESOLUTION OF THE COURT OF APPEALS SHOULD
of refusal of Win Multi-Rich to comply, to hold Visayan BE REVERSED AND SET ASIDE FOR BEING
Surety and FESICO liable under their respective bonds.25 CONTRARY TO LAW AND JURISPRUDENCE
CONSIDERING THAT THE RIGHT TO DUE PROCESS
Win Multi-Rich, Visayan Surety and FESICO were served OF THE TWO SURETY COMPANIES WILL NOT BE
with copies of the motion for execution.26 During the August VIOLATED IF EXECUTION OF THE JUDGMENT
7, 2009 hearing on the motion for execution, counsels for AGAINST THEM IS ALLOWED.
petitioner, Win Multi-Rich and FESICO were present.27 The
hearing, however, was reset to September 16, 2009. On II
the said date, Win Multi-Rich, Visayan Surety and FESICO
were given fifteen (15) days to submit their respective
THE ASSAILED DECISION AND THE ASSAILED
comments or oppositions to the motion for execution.28
RESOLUTION OF THE COURT OF APPEALS SHOULD
BE REVERSED AND SET ASIDE FOR BEING
On October 15, 2009, Win Multi-Rich opposed the motion CONTRARY TO LAW AND JURISPRUDENCE
for Execution29 because the cash deposit awarded to it by CONSIDERING THAT TO ALLOW THE EXECUTION
the RTC had been paid to suppliers and the said amount AGAINST THE TWO SURETY COMPANIES WOULD
was long overdue and demandable. GIVE FULL EFFECT TO THE TERMS OF THE
JUDGMENT.34
The RTC granted the motion for execution in an
Order,30 dated October 19, 2009, and issued a writ of Petitioner contends that Visayan Surety and FESICO could
execution.31 Visayan Surety and FESICO separately moved be held liable because the Court, in G.R. No. 175048, ruled
for reconsideration of the RTC order. that it cannot allow Win Multi-Rich to retain the garnished
amount turned over by the RTC, which had no jurisdiction
The RTC Ruling to issue the questioned writ of attachment. Petitioner
argues that if Win Multi-Rich fails or refuses to refund or
On January 15, 2010, the RTC issued the order,32 granting return the cash deposit, then Visayan Surety and FESICO
the surety respondents’ motion for reconsideration and must be held liable under their respective bonds. Also,
lifting its October 19, 2009 Order insofar as it granted the petitioner claims that the surety bond of FESICO is not
motion for execution against Visayan Surety and FESICO. covered by Section 20, Rule 57 because it did not pertain to
The RTC absolved the surety respondents because the writ of attachment itself, but on the withdrawal of the
petitioner did not file a motion for judgment on the cash deposit.
attachment bond before the finality of judgment, thus,
violating the surety respondents’ right to due process. It On October 3, 2014, Visayan Surety filed its Comment. 35 It
further held that the execution against the surety asserted that no application for damages was filed before
respondents would go beyond the terms of the judgment the Court in G.R. No. 175048. Thus, there was no occasion
sought to be executed considering that the Court decision to direct the RTC to hear and decide the claim for damages,
pertained to Win Multi-Rich only. which constituted a violation of its right to due process.
Also, Visayan Surety contended that Section 20, Rule 57
Petitioner moved for reconsideration, but its motion was provided a mandatory rule that an application for damages
denied by the RTC in its May 19, 2010 Order.33 must be filed before the judgment becomes final and
executory.
Undaunted, petitioner appealed before the CA, arguing that
there was no violation of the right to due process because On October 8, 2014, FESICO filed its Comment.36 It averred
the liability of the surety respondents were based on the that petitioner failed to comply with Section 20, Rule 57 of
bonds issued by them. the Rules of Court because the hearing on the motion for
execution was conducted after the decision in G.R. No.
175048 had already become final and executory. It also
The CA Ruling
stated that petitioner failed to implead the surety
respondents as parties in G.R. No. 175048.
On January 26, 2015, petitioner filed its Consolidated The history of Section 20, Rule 57 was discussed
Reply.37 It stressed that because the highest court of the in Malayan Insurance, Inc. v. Salas.42 In that case, the
land had directed the return of the wrongfully garnished Court explained that Section 20, Rule 57 was a revised
amount to petitioner, proceedings on the application under version of Section 20, Rule 59 of the 1940 Rules of Court,
Section 20, Rule 57, became no longer necessary. which, in turn, was a consolidation of Sections 170, 177,
223, 272, and 439 of the Code of Civil Procedure regarding
The Court’s Ruling the damages recoverable in case of wrongful issuance of
the writs of preliminary injunction, attachment, mandamus
and replevin and the appointment of a receiver.
The petition is partly meritorious.

Thus, the current provision of Section 20, Rule 57 of the

There was an application
1997 Rules of Civil Procedure covers application for
for damages; but there
damages against improper attachment, preliminary
was no notice given to
injunction, receivership, and replevin.43 Consequently,
Visayan Surety
jurisprudence concerning application for damages against
preliminary injunction, receivership and replevin bonds can
By its nature, preliminary attachment, under Rule 57 of the be equally applied in the present case.
Rules of Court, "is an ancillary remedy applied for not for its
own sake but to enable the attaching party to realize upon
In a catena of cases,44 the Court has cited the requisites
relief sought and expected to be granted in the main or
under Section 20, Rule 57 in order to claim damages
principal action; it is a measure auxiliary or incidental to the
against the bond, as follows:
main action. As such, it is available during the pendency of
the action which may be resorted to by a litigant to
preserve and protect certain rights and interests therein 1. The application for damages must be filed in the
pending rendition and for purposes of the ultimate effects, same case where the bond was issued;
of a final judgment in the case. 38 In addition, attachment is
also availed of in order to acquire jurisdiction over the 2. Such application for damages must be filed
action by actual or constructive seizure of the property in before the entry of judgment; and
those instances where personal or substituted service of
summons on the defendant cannot be effected."39 3. After hearing with notice to the surety.

The party applying for the order of attachment must The first and second requisites, as stated above, relate to
thereafter give a bond executed to the adverse party in the the application for damages against the bond. An
amount fixed by the court in its order granting the issuance application for damages must be filed in the same case
of the writ.40 The purpose of an attachment bond is to where the bond was issued, either (a) before the trial or (b)
answer for all costs and damages which the adverse party before the appeal is perfected or (c) before the judgment
may sustain by reason of the attachment if the court finally becomes executory.45 The usual procedure is to file an
rules that the applicant is not entitled to the writ.41 application for damages with due notice to the other party
and his sureties. The other method would be to incorporate
In this case, the attachment bond was issued by Visayan the application in the answer with compulsory
Surety in order for Win Multi-Rich to secure the issuance of counterclaim.46
the writ of attachment. Hence, any application for damages
arising from the improper, irregular or excessive The purpose of requiring the application for damages to be
attachment shall be governed by Section 20, Rule 57, which filed in the same proceeding is to avoid the multiplicity of
provides: suit and forum shopping. It is also required to file the
application against the bond before the finality of the
Sec. 20. Claim for damages on account of improper, decision to prevent the alteration of the immutable
irregular or excessive attachment. judgment.47

An application for damages on account of improper, In Paramount Insurance Corp. v. CA,48 the Court allowed an
irregular or excessive attachment must be filed before the application for damages incorporated in the answer with
trial or before appeal is perfected or before the judgment compulsory counterclaim of the defendant therein. The
becomes executory, with due notice to the attaching party sureties were properly notified of the hearing and were
and his surety or sureties, setting forth the facts showing given their day in court.
his right to damages and the amount thereof. Such
damages may be awarded only after proper hearing and Conversely, in the recent case of Advent Capital and
shall be included in the judgment on the main case. Finance Corp. v. Young,49 the application for damages
against the bond was not allowed. The respondent therein
If the judgment of the appellate court be favorable to the filed his omnibus motion claiming damages against surety
party against whom the attachment was issued, he must after the dismissal order issued by the trial court had
claim damages sustained during the pendency of the attained finality.
appeal by filing an application in the appellate court, with
notice to the party in whose favor the attachment was In the present petition, the Court holds that petitioner
issued or his surety or sureties, before the judgment of the sufficiently incorporated an application for damages against
appellate court becomes executory. The appellate court the wrongful attachment in its answer with compulsory
may allow the application to be heard and decided by the counterclaim filed before the RTC. Petitioner alleged that
trial court. the issuance of the improper writ of attachment caused it
actual damages in the amount of at least P3,000,000.00. It
Nothing herein contained shall prevent the party against added that the Equitable PCI Bank Check No. 160149 it
whom the attachment was issued from recovering in the issued to the RTC Clerk of Court, to lift the improper writ of
same action the damages awarded to him from any attachment, should be returned to it.50 Evidently, these
property of the attaching party not exempt from execution allegations constitute petitioner’s application for damages
should the bond or deposit given by the latter be arising from the wrongful attachment, and the said
insufficient or fail to fully satisfy the award.
application was timely filed as it was filed before the finality petitioner on June 29, 2009, after the judgment in G.R. No.
of judgment. 175048 had become final and executory on June 2, 2009.

The next requisite that must be satisfied by petitioner to Clearly, petitioner failed to comply with the requisites under
hold Visayan Surety liable would be that the judgment Section 20, Rule 57 because Visayan Surety was not given
against the wrongful attachment was promulgated after the due notice on the application for damages before the
hearing with notice to the surety. Certainly, the surety must finality of judgment. The subsequent motion for execution,
be given prior notice and an opportunity to be heard with which sought to implicate Visayan Surety, cannot alter the
respect to the application for damages before the finality of immutable judgment anymore.
the judgment. The Court rules that petitioner did not satisfy
this crucial element. FESICO’s bond is not
covered by Section 20,
Section 20, Rule 57 specifically requires that the application Rule 57
for damages against the wrongful attachment, whether
filed before the trial court or appellate court, must be with While Visayan Surety could not be held liable under Section
due notice to the attaching party and his surety or sureties. 20, Rule 57, the same cannot be said of FESICO. In the
Such damages may be awarded only after proper hearing case at bench, to forestall the enforcement of the writ of
and shall be included in the judgment on the main case. preliminary attachment, petitioner issued Equitable PCI
Bank Check No. 160149, dated February 16, 2004, in the
Due notice to the adverse party and its surety setting forth amount of P8,634,448.20 payable to the Clerk of Court of
the facts supporting the applicant's right to damages and the RTC. Pursuant to the RTC Order, dated April 29, 2004,
the amount thereof under the bond is indispensable. The the garnished funds of petitioner were deposited to the
surety should be given an opportunity to be heard as to the cashier of the Clerk of Court of the RTC. The procedure to
reality or reasonableness of the damages resulting from the discharge the writ of preliminary attachment is stated in
wrongful issuance of the writ. In the absence of due notice Section 12, Rule 57, to wit:
to the surety, therefore, no judgment for damages may be
entered and executed against it.51 Sec. 12. Discharge of attachment upon giving counterbond.

In the old case of Visayan Surety and Insurance Corp. v. After a writ of attachment has been enforced, the party
Pascual,52 the application for damages was made before the whose property has been attached, or the person appearing
finality of judgment, but the surety was not given due on his behalf, may move for the discharge of the
notice. The Court allowed such application under Section attachment wholly or in part on the security given. The
20, Rule 59 of the 1940 Rules of Court because there was court shall, after due notice and hearing, order the
no rule which stated that the failure to give to the surety discharge of the attachment if the movant makes a
due notice of the application for damages would release the cash deposit, or files a counter-bond executed to the
surety from the obligation of the bond.53 attaching party with the clerk of the court where the
application is made, in an amount equal to that fixed
The case of Visayan Surety and Insurance Corp. v. Pascual, by the court in the order of attachment, exclusive of
however, was abandoned in the subsequent rulings of the costs. But if the attachment is sought to be discharged
Court because this was contrary to the explicit provision of with respect to a particular property, the counter-bond shall
Section 20, Rule 57.54 be equal to the value of that property as determined by the
court. In either case, the cash deposit or the counter-bond
In People Surety and Insurance Co. v. CA, 55 the defendant shall secure the payment of any judgment that the
therein filed an application for damages during the trial but attaching party may recover in the action. A notice of the
the surety was not notified. The Court denied the deposit shall forthwith be served on the attaching party.
application and stated that "it is now well settled that a Upon the discharge of an attachment in accordance with
court has no jurisdiction to entertain any proceeding the provisions of this section, the property attached, or the
seeking to hold a surety liable upon its bond, where the proceeds of any sale thereof, shall be delivered to the party
surety has not been given notice of the proceedings for making the deposit or giving the counter-bond, or to the
damages against the principal and the judgment holding person appearing on his behalf, the deposit or counter-
the latter liable has already become final."56 bond aforesaid standing in place of the property so
released. Should such counter-bond for any reason to be
found to be or become insufficient, and the party furnishing
In Plaridel Surety & Insurance Co. v. De Los Angeles,57 a
the same fail to file an additional counter-bond, the
motion for execution against the bond of the surety was
attaching party may apply for a new order of attachment.
filed after the finality of judgment. The petitioner therein
asserted that the motion for execution was a sufficient
notification to the surety of its application for damages. The [Emphasis Supplied]
Court ruled, that "[t]his notification, however, which was
made after almost a year after the promulgation of the Win Multi-Rich, however, took a step further and filed a
judgment by the Court of Appeals, did not cure the motion to release petitioner’s cash deposit to it.
tardiness of the claim upon the liability of the surety, which, Immediately, the RTC granted the motion and directed Win
by mandate of the Rules, should have been included in the Multi-Rich to post a bond in favor of petitioner in the
judgment."58 amount of P9,000,000.00 to answer for the damages which
the latter may sustain should the court decide that Win
In the present case, petitioner’s answer with compulsory Multi-Rich was not entitled to the relief sought.
counterclaim, which contained the application for damages, Subsequently, Win Multi-Rich filed a surety bond of FESICO
was not served on Visayan Surety.59 Also, a perusal of the before the RTC and was able to obtain the P8,634,448.20
records60 revealed that Visayan Surety was not furnished cash deposit of petitioner, even before the trial
any copies of the pleadings, motions, processes, and commenced.
judgments concerned with the application for damages
against the surety bond. Visayan Surety was only notified of Strictly speaking, the surety bond of FESICO is not covered
the application when the motion for execution was filed by by any of the provisions in Rule 57 of the Rules of Court
because, in the first place, Win Multi-Rich should not have
filed its motion to release the cash deposit of petitioner and attachment. In other words, the damages sought to be
the RTC should not have granted the same. The release of enforced against the surety bond
the cash deposit to the attaching party is anathema to the are unliquidated. Necessarily, a notice and hearing before
basic tenets of a preliminary attachment. the finality of judgment must be undertaken to properly
determine the amount of damages that was suffered by the
The chief purpose of the remedy of attachment is to secure defendant due to the improper attachment. These damages
a contingent lien on defendant’s property until plaintiff can, to be imposed against the attaching party and his sureties
by appropriate proceedings, obtain a judgment  and have are different from the principal case, and must be included
such property applied to its satisfaction, or to make some in the judgment.
provision for unsecured debts in cases where the means of
satisfaction thereof are liable to be removed beyond the On the other hand, under Section 17, Rule 57, in relation to
jurisdiction, or improperly disposed of or concealed, or Section 12 therein, the cash deposit or the counter-bond
otherwise placed beyond the reach of creditors.61 The shall secure the payment of any judgment that the
garnished funds or attached properties could only be attaching party may recover in the action. Stated
released to the attaching party after a judgment in his favor differently, the damages sought to be charged against the
is obtained. Under no circumstance, whatsoever, can surety bond are liquidated. The final judgment had
the garnished funds or attached properties, under already determined the amount to be awarded to the
the custody of the sheriff or the clerk of court, be winning litigant on the main action. Thus, there is nothing
released to the attaching party before the left to do but to execute the judgment against the losing
promulgation of judgment. party, or in case of insufficiency, against its sureties.

