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Transcript of Cases on Special Civil Actions 2013
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Republic of the Philippines
SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 158271 April 8, 2008
CHINA BANKING CORPORATION, petitioner,
vs.
ASIAN CONSTRUCTION and DEVELOPMENT CORPORATION, respondent.
D E C I S I O N
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by
petitioner China Banking Corporation (China Bank) seeking to annul the Resolution1 dated October 14,
2002 and the Resolution2 dated May 16, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 72175.
The facts of the case:
On July 24, 1996, China Bank granted respondent Asian Construction and Development Corporation
(ACDC) an Omnibus Credit Line in the amount of P90,000,000.00.3
On April 12, 1999, alleging that ACDC failed to comply with its obligations under the Omnibus Credit
Line, China Bank filed a Complaint4 for recovery of sum of money and damages with prayer for the
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issuance of writ of preliminary attachment before the Regional Trial Court (RTC) of Makati, Branch 138,
docketed as Civil Case No. 99-796. In the Complaint, China Bank claimed that ACDC, after collecting and
receiving the proceeds or receivables from the various construction contracts and purportedly holding
them in trust for China Bank under several Deeds of Assignment, misappropriated, converted, and used
the funds for its own purpose and benefit, instead of remitting or delivering them to China Bank.5
On April 22, 1999, the RTC issued an Order6 granting China Banks prayer for writ of preliminary
attachment. Consequently, as shown in the Sheriffs Report7 dated June 14, 1999, the writ of
preliminary attachment was implemented levying personal properties of ACDC, i.e., vans, dump trucks,
cement mixers, cargo trucks, utility vehicles, machinery, equipment and office machines and fixtures.
On March 27, 2000, upon motion of China Bank, the RTC issued a Summary Judgment8 in favor of China
Bank. ACDC filed its Notice of Appeal9 dated April 24, 2000.
On June 15, 2000, China Bank filed a Motion to Take Custody of Attached Properties with Motion for
Grant of Authority to Sell to the Branch Sheriff10 with the RTC, praying that it be allowed to take
custody of ACDCs properties for the purpose of selling them in an auction.11 On June 20, 2000, ACDC
filed its Opposition12 to the June 15, 2000 Motion arguing that there can be no sale of the latters
attached properties in the absence of a final and executory judgment against ACDC.
On August 25, 2000, China Bank partially appealed the Summary Judgment for not awarding interest on
one of its promissory notes.13 Records of the case were elevated to the CA.14
On April 18, 2002, China Bank filed a Motion for Leave for Grant of Authority to Sell Attached
Properties15 which the CA denied in the herein assailed Resolution dated October 14, 2002.
According to the CA, selling the attached properties prior to final judgment of the appealed case is
premature and contrary to the intent and purpose of preliminary attachment for the following reasons:
first, the records reveal that the attached properties subject of the motion are not perishable in nature;
and second, while the sale of the attached properties may serve the interest of China Bank, it will not be
so for ACDC. The CA recognized China Banks apprehension that by the time a final judgment is
rendered, the attached properties would be worthless. However, the CA also acknowledged that since
ACDC is a corporation engaged in a construction business, the preservation of the properties is of
paramount importance; and that in the event that the decision of the lower court is reversed and a final
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judgment rendered in favor ACDC, great prejudice will result if the attached properties were already
sold.
China Bank filed a Motion for Reconsideration16 which was denied in the herein assailed CA
Resolution17 dated May 16, 2003.
Hence, the present petition for review on certiorari, on the following ground:
THE HONORABLE COURT OF APPEALS RENDERED THE QUESTIONED RESOLUTIONS (ANNEXES "A" and
"B") IN A MANNER NOT IN ACCORD WITH THE PROVISIONS OF SECTION 11, RULE 57 OF THE RULES OF
CIVIL PROCEDURE, AS IT SHELVED THE DEMANDS OF EQUITY BY ARBITRARILY DISALLOWING THE SALE
OF THE ATTACHED PROPERTIES, UPHOLDING ONLY THE INTEREST OF RESPONDENT, IN UTTER
PARTIALITY.18
Considering that the herein assailed CA Resolutions are interlocutory in nature as they do not dispose of
the case completely but leave something to be done upon the merits,19 the proper remedy should have
been by way of petition for certiorari under Rule 65, as provided for in Section 1 (b), Rule 41 of the Rules
of Court, as amended by A.M. No. 07-7-12-SC,20 which provides:
Section 1. Subject of appeal. - An appeal may be taken from a judgment or final order that completely
disposes of the case, or of a particular matter therein when declared by these Rules to be appealable.
No appeal may be taken from:
x x x x
(b) An interlocutory order;
x x x x
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In any of the foregoing instances, the aggrieved party may file an appropriate special civil action as
provided in Rule 65. (Emphasis supplied).
The present petition for review on certiorari should have been dismissed outright. However, in many
instances, the Court has treated a petition for review on certiorari under Rule 45 as a petition for
certiorari under Rule 65 of the Rules of Court, such as in cases where the subject of the recourse was
one of jurisdiction, or the act complained of was perpetrated by a court with grave abuse of discretion
amounting to lack or excess of jurisdiction.21 The present petition does not involve any issue on
jurisdiction, neither does it show that the CA committed grave abuse of discretion in denying the motion
to sell the attached property.
Section 11, Rule 57 of the Rules of Court provides:
Sec. 11. When attached property may be sold after levy on attachment and before entry of judgment.-
Whenever it shall be made to appear to the court in which the action is pending, upon hearing with
notice to both parties, that the property attached is perishable, or that the interests of all the parties to
the action will be subserved by the sale thereof, the court may order such property to be sold at public
auction in such manner as it may direct, and the proceeds of such sale to be deposited in court to abide
the judgment in the action. (Emphasis supplied)
Thus, an attached property may be sold after levy on attachment and before entry of judgment
whenever it shall be made to appear to the court in which the action is pending, upon hearing with
notice to both parties, that the attached property is perishable or that the interests of all the parties to
the action will be subserved by the sale of the attached property.
In its Memorandum,22 China Bank argues that the CAs notion of perishable property, which pertains
only to those goods which rot and decay and lose their value if not speedily put to their intended use,23is a strict and stringent interpretation that would betray the purpose for which the preliminary
attachment was engrafted.24 Citing Witherspoon v. Cross,25 China Bank invokes the definition of
"perishable property" laid down by the Supreme Court of California as goods which decay and lose their
value if not speedily put to their intended use; but where the time contemplated is necessarily long, the
term may embrace property liable merely to material depreciation in value from other causes than such
decay.
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As stated in the Sheriffs Report26 and Notices of Levy on Properties,27 all of
ACDCs properties which were levied are personal properties consisting of used vehicles, i.e., vans, dump
trucks, cement mixers, cargo trucks, utility vehicles, machinery, equipment and office machines and
fixtures. China Bank insists that the attached properties, all placed inside ACDCs stockyard located at
Silang, Cavite and the branch office in Mayamot, Antipolo City, are totally exposed to natural elements
and adverse weather conditions.28 Thus, China Bank argues, that should the attached properties be
allowed to depreciate, perish or rot while the main case is pending, the attached properties will
continue losing their worth thereby rendering the rules on preliminary attachment nugatory.
The issue hinges on the determination whether the vehicles, office machines and fixtures are
"perishable property" under Section 11, Rules 57 of the Rules of Court, which is actually one of first
impression. No local jurisprudence or authoritative work has touched upon this matter. This being so, an
examination of foreign laws and jurisprudence, particularly those of the United States where some of
our laws and rules were patterned after, is in order.29
In Mossler Acceptance Co. v. Denmark,30 an order of the lower court in directing the sale of attached
properties, consisting of 20 automobiles and 2 airplanes, was reversed by the Supreme Court of
Louisiana. In support of its contention that automobiles are perishable, Mossler offered testimony to the
effect that automobile tires tend to dry-rot in storage, batteries to deteriorate, crankcases to becomedamaged, paint and upholstery to fade, that generally automobiles tend to depreciate while in
storage.31 Rejecting these arguments, the Supreme Court of Louisiana held that while there might be a
depreciation in the value of a car during storage, depending largely on existing economic conditions,
there would be no material deterioration of the car itself or any of its appurtenances if the car was
properly cared for, and therefore it could not be said that automobiles were of a perishable nature
within the intendment of the statute, which could only be invoked when the property attached and
seized was of a perishable nature.32
With respect to the determination of the question on whether the attached office furniture, office
equipment, accessories and supplies are perishable properties, the Supreme Court of Alabama in
McCreery v. Berney National Bank33 discussed the "perishable" nature of the attached properties,
consisting of shelving, stock of drygoods and a complete set of store fixtures, consisting of counters iron
safe, desk and showcases, to be within the meaning of "perishable" property under the Alabama Code
which authorizes a court, on motion of either party, to order the sale, in advance of judgment, of
perishable property which had been levied on by a writ of attachment.34
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In McCreery, the Supreme Court of Alabama rejected the argument that the sale of the attached
property was void because the term "perishable" property, as used in the statute, meant only such
property as contained in itself the elements of speedy decay, such as fruits, fish, fresh meats, etc.35 The
Supreme Court of Alabama held that whatever may be the character of the property, if the court issatisfied that, either by reason of its perishable nature, or because of the expense of keeping it until the
termination of the litigation, it will prove, or be likely to prove, fruitless to the creditor, and that the
purpose of its original seizure will probably be frustrated, the sale of the attached property is justified.
