4.

Vicente CHUIDIAN V.
SANDIGANBAYAN and the
Republic

G.R. No. 1339941 | JANUARY 19, 2001

Facts:
In September 1980, Chuidian
allegedly a dummy of Ferdinand and
Imelda Marcos, was able to obtain,
allegedly under false pretenses, a loan
guarantee from Philguarantee Corp.,
the BOI and the Central Bank, in favor
of the Asian Reliability Co. Inc. (ARCI).
ARCI, 98% of which was allegedly
owned by Chuidian, was granted a
loan guarantee of US $25M for the
establishment
of
5
inter-related
projects in the country.
However, Chuidian used the
same in investing in corporations
operating in the US. ARCI then
defaulted in the payments of the loan,
compelling Philguarantee to undertake
payments for the same. Philguarantee
sued Chuidian before a Californian
court, charging him of violating the
terms of the loan, defaulting in
payments and misusing the proceeds
for his personal benefit. Chuidian
claimed that he himself was a victim
of the systematic plunder perpetrated
by the Marcoses.
On
November
1985,
Philguarantee
entered
into
a
compromise agreement with Chuidian
whereby Chuidian shall assign and
surrender title to all his companies in
favor of the Phil. Govt. In return,
Philguarantee shall absolve Chuidian
from all civil and criminal liability
concerning
the
payments
Philguarantee had made on Chuidians
defaulted loans. It was further
stipulated that the Phil. government
shall pay Chuidian the amount of US
$5.3M. Chuidian received the 1st two
installments of the payment. The
remaining balance of US $4.6M was to
be paid through an irrevocable Letter

of Credit (L/C) from which Chuidian

would draw US $100k monthly.
With the advent of the Aquino
administration, the newly-established
PCGG exerted earnest efforts to search
and recover properties and assets
suspected as having been illegally
acquired by the Marcoses, their
relatives and cronies. Chuidian was
among those whose assets were
sequestered by the PCGG. The PNB
was directed to place the letters of
credit under its custody, in behalf of
the PCGG.
In the meantime, Philguarantee
filed a motion before the Superior
Court of California, seeking to vacate
the stipulated judgment containing the
settlement between Philguarantee and
Chuidian on the grounds that: (a)
Philguarantee was compelled by the
Marcos administration to agree to the
terms of the settlement; (b) Chuidian
blackmailed Marcos into pursuing the
settlement agreement by threatening
to expose the fact that the Marcoses
made
investments
in Chuidians
American enterprises; and (c) the
Aquino administration had ordered
Philguarantee not to make further
payments
on
the
L/C
to
Chuidian. However, the Californian
court concluded that Philguarantee
was not able to sufficiently show that
the settlement should be set aside. On
appeal, the CA of the State of
California affirmed the judgment of the
Superior
Court
denying
Philguarantees motion.
Chuidian
filed
before
the
California Central District Court, an
action against PNB seeking to compel
the latter to pay the proceeds of the
L/C. Philguarantee intervened in said
action, raising the same issues and
arguments it had earlier raised in the
action before the Santa Clara Superior
Court, alleging that PNB was excused
from making payments on the L/C

since the settlement was void due to

illegality, duress and fraud.
The Federal Court rendered
judgment ruling: (1) in favor of PNB
excusing the said bank from making
payment on the L/C; and (2) in
Chuidians favor by denying intervenor
Philguarantees action to set aside the
settlement agreement.
Meanwhile a Deed of Transfer
was executed between then Sec. of
Finance and then PNB President
Edgardo Espiritu, to facilitate the
rehabilitation of PNB. Thus, the govt
assumed all liabilities of PNB including
the L/C listed in favor of Chuidian in
the amount of US $4.4M
On July 1987, the govt filed
before the Sandiganbayan a civil case
against the Marcos spouses, several
govt officials, and a number of
individuals known to be cronies of the
Marcoses, including Chuidian, seeking
the reconveyance, accounting and
restitution of all forms of wealth
allegedly procured illegally by the
defendants.
While the case was pending, the
Republic filed a motion for issuance of
a writ of attachment over the L/C in
the name of Chuidian, citing as
grounds therefor the following:
(1) Chuidian embezzled or fraudulently
misapplied the funds of ARCI acting in
a
fiduciary
capacity,
justifying
issuance of the writ under Section
1(b), Rule 57 of the Rules of Court;
(2) The writ is justified under Section 1(d)
of the same rule as Chuidian is guilty
of fraud in contracting the debt or
incurring the obligation upon which
the action was brought, or that he
concealed or disposed of the property
that is the subject of the action;
(3) Chuidian has removed or disposed of
his property with the intent of
defrauding the plaintiff as justified
under Section 1(c) of Rule 57; and