Cash deposits and counterbonds posted by the defendant Here, the Court is convinced that a demand against FESICO
to lift the writ of attachment is a security for the payment had been made, and that it was given due notice and an
of any judgment that the attaching party may obtain; they opportunity to be heard on its
are, thus, mere replacements of the property previously defense.1âwphi1 First,  petitioner filed a motion for
attached.62 Accordingly, the P8,634,448.20 cash deposit of execution on June 29, 2009, a copy of which was furnished
petitioner, as replacement of the properties to be attached, to FESICO;67 second,  petitioner filed a
should never have been released to Win Multi-Rich. manifestation,68 dated July 13, 2009, that FESICO was duly
served with the said motion and notified of the hearing on
Nevertheless, the Court must determine the nature of the August 7, 2009; third,  during the August 7, 2009 hearing
surety bond of FESICO. The cash deposit or the counter- on the motion for execution, the counsels for petitioner,
bond was supposed to secure the payment of any Win Multi-Rich and FESICO were all present;69 fourth,  in an
judgment that the attaching party may recover in the Order, dated September 16, 2009, FESICO was given
action.63 In this case, however, Win Multi-Rich was able to fifteen (15) days to submit its comment or opposition to the
withdraw the cash deposit and, in exchange, it posted a motion for execution;70 and lastly,  FESICO filed its
surety bond of FESICO in favor of petitioner to answer for comment71 on the motion on October 1, 2009. Based on the
the damages that the latter may sustain. Corollarily, the foregoing, the requirements under Section 17, Rule 57 have
surety bond of FESICO substituted the cash deposit of been more than satisfied.
petitioner as a security for the judgment. Thus, to claim
damages from the surety bond of FESICO, Section 17, Rule Indeed, FESICO cannot escape liability on its surety bond
57 could be applied. It reads: issued in favor of petitioner. The purpose of FESICO's bond
was to secure the withdrawal of the cash deposit and to
Sec. 17. Recovery upon the counter-bond. answer any damages that would be inflicted against
petitioner in the course of the proceedings.72 Also, the
undertaking73 signed by FESICO stated that the duration of
When the judgment has become executory, the surety or
the effectivity of the bond shall be from its approval by the
sureties on any counter-bond given pursuant to the
court until the action is fully decided, resolved or
provisions of this Rule to secure the payment of the
terminated.
judgment shall become charged on such counter-bond and
bound to pay the judgment obligee upon demand the
amount due under the judgment, which amount may be FESICO cannot simply escape liability by invoking that it
recovered from such surety or sureties after notice and was not a party in G.R. No. 175048. From the moment that
summary hearing in the same action. FESICO issued Surety Bond No. 10198 to Win Multi-Rich
and the same was posted before the RTC, the court has
acquired jurisdiction over the surety, and the provisions of
From a reading of the above-quoted provision, it is evident
Sections 12 and 17 of Rule 57 became operational. Thus,
that a surety on a counter-bond given to secure the
the Court holds that FESICO is solidarily liable under its
payment of a judgment becomes liable for the payment of
surety bond with its principal Win Multi-Rich.
the amount due upon: (1) demand made upon the surety;
and (2) notice and summary hearing on the same
action.64 Noticeably, unlike Section 20, Rule 57, which On a final note, the Court reminds the bench and the bar
requires notice and hearing before the finality of the that lawsuits, unlike duels, are not to be won by a rapier's
judgment in an application for damages, Section 17, Rule thrust. Technicality, when it deserts its proper office as an
57 allows a party to claim damages on the surety bond aid to justice and becomes its great hindrance and chief
after the judgment has become executory.65 enemy, deserves scant consideration from courts. There
should be no vested rights in technicalities.74
The question remains, in contrast to Section 20, why does
Section 17 sanction the notice and hearing to the surety WHEREFORE, the petition is PARTIALLY GRANTED. The
after the finality of judgment? The answer lies in the kind of October 21, 2013 Decision and the April 1, 2014 Resolution
damages sought to be enforced against the bond. of the Court of Appeals in CA-G.R. CV No. 95421
are AFFIRMED WITH MODIFICATION. The Regional
Trial Court of Manila, Branch 32 in Civil Case No. 04-108940
Under Section 20, Rule 57, in relation to Section 4
is hereby ordered to proceed with the execution against Far
therein,66 the surety bond shall answer for all the costs
Eastern Surety & Insurance Co., Inc., to the extent of the
which may be adjudged to the adverse party and all
amount of the surety bond.
damages which he may sustain by reason of the
SO ORDERED.
 Republic of the Philippines selling their property in Ayala Alabang Village, Muntinlupa
SUPREME COURT City (subject property), covered by a clean title, i.e., TCT
Manila No. 85029 in the name of Rosario Baladjay, married to
SECOND DIVISION Saturnino Baladjay, and that the proceeds of the said sale
G.R. No. 190028               February 26, 2014 could easily pay-off the loan.10 Unfortunately, the Allied
LETICIA P. LIGON, Petitioner, Bank check was dishonored upon presentment and, despite
vs. assurances to replace it with cash, Rosario failed to do so.
THE REGIONAL TRIAL COURT, BRANCH 56 AT Moreover, Ligon discovered that the subject property had
MAKATI CITY AND ITS PRESIDING JUDGE, JUDGE already been transferred to Polished Arrow, alleged to be a
REYNALDO M. LAIGO, SHERIFF IV LUCITO V. ALEJO, dummy corporation of Sps. Baladjay and the individual
ATTY. SILVERIO GARING, MR. LEONARDO J. TING, defendants (defendants). As a result, TCT No. 8502 was
AND MR. BENITO G. TECHICO, Respondents. cancelled and replaced on October 11, 2002 by TCT No.
DECISION 927311 in the name of Polished Arrow. Thus, Ligon prayed
that all defendants be held solidarily liable to pay her the
PERLAS-BERNABE, J.: amount of ₱3,000,000.00, with interest due, as well as
₱1,000,000.00 as attorney’s fees and another
₱1,000,000.00 by way of moral and exemplary damages.
Assailed in this petition for review on certiorari1 is the
Asserting that the transfer of the subject property to
Decision2 dated October 30, 2009 of the Court of Appeals
Polished Arrow was made in fraud of Sps. Baladjay’s
(CA) in CA-G.R. SP No. 106175, finding no grave abuse of
creditors, Ligon also prayed that the said transfer be
discretion on the part of the Regional Trial Court of Makati
nullified, and that a writ of preliminary attachment be
City, Branch 56 (Makati City RTC) in issuing the following
issued in the interim against defendants’ assets, including
orders (Assailed Orders) in Civil Case No. 03-186:
the subject property. Subsequently, an Amended Writ of
Preliminary Attachment12 was issued on November 26,
(a) the Order3 dated February 9, 2007 which 2002, and annotated on the dorsal portion13 of TCT No.
directed the Register of Deeds of Muntinlupa City, 9273 on December 3, 2002 (December 3, 2002 attachment
respondent Atty. Silverio Garing (Atty. Garing), to annotation).
(1) register the Officer's
On February 18, 2003, a similar complaint for collection of
Final Deed of Sale issued by respondent sum of money, damages, and cancellation of title with
SheriffLucito V. Alejo (Sheriff Alejo) on October 27, prayer for issuance of a writ of preliminary attachment was
2006 in favor of the highest bidder, respondent lodged before the Makati City RTC, docketed as Civil Case
Leonardo J. Ting (Ting), (2) cancel Transfer No. 03-186 (Makati City Case), by Spouses Cecilia and Gil
Certificate of Title (TCT) No. 8502/T44 in the name Vicente (Sps. Vicente) against Sps. Baladjay, Polished
of Spouses Rosario and Saturnino Baladjay (Sps. Arrow, and other corporations.14 In that case, it was
Baladjay), and (3) issue a new certificate of title in established that Sps. Baladjay solicited millions of pesos in
favor of Ting, free from any liens and investments from Sps. Vicente using conduit companies
encumbrances; that were controlled by Rosario, as President and
Chairperson. During the proceedings therein, a writ of
(b) the Order4 dated March 20, 2007 which preliminary attachment also against the subject property
directed Atty. Garing to comply with the February was issued and annotated on the dorsal portion of TCT No.
9, 2007 Order under pain of contempt of court; 9273 on March 12, 2003. Thereafter, but before the
and Quezon City Case was concluded, the Makati City RTC
rendered a Decision15 dated December 9, 2004 (December
(c) the Order5 dated April 25, 2007 which 9, 2004 Decision), rescinding the transfer of the subject
reiterated the directive to Atty. Garing to issue a property from Sps. Baladjay to Polished Arrow upon a
new title in favor of Ting after the latter’s payment finding that the same was made in fraud of
of capital gains, documentary and transfer taxes, creditors.16 Consequently, the Makati City RTC directed the
as required. Register of Deeds of Muntinlupa City to: (a) cancel TCT No.
9273 in the name of Polished Arrow; and (b) restore TCT
The Facts No. 8502 "in its previous condition" in the name of Rosario
Baladjay, married to Saturnino Baladjay.
On November 20, 2002, petitioner Leticia P. Ligon (Ligon)
filed an amended complaint6 before the Regional Trial Court Meanwhile, in the pending Quezon City Case, Polished
of Quezon City, Branch 101 (Quezon City RTC) for Arrow and the individual defendants (with the exception of
collection of sum of money and damages, rescission of Marasigan) were successively dropped17 as party-
contract, and nullification of title with prayer for the defendants, after it was established that they, by
issuance of a writ of preliminary attachment, docketed as themselves directly or through other persons, had no more
Civil Case No. Q-10-48145 (Quezon City Case), against Sps. ownership, interest, title, or claim over the subject
Baladjay, a certain Olivia Marasigan (Marasigan), Polished property. The parties stipulated on the existence of the
Arrow Holdings, Inc. (Polished Arrow), and its December 9, 2004 Decision of the Makati City RTC, and the
incorporators,7 namely, Spouses Julius Gonzalo and fact that the same was no longer questioned by defendants
Charaine Doreece Anne Fuentebella (Sps. Fuentebella), Ma. Sps. Fuentebella, Arit, Jr., and Polished Arrow were made
Linda Mendoza (Mendoza), Barbara C. Clavo (Clavo), conditions for their dropping as party-defendants in the
Bayani E. Arit, Jr. (Arit, Jr.), and Peter M. Kairuz (Kairuz), as case.18 In view of the foregoing, the Quezon City Case
well as the latter’s spouses (individual defendants). proceeded only against Sps. Baladjay and Marasigan and,
after due proceedings, the Quezon City RTC rendered a
Decision19 dated March 26, 2008 (March 26, 2008 Decision),
In her complaint, Ligon alleged, inter alia, that Rosario
directing Sps. Baladjay to pay Ligon the amount of
Baladjay (Rosario) enticed her to extend a short-term loan
₱3,000,000.00 with interest, as well as attorney’s fees and
in the amount of ₱3,000,000.00, payable in a month’s time
costs of suit.
and secured by an Allied Bank post-dated check for the
same amount.8 Ligon likewise claimed that Rosario, as
further enticement for the loan extension, represented that On September 25, 2008, the March 26, 2008 Decision of
she and her husband Saturnino were in the process of the Quezon City RTC became final and
executory.20 However, when Ligon sought its execution, she On June 7, 2007, Atty. Garing issued TCT No. 1975630 in
discovered that the December 3, 2002 attachment the name of Ting, free from any liens and encumbrances.
annotation had been deleted from TCT No. 9273 when the Later, Ting sold31 the subject property to respondent Benito
subject property was sold by way of public auction on G. Techico (Techico), resulting in the cancellation of TCT
September 9, 2005 to the highest bidder, respondent Ting, No. 19756 and the issuance of TCT No. 31001 32 in Techico’s
for the amount of ₱9,000,000.00 during the execution name.
proceedings in the Makati City Case, as evidenced by the
Officer’s Final Deed of Sale21 dated October 27, 2006 In view of the preceding circumstances, Ligon filed, inter
(Officer’s Final Deed of Sale) issued by Sheriff Alejo. In this alia, a certiorari petition33 against respondent Presiding
regard, Ligon learned that the Makati City RTC had issued Judge Reynaldo Laigo (Judge Laigo), Sheriff Alejo, Atty.
its first assailed Order22 dated February 9, 2007 (First Garing, Ting, and Techico (respondents), alleging, among
Assailed Order), directing Atty. Garing, as the Register of others, that the Makati City RTC committed grave abuse of
Deeds of Muntinlupa City, to: (a) register the Officer’s Final discretion in issuing the Assailed Orders. In this relation,
Deed of Sale on the official Record Book of the Register of she prayed that the said orders be declared null and void
Deeds of Muntinlupa City; and (b) cancel TCT No. 8502 in for having been issued in violation of her right to due
the name of Sps. Baladjay and issue a new title in the name process, and resulting in (a) the deletion of the December
of Ting, free from any liens and encumbrances. 3, 2002 attachment annotation on TCT No. 9273 which
evidences her prior attachment lien over the subject
Atty. Garing manifested23 before the Makati City RTC that it property, and (b) the issuance of new titles in the names of
submitted the matter en consulta24 to the Land Registration Ting and Techico.
Authority (LRA) as he was uncertain whether the
annotations on TCT No. 9273 should be carried over to TCT Consolidated with Ligon’s certiorari petition is a complaint
No. 8502. In response to the manifestation, the Makati City for indirect contempt34 against respondents, whereby it was
RTC issued its second assailed Order25 dated March 20, alleged that the latter unlawfully interfered with the court
2007 (Second Assailed Order), directing Atty. Garing to processes of the Quezon City RTC, particularly by deleting
comply with the First Assailed Order under pain of the December 3, 2002 attachment annotation on TCT No.
contempt. It explained that it could not allow the LRA to 9273 which thereby prevented the execution of the Quezon
carry over all annotations previously annotated on TCT No. City RTC’s March 26, 2008 Decision.
9273 in the name of Polished Arrow as said course of action
would run counter to its December 9, 2004 Decision which
The CA Ruling
specifically ordered the cancellation of said TCT and the
restoration of TCT No. 8502 in its previous condition. It
further clarified that:26 In a Decision35 dated October 30, 2009, the CA dismissed
Ligon’s certiorari petition, finding that the Makati City RTC
did not gravely abuse its discretion in issuing the Assailed
[I]f there were liens or encumbrances annotated on TCT
Orders, adding further that the same was tantamount to a
No. 8502 in the name of Rosario Baladjay when the same
collateral attack against the titles of both Ting and Techico,
was cancelled and TCT No. 9273 was issued by the Register
which is prohibited under Section 4836 of Presidential
of Deeds of Muntinlupa City in favor of Polished Arrow
Decree No. (PD) 1529.37 Likewise, it dismissed the indirect
Holdings, Inc. based on the Deed of Absolute Sale executed
contempt charge for lack of sufficient basis, emphasizing
between the former and the latter, only such liens or
that the Assailed Orders were issued prior to the Quezon
encumbrances will have to be carried over to the new
City RTC’s Decision, meaning that the said issuances could
Transfer Certificate of Title that he (Atty. Garing) is
not have been issued in disregard of the latter decision.
mandated to immediately issue in favor of Leonardo J. Ting
even as the Order of the Court dated February 9, 2007
decreed that a new TCT be issued in the name of Mr. Aggrieved, Ligon filed the present petition.
Leonardo J. Ting, free from any encumbrance. On the other
hand, if TCT No. 8502 in the name of Rosario Baladjay was The Issues Before the Court
free from any liens or encumbrances when the same was
cancelled and TCT No. 9273 was issued by the Register of The Court resolves the following essential issues: (a)
Deeds of Muntinlupa City in favor of Polished Arrow whether or not the CA erred in ruling that the Makati City
Holdings, Inc. by virtue of that Deed of Absolute Sale RTC did not gravely abuse its discretion in issuing the
executed between Rosario Baladjay and Polished Arrow Assailed Orders; and (b) whether or not Judge Laigo should
Holdings, Inc., it necessarily follows that the new Transfer be cited in contempt and penalized administratively.
of Certificate of Title that the said Registrar of Deeds is
duty bound to issue immediately in favor of Leonardo Ting The Court’s Ruling
will also be freed from any liens and encumbrances, as
simple as that. (Emphases and underscoring supplied)
The petition is partly meritorious.