McCreery applied the doctrine in Millards Admrs. v. Hall36 where the Supreme Court of Alabama held
that an attached property is perishable "if it is shown that, by keeping the article, it will necessarily
become, or is likely to become, worthless to the creditor, and by consequence to the debtor, then it is
embraced by the statute. It matters not, in our opinion, what the subject matter is. It may be cotton
bales, live stock, hardware provisions or dry goods." Although the statute under which Millards was
decided used the words "likely to waste or be destroyed by keeping," instead of the word "perishable,"
the reasons given for the construction placed on the statute apply equally to the Alabama Code which
uses the term "perishable."37
In the Motion for Leave for Grant of Authority to Sell Attached Properties38 filed before the CA, China
Bank alleged that the attached properties are placed in locations where they are totally exposed to the
natural elements and adverse weather conditions since their attachment in 1999;39 that as a result, the
attached properties have gravely deteriorated with corrosions eating them up, with weeds germinatingand growing thereon and their engines and motors stock up;40 and that the same holds true to the
office furniture, office equipment, accessories and supplies.41 No evidence, however, were submitted
by China Bank to support and substantiate these claims before the CA.
Notably, in the Petition filed before the Court, China Bank, for the first time, included as annexes,42
photographs of the attached properties which were alleged to be recently taken, in an attempt to
convince the Court of the deteriorated condition of the attached properties.
The determination on whether the attached vehicles are properly cared for, and the burden to show
that, by keeping the attached office furniture, office equipment and supplies, it will necessarily become,
or is likely to become, worthless to China Bank, and by consequence to ACDC, are factual issues
requiring reception of evidence which the Court cannot do in a petition for certiorari. Factual issues are
beyond the scope of certiorari because they do not involve any jurisdictional issue.43
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As a rule, only jurisdictional questions may be raised in a petition for certiorari, including matters of
grave abuse of discretion which are equivalent to lack of jurisdiction.44 The office of the writ of
certiorari has been reduced to the correction of defects of jurisdiction solely and cannot legally be used
for any other purpose.45
Certiorari is truly an extraordinary remedy and, in this jurisdiction, its use is restricted to truly
extraordinary cases - cases in which the action of the inferior court is wholly void; where any further
steps in the case would result in a waste of time and money and would produce no result whatever;
where the parties, or their privies, would be utterly deceived; where a final judgment or decree would
be nought but a snare and delusion, deciding nothing, protecting nobody, a judicial pretension, a
recorded falsehood, a standing menace. It is only to avoid such results as these that a writ of certiorari is
issuable; and even here an appeal will lie if the aggrieved party prefers to prosecute it.46
Moreover, the Court held in JAM Transportation Co., Inc. v. Flores47 that it is well-settled, too well-
settled to require a citation of jurisprudence, that this Court does not make findings of facts specially on
evidence raised for the first time on appeal.48 The Court will not make an exception in the case at bar.
Hence, the photographs of the attached properties presented before the Court, for the first time on
appeal, cannot be considered by the Court.
China Bank argues that if the CA allowed the attached properties to be sold, whatever monetary valuewhich the attached properties still have will be realized and saved for both parties.49 China Bank further
claims that should ACDC prevail in the final judgment50 of the collection suit, ACDC can proceed with
the bond posted by China Bank.51 The Court finds said arguments to be specious and misplaced.
Section 4, Rule 57 of the Rules of Court provides:
Section 4. Condition of applicants bond. - The party applying for the order must thereafter give a bondexecuted to the adverse party in the amount fixed by the court in its order granting the issuance of the
writ, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all
the damages which he may sustain by reason of the attachment, if the court shall finally adjudge that
the applicant was not entitled thereto.
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It is clear from the foregoing provision that the bond posted by China Bank answers only for the
payment of all damages which ACDC may sustain if the court shall finally adjudge that China Bank was
not entitled to attachment. The liability attaches if "the plaintiff is not entitled to the attachment
because the requirements entitling him to the writ are wanting," or "if the plaintiff has no right to the
attachment because the facts stated in his affidavit, or some of them are untrue."52 Clearly, ACDC can
only claim from the bond for all the damages which it may sustain by reason of the attachment and not
because of the sale of the attached properties prior to final judgment.
Sale of attached property before final judgment is an equitable remedy provided for the convenience of
the parties and preservation of the property.53 To repeat, the Court finds that the issue of whether the
sale of attached properties is for the convenience of the parties and that the interests of all the parties
will be subserved by the said sale is a question of fact. Again, the foregoing issue can only be resolved
upon examination of the evidence presented by both parties which the Court cannot do in a petition for
certiorari under Rule 65 of the Rules of Court.
WHEREFORE, the petition is DENIED. The assailed Resolutions of the Court of Appeals dated October 14,
2002 and May 16, 2003 in CA-G.R. CV No. 72175 are hereby AFFIRMED.
SO ORDERED.
FIRST DIVISION
[G.R. No. 123358. February 1, 2000]
FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU, petitioners, vs. THE COURT OF APPEALS, THE
HON. JOSE C. DE LA RAMA, Presiding Judge, Branch 139, Regional Trial Court, NCJR, Makati City, Metro
Manila, and LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, respondents.
D E C I S I O N
YNARES_SANTIAGO, J.:
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On June 29, 1993, private respondent Ley Construction and Development Corporation filed a Complaint
for collection of a sum of money with application for preliminary attachment against petitioner FCY
Construction Group, Inc. and Francis C. Yu with the Makati Regional Trial Court which was docketed as
Civil Case No. 93-2112. Private respondent alleged that it had a joint venture agreement with petitionerFCY Construction Group, Inc. (wherein petitioner Francis C. Yu served as President) over the Tandang
Sora Commonwealth Flyover government project for which it had provided funds and construction
materials. The Complaint was filed in order to compel petitioners to pay its half share in the collections
received in the project as well as those yet to be received therein. In support of its application for a writ
of attachment, private respondent alleged that petitioners were guilty of fraud in incurring the
obligation and had fraudulently misapplied or converted the money paid them, to which it had an equal
share.
On July 6, 1993, following an ex-parte hearing, the lower court issued an Order for the issuance of a writ
of preliminary attachment, conditioned upon the filing of a P7,000,000.00 attachment bond.
Petitioners moved for the lifting of the writ of preliminary attachment on the following grounds: (1) the
attachment was heard, issued and implemented even before service of summons upon them; (2) failure
of the attaching officer to serve a copy of the affidavit of merit upon them; and (3) that there was no
fraud in incurring the obligation. As an alternative prayer in their Motion, petitioners prayed that the
attachment be limited to their receivables with the Department of Public Works and Highways. This
alternative prayer was later withdrawn by petitioners in a Manifestation and Motion.
On May 25, 1994, the lower court issued another Order denying petitioners' Motion to Lift
Attachment.[1] It, however, reduced and confined the attachment to receivables due petitioners from
the Tandang Sora commonwealth Flyover project.
Subsequently, petitioners filed a Motion for Reconsideration[2] as well as an Omnibus Motion for Leave
to file Amended Answer and/or to delete Francis C. Yu as party-defendant.[3]
With the denial of both Motions by the lower court on September 4, 1994,[4] petitioners filed a Petition
for Certiorari before the Court of Appeals on September 16, 1994.[5] The Petition was, however, denied
on July 31, 1995;[6] so was petitioners' Motion for Reconsideration.[7]
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Hence, the instant Petition.