(4) Chuidian is residing out of the country

or one on whom summons may be
served by publication, which justifies
the writ of attachment prayed for
under Section 1(e) of the same rule.
The Republic also averred that
should the action brought by Chuidian
before the U.S. District Court of
California to compel payment of the
L/C
prosper,
inspite
of
the
sequestration of the said L/C, Chuidian
can ask the said foreign court to
compel the PNB Los Angeles branch to
pay
the
proceeds
of
the
L/C. Eventually, Philguarantee will be
made to shoulder the expense
resulting in further damage to the
government. Thus, there was an
urgent need for the writ of attachment
to place the L/C under the custody of
the Sandiganbayan so the same may
be preserved as security for the
satisfaction of judgment in the case
before said court.
Chuidian opposed the motion for
issuance of the writ of attachment,
contending that:
(1) The plaintiffs affidavit appended to
the motion was in form and substance
fatally defective;
(2) Section 1(b) of Rule 57 does not apply
since
there
was
no
fiduciary
relationship between the plaintiff and
Chuidian;
(3) While Chuidian does not admit fraud
on his part, if ever there was breach of
contract, such fraud must be present
at the time the contract is entered
into;
(4) Chuidian has not removed or
disposed of his property in the
absence of any intent to defraud
plaintiff;
(5) Chuidians absence from the country
does not necessarily make him a nonresident; and
(6) Service of summons by publication
cannot be used to justify the issuance
of the writ since Chuidian had already
submitted to the jurisdiction of the

Court by way of a motion to lift the

freeze order filed through his counsel.
On July 1993, the Sandiganbayan
ordered the issuance of a writ of
attachment against the L/C as security
for the satisfaction of judgment. The
Sandiganbayan ruled:
1) Although there was no separate
was attached to the motion, the
motion itself contained all the
requisites of an affidavit, and the
verification thereof is deemed a
substantial compliance of Rule 57,
Section 3.
2) Fiduciary relationship exists
between Chuidian and ARCI but not
with the Republic. Hence, the Republic
cannot invoke Sec. 1(b) of Rule 57.
3) There was a prima facie case of
fraud
committed
by
Chuidian,
justifying the issuance of the writ of
attachment.
4)
The
Sandiganbayan
also
adopted the Republics position that
since it was compelled to pay, through
Philguarantee, the bank loans taken
out by Chuidian, the proceeds of which
were fraudulently diverted, it is
entitled to the issuance of the writ of
attachment to protect its rights as
creditor.
5) Chuidians absence from the
country was considered by the
Sandiganbayan to be the most
compelling ground for the issuance of
the writ.
Almost four (4) years after the
issuance of the order of attachment,
Chuidian filed a motion to lift the
attachment based on the following
grounds:
1) He had returned to the
Philippines, and considering that his
absence was the most compelling
ground for the issuance of the writ, the
latter should be lifted.
2) There was no evidence at all of
initial
fraud
or
subsequent
concealment except for the affidavit
submitted by the PCGG Chairman

whose statement is hearsay since he

was not a witness to the litigated
incidents, was never presented as a
witness by the Republic and thus was
not subject to cross-examination.
3) He denies that he ever disposed
of his assets to defraud the Republic,
and there is nothing in the records
that support the Sandiganbayans
erroneous conclusion on the matter.
4) He was never a defendant in
any other pending criminal action.
5) He was not guilty of fraud in
contracting the debt or incurring the
obligation. L/C was not a product of
fraudulent transactions but the result
of court-approved settlement.
6) Should the attachment be
allowed to continue, he will be
deprived of his property without due
process. The L/C was payment to
Chuidian in exchange for the assets he
turned over to the Republic. Said
assets had already been sold by the
Republic and cannot be returned to
Chuidian should the government
succeed in depriving him of the
proceeds of the L/C.
7) Finally, throughout the 4 years
that the preliminary attachment had
been in effect, the govt had not set
the case for hearing. The case itself
should be dismissed for laches owing
to the Republics failure to prosecute
its action for an unreasonable length
of time. Accordingly, the preliminary
attachment, being only a temporary or
ancillary remedy, must be lifted and
the PNB ordered to immediately pay
the proceeds of the L/C to Chuidian.
The Republic opposed the motion
and contended that allowing the
foreign judgment as a basis for the
lifting of the attachment would
essentially amount to an abdication of
the jurisdiction of the Sandiganbayan
to hear and decide the ill gotten
wealth cases lodged before it in

deference to the judgment of foreign

courts.
The
Sandiganbayan
denied
petitioners motion and also the
latters subsequent MR.
Issue:
Whether the writ of preliminary
attachment should be lifted as a result
of petitioners return to the country
and his averments that there was no
fraud in incurring the obligation
Held:
No. Preliminary attachment
issued upon a ground which is at
the same time the applicants
cause
of
action.
When
the
preliminary attachment is issued upon
a ground which is at the same time
the applicants cause of action, the
defendant is not allowed to file a
motion to dissolve the attachment
under Section 13 of Rule 57 by offering
to show the falsity of the factual
averments in the plaintiffs application
and affidavits on which the writ was
based and consequently that the writ
based thereon had been improperly or
irregularly issued the reason being
that the hearing on such a motion for
dissolution of the writ would be
tantamount to a trial of the merits of
the action. In other words, the merits
of the action would be ventilated at a
mere hearing of a motion, instead of
at the regular trial.
The merits of the action in
which a writ of preliminary attachment
has been issued are not triable on a
motion
for
dissolution
of
the
attachment; otherwise an applicant for
the lifting of the writ could force a trial
of the merits of the case on a mere
motion.
There are only two ways of
quashing a writ of attachment: (a)
by filing a counterbound immediately;
or (b) by moving to quash on the
ground of improper and irregular

issuance. These grounds for the

dissolution of an attachment are fixed
in Rule 57 of the Rules of Court and
the power of the Court to dissolve an
attachment is circumscribed by the
grounds specified therein. Petitioners
motion to lift attachment failed to
demonstrate any infirmity or defect in
the issuance of the writ of attachment;
neither did he file a counterbond.