Based on the foregoing, it pronounced that it was Atty.

A. Issuance of the Assailed Orders vis-à-vis
Garing’s ministerial duty "to promptly cancel TCT No.
8502/T-44 in the name of defendant-spouses Baladjay and
to issue a new Transfer Certificate of Title in the name of Grave Abuse of Discretion.
the highest bidder, Leonardo J. Ting."27
Attachment is defined as a provisional remedy by which the
Separately, Ting filed a motion before the Makati City RTC property of an adverse party is taken into legal custody,
on account of Atty. Garing’s letter28 dated March 26, 2006 either at the commencement of an action or at any time
requiring him to comply with certain documentary thereafter, as a security for the satisfaction of any
requirements and to pay the appropriate capital gains, judgment that may be recovered by the plaintiff or any
documentary stamp and transfer taxes before a new title proper party.38 Case law instructs that an attachment is a
could be issued in his name. In its third assailed proceeding in rem, and, hence, is against the particular
Order29 dated April 25, 2007 (Third Assailed Order), the property, enforceable against the whole world. Accordingly,
Makati City RTC directed Ting to pay the aforesaid taxes the attaching creditor acquires a specific lien on the
and ordered Atty. Garing to immediately cancel TCT No. attached property which nothing can subsequently destroy
8502 and issue a new title in the former’s name. except the very dissolution of the attachment or levy itself.
Such a proceeding, in effect, means that the property its restricted and more usual sense, contempt comprehends
attached is an indebted thing and a virtual condemnation of a despising of the authority, justice, or dignity of a court.50
it to pay the owner’s debt. The lien continues until the debt
is paid, or sale is had under execution issued on the Contempt of court is of two (2) kinds, namely: direct and
judgment, or until the judgment is satisfied, or the indirect contempt.1âwphi1 Indirect contempt or
attachment discharged or vacated in some manner constructive contempt is that which is committed out of the
provided by law.39 Thus, a prior registration40 of an presence of the court. Any improper conduct tending,
attachment lien creates a preference,41 such that when an directly or indirectly, to impede, obstruct, or degrade the
attachment has been duly levied upon a property, a administration of justice would constitute indirect
purchaser thereof subsequent to the attachment takes the contempt.51
property subject to the said attachment.42 As provided
under PD 1529, said registration operates as a form of
The indirect contempt charges in this case involve an
constructive notice to all persons.43
invocation of paragraphs b, c, and d, Section 3, Rule 71 of
the Rules of Court which read as follows:
Applying these principles to this case, the Court finds that
the CA erred in holding that the RTC did not gravely abuse
Section 3. Indirect contempt to be punished after charge
its discretion in issuing the Assailed Orders as these
and hearing. — After a charge in writing has been filed, and
issuances essentially disregarded, inter alia, Ligon’s prior
an opportunity given to the respondent to comment
attachment lien over the subject property patently
thereon within such period as may be fixed by the court
anathema to the nature of attachment proceedings which is
and to be heard by himself or counsel, a person guilty of
well-established in law and jurisprudence.44 In this case,
any of the following acts may be punished for indirect
Ligon, in order to secure the satisfaction of a favorable
contempt:
judgment in the Quezon City Case, applied for and was
eventually able to secure a writ of preliminary
attachment45 over the subject property on November 25, xxxx
2002, which was later annotated on the dorsal portion 46 of
TCT No. 9273 in the name of Polished Arrow on December (b) Disobedience of or resistance to a
3, 2002. Notwithstanding the subsequent cancellation of lawful writ, x x x;
TCT No. 9273 due to the Makati City RTC’s December 9,
2004 Decision rescinding the transfer of the subject (c) Any abuse of or any unlawful
property from Sps. Baladjay to Polished Arrow upon a interference with the processes or
finding that the same was made in fraud of creditors, proceedings of a court not constituting
Ligon’s attachment lien over the subject property continued direct contempt under section 1 of this
to subsist since the attachment she had earlier secured Rule;
binds the property itself, and, hence, continues until the
judgment debt of Sps. Baladjay to Ligon as adjudged in the (d) Any improper conduct tending, directly
Quezon City Case is satisfied, or the attachment discharged or indirectly, to impede, obstruct, or
or vacated in some manner provided by law. The grave degrade the administration of justice;
abuse of discretion of the Makati City RTC lies with its
directive to issue a new certificate of title in the name of
Examining the petition, the Court finds that Ligon failed to
Ting (i.e., TCT No. 19756),47 free from any liens and
sufficiently show how the acts of each of the respondents,
encumbrances. This course of action clearly negates the
or more specifically, Judge Laigo, constituted any of the
efficacy of Ligon’s attachment lien and, also, defies the
acts punishable under the foregoing section tending
legal characterization of attachment proceedings. It bears
towards a wilful disregard or disobedience of a public
noting that Ligon’s claim, secured by the aforesaid
authority. In issuing the Assailed Orders, Judge Laigo
attachment, is against Sps. Baladjay whose ownership over
merely performed his judicial functions pursuant to the
the subject property had been effectively restored in view
December 9, 2004 Decision in the Makati City Case which
of the RTC’s rescission of the property’s previous sale to
had already attained finality. Thus, without Ligon's proper
Polished Arrow.48 Thus, Sps. Ligon’s attachment lien against
substantiation, considering too that Judge Laigo's official
Sps. Baladjay as well as their successors-in-interest should
acts are accorded with the presumption of regularity,52 the
have been preserved, and the annotation thereof carried
Court is constrained to dismiss the indirect contempt
over to any subsequent certificate of title, 49 the most recent
charges in this case.
of which as it appears on record is TCT No. 31001 in the
name of Techico, without prejudice to the latter’s right to
protect his own ownership interest over the subject WHEREFORE, the petition is PARTLY GRANTED. The
property. Decision dated October 30, 2009 of the Court of Appeals in
CA-G.R. SP No. 106175 is REVERSED and SET ASIDE.
Accordingly, the Assailed Orders subject of this case are
That said, the Court now proceeds to resolve the second
hereby declared NULL and VOID only insofar as they relate
and final issue on indirect contempt.
to the issuance of Transfer Certificate of Title No. 19756 in
the name of respondent Leonardo J. Ting free from any
B. Indirect Contempt Charges. liens and encumbrances. The Register of Deeds of
Muntinlupa City is DIRECTED to carry over and annotate on
While the Court agrees with Ligon’s position on the issue of TCT No. 31001 in the name of respondent Benito G.
grave abuse of discretion, it holds an opposite view anent Techico the original attachment lien of petitioner Leticia P.
its complaint for indirect contempt against Judge Laigo Ligon as described in this Decision. The indirect contempt
and/or the respondents in this case. charges are, however, DISMISSED.

Contempt of court has been defined as a willful disregard or SO ORDERED.

disobedience of a public authority. In its broad sense,
contempt is a disregard of, or disobedience to, the rules or
orders of a legislative or judicial body or an interruption of
its proceedings by disorderly behavior or insolent language
in its presence or so near thereto as to disturb its
proceedings or to impair the respect due to such a body. In
 Republic of the Philippines Court of Appeals in its Decision of May 4, 1990. The
SUPREME COURT Appellate Court's decision closed with the following
Manila disposition:
EN BANC
. . . the Orders dated May 3, 1989 granting the
issuance of a writ of preliminary attachment, dated
G.R. No. 93262 December 29, 1991 September 19, 1989 denying the motion to
DAVAO LIGHT & POWER CO., INC., petitioner, discharge attachment; dated November 7, 1989
vs. denying petitioner's motion for reconsideration; as
THE COURT OF APPEALS, QUEENSLAND HOTEL or well as all other orders emanating therefrom,
MOTEL or QUEENSLAND TOURIST INN, and specially the Writ of Attachment dated May 11,
TEODORICO ADARNA, respondents. 1989 and Notice of Levy on Preliminary Attachment
Breva & Breva Law Offices for petitioner. dated May 11, 1989, are hereby declared null and
Goc-Ong & Associates for private respondents. void and the attachment hereby ordered
DISCHARGED.

NARVASA, J.: The Appellate Tribunal declared that —

Subject of the appellate proceedings at bar is the decision . . . While it is true that a prayer for the issuance
of the Court of Appeals in CA-G.R. Sp. No. 1967 entitled of a writ of preliminary attachment may be
"Queensland Hotel, Inc., etc. and Adarna v. Davao Light & included m the complaint, as is usually done, it is
Power Co., Inc.," promulgated on May 4, 1990. 1 That likewise true that the Court does not acquire
decision nullified and set aside the writ of preliminary jurisdiction over the person of the defendant until
attachment issued by the Regional Trial Court of Davao he is duly summoned or voluntarily appears, and
City 2 in Civil Case No. 19513-89 on application of the adding the phrase that it be issued "ex parte" does
plaintiff (Davao Light & Power Co.), before the service of not confer said jurisdiction before actual summons
summons on the defendants (herein respondents had been made, nor retroact jurisdiction upon
Queensland Co., Inc. and Adarna). summons being made. . . .