It is evident that the questioned writ of attachment was anchored upon Section 1(d), Rule 57 of the
Revised Rules of Court, to wit -
"SECTION 1. Grounds upon which attachment may issue. - A plaintiff or any proper party may, at the
commencement of the action or at any time thereafter, have the property of the adverse party attached
as security for the satisfaction of any judgment that may be recovered in the following cases:
x x x x x x x x x.
(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the
obligation upon which the action is brought, or in concealing or disposing of the property for the taking,
detention or conversion of which the action is brought;
x x x x x x x x x."
Petitioners, however, insist that the writ of preliminary attachment was irregularly issued inasmuch as
there was no evidence of fraud in incurring the obligations sued upon.
In support of their stand, petitioners alleged that private respondent's principal witness admitted that it
was the Department of Public Works and Highways (DPWH) that induced it to deliver materials and cash
for the Tandang Sora Commonwealth Flyover project, to wit -
COURT: Now . . . as of January 5, 1993 you delivered to him (referring to defendant FCY corporation) incash and in kind amounting to Fifteen Million Pesos (P15,000,000.00), now why did you keep on
delivering cash and materials to him if you were not paid a single centavo?
A Because of every need for the project, and the Public Works official assured me that I will be
given a new project after the Tandang Sora will be finished.
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Q Who is this public official that promised you?
A Director Pendosa, Teodoro Encarnacion and Secretary de Jesus your Honor. (TSN, 6 July 1993,
pp. 47-48)
x x x x x x x x x
Q What about these officials of the Department of Public Highways, what would they do to project
their sub alleged project?
A Secretary de Jesus is no longer connected there, your Honor.
Q At the time?
A At that time, he resigned.
Q Before he resigned.
A He gave me assurance that they will soon give assurance, they will soon give me another project
. . . (TSN, 6 July 1993, p. 55)[8]
A cursory reading of the above-cited testimony, however, readily shows that said reassurance from theDPWH officials came, not at the inception of the obligation or contract, but during its performance. On
the other hand, the fraud of which petitioners are accused of and which was the basis for the issuance
of the questioned attachment, is fraud alleged to have been committed upon contracting the obligation
sued upon. Thus, petitioners argument that "the inducement was the mouth-watering temptation of a
DPWH promise of a 'new project after the Tandang Sora Flyover project will be finished"' is clearly off-
tangent as such inducement, if any, came not at the inception of the obligation.
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Similarly, petitioners' arguments that it was private respondent who admittedly prepared the letter
embodying the alleged joint venture agreement[9] and had petitioner Francis Yu sign it must fail. The
written agreement referred to was signed by petitioner Francis Yu only on January 5, 1993, long after
the project had commenced. Thus, It was only a written confirmation of an arrangement that hadalready been existing and operational. Similarly then, such written confirmation did not occur at the
inception of the obligation sued upon.
In Liberty Insurance Corporation vs. Court of Appeals,[10] this Court, discussing Section 1(d), Rule 57,
cautioned as follows --
To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or
incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the
agreement and must have been the reason which induced the other party into giving consent which he
would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the
Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is
fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention
not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but
may be inferred from the circumstances attendant in each case. (Republic v. Gonzales, 13 SCRA 633).
From the foregoing, therefore, the alleged inducement by the DPWH officials upon private respondentas well as the circumstances surrounding the execution of the joint venture agreement, both appear
immaterial as they were not committed upon contracting the obligation sued upon but occurred long
after the obligation has been established.
The fact that petitioners have paid a substantial amount of money to private respondent cannot save
the day for them either. As per their own accounting, such payments were for accounts payable for
labor supplied, construction materials and cash advances.[11] It is not denied that no payment of profits
has been given to private respondent, which is precisely what it is suing for.
Finally, considering that the writ of preliminary attachment has been issued on account of allegations of
fraud in contracting the obligation upon which the action is brought petitioners' efforts to have the writ
of preliminary attachment dissolved on the ground that it was improperly or irregularly issued is in vain.
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Indeed, in Liberty Insurance Corporation, supra, which cited Mindanao Savings and Loan Assoc. vs. Court
of Appeals (172 SCRA 480), we ruled -
"x x x, when the preliminary attachment is issued upon a ground which is at the same time the
applicant's cause of action: e.g., x x x an action against a party who has been guilty of fraud in
contracting the debt or incurring the obligation upon which the action is brought, the defendant is not
allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to show the
falsity of the factual averments in the plaintiffs application and affidavits on which the writ was based
and consequently that the writ based therein had been improperly or irregularly issued - the reason
being that the hearing on such motion for dissolution of the writ would be tantamount to a trial on the
merits. In other words, the merits of the action would be ventilated at a mere hearing of a motion;
instead of the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can
be dissolved is by a counterbond."
We now come to the issue of whether or not petitioner Francis Yu should remain as party-defendant.
Petitioners argue that since the transactions were corporation to corporation only, petitioner Francis Yu
should be dropped as party-defendant considering the hornbook law that corporate personality is a
shield against personal liability of its officers. We agree that petitioner Francis Yu cannot be made liable
in his individual capacity if he indeed entered into and signed the contract in his official capacity as
President, in the absence of stipulation to that effect, due to the personality of the corporation being
separate and distinct from the persons composing it.[12] However, while we agree that petitioner
Francis Yu cannot be held solidarily liable with petitioner corporation merely because he is the President
thereof and was involved in the transactions with private corporation, we also note that there existsinstances when corporate officers may be held personally liable for corporate acts. Such exceptions
were outlined in Tramat Mercantile, Inc. vs. Court of Appeals,[13] as follows --
"Personal liability of a corporate director, trustee or officer along (although not necessarily) with the
corporation may so validly attach, as a rule, only when -
1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence indirecting its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its
stockholders or other persons;
2. He consents to the issuance of watered down stocks or who, having knowledge thereof, does not
forthwith file with the corporate secretary his written objection thereto;
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3. He agrees to hold himself personally and solidarily liable with the corporation; or
4. He is made, by a specific provision of law, to personally answer for his corporate action."
The attendance of these circumstances, however, cannot be determined at this stage and should
properly be threshed out during the trial on the merits. Stated differently, whether or not petitioner
Francis Yu should be held personally and solidarily liable with petitioner corporation is a matter that
should be left to the trial court's discretion, dependent as it is on evidence during trial.
WHEREFORE, in view of the foregoing, the instant Petition is hereby DISMISSED. No pronouncement asto costs.
SO ORDERED.
SECOND DIVISION
SECURITY PACIFIC ASSURANCE CORPORATION,
Petitioner,
- versus -
THE HON. AMELIA TRIA-INFANTE, In her official capacity as Presiding Judge, Regional Trial Court, Branch
9, Manila; THE PEOPLE OF THE PHILIPPINES, represented by Spouses REYNALDO and ZENAIDA ANZURES;
and REYNALDO R. BUAZON, In his official capacity as Sheriff IV, Regional Trial Court, Branch 9, Manila,
Respondents.
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G.R. No. 144740
Present:
PUNO,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.
Promulgated:
August 31, 2005
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
D E C I S I O N
CHICO-NAZARIO, J.:
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Before Us is a petition for review on certiorari, assailing the Decision[1] and Resolution[2] of the
Court of Appeals in CA-G.R. SP No. 58147, dated 16 June 2000 and 22 August 2000, respectively. The
said Decision and Resolution declared that there was no grave abuse of discretion on the part of
respondent Judge in issuing the assailed order dated 31 March 2000, which was the subject in CA-G.R.
SP No. 58147.
THE FACTS
The factual milieu of the instant case can be traced from this Courts decision in G.R. No. 106214
promulgated on 05 September 1997.
On 26 August 1988, Reynaldo Anzures instituted a complaint against Teresita Villaluz (Villaluz) for
violation of Batas Pambansa Blg. 22. The criminal information was brought before the Regional Trial
Court, City of Manila, and raffled off to Branch 9, then presided over by Judge Edilberto G. Sandoval,
docketed as Criminal Case No. 89-69257.
An Ex-Parte Motion for Preliminary Attachment[3] dated 06 March 1989 was filed by Reynaldo
Anzures praying that pending the hearing on the merits of the case, a Writ of Preliminary Attachment be
issued ordering the sheriff to attach the properties of Villaluz in accordance with the Rules.