Following is the chronology of the undisputed material facts It went on to say, citing Sievert v. Court of Appeals, 3 that
culled from the Appellate Tribunal's judgment of May 4, "in a proceedings in attachment," the "critical time which
1990. must be identified is . . . when the trial court acquires
authority under law to act coercively against the defendant
1. On May 2, 1989 Davao Light & Power Co., Inc. or his property . . .;" and that "the critical time is the of the
(hereafter, simply Davao Light) filed a verified complaint for vesting of jurisdiction in the court over the person of the
recovery of a sum of money and damages against defendant in the main case."
Queensland Hotel, etc. and Teodorico Adarna (docketed as
Civil Case No. 19513-89). The complaint contained an ex Reversal of this Decision of the Court of Appeals of May 4,
parte application for a writ of preliminary attachment. 1990 is what Davao Light seeks in the present appellate
proceedings.
2. On May 3, 1989 Judge Nartatez, to whose branch the
case was assigned by raffle, issued an Order granting The question is whether or not a writ of preliminary
the ex parte application and fixing the attachment bond at attachment may issue ex parte against a defendant before
P4,600,513.37. acquisition of jurisdiction of the latter's person by service of
summons or his voluntary submission to the Court's
3. On May 11, 1989 the attachment bond having been authority.
submitted by Davao Light, the writ of attachment issued.
The Court rules that the question must be answered in the
4. On May 12, 1989, the summons and a copy of the affirmative and that consequently, the petition for review
complaint, as well as the writ of attachment and a copy of will have to be granted.
the attachment bond, were served on defendants
Queensland and Adarna; and pursuant to the writ, the It is incorrect to theorize that after an action or proceeding
sheriff seized properties belonging to the latter. has been commenced and jurisdiction over the person of
the plaintiff has been vested in the court, but before the
5. On September 6, 1989, defendants Queensland and acquisition of jurisdiction over the person of the defendant
Adarna filed a motion to discharge the attachment for lack (either by service of summons or his voluntary submission
of jurisdiction to issue the same because at the time the to the court's authority), nothing can be validly done by the
order of attachment was promulgated (May 3, 1989) and plaintiff or the court. It is wrong to assume that the validity
the attachment writ issued (May 11, 1989), the Trial Court of acts done during this period should be defendant on, or
had not yet acquired jurisdiction over the cause and over held in suspension until, the actual obtention of jurisdiction
the persons of the defendants. over the defendant's person. The obtention by the court of
jurisdiction over the person of the defendant is one thing;
quite another is the acquisition of jurisdiction over the
6. On September 14, 1989, Davao Light filed an opposition
person of the plaintiff or over the subject-matter or nature
to the motion to discharge attachment.
of the action, or the res or object hereof.

7. On September 19, 1989, the Trial Court issued an Order

An action or proceeding is commenced by the filing of the
denying the motion to discharge.
complaint or other initiatory pleading. 4 By that act, the jurisdiction of the
court over the subject matter or nature of the action or proceeding is invoked or called into

This Order of September 19, 1989 was successfully activity; 5

 and it is thus that the court acquires jurisdiction over
challenged by Queensland and Adarna in a special civil said subject matter or nature of the action. 6 And it is by
action of certiorari instituted by them in the Court of that self-same act of the plaintiff (or petitioner) of filing the
Appeals. The Order was, as aforestated, annulled by the complaint (or other appropriate pleading) — by which he
signifies his submission to the court's power and authority due to the applicant, or the value of the property the
— that jurisdiction is acquired by the court over his possession of which he is entitled to recover, is as much as
person. 7 On the other hand, jurisdiction over the person of the sum for which the order (of attachment) is granted
the defendant is obtained, as above stated, by the service above all legal counterclaims." 22 If the court be so
of summons or other coercive process upon him or by his satisfied, the "order of attachment shall be granted," 23 and
voluntary submission to the authority of the court. 8 the writ shall issue upon the applicant's posting of "a bond
executed to the adverse party in an amount to be fixed by
The events that follow the filing of the complaint as a matter of routine are well known. After the the judge, not exceeding the plaintiffs claim, conditioned
complaint is filed, summons issues to the defendant, the summons is then transmitted to the sheriff, that the latter will pay all the costs which may be adjudged
and finally, service of the summons is effected on the defendant in any of the ways authorized by the to the adverse party and all damages which he may sustain
Rules of Court. There is thus ordinarily some appreciable interval of time between the day of the filing by reason of the attachment, if the court shall finally
of the complaint and the day of service of summons of the defendant. During this period, different acts adjudge that the applicant was not entitled thereto." 24
may be done by the plaintiff or by the Court, which are unquestionable validity and propriety. Among

these, for example, are the appointment of a guardian ad litem, 9 In Mindanao Savings & Loan Association, Inc. v. Court of Appeals,  decided on April 18, 1989, 25
 the grant of  this
authority to the plaintiff to prosecute the suit as a pauper Court had occasion to emphasize the postulate that no
litigant, 10 the amendment of the complaint by the plaintiff hearing is required on an application for preliminary
as a matter of right without leave of court, 11 authorization attachment, with notice to the defendant, for the reason
by the Court of service of summons by publication, 12 the that this "would defeat the objective of the remedy . . .
dismissal of the action by the plaintiff on mere notice. 13 (since the) time which such a hearing would take, could be
enough to enable the defendant to abscond or dispose of
This, too, is true with regard to the provisional remedies of preliminary attachment, preliminary his property before a writ of attachment issues." As
injunction, receivership or replevin. 14
 They may be validly and properly observed by a former member of this Court, 26 such a
applied for and granted even before the defendant is procedure would warn absconding debtors-defendants of
summoned or is heard from. the commencement of the suit against them and the
probable seizure of their properties, and thus give them the
advantage of time to hide their assets, leaving the creditor-
A preliminary attachment may be defined, paraphrasing the
plaintiff holding the proverbial empty bag; it would place
Rules of Court, as the provisional remedy in virtue of which
the creditor-applicant in danger of losing any security for a
a plaintiff or other party may, at the commencement of the
favorable judgment and thus give him only an illusory
action or at any time thereafter, have the property of the
victory.
adverse party taken into the custody of the court as
security for the satisfaction of any judgment that may be
recovered. 15 It is a remedy which is purely statutory in Withal, ample modes of recourse against a preliminary
respect of which the law requires a strict construction of attachment are secured by law to the defendant. The
the provisions granting it. 16 Withal no principle, statutory or relative ease with which a preliminary attachment may be
jurisprudential, prohibits its issuance by any court before obtained is matched and paralleled by the relative facility
acquisition of jurisdiction over the person of the defendant. with which the attachment may legitimately be prevented
or frustrated. These modes of recourse against preliminary
attachments granted by Rule 57 were discussed at some
Rule 57 in fact speaks of the grant of the remedy "at the
length by the separate opinion in Mindanao Savings &
commencement of the action or at any time
Loans Asso. Inc. v. CA., supra.
thereafter." 17 The phase, "at the commencement of the
action," obviously refers to the date of the filing of the
complaint — which, as above pointed out, is the date that That separate opinion stressed that there are two (2) ways
marks "the commencement of the action;" 18 and the of discharging an attachment: first, by the posting of a
reference plainly is to a time before summons is served on counterbond; and second, by a showing of its improper or
the defendant, or even before summons issues. What the irregular issuance.
rule is saying quite clearly is that after an action is properly
commenced — by the filing of the complaint and the 1.0. The submission of a counterbond is an efficacious
payment of all requisite docket and other fees — the mode of lifting an attachment already enforced against
plaintiff may apply for and obtain a writ of preliminary property, or even of preventing its enforcement altogether.
attachment upon fulfillment of the pertinent requisites laid
down by law, and that he may do so at any time, either 1.1. When property has already been seized under
before or after service of summons on the defendant. And attachment, the attachment may be discharged upon
this indeed, has been the immemorial practice sanctioned counterbond in accordance with Section 12 of Rule 57.
by the courts: for the plaintiff or other proper party to
incorporate the application for attachment in the complaint
Sec. 12. Discharge of attachment upon giving
or other appropriate pleading (counter-claim, cross-claim,
counterbond. — At any time after an order of
third-party claim) and for the Trial Court to issue the
attachment has been granted, the party whose
writ ex-parte at the commencement of the action if it finds
property has been attached or the person
the application otherwise sufficient in form and substance.
appearing in his behalf, may, upon reasonable
notice to the applicant, apply to the judge who
In Toledo v. Burgos, 19 this Court ruled that a hearing on a granted the order, or to the judge of the court in
motion or application for preliminary attachment is not which the action is pending, for an order
generally necessary unless otherwise directed by the Trial discharging the attachment wholly or in part on the
Court in its discretion. 20 And in Filinvest Credit Corporation security given . . . in an amount equal to the value
v. Relova, 21 the Court declared that "(n)othing in the Rules of the property attached as determined by the
of Court makes notice and hearing indispensable and judge to secure the payment of any judgment that
mandatory requisites for the issuance of a writ of the attaching creditor may recover in the action. . .
attachment." The only pre-requisite is that the Court be .
satisfied, upon consideration of "the affidavit of the
applicant or of some other person who personally knows
1.2. But even before actual levy on property, seizure under
the facts, that a sufficient cause of action exists, that the
attachment may be prevented also upon counterbond. The
case is one of those mentioned in Section 1 . . . (Rule 57),
defendant need not wait until his property is seized before
that there is no other sufficient security for the claim
sought to be enforced by the action, and that the amount
seeking the discharge of the attachment by a counterbond. course of his employment as such, or by any other
This is made possible by Section 5 of Rule 57. person in a fiduciary capacity, or for a willful
violation of duty." (Sec. 1 [b], Rule 57), or "an
Sec. 5. Manner of attaching property. — The action against a party who has been guilty of fraud
officer executing the order shall without delay m contracting the debt or incurring the obligation
attach, to await judgment and execution in the upon which the action is brought" (Sec. 1 [d], Rule
action, all the properties of the party against whom 57), the defendant is not allowed to file a motion
the order is issued in the province, not exempt to dissolve the attachment under Section 13 of
from execution, or so much thereof as may be Rule 57 by offering to show the falsity of the
sufficient to satisfy the applicant's demand, unless factual averments in the plaintiff's application and
the former makes a deposit with the clerk or judge affidavits on which the writ was based — and
of the court from which the order issued, or gives consequently that the writ based thereon had been
a counter-bond executed to the applicant, in an improperly or irregularly issued (SEE Benitez v.
amount sufficient to satisfy such demand besides I.A.C., 154 SCRA 41) — the reason being that the
costs, or in an amount equal to the value of the hearing on such a motion for dissolution of the writ
property which is about to be attached, to secure would be tantamount to a trial of the merits of the
payment to the applicant of any judgment which action. In other words, the merits of the action
he may recover in the action. . . . (Emphasis would be ventilated at a mere hearing of a motion,
supplied) instead of at the regular trial. Therefore, when the
writ of attachment is of this nature, the only way it
can be dissolved is by a counterbond (G.B. Inc. v.
2.0. Aside from the filing of a counterbond, a preliminary
Sanchez, 98 Phil. 886).
attachment may also be lifted or discharged on the ground
that it has been irregularly or improperly issued, in
accordance with Section 13 of Rule 57. Like the first, this (b) Effect of the dissolution of a preliminary attachment on
second mode of lifting an attachment may be resorted to the plaintiffs attachment bond:
even before any property has been levied on. Indeed, it
may be availed of after property has been released from a . . . The dissolution of the preliminary attachment
levy on attachment, as is made clear by said Section upon security given, or a showing of its irregular or
13, viz.: improper issuance, does not of course operate to
discharge the sureties on plaintiff's own
Sec. 13. Discharge of attachment for improper or attachment bond. The reason is simple. That bond
irregular issuance. — The party whose property is "executed to the adverse party, . . . conditioned
has been attached may also, at any time that the . . . (applicant) will pay all the costs which
either BEFORE or AFTER the release of the may be adjudged to the adverse party and all
attached property, or before any attachment shall damages which he may sustain by reason of the
have been actually levied, upon reasonable notice attachment, if the court shall finally adjudge that
to the attaching creditor, apply to the judge who the applicant was not entitled thereto" (SEC. 4,
granted the order, or to the judge of the court in Rule 57). Hence, until that determination is made,
which the action is pending, for an order to as to the applicant's entitlement to the attachment,
discharge the attachment on the ground that the his bond must stand and cannot be with-drawn.
same was improperly or irregularly issued. If the
motion be made on affidavits on the part of the With respect to the other provisional remedies, i.e.,
party whose property has been attached, but not preliminary injunction (Rule 58), receivership (Rule 59),
otherwise, the attaching creditor may oppose the replevin or delivery of personal property (Rule 60), the rule
same by counter-affidavits or other evidence in is the same: they may also issue ex parte. 29
addition to that on which the attachment was
made. . . . (Emphasis supplied) It goes without saying that whatever be the acts done by the Court prior to the acquisition of

jurisdiction over the person of defendant, as above indicated — issuance of summons, order of

This is so because "(a)s pointed out in Calderon v. I.A.C., attachment and writ of attachment (and/or appointments of guardian ad litem, or grant of authority to

155 SCRA 531 (1987), The attachment debtor cannot be the plaintiff to prosecute the suit as a pauper litigant, or amendment of the complaint by the plaintiff as

deemed to have waived any defect in the issuance of the a matter of right without leave of court 30
 — and however valid and proper
attachment writ by simply availing himself of one way of they might otherwise be, these do not and cannot bind and
discharging the attachment writ, instead of the other. affect the defendant until and unless jurisdiction over his
Moreover, the filing of a counterbond is a speedier way of person is eventually obtained by the court, either by service
discharging the attachment writ maliciously sought out by on him of summons or other coercive process or his
the attaching creditor instead of the other way, which, in voluntary submission to the court's authority. Hence, when
most instances . . . would require presentation of evidence the sheriff or other proper officer commences
in a fullblown trial on the merits, and cannot easily be implementation of the writ of attachment, it is essential that
settled in a pending incident of the case." 27 he serve on the defendant not only a copy of the
applicant's affidavit and attachment bond, and of the order
It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings & Loans of attachment, as explicity required by Section 5 of Rule 57,
Asso. Inc. v. C.A., supra., 28
 to wit: but also the summons addressed to said defendant as well
as a copy of the complaint and order for appointment of
guardian ad litem, if any, as also explicity directed by
(a) When an attachment may not be dissolved by
Section 3, Rule 14 of the Rules of Court. Service of all such
a showing of its irregular or improper issuance:
documents is indispensable not only for the acquisition of
jurisdiction over the person of the defendant, but also upon
. . . (W)hen the preliminary attachment is issued considerations of fairness, to apprise the defendant of the
upon a ground which is at the same time the complaint against him, of the issuance of a writ of
applicant's cause of action; e.g., "an action for preliminary attachment and the grounds therefor and thus
money or property embezzled or fraudulently accord him the opportunity to prevent attachment of his
misapplied or converted to his own use by a public property by the posting of a counterbond in an amount
officer, or an officer of a corporation, or an equal to the plaintiff's claim in the complaint pursuant to
attorney, factor, broker, agent, or clerk, in the Section 5 (or Section 12), Rule 57, or dissolving it by
causing dismissal of the complaint itself on any of the
grounds set forth in Rule 16, or demonstrating the
insufficiency of the applicant's affidavit or bond in
accordance with Section 13, Rule 57.

It was on account of the failure to comply with this

fundamental requirement of service of summons and the
other documents above indicated that writs of attachment
issued by the Trial Court ex parte were struck down by this
Court's Third Division in two (2) cases, namely: Sievert v.
Court of Appeals, 31 and BAC Manufacturing and Sales
Corporation v. Court of Appeals, et al . 32 In contrast to the
case at bar — where the summons and a copy of the
complaint, as well as the order and writ of attachment and
the attachment bond were served on the defendant —
in Sievert, levy on attachment was attempted
notwithstanding that only the petition for issuance of the
writ of preliminary attachment was served on the
defendant, without any prior or accompanying summons
and copy of the complaint; and in BAC Manufacturing and
Sales Corporation, neither the summons nor the order
granting the preliminary attachment or the writ of
attachment itself was served on the defendant "before or at
the time the levy was made."

For the guidance of all concerned, the Court reiterates and

reaffirms the proposition that writs of attachment may
properly issue ex parte provided that the Court is satisfied
that the relevant requisites therefor have been fulfilled by
the applicant, although it may, in its discretion, require
prior hearing on the application with notice to the
defendant; but that levy on property pursuant to the writ
thus issued may not be validly effected unless preceded, or
contemporaneously 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.
 Republic of the Philippines registered in her name was covered by a third-party liability
SUPREME COURT insurance policy issued by petitioner Perla.
Manila
FIRST DIVISION Thus, on 31 July 1979, private respondent Palmes filed a
G.R. No. L-60887 November 13, 1991 motion for garnishment 7 praying that an order of
PERLA COMPANIA DE SEGUROS, INC., petitioner, garnishment be issued against the insurance policy issued
vs. by petitioner in favor of the judgment debtor. On 6 August
HON. JOSE R. RAMOLETE, PRIMITIVA Y. PALMES, 1979, respondent Judge issued an Order 8 directing the
HONORATO BORBON, SR., OFFICE OF THE Provincial Sheriff or his deputy to garnish the third-party
PROVINCIAL SHERIFF, PROVINCE OF liability insurance policy.
CEBU, respondents.
Hector L. Fernandez for petitioner.
Petitioner then appeared before the trial court and moved
Domingo Quibranza and Vicente A. Quibranza for private
for reconsideration of the 6 August 1979 Order and for
respondents.
quashal of the writ of garnishment, 9 alleging that the writ
was void on the ground that it (Perla) was not a party to
FELICIANO, J.: the case and that jurisdiction over its person had never
been acquired by the trial court by service of summons or
The present Petition for Certiorari seeks to annul: (a) the by any process. The trial court denied petitioner's
Order dated 6 August 1979 1 which ordered the Provincial motion. 10 An Order for issuance of an alias writ of
Sheriff to garnish the third-party liability insurance policy garnishment was subsequently issued on 8 April 1980. 
issued by petitioner Perla Compania de Seguros, Inc.
("Perla") in favor of Nelia Enriquez, judgment debtor in Civil More than two (2) years later, the present Petition for
Case No. R-15391; (b) the Order dated 24 October Certiorari and Prohibition was filed with this Court on 25
1979 2 which denied the motion for reconsideration of the 6 June 1982 alleging grave abuse of discretion on the part of
August 1979 Order; and (c) the Order dated 8 April respondent Judge Ramolete in ordering garnishment of the
1980 3 which ordered the issuance of an alias writ of third-party liability insurance contract issued by petitioner
garnishment against petitioner. Perla in favor of the judgment debtor, Nelia Enriquez. The
Petition should have been dismissed forthwith for having
In the afternoon of 1 June 1976, a Cimarron PUJ owned been filed way out of time but, for reasons which do not
and registered in the name of Nelia Enriquez, and driven by appear on the record, was nonetheless entertained.
Cosme Casas, was travelling from Cebu City to Danao City.
While passing through Liloan, Cebu, the Cimarron PUJ In this Petition, petitioner Perla reiterates its contention
collided with a private jeep owned by the late Calixto that its insurance contract cannot be subjected to
Palmes (husband of private respondent Primitiva Palmes) garnishment or execution to satisfy the judgment in Civil
who was then driving the private jeep. The impact of the Case No. R-15391 because petitioner was not a party to the
collision was such that the private jeep was flung away to a case and the trial court did not acquire jurisdiction over
distance of about thirty (30) feet and then fell on its right petitioner's person. Perla further argues that the writ of
side pinning down Calixto Palmes. He died as a result of garnishment had been issued solely on the basis of the
cardio-respiratory arrest due to a crushed chest. 4 The testimony of the judgment debtor during the examination
accident also caused physical injuries on the part of on 23 July 1979 to the effect that the Cimarron PUJ was
Adeudatus Borbon who was then only two (2) years old. covered by a third-party liability insurance issued by Perla,
without granting it the opportunity to set up any defenses
On 25 June 1976, private respondents Primitiva Palmes which it may have under the insurance contract; and that
(widow of Calixto Palmes) and Honorato Borbon, Sr. (father the proceedings taken against petitioner are contrary to the
of minor Adeudatus Borbon) filed a complaint 5 against procedure laid down in Economic Insurance Company, Inc.
Cosme Casas and Nelia Enriquez (assisted by her husband v. Torres, et al., 12 which held that under Rule 39, Section
Leonardo Enriquez) before the then Court of First Instance 45, the Court "may only authorize" the judgment creditor to
of Cebu, Branch 3, claiming actual, moral, nominal and institute an action against a third person who holds
exemplary damages as a result of the accident. property belonging to the judgment debtor.

The claim of private respondent Honorato Borbon, Sr.,

being distinct and separate from that of co-plaintiff
Primitiva Palmes, and the amount thereof falling properly We find no grave abuse of discretion or act in excess of or
within the jurisdiction of the inferior court, respondent without jurisdiction on the part of respondent Judge
Judge Jose R. Ramolete ordered the Borbon claim excluded Ramolete in ordering the garnishment of the judgment
from the complaint, without prejudice to its being filed with debtor's third-party liability insurance.
the proper inferior court.
Garnishment has been defined as a species of attachment
On 4 April 1977, the Court of First Instance rendered a for reaching any property or credits pertaining or payable to
Decision 6 in favor of private respondent Primitiva Palmes, a judgment debtor. 13 In legal contemplation, it is a forced
ordering common carrier Nelia Enriquez to pay her novation by the substitution of creditors: 14 the judgment
P10,000.00 as moral damages, P12,000.00 as debtor, who is the original creditor of the garnishee is,
compensatory damages for the death of Calixto Palmes, through service of the writ of garnishment, substituted by
P3,000.00 as exemplary damages, P5,000.00 as actual the judgment creditor who thereby becomes creditor of the
damages, and P1,000.00 as attorney's fees. garnishee. Garnishment has also been described as a
warning to a person having in his possession property or
The judgment of the trial court became final and executory credits of the judgment debtor, not to pay the money or
and a writ of execution was thereafter issued. The writ of deliver the property to the latter, but rather to appear and
execution was, however, returned unsatisfied. answer the plaintiff's suit. 15
Consequently, the judgment debtor Nelia Enriquez was
summoned before the trial court for examination on 23 July
1979. She declared under oath that the Cimarron PUJ
In order that the trial court may validly acquire jurisdiction intervenor; and the court, having acquired jurisdiction over
to bind the person of the garnishee, it is not necessary that him by means of the citation, requires him to pay his debt,
summons be served upon him. The garnishee need not be not to his former creditor, but to the new creditor, who is
impleaded as a party to the case. All that is necessary for creditor in the main litigation. (Emphasis supplied).
the trial court lawfully to bind the person of the garnishee
or any person who has in his possession credits belonging In Rizal Commercial Banking Corporation v. De Castro, 17
to the judgment debtor is service upon him of the writ of the Court stressed that the asset or credit garnished is
garnishment. thereupon subjected to a specific lien:

The Rules of Court themselves do not require that the The garnishment of property to satisfy a writ of execution
garnishee be served with summons or impleaded in the operates as an attachment and fastens upon the property a
case in order to make him liable. lien by which the property is brought under the jurisdiction
of the court issuing the writ. It is brought into custodia
Rule 39, Section 15 provides: legis, under the sole control of such

Sec. 15. Execution of money judgments. — The officer court. 18 (Emphasis supplied)
must enforce an execution of a money judgment by levying
on all the property, real or personal of every name and
nature whatsoever, and which may be disposed of for
value, of the judgment debtor not exempt from
In the present case, there can be no doubt, therefore, that
execution . . .
the trial court actually acquired jurisdiction over petitioner
Perla when it was served with the writ of garnishment of
Real property, stocks, shares, debts, credits, and other the third-party liability insurance policy it had issued in
personal property, or any interest in either real or personal favor of judgment debtor Nelia Enriquez. Perla cannot
property, may be levied on in like manner and with like successfully evade liability thereon by such a contention.
effect as under a writ of attachment. (Emphasis supplied).

Rule 57, Section 7(e) in turn reads:

Every interest which the judgment debtor may have in
Sec. 7. Attachment of real and personal property; recording property may be subjected to execution. 19 In the instant
thereof. — Properties shall be attached by the officer case, the judgment debtor Nelia Enriquez clearly had an
executing the order in the following manner: interest in the proceeds of the third-party liability insurance
contract. In a third-party liability insurance contract, the
xxx xxx xxx insurer assumes the obligation of paying the injured third
party to whom the insured is liable. 20 The insurer
(e) Debts and credits, and other personal property not becomes liable as soon as the liability of the insured to the
capable of manual delivery, by leaving with the person injured third person attaches. Prior payment by the insured
owing such debts, or having his possession or under his to the injured third person is not necessary in order that
control such credits or other personal property, or with his the obligation of the insurer may arise. From the moment
agent, a copy of the order, and notice that the debts owing that the insured became liable to the third person, the
by him to the party against whom attachment is issued, insured acquired an interest in the insurance contract,
and the credits and other personal property in his which interest may be garnished like any other credit. 21
possession, or under his control, belonging to said party,
are attached in pursuance of such order; Petitioner also contends that in order that it may be held
liable under the third-party liability insurance, a separate
xxx xxx xxx action should have been commenced by private
respondents to establish petitioner's liability. Petitioner
invokes Economic Insurance Company, Inc. vs. Torres, 22
(Emphasis supplied)
which stated:

It is clear from Section 45, Rule 39 that if a

persons alleged to have property of the judgment
Through service of the writ of garnishment, the garnishee debtor or to be indebted to him claims an interest
becomes a "virtual party" to, or a "forced intervenor" in, the in the property adverse to him or denies the debt,
case and the trial court thereby acquires jurisdiction to bind the court may only authorize the judgment creditor
him to compliance with all orders and processes of the trial to institute an action against such person for the
court with a view to the complete satisfaction of the recovery of such interest or debt. Said section does
judgment of the court. In Bautista v. Barredo, 16 the Court, not authorize the court to make a finding that the
through Mr. Justice Bautista Angelo, held: third person has in his possession property
belonging to the judgment debtor or is indebted to
While it is true that defendant Jose M. Barredo was not a him and to order said third person to pay the
party in Civil Case No. 1636 when it was instituted by amount to the judgment creditor.
appellant against the Philippine Ready Mix Concrete
Company, Inc., however, jurisdiction was acquired over him It has been held that the only power of the court
by the court and he became a virtual party to the case in proceedings supplemental to execution is to
when, after final judgment was rendered in said case niake an order authorizing the creditor to sue in
against the company, the sheriff served upon him a writ of the proper court to recover an indebtedness due to
garnishment in behalf of appellant. Thus, as held by this the judgment debtor. The court has no jurisdiction
Court in the case of Tayabas Land Company vs. Sharruf, 41 to try summarily the question whether the third
Phil. 382, the proceeding by garnishment is a species of party served with notice of execution and levy is
attachment for reaching credits belonging to the judgment indebted to defendant when such indebtedness is
debtor and owing to him from a stranger to the litigation. denied. To make an order in relation to property
By means of the citation, the stranger becomes a forced which the garnishee claimed to own in his own
 right, requiring its application in satisfaction of
judgment of another, would be to deprive the
garnishee of property upon summary proceeding
and without due process of law. (Emphasis
supplied)

But reliance by petitioner on the case of Economic

Insurance Company, Inc. v. Torres (supra)  is misplaced.
The Court there held that a separate action needs to be
commenced when the garnishee "claims an interest in the
property adverse to him (judgment debtor) or denies the
debt." In the instant case, petitioner Perla did not deny
before the trial court that it had indeed issued a third-party
liability insurance policy in favor of the judgment debtor.
Petitioner moreover refrained from setting up any
substantive defense which it might have against the
insured-judgment debtor. The only ground asserted by
petitioner in its "Motion for Reconsideration of the Order
dated August 6, 1979 and to Quash Notice of Garnishment"
was lack of jurisdiction of the trial court for failure to
implead it in the case by serving it with summons.
Accordingly, Rule 39, Section 45 of the Rules of Court is not
applicable in the instant case, and we see no need to
require a separate action against Perla: a writ of
garnishment suffices to hold petitioner answerable to the
judgment creditor. If Perla had any substantive defenses
against the judgment debtor, it is properly deemed to have
waived them by laches.