On 03 July 1989, the trial court issued an Order[4] for the issuance of a writ of preliminary
attachment upon complainants posting of a bond which is hereby fixed at P2,123,400.00 and the
Courts approval of the same under the condition prescribed by Sec. 4 of Rule 57 of the Rules of
Court.
An attachment bond[5] was thereafter posted by Reynaldo Anzures and approved by the court.
Thereafter, the sheriff attached certain properties of Villaluz, which were duly annotated on the
corresponding certificates of title.
On 25 May 1990, the trial court rendered a Decision[6] on the case acquitting Villaluz of the crime
charged, but held her civilly liable. The dispositive portion of the said decision is reproduced hereunder:
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WHEREFORE, premises considered, judgment is hereby rendered ACQUITTING the accused TERESITA E.
VILLALUZ with cost de oficio. As to the civil aspect of the case however, accused is ordered to pay
complainant Reynaldo Anzures the sum of TWO MILLION ONE HUNDRED TWENTY THREE THOUSAND
FOUR HUNDRED (P2,123,400.00) PESOS with legal rate of interest from December 18, 1987 until fully
paid, the sum of P50,000.00 as attorneys fees and the cost of suit.*7+
Villaluz interposed an appeal with the Court of Appeals, and on 30 April 1992, the latter rendered
its Decision,[8] the dispositive portion of which partly reads:
WHEREFORE, in CA-G.R. CV No. 28780, the Decision of the Regional Trial Court of Manila, Branch 9,
dated May 25, 1990, as to the civil aspect of Criminal Case No. 89-69257, is hereby AFFIRMED, in all
respects.
The case was elevated to the Supreme Court (G.R. No. 106214), and during its pendency, Villaluz
posted a counter-bond in the amount of P2,500,000.00 issued by petitioner Security Pacific AssuranceCorporation.[9] Villaluz, on the same date[10] of the counter-bond, filed an Urgent Motion to Discharge
Attachment.[11]
On 05 September 1997, we promulgated our decision in G.R. No. 106214, affirming in toto the decision
of the Court of Appeals.
In view of the finality of this Courts decision in G.R. No. 106214, the private complainant moved
for execution of judgment before the trial court.[12]
On 07 May 1999, the trial court, now presided over by respondent Judge, issued a Writ of Execution.[13]
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Sheriff Reynaldo R. Buazon tried to serve the writ of execution upon Villaluz, but the latter no
longer resided in her given address. This being the case, the sheriff sent a Notice of Garnishment upon
petitioner at its office in Makati City, by virtue of the counter-bond posted by Villaluz with said insurance
corporation in the amount of P2,500,000.00. As reported by the sheriff, petitioner refused to assume its
obligation on the counter-bond it posted for the discharge of the attachment made by Villaluz.[14]
Reynaldo Anzures, through the private prosecutor, filed a Motion to Proceed with
Garnishment,[15] which was opposed by petitioner[16] contending that it should not be held liable on
the counter-attachment bond.
The trial court, in its Order dated 31 March 2000,[17] granted the Motion to Proceed with
Garnishment. The sheriff issued a Follow-Up of Garnishment[18] addressed to the President/General
Manager of petitioner dated 03 April 2000.
On 07 April 2000, petitioner filed a Petition for Certiorari with Preliminary Injunction and/or
Temporary Restraining Order*19+ with the Court of Appeals, seeking the nullification of the trial courts
order dated 31 March 2000 granting the motion to proceed with garnishment. Villaluz was also named
as petitioner. The petitioners contended that the respondent Judge, in issuing the order dated 31
March 2000, and the sheriff committed grave abuse of discretion and grave errors of law in proceeding
against the petitioner corporation on its counter-attachment bond, despite the fact that said bond was
not approved by the Supreme Court, and that the condition by which said bond was issued did not
happen.[20]
On 16 June 2000, the Court of Appeals rendered a Decision,[21] the dispositive portion of which
reads:
WHEREFORE, premises considered, the Court finds no grave abuse of discretion on the part of
respondent judge in issuing the assailed order. Hence, the petition is dismissed.
A Motion for Reconsideration[22] was filed by petitioner, but was denied for lack of merit by the
Court of Appeals in its Resolution[23] dated 22 August 2000.
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Undeterred, petitioner filed the instant petition under Rule 45 of the 1997 Rules of Civil Procedure,
with Urgent Application for a Writ of Preliminary Injunction and/or Temporary Restraining Order.[24]
On 13 December 2000, this Court issued a Resolution[25] requiring the private respondents to file
their Comment to the Petition, which they did. Petitioner was required to file its Reply[26] thereafter.
Meanwhile, on 17 January 2001, petitioner and the spouses Reynaldo and Zenaida Anzures
executed a Memorandum of Understanding (MOU).[27] In it, it was stipulated that as of said date, the
total amount garnished from petitioner had amounted to P1,541,063.85, and so the remaining amount
still sought to be executed was P958,936.15.[28] Petitioner tendered and paid the amount of
P300,000.00 upon signing of the MOU, and the balance of P658,936.15 was to be paid in installment at
P100,000.00 at the end of each month from February 2001 up to July 2001. At the end of August 2001,
the amount of P58,936.00 would have to be paid. This would make the aggregate amount paid to the
private respondents P2,500,000.00.[29] There was, however, a proviso in the MOU which states that
this contract shall not be construed as a waiver or abandonment of the appellate review pending
before the Supreme Court and that it will be subject to all such interim orders and final outcome of said
case.
On 13 August 2001, the instant petition was given due course, and the parties were obliged to
submit their respective Memoranda.[30]
ISSUES
The petitioner raises the following issues for the resolution of this Court:
Main Issue - WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN AFFIRMINGTHE 31 MARCH 2000 ORDER OF PUBLIC RESPONDENT JUDGE WHICH ALLOWED EXECUTION ON THE
COUNTER-BOND ISSUED BY THE PETITIONER.
Corollary Issues (1) WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED THAT THE
ATTACHMENT ON THE PROPERTY OF VILLALUZ WAS DISCHARGED WITHOUT NEED OF COURT APPROVAL
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OF THE COUNTER-BOND POSTED; and (2) WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED
THAT THE ATTACHMENT ON THE PROPERTY OF VILLALUZ WAS DISCHARGED BY THE MERE ACT OF
POSTING THE COUNTER-BOND.
THE COURTS RULING
Petitioner seeks to escape liability by contending, in the main, that the writ of attachment which
was earlier issued against the real properties of Villaluz was not discharged. Since the writ was not
discharged, then its liability did not accrue. The alleged failure of this Court in G.R. No. 106214 to
approve the counter-bond and to cause the discharge of the attachment against Villaluz prevented the
happening of a condition upon which the counter-bonds issuance was premised, such that petitioner
should not be held liable thereon.[31]
Petitioner further asserts that the agreement between it and Villaluz is not a suretyship agreement
in the sense that petitioner has become an additional debtor in relation to private respondents. It is
merely waiving its right of excussion[32] that would ordinarily apply to counter-bond guarantors as
originally contemplated in Section 12, Rule 57 of the 1997 Rules.
In their Comment,[33] the private respondents assert that the filing of the counter-bond by Villaluz
had already ipso facto discharged the attachment on the properties and made the petitioner liable on
the bond. Upon acceptance of the premium, there was already an express contract for surety between
Villaluz and petitioner in the amount of P2,500,000.00 to answer for any adverse judgment/decision
against Villaluz.
Petitioner filed a Reply*34+ dated 09 May 2001 to private respondents Comment, admitting the binding
effect of the bond as between the parties thereto. What it did not subscribe to was the theory that the
attachment was ipso facto or automatically discharged by the mere filing of the bond in court. Such
theory, according to petitioner, has no foundation. Without an order of discharge of attachment and
approval of the bond, petitioner submits that its stipulated liability on said bond, premised on their
occurrence, could not possibly arise, for to hold otherwise would be to trample upon the statutorily
guaranteed right of the parties to contractual autonomy.
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Based on the circumstances present in this case, we find no compelling reason to reverse the ruling of
the Court of Appeals.
Over the years, in a number of cases, we have made certain pronouncements about counter-
bonds.
In Tijam v. Sibonghanoy,[35] as reiterated in Vanguard Assurance Corp. v. Court of Appeals,[36] we
held:
. . . *A+fter the judgment for the plaintiff has become executory and the execution is returnedunsatisfied, as in this case, the liability of the bond automatically attaches and, in failure of the surety to
satisfy the judgment against the defendant despite demand therefore, writ of execution may issue
against the surety to enforce the obligation of the bond.
In Luzon Steel Coporation v. Sia, et al.: [37]
. . . [C]ounterbonds posted to obtain the lifting of a writ of attachment is due to these bonds
being security for the payment of any judgment that the attaching party may obtain; they are thus mere
replacements of the property formerly attached, and just as the latter may be levied upon after final
judgment in the case in order to realize the amount adjudged, so is the liability of the countersureties
ascertainable after the judgment has become final. . . .
In Imperial Insurance, Inc. v. De Los Angeles,[38] we ruled:
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. . . Section 17, Rule 57 of the Rules of Court cannot be construed that an execution against the
debtor be first returned unsatisfied even if the bond were a solidary one, for a procedural may not
amend the substantive law expressed in the Civil Code, and further would nullify the express stipulation
of the parties that the suretys obligation should be solidary with that of the defendant.
In Philippine British Assurance Co., Inc. v. Intermediate Appellate Court,[39] we further held that
the counterbond is intended to secure the payment of any judgment that the attaching creditor may
recover in the action.
Petitioner does not deny that the contract between it and Villaluz is one of surety. However, it
points out that the kind of surety agreement between them is one that merely waives its right of
excussion. This cannot be so. The counter-bond itself states that the parties jointly and severally bind
themselves to secure the payment of any judgment that the plaintiff may recover against the defendant
in the action. A surety is considered in law as being the same party as the debtor in relation to whatever
is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be
inseparable.[40]
Suretyship is a contractual relation resulting from an agreement whereby one person, the surety,
engages to be answerable for the debt, default or miscarriage of another, known as the principal. The
suretys obligation is not an original and direct one for the performance of his own act, but merely
accessory or collateral to the obligation contracted by the principal. Nevertheless, although the contract
of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor or
promise of the principal is said to be direct, primary and absolute; in other words, he is directly and
equally bound with the principal. The surety therefore becomes liable for the debt or duty of another
although he possesses no direct or personal interest over the obligations nor does he receive any
benefit therefrom.[41]
In view of the nature and purpose of a surety agreement, petitioner, thus, is barred from
disclaiming liability.
Petitioners argument that the mere filing of a counter-bond in this case cannot automatically
discharge the attachment without first an order of discharge and approval of the bond, is lame.
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Under the Rules, there are two (2) ways to secure the discharge of an attachment. First, the party
whose property has been attached or a person appearing on his behalf may post a security. Second,
said party may show that the order of attachment was improperly or irregularly issued.[42] The first
applies in the instant case. Section 12, Rule 57,[43] provides:
SEC. 12. Discharge of attachment upon giving counter-bond. After a writ of attachment has been
enforced, the party whose property has been attached, or the person appearing on his behalf, may
move for the discharge of the attachment wholly or in part on the security given. The court shall, after
due notice and hearing, order the discharge of the attachment if the movant makes a cash deposit, or
files a counter-bond executed to the attaching party with the clerk of the court where the application is
made, in an amount equal to that fixed by the court in the order of attachment, exclusive of costs. But if
the attachment is sought to be discharged with respect to a particular property, the counter-bond shall
be equal to the value of that property as determined by the court. In either case, the cash deposit or the
counter-bond shall secure the payment of any judgment that the attaching party may recover in the
action. A notice of the deposit shall forthwith be served on the attaching party. Upon the discharge of an
attachment in accordance with the provisions of this section, the property attached, or the proceeds of
any sale thereof, shall be delivered to the party making the deposit or giving the counter-bond, or to the
person appearing on his behalf, the deposit or counter-bond aforesaid standing in place of the property
so released. Should such counter-bond for any reason be found to be or become insufficient, and the
party furnishing the same fail to file an additional counter-bond, the attaching party may apply for a new
order of attachment.
It should be noted that in G.R. No. 106214, per our Resolution dated 15 January 1997,[44] we permitted
Villaluz to file a counter-attachment bond. On 17 February 1997,[45] we required the private
respondents to comment on the sufficiency of the counter-bond posted by Villaluz.
It is quite palpable that the necessary steps in the discharge of an attachment upon giving counter-
bond have been taken. To require a specific order for the discharge of the attachment when this Court,
in our decision in G.R. No. 106214, had already declared that the petitioner is solidarily bound with
Villaluz would be mere surplusage. Thus:
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During the pendency of this petition, a counter-attachment bond was filed by petitioner Villaluz before
this Court to discharge the attachment earlier issued by the trial court. Said bond amounting to P2.5
million was furnished by Security Pacific Assurance, Corp. which agreed to bind itself jointly and
severally with petitioner for any judgment that may be recovered by private respondent against the
former.[46]
We are not unmindful of our ruling in the case of Belisle Investment and Finance Co., Inc. v. State
Investment House, Inc.,[47] where we held:
. . . [T]he Court of Appeals correctly ruled that the mere posting of a counterbond does not
automatically discharge the writ of attachment. It is only after hearing and after the judge has ordered
the discharge of the attachment if a cash deposit is made or a counterbond is executed to the attaching
creditor is filed, that the writ of attachment is properly discharged under Section 12, Rule 57 of the
Rules of Court.
The ruling in Belisle, at first glance, would suggest an error in the assailed ruling of the Court of Appeals
because there was no specific resolution discharging the attachment and approving the counter-bond.
As above-explained, however, consideration of our decision in G.R. No. 106214 in its entirety will readily
show that this Court has virtually discharged the attachment after all the parties therein have been
heard on the matter.
On this score, we hew to the pertinent ratiocination of the Court of Appeals as regards the heretofore
cited provision of Section 12, Rule 57 of the 1997 Rules of Civil Procedure, on the discharge of
attachment upon giving counter-bond:
. . . The filing of the counter-attachment bond by petitioner Villaluz has discharged the
attachment on the properties and made the petitioner corporation liable on the counter-attachment
bond. This can be gleaned from the DEFENDANTS BOND FOR THE DISSOLUTION OF ATTACHMENT,
which states that Security Pacific Assurance Corporation, as surety, in consideration of the dissolution of
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the said attachment jointly and severally, binds itself with petitioner Villaluz for any judgment that may
be recovered by private respondent Anzures against petitioner Villaluz.
The contract of surety is only between petitioner Villaluz and petitioner corporation. The
petitioner corporation cannot escape liability by stating that a court approval is needed before it can be
made liable. This defense can only be availed by petitioner corporation against petitioner Villaluz but not
against third persons who are not parties to the contract of surety. The petitioners hold themselves out
as jointly and severally liable without any conditions in the counter-attachment bond. The petitioner
corporation cannot impose requisites before it can be made liable when the law clearly does not require
such requisites to be fulfilled.[48] (Emphases supplied.)
Verily, a judgment must be read in its entirety, and it must be construed as a whole so as to bring all of
its parts into harmony as far as this can be done by fair and reasonable interpretation and so as to give
effect to every word and part, if possible, and to effectuate the intention and purpose of the Court,
consistent with the provisions of the organic law.[49]
Insurance companies are prone to invent excuses to avoid their just obligation.[50] It seems that this
statement very well fits the instant case.
WHEREFORE, in view of all the foregoing, the Decision and Resolution of the Court of Appeals
dated 16 June 2000 and 22 August 2000, respectively, are both AFFIRMED. Costs against petitioner.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
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WE CONCUR:
REYNATO S. PUNO
Associate Justice
Chairman
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
ROMEO J. CALLEJO, SR.
Associate Justice
DANTE O. TINGA
Associate Justice
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A T T E S T A T I O N
I attest that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Associate Justice
Chairman, Second Division
C E R T I F I C A T I O N
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairmans Attestation, it is
hereby certified that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
HILARIO G. DAVIDE, JR.
Chief Justice
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Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 88379 November 15, 1989
PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS, GATES LEARJET CORPORATION and GATES LEARJET EXPORT CORPORATION,
respondents.
T.J. Sumawang & Associates for petitioner.
Quasha, Asperilla, Ancheta, Pea & Nolasco for private respondents.