WHEREFORE, the Petition for Certiorari and Prohibition is

hereby DISMISSED for having been filed out of time and for
lack of merit. The assailed Orders of the trial court are
hereby AFFIRMED. Costs against petitioner. This Decision is
immediately executory.

SO ORDERED.
 Republic of the Philippines be recovered by the action as also required by said Sec. 3;
SUPREME COURT and (3) the affidavit did not specify any of the grounds
Manila enumerated in Sec. 1 of Rule 57, 5 but, the respondent
SECOND DIVISION Judge denied the motion and ordered the Philippine
G.R. No. L-48756 September 11, 1982 Geothermal, Inc. to deliver and deposit with the Clerk of
K.O. GLASS CONSTRUCTION CO., INC., petitioner, Court the amount of P37,190.00 immediately upon receipt
vs. of the order which amount shall remain so deposited to
THE HONORABLE MANUEL VALENZUELA, Judge of await the judgment to be rendered in the case. 6
the Court of First Instance of Rizal, and ANTONIO D.
PINZON, respondents. On June 19, 1978, the defendants therein filed a bond in
Guillermo E. Aragones for petitioner. the amount of P37,190.00 and asked the court for the
Ruben V. Lopez for respondent Antonio D. Pinzon. release of the same amount deposited with the Clerk of
Court, 7 but, the respondent Judge did not order the
CONCEPCION, JR., J.: release of the money deposited. 8

Petition for certiorari to annul and set aside the writ of Hence, the present recourse. As prayed for, the Court
preliminary attachment issued by the respondent Judge in issued a temporary restraining order, restraining the
Civil Case No. 5902-P of the Court of First Instance of Rizal, respondent Judge from further proceeding with the trial of
entitled: Antonio D. Pinzon plaintiff, versus K.O. Glass the case. 9
Construction Co., Inc., and Kenneth O. Glass,
defendants, and for the release of the amount of
We find merit in the petition. The respondent Judge gravely
P37,190.00, which had been deposited with the Clerk of
abused his discretion in issuing the writ of preliminary
Court, to the petitioner.
attachment and in not ordering the release of the money
which had been deposited with the Clerk of Court for the
On October 6, 1977, an action was instituted in the Court of following reasons:
First Instance of Rizal by Antonio D. Pinzon to recover from
Kenneth O. Glass the sum of P37,190.00, alleged to be the
First, there was no ground for the issuance of the writ of
agreed rentals of his truck, as well as the value of spare
preliminary attachment. Section 1, Rule 57 of the Revised
parts which have not been returned to him upon
Rules of Court, which enumerates the grounds for the
termination of the lease. In his verified complaint, the
issuance of a writ of preliminary attachment, reads, as
plaintiff asked for an attachment against the property of the
follows:
defendant consisting of collectibles and payables with the
Philippine Geothermal, Inc., on the grounds that the
defendant is a foreigner; that he has sufficient cause of Sec. 1. Grounds upon which attachment
action against the said defendant; and that there is no may issue. —A plaintiff or any proper
sufficient security for his claim against the defendant in the party may, at the commencement of the
event a judgment is rendered in his favor. 1 action or at any time thereafter, have the
property of the adverse party attached as
security for the satisfaction of any
Finding the petition to be sufficient in form and substance,
judgment that may be recovered in the
the respondent Judge ordered the issuance of a writ of
following cases:
attachment against the properties of the defendant upon
the plaintiff's filing of a bond in the amount of
P37,190.00. 2 (a) In an action for the recovery of money
or damages on a cause of action arising
from contract, express or implied, against
Thereupon, on November 22, 1977, the defendant Kenneth
a party who is about to depart from the
O. Glass moved to quash the writ of attachment on the
Philippines with intent to defraud his
grounds that there is no cause of action against him since
creditor;
the transactions or claims of the plaintiff were entered into
by and between the plaintiff and the K.O. Glass
Construction Co., Inc., a corporation duly organized and (b) In an action for money or property
existing under Philippine laws; that there is no ground for embezzled or fraudulently misapplied or
the issuance of the writ of preliminary attachment as converted to his own use by a public
defendant Kenneth O. Glass never intended to leave the officer, or an officer of a corporation, or
Philippines, and even if he does, plaintiff can not be an attorney, factor, broker, agent, or
prejudiced thereby because his claims are against a clerk, in the course of his employment as
corporation which has sufficient funds and property to such, or by any other person in a fiduciary
satisfy his claim; and that the money being garnished capacity, or for a willful violation of duty;
belongs to the K.O. Glass Corporation Co., Inc. and not to
defendant Kenneth O. Glass. 3 (c) In an action to recover the possession
of personal property unjustly detained,
By reason thereof, Pinzon amended his complaint to include when the property, or any part thereof,
K.O. Glass Construction Co., Inc. as co-defendant of has been concealed, removed, or disposed
Kenneth O. Glass. 4 of to prevent its being found or taken by
the applicant or an officer;
On January 26, 1978, the defendants therein filed a
supplementary motion to discharge and/or dissolve the writ (d) In an action against the party who has
of preliminary attachment upon the ground that the been guilty of a fraud in contracting the
affidavit filed in support of the motion for preliminary debt or incurring the obligation upon
attachment was not sufficient or wanting in law for the which the action is brought, or in
reason that: (1) the affidavit did not state that the amount concealing or disposing of the property for
of plaintiff's claim was above all legal set-offs or the taking, detention or conversion of
counterclaims, as required by Sec. 3, Rule 57 of the which the action is brought;
Revised Rules of Court; (2) the affidavit did not state that
there is no other sufficient security for the claim sought to
 (e) In an action against a party who has CORPORATION and GLASS have a valid
removed or disposed of his property, or is and just obligation to plaintiff in the total
about to do so, with intent to defraud his sum of P32,290.00 arising out
creditors; for their failure to pay (i) service charges
for hauling of construction materials, (ii)
(f) In an action against a party who rentals for the lease of plaintiff's Isuzu
resides out of the Philippines, or on whom Cargo truck, and (iii) total cost of the
summons may be served by publication. missing/destroyed spare parts of said
leased unit: hence, a sufficient cause of
action exist against said defendants.
In ordering the issuance of the controversial writ of
Plaintiff also avers under oath that there is
preliminary attachment, the respondent Judge said and We
no sufficient security for his claim against
quote:
the defendants in the event a judgment be
rendered in favor of the plaintiff. however,
The plaintiff filed a complaint for a sum of defendant CORPORATION has sufficient
money with prayer for Writ of Preliminary assets in the Philippines in the form of
Attachment dated September 14, 1977, collectibles and payables due from the
alleging that the defendant who is a Philippine Geothermal., Inc. with office
foreigner may, at any time, depart from address at Citibank Center, Paseo de
the Philippines with intent to defraud his Roxas, Makati, Metro Manila, but which
creditors including the plaintiff herein; that properties, if not timely attached, may be
there is no sufficient security for the claim disposed of by defendants and would
sought to be enforced by this action; that render ineffectual the reliefs prayed for by
the amount due the plaintiff is as much as plaintiff in this Complaint. 12
the sum for which an order of attachment
is sought to be granted; and that
There being no showing, much less an allegation, that the
defendant has sufficient leviable assets in
defendants are about to depart from the Philippines with
the Philippines consisting of collectibles
intent to defraud their creditor, or that they are non-
and payables due from Philippine
resident aliens, the attachment of their properties is not
Geothermal, Inc., which may be disposed
justified.
of at any time, by defendant if no Writ of
Preliminary Attachment may be issued.
Finding said motion and petition to be Second, the affidavit submitted by Pinzon does not comply
sufficient in form and substance. 10 with the Rules. Under the Rules, an affidavit for attachment
must state that (a) sufficient cause of action exists, (b) the
case is one of those mentioned in Section I (a) of Rule 57;
Pinzon however, did not allege that the defendant Kenneth
(c) there is no other sufficient security 'or the claim sought
O. Glass "is a foreigner (who) may, at any time, depart
to be enforced by the action, and (d) the amount due to
from the Philippines with intent to defraud his creditors
the applicant for attachment or the value of the property
including the plaintiff." He merely stated that the defendant
the possession of which he is entitled to recover, is as
Kenneth O. Glass is a foreigner. The pertinent portion of
much as the sum for which the order is granted above all
the complaint reads, as follows:
legal counterclaims. Section 3, Rule 57 of the Revised Rules
of Court reads. as follows:
15. Plaintiff hereby avers under oath that
defendant is a foreigner and that said
Section 3. Affidavit and bond required.—
defendant has a valid and just obligation
An order of attachment shall be granted
to plaintiff in the total sum of P32,290.00
only when it is made to appear by the
arising out from his failure to pay (i)
affidavit of the applicant, or of some
service charges for the hauling of
person who personally knows the facts,
construction materials; (ii) rentals for the
that a sufficient cause of action exists that
lease of plaintiff's Isuzu Cargo truck, and
the case is one of those mentioned in
(iii) total cost of the missing/destroyed
Section 1 hereof; that there is no other
spare parts of said leased unit; hence, a
sufficient security for the claim sought to
sufficient cause of action exists against
be enforced by the action, and that the
said defendant. Plaintiff also avers under
amount due to the applicant, or the value
oath that there is no sufficient security for
of the property the possession of which he
his claim against the defendant in the
is entitled to recover, is as much as the
event a judgment be rendered in favor of
sum for which the order is granted above
the plaintiff. however, defendant has
all legal counterclaims. The affidavit, and
sufficient assets in the Philippines in the
the bond required by the next succeeding
form of collectible and payables due from
section, must be duly filed with the clerk
the Philippine Geothermal, Inc. with office
or judge of the court before the order
address at Citibank Center, Paseo de
issues.
Roxas, Makati, Metro Manila, but which
properties, if not timely attached, may be
disposed of by defendants and would In his affidavit, Pinzon stated the following:
render ineffectual the reliefs prayed for by
plaintiff in this Complaint. 11 I, ANTONIO D. PINZON Filipino, of legal
age, married and with residence and
In his Amended Complaint, Pinzon alleged the following: postal address at 1422 A. Mabini Street,
Ermita, Manila, subscribing under oath,
depose and states that.
15. Plaintiff hereby avers under oath that
defendant GLASS is an American citizen
who controls most, if not all, the affairs of 1. On October 6,1977,I filed with the
defendant CORPORATION. Defendants Court of First Instance of Rizal, Pasay City
Branch, a case against Kenneth O. Glass
 entitled 'ANTONIO D. PINZON vs. the order, or to the judge of the court in
KENNETH O. GLASS', docketed as Civil which the action is pending, for an order
Case No. 5902-P; discharging the attachment wholly or in
part on the security given. The judge
2. My Complaint against Kenneth O. Glass shall, after hearing, order the discharge of
is based on several causes of action, the attachment if a cash deposit is made
namely: or a counterbond executed to the
attaching creditor is filed, on behalf of the
adverse party, with the clerk or judge of
(i) On February 15, 1977, we mutually
the court where the application is made, in
agreed that I undertake to haul his
an amount equal to the value of the
construction materials from Manila to his
property attached as determined by the
construction project in Bulalo, Bay, Laguna
judge, to secure the payment of any
and vice-versa, for a consideration of
judgment that the attaching creditor may
P50.00 per hour;
recover in the action. Upon the filing of
such counter-bond, copy thereof shall
(ii) Also, on June 18, 1977, we entered forthwith be served on the attaching
into a separate agreement whereby my creditor or his lawyer. Upon the discharge
Isuzu cargo truck will be leased to him for of an attachment in accordance with the
a consideration of P4,000.00 a month provisions of this section the property
payable on the 15th day of each month; attached, or the proceeds of any sale
thereof, shall be delivered to the party
(iii) On September 7, 1977, after making making the deposit or giving the counter-
use of my Isuzu truck, he surrendered the bond, or the person appearing on his
same without paying the monthly rentals behalf, the deposit or counter-bond
for the leased Isuzu truck and the peso aforesaid standing in the place of the
equivalent of the spare parts that were property so released. Should such
either destroyed or misappropriated by counter-bond for any reason be found to
him; be, or become, insufficient, and the party
furnishing the same fail to file an
3. As of today, October 11, 1977, Mr. additional counter-bond the attaching
Kenneth 0. Glass still owes me the total creditor may apply for a new order of
sum of P32,290.00 representing his attachment.
obligation arising from the hauling of his
construction materials, monthly rentals for The filing of the counter-bond will serve the purpose of
the lease Isuzu truck and the peso preserving the defendant's property and at the same time
equivalent of the spare parts that were give the plaintiff security for any judgment that may be
either destroyed or misappropriated by obtained against the defendant. 15
him;
WHEREFORE, the petition is GRANTED and the writ prayed
4. I am executing this Affidavit to attest to for is issued. The orders issued by the respondent Judge on
the truthfulness of the foregoing and in October 11, 19719, January 26, 1978, and February 3,
compliance with the provisions of Rule 57 1978 in Civil Case No. 5902-P of the Court of First Instance
of the Revised Rules of Court. 13 of Rizal, insofar as they relate to the issuance of the writ of
preliminary attachment, should be as they are hereby
While Pinzon may have stated in his affidavit that a ANNULLED and SET ASIDE and the respondents are hereby
sufficient cause of action exists against the defendant ordered to forthwith release the garnished amount of
Kenneth O. Glass, he did not state therein that "the case is P37,190.00 to the petitioner. The temporary restraining
one of those mentioned in Section 1 hereof; that there is no order, heretofore issued, is hereby lifted and set aside.
other sufficient security for the claim sought to be enforced Costs against the private respondent Antonio D. Pinzon.
by the action; and that the amount due to the applicant is
as much as the sum for which the order granted above all SO ORDERED.
legal counter-claims." It has been held that the failure to
allege in the affidavit the requisites prescribed for the
issuance of a writ of preliminary attachment, renders the
writ of preliminary attachment issued against the property
of the defendant fatally defective, and the judge issuing it
is deemed to have acted in excess of his jurisdiction. 14