NARVASA, J.:
In December, 1981, Learjet Phil. Inc. commenced suit in the Regional Trial Court at Pasig against Gates
Learjet Corporation and Gates Learjet Export Corporation. 1 On said plaintiffs application, and upon the
posting of an attachment bond in its behalf by Philippine Charter Insurance Corporation (then known as
Phil-Am Assurance Co., Inc.), the Court issued a writ of preliminary attachment directed against the
defendants' properties. On the strength of the writ, the sheriff seized a twin engine airplane, a Learjet
35-A-3799, belonging to the defendants.
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After due proceedings, judgment was rendered by the Trial Court in plaintiffs' favor, sentencing the
defendants to pay US$2,250,000.00 as actual damages, P200,000.00 as moral damages, P100,000.00 as
exemplary damages, as well as attorney's fees and costs. On appeal to the Court of Appeals by the
defendants, 2 however, this judgment was reversed. The decision of the Appellate Tribunal,promulgated on December 10, 1986, disposed as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and Civil Case No. 43874
of the Regional Trial Court of Pasig is DISMISSED for lack of merit. For the wrongful attachment of
Learjet aircraft 35A-44 owned by defendant-appellant Gates Learjet Corporation, plaintiff-appellee
Learjet Philippines, Inc. is hereby ordered to pay to the former by way of actual damages the amount of
$73,179-36, P50,000.00 as exemplary damages, and the costs of the suit.
On December 16, 1986 four days after notice of the judgment was served on the defendants, they filed
with the Court of Appeals an "Urgent Petition to have Damages Awarded on Account of Illegal
Attachment Executed Against Attachment Bond Issued by the T.J. Philippine American Assurance Co.,
Inc., Now Pan-Philippines General Insurance Corporation." The petition adverted to the attachment
bond posted by the surety firm in the amount of P2,000,000.00, and asked that the "damages awarded
defendants- appellants by reason of the wrongful attachment be enforced, after proper notice to
plaintiff and its bondsman and hearing of ... (the) application, jointly and severally against both the
plaintiff and the bonds-man-surety ... ." A copy of the petition was furnished the surety. The plaintiff, in
its turn, filed a motion for reconsideration of the decision of December 10, 1986.
By Resolution dated March 10, 1987, the Court of Appeals: 3 (1) denied the plaintiffs motion for
reconsideration for lack of merit; and (2) NOTED "defendants-appellants' application or claim for
damages against the surety" and RESOLVED "to refer the Said claim or application to the trial court and
allow the latter to hear and decide the same pursuant to Section 20, Rule 57 of the Rules of Court."
The plaintiff tried to have the Appellate Court's decision reviewed and reversed by us, but failed. 4 We
denied its petition for review by resolution dated August 10, 1987; and entry of the resolution was made
on February 26, 1988.
On remand of the case to the Trial Court, the defendants filed an "Urgent Petition to Have Damages
Awarded on Account of Illegal Attachment Executed Against Attachment Bond Issued by the Surety
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Philippine American Assurance Co., Inc., now Pan-Philippines General Insurance Corporation" dated
December 16, 1986. The Court ordered execution of the judgment "against the plaintiff at Suite 10
Prescon Strata 100 Emerald Avenue, Pasig, Metro Manila" in accordance with the Rules. The writ issued
on April 8, 1988.
Evidently, the sheriff sought to enforce the writ also against the surety, "Philippine Charter Insurance
Corporation ... (formerly Pan-Philippines General Insurance Corporation)." Said surety thereupon filed
with the Trial Court an "Urgent Motion to Recall against Nullify Sheriffs Notice of Enforcement of Writ of
Execution, and for Issuance of Restraining Order/Writ of Restraining Injunction." It contended that there
was in truth no judgment against it "due to the wrongful attachment of ... (the defendants') Learjet
Aircraft 35A-44," that since neither Section 20, Rule 57 of the Rules of Court nor the Resolution of the
Court of Appeals of March 10, 1987 had been complied with, there existed no award of damages against
it under its attachment bond, and enforcement of execution against said bond would be contrary to due
process.
The Trial Court forthwith restrained enforcement of the writ of execution against the surety and set the
surety's motion for hearing in the morning of May 27, 1988. After receiving the parties' arguments, the
Court promulgated an Order on June 14, 1988 overruling the movant surety's argument that it (the
Court) had lost competence to hear and determine the application or damages against the attachment
bond because the judgment of the Court of Appeals had become final and executory. The Court
observed that:
What is contemplated under Section 20, Rule 57, is that if no application for damages is made before
the entry of the final judgment the surety on the bond is relieved from liability therefor. (Visayan Surety
and Insurance Corporation v. Pascual [85 Phil. 779], citing Facundo vs. Tan and Facundo vs. Lim). In the
case at bar, an application was made before the entry of final judgment ... . What was merely deferred
was the hearing of said application before the trial court. In fact, said application was duly noted by the
Honorable Court of Appeals in its resolution. Hence, an application for damages was filed in time.
Considering the foregoing, and in order to determine the extent of the liability of both principal and
surety on the attachment bond, a hearing is necessary.
The Court also resolved to issue, upon a bond of Pl,000,000.00, a writ of preliminary injunction
restraining the sheriffs from enforcing the writ of execution or otherwise executing the judgment
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against the surety "until the application for damages on the attachment bond is heard and decided;"
and set the hearing on the matter on August 9, 1988.
The surety moved for reconsideration, but its motion was denied by Order handed down on October 13,
1988. The surety then went to the Court of Appeals again, where it sought annulment of the Trial
Court's Orders of June 14, 1988 and October 13, 1988. Its petition for certiorari, prohibition and
preliminary injunction, filed on November 3, 1988, was docketed as CA-G.R. No. SP No. 15987. In it the
surety argued that it had been denied its day in court when, without its being present at the trial, the
defendants had "adduced evidence in support of ... (the) damages" eventually awarded by the Court of
Appeals; that said defendants had "fatally failed to file an application for damages on account of the
wrongful attachment," and consequently, the Court had "no more jurisdiction to set for hearing ... (the)
urgent petition" (to have damages awarded on account of illegal attachment executed against
attachment bond, etc.).
The Appellate Court's verdict however again went against the surety. By Decision promulgated on March
8, 1 989, 5 the petition was "DENIED DUE COURSE." According to the Court, (1) the "general prayer" in
the petition (to hold surety liable on its bond) dated December 16,1986 "for such further reliefs justified
in the premises" was "broad enough to include and embrace an application or claim for whatever
damages movants sustained during the pendency of the appeal, by reason of ... "the wrongful
attachment ...", (2) such a finding was consistent with "Supreme Court rulings' and the earlier
"Resolution of March 10, 1987" noting "defendants-appellants' application or claim for damages against
the surety" and referring it "to the, trial court ... pursuant to Section 20, Rule 57 of the Rules of Court;"
and (3) "what must have been contemplated ... (in said application or claim for damages) were not thedamages awarded in CA-G.R. CV No. 08585, 6 but the damages which applicants or claimants could have
suffered during the pendency of said appeal, as a consequence of the wrongful attachment found by
final judgment," for otherwise "there would have been no need for this Court to allow and, in effect,
direct the trial court a quo 'to hear and decide' subject post-judgment petition in CA-G.R. CV No. 08585."
The surety's motion for reconsideration dated March 28, 1989 was denied by Resolution dated May 17,
1989.
The surety is once again before us, 7 this time praying for reversal of the Appellate Tribunal's aforesaid
judgment of March 8, 1989. Once again it will fail, no merit being discerned in its petition for review on
certiorari.
By settled rule a writ of preliminary attachment may issue once the Court is satisfied, on consideration
ex parte of the application and its supporting affidavits and documents, 8 or after healing, as the court
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may in its discretion consider proper, that any of the grounds specified by law exists, and an acceptable
bond is given by the applicant 9
... executed to the adverse party in an amount ... fixed by the judge, not exceeding the applicant's claim,
conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all
damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the
applicant was not entitled thereto.
The filing of the attachment bond by a surety undoubtedly connotes and operates as a voluntary
submission by it to the Court's jurisdiction, and of course binds it to faithfully comply with its specific
obligations under its bond.