Finally, it appears that the petitioner has filed a

counterbond in the amount of P37,190.00 to answer for
any judgment that may be rendered against the defendant.
Upon receipt of the counter-bond the respondent Judge
should have discharged the attachment pursuant to Section
12, Rule 57 of the Revised Rules of Court which reads, as
follows:

Section 12. Discharge of attachment upon

giving counterbond.—At any time after an
order of attachment has been granted, the
party whose property has been attached,
or the person appearing on his behalf,
may upon reasonable notice to the
applicant, apply to the judge who granted
 Republic of the Philippines On December 24, 1997, the trial court issued an order
SUPREME COURT quashing the writ and holding that the withdrawal of
Manila respondent’s unassigned deposits was not intended to
THIRD DIVISION defraud petitioner. It also found that the representatives of
G.R. No. 175587               September 21, 2007 petitioner personally transacted with respondent through
PHILIPPINE COMMERCIAL INTERNATIONAL his home address in Quezon City and/or his office in Makati
BANK, Petitioner, City. It thus concluded that petitioner misrepresented and
vs. suppressed the facts regarding respondent’s residence
JOSEPH ANTHONY M. ALEJANDRO, Respondent. considering that it has personal and official knowledge that
DECISION for purposes of service of summons, respondent’s residence
YNARES-SANTIAGO, J.: and office addresses are located in the Philippines. The
dispositive portion of the court’s decision is as follows:
This petition for review assails the May 31, 2006
Decision1 of the Court of Appeals in CA-G.R. CV No. 78200 WHEREFORE, the URGENT MOTION TO QUASH, being
affirming the August 30, 2000 Decision2 of the Regional meritorious, is hereby GRANTED, and the ORDER of 24
Trial Court of Makati, which granted respondent Joseph October 1997 is hereby RECONSIDERED and SET ASIDE
Anthony M. Alejandro’s claim for damages arising from and the WRIT OF attachment of the same is hereby
petitioner Philippine Commercial International Bank’s (PCIB) DISCHARGED.
invalid garnishment of respondent’s deposits.
SO ORDERED.11
On October 23, 1997, petitioner filed against respondent a
complaint3 for sum of money with prayer for the issuance of With the denial12 of petitioner’s motion for reconsideration,
a writ of preliminary attachment. Said complaint alleged it elevated the case to the Court of Appeals (CA-G.R. SP No.
that on September 10, 1997, respondent, a resident of 50748) via a petition for certiorari. On May 10, 1999, the
Hong Kong, executed in favor of petitioner a promissory petition was dismissed for failure to prove that the trial
note obligating himself to pay ₱249,828,588.90 plus court abused its discretion in issuing the aforesaid
interest. In view of the fluctuations in the foreign exchange order.13 Petitioner filed a motion for reconsideration but was
rates which resulted in the insufficiency of the deposits denied on October 28, 1999.14 On petition with this Court,
assigned by respondent as security for the loan, petitioner the case was dismissed for late filing in a minute resolution
requested the latter to put up additional security for the (G.R. No. 140605) dated January 19, 2000.15 Petitioner filed
loan. Respondent, however, sought a reconsideration of a motion for reconsideration but was likewise denied with
said request pointing out petitioner’s alleged mishandling of finality on March 6, 2000.16
his account due to its failure to carry out his instruction to
close his account as early as April 1997, when the
Meanwhile, on May 20, 1998, respondent filed a claim for
prevailing rate of exchange of the US Dollar to Japanese
damages in the amount of P25 Million17 on the attachment
yen was US$1.00:JPY127.50.4 It appears that the amount
bond (posted by Prudential Guarantee & Assurance, Inc.,
of ₱249,828,588.90 was the consolidated amount of a
under JCL(4) No. 01081, Bond No. HO-46764-97) on
series of yen loans granted by petitioner to respondent
account of the wrongful garnishment of his deposits. He
during the months of February and April 1997.5
presented evidence showing that his ₱150,000.00 RCBC
check payable to his counsel as attorney’s fees, was
In praying for the issuance of a writ of preliminary dishonored by reason of the garnishment of his deposits.
attachment under Section 1 paragraphs (e) and (f) of Rule He also testified that he is a graduate of the Ateneo de
57 of the Rules of Court, petitioner alleged that (1) Manila University in 1982 with a double degree of
respondent fraudulently withdrew his unassigned deposits Economics and Management Engineering and of the
notwithstanding his verbal promise to PCIB Assistant Vice University of the Philippines in 1987 with the degree of
President Corazon B. Nepomuceno not to withdraw the Bachelor of Laws. Respondent likewise presented witnesses
same prior to their assignment as security for the loan; and to prove that he is a well known lawyer in the business
(2) that respondent is not a resident of the Philippines. The community both in the Philippines and in Hong Kong.18 For
application for the issuance of a writ was supported with its part, the lone witness presented by petitioner was
the affidavit of Nepomuceno.6 Nepomuceno who claimed that she acted in good faith in
alleging that respondent is a resident of Hong Kong.19
On October 24, 1997, the trial court granted the application
and issued the writ ex parte7 after petitioner posted a bond On August 30, 2000, the trial court awarded damages to
in the amount of ₱18,798,734.69, issued by Prudential respondent in the amount of P25 Million without specifying
Guarantee & Assurance Inc., under Bond No. HO-46764-97. the basis thereof, thus:
On the same date, the bank deposits of respondent with
Rizal Commercial Banking Corporation (RCBC) were
WHEREFORE, premises above considered, and defendant
garnished. On October 27, 1997, respondent, through
having duly established his claim in the amount of
counsel, filed a manifestation informing the court that he is
₱25,000,000.00, judgment is hereby rendered ordering
voluntarily submitting to its jurisdiction.8
Prudential Guarantee & [Assurance] Co., which is solidarily
liable with plaintiff to pay defendant the full amount of
Subsequently, respondent filed a motion to quash9 the writ bond under Prudential Guarantee & Assurance, Inc. JCL(4)
contending that the withdrawal of his unassigned deposits No. 01081, [Bond No. HO-46764-97], dated 24 October
was not fraudulent as it was approved by petitioner. He 1997 in the amount of ₱18,798,734.69. And, considering
also alleged that petitioner knew that he maintains a that the amount of the bond is insufficient to fully satisfy
permanent residence at Calle Victoria, Ciudad Regina, the award for damages, plaintiff is hereby ordered to pay
Batasan Hills, Quezon City, and an office address in Makati defendant the amount of ₱6,201,265.31.
City at the Law Firm Romulo Mabanta Buenaventura Sayoc
& De los Angeles, 10 where he is a partner. In both
SO ORDERED.20
addresses, petitioner regularly communicated with him
through its representatives. Respondent added that he is
the managing partner of the Hong Kong branch of said Law The trial court denied petitioner’s motion for
Firm; that his stay in Hong Kong is only temporary; and reconsideration on October 24, 2000.21
that he frequently travels back to the Philippines.
Petitioner elevated the case to the Court of Appeals which the Philippines, attachment is still proper under Section 1,
affirmed the findings of the trial court. It held that in paragraph (f), Rule 57 of the Rules of Court since he
claiming that respondent was not a resident of the (respondent) is a resident who is temporarily out of the
Philippines, petitioner cannot be said to have been in good Philippines upon whom service of summons may be
faith considering that its knowledge of respondent’s effected by publication.
Philippine residence and office address goes into the very
issue of the trial court’s jurisdiction which would have been Petitioner’s contentions are without merit.
defective had respondent not voluntarily appeared before
it.
While the final order of the trial court which quashed the
writ did not categorically use the word "bad faith" in
The Court of Appeals, however, reduced the amount of characterizing the representations of petitioner, the tenor of
damages awarded to petitioner and specified their basis. said order evidently considers the latter to have acted in
The dispositive portion of the decision of the Court of bad faith by resorting to a deliberate strategy to mislead
Appeals states: the court. Thus –

WHEREFORE, the appeal is PARTIALLY GRANTED and the In the hearings of the motion, and oral arguments of
decision appealed from is hereby MODIFIED. The award of counsels before the Court, it appears that plaintiff BANK
damages in the amount of ₱25,000,000.00 is deleted. In through its contracting officers Vice President Corazon B.
lieu thereof, Prudential Guarantee & [Assurance, Inc.], Nepomuceno and Executive Vice President Jose Ramon F.
which is solidarily liable with appellant [herein petitioner], is Revilla, personally transacted with defendant mainly
ORDERED to pay appellee [herein respondent] through defendant’s permanent residence in METRO-
₱2,000,000.00 as nominal damages; ₱5,000,000.00 as MANILA, either in defendant’s home address in Quezon City
moral damages; and ₱1,000,000.00 as attorney’s fees, to or his main business address at the Romulo Mabanta
be satisfied against the attachment bond under Prudential Buenaventura Sayoc & Delos Angeles in MAKATI and while
Guarantee & Assurance, Inc. JCL (4) No. 01081. at times follow ups were made through defendant’s
temporary home and business addresses in Hongkong. It is
SO ORDERED.22 therefore clear that plaintiff could not deny their personal
and official knowledge that defendant’s permanent and
Both parties moved for reconsideration. On November 21, official residence for purposes of service of summons is in
2006, the Court of Appeals denied petitioner’s motion for the Philippines. In fact, this finding is further confirmed by
reconsideration but granted that of respondent’s by the letter of Mr. JOHN GOKONGWEI, JR. Chairman,
ordering petitioner to pay additional ₱5Million as exemplary Executive Committee of plaintiff BANK, in his letter dated 6
damages.23 October 1997 on the subject loan to defendant of the same
law firm was addressed to the ROMULO LAW FIRM in
MAKATI.
Hence, the instant petition.