The surety does not, to be sure, become liable on its bond simply because judgment is subsequently
rendered against the party who obtained the preliminary attachment. The surety becomes liable only
when and if "the court shall finally adjudge that the applicant was not entitled to the attachment." This
is so regardless of the nature and character of the judgment on the merits of the principal claims,
counterclaims or cross-claims, etc. asserted by the parties against each other. Indeed, since an
applicant's cause of action may be entirely different from the ground relied upon by him for a
preliminary attachment, 10 it may well be that although the evidence warrants judgment in favor of said
applicant, the proofs may nevertheless also establish that said applicant's proferred ground for
attachment was inexistent or specious and hence, the writ should not have issued at all; i.e., he was not
entitled thereto in the first place. In that event, the final verdict should logically award to the applicant
the relief sought in his basic pleading, but at the same time sentence him usually on the basis of a
counterclaim to pay damages caused to his adversary by the wronful attachment. 11
When the final judgment declares that the party at whose instance an attachment had issued was not
entitled thereto, there is no question about the eminent propriety of condemning that party to the
payment of all the damages that the wrongful attachment had caused to the party whose property had
been seized under the attachment writ.
But what of the surety's liability? The surety on an attachment bond, as already pointed out, assures
that the applicant "will pay all the costs which may be adjudged to the adverse party and all damages
which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant
was not entitled thereto." 12 In other words the surety, by submitting its attachment bond, binds itself
solidarily to make the same payments which its principal the party at whose instance the attachment
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issues may be condemned to make, to compensate for the damages resulting from the wrongful
attachment, although unlike its principal, its liability is limited to the amount stated in its bond.
The final adjudication "that the applicant was not entitled" to the attachment, standing alone, does not
suffice to make the surety liable. It is necessary, in addition, that the surety be accorded due process,
i.e., that it be given an opportunity to be heard on the question of its solidarily liability for damages
arising from wrongful attachment. This, by established rule and practice, is accorded to the surety at a
summary hearing, scheduled after, judgment on presentation of an application to hold it answerable on
its bond. Evidently, such a summary hearing is not rendered unnecessary or superfluous by the fact that
the matter of damages was among the issues tried during the hearings on the merits, unless of course,
the surety had previously been duly impleaded as a party, or otherwise earlier notified and given
opportunity to be present and ventilate its side on the matter during the trial. The procedure for the
rendition of a binding directive on the surety upon its solidarily liability for damages for wrongful
attachment is indicated in Section 20, Rule 5'7 of the Rules of Court. The section reads as follows:
Sec. 20. Claim for damages on account of illegal attachment. If the judgment on
the action be in favor of the party against whom attachment was issued, he may recover upon the bond
given or deposit made by the attaching creditor,, any damages resulting from the attachment. Such
damages may be awarded only upon application and after proper hearing, and shall be included in the
final judgment. The application must be filed before the trial or before appeal is perfected or before the
judgment becomes executory, with due notice to the attaching creditor and his surety or sureties,
setting forth the facts showing his right to damages and the amount thereof.
If the judgment of the appellate court be favorable to the party against whom the attachment was
issued, he must claim damages sustained during the pendency of the appeal by filing an application with
notice to the party in whose favor the attachment was issued or his surety or sureties. before the
judgment of the appellate court becomes executory. The appellate court may allow the application to be
heard and decided by the trial court.
Certain principles are derived from this provision of the Rules. A party against whom a writ ofpreliminary attachment issues may impugn the writ by alleging and proving inter alia that the applicant
was not entitled thereto, i.e., that the asserted ground for attachment was inexistent, or the amount for
which the writ was sought was excessive, etc., this, by appropriate motion. He may also claim damages
on account of the wrongful attachment through an appropriate pleading, such as a counterclaim, or
other form of application. What is important is that the "application must be filed before the trial or
before appeal is perfected or before the judgment becomes executory, with due notice to the attaching
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creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount
thereof."
In the case at bar, since the Trial Court's decision had gone against the defendants, and no irregularity
had been adjudged as regards the preliminary attachment, the latter obviously had no occasion to apply
for damages from wrongful attachment although they could have so applied therefor because, as
already pointed out, it is entirely possible under the law that an applicant for preliminary attachment be
adjudged entitled to relief on his basic claim and at the same time pronounced as not entitled to the
attachment.
As things turned out, the Trial Court's judgment was reversed by the Court of Appeals; the latter
dismissed the complaint, declared the plaintiff not entitled to the attachment and sentenced it to pay to
the defendants damages on account thereof And it was only at this time that the defendants could havepresented and did actually present their petition to enforce the surety's liability on its bond. This
petition, as aforestated, the Court of Appeals (a) noted and (b) referred to the Trial Court with
instructions "to hear and decide ... pursuant to Section 20, Rule 57 of the Rules of Court." Under the
circumstances, and in the light of the explicit provisions of said Section 20, Rule 57, there can be no
debate about the seasonablenes of the defendants' application for damages and the correctness of the
referral by the Court of Appeals of the application for damages to the Trial Court for hearing and
determination.
Under the circumstances, too, there can be no gainsaying the surety's full awareness of its undertakings
under its bond: that, as the law puts it: "the plaintiff will pay all costs which may be adjudged to the
defendant(s), and all damages which may be sustained by reason of the attachment, if the same shall
finally be adjudged to have been wrongful and without cause," and that those damages plainly
comprehended not only those sustained during the trial of the action but also those during the
pendency of the appeal. This is the law, 13 and this is how the surety's liability should be understood.
The surety's liability may be enforced whether the application for damages for wrongful attachment be
submitted in the original proceedings before the Trial Court, or on appeal, so long as the judgment has
not become executory. The surety's liability is not and cannot be limited to the damages caused by the
improper attachment only during the pendency of the appeal. That would be absurb. The plain and
patent intendment of the law is that the surety shall answer for all damages that the party may suffer as
a result of the illicit attachment, for all the time that the attachment was in force; from levy to
dissolution. The fact that the attachment was initially (and erroneously) deemed correct by the Trial
Court, and it was only on appeal that it was pronounced improper, cannot restrict recovery on the bond
only to such damages as might have been sustained during the appeal. The declaration by the appellate
court that the applicant for attachment "was not entitled thereto," signifies that the attachment should
not have issued in the first place, that somehow the Trial Court had been misled into issuing the writ
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although no proper ground existed therefor. The logical and inevitable conclusion is that the applicant
for attachment and the surety on the attachment bond are solidarily liable for all the damages suffered
by the party against whom the writ is enforced, except only that the surety's liability is limited to the
amount set forth in its bond.
The fact that the second paragraph of the rule speaks only of "damages sustained during the pendency
of the appeal" is of no moment; it obviously proceeds from the assumption in the first paragraph that
the award for the damages suffered during the pendency of the case in the trial court was in fact
"included in the final judgment" (or applied for therein before the appeal was perfected or the judgment
became executory); hence, it states that the damages additionally suffered thereafter, i.e., during the
pendency of the appeal, should be claimed before the judgment of the appellate tribunal becomes
executory. It however bears repeating that where, as in the case at bar, the judgment of the Trial Court
has expressly or impliedly sustained the attachment and thus has given rise to no occasion to speak of,
much less, file an application for damages for wrongful attachment, and it is only in the decision of the
Court of Appeals that the attachment is declared wrongful and that the applicant "was not entitled
thereto," the rule is, as it should be, that it is entirely proper at this time for the application for damages
for such wrongful attachment to be filed i.e., for all the damages sustained thereby, during all the
time that it was in force, not only during the pendency of the appeal. And the application must be filed
"with notice to the party in whose favor the attachment was issued or his surety or sureties, before the
judgment of the appellate court becomes executory." In such a situation, the appellate court may
resolve the application itself or allow it "to be heard and decided by the trial court."
WHEREFORE, the petition is DISMISSED for lack of merit, the costs against the petitioner.
SO ORDERED.
THIRD DIVISION
SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR RESOURCES, INC.,
Petitioners,
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- versus -
NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and NIKKI NORLIN
SATSATIN,
Respondents.
G.R. No. 166759
Present:
CORONA, J., Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
Promulgated:
November 25, 2009
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DECISION
PERALTA, J.:
This is a petition for review on certiorari assailing the Decision[1] dated November 23, 2004 of the Court
of Appeals (CA) in CA-G.R. SP No. 83595, and its Resolution[2] dated January 18, 2005, denying
petitioners motion for reconsideration.
The factual and procedural antecedents are as follows:
The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario Torres (Mario) each own
adjacent 20,000 square meters track of land situated at Barrio Lankaan, Dasmarias, Cavite, covered by
Transfer Certificate of Title (TCT) Nos. 251267,[3] 251266,[4] and 251265,[5] respectively.
Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners mother, Agripina Aledia, if she
wanted to sell their lands. After consultation with her daughters, daughter-in-law, and grandchildren,
Agripina agreed to sell the properties. Petitioners, thus, authorized Nicanor, through a Special Power of
Attorney, to negotiate for the sale of the properties.[6]
Sometime in 1999, Nicanor offered to sell the properties to Solar Resources, Inc. (Solar). Solar
allegedly agreed to purchase the three parcels of land, together with the 10,000-square-meter property
owned by a certain Rustica Aledia, for P35,000,000.00. Petitioners alleged that Nicanor was supposed to
remit to them the total amount of P28,000,000.00 or P9,333,333.00 each to Sofia, Fructosa, and the
heirs of Mario.
Petitioners claimed that Solar has already paid the entire purchase price of P35,000,000.00 to
Nicanor in Thirty-Two (32) post-dated checks which the latter encashed/deposited on their respective
due dates. Petitioners added that they also learned that during the period from January 2000 to April
2002, Nicanor allegedly acquired a house and lot at Vista Grande BF Resort Village, Las Pias City and a
car, which he registered in the names of his unemployed children, Nikki Normel Satsatin and Nikki Norlin
Satsatin. However, notwithstanding the receipt of the entire payment for the subject property, Nicanor
only remitted the total amount of P9,000,000.00, leaving an unremitted balance of P19,000,000.00.
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Despite repeated verbal and written demands, Nicanor failed to remit to them the balance of
P19,000,000.00.
Consequently, on October 25, 2002, petitioners filed before the regional trial court (RTC) a
Complaint[7] for sum of money and damages, against Nicanor, Ermilinda Satsatin, Nikki Normel Satsatin,
and Nikki Norlin Satsatin. The case was docketed as Civil Case No. 2694-02, and raffled to RTC, Branch
90, Dasmarias, Cavite.
On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ of
Attachment,[8] alleging among other things: that respondents are about to depart the Philippines; that
they have properties, real and personal in Metro Manila and in the nearby provinces; that the amount
due them is P19,000,000.00 above all other claims; that there is no other sufficient security for the claim
sought to be enforced; and that they are willing to post a bond fixed by the court to answer for all costswhich may be adjudged to the respondents and all damages which respondents may sustain by reason
of the attachment prayed for, if it shall be finally adjudged that petitioners are not entitled thereto.
On October 30, 2002, the trial court issued an Order[9] directing the petitioners to post a bond in
the amount of P7,000,000.00 before the court issues the writ of attachment, the dispositive portion of
which reads as follows:
WHEREFORE, premises considered, and finding the present complaint and motion sufficient in form and
substance, this Court hereby directs the herein plaintiffs to post a bond, pursuant to Section 3, Rule 57
of the 1997 Rules of Civil Procedure, in the amount of Seven Million Pesos (P7,000,000.00), before the
Writ of Attachment issues.[10]
On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff,[11] informing the
court that they have already filed an attachment bond. They also prayed that a sheriff be deputized to
serve the writ of attachment that would be issued by the court.
In the Order[12] dated November 15, 2002, the RTC granted the above motion and deputized the
sheriff, together with police security assistance, to serve the writ of attachment.
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Thereafter, the RTC issued a Writ of Attachment[13] dated November 15, 2002, directing the sheriff to
attach the estate, real or personal, of the respondents, the decretal portion of which reads:
WE, THEREFORE, command you to attach the estate, real or personal, not exempt from execution, of the
said defendants, in your province, to the value of said demands, and that you safely keep the same
according to the said Rule, unless the defendants give security to pay such judgment as may be
recovered on the said action, in the manner provided by the said Rule, provided that your legal fees and
all necessary expenses are fully paid.
You shall return this writ with your proceedings indorsed hereon within twenty (20) days from the date
of receipt hereof.
GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day of November, 2002, at Imus for
Dasmarias, Cavite, Philippines.[14]
On November 19, 2002, a copy of the writ of attachment was served upon the respondents. On the
same date, the sheriff levied the real and personal properties of the respondent, including household
appliances, cars, and a parcel of land located at Las Pias, Manila.[15]
On November 21, 2002, summons, together with a copy of the complaint, was served upon the
respondents.[16]
On November 29, 2002, respondents filed their Answer.[17]
On the same day respondents filed their answer, they also filed a Motion to Discharge Writ of
Attachment[18] anchored on the following grounds: the bond was issued before the issuance of the writ
of attachment; the writ of attachment was issued before the summons was received by the
respondents; the sheriff did not serve copies of the application for attachment, order of attachment,
plaintiffs affidavit, and attachment bond, to the respondents; the sheriff did not submit a sheriffs
return in violation of the Rules; and the grounds cited for the issuance of the writ are baseless and
devoid of merit. In the alternative, respondents offered to post a counter-bond for the lifting of the writ
of attachment.[19]
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On March 11, 2003, after the parties filed their respective pleadings, the RTC issued an Order[20]
denying the motion, but at the same time, directing the respondents to file a counter-bond, to wit:
WHEREFORE, premises considered, after the pertinent pleadings of the parties have been taken into
account, the herein defendants are hereby directed to file a counter-bond executed to the attaching
party, in the amount of Seven Million Pesos (P7,000,000.00), to secure the payment of any judgment
that the attaching party may recover in the action, with notice on the attaching party, whereas, the
Motion to Discharge Writ of Attachment is DENIED.
SO ORDERED.[21]
Thereafter, respondents filed a motion for reconsideration and/or motion for clarification of the above
order. On April 3, 2003, the RTC issued another Order[22] which reads:
In view of the Urgent Motion For Reconsideration And/Or Motion For Clarification of the Order of this
Court dated March 11, 2003, denying their Motion to Discharge Writ of Attachment filed by the
defendants through counsel Atty. Franco L. Loyola, the Motion to Discharge Writ of Attachment is
denied until after the defendants have posted the counter-bond in the amount of Seven Million Pesos
(P7,000,000.00).
The defendants, once again, is directed to file their counter-bond of Seven Million Pesos
(P7,000,000.00), if it so desires, in order to discharge the Writ of Attachment.
SO ORDERED.
On December 15, 2003, respondents filed an Urgent Motion to Lift/Set Aside Order Dated March [11],
2003,[23] which the RTC denied in an Order[24] of even date, the dispositive portion of which reads:
WHEREFORE, premises considered, defendants Urgent Motion to Lift/Set Aside Order Dated March 23,
2003 (With Manifestation to Dissolve Writ of Attachment) is hereby DENIED for lack of Merit.
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SO ORDERED.
Respondents filed an Urgent Motion for Reconsideration,[25] but it was denied in the Order[26] dated
March 3, 2004.
Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and Prohibition with
Preliminary Injunction and Temporary Restraining Order[27] under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 83595, anchored on the following grounds:
(1) public respondents committed grave abuse of discretion amounting to lack of or in excess ofjurisdiction in failing to notice that the lower court has no jurisdiction over the person and subject
matter of the complaint when the subject Writ of Attachment was issued;
(2) public respondents committed grave abuse of discretion amounting to lack of or in excess of
jurisdiction in granting the issuance of the Writ of Attachment despite non-compliance with the formal
requisites for the issuance of the bond and the Writ of Attachment.[28]
Respondents argued that the subject writ was improper and irregular having been issued and enforced
without the lower court acquiring jurisdiction over the persons of the respondents. They maintained
that the writ of attachment was implemented without serving upon them the summons together with
the complaint. They also argued that the bond issued in favor of the petitioners was defective, because
the bonding company failed to obtain the proper clearance that it can transact business with the RTC of
Dasmarias, Cavite. They added that the various clearances which were issued in favor of the bonding
company were applicable only in the courts of the cities of Pasay, Pasig, Manila, and Makati, but not in
the RTC, Imus, Cavite.[29]
On November 23, 2003, the CA rendered the assailed Decision in favor of the respondents, finding grave
abuse of discretion amounting to lack of or in excess of jurisdiction on the part of the RTC in issuing the
Orders dated December 15, 2003 and March 3, 2004. The decretal portion of the Decision reads:
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WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed Orders are hereby
nullified and set aside. The levy on the properties of the petitioners pursuant to the Writ of Attachment
issued by the lower court is hereby LIFTED.
SO ORDERED.[30]