[Anent the] second ground of attachment x x x [t]he Court

At the outset, it must be noted that the ruling of the trial
finds that the amount withdrawn was not part of
court that petitioner is not entitled to a writ of attachment
defendant’s peso deposits assigned with the bank to secure
because respondent is a resident of the Philippines and that
the loan and as proof that the withdrawal was not intended
his act of withdrawing his deposits with petitioner was
to defraud plaintiff as creditor is that plaintiff approved and
without intent to defraud, can no longer be passed upon by
allowed said withdrawals. It is even noted that when the
this Court. More importantly, the conclusions of the court
Court granted the prayer for attachment it was mainly on
that petitioner bank misrepresented that respondent was
the first ground under Section 1(f) of Rule 57 of the 1997
residing out of the Philippines and suppressed the fact that
Rules of Civil Procedure, that defendant resides out of the
respondent has a permanent residence in Metro Manila
Philippines.
where he may be served with summons, are now beyond
the power of this Court to review having been the subject
of a final and executory order. Said findings were sustained On the above findings, it is obvious that plaintiff already
by the Court of Appeals in CA-G.R. SP No. 50784 and by knew from the beginning the deficiency of its second
this Court in G.R. No. 140605. The rule on conclusiveness ground for attachment [i.e.,] disposing properties with
of judgment, which obtains under the premises, precludes intent to defraud his creditors, and therefore plaintiff had to
the relitigation of a particular fact or issue in another action resort to this misrepresentation that defendant was residing
between the same parties even if based on a different claim out of the Philippines and suppressed the fact that
or cause of action. The judgment in the prior action defendant’s permanent residence is in METRO MANILA
operates as estoppel as to those matters in issue or points where he could be served with summons.
controverted, upon the determination of which the finding
or judgment was rendered. The previous judgment is On the above findings, and mainly on the
conclusive in the second case, as to those matters actually misrepresentations made by plaintiff on the grounds for the
and directly controverted and determined.24 Hence, the issuance of the attachment in the verified complaint, the
issues of misrepresentation by petitioner and the residence Court concludes that defendant has duly proven its grounds
of respondent for purposes of service of summons can no in the MOTION and that plaintiff is not entitled to the
longer be questioned by petitioner in this case. attachment.25

The core issue for resolution is whether petitioner bank is Petitioner is therefore barred by the principle of
liable for damages for the improper issuance of the writ of conclusiveness of judgment from again invoking good faith
attachment against respondent. in the application for the issuance of the writ. Similarly, in
the case of Hanil Development Co., Ltd. v. Court of
We rule in the affirmative. Appeals,26 the Court debunked the claim of good faith by a
party who maliciously sought the issuance of a writ of
attachment, the bad faith of said party having been
Notwithstanding the final judgment that petitioner is guilty
previously determined in a final decision which voided the
of misrepresentation and suppression of a material fact, the
assailed writ. Thus –
latter contends that it acted in good faith. Petitioner also
contends that even if respondent is considered a resident of
Apropos the Application for Judgment on the Attachment (b) In an action for money or property embezzled
Bond, Escobar claims in its petition that the award of or fraudulently misapplied or converted to his own
attorney’s fees and injunction bond premium in favor of use by a public officer, or an officer of a
Hanil is [contrary] to law and jurisprudence. It contends corporation or an attorney, factor, broker, agent,
that no malice or bad faith may be imputed to it in or clerk, in the course of his employment as such,
procuring the writ. or by any other person in a fiduciary capacity, or
for a willful violation of duty;
Escobar’s protestation is now too late in the day. The
question of the illegality of the attachment and Escobar’s (c) In an action to recover the possession of
bad faith in obtaining it has long been settled in one of the personal property unjustly or fraudulently taken,
earlier incidents of this case. The Court of Appeals, in its detained, or converted, when the property, or any
decision rendered on February 3, 1983 in C.A.-G.R. No. SP- part thereof, has been concealed, removed, or
14512, voided the challenged writ, having been issued with disposed of to prevent its being found or taken by
grave abuse of discretion. Escobar’s bad faith in procuring the applicant or an authorized person;
the writ cannot be doubted. Its Petition for the Issuance of
Preliminary Attachment made such damning allegations (d) In an action against a party who has been
that: Hanil was already able to secure a complete release of guilty of a fraud in contracting the debt or
its final collection from the MPWH; it has moved out some incurring the obligation upon which the action is
of its heavy equipments for unknown destination, and it brought, or in the performance thereof;
may leave the country anytime. Worse, its Ex Parte  Motion
to Resolve Petition alleged that "after personal verification
(e) In an action against a party who has removed
by (Escobar) of (Hanil’s) equipment in Cagayan de Oro City,
or disposed of his property, or is about to do so,
it appears that the equipments were no longer existing
with intent to defraud his creditors;
from their compound." All these allegations of Escobar were
found to be totally baseless and untrue.
(f) In an action against a party who resides out of
the Philippines, or on whom summons may be
Even assuming that the trial court did not make a
served by publication.
categorical pronouncement of misrepresentation and
suppression of material facts on the part of petitioner, the
factual backdrop of this case does not support petitioner’s The purposes of preliminary attachment are: (1) to seize
claim of good faith. The facts and circumstances omitted the property of the debtor in advance of final judgment and
are highly material and relevant to the grant or denial of to hold it for purposes of satisfying said judgment, as in the
writ of attachment applied for. grounds stated in paragraphs (a) to (e) of Section 1, Rule
57 of the Rules of Court; or (2) to acquire jurisdiction over
the action by actual or constructive seizure of the property
Finally, there is no merit in petitioner’s contention that
in those instances where personal or substituted service of
respondent can be considered a resident who is temporarily
summons on the defendant cannot be effected, as in
out of the Philippines upon whom service of summons may
paragraph (f) of the same provision.27
be effected by publication, and therefore qualifies as among
those against whom a writ of attachment may be issued
under Section 1, paragraph (f), Rule 57 of the Rules of Corollarily, in actions in personam, such as the instant case
Court which provides: for collection of sum of money,28 summons must be served
by personal or substituted service, otherwise the court will
not acquire jurisdiction over the defendant. In case the
(f) In an action against a party x x x on whom summons
defendant does not reside and is not found in the
may be served by publication.
Philippines (and hence personal and substituted service
cannot be effected), the remedy of the plaintiff in order for
In so arguing, petitioner attempts to give the impression the court to acquire jurisdiction to try the case is to convert
that although it erroneously invoked the ground that the action into a proceeding in rem  or quasi in rem by
respondent does not reside in the Philippines, it should not attaching the property of the defendant.29 Thus, in order to
be made to pay damages because it is in fact entitled to a acquire jurisdiction in actions in personam where defendant
writ of attachment had it invoked the proper ground under resides out of and is not found in the Philippines, it
Rule 57. However, even on this alternative ground, becomes a matter of course for the court to convert the
petitioner is still not entitled to the issuance of a writ of action into a proceeding in rem or quasi in rem by attaching
attachment. the defendant’s property. The service of summons in this
case (which may be by publication coupled with the
The circumstances under which a writ of preliminary sending by registered mail of the copy of the summons and
attachment may be issued are set forth in Section 1, Rule the court order to the last known address of the
57 of the Rules of Court, to wit: defendant), is no longer for the purpose of acquiring
jurisdiction but for compliance with the requirements of due
SEC. 1. Grounds upon which attachment may issue. — At process.30
the commencement of the action or at any time before
entry of judgment, a plaintiff or any proper party may have However, where the defendant is a resident who is
the property of the adverse party attached as security for temporarily out of the Philippines, attachment of his/her
the satisfaction of any judgment that may be recovered in property in an action in personam, is not always necessary
the following cases: in order for the court to acquire jurisdiction to hear the
case.
(a) In an action for the recovery of a specified
amount of money or damages, other than moral Section 16, Rule 14 of the Rules of Court reads:
and exemplary, on a cause of action arising from
law, contract, quasi-contract, delict or quasi-delict Sec. 16. Residents temporarily out of the Philippines. –
against a party who is about to depart from the When an action is commenced against a defendant who
Philippines with intent to defraud his creditors; ordinarily resides within the Philippines, but who is
temporarily out of it, service may, by leave of court, be also
effected out of the Philippines, as under the preceding strictly construed in favor of the defendant. For attachment
section. is harsh, extraordinary, and summary in nature; it is a
rigorous remedy which exposes the debtor to humiliation
The preceding section referred to in the above provision is and annoyance.35 It should be resorted to only when
Section 15 which provides for extraterritorial service – (a) necessary and as a last remedy.
personal service out of the Philippines, (b) publication
coupled with the sending by registered mail of the copy of It is clear from the foregoing that even on the allegation
the summons and the court order to the last known that respondent is a resident temporarily out of the
address of the defendant; or (c) in any other manner which Philippines, petitioner is still not entitled to a writ of
the court may deem sufficient. attachment because the trial court could acquire jurisdiction
over the case by substituted service instead of attaching
In Montalban v. Maximo,31 however, the Court held that the property of the defendant. The misrepresentation of
substituted service of summons (under the present Section petitioner that respondent does not reside in the Philippines
7, Rule 14 of the Rules of Court) is the normal mode of and its omission of his local addresses was thus a
service of summons that will confer jurisdiction on the court deliberate move to ensure that the application for the writ
over the person of residents temporarily out of the will be granted.
Philippines. Meaning, service of summons may be effected
by (a) leaving copies of the summons at the defendant’s In light of the foregoing, the Court of Appeals properly
residence with some person of suitable discretion residing sustained the finding of the trial court that petitioner is
therein, or (b) by leaving copies at the defendant’s office or liable for damages for the wrongful issuance of a writ of
regular place of business with some competent person in attachment against respondent.
charge thereof.32 Hence, the court may acquire jurisdiction
over an action in personam by mere substituted service Anent the actual damages, the Court of Appeals is correct
without need of attaching the property of the defendant. in not awarding the same inasmuch as the respondent
failed to establish the amount garnished by petitioner. It is
The rationale in providing for substituted service as the a well settled rule that one who has been injured by a
normal mode of service for residents temporarily out of the wrongful attachment can recover damages for the actual
Philippines, was expounded in Montalban v. Maximo,33 in loss resulting therefrom. But for such losses to be
this wise: recoverable, they must constitute actual damages duly
established by competent proofs, which are, however,
A man temporarily absent from this country leaves a wanting in the present case.36
definite place of residence, a dwelling where he lives, a
local base, so to speak, to which any inquiry about him may Nevertheless, nominal damages may be awarded to a
be directed and where he is bound to return. Where one plaintiff whose right has been violated or invaded by the
temporarily absents himself, he leaves his affairs in the defendant, for the purpose of vindicating or recognizing
hands of one who may be reasonably expected to act in his that right, and not for indemnifying the plaintiff for any loss
place and stead; to do all that is necessary to protect his suffered by him. Its award is thus not for the purpose of
interests; and to communicate with him from time to time indemnification for a loss but for the recognition and
any incident of importance that may affect him or his vindication of a right. Indeed, nominal damages are
business or his affairs. It is usual for such a man to leave at damages in name only and not in fact.37 They are
his home or with his business associates information as to recoverable where some injury has been done but the
where he may be contacted in the event a question that pecuniary value of the damage is not shown by evidence
affects him crops up. and are thus subject to the discretion of the court according
to the circumstances of the case.38
Thus, in actions in personam against residents temporarily
out of the Philippines, the court need not always attach the In this case, the award of nominal damages is proper
defendant’s property in order to have authority to try the considering that the right of respondent to use his money
case. Where the plaintiff seeks to attach the defendant’s has been violated by its garnishment. The amount of
property and to resort to the concomitant service of nominal damages must, however, be reduced from ₱2
summons by publication, the same must be with prior million to ₱50,000.00 considering the short period of 2
leave, precisely because, if the sole purpose of the months during which the writ was in effect as well as the
attachment is for the court to acquire jurisdiction, the latter lack of evidence as to the amount garnished.1âwphi1
must determine whether from the allegations in the
complaint, substituted service (to persons of suitable Likewise, the award of attorney’s fees is proper when a
discretion at the defendant’s residence or to a competent party is compelled to incur expenses to lift a wrongfully
person in charge of his office or regular place of business) issued writ of attachment. The basis of the award thereof is
will suffice, or whether there is a need to attach the also the amount of money garnished, and the length of
property of the defendant and resort to service of summons time respondents have been deprived of the use of their
by publication in order for the court to acquire jurisdiction money by reason of the wrongful attachment.39 It may also
over the case and to comply with the requirements of due be based upon (1) the amount and the character of the
process. services rendered; (2) the labor, time and trouble involved;
(3) the nature and importance of the litigation and business
In the instant case, it must be stressed that the writ was in which the services were rendered; (4) the responsibility
issued by the trial court mainly on the representation of imposed; (5) the amount of money and the value of the
petitioner that respondent is not a resident of the property affected by the controversy or involved in the
Philippines.34 Obviously, the trial court’s issuance of the writ employment; (6) the skill and the experience called for in
was for the sole purpose of acquiring jurisdiction to hear the performance of the services; (7) the professional
and decide the case. Had the allegations in the complaint character and the social standing of the attorney; (8) the
disclosed that respondent has a residence in Quezon City results secured, it being a recognized rule that an attorney
and an office in Makati City, the trial court, if only for the may properly charge a much larger fee when it is
purpose of acquiring jurisdiction, could have served contingent than when it is not.40
summons by substituted service on the said addresses,
instead of attaching the property of the defendant. The
rules on the application of a writ of attachment must be
All the aforementioned weighed, and considering the short
period of time it took to have the writ lifted, the favorable
decisions of the courts below, the absence of evidence as
to the professional character and the social standing of the
attorney handling the case and the amount garnished, the
award of attorney’s fees should be fixed not at ₱1 Million,
but only at ₱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 Million
excessive. Moral damages are to be fixed upon the
discretion of the court taking into consideration the
educational, social and financial standing of the
parties.41 Moral damages are not intended to enrich a
complainant at the expense of a defendant.42 They are
awarded only to enable the injured party to obtain means,
diversion or amusements that will serve to obviate the
moral suffering he has undergone, by reason of petitioner’s
culpable action. Moral damages must be 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 of

attachment, we sustain the award of exemplary damages
by way of example or correction for public good. This
should deter parties in litigations from resorting to baseless
and preposterous allegations to obtain writs of
attachments. While as a general rule, the liability on the
attachment bond is limited to actual (or in some cases,
temperate or nominal) damages, exemplary damages may
be recovered where the attachment was established to be
maliciously sued out.43 Nevertheless, the award of
exemplary damages in this case should be reduced from
₱5M to ₱500,000.00.

Finally, contrary to the claim of petitioner, the instant case

for damages by reason of the invalid issuance of the writ,
survives the dismissal of the main case for sum of money.
Suffice it to state that the claim for damages arising from
such wrongful attachment may arise and be decided
separately from the merits of the main action.44

WHEREFORE, the petition is PARTIALLY GRANTED. The

May 31, 2006 Decision of the Court of Appeals in CA-G.R.
CV No. 78200 is AFFIRMED with MODIFICATIONS. As
modified, petitioner Philippine Commercial International
Bank is ordered to pay respondent Joseph Anthony M.
Alejandro the following amounts: ₱50,000.00 as nominal
damages, ₱200,000.00 as attorney’s fees; and ₱500,000.00
as moral damages, and ₱500,000.00 as exemplary
damages, to be satisfied against the attachment bond
issued by Prudential Guarantee & Assurance Inc.,45 under
JCL (4) No. 01081, Bond No. HO-46764-97.

No pronouncement as to costs.

SO ORDERED.